Ecolab Inc.

Thank you, everyone, for joining the Ecolab's first quarter 2026 earnings release call. This time, all participants will be in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, today's conference is being recorded. It is now my pleasure to introduce your host, Andy Hedberg, Vice President, Investor Relations. Thank you, Andy. You may now begin.

Thank you. Hello, everyone, and welcome to Ecolab's first quarter conference call. With me today are Christoph Beck, Ecolab's chairman and CEO, and Scott Kirkland, our CFO. A discussion of our results, along with our earnings release and the slides referencing the quarter results, are available on Ecolab's website at ecolab.com slash investors. Please take a moment to read the cautionary statements in these materials, which state that this teleconference and the associated supplemental materials include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the risk factor section in our most recent Form 10-K and our posted materials. We also refer you to the supplemental diluted earnings per share information and release. With that, I'd like to turn the call over to Christophe Beck for his comments.

Thank you so much, Andy, and welcome to everyone joining us today. We had a great quarter with accelerating momentum across our portfolio, and I know Oil prices, energy, and supply are top of mind for most. It's not for me. In 2022, commodities cost was up 50%, and our margin sports cycle went further up. Today, commodities cost is up 9%, and we have all the tools to address this within one quarter, done the right way for our customers. As I sit here today, I feel very good about the year and how we're managing a complex environment, and I feel even better about where we're going next. What matters most to me today is to keep the organization focused on growth, to supply our customers seamlessly anywhere around the world, and to support our teams, especially those operating in the Middle East. In a complex environment, our teams are staying very close to customers and supporting their operations without any single disruption, because what we do is almost always mission critical to them. And when something is mission critical to our customers, it becomes mission critical to us too. That means supplying reliably, solving problems quickly, and delivering the outcomes they count on. And it's working. We would never, ever let the customer down. That commitment is what drives the consistency and the strength you see in our results. Now turning to the first quarter, we delivered once again a very strong quarter with adjusted value GDP as close to 13% right in the middle of our range. Momentum strengthened across the business as organic sales grew 4%, driven by continued strong value pricing of 3% and volume growth that accelerated to 1%. We also expanded operating income margins, reflecting the discipline execution across our global portfolio and the strength of our OneEcoLab approach, which brings together service, expertise, and breakthrough technology at scale. Momentum continued to strengthen across the portfolio, led by our growth engines, which, by the way, have close to no exposure to energy costs. Global high tech and digital growth grew more than 20%, driven by strong demand tied to digital adoption and the ongoing AI build-up. Life sciences accelerated to 11% growth, led by bioprocessing, where sales more than doubled. We have been investing in talent, capabilities, capacity, and breakthrough innovation in this high growth, high-margin business for quite some time. And today, these efforts are clearly paying off. And we're just getting started. We expect life sciences growth to continue its double-digit momentum and operating income margins to expand toward our 30% target over the next few years. And finally, pest elimination delivered a strong quarter with 7% growth, reflecting strong share gains from our One Ecolab Growth Initiative and, naturally, our new pest intelligence offerings. Our core portfolio also performed very well. Institutional strengthened with solid growth across restaurant and lodging customers more than offsetting somewhat softer market trends. Specialty gained share with 9% growth driven by innovation that helps customers optimize costs. Food and beverage outperformed its end market again. drawing 5% supported by strong execution of our one Ecolab approach and light water delivered steady growth too. We also see progress in smaller parts of the portfolio that have been a bit under pressure. Collectively, the performance in paper and heavy water stabilized as we supported them with new business and innovation. Overall, our growth engines are accelerating, our core performance is strong, and business that had been under pressure are turning the corner. Together, this continues to shift our portfolio towards higher margin, higher growth, and markets well aligned with our long-term strategy. We also delivered solid operating income margin expansion this quarter, and the line gross margin was steady, a strong value pricing offset commodity cost inflation. Reporting gross margin was slightly low due to a short-term impact from recent M&A and higher commodity cost inflation. However, the M&A impact was favorable to our SG&E ratio, and as a result, largely neutral to our OI margin. And allowing SG&E productivity improved meaningfully as we continued to scale our unique digital and agency capabilities, resulting in strong SG&E leverage year over year. As a result, organic operating income margins extended by 70 basis points to 