Vontier Corporation Aktie

And welcome to the Vontier Second Quarter 2026 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, August 6, 2026, and a replay will be made available shortly after. I would now like to turn the conference over to Ryan Edelman, Vontier's Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us on the call this morning to discuss our second quarter results. With me on the call today are Mark Morelli, our President and Chief Executive Officer; and Anshooman Aga, our Executive Vice President and Chief Financial Officer. You can find both our press release as well as our slide presentation that we'll refer to during today's call on the Investor Relations section of our website at investors.vontier.com. Please note that during today's call, we will present certain non-GAAP financial measures.

We will also make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to risks and uncertainties. Actual results might differ materially from any forward-looking statements that we make today, and we do not assume any obligation to update them. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available on our website and in our SEC filings. With that, please turn to Slide 3, and I'll turn the call over to Mark.

Thanks, Ryan, and good morning, everyone. Thank you for joining us today. Let me begin with a few high-level takeaways from the quarter. We delivered a strong second quarter with results that came in ahead of our expectations on both the top and bottom line. We see healthy underlying demand across much of the portfolio, particularly in the convenience retail-facing businesses, made important progress on our cost and simplification actions and remain disciplined in how we deploy capital. Our performance this quarter reinforces our confidence in the full year outlook and in the second half growth expectations. Core sales were flat in the quarter, slightly ahead of our guide, driven by upside in Environmental & Fueling Solutions. This performance came against a difficult prior year comparison with approximately 11% core growth in the second quarter of last year.

Adjusted operating margin increased 190 basis points year-over-year, led by strong performance at Mobility Technologies. Notably, after adjusting for tariff refunds in the quarter, we exceeded our expectations. Orders were up low single digits in the quarter, and book-to-bill was above 1, led by strength in Mobility Tech and Environmental & Fueling Solutions. In Environmental & Fueling, we've seen strong growth in dispensers and aftermarket parts. The broader backdrop is strong with customers continuing to invest in site modernization, new store expansion and replacement activity tied to more advanced forecourt and payment technologies.

Consolidation also remains a tailwind as operators standardize equipment across acquired sites. Within Mobility Tech, core growth was affected by the difficult comparison associated with elevated vehicle identification solution shipments in the prior year. Absent that compare, Mobility Tech grew mid-single digits in the second quarter and the first half. We expect this momentum to continue and further supports our outlook for the second half. Demand for our in-store payment, point-of-sale and asset management offerings is robust, which speaks to how our portfolio is aligning with customer priorities. It also speaks to the success of our strategic growth initiatives and new product introductions and our unique positioning in the marketplace.

With respect to Repair Solutions, sales trends continue to stabilize, but margin performance in the quarter was below our expectations and remains a clear area of focus. Put simply, the business is not performing where it needs to, and we are taking actions to address that. During the quarter, we announced a leadership transition at Repair Solutions. Kameron Richardson joined us from NAPA Auto Parts and brings more than 25 years of global experience in the automotive aftermarket and retail industry with a proven track record of leading successful turnarounds. We are focused on the key operational levers within the business and expect the actions now underway to strengthen execution and improve profitable growth.

Turning to capital allocation. We increased our share repurchase authorization to $1 billion and accelerated buyback activity during the quarter. Given the current valuation and supported by our strong free cash flow profile, we continue to view buybacks as a very attractive use of capital. At the same time, we completed the sale of Teletrac and announced the acquisition of EKOS, both of which better align the portfolio with our Connected Mobility strategy and our returns-driven philosophy. Approximately 80% of our portfolio is aligned to end markets that are supported by favorable secular trends and durable underlying demand, particularly convenience retail and fleets. Across these markets, operators facing greater complexity are increasingly investing in a network of connected, intelligent and integrated operating environments. We are winning with customers who are prioritizing solutions that enable productivity, growth and scale, which plays to our competitive advantages.

Our Connected Mobility strategy is becoming increasingly tangible in the business. One example is asset management, where we bring together connected hardware and software to help customers remotely manage and maintain fueling assets across their networks. Year-to-date, connected assets managed through our applications are up more than 20% versus last year. And in Q2 alone, we brought more than 2,000 new sites online for several existing customers. At QuikTrip, a key strategic partner, deployment of our asset management platform across its forecourt has reduced truck rolls for service events by more than 80%. Our value proposition is resonating as operators look for ways to ensure higher equipment uptime, address labor constraints and improve operating efficiency.

The rollout of our next-gen payment kit offerings is in full swing. In Q2, nearly 1/4 of the new dispensers that left our factory were equipped with the updated FlexPay 6 terminal that launched late last quarter. We anticipate this mix to accelerate as retailers prefer a more engaging, common consumer experience and drive cost and complexity out of their payment technology. This not only supports top line growth in Mobility Tech and EFS, but also our margin expansion assumptions for the second half. Taken together, these examples illustrate how our product development and simplification efforts are translating into higher customer adoption and improving quality and margins.

Let me spend a moment on EKOS on Slide 4, which is a compelling addition to the portfolio and an important step forward in our Connected Mobility strategy for our fleet customers. EKOS adds a high-growth fleet energy management business that integrates with our existing fuel equipment and site management offerings. As an existing strategic partner, it strengthens our ability to provide a more comprehensive solution across private fueling operations. This combination is both differentiated and durable. By embedding software into mission-critical fueling hardware, it helps customers improve visibility, control and operating efficiency. That makes the offering relevant as fleets continue to adopt more intelligent operating tools, including AI. EKOS also brings an attractive recurring revenue profile with ARR representing approximately 80% of revenue and growing at a 25% compound annual rate over the last 3 years. The platform connects more than 1 million vehicles and manages approximately 10,000 customer sites, including for customers like Ryder, GFL and XPO Logistics.

As we look ahead, we remain confident in our full year outlook and are raising our EPS guidance. We enter the second half with the business in a strong position. Overall, order trends and a solid pipeline support our growth outlook for the balance of the year. Demand in Environmental & Fueling Solutions remains robust. Mobility Tech is inflecting positive as we move beyond the compare dynamics and underlying growth continues. We see a clear path to double-digit earnings growth this year, supported by stronger operational execution, delivering on our cost savings commitments and additional share repurchases. With that, I'll turn the call over to Anshooman to walk through the quarter and outlook in more detail.

Thanks, Mark, and good morning, everyone. Before discussing the quarter in more detail, I'd like to bridge our second quarter guidance to the results we reported today on Slide 5. There were two notable items in the quarter that deferred from the assumptions embedded in our original guidance. First, the Teletrac transaction closed approximately 1 month later than we had assumed, which resulted in an additional month of contribution in the quarter. Second, we recognized a onetime favorable net impact from IEEPA tariff refunds related to inventory sold in the prior year. Importantly, after adjusting for the Teletrac divestiture timing and the tariff refund, our results exceeded the high end of our original guidance range, reflecting solid underlying execution. Turning to the consolidated results for the quarter on Slide 6. Total sales were $757 million, with core sales approximately flat year-over-year, led by strong performance in Environmental & Fueling Solutions. Adjusted operating profit margin increased 190 basis points, including a net benefit of approximately 120 basis points from the IEEPA tariff refunds.

Our underlying margin expanded 70 basis points, driven by solid performance at Mobility Technologies. We delivered approximately $4 million in year-over-year savings in the quarter ahead of plan and now expect to exceed our $50 million commitment for the full year. The progress we're making on our VBS-led simplification efforts, including 80/20, is showing up in several ways. In EFS, we are nearing completion of our move from 32 to 8 dispenser platforms with the remaining rationalization expected in the second half alongside regional simplification that is consolidating production capacity needs. Recently, we began a new multiyear platform rationalization program across our Mobility Tech businesses to support future productivity savings. We also rationalized approximately 1,400 SKUs in the first half following a Kaizen event.

We are applying these same principles to drive R&D efficiency and optimize our customer service footprint, incorporating the use of AI tools. These actions are helping us reduce structural costs, improve execution and better align resources behind our highest value opportunities. Adjusted free cash flow of $98 million reflects approximately 80% conversion to adjusted net income or around 13% of sales. Turning to our segment results beginning on Slide 7. Environmental & Fueling Solutions delivered core growth of approximately 5%. Demand trends remain strong with healthy double-digit growth in global dispenser sales driven by continued investment and strong demand for new equipment as well as strong upgrade and replacement activity. Segment margin increased 240 basis points, including a 220 basis point tailwind from tariff refunds.

Turning to Mobility Technologies on Slide 8. Core sales declined against a difficult prior year comparison related to elevated shipments of our vehicle identification system solution. That compare equated to approximately $25 million or a 10-point growth headwind in the quarter. Excluding that dynamic, sales in the segment would have increased mid-single digits, which better reflects underlying demand for these businesses. We continue to see strong customer adoption of our integrated payment, point-of-sale and asset management solutions. Segment margin expanded 190 basis points, including a 20 basis point benefit from the tariff refund. Underlying segment margins expanded 170 basis points to approximately 21%.

Finally, turning to Repair Solutions on Slide 9. Same-store sales were essentially flat in the quarter, reflecting a stable demand environment and still constrained technician spend. Demand remains oriented towards products with a clear and relatively quick payback, which continues to support value-oriented technician purchasing decisions. From a margin standpoint, Repair Solutions decreased 180 basis points, including 130 basis point tailwind from the tariff refund. Profitability in the segment continues to see pressure from unfavorable price and mix as well as targeted investment spend in the quarter related to sales and the recent leadership transition. To put the margin pressure into context, the delta versus our guidance framework amounted to around a $1.5 million headwind in the quarter.

Turning to the balance sheet on Slide 10. We ended the quarter with over $260 million in cash on the balance sheet and net leverage at 2.3x. Supported by strong free cash flow and including proceeds from the Teletrac divestiture, we repurchased approximately 4 million shares or $130 million during the quarter, bringing the year-to-date total to just over 6 million shares for about $200 million. As we have consistently said, we remain disciplined and balanced in our approach to capital allocation. At current valuation levels, we have leaned more heavily into share repurchases, which we believe offer the most attractive risk-adjusted return. We also completed the acquisition of EKOS after quarter end. The cash purchase price was $43 million, plus a potential earn-out tied to future ARR growth. We expect EKOS to achieve double-digit ROIC by year 3 with returns approaching 20% by year 5. Overall, our capital deployment in the first half reflects our balanced framework, continuing our portfolio transformation while also returning meaningful capital to shareholders through share repurchases.

Turning to Slide 11 for a discussion on our updated guidance. Starting with the third quarter, we expect sales in the range of $720 million to $735 million, with core sales growth of approximately 5% at the midpoint, driven by mid-single-digit plus growth in both EFS and Mobility Tech. As we have discussed, tougher compare headwinds are behind us, which should allow the underlying growth across the rest of the portfolio to become more visible. We expect operating margin to expand 110 basis points at the midpoint, led by Mobility Tech, reflecting favorable volume and mix, increased productivity savings and an approximate 70 basis point tailwind from the Teletrac divestiture. Adjusted EPS is expected to be in the range of $0.82 to $0.86, representing growth of 6% to 11% year-over-year.

Turning to the full year. The midpoint of the sales range increases by approximately $10 million, reflecting the net impact of acquisitions and divestitures and a modest FX headwind relative to our prior guidance. Our core growth assumptions remain approximately 3% at the midpoint. We now expect operating margin to expand by approximately 100 basis points at the midpoint to over 22%. There have been no changes to the phasing of our cost savings plan with approximately 2/3 of the savings still expected in the second half. Additionally, our margin outlook includes a tailwind of approximately 40 basis points associated with the Teletrac divestiture. We are raising our full year adjusted EPS guidance to $3.45 to $3.55, which represents growth of 8% to 11% versus the prior year. Our outlook for adjusted free cash flow conversion remains 95%, representing 15% of sales.

As always, we've included some other modeling assumptions on the right-hand side of the slide. which have also been updated to reflect the divestiture impacts on the top line and adjustments to below-the-line items. I would also note our guide assumes about $250 million in share buyback and that we have already completed about $40 million in share repurchases quarter-to-date. With that, I'll pass the call back to Mark for his closing comments.

Thanks, Anshooman. We had solid execution in the second quarter, and we are encouraged by what we are seeing as we head into the second half of the year. I'd like to thank the Vontier team for their continued focus, dedication and commitment to deploying our integrated operating model and a culture of continuous improvement. The progress we delivered in the second quarter reinforces our confidence in the growth and margin trajectory we expect over the balance of the year. Underlying demand across our key end markets remains healthy. Order trends through the first half were supportive. We're seeing increased traction on new product launches and our commercial pipeline remains solid. Importantly, the more difficult revenue compare headwinds are now behind us.

We are seeing traction on our cost savings program, which is tracking ahead of plan and provides confidence through the balance of the year. Our integrated operating model, which simplifies the organization and aligns us more closely around our customers and end markets is sharpening our commercial focus and strengthening our ability to deliver integrated solutions. Together with our Connected Mobility strategy and disciplined capital allocation, we believe these actions are building a more focused company, a more durable earnings profile and a stronger platform for long-term shareholder value creation. With that, operator, please open the line for questions.

[Operator Instructions]

Our first question comes from Andy Kaplowitz with Citigroup.

I just want to focus on your adjusted operating margin guidance to 100 basis points for the year. I think you had 130 basis points previously. Obviously, you're including the tariff refunds in Q2 as you disclosed. So can you give us more color on expected margin in the second half across your segments and how you're looking at price versus cost? And maybe any memory chip inflation impact that you're assuming now in the guide?

Thanks, Andy, for the question. So if you look at our guide on an absolute dollar basis, our gross -- our operating margins are down about $4 million, but that does include the benefit of the tariffs of $9 million, so roughly $13 million. The biggest piece of the difference is in Repair Solutions, where we're bringing that number down by $7 million to $8 million. So Repair Solutions will be down about 150 basis points for the year in operating profit margin. In Mobility Technologies, our growth will be low single digits. Previously, we've guided to low to mid-single digits. Operating profit margins will be about 150 basis points up year-on-year versus the previous guide of 200 basis points. In Mobility Technologies, in the car wash part of our business, while the underlying market remains strong, the credit card data on car wash is encouraging.

We are seeing some of the larger migrations from our legacy technology to a new cloud-connected Patheon software are taking a little bit longer and will likely slip out of the year. As a reminder, 90% of our installed base is still on the legacy technology, and there's a pretty attractive return on investment for our customers to move to the new Patheon technology, but it's just taking a little bit longer. On the positive side, our EFS business continues to be extremely strong. We're increasing the guide from low to mid-single digits to mid-single digits. Operating profit margins will be up about 100 basis points in that business on a full year basis. So that kind of bridges the guide.

From a memory chip perspective, like I mentioned on the last call, on last year's prices, we bought about $5 million, $6 million of memory chips. We probably have a high single-digit headwind related to memory price. But at the same time, we're putting in price increases in the market. And from a price cost perspective, we are slightly positive for the first half of the year.

Very helpful. And then, Mark, maybe just sort of focusing on the EFS ongoing upturn. I know you mentioned the launch of next-gen payment helps. How much are new products supporting the continued growth? And obviously, as you know, like gas prices have been all over the place over the last few months, but it looks like the customers are still spending. You still got the focus on national accounts. So maybe you could double-click on sort of what you're seeing and the durability of growth in EFS.

