Ecolab Aktie

Okay. We're good to go. We're going to get started here. Thank you, everyone, for joining us today with Ecolab. My name is Tim Mulrooney. I'm the analyst here that covers Ecolab, and I'm required to inform you that for a complete list of research disclosures and conflicts of interest, please visit our website at williamblair.com.

So I'm really excited to have Ecolab here today. This has been a company that's been a fun one to follow, particularly recently. There's been a lot of news out about the company. And we recently added Ecolab to our current Better values list last month with the thesis being basically the recent spike in energy costs, which have driven the stock price down, actually isn't going to result in the impact that you'd normally see at Ecolab. Of course, I know it's famous last words to say this time is different, but we're saying this time is different. And so that was part of it. And then the other part was an expectation and acceleration of volumes next year as some of these higher-growth businesses get folded into their business.

So hopefully, Scott, you don't say anything today that contradict anything I put in the current better values write-up. I don't know. But that was basically what we were saying and are very excited when we see dislocations like this between the stock price and what we view as the fundamentals. So with that, I'm going to pass it over to -- we're very pleased to have Scott Kirkland here, the CFO; and Andy Hedberg, the Head of IR. Thank you guys for coming today. And I'll pass it over to you for some opening remarks, and then we can hop into Q&A.

Great. Thank you, Tim. Appreciate the introduction. Good morning, everybody. It's great to be here with you today, share with you, especially those new to the story, Ecolab's growth story, but also about how our model is delivering really good performance today, very strong performance, but positioning for us -- for even better performance in the future. But before we get started, I'd ask you to read the cautionary statement. I won't read it verbatim, but please read it. And with that, I will move on to the fun stuff.

So for those new to the Ecolab story, Ecolab is a global leader in water, hygiene and infection prevention, protecting people and resources vital to life. Our strong performance comes from pairing that mission with a disciplined business model. What we do matters for our customers, and it helps them improve their performance and profitability. We apply this model across more than 40 industries, driving consistent growth, margin expansion and strong earnings performance, strengthened further by our growth engines that I'll talk about in a little bit, which are scaling at double-digit rates with very attractive margins.

All of this is supported by a very clear financial framework, including strong free cash flows, a disciplined approach to capital allocation and a balance sheet that provides us flexibility to invest through a variety of economic environments. And we have the means to achieve our ambitions with unmatched capabilities and reach. We have 48,000 associates serving customers in more than 170 countries, supported by deep scientific and digital expertise. Ecolab is a trusted and innovative partner at millions of customer locations, some of the biggest brands in those industries.

In 2025, we protected 1.7 billion people from infection. We protected 1/3 of the world's food production and 1/4 of the power generated. The way we deliver those outcomes is through a very simple but powerful model. We deploy on-site experts at every customer site who understand how those customers operate. We then apply chemistry, technology, data and digital tools to improve the performance and reliability at our customer sites. The result is a best-in-class performance outcome at the lowest total cost through reduced water, energy and waste. And because the value we deliver far exceeds the cost of our solutions to our customers, the customers see clear economic returns in what we do for them.

That's what we mean by total value delivered, which is a foundation of our growth. And that value proposition creates a very resilient model. More than 90% of our revenue comes from consumable products that are mission-critical to our customers. That drives predictability and durability in our business. We also benefit from very broad industry diversification, both industries and geographies, which helps balance performance through different economic environments and reinforces that stability of our growth. That stable foundation supports the strong and consistent financial performance, and our long-term growth algorithm is clear. We target 12% to 15% of adjusted EPS growth every year through disciplined execution and balanced capital deployment.

We're on track to reach a 20% operating income margin by 2027, driven by value pricing, innovation, high-margin growth engines and productivity. And as our growth engine scales, we see a clear path to accelerating organic sales growth into that 5% to 7% long-term range. I know recent macro volatility, as Tim talked about, and the energy inflation is top of mind for many investors. We see that environment as manageable with the pricing and supply chain actions that we've taken in our history of performance. Our exposure to raw materials derived from oil and gas is about 6% of our total sales. Exposure will only decrease as our growth engines accelerate as they have a much smaller reliance on oil and gas-based raw materials.

And the inflation environment this year is also very different than 2022 when our commodity costs increased nearly 50%. Looking at the current environment and assuming that our energy costs remain high through the balance of the year, our commodity costs are expected to increase this year by about 9%. But we continue to expect to deliver 12% to 15% EPS growth this year, excluding the short-term impact of the pending CoolIT acquisition, which I'll talk about in a bit. And we're doing that as our pricing continues to strengthen with the implementation of our energy surcharge, which we launched in April.

You can see that pricing acceleration we're driving through the second quarter in the slide here. And while higher commodity costs have been a headwind, pricing is quickly building during the second quarter. And in the second half of this year, we expect organic sales growth to accelerate to 6% to 7%, with pricing roughly 2x the inflationary headwinds, helping to quickly stabilize gross margins.

In other words, we'll be fully offsetting the impact of commodity costs and earnings and margins in just a few quarters. The pricing discipline isn't a new thing for Ecolab. We have a long history of keeping and growing pricing every year because our pricing is backed, as I mentioned before, by incremental value our solutions create for our customers. Since 2021, our solutions have delivered a cumulative value to customers of more than $11 billion, and we've captured a meaningful share of that through pricing, as you can see here. This is a durable advantage that supports both the growth and margin expansion of our business.

Turning to near-term performance. With good business momentum and accelerating pricing overcoming the commodity cost inflation, as I mentioned, we expect strong second quarter with organic sales growth of at least 4%, stable organic gross margins, excluding the impact of the Ovivo acquisition and adjusted EPS growth of 9% to 12% in the second quarter, which is stronger than our initial guidance for Q2. And we expect this momentum will continue into the second half as organic sales growth accelerates to 6% to 7% and our organic gross margin expands 75 basis points. And with that, our adjusted EPS of 14% to 15% before the impact of CoolIT, which I'll talk about in a moment.

As I mentioned, in the second half of '26, we expect that underlying performance to reach the upper end of our range without the impact of CoolIT amortization and financing costs. Including the impact of CoolIT amortization financing costs, adjusted EPS is expected to grow 4% to 5% when the CoolIT deal closes. Looking beyond this year, including CoolIT and the roll-off of the Nalco amortization, we expect our 12% to 15% EPS growth trajectory to only strengthen, as I mentioned, with a clear path to the 5% to 7% organic sales growth and expanding our OI margins to and beyond the 20% target we have for 2027. We've built a portfolio that's both resilient and positioned for faster growth. Our growth engines are scaling quickly. I'll talk more about those in a second and represent roughly 1/4 of the business.

Our core businesses are also performing well, delivering steady mid-single-digit growth with strong and expanding margins. As 2026 progresses, we expect continued growth -- improvement in paper and heavy water as we drive good share gains to mitigate softer market demand. And our growth engines are compounding. With those compounding, the core business is performing well and our more challenged businesses stabilizing, we will grow faster and with strong margin expansion. Our largest core business, Institutional & Specialty, is performing very well, delivering mid-single-digit growth with good margin expansion.

This strong performance is fueled by breakthrough technology platforms like DishIQ, AquaIQ, which help foodservice and hospitality customers improve guest satisfaction while using less labor and significantly reducing their operating costs. We are expanding from anchor innovation like into digital solutions like KitchenIQ, which is our proprietary digital platform that helps foodservice customers streamline back-of-the-house workflows, enhance food safety management and ultimately optimize labor. And we're tying it all together with our One Ecolab growth model, where we can drive best-in-class performance across our customers' locations, unlocking value for them and growth for Ecolab.

All of this translates into strong performance for our Institutional & Specialty segment, growing mid-single digits despite fairly stable markets, and we expect sales growth for this segment to accelerate to the 4% to 6% range in 2026 with strong and expanding margins. The same model and performance shows up in Food & Beverage. Another one of our core businesses that is outperforming its end markets. We are bringing together new technologies like enzymatic cleaners that deliver better, faster cleaning outcomes for customers and a more attractive growth and margin profile for Ecolab as we innovate to provide alternatives to volatile raw materials like caustic.

And we're leveraging this new innovation with digital solutions like Ecolab CIP IQ, which provides real-time proof of clean. And combined with our leading water technologies, the Food & Beverage business brings a One Ecolab integrated water and hygiene program to customers to drive that best-in-class performance at customer locations. And as a result, Food & Beverage continues to grow well ahead of its end markets. We expect growth for Food & Beverage to accelerate to 6% to 8% in 2026, again, with strong and expanding margins.

Beyond our core businesses, our growth engines are an increasingly important part of our story. Pest, Life Sciences, Digital, Global High-Tech represent about 1/4 of the company today and are growing faster than the enterprise with margins accretive to Ecolab. We're investing in each of them with purpose, both organically and inorganically. In Pest, we're performing within our long-term sales target and have a long runway as we scale our Pest intelligence platform, which fundamentally changes the service -- how the service model works. Today, 95% of our time is spent checking empty traps.

With Pest Intelligence, we flip that, spending 95% of our time solving customer problems. We'll know exactly where the Pest activity is happening and focus service where it counts the most. For customers, we're able to deliver nearly 90% Pest-free locations versus an industry average in the low 90s. This creates a significantly better experience for our customers while reducing the high cost and brand damage with large-scale Pest issues. This means more value for our customers and more growth and higher margins for Ecolab. Life Sciences follows a similar pattern.

Through One Ecolab, we're bringing together drug purification technologies, cleaning and sanitation solutions, digital and water purification. This unique solution set allows our customers to produce the highest quality drugs at the lowest total cost. We have been investing in this large and expanding market, and you're seeing that show up in strong performance. Organic sales are growing double digits with our biopharma business doubling its sales in the first quarter. Growth for Life Sciences is expected to further accelerate during 2026, driving strong double-digit OI growth on our path to our 20%, 30% OI margin target. And as we leverage significant business investments we've made in this business, this will drive high growth and continued high margins in this business on the path to 30% OI margin.

AI is an important part of the Ecolab growth strategy with our Global High-Tech business that spans fabs and data centers. As you've probably heard, AI demand is reshaping digital infrastructure and AI compute is expected to roughly double over the next 3 or 4 years. Industry plans call for about 50 gigawatts of incremental compute demand. That's driving roughly 70 new fabs and 1,000 new data centers over the next few years. For us, that represents a $10 billion opportunity for our Global High-Tech business that's growing -- already growing extremely fast with accretive margins to Ecolab. And as the world's water technology and services company, we are well positioned to capture this high-growth, high-margin opportunity.

Water sits at the critical step -- every critical step of AI. You need ultra-pure water to produce the chips. You need water to generate the electricity that powers those chips and you need water to cool the chips and data centers. On the microelectronics side, we partner with fabs to deliver ultra-pure water and water circularity programs, strengthened by our recent Ovivo acquisition, allowing customers to produce more chips with less water. In data centers, we combine Ecolab's water treatment, cooling liquids, 3D TRASAR monitoring and our latest Cooling-as-a-Service offering with CoolIT's direct-to-chip liquid cooling technologies.

And together, we'll deliver more computing with less cooling through a single integrated direct-to-chip model that improves reliability, efficiency and uptime. So together with Ovivo and our pending acquisition of CoolIT, Global High-Tech will be our largest and fastest-growing growth engine with $1.5 billion in sales. The business is growing above 20% in a large and rapidly growing market. The business meaningfully accelerates our growth algorithm. Global High-Tech alone will accelerate sales growth by 200 basis points with a very attractive margin profile.

Putting this all together, we see a clear pathway to accelerate Ecolab's organic sales from the 3% to 4% last year to 5% to 6% in 2026 and 5% to 7% in next year. Within this, we expect our core businesses to contribute 3% to 4% to our total growth and for our growth engines to add another 2% to 3% growth. Our stronger top line trajectory helps to further expand our operating margins. Within our portfolio, about 2/3 of our businesses are already at or above our 2027 OI margin target of 20%. 1/3 of our businesses are below the 20%, including Life Sciences and Global High-Tech, 2 businesses where we are investing for the future and underlying operating margins are already north of 20%.

We've been driving -- delivering strong margin expansion for a long time with OI margins up 600 basis points since 2022. We exited 2025 with a record 18% OI income margin. With value pricing well ahead of DPC inflation, accelerating growth engines and One Ecolab-enabled productivity, we're confident in reaching our 20% OI margin target by 2027. But 20% is not the destination. Beyond 2027, we're targeting 100 to 150 basis points of annual OI margin accretion through 2030. All of this is guided by our disciplined financial framework I referenced before, strong organic sales growth and continuing to deliver adjusted EPS growth of 12% to 15%, a strong cash generation model, targeting free cash flow conversion of 90% to 100%, which supports rapidly deleveraging and strong liquidity.

We'll continue to focus on our fortress balance sheet with disciplined capital allocation, providing us the financial flexibility to invest through the cycle. And that discipline translates directly into strong shareholder returns. Over the past decade, we've returned more than $10 billion to shareholders and increased our dividends for more than 3 decades. Ecolab is a high-quality compounder with a durable recurring cash flow, established market leadership and accelerated growth driven by AI infrastructure. We expect gross margins to stabilize as we exit Q2. Our core businesses are outperforming and expanding their margins, and our growth engines are compounding at double-digit rates with margins accretive to the company. All of this reinforces our confidence in delivering strong financial performance in 2026 and well beyond. Thank you for listening.

Yes. Thanks, Scott. That was a great overview. There's a lot to be excited about here. And we got about 20 -- or 10 minutes left before we go to the breakout. By the way, the breakout room is in the Adler room for those that are interested in exploring some of these topics in more detail. I'm going to ask a couple of questions, and then I can open it up to you all. But I want to start it out with the guide. I think that's new news. Today so you raised it, you were looking for EPS growth of 7% to 12%, and you raised the low end to 9% to 12%. Can you just talk about what drove that increase specifically?

Yes. Good question. So as we exited Q1, and we talked about Q2 as this transition quarter that we are launching our energy surcharge with the raw material inflation, not understanding exactly how that pacing would be, but feeling very confident about the second half, but the pacing in the second quarter was hard to predict. But now as we're more than 50% through the second quarter and have very good visibility, have great confidence in that delivery, and that's why we changed the original guidance from this 7% to 12% to the 9% to 12% and brought up the bottom of the range.

Got it. So it was execution on the energy surcharge is going better than expected?

I wouldn't say better than expected, it's within our range, but it's just given us -- it's going very well.

It's not because some geography is doing better than you thought or some business is performing better than you thought.

Well, all of the businesses are continuing to perform very well. As we exited Q1, business is performing well. That's continuing. And then on top of that, also executing, as you said, very well on the energy surcharge. And that's going very well, giving us the confidence to both say the minimum on sales is that 4%. And so we feel that is the bottom on sales, but also that the bottom end of the EPS range is now 9%, so that 9% to 12%. So just great confidence given the execution and visibility we have into the second quarter, but also that confidence now as we exit the second quarter that this underlying, excluding the impact of CoolIT once it closes, but excluding CoolIT, that the second half EPS will be this 14% to 15% and top line is 6% to 7%, inclusive of 5% to 6% of pricing because of the energy surcharge implementation and the path we're seeing in Q2.

That 6% to 7% organic growth is for the second half?

For the second half year. Correct.

And I think that might be a little bit higher than my model. I'll have to go back to check, but it seems like all is going according to plan, which is why Christophe said on the first quarter call, by the way, like this isn't where his focus is, right? Like he's obviously focused, but he's like this isn't where he's...

This isn't his high priority. Because of the confidence that we have, and we've seen this movie before, right? So 4 years ago, we had a surcharge in the second quarter and learned a lot from it, executed really well and exited that cycle, as you recall, with higher margins. We've had record margins at 18% last year and showed great discipline and execution to be able to do this and build strong muscles from 4 years ago that we're flexing even now.

Yes. Okay. So this time is different, in fact.

Yes. As you think about the quarters because we're talking about the organic gross margin, excluding the impact of Ovivo because there's some P&L geography from that. So the organic gross margin, we expect to be up 75 basis points in the second half. So we're doing what used to take us a few quarters and doing that basically in 1 quarter.

I remember Mike Monahan would be coming to these conferences when there'd be a dislocation or a surge in energy costs and -- the old saying was it takes 4 quarters to build back the gross...

The dollars.

Dollars. And then 4 more quarters to...

Build back the margin.

Build back the margin. You are, in essence, building back all of the dollars in 1 quarter and your margin will be expanding in the second half of this year. So you've compressed the cycle.

Correct. We've taken the approach to TBD, the muscle that we built 4 years ago and made that an operational discipline and created scale and efficiency in doing that and efficacy because we better understand the value that we deliver more than ever, and we're able to get that pricing and prove that value to customers.

Got it. Okay. The only other question that I wanted to ask before I open it up is really around CoolIT because the headline number on CoolIT is that you spent 29x EBITDA to acquire this company. But I also note that you implied in that next 12 months outlook was 30% growth. And please correct me if I'm wrong on any of this.

Well, we said 30%, and that was over the first 3, 4, 5 years, right? And so the early years would be higher, just obviously given the small numbers. And so we said 30% over the first few years. And so that's the CAGR. Obviously, in the first year, we expect that to grow faster.

Okay. Because that was basically my question is I think it grew over 100% in the first quarter. Is it growing faster than what you expected when you first started diligencing this thing?

It's doing really well. We don't own it yet. So I'm always cautious with assets. We don't yet own and we only have limited visibility, but it is doing very well. And so we're always very disciplined about our approach to investing both organically and inorganically. And I think we always take a prudent view of it -- of these deals. And so it is performing very well from everything we can see. And as we talked about in the first quarter, yes, it basically grew 100%. So it's going to grow much faster than the 30%, but that was over the next 4- or 5-year time line.

And so this year and into next year, which is the reason we talked about this 200 basis points combined from Ovivo and CoolIT that they are going to add on a pro forma basis, if you will. But once that annualizes, that will provide a 200 basis point benefit to our top line, which is why we see this, as I said, this very clear path from this historical 3% to 4% and how do we get to that 5% to 7%, and that is going to be driven by our growth engines. Certainly, in the short term, we're going to benefit from the energy surcharge. But even as that energy surcharge annualizes in the first half of next year, we see that path to that 5% to 7% because of the benefit of the growth engines, including CoolIT.

So it would be -- the growth algorithm for next year would look a little bit differently as you break it down between price and volume?

Yes, I think so. I think there will probably be more price in the first half naturally because you'll see the -- right now, where there's 2% to 3% pricing in the first quarter, right? That's accelerating, and we're expecting pricing total, including the surcharge of 5% to 6% in the second half. So you'll have some natural annualization in the first half. But then that annualization will then -- that will happen in the first half as the CoolIT deal hopefully annualizes as well. And then you'll see the organic, including the benefit from CoolIT in the second half.

Got it. Okay. That's very clear. I appreciate that.

But obviously, the reported number will be even better because it will include both the benefit from the higher pricing and the benefit from CoolIT on a reported sales basis. So I'm talking organic.

Okay. Got it. Yes. Got it. On the organic basis. Okay. A couple of minutes left if we have any questions in the crowd for Scott. Otherwise, we can wrap it up early. But any questions -- burning questions?

Okay. I think we'll leave it -- yes, we got one over here. Sir?

Can you talk a little bit about the data center buildout and how maybe the [indiscernible] states, how does that impact your timing for CoolIT and the growth rates you're expecting?

And would you repeat the question just because I think this being webcast.

Yes, there was a question on how moratoriums in certain states and data centers may affect the growth of CoolIT. Well, the growth of CoolIT is going to be correlated to what's happening from a chip perspective as much as it is from a CapEx perspective. And I don't think what's happening in the data center build-out, whether -- and our data center slows is going to slow down the innovation happening from an AI perspective and the chips being designed for AI. And because that will change the cooling needs, whether it's from the cold plates or the CDUs, that's where the growth from CoolIT is going to happen. So we believe the growth is going to continue, and we don't have concerns around that growth because of what's happening in the AI and the chip space.

Okay. Thank you all, and we'll see you in the Adler room. Thank you, Scott.

Thank you.

Thank you, everyone, for joining the Ecolab's First Quarter 2026 Earnings Release Call. [Operator Instructions] As a reminder, today's conference is being recorded. It is now my pleasure to introduce your host, Andy Hedberg, Vice President, Investor Relations. Thank you, Andy. You may now begin.

Thank you. Hello, everyone, and welcome to Ecolab's first quarter conference call. With me today are Christophe Beck, Ecolab's Chairman and CEO; and Scott Kirkland, our CFO.

A discussion of our results, along with our earnings release and the slides referencing the quarter results are available on Ecolab's website at ecolab.com/investor. Please take a moment to read the cautionary statements in these materials, which state that this teleconference and the associated supplemental materials include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the Risk Factors section in our most recent Form 10-K and in our posted materials. We also refer you to the supplemental diluted earnings per share information in the release.

With that, I'd like to turn the call over to Christophe Beck for his comments.

Thank you so much, Andy, and welcome to everyone joining us today. We had a great quarter with accelerating momentum across our portfolio. And I know oil prices, energy and supply are top of mind for most, it's not for me. In 2022, commodities cost was up 50% and our margins for cycle went further up. Today, commodities cost is up 9%, and we have all the tools to address this within 1 quarter, done the right way for our customers. As I sit here today, I feel very good about the year and how we're managing a complex environment, and I feel even better about where we're going next.

What matters most for me today is to keep the organization focused on growth, to supply our customers seamlessly anywhere around the world and to support our teams, especially those operating in the Middle East. In a complex environment, our teams are staying very close to customers and supporting their operations without any single disruption because what we do is almost always mission-critical to them. And when something is mission-critical to our customers, it becomes mission-critical to us, too. That means supplying reliably, solving problems quickly and delivering the outcomes they count on, and it's working. We would never ever let the customer down. That commitment is what drives the consistency and the strength you see in our results.

Now turning to the first quarter. We delivered once again a very strong quarter with adjusted diluted EPS growth of 13%, right in the middle of our range. Momentum strengthened across the business as organic sales grew 4%, driven by continued strong value pricing of 3% and volume growth that accelerated to 1%. We also expanded operating income margins reflecting the disciplined execution across our global portfolio and the strength of our One Ecolab approach, which brings together service, expertise and breakthrough technology at scale.

Momentum continued to strengthen across the portfolio, led by our growth engines, which, by the way, have close to no exposure to energy costs. Global High-Tech and digital both grew more than 20%, driven by strong demand tied to digital adoption and the ongoing AI build-out. Life Sciences accelerated to 11% growth, led by bioprocessing where sales more than doubled. We have been investing in talent, capabilities, capacity and breakthrough innovation in this high-growth, high-margin business for quite some time. And today, these efforts are clearly paying off, and we're just getting started. We expect Life Sciences growth to continue its double-digit momentum and operating income margins to expand toward our 30% target over the next few years. And finally, Pest Elimination delivered a strong quarter with 7% growth, reflecting strong share gains from our One Ecolab growth initiative and naturally, our new Pest Intelligence offering.

Our core portfolio also performed very well. Institutional strengthened with solid growth across restaurant and lodging customers more than offsetting somewhat softer market trends. Specialty gained share with 9% growth driven by innovation that helps customers optimize costs. Food & Beverage outperformed its end markets again. Growing 5%, supported by strong execution of our One Ecolab approach and Light Water delivered steady growth, too. We also progress in smaller parts of the portfolio that have been a bit under pressure. Collectively, the performance in Paper and Heavy Water stabilized as we supported them with new business and innovation.

Overall, our growth engines are accelerating. Our core performance is strong and business that have been under pressure are turning the corner. Together, this continues to shift our portfolio towards higher-margin, higher-growth end markets well aligned with our long-term strategy.

We also delivered solid operating income margin expansion this quarter. Underlying gross margin was steady as strong value pricing offset commodity cost inflation. Reported gross margin was slightly lower due to a short-term impact from recent M&A and higher commodity cost inflation. However, the M&A impact was favorable to our SG&A ratio and as a result, largely neutral to our OI margin. Underlying SG&A productivity improved meaningfully as we continue to scale our unique digital and agency capabilities, resulting in strong SG&A leverage year-over-year. As a result, organic operating income margin expanded by 70 basis points to 16.8%. We expect OI margin expansion to improve in the second half of the year as pricing accelerates, and we remain very confident in delivering on our 20% OI margin target by '27.

Looking ahead, the operating environment remains dynamic, but we are ready. We remain focused on growth opportunities while we keep managing a complex global environment. The conflict in the Middle East is one example. It has driven sharply higher global energy costs, creating additional pressure across supply chains. And in a moment like this, customers turn to us as their partner of choice to ensure secure supply, exceptional service and solutions that help reduce operating costs.

We take decisive actions to absorb cost pressures wherever we can. However, the magnitude of energy cost increases requires additional action to ensure reliable supply, which is why we quickly implemented an energy surcharge. This is an approach we've used successfully before, focused on delivering incremental total value for customers that exceeds the total price increase. We know it works for our customers, and we know it works for us.

As a result, the second quarter will be a short transition period. Commodity costs are expected to increase high single digits starting in the second quarter and we expect those costs to remain high through the end of the year. Surcharge benefits will build through the quarter following implementation on April 1. With this, higher commodity costs will impact second quarter EPS growth by a few percentage points. However, underlying performance remains on track and within the targeted 12% to 15% range.

Importantly, we expect to already fully offset the dollar impact from higher commodity costs as we exit the second quarter as pricing continues to accelerate and volumes continue to grow. We expect organic sales to increase 6% to 7% in the second half of the year, helping to stabilize our gross margin during that period. And that's net of Ovivo. Ex Ovivo, gross margins would be up 70 to 80 basis points in the second half. In other words, we will be fully offsetting the significant rise in commodity costs and its impact on earnings and margins in just a few quarters.

As a result, we expect EPS growth to strengthen in Q3 and Q4, resulting in unchanged full year expectations. We, therefore, continue to anticipate adjusted diluted EPS growth of 12% to 15% this year, excluding short-term impact from the pending CoolIT acquisition. As discussed earlier, CoolIT financing and noncash amortization are expected to have a short-term impact on adjusted EPS in the second half of the year. Following the close, the impact is expected to reduce quarterly EPS by approximately $0.20. Importantly, underlying EPS growth remains unchanged. Beyond the short-term impact this year, we expect EPS growth, including CoolIT to accelerate back into the 12% to 15% range as contributions from this high-growth, high-margin acquisition accelerate and amortization from the Nalco acquisition rolls up.

What's even better, the impact of our growth engines on Ecolab's global performance is accelerating as we scale down. This is especially true for global high-tech, where AI is driving significant demand for circular water management and high-performance cooling. By bringing CoolIT and Ovivo together with our global high-tech water business, we're building a $1.5 billion powerhouse that will help fuel Ecolab's next phase of growth and margin expansion.

As AI accelerates the build-out of global digital infrastructure, customers are prioritizing uptime, cooling performance and reliable water management while driving massive increases in compute power with lower energy use and net near zero water footprint. Our circular water solutions help deliver exactly that from ultra-pure water to produce the most advanced chips to 3D TRASAR connected water to support power generation and now direct-to-chip cooling to cooler chips.

Ovivo expands our ultra-pure water and end-to-end microelectronics offering in a business expected to grow at mid-teens rate this year, supported by a strong pipeline tied to fab expansions and increasing water circularity needs. Our pending acquisition of CoolIT builds on this momentum, adding a scaled direct-to-chip liquid cooling platform and positioning Global Hi-Tech with an integrated service-led cooling solution for high-density AI data centers.

And here's more good news. CoolIT has shared with us that they are off to a very strong start in 2026, with first quarter sales growing well ahead of the 30% plus we discussed on the acquisition call as demand for the leading liquid cooling technologies continues to rapidly accelerate. Together, these two businesses have the potential to add a couple of points of high-margin organic sales growth to Ecolab's total growth as they scale and capture more of this huge and fast-growing high-tech market.

In closing, we delivered a strong quarter with accelerating top line momentum, continued margin expansion and double-digit EPS growth in a complex environment. Our near-term outlook is strong and consistent. Growth momentum continues to build. Our portfolio is shifting towards higher-margin, higher-growth markets and much less exposed to energy costs, and our team is executing at a very high level. We're well positioned to deliver another year of strong performance in 2026, and we remain confident in the long-term trajectory we built in.

So thank you for your continued trust and your investment in Ecolab. I'll now turn it back to Andy for Q&A.

Thanks, Christophe. That concludes our formal remarks. Operator, would you please begin the question-and-answer period?

[Operator Instructions] And our first question is from the line of Tim Mulrooney with William Blair.

This is Sam Kusswurm on for Tim. In your outlook, I think you shared your expected gross margins to stabilize in the second half, which is quicker than I think some investors may have been expecting. I imagine that's because of the decision to implement your surcharge pricing pretty quickly when this conflict started. But can you help us understand how this fits into your goal of reaching a 20% OI margin in 2027, including with the impact that the CoolIT system acquisition will have?

Thank you, Sam. As mentioned before, I know most of you have these energy costs, oil prices top of mind. And for me, that's not the case because we've been here before, and we've learned to master this very well. As a reminder, so commodities cost in '22 was up 50%. And as you remember, margins went further up post cycle. Here, we're talking 9% up as we see it in Q2, and we're expecting to stay high until the end of the year, at least. I'm expecting that 6 to 12 months. So we're expecting in Q2 to get the dollars back as we exit Q2. And then as you said, to get gross margin to stabilize in the second half, including Ovivo. And if you exclude Ovivo, as mentioned, gross margin would be up 70 to 80 basis points, which is our traditional run rate, which is, as mentioned, in line with our model. So OI margin will be even better because SG&A is going to keep improving as well during that time.

So when I'm looking at the math as well of pricing and DPC and commodity cost, well, basically, as you know, 30% of our DPC is roughly impacted by energy cost, while growing 9%, if that's the gross impact of inflation out there, while it's 2.5% that we need to compensate, and that's why a 5% to 6% pricing in the second half brings us in a place where margins are stabilized at the minimum. And that's obviously including Ovivo as well. So underlying, so we improve even further.

But as mentioned before, so my priority is making sure that the organization will stay focused on growth, which means affecting our core businesses and building our new growth engines around high-tech, life science, Pest Intelligence and digital, which today or tomorrow with CoolIT will represent 20% plus of our company, which is really good news because it's high-growth businesses in very natural growth industries, high margins and on a side note that have low to no dependency on energy cost and supply as well.

So if I put it all together, a second half that's going to be stable to good in gross margin, SG&A, that's going to be favorable. So it means a stronger OI and EPS delivery. If I look at '27, including CoolIT, including as well the roll-off of the Nalco acquisition, where we end up, that's my objective. So for '27, it's very early, obviously, so to talk about a year from now. Well, I think that we have a real good chance to be within our 5% to 7% top line growth and for sure, to get to the 12% to 15% earnings per share growth in a pretty solid way.

The next question is from the line of Manav Patnaik with Barclays.

This is Ronan Kennedy on for Manav. Christophe, could you please help us understand the base macro scenario embedded in the guide? Does it assume broadly stable demand environment with modest improvement? Or does it contemplate an already cautious consumer posture and customer posture rather, given the higher energy costs, geopolitical certainty, et cetera? And given the backdrop and your comments regarding not necessarily having the higher energy costs and oil prices top of mind, is there macro sensitivity? Or is it just a function of your internal execution levers like the pricing, productivity and mix?

It's 90% execution we live on the same planet as everybody else, obviously here. But that's why our assumptions, I think, are pretty conservative with this 9% commodity inflation in the second quarter and expecting it's going to stay until the end of the year and probably into next year as well at the same time. From a demand perspective, we're expecting this 1% in the second half. Q2 is always a little bit harder to define in details as it's a transition quarter as we're here. But I look at the second half, I feel good about the 1% growth. This is our assumption. This is not my plan. We're going to accelerate, obviously, our volume growth and pricing in that range of 5% to 6%, as I mentioned before. So you end up with 6% to 7% top line growth for the second half.

So that's assumption for pricing, that's the assumption, 9% on commodity cost as well and kind of this 1% volume, which means that there might be some pluses and minuses in terms of demand around the world. But for me, controlling what we can control, the fact that our growth engines are doing really well. Collectively, they're growing 12% at high margins. Our new business is at record level as well. I feel really good about that. Our core business is in a very strong and steady growth performance, as you've seen. And our underperformers, well are stabilizing the paper and heavy industries as well.

So you bring it all together, I think that between our assumption and controlling what we can control by focusing on growth, managing performance at the same time, well, we end up in a place where the second half is a little bit better than we even thought a few months ago. So feel good about where we're going here.

The next question is from the line of Ashish Sabadra with RBC.

So very strong growth, obviously, in high-tech, 20% plus. You talked about CoolIT also growing really above that 30% growth in 1Q. I was wondering if you could also talk about Ovivo, how that's tracking compared to your expectation? If you could talk about the cross-sell opportunities of Ovivo with your core offerings in hi-tech and also as you're thinking about cross-selling once the CoolIT acquisition closes?

Thank you, Ashish. So Global Hi-Tech is going to become most probably our strongest growth engine in the near to long-term future. And together with life science, I think that we have two amazing growth engines for the future of our company, really focused on industries that are growth industries, high-margin industries and very little depending on any energy impact as well at the same time. So kind of really a combination of sweet spots that I really like.

So on high tech, as mentioned, you bring everything together, our legacy business, Ovivo, CoolIT, you get to a business of $1.5 billion that's growing 20%, 25% or more at high margin as well at the same time. We're exactly at the place we wanted to be strategically. We wanted to be the partners of the industry to help them produce better outcome chips or data compute, obviously, with low to no water usage, which is a big issue for most of those industries and socially as well around fabs or data centers. This is exactly what we're doing with Ovivo that's helping in microelectronics will move from 5% water recycling to north of 95%. So it's absolutely game-changing for fabs.

And keep in mind, so by 2030, 10 new fabs are going to be opened. That's roughly a month. And Ovivo is the most advanced technology to recycle water at ultra-pure level. And something that's really interesting with Ovivo that we've discovered is that the quality of the ultra-pure water is having a direct impact on the yield of the chips manufacturing, which is game changing for the microelectronics industry. So great for them in terms of performance, cheap manufacturing, quality of the chip and yields and at the same time, reducing by 95% the net water usage.

On the other hand, CoolIT, well, you're all familiar with all the app that's happening around data center on water impact. Well, with our end-to-end technology that we're going to bring to the market, well, data centers are going to have the water footprint of a car wash in one of the largest in the country in Milwaukee. Well, the humans in the data center use more water than the data center itself, just to showcase a little bit of the power of that technology.

So all in all, it's the first time in my career actually that I see on both fronts, customers coming to us because they know there's not enough capacity to supply everyone, and we have the two best technologies for microelectronics and data centers out there and customers want to jump the queue in order to be able on their side, obviously, to gain share in their own respective industry.

So CoolIT, as mentioned, first quarter of the year, way north of the 30% that we were planning, which is a very good problem to have, obviously. I think it's going to be a great story for all of us and Ovivo will be [ up ] as well in this mid-teens type of growth. It's a longer cycle, obviously, business, building pads takes more time than building data centers. But the backlog at Ovivo is way higher than what we had thought as well because of all the reasons I mentioned before. So I think that we've bet exactly on the right things that are going to pay off short and long term.

Our next question is from the line of John McNulty with BMO Capital Markets.

Maybe just shifting tack to One Ecolab. Sales growth, you called out noticeably above kind of the core. I guess can you highlight how much better it was than the core? And if you've got any ways to further accelerate the program now that you've been running on this program for a couple of years now?

Yes, John, it's been a bit less than 2 years, but it's been a very good story. So the most obvious outcomes of it are, on one hand, so Food & Beverage United, where we're bringing food safety, hygiene and water together. Well, you see the results of F&B have been very strong. So 5% growth major multibillion business in an industry that's not growing. Consumer goods are not exactly so growing really fast at the moment. F&B United is. And we've done only North America, by the way, so far. So we're expanding around the world, and that's going to extend and expand, obviously, the impact on that very promising business.

Second is our largest customers, our top 35, as I've shared with you, our top 20 and emerging 15, those are the 35 that we focus on. They're growing quite a bit faster than the average of the company because of One Ecolab. And last but not least, through agentic technology, and we're really at the forefront of any industry in how we're using that. Well, our savings in terms of performance have been remarkable while making sure that our teams remain confident that ultimately, so we will really focus most of our attention on growth while we drive performance as well at the same time. So early on the journey, but we see the pace picking up, which is exactly what we wanted and what we need in an environment or a global environment that's a little bit complex at the moment.

Our next question is from the line of David Begleiter with Deutsche Bank.

Christophe, on CoolIT, can you help us with the $0.20 of dilution in Q4? And what is your expectation or forecast for dilution in 2027 from CoolIT.

Yes. So thank you, David. So let me pass it to Scott. And by the way, it's $0.20 per quarter in the second half, as we've described that as well in the release and talked about during the acquisition call as well, and it's going to neutralize in '27. But let me pass it to Scott, and I can add any comment on to that.

Yes. David, as we talked about a month ago when we had the CoolIT call and as Christophe talked about, is that the $0.20 per quarter this year, again, because the close date, we don't know that exactly yet. So I want to make sure you understand what it is by quarter depending on the close. But as we've talked about a month ago, first of all, excluding CoolIT this year, we're going to deliver the 12%, 15%, as Christophe talked about before. And then this is the $0.20 reduction this year. But as we think about to 2027, all with CoolIT, including the amortization, but the net impact, the roll-off of the Nalco and amortization really offsets the noncash amortization from CoolIT. So that's why we feel very good next year of staying in that 12% to 15% range from an EPS growth perspective.

Which adds as well to it to the top line, which is why we did those two investments, by the way, so on Ovivo and CoolIT, both going better than we thought, while it's adding a couple of points on the top line as well. So it's acceleration on the top line, aiming at this 5% to 7% for the overall company and strengthening the 12% to 15% earnings per share growth as well. So as we enter next year, these are the objectives that I have that we will build towards to. But so far, things are going really well on both fronts.

Our next question comes from the line of Seth Weber with BNP Paribas.

I wanted to ask about the life science business, the strength in the organic growth. Is this a step change that we've been kind of waiting for? I think, Christophe, you mentioned that double digits is kind of in the near-term foreseeable future. But can you just help us contextualize how this business is going to then react once the new capacity comes online? And what type of operating leverage should we expect to see kind of intermediate term in this business? I know you have the 30% number long term, but if you are growing double digits, how much leverage can we see on the margin side there?

Thank you, Seth. Well, the short answer is yes. This is the performance that we were looking for, that we've been building towards to. And I'm really, really pleased with what the team has done, both internally, getting the capacity, getting quality, getting our systems, getting our platforms, R&D, everything together in order to get Life Sciences to the performance we're all planning for. So 11% in the first quarter. We've said we're building a double-digit growth business all in. So with life science, this is where we are. This is where we're going to stay. And honestly, that's the idea, it's to grow even faster than that as well with an operating income leverage of getting close to 30%.

I want to make absolutely sure that we keep investing behind that business. So short to midterm, we might be in this mid-20s type of thing as we keep building like the plant that we're going to open in the second half of the year as well, that's going to unleash even more capacity for that business. And then knowing that we get to the 30%, I have no doubt that we're going to get there because it's all impacted by investments, basically, so the performance in terms of leverage that we're getting now.

I'd like to remind you as well what I said earlier as well, our bioprocessing business, which is the core of our business, will grew north of 100% in the first quarter. This is very encouraging. It's not going to be every quarter the same like that, but the steady growth is going to be very strong in that business here. We packed for now, we'll need more capacity as well. So for it, a good problem to have as well and with the fastest-growing business in the life science industry. So right now, and I think that we're going to stay that way with the smaller, most agile, most innovative, probably most aggressive team as well that we have in the industry, very happy with what the life science team has done. We finally where we were hoping to be.

Our next question is from the line of Chris Parkinson with Wolfe Research.

Christophe, obviously, there's a lot to go on in terms of raw materials over the next 2 quarters. But in terms of your '27 CMD margin targets, it seems like you're actually well ahead in certain cases, [ flash ] in line. But I'd love it if you could kind of walk us through the intermediate to longer-term puts and takes of those targets and specifically how you're thinking about any newer dynamics across institutional markets as well as kind of the impending ramp of Life Sciences as well.

Thank you, Chris. I feel really good with where we're heading. But let me have Scott answer that question first, and I'll build on it.

Yes. Thanks, Chris. As Christophe said, we're very confident in the margin expansion we're delivering and the path to 20%. I mean, as you probably know, over the last few years, we've delivered north of 500 basis points of OI margin expansion and feel very good about delivering the 19% this year. So that's 100 basis points year-on-year. And then there's 100 basis points left to get to the 20% next year, which we feel very good about. And as Christophe said, the surcharge is going well, and so that Q2 will be a transition quarter, but feel very good about the second half gross margin, as you talked about.

And in addition, as part of that driver of that confidence, we talked about that business mix where this higher growth, higher-margin businesses, GHT, Life Sciences, pest, digital are also supporting that confidence in that 20% by 2027, but also in our longer-term algorithm, which we talked about, that 100 to 150 basis points through 2030.

And to build on that, as I've shared with you so many times, I'm really focused on beyond the 20%. For me, the 20% is a given next year. And when I think about it, our institutional specialty is already north of the 20%. When we talk about Life Sciences, as mentioned before, so underlying is north of 20% as well [indiscernible] before the investment that we're making that you're seeing, it's getting north of 20% as well. Pest Elimination is north of 20% as well at the same time. And most of water is as well at the same time. So we know exactly how to get north of 20%.

For me, it's just said what's the next milestones that we want to get I'll share with you as soon as I have clear solid view on that, but it's going to be quite a bit north of the 20%. And when you think about Ovivo and CoolIT joining us, that's on top of it, obviously, with businesses that are growing really fast at very good margins. So I feel really good about the 20%. So for next year, 90% of my focus is really on what's next post the 20% to make sure that we keep growing the margins of the company.

Our next question is from the line of Vincent Andrews with Morgan Stanley.

I did want to talk a bit more about Global Water and the margins. And I think in the quarter, there were three dynamics going on. There was the Ovivo acquisition. You called out some raw material inflation. I suspect that hit you pretty hard in March, which you obviously couldn't price right away for. And then the stabilization of the headwind of the softer sales in heavy water and paper. But that -- you called out an upper single-digit operating income growth decline, which I would have thought would have helped the percentage margin. So maybe you could just unpack the margin performance in Global Water, the decline and how those three different buckets contributed to it and how we should think about it over the next couple of quarters?

So I'll pass it to Scott. But generally here, so overall water was flat in terms of OI growth. So slightly 0.5%, so down in Q1. If you exclude Paper and Heavy Water, well, water has been growing top line mid-single and operating income high single digit as well [indiscernible]. So generally, water is doing really well ex Paper and heavy. We're working on these two, Paper and heavy. But honestly, most of my focus is really on the growth part of water. The combination of both, most of water getting better through higher growth, higher-margin businesses like Global High-Tech, well, we'll get to a much, much better place very soon. And at the same time, getting the underperformance Paper and Heavy Water stabilized and improving. We've reached the bottom for these two businesses, while the combination of both will lead to good results for the second half in water. I'm not worried in water. But Scott, anything you'd like to add?

Yes. The only thing you mentioned as well is on Ovivo and Ovivo, as we talked about for the total company, there's a geographical mix between gross margin and SG&A, but not a material impact in OI. So there's a little bit of that geography in the water business as well. But as Christophe said, we feel good about the business. The OI growth, excluding the Paper and heavy, which we talked about, is very good, and we expect the water OI to progressively accelerate throughout the year.

Our next question is from the line of Patrick Cunningham with Citibank.

The specialty division within INS, pretty impressive organic growth. In an environment where you see weaker foot traffic in consumer, highly sensitive to wage inflation, is most of your growth coming from deeper penetration of digital suites and productivity tools versus traditional chemical volume at this point?

Yes, Patrick, the short answer is yes. It's mostly focused on solutions that are helping them get the job done at a lower cost because they use less labor and less natural resources, energy and water. And it's working very well. When we think about the One Ecolab approach, well, we have a great example in F&B United, but we have a great example as well in specialty. It's a business of scale, of standards at scale, of performance at scale. And the way the team is approaching those large quick-serve fast food companies is to help them understand, where is the best performance? What's the best restaurant out there in terms of guest satisfaction, cost and environmental impact and to scale those solutions across the system around the world. And those are customers that are used to that approach, that are welcoming that approach. As you know, they're mostly franchised.

So we have the opportunity with our team to influence every unit anywhere around the world the same way. And this is a huge upside for those customers, and you see it in the results. Growing 9% at the type of margins that we have in this business. This is quite remarkable. And the last thing I'd say, it's the beauty of the Institutional and Specialty business that we have is that wherever the consumer is going to go based on the economic development, let's put it that way, well, we will capture them somewhere. It can be in a luxury restaurant. It can be in a mid-scale restaurant or it can be in a quick serve. We're going to be there. Margins are very similar.

