Vontier Corporation Common Stock

Good morning, ladies and gentlemen, and welcome to the volunteer second quarter 2023 earnings call. At this time, all lines are in the listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 3, 2023. and the replay will be made available shortly after. I would now like to turn the conference over to Ryan Edelman, Fortier's Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us on the call this morning to discuss our second quarter results. With me today are Mark Morelli, our President and Chief Executive Officer, and Enshuman Agha, 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 investors.fonteer.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 beginning last quarter, we are now 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 continue to deliver on our commitments accelerating baseline growth and profitability in Q2 and demonstrating strong traction on our connected mobility strategy. We delivered another quarter of strong top-line performance above our expectations with baseline core growth of 9%. As a reminder, baseline core growth excludes the year-over-year impact from the EMV sunset, which continues to play out as anticipated. There is no change for our outlook for the EMV-related trough in 2023, which is setting us up for accelerating core growth in 2024 and beyond. All three segments contributed to the upside. First, mobility technologies reported low double-digit baseline growth led by double-digit growth at DRB and our alternative energy businesses. Second, in our environmental and fueling segment, we continue to see strong performance in our U.S. dispenser business driven by significant expansion, refresh, and rebuild activity. And in our repair solution segment, Matco continues to capitalize on a very strong in-market dynamics, delivering solid same-store sales growth and net franchisee ads this quarter. Supply chain conditions continue to normalize in Q2, enabling our teams to convert higher levels of backlog and exceed our top-line commitment, building on our record of strong operational execution. Recent channel checks and customer conversations indicate that the demand backdrop across our end markets remains constructive supported by strong secular tailwinds and the traction we're gaining and accelerating growth across the portfolio. Our book to bill was 0.97 in line with what we were anticipating and comes after a solid Q1 performance. Order activity and healthy leading indicators along with elevated backlog levels provides confidence in our outlook for the full year. Our reported operating profit declined versus the prior year as expected due to the sunset of EMV. Now, I want to share with you why I'm excited about the underlying performance of our businesses. Baseline operating margin expansion of 230 basis points demonstrates the power of VBS to deliver operational excellence and rigorous execution. as well as incremental progress on our restructuring actions. We remain on track to deliver the $45 million of in-year savings, which is at the high end of the range we committed to you earlier this year. I am confident in our ability to achieve our multi-year margin expansion target as we continue on the path of optimizing our businesses. I am pleased with what we've accomplished through the first half, and I'm confident in our outlook for the remainder of the year. Importantly, we're laser focused on executing on our strategic vision to accelerate growth. With the depth and breadth of our portfolio, we're uniquely positioned to capitalize on the strong secular tailwinds within the mobility ecosystem, and we're seeing those play out in our ongoing performance and outlook. As we will share with you over the next couple of slides, we're seeing strong traction on our connected mobility strategy. A majority of our end markets are experiencing a shared set of growth drivers. For example, side expansions, modernizations, and industry consolidation, increasing regulatory compliance, increasing site complexity, increasing car park complexity, and decarbonization. Underpinning these trends in the mobility ecosystem is a drive for greater productivity and automation, which means higher levels of capital investment by our customers. Turning to slide six, you may recall from our investor day and our first quarter earnings call, our connected mobility strategy is centered around driving operational excellence and accelerating growth through expanding our core businesses and gaining leverage through adjacent markets. We refer to these as our three pillars, optimizing the core, expanding the core, and leveraging adjacent markets. Starting with expanding the core, we recently announced a formal rebranding of our legacy GVR retail solutions business to Invenco by GVR, a significant milestone in a process that accelerated following the acquisition of Invenco last year. This is more than rebranding. This is about better positioning our convenience retail and fueling businesses for long-term success, providing greater depth to meet our customers' needs. Resegmenting our businesses gives us greater focus and transparency, both strategically and operationally, to truly accelerate growth for both businesses. In the case of InventGo by GVR, the creation of this platform enables us to better serve our convenience retail customers in new, more innovative ways by focusing on the outcomes that are most important for them. At the same time, we're better able to focus on and solve for the unique set of challenges our fueling customers are facing. Evenco by GVR brings together our core point of sale, payment, cloud-based