Yes. I'm happy to, Andy. Look, there's no question that convenience store market is in a really good spot with this current macro environment that's underway. Folks continue to build out NTIs, spending a lot of time with our distributors and our customers. The big players out there in the convenience store space are healthy, very healthy, in fact. And they're putting a lot of their capital to work by continuing to building out their successful formats. You can read about that. You can see that. We see the uptick. We know from our distributors that also do installation that NTI, which is new to industry, and also retrofit for the larger and smaller folks is really very, very healthy. They plan out, even though we're a short-cycle business, our book to turn is pretty quick in our business, but they plan out a couple of years in terms of their building out cycles, and there's no abatement of that where they continue to look at their footprint builds out.

I think the other thing that's reading through that we're really happy about is our Unified Payment, some of the new offerings that we've been talking about that we showed in the NACS show last October, November. Those are really resonating. We're talking about bringing those to market. These products are called FlexPay 6, M2-15. It's really our unified payment offerings that are getting uptick, particularly with some of these larger players that are doing those rollouts. We talked about some of the asset management that is really falling into these secular drivers because this is a remote device management capability that helps them with managing uptime, servicing costs, rolling less trucks. So we think we've got a really good fit for our product lines in the market. And I think you see the strength in EFS and continued strength both on the top line as well as margins.

Our next question comes from Jeff Sprague with Vertical Research.

I was hoping we could just drill in on Repair Solutions and in particular, sort of the action items anticipated under the new management change. And what are kind of the key drivers of, I guess, the turnaround you'd expect? And just thinking about the sort of the multiyear slide in margins that we've had there. I just wonder if you could kind of speak to what you view the actual margin entitlement in the business on the other side of the restructuring.

Yes, Jeff, great question. Look, margins are not where we want them to be. We believe they should be better, and we can do better. A couple of key things that the new team is really grabbing hold of and we're really diving into. The first one is on the supplier management side. We're really streamlining with strategic supply chain partners. We're reducing steps in the supply chain and waste. We're also working with our suppliers on a co-marketing program, where that will help us in terms of dollars as well as there's further SKU rationalization that's going to really help us be more agile, bring our cost to serve down as well as improve our inventory costs on the margin side. When you look at the margin progression, we're holding 19% in the back half of the year. That's a step up when you take into account the benefit from the tariff. And so we feel like with the actions in place, the new management team grabbing hold of it, we're really encouraged.

On the revenue side, if you may remember, we ended last year down mid- to high single digits. We've stabilized that. We think there's more room to go. We've done that on the backs of better productivity for our technicians through diagnostics, which are selling well as well as toolboxes. We also have our district management or DM structure where we've upgraded, topgraded, have new talent in for more than 20% of our DMs across the country, and there is a new program that's being prosecuted with the management team to tighten that up. So we think there are a lot of levers here that we can pull. The backdrop remains the way that it has been. Happy to talk about some of those drivers there and some of the KPIs that we watch on that. But we're essentially operating in the same backdrop, improving top line, but definitely can do better on margins.

So just thinking about the margins, I'm sure you don't want to give a specific target, though if you do, I'll take it. But should we just think of like normal incremental margins plus a tick or 2 or 3 as this stuff comes through? Or could we actually see maybe more of a step function in margins as maybe volumes ultimately recover looking forward a year or two?

Yes. I think we're -- what we're guiding to is stability in margins on the second half around the 19%, which is a slight step up. But I do believe there's real opportunity for us to do better, and we'll drive to do better, but I think we're going to offer a responsible guide.

Our next question comes from Andrew Obin with Bank of America.

This is David Ridley-Lane on for Andrew. Just sort of a question on the rationale for the acquisition of EKOS. And also, if I could, if you're giving any revenue contribution, financial metrics on that.

Yes. I'll give some of the color and the rationale for EKOS and let Anshooman talk about some of the numbers associated with it. Look, we're really excited about EKOS. If you may remember, we did a relatively small acquisition called Invenco a couple of years ago. That was a real technology unlock for us that really ignited growth and also margin improvement. And this kind of tuck-in, it's a great industrial tech company. It's got real industrial software that's embedded with our hardware. It's a bolt-on. It is an existing strategic partner with us. So we've worked very, very closely with them, integrating them with our products. And essentially, what it does is it really gives us a higher growth capability by connecting fleet fueling.

So we talk a lot about convenience retail, but think about the same type thing that are needed for private fueling networks. These are fleet fueling networks where they want to put stuff on the same pane of glass. They want better control. They want better cost management of their infrastructure, think about fueling costs and how they're on the rise and getting this, it integrates with our existing fueling equipment. It has site management offerings. It's a comprehensive solution for fleet operators. It's exactly the kind of productivity they need when they face rising costs. And it really is an important step for us when you think about it in the context of our Connected Mobility strategy. This is the Connected Mobility strategy for fleet operators. So we think it's a real unlock for us, relatively small in size, but these are the kind of tuck-ins that we like to ignite higher growth and better margins.

[Audio Gap]

David, from a revenue perspective, obviously, this year stub period is built into our guidance. For next year, fiscal 2027, think of this business as somewhere between $15 million and $17 million in revenue, mainly recurring revenue. And margins next year on this business should be in the mid-teens, maybe mid-teens plus.

Got it. And then just as a quick follow-up, it sounds like some of the lower revenue in the second half of 2026 is more about delays, not to put words in your mouth, than change in the market? You say it's less than half roughly?

So maybe I'll just start. From a total guide perspective, there's really no change in our revenue. The midpoint of our guide is actually up $10 million. Core growth is still at 3%. So overall, there is no change in Vontier's revenue. There's really a little bit of a mix change where we've increased the guide on our environmental and fueling business to mid-single digits. It used to be low to mid-single digits. We've lowered Mobility Technologies from low to mid-single digits to low single digits. And that was really on the backs of DRB, some of the upgrade projects. They're still in the pipeline. They're great returns for our customers, but these are complex projects of migrating their existing software technology from our legacy solution to our new solution, and they're just taking a little bit longer from a close perspective.

Our next question comes from Katie Fleischer with KeyBanc.

I wanted to ask about some of the progress on your cost-out initiatives. It sounds like you've taken out a lot of costs, they might be tracking a little bit ahead of schedule. Just curious how much upside there is in terms of that program and how you kind of think about that in the context of the margin guidance for the full year?

Yes. Thanks, Katie, for the question. So when we started the program, we said it was $15 million in year and the progression I had given was $1 million in Q1, $3 million in Q2, $5 million in Q3, $6 million in Q4. We delivered $1 million more in the second quarter as we've accelerated some of those savings. So it will be slightly above the $15 million for this year with incremental benefits for next year. The important thing is this isn't a onetime take cost out and move on. This is part of our tier business system, a process of continuous improvement.

And it's structural with our focus on product line simplification, our focus on 80/20. And we talked in the prepared remarks that we started a multiyear effort in Mobility Technologies to reduce the complexity and simplify our portfolio from the different variants. We took out as part of our CEO Kaizen that we had early in the second quarter, we took out 1,400 SKUs across the company. So we're continuously looking at ways to continue to expand margin, and it's a multiyear program. We're probably third or fourth innings in it. So a long runway of margin expansion opportunity as we go through.

And that's really -- I used to talk about Mobility Technologies had a lot of margin expansion, and that kind of started to read through in our margins in Q2. Our Mobility Tech margins expanded 190 basis points, 20 basis points was tariffs, so 170 basis points of core margin expansion in that business. And for the back half of the year, we will also have good margin expansion in Mobility Technologies based off a lot of the simplification effort that we're driving.

Okay. That's helpful. And then turning to EFS. So you talked about some of the really strong secular trends there and growth and modernization within C-stores. I'm curious if the growth that we saw this quarter within that business was a result of some big wins with customers or more of just the constant upgrade modernization activity and maybe we should expect that to continue at a more regular pace going forward?

Yes. I think there's -- it's more of a regular pace. There clearly are some large customers that get in the mix, but that's what we're kind of seeing as a pretty regular rollout of that. There's also -- this business is also driven by some regulatory drivers on payment that has always been part of it. That is also playing through. So we -- steady as she goes in terms of the overall uptake in this. We love our competitive position in the market. We love our new product offerings. We love to see the secular drivers in this industry, just really encouraged by what we see.

Our final question comes from Rob Mason with Baird.

Just on Mobility Tech, you already referenced DRB and some of the challenges just to deploy that -- those new systems inside the calendar year. I think there were some other projects that were due to ramp. Maybe touch on just how you think or how you risk managing those being deployed inside the year and whether they appear to be on schedule, pulled forward or just give us an update on kind of the full scope of projects within Mobility Tech.

Yes, Rob, thank you for the question. Look -- the thing that is really important in DRB is our new product called the Patheon product. And the reason why that's relevant is if you look at the industry, the new builds are down year-over-year. We anticipated they would be down. I think they were probably even down probably more than we had anticipated. But what's really driving our opportunity there is Patheon because we have more than 5,000 installations of a product called SiteWatch. And when you look at what the car wash operators need to run a good car wash, Patheon is a great product, and it gives them better productivity. So what we're doing is we're going out there and we're or offering retrofits onto the SiteWatch platform with the Patheon upgrade, and they're getting real productivity.

Look, if you look at some of the data out there, some of the credit card data to see what's going on in car wash and in the current consumer backdrop right now, people are definitely paying for car washes. And we know when one of our customers opens a new car wash, they may open with thousands of subscribers to the car wash system. And a large part of that is due to the Patheon technology. It enables them to get better connection to consumers. It gets better marketing pricing and productivity for that. And so they get an ROI by actually doing that. So to now get to your question, the key is these Patheon upgrades, like what's the pace and the rate of that? A bit slower in the first half than we anticipated based on permitting. By the way, we're less than 10% into the launch on Patheon. So we've got a great runway ahead of us, but a little bit slower uptake than we thought. In terms of our guidance for the back half, we have a good pipeline of these opportunities, and we're continuing to work to smooth that out. So we're encouraged on what we see for the longer term. We just -- it will just be down some from our guide that we gave you earlier.

And Rob, to your point on the other projects in Mobility Technologies, those are actually -- a lot of them were in backlog and actually are progressing extremely well. We're on track. If you really look at the underlying business of Mobility Technologies, excluding that compare issue for the vehicle identification system -- the business grew mid-single digits, excluding that in Q2, and that's our guide for Q3, really mid-single-digit growth. Our unified payment projects are moving extremely well. Also some of the fleet projects that we're working on. And actually, EKOS acquisition is part of a couple of those fleet projects. Those are progressing well. So overall, we feel pretty good about our Mobility Technology business, both from delivering mid-single-digit growth in Q3 and the margin expansion that we've guided to.

I see. I see. And just as a follow-up, the -- your guidance for the intersegment portion of the business has moved around as we've gone through each quarter. My sense is, obviously, that may just be mix shift around FlexPay 6 or FlexPay 4 or -- but you've commented that you've seen pretty good demand on FlexPay 6. So I'm just curious if our certification efforts coming into play there? And if they are, is that something that maybe you work past this year and it doesn't present any kind of issue constraint on your growth in '27?

That's correct. There's some movement based on mix of how much FlexPay 6, the new versions being adopted, we've seen some good uptake in that. Also, there was an update to our transfer price from our original expectations between the businesses as we went through our final analysis on transfer pricing. So that was a little bit -- but that's going to be more stable going forward and also the adoption of FlexPay 6 is just getting more and more and especially the new version. We talked about the new version that we introduced at the end of last quarter. And on our dispenser shipments, there was a 25% roughly take rate of the new version already. So we're pretty excited about the prospects of Flexpay 6 and where the payment technology is headed.

There are no further questions at this time. I will now turn the call back to Mark Morelli for closing remarks.

Yes. Thanks for joining us on the call today. We appreciate your continued interest in Vontier, and we look forward to engaging with many of you over the next several weeks. Have a great day.

Good morning, ladies and gentlemen, and welcome to the Vontier First Quarter 2026 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, May 7, 2026. Replay will be made available shortly after. I'd like to turn the conference over to Ryan Edelman, Vontier's Vice President of Investor Relations. Please go ahead.

Thanks. Good morning, everyone, and thank you for joining us on the call this morning to discuss our first quarter results. With me on the call today are Mark Morelli, our President and Chief Executive Officer; and Anshooman Aga, our Executive Vice President and Chief Financial Officer. You can find both our press release as well as our slide presentation that we will refer to during today's call on the Investor Relations section of our website at investors.vontier.com.

Please note that during today's call, we will present certain non-GAAP financial measures. We'll also make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to risks and uncertainties. Actual results might differ materially from any forward-looking statements that we make today, and we do not assume any obligation to update them. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available on our website and in our SEC filings.

With that, please turn to Slide 3, and I'll turn the call over to Mark.

Thanks, Ryan. Good morning, everyone, and thank you for joining us on the call this morning. Let's get started with a few high-level takeaways from the quarter. Vontier delivered solid sales and orders growth to start the year as we continue to gain traction on our connected mobility strategy. We're expanding our integrated offerings to capitalize on strong secular tailwinds across our end markets. Core sales grew nearly 2%, slightly ahead of our expectations, driven by strong performance in our Environmental & Fueling Solutions segment. Orders were up approximately 5% on a core basis, including strong demand for fueling equipment and key wins in retail solutions. Adjusted operating margin declined 70 basis points below our expectations, reflecting unfavorable mix and timing of R&D expenses. Importantly, the underlying fundamentals of the business are intact, and we are confident in our full year outlook as well as our ability to achieve the $15 million in savings related to ongoing simplification and 80/20 efforts.

We're seeing meaningful momentum in our convenience retail end market, which strengthens our visibility and reinforces our confidence in the growth opportunity ahead. We have market-leading technologies that optimize our customers' operations, unmatched domain expertise to solve high-value problems and best-in-class channels to market. Growth within this end market was led by Environmental & Fueling Solutions with double-digit growth in both dispensers and aftermarket parts. Dispenser demand is strong, supported by the ongoing build-out and modernization of retail fueling infrastructure. The pull-through from advanced payment technology is helping to drive replacement and upgrade demand. As an example of this, we launched the next-generation FlexPay6 outdoor payment terminal in the first quarter.

While bolstering our cloud-connected industry-leading payment security, it features a larger flush-mounted touchscreen along with an integrated card reader and PIN pad. It also enhances our unified payment solution by offering a more interactive consumer interface that helps reduce transaction times and improves engagement at the pump. We're also seeing strong momentum for our innovative technologies inside the store. Retail solutions, part of Invenco brand delivered strong growth in payment, media and point-of-sale systems. The convenience retail end market is resilient even in uncertain economic backdrops. Over the last 25 years, this end market has consistently demonstrated durability through periods of volatility. Higher oil prices have historically been a net positive as higher fuel margins drive improved profitability for C-store operators, enabling them to prioritize modernization, food and beverage offerings and invest in the consumer experience.

