Good morning, ladies and gentlemen, and welcome to the Vontier Third Quarter 2024 Earnings Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, October 31, 2024 and a replay will be available shortly after. I would now like to turn the call over to Ryan Edelman, Vontier's Vice President of Investor Relations. Please go ahead.

Thank you. Good morning everyone, and thank you for joining us on a call this morning to discuss our third quarter results. With me today are Mark Morelli, our President and Chief Executive Officer and Anshooman Aga, 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.vontier.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 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. Anshooman 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 3. 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. Vontier 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 customer's 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…

Thanks, Mark, and good morning, everyone. I'll start on slide 6 with a summary of our consolidated results for the third quarter. Reported sales were $750 million with core growth of approximately 3%, led by solid growth from our environmental and fueling and mobility technology segment, adjusted operating profit margin declined 80 basis points at the better end of our guide as contributions from positive price/cost and accelerated cost actions were more than offset by lower volume and unfavorable mix associated with lower sales at DRB and repair solutions. This resulted in an adjusted EPS of $0.073 for the quarter ahead of our expectations, adjusted free cash flow was $109 million with conversion of 98%. Let's review our segment results starting on slide 7. Environmental and fueling solutions achieved core growth of 9% in the quarter, driven by broad based trends across the portfolio. Total dispenser sales increased high single digits with US dispensers contributing mid-single digit growth. Aftermarket part sales increased over 20% in the quarter, bringing year-to-date growth into the high-teens. We continue to leverage our large and expanding installed base and focus on higher value components, accelerating growth in this higher margin offering. Environmental solutions grew low-single digits, with strong growth in North America supported by new product launches earlier in the year, partially offset by a strong 30% prior year comparison in international markets. Segment operating profit margin expanded 50 basis points in the quarter on positive price/cost and continued execution on our ongoing simplification efforts. Year-to-date, segment operating profit margins at E&F are up 160 basis points over the prior year. The team has done an incredible job executing, leveraging VBS and Pillar One initiatives. Turning to slide 8, Mobility Technologies reported a core sales increase of over 4% in the quarter, driven by robust…

Thanks, Anshooman. I'm encouraged by our progress year-to-date, as we're gaining traction in our end markets that are strong, offsetting some weaker segments with innovation and beginning to see signs of stabilization and recovery in the businesses that have softened earlier this year. We're executing on our connected mobility strategy and our focus on innovation is delivering critical new product introductions at a faster pace. We have a good set up for 2025 to continue to accelerate growth and profitability. Vontier is uniquely positioned to lead the digital transformation of the mobility ecosystem, which is still in the early innings. We're enabling our customers to manage an increasingly complex infrastructure through best-in-class technology and a portfolio of multi energy solutions. As we connect manage and scale the mobility ecosystem, we expect our continued portfolio transformation will enable sustainable growth and allow us to deliver top tier financial returns. I'd like to thank our teams around the world for their commitment to execution and dedication to delivering for our customers. Our performance is directly attributable to our culture of continuous improvement, which our employees demonstrate every day. With that operator, please open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And we have questions that came in. And the first question comes from the line of Nigel Coe from Wolfe. Your line is now open. Please go ahead.

Thanks. Good morning, everyone. Thanks for the question. Anshooman, I just wonder maybe you can just kick off with just any additional color on how you see 4Q so that 1.5% organic growth breaking out between the segments. And then the -- I think you're guiding for 50 bps of sequential margin expansion which would be, obviously, very normal with the 4Q seasonality. But again, any color on the segments would be helpful.

Yes. Good morning, Nigel. So, from a environmental and fueling perspective that business should continue to have good growth in the fourth quarter. We're expecting high-single-digit growth for EFS. They're coming off a really strong quarter of bookings and a good book-to-bill. Mobility technologies, also, book-to-bill was above 1% and actually all our businesses. But Mobility technology business should be flattish for the fourth quarter from a revenue perspective. We continue to see good growth and good fraction on Invenco with our innovation paying off. The car wash market, as we talked about, we're seeing sequentially it's stabilized. But from a year on year perspective, that would be a headwind for us. So that leads to a flattish number for mobility technologies and then repair solutions. Again, while the market is stabilizing, we expect it still to be down on a year-to-date basis -- a year-over-year basis of about the single-digits.

Okay. That's helpful. And then just wanted to dig into the aftermarket strength within the EFS segments, I mean 20% growth for parts and aftermarket is extraordinary number. Is there anything here, is there sort of dilapidated in sort of base? Are there some growth initiatives coming to bear here? You know share gains? I know that you've been showing double-digit growth here, but I just wanted to just dig into that, and just remind us how big is that portion of the segment?

So Nigel, I'll take that question. It’s mark. Look, this is a beneficiary of the EMV cycle that we all had to live through. But the installed base went up and I think we demonstrated we gained share during that cycle. And at the same time, it was one of our earlier profitable growth initiatives that we launched post spin to resegment this as a separate business inside of Vontier. And then have that business run with a strong focus on VBS and putting in place some of these 80/20principles to try to one clean up some of the offerings. A great example of that is we do some refurb manufacturing of boards was one of the new launch efforts. And then we took out some of the SKUs so that we could try to get some more acceleration on that. So you've seen a great trend on that business, and I think it continues to show that this is going to be a business for a long time where we get that, and then the total revenue for the business is over $200 million at above the margins by the way.