So in a way, we're extremely well positioned wherever the consumer is going to eat because ultimately, some people are going to keep eating. And if they don't go out, well, they're going to buy from food retail, which is a business that's doing really well as well, which is explaining why Institutional and Specialty is such a steady, stable, strong business with high margin because it's a great offering for our customers to drive their own performance around the world and at the same time, so for us, we drive this huge stability and consistency because wherever the consumer goes, we will capture them.

Our next question is from the line of Shlomo Rosenbaum with Stifel.

Christophe, I was just hoping to get a little bit more detail on what you meant that the Paper and the basic industries are turning the corner. Is the growth getting better over there? Is it that you've just seen -- you haven't seen any more paper mills that are closing? Like what's going on with the metal side of it? Are we going to see those businesses get to flat this year? Like just if you could give us a little bit more color because obviously, the other parts of the business are already running in the range where you want, and these are the ones that are kind of pulling you down below that range.

Yes. Because the -- I mean, the whole company, so if you exclude these two, is growing 5% plus top line. So we're in a very good place. Water is also in that range with good volume growth as well. But any company has a few kids that need a little bit some special care because they are in older industries that are growing less fast.

So the short answer is it's stabilized. We haven't been impacted by closures. anymore in the last few months, 3 to 6 months, which is something that's hard to mitigate because when they close a factory, well, there's not much you can do. Obviously, you didn't lose it to a competitor. It's just the factory of the mill closed. So we see that it's stabilized. For me, if it gets into slightly positive in the second half, we'll be fine. This is what the team is heading towards to. I'm feeling pretty good that we're going to get there, to be very honest. This is not where I'm spending my time. I'm spending my time on 80% of the company that's doing extremely well, building those new engines as well at the same time. I want to be absolutely growth focused, driving the performance at the leverage at the operating income side, while we manage those businesses that are a little bit more struggling.

But as I look at the second half, I feel that these two are going to get to a more positive territory. And just also mentioning so they have good margins. It's not great, but they're pretty good as well. So in a way, they're not destroying value for the company, which is the most important for me. So 80% doing great, I mentioned north of 5% of the company. So without these two at the top line as well. But these two doing better, well, it's going to help the overall company as well in the second half and in '27.

The next question is from the line of John Roberts with Mizuho.

Is your inflation higher on raw materials? Or is it higher on your CapEx because you purchase a lot of equipment that has metals and plastics contained in it?

John, it's mostly on the commodity raw material side of things, logistics as well because logistic costs are going up, shortage of drivers, fuel costs, I mean, traditional stuff that we used to. But no, on the -- what you call CapEx, which is more technology equipment, we don't call it CapEx. Yes, there's some inflation, but there's nothing dramatic here. It's not energy related, as you know. So nothing to see there.

The next question is from the line of Jeff Zekauskas with JPMorgan.

Christophe, you said that CoolIT is growing a lot faster than 30%. Is it growing 50% or 70% or 60%? Or can you quantify that? And secondly, when you think about competing in the data center markets in direct-to-chip technology, does the competition emphasize water treatment chemistry? Or is their direction more equipment based? And how do you see your competitive status in offering water treatment technology in the direct-to-chip area?

So Jeff, great question. Actually, the true growth, you haven't even mentioned it in all the numbers that you listed. So it's even higher than that. To be honest, it's close to the triple-digit range, which is pretty cool. But I want to also mention, we haven't closed that acquisition. So I just want to be clear here. We need to have the regulatory approvals for that. It feels good so far that it should happen sometime in the third quarter. That's not depending on us. But so far, exceptional performance that those guys are having.

And Jeff as mentioned, I've met many customers in the meantime because we meet the same [indiscernible] obviously. They want what CoolIT does more than anything. This is the company they want to focus on. You're familiar with a few others, obviously, out there that are doing pretty well, one starting with a V, obviously, is performing very nicely, has a very good backlog as well. This is the case as well for CoolIT.

So generally, great growth trajectory. It's not going to be a straight line to have -- forever. We'll see how that goes. But generally, I think it's going to be a very high run rate. And for me, the biggest challenge we have is to make sure we can build enough capacity behind it in order to feed the growth. Great problem to have first time that we see really customers trying to jump the line in order to get the services from what CoolIT can provide.

Then the second part of your question. So for us, as you know, I don't really care whether products are chemistry-based or technology-based or service-based or digital based. What we are offering to the data centers is ultimately a higher uptime at a lower water usage and lower or better power performance. This is the outcome that we're promising to them. The fact that we can go from low to 0 net water usage is game changing for them. Jeff, you're familiar with the upward that's happening around data centers in our country and around the world. Well, what we do here is solving that problem. This is a big deal for the hyperscalers. At the same time, obviously, it's enabling the more advanced chips that require the direct-to-chip cooling as well.

So we're exploring various models as well here. They're all recurring models in a typical Ecolab manner. That's the way we're developing the business as we get together with what we do in terms of services, 3D TRASAR optimization of water and power cooling, coolant as well, which is by design, a recurring product as well and all the technology that comes with it as well, as I've shared during the acquisition call. Well, every time that the new generation of chips coming, well, you change all the system for the direct-to-chip cooling, which means new cold plates, new coolant and as the power demand goes up, you change the CDUs as well at the same time. So it's inherently a recurring business.

The next question is from the line of Matthew DeYoe with Bank of America.

Thanks for kind of addressing that. I feel like one of the concerns we hear from investors all the time on the CoolIT deal is just it doesn't feel like a consumables business. But I had two to kind of backfill on this. One, the $0.20 per share dilution that you're talking about per quarter, is that math based on the 30% sales growth that you had been laying out there? Or is that reflective of the 100% near 100% sales growth that it's currently looking at? And -- or does that matter over the near term?

And then how R&D intensive do you expect CoolIT to be? Because presumably, the technology changeover here could be pretty rapid. And cold plates and things like that, it's not really like a core competency of Ecolab. 3D TRASAR, yes, but maybe not so much this architecture and tech infrastructure stuff. So I'll leave it there.

So a few things, Matt, and then I'll pass it to Scott, if there's anything that needs to be added. So generally, so the base case is the 30% growth plus that we've talked about. So that's the base assumption. That's what we knew back then. That's what we based our assumptions on as well. And anything that's better is going to help us, obviously. But Scott is going to add to that as well.

That question on the R&D and the knowledge, I'd like just to remind you that it's a water business because direct-to-chip cooling, well, the next technology is to get towards water. Even the coolants that we are offering to customers today are not water-based, but water-based are the best heat transfer coolant that we can imagine. Then you get all the challenges to work with water, obviously, of scaling, of fouling, of corrosion and all the things that comes together with water, especially when you work at lukewarm temperature, which are the latest NVIDIA chips, the type of temperature that they're going to have.

This is a business -- this is a technology that we've been mastering for a very long time, mastering water at higher temperature, mastering heat transfer. We are the leading cooling company. We can't forget that for 80 years. So we know thermal management really, really well. We have a lot of R&D here. And the last thing is CoolIT is super strong in R&D as well. You add to it the 3D TRASAR technology that we're going to bring together. It's going to be CoolIT plus 3D TRASAR technology is going to become the new Ecolab offering for customers the moment that we close as well. Well, it's going to be game changing for our customers ultimately.

So I feel really good in terms of R&D, in terms of expertise, it's a typical 1 plus 1 equals 3, which is exactly where we want it to be. It's a water business, removing heat. which is what we've done basically for 80 years in both other industries and now in this new industry. Scott, do you want to add anything on the EPS impact?

Yes. One thing I would say, Matt, on the EPS is, as we've talked about, we think this is a very high-growth, high-margin business and that 30% sales growth is over the next few to several years. And obviously, in the earlier years with that averaging, it will grow faster. So certainly, as Christophe said, we like what we see, and we see growth accelerating. But I still think that $0.20 is a good base case to have once we close per quarter. And then we'll adjust from there once we get hold of the asset.

For the second half of this year and then it gets neutralized in '27 because of the amortization that's rolling off as well at the same time. So it's almost perfect timing for that.

The next question is from the line of Mike Harrison with Seaport Research.

I was hoping that I could ask a question on the pest business. Just in terms of the digital and kind of smart connected traps that you're rolling out, can you give us a sense of what percentage of customer locations are using those new traps? Maybe just give a little more color on the timing of that rollout and when you might expect to see some margin benefits as you get better efficiency from your sales and service force with those new traps.

Thanks for that question, Mike. I love that business, and I love it even more moving towards the Pest Intelligence. We have roughly 700,000 smart devices that have been implemented so far. As you know, it's been driven by the largest retailer in the world with whom we've developed that proposition. It's working extremely well, really resulting in close to 99% of pest-free environment with much better service because well, 95% of the time we were spending in the past checking empty traps, well, is now sort of transformed into value add, which means selling more new accounts as well out there.

The plan we have, Mike, is that in the next 3 to 4 years, the whole Pest Elimination business is going to be a Pest Intelligence business. It's not going to be a straight line. We have to make sure that things would be working well. We're going to reach probably 1 million connected devices by the end of this year and we'll keep ramping up in the next few years. That's going to have an impact on growth. It's going to have an impact on retention. It's going to have an impact on performance for our customers. And yes, it's going to have an impact on our margins as well at the same time. And so far, it's working really, really well. We have a great team of that project and customers are really thrill about what they're experiencing.

Our next question is from the line of Laurence Alexander with Jefferies.

As you think about the surcharges and the pricing traction you have and how that has changed over the years, is your percentage value capture across your portfolio increasing? Or is it a matter of delivering more value, but capturing the same percentage? And as you think about those dynamics, are the newer businesses where you prefer to focus your time right now, do they have a higher value capture level relative to the value create for the customer than kind of some of the older legacy Ecolab businesses?

Laurence, it's something that we perfected over the past 4, 5 years, I would say. We always do that in a way that is beneficial to our customers at the same time. And that's been a clear rule, which is why we make absolutely sure that the total value delivered to our customers is north of what we are capturing in terms of price. And not every business is created equal. So if you go to a biotech manufacturer or you talk about Pest Intelligence in a retailer or Food & Beverage for a brewery, it's very different, and we do it in a very thoughtful manner. Over the last 5 years, we haven't lost customers doing it as well. Our margins went up. retention has remained strong as well at the same time.

That's why when we talk about the surcharge, it's kind of a direction. It's providing a framework for our teams and our customers to understand where we're going. While in some places around the world, you have more. In some places, you have a bit less in some of the businesses, it's going straight to structural pricing as well at the same time. It's working really well. That's why I was saying early on the call as well, this is something that we master really well. I'm not worried about it. This is an execution play that our teams are doing really well, the right way, and we're going to be fine with it as well, and we're going to keep sharing with you the progress we're making here. But so far, it's going really well.

Our next question is from the line of Andy Wittmann with Baird.

I guess I just wanted to maybe elaborate just to touch more on that one. It seems like the achievement of the energy surcharge is be important for that second half ramp here. And so just given that, Christophe, as you look at the total customers that you expect to approach with the energy surcharge versus how many you've approached today and are aware that this is coming, can you just help us understand how many of them or what percentage of them have been approached and are aware of this coming? And how many are still in the go-get for the balance of the year for you to achieve your ultimate target there?

Thank you, Andy. Well, it's everyone is impacted. There's no exception. We've said it's 100% of our customers in 100% of our businesses in 100% of the countries that we operate in. And it's not an easy task. Obviously, we have a few million customers in 172 countries in 40 different industries, but it's the third time we're doing it. We started April 1. So it's a few weeks back. It's pretty new. It's progressing very well. The mechanics are there, the systems are there. The tracking is there. I know every week where we are on pricing overall as well. That's why I feel good with the progress that we're making here as well at the same time. And the objective that we have is to be mostly done at the end of Q2, early Q3, while we keep building as well on the structural price.

And as you know, Andy, ultimately, all the surcharge is going to be converted into structural as well as quickly as we can. And in some of the businesses, it goes straight to structural as well, institutional being one of them as well. So the mechanics are there, and that's why we can go much faster and we can do it with a much higher level of confidence as well than in the past because, well, maybe unfortunately, we've become really good at it.

Our next question is from the line of Jason Haas with Wells Fargo.

I was curious if the conflict in the Middle East has had any impact on any of your end markets in terms of like hitting your customers' confidence in any way in any segment.

So short answer is yes. But Middle East is a pretty small business. So for us, it's a few hundred million. It's critical for the customers that are there. And that's why we take it very seriously, and we don't let any customer down over there. There's no customer location that we have left. No, we're there. We're helping them, especially in difficult time. Some of the units were closed for all the reasons that we're familiar with. So it's immaterial, and we want to do things the right way for our customers, for our teams as well. We have practice with it as well. Our customers trust us as well to be with them as well at the same time.

And most importantly, our competition has a very hard time to supply and to serve those customers, a great opportunity for us to gain share as well at the same time. So it might impact slightly our volume growth in Q2. Honestly, I don't care because it's going to help us in the second half, ultimately as we build on new shares in the Middle East. So I look at Q2 as a transition quarter, but the way customers are reacting, they love what we're doing. The fact that we here in the toughest of times as well, it's working well. Really proud of what the team is doing over there, and it always pays back after those phases are behind us.

The next question is from the line of Josh Spector with UBS.

I'm unfortunately going to continue to ask on the price cost side of things, but I just wanted to get some clarity that it's a little bit odd to me that you're talking about high single-digit raws inflation in 2Q. I mean that's coming quicker than I think I would have anticipated. And then you're not really saying that it's going to increase through the rest of the year, which most other companies are expecting higher inflation in the second half. So I'm wondering, one, what's different or unique there? And then two, just your ability to ratchet up that surcharge automatically if inflation goes to mid-teens from the high single digits. Is that baked in? Or is that something that has to be retrieved by you?

So we buy a lot of products like over 10,000, as you know. So that's kind of the good news. It's very broad. So it's pretty stable as well so how it's increasing. It started in February, as you know. So it's impacting the second quarter because of the inventories in between as well. So this expected impact of 8%, 9% of commodity cost in the second quarter. Some are thinking it's going to go down. I don't. I think it's going to be flat to up to your point as well here. We're counting so for that as well. We can manage that in terms of how we buy, how we save cost and most importantly, so how we price as well at the same time. It's impacting 1/3 of our commodities. So not everything, obviously, here.

So we're pretty well insulated with it. And in the extreme case where things change completely, well, we're going to go to the next level of energy surcharge. We did it in the past as well. We know exactly how to do it. Our customers are familiar with those discussions as well. This is not something I'm spending a lot of time on. This is something that our teams master extremely well. They've had the opportunity to do that a few times with our customers. And don't forget that we're providing more cost savings value to our customers' operations than what we're asking them to pay in price as well. That's the reason why surcharges get into structural price, and that's the reason why customers staying with us as well at the same time.

So this is something that is not high on my priority list because I know it works. I know our customers are familiar with it, and I know that we're going to master it whatever happens in the market out there. 80% of my focus is really start to grow the company while we manage that, like many other things that are happening in the world as well at the same time. This is just one of them.

The next question is from the line of Kevin McCarthy with Vertical Research Partners.

Christophe, I'd appreciate your updated thoughts on the subject of SG&A leverage. It looks like you were able to decrease your ratio of SG&A to sales by 130 basis points in the March quarter. Is that a reasonable trajectory to think about for the next several quarters? Maybe you could provide some updated thoughts on what you're doing productivity-wise and the effect of acquisitions on that ratio as we model the company going forward?

Yes. Thank you, Kevin. I'll pass it to Scott. But talking about what I said before that the whole price surcharge delivered product cost is not exactly high on my agenda. SG&A leverage is not high on my agenda either. And it's not because it doesn't matter. It's because it's very well mastered. We know how to manage price DPC. We know how to manage SG&A through technology. By the way, we're clearly at the forefront of all agentic in our organization, and it's delivering great results. So these two things, not very high on my agenda. Those ones are really well mastered while we focus on the growth of the company. But let me have Scott give some color on the SG&A evolution here.

Yes. Thanks, Kevin. So as you said, really good productivity on SG&A in Q1, up 130 basis points. We are getting the benefit of what we're doing for the One Ecolab program as we're launching digital and AI programs. As you noted, there is some shift, and I mentioned before, between gross margin and SG&A from M&A, primarily Ovivo. So in the first quarter, that accounted for 20 to 30 basis points, but still driving 100 basis points underlying, which is above our long-term target we've talked about in leverage being that 25 to 50 basis points.

So on a full year basis, I expect that SG&A leverage to be around 100 basis points, again, including some benefit from Ovivo because of the geography between gross margin and SG&A. But still the underlying is above our long-term 25 to 50 basis points target because of, in part, the faster sales growth, but also because of the great productivity we're driving. But over the long term, I still feel very good about that 25 to 50 basis points.

Our final question is from the line of Scott Schneeberger with Oppenheimer.

Just I'm going to touch on Light Water. You saw some solid sales in the first quarter, expecting that again in second quarter. Do you expect transportation and green energy, which were cited to remain the primary drivers going forward? And what's driving those verticals? Is it something just from a few large projects? Or is it a structural formation that's creating here?

Well, Scott, Light Water is doing quite well. Actually, transportation is one of them. What we do for them is ultimately better paint while using much less water and creating much less waste. It's a great offering that we are providing to the most advanced car manufacturers around the world. They like the idea of better products at a lower impact and lower cost as well at the same time. This is something that we've built over the last few years. We have not been very known at it, but it's working really well with great technology. The green manufacturers as well, total different industry, obviously, but a very interesting one. When you think about solar panels as well, it's a technology that's very close to the semiconductor type of manufacturing. This is something that we master quite well and in some places around the world. So it's growing very nicely.

And the last part that's in Light Water is what we call institutional water. Those are hotels and public buildings, office buildings, air conditioning, water management, Legionnaires' disease management, and those ones are working well. We used to be much more in that business going. So one unit by one unit. Now we're working with the large real estate companies around the world, the facility management companies as well around the world because they like this approach of a standard implemented anywhere around the world that's driving cost down and environmental impact at the same time down. So like what I'm seeing in the Light Water business, and that's why you're seeing the performance keeping getting better, and it's going to keep improving as we move forward into the year, so which is a really good story actually here.

So since it was the last question as well, so just to wrap up and recap a few things. We had a very good start of the year with strong momentum driven by what we like the most, which is record new business. That's exactly where we want to be in a world that's quite complicated. Our new engines are doing extremely well. High-tech, life science are really sort of driving growth in dramatically good ways at high margin with very low impact from energy costs as well at the same time. And I have full confidence in our team in managing margins, both on the price of DPC equation and SG&A, as we were saying before, those are not priorities to me as the CEO, but much more so counting on the team to deliver as this team has always delivered. And that's why I feel really good that '26 is going to be a great year for the company, both at top line and at the bottom line.

And when I look a little bit ahead, well, the new engines that we have with CoolIT and Ovivo, you've heard about the performance, both top line and bottom line are putting us in a very unique leak to serve this industry, the same on life science as well. And that's why I think that '27 is going to be an even better year for us. So a strong '26 and an even stronger '27, which is what I've been committing to you for quite a while and every single year, wanted to make some progress towards that ambition. And I think that we're getting towards that as we enter the next year. So I feel really good and even better about where we're going.

So thank you so much for attending the call today, and I'll pass it back to Andy.

Yes. Great. Thanks, Christophe and Scott. That wraps up our first quarter conference call. This conference call and the associated discussion slides will be available for replay on our website. Thank you for your time and participation. Hope everyone has a great rest of your day.

This concludes today's conference. You may disconnect your lines at this time. Have a wonderful day.

Greetings. Welcome to Ecolab's acquisition of CoolIT Systems Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, it is now my pleasure to introduce your host, Andy Hedberg, Vice President, Investor Relations. Thank you, Andy. You may now begin.

Thank you. Hello, everyone, and welcome to Ecolab's conference call to discuss our announced acquisition of CoolIT Systems. With me today is Christophe Beck, Ecolab's Chairman and CEO; and Scott Kirkland, our CFO.

Today's presentation deck is available on our Investor Relations website. You can access it now and follow along throughout the call. Please take a moment to read the cautionary statements in these materials, which state that this teleconference and the associated supplemental materials include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described in the Risk Factors section in our most recent Form 10-K and in our posted materials.

With that, I'd like to turn the call over to Christophe.

Thank you, Andy, and hello, everyone, and welcome to our Monday morning call on this great acquisition of CoolIT. I'm very excited to announce Ecolab's acquisition of CoolIT Systems. On Friday, we shared that Ecolab has entered into a firm agreement with KKR to acquire CoolIT for $4.75 billion. We expect the deal to close in the third quarter of 2026, subject to the normal customary approvals.

Before we dive into this exciting acquisition and what it means for Ecolab, I want to give you an update on the strong performance we're expecting to deliver for the first quarter and how we currently see 2026 trending. We actually feel very good because we are ready and what we're building prepares Ecolab for a future of accelerated growth.

Despite the uncertainty in the macro environment and rising geopolitical challenges we're all facing, our customers count on Ecolab to deliver every single day, anywhere around the world. We're executing and supplying reliably serving customers when they need us the most.

Turning to Slide 3. For the first quarter, which we'll report in about a month, we expect to deliver adjusted EPS of $1.69 to $1.71, representing 13% to 14% growth year-over-year. This is a tightened range around our original midpoint and reflects the confidence we have in our strong delivery. We see organic sales growth trending as expected, with continued strong margin expansion to deliver double-digit earnings growth.

For full year 2026, excluding CoolIT, we are reiterating our original EPS guidance, where we expect to deliver 12% to 15% adjusted EPS growth. Organic sales growth is expected to be higher than our original 3% to 4% target given our recently announced energy surcharge. This surcharge is expected to mitigate the impact of higher delivered product costs, which are expected to increase further in the second quarter. Bottom line, our near-term plan is steady. We're serving customers without disruption and staying focused on delivering superior returns for shareholders in 2026.

Now looking at Slide 4. Our long-term algorithm is steady as well. And with CoolIT, it has strengthened even more. We remain committed to 12% to 15% adjusted EPS growth supported by disciplined execution and balanced capital deployment. We're on track to reach an operating income margin of more than 20% by 2027, driven by 100 to 150 basis points of annual OI expansion from value pricing, strong growth in our high-margin growth engines, innovation and productivity. As our growth engine scale, we see a clear path towards 5% to 7% organic sales growth accelerating from our current 3% to 4% trajectory. And adding high growth, high-margin businesses like CoolIT further strengthened our durable growth algorithm.

Turning to Slide 5. Our growth engines, you're familiar with them, Global High-Tech, Ecolab Digital, Pest Elimination, and Life Sciences are growing really fast. Collectively, they are compounding at double-digit rates, and now with CoolIT represent nearly 25% of the portfolio. Our core businesses are performing well, delivering steady mid-single-digit underlying growth with strong and expanding margins. And as 2026 progresses, we expect improvement in basic industries and paper, which will support better volume performance for Ecolab. With growth engines compounding, the Core performing well, and the Challenged business is improving, we will grow faster, and we will do it with strong margins.

Now on Slide 6. Our growth engines are central to our long-term growth targets, so we're investing in each of them with purpose, capacity where demand is constrained, new technologies where high performance wins and digital scale where connectivity compounds value.

In pest elimination, we're already performing within our long-term sales target range and have a long runway as we scale our pest intelligence platform. It's an outcome-based offering that nobody else has at that scale and that grows share and margin. In Life Sciences, momentum is accelerating with very high margin. New capacity comes online in the second half of 2026, which will remove constraints and unlock further growth for our business where long-term margins can reach 30%. In Ecolab Digital, we're growing more than 20% with a run rate of $400 million in sales in a $13 billion market and growing. We're still in the early stages and expanding connection and monetization across applications gives us a long runway from here. And in Global High-Tech, we're performing extremely well as the AI build-out continues. We're uniquely positioned across fabs and data centers. We entered the high-tech industry in 2021 with only about $150 million in sales and with very strong organic growth and the addition of Ovivo and now CoolIT, Global High-Tech will be a $1.5 billion business, delivering strong double-digit growth with margins north of 20%.

Focusing more closely on Global High-Tech on Slide 7. AI demand is reshaping the digital infrastructure and globally high compute power is expected to roughly double over the next 3 to 4 years. Industry plants call for about 50 gigawatts of incremental compute demand driving roughly 70 new fabs and 1,000 new data centers over the next few years. Today, that represents a $10 billion opportunity for our Global High-Tech alone, and it is growing extremely fast. This is why AI is central to Ecolab's growth strategy, large visible demand, a platform that spans fabs and data centers and a model that scales with above average margins.

As a world's water technology and services company, we are best positioned to support the industry's growing needs and capture a leading share of that growth. This is actually a high-tech water business, serving critical water needs on the world's most demanding customers. This is Ecolab at its best.

Looking at Slide 8, water sits at every critical step of AI. You need ultrapure water to produce the chips. You need water to generate the electricity that powers those chips, and you need water to cool the chips in data centers. On the microelectronic side, we partnered with fabs to deliver ultrapure water and water circularity programs, capabilities strengthened by Ovivo, which we acquired in the fourth quarter of 2025. So together, we now provide end-to-end water offerings for microelectronic productions. This allows customers to produce more chips with less water.

In data centers, we combine Ecolab's water treatment, chemistry, cooling liquids and 3D TRASAR monitoring and our latest cooling as a service platform offering with CoolIT's direct-to-chip liquid cooling platform. Together, we deliver more computing with less cooling through a single integrated site-to-chip model that improves reliability, efficiency and uptime. That's why Global High-Tech is scaling as a growth engine, a business with about $1.5 billion in sales, including CoolIT and expected to compound up more than 20% per year with margins expanding above 20%.

On Slide 9, you can see just how quickly the liquid cooling market is expanding. AI is making liquid cooling the default for high-density compute, and the market is scaling fast. Industry estimates project more than 30% annual growth, with the addressable market reaching approximately $50 billion by 2035. This growth is being driven by rising compute demand, increasing heat output and higher right densities, all of which require more effective cooling solutions. That is exactly where our combined platform plays.

Together, Ecolab and CoolIT provide a single platform that meets customers where they are already investing as they standardize high-density deployments. The secular tailwind is strong and durable, more AI, more data, higher heat equal more liquid cooling and an expanded platform positions us to capture that growth.

Turning to Slide 10. Within this market, CoolIT is a clear leader. Direct-to-chip liquid cooling is a $5 billion market today within the $10 billion Global High-Tech opportunity we just discussed, and it's growing at about 30% annually as high-density AI deployments become a standard. And for perspective, only 5% of data centers already use this technology, which means 95% of the existing ones with [indiscernible] at some point.

CoolIt is a scale leader with a double-digit share and a top 3 position in North America. Demand is expanding so quickly that supply is tight across the industry, leaving room for multiple winners. What sets CoolIT apart is its anchor technology, validated by hyperscale customers and engineered to perform with hotter chips and denser racks. That leadership in a large, fast-growing market sets up the acceleration you will see as our Global High-Tech scales rapidly with CoolIT.

Now on Slide 11, view through the lens of growth. The impact is compelling. CoolIT brings a scale $550 million revenue base with 30% margins, driving EBITDA that is growing much faster than its rapid sales growth. By adding CoolIT, we expand our High-Tech total addressable market from $5 billion to $10 billion. Because this is a high-growth, high-margin business, CoolIT is expected to lead Ecolab's total organic sales growth by more than 1 percentage point, beginning 1 year after close. It's a powerful addition that strengthens the long-term growth trajectory of our fastest growth engine. Together, Ecolab and CoolIT create the industry's most complete cooling platform, a single integrated service-led offering that spans site-to-chip pairing world-class anchor technologies with water expertise, chemistry, monitoring and global service. That combination, which is a typical Ecolab combination positions us to deliver more value to customers and capture a leading share of this expanding market.

Looking at Slide 12. you'll see a snapshot of CoolIT's capabilities. CoolIT is a global leader in advanced direct-to-chip cooling solutions built on deep engineering expertise and real-world performance across the AI ecosystem. The company employs more than 600 people with strong design and manufacturing capabilities and active deployments with major hyperscalers and chip makers, including NVIDIA and AMD. Its platform includes next-generation CDUs, cold plates, rack manifolds and cooling loops, all engineered to perform together as one closed-loop liquid cooling system.

CoolIT's innovation centers in Canada and Taiwan provide rapid prototyping, testing and engineering depth at a time when customers need high-performance solutions very quickly. These capabilities directly complement Ecolab's strength in water management, chemistry, digital monitoring and global service delivery. Together, we create a differentiated end-to-end cooling platform designed to scale with the industry's most demanding customers.

Now turning to Slide 13. This is a growth acquisition, one that fits squarely within our strategy. Ecolab will acquire CoolIT for approximately $4.75 billion in cash. The deal is accretive to our long-term sales and EPS growth algorithm with returns expected to be significantly above our weighted average cost of capital, and we expect to maintain our strong investment-grade profile. On a pro forma basis, net debt to adjusted EBITDA is anticipated to be 3x at close, turning back to about 2x by the end of the second year after closing already. Closing is targeted for the third year -- third quarter of 2026, subject to customary closing conditions and regulatory approvals.

On Slide 14, you can see how CoolIT reinforces our long-term successful Ecolab business model. In a liquid cooled data center, the CDU serve as the anchor points of the cooling loops, and there are up to 100 CDUs data center. These CDUs are the central interface between facility water and the coolant circulating through the thousands of cold plates and chips in service. Cold plates change every time chips change generations, with chip innovation happening faster than ever as new chips come to market every 6 to 12 months and CDUs change as power requirements go up. It's in a way, a consumable business. Around that anchor, Ecolab brings a robust recurring portfolio, chemistry, coolants, digital monitoring through 3D TRASAR, utility water management, pretreatment and water safety programs. This is the Ecolab model we have practiced for more than 100 years in all the industries we serve, and it scales very effectively.

As customers add service, increase density or activate additional roles, the system runs harder and requires more consumables, monitoring and service. Cold plates refresh with each new chip generation and CDUs upgraded as thermal loads rise. Most importantly, with CoolIT, customer spend with Ecolab increases significantly, expanding by 3 to 5x compared with today. With this, we have identified significant sales synergies between the 2 offerings. CoolIT strengthens the Ecolab model. It anchors our consumable digital capabilities and service with high-performance technologies that allow us to deliver better customer performance.

Now on Slide 15, we see further differentiation with digital intelligence is embedded directly into the platform. CoolIT CDU is the inroad liquid cooling unit built for today's high-power AI rooms. These units deliver stable flow, efficient heat transfer and modern controls that allow operators to deploy high-density AI rights consistently across sites. When we embed Ecolab 3D TRASAR technology inside the CDU, the system becomes significantly more capable. 3D TRASAR provides real-time visibility into cooling quality, temperature, flow rate and system health. It enables automated adders, precision dosing, predictive maintenance and continuous optimization, all of which protect the loop and improve data center performance. This is 3D TRASAR at its best and Ecolab at its past. So as thermal loads continue to rise, this level of intelligence becomes essential. Together, CoolIT's anchored technologies and Ecolab's digital capabilities create a differentiated hyperscale-ready CDU that improves performance, reduces pump and chiller load, accelerates commissioning and allows global standardization. This is a meaningful advantage as customers race to deploy infrastructure consistently across regions.

On Slide 16, you can see why the customer value proposition is so compelling. Across the large AI sites, the total spend with Ecolab, including CoolIT technologies, chemistry and service is less than 10% of the customers' annual operating cost, yet we influence the part of the P&L that matters most, cooling. Cooling determines uptime, energy use, power availability and the lifespan of critical equipment, and that's where we add meaningful value. Historically, about 40% of a data center's power went to cooling. Our integrated site-to-chip system, combining CDUs, cold plates, cooling quality, monitoring and service can shift that closer to 10%. That means operator gains significantly more usable power for AI compute without expanding their electrical footprint. In an environment where power availability is one of the biggest constraints on new capacity, this advantage is material. By improving thermal efficiency, stabilizing the loop, lowering energy use and shrinking the water footprint to that of a car wash, we help customers get more performance out of every megawatt. That's why the combination of Ecolab and CoolIT resonates so strongly with hyperscale operators.

Bringing it all together on Slide 17. CoolIT meaningfully accelerates Ecolab's growth profile. It adds more than $550 million of high-growth, high-margin revenue and lift Ecolab total organic sales growth by about 1 percentage point at 30% margin. It strengthens Global High-Tech, our largest and fastest-growing engine and improves the overall quality of our portfolio. This accelerates our path towards our long-term financial targets, 5% to 7% organic sales growth, more than 20% adjusted operating income margin and 12% to 15% adjusted EPS growth. CoolIT contributes meaningfully to each part of that, each part of that algorithm through faster growth, stronger margins and sustained visible demand tied to the global AI build-out.

Finally, on Slide 18, CoolIT extends our proven disciplined approach to strategic M&A. We focus on high-return businesses that strengthen our platform and compound value over time. CoolIT fits well within that playbook. It's supported by visible and durable market expansion and reinforces the same model that has driven our consistent adjusted EPS compounding time. In summary, our year plan is steady. Our long-term algorithm is strengthening, and our growth engines are compounding with Global High-Tech meaningfully enhanced by CoolIT. We couldn't be more excited about this addition.

And with that, we'll open it up for questions. Andy?

Thanks, Christophe. That concludes our formal remarks. Operator, would you please begin the question-and-answer period? .

[Operator Instructions] And the first question is from the line of Tim Mulrooney with William Blair.

Christophe, I appreciate the overview there. I just have one question. With this acquisition of CoolIT, how much of your High-Tech Water business will be equipment sales versus consumables. We typically think of Ecolab as is having a core anchor and then surrounding that with services and consumables, high recurring revenue. But is this acquisition changing your model at all? Are you moving more towards capital equipment?

And the quick answer is absolutely not. Our recurring revenue model has been part of our winning formula, Tim, for 103 years now, and it will not change. It will never change. That's really part of our recipe for success. And when we think about it, both microelectronics and data centers are water-based businesses that are focused on the fastest growth end markets. I see it as my duty, obviously, to make sure that our main capabilities, which in that case, is water, but it's focused on the markets that are growing the most and especially growing the most tomorrow.

And both businesses, microelectronics and data centers are water as a service models that are enabled by technology. That's true in every single business of the company. We need technology in order to drive the consumables, the famous razor that required the razor blades. So the model we have is 90% recurring. It will remain 90% recurring in the future.

If I unpack a little bit, so in microelectronics, we helping customers move from 5% water recycling and it's huge amount of water as we know, to 95% water recycling. Nobody does that. And we're selling outcomes and Ovivo that we acquired in December provides the technology, this ultra pure water technology that enables it. We needed to have that technology in order to bring the water back to the system at the highest purity level, which is called in the industry, so ultra pure water.

CoolIT for data center is recurring, too. But there's a different frequency. Cold plates, as I've mentioned, so I exchanged at every new chip generation change. Every time that NVIDIA comes with something new, well, they need to change the chips, they need to change the cold plates, they need to change the coolant as well. And the CDUs are switched when cooling power goes up as compute power goes up, and it goes very quickly up as we know. So in data centers, our growth is mostly driven by data usage and new chips generations from the likes of NVIDIA. And it's important to keep that in mind.

Obviously, new data centers accelerate the growth but our main focus is making sure that the current data centers, as they refurbish with the new generations of chips are liquid cooled as well with the right CDUs. So you have recurring revenue as well, both on cold plates and on CDUs, albeit at a different frequency. It's not happening every day, but it's a matter of months or quarters.

And the CDUs are like the dishwasher in a restaurant. It's the main dispenser and controlled unit which all other services are anchored around. And the good news is that there is up to 100 in one data center. So bottom line, our 90% recurring business doesn't change and will not change.

Our next question is from the line of Manav Patnaik with Barclays.

This is Ron Kennedy on for Manav. As a follow-up to Tim's question, Christophe, your response in relation to the 90% historical consumable revenue model that mostly avoided direct sales manufacturing with heavy in favor of leasing anchor machines. What gives you confidence in Ecolab successfully managing and scaling a highly tech fast-paced [ hardware ] design and manufacturing operation? And given that it generates revenue primarily through upfront sale of that complex liquid cooling systems like CDUs and cold plates, is there a road map and time line for transitioning into recurring razor blade and razor revenue streams?

So Ron, it's a bit of a similar question, obviously, as what Tim was asking. So I'm not going to repeat, obviously the same. But our model has been 90% recurring and will remain 90% recurring. To close those loops being in a microelectronics fab to reuse and recycle water, you need upfront technology in order to get the direct-to-chip liquid cooling system in a data center, you need additional technology as well. So as mentioned before, the cold plates are changing every time you change the chips, which is related to every time you hear obviously, NVIDIA announcing their new chips. And the very good news is that it's happening to the older data center. Only 5% of the data centers today use direct-to-chip liquid technology because that's the newest technology for the future, obviously. So you still have 95% of the data centers out there that are going to have the retrofit to the newer technology of chips. That means new consumables as the cold plates and the CDUs that come in.

When it accelerates again in terms of compute power, well, you need different cold plates, new coolant, new CDUs as well in there. So you can see that recurring theme. So coming back for old data centers as well as for the new ones, so a different approach. But the good thing is that we're not depending on the number of data centers that are being built because there's so much work that can be done on the existing data centers as well today, which is a huge advantage when people are thinking about, well, how much investments are truly going to happen in new data centers. Well, we have 95% of the data centers out there that still need to be retrofitted because we will need -- they will need the hyperscalers and co-locators. So more power, which means more cooling, which means more cold plates, new cold plates, new CDUs as well at the same time.

And to your question, Ronan, on the technology, I feel really good. We have thousands of engineers in our company. We've demonstrated that we can master high-tech technology in every single of our businesses. Think about even so Pest Elimination, moving to Pest Intelligence. It's been a remarkable technological move that's been done in 18 months. And now we have thousands -- hundreds of thousands going towards 1 million devices in the Pest Elimination group as well, and it's happening as we speak, and it's driving great results. This is true in Life Sciences as well. This is true in Ecolab Digital. This is true in F&B as well with all the new systems that we're bringing as well to life. So investing in new technology allows us to increase our moat, increase our growth, increase our margins and increasing the stickiness as well so with customers for all the right reasons because it's driving better performance to them. So I feel really good with where we're going, both in terms of model and in our ability to stay ahead of technology.

Our next question is from the line of Ashish Sabadra with RBC Capital Markets.

Congrats on the acquisition. My question is on revenue synergies. Can you talk about the opportunity to cross-sell both Ecolab's core offering, the consumables and 3D TRASAR into the CoolIT customer base and the other way around? And how does that improve CoolIT's competitive positioning? Right now it's the #3 player, how can it further improve its competitive positioning plus revenue synergies?

Ashish, thank you. Synergies are quite significant in that case because it's true when we think about individual offering like the CDU and I'll come back to that and how we integrate the overall system as well together. As I shared earlier on, Ashish, the CDUs that CoolIT is providing are the most advanced that are available out there. They have great technology as well to stay ahead of that curve. They don't have the 3D TRASAR monitoring technology, which is something that we've practiced for 30 years now, which is enabling any piece of technology to stay connected with the liquid fluid that's being managed and making sure that the system is running at optimum performance.

Well, we're going to bring together the CDU technology and the scale of manufacturing at high-quality standards that CoolIT has demonstrated in the past few years together with the 3D key technology in order to create the next generation of CDUs to make them really differentiated to what competition out there can provide. And as you know, so with 3D TRASAR, we can connect every element within the system, in that case, so the cooling system in a data center in order to optimize the overall cooling performance of the data center and no one does that today. So that's the first component. It's the individual offering and especially around the CDU, which is 2/3 of the CoolIT's revenue.

The second one, which is the most important one, is when we get together, we become an end-to-end provider of cooling technology. It's not individual offerings within the data center. It's an end-to-end offering of a closed-loop liquid cooling system with coolants, with services, with recurring revenue, everything that I shared as well early on. And the most important news in here is when we add CoolIT to our existing offering, it multiplies the opportunity for Ecolab times 3 to 5x what we sell today. So being able to bring CoolIT to the data centers that we serve today as Ecolab, and it's over 1,000 already today and the same -- the other direction, obviously, so bringing Ecolab in the data centers where CoolIT is present, that's driving a lot of very natural synergies, which is a very natural Ecolab approach when we think about synergies when we acquire a new business as well.

So overall, a very unique story that's helping CoolIT leverage the scope of Ecolab and Ecolab, leveraging, obviously, so the customer scope of CoolIT. And last thing is, ultimately, it's an Ecolab model. It's less than 10% of the overall spend annual OpEx of the data center that's impacting almost half of the overall cost, which is total value delivered at its best, which is what we've been doing for a very longtime.

Our next question is from the line of John McNulty with BMO Capital Markets.

So it sounds like a lot of the longer-term future value of this is really going to be coming together and putting the 2 assets together where you've got a fully closed-loop system. I guess how long before you feel like you've got -- or how long will it take to get a fully integrated product where 3D TRASAR is fully looped into the CDU system and you can kind of offer a full one-stop shop approach. Is that something that can be done in whatever the first 9 to 12 months? Does it take a few years to kind of get that rolling? I guess, how should we be thinking about that?

So it's going to evolve all the time, and it's never really going to stop, John. The good thing is that before we announced the acquisition of CoolIT, we had already launched our service that we call Cooling as a Service, which is a very Ecolab way of selling a service that's driving committed outcome of cooling at certain cost preference and reduced water footprint. This is something that we have already launched. So that exists. We had our own CDU as part of it as well. Now we're adding, obviously, a huge capabilities from CoolIT to come behind our CDU offering, and we add the cold plate to it, which makes the system even more comprehensive.

So we're talking about quarters or 1 to 2 years in front of us. So we're not talking about a very long-term development here. 80% of the work is already done. Getting together will make it even stronger. This is really what attracted the 2 teams because basically, CoolIT needed what we can provide and we needed what CoolIT can provide, which is really our CDUs and cold plates at scale that we plug together and provide our customers with this committed value of more cooling or less power for more cooling, which means more compute, which means better cost per data and reduced water usage as well. So it's going to happen as we speak in the next few quarters and the next 2 years, a lot of game-changing offerings that will be coming on the market.

Our next question comes from the line of Seth Weber with BNP Paribas.

Thank you, Seth. The Ecolab CapEx model will not change. So what you've seen so far will remain. That's really something that we really liked and CoolIT compared to its peers without naming them is in the same swim lane. So no surprise on that side. Now in terms of capacity, obviously, mid- to longer term, considering all the growth that industry is on will require investment as we grow, but that's pay as you grow, which is a very Ecolab-like type of model. Now back to short term, CoolIT has the capacity today to double again their sales, which is actually a very reassuring place to be. At the same time, they're working as well with partners, manufacturers in Asia. We do too as Ecolab, which means that when we bring together CoolIT's capabilities and capacity with Ecolab capabilities and capacity, what it makes that situation even better. So no constraint short term. We feel good about where we're going for the next few years.

We'll keep building capacity and capability as we think a little bit more down the road, but it will be a mix between what we manufacture ourselves that we absolutely want to protect and what is something that we can let produce by someone else under our own design. This is something that we've done as a company for a very long time. Take dish machines. We have hundreds of thousands of dish machines out there. Well, we don't produce any, but the design and the IP is ours. So it's going to be a similar idea as we go forward with Hi-Tech and CoolIT.

The next question is from the line of Andrew Wittmann with Baird.

I guess kind of a 2-parter here. I guess just for context here, Christophe, could you just talk about what the trailing 12 revenue was here? Maybe how the backlog compares of orders compares like this today versus its size last year at this time? Just for some context of what's been happening here in the recent term. And just thought maybe it would be helpful for you to comment on how your 2 companies have worked together so far to this point. Obviously, there's been a lot of integration that's been done by someone else, and that's the opportunity for you. But I'm just wondering the familiarity or any integration that you've had to do that maybe gotten you to this point with this company already, if any?

Good question. Thank you, Andy. So two questions, as you said. So the past trajectory is similar to the future trajectory, which is not too surprising. And in a typical Ecolab manner, obviously. So we're projecting sort of the trajectory for the future in realistic ways and it might well be better/much better than that. So we will see. So when we look at the past, we look at where they are exactly today, how 2026 looks like. So we feel very comfortable.

And that leads to your question as well of the backlog that covers the majority of '26 is supposed to be delivering as well. So we feel very good about 2026. They feel very good. We spend a lot of time together to really understand what was in the pipeline. We're very familiar with that type of approach, obviously. And we feel good. And when we look down the road of '27 and beyond, actually it's even better. And the fact that we get together will open, obviously, the synergies. I was mentioning to Ashish a little bit earlier as well.

Now to the second part of your question, the relationship between the two companies. So we've been connecting so for quite a while together even before they were on the market because, obviously, most people were familiar with them. And we were trying to get to know each other to learn from each other, to understand what's out there? What are the capabilities that we will need? What are the opportunities that are out there.

