Vontier Corporation Common Stock

good morning ladies and gentlemen and welcome to the volunteer third quarter 2024 earnings call at this time all lines are in listen only mode following the presentation we will conduct a question and answer session if at any time during the call you require immediate assistance please press star 0 for the operator this call is being recorded on thursday october 21st 2024. and a replay will be available shortly after. I would now like to turn the call over to Ryan Edelman, Vontiers 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 third quarter results. With me today are Mark Corelli, our President and Chief Executive Officer, and Anshuman 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.bondtier.com. Please note that during today's call, we will present certain non-GAAP financial measures. We will also make forward-looking statements within the meanings 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. With that, I'd like to turn the call over to Mark.

Thanks, Ryan, and good morning, everyone. Thank you for joining us on today's call. I'll provide a high-level overview of our performance in Q3 and a brief update on our end markets and the progress we're making on our strategy. And Schumann will then provide a deeper dive into our results and outlook for the full year. Let's get started with a summary of the quarter on slide three. We delivered solid results in the third quarter as we continue to capitalize on strong momentum across our convenience retail and fueling end markets. supported by increased adoption of our market-leading technologies. Core sales increased 3% above the high end of our guidance range with upside from both our environmental and fueling and mobility technology segments. Discipline operational performance drove operating margins toward the better end of our guidance and EPS above the high end of our range. Frontier has a unique competitive advantage within the mobility ecosystem with a purpose-built portfolio of connected hardware and software solutions. We continue to make solid progress on our connected mobility strategy, which places us at the forefront of our customers' digital transformation journey. A great example of how we're delivering differentiated solutions is the traction we are seeing with our Invenco offerings in payment and enterprise productivity. Invenco sales increased more than 20% in the quarter, driven by higher adoption of our recently launched FlexPay 6 payment terminal, as well as our vehicle identification system discussed on last quarter's call. As we connect, manage, and scale the mobility ecosystem, our focus on reinvigorating R&D and new product introductions are delivering tangible results. Our environmental and fueling business improved sequentially and delivered nearly 9% core growth in the quarter with broad-based demand across regions and product lines. Growth was particularly strong in North America across the entire product portfolio. The pipeline of new site build activity continues to expand, and the increased adoption of FlexPay 6 is helping to reaccelerate record fit and refresh activity. Notavanteer orders were encouraging in the quarter up 10% year-over-year organically and resulting in a book-to-bill over one for the third consecutive quarter. Some of this reflects the benefit of Q2 order recovery, but the underlying booking trends were a positive indicator. We are still in the early innings of our simplification program under Pillar 1, Optimize the Core, and we will continue to execute against the pipeline of opportunities. leveraging DBS and the 80-20 principles embedded in our focus and prioritization program. Operating profit margins benefited from accelerated cost actions announced last quarter, delivering approximately $5 million in savings. Let's turn to slide four. Looking across our primary end markets and the individual verticals within each, we continue to see momentum for most of the portfolio. Convenience, retail, and fueling are largest in market, has unmatched channel presence with leading share positions. Demand here remains robust, with the one exception being car wash, which accounts for about 7% to 8% of total tier sales. Successful C-Store operators continue to execute their multi-year site expansion and modernization plans, and the industry continues to consolidate. This favors the large national and regional operators where we have the higher market share and where we are focusing innovation. We're seeing more evidence that the organic and inorganic investments we've made to accelerate growth, executing on pillars two and three of our framework, are paying off, giving us even stronger conviction around this end market. As you may recall, pillar two, expanding the core, It's about leveraging our current market positions to accelerate profitable growth with a focus on driving share gains through innovation and market-leading product vitality. We're advancing our Invenco product strategy, and we are seeing increased customer adoption of our innovative payment point of sale and four core automation solutions. We are standardizing our convenience retail offerings around our in-effects microservices architecture. This allows us to deliver a customizable, scalable platform that unlocks the ability to drive growth, reduce cost, and enhance the consumer experience. As an example, we were recently selected by one of our longstanding customers, Costco, to deploy our unified payment solution across their footprint in Canada. This includes our FlexPay 6 payment terminal and NFX microservices software. With this solution, Costco will have the ability to seamlessly integrate their existing hardware, software, and services while enabling over-the-air updates, optimizing payment security compliance, and customizing loyalty programs. The critical value proposition we are offering customers like Costco is improved uptime, faster transaction times, and lower cost to operate. The end result is improved productivity and throughput