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spk02: My name is Travis, and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Volunteer Corporation's first quarter 2023 earnings 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 telephone keypad. If you would like to withdraw your question, press star two. I would now like to turn the conference over to Ryan Edelman, Vice President of Investor Relations. Mr. Edelman, you may begin your conference.
spk06: Thank you. Good morning, everyone, and thank you for joining us on the call this morning to discuss our first quarter results. With me today are Mark Correlli, our President and Chief Executive Officer, and Anshuman Abra, our Senior Vice President and Chief Financial Officer. You can find both our press release as well as our slide presentation that we will refer to during today's call on the Investor Relations section of our website at volunteer.com. Please note that during today's call, we will present certain non-GAAP financial measures. We'll 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 risks and uncertainties. Actual results might differ materially from any forward-looking statements that we make today, and we do not assume any obligation to update them. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available on our website and in our SEC filings. Before I hand the call over to Mark, I want to take a moment to remind everyone that starting this quarter, we are reporting and discussing our results in line with our updated segmentation. Additional information regarding our segmentation is included in the appendix of today's presentation. With that, I'd like to turn the call over to Mark. Thanks, Ryan. Good morning, everyone, and thanks for joining us on today's call. Let me kick things off with some high-level commentary beginning on slide five. We're off to a strong start in 2023, having delivered Q1 results that are above the guidance we provided and raising our outlook for the full year. We delivered another quarter of strong top-line performance in Q1, with all three segments exceeding expectations. Core revenue grew 4%. Baseline core revenue, which excludes the year-over-year impact from the EMV sunset, grew 11%. Both of these were above the guidance we provided, and Schumann will provide more details later in the call, but at a high level, upside was driven by better-than-expected demand in our U.S. dispenser business, as well as continued strength in our environmental and aftermarket and our fueling segment. In mobility technologies, DRB continues to outperform, along with another solid quarter at ANGI, our CNG, and hydrogen business. And we're seeing nice growth at Matco, both on same-store sales as well as net franchisee ads. This strong performance reflects the execution of our connected mobility strategy, which incorporates our ongoing growth initiatives as well as incremental improvements in supply chain conditions, which allowed us to convert higher levels of backlog. Our end markets remain constructive, supported by strong secular drivers, demonstrating the resiliency of our portfolio. Our book-to-bill ended the quarter at one, despite strong sales growth this quarter. This included nearly $20 million in incremental sales from higher backlog conversion. Our reported operating profit declined versus prior year as expected due to the sunset of EMV, and I'm encouraged by the underlying performance of our businesses. Baseline operating margin expansion of 80 basis points demonstrates solid execution, the benefits of our strategic initiatives, and the power of VBS to deliver operational excellence. We're in the early innings of a longer-term opportunity to optimize our cost structure, which gives us confidence in the ability to achieve our multi-year margin expansion opportunity. The cost actions we began implementing last quarter continue to gain traction in Q1 and will continue to ramp through the remainder of the year. We continue to make progress on our multi-year portfolio transformation as well. In mid-April, we announced the sale of GTT for $107 million, or about 10 times 2022 EBITDA. We will redeploy these proceeds to further strengthen our balance sheet and return capital to shareholders through additional share buybacks. These actions are already underway, as Enshuman will highlight in a moment. Turning to our outlook for the remainder of the year, strong first quarter results, solid end market demand, and conviction in our strategic initiatives provide increased confidence in our outlook, and we are raising our adjusted EPS guidance for the full year. While we remain vigilant in the current macro environment, demand across our end markets is supported by the secular drivers we highlighted during our recent investor day. This is reinforced by our recent channel checks and customer conversations. We remain optimistic given our strong fundamentals, the momentum with our strategy, and our resiliency in our portfolio. We continue to make great progress on our connected mobility strategy as we shared with you at our recent investor day. Our strategy is centered around driving operational excellence, accelerating core growth, and transforming our portfolio through greater leverage in adjacent markets. We refer to these as our three pillars, optimizing the core, expand core, and adjacent markets. In addition to delivering annual margin improvement, pillar one, optimize the core, increases our focus on