Vontier Corporation Common Stock

My name is Brittany, and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Volunteer Corporation's Second Quarter 2021 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star and then the number one on your telephone keypad. If you would like to withdraw your question, Press the pound key. I would now like to turn the call over to Ms. Lisa Curran, Vice President of Investor Relations. Ms. Curran, you may begin your conference.

Thank you, Brittany. Good morning, everyone, and thank you for joining us on the call. With me today are Mark Morelli, our President and Chief Executive Officer, and Dave Nomura, our Senior Vice President and Chief Financial Officer. We will present certain non-GAAP financial measures on today's call. Information required by SEC Regulation G relating to these non-GAAP financial measures is available on the Investors section of our website, www.vontier.com, under the heading Financials. Please note that unless otherwise noted, the presented financial measures reflect year-over-year increases or decreases. During the call, we will make forward-looking statements within the meaning of the federal securities laws. including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties and actual results might differ materially from any forward-looking statements that we make today. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available in our SEC filings and subsequent quarterly report on Form 10-Q. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements. With that, I'm pleased to turn the call over to Mark.

Thanks, Lisa, and good morning, everyone. We're very pleased with our second quarter performance. Thanks to our team's strong execution and rigorous application of the Vontir business system, we delivered another quarter exceeding our guidance on all metrics. We achieved 33% core revenue growth, 450 basis points of adjusted core operating margin expansion, and 69% adjusted earnings per share growth. The results were largely driven by growth in non-EMV solutions, with better than expected growth in retail solutions and auto repair solutions. Core revenue growth excluding EMV was greater than 35%. Orders were strong, increasing nearly 40% year-over-year. Our backlog remains high with nearly 50% growth year-over-year and 20% growth sequentially. Our top operational priority has been navigating supply chain challenges. I'd like to recognize the tireless efforts of our teams. I'd also like to thank our network of supplier partners. Once again this quarter, we've leveraged the Vontir business system to successfully manage tight availability. We've also increased prices to more than offset inflation. We continue to focus on our most critical profitable growth initiatives. In addition to our accelerated core growth, we saw margin expansion across the platforms through better focus and prioritization, and we are gaining momentum. We're also making progress on the innovation front with new targeted high growth market offerings and Macco's launch of the Maximus 4.0 diagnostic software. We've consistently made meaningful progress towards all of our operational and strategic goals since separation only nine months ago. In particular, we recently announced the acquisition of DRB, whose focus on technology and software solution complements our existing point of sale and payment offerings. This also gives us critical scale, establishing a $500 million retail solutions portfolio. The addition of DRB enhances our growth and recurring revenue profile, profitability, and free cash flow generation. This is an important first step in diversifying our portfolio towards long-term secular growth drivers in attractive markets. While the acquisition is subject to customary closing conditions, including regulatory review, we anticipate closing this transaction in the third quarter, giving us approximately mid to high-teen cents per share accretion to 2022. Over the years, the Vontir team has done a remarkable job of strategically expanding our portfolio. We've built a competitive advantage by offering a broader suite of products as we more deeply embed ourselves in our customers' workflows. We focus these offerings on the highest value part of the workflows, leveraging the more intelligent electronic components of the system and connecting the convenience store with the forecourt. In the early 2000s, we strategically focused on point of sale systems, site control systems, and software systems. In 2017, we acquired a leading provider of hardware and software solutions focused on retail and site systems automation. Our systems are now more profitable and benefit from regular upgrade cycles. The future of the convenience store is bright and transforming. While operators will need to maintain fueling infrastructure for decades, it's clear that our customers will increasingly be investing in non-fuel retail, including sustainable services like car washes. The DRB acquisition positions us well to continue to support our customers as they diversify their offerings. So, you can see why DRB fits our strategy. I'm happy to share today that we plan to host a deep dive into retail solutions, including DRB, this coming November. Stay tuned for more details on this virtual event. Moving to the outlook, we're raising our full year 2021 adjusted diluted net EPS guidance to $2.77 per share to $2.82 per share. This includes improved assumptions for high single-digit core revenue growth and core adjusted operating margin expansion of greater than 125 basis points. This increase to our core growth outlook reflects mid-teens growth at Matco, improved non-EMV demand at GVR in developed markets, and includes a more favorable view of the 2021 EMV headwind of $75 to $100 million. Excluding the EMV impact, core revenue growth is expected to be low teens despite the challenging comps in the second half. As a reminder, this year's guide reflects a tale of two halves given the pandemic comparisons and EMV dynamics. We are initiating our third quarter adjusted diluted net EPS guidance of 71 to 74 cents, which includes assumptions of essentially flattish core revenue and core operating margin. With that, I'll turn it over to Dave to provide the financial results. Dave?