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spk00: Hello, my name is Katie and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Vontir Corporation's second quarter 2022 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, then the number one on your touchtone phone. If you would like to withdraw yourself from the queue, please press the pound key. I would now like to turn the conference over to Ms. Lisa Curran, Vice President of Investor Relations. Ms. Curran, you may begin.
spk01: Thank you, Katie. Good morning, everyone, and thank you for joining us on the call. With me today are Mark Morelli, our President and Chief Executive Officer, David Amura, our Senior Vice President and Chief Financial Officer, and Ryan Edelman, our incoming Vice President of Investor Relations. 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 investor section of our website, www.vonteer.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 they are made, and we do not assume any obligation to update any forward-looking statements. With that, I'd like to turn the call over to Mark.
spk06: Thanks, Lisa. Good morning, everyone, and welcome to our second quarter earnings call. Once again, our strong execution, price cut performance, and capital allocation drove double-digit earnings growth, more than offsetting supply chain inflation and other headwinds. We delivered adjusted earnings per share of 72 cents, or an increase of 18%, despite a challenging comparison year over year. These strong results reflected positive operating leverage and a top-line beat. The beat was driven by double-digit growth at DRB and environmental, more than offsetting underperformance in diagnostics and repair technologies, which I'll come back to. DRB delivered yet another quarter of robots growth, highlighting the strength of our capital deployment and portfolio strategy to accelerate non-ICE business growth. Furthermore, we leveraged the strength of our portfolio's cash generation and balance sheet by deploying $14 million of capital in the quarter towards share repurchase and followed with an additional $17 million in early July. Today's announcement of our bolt-on acquisition of Invenco and further actions on the planned divestitures that Dave will discuss in more detail are important milestones towards building a better, stronger, more focused growth portfolio. We're excited to acquire industry leader Invenco and expand our software-enabled workflow solutions and subscription business model. EventGo is a leading global provider of open platform retailing and payment hardware and software solutions. Its disruptive edge computing technology roadmap and modular solutions offer extensibility across other retailing verticals. This acquisition accelerates our digital strategy and better positions us to serve our customers' growing demand for digitally agile software systems. Evenco is one of the top suppliers of retailing and payment solutions to the convenience retail industry worldwide. Evenco's innovative, secure solutions are well-positioned to enable retailers to customize digital payments and consumer services as the energy markets evolve. Eventco's expected 2022 revenue of $80 million with mid-40s gross margin enhances Vontir's growth and recurring revenue profile. The acquisition purchase price is $80 million and is expected to achieve a very attractive 20% return on invested capital in three years. While we are still in the early stages of developing our M&A track record as a standalone company, I'm very pleased with our results and return profile. DRB is pacing nicely towards delivering 10% ROIC within five years. And collectively, our $1.5 billion of capital deployed since separation is delivering double-digit returns in approximately three years. We're also continuing to advance our profitable growth initiatives, and I'm encouraged by the progress and earnings potential in front of us. But we have more work to do. We have a strong runway of opportunities where we've made important early strides with strategic pricing and product line simplification, which is beginning to take hold. As an example, in GVR, we're on a multi-year journey to reduce our global dispenser platforms from 32 to 8%. So far this year, we've eliminated six dispenser lines. This is indicative of the cost structure opportunities we have to improve our efficiency, cost position, and follow-on improvements to working capital. Before moving to the outlook, I'd like to provide more color on the supply and demand environment and broader backdrop. I'm incredibly pleased with our team's ability to deliver on profitable growth initiatives leveraging VBS. Strong price-cost execution and DRB performance resulted in an adjusted gross margin expansion of 100 basis points in the quarter. Strong execution rigor enabled us to deliver nearly 30% incrementals in the face of supply chain and inflationary headwinds. We expect supply to remain tight but not get worse through the back half of the year. And while we are seeing deflation in some inputs like steel and aluminum, we're also forecasting higher freight. Net-net, we have taken cost measures to