simplifying our business and expands margins. And pillar two, expand the core, accelerates profitable growth by focusing on select opportunities, which we've referred to in the past as our profitable growth initiatives. We're also redeploying investments in new product development and sales capabilities in support of expanding organic top-line growth. Longer term, these two strategic pillars enhance our ability to leverage adjacent markets, pillar three, through both organic and and inorganic means to further accelerate growth and transformation. Let's turn to slide six for a quick look at a few strategic developments in the quarter. Two weeks ago, we held our annual CEO Kaizen event, building eight teams with the intent of accelerating our connected mobility strategy. These events are a critical part of the VBS culture and bring together dozens of cross-functional and business leaders to collaborate on the company's actionable opportunities. Just as an example of some of the actions we focused on this year pertinent to the Optimize the Core pillar, we accelerated our product line simplification and SKU rationalization programs. We are reducing our number of dispenser platforms from 20 to 15 this year, having already come down from 32. We're also implementing dynamic Kanban across the VitaRoot factories, identifying a path to reduce several million dollars worth of inventory over the remainder of the year. Under Expand the Core, the Matco team worked through accelerating initiatives to drive higher franchisee ads by materially improving the conversion rate and reducing time to conversion. The Retail Solutions team implemented process improvements to streamline the setup time for the NFX software platform by 75% per site. This frees up more capacity internally to scale more effectively to meet our large and growing backlog. As many of you will remember, we acquired Invenco last September to augment our payment solution through both vertical integration and building a stronger offering in microservices. Importantly, we formally launched the NFX microservices software platform late last year. NSX is revolutionizing the way our convenience retail customers operate, enabling them to consolidate major four-core systems into a set of lightweight microservices. It also provides customers with an easily configurable cloud-based solution with standard-based APIs that enable faster deployment on-site. Significantly improved transaction speeds and differentiated customer offerings address a key secular trend within convenience stores, the need for enhanced end-user experiences to drive engagement, traffic, and loyalty. Convenience retail is an attractive growth vertical for us, and we have leading positions. Non-fuel retail sales have grown at a 5% CAGR over nearly 20 years. And retailers have seen a 20% plus increase in foot traffic with investments in newer, larger formats, enhanced amenities, expanded offerings and food service, and professionalist experiences. All of this is enabled by automation and digitalization, which are our two core competencies. And these trends are sustainable even through the energy transition. Industry data shows that C-Store retailers with an onsite EV charging capability are seeing a 50% increase in foot traffic into the store to make a purchase. There is real value to be generated for the convenience retailer, and we are competitively advantaged to solve their high value problems. As an example, We are excited to announce a substantial win for the NFX software platform, where we are deploying the platform across all of the U.S. sites for a major C-Store operator. We also have an attractive pipeline of opportunities going forward to continue rolling out NFX. At Teletrak Davman, we've launched nine new feature sets or programs in the first quarter across multiple industries and geographies. This includes Canadian ELD solutions for the transportation industry, asset tracking and management tools for the construction industry, and an expanded EV vehicle library across all industries. We have notable momentum around Teletrac's new electric vehicle readiness tool that integrates seamlessly with the TN360 platform. The AI power tools shows fleet operators the feasibility of switching to EVs calculates the total cost of ownership, calculates the total CO2 and fuel savings, and facilitates easy carbon reporting. The tool also recommends the ideal electric vehicles to switch to and advises on the number, type, and ideal location for chargers. In sum, We have solved one of our fleet customers' biggest pain points by significantly reducing the complexity in the energy transition planning process. And we now have a comprehensive end-to-end solution for managing sustainable fleets. Lastly, while not listed on this page, we are equally excited to have received SBTI validation of our near-term greenhouse gas emission targets. We are targeting a reduction in Absolute Scope 1 and Scope 2 emissions by 45% and a reduction of Absolute Scope 3 emissions by 25%, both by 2030. As our Chief Legal and Sustainability Officer Kay Rowan shared with you at our Investor Day, our strategy is inextricably bound to sustainability. It's about providing smarter, more sustainable solutions to our mobility ecosystem customers helping them achieve their own sustainability goals and doing our part to ensure a healthy planet. Now, I'd like to turn the call over to Ann Schuman to provide the financial results.
