Vontier Corporation Common Stock

on the investor relations section of our website at .vontier.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 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. 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, please turn to slide three and I'll turn the call over to Mark.

Thanks, Ryan, and good morning, everyone. Thank you for joining us on the call today. We delivered strong second-quarter results with core sales, adjusted operating profit, and adjusted EPS exceeding our guidance, reflecting discipline execution against a dynamic backdrop. Core sales growth of 11% was led by mobility technologies and environmental and healing solutions, which both grew over 15% in the quarter. Orders were up 8% organically, and our book to bill was approximately one in the quarter. We're encouraged by the market's acceptance of our new product introductions, validating the R&D investments we've made, strengthening our competitive advantage. The traction we are seeing demonstrates Vontiers' unique position to capitalize on secular trends across our end markets. Our innovative solutions and deep domain expertise create a compelling value proposition for our customers, unlocking growth, improving productivity, and elevating their customer experience. This is a testament to our team who has been instrumental in focusing our business on process improvements and new product innovation. I couldn't be more thankful for their hard work and dedication. Adjusted operating profit increased 15% year over year with margin expansion of 80 basis points. This improvement reflects the benefits of ongoing simplification efforts and productivity gains driven by the Vontier business system and what we call our focus and prioritization process or our 80-20 initiatives. While tariff related cost pressures are real, we were able to maintain positive price costs in the second quarter. We delivered another quarter of free cashflow conversion above seasonal norms. This enables us to maintain our dynamic capital allocation program with ongoing share repurchases at attractive levels and a bolt-on acquisition completed during the quarter. We continue to advance our strategic priorities with an intensifying focus on operational discipline and commercial excellence, critical in navigating the current macro environment. These efforts are underpinned by our three pillar value creation framework with pillar one centered on self-help and pillars two and three driving sustainable organic revenue growth. Under pillar one optimizing our core, we delivered meaningful operational efficiencies in the first half supported by our 80-20 process initiatives. At Fueling Solutions, we're driving further savings through product line simplification and lean manufacturing to countermeasure tariff related cost headwinds. We've reduced labor costs by nearly 10% year to date at our Greensboro Dispenser facility through increasing labor efficiency and reducing overtime. At the same time, we've identified incremental simplification opportunities including actions to reduce the cost of quality by more than half over the next couple of years. We're also moving forward on a number of opportunities to optimize our regional footprint in various international markets, ensuring we are aligning our resources to the most profitable regions and product lines. We're advancing an agreement to divest our European service business, which exemplifies this effort. At Invenco, we set up our global software factory last year which reduced our overall engineering labor costs by 30%. Invenco is on track to double its engineering velocity this year while driving R&D efficiency through automation, the use of AI and global scale. As it relates to tariffs, we've made significant progress on our mitigation initiatives year to date. From a supply chain standpoint, our primary focus is reducing our exposure to China with several major projects underway expected to complete in the second half. Within repair solutions, for example, we started the year with 20% exposure to China with a goal of reducing this to less than 10% by year end. We implemented pricing actions mid-quarter and we expect the benefits to ramp in Q3 and Q4 with price expected to offset about half of our updated tariff exposure. Innovation has been a cornerstone of our pillar two, expand the core initiatives and a key driver of above market organic growth. Our disciplined investments in new product development are strategically aligned with powerful secular drivers, including digital transformation. This underpins our connected mobility strategy and positions us to capture evolving customer needs. The benefits are evident across our portfolio but are perhaps most visible at mobility technologies. As an example, the Invenco team has successfully accelerated adoption of the FlexPay6 payment terminal with over 50% of new dispensers leaving the factory with the FlexPay6 unit. Our market leading global dispenser base provides us with a sizable funnel of upgrade and replacement opportunities ahead. As we migrate customers to FlexPay6, we enable flexible onsite commerce which unlocks revenue growth potential for customers and enables