protect our margin expansion outlook for the full year. Reflecting the strength and resiliency of our portfolio, the overall demand environment remains solid despite some pockets of softening at Hennessy. And while we always expected a decline in order rates this quarter, given peak growth of over 50% for non-EMV orders in the prior year period, underlying order trends and elevated backlog levels position us well for accelerated growth into the back half of this year and into 2023. That said, the DT businesses did underperform against our expectations in the second quarter, even though demand remains above pre-pandemic levels. We did not reduce backlog or grow macro franchisee count as planned, primarily due to labor challenges and higher separations. Importantly, we've developed countermeasures to address the challenges within DT, including ramping up company-owned stores. And looking into the back half of the year, we've subsequently lowered our assumptions for DT and also high growth markets due to timing of large tender orders shifting out. That said, we are still maintaining our full year core revenue growth outlook primarily due to continued outperformance by DRB and expectations of improving backlog. Moving to the outlook, we're holding our full year 2022 adjusted diluted net EPS guidance to $3.20 to $3.30 per share. Our core growth and adjusted core operating margin expansion assumptions remain the same at low to mid single digits and 30 to 60 basis points respectively. Reflecting continued poor sales linearity and assumptions for increased working capital, we're expecting adjusted free cash flow conversion of approximately 90%. We're also initiating our third quarter adjusted diluted net EPS guidance of 85 to 90 cents, which includes assumptions of low single-digit core revenue growth and 20 to 40 basis points of adjusted core operating margin expansion. Looking beyond this year, I continue to have strong conviction in our ability to offset the peak EMV headwind and deliver earnings growth and strong free cash flow conversion in 2023. Dave will be walking you through a more detailed view of our assumptions to achieve this performance and our roadmap for accelerated growth that we introduced last quarter. With that, I'll turn the call over to Dave to provide the financial results. Dave?
spk04: Thanks, Mark. I'll get started with a brief summary of our performance in the quarter. Adjusted net earnings for the second quarter were $116 million, an increase of 11.5% from $104 million in the prior year period. This translated to adjusted net earnings per share of $0.72, an 18% increase compared to $0.61 in the prior year period. Revenue grew 7.2%, with core revenue up 1.6%. Our non-EMV core growth was mid-single digits on a difficult compare, particularly for our diagnostics and repair businesses, where prior year core growth was over 50%. Growth was primarily driven by GVR, which grew mid-single digits on an overall core basis with growth in both developed and high-growth markets. GVR growth was driven by environmental, aftermarket, and our CNG business. Our compressed natural gas business has grown greater than 65% year-to-date, off a relatively small base. And, although not core yet, DRB continued to demonstrate strong growth of high 20s. Adjusted operating profit for the second quarter was $167 million, an increase of 10% compared to the prior year period. Gross margin expansion of almost 100 basis points reflected continued effective price cost management and the benefits of DRB and other higher margin solutions. These favorable items helped offset production inefficiencies from a very back-end loaded quarter driven by timing of supply, which I will elaborate on further in a bit. The increase in operating profit and strong execution drove incremental margin of nearly 30% and modest adjusted core operating margin expansion. Excluding the $0.02 or $3 million dilutive impact of our energy transition investments, our incremental margin is high 30s. Looking at the top-line performance of our two platforms, in our mobility technologies platform, core revenue is was 3.5% reflecting growth in GBR in developed and high-growth markets, particularly in North America, more than offsetting the sunsetting EMV impact of nearly $15 million in the quarter. Total growth in mobility technologies was 11% as DRB continues to increase market share and increase share of Wallen while benefiting from their industry-leading position and a very strong market backdrop. DRB has continued to outperform our expectations during this first year of ownership and will become core near the end of Q3. In our diagnostics and repair technologies platform, Core revenue declined 3.6% in the quarter as a result of both a difficult compare against the 57% growth in Q2 of the prior year and also normalization of Matco to a more typical growth and operating profile, but still above pre-pandemic levels. The demand backdrop remains healthy as technician employment and auto repair remain at high levels. As Mark referenced, we did experience some labor and other production challenges that prevented us from reducing backlog