Vontier Corporation Common Stock

My name is Gretchen and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Volunteer Corporation fourth quarter and full year 2022 earnings result 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'd like to ask a question during that time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press star two. I would now like to turn the call over to Ryan Edelman, Vice President of Investor Relations. Mr. Edelman, you may begin your conference.

Thank you, Gretchen. Good morning, everyone, and thank you for joining us on the call this morning to discuss our fourth quarter results. With me today are Mark Morelli, our President and Chief Executive Officer, and Anshu Managa, our Senior Vice President and Chief Financial Officer. During today's call, we'll present certain non-gap financial measures. Information relating to these non-GAAP financial measures is available on the investor section of our website at bondtier.com. Please note that unless otherwise noted, the presented financial measures reflect the year-over-year increases or decreases. We will also 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 annual report on Form 10-K. These forward-looking statements speak only as of the date they are made, and we do not assume the obligation to update any forward-looking statements. With that, I'd like to turn the call over to Mark.

Thanks, Ryan. Good morning, everyone, and thanks for joining us on the call today. Let's get started with a few highlights of the quarter and the year on slide four. We're very encouraged by our strong finish to the year, reporting 10% core top-line growth for the fourth quarter, 11% excluding the impact of EMV. Our teams around the globe remain disciplined in their execution of our profitable growth initiatives and platform strategies, which continue to deliver results. As we noted on the last quarter's call, we are sunsetting EMV. This upgrade cycle has impacted our U.S. fuel dispenser business over the last five-plus years, and we are transitioning to a new normal in 2023. We are confident in our outlook for our growth in this business going forward, as well as in our strategic vision to accelerate profitable growth across the portfolio. Orders in the quarter were up 10%. Excluding the impact of EMV from the year-over-year comparison, orders in Q4 were up in the high teens. We continue to see good momentum as the demand environment remains constructive across most of our end markets and backlogs remain above pre-pandemic levels. Global supply chain conditions are normalizing, shortening lead times, and helping to reduce our past due backlogs. The momentum we've seen in core top line growth underscores our team's commitments to our customers, along with the execution of our profitable growth initiatives and platform strategies. We're building a portfolio of industry leading technologies and solutions and higher growth verticals of the mobility ecosystem. Let me highlight a couple of notable examples of our profitable growth initiatives. Our fueling aftermarket business grew top line more than 20% in 2022. We have built an incredible installed base of dispensers globally, and this is a solid example of profitable growth initiatives we are executing with VBS. We'll monetize this growth opportunity for years to come. Our environmental products business delivered high single-digit growth, driven by increased market demand for our innovative solutions that solve one of the most pressing needs of our fueling customers, environmental compliance. Technologies like vapor recovery and leak detection are benefiting directly from increasing global regulation. Our platform strategies are also making significant progress. Let me highlight a couple examples. BRB, which ended the year with pro forma core top line growth of over 30%, was largely driven by strong market demand for tunnel car wash and continued share gain. We deployed VBS across this business, which helped drive a 400 basis point improvement in operating margins under our first year of ownership. We see a clear path for sustainable growth in this platform over the next several years as we begin to leverage existing customer relationships to capitalize on upgrade and expansion opportunities. The integration of Invenco is off to a great start, and we're beginning to see early benefits of the investment thesis from the combined portfolio in our dispensers and payment business. During the quarter, we successfully launched the new INFX microservices software platform, which enables a more modular, scalable, and customizable solution for our convenience retail customers. Our fuel or C-store early adopters are already seeing the benefits of this technology. Alternative Energy grew more than 30% last year as our fleet and municipal customers continue to shift more fuel usage towards compressed natural gas and renewable natural gas or biofuels to support cost-effective decarbonization efforts. We are optimistic about the future of this business, particularly as we launch our new hydrogen dispensing technologies and can better serve a multi-fuel future. Lastly, DRIVE continues to scale commercially, owing to its best-in-class, hardware-agnostic EV charging software. DRIVE now manages over 35,000 charge points, and we continue to gain traction with key customers. We now serve over 60 premier customers like EVgo, Shell, Mer, Volvo, and Circle K, to name a few, in more than 30 countries and across a variety of verticals. Drive's scalability and track record of successful integrations has enabled leading market positions in places like the Nordics, which has among the highest penetration of EVs anywhere in the world, and where Drive now manages 75% of the public fast-charging networks. These examples demonstrate that we are making meaningful progress on our strategy-led portfolio transformation designed to enhance profitable growth through delivering smart, sustainable solutions with a tighter focus on the mobility ecosystem. We're bolstering our competitive advantages in markets with strong secular drivers by adding to our connected hardware and software capabilities, and in turn, creating offerings that leverage data analytics to solve increasingly high-value customer problems. Our strategy revolves around connecting smart hardware, scaling through digitally enabled platforms, and managing assets to deliver outcomes like improved operational efficiency, enhanced user experiences, or frictionless payment transactions. All of these lead to more growth and higher recurring revenues with more accretive margins. Throughout 2022, we exercised a disciplined capital allocation approach. As you may remember, early last year, we committed to prioritizing share repurchase. And for the full year, we completed over $325 million of share repurchase. Share repurchase remains a key component of our capital deployment strategy. And as Inshuman will share with you, we also plan to pay down debt in the coming quarters. We also invested organically in new product developments and technologies, along with nearly $300 million in strategic acquisitions that will drive sustainable long-term growth and value creation. Notably, we published our first ESG report in November. I am proud of the ambitious goals we've set for ourselves and the progress we have already made across a number of dimensions, including greenhouse gas emissions, diversity, and safety. In 2022, we reduced our total recordable injury rate by 30%, increased our percentage of global female leaders from 22% to 26%, and increased our percentage of Black and Latinx employees from 10% to 15%. It's imperative that we attract and retain world-class talent and that we cultivate an inclusive and innovative culture. Our ESG program is helping us do just that. More recently, we received a B from CDP following our first climate disclosure. This puts us in roughly the top 30% of all submitting companies right out of the gates, recognizing our programmatic rigor and commitment to transparency. Sustainability is core to our business and strategy. We are uniquely advantaged to drive sustainability impacts that matter to our customers and key stakeholders. including helping our customers meet their own ESG commitments. Before I turn the call over to Ann Schuman, I wanted to provide a few key thoughts on our progress and outlook. I couldn't be more pleased with the way our colleagues around the globe responded to adversity and stayed focused delivering for our customers and stakeholders this past year. It's a true testament to the fundamentals of the volunteer business system or VBS that underpins our culture of innovation and continuous improvement. Looking into 2023, while the macroeconomic backdrop remains dynamic, historically, our businesses have proven to be resilient and we are seeing signs of healthy customer demand. We remain agile and we will continue to closely track order trends and monitor leading indicators for each of our businesses. Regardless of the economic outcome, we are ready and we will continue to leverage our culture of excellence powered by VBS to deliver strong operating results and enhance core growth. When coupled with disciplined capital deployment, we have an attractive framework for value creation. I'd like to turn the call over to Ann Schuman to provide the financial results.