recurring revenue for volunteer. We are actively expanding our current revenue base a key strategic initiative for volunteer. Invenco's recurring revenue which accounts for about 35% of the base was up 17% year over year as the install base of NFX continues to ramp and as the feature set continues to expand. We've nearly completed the initial deployment with Shell and continue to make good progress for Chevron and recently surpassed one billion transactions on our NFX payment servers. Invenco's solutions cater to executing fuel and in-store commerce, driving more consumer engagement through loyalty and media and ensuring assets, physical and digital are available when a consumer is transacting. We are enabling all this with leading edge technologies that are transforming and enhancing the way convenience retailers operate their businesses. Environmental and fueling solutions delivered broad-based growth across both above ground dispensers and underground environmental sensing and monitoring. Our environmental solutions business continues to capitalize on multi-year replacement opportunities particularly through automatic tank gauge upgrades with an install base of over 350,000 ATG units globally. Our new TLS 450 plus connected ATG offers market leading technology for advanced fuel management enabling real-time monitoring, improved accuracy and proactive maintenance that reduce downtime and lowers operating costs for our customers. Just this quarter, we were thrilled to be selected by one of the largest global C-store operators in North America to upgrade their entire install base of ATGs across 4,500 sites over the next five years. Alongside the equipment upgrade, this customer will adopt VitaRoot's new cloud-based device management software. This application will collect data from onsite environmental devices across their network and produce outcomes that improve uptime and asset reliability as well as reduce maintenance costs. This integrated approach highlights our ability to cross-sell and deliver future-proof scalable solutions that unify forecourt and site management helping our customers maximize operational efficiency and make smarter decisions across their entire network. It also highlights the meaningful progress we're making on our efforts to deliver fully integrated solutions and technologies by leveraging our relationships with some of the largest global convenience retail operators. Our commitment to new product development remains strong with R&D investments hovering around 6% of total sales. We're redeploying resources freed up to hire Pillar 1 8020 initiatives to create capacity for margin expansion and growth. This enables Pillar 2 successes including a focus on connected hardware and smart software that enables higher recurring revenue streams across the portfolio. Given our strong first half results, we're raising our full year guide with adjusted EPS on track for high single digit growth. While tariff headwinds and macro uncertainties are still expected to weigh on demand in the second half, particularly in repair solutions, key end markets such as convenience retail and fueling continue to show resilience. We are confident we're on the right path to delivering sustainable above market growth. As we navigate through the remainder of the year, we'll remain agile and focused on controlling what we can while delivering innovative solutions for our customers and driving value for our shareholders. With that, I'll turn the call

over to Ann Schuman. Thanks, Mark, and good morning, everyone. I'll start off with a summary of our consolidated results for Q2 and slide four. As Mark mentioned, we had a very strong second quarter with sales, adjusted operating profit margin, and EPS coming in at or above the high end of our guidance range. Sales of 774 million increased 11% both on a reported and core basis. Recognizing we had a favorable prior year comparison in Q2, on a two year stack basis, total volunteer core sales are up approximately 8%. Overall, roughly 70% of our portfolio outperformed in the quarter, reflecting the strong progress we are making in a resilient end market and the success of our new product introductions. Relative to our guidance, we estimate sales outperformance benefited by approximately 15 to $20 million related to favorable shipment timings, given a planned factory maintenance outage and a successful ERP goal life, both in the first week of July. Adjusted operating profit margin improved 80 basis points year over year. And adjusted EPS increased 25% to 79 cents above the high end of our guidance range. Adjusted free cash flow of $89 million increased significantly versus the prior year and reflects a seasonably strong 76% conversion to adjusted net income or approximately 12% of sales. Turning to our segment results starting on slide five, environmental and fueling solutions delivered core growth of nearly 16%, bringing first half growth to over 8%. Shipments of dispensers increased over 20% in the second quarter, but strong growth in both North America and rest of the world. We're seeing strong demand tied to new built activity from large national and regional players, as well as healthy refresh and replacement