analytic software, and side automation platforms with Evenco's payment technology and microservices software. The combination creates a portfolio of best-in-class automation technology and the next generation operating system that enables convenience retailers to increase productivity and drive better customer engagement. We are deploying a cohesive platform with increased agility in how we develop and bring to market connected hardware and software solutions. We're now better positioned to serve as the preferred technology provider for C-Store operators with a unified strategy and product platforms, leveraging global scale and delivering more flexible modular solutions. Last quarter, we announced the rollout of our innovative NFX solution to 13,000 shell locations. Another large-scale fueling and C-Store operator awarded us a project with similar scope, this time with an 8,000 store deployment set to begin in the third quarter. The recent NFX wins and growing pipeline of opportunities demonstrates the power of our differentiated automation capabilities combined with unmatched channel presence. The team is doing a fantastic job accelerating growth, and I'm excited about the path that we've laid out for this business. Let's turn to slide seven and focus on pillar three, leveraging adjacent markets for growth. Evolve, our business combining our drives EV charging network software with our Sparkion AI-driven energy management business enables us to better support EV charging providers and fleet operators in scaling their EV infrastructure. We provide an interoperable solution that simplifies and improves the customer charging experience. You're likely aware of the unprecedented level of incentive dollars for EV charging infrastructure across many parts of the globe. In the US alone, the bipartisan national EV infrastructure funding program established $5 billion in federal funds available to states that strategically deploy EV charging infrastructure and create an interconnected network through 2026. This is in addition to the billions available by way of tax credits for alternative fuels infrastructure under the Inflation Reduction Act. In Europe, investment in EV charging infrastructure continues to ramp, led by the European Investment Bank, the European Commission, and national governments. By some estimates, hundreds of billions of dollars of investment will be required to reach their target for expansion and reliability of EV chargers across the continent. Having doubled its ports under management in 2022, DRIVES currently manages more than 40,000 ports and is on track to double yet again this year, reinforcing the compelling value proposition of our DRIves operating system. During the quarter, DRIves signed a number of new Tier 1 customers who are scaling their infrastructure rapidly. At initial deployment, these recent wins will add more than 20,000 additional ports under management. From a quantity of ports on our management standpoint, the DRIVES platform is one of, if not the largest, managers of high-speed charging networks globally. Our current scale, rate of growth, and momentum is recognition that we have the leading operating system that allows interoperability. DRIVES provides the critical connective tissue between and amongst a rapidly growing and diverse number of global charge point operators. As EV charging infrastructure and utilization continue to expand rapidly, consumers demand a more simplistic, reliable, and accessible charging experience. DRIVE is in the pole position with hardware agnostic solutions that enable a seamless and more reliable charging experience, including with self-healing algorithms. In addition to leading productivity and automation solutions, our customers are also investing in a more sustainable future. This benefits our comprehensive multi-energy portfolio of solutions. Our alternative energy solutions business is a leading global supplier of compressed natural gas and renewable natural gas infrastructure solutions and an emerging leader in hydrogen. These are attractive growth markets where we have market-leading capabilities. Our sustainable fleet customers remain committed to CNG and R&G. They're continuing to invest in their own infrastructure build outs and we're seeing early demand for our hydrogen solutions. We recently completed our 100th R&D station with waste management, now WM, who uses landfill gas to fuel their fleet and supply the grid with renewable natural gas. WM has a network of over 22,000 trucks running on CNG and RNG in the U.S. and recently announced plans to expand that network even further over the next three years. We're incredibly proud to partner with them to support their infrastructure build-out. Broader industry acceptance and support for clean hydrogen continues to gain momentum. In June, the Department of Energy unveiled its National Clean Hydrogen Strategy and roadmap, which aims to increase hydrogen production from near zero today to 10 million metric tons by 2030 and 50 million metric tons by 2050 through the use of hydrogen hubs. The investment required to build up this infrastructure is anticipated to be nearly $10 billion, and we're well positioned to support this infrastructure build out with decades of domain expertise and a robust channel presence for fueling with high pressure fuels. We are shipping our first hydrogen units this month with key customers lined up to take delivery over the next several months. Now, I'd like to turn the call over to Ann Schuman to provide for more color on our financial results and update you on our outlook for the full year.