spk03: Ann Schuman Thanks, Mark, and good morning, everyone. As Ryan mentioned at the start, beginning this quarter, we are reporting results for our three operating segments, mobility technologies, prepared solutions, and environmental and fueling solutions. Please turn to slide seven. Reported revenue of $776 million increased 4% on a core basis or an 11% baseline increase, excluding the impact of the EMV sunset. All of our operating segments saw the benefits of healthy end market demand and improving supply chain conditions, driving the solid year-over-year performance. Adjusted operating profit of $161 million declined slightly versus the prior year, and the adjusted operating profit margin of 20.8% declined approximately 100 basis points, at the better end of a previous guidance range. Baseline margin improved 80 basis points, led by our productivity initiatives and continued cost-price performance. Adjusted earnings per share of 68 cents was above our guidance range and relatively flat with the prior year despite an 11-cent headwind from EMV. A year-over-year benefit from share repurchase was offset by higher interest and FX. Adjusted free cash flow in the quarter was 78 million, representing 73 percent conversion ahead of a normal seasonality and well above prior levels, resulting from solid working capital management. Turning to the segment performance, starting with mobility technologies on slide eight. Sales increased over 18%, including a full quarter contribution from the Invenco acquisition. Core growth of 12% was broad-based. Demand for our market-leading car wash technologies remains robust. with DRB growing over 20% as we continue to expand share in an attractive market for tunnel car wash. Sales at Angie, our alternative energy solutions business, were up over 30%. Angie continues to benefit from the increased adoption of lower-emission alternative fueling solutions like compressed and renewable natural gas, as well as hydrogen systems for large and medium-duty commercial vehicles. The turnaround of Teletrak Navman continues to gain speed, with annual recurring revenue up high single digits and core sales up low single digits in the quarter. Segment operating profit of $48 million increased 17% versus the prior year, translating to an operating margin of 19.5%, which is down 30 basis points versus the prior year. Invenco profitability is still in the early stages of scaling up, creating a year-over-year mixed headwind for us in the first half. Additionally, we continue to invest for growth within the segment, including a full first quarter of drives in our results. Excluding the impacts from the Invenco acquisition and a full quarter of drives investment, our margin percentage would have increased year-over-year. Turning to repair solutions on slide nine. Revenue increased over 10% to $181 million in Q1. During the quarter, Matco hosted its annual expo event, which is traditionally the most significant stocking event of the year for our franchisees. Record sales at this event, coupled with easing supply chain conditions, allowed our teams to convert backlogs at a faster rate. An increase in net franchisee ads in the quarter further supported our top line growth. Operating profit of $47 million is in line with the prior year results, and operating profit margin declined 250 basis points due to timing of year-over-year reserve adjustments related to the finance portfolio. And finally, environmental and fueling solutions on slide 10. Reported revenues declined approximately 4% to $314 million. Baseline core revenues increased 10%, excluding the year-over-year impact from the sunset of EMV. As noted, U.S. dispenser demand is tracking ahead of our initial expectations, primarily the result of robust new site build and site refresh activity. Sales in both our environmental solutions and aftermarket parts businesses increased low double digits in the quarter. Demand for environmental solutions continues to benefit from regulations across multiple regions, as well as our industry-leading product offerings. And in aftermarket parts, we continue to leverage a large install base to drive growth. Additionally, Improved supply chain conditions enable GBR to continue converting backlog at higher levels, supporting sales outperformance in the quarter. Segment operating profit of $81 million is in line with the prior year results, while operating profit margin expanded 70 basis points to 25.7%. Execution on our previously announced restructuring actions, price-cost disciplined, and proactive supply chain management probe margin expansion. Just a quick note. As you may recall, one of the key initiatives from last year's CEO Kaizen event included focusing our engineering resources to expedite board redesigns ahead of component obsolescence, putting us on a much stronger footing as the broader supply chain conditions continue to recover. I'll now pivot to the balance sheet and free cash flow detail on slide 11. During the quarter, we repaid $65 million in debt, reducing our 2024 