Industry data suggests high retail fuel prices typically result in more frequent visits, which creates an opportunity for greater conversion for in-store sales as consumers place more emphasis on value. In prior cycles, higher fuel margins, combined with the trade-down effect as consumers shift toward lower-cost C-store options have created tailwinds to generate more cash flow for C-store operators. In turn, we see robust capital expenditures for multiyear storefront build-outs and retrofits. This is particularly true of larger regional and national C-store chains where we have higher share and they focus on delivering an elevated consumer experience. We're seeing this play out today. A good example is 7-Eleven's recently announced intention to remodel 7,000 stores across North America through 2030, standardizing around their more modern food and beverage focused format. This is in addition to the 1,300 new sites they expect to build over that same time horizon. This kind of long-term investment reinforces the strength of the category and the opportunity for Vontier.

This morning, we also announced an important step in our portfolio simplification strategy. We've announced an agreement to sell our global fleet telematics business, Teletrac, for a total purchase price that values the business at $220 million. The purchase price consists of $80 million in cash proceeds and a $100 million seller's note, and Vontier will retain an approximate 30% equity stake in the business. We've outlined those details for you on Slide 4. The sale marks the completion of a successful multiyear turnaround of this business. At the time of our spin, Teletrac was churning out about 25% of customers with declining profitability and negative free cash flow. Since then, the team has meaningfully improved the business by launching a new platform, significantly reducing churn, accelerating ARR growth to mid-single digits, improving profitability and generating positive free cash flow. This has been a major effort for the Teletrac team, and we're grateful for their contributions. We believe Teletrac is well positioned for its next chapter of growth with better focus and access to capital under its new ownership.

We expect this transaction to close in June, and we'll deploy the cash proceeds consistent with our disciplined capital allocation framework with a focus on additional share repurchases and selective bolt-on acquisitions. Before I turn the call over to Anshooman, I want to reiterate our confidence in the full year outlook. While the geopolitical backdrop added some uncertainty, demand trends remain constructive. We're also strengthening the foundation of our business to drive more profitable growth over time through commercial excellence and innovation and a relentless focus on execution. As we finalize the remaining organizational changes and implement our cost actions, we still expect incremental savings to ramp in the second half of this year. Combined with disciplined capital deployment, we are confident in our ability to deliver double-digit EPS growth.

With that, I'll turn the call over to Anshooman to walk you through a more detailed review of the quarter's financials and our outlook.

Thanks, Mark, and good morning, everyone. Please turn to Slide 5 for a summary of our consolidated results for the quarter. Total sales of $751 million and core sales growth of 1.7% were above our guide, driven by notable strength at Environmental & Fueling Solutions with Mobility Tech and Repair Solutions generally performing in line with our expectations. As Mark mentioned in his remarks, adjusted operating profit margin fell short for the quarter, reflecting unfavorable mix and timing of operating expenses within both Mobility Tech and Repair. We expect full year margins to be consistent with our previous guidance. Adjusted EPS was $0.80, up 4% year-over-year. Adjusted free cash flow was below our normal seasonal pattern and prior year. The timing of our semiannual bond interest payment of approximately $19 million was in Q1 this year versus Q2 last year.

Additionally, Q1 had an extra payroll run compared to the previous year, along with higher incentive compensation driven by the strong performance in fiscal 2025. We expect several of these timing differences to level out during the year, and we expect free cash flow conversion of around 95%. Turning to our segment results, beginning on Slide 6. Environmental & Fueling Solutions started the year off strong, benefiting from solid industry demand and an innovative product portfolio, driving higher new equipment and aftermarket activity. Total dispenser sales increased low double digits on a global basis, led by strength in North America. We saw notable bookings and sales strength from large national accounts, evidence of stable CapEx budgets. Segment margin was flat at nearly 30%, with volume leverage and ongoing productivity actions offset by less favorable mix.

Moving to Mobility Technologies on Slide 7. Core sales declined by about 1% as strong underlying demand for convenience retail technologies was offset by more than a $25 million headwind associated with higher shipments for our Vehicle Identification Solution, or VIS in the prior year. Our commercial pipeline is robust, and we continue to win new business for integrated solutions, including orders for our unified payment point-of-sale and VIS offerings. The consolidated Mobility Technologies segment margin declined 260 basis points, driven by unfavorable mix and higher operating expense. On the OpEx side, we incurred higher R&D expenses in order to accelerate new product launches. At the same time, our cost-out activities are ramping in Q2, giving us momentum for the back half of the year. On the mix side, product and geographic mix impacted margins in Q1, which we expect to recover in Q2 and the balance of the year. When you combine this with stronger volume growth and incremental benefits from our cost initiatives in the second half, we remain on track for solid margin expansion this year.

Additionally, the divestiture of Teletrac will be accretive to margin performance for the segment and Vontier overall. Finally, turning to Repair Solutions on Slide 8. Sales performance was in line with our expectations with progress on our growth initiatives successfully offsetting pressure on technicians' discretionary spending. This was most notable in our Tool Storage, Diagnostics and Power Tools categories. Additionally, we are focused on quicker payback tools that improve technicians' productivity. The lower segment margin can be attributed to unfavorable product mix and a discrete bad debt reserve of about $2 million related to delayed collections caused by the implementation of a new financial system. We're making good progress in collections and would expect to recover a majority of this reserve over the next several months.

Turning to the balance sheet on Slide 9. Adjusted free cash flow of $28 million was impacted by the working capital items I highlighted earlier. We accelerated share repurchase in the quarter, buying back $70 million given the market dislocation. While we will maintain some flexibility on cash, given an increasingly actionable deal pipeline at current valuations, buybacks remain a very compelling use of cash. To address the $500 million bond maturity at the end of the quarter, we used about $200 million in cash on hand to repay a portion of the bond and issued a new 364-day term loan for the remaining $300 million at a relatively attractive spread. We ended the quarter with over $200 million in cash on the balance sheet and net leverage at 2.4x.

Please turn to Slide 10 to discuss our guidance for 2026 and Q2. Beginning with a look at our full year guidance. What is shown here is what our guide would have been prior to the Teletrac divestiture, the impact that divestiture will have on our P&L, landing on our official guide, which includes the removal of Teletrac's results in the last column of this table. Importantly, there are no changes to the underlying fundamentals of our previous guidance, and we are only adjusting our guide to reflect the removal of Teletrac. We are assuming the transaction closes in early June, which means we remove about 7 months of contribution. Following this adjustment, relative to our previous guide, we lose about $110 million in sales, bringing the midpoint of our new range to just over $3 billion. Teletrac has little to no impact on our organic growth, but will be accretive to our margin rate by about 50 basis points. We now expect operating margin to expand by about 130 basis points to approximately 22.5%, which includes the contribution from the $15 million savings initiatives over the balance of the year.

On a gross basis, the transaction will be about $0.05 dilutive to EPS for the full year. However, the interest received from the seller's note and the benefit from share buyback offset that EPS headwind, so we leave our full year range unchanged at $3.35 to $3.50. Our outlook for adjusted free cash flow conversion remains at 95%, representing around 15% of sales. Looking at our guide for Q2 on Slide 11, we follow the same format. We expect sales in the range of $730 million to $740 million, with core sales down about 1% at the midpoint, which implies the first half at roughly flat, in line with the initial outlook we outlined for you on the Q4 call. As you may recall, shipment timing of the vehicle identification system in the prior year drove high teens growth in Mobility Tech, along with 11% core growth for overall Vontier. This compare issue starts easing in the third quarter.

Margins will begin to accelerate in the second quarter, expanding approximately 80 basis points, reflecting lower operating expenses. EPS will be in the range of $0.78 to $0.81, including a $0.01 headwind from the divestiture. As we highlighted on our last call, the year-over-year organic growth rates will look better in the second half, accounting for first half compare issues at EFS and Mobility Tech and the timing of shipments on projects in backlog, which favor Q3 and Q4. As always, we've included some other modeling assumptions on the right-hand side of the slide, which have also been updated to reflect the divestiture impact on the top line and adjustments still below-the-line items.

With that, I'll pass the call back to Mark for his closing comments.

Thank you, Anshooman. We're encouraged by the start to the year and by the underlying momentum across our most important end markets. I'd like to thank the entire Vontier team for their hard work and dedication to delivering for our customers and each other. As we look ahead, one of the most important evolutions underway at Vontier is how we operate the business. Historically, we've operated largely through individual lines of business. Over the past 2 quarters, we've reorganized significantly from the customer back, streamlining operations, raising the bar on operational excellence and becoming a more integrated enterprise. Today, our go-to-market strategy is deployed around 3 core end markets: convenience retail, fleet and repair. This shift is simplifying how we operate and setting the foundation for greater scale over time.

By aligning around our customers, we bring more depth and expertise to enable integrated solutions. We believe this customer-led model strengthens our competitive advantage, improves how we innovate and sell and positions Vontier to deliver more consistent growth, margin expansion and long-term value creation. We believe our connected mobility strategy is the right long-term strategy for Vontier, and we are focused on executing with discipline to convert that strategy into durable top line growth, stronger profitability and greater value for shareholders. We have strong leadership positions in attractive and resilient end markets that offer significant opportunities. That means we need to continue to drive commercial excellence while also maintaining a relentless focus on execution, simplification and disciplined capital allocation. As we do this, we believe we are well positioned to deliver on our commitments and create meaningful long-term shareholder value.

With that, operator, please open the line for questions.

[Operator Instructions]

And your first question comes from David Raso of Evercore ISI.

Two questions. One about the mobility mix moving forward and also the use of the proceeds on the divestiture. On the margin mix, can you help us a bit how you're thinking about the various pieces within Mobility, the growth the rest of the year? Just the margin in mobility was a little bit lower than I would have thought. And you mentioned also some costs involved. So maybe if you can help break out that margin decline year-over-year and again, how to think about the mix for the rest of the year? And then lastly, on the repo, the share count for the full year, it looks like maybe you are assuming it depends on the, obviously, share price, but maybe another $75 million, $100 million of repo after the $70 million guide in 2Q. I just want to make sure I'm thinking about that correctly.

David, thanks for the question. So for Mobility Tech margins for Q1, there were really 2 items that impacted margins. One was mix and mix really was product, customer and geographic mix played out differently versus our expectations and also historical norms. The second piece is higher R&D expenses in the tune of a couple of million dollars. And this was really accelerated spend on launch of new products. In the prepared remarks, Mark talked about the next-generation FlexPay6 products, which brings a lot of customer benefits that we launched, but also the redesign of some of our printed circuit boards for the memory chip shortage working around that, that drove the higher R&D expense.

Coming back to the rest of the year for Mobility Tech, we've already seen in April, the mix normalize back to what we would expect in our historical norms. And also on the OpEx, we're confident that we'll get our $15 million savings. Part of it is obviously in Mobility Tech, and we're seeing traction on some of those saving actions in Q2 as we speak. So we feel pretty comfortable that for the full year, our guide for Vontier is unchanged other than the change for the divestiture of Teletrac. In terms of share buybacks, we've assumed about $150 million of buybacks for the year in the guide. We did $70 million already in Q1. So you can expect majority of the proceeds from the Teletrac divestiture would go towards buybacks at the current share price, buybacks remain extremely attractive from a capital allocation perspective. And additionally, we'll be generating a significant amount of free cash flow for the rest of the year. So that does give us optionality that's not built into the guide.

Okay. So to be clear, the $150 million, you'll have $140 million done by 2Q. So there isn't much baked into the second half at the moment?

Correct.

I appreciate it.

And your next question comes from Julian Mitchell of Barclays.

I just wanted to start with maybe a longer-term question. So if I look at Slide 4, you've done another divestment today alongside a bunch of portfolio changes that you put on Slide 4. But I guess if I look at just the overall kind of history of this since it's spun out, the PE, I think, the first year after the spin was about 13, 14x. Now it's kind of 9 or 10x. Operating margins for the company are about where they were 5 years ago. So just I wondered to what extent the management, the Board are thinking about more radical portfolio options perhaps than shaving off one brand a year, adding another brand? Because certainly, the multiple doesn't seem to be reacting based on the last 5 years to these types of changes. Just wondered, again, the appetite to do something broader.

Yes. Julian, this is Mark. Thanks for the question. Look, I think the way we've internalized the strategy and the pieces of the portfolio, I think we -- as a good example from the Teletrac one, you get accretive margin, you're left with a growthier space with less spend on R&D and a better drop-through. So I think when you take each piece incrementally, the portfolio is getting stronger. And we constantly look at our strategy. I think it's a step-by-step approach. I think the work we put into Teletrac Navman enabled a good transaction here and a good -- a better positioning for the overall portfolio. And I think we constantly look at the portfolio. We constantly look at what are the next set of actions that we think will drive greater shareholder value. And I think what we've got right now with the connected mobility strategy and a good backdrop with secular tailwinds from the majority of our portfolio here that, that strategy is working, and I think there'll definitely be a payoff as we continue to focus on that and improve the results.

Great. And then maybe a short-term one. So I think the operating margins are guided to be up 80 bps or so sequentially, and you have the expansion in Q2 year-on-year as well. Maybe just kind of flesh out how you're thinking about the segment level there, particularly repair, I guess, it looked like some of the headwinds you saw in Q1 in terms of lower price point tools that may be something that persists over the balance of the year just because of consumer wallets and so forth.

Thanks, Julian. And that's correct. So when you think of Q2 margins, our overall Vontier margins will be up 80 basis points. 20 basis points of that 80 will be because of the Teletrac divestiture. So core business up 60 basis points. That increase will be driven by Mobility Tech, which will be at somewhere north of 120 basis points in terms of margin expansion. EFS will also have margin expansion, probably 80 basis points or so, maybe a touch higher. And then repair, I expect will be down year-on-year. Just as you mentioned, we're seeing a higher percentage of the portfolio on the lower price point, higher -- quicker payback items being sold. So there will be a little bit of margin pressure that will continue into Q2. That will start easing towards the back half of the year, where some of the mix really coming into Q3, Q4, especially Q4 last year was in line with what we're trending towards.

And your next question comes from Andy Kaplowitz of Citigroup.

Mark, just back to Mobility for a minute. I don't think the memory chip shortage under inflation has been getting better, but it sounds like you're comfortable around that issue for Mobility. I just wanted to sort of double-click on that. And then obviously, comps in Mobility get easier. I think last quarter, you mentioned a number of wins though that ramp up in the second half. Is that still the case? So you've got good visibility to ramp up? And maybe do you need DRB to ramp up as well?

Yes. So Andy, I'll give a little bit of color on the second half ramp. So first of all, the end market mostly tied to convenience retail. And I think our remarks there on the call is pretty resilient, and that certainly helps the Mobility Tech segment as well. And when you look at it, it's not only a good compare or a better compare for second half, our seasonality is definitely the same. Sales at 48% to 52% as that's our historical average. And then good bookings clearly in the quarter were pretty solid. And when we go into April, we're also seeing really good bookings as well. So I think to your point, we're getting better leverage for the second half. And while we over got a little bit better in Q1 on the revenue side, and we've got cost takeout actions in place that will carry through to the second half, we feel pretty good about the setup.

Yes. I would just add, as you mentioned, the compare does get easier in the second half. If you go back to the prepared remarks, we had over $25 million headwind in Q1, and it's about the same in Q2 tied to the vehicle identification system, which eases into Q3 and has definitely gone by Q4. Importantly, bookings in Q1 were up 5% on a core basis at a Vontier level. A couple of those were larger projects combined for $15 million and majority of that revenue based on our customer schedule is in the second half. So we are feeling incrementally better for the second half as we continue to book and how our compares also play out.