as much as we had anticipated, which remains an opportunity in the second half of the year. Looking at total company sales regionally, North America core revenue grew low single digits due to GVR growth and non-EMV applications more than offsetting a decline in EMV. Developed markets overall grew low single digits as strength in North America was partially offset by a mid-single-digit decline in Western Europe. High-growth markets, which are typically lumpy, grew low single digits with strong double-digit growth in India being partially offset in other areas, including Eastern Europe and China. we anticipate increased lumpiness in high-growth markets due to the broader macroeconomic and geopolitical factors, as well as timing of tender orders. That may impact growth rates some in the near term, but overall, we remain confident in this profitable growth initiative in the middle and long term, given the attractive long-term secular drivers. Moving on to the balance sheet, we ended the quarter with a cash balance of just under $130 million, and had $14 million of borrowings under our $750 million credit facility. Our net leverage was 3.3 times adjusted EBITDA at the end of the quarter and temporarily elevated due to the large cash outflow year to date related to share repurchase and acquisition activity, and a temporary shift in the timing of free cash flow generation from first half to second half of the year. The quarter became significantly back-end loaded given supply chain issues, and this lack of linearity shifted precast flow from Q2 to Q3. Further, we saw additional working capital build in inventory. We maintain our commitment to investment-grade credit ratings and expect that our leverage will end the year below three times net leverage, with our targeted range being between two and a half times and three times net. We will also have capacity for further free cash flow deployment in 2022, which will fund the announced acquisition of Invenco and also additional share repurchase of approximately $100 million. These assumptions, of course, are influenced by market conditions and further M&A opportunity. In Q2, we refreshed our repurchase authorization back up to $500 million and subsequently have deployed $31 million against that. Our total year-to-date share repurchase stands at $288 million as of today. These assumptions on leverage and capital deployment capacity do not consider any additional capital raised through divestiture activities. Today, we disclosed assets for sale, and those being considered are the Hennessy and GTP operating companies. These businesses comprise about $175 million of annual revenue at a combined growth rate that is below the non-EMV fleet average. The impact of selling these businesses will be accretive to enterprise gross margins and operating margins by greater than 60 and 40 basis points, respectively. We anticipate that proceeds from divestiture will be used for some debt reduction and and then also provides further available capital for deployment on M&A and or share repurchase, which would more than offset the reduction in EPS resulting from removing these businesses. In our full year 2022 guide, we have assumed approximately $0.12 to $0.13 of contribution from these combined businesses. Returning to adjusted free cash flow conversion, on a year-to-date basis, our conversion is 23%. We talked previously about the poor linearity we experienced in Q1, which is typically a low point for free cash flow generation, and we saw further deterioration in Q2. We anticipate that this dynamic will normalize over the second half of the year, but we also are seeing some upward pressure on working capital levels, mostly in inventory as we build stock to satisfy demand. We anticipate that a combination of these factors will have some impact on our full-year free cash flow conversion, and we will more likely be around the 90% range rather than the typical 100% the portfolio generates. Turning to the outlook assumptions, for full year 2022, we are maintaining our core revenue guide of low to mid single-digit growth. with non-EMV growth of high single digits, as EMV is still expected to be approximately a $50 million headwind. We also continue to expect core operating margin expansion of 30 to 60 basis points, reflecting our leveraging of VBS to dynamically adjust our cost structure to effectively adjust to demand levels and offset inflationary impacts. Our confidence in delivering these results reflects continued execution on our profitable growth initiatives and price cost management and the resiliency of our portfolio through the cycle. The full year EPS guide is unchanged and adjusted earnings per share range of $3.20 to $3.30 and does not contemplate the impact of noted divestitures. We anticipate that the Invenco acquisition will close in Q3 and that it will be neutral to EPS in 2022 and accretive in 2023 by mid-single-digit cents per share. Taking a closer look at some of our other assumptions, we now expect full year 2022 weighted average share count to be approximately 161.4 million, which reflects the impact of the share repurchase activity conducted