And it's actually the more we were talking together, the more that we realized we made for each other because CoolIT is 100% data center liquid cooling technology company. There's none out there that was existing, 2/3 in CDUs, 1/3 in cold plate, exactly the mix that we were looking for half in North America, 1/3 in Europe, 20% in Asia, the geographic footprint that is aligned with investments of data center as well at the same time. And most importantly, the best quality and technology that was out there, and the teams really had pleasure working together, and that's how it accelerated ultimately so the process of thinking of getting together at some point.

It's obviously attracted a lot of others on our path. But ultimately, we ended up exactly where we wanted to be when we started to get to know each other.

The next question is from the line of Vincent Andrews with Morgan Stanley.

This is Steve Haynes on for Vincent. I wanted to ask a question about the guide for the full year. And I understand that you're reiterating it ex the acquisition, but maybe you could just give a bit more color on what you've one assumed for price raws and if there's any change to the kind of the cadence of the second quarter through the fourth quarter versus your prior outlook?

Thank you, Steve. I'll pass it to Scott first, and then I'll make a few comments if needed.

Thanks, Christophe. Yes, Steve, so excluding CoolIT, just to set the baseline, there's no change to our 12% to 15% growth for the full year. And obviously, given what's happening in the world, we're overcoming significant DPC inflation in doing that with doing the surcharge, which we announced effective April 1, but also just generating growth to our One Ecolab performance. Specific to CoolIT, obviously, dependent on timing of close. We've said we expect it to close in the third quarter.

And with the CoolIT financing costs, we expect a low to mid-single drag on the overall 2026 EPS relative to the 12% to 15% I mentioned before, okay? But all in, expect CoolIT and with the amortization, we still expect both the impact of CoolIT and [ ACO ] amortization next year. We expect the 2027 to remain in that 12% to 15% growth scenario. So really sort of a perfect timing for us. But ultimately, as Christophe mentioned before, we think CoolIT strengthens the overall long-term EPS algorithm as you think about, this is adding 1 point of sales growth to overall Ecolab, and it's at a 30% EBITDA margin.

Maybe a few additional comments here in my role here looking at '26. It's one of those years as well where we spend a lot of time planning for our delivery of the coming year. And well, the delivery plan is quite different than what we had expected. That's been true for the past many years for all of us, obviously, on this planet. So we've gotten very used to doing great plans that do not happen as planned, but that doesn't compromise the outcome, the delivery. The path to get there changes, obviously, because the environment has changed. But I'm looking at our team and saying, okay, we've been here before. We have 2 options. One is to step back, sit back, observe what's happening and becoming more cautious.

My approach here is to say, this is an Ecolab moment. This is an exact time where customers need us more than ever in order to ensure their operations that we can supply them all the time, that we can help them so get their productivity as well up in a difficult environment. So this is an Ecolab moment. This is a moment where I want the whole organization to gain share, to bring innovation and to acquire new capabilities for growth in the future. And that's why what we did with Ovivo in December, what we're doing with CoolIT today is all in that spirit of saying this is a great opportunity for Ecolab, and we won't miss that opportunity to get there.

So feel pretty good for '26 with everything we know now, okay? We'll see what we learn, obviously, in the next few days, weeks, months. But we're very agile as an organization, and we demonstrated that year in and year out. I feel really good for '26, and I feel even better for '27 with the growth engines that we're building and how we're strengthening our core business at the same time.

The next question comes from the line of Patrick Cunningham with Citi.

So it seems the interest expense to fund this deal is higher than the EBITDA contribution at least initially. How should we think about sensitivity and level of risk tolerance in order to achieve 2x leverage by the end of year 2, given there could be some potential fluctuations in the broader AI investment cycle?

I'll pass this right over to Scott much more for this year for...

Yes, Patrick, I'll just talk on the interest itself. So as you know, we've talked about for the year, our interest expense coming into the year is about $290 million. This will add about $260 million. But given the strong growth and the strong margins of this business and you add on top of that, just the strong cash generation we have as an Ecolab business, we feel very good about getting to that 2x within 24 months. The peak leverage after close is going to be around 3x, as I think Christophe mentioned earlier. But just given that strong cash generation model, given our strong balance sheet, which is in great shape, we feel very good about delivering that leverage back to about 2x in 2 years.

And if you just consider what we did in the past with previous acquisitions, we practice that very well. We take it very seriously, getting back to [ 2x ] as quickly as we can, which means just a few years is something we demonstrated in the past. We know how to do it. We have the right cash flow as well to do it. This is the beauty of the Ecolab model, and we will not diverge from our commitment to get back to [ 2x ] in a very short period of time.

The next question is from the line of David Begleiter with Deutsche Bank.

Christophe, post CoolIT and Ovivo, are there other technologies you'd be looking at to possibly add to the Global High-Tech platform? And secondly, is the potential at some point to have Global High-Tech being its own segment in the reporting structure of Ecolab?

Thank you, David. So two very different questions, obviously. So starting with the first one. The second, you might stress a little bit to our science team that loves having new reporting segments. It's -- maybe starting with the second might be easier, so the reporting segment. We're trying to give you as much transparency as we allowed to obviously, from an accounting perspective around our growth engines in General and Global High-Tech as well. So more specifically, so GHT, Global High-Tech is an operating segment within our reported segment water already today. So we're going to keep building on that and give you as much transparency as we can. That's been our approach, our philosophy and our practice, and we will keep doing that always more as well going forward. So more to come here, but as much transparency as we can as we've always done.

And your first question in terms of acquisitions, I guess, with CoolIT and with Ovivo, I think we are in the exact right place for us. We wanted to really build scale on how chips are being produced, which are produced in water. As you know, we wanted to have those water capabilities in data centers where chips need to be cooled. Well, we created the critical mass that we needed in data centers with CoolIT. And there's a third component that we're not talking about here is how do you power, obviously, the chips. We have a very strong presence in the power industry that interestingly enough, has been growing the past few years between 0% and 0.5%. It's expected to grow 10x that growth rate, which means 5% in the many years to come, starting right now, by the way.

Well, this is why our power business, which is not in High-Tech is obviously benefiting as well from that AI drive, which is a very good thing. But in short, we feel that we have what we need right now, so with CoolIT and with Ovivo. And we will keep working with partners out there to really be at the center of this ecosystem to really own water as a service for our customers. That's going to be true in microelectronics for the fabs, and that's going to be true for data centers as well. But for the most part, we have what we needed in both those segments.

The next question is from the line of Shlomo Rosenbaum with Stifel.

Christophe, I understand the future positioning with the 3D TRASAR together with the CoolIT. What I'm trying to understand is the positioning of the business right now within the market versus the other two larger competitors, what is unique about CoolIT? What do they do that they don't -- other ones don't do? Or does everyone have kind of a similar type of technology and they're all kind of growing with the market growth?

Well, generally, as mentioned before, so it's a new technology for data centers that's been brought to the market just a few years back. We're talking about 2 to 3 years here. So it's not that long ago that, that technology is truly took off in the data center world. So there is room for plenty of players, obviously, out there because -- well, every supply that's out there gets taken by the customers, the hyperscalers and the colocators as well at the same time. So plenty of room to grow for the few players that you mentioned as well before.

What I really like in CoolIT and second, in the combination of the two companies. So first on CoolIT. As mentioned before, it's a pure-play cooling data center business. That's the only one out there. That's all they do. It's 2/3 CDUs. It's 1/3 cold plate. It's exactly the right mix, exactly the right geographic presence, as I mentioned as well before. So that's all they do. They have those relationships with chip designers and manufacturers as well as the hyperscaler to know what's to come, to design together with them. They have great testing capabilities that most don't have at that scale and that we certainly Ecolab do not have as well today. So it's kind of the best property out there, the best asset. And that's why for me, when I was looking at what was out there, well, it was well, half the price of others out there, higher quality, higher growth opportunity, a pure play at a higher return. So that was pretty easy.

So for us and for me to say, this is the one we need because it's exactly the right balance for us and for our customers. That's when I look just CoolIT. When I compare -- so Ecolab plus CoolIT compared to the other 1 or 2 guys that you're mentioning out there, the other ones are product companies. So they sell products. They sell most of it through distribution as well. It's like electric supplies type of companies doing very well, different model. This is not the way Ecolab runs business because we are driven by outcomes that we commit to. And then so we get this revenue model with consumables that we provide to our customers. We've seen that in many of our businesses. Most of our competitors are product companies in most of the other segments that we serve. Well, we're not. We're outcome-driven with a recurring service model to deliver that outcome.

That's exactly what we're planning to do as soon as we close, obviously, with CoolIT is to strengthen this cooling as a service offering for our customers that's bringing all the aspects, all the products, bringing all together through 3D TRASAR and having service capabilities on the ground in those data centers anywhere around the world. Competition does not have service people going to data centers as well. So I think that the differentiation is going to be pretty strong compared to the other two.

The next question is from the line of John Roberts with Mizuho Securities.

This is Edlain Rodriguez for John. I mean, Christophe, technology keeps changing. I mean now it's direct-to-chip, but this may not be the future of data center cooling. I mean single phase immersion cooling seems to be the next leap. Like how confident are you that CoolIT is future-proof?

So future proof is always depending on your ability to keep innovating out there. But this is true in all of our businesses, obviously. So when I think about Pest Intelligence, when I think about Life Science, when I think about Institutional, when I think about F&B, it's always been driven by innovation. And that's why as a company, when we launched our mega innovation program 5 years ago, you've seen some of those during Investor Day as well last year. Well, I feel much better today with all that breakthrough innovation portfolio that we have and that we're strengthening for the future because it's allowing us in each of our businesses to stay at the forefront of what's required, obviously, so by each of those customers in each of those industry segments. So this is something that is true for most of the segments that we're serving.

This one is more extreme. It's growing fast. Technology is moving really fast as well. This is something I really like because this is good ultimately for that industry. This is even better for the overall company because that mindset of innovating in big leaps and really fast what is exactly something I'd like to have for every other segment of our organization. So it's going to help us indirectly for the overall company as well at the same time.

So back to your practical question, as mentioned before, liquid cooling is in 5% of the data centers today, which means 95% do not have think about shifting those 95% towards liquid cooling. Well, that's going to provide a pretty long runway out there. Thinking about the next generation of cooling with 2 phases, for instance. Well, we're thinking about this one. Don't forget that Ecolab is the leading cooling company in the world. We've done that for 80 years. So that's something that's very familiar. We have the physical capabilities. We have the scientific capabilities. We have the digital capabilities.

And most importantly, we have thousands of scientists and engineers that are doing that every single day. If there is one company that understands cooling, this is Ecolab. We've done that for nuclear plants to hotels, to data centers as we are talking today, it's the same physics, obviously here. So I feel good about what we can do here. And -- where it's going to go? Well, the fact that we're very close together with CoolIT with the chips designers and the chips manufacturers that those 2 are separate usually, well, is helping us understand, well, what do they need? What can we provide? That's going to happen so years down the road. Well, this is the power of innovation. This is exactly what I like, and this is exactly what we're good at as well. So liquid cooling is, for sure, the next generation of cooling solutions for the years to come, and we keep thinking about what's coming next after that as we've always done in every single other business too.

We're nearing the end of our question-and-answer session. We have time for one final question, which will be from the line of Jason Haas with Wells Fargo.

I want to take a step back and just ask a bigger picture question on the philosophy behind doing this deal. I'm curious like how this plus Ovivo shifts the focus and growth of Ecolab like over the next, call it, 5 to 10 years. I'm just curious like for how long you'd be considering doing an acquisition to get bigger in data centers like this.

Thank you, Jason. If I step back as a company, Ecolab has always done that. That's always been our driving force is making sure that we're building new businesses that are capturing the next growth opportunity. That was true 25 years ago with Pest Elimination. That was true more or less the same time when we started with F&B with cleaning in place. That was true with water in 2011 when we acquired Nalco. That was true when we created Life Science in 2017. That was true when we created our Digital Business as well so a couple of years ago. And this is true with Global High-Tech today. So it's always been a combination of affecting our core businesses for the future, making sure that the core business is doing extremely well, while we're building new growth engines for the future. So I feel really good with the fact that tomorrow with CoolIT, our growth engines familiar with them with Pest Intelligence, with Global Hi-Tech, with Life Science and with Ecolab Digital.

Well, it's 25% of our sales and having 25% of our sales that are growing double digit at higher margins and with stronger earnings growth as well, but it's continuously shifting our portfolio towards higher growth, higher-margin businesses. This is exactly what we've done since we began as a company. We've accelerated that over the last 20 years. We accelerated it even more in the last 5 years with Life Sciences, Pest Intelligence and now start with Global High-Tech. So it's a very traditional Ecolab approach of making sure that we keep shifting, obviously, our business where the puck is.

And as the world's water company and knowing that water is central to AI, chips are produced in ultra pure water, chips are powered with electricity that requires a lot of water and chips are cooled tomorrow with water technology. Well, this is an obvious place for us to invest, to own and to be really the game-changing partner for each of those customers in those several industries. So I feel really good about this continuous shift that we've always done towards higher growth, higher margins, higher returns, higher moat with the same model of 90% recurring revenue model that has made us successful for a very long time. And it's going to be even more the case tomorrow because High-Tech, well, is the highest growth industry in the world out there with whatever risk out there, the demand of AI is going to keep going up in a really pay-as-you-go type of approach model for Ecolab. This is an Ecolab model. This is a water business. This is the highest growth industry. This is exactly what we need. So that's why I feel really good about the strategic relevance of this deal, building those growth engines for the future.

And if I step further back, well, I feel good about how it fits into our commitment to deliver our performance short and mid- and long term for you, for our shareholders, the 12% to 15% algorithm of earnings growth has just gotten stronger with it. We're adding 1 percentage point to the top line as well of the company at 30% margin. This is a really good thing as well and getting to the 20% OI margin in '27 remains absolutely unchanged as well. And my eyes are clearly focused on what's next, how high can it truly go after 20%. So pieces are coming very well together in a world that's hard to predict, that's complex out there. But as mentioned before, I see that as an Ecolab moment. That's where we are at our best. This is what we like. We will capture that opportunity as we've always done in the past, and that's going to drive higher return for shareholders as it has as well over time in the past done as well.

So thank you so much for joining us today, a big moment for our company, for our team, really proud of all the great work that our teams have done, specifically for that acquisition, but more broadly in delivering a very strong 2025, starting strong in '26 as well and building the future as we've always done as a company. So thank you for joining us. We will see each other, obviously, in a month from now for the Q1 earnings. And if you have any questions in between, reach out to us at any time. Thank you so much. Have a great day and stay safe. Bye, everyone.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to Ecolab's Fourth Quarter 2025 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, it is now my pleasure to introduce your host, Andy Hedberg, Vice President of Investor Relations. Andy, you may now begin.

Thank you. Hello, everyone, and welcome to Ecolab's fourth quarter conference call. With me today are Christophe Beck, Ecolab's Chairman and CEO; and Scott Kirkland, our CFO.

A discussion of our results along with our earnings release and the slides referencing the quarter's results are available on Ecolab's website at ecolab.com/investors. Please take a moment to read the cautionary statements in these materials, which state that this teleconference and the associated supplemental materials include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the Risk Factors section in our most recent Form 10-K and in our poster materials. We also refer you to the supplemental diluted earnings per share information in the release.

With that, I'd like to turn the call over to Christophe Beck for his comments.

Thank you so much, Andy, and welcome to everyone joining us today. 2025 was another record year for Ecolab with record-breaking sales, margins, earnings per share and free cash flow. This was all enabled by the exceptional total value of our team and technologies delivered to customers, helping them achieve better business outcomes, operational performance and environmental impact. Thanks to our team's dedication expertise, we're entering 2026 with strong momentum and are very well positioned to deliver continued high performance with confidence.

In Q4, we delivered 15% adjusted EPS growth with quarterly growth strengthening throughout the year. This was driven by accelerating underlying sales growth and continued strong OI margin expansion. Organic sales grew 3%, driven by 3% value pricing and positive volume growth. Volume actually was stronger than it appeared, with performance improving across most of our businesses. Food & Beverage accelerated to 5%, Pest Elimination and Life Sciences both accelerated to 7% and Specialty continued to drive significant share gains, growing 7% as well. Institutional underlying sales growth was consistent with prior quarters, excluding the unexpected short-term impact from lower distributor inventories.

We also maintained strong double-digit growth in Global High Tech and Ecolab Digital. And taken together, this strong momentum lifted Ecolab's underlying volume growth to 2%, driving mid-single-digit underlying organic sales growth when we exclude impact from basic industries, paper and this lower distributor inventories. In other words, our core businesses and our growth engines are doing very well.

We expect the distributor impact to largely normalize in the first quarter of 2026. We also continue to anticipate basic industries and paper's performance to progressively improve in 2026. Combined with strong new business wins and continued momentum across our growth engines, we expect volume growth to get back to 1% as we exit the first quarter, with growth accelerating further as the year progresses.

Our strengthening underlying sales drove organic operating income growth of 12% and expanded our organic operating income margin by 140 basis points to 18.5%. This resulted in a full year operating income margin of 18%, up 150 basis points versus last year. We're confident we can continue to expand our OI margin well beyond the 20%.

Now before I move into our 2026 outlook, I want to take a moment to acknowledge current events in Minnesota. Ecolab has customers in more than 170 countries, but Minnesota has been our home for more than a century. It is where our headquarter sits, and where thousands of our colleagues, customers and communities counting us every single day. In recent weeks, Ecolab, along with other business leaders across the state, have come together to call for de-escalation and a constructive path forward. As a company that has always believed in doing well by doing good, we stepped in early to have rally business leadership and support the efforts underway. I'm proud of the progress we're seeing and encouraged by the positive momentum.

As expressed in an open letter signed by 60 Minnesota-based CEOs, the business community has an important role in supporting stability, strengthening local businesses and helping build the brighter future for Minnesota. We will continue to work together to help ensure Minnesota remains a strong and resilient place to live, work and grow.

Now looking ahead to 2026. Our priorities are very clear. First is rapidly grow total value delivered to customers across our core businesses; second is to accelerate our One Ecolab growth initiative; and third is to fuel our growth engines. We expect 3% to 4% organic sales growth this year with growth accelerating as the year progresses, driven by strengthening volume gains and continued 2% to 3% value price.

Total reported sales, including the Ovivo Electronics acquisition, is expected to grow upper single digits in 2026. And with this strong growth, OI margin is anticipated to expand 100 to 150 basis points to more than 19%, resulting in an OI growth of 14% to 16%. Altogether, this is expected to drive strong EPS growth of 12% to 15%, which includes the headwind of additional noncash amortization from the Ovivo acquisition.

Our first priority is to rapidly grow total value delivered, or as we call it, TVD. Across our core businesses, TVD is our formal framework for measuring the business outcomes, operational performance and environmental impact we deliver to customers. When we deliver measurable value across these 3 dimensions, it not only drives share gains, but it earns Ecolab collapse the ability to value price. And with the strong customer value pipeline heading into 2026, we remain very confident in delivering 2% to 3% pricing this year.

What makes our value model so powerful is our best-in-class approach. With our scale, digital intelligence and global service, Ecolab partners with customers to define what best-in-class looks like and scale it across their operations, helping them achieve peak performance. This has consistently help customers lower costs, reduce risk and improve performance across the entire enterprise.

Innovation is also essential to our best-in-class value model, and our 2026 lineup is strong and keeps getting stronger. In Global High Tech, we're launching direct chip pooling as a service to the data center market. This brings liquid cooling right where it's needed the most, the chip. By combining our CDO platform with Ecolab 3D trays, our real-time monitoring, advanced cooling technology and on-site service, we improve uptime, lower cooling costs and allow more power to be put towards compute.

In Food & Beverage, we're launching CIP IQ an AI-enabled digital solution that uses real-time analytics for a smarter way to optimize cleaning places. It decreases capacity, reduces water and energy use and improves quality control and product safety, helping customers run more efficiently at the time when every hour of production matters. Earn interest is strong, and we're looking forward to a healthy rollout in 2026.

In Institutional & Specialty, we focused on scaling our IQ suite, DisiQ, AquaIQ, KitchenIQ and BeverageIQ. These solutions directly address labor shortages, guest satisfaction and rising operating costs, giving operators smarter, more automated ways to run their kitchens and front of the house operations. We expect strong growth from the suite in 2026 as well.

And in Pest Elimination, we're expanding beyond our rodent-focused smart devices with the new smart solution for approaches extending the reach and impact of our paste diligence platforms.

Moving into our second priority, 2026: expanding the One Ecolab growth initiative. We've demonstrated immense success over the last year. We've aligned our global resources to better serve our top 35 global customers, where there is a INR 3.5 billion growth opportunity. In 2025, sales growth with this group outpaced total company by approximately 2 percentage points. This year, we're expanding this model to our largest regional customers around the world, leveraging the tools, processes and sales structures bid for our top 35 customers.

Within One Ecolab, we've also delivered more than $100 million in SG&A savings as of year-end 2025. We achieved this by consolidating functional work into our global centers of excellence and deploying a number of agentic AI applications as 1 of the most advanced companies.

As we shared at Investor Day, our initial One Ecolab rollout exceeded expectations, allowing us to increase our savings target from $140 million to $225 million by 2027. And today, we're increasing our savings target again to $325 million by the same year, 2027, due to the continued success of the overall program.

Finally, looking at our growth engines, they now represent about 20% of our portfolio, including Ovivo Electronics, which closed earlier than expected. Together, our growth engines have very attractive long-term OI margin profiles, and in 2026, we expect them to collectively grow double digits, lifting Ecolab sales crops. When we look at what's skirting that trajectory, Global High Tech is leading the way as AI expands and every part of its value chain depends on water: the fabs that make the chips, the power plants that fuel the chips and the data centers that run and cool them. Ecolab is uniquely positioned in all these markets to help enable the AI build-out. With Ovivo Electronics now part of Ecolab, we provide the ultra-pure water essential for semiconductor manufacturing, supporting the fabs producing the world's most advanced chips. As we bring our unmatched capabilities together, we're building a unique circular water offering for the fast-growing microelectronics sector. And Ovivo is off to a strong start in 2026 as we have already secured several new fabs where leading ultra-pure water technologies will be deployed.

On the data center side, the industry expects unprecedented demand for AI to continue to rapidly expand. Higher rack densities and rising chip heat make liquid cooling mission critical. Our direct to chip cooling platform, including integrated 3 trays monitoring and on-site service positions us to help data centers improve cooling asset performance, reduce the power required to cool and return more power to compute. And as the industry increasingly turns to water to cool next-generation chips like NVIDIA's [indiscernible] platform, we're very well positioned backed by more than a century of experience managing cooling and water systems in complex environments at scale.

As strong as that momentum is, it's only part of our growth engine story. Another major contributor is Pest Elimination. Nearly every Ecolab customer today uses some form of pest elimination. With our One Ecolab strategy, we're unlocking a $3 billion cross-sell opportunity by delivering the most compelling outcomes in the industry, targeting 99% pest relocation through our digital connected pest intelligence platform. We're leaders in deploying digital technologies to this commercial market and expect to have more than 1 million smart devices in the field in 2026.

This technology not only drives best-in-class outcomes for our customers, but it also frees our team to spend more time driving strong sales growth while continuing to expand margin.

We're also seeing exceptional progress in Life Sciences. We delivered our best year yet in bioprocessing. We saved up nearly 75% in 2025. Life Sciences has the potential to be one of Ecolab's highest-margin businesses, where we target long-term operating margins of 30%. We're investing behind these attractive and significant long-term opportunity with breakthrough biopharma purification innovations, new digital solutions and capacity expansions. That includes the capacity expansion of our Life Sciences' industrial water purification business, which is expected to begin production in the second half of this year, removing the constraints that created a drag in 2025 and positioning us for strong growth in the years ahead.

And the fourth engine powering our growth is Ecolab Digital. We've grown this business to nearly $400 million in annual sales, increasing more than 20% in 2025, and we're still in the very early days. We're investing heavily to bring market-leading digital solutions to our customers across our portfolio. In 2025, more than 25% of our innovation pipeline was digital, which has grown significantly over the last few years.

The strength of Ecolab Digital comes from its focus on solving critical customer challenges and increasing the total value delivered to our customers.

With all of this, we enter 2026 confident in our ability to deliver continued strong performance, and we're off to a strong start in the first quarter. For the year, we expect reported sales growth of 7% to 9% and organic sales growth of 3% to 4%, with organic growth accelerating as the year progresses, driven by strengthening volume growth. And with 100 to 150 basis points of OI margin expansion, we expect 14% to 16% OI growth, and EPS growth of 12% to 15%, including the impact of Oviva. And we are often [indiscernible]. The best of Ecolab is yet to come. Our ability to improve customers' business outcomes, operational performance and environmental impact is more relevant than ever and it's powering consistent double-digit EPS growth.

So thanks so much for your interest and your investment in Ecolab. I look forward to your questions.

Thanks, Christoph. That concludes our formal remarks. Operator, would you please begin the question-and-answer period.

[Operator Instructions] And our first question is from the line of Tim Mulrooney with William Blair.

I just wanted to double click on the -- you gave a lot of good color in the prepared remarks, but I just wanted to double click on that volume cadence as you move through the year, specifically organic volumes. Because I know you've got a couple of headwinds from paper and basic and as well the inventory thing with institutional. So how do you think about these headwinds moving through the year as well as then on the other side of it, you got that solid momentum in some of these other businesses. Can you walk me through these pieces, and taking that all into account, how you're thinking about the trajectory for organic volumes, specifically as you move through the year?

I'd love to, Tim. And our framework remains the same with the 1% to 2% volume growth and 2% to 3% to get to the 3% to 4%, so the year accelerating in 2026. And when I step back, the truth is that the volume growth in Q4 was almost the same as in Q3. As you know, so we round up or down our volume. And the difference versus around and around 1 was actually only a few million dollars. So at the end of the day, was almost the same in Q4 as in Q3, which is why earnings were strong, and I feel great about where we're going. But what makes me the most optimistic about our future is that Well, 85% of our businesses are doing great. As mentioned, F&B, which we're building around this F&B united idea of bringing hygiene and water very closely together, that's done in North America, well have accelerated to 5%, Life Science 7%, Pest 7%, water ex paper and basic to 5%, and INS ex the distribution inventory story there, well, we're growing the same at 4%, with specialty is steady at 7%.

So in other words, what I really like is that our portfolio is shifting to higher growth, higher margin businesses, which is exactly where we want to go. And we did obviously saw, with the 15% of the portfolio that needs to work, and there will always be something and I expect paper and basics to kind of get to a much better place as we progress in 2026.

So if I put all that together, improving the underperforming businesses of paper and basic, normalization of the distributor inventory in institutional and 85% of the company growing very nicely, I expect the Q1 to be pretty similar to Q4, but with acceleration towards the end of the quarter and acceleration continuing in the quarters to come during the year of 2026.

So overall, a very good trajectory, especially from the underlying growth.

Our next question is from the line of Manav Patnaik with Barclays.

Christophe, I was hoping you could just double click on the global high-tech piece, the water, the semi, the data center piece, post Ovivo, just help us size, what do you think the growth rate is, where the opportunities are? And perhaps if you see any roadblocks to you achieving some of your growth ambitions there?

I'd love to, Manav, for that question. So global Hitech is kind of a new business for us, started it 3, 4 years ago. really focused on data centers and on fabs, which is the short name so for manufacturing of microelectronics chips. And if I step back as I mentioned so many times, why are we so interested in that field. On one hand, well, AI demand is booming. Is that going to be a straight line to heaven? Probably not. There's going to be apps and slower apps probably as well going forward, but the trend are clearly up and we see it from an investment perspective. Second, the power and water that's required for that is incredible. As mentioned, so by 2030, we expect an incremental need of power for the whole of the electrical consumption of India and the incremental needs of the freshwater use of the whole United States. So at the end of the day, when at the heart of AI is water. As mentioned before, to produce the chips because they produced in ultrapure water, to power the chips because power generation is the second largest water user in the world of the agriculture, and the third one is to cool chips, which is shifting towards water at the same time. So high-growth market, where water is a heat of it and especially on those 2 key areas of fabs and data centers and one might argue that power generation is also part of it was kind of a flat market for a very long time, but that's changing because we need much more power that's going to help as well up on the side, but it's not part of our global high tech.

So the way we're thinking about building it on fabs, since one fab requires the amount of water equivalent to 17 million people, that's an example in Korea, for instance, there, well, the solution is to provide technology where you can recirculate water within the fab, which is really hard because at the same time, the quality of the water that's used to produce the chip is directly correlated to the quality of the advanced chips, and that 1,000x more pure than water that's used in our blood injections by the way. So recycling water tha's difficult to recycle at a super high standard, but that's exactly what Ovivo helps us to do. That was the piece of the puzzle that was missing for us. and now we can provide so the semiconductor manufacturers with circular water solutions and we're seeing very high interest from the key players out there.

And the second and last I'll mention is data centers. Well, for a long time, they've been air cooled. That required cooling towers with a lot of water that we've been used to manage for a very long time. Now that's shifting to liquid cooling, which means that you you reuse the liquid in the data center, a liquid that's coming [indiscernible] on top of the chip and that liquid is not water today, but it's getting towards water [indiscernible] because it's the liquid with the best thermal properties, which is what we mastered the most as well at the same time.

So liquid cooling in circular mode for data centers and circular water for fabs manufacturing. That's the way we're thinking about it. We added Ovivo for fabs, and we will keep building our capabilities on data center. Today, combined, these 2 businesses are roughly $1 billion, growing strong double digit right now at very high margin. And we see many opportunities to make that business way bigger in the years to come.

Our next question is from the line of Ashish Sabadra with RBC Capital Markets.

I just wanted to drill down further on the drivers for the 100- to 150-basis-point of margin expansion you obviously raised the 1 collapse saving targets and talked about $100 million of savings already achieved in 2025. I was wondering if you could provide any incremental color on the savings in '26, but also tailwinds from pricing as well as mix shift in '26?

Thank you, Ashish. I'll pass it to Scott, just to start the answer.

Yes. Thanks, Ashish. Similar to the targets we set out at Investor Day last fall, this 100 to 150 basis points is anchored on really 2 things: gross margins which is at 75 to 100 basis points annually, which we're thinking about that long term, same sort of targets for 2026, and then this 25 to 50 basis points of SG&A leverage annually through 2030. So that's how we get to this 100 to 150 basis points. And then just diving into the gross margin, the drivers of that being the value-based pricing that Christophe referenced, our mix of businesses, as you see these growth engines being higher-margin businesses, but also innovation. And then on the SG&A savings, if you look at over the last 5 years, we've delivered sales productivity almost 30%, which is sort of sales per head, which is part of that driver. And on top of that, with that, we're also driving the One Ecolab program, which Christophe announced that will now increased that savings target of $325 million. And that $325 million, as we think about it, about $120 million. So I think that's sort of 1/3, 1/3, 1/3, a little bit more than 1/3 through the end and then the remaining $200 million will be sort of equally over the next 2 years. And so that will be a driver of that 25 to 50 basis points as well.

Our next question is from the line of John McNulty with BMO Capital Markets.

So I wanted to drill down a little bit into the incremental margins because it looks like what we saw in the Past was kind of a really explosive incremental margin in terms of how much kind of came down to the bottom line. And then when I look at things like the Life Sciences side, it was dramatically less so. It was probably the weaker of the performers of your businesses. So I guess can you unpack that a little bit in terms of what some of those dynamics might be? Why we're seeing such different results by segment, and how we should be thinking about that going forward?

Thank you, John. It looks like Scott is on a roll, so he's going to take the first part of the answer here.

Yes. Thanks, John. As we've talked about in the past, we don't really think about incremental margins in that way. But I get your point on Life Sciences and Pest, the Life Sciences, you saw the OI growth in low single digits in Q4. But frankly, that was as we expected because we had targeted OI margins in that mid-teen range. It was due to 2 things. One, as we talked about, we're investing in that business. Underlying margins are actually better. And on top of it, you had a year-on-year comparison, sort of bad comp, if you will, on Life Sciences really because of performance-based compensation. And that business, sales accelerate throughout the year, as Christophe talked about, and the OI growth for the full year was 30%, and so they've earned that performance-based compensation. But we really expect that business going forward to increase OI to increase double digits into '26 and going forward. And then Pest, as you mentioned, was sort of the opposite, and again, that was comparing against a comp last year. As you might remember, we had a spike in accidents at the end of last year, which was creating a lower base point for them. But again, that business is doing really well, as Christophe said, growing 7% top line and OI margins north of 20%, and we expect to continue that trajectory.

So maybe a few points here to build on what Scott just said. Not every quarter is treated equal. You can have year-on-year obviously some comparisons like our accidents in Pest Elimination, which were unfortunate a year prior, obviously, that's changing, obviously, the March profile on a year-on-year basis. It's also investment pacing by business. We're all in the spirit of investing the right way, the right time. It's not always equal in every quarter. And here, I'm speaking about Life Science, for instance, as well, but generally is really making sure that we get or beat the 20% OI margin that we've talked about over 2027. We feel really good about it. So we were 18% last year, we are planning to be north of 19% '26. And I'm already thinking about what's beyond to 20% because many of our businesses or either beyond 20% already or have underlying margins that are already north of it, which is the case of Life Science.

Our next question is from the line of Chris Parkinson with Wolfe Research.

Christophe, if you can just dig in a little bit to what you're seeing in the global water business. Over the last couple of quarters, there's been a bit of a divergence between light and heavy within water. Mining seems mix, perhaps some [indiscernible] metals. F&B, it seems like it's inflected and papers continue to be a drag. But can you just kind of give the way you -- if you can give us some insights on how you're thinking about that business in 2026? What you would need to see at the top and the bottom end? And forgive me for coming my own range, but to the 3.5% to 4.5% range, call it midpoint, obviously, just how are you thinking about this business? And what are you hearing from your teams to kind of confirm or deny the bottom or the top end of that range?

I'd love to, Chris. Water is half the company -- sorry, it's a big chunk of it. We've built that business since 2011, obviously, when we acquired Nalco. And our ambition was really to create the world's water company, and we come to that ambition over the last 10 years. And there is that feeling that we're just getting started on that journey.

Now that being said, we're serving many end markets. with water. Obviously, some are growing very fast, and some are growing a little bit less. But no one has the capabilities that we do have and the reach that we have around the world plus the digital technology that we bring into it in order for our customers to reduce and recycled water so in a closed circle as mentioned, so for the GHT or global high-tech example as I described a little bit before.

So if we look at the performance of that business, Chris, yes, we grew 2% organic in Q4 as a whole. But if you exclude basic and paper, which are down part of the cycle, well, water was growing 5% in Q4, which is very strong performance, and we still want to get better than that. As I mentioned, the biggest business in there is Food & Beverage. We are merging hygiene and water to provide the best solutions for our customers around the world. We've done it in North America. It's led to very good results, 5% for that business is good in an industry that's flat by the way. I mean, the end customers that we are serving as well here. And we've only done North America with that can be united. We're going to keep expanding around the world. Then there is the global high-tech story that I just described before, Chris, which is close to $1 billion, which is growing, so in strong double-digit rate with very high margins as well at the same time.

And then you have all the businesses in between from manufacturing areas, for instance, to our institutional water business as well, which is providing water services to our institutional businesses as well. But bottom line, so we end up with a business that underlying growth is close to the mid-single, so this 5%, drag down by basic and paper. But those two will recover. That's the good and the less good things are a little bit more cyclical businesses, and we will deal with that. So you bring together strong underlying growth acceleration in global high tech and recovering of basic and paper industries and you end up in a pretty good place in a business that has strong margins. We had a very good quarter in Q4. I think it was the second highest quarter of the last 5 years from a margin perspective and water will get as well to the 20% and move beyond the 20% in the years to come.

The next question is from the line of Seth Weber with BNP Paribas.

Christophe, in your prepared remarks and the slide deck, there were a bunch of mentions about new business wins, I'm wondering, can you just give a little bit more color around that? Are these conquest from other providers or just new -- companies that are new to the space that are kind of just adding suppliers? Or any color around these new business wins would be helpful.

Yes. New business is the #1 focus of the whole company. We have this mantra of all-in sales. So no one is not selling in the company, it's either you're dealing with customers every single day or you're supporting someone with serving customers every single day. I have this objective myself to meet once a week, the CEO of a customer. And last year, I met close to 100 customers as well. So this is where we all collectively spend most of our time.

Now we are focusing, first and foremost, on our current customers and our largest customers as well. As mentioned earlier, so our top 35 customers have a growth potential of $3.5 billion. Well, this is where we want to focus our attention first and foremost, because it's the most obvious growth to get, and that's why we're growing much faster with those customers than everyone else. And it's the most cost-effective way, obviously, to get new business because we have service people going into those sites already today. So it's expanding the share of wallet, and at the same time, it's helping our customers because we go with end-to-end solutions, helping them get to best-in-class performance. They get better total value delivered, better for their P&L, we get a share of it. So at the same time, we get higher growth, better margin for us, and it's a better deal for our customers. That's the first priority that we have.

And second, it's to do the same for our local large customers around the world. And the third priority are more the individual customers around the world. And the last thing I'd say, we had our global blitz 2 weeks ago, which is engaging the whole organization around the world on new business. And within 1 week, we managed to grow our new business versus the same week a year ago by over 30% during that week as well. So a very good story. Our value proposition is very well received by our customers because they needed more than ever, either because they don't have enough water or they're trying to improve their cost performance because they have price pressure, cost pressure and so on. This is the value that Ecolab provides to them. This is the way we sell, and this is why our new business is going very well, while retention remains very stable as well across our businesses around the world.

The next question is from the line of Andrew Wittmann with Baird.

Great. I guess I wanted to ask a couple of kind of maybe kind of punch list items here. But usually, you all have a view on FX that's included in your guidance. And I didn't see one in this press release, Scott. I was wondering if you could talk about the FX rates that are implicit in your EPS guidance raise. So that was kind of one there. And then just on the expected volume improvements on the water side, Christophe, is -- are you seeing that -- is this just going to be a comp game where the comps get easier? Or are you, in fact, expecting the volumes in some of those more challenged industries to actually improve? And if so, what are you looking at that gives you that indication?

Thank you, Andy. So let me start with the second part, and then I'll ask the FX to Scott, 2 very different questions, obviously. The new business in -- for the whole companies has kept going up in absolute terms, so dollar of net new business. So net of what we might have lost, which is very little usually. This is true for water, and this is true for the challenged businesses as well of basic and paper. They also got to record new business. It's just that the demand then afterwards of those businesses is lower year-on-year, and that's driving the growth or the slight decline that these 2 businesses are experiencing as well at the same time. But generally, new business, Andy, is a very strong proposition for us. why we focus the whole organization on it, making sure that whatever happens out there, your business is where you need to focus your time, gain share even in a market that might be declining. So good story even in our challenged businesses. Now on FX, Scott?

Yes, happy to answer the mechanical questions, Andy. So on the FX for '26, we're not expecting a significant health for hurt. We're sort of thinking it's neutral to the year. Just given the current position of the dollar, probably slightly favorable in the first half, but really assuming neutral in the second half going in. Obviously, the FX is pretty dynamic, the macro environment, so that could change. But that's our going in assumption, but even any upside in the first half, as you look at sort of all items below OI, there's going to be offsets to that as we had in our guidance the tax rate is going to go up from the 20.2% we had this year to somewhere between 20.5% to 21.5%. And then also, which wasn't in our specific guidance, but other income is going to be a little bit of a headwind. It will be about $30 million next year. So that's about a $20 million decrease on that other income just due to pension assumptions. So if you look at as a whole below OI items, they're not a net help to us.

But maybe a point on this FX because it's always -- when we think about sort of the next year or at the beginning of the year what are the assumptions that we've taken? When I think a year ago or even all the years prior, Andy, we were almost never right. We thought that FX would be a massive headwind in 2025, while it was not. We thought that our delivered product cost would be pretty benign, [indiscernible] situation changed quite a bit during the year as we now and we adjusted. So we've got us to become very agile to adapt to local conditions and make absolutely sure that we still deliver our [ 12 to 15 ] earnings per share. We hope -- we think that FX is going to be pretty benign in '26. Maybe it's not. And if it's not, we will adjust accordingly as well as we've done in the past few years.

The next question is from the line of Vincent Andrews with Morgan Stanley.

Just a question on the One Ecolab cost savings. You raised it again. I'm just wondering if your assessment is that this will probably be the last raise to it or if you still think there's opportunity there, maybe there's some conservatism in the number because it looks like the the cash costs associated with achieving these benefits are still nicely above the benefits themselves. And I often think of those 2 lines, those 2 numbers ultimately intersecting. So maybe just your latest thoughts there, and how that might carry forward into '27.

Maybe a comment before I pass it to Scott. I don't think it's conservatism. It could have been, but it's not in that case. We're leveraging, obviously, the technology, AI agents, agentic technology as well here that no one has really done so far. So there is no real benchmark blueprint out there. You've probably seen that we ranked #9 on the Fortune AI list of most prepared companies. So for the age of AI, I really encourage the whole team to embrace technology, to stay at the frontier of what's out there and to see how it works. And for the most part, it's been a very good story. It's not a perfect story. There are places where it didn't work, but 80% of the time it's working really well, where it's driving better outcome for our customers, for our teams to where we operate, while at the same time, driving huge productivity gains. And my feeling is that it's going to keep improving in the years to come, but we don't know exactly where it's going to come from because the technology, in some cases, doesn't even exist. Scott?

Yes. Christophe said it very well, Vincent. The savings momentum is better than we expected, as you said, moving from that $225 million to $325 million now by 2027. And it's that way as we're learning, but also moving up the value chain as we deploy technology and AI and tie touch processes and then leveraging the global COEs that Christophe referenced before, which allows us to deploy that technology at scale. But I think as we think about '26 to '27, that incremental $200 million from what we've already realized, I would think about that pretty evenly. And then long term, this is really an enabler to this 25 to 50 basis points of SG&A leverage, which is our long-term target. And that's relative to historically what we've done about 20 to 30 basis points. So really almost doubling our SG&A leverage that we've had historically enabled by the One Ecolab and the scalability that it provides.

At this time, we'll go the next line, and the question is from the line of Patrick Cunningham with Citibank.

Just on the digital sales piece, could you maybe give us an update on how your ability to monetize these technologies has evolved in 2025, where you ultimately see it going and where you're getting the best traction with customers?

Thanks, Patrick. [indiscernible] question. Well, as we go, we've been for a long time in the business of building great new businesses and Ecolab Digital, as we know, as you know, is a fairly new business that we started 2 years ago. It's not that we started digital technology and digital offerings to our customers 2 years ago. We just did it as part of our offering for 30 years when we invested in 3D TRASAR technology. And we haven't monetized directly that offering to our customers for 28 years of the last 30 years that we've been in that field. So we're building that new organization. We created a dedicated organization on that opportunity. It is in the early years. It's not perfect. It's a bit rough on the edges at the beginning, but that's always been true when we build new businesses. But the fact that we are already generating close to $400 million of sales, which encompasses only 2 components of it, it's connected hardware and it's software. Those are the 2 elements that are driving those $400 million, very high margin and growing, obviously, north of 20%. And I think we'll grow probably 25% in '26 as well as here. And we're really at the beginning of it. The way we think about digital sales at Ecolab and especially in the future is what we call the 100%, 100%, 100%, where 100% of the customer locations that we serve will have to be connected, 10% of the applications that we provide to each of those locations think about the hotel, where you have the dish machine, a laundry machine, an AC unit, Pest Elimination, EcoSure audit systems and all that, those are the applications, 100% of them need to be connected. And the third element is 100% of the time where people pay for its own, 100% of the units or 100% of the applications, 100% and billable offering. This is the way we think about it. And that's why when I think about the $400 million we have today, we have just scratched the surface of what we can do.

We still have a lot of customers using those technologies that do not pay because they're still on the old programs, and we have a lot of customers that do not use it today, especially in institutional because it's relatively new that the cost barrier is not the barrier anymore so for most of our customers as well, and we have millions of customers out there that can use it. That's why Ecolab Digital is a great story, very early in that development. And I think it's going to become one of the biggest growth drivers of our company going forward by driving customer benefits ultimately because our promise is to help them reduce their total operating cost. That's the TVD that we've always promised to our customers.

The next question is from the line of David Begleiter with Deutsche Bank.

Christophe, back to Basic Industries and Paper. Is your confidence in the back half recovery just because of easier comps? Or are you seeing some underlying improvement in these end markets as we progress through the quarter?

Thanks, David. It's a combination of both that industry for the paper and packaging industry had a dual challenge. On one hand, okay, a demand that was pretty low and at the same time, related to it consolidation of the industry. So consolidation means that they were closing paper mills and a paper mill for us is a big chart. So it can be up to $10 million or $15 million of sales in 1 location. Well, if it happens that, that location gets closed, okay, there's not much you can do because you're not going to sell much to that location anymore. So we had to go through that the last 12 to 24 months. And that seems to be behind us.

We haven't seen in our environment, mill closures in the last few months, which obviously is a good news for us as we enter 2026. New business is good in that business as well. Innovation is strong as well at the same time. And the margin of that business was, what, 13% last year. It's not Ecolab average, but okay, if I may say. So the combination of both kind of recovering progressively and pretty good margins even in a down environment in 2025 makes me a bit more optimistic for 2026, but I'm not even close to declaring victory on this one. Same for basic industries, different industries, obviously, but similar model as well.