That's helpful color, guys. And then I think you explained the trade-down effect kind of from high oil and gas prices when you were talking about the potential duration of the cycle for C-store CapEx and your EFS growth and your EFS growth in general. But maybe you could give us a bit more color regarding how to think about EFS moving forward. I think growth was even higher than you thought for Q1. Does that higher growth actually continue given C-store behavior such as what you mentioned with 7-Eleven? I think any color would be helpful there.

Yes. With EFS, we're very pleased with our team's performance. We remain bullish on a multiyear CapEx cycle that's playing through, and it's really driven by our innovation and our channel strength, which are both reading through. Dispenser shipments were up low double digits in North America, leading the way with especially strong national account bookings that we had in the first quarter. We expect dispensers will continue to play out strong for the year. We also expect strength in the build-out of convenience stores in North America to continue. So overall, we're feeling pretty good about the business in EFS, and we'll continue to see growth in line with what we're projecting for the year.

Appreciate the color.

And your next question comes from Joe Ritchie of Goldman Sachs.

This is Luke McCollester on for Joe. Just curious if you can share any early data points on customer reception from the new outdoor payment terminal. How is this product fit into the broader connected mobility strategy? And is this a replacement cycle product? Or does it expand the addressable market?

Yes. Luke, this is Mark. So thanks for the questions here. I think one of the things we showed in NACS in October or the fall of last year was unified payment, and this clearly extends our addressable market by providing a payment kit with more capabilities, order at the pump is a great example of that. It is incrementally better than the FlexPay6 that we recently launched and the uptake from our customers has been quite favorable. I think this is an outgrowth of our Invenco acquisition, where we've been able to build off that through integrating that platform. So I think we're seeing this also as an excellent example of the connected mobility strategy at work and differentiation that we can provide through launching new products where we're getting really good uptake from it.

Got it. Helpful. And then within convenience retail, are you seeing any change in the pace of consolidation activity or capital spending plans there in light of the current geopolitical and macro backdrop? And this consolidation kind of tend to be more of a net positive or net negative?

Yes. I think consolidation tends to go in our favor. The people that are doing the consolidators is where we have higher share in the marketplace, and they tend to buy up some of the smaller players where we sort of split share in the market. And so we tend to get more out of that as our -- as the folks consolidating in the industry are consolidating off typically our technology platform. There's no real change to that. I think there's been a backdrop of consolidation that's been sort of ongoing, I would say, over the years. and would anticipate -- of course, some of the prices have changed with interest rates and other things are ebbing and flowing. But I think you could just look at it as a long-term trend where there's plenty of opportunity for consolidation over the next 5 years.

And on the CapEx trend, keep in mind, while our bookings might be shorter term from a book-to-bill perspective, our customers are really planning out 2 or 3 years in advance. They're going through their site acquisitions, permits, build-outs. So they're really looking out 2 or 3 years from a CapEx plan, and there aren't -- oil price volatility doesn't really change their longer-term CapEx plans.

And your next question comes from Katie Fleischer of Key Capital Markets.

Can we talk a little bit about the progress on the internal cost initiatives? I know that R&D is a focus there. So just how to think about incremental savings within that and potential upside kind of balanced against some of those higher R&D costs that you saw in Mobility Tech this quarter?

Katie, thanks for the question. We are very confident on the $15 million in-year savings that we guided to last quarter. We're reconfirming that. About $1 million in savings played out in the first quarter. The Q2 number will be $3 million, maybe a little bit higher and then the balance of it coming in the back half of the year. We're already through some of the savings plans, but I think we're progressing really well to our plans. Q1 was a little bit higher in R&D, timing of the launch of some products. We talked about the new FlexPay6 launch, but also the redesign on some of the printed circuit boards related to the memory chip. We're trying to stay ahead of the supply chain issues on memory chips. And as a result, there's some redesign work out there. But again, we're pretty confident in hitting our $15 million in-year savings target for the year.

Okay. That's helpful. And then on Matco, when we think about those customers recovering, what's really driving the spend there? Is it just delayed CapEx purchases? Is it more customer activity that's driving higher in days? Just help us think about what it will actually take to see a flow-through of spending from customers in Matco.

Yes. So Katie, the backdrop on Repair is relatively attractive. The car park continues to age. It's about 12.8 years going to 13 years. So a lot more used cars out there in the market changing hands. That's good for Repair. The complexity for Repair is good. And the demand for tech and the wages are also strong. So we know from last year, actually, shop visits were up. So we -- that's a great underlying backdrop for Repair. I think the issue that has been underfoot is that the consumer has represented the working class for the shop technicians that buy our tools has had a harder time with their pocketbook. But the areas that we're getting traction is in the areas of diagnostics and toolboxes, and we had a good run of that in the quarter, which is indicative there can be strength there.

And then also more value-added items where they can get more productivity. The technician gets paid based on a standard hour of work if they can be more productive and we say, well, how does the toolbox help with these are these productivity cards that help them on the job site. And so those type things, there's good payback for them. And as we continue to introduce and be more effective at selling those kind of things, even in a fairly rough backdrop, then we can have decent performance out of Matco.

The next question comes from Andrew Obin of Bank of America.

This is David Ridley-Lane on for Andrew Obin. Just sort of thinking about the full year guide here, did your expectations on Mobility Tech, have they shifted a little bit? What are you thinking for organic growth for that segment for the year?

Yes. Mobility Tech, their growth for the year will be low to mid-single digits versus the mid-single digits we said, but it's really on lower intercompany sales. If you look last quarter, we guided to north of $90 million of intercompany sales, and we dropped that down to $80 million. Part of it was every year, you update the transfer price, and we did that in Q1, where the transfer price intersegment came down a little bit, and then there's a little bit of mix between FlexPay4 and FlexPay6 products also that we updated for. So the underlying core business, no change to that.

Okay. And I'm surprised I'm going to be the first person asked this, but the changes to Section 232 tariffs, IEEPA tariffs, can you just give us around the world on what the impact of Vontier is going to be inside 2026 as you see it?

Yes. The tariff remains a very dynamic environment. And there's -- we're continuously evaluating both where we are the importer of record and where our suppliers are the importer of record. We also are taking into account other dynamics that are playing out, for example, the memory chip pricing, oil and gas price and the impact on transportation costs, transportation routes. So net of all of this, while a lot of pluses and minuses, puts and takes, there's no material change to our view for the year, just playing out on aggregate as we'd expected.

Got it. And just since it's been mentioned a few times on the conference call, can you quantify just in broad brush strokes, sort of memory chips like 1% of your total cost? Or is that -- do you have that number handy by any chance?

Yes, I'll give you last year's price or cost on memory chips because I think that's a little bit easier. The market is pretty dynamic. We -- it's in the mid- to high single-digit million dollars. So it's not material from an overall cost perspective, but it's -- every cost we control and manage to the best of our ability.

I know there's -- when you have a small item that's doubling or tripling or quadrupling in price, it sometimes catch you up.

And your next question comes from Rob Mason of Baird.

I wanted to see if you could just relative to the second quarter expectations on core growth in the down 1%. Kind of discuss how you think that may play out across the segments?

Yes. The EFS business will continue to grow. We expect that will be up low single digits for the quarter. Mobility Tech will be down low to mid-single digits on the compare issue. Just keep in mind the $25 million in shipments for the vehicle identification system order last year, both in Q1 and Q2. And then on Repair Solutions, we expect there will be also low single-digit growth, maybe low to mid-single-digit growth for the quarter in Repair.

Very good. Just a follow-up. Mark, just any quick thoughts on the decision to retain a minority stake in the telematics business and how we should think about how that plays out in the future as well?

Yes. Thanks for that question, Rob. Look, we're pleased on the transaction. It's the result of a multiyear turnaround, launching a new product technology into the space. I think we're getting real momentum in that space. I think retaining a minority ownership there also gives us some upside on the trajectory they're on. They ended the year with strong bookings. They got past the 3G to 4G transition in Australia, which was a big headwind for them as well, and that's now in the clear. So we're optimistic also with more focus with the new owner and our partial ownership here and legacy knowledge of that business that we can unlock further value.

Thank you. And there are no further questions at this time. I'd now like to turn the call back over to Mark Morelli, Chief Executive Officer, for closing comments.

Yes. Thanks again for joining us on the call today. We're off to a solid start in '26. We're confident we can deliver above-market growth and in our ability to drive margin expansion and free cash flow. We're proactively managing the portfolio and staying disciplined on capital allocation, all through the lens of creating shareholder value. We appreciate your continued interest in Vontier and look forward to engaging with many of you over the next several weeks. Have a great day.

Ladies and gentlemen, this concludes today's conference. We thank you for participating and ask that you please disconnect your lines.

Great. Well, next up, it's my pleasure to have Vontier Corporation, Mark Morelli, President and CEO; and Anshooman Aga, CFO. So I appreciate both of you coming down here. Maybe start off with a topic that's generated a lot of discussion in the last sort of month or so, in particular, around your software exposure, maybe kind of frame for us the scale of that software business in the overall sort of Vontier revenue mix? And help us understand why you think AI-related concerns are probably not merited in this case.

Yes. Julian, thank you for having us. I really appreciate getting this question because it's something that we're really happy to talk about.

Look, we are not a generic enterprise software company nor are we -- do we have thinly -- thin capabilities in SaaS. Our total software as a percentage of sales is between about 10% and 12%. And the important thing to think about our software as we have industrial software that is tightly linked to equipment. And the best way to think about this, our software platforms is that they control, automate and optimize the physical layer. In fact, they're actually sold with hardware. They work in conjunction with the hardware. And more importantly, this forms a critical application layer that is mission-critical for the people to use it like convenience store operators or fleet operators as an example, or ChargePoint operators, this is how they're doing business. They're doing it through this is actually where the payments are flowing through it.

And so that type of application requires multi-levels of certification like our FlexPay 6, in fact, requires 3 levels of certification. And when our system goes down, you're bringing down all stores that have that capability. So you can imagine how carefully that is guarded and that's the kind of software we do. More importantly, this physical application layer, this foundational layer, what we call it, is also where we aggregate data. It's enabled by AI. We can either embed those in and we have great applications that manage uptime or preventive maintenance like in the hub as an example. But also the -- it's an open system architecture where you can enable applications from AI to tap into it. Of course, you charge an API fee and that enables a very robust innovative environment, but it's not something that's going to be disintermediated from AI agent taking over your application and commoditizing it.

And maybe remind us kind of what are the specific kind of pure software applications, not what's embedded inside the hardware, but that stand-alone 10% to 12%. Where does that sit in terms of the different brands inside the company?

Yes. So one of the areas that we're talking about that you saw in our Investor Day last fall at the NAC show, the National Association for Convenience Store owners show was unified payment. Here's a great example of a LEGO building block of typically it's FlexPay 6 and NFX that enables this backbone of a payment to be enabled whether you're inside the store, doing a transaction, whether you're at the dispenser or the fuel dispenser doing the transaction, whether you're at the car wash or the EV charger, whether you can enable ordering at the pump through food, as an example. It enables media and also loyalty where it's a connection of loyalty. So all of that's software-enabled, but once again, it's just durable software that's part of this backbone that is their critical infrastructure and how they do business. That's an example.

On the fleet side, we have the vehicle identification system, which is a security of payment application system that is a tight linkage between the vehicle and fleet depot. And they -- that -- through that transaction, it's very difficult for that to get hacked. So can you imagine if you want people from the outside just with an AI agent in there running that application on security of payment. The whole reason why they have it and they pay for it is because it is a more secure payment way to get things done. On the drive software side, this is a deeply embedded software platform by which the operators are now experiencing nearly 100% uptime for the adoption of that network. And about 1 terawatt of energy is going through that and about 20% of all drivers outside of China are using that network, but it enables payments, enables customer interface.

It manages the how it backs into the grid, it pays taxes. This is all like a really difficult thing. And the reason why we're getting more customers on it is because it's so difficult to get right. So it's really this foundational layer that -- and by the way, is being AI-enabled for uptime. So we're embedding that into it as an example.

And how you kind of -- you mentioned the AI-enabling aspect. How are you kind of pushing that across the various businesses to make sure that they're helping out customers or getting some value from it in the selling process?

Yes. There's 2 layers to it. The first 1 is certainly how we can enable a better customer experience. I'll just throw another 1 out. In DRB, we have something called no pile-ups where you get into the car wash and you can run a very fast throughput through your car wash and it prevents vehicles from knocking into one another, which is actually a thing. So be careful, Julian. If you're ever in an accident in a car wash, it's actually your insurance that pays but you can actually increase the throughput there. And I wouldn't get into a car wash without that, but it's definitely AI-enabled. We have the hub, which is for underground equipment. We call that environmental that is providing remote diagnostics, and those are a couple of other applications. But we're also getting a lot of cost benefit and pickup. Anshooman, you want to talk about that?

Yes. Especially in our R&D organization. We have over 1,200 software engineers that are 90% plus are using AI as part of the standard work process. We have seen that the velocity of our Sprints or EPX series of Sprints has gone up well into the double digits as we've used AI for cogeneration of code, and we're also using it for automated testing. So as a result, when the velocity of the Sprints goes up that significantly, you have, one, an option to increase the amount of R&D you're doing. But second you can start lowering your costs. And so we are actually going to be reducing cost in R&D, which is part of a $15 million in year savings that we've talked about, where the cost is actually coming out. Another quick example is for our internal IT organization. We're rolling out AI for answering, help desk tickets. So we expect very conservatively -- over 30% of our tickets will be handled via AI without human intervention. And even where human intervention is needed the analysis that you can pull through that used to take 4 to 8 hours can be done in less than 30 minutes. So it really helps with the productivity out there.

We're using AI for cybersecurity, for monitoring, looking at unusual data patterns et cetera. But the next opportunity for us is around our customer service. We have a large customer service organization and using AI enablement for basic Level 1 helped us support for our customers is not only a good benefit for us from a cost perspective, but will also lead to higher customer satisfaction if you can get an instant answer. So there are multiple layers. Some of them are already embedded in our guidance and execution as we speak and some are to come, and that's why we feel there's a runway of opportunity on self-help ahead of us.

Fantastic. And maybe on the very near-term, switching to the sort of overall Vontier company-wide. Since the guide looks a little bit back-end loaded at first glance, whether on the top line or the EBITDA margin progression. So maybe help kind of flesh out why that's the case and the sort of confidence in that improvement?

Yes, Julian. There are a couple of ways to break down our guide for Q1, and we kind of gave an implied model for Q2 in there at our earnings call. One is obviously the traditional way, if you look at it year-on-year, and we do have harder compares in half 1 because of a couple of larger projects last year that drove revenue earlier in the year than typical.

The second way is, if you just look at our traditional seasonality, Q1, Q2, Q3, Q4. And if you really look at 2021 through 2024, those 4 years, we did roughly a little over 48% of our revenue in half 1, which is what we guided to for half 1 of this year. If you back then in those 4 years, Matco Expo used to be in Q1. So if you physically moved it from Q1 to Q2, which is where it has been in 2025 and now in 2026. We typically did 23.5% of our revenue in Q1, which is exactly squarely where our guide is at the midpoint for Q1. Margins also last year was a little atypical where margins in Q1 were the highest all year. That's -- as volume develops this year, normal seasonalities, we get some of the benefit of that. Additionally, the $15 million in-year savings, we're in process of executing those right now. So there will be some benefit in Q1, but most of the benefit starts in Q2 and fully ramps up in Q3 into Q4. So you get some tailwind from that.