activity. Environmental solutions also showed strong momentum in growing high teams in the quarter, fueled by new product launches and higher shipments of submersible pumps related to last year's India Tender Win. Segment operating profit margin expanded another 50 basis points driven by volume leverage combined with strong self-help measures and disciplined cost management. On slide six, mobility technology score sales grew 18% driven by solid performance at Invenco, up strong double digits in the quarter on higher shipments of payment technology and enterprise productivity solutions. DRB sales declined in the teens year over year, relatively consistent with what we were anticipating. While the industry is experiencing some minor project timing delays, car wash operators are bullish regarding the CAPEX plans going forward. We still expect DRB to inflect positive later this year as new built and replacement activity continues and as we drive higher customer conversion to a Parthion software platform. Conversion rates for Parthion contributed to approximately 2% increase in software revenue for DRB in the quarter. Mobility techs operating profit margin increased over 180 basis points with the prior year on strong volume leverage and cost savings from Pillar One Initiatives. On slide seven, prepared solution sales were flat compared to the prior year as ongoing market pressures offset the gains expected from the annual Matco Expo. Sales trends post Expo confirmed that we experienced elevated pre-buy activity. Sell through off the truck was down mid single digits in the first half, but exceeded sell in, suggesting distributors were destocking. Tool storage and hard lines declined in the quarter, offset in part by strength and speciality, power tools and branded merchandise. While higher ticket product categories remain under pressure, we continue to see solid demand for lower price point tools that improve technicians' productivity. We made clear progress in focusing our offerings on these categories with their new product vitality up nearly 50% year over year for the first half of 2025. Two notable examples of these low price point offerings are the new folding clip lifter and the ready tool cart. These products were developed after extensive voice of the customer work and performed well through Expo and the remainder of the quarter. Segment operating profit declined $700,000 on flat revenue, reflecting mixed headwinds offset in part by Pillar One Actions that drove cost savings in the quarter. Turning to the balance sheet and cash flow on slide eight. Our net leverage ratio stepped down sequentially to 2.5 times, highlighting the health of our balance sheet. We completed another $50 million in share buybacks in the quarter, bringing us to $105 million in the first half. Over the past three plus years, we have now completed over $730 million in share buybacks, representing 15% of our shares outstanding. Turning to our updated outlook assumptions for Q3 and the full year on slide nine. For the third quarter, we project revenues in the range of 745 to 755 million. At the midpoint, we expect core sales to be roughly flat. Adjusted EPS is expected in the range of 74 to 78 cents up mid-single digits. Both the top and bottom line reflects the impacts of the shipment timing dynamics I mentioned earlier. As Mark mentioned at the start of the call, we are raising our full year guidance. Operationally, our outlook for the second half is mostly unchanged. Our full year sales guidance range is now 3.02 to 3.07 billion, reflecting our strong operational performance and a tailwind from FX relative to our prior guide. Strengths within our fueling and Invenco business is more than offsetting our outlook for repair solutions. As we have communicated previously, Invenco's core growth will begin lapping more difficult comparisons with this business having grown 25% on average over the past four quarters. As we look into next year, we still expect Invenco to achieve attractive mid to high single digit core growth supported by strong pipeline of opportunities for unified payment and enterprise productivity solutions. Operating margin expansion is expected to be in the range of 20 to 40 basis points, which incorporates lower drop through on FX. We still expect to fully mitigate tariff headwinds within the year, with encouraging progress made in Q2. We now expect adjusted earnings per share of $3.15 at the midpoint at the high end of a prior guide and equating to 9% growth year over year. You can find our other guidance assumptions on the right-hand side of the slide. Based on our first half performance and the recent passage of the big, beautiful bill, we are raising a free cashflow conversion target to approximately 100%. Our teams are well prepared to execute in any environment and the end markets we operate in have proven to be resilient over time. We have a solid runway of self-help opportunities through our pillar one actions and we're confident in our growth trajectory. Our balance sheet is in good shape. We're generating strong free cashflow and we're returning capital to our shareholders. With that, I'll pass the call back over to Mark for his closing comments.