to date in 2022, but not the additional 100 million that I previously referred to. Interest expense is anticipated to be 68 million, reflecting an increase in interest on the variable portion of our debt. Our guide also reflects the current foreign currency translation rates and the strengthening of the U.S. dollar since our last guide, which has had a $0.02 dilutive impact to the full year since our last update. Our assumption on the full year effective tax rate remains at 23%. Moving on to the third quarter of 2022, we expect core revenue growth of low single digits with non-EMV core growth of high single digits. This contemplates a supply environment similar to what we experienced in Q2, still not normal, but more stable than what we experienced in previous quarters. Adjusted core operating margin is expected to be 20 to 40 basis points. As Mark stated, this translates into adjusted earnings per share of 85 to 90 cents in the quarter. Before turning it back to Mark, I'd like to call your attention to slide eight. We presented this slide last quarter to better dimensionalize our conviction and our ability to offset the impact of the EMV decline in 2023, and most importantly, how we expect to have a re-baseline core revenue growth rate of mid-single digits at accretive margins post the EMV sunset, which we continue to expect completes in 2023. Our conviction in accelerated growth and returns has not changed, and we continue to make progress on many fronts. The profitable growth initiatives and platform strategies continue to progress. We have deployed further capital to share repurchase and announce the acquisition of Invenco, demonstrating progress on the capital deployment section of this slide. Also, the disclosure of our plans to divest Hennessy and GTT demonstrates progress on the continuing evolution of our portfolio towards markets with attractive growth and margin profiles. With that, I will turn it back to Mark.
spk06: Thanks, Dave. As Dave highlighted, we're continuing to evolve the portfolio towards attractive markets and growth characteristics. And as we potentially enter a slower growth macroeconomic environment, I think it's worth reminding you of our portfolio's low cyclicality, as best demonstrated in 2008-2009, where sales were down only mid-single digits. We have a highly resilient portfolio of businesses, not correlated to PMI, but rather tied to a steady wave of regulatory drivers. The economy of convenience, expansion of digital workflows, modernization and build-out of retail fueling infrastructure, and increasing complexity of the car park are attractive secular drivers of sustainable growth. And as the 2023 growth roadmap in slide eight also illustrates we're taking advantage of the resiliency and strategic optionality inherent in our businesses to build a better, stronger, more focused growth portfolio. I want to underscore once again that while we believe continued M&A will be a part of our strategy to continue our multi-year portfolio transformation, we are not dogmatic in our approach. Given the strength of our cash generation, we will balance investing in organic and inorganic opportunities along with returning capital to shareholders. They are not mutually exclusive. We will continue to align our capital allocation priority to the benefit of our shareholders as we execute on the initiatives underway to drive further portfolio diversification, profitable growth, and increased returns. We are driving a value-creating growth agenda. We are making meaningful progress on our most important priorities and shareholder commitments. We are demonstrating strong execution and successfully delivering our profitable growth initiatives. We're showing we will make acquisitions and carry only assets that maximize value, even at the expense of near-term earnings. Bottom line, we are focused on long-term shareholder value and we're accelerating returns. And lastly, before turning it over to Lisa, I'd like to thank her for her important role in the successful launch of Vontir as a public company, especially for her professionalism, intellect, and investor relations expertise. We are fortunate to have Lisa staying on long enough to help ensure a smooth transition. With that, I'd like to welcome Ryan Edelman to the team. I believe many of you already know Ryan from his prior roles in both IR and the sell side. Ryan brings deep experience in our sector and a clear understanding of market dynamics. We are very excited to have him aboard. With that, Lisa, I wish you all the best in your next chapter, and I'll turn the call back over to you.
spk01: Thanks for the kind words, Mark. After the pleasure of working with Ryan the last month, I'm confident that you all are in the best of hands with him. Katie, we are now ready for questions.
spk00: Thank you. At this time, if you would like to ask a question, please press star 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star 1 if you would like to ask a question. We will pause for a moment to allow questions to queue. Thank you. Our first question will come from Andrew Obin with Bank of America. Your line is now open.