maturity, as you can see at the bottom right-hand side of the slide. Our night leverage ratio continues to decline sequentially, ending Q1 at 3.1 times. we maintain our commitment to an investment-grade credit rating and still expect that a leverage will end the year within our targeted range of 2.5 to 3 times on a net basis. With over $100 million in proceeds from the divestiture of GTT in April, we now anticipate paying down $200 to $250 million in debt for the full year, an increase of $50 million compared to a prior assumption announced last quarter. We have already redeployed 50 million of those proceeds to incremental debt pay down over the last two weeks. Additionally, we also completed approximately $18 million in share repurchases in Q1, which we mentioned on the fourth quarter call. We have outlined our modeling assumptions for GTT on slide 12, which includes an approximately 35 million impact to revenue, $10 million of adjusted operating profit, or $0.05 of adjusted diluted EPS. Through return-driven redeployment of proceeds for debt and share repurchases, we anticipate mitigating at least $0.03 of this impact by year-end. Over a 12-month period, we expect to fully offset EPS dilution related to this transaction. Turning to our outlook assumptions on slide 13, we're initiating Q2 guidance for adjusted EPS of 61 cents to 66 cents, which assumes a low to mid-single digit decline in core sales and baseline core growth of mid-single digits. We expect adjusted operating margins to decline between 65 and 105 basis points, with baseline operating margin expansion of 170 to 220 basis points. I would also remind everyone that Q2 is typically our seasonally low quarter for free cash flow due to the timing of cash tax and interest payments. Therefore, we expect conversion to be less than 50% in the quarter. For the full year, as Mark mentioned, while we remain vigilant, our end markets remain constructive. Dealing indicators like fuel margins, technician health, return on investment on car wash projects remain positive, and the view is supported by our customer conversations. Based on this and our strong first quarter performance, we are increasing our adjusted EPS guidance range to $2.77 to $2.87 Adjusting our prior guides for the 5-cent contribution of GTT, our new guidance increases by 9 cents at the midpoint, which flows through the upside in Q1 and incorporates the benefit from lower interest expense from our debt repayment. We are now assuming a core sales decline of low to mid-single digits, slightly ahead of our original guidance for a mid-single digit decline. and baseline sales growth of mid-single digits plus. No change to our margin assumptions. Also, I would note that our guidance is based on a share count of approximately 155 million shares and does not include the benefit from additional share repurchases, including the 50 million redeployment of GTT proceeds. With that, I will turn the call back over to Mark.
spk06: Thanks, Dan Schumann. I couldn't be more pleased with the progress we continue to make day in and day out, further establishing Vontir as a premier industrial technology company. As we shared with you at our investor day a little more than a month ago, our unparalleled portfolio breadth uniquely positions Vontir to lead the evolution of the mobility ecosystem. We believe we're the only company capable of providing a full suite of connected hardware and software solutions to connect, manage, and scale assets across this $30 billion addressable market. We have a diverse and growing set of customers across the car wash, multi-energy fueling, convenience retail, auto repair, fleet operators, and EV charging verticals. These customers are facing common secular trends and common challenges that they trust us to solve. Labor and skill shortages, increasing car park complexity, increasing regulation, increasing focus on decarbonization and sustainability, and consumer demands for more personal, frictionless experiences are all forcing an evolution of the mobility ecosystem. It's an ecosystem experiencing massive investment tailwinds, and we're right at the center of it. Vontir is a company in motion, transforming and aligning our portfolio to deliver attractive growth, industry-leading profitability, and significant free cash flow. Propelled by market-leading positions in connected automation and multi-energy fueling and robust secular tailwinds sweeping the mobility ecosystem, We are well positioned to strategically invest in our company, execute on our connected mobility strategy, and deliver outstanding shareholder returns. Our entire team is energized by our performance, our recent wins, and our strategic vision. Our culture of operational excellence and innovation powered by VBS is stronger than ever. our businesses continue to collaborate and innovate to enable the way the world moves, driving smart, sustainable solutions for our customers, investors, and the planet. And we're just getting started. With that, operator, we're ready to open the line for questions.