And then the additional comfort, I'll say is if you step back to how our end markets are performing and jumping from the segment view to the end market view the 3 end markets we serve. Convenience Retail, our exit rate was pretty attractive. The market remains constructive and innovation is really reading through. And that's why we're growing above market and taking share. So that we expect will continue. Fleets where we have the vehicle identification system, what Mark had also referenced. We had a very large project there last year in the Middle East in half 1, both Q1, Q2. We won another project in vehicle identification system. That delivery will start in the back half of this year. The reason is we have to deliver the proof of concept, the customer pilots it. They go through their certification and then you start a rollout. Again, these are handling payments in a very secure fashion. And if payment isn't working, your store isn't working.

So it takes a little bit of phase, but we have a track record of delivering these projects on time. So we feel pretty good about those end markets. On repair, we saw stabilization of that end market. And we have initiatives in place that we're doing to really help ourselves in that from a volume perspective, and we're guiding to roughly flat for the year in there.

Perfect. That's very helpful, Anshooman. And maybe sort of dial into Invenco a little bit. It's been a very strong growth. How do we think about the sort of trend growth ahead? What's the pipeline of wins looking like in terms of sort of projects that you're going for?

Yes, let me start off with just a little bit of background on what you're seeing currently in the business. So Invenco is doing a great job, particularly in 2 areas, but both of them are thematically around the same thing. We are essentially making investments, solving customer high-value problems around people that are trying to scale the infrastructure, whether it be inside of the convenience store operator, where the large regional, national, multinational oil companies are building out their footprints, buying up smaller players and they're having to manage that network and doing it in a more effective way unified payment that we talked about is a great example of them being able to do that or when we talk about FlexPay and NFX, working for Costco, as an example, to speed up their transactions, those are great examples of that.

The other one is on the fleet side and fleet operator that we also discussed. And so what you're seeing happen with the business is a result of us putting development in place a couple of years ago, and you saw an increase in our R&D expense, but now you're beginning to see those green shoots coming through. And these are also mission-critical capabilities that we're talking about and folks take a bit to digest what -- how they want to go after it and then they roll it out. So it's a little bit difficult for us to tell exactly when in our guidance that some of these rollouts will occur. But I think what you should take away from what you've seen, particularly in things like Q4 is that there is a great runway of these opportunities. Another thematic around this that shows up in mobility technologies as DRB and Patheon. So all of this is innovation-driven growth. All of this is at a relatively early stage in terms of the penetration in the industry for these kind of applications.

And it's also indicative of our differentiation where you look at -- we're providing solutions from being either #1 or #2 in our brands in these siloed ways that are now coming together, and we've reorganized around this last year. We've an organization around convenience retail, where we have a head of sales for Convenience Retail, Chief Product Officer for Convenience Retail, Chief Technology Officer for Convenience Retail, same thing for fleet. And so we're bringing these solutions to market also in a more concerted way so they can also work together. And I think you're seeing that growth uplift as a result.

And so I think sort of what double-digit revenue CAGRs are realistic?

Yes, I think for 2026, we think Invenco is more mid-single digits after 2025 being north of 20% and 2024 being anywhere similar to that. So -- but I think longer-term, this should be a high single-digit kind of growth business because of the innovation we're bringing and the high customer pain points we're solving that are really driving productivity and automation.

And the interesting thing is it's like LEGO building blocks that take a slightly different shape and solve different problems for our customers. We talked about Shell and Chevron in the past where they did a countrywide adoption because it helps them manage their payment complexity. Costco Canada was a slightly different use case for them, where we significantly improved the throughput by speeding up the transaction. And there are other customers where we have a large national account, which is looking at the same payment terminal across to simplify their complexity, but also improve the consumer experience, you can drive down media, you can drive down loyalty and start steering the consumer at the end of the day. So all of these are playing out as we speak.

One of the things that maybe what people miss in this is one thing that is very helpful is that we have a very extensive service network of technicians that know how to work on our products. And in fact, that's best-in-class what's available. That happens through our partnerships on our 2-step distribution model, even though these sales are made direct. And that's also a really important part where when you do these rollouts, they want to see that you can stand behind this with a really strong service network. And because it is like we're seeing that foundational layer that we're providing is so mission-critical. And so it's something as we build this ecosystem out that we can continue to add to it and particularly because we have such a strong service network.

And then drives and telematics came up a little bit at the beginning of our discussion. How satisfied are you with the sort of turnaround effort as it was telematics? And is that kind of steady state and growing decently. And then drives, what should we expect there kind of medium-term top line growth?

Yes. So on the telematics side, we had to get out of some technology debt. We've launched TN360. Then we also ran into some countrywide transition from the 3G to 4G network and when telecom companies were cutting over on a countrywide basis, we had some churn as a result of that. And I think all that's behind us. Last year, we grew operating profit by 50% for the first time, cash flow positive. Churn rates have dropped. We had a really great bookings in Q4. We started this year really strong. So I'm glad that those things are beginning to come together. It's well below fleet margin. So we have real opportunity there for uplift. On the drive side, this is -- when we bought it at its infancy, we've really moved that into the #2 player worldwide with plugs under management. We're seeing some really steady growth. It's still -- if you look at EVs, they're still relatively in their infancy in Northern Europe, Nordics, clearly, U.K., it's -- we're the market leader there and adoption is going really well.

But in the U.S., it certainly had a slowdown. But we believe EVs are here to stay. We think this is a very sticky way by which operators of charging networks have to be able to manage their networks and we continue to get really good growth out of that business. And as a consequence, if you look at also what's going on in fleets and convenience retail, particularly on the convenience retail side, a lot of these folks sit on the right street corners and for them to incorporate EV into that into their offering is kind of a no-brainer. We saw this actually in areas which are more mature on EV charging and they want to have the benefit for the consumer to accrue to the people that own that property, not necessarily just the ChargePoint operator. So we've definitely seen a trend where the convenience store operators are also getting into that business.

So I think it's got a long road for EV. I really like the position that we're in because we don't have to play political football when it comes to our guesswork, whether we know who's going to be in favor and which incentives are going to be in favor. We're selling a lot of high-flow diesel pumps right now because contractors are using those kind of trucks and they're servicing your neighborhoods with plumbing contractors and yard contractors, and they're driving a lot of diesel vehicles. But at the same time, we're advancing our EV charging network in areas of the world that appreciate that.

And I think the important thing, Julian, is not to be able to guess what is going to be in favor, but to have the right portfolio and do it at the right return on capital. I mean, we're doing this in a way that we're in the right profit pools that I think are sticky for the long-term, and we couldn't have said that about the portfolio 3, 4 years ago.

And you mentioned the aspect of some good revenue synergies across the business. If you think about the total kind of gas station pad and C-store attached there and so forth, how are you thinking about the Vontier firm-wide dollar that's addressable or dollar content per station?

Yes. So I think our -- the way we organize in the back half of last year really gets to your question because we see a lot more synergy by bringing our siloed solutions together and selling a lot more share of wallet. We know that after a couple of hundred thousand dollars we might have by selling dispensers and underground technology can be enhanced a lot when you look at all the other offerings that we have around car wash, point-of-sale, unified payment, new offerings on the hub. And we can get a couple of hundred million dollar uplift by fully exploring our share of wallet opportunity there.

And our new organization structure really helps us get at that. We have a similar kind of opportunity on fleet and fleet operators. And now we've organized around that. And then there's a third dimension is go look at developing countries versus developed countries. A lot of developing countries have a fueling kiosk. They might have 2 dispensers. They have a person with a long stick, Julian, that tests the level of the fuel with a long stick. I mean this is far from the modern convenience store experience with automatic tankages and having a convenience store experience. And when you start measuring the dollar content uplift, now I don't think this is a 2-year thing. I think this is over a 10-year plus thing. There's a major uplift in the content. And by the way, it's more sustainable. Governments are very interested in the sustainability of this. I don't think leaching fuel into your groundwater is political football anywhere. I think pretty much across the globe, governments are really interested in that.

And the other thing that is really tied to is payment security. Governments and people are really interested in that because fuel theft is a really big thing on a global basis and that is responsible for a lot of illicit crime rings that are involved with that kind of thing. Governments want to break that down. They also want their share of the tax revenue and so none of this is -- what we're talking about is political football. It's all about providing better, more sustainable solutions that the public is really interested in, and it creates great uplift for us. There's great regulatory drivers that we can able to latch on to, great margins provided and I think great business model for the long-term.

Fantastic. And then on the repair side, you had very high margins, just a few years ago, sort of bottoming out at 20% plus right now. What do you need to get the repair margins back to those prior levels?

Yes. Let's break down the margins from the mid- to high 20s down to the low 20s right now. So if you look underlying, the gross margin was around 50%, it's still the same. So it's not that we've discounted or we've lost price or cost has gone up, our gross margins are intact. If you look at our SG&A at that level at those years earlier years, it's relatively flat despite inflation. We managed that. So really, there's 2 aspects that's impacted profitability. One is the volume deleverage as we've had 2 years where volume came down. It came down at that roughly 50% gross margin.

And the second was post-COVID when the amount of stimulus that was put in and with people don't have anywhere to go, personal savings went up and the delinquency rates were at the lowest they've ever been and write-offs were the lowest they've ever been. We've seen delinquency and actually the write-offs move to the higher end of the range, but they're stable 2024 to 2025, they haven't gotten worse, and we're managing that by having a better book of portfolio, more stringent underwriting standards. But over time, they'll start shifting back. Really for us, as this business starts growing, the drop-through or the leverage on that is going to be pretty darn good because the infrastructure doesn't need to grow to scale that.

And then also with time as we continue to focus on improving our underwriting standards, be a little more stringent and that starts leading through the portfolio as the portfolio mix keeps shifting. But also as ultimately, we aren't counting on it, but ultimately, as the economy for the lower -- the working class consumer improves, we'll see some benefit. But really for us, right now, it's -- we're excited that we're seeing this year, we expect will be relatively flat from a volume perspective and that should hold margins also relatively flat.

Great. And so lastly capital deployment, how are we thinking about priorities there?

Yes. So our capital allocation policy is unchanged. We say it's dynamic because we will always go to what the highest return option for our shareholders. At our current valuation, stock buybacks are very attractive. And we have an internal model where we look at our high confidence plan over the next 2, 3 years and say, based on that, even keeping the same multiple, where should our stock trade and what's the return, and we compare that against acquisitions. So buybacks remain very attractive. At the same time, our M&A pipeline, we continue to work. We have -- it's strategy driven, but it's also very focused around making sure we get the returns.

So it's -- usually, you have to get the seller and the buyer to mind to meet and sometimes we take a shot at the goal, but the deal doesn't close because of that, we're very disciplined, and we're committed not to overpay for acquisitions by doing right.

I think, Julian, about the only way we can truly demonstrate, we believe that we're trading at a discount multiple is by really committing to buybacks. And I think we've done that. We'll continue to do that as we feel there's a real opportunity for our multiple.

Fantastic. And with that, we'll switch to audience response survey questions. So the first 1 is around sort of current ownership. Sort of fairly even.

Secondly is around current bias or kind of attitude to the stock. That's the next question. So neutral-ish.

Third question is around EPS growth for Vontier versus the sort of multi-industry average? So in line-ish.

Next question is on usage of excess cash? Sort of bolt-on M&A.

And then last, penultimate question on the valuation multiple. Where should the stock trade on kind of year 1 PE? Sort of mid- to high teens.

And then last question, what's the biggest anchor on the valuation today. Organic growth.

Good. Well, with that thanks so much, Mark and Anshooman. Thank you for being here.

Thank you for having us.

Thanks a lot.

So we're very excited to have Vontier Corporation with us today. We've got Mark Morelli, who is the President and CEO; and then Anshooman Aga, who is the SVP and CFO.

So guys, as I kind of walk over here, I'll start with my first question. I think you guys have talked about Connected Mobility for a while now, and it does seem to be gaining additional traction, particularly in the year 2025. I think we've seen how Invenco seems to be helping to bridge your 2 segments, 2 larger segments in EFS and Mobility with innovations such as FlexPay 6. So could you talk a little bit more about the progress you've made? How the solutions you're offering going forward, different from what exists today?

Yes. Thank you for the question, Andy. Thank you for having us. Look, I think '25 was a good proof point year for the Connected Mobility strategy as you asked in your question. And the reason why is that, really, for the first time, you're seeing some of our innovation read through at scale. And a great proof point of that for us was our investor event, we had at the NACS show, NACS is National Association for Convenience Store Owners, which showed real concrete examples of how we're solving high-value problems with some of the products we're introducing.

But this is -- it is a point of a departure for us, if you will, because when we spun, we had a bunch of decentralized operating companies. We spun with what we had. And we used to talk about our business the way we ran our business, which was in these very discrete siloed businesses that didn't necessarily have a lot of connected tissue between them. And if you look at the progress that we've made, we've really oriented our business into 3 verticals, Convenience Retail being the biggest, where overall, 70% of our businesses really rely on that. And then our Fleets and Fleet Depot and Operators, is about 10% and 20% is in Repair and Repair Solutions. So those are really centered around the Connected Mobility strategy. And more importantly, last year, we did a reorganization around these verticals so that we bring to market our solutions not in a siloed fashion, but also in an integrated fashion.

And we're really excited about the setup for 2026 because not only is the strategy differentiating with our positions being #1 or #2 in the market for each one of our product offerings that we have, but the way to bring the Connected Mobility strategy forward through our new organization that is really centered around the customers in these 3 verticals really enables us to bring these integrated solutions forward.

I think FlexPay 6 and iNFX is a great example, where we talked about Unified Payment where each of our technologies can work together to accrue to the same payment system architecture that makes it a lot easier for our customers to be able to manage their infrastructure and enable things like loyalty. So we're really excited about the progress we've made, and we're really excited about the setup we have for 2026.

That's helpful, Mark. And then on the EFS and Mobility side, as these connected solutions become a larger share of the mix. How are you thinking about pricing over the next couple of years? Are you seeing opportunities to expand value-based pricing as customers adopt more of these integrated solutions?

Yes. So we operate in competitive markets. They're also very disciplined markets, and we've been able to maintain price cost ahead of that curve. And as we bring these other solutions to the market, they really enhance productivity. They grow our addressable market opportunity at a healthy rate at really good margins.

Got it. And then maybe let's click on 80/20. Like you guys have talked about 80/20, I think since 2020. Maybe you don't get enough fanfare on it, but you've significantly reduced fuel dispensers from, I think, 32 to 14 and software platforms from 30 to 20, and you've talked about further room to go. So I understand that you're guiding to greater than 60% incremental margins for '26, which seems pretty good. But you've talked about sort of a normalized still 30% to 35% incrementals. So is that conservative? Does that not anticipate bigger productivity improvements? Can you talk about sort of where you are in the process?