So we're dealing with it, making sure we make money in all of those businesses. We will keep gaining share as well. And as those industries recover, that's going to help us as well over the next few quarters.

The next question is from the line of Shlomo Rosenbaum Stifel.

Quick questions. Christophe has normalized for that distributor inventory reductions. Just looking at a normalized way, what's going on with the volumes? Are the volumes actually going up? Like if you didn't have that surprise, are the volumes going up? Or are you still -- you're kind of at a flattish trajectory? And then it's just a technical question I want to ask afterwards. On Slide 13, on the top left, it talks about Water's organic operating income growth is expected to something in the first quarter of 2026, and there's -- it's a blank or there's a word missing. Is that expected to go up, go down, be flat? If someone could just answer that.

So thank you, Shlomo. So a few questions, obviously, that you have in there. I&S, Institutional & Specialty, basically nothing changed from a demand perspective. And if you normalize, it was 4% organic for I&S and 3% for the institution division at 7% for specialty. So generally, nothing to see in I&S in a market, that's a difficult market, as you probably noticed, the restaurant and hospitality industry is not doing great right now, but we're gaining a lot of share, which is really good.

Maybe a comment on this distributor event, why did they go down and that's not under our control. It's obviously our customers ceciding that. But the better we become in our supply chain service, the more reliable, the more accurate we become, well, the less inventory they need to carry from our products. We've seen that in the past a few times already. That happens mostly at the end of the year as well. Well, that's exactly what happened in the fourth quarter, and that takes a few weeks to happen and then it takes a few weeks or months to normalize as well. But it's driven by 2 good things. On 1 hand, demand hasn't changed. And on the other hand, inventories went down because our service improved.

Okay, we don't like the optics, but generally, it's a good thing as well as going forward. And your question on the water. So for the Slide 13, I don't know what Slide 13 was to be honest. So I'm glad I have some help here. I think that the word was missing. And what I'm seeing here, it should have said expected to accelerate [indiscernible].

The next question is from the line of Jeff Zekauskas with JPMorgan.

I have a couple of questions about Ovivo. Is Ovivo roughly $500 million in sales, maybe growing to $550 million? And is the EBIT, I don't know, $75 million, the EBITDA $100 million. Can you give us an idea about that? And Ovivo is a combination, I think, of sale of equipment and consumables. What's the balance between equipment sales and consumables? And in the fourth quarter, it seems that you excluded it, that is you took out the interest costs that were connected with the acquisition and the revenues of Ovivo [indiscernible]. Why did you treat it that way from an accounting standpoint? And what do you plan to do in the first quarter?

Thank you, Jeff. So I start looking at me because I'm not the accountant here in the group there. So he's going to take that question of the December accounting. And I'll cover your other questions after that. Scott?

Yes. Thanks, Jeff. So as you know, Ovivo closed a bit earlier than we expected and wanted to show that Q4 really show the underlying business without the transaction noise, which was very consistent on how we handle both the Purelite and Nalco acquisitions. So if you look at it because in Q4, the deal closed in the middle of December. In Q4, we had like half a month of interest expense, but very minimal sales and OI benefit just given the timing of flows and mix of the business geographically. So it would have been very noisy. It was not part of our guidance that we had for Q4. And again, it's consistent with how we treated PureLight and Nalco.

That's the first part of the question. So I hope it answered your question, Jeff. And so now on Ovivo as a business. It's roughly $0.5 billion. Yes, it's a bit less than that. And it's growing double digit. The way it looks for the first quarter is double-digit growth as well. I've been very pleased with the new business in that field. It's focused 99% on fabs, as you know. And we've closed a few very interesting deals in Singapore and in the U.S. It's very few customers as we know that are producing some microelectronic chips. But those are very big every single time. There's no one that can do what Ovivo can do. And there's no one that can do what together we can do, which is the circular approach of reusing and recycling ultra-pure water. 95% of the water does not get recycled in microelectronics today, which is a major issue. Our ambition is to get north of 80% recycled. So from 5% to 80%, or in some cases, even 100% of reuse.

Now to your question on equipment and consumables. The Ovivo as such, is mostly technology and much less consumable. What's important to us is the combination of Ecolab and Ovivo, which then becomes very much like an Ecolab business where it's mostly consumables and technology as a secondary growth driver. That's why we really like it. It was technology that was really hard to develop. No one is even coming close to them, Jeff. We could have developed it ourselves. It would have taken years.

The second issue is to get the credibility with those microelectronics manufacturers. They're very few and they're not exactly risk takers for technologies that are absolutely critical to the chip manufacturing. That would have been a second hurdle for us as well. And everything is happening as we speak as well at the same time. So a great business coming with what we have done for a very long time in terms of water management. Well, it's a typical 1 plus 1 equals 3, I think that for our fabs business, it's going to be game changing.

The next question is from the line of Matthew DeYoe with Bank of America.

Think you're done with year 1 of One Ecolab that you'd rolled out to like the 3 largest customers. What's the feedback and any wins, learnings you can take as you deploy this to I think it's the top 25 customers in 2026, so an incremental 20 so to adds. And when do we see this as more of a top line driver? What kind of rollout do you ultimately need? Because it didn't feel like you have a pretty considerable amount of sales opportunity just with that top 35 based on the kind of conversations we've had over time?

Yes. So it's 35 customers. So it's our top 20 largest customers in the world and what we call our emerging 15. So those are not the biggest, but the ones having the potential to become some of our biggest, microelectronics being a perfect example of one of those 15. So you get to 35, that could drive $3.5 billion of share increase potential. That's why we focus on those ones first and foremost.

It's simpler because it's fewer customers, and it's the biggest potential, the $3.5 billion in many locations around the world. So we've gotten organized behind our 35 customers, which are the biggest brands, obviously, that you know in all industries as well at the same time. So that organization component has been done. The growth of those 35, as mentioned before, so it's 2 percentage points higher than the rest of the company. So facts of demonstrating that it's working. And it's probably the second biggest moat that we have as a company, our first being our team, serving our customers everywhere around the world, is delivering best-in-class performance. Basically, we help each of those customers understand what's the best-in-class performance within their own company if it's a restaurant with the best guest satisfaction, what's the best cost performance, what's the best environmental impact. If it's a data center, it's uptime, cost and impact, you get the system here, and we have them drive the performance of all the units towards the best-in-class performing unit within the company. And we do the same across the industry, not sharing the names, obviously, to help our customers understand all [indiscernible] from a best-in-class performance.

So it's been developed based on an idea from a few of our customers a few years back. And those customers are ultimately asking even more than what we can deliver today, which is kind of a good problem to have because our customers, I would say, are ahead of us in terms of what they would like to see from us and what we can deliver. Well, that's a good problem to have, and that's where we are.

Our next question is from the line of Mike Harrison with Seaport Research.

Christophe, you mentioned the IQ suite. I was wondering if you could talk about what penetration looks like today versus where you think penetration could go over the next, say, 2 to 3 years? Just curious, are you 5% or 10% of the way to where you hope to be or more like 30%, 40%, 50%?

And I guess as we think about growth in the IQ suite, where would we expect that to show up? Does it show up in digital sales? Does it show up in institutional volume growth? Or does it show up in margin expansion or all 3?

The short answer is all 3, Mike. So first your questions penetration. It's in the low single digit. Today, we're very early here. As mentioned often, this is something we did not exactly do in our institutional end markets because it was too expensive for our customers to embrace that technology, things that changed dramatically in the last 2 years, and we have the knowledge and expertise our water industrial businesses. So we're kind of very well positioned for that. So very early on that journey.

Second question, where it comes. Well our reporting segments are our traditional 4 reported segments that we have. The digital sales that we're mentioning are the digital sales of those 4 segments. so included in the 4 segments, which is the way we've presented at the last 12 or 13 months that we're doing that. And last but not least, yes, it improves the margin because digital sales have a way higher margins because there is no real cost or hardware cost related to it on the software side. On the hardware side, it's a little bit different, but it's much higher than the average gross margin we have in the company. So it's all 3.

Our next question comes from the line of Laurence Alexander with Jefferies.

Just wanted to flesh out a little bit how your thinking is evolving around the interplay between your M&A targets and your margin targets. The 20% margin has been kind of an elusive 1 over the years and kind of now it's within reach. You hinted earlier, you may be thinking about moving it higher sooner rather than later. Would you -- what type of M&A would you consider that would structurally push back the margin target a few years? Or do you see that as, given the types of things you look at, just sort of structurally unnecessary?

So just to be clear, we're not trying to push back any margin target. 20% by '27%, that remains the same. We had 18% last year. We'll get north of 19% in 2026, and we will get to 20% in '27. And then we'll keep growing so 100 basis points, as we shared as well on Investor Day. And M&A needs to help getting there. We will never do an M&A deal that is destroying value for shareholders. So return on investment needs to be at the right level. It needs to be growth and margin accretive. Those are the plans. Afterwards, whether everything happens as planned, well, that's an execution question, obviously. But we are very disciplined in how we do M&A. We will never do something that's destroying value because what we say inside the company that's buying work and it's done for shareholders. Well, those are 2 reasons for not doing that, at least not consciously. And we've done 100 deals in the last 10 years. We have a lot of practice, we've learned a lot, and we are very successful in how we do M&A in general. So no change for the margin targets.

Our next question is from the line of John Roberts with Mizuho Securities.

This is Edwin Witbier for John. Christoph, just 1 quick 1 on the 2026 guide. Can you talk about the factors that could drive the higher end or lower end of that range, like what are the swing factors in there?

I guess all the things that we don't know are going to happen. If we look at the last 5 years, there was not 1 year that happened as planned, not because of us, but because of what's happening around the world. So we have this range of the 12% to 15%. The fact that we are very agile as a company on how we run our businesses, how we manage value price, how we drive surcharges if we need, getting as well more performance out of One Ecolab as we discussed before as well, we have a great supply chain and procurement team as well doing unbelievable work in whatever conditions out there. So the big questions are the things, I don't know. But I know that the team knows how to deal with them.

With everything we know now, I feel that the year is very well balanced, and I feel really good about the 12 to 15.

Our next question is from the line of Jason Haas with Wells Fargo.

I'm curious if you can talk about I'm curious if you could talk about the cadence of the contribution from pricing as we go through 2026? And the reason I ask is because I believe you put in a tariff surcharge that went into effect the second half of 2025. So I'm curious if there's like a go over factor where you'll have more contribution from price in the first half of 2026 and then less in the second half. Is that the right way to think about it?

Well, the key point is also that surcharge, which was a trade surcharge. We had an energy surcharge in '21 or '22, I'm losing track of the year. We convert all that into structural pricing and everything has been done as well as we speak. That's why on one hand, whatever happened on tariffs with the Supreme Court, I'm not worried about that. And on the other hand, well, it's going to drive this 2% to 3% price in 2026 pretty consistently for the quarters to come. That's obviously assuming that nothing else happens in 2026, but that's not at the heart of your question here. So basically, a traditional year in '26 with 2% to 3% value price, which is obviously a 100% margin driven by the total value delivered that we generate for our customers, which is a big growth driver for us and probably one of the best ones that I really like, and we'll keep focusing on that in the future.

Our next question is from the line of Josh Spector with UBS.

Just a quick 1 here. I know you guys were spending a bit more on CapEx the last couple of years to basically grow into some new wins that I think you had in specialty. I guess with specialty growing 7% the last couple of quarters, is that now in the run rate? Or is there more of that to come? And will CapEx step down into next year as a result or stay at similar levels?

Let me pass it to Scott.

Josh, yes, on CapEx, as you know, our historical CapEx has been in this 5% to 6% range and about half of that is equipment at customer locations so -- which is why this thing grows in proportion to sales. The 2026 CapEx came in at about 6.5% of sales, to your point, because we're investing in growth like the new business but also the innovations around DISHIQ, Pest Intelligence, Global High-tech, and that will continue into 2027. I expect that the CapEx -- sorry, the '26. I expect the CapEx for '26 to be around 7% and probably for the next couple of years because we're continuing to invest in those growth engines, really to focus on accelerating sales and expand margins. So we're investing organically and inorganically, both to expand margins and drive sales. And at the end of the day, it comes down to ROIC, and we like where we're at in ROAC, continue to expand that in line with our long-term targets.

Our next question is from the line of Kevin McCarthy with Vertical Research Partners.

Christophe, on Slide 6, you indicate organic sales growth of 3% to 4% accelerating through the year. And I just wanted to understand that acceleration piece better. Is that to do with the aforementioned normalization or stabilization in basic industries? Or are you expecting your higher growth platforms to accelerate as well? And then related to that, would you make a comment on the expected growth in your data center linked businesses this year?

The 2 questions, [indiscernible]. So you're right, the 3% to 4% where we are now, obviously, and do the upper range or more after 3% to 4%, driven by both actually, so the normalization of the more challenged industries in paper and basic. And our core and growth engine businesses that are doing extremely well. As we discussed before, our gross engines are growing double digit today and some of our core businesses like institutional and specialties at 4%, F&B at 5%, So our core business growth engines are doing really well at great margins and great margin development as well. So it's a combination of the 2, and more specifically, the data center, which we don't exactly disclose as such, but our global high-tech business is growing pretty strong double-digit sales.

We will publish our exact numbers in the first quarter by the way, so I want to make sure I'm not getting ahead of my skis here, but we will get more color in the first quarter, but it's one of our best businesses that we have here, very strong margin, growing double digits at strong rates and Ovivo is going to help and all the innovation I mentioned before on the cooling as a service is getting great reception from our customers that needed more than ever because chips get more powerful, they get more concentrated on a rack. They create more heat that requires more cooling. And if that doesn't happen, obviously, the data center stops operating. So it's absolutely essential as a component of the compute offering here.

So a very good story and early on that story. I think that that's one of the businesses that's going to become one of the best and biggest businesses we will have in the future.

The next question is from the line of Scott Schneeberger with Ampeheimer.

Just a quick one. In Life Sciences, you had great momentum, a little step back in the fourth quarter on the margin trajectory. It looks like you're doing some investments, some global capability build-out. Just curious if that -- is that going to be something that is pressured for multiple quarters? Or are we going to get back to inflect and had higher towards that target?

It's going to be a great story in '26. We've been building that business for years, as you know. I always love that opportunity. The first figures were more complicated than we were hoping, not because of internal questions, but the market. So it was a bit in a more challenging place after COVID. It helped us gain share, build further our business, and now we're collecting the fruits of what we've built in Life Science, and you've seen the growth acceleration. Bioprocessing, which is a core part of it, is doing extremely well in there, is really at the forefront of innovation for the biotech industry as well at the same time. So we're all going to really like the growth of that business starting in Q1, by the way, for Life Sciences. And our objective is to get to 30% margin, but we will not reduce our investment in the meantime to get the margin quicker.

What we want to make sure is that we get as much share as we can in order to get the returns ultimately in the long run, that business. So overall, a great story that keeps getting stronger.

Our final question is from the line of Bob Zolper with Raymond James.

How is your customer retention in institutional and specialty?

It hasn't changed. So it's always in the low to mid-90s in terms of retention attrition is obviously the reverse of that. It stays very stable over the years. We're looking at that very carefully because, well, we want to make absolutely sure that we do not lose our customers. We have this mantra of never ever letting our customers down in institutional and specialty. Well, there's another dimension, it's restaurants close, there's not much we can do for that. It's very different by country obviously, but the customers we have and the numbers I gave you include the closures that we can't do anything against obviously.

So short answer, very stable. That's why I really like what our institutional is doing, has done over the last as well, shifting towards digital technology, all those IQ platforms that we talked about, AquaIQ, for instance, which is remote service for pools around the world. When you think about the work that's required, while that's taken over by AI with that application, those are game-changing innovations in that business that didn't exist 5 years ago. So institutionally in a very good place, specialty that's some more quick serve as part of this hospitality business, as you've heard, it's growing very nicely, so at 7% very consistently with great margin as well. So I think that I&S is in a very good shape. So I'll end where I started. The company is doing well, and I especially like the growth development we have in our core businesses. On top of it, the gross engines that are 20% of the company today are growing double digit with over average margins as well. So our portfolio is shifting towards higher growth businesses, higher margins, which is exactly where we want to get to, and that's why I feel as good as I can be in 2026 with everything I know to that.

Thank you. That wraps up our fourth quarter conference call. This conference call and the associated discussion slides will be available for replay on our website. Thank you for your time and participation. I hope everyone has a great rest of the day.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time, and have a wonderful day.

Thanks, everyone, for joining us at the next session here at Baird's Global Industrial Conference. I'm Andy Wittmann. I'm the senior analyst that covers facility services.

And the next session here is with Ecolab. Obviously, we've got the company's Chairman and CEO, Christophe Beck, here. This one is going to be done as a formal presentation. And we also do have a breakout session after this. So if you do have Q&A, you can see us at that with a little bit more detail.

So this is a stock that we've recently upgraded a couple of quarters ago. There's some really interesting growth areas of the company that we find pretty attractive. Certainly, there are opportunities in advanced technologies, are new and growing and relevant to the conference. It's obviously been a thematic thing. And we're seeing a little bit more price coming out of the company, which is also kind of new and different, and I'm sure Christophe is going to talk a lot about that during his remarks.

So I'm going to leave it there, turn it over to Christophe, and we'll go from there.

Great. Thank you so much. Thank you, Andy, for having me. Thanks for joining us as well today. As mentioned, so I'm going to share with you the story of our company and we can have time for Q&A in a separate room afterwards. And we'll see, maybe we have a few minutes as well here.

So always a pleasure to share the 102 years story of the company and still having that feeling that we're just getting started. So before get started, obviously, reminding you of the cautionary statement that we managed to have on just 1 page. I'm sure that you've all read it, especially since we're going to talk a little bit about the future or mostly about the future of our company.

Because our company has been a great success story for a very long time; I'm the seventh CEO in 102 years, which is demonstrating the steadiness, the long-term focus of this company. It's a company that has been focused on growth and creating value long term for customers, for shareholders, for our teams and for our communities for a very long time, as mentioned before.

It's a success story of delivering double-digit growth. 12% to 15% is our commitment year in and year out, and that's been the case for a very long time as most of you know as well. By driving steady top line growth; our sweet spot is this 3% to 4% that we've been delivering as well consistently.

While we build high-margin, high-growth new engines for the future, and I'm going to talk about that. That's been true for this company for a very long time as well. We're in the business of building new businesses in new industries as well in the world that we serve. Which ultimately helps us to expand our margins towards 20%. We're 18% this year, getting towards the 20% by '27, and going beyond that, and I'll cover that as well in a second.

And one of the core reasons why this company has been so successful for such a long time is because what we do matters and has mattered for a very long time. There will be 1/3 more people on the planet in the next 25 years, by 2050. We will need 56% more food. We will need almost 50% more energy. And we will need, by 2030 alone, 56% more water, that we don't have. And that's a problem. We can create new energy; we cannot create new water, as we know. We need to use it and recycle, and that's what we do for a living, which is essential as a company, which is at the core of who we are.

We're the world's water and infection prevention company. We've been protecting people for a very long time, 1.7 billion people, of infection, protecting natural resources, while helping our customers around the world improve their operating performance. So it's a really win-win-win proposition for our customers, for our company and our shareholders and the communities that we serve as well around the world.

And it's leading to a very good story that by doing good, we're doing well as well at the same time. We've been driving this double-digit earnings growth for a very long time. And that's been true, especially so during difficult times as well out there, which are obviously behind us.

And even after 102 years, as mentioned, so we still have that feeling that we're just getting started, because we have unique capabilities, some we're talking this morning about the moat that Ecolab has. Because we have 48,000 people serving 3 million customers around the world in 40 different industries and 172 countries. We have 3,000 people in R&D and digital technology supporting those people. It's a critical mass that's really hard, obviously, to replicate.

And when you think about the impact that we have as well around the world, as mentioned, we protected 1.7 billion people from infection last year, enough water for the drinking needs of 780 million people in 2024. And we protect 1/3 of the world food production and almost 1/4 of power that's generated as well. So what we do matters and has a big impact on all the customers that we're serving.

We keep expanding as well the markets that we're serving. $165 billion is the total available market that we have out there. We keep growing it. We want to keep roughly 10% of the overall market that we're serving, which means 90% is up for grab. And we do it by adding businesses, like 20 years ago, Pest Elimination, which has become one of our best franchises. We've built our Water business to become the world's water company as well over time. We had the Life Science in 2017, and Global High-Tech in the last few years as well with data centers and microelectronics, which are big, high-growth businesses, as we know.

What's interesting is that $60 billion of this available market is in customers we already have a connection with. In other words, it's a penetration play, which is a core element of our strategy. How do we capture more of this $60 billion of our customers that we are serving already today that could get even more of the services that we're providing?

The breadth of our end markets and geographies is a real strength for this company because not every end market, not every geography out there will be facing challenges at the same time. So it drives a lot of resilience as a company, and that's why we have this steady top line growth kind of no matter what is happening around the world. And 90% of our revenue is consumables, it's typical razor, razor-blade type of business. And we work really hard to make sure that we focus 99% of our time on the blades, not on the razors, because this is the model that we've developed for a very long time.

And it leads to very great performance, this 12% to 15% earnings per share, which has been our commitment for quite a while now, driving towards this 20% OI margin and, ultimately, reinvesting to accelerate the top line as well towards this 5% to 7%, which I believe should be the next steady state for this company. So let me unpack each of them quickly, so for you to understand, what are the mechanics behind them? And how does it work to deliver such performance?

3% to 4% for me is the steady growth. It's not the ultimate growth, as mentioned before. This is what we need to deliver 12% to 15% earnings growth while we invest in our new engines, that I will cover as well in a second. Obviously, as we move towards the 5% to 7%, it's going to help us drive, obviously, to 12% to 15% earnings growth and invest even more in our future. And we're very transparent, with the ones who are familiar with us, on how do we share the over-delivery between reinvesting in the business, providing that cash to shareholders or a combination of both as well. But the core is really driving this 12% to 15% while we keep investing in the business to accelerate the company.

The good thing is, a little bit like the end markets and the geographies we serve, the good news is that we have a portfolio where we will never have a place where all the businesses are in the red. We won't have all the businesses in the green at the same time either, we know that. But 85% of the company is growing in a mid-single or mid-teens type of operating income growth, which is a very good place to be, with 20% of the company, you can see $3 billion, growing double digit with even better growth from an operating income perspective. And I'm going to come back to that because those are the key growth engines for the future, while we keep building our core business which are ultimately financing the future of the company as well at the same time.

But what's key for us is how do we gain share in the markets we serve? Because not all are created equal, if we think data centers or if we think the Paper business, where it's not exactly the same dynamics that we have out there. So we're looking at our growth versus the industry growth. Keep in mind that we are in 172 countries, so it's not just U.S., which is our best market, by the way, as well, which is a good place to be. And we're gaining share almost in every market. And this is the way we measure our people and making sure that we are ahead of the market and competition in every market that we serve.

So why that? Because especially in more difficult times, our promise, which is anchored in -- the first name of the company in 1923, Ecolab meant Economics Laboratory. It was an economic idea, not an ecological idea, just to remind a little bit the history here. Our promise to customer is better outcomes at a lower total cost because you're going to use less labor, less natural resources and create less waste. And we do it by bringing chemistry, technology, data science and local expertise anywhere in the 3 million locations that we're serving around the world.

So our promise is to help our customers do more with less, improve their P&L. So we have this advantage that in more difficult times or a tougher cycle, whatever industry we serve, well, they need us even more. Because they need to improve their P&L in more difficult times, they buy more from us, which is one of the reasons that we can gain share in most of the markets that we're serving as well around the world.

And we measure it in a very consistent way. We call it total value delivered. It's a combination of business outcome. It can be a guest satisfaction in a hotel, it can be an uptime in a data center, it can be an infection rate in a hospital, whatever is that industry-specific outcome that you're looking for. We add to it the cost improvement and we add to it the environmental impact, which is another word how much water, how much energy, how much waste could you optimize in the process. And you have a total dollar number or whatever you currency is. This is our promise at the local level and this is our promise at the enterprise level at the same time. This is the core metric of the company that we use in all industries, all locations around the world.

And interestingly enough, if we do it for 3 million locations around the world, well, ultimately, we know which restaurant is the best restaurant out there, which one is the best data center, which one is the best brewing site out there, hospitals, you name it, because we do that in every industry, in every country around the world.

We have a good knowledge of what best-in-class is in terms of performance, and we know how to deliver it because we have delivered it together with the customer. And that's a core element of our strategy, that when we talk to whoever in any industry, we serve mostly large customers, large companies, as you probably know, well, we can tell them, well, what's the best-in-class performance that you should be delivering in each of your locations? And our job together with them is to help them get all the locations within the company at the best-in-class performance. So we have the knowledge and the capability to deliver that for them anywhere around the world, which is a core element of our strategy.

And at the end of the day, when we've delivered total value, delivered for our customer, we discuss about how do we share what's our share of it versus their share of it? And order of magnitude is usually they get 3 and we get 1, in what we call value price. So we get 1 value price, and they get 3. It's 25% for us and 75% for the customer, which is a very good story. And we've done that as well during tariff times, really making sure that our customers always get much more total value delivered than the increase that they pay for our own services as well, which is why the return is higher for our customers, they buy more from us, which is a good story, which allows us to invest even more in innovation in order to provide them even more value.

Which brings me to innovation, which, as mentioned, is a core element of our company, 3,000 people in R&D and in digital technology around the world. We've been a digital technology for 30 years. It was called many times different ways, obviously, then we call it AI today. But that's feeding all the breakthrough innovations that we have around the world, we can help ultimately get to net-zero water data centers or we can reuse and recycle the water in a microchip fab, or we can have a system in a restaurant that allows anyone going to a Chick-fil-A and not having to wait too long in the line. So just in case you go into the drive-through, or you go down the line of all the innovation that we're bringing on the market, which all are focused on not having a new product, but delivering a new outcome for a restaurant, for a data center, for a fab or for any manufacturing site that we have out there.

And last but not least, we focus our attention on large companies. We serve 80% of the Fortune 500 around the world and the local large companies as well. But every innovation, every focus on best-in-class, we start on our top 7 customers. We move towards our top 35 that are split in our top 20 and the ones that we call Emerging 15, the ones with the potential to get much bigger in the future, and our local 10 customers in every country around the world, which is roughly 100 customers in total like that.

That's how we deploy our innovation. That's how we deploy our best technologies. And as we can see on that chart, our top 35 customers have a potential of $3.5 billion of growth potential, and it's accelerating growth as well, because of all the focus that we have on them and the innovation that we're providing them.

The next part is investing in future growth. We have our core businesses, our hospitality that we call institutionals, our restaurants and hotels and retail stores. We have our Food & Beverage business, which is all the consumer goods companies around the world. This is core business for us. This is where I focus most of my attention. It's making sure those businesses keep getting better year in and year out. At the same time, it's making sure we're building the future.

And we have 4 businesses that we are focusing on that represent roughly $3 billion of the company. I'm going to share with you each of those, so depending on how familiar you are with our company. The first one is Pest Intelligence; the second is Life Sciences; the third one is Global High-Tech; and the fourth one is Global Digital.

And as you can see, good businesses, good-sized businesses, still small versus the size of our company, obviously. Serving big markets, high-growth markets, high-margin markets. And that's how we choose them, also aligned with the capabilities and technologies that we have that we can offer to those industries down the road. Let me take them one by one.

So Pest Intelligence, which is always a bit of an interesting word. We're talking about the technology here, so not the pest that we're dealing with, obviously, that are really smart as well at the same time. But we're serving, okay, millions of devices around the world, so-called mousetraps, for the ones who are closer to that industry.

The real truth is that 95% of the traps that we go and visit have absolutely nothing in there because the traps do not tell us yet where and what is in them, until Pest Intelligence came to life 2 years ago when the largest retailer on the planet embarked on that journey with us and said, we need to change the way we do it. On the one hand, I want to have 99% pest-free environment because this is a brand issue, it's a food safety issue and all the challenges that are related, obviously, to pests in any location out there.

In the last 2 years, we've been developing with them a very unique technology that we've been leveraging from our Water business, where we have a few hundred thousand systems that are already connected, and we've leveraged that technology for our Pest Elimination business. And today, that retailer, part of it has been, 1 of the 2 brands that they have, so without going too much in detail, obviously, is fully covered with them. All the devices are connected. We're getting closer to 99% of pest-free environment, at 95% less effort to get there because we only go and check the devices where there is something or someone, or whatever is the right word, in that device.

A great story, and we're expanding that across the country and around the world, which is a good example of how do we leverage a technology in other businesses into a business that didn't have much technology. And now it's becoming a purely AI-driven business, which who would have thought that pest elimination would become an AI business at some point? Great story, growing fast, high margin. And I think that we're differentiating ourselves in great ways with that business.

Life Sciences is a new business, we created in 2017, was less than $100 million back then. So it's getting closer to $1 billion today. Where we help keep white rooms, clean rooms where drugs are being produced, super sterile, and at the same time, purify the drugs that are being produced as well in those environments. So you get this combination of perfect drug quality produced in the right environment, at the right cost, with the right environmental impact as well. A very good new story for us.

High-Tech, a very interesting new field for us. It's 2 pillars. One is microelectronics, the fabs. It's really making sure that you can reuse and recycle water in a fab. Just for perspective, 1 fab uses roughly the equivalent of the drinking water of 17 million people. There are 500 fabs around the world, 100 are going to get built in the next 10 years. Well, there's a water problem there.

And to reuse and recycle the water is a bigger problem because the quality of the water that's being used in a fab is ultra-pure water, 1000x more pure than the water you use in a drug that gets injected in your blood. So it's hard from a technology perspective. So it's a lot of water that you need to bring back at a super high level of standard that allows you to produce the next-generation chips as well. That's on the fab side.

On the data center is really helping data centers use less energy to cool the data centers, that the energy can be used ultimately more for compute than for cooling, which has been a very good journey for us. Started 4 years ago, one of the new growth engines we have.

And the last one, Ecolab Digital. For 30 years, we started with connected chemistry in 1991. The web didn't exist by then. And we've built that technology of measuring fluid properties in real time anywhere around the world. And now we have over 100,000 locations that are connected and a few hundred thousand devices that are connected to our cloud today.

For 28 of the 30 years that we've been on digital technology, we did it for free, as part of everything we were doing for our customers. That has changed over the last few years where we start to put value, in other words, we monetize the services we provide to our customers in terms of digital technology. We're close to $400 million today, as you've seen in the third quarter, at very high margin. A very good story here for our customers and for our shareholders, obviously.

And last but not least, AI has been a blessing for us, not just in terms of digital technology, but there's the whole infrastructure of data centers and microelectronics, as mentioned before. Well, that's driving business growth with the services that we're providing. At the same time, we're monetizing all the digital value, as mentioned before, that we're providing to our customers.

We're leveraging One Ecolab, which is having all our processes run by agents, the last few years, has helped us save, well, $225 million in the next 2 years, as we've mentioned during Investor Day. A year ago, we thought it would be $140 million; we think it's going to be closer to $225 million today. And it keeps getting better. And we want to be -- I want to stay at the forefront of how we leverage and utilize AI technology in our operations everywhere around the world.

And last but not least, we have so much data about the 3 million customers that we serve in those 40 industries, in 172 countries, that we want to provide to our customers to understand what best-in-class performance is and how to get there. So AI, a good story for us.

Last but not least, margin. 20% has been our objective; 18% is where we are roughly. So this year, 2/3 of our businesses are already at or beyond 20%. So we know exactly how to get there. And the ones that are below, well, are usually because we're investing or overinvesting in those businesses, like Life Sciences, since we're building them for the future as well.

And 20% is not the end of the story. It's 2027. And after that, we will keep moving between 100 and 150 basis points a year towards 2030. So you can do the math where we are expecting to be by 2030.

Last but not least, really proud of the performance of the company, but also the strength of the balance sheet that we have, with a leverage lower than 2. It's a very good story, a great cash generation machine as well. Really making sure that our priorities remain really strong, and it's around dividends, it's acquisitions, investing in the business and share repurchase as well. Which we've done as well regularly, as you will see in a second, where we reinvest in the business continuously year in and year out as well at the same time.

And as mentioned, we return as well cash to shareholders. Last 10 years, roughly $10 billion as well. We've done it for a long time and we'll keep doing it as well for a long time. Nothing changes. It's all part of our long-term model.

So bottom line, a very good story that keeps getting better in good, like in less good times as well, while we focus on the core, making sure our business keeps getting better, delivers better value for our customers, while reducing the impact on the environment. We keep building as well the new engines for the future that are going to drive better margins, better earnings and better results for our customers and our shareholders.

So in short, that was our story. And we even have a few minutes, Andy, if we want to get on a few questions.

Yes. I've got a couple here lined up. And I really wanted to start, one of your key businesses is the institutional business you referred to. In that, that's where you serve hotels, restaurants, like you said. The restaurant business has actually been pretty tough, but your results, I thought, in the quarter that you just reported were pretty strong and maybe suggested that you're kind of bucking some of the challenges there.

What is it about the Ecolab model that has allowed you to give pretty steady performance in that business despite some tougher foot traffic trends? And can you just talk about some of the dynamics that are good for you or challenging for you in that business today?

Yes. Great question. So we've gone through all those industry cycles for a very long time. Obviously, as you've seen, so the industry is kind of flat, today. Foot traffic is flat to down. We're growing roughly 4%.

Two reasons. Interestingly enough, so since we serve all end markets, so from quick serves, the McDonald's of that world, to the fine dining, depending on where consumers are going, we always capture them in a way. And you could see in the third quarter, our specialty business, which is QSR, so quick serve, grew 7% plus. It's been a great story there, while the core business was closer to 4%, which is still a very good story, around the world, not just in the U.S. In the U.S., it's even better actually, which is a really good story, at very high margin.

Why that? It's in more difficult times, the industry needs even more help from us to reduce their total cost. They have a hard time to find labor. When they find labor, it's more expensive, as we know as well. The cost of goods are going up. Meat has doubled the last few years as we know as well. So they need to find ways to reduce their cost or optimize their performance. This is a perfect time for them to come to us and say, "How can you help me?"

And the best-in-class approach, Andy, to help especially those chain restaurants understand what's the best-performing location they have in their enterprise, and bring all the other ones towards the best-in-class performance, resonates extremely well with them because it's a dollar promise at the end.

Great. And then just maybe the last question for me was on your Life Sciences business. I'd say this is one of the bigger opportunities in your company right now. The margin performance is in the mid-teens, but you have aspirations that are much higher than that. So my question is, what are those aspirations? If you could talk about what's going to help you get there. Do you need share gains or do the secular trends in the business lend itself to the kind of leverage that you need to get your margins up?

So maybe if you could just talk about kind of what you see there. Obviously, we'd all love a time frame of what you're thinking about how long it takes you get you there. I think you're probably going to punt on that. But anything you could talk about kind of your plan there, I think, would be helpful.

I love that business. As mentioned, so we started 2017, less than $100 million. We're getting closer to $1 billion right now. There was an acquisition with Purolite in the biotech area that we did in '21. We're going to love that business. It's a high-growth business, high margin. The ambition is to get to 30% in terms of operating income.

The underlying performance in terms of margins is in the mid-20s right now. We're building plants, we're building systems, we're building capabilities and capacities. So we know exactly how much we are over-investing as we're building that business. So the reported margin in the mid-teens is actually underlying mid-20s. That's why I feel pretty good to get towards the 30%. And part of that business is already north of 30% as well. So we know how to get there, we have the path pretty well laid out.

But to your point, for me, it's to gain share. We are -- in most of the segments that we serve, we're the clear leader globally, even though we have 10% global market share of the markets we serve. In Life Science, we're kind of the third one out there, so behind some strong companies like Danaher and Thermo Fisher, just to name some of them. It's not a secret, obviously, there. We're much smaller than they are. We're very agile, very entrepreneurial, very innovative.

So it's about gaining share in a market that's growing, that's generating very high margin. For me, it's the perfect combination of a market where Ecolab should be winning.

Great. Cool. I think we're going to leave it there. Then again, we'll see you in the breakout room that's located in the Chestnut Room. So we'll see you there if you have any follow-up questions. Thanks all very much.

Thank you so much.

Greetings. Welcome to Ecolab's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.

At this time, it is now my pleasure to introduce your host, Andy Hedberg, Vice President, Investor Relations for Ecolab. Thank you, Andy. You may now begin.

Thank you, and hello, everyone. Welcome to Ecolab's third quarter conference call. With me today are Christophe Beck, Ecolab's Chairman and CEO; and Scott Kirkland, our CFO.

A discussion of our results along with our earnings release and the slides referencing the quarter's results are available on Ecolab's website at ecolab.com/investor. Please take a moment to read the cautionary statements in these materials, which state that this teleconference and the associated supplement materials include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the Risk Factors section in our most recent Form 10-K and our posted materials. We also refer you to the supplemental diluted earnings per share information in the release.

With that, I'd like to turn the call over to Christophe Beck for his comments.

Thank you, Andy, and welcome to everyone joining us today. And I'd like to start by recognizing the strength and the resilience of Ecolab's team. Because in a year defined by persistent macro uncertainty that we've all lived through and shifting global dynamics, our team continues to deliver consistent double-digit earnings growth.

And they focus on what matters most, our customers, our strategy and our long-term goals, is what enables us to perform at a very high level quarter after quarter. And we've seen that in the third quarter where sales growth improved fueled by escalating pricing, up to 3% from 2% last quarter, while volumes increased 1%. This momentum was driven by double-digit organic growth in our growth engines, which is remarkable and which includes Pest Elimination, Life Sciences, Global High-Tech and Ecolab Digital. Our core business, Institutional & Specialty and the rest of Global Water delivered solid growth. All of this supported by exceptional total value delivery through best-in-class breakthrough innovation and disciplined execution of our One Ecolab enterprise growth strategy.

In total, our growth engines and core businesses represent about 85% of our total sales, and they delivered 4% organic sales growth and mid-teens organic operating income growth. The strong performance more than offset ongoing market softness in our underperforming businesses, Basic Industries and Paper, which together represent the remaining 50% of our global sales. And these 2 businesses declined 3% and had an impact of 1 percentage point of volume in the quarter.

So let me briefly expand on each of these drivers before sharing how we're thinking about the remainder of the year and how we're positioned to deliver another strong year of double-digit EPS growth in 2026. Pricing accelerated to 3% this quarter, driven by the full implementation of our trade surcharge and continued value pricing that's working really well. As always, the total value we deliver to customers continue to outpace and, by far, our total pricing, as our technologies and services help to deliver enhanced business outcomes, operational performance and environmental impact for our customers.

Our breakthrough innovation is the strongest it's ever been, delivering significant value for customers and growth for Ecolab. In Institutional & Specialty, breakthrough innovations like the ones you've seen at Investor Day, like DishIQ, AquaIQ and ReadyDose are growing double digits as these solutions help our customers improve operational performance, optimize the scarce labor resources and reduce total cost.

In our Pest Intelligence platform, we've now installed over 400,000 intelligent devices, formerly called mousetraps, on our way to deploying over 1 million devices. With this leading technology, we aim to deliver 99% pest-free outcomes as we harness the power of our Ecolab 3D digital infrastructure and our expert service capabilities.

Within Global Water, we recently launched 3D TRASAR for direct-to-chip liquid cooling for next-generation AI data centers, which uniquely monitors and optimizes coolant performance in real time. And when combined with our full portfolio of data center cooling technologies, we're helping to reduce up to 10% of the power used to cool data centers, which can now be utilized for compute power. And this is just the beginning as we build our leadership position in data center cooling and water [indiscernible].

And finally, within Global Life Sciences, we've launched a series of cutting-edge drug purification [indiscernible] for the bioprocessing industry, which drives the improved product quality and significant operational efficiencies for our customers. When Ecolab focuses its breakthrough innovation on solving critical customer challenges like this, everyone wins.

One Ecolab is helping us unlock significant cross-sell opportunities across our customer base. In total, this represents a $65 billion growth opportunity, with $3.5 billion of this sitting with our largest customers. And we're seeing early successes in businesses like Institutional & Specialty and Food & Beverage that are growing very nicely. Talking about that, in Institutional & Specialty where organic sales grew by 4%, outpacing end market trends -- and this good performance is being fueled by the exceptional value we are delivering to customers, which we capture through value pricing and growth from One Ecolab. With this, we're working to deliver best-in-class operating performance for customers as they utilize more of our breakthrough technologies across more of their locations.

In Food & Beverage, growth continued to accelerate with organic sales up 4% this quarter, once again ahead of market trends. This strong acceleration is being driven by One Ecolab where we bring together our industry-leading cleaning and sanitizing water treatment and digital technologies. This comprehensive offering delivers significant customer value to improve food safety, lower operating cost and optimize water usage, which was always our promise.

And of course, our growth engine delivered another quarter of double-digit sales growth. These businesses are gaining momentum and Ecolab is well positioned to capitalize on the strong secular tailwinds driving these markets. So let me unpack them one by one.

Pest Elimination delivered 6% organic sales growth. And as mentioned earlier, the Pest Intelligence rollout is going extremely well. Our Pest team has just won another very large retailer here in the U.S., which have thousands of locations which we will be deploying in the coming months. This innovation is transforming our Pest Elimination model as we shift from spending 95% of our time physically checking every device to 95% of our time solving critical customer problems and selling new solutions.

Even with ongoing investment in Pest Intelligence, operating income margins improved to nearly 21%, driven by our strong sales growth and the leverage we're generating from Pest Intelligence.

Life Sciences sales growth also improved to 6%, led by double-digit growth in biopharma and pharma and personal care. This very strong performance overcame capacity constraints within our water purification business. Looking at the fourth quarter, we expect Life Sciences year-on-year sales growth to moderate a little bit from third quarter 6% growth as we compare against nearly 70% growth in our bioprocessing business last year, but underlying, trend. Despite this strong comparison, we expect bioprocessing to still grow double digits in the fourth quarter as we continue to gain share in this super-attractive market.

Global High-Tech continues to grow rapidly, with sales up 25%. We've built an incredible growth platform where we're uniquely positioned to serve the high-growth data center and microelectronics industries. And the pending acquisition of Ovivo electronics will more than double the size of Ecolab's Global High-Tech business to nearly $900 million, further strengthening this growth engine by bringing together Ovivo's very unique, attractive water technologies with Ecolab's leading water solutions, digital technologies and global service capabilities. The combined technology platform will enable Ecolab to expand our offerings to provide circular water solutions for microelectronics, helping to maximize chip production and quality for this booming industry.

Ecolab Digital maintained its strong momentum, delivering 25% sales growth this quarter. Ecolab Digital now has annualized sales of more than $380 million, driven by rapid growth in subscription revenue and digital hardware. Overall, digital is a $13 billion growth opportunity for Ecolab with $3 billion of this sitting within our existing customer base. So we remain focused on capturing this high-margin opportunity as we leverage our leading digital technologies and monetize our large and expanding installed base.

We're not only leveraging AI to build new fast-growing capabilities in Global High-Tech and Ecolab Digital. We're rapidly leveraging it in our own operations to dramatically improve our customer experience and enterprise performance. With this, I'm very proud to share that Ecolab has ranked #9 on the Fortune AIQ 50 List, recognizing the companies most prepared for the age of AI. Our global teams are quickly scaling AI to drive innovation, deliver customer impact to our best-in-class model and deliver significant cost savings.

Finally, we remain confident in our team's ability to get our 2 underperforming businesses, Basic Industries and Paper, back to growth, and they're already making meaningful progress. We've shifted resources to support emerging opportunities like in power and precious metals where they're supporting AI-driven power build-outs. For end markets still facing near-term demand headwinds, like Paper, we're focusing on innovation that can drive significant operational savings for customers.

We're also leveraging our One Ecolab growth strategy in these businesses to expand relationships with existing customers. These actions are working as evidenced by our share gains and relative outperformance in these end markets. But we're not satisfied. While we expect these markets to remain soft in the near term, with actions well underway, we anticipate these businesses to return to growth during 2026.

One of the greatest strengths of Ecolab for decades has been the breadth and diversity of our portfolio. While not every business delivers strong performance at all times, our diverse portfolio is the key reason Ecolab collectively delivers double-digit EPS growth in nearly any environment. With our strong performance, we drove a 110 basis point increase in our organic operating income margin, which reached a record 18.7% this quarter. We continue to expect our operating income margin to expand at steady levels due to growth in high-margin businesses, [indiscernible] price, share gains and productivity improvements, reaching a strong 18% for the full year '25.

Importantly, our margin expansion also includes significant and ongoing investments in our business. We continue to make these growth investments as [ they feel ] high performance in the quarters and years ahead.

As a result, we're increasing our '25 full year adjusted diluted EPS midpoint to $7.53, with a range of $7.48 to $7.58. Beyond this year, we remain firmly on track to achieve a 20% OI margin by 27%. And as mentioned during our Investor Day last month, we expect to continue our momentum with 100 to 150 basis points of annual OI margin expansion to 2030. This positions us extremely well to continue to deliver steady 12% to 15% earnings growth in '26 and beyond.