spk02: Yes. Good morning, Mark, Dave, Lisa. Thanks so much. We'll definitely miss you. And Ryan, welcome. Look forward to working with you. First question on working capital. And, you know, you guys are considered to be some of the better operators out there. And I appreciate, you know, this shift in free cash flow story. What are you looking for? to sort of, you know, what signposts should we look for for the industry, you know, for your supply chain to normalize? And this is a bigger picture question, right? I'm, you know, sort of taking it beyond volunteer. What's your best guess as to when things get to normal? And if they don't, what structural countermeasures can you take? Do you need to carry sort of more buffer stock going forward? Do you need to rethink your supply chains?
spk06: in 12 to 24 months just you know more of a 30 40 000 foot view uh on supply chain thank you yeah andrew thanks for the question look there's no question we've all been wrestling with the supply chain issues now for a while and and i'll absolutely say that we have taken measures already anticipating the supply chains just to be different you know one of the things that we've talked about is a simplification program that we've engaged in that will flow right through to your suppliers So I think that's really the starting point because if you can kind of consolidate and figure out and particularly figure out what region you get supply chain from. But going back to sort of the first part of your question there, you know, it's continuing to be challenging. There's no question about it. I couldn't be more proud of what our team has done to be able to once again face some pretty significant issues and deliver on our commitments. But at the same time, I anticipate we will be in this situation for a little bit longer. And hopefully into 2023, we'll be able to see some of these things get better. Clearly, we are seeing some things getting better on the semiconductor side and electronic component side, but that's actually where most of the stuff still resides. So Dave, any comments there?
spk04: Yeah, I'd just add, Andrew, you made a great point about the linearity. You know, when we look at what happened in Q2, it was really, you know, VBS at its finest. When we look at how supply pushed production to the back end, usually as, you know, overall we'd ship maybe 40% of the quarter in the third month. You know, that was well up over 50%. When we look at our biggest factory, where EMV comes out of, actually half the quarter was shipped in about the second half of June. A little under half the quarter was shipped in the second half of June. And that was really BBS at its finest, but I think it puts a sharp point on some of the challenges that we fielded. And, you know, it rolled through in our shorter collection type region to pushing receivables and free cash flow out of the quarter. So, you know, just to put a highlight on that.
spk02: Yes, and another question I have just with follow-up on M&A. I think, you know, your recent acquisition is sort of more – you know, middle of the fairway type of acquisition for you. But would you say that the M&A funnel is skewed more towards software solution? My driver was early stage, high growth. Invenco, you know, they've scaled to a decent level of profitability. Do you have a philosophy on what's the better time to acquire software firms? Because it seems that's where the company is going. Thanks.
spk06: Yeah, and I definitely wouldn't say that, you know, we're looking for software companies to acquire. I think there's a mix. of things that are in our pipeline and that you can expect us to execute and cultivate our pipeline accordingly because I think there are great returns that can have some embedded hardware into it as well as software. And if you look at companies like Invenco, you look at companies like BRB, it has a combination of those. They're not just software. Now, granted, some of the alternative energy stuff that we did earlier in the year with drives you know with an embedded technology sparky on those those can be more software oriented but once again a mix thanks so much thanks andrew thank you our next question will come from nigel co with wolf research your line is now open good morning this is ryan cook on for nigel co thanks for taking my question
spk05: I just wanted to ask about gas station investments and if you could provide some color on how you typically see match tracking with higher gas prices.
spk06: Yeah, so the industry is actually going through a very interesting, not only investment from an energy transition perspective, but also the sophistication of the retailing environment. and so you do see some really interesting formats being advanced on your your local neighborhood store as well as your truck stop and so we are there's no question that we're seeing that i've just come back from norway where we're kind of looking at a company that has electrified a lot and they do a lot of home charging but at the same time you see those investments going into that format And with higher gas prices, if they're a multinational oil company or they're backward integrated into the supply of gas, then they're going to have more margins here. And you certainly see the energy companies with higher margins. So I think the key thing is that companies like 7-Eleven that have a very sophisticated set of offerings – you're going to see them making those investments in that energy transition and that retailing environment. So I think it's a really good, growthy, and forward-looking way of building out the mobility infrastructure. So we're pretty pleased on the position that we're in to be able to take advantage of those investments.