Great. Thanks Mark. I appreciate it.

Thank you. And the next question comes from the line of Julian Mitchell from Barclays. Your line is now open. Please go ahead.

Thanks very much, and good morning. Maybe just coming off the back of some of the initial comments on 2025, if I'm thinking organic sales, you're exiting this year up low-single-digits with the headwinds are also, auto repair and car wash. So, it says low single digits for next year, at least the first half looks reasonable for now. And then anything on operating leverage or below the line to emphasize, I think operating leverage you have the low 30s placeholder for the investor day, any reason that would not apply in 2025, and then anything sort of below the line to emphasize, if you look at it today.

So Hi, Nigel -- excuse me – Julian, this is I think great set up for 2025 for us. I think the areas that we're really encouraged about is, one, we're seeing stabilization some of the markets that we talked about that were choppy. We're seeing some really great innovation read through, and we're of course bringing on the call some really specific examples where there's uptake on this integrated network that is getting a lot of favorability, with our customers. So, we think we're going to get uplift in the markets that have been stronger and the self help issues in our pillar one are going to help buoy the margin. So the set up for 2025, looks pretty positive from us. Of course, mix has not been our friend. You know with some of our profitable businesses being weighed down, but I think we've got the right actions in place, regardless of what the market spring next year, it's a little bit too early to give guidance specifically on that, but really encouraged by the set up we see. Anshooman, do you want to jump in there?

Yes, Julian. So the incrementals that you mentioned, the 30 to 35% should play out. We're in the early innings of our pillar one and with the power of VBS around continuous improvement. So we feel confident that we should drive margin expansion next year. Also, below the line obviously, with the buybacks we've done, the share count of about 152 million is where we stand right now, for the fourth quarter that will continue. So there should be some benefit into next year, when you look at the year-on-year. And then, your point on the low single digit growth, just I will point out, which I also said during the prepared remarks, Q1 we have a difficult compare for EFS, but also the Matco Expo, which is our largest sales event is movement from Q1 to Q2, which moves about 30 million out of Matco's revenue orders and sales for Q1 into Q2. No, change for the first half, but just a shift between quarters. Q – Julian Mitchell: That's helpful. Thank you. And just wanted to make sure on the sort of margins for the fourth quarter. You have that sequential uplift with normal seasonality firm wide, just any points of emphasis on which segment might lead or lag, in terms of the sequential margin increase in Q4.

Julian, some of the fall through from the incremental revenue obviously, will play out. For EFS, we expect margins to be relatively flat to potentially slightly down year-on-year. They had a good Q4 last year from a margin perspective. Repair solutions should be sequentially flat again to potentially slightly up. So, that's we've seen the margins stabilize out there from Q2 to Q3 and we should see that continue into Q4. Q – Julian Mitchell: That's great. Thank you.

Thanks Julian.

Thank you. [Operator Instructions] And the next question comes from Andrew Obin from Bank of America. Your line is now open. Please go ahead.

Good morning. This is David Ridley Lane on for Andrew. On the on the India Tenders. We think that flows in over two to three years. I heard that the just to confirm it's 15 1-5 for the underground stuff is coming 12 to 18 months. What about the other?

Yeah. So of the 70 million that we called out in terms of bookings. There's two components of it. There's the hardware that goes over the next 18 months or so. And then we have the services that goes over multiple years. Just from a bookings perspective our policy is to book the next 12 months. So we booked about 25 million of the 70 million in the third quarter. So what you can expect over the next 12 months 25 million of that hardware revenue will flow through up to 70 million that we called out for the third quarter.

Got it. Thank you. And then on the on the $12 million cost cutting benefit here in 2024 that would imply you have a kind of 12 million carry over benefit next year. Wanted to get a sense you're doing R&D investments in in bingo and other places to accelerate the NPI, how much of that do you think would be used for reinvestment versus pulling through?

After the 12 million what we said last quarter about two-thirds of it is permanent and there's a little bit that is temporary. So you could expect about 8 million of it to carry forward into next year. It's a little early to give guidance but and early to have finalized plans, but we expect R&D as a percentage of sales to stay relatively stable going into next year.

And if I could squeeze one more in. On the macro bad debt reserves, do you just mathematically lap those next year or could there still?

We do.

Okay.

Yeah. We lap them next year. And the market for the financial portfolio isn't getting worse, it's stabilized. So when we look at our actual bad debt expense for Q1, Q2, Q3, it's relatively flat every quarter over those three years, it's just a compare issue. The market stabilized. Our portfolio is relatively healthy. And especially when you compare it to some of the credit card industry data, we're doing actually better and it stable.

Thank you. Thank you very much.

Thank you. And it seems like no further questions that came through. I would now like to hand back the call over to mark. Please go ahead, sir.

Yeah. Thanks, John. We appreciate folks joining us on today's call and we appreciate the interest in Vontier and look forward to engaging many of you on the road in the next several weeks. Have a good day.

Thank you. This concludes our conference for today. Thank you all for participating. You may now disconnect your lines.