In closing, our third quarter results reflect the strength of our business and the power of our strategy. Our pricing discipline, breakthrough innovation and One Ecolab execution continued to drive share gains and margin expansion across our core business. Our growth engines are scaling rapidly and positioned to benefit from long-term secular tailwinds. All of this is enabling us to deliver consistent earnings growth even in a complex and complicated macro environment.

With strong and resilient free cash flow and an extremely strong balance sheet, we're very well positioned to capitalize on both organic and inorganic growth opportunities to create significant value for our customers and drive attractive returns for our shareholders. I remain very confident in our ability to deliver sustained strong performance in Q4 this year and beyond.

Thanks again for your continued trust and your investment in Ecolab. I look forward to your questions.

Thanks, Christophe. That concludes our formal remarks. Operator, would you please begin the question-and-answer period?

[Operator Instructions] And the first question is from the line of Tim Mulrooney with William Blair.

This is Luke McFadden on for Tim. I wanted to ask about Global High-Tech business. We noticed the slides mentioned some recent market share wins in data centers. Can you talk a bit more about how you're achieving and measuring the gains here? And I know you haven't closed the deal yet, but curious to hear any updated thoughts on the Ovivo acquisition and how you would characterize the growth opportunity in microelectronics post deal close relative to your already strong performance in this end market today.

Thank you, Luke. Love that field, as you know. So let me step back a bit because it's important. So for all of us to understand, so High-Tech for us is a combination of data centers and microelectronic plants, many call it fabs, which at some point will be 2 businesses focused on different technologies, obviously. But for now, it's really high-tech, combining data centers and microelectronics. And it's a field that attracts most of the global investment, as we know. And we expect these global investments to continue to drive that growth trend even though we don't expect it to be a straight line to heaven, there will be, obviously, some more difficult and some better times ahead, but generally, it's going to be the growth of our times.

When we think about some of the facts, talking about metrics, Luke, 1 data center opens in the world every 1 to 2 weeks, with an investment ranging from $500 million to $3 billion, and there are 10,000 data centers in the world today. So showing a strong base that's getting even bigger as we speak.

On the other hand, you have 1 fab, 1 microelectronics plant that's opening up roughly every month or so with average investments in the billions. There are 500 fabs today and expected to be 100 more, getting to 600 in the next 10 years. So we can see the pace at which those data centers and fabs are opening up, and our objective is ultimately to be in and hopefully own each of them around the world.

So the key thing is that all of this will require way more power and way more water, which is where our role comes into it. Because as mentioned as well, by 2030, we expect that this industry, powering AI with fabs and data centers, will need the incremental power of the whole of India in the next 4 years and the drinking water needs of the whole of the United States as well at the same time, because data centers will need to be cooled and fabs require vast amounts of ultrapure water.

And the cool news is that those are technologies that we master, we've been mastering for a very long time. Nobody understands water better than Ecolab. We've been in the cooling business for a very long time and we've been in the water business, obviously, for a very long time as well.

So we're building offerings that are helping data centers to be cooled in more efficient way by reducing the amount of water and moving towards direct-to-chip technologies. That helps cooling faster. This means more compute power and this means less power for cooling and more power for compute, which is exactly what the tech industry is looking for.

On the other hand, we're providing circular water solutions for microelectronics manufacturers because 1 fab requires roughly the drinking water needs of 17 million people, and the pace at which it's being built, well, that's not going to work for the communities, obviously. So the tech industries, famous ones, especially in Asia, but in the U.S. as well, are looking for solutions to reuse and recycle water. But here is the key point, that water that's being used in those fabs needs to be ultrapure water, which means roughly 1,000x more pure than the water that you would use in drugs, that you inject in your bloodstream, which is exactly what Ovivo is doing.

So by bringing what Ecolab has always done in border circularity plus the capabilities of Ovivo in ultrapure water, we help microelectronics, ultimately, will use and recycle water at ultrapure water level.

So at the end, '26 for Global High-Tech, assuming we close, obviously, so on Ovivo, will be roughly a $900 million business, growing double digits with very strong margins. And it's important to keep in mind that, for us, it's a new step, a further step on our high-tech journey and one that will change over time the growth profile of our company. So a very good new chapter for our company.

Our next question comes from the line of Ashish Sabadra with RBC Capital Markets.

I just wanted to focus on the Basic Industries and Paper returning back to growth in 2026. I was wondering if you could drill down further about on shifting resources, innovation as well as share gains, how that can help offset some of the end market weakness?

Yes. Thank you, Ashish. I really like the underlying performance of that business. It's a good margin business, just that you know as well, it's slightly below our company average. But it's still a good business, good margin and good underlying performance. The biggest issue we have in that industry is it's consolidating, which means that they are closing mills, and mills are very big. And those mills, obviously, when they close are impacting our growth, and there's not much we can do. We lose very little to competition, we gain share in the existing and new mills. But when a mill is closing, well, we lose those sales.

And that's what happened over the last 18 months. We see that process of consolidation slowing down. We see our underlying performance driven by what you were saying, innovation improving as well. And I think the combination of both ultimately so will be positive for Paper. So I think that we are reaching the bottom of that cycle in Paper. And I think in the next, I don't know, 1, 2, 3 quarters, Paper is going to get back to a growth trajectory, and the sooner the better, obviously.

And on the Basic Industries, we have regrouped our resources, we're driving critical mass as well, driving efficiencies. But it's really making sure that we capture as much market share as we can right now as the market recovers as well. And similar to Paper, but for different reasons, we see as well kind of the bottom come in the next couple of quarters, and then we should get back to a good place.

So in both business here, 50% of our company, we need to keep that in mind, and there will always be a few businesses that are having subpar performance. I like the underlying performance, the market trends have been hard in the past. This is changing. So that's why I'm quite optimistic we will like where those 2 businesses are going to go. But at the end of the day, keep in mind that 85% of the company is growing very well with mid-teens operating income growth, so in a very healthy place.

Our next question comes from the line of John McNulty with BMO Capital Markets.

So I had a question on pricing. I guess if you can take the tariff surcharge out of the equation, I guess, would you say that pricing is getting easier to push through just because the value proposition is becoming more evident? Or would you say -- or would you characterize it as maybe getting tougher just because there may be price fatigue, inflation may be moderating a little bit? I guess, how would you characterize it?

Thank you, John. I would say the same [indiscernible] metric obviously on that. But generally, the fact that pricing is getting stronger -- our total value delivered by the way, is getting much stronger too. And we're always trying to get 2 to 3 -- sorry, more total value delivered than pricing that's being captured. So it's a good deal for customers.

I feel that we're in a pretty good place, and our retention is very high, in the 90s, as you know, and it's remaining very stable as well at the same time. So a good story of customer for life with good retention, sharing the savings that they get in their operations, that translates into value pricing. And you're right on top of it, so the tariff surcharge or trade surcharge, as we called it, is helping as well. But that's why we feel that 2% to 3% value price for the long run seems to be the sweet spot for our company.

Next question is from the line of Andrew Wittmann with Baird.

Great. I had 2 questions. I guess, Christophe, just talking about the Water business as well here, you discussed the top line impact, the quarter, very detailed. I'm just wondering if you could just help us understand a little bit about how that top line is affecting that segment's margin performance. So maybe if you could bifurcate that as well.

And then just quickly, kind of a technical question here. You mentioned a large new Pest customer. I was just wondering, was that reference into an entirely new customer that is not a customer today? Or were you saying that's just a conversion to the new technology?

Thank you, Andy. So 2 different questions, obviously. I think the easiest way to talk about Water, top line and margin, if you exclude Basic Industries and Paper, which I know is a bit of a challenge in accounting approach here to make sure I remain in GAAP. But generally, Water would be having a 4% top line growth and a 15% operating income growth excluding those 2 businesses. So it's pretty fair where our work is focused on, and that's why we're focusing on these 2 businesses, to make sure that we enjoy, so all the good side of the Water business that we really love, and that keeps getting better.

Now on the Pest question, so we never mentioned which customer that is, just to respect, obviously, their own confidentiality. But it's a new one, which has been really interested by that new technology. The fact that we focused early on, on the biggest out there, helps obviously, so everyone else see that it's good. The leading companies are embarking on that journey and that it's really working. So that's going to be, I think, helping us for the future as well because the more of those great retailers we have on board, the more others will join as well. It's an ideal proposition for them. 99% [indiscernible] a good deal for their own operations, it's good for us. It's exactly the model that we want to build in the future.

We're early on that journey, as mentioned, 400,000 devices today, but we will be at 1 million first half of next year. So it's showing how quick we're moving here, and we're clearly leading the industry, which is helping customers come to us.

Our next question is from the line of Vincent Andrews with Morgan Stanley.

Christophe, if I could ask you for an update on One Ecolab. In particular, I know the focus initially was the top 35 customers. So as we get to year-end 2025, where will you be in terms of sort of the work you wanted to do with that top 35? As we get into '26, will you be rolling it out more aggressively to the next 25 or 50 or what have you? Or how should we think about the layering in of incremental One Ecolab efforts from '25 to '26?

Thank you, Vincent. So the way we approached it, and I don't remember how public I was with it. So we launched One Ecolab a year plus ago, as you remember, mid of last year. And we said we will start with 3 customers in 3 major industries of the company, to move to the [indiscernible] we called it internally the MAX 7, they're not exactly the same as the ones you would have in mind, but some are obviously in '25. And then to move towards the top 20 [ E15 ] in 2026, to really make sure we can demonstrate that customer after customer and learn as an organization as well without boiling the ocean.

It's progressing very well. Customers are very receptive. And the best example is really Food & Beverage united, where we brought hygiene and water together in North America, which you see the results in Food & Beverage, so how the growth trends have shifted towards higher growth. It's exactly driven by One Ecolab, focused on some of those critical customers. It's where the whole idea came from when we acquired [ Nalco ], by the way, in 2011. So it's an old idea that's coming to life, very well received by customers working in terms of growth, and we will expand as we move forward in 2026.

The next question is from the line of Patrick Cunningham with Citigroup.

I think -- how should we think about SG&A leverage, particularly Pest and Life Sciences, next year as you start to lap some of the growth investments you've made across both businesses? Is it a relatively linear path to your 2027 targets? Or is there sort of a continued step-up in growth investments embedded next year?

Thank you, Patrick. Scott was looking for a question, so this is a perfect segue. And I would suggest we start with SG&A in general as well and then focusing on these 2.

Yes. Thanks, Patrick. As we've talked about, SG&A productivity has been a great story over the last several years -- since 2019, our SG&A leverage has improved 150 basis points, and we're expecting to improve another 20 to 30 basis points this year for full year 2025.

As we talked about at Investor Day, beyond 2025, with the benefit of the One Ecolab savings that we're driving and net of investments, we'll continue to invest in the business. And that leverage, I expect it to be pretty broad-based. Certainly, we are investing in the growth businesses, the growth engines, but expect going forward to deliver 25 to 50 basis points of SG&A leverage, benefiting from the One Ecolab program and the technology we're deploying.

And what I really love on that whole journey, it's not becoming cheap and saving money left and right. It's leveraging digital technology agents. We have many now in our organization. That's why being recognized as one of the leading AI companies in the world was a really cool news. So for us. It's really leveraging technology to do more with less. And we are still early on that journey. So I think it's going to keep getting better. So really good work here that's feeding ultimately the growth story that we want to capture.

The next question is from the line of Manav Patnaik with Barclays.

I just had a question. The 85% of your business core, I guess, that you said was growing 4%. Assuming the macro stay the same, I guess, it sounds like it's the growth engines that could take that higher. And so I'm just trying to understand from your perspective, how long do you think before that mix is big enough to start moving the needle? Because you've obviously delivered well on the margins and EPS, and I think we're all looking to see if revenue growth can be better.

It's a great question. As I was sharing, so I think [indiscernible] with the team, the beauty of the company is our broad exposure to end markets, which means that we won't have all end markets in the red at the same time, but which means that we won't have all end markets in the green at the same time as well. So focusing on this 15% a little bit of our time to make sure that those ones are becoming less of a drag and, ultimately, a positive driver.

But when we look at this 85% growing 4% and mid-teens, the growth engines are growing 12% and even more on operating income. So which is a very good story. Ovivo is going to add to it, as mentioned earlier, obviously, so High-Tech is going to get bigger. Since that growth of gross engines is growing double digit, obviously, the mix is going to shift towards them over time. And I think that in the next few years, growth engines are going to become a really relevant part of our company. It's roughly 20% today, $3 billion. I would not be surprised if it becomes 30% to 40% in a few years down the road.

The next question is from the line of David Begleiter with Deutsche Bank.

Christophe, on the price surcharge, how much did you realize? And with the surcharge now fully in place, should we think about this 3% pricing continuing for the next perhaps 2 to 3 quarters?

It's hard to know exactly because some businesses, like institutional, for instance, [indiscernible] and that was the same in '22, so [indiscernible] directly within the structural price. So we don't have a perfect tracking of that. And obviously, I don't really care because, anyway, also converging towards a structural price. So with the surcharge, we're closer to 3%, obviously. That's why I'm saying 2% to 3% is the sweet spot. And since we ramped those numbers, sometimes you might be rounding down to 2% and sometimes 3%, but I feel pretty good with where we are now.

Our objective is to stay closer to 3%, but it depends what's happening with the tariffs as well. We're looking as well as what's happening with China this week. We will know that in the next few days as well. The good news is that we know exactly how to manage that if we need to, and it leads to very good margin performance. So for me, 2% to 3% is the sweet spot, and our objective is to be as close to 3% as we can.

The next question is from the line of Chris Parkinson with Wolfe Research.

Could we just dig in a little bit more into the Life Sciences segment? Understanding it's been volatile over the last few years. However, it seems like there's a decent recovery pending in bioprocessing and pharma, so on and so forth. So if you could hit on the top line first, that would be helpful.

And then if we could move into just the capacity additions, where we stand there and your ultimate progress towards '27 goals and how you feel about them.

Thank you, Chris. It's a business and an industry that I love. And as hard as it's been in the last few years, I would do it again and we will love where this business is heading. Great team focused exactly on the right innovations that the pharma industry is looking for to produce faster, high-quality, lower-cost drugs at a lower environment that impacts, really converging with an Ecolab model.

When I look at the 3 elements that you mentioned, so top line, capacity and margins, let me take them one by one. So the top line, we've been growing low to mid-single in the last few years. That was less than what we had planned for when we acquired [ Purelite ]. Well, that was during a time when the market went down, most of our competitors went down in terms of growth. Doesn't make it great for us, but at least it's adding some perspective.

When I look at the growth trajectory that we have now, it's clearly accelerating. I mentioned this Q4 is going to be a little bit softer because it compares to a huge growth in Q4 last year. But underlying, it's clearly accelerating. The new business is very strong. We're getting more commercial drugs as well in our pipeline, which makes a big difference, obviously. And the team keeps getting stronger and better as well. We're one of the only few companies having as well capacities in various places around the world that adds to the resilience as well to it. And we have a whole water components and environmental hygiene that the other ones do not as well.

So top line, finally, so getting from good to much better, and it's going to keep accelerating, with one caveat. If this capacity challenge that we have in our purification business, just because we have max capacity of what we can manufacture. But our plant in China in mid-2026 is going to open and it's going to enable us to unleash that growth in that part as well as the business, which is going to be great for the local market and as well for some international markets.

And last point, on the margin, as we've shared as well at the Investor Day, we are kind of in this mid-teens today. But underlying, it's more mid-20s because of the investments that we are making in that business as we build that franchise. So from the mid-20s to the 30, we see a clear path. But our focus is really to drive growth in that phase of the investment and then start to drive margins once we get enough growth that we can leverage the critical mass that we've built.

Our next question is from the line of John Roberts with Mizuho Securities.

In hospitality, you use a metric called seats in the seats. Could you give us an update on that? It seems like we have a lot of mix trends going on in the full-service restaurant market.

So thank you, John. So I'm using the terms of food traffic for our business here. It's -- as you know, it's been very different versus than 2019, so before COVID, so people going and sitting in restaurants, so down 30% versus 2019. And that hasn't changed. Unfortunately, or fortunately, depending on how we want to look at it, 1/3 of the people are just going for takeaway, for delivery or for drive-through, same as [ 3D].

So we see a stabilization of the food traffic, which is kind of a good news. But we've gotten used to that new model. And ultimately, with all the digital solutions that we have offered to that industry to manage this different way of selling products with less people as well, it's been a very good story because we could grow very nicely, because what we did was even more important to the hospitality industry, and it was sold at a higher margin. as well. So less volume, better margins, very good growth.

And I think for us, it's been exactly what we needed and it's made institutional or the hospitality business even much better than what it used to be, and you can see it in the margin that's north of 20% today. And it's going to keep moving up with very nice top line growth as well. So far, so good.

And the last point, I'd say as well our Specialty business is doing extremely well, doing even better than full service restaurants. So the QSR, the fast food businesses growing in the high single. It's a very good story as well there, which helps us capture wherever people go depending on the economic times that we're facing. So overall, net-net, a very good story in a very new market.

The next question is from the line of Jeff Zekauskas with JPMorgan.

In the Water business, this quarter, did volume grow? And in Basic Industries and Paper, was volume growth negative high single digits? And did that represent a deceleration from the numbers you would experience in the previous quarters?

So thank you, Jeff. We -- as you know, so we don't disclose volumes by business, for obvious reasons. But as mentioned, so every segment had positive growth, that we reported. So that's the good news. So there was no segment that was going down. And for me, it's really important that all businesses maintain positive growth whether you're in high tech where it's much more obvious because the flow of the river is very strong or you're in more challenged businesses, like hospitality, as we talked about before, and still there. So our teams are doing really well.

So Water was positive with that perspective, obviously. Paper within quarter was not, and it's in the low to mid-single. But it's improving. So that's why I feel quite optimistic with the next few quarters with our so-called underperforming businesses of Paper and Basic Industries. They're not where they should be. They do exactly the right things. So the underperforming -- underlying performance of underperforming businesses is strong. Markets are not. But net-net, we're going to get to a good place in the next few quarters. So we're doing all the right things here.

The next question is from the line of Matthew DeYoe with Bank of America.

Follow up on Vincent's question earlier on cross-selling in One Ecolab. Do you have any idea how much that contributed to organic growth in the quarter or an expectation you can kind of give us for this year as it relates to just overall revenue generation?

Well, Matt, it's very good, actually. So we are a corporate account, as call it, driven organization, enterprise customers, to use a different term as well. And the top 20 E15 focus is contributing over average to the growth of the company. So this is exactly the right place to focus. It's always been true as a company. But to get the whole One Ecolab within an enterprise is harder, to make it work very well. And that's why we've chosen to go with all our innovation, all our technology, bringing One Ecolab digital services together towards [indiscernible] as mentioned before, then the T20 E15 or the top 20 customers and emerging 15, so for next year as well. But they're doing better than the average of the company as well.

So it's clearly a strategy that's working. And as we expand the focus beyond those 35 customers, it's going to help drive as well better performance for the overall company at higher margin because it's helping customers drive even more efficiencies within their own operations. And the best example is Food & Beverage, Food & Beverage United, as we call it, within our own company, where we brought Hygiene and Water together, and you can see the performance of Food & Beverage has been remarkable in the third quarter, and it's going to keep getting better. It's only North America that we've done it, by the way, and it's very global business, serving global customers with global quality standards, as you would imagine. And this one is going really well. It's a great team with customer feedback, also because no one else can do it as well, which is a great way for us to strengthen our moat.

So generally, this One Ecolab approach, our enterprise customers, it's really working, and it's going to be a growth driver for the years to come.

The next question is from the line of Mike Harrison with Seaport Research Partners.

Christophe, just kind of following up on what you were just talking about with Food & Beverage. The performance this quarter was, I think, the best organic growth that you've shown in several quarters. You mentioned that there is some momentum from One Ecolab and from pricing. But I was hoping you could help us understand a little bit more about what's going on with underlying market dynamics that you're seeing there. And to the extent that you are winning new business, is that mostly share of wallet and One Ecolab opportunities with existing customers? Or are you seeing some new wins in that business in Food & Beverage as well?

It's good question, Mike. It's -- 4% organic growth in Food & Beverage is strong, so for sure. It's much better than the market. Consumer goods are not exactly growing fast, when you look at the companies out there or the, obviously, saw famous names out there, closer to flat than to mid-single type of growth. So really pleased with the performance that we're driving.

And we're doing it while increasing our margins as well at the same time. So it's almost a perfect play what's happening in Food & Beverage here, with this unification of Hygiene and Water. And again, it's only North America that we've done it so far, which is less than half our global business, but it's showing how well it's working, that whole approach.

And to your point on the share of wallet and white spaces, it's a combination of both. We get [indiscernible] gaining definitely some new customers, new plants as well within existing customers as well. Because by bringing Water and Hygiene together, we help them not only produce higher-quality, safer food, but reduce a lot of costs as well at the same time. So in a slow growth industry, that's exactly what they're looking for. So what we're doing for them is exactly what they're expecting.

But at the same time, we're adding digital technology that we monetize, charge for using a different term. And we get as well the value share, so our share of the savings we're generating for them in terms of value pricing, that's also incremental. So it's a combination of white spaces and share gains overall, and also story for probably 1 of our best global businesses that we have.

Our next question is from the line of Laurence Alexander with Jefferies.

It looks like your operating results are running -- I mean, your organic growth is running pretty much in line or better than what you thought earlier in the year. FX looks like it's basically double the tailwind of what it was last year. Can you talk a little bit about the gives and takes and what levers you have to pull if currency moves the other way next year?

Yes. Good question, Laurence. Let me pass it to Scott because it's an FX [ DPC ]question.

Yes. Thanks, Laurence. As we've talked about, the underlying performance remains really strong. So with FX, I mean the underlying EPS is -- why it's growing double digits. And as you think about just in Q3 itself, while FX is in line with what we expected and as we guided, you also have the impact of year-over-year SG&A comp that is offsetting that FX and benefit of the nonoperating. So that underlying growth is really very strong. We previewed the year-over-year comp in SG&A during the Q2 call and expect that Q2 -- our Q4 performance to continue as the SG&A normalizes, but we also are seeing commodity costs growing low to mid-single digits and overcoming that as well. .

The next question is from the line of Jason Haas with Wells Fargo.

I'm curious if you could talk about the Pest business, if you've seen any increasing costs for lead or any increased competition in that space recently.

If I understood well your question, so on Pest, Jason, so the SG&A versus competition? Is that what you asked?

Sorry, just to be more clear, I'm asking if the customer acquisition costs have gone up at all, if you've seen any step-up in competition from one of the major players out there?

Customer acquisition costs Okay. I wanted to make sure I got it right, Jason. Actually, it's a bit of easier because -- and we're early on that journey, as mentioned. So we got 1 major retailer in the U.S. We're getting the second as we speak. We wanted to do it large customer by large customer. It's not a geographic play. It's a customer play because ultimately, one brand wants to be safe and not have any issue in social media or whatever related to concentrate and guest satisfaction and quality of the experience of the food, obviously, here.

But what we offer here, with all the digital technology, all the AI that we've developed within the company for many years now, well, is serving the needs of our Pest Intelligence business. No one else can provide as much technology as we can and have such a backbone like Ecolab 3D as well at the same time. So it's a leading offering. It's ahead of the competition. Customers are very open to it.

And what I really like as well with it is that the whole industry, even if not moving all at the same pace, is trying to add value to customers and get paid for it as well at the same time. So very healthy competition, and it's a good thing for customers and for the guests or the ultimate consumer [indiscernible] whatever [indiscernible] are ultimately.

And in terms of operating costs, well, when 95% a few time was spent in the past, checking devices that were empty and you spend 5% of your time doing it tomorrow within your system, your operating costs are getting better and you can spend much more time acquiring new customers and serving them even better, which is why our margin is improving as well at the same time. We love that business. It's going to keep -- it's on a strong base of performance right now. It's going to keep improving as we move forward. And margin is going to improve as well. But I want to make sure that we keep investing as well in there because until we are 100% with the Pest Intelligence model around the world, well, we will not slow down our investments that has real impact on the operating margin, but it's still improving, as you could see since our [indiscernible] 20% now.

Our next question is from the line of Josh Spector with UBS.

I wanted to ask from a general context. You talked about '26 confident in the low to mid-teens EPS growth. I think around this time a year ago, you made comments around you don't really need strong volumes to get there. You're really confident in the price/cost equation. I guess when you sit here today and look out a year, do you feel the same way that you can kind of get there with 0% to 1% volumes? And if you start to see an acceleration, that's upside? Or would you frame it differently?

I see exactly the same way, the way that you described it. With the only caveat, we don't know also how the environment is going to be in '26. We had some very firm plans for '25 with very strong FX headwinds and delivered product cost that would be really helping. Well, it was exactly the other way around that it happened in 2025. And still we delivered what we had promised in terms of top line, but most importantly, in terms of bottom line.

So when I think about '26 for me, it's going to be a strong year, very similar to '25, with 3% to 4% top line, positive volume, 2% to 3% price to drive this 12% to 15% EPS, and at least 100 basis points in terms of operating income margins, to get to 19% plus, which is bringing us closer to the 20% that we committed to for '27. FX are going to be a help. Inflation might be a little bit of a headwind in '26 and everything else that we don't know.

But I feel really good on that trajectory. And to your point, if things improve, if our end markets are even more open to what we do, well, that's going to be upside. That's why I feel really good with where we're heading in 2026 one more time like it's been in the past few years.

Our final question is from the line of Kevin McCarthy with Vertical Research Partners.

This is [ Matt Hatwear ] on for Kevin McCarthy. Thanks for color on data centers that you gave earlier. Just following up on that conversation, I wanted to get your thoughts on how Ecolab is positioned with regards to next-generation cooling technologies such as direct-to-chip cooling. Do you have everything you need to compete and win there? Or should we expect additional bolt-on deals in that arena?

Love that question, Matt. No one has everything they need for direct-to-chip cooling. This is leading-edge technology. It's 5% of the data centers, those are the newest. But interestingly enough, when you say direct-to-chip cooling, liquid cooling, this is fluid management. This is exactly what we've done for a very long time. So managing fluids in a bunch of different industries, obviously. So in a way, it's coming closer to our own mastery of science and technology.

So when I think direct to chip cooling, well, we talked about our cooling distribution units that we call Coolant Intelligence Unit because they integrate 3D TRASAR technology that we've been obviously developing for many, many years. So we have that technology in the middle of a data center integrating 3D TRASAR. We've developed as well Connected Coolant, so the liquid itself, so to make sure that you have the best thermal performance to cool the chips as well.

We have coolant monitoring systems as well to make sure that you don't have leaks, you don't have fouling, you don't have anything bad that's happening as well, to maximize as well the performance of the data center. And you have everything else obviously that's going up the chain, in chillers and towers, on the roof. The latest data centers that we're serving have no cooling towers on the roof and have no water in there as well.

So we have many pieces that we need and we're developing and exploring the new pieces that we will need as well in the future. And that's why I think we're just at the beginning of that journey, but that's a field that's exactly what Ecolab should be focused on. We should become the owner of cooling technology for data centers in the world. And that's we're focusing all our efforts, all our resources and all our investments as well in Global High-Tech.

On top of it, we do similar, obviously, with microelectronics, different technology. I mentioned before, it's reuse and recycle of ultrapure water, and that's where Ovivo is playing exactly in that field. So it's really serving our dual strategy in high tech, to be the owner of circular water -- ultrapure water standards in microelectronics, and cooling technologies in data centers. And that's why I'm so bullish about what we've done, where we are today, but most importantly, where we're going.

And that's why I'm saying, it's going to change over time the growth profile of this company because it's a huge growth wave, and we're very well positioned on that wave. So really like where we are. The competitive set is strong out there, but no one understands cooling and water better than we do. So I would clearly bet on the Ecolab team.

Thank you. At this time, we've reached the end of our question-and-answer session. I'll turn the floor back to management for closing comments.

Thank you. That wraps up our third quarter conference call. This conference call and the associated discussion slides will be available for replay on our website. Thank you for your time and participation. I hope everyone has a great rest of your day.

Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Have a wonderful day.

[Audio Gap] from anywhere around the world remotely. We were forecasting for some rain today. Well, the weather is perfect here in Minnesota. We'll see how long that lasts. I guess that's a little bit the name of the game for the year and for the year before us and the years to come as well. When we think about -- last time we met was October '23, a lot of things have happened in the world. A lot of things have happened differently than we had expected.

And I was discussing with some of you as well this morning how much time we're spending in planning for the year that's to come. And then the year starts and the world is different. And we adjust and we still keep delivering as expected. And this is the Ecolab way. This is the way this team is delivering. And that's why if we're here today with the results that we've been delivering so far and will be delivering in the years to come, it's because of the team that you will see today that you'll have the opportunity to interact with the broader team as well at the innovation fair and over lunch, as Andy mentioned as well, but also the 48,000 people that are fighting for our customers to help them make sure that they improve their operations every single day. And that's the magic of the company.

So before we jump in with all the various presenters, I thought I would share with you some perspective on who we are for the ones who are a little bit early in our story, but also where we are and where we're going, most importantly. And starting with our purpose, which is guiding us every single day, whatever happens out there. Our purpose is to protect what's vital, people from infections, natural resources while improving business performance of our customers. And that's been true for 102 years since 1923 when we started as economics laboratory as an economic idea, which is still true today.

We have the means for our ambition. We have the capabilities. We have 48,000 people serving millions of customers around the world with 3,000 people in R&D, in data science, supporting everything we do every single day anywhere around the world. And we have a reach that no one else has. We've been protecting in 2024 1.7 billion people from infection. We've protected 1/3 of the world's food production, 1/4 of the power that's being generated, which is going to be so essential because of the new technologies that we will need in the months and in the years to come as well at the same time.

We have a very resilient business model, which is so essential for us, for our customers and obviously, for you, our shareholders, for 4 key reasons. The first one, it's a recurring model. We sell annuities. We sell consumables. It's a recurring business. 90% of our sales are recurring. The second is we serve 40 different end markets. The third, we serve 172 countries with our people around the world. So not all businesses, not all markets are going to be in the green at the same time. But the vast majority will be and are today.

And the fourth reason is, once again, our team, some of them that you will see and meet today and many that are behind the scene, well, selling today, helping our customers grow and helping us create value, obviously, for our shareholders and for our future. This is a super global team, a super diverse team, a team that's super engaged as well at the same time, and that knows how to adjust to whatever conditions are changing today on a daily basis, as we all know.

Which brings me to the 3 key messages for today. We're blessed with the momentum we have as an organization, delivering double-digit earnings growth for a very long time. The second is that we have plenty of growth engines that can accelerate our growth and at the same time, protect any growth depending on the economic conditions as well. This is true for today. This is true for the years to come, obviously. And the third message is the 20% OI margin we talked about at the last Investor Day in 2023, we feel more confident than ever to deliver this 20% by 2027, which is much less than the 5 years that we had planned a few years back. And our eyes are focused on what's beyond the 20% because we're not going to stop there.

So let me jump in and unpack each of them one by one. First, we have good momentum in a pretty complicated world to say the least. Since we last met, the S&P went up 72%. That includes, obviously, the Mag-7. As we all know, Ecolab grew close to 100% during that same period of time. When we think about the macro growth trends that have been helping us, obviously, for many, many years, where they're shifting even more towards our direction, talking about climate change, talking about water scarcity, talking about the risk of infection. We're all experiencing that on a daily basis, in most places around the world, this is going to intensify because of one key reason. Because of the name that we've heard for just a few years now, like a couple, AI is going to need even more power, even more water than we had planned initially. And we estimate that AI will require the power equivalent of the whole of India by 2030 and will require for cooling and for generating the power that's required, the equivalent of the drinking needs of the United States by 2030. That's 4 or 5 years.

You saw the trends before, you saw the gaps that we have by 2030. Well, that's making it even more extreme. And what we do is even more required by our customers. And when we think about AI for us as an organization, it's a source of growth. This is the main focus for us when we think about AI. We think about operational performance for sure, and you're going to hear it from Scott a little bit later. But first and foremost, it's a growth engine for us.

It's 4 different components. The first one, we need to help build that infrastructure. We need to help produce the chips. We'll talk more about that, obviously, today because of all we do and the acquisition that we've just announced as well a week ago. It's to help produce chips in ways that require much less water, which is a huge challenge. We need to cool the data centers more than ever, and you're going to hear more of that as well today. This is generating new growth, new businesses. This is the first one.

The second, well, we use it for our own operations, and it's working very well. As you'll hear it as well today, I think it's moving faster than we thought. We've been maybe a bit conservative on it. We wanted to make sure we could learn, we could get ahead. And we are ahead, and we'll stay ahead as you'll hear it more as well so from Scott in a minute.

The third one is, well, we can sell our digital services. For 30 years that we've been in digital technology, it's always been part of our programs, our offering. It's been for free for our customers. That has changed a few years back, and we've started reporting, as you know, the sales that we're making in digital technology. And last but not least, obviously, by capturing all that data, all those insights from the millions of locations around the world, we get insights from 40 industries in 172 countries that we can use and leverage with our customers to help them get to a higher level of performance. So 4 ways for us when we think about how AI can create value for the company and for you, our shareholders.

Our total available market keeps growing as well. We've been working on that for many, many years. This is not new. We started that 25, 30 years ago when we added Pest Elimination to our portfolio. We added Water in 2011. We added Life Sciences. We added biotech with Purolite, and we just added Global High-Tech just a few years back and especially with the latest acquisition from last week as well. We have now a $165 billion market opportunity, we have roughly 10% of that market. This is what we're trying to strive for, always making sure that we have a small share of a very big growing market.

And what's really interesting is that $60 billion of those $165 billion, well, that's an opportunity that we have within customers that we already have a connection with. It's a penetration opportunity, so to use a different term. Our model, as you know, is generating demand because the way we provide value for our customers, it's to bring expertise, technology, chemistry, data insights to help them produce better outcomes at a lower total cost because they use less natural resources and labor. This means that they get a return of what they buy from us, and the higher the return, the more they buy from us as well at the same time. So it's a very good virtuous cycle that we've been practicing for many, many years.

And while we do that, while we grow, we grow our impact as well at the same time. We made a commitment in 2015 that we will reach by 2030, and we are perfectly on track to get to those objectives. Last year, we protected 1.7 billion people from infection, enough water for the drinking needs of 780 million people, and we've helped our customers reduce their cost by $9.1 billion. And those are numbers that we align with our customers every single year when we look back and we plan for the year to come as we do every single time as well.

So we have this very special model of growing by growing our impact and growing our team that we've been practicing for many, many years, which has helped us deliver steady performance especially from an earnings perspective, which is my #1 priority, making sure we're always within the 12% to 15% earnings growth, that we get to over 20% OI margin and get beyond that as well after '27 while driving top line as well, keeping in mind. And that's the beauty of our model as well in order to get the other 2 on margin and earnings, 3% is good for it as well, 5% to 7% is even better, obviously, and that's the beauty of the model that we have where we can fuel the future of our company or increase our earnings as well at the same time, building on a great trajectory and history of a great track record that we've had in terms of earnings for 20 or 30 years or as far as you can look, it's been a very strong, steady, solid story over time.

So we have good momentum, and this is our best friend, obviously, in the world that we live in. Second, we have good opportunities to accelerate growth and to protect growth as well at the same time. The best way to look at how do we think about growth as a company, it's to look at it in 3 different ways. The first one is our core business, our traditional businesses, it's 80% of our company. It's Institutional, it's Food & Beverage. Those are the traditional core businesses that we feed first and foremost as an organization, and we expect to grow that business roughly 2%. We add to it 2% to 3% of value price, nothing new. This is something we've been discussing for a very long time. And we add 1 to 2 percentage points from new growth engines and are going to come back in a second. And that's how you get towards this 5% to 7%, and that's how we protect as well the trajectory that we have now, whatever happens in the world out there.

Today, 80% of the company is already growing at 4%. We have 1 drag because of Paper and basic industries, 2 businesses that are not in the green today. We're working on them. There will always be businesses that we can improve. This is the way we run the company, making sure that all the businesses in the greens, they're in the green, and the ones that are a little bit more challenged because demand is harder, well, we work on them and we improve them, and we have a great track record at doing that for a very long time as well. In terms of price, the 2% to 3% is something that we've been delivering this year, we'll be delivering in the years to come. And the growth engine are already adding 1 percentage point today, and we'll be moving towards the 2% over time as well at the same time.

Another way to look at our growth. Out of the $16 billion, $13 billion is growing low single. Good. At the same time, we have $3 billion off 4 businesses: Pest Elimination, Life Sciences, Global High-Tech, and Ecolab Digital that's growing double digit. And those are the businesses of the future where we invest as well and making sure that we have core businesses that are strong, steady, generating great margins and cash flows while we build as well the future of the company at the same time, and this is working very well.

Let me go a little bit more in detail, starting with innovation. We've been delivering very good results in innovation. We've accelerated it over the last few years. I've been very transparent with you as well. We've been renovating a lot of our products over the many, many years. The last 5 years, we've changed the game in the way we look at innovation. We said we need to renovate, obviously, the products that our customers are used to. We need to do that every single day. This is our job, our duty. At the same time, we need to bring breakthrough innovations.

Started a few years back, you can see in 2022, 18% of the pipeline was breakthrough innovations. Today, it's 50%. And you will see for today at the Innovation Fair and we have 19 of those in the pipeline. Not all are going to be successful, but the vast majority will be. That's the game of innovation, obviously. I'll make just a few examples here. AI data centers. They need way more cooling technology in order to shift the power that's being used from cooling to compute. Usually, 60% of the power is used to compute, 40% is used to cool. Well, when your power constrained, you'd like to shift that balance, and that's exactly what we're doing, and you're going to hear more as well as the day goes on.

Second, circular water for microelectronics. One of the top microelectronics manufacturers in the world uses in 1 day as much water as one of the largest food manufacturer uses in 1 year. 1 day versus 1 year. This is not going to work. Obviously, longer term, we need to be able to reuse and recycle water in a fab, but here's the catch. This is water that is thousand times more pure than the water that's being used in drugs. So it's a lot of water at the super high quality. This is a typical Ecolab play. And you're going to hear more not today, but in the months to come on that project as well.

Our customers in the restaurant industry, difficult to find labor. Labor is getting more expensive. They don't have huge margins, as we know. We've developed together with Microsoft, a unique platform to manage the operation and drive their performance. More sales, less labor, better margins. We call it RushReady, and it's coming on the market as we speak. Pest Intelligence, you've heard a lot about this one, you're going to see a lot as well today. This is game-changing for that business going forward. And our Life Sciences team working on biopharma solutions in order to help produce drugs at the highest quality at the lowest cost, which is the name of the game, and you're going to hear more as well today about those ones. So that's one growth driver for us.

The second one is by adding value for our customers. We call it total value delivered. This is the way we've been delivering to our customers for a very long time. We formalized it across businesses, across industries, across the markets. We have the same language to all customers, all our businesses. It's about how do we improve business outcomes, how do we improve operational performance? How do we improve their operational environmental impact? And how does it add up ultimately to a number that's aligned with their P&L expectations. At the same time, while we do that for millions of customers around the world, well, we know what best-in-class performance is, what the best restaurant is, with the best hotel, what the best data center, what the best hospital and so on in the 40 industries that we serve. We can share that information with our customers without obviously sharing from whom that is, but they can know what's the best-in-class performance.

We've been delivering it, obviously, since those are actual numbers. And we can help them understand how far are they from a best-in-class performance if all the locations were performing at the performance of their best location. And this is the best-in-class approach that we are using with our customers around the world, starting with our largest customers, our corporate accounts. And if we look at our top 35 customers, they represent an opportunity, a growth opportunity of $3.5 billion, with some of the biggest names, obviously, of the industry, the ones who have helped us shape that concept of best-in-class with whom we're working together in order to deliver best-in-class to them, for them and for everyone else in the industry.

That translates into total value delivered. And as you know, we take a share of the TVD that we're generating for our customers. That translates into value price. We don't look at price like list price in our company. We look at it as a share of the improvements that we are delivering to our customers. This is a revenue stream, obviously, at 100% margin. It's a great part of our business model. As you can see in '25, we expect to deliver over $9 billion of cost savings to our customers. This is the base of last year. So it's going to be more than that. And we capture $3 billion out of pricing as well out of it. Good deal for our customers, it's a good deal for us as well at the same time.

The next one are the growth engines. As mentioned before, it's 4 key ones that we have started within the last 5 years: Pest Intelligence, Ecolab Digital, Life Sciences and Global High-Tech. They represent roughly $3 billion in aggregate, growing double-digit with margins that are north of 20%. This is where the company is going, building on our core businesses, making sure that we have new engines as well for the future.

And we keep improving those ones. As mentioned before, in our High-Tech business, 1 element was essential for us to provide this circular water within microelectronics. Ovivo, the company that we just announced a week ago, we need to close, hopefully, it's going to be done by the first quarter of 2026, helps us produce ultra-pure water that we can reuse and recycle within the fab. This is game-changing for microelectronics manufacturers. You're familiar with those names. There are not many out there. There's 1 fab being built every single month today for the next 10 years, 100 new ones are being planned and being built as we speak as well at the same time.

Ecolab Digital, we've created that new business 12 months ago. Today, $380 million annualized sales, growing north of 20% with very high margin, as you can imagine as well, and we're going to report the margins as soon as we can do it, making sure that it's done in a GAAP way, obviously. We report the growth, we'll be reporting as well the margin whenever we're ready. But what's most important is all our current customers that are currently using digital technology were to pay as the ones paying today, well, it's a potential of $3 billion. So we're moving from $380 million to $3 billion with customers that are using that technology today, that are enjoying that value today. And every time we get an innovation while we move from premium to premium. And we do it in a way that's good for customers, as we've always done as an organization.

So at the end of the day, I feel good about all the growth engines that we have that are helping us protect the growth and accelerate the growth that we have in all our businesses. So we have good momentum. We have plenty of growth engines for the future. And third, this confidence in the 20% OI margin. Well, I'm focusing my time on looking at not only how do we get to the 20% in '27 in a world that's changing pretty fast, but at the same time, thinking about how do we get beyond the 20%. And here is the fact. 2/3 of our businesses are already at or beyond 20%. You can see the names of those businesses, and we have 1/3 of our business that is below 20%.

As you can see, Life Sciences and Light & Heavy includes Global High-Tech. Those are 2 businesses where we are overinvesting for the future, which means we know exactly that the underlying growth margin performance is way higher than what we report. We do it consciously, so that's going to be an easy one to bring beyond 20% in the years to come. And you'll hear it from Scott in a second as well, that we feel good of the building blocks that we have to get to 20% by '27. We promised 18% for this year. We feel really good about this one as well, getting to 20% by '27. And we expect that beyond '27, we'll improve our margin between 100 and 150 basis points by -- between '27 and 2030. More to come from Scott on this one. But when I think about innovation, our growth engine, value price and One Ecolab are all feeding into that margin improvement in the years to come.

Last but not least, I feel good about our future. We're in a place where we worked hard to get to where we are today in a world that's changing every single day. We've done that for 102 years. Really proud of the track record that this team has delivered in good times, like in less good times. We feel good about the commitments that we've made. For me, the #1 is really delivering double-digit earnings growth, 12% to 15% or better every single quarter, every single year. This is my job, this is our job, this is our commitment, getting to a company that is having a margin that's beyond 20%, by driving top line as we've always done, and we'll do even better in the years to come.

So I like the momentum that we have, like especially the new engines that we have to drive the growth in the months, quarters and years to come and getting to the margin that is fueling our future as well at the same time. So I hope it gives you a bit of an overview of who we are, where we are, where we're going in a world that's changing all the time. And that's fine. This is something we're used to. This is something that our team, as you will see today, can deal with and can deliver as well during any time that we can face as well out there.

So the program today, Darrell is going to join me just in a second, so our President and Chief Operating Officer talking about how to execute behind all those commercial priorities done in a very good way, in a very Australian way. We have a great partnership together. We've been working together for 15 years. We know each other very well, which is a huge advantage. We don't always see things the same way. This is a strength. We have real discussions. We talk about the real challenges, the real opportunities, and we'll build this company together. This is a blessing for me.

We will have our 4 business leaders, our Group Presidents, as we call them, share with you where they are, where they're going, what are the growth engines that they have in mind in the years to come. We'll have Scott present the financial targets and the financial plans as well. We'll have a break as well in between. We'll see when time is best for that, probably during the segment overviews. And then I'll do a quick close around 10:00 until 10:15, and then we'll move to the Q&A. So it's going to be an opportunity. We have half an hour. All the Group Presidents are going to be here together with Scott, Darrell and me and to get through your questions. We're going to have half an hour. We're going to have the lunch as well, where you have plenty of opportunity to talk to our team. We'll have the Innovation Fair, we have another opportunity as well, and we'll go around the hotel as well for the One Ecolab tour between 12:30 and 2:00. So plenty of opportunities to learn to interact and to get your feedback as well during the day, and we'll close sharply at 2:00 p.m. this afternoon.