Yes. We're very proud of the 80/20 journey we've gone through so far. 80/20 is a very important part of the Vontier Business System and Vontier Business System is how we do what we do. We've really incorporated the 80/20 thinking in multiple layers of how we go about doing our business, starting off with portfolio. We've made decisions around portfolio based on 80/20, for example, we, just this past year in 2025, got out of our European Services business and really followed the U.S. model where we're servicing our customers, where they're rolling trucks through partners, but we're selling the higher-margin spare parts.

We also got out of oil and lube point-of-sale business. And we added Sergeant Sudz, which is part of the brains of the car wash where we now have the whole brains of the car wash. Also, when you go down to the SKU level, we've been rationalizing our portfolio from a SKU perspective, you gave the examples of going down from 32 dispensers to 14, reducing the number of software platforms and that has material benefits for the business. For example, we've already taken out 1 million square foot of real estate. It gives us leverage as we have more standardized components from a supply chain perspective, both from a pricing and from a cash flow perspective.

So we're going to continue to see these benefits. Next year's margins are greater than 60%, as you said, very attractive. But continuous improvement is part of our culture. Lean is a journey we're on. And from a longer framework perspective, 30% to 35% incrementals are still valid. Obviously, we are never happy with our results. It's the constant drive to get through breakthrough performance. So we'll continue to try to do better, but 30% to 35% is the way to think about it longer term.

You've got to set a reasonable bar, Anshooman. So maybe just like you also -- you have simplification savings that you've talked about, $15 million, I think, that you're targeting for '26. And a lot of it comes from lower R&D spend as you've made improvements in the velocity of product development. I think you guys have talked about using AI to do that and maybe been one of the early adopters on AI. So maybe talk about what you're doing from an efficiency standpoint in that respect?

Yes. Let me start with this, and Anshooman can certainly jump in here, too, with some examples. But look, the AI journey for us really started, both in 2 camps. One is the productivity, which we'll elaborate on a little bit further, but also how do we help our customers do business better. And in both those camps, we really started with some pretty broad-reaching piloting experimentation going back a couple of years. And now what you really see is really deeply embedded into our industrial software, some capabilities around AI that are really being valued, but on the productivity front, you want to give some examples Anshooman?

Yes. So over 90% of our software engineers, and we have over 1,000 software engineers as a company. Over 90% of our software engineers are using AI in their day-to-day work. It comes to cogeneration of code where we've significantly increased the velocity of the R&D efforts. It also is coming through an automated testing. We're using AI for all our testing, and we've seen the cost of poor quality go down by 20% to 25%. So really -- when you look at what we're doing with higher velocity, we measure EPX, which is a series of sprints from R&D perspective.

We've seen well into the double-digit increase in the velocity of our EPX or Sprints. And so you really -- in the beginning, you could speed up R&D efforts and bring products to market faster. And with our integrated offerings like Unified Payments, we've really seen traction. But at a certain stage, the incremental velocity starts converting into savings, which is what we're going to start seeing this year in our results. So we'll see R&D velocity continue to increase, costs go down and fall to the bottom line. But we're also using AI in other aspects of our business.

For example, we're basically in the process of rolling out AI for internal IT help desk support. We conservatively expect 30% of all tickets will be handled by AI, taking out human intervention. We're using AI in terms of cybersecurity. So the benefits of AI are going to continue to compound for us as we continue to look at new ways to get more efficient, drive more productivity. And then as Mark said, also continue to embed it in our products to provide better outcomes for our customers.

That's helpful. And Anshooman, just to get it out of the way, your bookings were up low single digits, exiting Q4. You're guiding at 1% core growth, I think, from Q1 '26, which seems to line up with your bookings. But you're guiding to 3% organic revenue growth of 26%. So do you need to see a bigger pickup in any of your markets to get that higher growth? And could you talk about what you're seeing so far in Q1 with the understanding that you did just report it.

Sure. So when you really think of most of our products that we sell, book-to-ship cycle is not that long. But when you really step back and really understand our customers' cycle where they're buying these products for, these are longer-cycle projects. So some of our customers are actually planning out the 2028, 2029 CapEx plans right now because they're in the process of building out new stores, renovating existing stores, building out new car washes. These are longer cycle projects that we're selling into, just when they place the order to us to the time we ship it out is pretty short duration.

We also had some wins in 2025, which -- both around payments and the vehicle identification system, which serves fleet customers that will add revenue in the back half of the year. And -- so we feel pretty good about it. January was actually a very solid month of bookings for us, just in line with our expectations. So we had a strong start to the year. And we're feeling relatively good around our guide for the year. We also were at the recent NACS event meeting with a lot of the leadership of our customers, and Mark can probably add some comments from there.

Yes, this was what they call a leadership forum. This is where C-suite officers from the convenience store operator space come and we have the opportunity to meet with some of the more blue-chip names in the space. And one of the questions that we always want to understand is what's their visibility on their growth plans, whether that would be new-to-industry sites. So they're building out new storefronts, whether they're scraping and rebuilding on that, what's the M&A activity for buying up sort of the mom-and-pops.

As you know, the mom-and-pops are about 60% of the overall industry itself in North America. And the area that's difficult for us to show to investors is that we are relatively short cycle in our bookings, as Anshooman said, but the visibilities folks have in their planning cycle is pretty long term out. I mean they're building out their footprints for 2028 and 2029, in terms of the real estate that they buy, in terms of how you get permitting for sites. And this is pretty robust in terms of how they're thinking about growing their successful storefronts. And these folks are winning in the marketplace. So when you look at what's really driving our growth, it's not necessarily the total growth in the industry, but it's the growth in the segment of this industry that we're serving, which is the successful regional, national multi oil -- national oil companies that are building out the successful storefronts, and they have really good secular drivers behind them, and that creates a level of comfort for us in terms of what we're bringing to market and the anticipated adoption rates.

Also, I'll add, having had the opportunity to sit in with Mark on some of these meetings. It's really their pain points which we're serving through our integrated offerings that really came across, and that also gives us confidence that they'll continue to deploy solutions like Unified Payment.

And so guys, I wanted to ask you sort of a related question, right? Because you're -- if I look at Environmental and Fueling Solutions, you're guiding to low to mid-single-digit growth. But the last couple of years, you did 7 in '25 and 6 and '24, a [ 50%] growth. So maybe talk about what's contributed to the higher growth. I think you kind of answered that, Mark. It seems like Connected Mobility, Integrated Solution, all that good stuff. But why shouldn't I think that this is a multiyear cycle. It seems like...

Well, I think we do believe it is a multiyear cycle. I think the uptake on the Integrated Solutions that we're offering is clearly there. I think real evidence for folks is go back, look at what we broadcasted from our NACS investor event last fall and some of the real concrete examples, that's what we're talking about, is Unified Payment order at the pump a digital hub for remote monitoring for underground equipment, new innovations around the automatic tank gauge for the 450 plus new horsepower. I mean all of these innovations are providing real growth, 6% on EFS as we spoke about with overall mid-single-digit growth last year in dispensers and low teens growth for Environmental, which is the underground.

And so I think we're really showing legs to it. I think we're offering responsible guidance. Some of these orders are large because now you're talking about large technology adoptions for folks. And these have been a little bit harder to exactly call the timing on some of those order uptakes. That's also a bit of a difference in the business model that we've had historically. We're not selling no replacement dispensers here, you're really doing larger technology infrastructure rollouts with people like we did with Shell and 13,000 sites, 8,000 sites with Chevron as an example, or Costco Canada, which was a large rollout of FlexPay 6 within iNFX.

And so as we sort of predict the timing there, we've also had India tenders that were part of that growth last year, and those tenders, how they come to market, can also be a little bit uneven. So I think the backdrop is really strong on a year-over-year basis. And I think we feel really good that you're seeing real proof points on growth. We're at industry average or better for MI. And I think we have certainly opportunities to do better on that, but it certainly has to be responsible guidance that we're offering based on the timing that we see.

Right. So you're reserving for timing when you put it in low single digits as part of low to mid basically.

Right.

Yes. Okay. And then turning to DRB. The turnaround here seems to be pretty encouraging, first in Q3, with low single-digit growth and high single-digit growth in Q4. So to start with, talking about the 60% recurring revenue, particularly with continued Patheon adoption. You've just been at NACS as you said. So can you give us a flavor of what you heard about existing potential customers on that side and remind us where current penetration rates sit with that?

Yes. So we really have 4 streams of recurring revenue when you think about it. We have the software subscription. We have maintenance and support. We have aftermarket parts and we have payments. So even if the tunnel newbuilds is flat or like last year, it was down slightly, their installed base is growing. So as the installed base grows, you're going to continue to grow your software subscription, you're going to continue to grow your maintenance aftermarket parts and your payments revenue that you're generating.

On top of that, you layer on Patheon. And Patheon, just as a reminder, is our cloud connected solution moving old technology from on-prem to the cloud, but also adding significant functionality which provides benefits of simplifying operations for our customers, but really adds revenue. We actually looked at over 150 sites, over 15 customers for those sites and benchmark that with our legacy solution. And our customers have seen an uptick of revenue north of 10% based on our new platform.

And the penetration of Patheon is about 10% in the market right now of our installed base. So we have a long journey ahead of upgrading our installed base. And the good news is with the additional functionality comes additional fees for us, the recurring revenue on Patheon is higher. And as it drives more revenue for our customers. We get a small cut of the transaction, which drives higher payment revenue for us, already a win-win for both our customers and us. So we see a long opportunity of potential growth in the car wash market based on our market position and our technology and innovation.

Got it. And then Anshooman, just on the other 40% of DRB. I mean you just talked about ton of builds being relatively flat. There are some tailwinds out there. Rates are obviously a little bit lower, accelerated and depreciation under OBBBA. Are you seeing anything in the early stage project pipeline that would suggest that you begin to get better on the tunnel side? And how should we think about the those projects, converting into orders, I think there's typically a 12- to 18-month lag tied to customers dealing with permits and stuff.

Yes. We don't have any assumption on uptick based on the Big Beautiful Bill in our guidance. When you really think about at the interest rates and the lower tax rate or accelerated depreciation, is definitely helpful for a build-out of new tunnel car washes. But really when you think about the duration, our customers, it will take them roughly up to 4 months for site acquisitions, then you go to permitting and zoning which could take 8 months, then construction 4 months, and then basically the installation of the equipment on site.

So it is a longer cycle. So by the time we get our orders, it's towards the tail end. So I would expect more of the benefit to be in 2027 based on the cycle of the build-out of carwash. But our customers that -- our good operators continue to build out carwashes, but also going back to the Patheon opportunity, there's the opportunity as they focus on running better car or existing car washes and improving the revenue yield on those car washes, we've proven with our Patheon solution that helps drive revenue for our customers. So we actually like where we are positioned in the car wash space.

That's helpful. And then just focusing on Invenco for a bit, even with tough comps in the first half of '26, you've reiterated the business should still grow in '26. So I think you've talked about significant recurring revenue after delivering these large equipments to -- significant equipment to large customers. So can you unpack that for us. And what gives you visibility toward growth? Do you see any other large rollouts like the original Shell and Chevron deals?

Yes. When you really think about the Invenco part part of our business in Mobility technology. There's growth coming from 2 aspects. The first aspect is Unified Payments. And just as a reminder, Unified Payments is the actual payment terminal it might pay outside, which it could be on the dispenser, but also moving more and more why do they have different payments on the car wash. Why do they have a different payment on the EV charger. And also why do they have different indoor payment terminals. So it's bringing together all the payment terminals.

One, it reduces operating costs because it's not only the cost of spare parts, you have to keep getting because of regulation changes around the Payment Card Industry standards and changes to the internal systems, they have to keep getting recertification. If you have 4 different payment terminals, that's payment certifications times 4 for everything you do. But also when you have these different payment terminals, it's about consumer experience, how do you bring together one transaction for the consumer bring in loyalty, bring in media, all of that.

And central to all of this is the iNFX solution that we talked about with Shell and Chevron being the early rollouts, but we've deployed Shell, Costco Canada, but the use case was slightly different, where for them, it was the speed of the transaction because they can increase the throughput at their pumps. So we continue to see great traction around our Unified Payments and that revenue is going to be significantly up this year, offsetting some of the difficult compares we had, which were mainly on a vehicle identification system also.

And on the vehicle identification system, we had a pretty large rollout last year. Now it goes into recurring revenue, which is a little less, but we also have potential new opportunities out there, including one win we had last year in the Vehicle Identification System. So we still feel that there will be growth in Invenco. It won't be at teens or 20% that has been growing the last 6 quarters. It's probably more mid-single digit kind of growth this year of pretty strong compares for the last 2 years.

That's helpful. So I want to open it up to the audience in a minute. Let me just ask you one more question before I do. So we have been getting the software resiliency question quite a bit lately. So I just want to ask you upfront. You've talked about there being no option to buy GVR dispenser without your payment system, but could you elaborate on how you approach this software topic. What is the percentage of the software at Vontier and/or software that isn't tied to hardware? And are you concerned that AI could be a threat to any of your specific offerings?

Yes. Thank you for that question. So we can hopefully dispel any misconceptions here. So first of all, our software offerings are about 10% to 12% of our total revenue. And these -- the software that we do is not a generic enterprise software. It's not a thin SaaS layer. It's deeply embedded industrial software. With a very strong linkage to hardware. But most importantly, it really controls, automates and optimizes the physical layer. And this is very durable industrial software. Many times, we -- if you look at the Invenco acquisition, this was a hardware and software acquisition, was not just a thin enterprise layer.

And one of the key reasons why we find this particularly so attractive and have found it attractive is that the regulatory drivers in our industry are really deep. And just to certify new payment kit offering, the software takes 3 levels of certification. It's very complicated for our customers to manage, we take on that complexity and manage that complexity and that certification, which is why it adds value to the industry.

But it also means that it also is a collection point for data. It's a foundational layer that is really important to, one, aggregate the data there, but also add value through the software. And it's also a basis by which AI is a real tailwind for us because we can incorporate AI into that foundational layer to be able to provide that. Now it's also on open system architecture. So it can also enable AI from outside of what we might write to add value into that micro services architecture, but we'll also charge for the API. So it's a real win-win. So we sit on a ton of data for the industry. And we also manage that complexity in that application in this foundational layer. And hopefully, if there's any misconceptions out there, we'd love to get more questions around it, but I think it's very clear in our minds.

Helpful. Any questions from the audience? Anyone has a question? Well, you know I have more questions. So let's move over to repair. So you're seeing sellout improve in Q4. You talked about that. Could you touch on how you've been -- have you seen delinquencies trending in Q4 and as we move into '26. And with comps getting meaningfully easier, carpark age quite elevated, as you know. What do you need to see in the underlying trend indicators to getting confidence the business could actually grow rather than the roughly flat that you've guided to?

Yes. So delinquencies have stabilized? And how do we see the market and the market evolution and the evolution of our business. Let me just sort of double click on this just for a second. So the backdrop for repair is attractive is what you just said, Andy, I mean look at the age of the car park, that's the fleet of all vehicles on the road. And that's getting older. The new cost of the vehicle on average is 45,000, 55,000 for ICE -- excuse me, for EVs. And folks are buying less new cars. So they're buying more used cars, and that's 12.8 years is the average age and why is that relevant for repair?