spk05: Thank you. That's very helpful. And then I also wanted to ask about the e-mobility space and see if you could provide some details surrounding the drives investments and I guess just how we should be thinking about those sort of investments moving forward.
spk06: Yeah, I'll turn it over to Dave, but let me just give an opening on that. You know, the bigger picture here is that we can play an and opportunity we believe in the petrol-based infrastructure particularly in high growth markets growing out but at the same time you know if you look at the energy transition we're actually very well positioned to take advantage of that investments like thrives with embedded technologies like sparkion give us a great platform for investment because it's the operating system for the electric charging network that needs to be managed. And if you think about the bigger issues here about range and anxiety, this is a huge growth space, and we're exactly at the right part of the value chain to not only grow but to grow profitably. Once again, I'll go back to my Norway visit. All the major players out there in the market doing electric charging have subscribed and are subscribing to that drives operating system. I think it's a real testament to how we position ourselves for growth. And so, you know, it's a great position to be in right now.
spk05: Great. I really appreciate that. Thank you.
spk01: Yeah, I just point out to folks, too, that we have some new disclosures sizing the dilutive impact of those investments in our supplemental slides in slide 15 and 16 of the presentation. We heard you asking for that information, and so we provided that this quarter. All right, thanks, Katie. Back to you.
spk00: Thank you. Our next question will come from Andy Capulets with Citi. Your line is now open.
spk03: Hi, this is Piyush on behalf of Andy. Thanks for taking my question. So DRB is growing nicely. Can you talk about the visibility through the remainder of the year at this business? And I think when you guys announced DRB, you talked about high single-digit growth over longer term. So maybe provide some additional color on what's driving this double-digit growth you saw in the quarter and how being part of one tier helps DRB achieve these growth rates.
spk06: Yeah, so I think you broke it a little bit at the beginning of that question. I think what you asked was what's driving the growth rates for DRB, correct? Yeah. Okay. So, look, I think, first of all, it goes back to the strategy around M&A. We've picked the right property, and we carefully did this. I think it shows the discipline around our M&A. This is by far the market leader in the space. It's a combination of hardware and software. It's a deeply embedded... end-to-end point-of-sale system where we layer on top of that workflow software solutions that really are in high demand for customers, and inherently it's in a growth space. And so that's the first reason. The second reason is just our integration plan, I think, just hit the right level. You know, this is not a hard integration because it's a growth-type thing. We've done a significant amount of high-level changeover management there. I think we've executed really well on that, too, taking advantage of that. of a lot of the expertise already in the business. So I think the overall, the strategic path and the execution path has worked incredibly well.
spk03: Got it. Very helpful. And my follow-up question is, like, maybe talk... I think you expect leverage to be under three turns by the end of the year. Can you talk about how you're planning to balance continued deleveraging versus driving incremental capital deployment in the second half and maybe into 2023?
spk04: Yeah, sure. I mean, I think we have a targeted range of below three times, kind of that two and a half to three times in that leverage that I talked about in our pre-cash flow generation profile. And EBITDA growth should facilitate that with additional capital to deploy. So it's always dynamic. M&A opportunities, we don't always get a pick when those come. We've talked about deploying additional capital, $100 million, over the second half of the year into share repurchase, and the timing of which will depend on market conditions. But when conditions are right, we'll be more aggressive. So we have to let the year develop. And we also said, I would remind you, that at times we'd be above three times. with line of sight to coming back below that in a reasonable period of time. So I think our current profile reflects that. And frankly, the 3.3 times net leverage is a reflection of the opportunities we've taken to date. Over 200, well, 288 million of capital deployed to share repurchase the deals we did in the first and then funding the Invenco deal that we just announced.
spk03: Very helpful. I'll pass it along. And good luck, Lisa, and welcome back.
spk08: Thank you.
spk00: Thank you. Thank you. Our next question will come from Julian Mitchell with Barclays. Your line is now open.
spk07: Hi, good morning. And yes, thanks, Lisa, for all the help down the years. Just wanted to follow up on the Invenco deal? Maybe help us understand, you know, recent organic sales growth rates in that business. You know, what you're thinking about the top line growth outlook there. And then when we're looking at earnings accretion for perhaps next year, are we thinking sort of single digits sense of EPS accretion is the right sort of ballpark for that?