So great day, looking forward to sharing more with you. And with that, I have the pleasure through welcoming on stage my partner and friend, Darrell Brown.

Okay. Good morning, everybody. Great to be here. I'm going to talk to you today about One Ecolab and how One Ecolab is accelerating not only our growth, but our value through best-in-class. We have an amazing opportunity. In actual fact, we have a $60 billion opportunity for growth with our existing customers right now today. One Ecolab unlocks that growth opportunity for us through best-in-class, and I'll talk to you more about that as I go through the presentation. And lastly, we have a great team, and we're going to leverage that great team that we have in the field, both corporate accounts and field, to enhance our performance.

As Christophe said a little earlier, the opportunity we have is absolutely enormous. We're operating in a $165 billion market where we have $16 billion worth of sales today. We have an $89 billion opportunity in unsold customers. We have a $60 billion opportunity with customers who already know and love us today, which is a real blessing for us. And of course, in that $60 billion parcel, we have a $3.5 billion opportunity with our top 35 customers, of which today, we have about $2.8 billion worth of revenue. So a big, big opportunity for us.

So I'm going to talk to you about the 3 pillars of One Ecolab: One Customer, One Field, and One Company. Scott Kirkland is going to talk more about the One Company side, and I'll concentrate mostly on One Customer and One Field. So as I think about One Customer. So One Customer is driving best-in-class at the enterprise level, unlocking for us $3.5 billion worth of growth opportunities. One Field is delivering best-in-class at the location level, at the unit operation level, which is actually giving our teams much more time to sell. And One Company is delivering best-in-class operations across the globe, which is unlocking $140 million worth of savings, which again, Scott will talk about a little later on.

So let's go to the video tape now, where we look at One Ecolab delivering best-in-class performance for the company.

[Presentation]

Okay. So let me take you a little bit deeper now in terms of One Customer and how that drives best-in-class at the enterprise level to unlock this $3.5 billion worth of growth opportunity that we have. So if we think about Ecolab and our global reach and our global footprint, there is no one in the world better positioned than us to try and understand exactly how many locations we serve across how many countries in so many industries where we can get a view of what best-in-class looks like. We can see that because we have connected devices all around the world all sending information data up into the cloud, into ECOLAB3D, which we turn into insights and predictive and prescriptive analytics for our customers. This then gives us the insight to understand what best-in-class looks like. Once we understand that, we can then get that view across the totality of the enterprise and then build a plan to make sure that every single location that, that customer has gets to a best-in-class position.

What it does, of course, for our top 35 customers is it allows us to unlock that $3.5 billion worth of opportunity on top of the $2.8 billion of revenue that we have today. We also have a unified customer experience now. We have our top 35, which now get to see everything, and I mean everything that Ecolab has to offer. They get to see our Pest Elimination offerings. They get to see our Water offerings. They get to see our Institutional & Specialty offerings, and they get to see our Life Sciences offerings, all in 1 unified customer experience, driving growth and driving value through best-in-class.

I have an example here of a hospitality customer. It's a custom we have today, where we're already delivering $50 million worth of value. If we take that customer to a best-in-class position through driving business outcomes, operational performance and environmental impact, it's a value multiplier for us. It takes $50 million worth of value and turns that into a $0.25 billion worth of value.

We know that business outcomes are important for hospitality customers. We know guest satisfaction matters. We know from an operational performance perspective, profitability and productivity matters, efficiency matters. And we know from an environmental impact perspective, they're looking at water saving, energy saving, waste reduction, all of that enabled by the fabulous tools that we have at Ecolab and the amazing innovations and solutions, which I think most of you are going to get blown away with today when you go to the Innovation Fair and see what we have on offer. So it's a fabulous way for us to multiply our growth for the organization but also multiply the value that we deliver to our customers.

So let's just talk about one field. So one field is delivering best-in-class experience at the location level. So this is at the unit operation level, which is actually giving our team more time to sell. So if we think about the visibility that we have at Ecolab through all of our connected devices, this happens to be a U.S. example, but we have this across the globe. We see that we have visibility to every single customer location right across the U.S. We know every single one of those locations, whether they're operating at best-in-class or not. If they are operating at best-in-class, great. If they're not, how do we get the rest of those locations to best-in-class with the first-class state-of-the-art AI offerings that we have as an organization. That's the task for the team, to get every single location that we have to best-in-class to deliver that fivefold increase in value.

From the example I showed a little earlier, from the $50 million to the $0.25 billion. How do we do that? And how do we enable our teams to get that done? Well, you need some tools. And we have some fabulous value selling tools. We have fabulous value selling tools for our corporate account team, which basically roll up at an enterprise perspective. So they can see today exactly how much value we're delivering to that enterprise. We can also see how much projects we have in our value pipeline, and we can also see the potential if we get every single one of those unit operations to best-in-class.

But more than that, our field team now have this information in their hands on their mobile devices. They can walk into a location. They can look at that location, know exactly the value they're delivering at that location. They know exactly the pipeline they have in place. And they know if they get that location to best-in-class, what the value multiplier is. So growth multiplication for Ecolab, value multiplication for our customer.

We know for our top 35, we've got great momentum there. We're moving nicely with them against this $3.5 billion opportunity, which gives us great confidence to say we can now tackle the $60 billion worth of opportunity in existing accounts who already know and love us. We can then take the work that we've done on t-35 and move that across to the $60 billion worth of opportunity in existing accounts.

So finally, we've got a great opportunity for growth, particularly with existing accounts who already know and love us, $60 billion worth of opportunity there. One Ecolab unlocks growth, but it also unlocks the value. The growth and value equation for us as it relates to best-in-class is absolutely game-changing for us and also for our customers. And lastly, we have a world-class team. And we're leveraging that world-class team at the enterprise level with our corporate account teams, but also at the unit operation level with our field teams giving them the tools in their hand's day in and day out to drive accelerated value for our customers.

And with that said, I'm going to hand over now to my friend Greg Cook, who leads our Global Institutional & Specialty business. Greg?

All right. Well, thank you, Darrell. And again, I'd like to say welcome to everybody here and all of those online that are able to join us here today. I am both excited and proud to be with you here today.

First, I'm extremely proud. It was 2 years ago when we met in Naperville when we talked about what had happened to the business, and we talked about what we needed to do and we committed on what we would work on. And I am extremely proud on behalf of the thousands of our associates around the world to -- of the job that they have done, accomplishing those objectives and delivering on our targets over the last couple of years.

I'm equally excited to be here because the best is yet to come. We've got an extremely strong team, a very proud team that is focused on winning. And we're excited to continue that trend, and we feel extremely confident given the position we're in and the ability that we've shown on how we can adjust and adapt and be agile in very challenging times. And with a world-class service organization, we are going to do that by leveraging innovation and the digital tools to continue that strong momentum into the future.

So as I shared, we're extremely proud of the ability to recover during a market recovery and take advantage of competitive gains to drive volume. We have also executed extremely well on delivering pricing over that time period. Value pricing, as has been mentioned, is the way we're delivering that, and we will continue to focus on that with a laser-sharp focus on delivering on our long-term targets of the 4% to 6%. And as Christophe mentioned, we're proud to be one of those businesses in the 20-plus percent operating margin business. But we're not done. We see opportunities to improve that. You see the improvement from when we last talked in 2023 from 15% to the 22%, and we're focused on delivering higher than as we continue to grow.

As a reminder, as the market leader, here are the segments we serve across the Institutional & Specialty segments. We serve the full-service restaurants; quick-service restaurants, known as QSR; food retail; the lodging segment, lodging -- the long-term care and acute care, as well as public spaces. And we do that by delivering on core platforms such as warewashing, laundry, surface hygiene, floor care audit and training with a world-class service organization. And we do that to deliver guest satisfaction, driving labor automation and environment impact, i.e., total value delivered, which has been very well received by our customers.

And we do operate within a segment that continues to grow. We've got an 11% market share, and we've got great opportunity to grow within that market, split 60-40 between customers that we do not sell to today and existing customers that we work with where we have opportunity to sell additional opportunities. Which has me excited is this pie continues to grow as we continue to expand in new spaces, digital being one of those, and you'll see more of that later today.

And we are perfectly positioned to change or to drive in a changing environment. This is an industry for the last 100 years, I would argue to say, has seen very little change in general. COVID changed all of that. We talked about that. It turned the world upside down. We talked about it being a new norm, and it has been a new norm, but we're taking advantage of those market challenges. Labor is less prevalent than it has been historically. It is hard to find labor in these segments today. The cost of finding that labor has gone up.

No better example than in the QSR segment that was built on high school labor, minimum wage and driving rapid experiences through the restaurant. Good luck finding a high school person to work in QSR. And if you do when you're in California, you're going to pay $20 an hour. That is not what the model was built on. So we're adapting and we're adopting to that model and driving innovation to help them.

There are new channels that exist within the segments that didn't exist pre-COVID or were not as prevalent. The dine-in and take out, the curbside delivery, the Uber Eats have changed that segment permanently. But those are changes that we are adapting with our customers and driving innovation to help them with. And the digital revolution, which I would argue was very little, if at all, talked about pre-COVID is one that is top of mind of every person in this industry. I cannot go to a National Restaurant Association Board meeting or a CEO top to top and not have this topic be one of the top items on their agenda. And it's not just on the agenda, it's things that are being driven and actions that are being taken, and we feel very well positioned in those conversations.

So let me give you one example. An example of an industry in a segment that was probably affected the most. I'll use the institutional U.S. foodservice business as an example. We all know during COVID that restaurants closed. Many of them never came back. So if you look to the far left of the chart, we'll talk about the market units, think about it as restaurant locations. Restaurant locations did not recover, more closed than opened, and they are still down 7% compared to where we were in 2019. That did affect us. We were not immune to that. We had locations that closed.

But we went and grabbed competitive gains, and we have gained market share, and we have recovered more than the market has recovered, taking market share from competition to drive location gains. If you look in the middle, I talked about the Uber Eats, the market demand in a location. We like to call it the seats in the seats. People that are dining at restaurants are down still almost 38%. That's not that far off from what we talked 2 years ago. We knew it was the new norm, and we adjusted to it.

Despite that, with competitive gains, solution penetration and pricing, we are up 125% in that segment. And while doing that, we have adjusted to market demands. We have taken advantage of investments we've made in digital solutions for our teams, and we have driven leverage at the SG&A line, which has all led to that strong operating margin growth that I showed you earlier. So extremely proud of the team to be able to pivot, take advantage of market conditions and then drive growth and drive value to our customers. So I'm really excited about some of the future growth opportunities we have here.

If you look, we are building on existing anchor technology we have. I'm going to talk about each one of these three in a little more detail: a dish machine, a pool and spa, a laundry facility. We are driving new innovation and new technology around those core competencies, i.e., anchors to drive more labor automation and more value for our customers. We are expanding from that core competency into additional spots within our customers' locations by driving digital innovation, driving operational performance improvement. And then we're tying it all together, as Darrell mentioned, as the best-in-class customer, drawing from our digital insights, drawing from our expertise, drawing from our cross-divisional programs to tell our customers which location is their best location.

So I mentioned I'd talk about each one of these. I think you are going to be blown away by the tour today in the facility as well as the Innovation Summit. And one of -- these are some of the things that you're going to see. The dish machine, which is the anchor of what we do in the foodservice business, anchored by our service capabilities is we're expanding on that. This is one of these things out of COVID where we developed in China with competencies in China, digital technology to give us insights of what's going on within the dish machine when we are not there. Very akin to what happens in Nalco Water with 3D TRASAR, common technology of giving insights. We are able to spot things, notify our customers, take care of problems within their operations, maybe with us not being there or allowing them to do that or allowing us to do it remotely or predictively. And we are reducing labor, we're reducing rewash, we're adding value at the location.

In the pool and spa space, hotels don't have the same engineering staff that they used to have pre-COVID. People are checking on pools that is where that's not their primary responsibility. They might be the receptionist. They might be working in the laundry and they have to test pools twice a day. So we are working with them to do that now remotely with technology to give them insights and actions that allow them to act or allows us to notify them, again, driving greater compliance and driving utility savings across the board. And then we're also expanding it into the laundry facility

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And taking the thought out of it. We have line checks. We have ship management. We have remote temperature monitoring. These are all programs that exist today digitally that we're incorporating to give insights to our customers. We are expanding on those digital offerings to give even more sites with our newest addition to the KitchenIQ family, which is called Ecolab RushReady. Again, you're going to see this in the showcase. So I think you're going to be blown away by this. But to give you a little more insight of what RushReady is, we have a brief video.

[Presentation]

It's a program we're really excited to introduce or incorporate into our KitchenIQ family. So I have been asked before I go through this slide, as you go through the property on the tour and as you look at the showcase, the innovation showcase, put yourself in the position of a hotel manager or a restaurant manager. Or you're dealing with the chaos of the day. Or you're dealing with being responsible for the entire hotel property. Or maybe you're at corporate, and you're responsible for thousands of locations. This is what we're thinking about when we innovate for our customers. How do we help them manage the chaos, how do we help them reduce cost? How do we help them manage their labor challenges of the day?

We have more data and more insights about what goes on with our customers at their location than anybody in the market. When you think about Pest Elimination, you think about Nalco Water. You think about our EcoSure programs. You think about the whole family of offerings we have, that is what's laddering up to best-in-class. And as Darrell mentioned this in a very large hospitality customer of ours, we are currently today providing them $50 million of TVD. When you look at the Ecolab solutions, Ecolab AquaIQ, KitchenIQ and the suite of offerings we have there, Water Safety Intelligence, Ecolab DishIQ, Pest Intelligence. Our core competency in chemistry that is still extremely differentiated and our world-class service. These are all programs that when pulled together, do drive business outcomes, operational performance and environmental impact. This is what differentiates us and allows us to talk to a customer in a way that does deliver the best-in-class or their best-performing location.

So I will finish where I started. I am extremely proud to represent the thousands of people around the world in our Institutional & Specialty business. That said, I'm equally as excited about what we've done and what we are going to continue to do. We do feel very well positioned in this market to be able to adapt and adopt new things. And we're leveraging the innovation and the digital momentum to drive that further growth, and we are laser-focused on delivering our targets. 4% to 6% in operating income is where we start the conversation, and we work back with how we're going to do it.

So thanks for your time. I think now we have a 15-minute break. I would hurry back because you've got Soraya, who's going to go through some exciting things in our Pest Elimination business. So thanks again for your time. Appreciate it.

[Break]

Please welcome EVP and General Manager of Global Pest Elimination, Soraya Hlila.

I'm excited to be with you today and share how we are transforming Pest Elimination business. Pest Elimination has been on a journey of growth. And today, we are building on this track record of high performance to take it to the next level and unlock the next chapter of growth with Pest Intelligence. Pest Intelligence, this is our AI-powered connected solution. It's a game changer for us. We are shifting the way we are going to the market, and we will deliver even better outcomes to our customers and drive significant margin expansion for Ecolab. And we are uniquely positioned, thanks to our capabilities to keep gaining share in a growing market.

When we look to the history of performance, this business has been consistently delivering over the years. There's a long history of performance. Our growth has been strong and steady. And then even if we are investing in Pest Intelligence, we're maintaining our high OI margin of 19% in both 2023 and 2025. And we have a clear path to expand way beyond 20% as we keep gaining share, thanks to One Ecolab enterprise selling and gaining efficiency with Pest Intelligence.

When we look to the pest industry, what makes us unique is we don't control pests, we eliminate them. And we do that with our science-based innovation data insights, but also through our service expertise. Our solutions are tailored to each industry, from foodservice to life science. And this is how we deliver this outstanding performance and we drive for higher margin and growth and we enhance the total value delivered.

From an opportunity perspective, we do operate into a $15 billion global commercial market. And within our Ecolab existing customers, we have $3 billion of opportunities that we can unlock thanks to One Ecolab enterprise selling and Pest Intelligence, and I will tell you a bit more here, starting with the firepower of the One Ecolab enterprise selling. Today, our Pest Elimination business is $1 billion. We have the opportunity to unlock an additional $3 billion, if every Ecolab customer is offered our solution. And every customer has pest challenges. And today, with One Ecolab enterprise selling, we're solving them together as one.

And our best sales talent from Pest Elimination are embedded into our customers' teams with a focus on the major accounts to make sure that Pest Elimination solution is part of Ecolab program from the very beginning. And Pest Elimination is crucial to unlock the full potential of the best-in-class solution through brand protection, through providing a clean, healthy, safe environment. And clean, healthy, safe environment are also a massive major component of the total value delivered that we provide to our customers.

And now let's look how Pest Intelligence is also helping us to unlock this future potential growth and these massive opportunities. When we look to the industry baseline, they are at 90% of pest-free environment. We, Ecolab, are already at 94%. And with Pest Intelligence, we're aiming to 99% of pest-free environment. How we do it? It's our AI-powered solution, our connected services that monitors customer sites real-time, 24/7.

So we don't go on schedule, we go when it matters and where it matters to our customers to make sure that we protect their brands and their operations and to give them the peace of mind. And this is where it really gets super exciting. Today, we spend 95% of the time checking empty traps. With Pest Intelligence, it's the opposite. We will use all that time to having value conversation with the customers, solving their problems and more importantly, to sell more and grow more. This is tailored solution, smarter, faster. And thanks to our predictive model, AI predictive model, we are able to anticipate and to predict when the issues will happen. And if they do, we are able to respond faster. So this is giving up a firepower and freeing up a great capacity to grow more and create more value to the customers.

And here, I want to share with you a real example from real life from one of the biggest global retailer in the world. They were facing brand harm risk, regulatories, issues. And then we partnered with them. And thanks to Pest Intelligence and our AI predictive model, we were able to identify the root cause of their issues and come up with a tailored solution that kept their best risk in health and helping them in their journey towards 99% pest-free environment. And in the process, we help them to save $7 million of labor that they use to generate more business and growth. So brand protection, health and safety environment, improving the operational cost of our customers, and all of that leading to 99% of pest-free environment. And here, we are leading the game in the industry.

Pest Intelligence is not only great for our customers. It's also great for Ecolab because we are creating the value and we are capturing the value so that additional value we're creating is driving for us, margin expansion and growth through the value selling. But it's also helping to improve the health and safety of our associates in the field. And you know for Ecolab, safety first, so this is making the job of our field associates healthier, safer and much easier to perform from a physical perspective.

And here, thanks to the huge amount of capacity and time we're freeing up, we're creating that SG&A leverage. Remember, we won't be spending 95% of the time checking empty traps. That time will be allocated to generate more growth and more margin expansion. And this is, again, a super exciting story because we will continue to grow to expand our margins to consistently hit our long-term growth target of 6% to 8% organic growth. We are deployed in 10 countries, but the opportunity to scale is just massive, and we're just about the start, and the best is yet to be.

Here, again, Pest Elimination business is a story of success of a business that is built on a strong foundation of performance. And now with Pest Intelligence, we are taking it to the next level. And we will continue to gain share in a growing market, a market that is growing mid-single digits. And you will see that we have a clear path to expand way beyond 22% OI margin as we continue to gain share and to continue to drive efficiency and creating value for our customers. And all our capacities are putting us in this unique position to continue to win. What I can tell you, I'm confident more than ever in the future of this business, but not only our entire Ecolab business.

And with that, I'm thrilled to introduce Josh Magnuson, EVP and General Manager of Global Water. Thank you very much.

Hello, and good morning. I'm Josh Magnuson, I lead our Water Solutions Group, and I'm here today to talk to you about all things water, but most specifically about our Global High-Tech business. It's one of our fastest growing and most exciting businesses in the entire company. And it's rooted in what Ecolab has always done, which has continued to perform excellent and deliver those great results to our customers across all of their locations around the world.

As Christophe led off this morning, AI is changing everything that we do. And it's changing our Water business as well. It's creating entirely new opportunities for us to grow in Water, specifically in delivering better value to our customers through leveraging the tools and insights that AI can bring, but also through the investments in the infrastructure that is being built to support AI, whether that's delivering water circularity in microelectronics fabs or cooling the AI data centers. All of this is opening new growth opportunities for Ecolab and new opportunities for us to innovate. And you're going to see a lot of that innovation today in the showcase as well as we'll have some discussions here now and in the future about what we're doing to support the AI boom and how the impact that we have can help accelerate that.

The great news is Water businesses has an incredible foundation of success, and we're continuing to build on that success with new growth engines that will return this business to the target 5% to 7% sales growth and 19% OI ratio by 2027. It's going to be rooted in our core Water business and Food & Beverage business as well as our growth engines to help us accelerate and continue to perform outstanding delivery through the next several years.

To refresh everyone on the Water portfolio, it's made up of 6 different industry verticals. Each one has its unique opportunities and challenges. But they're all rooted in the common theme of productivity, environmental impact and product quality, and we can impact all three of those through our outstanding programs and our innovations, delivered with a holistic approach of digital automation, services and chemistry to make sure our customers are receiving the best outcomes at the total lowest cost, delivering that value in return for what they're putting in. And so we look across all 6 and we see tremendous opportunities to continue to grow and accelerate. And specifically today, we're going to talk about the High-Tech division.

The good news is we have a huge share to go after, $26 billion of remaining opportunity in customers that already do business with us today. So you heard Darrell talk about this in the One Company initiative. As we look at selling our entire suite of solutions into those customers who we already work with, who already know us well and have experience with our solutions, we think we can continue to gain share in a big market.

And just as importantly, we're expanding that market every year through new innovations in our growth bets such as digital and high tech, we continue to have market expansion so we can get a bigger share of what is going to be a bigger pie in the future. And we started the conversation this morning to talk about AI. And Christophe set it up nicely on how AI is changing the world, how AI is changing what we do every day as consumers of AI, but AI is also having a significant impact in our Water business. It's creating more strain on the scarce resources that are there. And it's also unlocking opportunities to leverage those AI tools to deliver greater value.

So when we think about the Water portfolio, it's really about those divisions in the Water portfolio that are enabling and unlocking this AI potential to keep up with the demand. So think of our Mining business with precious metals or our Power division as we think about the power infrastructure of unlocking trapped capacity in the grid or building new sources of power. And our Global High-Tech business, supporting the build-out of the microelectronics customers that make the chips that fuel AI, but also those data center customers that are building and constructing brand-new data centers that have to rethink how to cool those data centers because of the enormous amount of heat that's been giving off.

But then we have our core Water business and our F&B divisions, which are using the tools developed with AI backbone. So if you think Water Quality IQ, Water Safety IQ, these are both offerings that we've developed using artificial intelligence to help provide insights to our field faster to deliver greater value to our customers and greater growth opportunities and margin expansion for us.

So getting deeper into AI and what we look at in the future, we think there's going to be about 50 gigawatts of computing power demand over the next 5 years. And this is an enormous amount of power that's going to be needed to fuel that computing demand. So either these power customers are going to have to optimize and be more efficient and bring that power into the grid, or they're going to have to build new sources of power, new power plants, new nuclear plants. And we're seeing these investments occur, which is helping our power business continue to grow and support our customer base. All of that power is going directly into the data centers. And you'll hear about it today in the showcase.

But those data centers, 1,000 new AI data centers are going to be needed to fuel the demand that's coming with AI. And those data centers are not the old warehouses with air conditioning. These are AI data centers that each require liquid cooling. That liquid cooling uses much more energy to keep the computer and the IT equipment cool. And so those data center opportunity opens approximately $2 billion of business opportunity for us. That's growth potential that we can go get and help support and drive our customers' expansion into the AI field. But all those data centers have to be filled with chips. And today, there's not enough capacity to make microprocessors to fill those data centers with chips.

So there's between 70 to 100 new fabs over the next 10 years that will need to be constructed, as I think Christophe said, 1 per month for the next 10 years to keep up with the chip demand to fuel the AI boom. Each one of those chips that are being produced uses 50% more water than the historic chips because as they get smaller and more complex, they become more water intensive. So this opportunity to continue to grow in the microelectronics sector is on the back of that demand coming from microprocessors.

As I said, these 70 to 100 new fabs that are going to be built use more water. And that is forcing our customers to rethink about how they programmatically use their water today. So historically, they used to have a linear approach to water, water in, water gets processed, treated, used in an application and discharged. In the future, they're going to move to a circular approach to water, being able to take the water that is used in the fabrication process of making chips, reuse that water, recycle that water and return it directly to the process to be used again. This is going to be a requirement. There just isn't enough water to keep up with the demand to make the chips.

And that's one of the reasons that we're so excited about our recent announcement of our intent to purchase Ovivo Electronics. Ovivo Electronics brings to Ecolab 2 key capabilities that unlock this potential of water circularity. First, it's their world-leading ultra-pure water technology. Ovivo produces the purest water in the world, 1,000x more pure than water used in pharmaceuticals, high enough purity to manufacture 2-nanometer microprocessors. In addition to the ultra-pure water capability, Ovivo brings water recycling and reuse technology. This is the technology needed to remove all the contaminants from that water so that same water can be recirculated directly back to feed water for ultra-pure water processing.

So Ovivo's technology, along with Ecolab's capabilities in water management, in digital and in services, really unlock the full vision of water circularity for microelectronics and allow us to provide that solution to our customers, to help them scale, to help them build new fabrication sites faster and fulfill the demand for AI and microprocessors now and in the future.

So now we have all these chips that are made with less water, and they're going to get put into these data centers. Challenge becomes every one of these new data centers uses more power than the old data centers. Every one of these data centers creates more heat because of processing power than the old data centers. So it's forced the data center industry to rethink how they design, engineer and manage and run their data centers of the future. Instead of a warehouse with an air conditioner, now you have a complex, almost industrial application where millions of gallons of coolant is pumped and recirculated through the IT equipment to keep the IT equipment cool. That has significantly increased the energy demand in cooling alone in these new data centers, but also created a challenge for data center operators on how do they know that the coolant is performing properly.

So we've expanded our legacy 3D TRASAR platform recently launched this summer into 3D TRASAR for liquid cooling. This allows us to tell our customers real time, 24 hours a day, the quality of their coolant, the performance of their coolant. And is it cooling the IT equipment sufficiently enough to protect their assets and optimizing the process of cooling. When we bring together our liquid cooling technology, inclusive of our cooling distribution unit that you'll have a chance to see this morning, along with our 3D TRASAR tagged coolant technology and our legacy knowledge on how to run a utility system, we can now optimize the cooling performance across the entire data center and return 10% of the energy used to cool directly back to the data center operator to use for computing power.

Now that may not sound huge, but when you start to multiply $10 million per 100 megawatts, and we're talking about 50 gigawatts of computing needed, that gets to be a $500 million value driver for the data center industry over the next 5 years. So it's a significant improvement. It helps drive the scale and efficiency while reducing the environmental impact of every one of these data centers.

So we're really excited about our High-Tech business overall. We believe with the addition of Ovivo's technology, our innovation around liquid cooling and the emergence of the data center market, we believe this could be a $1 billion business for the company by 2026, continuing to grow at over 20%. So with High-Tech being $1 billion and growing really fast, this will add 200 basis points of total growth for our Water business over the next several years.

So we take this great High-Tech business, which today is only 5% of our total Water portfolio, growing fast. Add in Ovivo, it becomes 12% of Water. That will lift us from our 2% to 3% legacy growth in Water up to that 5% to 7% target growth we have in the water solutions sector. So overall, as we said from the onset, AI is driving a revolution in the industry, but it's also propelling our Water business into the future through digital tools and technology to help optimize our customers' process, create more value and unlock opportunities for our growth while also helping our customers scale to meet the demands of AI in both microelectronics and data centers, we believe the Water business overall will achieve the 5% to 7% growth target and hit 19% OI ratio by 2027.

Thank you all for the attention. Look forward to further discussions later. I'm going to now bring up Hayley Crowe, my friend and colleague, who runs our Life Sciences business. Thank you.

Good morning. My name is Hayley Crowe, and I have the pleasure of leading our Life Sciences business today. I'm excited to talk to you today about the journey that we're on, growing the Global Life Sciences business.

So first, as Christophe mentioned, we've been strategically investing into the business over the last few years to really drive the growth of this business for the years to come. We've been leveraging our investments in innovation, capacity and in our teams, and you'll start to see that come through this year. Secondly, the life sciences market is a major market, and it's growing in the high single digits today. And last, we're well on our journey to building a double-digit high-margin growth engine for Ecolab.

So let's take a look at the history in terms of our delivery. While we've been continuing to grow in the low single digits, it's been against a market that's gone through a lot of turmoil in the beginning of COVID and post-COVID. And I'll talk to you about that in just a minute to showcase how we're doing versus our top competitors in the industry. We are making progress, and we're very confident about delivering our long-term ambitions of 10% to 12% in organic sales as well as meeting our long-term targets of 30% OI in the future.

So let me just give you a refresher really quick on what do we do in the Life Sciences space. So we're really focused on pharmaceutical and personal care manufacturers. To put it into perspective, these are manufacturers who make the pills that you take every day and potentially the lotions and makeup that's used around the world. Additionally, we're focused on biologics purification. And this came to us when we made the acquisition of Purolite back in late 2021. And last, with the Purolite technology came a purification technology platform that can be used across industries, and we're leveraging that today to help deliver clean water and clean energy.

And so when we pull it all together for our customers, we're really focused on delivering value that matters to them. We deliver process quality, operational excellence as well as helping them meet their sustainability goals. And when we pull it all together, we're able to deliver total value. And I'll walk you through what that looks like in real terms as we get on with the presentation.

So let's talk about the market. Our addressable market today is around $15 billion. What you'll notice is that we actually touch 75% of the customers in that market today. And the reason is that the 80% of the total addressable market is driven by the top 25 pharmaceutical and CDMO manufacturers today. So we sell at least one solution across our solutions to nearly every customer. To continue to grow, we need to sell the rest of those solutions through our best-in-class solutions approach.

So I told you I'd talk about the market and what happened. We all remember COVID. It wasn't too long ago that we all wore masks on planes, funny how fast we forget that. Back in late 2019 and into 2020, there was a boom in the pharmaceutical space as pharmaceutical manufacturers stocked up to be able to deliver life-saving drugs around the world. And it was a huge challenge for everybody. I think we all remember that.

But what happened after in the industry was what we call the COVID cliff, where everyone went through destocking, sometimes for a year, and in other cases, 2 years. And we also experienced some of that as we went through the time. But what's been great is that we've leveraged our innovations to gain market share during that time. And if you see, we've been able to grow while our best competitors have been down, in some cases, double digits. And we've continued to grow during this time, and we continue to grow this year.

So let's talk about the investments. We've made strategic critical investments, which I'm going to go through in a minute, the details on that and where we are in the journey, starting in late 2022 and still continuing today. What's great about this is that it's enabling us to grow into the future, and you're starting to see that leverage come through this year. But we're able to strip out those one-off investments to showcase that the business is actually landing in the mid-20s today, showing that long term, we will meet our target of getting to that 30% margin.

So the investments we've made, this is the most exciting part of our business. We've invested quite a bit in capacity to meet the demand of our growing customer base. We've also invested in our innovation, and I'm really excited to showcase that to you now, but then also as we get into the Innovation Showcase, we're going to give you a real tour through a clean room. And last, as we've been scaling this business, we've needed to invest in the teams to make sure that we have expert teams around the world serving our customers.

So one of our latest investments, this is actually a picture of our Pharma Enterprise Customer Experience Center. This is in the King of Prussia facility, where I'm located near our customers. And in this back picture, you see our bioprocessing applications lab. It's part of that Customer Experience Center. Our customers come to work with us to truly partner on our innovations and how we can apply them into their manufacturing space today. And the bioprocessing applications lab is like an extension of their own R&D teams, where we take our latest bioprocessing resins and apply them to their drugs and come up with an optimized manufacturing process, done in partnership with their scientists.

Speaking of capacity, as you can see, we've expanded our Wales facility, nearly doubling our capacity of our patented jetted resin technology that's used for biopharmaceutical customers. And you see our Quzhou, China plant. This is going to be opening next year towards the latter half of the year, with real impact happening in 2027, supporting the growth in our Purification Technologies business.

So, innovation. We've been very, very focused on the biologics industry, and there's a reason for that. So by 2030, biological drugs are going to make up 50% of the drugs on the market being delivered, and it's needed a lot of innovation to help with that growth. We focused on new resins. We've launched nearly 5 new resins for biological manufacturing since we acquired Purolite, and that's because the diversity of drugs is growing as each and every one of us start to demand personalized medicine.

Building upon our chemistry technology of the past, we've developed a very specific program for biologics manufacturing for cleaning programs, ensuring these sterile spaces and also that we're meeting the regulatory requirements of the space. Most recently, we've launched our Pharma Intelligence platform, truly looking at pharmaceutical operations and ensuring that our customers are audit ready in a digital way. Historically, most pharmaceutical customers are still operating on paper. And so this enables our customers to track and trace their every move when it comes to cleaning validation and being ready when that auditor walks in the door. And partnering with my esteemed friend Josh on Global Water Technologies, we're also able to now implement the Pharma Water program across our global pharmaceutical customers.

I mentioned new talent. We've been building this team over the past few years. And on the screen, you can see the latest additions to the team focused in our high-growth areas. We're focusing on expanding in Asia, our digital solutions, ensuring that our supply chain can scale and is ready for our pharmaceutical customers, as well as doubling down in the bioprocessing space, as I showcased through the innovations we're building.

So let me take you to what does this all look like when we pull it together. I mentioned we potentially sell 1 solution today. And if we just expand the solutions we sell to the same customer, we can deliver more value. This is a pharmaceutical manufacturing space. And you can see all of our solutions across that space today, everything from water for facility cleaning, all the way to biological resins used in the purification of the drug itself. And so when we pull all these together and we look at our best-in-class solutions for our customers, we're able to deliver operational excellence, the product and quality safety needed for these drugs, ensuring that our customers are compliant and audit-ready, as well as delivering sustainability goals, which starts at our heart and soul with the innovation and leading all the way into their plant.

So I'll showcase a case study. I mentioned that we have a lot of opportunity for growth in this big market. If we take 1 customer, and this is 1 of our pharmaceutical customers, 1 of the top 20 out there, where we sold just 1 solution today, we were delivering a little over $1 million a year in value. We worked with that customer to map out all their facilities and all of their programs to say, well, what would it look like if we work together and partnered on all the solutions? And it came back that we could deliver nearly $80 million of value a year. So it's quite sizable for a pharmaceutical customer who's focused on getting their operational cost down.

But what's more important to them is ensuring faster time-to-market for their patients. And so as we work across the solutions, we pull them together, we're able to deliver better operational performance, as well as environmental impact in terms of meeting their sustainability goals.

So pulling it all together, I'm really excited this afternoon -- morning to showcase with you with the Innovation Showcase, what we're doing with our customers. We've been leveraging the investments, not just in the capacity and the innovation, but also the teams to ensure that we're built for the long-term future and growth of this business.

The life sciences market will continue to grow. As I mentioned, the biologics drug market is growing significantly right now and expected to reach quite a few double-digit percentages in the next few years. And our business will continue to grow double digits and meet those long-term goals in the years to come.

So with that, I thank you. I'm going to hand it over to our CFO, Scott Kirkland.

Thank you, Hayley. That is a tough act to follow. It's a great business with an amazing leader. Just want to take a moment to thank you all for your interest in trust in Ecolab. It means a lot to us. So today, I'm going to go through our financial priorities, as Christophe said. Firstly, going through the clear path to our 20% OI margin target by 2027. But we'll also talk, as Christophe set up earlier, the path beyond 2027 and what that looks like. And I'll also review and give you some perspectives on our strong free cash flows as well as our balance sheet, all of which is grounded in our commitment to driving outside shareholder returns.

As Christophe shared earlier, our target is to deliver 5% to 7% organic sales growth. And over the last several years, we've delivered a 6% CAGR. And the reason I bring that up is because a couple of those drivers, as he talked about value pricing and the growth engines, are also significant contributors to operating income margins. Which is why we're so confident in delivering our 20% OI margin target by 2027. And that confidence has only increased with the 400 basis points of OI margin expansion we've delivered over the last 4 years, led by value pricing, as many of my colleagues have talked about.

But we've also overcome significant DPC inflation during that time. In addition, as Greg talked about, we've had the amazing post-pandemic recovery of our high-margin Institutional business, all of which is leading to our record 18% OI margins we expect to deliver in 2025. And going forward, the value pricing, our growth engines, which I'll talk more about, and One Ecolab enabled productivity are the drivers that will help get us to that 20% OI margin target by 2027, and we're highly confident in doing that.

But 20% is not the destination, as Christophe told you. Our target with those drivers is to deliver 100 to 150 basis points of OI margin expansion beyond 2027. And the lion's share of that will come from gross margins. And over the last 4 years, we've delivered 400 basis points of gross margin expansion, leading up to the 45% gross margin expansion we expect to deliver in 2025. And we're doing that through breakthrough innovations, the value pricing and the growth engines, which I'll talk more about. And these sustainable drivers is what's going to get us to what we believe is the new target of 75 to 100 basis points of gross margin expansion beyond 2025. And as I said, that will be a big driver of that OI margin expansion of the 100 to 150 basis points.

And we've talked a lot about value pricing today, and we have a very long history of delivering positive pricing. And we do that because of the value we create for our customers. But we also deliver value pricing. We've overcome significant DPC inflation, as I've talked about, but we also delivered positive pricing even when DPC goes down. And we do that because of the value we create for our customers, which you heard today, TVD. And we've been leveraging technology to better understand and communicate that value to customers as we work to deliver the best-in-class performance you heard my colleagues talk about today. And that value-based pricing is going to be a big driver of that gross margin I talked to and expect to drive more than 50% of that gross margin expansion going forward.

I mentioned growth engines. As you've heard today, the growth engines combined represent about $3 billion in sales today, including Pest Elimination, Life Sciences, Global High-Tech, and Ecolab Digital. These businesses are not only growing fast, but they have margins accretive to overall Ecolab. Pest and Global High-Tech, as you heard today, both have OI margins already around 20%. As Hayley talked about, Life Sciences, excluding the growth investments, those underlying margins are north of 20%. With a target of 30%, we have a confidence to get there as well. And Ecolab Digital, Chris talked about earlier, while we don't yet disclose Ecolab Digital margins, as you can imagine, the incremental margins on digital sales are highly accretive.

Also helping that OI margin expansion is SG&A productivity. And this has been a great story over the last several years. Since 2019, we've delivered 160 basis points of SG&A productivity. And we've done this while investing in the business, investing in the great innovation you'll see here today. We've continued to invest in digital, both for the benefit of customers as well as for the benefit of our own operations. And we are continuing to invest in the backbone of Ecolab, which is our sales and service teams. And net of those investments, beyond 2025, our target is to deliver 25 to 50 basis points of SG&A productivity.

And a big driver of that will be One Ecolab. Darrell talked about One Ecolab earlier. And Ecolab is about growth. It is focused on growth by accelerating the $60 billion cross-sell opportunity that we have with our existing customers that he touched on. The One Company program which he mentioned is part of One Ecolab and is focused on streamlining our operational processes to support that accelerated rate of growth, how do we create scale in our operations to support that accelerated growth. And we do this by moving functional work from hundreds of locations to our global centers of excellence.

And we're ahead of pace on this program. And it largely started as a -- what I call an analog program, leveraging some legacy technologies, but largely an analog program. And we've since this year, launched an agentic AI road map, including launching our first 4 use cases this year. And with the benefits of that AI and our operational momentum, we're taking what was announced last year's $140 million structural savings program by 2027 and we're expanding that. And we expect to deliver $225 million of structural savings by 2027 through that agentic AI road map and the operational momentum we have.

The costs, as we announced last year, were originally $225 million, they will go to $300 million. But you can do the math. It's both a better payback and a better return. So I just want to pause for a moment. We announced last year, $140 million of savings on One Ecolab. That is moving to $225 million of savings in the same time period, with the cost going from $225 million to $300 million.

So it wouldn't be a finance presentation if I didn't talk about balance sheet and cash flows, which is near and dear to my heart, of course. We've had a long history of driving double-digit earnings growth, and that has been the backbone to this strong free cash flow, so strong free cash flow conversion. In addition, we have low capital intensity. Historically, our CapEx is about 5% to 6% of sales. And about half of that CapEx is dispensing equipment at customer locations. So fueling growth by being embedded into our customers' operations.

We've also continued to optimize working capital. And the combination of those things has resulted in a free cash flow conversion consistently above 90%, as you can see here. That strong free cash flow and our disciplined approach to capital allocation has resulted in what we call our fortress balance sheet. We've targeted for a long time, what we describe as A-range metrics. What that means is our target is to have net debt to adjusted EBITDA of about 2x. And as you can see in this slide, that we've been at that level for many years. And actually, in Q2, our net leverage got down to 1.7x, so below our long-term target of the low 2s.

And while the Ovivo acquisition that was mentioned earlier, we don't expect to close until Q1, if we included that impact at the end of 2025, just for illustrative purposes at this point, our net leverage we expect would still be below that long-term target at 1.9x. So the strong cash flows, the great balance sheet provides a lot of optionality to create value, okay? Investing in the business, investing organically in innovations like DishIQ that your -- Greg talked about, our Pest Intelligence that Soraya talked about or investing in capacity for Life Sciences that Hayley talked about. Or continuing our long and strong track record of driving great returns through acquisitions, with the vast majority of them being technology or geographic bolt-ons, like Barclay's, like Ovivo, we expect Chem Link, Bioquell or the many Pest Elimination acquisitions that we've had have been very successful at. Or investing in new platforms like we did with Nalco Water and Purolite.

I want to talk a little bit more about M&A. We have a very disciplined approach to our M&A process and targets. First and foremost, we are targeting double-digit returns well above our cost of capital. And in doing that, we're focusing on our highest growth, highest margin opportunities, like Water, like Life Sciences, like Digital. And in the targets, we are not only looking for strong strategic alignment, but for strong culture alignment as well, which is important to a successful acquisition.

And M&A has always been part of our growth story, going back 25 years to the Henkel acquisition that took us from being largely a U.S. business to a global company. Or the Nalco acquisition that I mentioned in 2020 -- 2011 that transformed us into being a leading water company. Or, as I mentioned, the many, many bolt-ons, and we do about, over the last 10 years, 40 to 50 acquisitions, the many bolt-ons in between, all of which that have contributed to the capabilities and the reach of the One Ecolab model.

In addition to the great returns on the deals and the operating performance, we remain committed to shareholder returns and returning cash to shareholders. Over the last 10 years, we've returned over $10 billion of cash to shareholders through a combination of dividends and share repurchases, and we've increased our dividend for 33 consecutive years.

And I'll finish with our long-term priorities, which we will continue to be guided by, which Christophe mentioned, the strong sales growth and continue to deliver double-digit earnings growth of 12% to 15%, maintaining our high free cash flow conversion between 90% and 100%, and maintaining this fortress balance sheet, which provides us the optionality to invest in the business and continue to drive outsized shareholder returns.

Thank you. And with that, I will turn it back to Christophe.

Well, I'd love to have Scott's job. It's a pretty cool company to be a CFO, good momentum, great cash flows, great conversion, very strong balance sheet and a team that's working very closely with the finance team. We call it finance business partnership, which is core to our model, and that's been true for a very long time. I hope that you had as well the chance to meet our team and understand a little bit better so how we create value, who is creating value in our organization.

You'll meet more of that team during the Innovation Showcase afterwards as well, where hopefully, we will have a little bit more time as well to spend time on innovation, understanding really how things are truly working behind the scene. But we will have as well some time for a Q&A as we always do. So we'll have kind of half an hour depending on how many questions, obviously, that you have. The whole team is going to come here on stage. So feel free to ask whatever question you have for the whole team as well here.

But before we get there, just a bit of a quick recap of what you've seen so far. So we have momentum. This is a pretty good place to be in a crazy complicated world that we all are living in. Most importantly, we have great opportunities in front of us. Our market keeps growing, keeps expanding, and this is the name of the game. We've always tried to expand our pie in order to make sure that we were seeing how do we capture more growth out there within our customers starting with the top 35, which are so essential for us to understand what's required for the future, how do we answer their needs. We stay very close to them.

I meet one CEO every week. That's my objective, 52 every year. I've met 53 already right now. So it's almost double what I had planned as well for this year. It's been true for many, many years. I want to stay close to our customers. Darrell does the same. The whole team does the same as well because it's our customers that are ultimately telling us how good we're doing or not so much, what they need for the future, what are the great ideas that they might have, that we might have, that we might discuss as well. We learn, we develop, we grow, we innovate together with our customers. You see some of the great names as well on that chart with whom we're very close to.

We have great new engines as well. And this is our role. This is my duty. This is making sure that we not only nurture our core businesses, what's made us who we are today since 1923, but making sure that we're building new businesses that are aligned with the new growth opportunities that are out there. And really happy to see that even a business like Pest Elimination that we might have thought this is a core business that's not going to change much in the years to come. You've heard it from Soraya, it's going through a dramatic transformation, driven by one of the customers that you've seen before that came to us and said, I need you to help me to change the way you serve, to make sure that you get to 99% of my stores being pest-free in a way that is a 24/7 control.