The sweet spot for repair is a vehicle anywhere from 5 to 7 years old to the end of life of that vehicle is the spot for the repair market. So as that fleet of vehicles on the road gets older, that repair market size grows. So that's one. The second is complexity of repair is up. Vehicles are more complicated to repair, hybrids are coming on the road. That's a great vehicle to repair. EVs actually, while they don't offer maintenance opportunities, they absolutely offer repair opportunities. And if you look at the cost of insurance for EVs, that's really being driven by the cost and complexity of repair is one of the fundamental things. And then ICE vehicles have more sensors on them. They're more complicated repair as well.

And so that in conjunction with a shortage of repair technicians means that repair technicians in the United States are under more pressure than ever to be productive. The way that repair technicians and shops make money is they have a standard rate by which they do business, they charge that standard rate. If they're able to get that repair done more quickly, they can pocket the difference if it takes them longer, then they have to eat that cost. The area for Matco that is differentiating for us is we have market-leading vitality, which means that we're not trapped into a backward integration.

We have a nimble supply chain base so we can bring the products to market more quickly, and we are bringing them in the fashion of better productivity for technicians. So the area that we got some uplift in Q4 was on the diagnostics. We have a great lineup of diagnostics that help reduce the complexity of repair. The issue is that we're -- we don't sell diagnostics completely through our distribution the way we'd like to. We're fairly thinly penetrated. And as we expand our competencies to be able to sell our offering, our lineup better, we'll get an uplift.

You saw a little bit of that in Q4. Also, on what we call productivity carts where you can bring your tools right into the job site from your large installed toolbox you might have, you can bring those right into your repair site. They're really organized in a way to be more productive. We've got an uplift there. So we're really looking at more productive solutions. We don't see the K-shaped economy helping us here. Certainly, technicians are under pressure for the amount that they can spend. But what we are seeing is there is a great ability for them to spend money on things related to productivity, and that's what we see going forward.

I don't think there'll be any dramatic change or improvement in the economy that might bolster the buying behavior there in a way. There is a possibility that income tax refunds that people might get. They might put to work. We're not putting that in our guidance, but that is a possible upside. But I think more importantly, it's staying on this theme of enhanced productivity to continue to stabilize and continue the momentum we're seeing in the repair space.

That's helpful. And then just a few years ago, you're getting lots of questions on your EV strategy and here we are and I'm asking toward the end, but maybe update us on Driivz and sort of what it's doing in the period towards profitability. How are you thinking about potential growth on that side of the business?

So our Driivz platform is making real measurable progress on the profitability front and is continuing to see really solid growth. We've been really excited about the traction that we're getting in the EV space. I know it's not a real popular theme to talk about right now. But if you remember, Andy, we were talking to you about petrol-based dispensers at the time it wasn't popular either. It Gets really difficult to be able to predict what any area in the world will favor, based on government incentives and consumer preferences.

But I think more and more of our portfolio now is really balanced to be able to offer what is needed in those geographies, in those markets. That Driivz, our big idea from Driivz from the beginning is how can any EV driver have the same experience they have with petrol-based dispensing. It should be frictionless, it should be easy for them to be able to have a transaction. And it should also be something that is very capable to manage the available energy. It's on site. The grid is more constrained than ever. We have real proprietary capabilities to do energy management very efficiently. We've done some acquisitions on that technology front, incorporated that into our platform, and I think in a differentiating way.

And the third element of this is that all the EV drivers that are out there are really looking for very high uptime. And 20% of drivers outside of China use our network, which is a staggering number. And we have about a terawatt of energy that's going through that. So think about all that data and how can you create higher uptime. We have nearly 100% uptime on that network, and we use AI for self-healing networks, and we're leveraging that data now at scale. So I think EVs are in their infancy, globally. Some areas in the Nordics are highly penetrated. Other areas in the U.S. are very thinly penetrated. I think overall, we've got the right offering for us to continue to build out a really attractive business model for the long term.

It's very interesting. So Anshooman, I want to go over to free cash flow for a second. I think at the Convenience Retail Showcase where you went to last year and the analysts went to. You modestly tweaked your adjusted free cash flow conversion to greater than 90%. Over a longer term, you're targeting 100% conversion before that. This year, you've got 95%, all pretty close. But can you talk about what drove that change and how you characterize working capital opportunity at Vontier.

We're very proud of the cash generation profile of our business, we're capital-light, and we throw off a lot of cash. Now whether it's 95% or 100% in a year, it's in the noise, I think a good way to think about it is one minus the growth rate for a multiyear period. So we'll throw off a lot of cash. If you really look at elements of our working capital, I'd say our Days Sales Outstanding and Days Payable Outstanding are probably near industry-leading from our profile perspective.

Inventory, I'd say we do have some opportunities over time to reduce, but it is deliberately a little elevated right now, given the fact that while not too much noise in the market, some electronic components like memory because of the data center build-outs are longer cycle to get in from a supply perspective, prices are tending up a little bit on memory components. So we're just mindful and have a little extra electronic components on inventory to manage through. So we don't have any supply chain disruptions.

Got it. But you're not worried about availability of memory chips or anything like that.

No, we're managing through it. I think there was a lot of lessons learned coming out of COVID when we had supply chain disruptions. We put in a lot of processes and mechanisms to work around it. So we continue to work around it. The one constant we've had since COVID is, there's some disruption every year, whether it was COVID, whether it was the supply chain, whether it was tariffs. And I think we can be very proud of the Vontier team of how we've managed through it, and it's a great testament to our employees.

Sure. And you guys seem pretty happy with focusing on share repurchases, debt pay down. Obviously, there is M&A out there. And maybe talk about the funnel, would you say it's relatively static for you guys? Is it improving? Are there any white spaces that help you expedite your journey towards Connected Mobility.

Yes. We're really happy with our balance sheet. It's in great position. We have dry powder. We -- our capital deployment as we describe as dynamic, i.e., we always go towards the highest return option we are evaluating and continue to evaluate in our pipeline, a bunch of M&A activities, more bolt-on-ish near adjacencies fit in what we do. But again, it's -- really, it has to be a meeting of minds between a buyer and seller. And sometimes there's a bit of spread, and we remain very disciplined in how we deploy capital and the price we pay for acquisitions because we are committed to delivering great returns for our shareholders.

We've deployed and spent north of $1 billion on acquisitions. We've deployed about just under $1 billion on buybacks. The cumulative return is about double digits on that combined capital deployment, and we remain committed. And given our current stock price, buybacks remain extremely attractive to us, and we see that as a great use of capital deployment.

So all that sounds pretty good Anshooman. So maybe Mark and Anshooman I'll ask you, like I do not ask this question to most companies on this stage. But what do you think investors are missing about Vontier. Vontier at like half of its multi-industry peer set. And if you just look at P/E and it seems like you've got a relatively good outlook you put on the stage here. Just this year, it's mid- to high single-digit EPS growth. Companies have lower than that with much higher multiples. So what do you think we're missing? Or how do you attract more interest?

I think that if you look at some of the headwinds we've had since spin, we've done a great job at really cleaning that up. And as a consequence, I think getting past some of those challenges and also solidifying our portfolio around 3 very easy-to-understand verticals with really strong secular drivers where we're able to point towards solving customer high-value problems. I think events like our NACS show and the Investor Day that we had are prime proof points for that.

And I think folks are following the story, they see the traction that we're getting and that -- all that we ask is people do work on the company, if you do work and follow what we're saying, I think you can start connecting the dots. I think it was a lot harder to do in early innings after spin, given all the work that we've done to help clean things up. But I think we're really excited about what we're being able to show folks based on the progress we're making. And hopefully, the folks doing that work, we'll see that as well.

Last question. So what are the top 2 or 3 innovations and structural changes affecting your company over the next 5 years? Are there any emerging industry trends that are perhaps being overlooked in the current disclose?

Yes. I think that's a great question for us. I think one of the hallmarks of Vontier as you can see it is we're really bringing industry in -- we're bringing innovation to our industry. It's been historically a fairly sleepy under-managed infrastructure. We call this the Mobility Ecosystem. I think people have kind of got Industry 4.0 and what you can do with -- how do you connect, manage and scale that through better asset management, people get that fully.

Look at the Mobility Ecosystem, $30 billion market. Look at all that capital that's going in there, look how challenged they are with labor turnover and the ability for this infrastructure to work in a connect managed scale way is what we call the Connected Mobility strategy, and look at great examples on Unified Payment that we've been talking about, look at fleet operators and getting everything on a single pane of glass as they try to manage their fleet operations out of their depots.

And all this, when you look forward, it's a deeply embedded foundational layer of software with connected hardware that is really also AI-enabled, which is a real tailwind for us. This is an open system architecture where we can charge for the APIs, but we can also bring our equipment and software together in a really value-added layer that is very differentiating for what we have to offer, and we're really excited with where we are.

Thanks, Mark, Anshooman. Appreciate it. .

Thanks for having us.

Good morning, ladies and gentlemen, and welcome to Vontier's Fourth Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, February 12, 2026, and a replay will be made available shortly after. I would now like to turn the conference over to Ryan Edelman, Vontier's Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us on the call this morning to discuss our fourth quarter results. With me today are Mark Morelli, our President and Chief Executive Officer; and Anshooman Aga, our Senior Vice President and Chief Financial Officer.

You can find both our press release as well as our slide presentation that we will refer to during today's call on the Investor Relations section of our website at investors.vontier.com. Please note that during today's call, we will present certain non-GAAP financial measures. We will also make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future.

These forward-looking statements are subject to risks and uncertainties. Actual results might differ materially from any forward-looking statements that we make today, and we do not assume any obligation to update them. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available on our website and in our SEC filings.

With that, please turn to Slide 3, and I'll turn the call over to Mark.

Thanks, Ryan. Good morning, everyone, and thank you for joining us. Let's get started with a quick walk-through of the key takeaways from the quarter and the year and why I'm confident we're entering 2026 on firm footing. The headline here is that we finished the year strong, strengthened our foundation and built meaningful momentum across the portfolio.

We delivered 5% core growth in Q4, led by high single-digit growth in both our Mobility Tech and Environmental & Fueling segments, underpinned by robust demand in our convenience retail end market. For the full year, organic sales grew nearly 4% and EPS finished up 11%. Strong cash generation is one of the hallmarks of performance at Vontier. And in 2025, we generated over $460 million in adjusted free cash flow, which equated to about 15% of our annual sales. Q4 adjusted EPS was at the high end of our guide despite the impact of a onetime inventory reserve adjustment related to the Invenco acquisition and by higher health care costs at corporate. Underlying operational performance was in line with our expectations.

2025 was a year of strategic repositioning and strong execution. I'm proud of the discipline our teams demonstrated in what turned out to be a dynamic macro environment. We're now more focused and better aligned around our connected mobility strategy, which fundamentally enables profitable growth and underpins innovation across Vontier. We're consistently demonstrating the power of having a synergistic portfolio, unmatched domain expertise and global scale. We made significant progress on simplifying and focusing our organization. These actions unlock growth, enable us to be easier to do business with and allow further efficiency across the organization.

This next phase of simplifying our business will result in $15 million of incremental in-year cost savings. Anshooman will share more details on timing and phasing in his prepared remarks. We maintained a focus on innovation in 2025, deploying multiple new solutions and creating more durable competitive advantages. We're deploying unique value propositions that leverage integrated solutions and capitalize on strong secular tailwinds, including digitalization and the energy expansion.

We're entering 2026 with good momentum, a stronger portfolio and healthy balance sheet. We're well positioned to deliver on our financial commitments and expect more benefits from our simplification efforts to drop through to the bottom line. As Anshooman will share with you our guidance for 3% core growth and attractive operating margin expansion of 80 basis points at the midpoint is in line with the framework we shared with you in October. I'm confident in our ability to execute and to continue building sustainable above-market growth.

Let's turn to Slide 4 for a quick walk-through on some of the high-level growth drivers by segment. Let's start with EFS. Fueling has been a dependable growth engine over the last 2 years, growing at roughly 6% organic CAGR. Market growth has been broad-based with increased new site builds retrofit activity and equipment replacement all driving investment. We see sustained high levels of capital investment for both above ground and below ground fueling equipment, particularly in North America. A recent industry report from NAC shows that while the U.S. convenience store count remained relatively flat year-over-year, the number of fueling sites grew approximately 1%.

An important takeaway from this is the larger national and regional chains with whom we have majority share positions are growing at faster than average rates. Environmental will finish the year with growth in the low teens, supported by strong upgrade activity for our connected automatic tankages and incremental share gains in submersible pumps with our new 4 horse power offering. Both of these are a result of traction in new product development.

For 2026, we expect growth to be in line with our longer-term targets of low to mid-single digits despite the tougher compares, especially in the first half. Mobility Tech and Invenco, in particular, was another standout. Invenco closed the year with revenues of nearly $650 million, up 22% organically versus the prior year. This reflects strong demand for our innovative payment technologies, including those that leverage our NFX micro services architecture, the rollout of new products and disciplined execution on a healthy order pipeline.

Our new product introductions, FlexPay 6, vehicle identification system and the NFX payment server, all contributed meaningfully to our growth last year. We've also been expanding our integrated offerings. And in Q4, we rounded out our unified payment solution by launching an indoor payment terminal that shares software across all devices. I'll unpack unified payments in a moment because it's a strategic priority for us. The Convenience retail end market is growing at a mid-single-digit CAGR, which is being fueled by strategic investments in food service and technology. Store formats are evolving to meet changing consumer needs and increased competition and, as a result, are becoming more complex and costly to run.

Our innovative portfolio positions us well to continue delivering above-market growth in this end market over the medium and longer term. PRB's growth accelerated in Q4, driven primarily improved pipeline conversion from ramping our new [indiscernible] software. PRB inflected positive in the second half and grew high single digits in Q4, almost entirely due to -- adoption. Customers who have upgraded are seeing growth in memberships, declines in churn and mid-teens revenue growth on average.

Repair solutions gained momentum as we got traction with growth initiatives. Sales grew sequentially in Q4 and what historically has been our slowest quarter. Our initiatives drove low double-digit growth for our diagnostic scan tools in Q4.

On Slide 5, as I mentioned, I want to spend a minute on unified payment because it ties a number of teams together and will be a key enabler of the value creation flywheel for our customers. We shared this with some of our investor event last fall. Over the last decade, payment complexity has increased rapidly. More devices, tighter security requirements and a growing need to integrate payment across fuel dispensers, car washes and in-store point-of-sale and EV chargers. The biggest pain point customers face is payment certification. It consumes significant amounts of their OpEx budgets and scarce engineering resources. Certification costs can range from hundreds of thousands to millions of dollars annually, and those costs only rise as new offerings are added.

Our unified payment solution addresses that head on by delivering integrated solutions, including outdoor payment terminals for multiple devices, the NFX electronic payment server that links terminals to payment processors and the indoor payment terminals we launched in Q4 that are the same software as our outdoors devices. In other words, customers can cover every transaction on their sites with a single common platform. That common software architecture materially reduces certification costs future deployment and delivers a seamless consumer experience.