spk02: At this time, if you would like to ask a question, please press the star and 1 on your touchstone phone. You may remove yourself from the queue at any time by pressing star and 2. Once again, that is star 1 to ask a question. We will pause just for a moment to allow questions to queue. Our first question comes from Julian Mitchell, Barclays.
spk09: Hi, good morning. Maybe just wanted to start off with the core sales outlook. So the first quarter you had double-digit growth in repair and mobility, that single-digit decline in EFS. Just maybe help us understand what across those three is baked into that second quarter sales guide where you've got the sales overall flipping negative year on year. and what were the businesses that drove the slightly better core growth outlook for the full year?
spk06: Yeah, let me start off, and then I'll turn it over to Ann Schumann on that one. So, first of all, I think, you know, to get to the second part of that, you know, we're pretty confident in the outlook that we have because the markets really are healthy. We've got some strong secular tailwinds that are in there, and I think it's broad-based across each of the segments. I think if you heard, too, on the prepared remarks that, you know, we think that DRB and Angie with greater than 20% sales and mobility technologies and then this strong Matco Expo with some really record sales as well as, you know, excellent bookings there give us some legs certainly into the rest of the year. And then I'm particularly encouraged, too, by the environmental and fueling, which was pretty broad-based, you know, environmental, aftermarket parts, a little double-digit. But also, too, we're doing better on the U.S. dispenser business, and we think there's upside to that $250 million in full year. And so I think, you know, I'll turn it over to Ann Schumann to give you more color on the beginning part of your question there.
spk03: Yeah, thanks, Julian, and good morning. Just as Mark mentioned, our end markets remain healthy, and there's a lot of the leading indicators remain positive. So really when we think across Q1, broad-based growth across all three segments, and we expect that the baseline growth to continue to be broad-based across all three segments, even going into Q2. Now Q1 on repair technologies, we have our annual expo event, which is the largest restocking event. So that and the easing supply chain conditions are, helped, and the easing supply chain conditions also helped on the environmental and fueling side. But again, we expect good growth in all three segments for next quarter.
spk09: That's helpful. Thank you. And then just maybe my second question around the phasing of that $300 million of EV sales headwinds through the year. You know, now we're a third of the way through the year. You've probably got a pretty good view of how that 300 sort of pauses out. Any details you could give on, you know, how do we see that through the year, that headwind?
spk03: Yeah, Julian. So the EMV headwind is more second half weighted, as I mentioned in the last quarter call. So really, if you think about the second half, about 60% to 65% of the EMV headwinds in the second half. Q3, 85 to 90 million. Q4, a little above 90 million. Q2, think of about 70 to 75 million of headwinds in Q2.
spk02: Our next question comes from Steve Cutson, J.P. Morgan.
spk00: Hi, this is Sam Yellen on for Steve to that. Thanks for taking my question. Could you give us a bit more color on how orders were tracking versus Q for any areas that were particularly strong?
spk03: Yeah, so as we mentioned, our end markets and the leading indicators are all positive, and we had a book-to-bill of one in the quarter, and that's despite the fact that we were able to accelerate our backlog deliveries due to easing supply chain conditions. The easing of the supply chain conditions helped generate about $20 million of incremental revenue, and despite that, our backlog book-to-bill was one. Also, our backlog remains at elevated levels compared to the pre-pandemic level. When you think back to Q1 of 2019, our absolute backlog amount is about 50% higher than it was in Q1 of 2019. So, overall, the market conditions remain healthy. When you start thinking of the book-to-bill bookings by 2019, Segment mobility technologies and repair solutions, both had strong bookings and both showed good growth. Fueling solutions also, when you start thinking of the baseline bookings, excluding the impact of the sunset of EMV, they had a good performance out there. So broad-based strength across all three businesses from an in-market perspective.
spk00: Great, thanks. And then organic growth was pretty strong this quarter. How should we think about the breakdown of price versus volume? And do you have any additional price increases planned this year?