The business is changing dramatically for the better for our customers, for our team and for our shareholders, an older business becoming a totally new business. You've heard it from institutional as well, so it was great. An industry for 100 years that hasn't changed much. COVID changed everything. Well, they made us more relevant to what they need in the future. That was a good meat of an older business, an industry that is changing for the future, and we get on innovation to answer their future needs. And you've heard it and you're going to see it as well this morning even more with the innovation showcase that we have.

Life Science, a great new business that we started in 2017. Started with less than $100 million, it's almost $1 billion today, growing very nicely, huge potential, great margins. Global High-Tech, this is something that 5 years ago, we didn't know would even exist. Well, 3 years ago, we decided to create Global High-Tech as a dedicated business on data centers and on microelectronics. That was exactly the right move because our customers were expecting that. Managing water for fabs, as you've heard it through recirculation and managing cooling technology for data centers is absolutely what they need. And we've been in the cooling business since 1923. We know what cooling means. We know what cooling technologies can do, and we are innovating ahead of the market in order to serve the market needs as we always do.

And Ecolab Digital has been a change for us, because we know for 30 years or almost 30 years, we always assumed that everything digital is part of our programs, part of our offering. That is changing because the world has changed as well. We all used to pay for our phones. We all used to pay for the apps that we have on our phones. We all used to pay for data consumption, movies, whatever you buy on your favorite e-commerce platform. Well, that's consumption, hardware, software consumption. And this is something that we've learned as well from Microsoft with whom we work very closely, saying, we need to value that, we need to monetize that. And that's how we created Ecolab Digital 12 months ago and shifted towards a value creation engine for our customers and for our shareholders.

All in all, $3 billion, growing double-digit with very high margin north of 20%. This is what makes me believe where this company is going to keep building in the future. And most importantly, we have an unbelievable team. You've seen some of them today. You've seen where they come from, how they're focusing on building new businesses, building new teams. We are a people company. We have always been a people company serving people's needs. This is at the core of who we are, technology, chemistry, services, digital technology is here to support the team, not to replace the team. We believe in expertise, and we believe that technology is enhancing expertise and value that we can deliver to our customers, which is why focusing on the team, building a team, a global team, a diverse team, an engaged team is our #1 priority as an organization.

And as you've heard from Scott, we have the path to get not only to the 20% by '27, but we want to keep building from there towards 2030, and who knows what's going to happen after 2030 anyway. But we have all the drivers that we need in order to improve our margins, the innovation, the new engines, the value price and obviously, the One Ecolab, which has gone, as mentioned earlier today, and you've heard this from Scott, much better than we thought. We thought it would be good, it turned great, which is really good, not only for our customers that have a better experience, for our teams that have a better experience as well because technology helps. It helps them ultimately spend more time creating value for our customers. And last but not least, as you've seen, our savings opportunity has gone up as well quite significantly within just a few years.

And that brings us, obviously, so to all that's required to keep driving high performance with at the core, the double-digit earnings growth that we've been delivering for a very long time and that will never change. Driving gross margin, driving operating margin, driven by a top line growth that's driving impact for our customers. Building on this tremendous legacy that we have over the last 5 years, 10 years, 15 years, 20 years, 30 years, how far as you can see, this has been a great story, and I'm proud with the team that keep building on an unbelievable legacy that we have as an organization.

So I'd like to welcome our team back on stage. It's going to take some logistics to get everyone settled here. We're going to try to do that in a very safe way with no one falling off the stage, including me. And we will have two mics. Andy and Andrew somewhere in the room are going to help us with the mics in the back over there. You're familiar with them. So just raise your hands when you have a question. We will have the right time for you guys. I want to spend enough time on innovation afterwards as well. And take the opportunity, obviously, to ask questions to the team. You see me a little bit all the time and Andy even more. So they're here for you. So I'm not totally sure where to start here. Dave?

David Begleiter, Deutsche Bank. For Scott. Scott, maybe a few more details on the additional cost savings of $85 million, how you gain them, where are they coming from? And as it relates to normal cost inflation in your business, is this truly incremental? Or is it just offsetting normal cost inflation over the next few years?

Yes. Thanks, David. As I mentioned, the $140 million of savings we announced last year was largely an analog program. This is about leveraging our global centers of excellence, centralizing processes, but with limited technology. And the big driver of this incremental savings is this Agentic AI road map. Last year, as we launched the program, it was still sort of a new thing. And since we've developed our own Agentic road map, partnering with Accenture to leverage that technology, and that's really the big driver of the acceleration on the $85 million. And this is above and beyond what we would do from a normal productivity. And I think more importantly, David, is by doing this, this will create scalability in our SG&A, right? We've always talked about how SG&A has grown sort of close to sales growth, but this, I think, bends the curve, particularly on the functional costs.

To add to that, maybe a little story. Scott just mentioned that we've partnered with Accenture to get there. It started with an interesting discussion almost 2 years ago with Satya Nadella and Julie Sweet at a Microsoft conference. And they were talking about all the new possibilities of Gen AI. And I shared with them saying, I'd like to become as a company, one of the pilots for all the new technologies that you're developing at Microsoft and that you're seeing within Accenture as well. Try it with us. Take us as your trial case.

And that's exactly what happened. The week after we got together with both partners and said, let's try one process which was the lead-to-cash process, and using Gen AI in order to really improve the performance and the experience of our team and our customers. That was 18 months ago, and those are the results of what we've been doing. Just wanted to share with you, Dave, as well.

So where did it come from? This is new for everyone. And we want to make sure that we don't just talk about AI, but that we see that AI is driving true cost performance as well. I'm mostly focused on the growth side of it, but the cost performance counts as well, which is what you've seen from Scott today. I'll let Andy choose, otherwise it's going to favoritism. Chris?

Chris Parkinson, Wolfe Research. Christophe, every single industrial company, chemical company wants to position itself to be the primary beneficiary of data center growth and cooling and CDUs. And I mean we've heard from, I mean, dozens and dozens of them. What differentiates your process, your current positioning with your customers? Obviously, we know you have very good ones to be clear. But what differentiates yourself? Do you need to partner with anybody else to make sure you're the sole beneficiary or the primary beneficiary of getting your lion's share? How are you thinking about the evolution of that platform given the fact that you said it yourself, it's only been around for 5 years?

That's a great question, Chris. Thank you. Let me say a few things, and then I'll pass it to Josh, who is even closer than I am. If we look at the three big components of what's happening in a data center, okay, you have the whole tech stack, the whole microprocessors, computers and all that. You're familiar with the names, obviously, so building that tech infrastructure and software. There's the few, not too many, as we know, that own obviously that space from chip manufacturing to the hyperscalers.

Then you have the power management companies that are pretty clear, the ones that are owning power management in a data center. Then you have the cooling. No one owns it today. It's seem a little bit like an add-on today where it's general contractor trying to put pieces together. That was okay when it was about, like Josh was saying, heavy air conditioning in a room with a hot computer in it. That has changed a year ago where the power went hugely up and obviously, the heat generation save time, technology had to change towards the liquid cooling, which is a very early emerging new technology or some of us are learning on how to master it as well at the same time.

We've been, as I mentioned before, in cooling technology since the very beginning of this company. We're by far the world leader in cooling technologies, cooling towers. You're familiar with that for many, many years. This is a sweet spot for us. No one owns it, we're the ones having to own it. And that's why bringing the technologies from the cooling tower to the chip, managing the coolants and the CDUs, as you will see afterwards, is emerging. This is exactly what I like because it's all new. We can get ahead, stay ahead and capture that value. But I'd like to have Josh build a bit on that.

Yes. So just to build on Christophe's point, if you break down the evolution of data centers from the cold room with air conditioning, air cooled data centers, we took care of over 1,100 of those data centers today. We manage the water process to help cool the data centers that are in existence today. As we move to liquid cooled technology, these data centers are now becoming more like an industrial application with hundreds of heat exchangers, millions of gallons of coolant that has to be managed. Well, that's what we do across all of our water businesses, whether you think of oil and gas or a food and beverage plant or a mine or a chemical plant. We currently today manage the fluid systems and the heat exchange performance to make sure they're effectively done. We're transferring all those skill sets and knowledge into the new data center industries.

So we bring 102 years of experience in managing complex cooling systems. We bring the technology needed to actually effectively measure and monitor and optimize the cooling performance, and we have the scale to go wherever our customers need us around the world with direct on-the-ground field sales and service people to help support their data center operations from design to operation. So I think it's very different than the competition in this space because of what we've done for 102 years.

If you take an example, I was in Singapore last week. They've declared 8 or 10 years ago, I don't remember exactly when it was that they will become the data center of the world with two small issues, they don't have space and don't have water. Other than that, they were a great place to become the data center of the world. We help them really manage cooling technology within those data centers that they can have more power while using less water. And today, we manage 80% of the installed capacity in Singapore. It's been a great story over there, and it's the very beginning of the whole story.

Kevin McCarthy, Vertical Research Partners. A few questions on the pest business, if I may. Obviously, Pest Intelligence is very new and exciting, but I'm also curious about your geographic expansion opportunity there. Christophe, you reminded us you do business in 172 countries. Soraya, I think you said you're in 10 countries, but you're just getting started. So how important or not is geographic expansion for pest? And if it is important, how do you get there? Is it organic or through acquisitions or both? And what sort of time lines or sequencing do you envision to penetrate on intelligence and then build out?

Great question. So let me start, and I'll pass it to Soraya. Geographic expansion is not the primary priority. We want to become really strong, even stronger in the United States focused on commercial, B2B, not residential, as others do very well, but this is not where we want to focus on, plus a few select countries. So it's really making the business we have today exceptionally good and managing that transformation towards intelligence is priority one. And second, it's to be thoughtful in geographic expansion, but this is not our first priority. But I'll let Soraya add a little bit on that.

Yes. Thank you. Great question indeed. So the focus is in North America, and this is our biggest market. And when I talked about 10 countries, this is where we are implementing Pest Intelligence today. The opportunity is great. Again, it's a $15 billion global commercial market. Most of it is in North America. And this is where we are scaling up and accelerating fast with the ambition to have Pest Intelligence deployed everywhere in the next 2 to 3 years' time.

And the starting base is a good one because you're strong in China, so we can build around it. Strong footholds in a few critical countries in Europe as well that we can build around at the same time. Those are the three major geographies anyway for us where 80% of our sales, 80% of our opportunity resides. This is where we want to focus. Pest Elimination is a very execution-driven business. We want to keep doing it really, really well. So that's the path that we've taken years back, by the way, and we're going to stick to that path.

Great. It's Justin Hauke with Robert W. Baird. First of all, thank you for assembling the team here. I appreciate doing that. So I guess the biggest takeaway that we had today, I mean, if I go back 2 years ago, Christophe, you outlined the 20% AOI margin in 5 years. And now it looks like you're going to maybe be a year ahead of what the original schedule was. And now today, you're saying beyond that '27, the 100 basis points and 150 basis points per year beyond that. And I think that's probably higher than most people are assuming that the business would generate. I was just hoping to get a little bit more detail on the drivers behind that, given that, that's more margin expansion than you've been getting for the last couple of years, and that's with the One Ecolab program. So maybe just a little bit more elaboration on that because I thought that was a really interesting takeaway.

So one comment for me and then Scott is the master for that. If we were to say we're focusing on beyond 20%, and we've never done it, that would be one challenge. As I shared, 2/3 of our businesses are already there today. So we know how to get there. Then we can debate, is it '20, '21, '28, '29. So honestly, I don't know yet, but it's showing a direction that we wanted to share with you because we know in many of our business already how to deliver that. But let me pass it to Scott.

Yes, happy to. The first thing I would just say is over the last 4 years, going back to the slide I have, we've been delivering 100 basis points a year, the 400 basis points over the last 4 years. And those drivers are going to be largely the same ones going forward with the additive of the One Ecolab program, as I mentioned to David's comment, is it's driving the structural savings immediately, but it also provides the scalability going forward. The value price, we've proven this, the 2% to 3%. The growth engines are accelerating as the team talked about, high-growth, high-margin businesses that are already north of 20%, including is digital, which is still $300 million to $400 million of sales with highly accretive margins. So those -- and then you add on that the scalability and the structural savings of One Ecolab, that's where we have great confidence and what we've done in the last 4 years to deliver the 100 basis points to 150 basis points.

John McNulty, BMO. Maybe a question for Hayley on the Life Sciences side. I guess a couple of things. One, it seems like there's a lot of enthusiasm for a ramp, but that ramp has been a little bit elusive. I guess, can you give us a little bit more comfort on when you're thinking about the timing of when things really start to inflect to double digit? And then I guess the second question would just be, you gave an interesting example where -- or the, I guess, case study where you did 1.2 -- you were doing $1.2 million as a target when you all came together of about $80 million. I guess, how should we think about how something like that can actually be executed on once you do identify that opportunity to the customer that you're working with?

Thank you, John. Hayley, do you want to start?

Of course. Thanks for the question. We anticipate that we will get to that 30% OI in less than 5 years. We have line of sight to that. As we showed our margins, once we strip out the one-off investments, are already in the mid-20s, and we've been making progress over the last couple of years to improve those. When it comes to the second part of the question, how do we win? As we map out something like that with a customer, we start with our pharma enterprise solutions team, where they look across all of the offerings of Ecolab and work directly with our customers on project plans to actually execute.

And then that brings me to our third part where we talked about investing in teams. We have expert teams around the world that are focused on different parts of the business: contamination control, application specialists and bioprocessing, water specialists from the water side, where we work directly with our customers either in their plants or in our labs to actually showcase the value and execute it step-by-step. So it's pure alignment with the customer execution plan, get to the results and then share those back with the customer.

So maybe building on that, there's just a few other players in that industry, great companies, by the way. They absolutely hated the fact that we entered that market. They made it very clear to me personally as well. I take that as a huge compliment that they did it that way. Talking to customers as well, really love the fact that there's kind of a new kid on the block with the agility, the flexibility, the innovation power to bring solutions that others were basically not of rank because it was my way or the highway generally.

And the last thing, as Hayley mentioned, the One Ecolab approach where we can help them, as you will see in the innovation fair afterwards, the environmental hygiene plus the product quality, plus the product process performance, no one can do that. It's a typical One Ecolab approach that's very natural to what we do. No one else does it, and the industry isn't even ready for it yet. Yet this is something that we've experienced in the past serving newer industries. Supply chain in the pharma industry is not organized in a central way. It's much more location by location, obviously, respecting the rules of FDA or whatever the institution is around the world. This is a new way that we are teaching them on how to approach performance with this best-in-class One Ecolab approach. It's very well received by our customers.

So the combination of competition so looking at us as a dangerous entrant, I take that as a plus. The fact that we are the new agile, flexible partner for the pharma industry that needs one more than ever since they're so much driven by innovation, the fact that we can provide all the solutions around it, well, this is making our offering very differentiated versus the other ones early on that journey, but the best is yet to come, and that's why we're investing so much behind that opportunity. Thank you, John.

James Cannon with UBS. I just wanted to go back to your comments, Christophe, on nobody owns the liquid cooling space in the data center. And just in the context of there being kind of as we get to these next-generation chips and we're seeing new chemistries come into play where there are products in development that aren't just water to cool the data center. How are you guys positioned to play in an environment such as that?

So the core thing, and I'll pass it to Josh, whether there's water in there or not, water is, by the way, the best way to extract heat. It's just a few challenges as well so related to heat when you heat it that much with so much flow as well going through. We look at it as a cooling technology opportunity. Whether there's chemistry, no chemistry, whether there's water, no water, doesn't matter. It's ultimately helping data centers extract the heat at the lowest power that's required in order to reuse that power on the compute side since we don't have enough power, as you heard from Josh, to feed all the AI demand that's out there. So we look at it in a very agnostic way and saying, it's about cooling the chip. And even there, that's evolving, and that's why we're working with some of those partners. You might want to talk a little bit about the discussions we have with the tech companies.

Yes. So we work with all the major chip designers, all the IT hardware equipment designers as well as the engineering companies and data center operators on how the new chip demands are going to increase rack densities, meaning the heat produced per rack. And will the cooling performance be able to be kept up with using the existing coolants that are on the market today? The answer is no.

Just flat out, I'll lift the secret out of the bag here. So we're going to have to innovate us along with our partners on novel cooling technologies and unique ways to cool that IT hardware down so it can be run differently in the future. And that's where we're partnering with our existing customers as well as with new entrants into the market to find those new technologies to help continue to advance the game. But I think Christophe is spot on. This isn't about whether there's water or no water, this is about heat removal. It's really thermal management of a data center, and we want to make sure we're bringing the right solutions to manage the thermal activity that's occurring in the data center as efficiently as possible while returning energy to compute.

John Roberts, Mizuho. I think you said full-service restaurant seat in the seat is down 38% since pre-pandemic and Ecolab is up 25%. Talk about what kind of share gain that kind of reflects? And maybe you could just prioritize the drivers. Is it winning with the winning customers, so the customers that you have are up that much more? Or is it more content per customer? Or is it more customers that you've added?

Perfect question for you, Greg.

Yes, I'd love to answer that one. It's a combination of a bit of everything is if you remember back, the seats in the seats is one component, but the other component is number of locations. And so I showed that the number of locations in the foodservice side have decreased, but have not decreased for us as much as the market has decreased, which means we are taking market share, more locations.

And despite that metric, that's not that different than it was 12, 24 months ago, it's flat. We are growing with solution penetration. We are growing with adding those locations. And quite honestly, we are still protected a little bit. If you remember, while those dinners may be shifting from drive-thru or Uber Eats, the seats in the seats aren't there, but the activity taking place on within the back of the kitchen is still volume and value that we are driving in those locations while driving overall price value as well.

So it's a combination of all three things. And I'll say, John, to your point, is part of the way we're doing it is that over troubled times, it takes competition or those that say they're good at something and does one of two things. It actually proves that they are good, or it proves that they're not. And I would put us on the side of the ledger that said, we are good at what we do, and we show that we were pretty good in delivering for customers and retention has been good on that side as well.

And maybe a few stories behind it as well, and Greg shared it a little bit earlier today. We've been [ with stores, ] lodging, food service, restaurant companies for a very long time, like over 100 years. And before the pandemic, when we were talking about technology, there was, John, absolutely zero interest. It's we've done it that way for 100 years. We're not going to change it. It's about labor, cheaper labor that was back then.

And everything changed with the pandemic because while everybody left the restaurants and the hotels that said in a nice way, obviously, they were asked to leave. They never came back. And when they came back, they came at a much higher cost as well at the same time. It changed the whole discussion, where labor automation is becoming absolutely essential, digital technology were not only essential, but guests, consumers have gotten used to use that. You mentioned Uber Eats as well earlier today and every other service that you're familiar with as well. We are getting used to it. We're going to use more of it, not less of it going forward. And that's changed the dialogue with our customers in dramatic ways.

And the last thing I'd say, like Pest Intelligence, it's easier said than done for most out there. The advantage we have is that digital technology is something that in our water business, what we call our Industrial business, well, it's something that we've been practicing and developing for 30 years that we can bring over in I&S, bring over in Pest Intelligence without having to reinvent everything. This is a huge advantage that we have over competition.

David Paige from RBC. I had a question just in terms of the OI margin expansion and targets, how should we think about amortization expense? How does that factor into your targets through 2027 and then beyond, 2027 and beyond?

And then just a quick follow-up. I'm sorry if I missed it, but EPS growth beyond 2027, you're doing, let's say, 6% organic, 125 bps of OI margin expansion. How does that translate into EPS growth?

Do you want to take it, Scott?

I will give that a shot. To answer your second question, yes, as part of that, that 100 to 150 basis points, that equates very well with the 12% to 15%. So our ongoing EPS target remains at 12% to 15% EPS growth.

As -- then as your first part of your question on the OI margins. So as I've talked before, that OI margin going forward is going to be driven by the growth engines, the pricing and the SG&A productivity. I mean those are going to be the big drivers, and we're seeing those, okay? And I think we'll see further acceleration on the growth engines and the scalability from an SG&A perspective.

Matthew DeYoe from Bank of America. Josh, you have a little bit of a lift for your OI margin target. I mean, at a high level, we talked about SG&A leverage and some of the things. But specifically in Global Water, kind of what do you think is needed? What are the key benchmarks for hitting that for '27? Is it mix? Or -- I'll let you answer that.

And then how should we think about the duration of some of the headwinds in the laggard businesses? We talked or we saw early on minus 1% sales, a decent amount of that comes from Global Water. So how do we move on that beyond that?

Maybe starting here and I'll pass it to you, Josh. Since we have three major businesses within Global Water. One, Water Services, so run by Josh; we have our global Food & Beverage business, run by Nicolas Granucci; and our Global Paper business as well and all, working for Nick Alfano. So he is going to be at one of the tables as well so for lunch if you want to have some more discussions as well with him.

The beauty of the company is that we serve so many end markets. The thing, as mentioned this morning, not all are going to be in the green all the time. We know that, and we build it that way. When I think about businesses like power generation, for instance, it's been kind of a stable business for a very long time where not much happened. The demand was not exactly going up as well at the same time. So that was kind of a little bit of a sleepy business. We were having good shares, growing our shares, having good margin, everything, changed because of AI. Suddenly, we need more power. There's not enough power anywhere, and everybody is scrambling in order to create more power.

That business is changing as we speak as well. I'm glad that we own power generation, cooling for power generation. So for sure, did not perform great the last few years. This is true for our steel business as well and the paper business is not the best business that we've seen the last few years as well. That being said, 80% of water is doing extremely well.

So that's the beauty of our portfolio that we have. We'll always be very transparent with you what are the ones where we need to work on in order to improve the performance, and that's who we are. And we'll continue doing that as well. And that's the way we manage the overall business, the overall portfolio and the margin as well because even if you have low growth, you're not allowed to have low margin. So it's either you have higher growth and high margin or you have lower growth and you still need to get the right margin. And I think we do that pretty well.

Just to explain a little bit how do we think about water in so many different end markets, which allows us to become very stable, very resilient always in that business as we demonstrated in the last few years. But maybe talking about your part of the business, Josh.

Yes, for sure. So I think we're going to see the OI margin lift really with three factors. One is coming from our high-tech business continuing to grow really fast, which is accretive to overall margins. Two is continuing to bring new innovations to markets in those other divisions within the water portfolio as a whole. Innovations traditionally add accretive margins overall, and so that's going to give us a lift. And then it's a turnaround in those poorer performing businesses, which will accelerate growth, giving us greater leverage, ultimately delivering a step-up in OI margin.

So we see the path definitely to the 19% OI ratio. It's just going to take a few more years for us to get there.

And one last thing, our Food & Beverage business, we've created Food & Beverage united. We've shared that with you. It's bringing hygiene and water together. We started in the U.S. this year. We'll be expanding around the world. It's a lot of hard work to get it work. It's working really well. Customers have been asking for that for a long time, by the way. It's hard to do. No one has ever done it. I really like how it's progressing. It's improving the growth trajectory of that business and margins are going higher as well because of bringing the two together into one proposition. So just to give you the overall perspective on water. We have a few more minutes. So...

Vincent Andrews from Morgan Stanley. I wanted to go back to the margin bridge. At least when I look at from 18% to 20%, and the preponderance of that is being driven by the value pricing, which is great, and it's easy to understand how accretive and drop down that is. But if we think out over the next couple of years and into that out years period, and let's say, your basic industries business comes back, let's say, One Ecolab is firing on more cylinders than you think, and total company volume is growing 1 point or 2 more than you're forecasting. What is the incremental value to that from a margin perspective versus what you have in your baseline?

A lot. Scott?

I guess what I would say, Vincent, that's a good problem to have. And that's why we feel so good about the 100 to 150 basis points, right? And why we've also talked about as we think about, hey, the OI margin is about -- it's a means to the end and driving the 12% to 15%, and it's really well aligned. But we don't need the 5% to 7% to get to the 12% to 15%.

And so within that, that also allows us because as we grow, we want to continue to invest in the business. And so there will be trade-offs there as we grow, as we drive additional margin expansion, a lot gives us opportunities to further invest in the business.

There's no doubt that we have more potential. The fact that we're so resilient at delivering this double-digit earnings growth is also related to that. As shared earlier today, we spent so much time planning for next year, which is what we're doing for '26. And I'm 100% sure that everything we're planning is not going to happen that way in '26. We spent a lot of time for '25 where we didn't count on the tariffs, obviously, when we plan and everything changed, obviously, in January, plus everything else as well.

The fact that we have so many levers helps us deliver always that double-digit earnings growth. And sometimes, yes, it can get even better. And as I've shared with you, we decide either we reinvest in the business, or we give it back to shareholders or we do both. Good problem to have.

Yes. You guys talked about One Ecolab a lot today, so I want to ask a little bit more about that. Maybe I'll send it Greg's way because Christophe just said it. I mean, he said, you've been working with many of the customers in your business for more than 100 years. And now you've got this new initiative, One Ecolab, where you've decided there's this major opportunity to further penetrate these customers, which I'm sure you've been trying to do for a very long time.

So can you just talk a little bit more about for your business, like what's different now? What's enabling an acceleration in that penetration rate, what the main pushbacks or challenges are? And overall, how this initiative is progressing? Because I think for your division, in particular, there's some very large national account customers.

It's a great question. I would say one of the changes around what we're calling the EES model, which is the Ecolab enterprise sales team. And it seems subtle, but we have shifted the way our teams are organized from being divisional to being the way our customer views us. One company, one team. So you have people that are now -- we talk sometimes and too much sometimes about a division. When you go to talk to a major global customer, you bring in the program, whether it be Institutional, Pest Elimination, EcoSure, Nalco Water. So the dialogue has shifted as the attention.

The other thing it adds is speed of decision-making, getting things done faster, quicker with the customer in mind. It sounds subtle, but it's a big difference. And the other thing I would say, having been in the institutional business for a while, it's great to hear what I'm hearing today. I feel a little bit like the big brother or the big sister. It's like the family is expanding, and the programs that we can talk to our customers about is really exciting. At the same time, it keeps Institutional fresh. It keeps us thinking differently on how we deliver new programs to customers.

We talk about -- you'll see it later, AquaIQ. This is something we've been working on for a while, but it came from Darrell saying, have you talked to the Nalco team about how to connect water connectivity. And that was taken care of within 3 months. We talked about doing an acquisition. We developed it with our friends in Nalco Water, and we brought it to market within 3 to 6 months. So I say subtle, the team, the EES model, the structure, the focus, the agility to get things done as well as kind of the program offering growing is a big contributor to driving that enterprise sale.

And it's been really driven by customers, [ Tim. ] We used to talk Circle the Customer - Circle the Globe. Some of you have heard that for, I don't know, 30 years. It's been a long time. That was Ecolab's speak. every customer understood it's good for us if they buy more from us. That was an easy sell, except that they didn't like it.

Best-in-class in One Ecolab is what's right for the customer. How do we help them get all their locations to the best potential around the world. That was driven by one of the CEOs a few years back, having exactly the discussion with me and saying, "We should flip, not what you do, but how you talk to us that it's helping our performance improve everywhere around the world instead of letting us know that if we buy more from you, it's better for Ecolab." We got that. Shift your language, adjust all the organization, work as one team, one company, working with another company. It made total sense, except that we had some work to do to shift towards that, and that's exactly where we are, and we are not done yet. Last question.

Jason Haas from Wells Fargo. In the past, you've talked about being able to hit the 12% to 15% EPS growth, even if the top line underwhelms a bit like if it's in the 3% to 4% range. So I know that you're not hoping that, that's the outcome, but I'm curious if that was a comment that was related just to this year, you think going forward, if it continues to be a soft backdrop, you're still able to get that 12% to 15% EPS algo?

And then since I think I'm the last one, I'll try to throw in another one. I'm curious if you could just talk bigger picture about the time line to get to that 5% to 7%. How long will it take to get back up into that range?

Good question. For me, the objective is always in that order. It's getting the 12% to 15%. That's been true for as you can see on that chart, obviously, it's getting to the right margin at a healthy top line. What the number is on the top line is whatever is right for that right economic time as well at the same time. So it's not that we're going to sell at lower margin in order to get a better top line. And we've practiced that for many, many years, as we can see, obviously, on that chart, and nothing is going to change in the future.

It's also to have that differentiated view, as I shared with you earlier today. Well, 80% of the company is growing at 4% today. $3 billion of our new engines are growing double digit with way higher earnings growth as well at the same time. This is what matters. The fact that we have one or two businesses that are a little bit behind. That's always going to be true in a way. It's managing that portfolio in order to make sure we get the right earnings trajectory, the right margin delivery, driving the right cash flow. This is the way we think about it.

And for your timing, I don't know exactly how it's going to be. It's going to take a few quarters, a few years to get there. We're going to do it in a smart way. We won't surprise anyone. For me, generating value comes first. It's never going to be at the expense of the earnings that we're delivering. You've seen that from us for many, many years. It's not going to change in the future as well. You've seen how we did value pricing as well during some of the extreme times, during the energy crisis in '22 as well. We do it with our customers that they can absorb it, that they can live with it, that we can keep them forever. And that's who we are as a company and want to remain in the future as well.

So we'll manage all three, being very clear that it goes in a very clear order, it's earnings delivery, it's margin and it's top line. And that's been the case for a very long time. It's going to remain like that. And it's looking at businesses in different ways in different industries, in different geographies. That's the beauty of a global company in so many end markets like we enjoy.

So thank you so much. We'll have plenty of time to have other discussions during the tours as well during lunch. Just -- so how we get organized? So for lunch, we'll have, I think, six or seven tables where you're going to have -- so the whole team is going to be there. You choose what's the theme that you'd like to discuss the most. You go to that table. And if there's no seat at that table, well, during the One Ecolab tour afterwards, you might meet some of them as well, where you can ask further questions as well. We want to be here for you. We'll always be here for you today or any time as well in the future.

Before we wrap up, so just quick indication on the innovation showcase, how it's going to work. It's going to be four different booths that you're going to see. Those are very practical, very real, you can touch, you can see people in each of those innovation showcases. We want you to meet the team and share with you what the innovations are and you can have a discussion with them as well.

We're going to start with AI data centers to see what Josh has been talking about on how do we deal with cooling, what have we done, what are we working on, where are we going and you see some very cool stuff that you can experience as well. KitchenIQ with RushReady, totally different setup than the data center, obviously, because it's going to be more about Coke, burgers and fries, not exactly the same technology, but leveraging digital technology. And you're going to see so how do we manage those rushes that restaurants have to manage. That's been a great partnership with Microsoft to develop that platform.

Biopharma solutions, you're going to enter a cleanroom, as Hayley has been sharing as well with you that you can see, so how do we deal with environmental hygiene, how do we deal with product quality and how do we bring it all together in order to optimize the process in a pharma plant. And last but not least, Pest Intelligence. I don't think there will be any pests around, I hope. But you're going to see in action the technology, at least how it's going to be and how it's working in a retail store. It's going to be quite fun.

So we're going to have, I think, four groups. And you're going to start at one place. It's on your badge, either the front or the back, I don't remember where it is, the -- saying which group you are, try to get to that group. People are going to help. So just as you exit the room as well here, get in your group and you're going to rotate around the four, we're going to have an hour-ish to do that, and then we'll move to lunch then to the One Ecolab, and we'll wrap up at 2:00.

So for everyone on the webcast, a big thank you for attending from anywhere around the world or through a recording as well. It's been a pleasure to share our story, where we are, who we are, where we're going. And meeting the team as well. We're going to be here for you at any time today, in the days to come and in the years to come as well. So thank you for attending and more to come for the innovation showcase. Thank you to everyone.

Greetings. Welcome to the Ecolab Second Quarter 2025 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

At this time, it is now my pleasure to introduce your host, Andy Hedberg, Vice President, Investor Relations. Andy, you may now begin the presentation.

Thank you. Hello, everyone, and welcome to Ecolab's second quarter conference call. With me today are Christophe Beck, Ecolab's Chairman and CEO; and Scott Kirkland, our CFO. A discussion of our results, along with our earnings release and the slides referencing the quarter results are available on Ecolab's website at ecolab.com/investor.

Please take a moment to read the cautionary statements in these materials, which states that this teleconference and the associated supplemental materials include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the Risk Factors section in our most recent Form 10-K and our posted materials. We also refer you to the supplemental diluted earnings per share information in the release.

With that, I'd like to call -- turn the call over to Christophe Beck for his comments.

Thank you so much, Andy, and welcome to everyone joining us today. the Ecolab team delivered another very strong quarter, once again, very consistent with our guidance. Our team's relentless focus on execution and delivering exceptional value to customers enabled us to achieve double-digit earnings growth despite the unpredictable global operating environment.

Organic sales continued to grow 3%, led by strong value pricing solid momentum in our core business driven by our One Ecolab strategy that's working really well and fueled by breakthrough innovation as well as steady strong performance from our growth engines. This good momentum more than overcame and even end market demand, particularly in our paper and basic industries businesses, which represent only 15% of Ecolab store sales. In other words, the remaining 85% of our business grew organic sales 4% and operating income by 18%, reflecting our broad and resilient business portfolio. This is a major strength of Ecolab allowing us to deliver superior performance in goods like in more challenging times.

Now let me spend a few minutes on our key growth drivers and talk about why I remain very confident about our future in '25, in '26 and beyond. First, on value price. It continued to build in the second quarter, increasing to 2%. This growth is supported by increasing value that our technologies and services bring to customers as we have to deliver best-in-class business outcomes, operational performance, and environmental impact.

During the second quarter, we also began implementing our trade surcharge for all customers in the United States only. Given the dynamic international trade environment, the surcharge coupled with the expertise of our world-class supply chain team enables us to reliably supply our customers while delivering value that exceeds the total price increases. With this now in place, we expect our total pricing to strengthen closer to 3% in the third and the fourth quarter.

Next, the growth in our core segments, like Institutional & Specialty and Global Water. While both continue to progress very well. In Institutional Specialty, we continue to drive robust share gains, allowing us to continue to outperform the industry while overcoming the headwind created by the strategic decision to exit noncore low-margin business. These exits, which are mostly in our hospitals and retail businesses are causing a 1 to 2 percentage point drag on Institutional Specialty second quarter crop but they're also helping us to further enhance our focus on the most critical customers and at the same time, to further improve our long-term margin profile. So all in all, a very good story.

In Global Water performance was led by food and beverage, which accelerated to 3% organic growth by executing very well on our One Ecolab growth strategy that provides customers with a comprehensive hygiene and water offering that actually no one else can truly provide. This strength more than offset the softer performance in more difficult end markets in paper and basic industries, as mentioned before. Excluding these businesses, Global Water sales growth accelerated to 4% and operating income grew double digits.

Finally, Ecolab growth engines, which include Pest Elimination, Life Sciences, Global High-Tech and Ecolab Digital continued to perform exceptionally well. Collectively, these businesses make up nearly $3 billion of Ecolab's annual sales and grew double digits in the second quarter. Pest Eliminations organic sales growth accelerated to 6% benefiting from our One Ecolab growth strategy and also the shift to our digital pest intelligence model. As expected, operating income margins increased sequentially to nearly 20%.

And as we continue to deploy pest intelligence in the next coming years by leveraging our major digital capabilities, we expect to generate steady, strong sales growth and very attractive operating income margin expansion.

Life Sciences grew mid-single digits, led by strong double-digit growth in biopharma as well as in core pharma and personal care, while performance in water purification was partially impacted by shorter-term limitations in production, and we are at full capacity. Also, OI grew significantly benefiting from the strong growth in our high-margin biopharma business. We expect reported OI margins to stay in the mid-teens as we invest further to fill this long-term high-growth business with OI margin potential of 30%.

Also, our Global High-Tech business continues to grow very rapidly with sales up over 30% and operating income margin exceeding 20%. We're just at the beginning of this incredible growth story, but this is one we will own by leveraging our vast expertise in cooling for data centers and water circularity solutions for microelectronics production.

And finally, Ecolab Digital. [indiscernible] accelerating sales growth to nearly 30% in the second quarter, reaching an annualized run rate of $380 million, driven by rapid growth in subscription revenue and digital hardware. This exceptional performance, combined with value price and share gains across the businesses drove a 170 basis points increase in Ecolab's second quarter operating income margin.

While commodity costs anticipated to keep increasing by low to mid-single digits in the second half of the year and in 2026, we expect our operating income margin to continue to expand at steady levels due to growth in high-margin businesses. value price, share gains and productivity improvements. In total, we continue to expect our full year 2025 operating income margin to reach a solid 18%, on our path to deliver a 20% OI margin by 2027. And as mentioned, we will not stop there.

Looking ahead, most business fundamentals seem to be trending up, which provides me with the confidence to deliver 12% to 15% adjusted EPS growth for the quarters to come in '25 and into '26 as we also keep investing in our growth engines. Our experience in navigating past macro challenges has only strengthened our capabilities and agility. With our diversified portfolio, record innovation pipeline, strong growth engines and focused execution with plenty of options and levers to deliver on our commitments in almost any environment.

Our unique ability to provide innovative solutions that drive best-in-class outcomes enhanced operational performance and conservative resources like water and energy for all our customers is crucial or more crucial than ever. With a strong and resilient free cash flow, an extremely strong balance sheet and a super low leverage ratio of 1.7, we're very well positioned to capitalize on both organic and inorganic growth opportunities.

The strong foundation and hence, our ability to create significant value for our customers and drive attractive returns to our shareholders. Therefore, we remain very confident in our ability to deliver sustained strong performance in '25 and beyond. So thanks again for your continued trust and your investment in Ecolab. I look forward to your questions.

Thanks, Christophe. That concludes our formal remarks. One final reminder before we begin Q&A. As a reminder, we'll be hosting our Investor Day on September 4 in Minnesota, where Ecolab's senior leadership team will provide an in-depth review of the company's strategy to drive strong growth and attractive margin expansion. This event will also include interactive sessions showcasing Ecolab's latest break through innovation. Please contact me if you are interested in joining us.

With that, operator, would you please begin the question-and-answer period.

[Operator Instructions] Our first question is from the line of Tim Mulrooney with William Blair.

Yes. So for my question, I wanted to ask -- I think some folks work we're thinking maybe that you would raise your guide or maybe the low end of the guide a little bit this quarter. So even though the second quarter came in line with expectations, I think some folks are maybe expecting a little bit more for the second half of this year. Can you just walk us through the puts and takes here? Is there maybe some conservatism being baked in here? Or is there maybe something else that I'm not seeing?

Thank you, Tim. It's actually a combination of both conservatism and at the same time, investing further in our growth businesses. 13% growth on earnings for the second quarter, guiding this 12% to 15% for the second half and beyond. For me, this is the commitment I've made to all of you guys, and this is where I want to make sure that at least I deliver that. Actually, well, I really like where we are right now. So we have good momentum with, as mentioned, 85% of our business growing 4% and growth engines, the one I mentioned before that represent close to $3 billion in sales, but they're growing double digit. So our investments in growth are really working.

Second, the macro trends, [indiscernible] water for AI infrastructure, pure replication for Life Sciences and productivity for hospitality and Pest Intelligence, while they're all trending in our favor. It's a good thing. And our business fundamental itself -- new business, innovation, value price, productivity, they're all trending in a positive direction. So I'm with you. I feel good about where we are, where we're going about the second half and for 2026 and beyond.

But as we know, the world is a bit of a complicated place and we honestly always build some room for the unexpected. And the last few years, while we have plenty of this and some could call it conservatism. For me, is making sure I can deliver what we've promised. And secondly, we keep investing more in our growth engines to fuel this long-term momentum, like science, in data centers, in [indiscernible], in pest intelligence, Ecolab Digital. And ultimately, this we keep paying dividends in the long run for all of us. So bottom line, I think we're in a very good place.

And any other delivery that we will get in the quarters to come and years to come will be shared between returns for incremental returns for investors and incremental investments in our growth business. So all in all, I think it's a win-win for the company and for investors as well at the same time. For me, as I mentioned, this 12% to 15% is not an ambition. It's a commitment and anything that comes above will be a combination of returns and investments in our growth businesses.

Our next question is from the line of Manav Patnaik with Barclays.

Christophe, I just wanted to touch on pricing. I understand from a volume perspective, obviously, as you mentioned, the [indiscernible] in an uncertain place, et cetera. Just can you help us dig through what you're hearing, what you're seeing on the pricing front? I think the 2%, I believe, was supposed to be 2.5% to maybe a bit higher. If you could just talk about what we should expect in the second half with and without the surcharge pricing that you have coming in?

Yes. Thank you, Manav. I like a lot where we are on pricing. And keeping in mind it's value pricing. We've made that commitment to customers as well that we will always deliver more value, which means cost savings in the operations and the incremental price the thing for us. It's kind of a value share that's the important component of how we think about pricing in our company. So 2% in Q1, 2% in Q2, starting the U.S. trade surcharge as well in the second quarter. So far, so good, but it's always a start during the quarter, you announced it.

So for Q3, Q4, I expect pricing to move closer to -- so I don't know exactly where we're going to land in Q3. But in Q4, it's going to be 3%, hopefully, will be 3% or close to 3% as well in Q3, but all trending up. And again, backed by the value delivery for our customers. And what's most important is that the retention of our customers, which is something that we look at very closely is getting stronger as well at the same time. And as you see in the volumes, positive as well, especially strong in our growth businesses.

So all in all, it's working well, and I see value price good revenue stream at 100% margin for us and in ways that are driving savings in our customers' operations as well at the same time. So it's working really well.

The next question comes from the line of Ashish Sabadra with RBC Capital Markets.

So just wanted to focus on the Pest Elimination business, where we saw an improvement. Can you talk about some of the efforts around pest intelligence, how those rollouts are coming together? And how should we think about the puts and takes for growth going forward?

Thank you, Ashish. We love that business. Pest Elimination is just an unbelievable story, which will shift towards pest intelligence over the next few years. It's not going to take forever, but we're going to move from Pest Elimination, the business that we have today with our people going and visiting every location and looking at every device at our customers' locations, which are millions around the world to pest intelligence where most of it is going to be done 24/7 remotely with our team ultimately so going to the places where they can add value and not chasing devices, mean mousetraps that are empty.

We are on an unbelievable journey with that. The huge advantage we have is that at Ecolab, well, we have massive capabilities in digital, in sensing technology the Ecolab 3D clouds, we have all it takes to put that into practice in our Pest Elimination business. As I've shared with some of you as well, the last few months, we've concluded one of the major retailers here in the U.S., which was our pilot making sure it was working from a technology perspective, from a model perspective and interestingly enough, when we think about the pest [indiscernible] ratio, the industry is at 92% today, which means 92% of the customer locations are pest free. The average for Ecolab is 95% which is better. You still have 5% of the locations that are not pest free. And that pilot that we deployed is showing that we can deliver trending to 99% [indiscernible] get to 100% because it's nature, obviously, but 99% seems to be the right number.

So a great outcome. The model is working. The customer is ready with -- is open and ready with the financial model as well at the same time. We're moving to a second retailer as we speak. The third one is lined up as well so for the months to come and will expand as well across all our end markets the months and quarters to come. I think that whole business in the next few years is going to become a full pest intelligence-based model with a new financial model, obviously, that's driving more growth, better margins and most important, 99% best pest free environment for our customers. So a very good story.

Our next question is from the line of John McNulty with BMO Capital Markets.

Can you help us to think about the delivered product cost that you saw in this quarter and how you're thinking about that as you go into the second half? It seems like there's kind of still a lot of moving parts around tariffs and headwinds around that, raw materials, kind of some of them fading, some of them pushing higher. So can you help us think about those trends?

John, a lot of moving pieces to say the least. We've been used to that. Scott, just to start with the answer.

Yes, absolutely, John. Yes, on DPC, so similar to Q1, Q2 commodities, so the market, if you will, was up low single digits, which includes the impact of tariffs and tariff-related inflation, which we're seeing -- but the net DPC was slightly favorable as we've gotten efficiencies from our great supply chain team. So we expect the market, the commodity inflation to be up that low single to mid-single digits in the quarters to come, ultimately, depending on the tariff impact, but we expect to continue to do better than this with the impact from our supply chain team, which we're seeing in the results of our gross margins being up 100 basis points in Q2.

So the combination of supply chain, doing an amazing work to get a net DPC that's favorable and value price that's trending positively as well, is obviously driving a very positive equation for our margins, which is one of the reasons why our gross margins went up 100 basis points again in Q2.

The next question is from the line of David Begleiter with Deutsche Bank.

Christophe, on U.S. surcharge, do you still expect to realize roughly half of what you announced? And are you seeing competitors support for this surcharge? And lastly, why not anything on the international side in terms of a surcharge?