16.8%. We expect oil margin expansion to improve in the second half of the year as pricing accelerates, and we remain very confident in delivering on our 20% oil margin target by 2027. Looking ahead, the operating environment remains dynamic, but we are ready. We remain focused on growth opportunities while we keep managing a complex global environment. The conflict in the Middle East is one example. It has driven sharply higher global energy costs, creating additional pressure across supply chains. And in moments like this, customers turn to us as their partner of choice to ensure secure supply, exceptional service, and solutions that help reduce operating costs. We take decisive actions to absorb those pressures wherever we can. However, the magnitude of energy cost increases requires additional action to ensure reliable supply, which is why we quickly implemented an energy surcharge. This is an approach we've used successfully before, focused on delivering incremental total value for customers that exceed the total price increase. We know it works for our customers, and we know it works for us. As a result, the second quarter will be a short transition period. Commodity costs are expected to increase by single digits starting in the second quarter, and we expect those costs to remain high through the end of the year. Search charge benefits will build through the quarter following implementation on April 1st. With this, higher commodity costs will impact second quarter EPS growth by a few percentage points. However, underlying performance remains on track and within the targeted 12% to 15% range. Importantly, we expect to already fully offset the dollar impact from higher commodity costs as we exit the second quarter, as pricing continues to accelerate and volumes continue to grow. We expect organic sales to increase 6% to 7% in the second half of the year, helping to stabilize our gross margin during that period. And that's net off of EVO. Ex of EVO, gross margins would be up 70 to 80 basis points in the second half. In other words, we will be fully offsetting the significant rise in commodity costs and its impact on earnings and margins in just a few quarters. As a result, we expect EPS growth to strengthen in Q3 and Q4. resulting in unchanged full-year expectations. We therefore continue to anticipate adjusted diluted EPS growth of 12% to 15% this year, excluding short-term impact from the pending Cool IT acquisition. As discussed earlier, Cool IT financing and non-cash amortization are expected to have a short-term impact on adjusted EPS in the second half of the year. Following the close, the impact is expected to reduce quarterly EPS by approximately 20 cents. Importantly, underlying EPS growth remains unchanged. Beyond this short-term impact this year, we expect EPS growth, including Cool IT, to accelerate back into the 12% to 15% range as contributions from this high-growth, high-margin acquisition accelerate and amortization from the NALCO acquisition falls off. What's even better, the impact of our growth engines on Ecolab's global performance is accelerating as we scale down. This is especially true for global high-tech, where AI is driving significant new demand for circular water management and high-performance cooling. By bringing Cool IT and Avivo together with our global high-tech water business, we're building a $1.5 billion powerhouse that will help fuel Ecolab's next phase of growth and margin expansion. As AI accelerates the build-out of global digital infrastructure, customers are prioritizing uptime, cooling performance, and reliable water management while driving massive increases in compute power with lower energy use and that near-zero water footprint. Our circular water solutions have delivered exactly that, from ultra-few water to produce the most advanced chips, to 3D-TRAZOR-connected water to support power generation, and now direct-to-cheap cooling to cooler chips. Ovivo expands our ultra-pure water and end-to-end microelectronics offering in a business expected to grow at mid-teens rate this year, supported by a strong pipeline tied to five expansions and increasing water circularity needs. Our pending acquisition of Cool IT builds on this momentum, adding a scaled direct-to-chief liquid cooling platform and positioning global high-tech with an integrated, service-led cooling solution for high-density AI data centers. And here's more good news. Cool IT has shared with us that they are off to a very strong start in 2026, with first quarter sales growing well ahead of the 30% plus we discussed on the acquisition call. As demand for their leading liquid cooling technologies continues to rapidly accelerate. Together, these two businesses have the potential to add a couple points of high-margin organic sales growth to Ecolab's total growth as they scale and capture more of this huge and fast-growing high-tech market. In closing, we delivered a strong quarter with accelerating top-line momentum, continued margin expansion, and double EGTPS growth in a complex environment. Our near-term outlook is strong and consistent. Gross momentum continues to build. Our portfolio is shifting towards higher margin, higher gross markets, and much less exposed to energy costs, and our team is executing at a very high level. We're well-positioned to deliver another year of strong performance in 2026, and we remain confident in the long-term trajectory we're building. So thank you for your continued trust and your investment in Ecolab. I'll now turn it back to Andy for Q&A. Thanks, Kristof.