spk03: Yeah, so if you look at our baseline growth, which factors in the sunset of EMV, that was just under 11%. Roughly 4%, 4.5% of that came from price. So about 40% of our growth for the quarter came from price, and the 60% of our growth came from actual volume growth. In terms of price, I mentioned we are cost price positive and we're dynamic and look at that every month. So if there is incremental inflation, there will be incremental pricing. We are very dynamic from a cost price perspective, and we're very proud of the fact that we have been cost price positive every quarter since we became public.
spk02: Our next question comes from Nigel Coe, Wolf Research.
spk01: Oh, thanks. Good morning, everyone. Good morning. It's great to see some segments here. So it's definitely helpful. So thanks for that. Yeah, so repair growth of 10% was obviously a big change versus second half of last year. You had some sort of franchisee churn, I think, in the second half of the year. So just wondering what you've seen in terms of the franchisee momentum and maybe talk about – the impact of bringing in Milwaukee into the offering and whether that's contributing to maybe better growth and perhaps some margin division.
spk06: Yeah, absolutely. Happy to take that one. Look, I think the Metco business is a great business. I think last year we suffered a little bit from the supply chain issues. I think we've worked through that admirably well. We have a great lineup with Milwaukee as part of our power tools offering, and we're getting really good traction with the offering we have coming out of the expo. I might also add that, you know, our toolbox availability in factories on the mend, which is great. We're seeing great demand there. You know, the service technicians out there are at very good wages, at full employment. It's a very healthy market for them, and certainly we're stepping in to capitalize on that. I think one of the things you also brought up was our net franchisees. I think they were down last year. We had a great 2021 2022 was not so great we did a little bit of retrenching on that but i think what we're showing after the first q1 we put a better focus on that a lot of learnings and also with a great lineup you know we're seeing uh 20 net ads in q1 and franchisees which is really strong i think it so the indications that we see and combined with this net franchisee ads looks like a good year certainly and a very good outlook for our macro business
spk01: Okay, that's helpful. Thanks, Mark. Then switching to what's it called? Mobility. I'm still getting used to the names here, mobility technologies. DRB, you know, 20% growth, more than 20% growth this quarter, I think 30% last quarter. I mean, people clearly have a preference for clean cars, but maybe just talk about the sustainability of these kinds of growth rates. I mean, I'm sure we're running into tough comps. You know, what's the pipeline looking for car wash here? And maybe just talk about the down margins for mobility this quarter. I thought DRB was a higher-profit business, so just maybe talk about that as well.
spk06: Yeah, so I'll take the outlook on the car wash side, and I'll turn over the margins to Unshuman. This is a question that we've looked at a lot, like where is the legs to this market for car wash? And we actually have a data analytic capability as well as we do a ton of channel checks here. And we believe that this market is very, very far from being fully penetrated. There's outstanding returns, even with an increased interest rate environment. And so folks that are building out the car wash footprint still enjoy, you know, with increased interest rates, really strong returns there. And so I think, if anything, there's a fear of missing out. And so I think you're looking easily at 10 years plus before we feel like the U.S. market is fully penetrated. And then we have international markets, too, that we can go after. So I think there is a long runway here. I think in our guide we have, you know, anticipated some slowing of the market because, you know, we have a tremendous share gain that's been ongoing here. And I think we're continuing to gain share. Next week we're at an international car wash show. in Las Vegas, and we also anticipate strong demand there. But I would say that, you know, the visibility that we have is certainly well into the back half of this year based on what we see folks doing and building out their footprints and the demand that we've got. So we couldn't be more happy with our business here and the visibility that we have and the outlook as well.
spk03: And taking the question on the margins, the margins were down 30 basis points in mobility technologies, but a large part of that decline was because of having Invenco in Q1 this year versus Invenco is about... $17 million of revenue at no operating profit this year in our results. Inventor profitability comes in in the back half of the year as we gain synergies and some of the NFX shipments start going out. Normalizing, so just in Venco, our margins would have been 21%. And then also this quarter, we have drives into the full quarter, which is a partial quarter. Last year, so the drive investments also bring down margins. So just normalizing for those, we would have had strong growth in operating profit margin year-on-year in that segment.