So a few questions in there, David, the first on competitors. They've announced a trade surcharge. I'm not in their books, obviously, so I don't exactly know what they're doing. The good thing is that we're gaining share again all of them, which is a good place to be. So good that they're all participating and that we're winning as well at the same time. The second in terms of delivery, it's an imperfect sign, as we know, but generally working, as you've heard so from Scott, when we look at tariff increase of prices by local manufacturing concentration our optimization in supply chain plus the trade surcharge, it's a net positive, and you see in our margins, ultimately, so the mechanics work really well for us and for our customers, which is exactly where we want to be.

And the third part of your question, international. We have all it takes to get it done. It's just that today, as you know, those trade deals with the economies around the world where are unilateral. So it's a tariff you get when you import or you export to the U.S., not when the U.S. is exporting. So to have a [indiscernible] we haven't seen those. The moment we see those, if there is a reciprocal actions from any market out there, we have the mechanics. We know how to make it work. We've used it with the energy surcharge in 2022. We can use it.

So far, we don't have any reason do it. So we will not obviously use it as long as the tariffs we made as they are to export to other countries.

The next question is from the line of Chris Parkinson with Wolfe Research.

Christophe, despite a pretty sluggish macro environment, your margins in institutional Life Sciences seem to be moving in the right direction. And on one hand, you've been talking about price presumably productivity and portfolio rationalizations on the positives versus presumably a still pretty sluggish macro and perhaps a little bit of gross spend on the opposite side of it. But just in the context of the macro we're in, what do 2Q results tell you about your longer-term opportunities by segment?

Great question, Chris. Well, what it's telling me is that it's working. Because I&S has reached the highest level of margin they've never had in their history. This team is doing unbelievable work by really focusing on what customers need the most. And it's labor automation labor optimization, whatever the words are, they have a hard time to get talent and the talent they're getting is at a higher cost, which was a good thing for the general environment but not so much for the P&L of our customers.

So when I look at automation solutions for our I&S customers, it works for them. It helps them reduce their costs in dramatic ways, which means that we can get some of that value share in our value price. So that's good for us. Good for them.

At the same time, we also leveraging technology within I&S, really pleased with the way I&S is embracing digital technology, One Ecolab platform that we've developed for the whole company for the whole as well at the same time. So we get an improvement as well at the same time from an operating performance perspective, which is really good.

And the third thing is that because of that, better service, better outcome, better productivity for our customers, we gain share as well at the same time. And you see the growth of I&S is really good. It's even been impacted 1 to 2 points by those exits, as I mentioned before, which were private label businesses, which didn't have much to do with our service business by the way we're gaining share. And that's showing that it's working. Customers like it.

So the combination of all 3 gaining share, driving value for our customers and driving operational performance within I&S will net to the highest margin in our history in I&S, and it's going to continue on that good trajectory so far the quarters and years to come.

Our next question is from the line of Vincent Andrews with Morgan Stanley.

Wondering, Christophe, if you could speak a little bit to -- I believe, in your prepared remarks, and please correct me if I'm wrong, you mentioned that you're maxed out on capacity in certain parts of the Water business. So just wondering if you could expand on that a little bit? And likewise, in pest, it sounds like these customer trials are going extremely well. So I'm wondering sort of what the S-curve of the implementation of that new technology, your better mousetrap, so to speak, what the timing and pace of that is going to be? And if there are any potential capacity constraints there that you need to get in front of?

Yes. So 2 different businesses. Obviously, it's our Pest Intelligence with the better mouse trap, which are truly better mouse traps. It feels easier to do than it truly is to get that working really, really well millions of times around the world where we operate with the pest elimination. And in the future so Pest Intelligence. We wanted to make sure it was working before we go too far getting ahead of our skis and not delivering the value to our customers would not be the right thing to do.

Obviously, having one of those great retail partners, which is a reference point in the U.S. was exactly what we wanted to do, and it worked. Now we're getting second and as mentioned, the third one as well. I think it's going to take a few years. It's going to take less than 5 years, hopefully much less, but let's see to shift the whole business towards Pest Intelligence. We have a great team with a great leadership and customers that really love what's being done. At the same time, we have digital capabilities that none of our competitors do have. So that should be all positive, obviously, so for us.

In Life Science, you're right, Nick. So we got some capacity limitations in our water business. So within Life Science, water purification, the Life Science business, not for the pharma business directly. Pharma, biopharma, as mentioned, is growing double digit, very strong, very good, really pleased to see that all the work that we've done over the past 2, 3 years since we acquired [indiscernible], Ultimately, it's paying off and really looking some really good momentum and, most importantly, great acceptance by our customers.

And in the second quarter, we had maintenance that were planned in one of our plants in Europe that limited how much we could produce there, and that has a slight impact on our production over there. That plant that's okay. We need to live with it. That's not much to do with [indiscernible] obviously. So kind of business as usual.

Next question comes from the line of Patrick Cunningham with Citi.

Maybe just a related follow-up there on Water. I think the operating income growth was rather modest relative to solid pricing growth and good underlying growth there. I think you cited supply chain costs and unfavorable mix. But I think our assumption was some of these faster-growing markets have better mix. So what was the source of that unfavorable mix?

Scott, do you want to answer that question?

Yes, happy to do it, Patrick. As Christophe noted in his opening, basic and paper have been a drag and that water OI growth of 6% was all due to basic and paper. If you look at the water OI growth, excluding both basic and paper, the sales were up 4% and the OI was up strong double digits. .

The next question is from the line of Shlomo Rosenbaum with Stifel.

If you don't mind, I'm going to ask a little bit more of a 2-parter. First one is just on the organic growth if we're kind of bouncing around at 3% and volume is only kind of 1% here, are you still -- do you still have the same level of confidence on that operating margin target, especially if we don't start to see a material improvement in the volume side? And then just wanted to touch on what you said on pest in terms of morphing the model because we've had a couple of quarters of growth that were lower than what we're used to seeing in that business. Is part of the shifting the model giving you a near-term headwind to revenue growth in that business?

Thank you, Shlomo. Yes, 2 very different questions. So on Pest Elimination, the short answer is yes. The shift towards Pest Intelligence is not [indiscernible] shift, it's a pretty significant shift within our organization. It's new technology. It's a new [indiscernible] model. It's a new financial model. It's a complicated piece, if I may say so to make it work really well. And on top of it, we had a few incidents that we had to deal with, unfortunately as well caring about our team. that's so important for us in the company. So it was kind of behind us.

Now we keep investing on Pest Intelligence because it's going to help us really lead that transformation in that industry in the U.S. and around the world, not just in terms of now the devices in terms of type of technology and business model as well at the same time. So it requires some investments, financial investments, but resources as well at the same time, which all people, obviously, to doing that work.

Generally, we feel good with the trajectory we have on the top line in terms of model as well. So the 20% plus is going to just strengthen with that shift in model in Pest Intelligence. So generally, a very good story. Those transformations are never obvious, and it's not a straight line to have either, but great leadership team, great team executing very well.

And as mentioned before, so customers are very pleased with how it's working because at the end of the day, well, it's aiming to the 99% pest reenvironment that matters.

Now to the first part of your question, my confidence to get the 20% by '27, just keeps getting stronger. If we look at the second quarter, well, with top line growth of 3%, being able to deliver 13% earnings growth and operating income margin up 170 basis points. Obviously, it's kind of a demonstration of what accelerated growth could mean as well for the delivery of the company. And as mentioned, so we have 2 businesses and [indiscernible] will always be a few businesses that are not exactly in a great place and the strength of the portfolio we have as a company here, so this paper and basic industries, well, 85% of the company is growing 4% and 20% our gross engines are growing double digit as well at the same time, and that's where we invest.

So generally, the mix of growth is going to turn positive, and that's going to help us get closer to the 20% quicker as well at the same time. So I can't judge what's going to happen in the outside environment. But generally, I feel really good about 20% by '27.

Our next question comes from the line of John Roberts with Mizuho Securities.

With the balance sheet now in great shape, how would you characterize the pipeline for inorganic growth? It's been a while since the Pure Life deal?

It's been a while end of '21. We did Pure Life. We did few smaller acquisitions in the meantime, which is the bread and butter of our M&A engine, by the way. And sometimes we have a few bigger ones. And you're right. We have a great cash flow, great cash flow conversion, very low leverage ratio and it's going to getting lower, obviously, time passes by. It's putting us in a great position to invest where it makes more sense. And John, we're going to keep investing as we've always done. It's first in dividend, in our business, and we have plenty of opportunities. We talked about innovation on this call. It's on our customers' technology as well in dispensing, in dish machines, in equipment and so on, as we've always done.

And then there is the M&A. I really like the pipeline that we have, very focused on the 3 areas that have been priorities [indiscernible] Water and especially on the High-Tech side, data centers and microelectronics so pubs, in other words, in Life Science and Digital.

So really like the pipeline we have, the capabilities we have at the same time, but we will always remain disciplined as well in terms of how we deploy our capital. So if we find the right things. And as mentioned, there are a lot of right good things out there for us. We will move, and we'll let you know, obviously. And as a lot of [indiscernible] will always be buybacks as we've done in the past 2 years and as we're doing as well in '25 at the same time.

So don't think we could be in a better position right now. So we have a great machine generating a lot of cash, a fortress balance sheet, great opportunities in front of us and priorities that haven't changed for a very long time.

The next question comes from the line of Jeff Zekauskas with JPMorgan.

In the Water business, the organic change was 2%. And I think your Water business grew, maybe volumes grew 1%. Please correct me if I'm wrong. And your overall price for the company was 2%, but it seems that it was lower in Water. So is the challenge for the second half to get better pricing in the Water division? And do you need it in paper and in heavy industry where you're contracting a little bit? Is that the challenge for the second half in pricing?

No, I don't think so. Our Water business has always been pretty strong at driving value price backed by total value delivered, they've invented actually that concept a long time ago. So they know how to do it. They've been good at delivering it same time, we make absolutely sure that we get the value price when we truly get as well so the [indiscernible], the cost savings within our customer operations. So we're not disclosing by segment, as you know, price and volume, but you're more right than [indiscernible].

So with your assumption on water, which makes me feel good actually. And as mentioned before, so water organic growth ex paper and basic industries, well, would be [indiscernible]. So it's a very good story. Scott mentioned as well, and the operating income would be up in the mid-teens as well at the same time. So a really good story.

So for me, Jeff, it's really focusing on what grows fast in water. It's Global High-Tech data centers and especially so microelectronics, these 2 growing collectively, so 30%, very good. The rest of the business is growing nicely. And we have those 2 businesses that are not growing, paper and basic industries. But I think that, that's going to change at some point.

Basic industries is, as you maybe or maybe don't know, it's our steel business. It's our power business, and it's our chemicals business are in there. Well, those ones with what's happening around us with the whole trade negotiations, I think ultimately are going to turn better as well over time. And the paper business is very much related to consumer goods growth as companies grow out there, the FMCG of that world. So those ones are going to be okay. It's never going to be a great [indiscernible], but it's going to be okay as well.

So if I put it all together, 85% is going really well in that Water business, 15%, a little bit more challenged. Margins are really good in the businesses that are growing for us and our growth businesses keep accelerating, especially in the High-Tech sector. So generally, Water will be in a good shape.

The next question is from the line of Andy Wittmann with Baird.

I guess I wanted to ask about free cash flow and just try to understand a little bit more about what's happening here. As I look at it on a year-over-year basis and normalize it for days, like the inventory up to the smidge, receivables are up more than a smidge and payable days are actually extended as well yet the cash flow is down. And year-to-date, you're about 65% of your adjusted net income. I know you always target 95%. And so obviously, the second half is going to have to ramp if this year is going to be a 95% year. So I guess come the question is, do you still expect it to be a 95% year? And maybe what happened in the first half? Or do you see -- did anything happen that's unusual in the first half that we should know about that maybe has you at or slightly below plan for the year?

Thank you, Andy. I will pass this to Scott [indiscernible] more of an expert [indiscernible].

Andy, on cash flow. The high-level answer is on the year, I expect the free cash flow conversion to be right around 90%, which is our historical trend. As you think about cash flow for the year, what you might not recall in Q1 is that we had an unfavorable year-over-year comparison. If you look at Q2, the free cash flows were actually up 17% year-over-year, driven by the great earnings growth. But -- and then the year-to-date down because of that Q1, and we had this really strong comp to last year just due to the timing of cash payments. And then that 90%, as I said, we expect to deliver for the full year is driven by the strong turning growth.

But as you might also recall, I talked about CapEx will be a little bit higher this year around 7%, which is why it's at 90%, maybe closer to 95%, but feel very good about the free cash flow trajectory but because of the Q1, the year-to-date number looks a little bit funky.

Our next question is from the line of Matthew Duo with Bank of America.

Margins in Life Sciences were pretty strong in the quarter. Can we just dive into that a little bit and maybe what's driving the expected quarter-over-quarter drop back towards the mid-teens from the nearly 20% on the quarter itself?

It's 2 things, actually, Matt. When you think about Life Science, i.e., the margin growth in Q2 was especially driven because pharma, biopharma had great growth, and they have the highest margins as well at the same time. So the mix of margins was highly positive in the second quarter. So very good story [indiscernible] that great outcome as well at the same time. Interestingly enough in that business, it's a little bit depending on the deliveries as well that you can have -- that price per pound is absolutely huge in that business. So depending on the exact timing of deliveries, it might be on one quarter or the other one, which is only fine. There is no cyclicality in that business year-over-year, it's pretty steady. But quarter-by-quarter, so you might have some timing differences related to deliveries.

But what's most important is that, as I've shared many times, we keep investing in that business. We are the small agile of the 3 players in that industry saw on the planet and want to remain. So we keep investing in that business. So you get mid-teens type of reported OI margin. The 2 underlying are closer to the mid-20s out there [indiscernible] kind of investing the difference in capabilities innovation, people, R&D in the world and capacity and plants as well at the same time in order to really [indiscernible] business and get to that leadership position that we're looking for as a business here.

So it won't be a straight line to heaven, but a very strong performance. I've always been bullish about that business while the results so far this year are very strong, and they're going to keep getting stronger. So it's a really good story that is getting stronger, but I want to make sure I keep investing as well at the same time. That will have an impact on our OI margin for a while.

Our next question is from the line of Mike Harrison with Seaport Research Partners.

Just looking at the balance sheet and the $1.9 billion in cash on the balance sheet is kind of an elevated number. I know that you have about $600 million worth of notes that are coming due. But any other explanation of why that cash balance is getting so high? And kind of should we expect that to remain high adjusted for that $600 million of notes payable?

[indiscernible]. I'll pass it to Scott, obviously.

Mike, first, I'll just start by saying our priorities around capital allocation have not changed. As Christophe said before, it's dividends, invest in the business and what's left over, we think about buybacks. As you said, balance sheet is in a great position. That leverage is down to 1.7%. And just for reference, our long-term target is around 2x. So in a very good position, as you said, about $1.9 billion at the end of Q2. That included $500 million from a bond offering we did in June. And that was in advance of a euro maturity of about $525 million in -- that we paid down in July. So there was a little bit of a timing from the bond offering on the maturity here.

But still even after that, cash remains high but it's really the fact that we have the strong balance sheet and we like the optionality gives us to create value, particularly in this environment, right? As Christophe said, we get to invest in the business, capabilities, capacity, firepower, innovation. But at the same time, we have a very good M&A pipeline that we'll be opportunistic about but also very disciplined and in a great position to enhance value by investing in those growth engines that you talked about, Water, GHT, Life Science and Digital but [indiscernible] disciplined about it to make sure we drive great returns. So we like the position we're in.

The next question is from the line of Laurence Alexander with Jefferies.

So one question about the gross investments that you're doing on the -- in the 3 growth areas for the 3 priority areas. How do the IRRs and cash paybacks or payback period compare with the more traditional investments that Ecolab would do in the institutional and in the Nalco business in the '90s, 2000, 2010. Can you just give a sense whether there's any material difference in the economics that you're seeing?

So I don't have an exact answer to that. I don't think that Scott has one either, but it's 4 businesses first. And depending on our account, it can be even 5 because it's Life Science, it's GHT, so Global High-Tech with 2 ports, data centers and microelectronics, it's Pest Intelligence and its Ecolab Digital. All 4 of 5 are growing very fast, close to $3 billion, growing double digit, which margins that are closer to 30% than 20%. That's a very good story.

So if margins are over average and as you know, we invest as we go as a business -- as business model principle, basically, well, we should have a return that's higher than the average. That's my rocket scientist math. I'm not the finance guy, but that's the way I would look at it, and that's why I keep investing in those business where I know there will be booming. When we think about biopharma, well, this is the future of pharma. When you think about data centers, where we're growing 30%.

We have technology that no one else has in order to really have data center shift the power that's being used for cooling, which is 40% of the power by the way towards compute. When we think about microelectronics, think about one of the big microelectronics manufacturers in Asia, in the world today uses as much water as one of the largest food company in the world in one year. So you put those 2 numbers together and say, well, Water solutions will be game-changing for that industry Pest Intelligence. We talked about it and Ecolab Digital, that's doing unbelievable work under David [indiscernible] leadership. It's been a year, $380 million annualized business, growing 30% at very high margin. Those are all businesses that are going to be great down the road. For me, I know it's higher than average in terms of return, and it's definitely the right thing to do.

Our next question is from the line of Josh Spector with UBS.

I was wondering if you could size how much you think you're reinvesting in the business today versus what you thought you would do in 2025 6 months ago? And if you could just help us understand kind of where that is going? I guess, in the context that your SG&A is actually down year-over-year. Where is that going? And kind of how do you think about the time line of that payback somewhat similar to Laurence's question?

It's a difficult question to answer here. But you've heard from Scott in terms of CapEx being 1 percentage point plus that we've invested this year. And since it's working quite well, it's maybe something we might be continuing to do as well. In SG&A, it might be half a point. It depends how you define that very clearly. But we want to make sure that it's focused on 3 things. The first one is, say, firepower, which means serving customers. Second is digital technologies. And third is One Ecolab. This is where we invest, how we invest and really making sure that we build those businesses as strong as we can. So I hope it's giving you some perspective on how we're thinking about it. But at the same time, like the Life Science example before, how long now, what's the margin, reinvestment and post investment so that we know what's the long-term run rate in Life Sciences that are mid-teens reported -- mid-20s underlying and while the business grows, that's going to go up as well at the same time, are very focused, very controlled, and we know where we're going.

Our next question is from the line of Jason Haas with Wells Fargo.

This one may piggyback off the last question. But I'm curious if you could maybe give some examples of the cost savings and efficiencies that you've been able to find as you've implemented One Ecolab and some of your other initiatives?

That's a great question. So Scott, who has done an amazing work in One Ecolab, especially the one company part, which is really aligning the whole company behind our customers by leveraging technology, Gen AI in dramatic ways. Probably one of the company is most advanced in that work that's what we hear out there. So Scott, why don't you share a little bit what you did and what you are doing?

Yes. Absolutely. Jason, as you said, SG&A leverage is very good. We drill 50 basis points in Q2, expect to drive that 20 basis points we talked about earlier in the year as we continue to invest in the business. The one thing I do want to know, and I going to take the opportunity. Not every quarter will be created equal. We expect Q3 SG&A to be up a couple of points sequentially, Q2 to Q3, in part due to FX, as you look at FX last year was a favorable item in Q3, it will be unfavorable this year.

But thinking to the core of your question on the savings, what's driving that leverage. It's One Ecolab, which is allowing us to reinvest in the business. As we've talked about, Ecolab is a growth program. But at the same time, there is productivity that we're getting out of it that we're focused on driving this growth with our cross-sell opportunity, which is $55 billion. But at the same time, we're driving great efficiencies as we do that. We're ahead of schedule on $140 million of savings. I would say we'll be a little bit north of 50% of that realized in 2025. Of course, the cost came a little bit ahead.

And driving those savings is how we use our 5 global centers of excellence, right, and create some scalable processes in leveraging that Agentic AI that Christophe talked about automating and augmenting people work, right, which improves the experience of both our customers as well as our associates. So I expect, as I said, the SG&A leverage to be about 20 to 30 basis points in 2025 as we continue to then to reinvest in the business. But beyond '25, that platform from One Ecolab and the digital platform that we're building there is going to help us generate leverage above our historical average, which has been about 20 to 30 basis points.

Next question is from the line of Kevin McCarthy with Vertical Research Partners.

Christophe, I appreciate your bifurcation into the 85% that's doing well and the 15% where basic industries are more challenging. I'm curious as to whether the relative weakness in those basic industry markets may necessitate any new or incremental actions by Ecolab? I'm thinking about portfolio composition, resource allocation, productivity initiatives and the like? Or is it the case that, hey, these are really just cyclical end markets and they'll come back before too long, and it would be a mistake to go down those paths. Maybe a different way to ask the question is, is it purely cyclical? Or do you see any structural elements that may argue for pulling some levers?

No, I don't see any structural issue. And if there were, we demonstrated that in the past that we have no problem of addressing those issues, either ourselves or in better hands as we did with our surgical business in 2024. This is not the case in those 2 businesses. And if I step back just for a second, one of the big strengths of our company of Ecolab is the number of end markets that we are serving, the number of geographies that we're serving as well at the same time, which means that when some are struggling a little bit, well, the vast majority is doing well for some very well like our growth engines, as mentioned before.

So there will not be all our businesses, all our geographies being in the green or at the same time. That would be, obviously, an ideal world. So I see that the strength of the company. And when I think about those 2 businesses, especially in basic industries, when I think about power, it's been a sleepy business forever, and we have very good years. We serve most of the nuclear plants, if not all of them out there, but it's not been wrong for a very long time. Well, this is changing dramatically now because of all the developments in AI infrastructure, data centers, microelectronics and so on there, that requires much more power. This takes time, obviously, to ramp up.

But a business, which I thought had a limited future, I think has now a big future, and we have all the capabilities and even some of the capabilities that the industry themselves do not have anymore because, well, we were the ones and having it and they just reduced their capabilities and leverage what we had in the past, especially in the nuclear industry.

Well, I think that, that's going to be good for us in the future. When you think about our paper business, the shift that we've made from graphic paper, which we are much less -- used to be [indiscernible] our business, its less than 20% today. And if our companies of any indication where we're trying to be a total paper-less company that everything is on digital, well, the business is going to disappear.

And that's why we're shifting towards consumer products, tissues and towels and specialized packaging. I like the innovation that we're making here. We have a lot of signs, a lot of R&D in that field. So we will get to the right place. So in short, those 2 businesses are not candidates for strategic options to use the industry term out there. It's much more for us to bring them to the right place, and we know how to do that. So generally, I'm okay with those.

Our final question is from the line of Scott Schneeberger with Oppenheimer.

I have a question for both of you. Scott, first, just have you had time to consider the one big beautiful Bill Act, the impact most likely on free cash flow? How you're thinking about that, any comprehensive quantification? And then Christophe, a lot of discussion, particularly about some of the basic industry paper software areas that seem, you've mentioned earlier, impacted by tariffs. Could you just kind of address a high level how you're thinking about the tariffs right now, how it could affect in the back half? I know it's very uncertain, so you can't really give one scenario. But what you're thinking about what's on your mind as far as what you may be experiencing in the back half for the broader business?

Scott. I'll pass it first to the other, Scott to talk about the BBB. And then I will cover the other question.

Thanks, Scott. So net overall, it's still early days, but our expectation is the big beautiful bill is going to be a net positive for the company. As you think about it, encouraging investment in the U.S., which is our strongest market, growing really well with good margins. At least to the tax side of it, a bit early to quantify any impact, but I would just tell you where I'm sitting here today. I don't expect it to have a material impact on our tax rate, frankly. But again, that overall expected to be overall favorable to the business. On the tax side, if anything, there be some short-term cash tax timing but not an overall effect on the rate.

So for the second part of your question, Scott, the tariff for the second half, well, they're going to be more impactful by design. It's just a question of time. But as mentioned before, I feel really good with our preparedness, the mechanics as well of it, the full component of it. So on one hand, so you get the [indiscernible] tariffs, how much you pay. So when you import. But we don't import that much since 92% of what we sell is produced locally, which has been our model for a very long time as a company, and we're driving that up.

The second or the price is going up. So for local manufacturers, everybody is [indiscernible] whole idea, obviously, of the tariffs here. And then we mitigate that first by great supply chain work, and I'm really pleased with the team we have in supply chain. And we have the trade surcharge. And if I put all that together, it's a clear net positive in practice in Q2. And when I look at the outlook for the second half year, I feel really good about it. And that's one of the reasons why our pricing is going to go up in second.

As I've mentioned before, I feel really good about our delivery of our 13% or 12% to 15% for the next few quarters and for 2026 because well, we're in a very fortunate place. Momentum is good. 85% of the business or 4% and delivering double-digit operating income at a very good place the macro is good for us in terms of Water for AI -- Water for AI infrastructure -- sorry, I'm going to get it right. Life Science for biotech, productivity in hospitality and in Pest Intelligence and ultimately, our fundamental are really strong as a company.

I'd like to end where I started as well that our conversation feel really good about where we're going, really good about the delivery for the next few quarters, getting to this 12% to 15%, aiming at this midpoint and anything that gets above it because of all the good things that are happening, well, will be shared between investors' returns and investments in future growth and will be totally transparent as we move forward on that journey. But overall, in a very good place, and I feel good with where we're going for the second half of 2026. So thank you to all of you. And with that, Andy?

Thank you that wraps up our second quarter conference call. This conference call and the associated discussion slides will be available for replay on our website. Thanks for your time and your participation, and hope everyone has a great rest of the day.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. You may now disconnect your lines.

All right. We're going to get started here. Thank you, everybody, for joining. My name is Tim Mulrooney, and I'm the analyst here who covers Ecolab. For a complete list of research disclosures or potential conflicts of interest, please visit our website at williamblair.com.

So Ecolab, I mean, we host them every year here, and we're very excited to have them again this year. They're a leading provider of chemical-based solutions for institutional and industrial end markets.

Shares -- so to write this in introduction, I kind of step back for a second, and I looked at the stock price chart. And what I noticed is that essentially since the end of 2022, shares have been on an upward trajectory since late 2022 as the company successfully navigated what was several years of unprecedented direct product cost inflation. And they successfully navigated through that really nicely, and the stock has responded really nicely. And I think that's largely due to the strong relationships that they have with their customers and the strong value proposition that they bring to their customers. That's how you offset the raw material price inflation, you partner with your customers and you navigate your way through that, and Ecolab largely proved that was the case.

So now that they've proved that out that they have the ability to do that, the focus on the company has really pivoted towards growth, towards volume growth and towards them hitting their long-term target of 20% OI margin. And so I'm excited to dig into all of that with you today, Christophe, as well as some of the newer growth opportunities on the horizon.

So very pleased to have CEO, Christophe, back with us today. This is a formal presentation. If there's a little time at the end for Q&A, we can do that. But most of the Q&A, we'll do at the breakout session after this, which is in the Maher room. But with that, we'll get started. Good afternoon, Christophe.

Good afternoon, team. Good afternoon, everyone. Enjoy your lunch. I'll try to be as entertaining as I can as well in that interesting world, obviously, but I like where the company is. As you said, Tim, we're in a very good place with great opportunities in front of us, with a very strong balance sheet, one that we've never had as great as it is even today.

And -- difficult times are good times for Ecolab. We've been 102 years in business. We've seen it all in a way. And every time that the world gets into more challenging situation, we take it as an opportunity to improve the company, to improve our businesses, to improve our relationships with our customers, which have been strong for many, many years as well. And we end up so those interesting times in history in a place that's stronger than what it used to be as well before. So in other words, it's an Ecolab moment for us that we're experiencing as well here.

And I'll go briefly on the cautionary statements. You're familiar with it, obviously, especially since we're talking about the future as well today. For the ones who are a little bit less familiar with our company, our purpose is to protect what's vital. Our ambition by 2030 is to protect 2 billion people from infection and enough water for the drinking needs of 1 billion people. And we do that while helping our customers save operating cost in the P&L last year was $9.1 billion that we had them save and by 2030, we'll see how close to $20 billion we can get as well in the next few years.

We have a huge reach and huge capabilities. We have 48,000 people that are serving over 1 million customers around the world. We touch 1/3 of the world food production, 1/4 of the power that's being generated. We have close to 3,000 people in R&D and digital technology, and we serve this million of customers in 172 countries in 40 different industries, all with the dedicated experts as well serving them. So a lot of capabilities, a very broad reach with a purpose that is game-changing for many human beings and industries around the world.

We're also the world's water company. What we do in water is not just in our water business, where it's close to $8 billion in sales, what we do in our institutional businesses, in hotels and restaurants is also water related. So $10 billion of what we do out of the close to $16 billion is water related, which makes us the world's water company with the most advanced technology, with the biggest reach as well out there and capabilities to really help customers produce more products, better products, safer products, while we're using and recycling water as much as we can, ideally reaching net zero.

We protect the world's most trusted brand in all industries, being in industrial setups, being in institutional hotels, restaurants, being in hospitals, being in pharma, we are everywhere it matters, really protecting people and the resources vital to life, very well aligned with our purpose.

One thing which is really essential to us, we've been in 102 years following our customers everywhere they were going around the world. And today, that's the key reason why we are present with our own operations, with our own people in 172 countries. And we have this blessing in a way that we've built over the years to have end markets from a geographic perspective that are very balanced around the world. We have 3 mega markets, with North America, with Europe and with Greater China, but we are present everywhere around the world as well with very similar margin profile as well. So when economies are changing around the world, ultimately, our overall performance remains more or less the same as well as a company.

This is true when we think in terms of end markets, industries as well, the 40 that we serve, as mentioned before, well, they have kind of similar margins as well around the world, which allows us, depending on how things are evolving, to remain extremely resilient at the same time. 90% of our sales are recurring and 92% of what we sell is produced locally. We didn't do that for tariff reason, obviously, so over history that was really so to secure proximity to our customers at any time. What we do for our customers is essential for them to keep operating. A data center without cooling technology stops, restaurants without warewashing stops, a hospital without sterile operating room stops, and so on. And that was the reason why we put our plans so close to our customers. It became a sustainable way of running our operation. It was a good approach in terms of FX. And today, it's a good thing in terms of tariffs, but that was not the reason why we built that, obviously.

Tim just mentioned as well, our objective to get to 20% operating margin by 2027. It's a commitment I've made 2 years ago. The last few years, we've been improving our margins very nicely. We'll get to 18% in 2025. So this year, I feel pretty good about this one as well. So it's 150 basis points improvement versus last year, and we'll keep on that trajectory until '27. And it's not that we all go home in '27 and stop there. 20% is the next threshold that we want to reach. A large part of the company is already there, by the way, and then we will keep building towards much higher margin numbers in the years to come, which is ultimately one of the key reasons why our earnings per shares have been growing for a very long time.

And even in more challenging times, as you've mentioned as well, Tim before, during COVID, during hyperinflation and all that, we've used those times to strengthen the company and position ourself in order to be even more successful after those cycles. And you can see, obviously, the evolution of our earnings per share growing very nicely over time, long term, especially.

Our financial targets 5% to 7% top line, 20% operating income margin by '27 and then we'll keep building from there, leading to 12% to 15% earnings per share growth. We don't need 5% to 7% to get to the 12% to 15%. This is a third ambition that we have here, the 12% to 15% is really our commitment that we've been delivering for a long time. And we're just getting started.

Why that? First, the macro trends are in our favor. We're going to be much more people on the planet in the years to come. That's a good news, obviously. We'll need more food. We'll need more energy. We will need more water. Unfortunately, that we don't have. We will need 56% more water than what nature can replenish by 2030. That was before AI. With AI started kind of 2 years ago to become really big, the world will need the same equivalent of power of electricity as India and the drinking water needs of the United States in the next 4 to 5 years. So if we thought that we were a little bit challenged from a natural resources perspective, well, it just got a little bit more challenging when we think in terms of AI for the years to come as well. The very good news, we have technology in order to help get the growth while using less natural resources as well at the same time.

The other thing is, I always get that question, so who is Ecolab's competitor? There is not really a company out there that's doing what we're doing, end-to-end for each end market, covering so many end markets in so many countries as well around the world. So we're the leader, the clear leader in a very fragmented global market that keeps growing. It's a very good place to be, obviously.

The third one is the way we provide value to our customers generates a virtuous cycle because our promise since 1923, when we recall the Economics Laboratory, back then was to really help our customers produce better outcomes as in the hotel with guest satisfaction back then at the lower total operating cost by reducing natural resources and labor. That's been true for 102 years. Which means, in other words, that the more they invest in what we do for them, the better off they are in their own operations. and in what they do for their own customers, consumers, patient, whatever or whoever they serve as well out there.

We're feeding as well our future through breakthrough innovation. As mentioned before, we have 3,000 people in R&D and digital technology, all helping, obviously, so to feed our pipeline, which keeps growing. As you can see here, what we call pipeline for us is ultimately the sales that our new products launched within the last 5 years are contributing to our top line. And today, roughly 30% of our sales are from products that have been launched in the last 5 years.

We have some great breakthrough solutions, a few I can share with you. One is helping data centers to move from water cooling to direct-to-chip cooling, where we've invented a lot of technology in order to go water-free in ways that are helping data centers to use much less power to cool, 40% usually is used for cooling and to shift that power towards compute power as well at the same time.

On microelectronics. I'll come back to that as well a little bit later as well, semiconductor manufacturing is a water business. You've got the lithium in water, you polish in water, you print in water as well, and it's all in ultrapure water. It's water that is more pure than 1,000 times what you get when you get water injected in your bloodstream, just to put it in perspective. So when we're trying to help those microelectronics manufacturers to reuse and recycle within the semiconductor plants, well, this is really hard from a technology perspective.

And then we do the same for restaurants with DishIQ, which is a very different technology, obviously, but it's making sure that dish machines, it's a water systems, obviously, so it can be operated, monitored and fixed as well remotely.

And last but not least, because we make sure as well that wherever you go around the world, it's a pest-free environment. Well, it's a hard thing to do. But with digital technology, you can do it much easier at a lower cost with a much better results as well. So just a few of the breakthrough innovation that we're launching in the market.

They're all connected. We've been on digital technology for 30 years. 1991, we invented connected chemistry. It's called 3D TRASAR. In our company, we have 100,000 water systems that are operated, monitored and controlled remotely today, and that's growing very fast, which means that we know how the units are operating out there, what's good, what's bad, what's the best performance, how we can help any customer around the world reach that best-in-class performance that they would like to reach, what's the performance improvement, what's the dollar value that's related to it, and we usually get a share of it as well, which translates into what we call value pricing, which is why we have this strong pricing muscle as well as a company.

We measure it in a very disciplined manner. We call it Total Value Delivered. It's how much do we help you improve your business performance, uptime in a data center, quality of the food in a food and beverage plant, guest satisfaction in a hotel, how much do we help you in terms of cost performance and how much do we help you in terms of environmental impact, water usage, energy usage and waste generation as well. It all adds up to Total Value Delivered, and we make sure that whatever they invest in what we do, they get it back at least in their own operation. This is TBD at Ecolab.

The way we operate, the way we grow within a customer, it's two dimension. The first one is what I mentioned before, it's helping a hotel chain, for instance, or a hyperscaler in data centers to really bring their performance everywhere at every location to their best-in-class location. But then it's at the location level is really making sure that we implement all the solutions that they need. It's a penetration play. You can see for a hotel here, we do the warewashing in the kitchen. We do the laundry for your linen in your room. We do the pool systems as well. We do the pest elimination. We do the food safety. We do guest satisfaction audits as well. All to make sure that ultimately, guests are satisfied, guests are safe, cost as low as they can be and the environmental footprint of that hotel is the lowest possible as well as it can be.

That's driving what I meant before with best-in-class, which has been a new approach for our corporate customers, ultimately to help them understand what's the best restaurant in the world, what's the best data center in the world, what's the best car manufacturing plant in the world. We serve a million of them in 172 countries. We know that, and they want to know it. And this is a huge element of the value we provide to our customers. They can know how far they are from best-in-class, but most importantly, we can help them get there as well over time, which ultimately helps us grow our share of our market, which is $152 billion market. We are $16 billion company with $55 billion of penetration opportunity, which means customers buying everything that we do or could offer them, but not in ways that are self-serving for Ecolab, but in ways that are driving them towards the best-in-class performance, which is the way we think about it.

At the same time, we're thinking about what's the future? What are the new segments, the new industries where we can leverage our expertise, our technology in order to keep growing the company by providing value to our customers? And we have 4 key ones that I'd like to share with you. The first one is what we call our global high-tech business. There are 2 big pillars here, as mentioned before, data centers and the fabs, the microelectronics manufacturers. Life sciences, pharma, I'll come back to that, and Ecolab digital, and I'll cover a few just in a second here.

When you think about AI, as mentioned before, in terms of power equivalent to India, water equivalent to the United States. When you think about that power of India, it's 50 nuclear plants that should come online in the next 5 years. Well, it's not going to happen because you need more than 5 years to build them, obviously. So we need to find different ways to provide that power. But most importantly, to reduce the power that's being used to cool data centers in order to use it on the compute side. Again, 40% for cooling, 60% for power -- for compute. Well, if you can shift that balance, you can have much more to compute, while everyone is building as well the power supply that we all need. We see that for us as an opportunity that's north of $5 billion which ultimately is helping our customers, the hyperscalers and the chips manufacturers to grow faster while doing what we all need in terms of digital technology on our phones, in our companies, at home or wherever you use that.

When you think about the data center, well, it's been for the last 10 years when it really started to grow. It was computers in a room that was air-conditioned. We've been the #1 cooling technology company in the world for 80-plus years. That was a very natural area for us to penetrate, and we did that. But now with the power that's required for those new chips, just air conditioning in a room doesn't work anymore. So we've shifted technology towards direct-to-chip technology, which means you bring a coolant directly on top of a chip, much more complicated. And if you bring together a liquid on a chip, in a high-powered environment, that's not exactly the best combination in terms of risk management.

Well, we've developed technology not only to provide the cooling, but to develop the CDUs, the coolant distribution unit, which is ultimately how you cool the coolant that's ultimately going to the chip. And we have technology that helps manage the fluid, which is something that we've done with 3D TRASAR as well for a very long time. So ultimately, helping drive uptime higher, while reducing the power that's required for cooling and to shift it towards the compute power as well at the same time.

When you think about the fabs, total different technology, but producing, obviously, what ends up in the data center. One fab, in general, requires the water equivalent of 17 million people. That's a lot. It's a water business. And just a few percentage points is reused in a fab, which means that we're coming at the limit of how much water we can get to produce those microelectronics chips. And we have a discharge issue as well at the same time if it's not the right way.

So the way we're working with the semi manufacturers is ultimately to help them understand that the new fabs will have to be designed in ways that eliminate the idea of wastewater, where we use and recycled water all the time. But as mentioned before, it has to be ultrapure water. So that requires a lot of technology to get there. That's what we've been developing for years as well and that we're providing to that industry for them to ultimately provide -- produce more chips, more powerful chips, with ultrapure water that's been we use and recycled as well over and over again. This is a very good deal for them, and it's a very high-margin business for us as well at the same time.

Shifting gear on life sciences. It's a business that we started in 2017, 2018, where we brought our expertise in process manufacturing, in health care, in digital technology to help the life science industry, which is the pharma industry, for us produce safer drugs at a lower cost. It's been a very good story. We built a $300 million business with it, a 30% margin, growing very nicely. It was environmental hygiene, which was a business making sure that where the drugs are produced is a safe environment, clean rooms, processing capabilities, everything that was ultimately touching the drug, but not the drug itself.

In 2021, we made a fairly significant investment in Purolite, which was one of the leading companies during ultrafiltration of drugs. And we've added that to our portfolio. And today, we have the opportunity to make sure that the environment is safe, the product is safe and done in typical Ecolab way that you can produce say products at a lower cost, reducing the impact on environment as well. This is our life science business. It's an $800 million business today, that's growing nicely, very nice margins as well, with a very good future as well within the company.

And we're touching, like it was in a hotel before, every part of the pharma manufacturing plant. It can be the clean room. It can be the cleaning in place. It can be the filtration of the product. It can be the ingredient water. It can be the audits as well that are provided in there. It's the same approach in a hotel or in a pharma manufacturing plant. The technology and the expertise are completely different, obviously, but the business model is very similar.

Last part, Ecolab digital. We've been in digital technology for 30 years when we started in '91, as I mentioned, with connected chemistry. Well, that's been game-changing, except that for 28 of the 30 years, we did that for free. For our customers, it was part of the programs we were providing to our customers. And the last few years, we have shifted our model towards what tech companies are doing. Our customers pay for the hardware, control equipments, sensing equipment, remote monitoring, you name it. They pay for software as a subscription, and they pay for subscription -- for consumption of the subscription software that they are buying as well at the same time. And in the first quarter, we reported for the first time our sales. It was an annualized number of $320 million at very high margin, growing 12%. And it's just the beginning of that whole story to serve the customers that are already using it today. And that's a multibillion opportunity that we have in front of us.

Last but not least, it's helping us improve our impact in our own operations and in our customers' operations for the most part. And I'm really proud that every single year we've delivered on our commitment on how much water we've had save, how much energy, how much food, how much value we've been generating as well so far with customers. We published that a few weeks ago. And we're perfectly on track towards our 2 billion people being protected by 2030, enough water for 1 billion people, while generating operating income, value for our customers as well.

And that leads to great financial performance. You've heard about our commitments on top line, on margin, earnings per share as well, making sure that our cash flow conversion remains north of 90%. That's been very steady for a very long time. A very strong balance sheet and a very clear capital allocation in terms of dividend, investing in the business, and last but not least, share buyback. And at the end of the day, we'll return over $10 billion of cash to our shareholders over the last 10 years. And that journey is going to continue. You can see it's been very steady the last 10 years as well. Nothing is going to change in the years to come. We've done that for 102 years and the story is just going to continue.

So at the end of the day, I really like where we are in an environment that's not an easy environment for anyone, but we're here to support our customers. And the more we support our customers, the better they do. The better we do, the more people we protect, the more natural resources we protect as well at the same time, and that allows us to return as much as we can to our shareholders while at the same time. So good story that keeps getting better.

That was great, Christophe. Thanks for the overview. And I hope you'll all join us at the breakout room. We just have a couple of minutes left. So I'm going to kick it off with a question, which is, yesterday, we had the opportunity to tour the Lowe's Hotel with some Ecolab folks. And I was really struck by example after example of how you're integrating digital technology. I feel like 5 years ago, when I would do one of these Ecolab tours, it was all about the superior chemistry and the superior service. And you guys are emphasizing that, which -- of course, it's still part of the story. But now it's also the -- how you're digitally connecting everything and how the customers paying for that, and it really struck me because I hear digital, but I didn't really -- I wasn't able to connect it as well until I went on the tour, I could see it in person. I was wondering if you could share an example or 2. I know you talked about digital high level, but maybe drill into an example or 2 of how you're really using digital today and what that means translating that into some numbers for us.

It's been game change for us when the industry changed during COVID. For 100 years, hotels and restaurants have been operated the same way, in a way. Not much was changing. The openness from the industry to use more technology was not exactly high. That has changed completely during COVID because most people went to other industries. And at the same time, the consumption habits have changed completely, where 1/3 of people staying in our restaurant are not staying in a restaurant anymore because you drive through, you get delivered or you order from your phone. That was a big impact for the restaurants, for the hotels and for us.

Suddenly, digital technology became necessary and game-changing for that industry. We've been using that in our industrial businesses for a very long time. We've brought it to the hotels and restaurants. And today, well, we can remote monitor what's happening in a dish room, in a laundry room and what's happening in a pool. You think about the pool here, without going too much into detail, people don't always go showering before they get in a pool, a lot of fun things are happening as well over there. Well, you don't want to hear about those things, especially just after lunch. But our technology today, well, you can now, what's the quality of the water in any pool, in any hotel around the world, you can adjust it and making sure that it's always healthy. And it reduces usually the labor that's required for it as well because the hotel needs to do it as well, usually.

While you're in your control room, you can check all the pools around the world, all the dish room around the world, making sure the linens are done the right way as well, which is making sure that guest satisfaction is high, you reduce the cost, and you reduce water and energy usage, while you reduce the labor as well at the same time because that labor doesn't exist anymore. So it's been a big change, and it's the beginning of that journey, but the promising one.

Yes, that's interesting. I appreciate you making that connection. What stimulated you guys to go down this path was the labor shortages that all these hotels and restaurants are facing right now, it's like they don't have a choice. They need to, and you're partnering with them in a real way to reduce that.

And you get better results.

And you get better results. And I imagine -- is there any data around the retention rates -- customer retention rates improve when you implement your digital solutions at a customer? Or is it too early to say?

Interestingly enough, so coming back to the pool, it's the second highest driver of guest satisfaction in a hotel, the pool. So if that's done well. Well, if the pool is closed, that's the bigger problem, obviously. But if it's an unhealthy pool, you feel it. You feel it in your skin. You fill it in your eyes. You feel it with your kids as well. This is the second highest on the list. This is what we do. It's water. It's infection prevention. It's digital technology. It's Ecolab at its best. And that's one example in one hotel.

That's perfect. Thank you. We'll see you all at the breakout, I hope next. Thanks, Christophe.

Thank you so much.