spk06: Yeah. So let me Let me jump in on this one. So, you know, their organic growth profile is something that, you know, it's kind of flattish, but it's something that we can really take advantage of. So let me just describe that, give a little color on it, and then I'll turn it over to Dave on the accretion side. So, first of all, this is an excellent strategic fit for us, and it really fits our portfolio diversification. And particularly the nature of this agile software that customers are really looking for, it really enhances our workflow solutions. And the key thing here is that not only is it a platform that is building out with some of our key customers, we have excellent leverage with our sales force. Particularly, it adds feature rich environment for our high growth market, and we can leverage our existing sales force to be able to do that. And so we think that on the growth side, this is really, it's a rare opportunity for us to be able to leverage what we've got and what they've got to really have growth. And there's also a cost synergy side, too. It wasn't where your question went, but there's also cost included to that. Happy to go there. Go ahead, Dave. You want to talk about accretion? Yeah.
spk04: So I would first highlight what Mark said. You know, very synergy-rich deal. Great channel synergies, but cost synergies as well. And the newer stage product they have on the software side fits hand-in-glove into our existing channel. So we're really excited about that. So it's an interesting deal in that it has attributes of a bolt-on, which helps us drive returns. They're very synergy-rich, but also on-point strategy with their newer product on the software side. As far as accretion, we're looking at kind of mid-single digits cents per share of
spk07: next year and beyond that moving up to high single digits sense for sure that's very helpful thank you and then um maybe just my um second question would be around the um you know any update on sort of that that emv outlook i see you got maybe a bigger headwind kind of third quarter than we thought and then a bigger step up perhaps in into the the fourth quarter with that 30 million number um maybe help us understand kind of where are we on the overall, you know, transition and kind of penetration of the installed base and, you know, amidst the sort of quarterly moving parts and maybe supply chain disruption, any change in perspectives on that EMV waiting next year or over the next 12 months?
spk04: Yeah, Julian, look, great question. So really, you know, I would say nothing overall in the big picture has changed. I think what we're feeling the most here is that we actually satisfied more EMV demand in the second than we had anticipated. So if you think of an additional 10 to 15 million that was part of that late June push got satisfied, and that really pulled in from the third, which kind of adds to that step up. You know, we're still satisfying a lot of demand in a pretty uncertain environment. So, you know, it'll move around some, and we try to keep you guys updated as we can. We keep We'll probably get to year end before we update the penetration numbers. But as far as we think of, you know, we talked about still being at that 50 million headwind through the year and our view to next year. No update to that.
spk03: That's great. Thank you. Thanks, Julian.
spk00: Thank you. Our next question comes from Rob Mason with Baird. Your line is now open.
spk04: Yes, good morning. I wanted to see if you could just elaborate, Mark, on some of the challenges you talked about at Matco and how you see those playing out in the second half. And then specific to, I thought I heard a comment around investment in company-owned stores, whether, you know, how new of a dynamic is that? What level of investment are you talking about and perhaps the timeframe that we would, you know, see that materialize?
spk06: Yeah, I'm happy to, Rob. So first of all, I think the backdrop here for Macco is a pretty strong macro environment for them. You know, the technician continues to be at high employment. They're getting paid well. There's robot shop activity. So all those things bear really well. And then the backdrop for complexity to repair is also really good, too. So I think that's great. I think one of the biggest issues we're running up against is, first of all, year-over-year compare is pretty significant. You know, MACCO had more than 50% organic growth in the prior year period. And we knew that the quarter was going to be challenging because the timing of the MACCO Expo was in Q1 this year instead of Q2. And so we did a lot of bookings according to that. But at the same time, you know, we experienced supply chain disruptions and had some labor issues associated mostly with our Jamestown factory that we build toolboxes on. And so we currently have a remedy plan in place for that that I feel confident in. And at the same time, I think the... The build-out of the franchisee, which is a real opportunity for us, and it goes back to your question on company-owned stores as well, is that it's not something that we have focused on a lot historically, but I think some of these underserved geographies and territories where we have a real advantage because about 30% of our territories are not yet penetrated, But sometimes you have to jumpstart that a bit with a company-owned store. You might get that route started, and then it's easier to hire somebody into that area that would be able to take that on. So it's kind of a transition plan for us, not necessarily a permanent plan. But we think that we've got to be creative to do that. particularly in these rather underserved geographies, with how to build that out, particularly with the labor constraints. You know, it's harder to attract maybe labor in some of these opportunities. So I think we've got an excellent value proposition, and it's just our effort here to be more creative.