for our customers and a better user experience for the consumer. We also secured a contract with a major global C-Store operator in the third quarter with a total contract value of approximately $10 million. This project involves upgrading and converting legacy payment technology to FlexPay 6 across our acquired sites in North America. This serves as a clear example of how industry consolidation drives increased retrofit activity as operators standardized technology platforms following acquisitions. At Environmental and Fueling, we won three large multi-year tenders in India in Q3, with a total contract value of approximately $70 million. This was a direct result of our VBS initiatives to design out costs and improve the quality and security of our dispenser equipment, as well as localized production. Just last week, we awarded a fourth tender to install underground submersible tank pumps across their network, which is an incremental contract value of approximately $15 million over the next 12 to 18 months. These wins are reflective of the significant effort by our teams and another example of how we are growing market share and improving market-leading margins in our EFS segment. Pillar three is about delivering profitable growth from adjacent markets. We are pursuing opportunities to expand into adjacent end markets with solutions leveraging new and existing offerings and channels to market. We continue to see strong evidence that convenience stores will be a big beneficiary of the build out of EV charging infrastructure as a preferred stop for on-the-go charging. Our Connect turnkey EV solution launched in May specifically targets this market and continues to gain momentum. We were recently awarded a $2 million contract by a large regional convenience store chain to begin deploying Connect at its sites across the U.S. Connect includes EV chargers, network software management, and leverages our extensive channel and service network from GVR. It also incorporates our FlexPay 6 payment terminal to deliver the same reliability and integrated payment capability used across convenience retail sites. The first sites go live this month, and we are managing everything from site selection and NEVI funding applications to installation and technical support. Drives is now a leading software offering for ChargePoint operators to manage their growing network of EV chargers. We are accelerating our plugs under management further, now sitting at over 100,000, more than doubling year over year. 80% of these are located in Western Europe, which is the leader in the world for EV adoption. In October, we signed one of the largest global fleet operators with 1.5 million vehicles under management to support their fleet electrification efforts. Drives revenue is up nearly 50%. year-to-date, and contributing to overall volunteer growth for 2024 and beyond. While we're seeing healthy demand across most of our end markets, there are two primary areas that are experiencing some pressure near term, car wash and auto repair. The car wash industry continues to transition from a multi-year hyper-growth phase for tunnel car wash systems to a more normalized growth rate. After rising significantly, construction costs for tunnel systems have now stabilized and interest rates are beginning to move in the right direction. However, we anticipate there will be a lag between these developments and an inflection in demand for greenfield tunnel systems. Turning to the auto repair and market, as we noted previously, headwinds at repair solutions are related to slower discretionary spending by service technicians resulting from persistent inflation and general uncertainty regarding the U.S. economic and political environment. While the volume declines in Q3 played out largely as we anticipated, order rates and distributors' sell-through volumes are showing improvement. The backdrop for auto repair remains strong. Technician wages and employment are healthy, and the age and complexity of the car park is increasing, providing demand for auto repair. A similar transformation to convenience stores is happening in the commercial and industrial fleet market. As the industry looks to modernize and decarbonize, managing fleet is a major challenge and requires multiple technologies, fuel types, and the integration of traditionally disparate systems and data. Our cross-business solutions optimize fleet depot management with the lowest total cost of ownership while achieving sustainability and compliance goals. Turning to slide five. Earlier this month, our teams gathered at the annual NACS trade show in Las Vegas, the convenience store industry's largest trade show of the year, where we were able to showcase the full breadth and depth of the Vontir portfolio. This was a great opportunity to highlight the outcomes of our connected mobility strategy with a best-in-class suite of end-to-end solutions that deliver enhanced consumer engagement and productivity while lowering the cost to operate. At NACCS, we introduced the Hub, a great example of the unique capabilities of our portfolio. The Hub is built on the in-effects microservices architecture and seamlessly integrates all existing devices at a retail site onto a single cloud-based platform to manage their infrastructure remotely and more efficiently. We also introduced several differentiated solutions and feature sets that expand our existing portfolio of productivity and revenue generation capabilities. Feedback from customers at the show validates our strategy around delivering best-in-class, end-to-end open architecture solutions. I'm confident we're on the right trajectory. We are well-positioned and durable, attractive in markets with long-term profitable growth opportunities. Our leading market share position, business simplification opportunities, and cash generation profile are bolstering our position, and we expect to capture even greater operating leverage as demand accelerates. With that, let me turn the call over to Ann Schumann.