spk01: Understood. Great, Keller. Thank you very much.
spk02: Just a reminder, if you would like to ask a question, please press star 1. Our next question comes from Guy Hardwick, Credit Suisse.
spk08: Hi, good morning. Apologies if this question has already been answered. I joined the call late. Can you talk about our pricing across your businesses in Q1 and expectations for the full year, especially for environmental and fueling solutions?
spk03: Good morning, Guy. So pricing for Q1 was roughly 40% of our baseline growth came from price, and 60% of our baseline growth of just under 11% came from volume. Translates to a little over 4% from price. From a full-year perspective, the price increases 2% to 3% of our mid-single-digit-plus growth from a baseline perspective. But I'd also made a comment earlier that pricing is dynamic if we see continued inflation. we would look at continued price.
spk04: We are very focused on price cost, and we've been price cost positive every quarter since then.
spk08: And is there any sort of mixed benefits at all, which is either in Q1 or you expect for the rest of the year?
spk03: From a mixed perspective, I'd just point out that we did have the EMV headwind is more backed
spk04: slightly over 60% is the second half versus first half.
spk03: Just, however, at the same time, as our portfolio continues to shape up, some of the higher margin elements like DRB aftermarket parts continue to grow at above fleet average rates.
spk06: Yeah, let me jump in there too, Guy, because the second question we've gotten sort of a little bit on the timing with the EMV. Look, I think what we're saying on today's call is good confidence in the top line. And I think on the bottom line, too, keep in mind we've been doing a lot of cost-saving and restructuring as part of this Pillar 1 program. where we're doing operational excellence. I think there's a lot of legs to that. So I think we're really confident, too, on delivering on the bottom line because there's a lot more to come based on the actions we've taken in the first half of the year. So I think we feel very confident in our outlook.
spk08: Just sorry, since you bring up the cost savings, I think at the investor day, you kind of got another 10 million of incremental cost savings in 2024. Is that correct? Am I understanding that correctly?
spk03: That's correct. And we're fully on track to deliver our cost savings target. We feel very strongly that we're going to achieve those targets.
spk08: Thank you.
spk02: Our next question comes from Joseph Donahue, Bayard.
spk05: Hey, guys. Thank you for taking the question and giving the cash flow on the quarter. I wanted to dig into inventory. It looks like the growth has slowed down there. Should we expect this quarter and next quarter to be peak inventory and then for that to start getting worked down through the remainder of the year?
spk03: That's correct. You know, as the supply chain conditions have normalized, we are managing inventory levels down. One of the CEO Kaizen events actually this quarter was around a dynamic combine at one of our manufacturing locations, which will lead to a multimillion-dollar reduction in inventory over the rest of the year. The actual interesting phenomena was as supply chain conditions have eased a lot, we actually saw some early declines. deliveries coming in where our suppliers were actually beating their expected lead times. So just as all of this has normalized, expect inventory levels to come down over the rest of the year.
spk07: Got it. Okay, thank you. And then just as a follow-up, you talked about the $20 million that you did in extra shipments. Was that concentrated in fueling or any one segment?
spk04: It was more on the fueling side, but also on Matco and a little bit in mobility technologies.
spk03: Really, the supply chain conditions, especially around electronics, have eased across the board, and we saw benefit of that, mainly in fueling, followed by repair solutions, and then mobility technologies.
spk04: Got it. That's very helpful.
spk07: Thank you. Welcome.
spk02: We have no further questions in the queue at this time. Now I'd like to turn the call back over to today's speakers.
spk07: Yeah, thank you, Travis.
spk06: This is Mark. Look, before we close, I just want to take a quick second here to thank the teams across Frontier. Norm, Our performance and dedication really enabled us to deliver top-tier financial performance and create shareholders for value. So many thanks to the hard work the team is doing.
spk04: We've got a lot of momentum with the business. And I'd like to thank you all for joining on today's call.
spk07: We look forward to catching up with many of you soon. Have a good day. Bye now.
spk02: This does conclude today's program.
spk07: Thank you for your participation.
spk04: You may disconnect at...
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