spk04: I see. And, Dave, could you just give a little bit of color on how you see growth in the second half, core growth in the second half of the year between the two platforms? Sure. Yeah. So, you know, I think we continue to, you know, track after a reasonably slower start in the DT side of the business. You know, we'll continue to track in the second to get to more of a low, kind of a low single-digit core growth for the full year. And then I would say, you know, overall in the MT side of the house, we're still tracking that mid-single-digit. to get to the full year guide that we articulated. Excellent. Thank you.
spk00: Thank you. Again, as a reminder, if you would like to ask a question, please press star 1 now to join the queue. Again, that is star 1 to ask a question. Our next question will come from Ty Hardwick with Credit Suisse. Your line is now open.
spk08: Hi. Good morning. I'd like to ask a question about Invenco. Is it correct, understanding it correctly, that it takes GVR a little bit beyond the gasoline forecourt and into the broader convenience store market? And also, can you give us a background as to what the contingent consideration is based on?
spk06: Yeah, so if I understood your question, you're trying to understand how that's positioned. And I think it's a great question because the key thing here is it does take us beyond the traditional C-store with our retail solutions platform. So if you think about what's happening here, this is a microservices software platform. offering that offers a lot of modularity and customer choice. And you're seeing this in other type of retailing venues that have not shown up into the verticals around the retailing spaces that we serve. And so not only is this great for the convenience store, there's other things part of the mobility infrastructure that we're very interested in, namely car washes as another thing the repair solution side. So it's a very contemporary, modular technology that customers are very interested in because it drops our costs as well as lead time with offering solutions that they can pick and choose from. So it's a really big step up. If we were to do this development ourselves, it would take us a couple years, and there's nothing available in the space that you can actually go out and develop. So it's a great position for us to pick up.
spk04: I'll just build on that a little bit. I'm not sure I got your words right, but you talked about moving from the forecourt into the C-Store, and I would just point out we're already well into the C-Store with our existing retail solutions. And as Mark pointed out, this really could tan the gloves with that and could take us into other verticals as well. The contingent consideration is based around revenue performance in the first kind of year, year and a half.
spk08: Thank you. And just as a follow-up, can you tell us what pricing was in Q2, and how you expect price-cost to progress through the rest of the year?
spk04: Yeah. So, look, we, again, you know, had pretty strong price. We were price-cost positive, and we offset the margin impact from cost as well. So, in other words, it was, you know, margin neutral. So, we did more than offset it just on a dollar basis. You know, we've been running really well on a year-to-date basis, got off to an early start last year, as most people know. But for the year, we still anticipate in the second half being price-cost positive as well and also offsetting the margin impact. And, you know, so for the full year, we would anticipate, you know, being margin neutral as well.
spk01: Yeah, and we did come in almost six points a price in the quarter and still on track for kind of that mid-single-digit range for the year.
spk08: Six points. Thank you.
spk00: Thank you. It appears we have no further questions at this time. I would now like to turn the program back over to Mark Morelli for any additional or closing remarks.
spk06: Yeah, thank you, Katie. Look, I couldn't be more encouraged in the track record that we're establishing and the runway of opportunities in front of us at Volunteer. I'm particularly thankful of the team for continuing to step up and work through challenges in this dynamic market environment, and I think our work is resulting in a stronger, more growth-oriented portfolio. I couldn't be more encouraged by all this. So thanks for joining us on today's call, and have a nice day.
spk00: Thank you, ladies and gentlemen. This concludes today's event. You may now disconnect.
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