Additionally, it enables our customers to drive revenue growth through offerings like media and loyalty. Perhaps most critical for Vontier, all of these opportunities pull through additional equipment and recurring revenues. We recently entered an agreement for a full unified payment solution with a global C-store customer one with whom we've built a strong technology partnership, and their early feedback has been positive.

With that, I'll turn the call over to Anshooman to walk you through the quarter's financial details and take you through our outlook.

Thanks, Mark, and good morning, everyone. Let me start off with a summary of our consolidated results for the fourth quarter on Slide 6. The total sales were $809 million, with core growth of 5%, reflecting disciplined operational performance and continued resilience across our end markets. Adjusted EPS was at the high end of our guidance at $0.86, up 8% year-over-year. Operating profit margin was 21.3% and on onetime costs related to Invenco inventic adjustments and higher health care gains. Underlying margin performance was in line with our expectations. .

In Q4, we delivered record free cash flow. On a full year basis, this was 98% adjusted free cash flow cover, representing an attractive 15% of sales and underscoring the strength of our cash generation model.

Turning to our segment results, beginning on Slide 7. Environmental & Fueling Solutions delivered a strong finish to the year with above market growth demonstrating our strong share position with large national and regional operators. Total dispenser sales increased high single digits in the quarter. Environmental Solutions grew double digits, supported by ongoing upgrade activity and share gains related to new products.

Fourth quarter segment margins expanded 90 basis points, the result of strong volume leverage and ongoing productivity actions. For the full year, EFS delivered 6% core growth on top of 6% growth in the prior year, with dispensers growing mid-single digits and environmental up low double digits.

Full year operating margin expanded 40 basis points, ending the year over 29%.

Moving to Mobility Technologies on Slide 8. Core sales increased 8.5% for the quarter, with relatively broad-based growth across all business lines. At Invenco, we continue to execute on a new product development road map with Q4 sales up 9%, following 6 quarters of double-digit growth attest to our team and proof of the strategic value of our suite of solutions is driving for our customers. DRB continued its growth trajectory, building on the momentum began to see in Q3 and ended the fourth quarter up high single digits. Although down high single digits for the full year, DRB recent return to growth and the order momentum you're seeing positions us well for 2026. Overall, segment margins declined 220 basis points for the quarter, mainly impacted by the onetime inventory adjustment at Invenco.

Finally, turning to Repair Solutions on Slide 9. Sales increased sequentially as the growth initiatives helped offset macro pressures on technician spending. Distributors' sell-through off the truck inflected positive for the first time all year in Q4 and high-ticket items like tool storage and diagnostics returned to growth. Fourth quarter sales declined 2% with lower volumes pressuring margins.

Turning to the balance sheet on Slide 10. As I mentioned earlier, we had another strong year of free cash flow generation, which provides meaningful flexibility as we execute on our 2026 priorities. In the quarter, we deployed an additional $125 million towards share repurchases, bringing total buybacks for the year to $300 million, equating to over 5% of our shares outstanding. Given the valuation disconnect relative to our long-term fundamentals, we continue to view buybacks as compelling use of capital. We ended the year with nearly $500 million in cash on the balance sheet and closed the year with a net leverage ratio of 2.3x, down from 2.6x at the start of the year.

Regarding our upcoming $500 million bond maturity, we intend to use cash on hand to repay $200 million and plan to enter into a $300 million 364-day term loan agreement of the remaining balance. We believe this option meets our current financing needs minimizes the interest headwind and gives us ability to address future maturities.

Turning to our outlook assumptions for the full year 2026 and Q1 on Slide 11. Our full year guidance is consistent with the framework we provided you on our Q3 call. We expect sales in the range of $3.1 billion to $3.15 billion. At the midpoint, this assumes core growth of about 3% and supported by low to mid-single-digit growth within Environmental and Fueling Solutions, mid-single-digit growth at Mobility Technologies and flattish growth at repair solutions.

We expect adjusted operating profit margins to expand 80 basis points at the midpoint, reflecting strong incrementals. As Mark disclosed at the start of the call, we expect to generate an additional $15 million of in-year savings. These are the results of our simplification efforts along with improved efficiency and velocity of product development with adoption of AI tools. A majority of the necessary actions are being implemented in Q1 with a modest ramp into the second half.

Adjusted EPS is expected to be in the range of $3.35 to $3.50, representing high single-digit growth year-over-year. This is due to repurchases of less than $50 million for the year and does not include any additional capital deployment benefits. Adjusted free cash flow conversion is expected to be about 95% which would equate to roughly 15% of sales for the year.

Looking at our guide for Q1, we expect sales in the range of $730 million to $740 million, with core growth of about 1% at the midpoint. Margins will be relatively flat to start the year, reflecting year-over-year timing differences in R&D and other operating expenses as well as less favorable mix. EPS will be in the range of $0.78 to $0.81 in line with our normal seasonality.

With respect to the shape of the year, we would expect first half sales at just over 48% of the full year and EPS approaching 47%, both in line with our normal historical seasonality. I would also note that the year-over-year organic growth rates will look better in the second half, which embeds the first half compare issues at EFS and Mobility Czech and the timing of shipments of projects and backlog which favor Q3 and Q4. This is the same view we shared with you on our last call.

As always, we've included some other modeling assumptions on the right-hand side of this slide. Just to highlight a couple of those. We do have some divestiture impacts to consider on the top line and the higher interest expense we noted last quarter, which steps off signing in Q2.

With that, I'll pass the call back to Mark for his closing comments.

Thanks, Anshooman. We finished the year strong with meaningful progress strengthening our foundation and advancing our connected mobility strategy. That progress reflects disciplined execution across the organization. I couldn't be more proud of what we've been able to accomplish in the last 12 months. I'm extremely grateful to our employees for their continued hard work and dedication. I'm genuinely excited about the setup for 2026 and the way Team Vontier is engaged to create value for all our stakeholders.

Looking ahead on Slide 13, I remain confident in the fundamentals we've built and the outlook for the year ahead. We have strong leadership positions in attractive and resilient end market that offers significant opportunities. We have the right strategy in place to capitalize on the key secular trends shaping our industries, and we're executing that strategy thoughtfully and with purpose. Innovation has become another hallmark of Vontier and our focus on product vitality is translating into stronger offerings, deeper customer engagement and measurable commercial momentum. We have a solid runway ahead on our 80/20 journey, combined with a culture center around VDS, we have a very visible path to expanding margins.

Our business generates strong free cash flow consistently in the mid-teens on a percent of sales basis, which gives us flexibility to continue driving above-market growth and returning capital to shareholders. We will continue to apply the same discipline to capital deployment that has served us well over the past several years.

With that, operator, please open the line for questions.

[Operator Instructions] Our first question is coming from Andy Kaplowitz of Citigroup.

Could you give us more clear on what's going on in Mobility Tech? I think Anshooman you thought mobility's growth might be flattish in Q4 '25 came in at 8.5%. I think you were concerned regarding the timing of projects and we could deliver hardware. Did that pull forward at all into Q4? And then you obviously have an expected back-end loaded guide in mobility. Can you remind us the level of visibility you have? And maybe give us a little more color on the Invenco reserve and what happened there? .

Yes. Andy, I'll start off, and I'll turn it over to Anshooman. Look, I think the really good news on Mobility Tech is our innovation-driven growth is really reading through. I think when you look at the FlexBase 6 offering, combined with the in effects that's the version of the unified payment. And the good news is that we've had better uptake on that. It's a product line that requires some level of not only certification, but piloting with our customers and the ramps a little bit hard to predict, but I think the backdrop here, the momentum here is pretty clear. And I think the real issue then is when you look at the outlook into the year, what do we see? I think you know that we've got a first half a bit of a compare issue but we see overall really strong growth coming from our Mobility Tech product lines, including the turnaround with DRB that is feeding into that and more visibility there. So overall, we're pretty happy with what we see. Anshooman?

Yes, Andy, thanks for the question. From a linearity perspective, for 2026 linearity is in line with what we've typically had -- Q1 is at the midpoint of our guide, above 23.5% of our total sales for the year, which if you look at our historical sales of Q1 and adjust for Matco Expo, which moved from Q1 to Q2 and that's typically where we end the year from a sales perspective. So seasonality is in line with what we've typically done last year because of some larger projects, which were in the first half weighted. It was a little bit front-end loaded to sales.

The other thing, we do have some larger wins, both in indoor pits and wholesale, which is part of our unified payment offering and also the vehicle identification system, another win out there, which the projects take some time for going through the customer certification as Mark mentioned. So that revenue ramps up in the second half of the year. So we feel pretty comfortable with our guys the way it is Mobile Tech still growing mid-single digits on really a strong off in 2024 and 2025.

Related to the inventory reserve, we did have an inventory reserve of $4 million at Invenco. This is for legacy inventory prior to acquisition. Now keep in mind back at the time of acquisition, supply chains were disruptive. Companies were keeping higher inventory levels. And then as we bought the business, we have spent quite a bit of time and effort on innovation and bringing in new versions of the product, which, as you can see from our Q4 results, there's a very strong uptick in the market for this new version and as a result, we wrote off some inventory that we had on hand from pre-acquisition time.

Got it. And maybe a similar question for EFS. I mean it grew strongly in Q4 against tough comps. So maybe you can comment on the longevity and strength of the retail fueling cycle this turnaround? Because I think, Mark, as you said channel checks seem good. I think I remember a slide maybe in the original Vontier Investor Day, where historically retail fueling does tend to clip along to mid-single digits. So why can't you continue to do that? .

Yes. A lot of confidence in that. We're at the NACS Leadership Summit this week. And so I'm hearing directly from CEO, C-suite officers of our convenience store customers. And as you may know, we have about 2/3 share with the largest regional and national and international players. And when you really look at the backdrop in some of my prepared remarks, I also spoke about this and the color that I'm getting directly from our customers this week, there's no question that they are advancing their footprints. Many times, when you ask folks about their build-out plans, they're looking 3 years out on average.

Some are even looking longer than that because of the certifications, the footprint build outs, real estate transactions, building a new store doesn't take that long, but doing all the permitting, setting all that up and they're very planful and really cash flow positive. They're not seeing anything in the economy right now. So that's about 2/3 of our business is really associated with that very constructive backdrop. So I think we are pretty bullish on what we're seeing. The new technologies that we're offering really help them solve high-value problems as they build out their infrastructure also as they do M&A and they combine with each other. It's a more complex backdrop for them to be able to manage. They're looking at new solutions such as low key and media to be able to drive more revenue, and they're seeing some really successful endeavors there. So yes, we're very excited on the backdrop and what we see in our position in the market with number one, number two of our strong brands, and we're doing it in a more unified concerted way that really helps them solve some high-value problems. So yes, we see a continuation of this.

Our next question is coming from Julian Mitchell of Barclays.

So I heard you on the sort of the phasing of the year, but maybe flesh out a little bit more, I guess, in that first quarter 1 point of organic growth. How are we thinking about the various segments because you had a very strong fourth quarter. Was there an of pull forwards you could flesh out? Or is it something around comps? Maybe help us understand this Q1 core growth across the segments, please?

Yes, Julian, thanks for the questions. So just from a segment perspective, we expect our EFS segment to continue to grow probably in the low single-digit growth range. Mobility Technologies will be flattish. That's really off the very strong compare in that. And then repair solution, again, we expect it to be relatively flat Q1, as we said in the prepared remarks, the turnaround continues in that business with stabilization. Sales off the truck were up for the first time in Q4. So we're starting to feel incrementally better about the business, and we expect Q1 to be relatively flat year-on-year.

And then on the operating margins year-on-year in the first quarter, up 80 points for the year. When we think about kind of what's changing as we go through the year, I suppose there's some volume leverage that builds. It also sounds like that $15 million savings number is sort of year-on-year, a bigger weighting in the back half. Just maybe help us understand kind of how the drivers of that improved margin year-on-year split between those 2? And then price cost, anything changing there first half versus second half, just as tariffs anniversary.

Yes. So some of the things you mentioned, Julian, but I'll start off by saying Q1 margins last year were the highest for the whole year, we were at 21.7% in Q1 last year and which was about 40 to 60 basis higher than all the other 3 quarters. So it was the highest margin quarter and typically our typical seasonality to volume leverage. Q4 is usually the highest margin quarter for us. We will get volume leverage as the business continues to perform better. Incrementals are relatively good in the business, but also a lot of the $15 million in-year savings, a lot of those actions are in flight right now. So the savings start ramping in Q2 but really fully ramped in the back half of the year, Q3, Q4. So definitely that will add to it also.

Got it. And price cost, is that pretty steady through the year?

Yes, price cost is pretty steady through the year. We ended 2025 a little over 1%. For 2026, again, I think we'll be somewhere around 1.3% average price increase. Tariffs hopefully, are behind us from a lumpiness perspective and we can go to our normal cadence of price increases.

Our next question is coming from Nigel Coe of Wolfe Research.

So yes, another question on phasing. So Anshooman, the first half, second half sort of implies, I think, flattish core in 2Q very similar EPS to 1Q. Just want to make sure that's the case. And then you've got a much, much tougher comp in the second quarter given the pull forward. So I just want to make sure you're confident that flat [indiscernible] about the right number?

Yes, we feel pretty good, given the visibility we have in the business around our framework that we provided with half 1 being little over 40% -- 48% of our total sales, EPS being a little under 47% of our total Europe. It's in line with our typical seasonality, also how our businesses are shaping up our backlog shipping up our orders come in, in January, all gives us confidence and the framework we've provided.

Okay. Good. And then the Patheon sort of penetration, can you just remind us where we are with that? It seems like there's some really good moment there. And then I'm just wondering, the car wash business seems to be maybe an industry that might benefit from the or rather the tax incentives out there sort of like might incentivize some investment. I'm just wondering if you've seen any return to activity in the tunnels. .

Yes. The Patheon software, I think, is a real success for us. It's a product we've been working on for a bit, trying to bring it to market in the right way. And I think what we're seeing now are real proof points that helps the folks that are the larger operators in the market, how do they run a better car wash. How do they also attract consumers to their site. It's also -- they have very high labor turnover and the ability for them for ease of use and training of employees and managing a network of carwash is certainly a real selling feature here. The way we're getting traction in the market and the turnaround in BRB, which you see real momentum building in the second half of this past year is not off new tunnel fills, new tunnels or haven't been coming to market. As you know, the business overall was really impacted by interest rates where folks were building out tunnels at a very rapid rate and it slowed down.

As we projected this year, we have a view that tunnel builds is probably going to be year-over-year and with that assumption, we will definitely make progress on Patheon because it takes a while for folks to get into that new software. And so we've got a pipeline, and we've got really good pilots out there and the great news is they have proof points of that, a system working with other blue-chip customers in the space. So I think we'll continue to see momentum. If we get any benefit from tax benefits, both on the car wash side or in Mako or how that how that drops through. I think it's a little bit of a question mark on how that will play through. I think we're all to watching that to see if that will have some impact, but that's not included in our guide.

And Nigel, I'll add that Patheon pretty early in this upgrade cycle. We've had some early adopters and larger customers that have deployed it, but we still have a pretty big installed base of our legacy solutions site watch out there. So there are a lot of good opportunities to continue to sell Patheon in the marketplace. Also, the recurring revenue on Patheon is higher than our legacy solution, given its higher capability and advantages that provides our customers.

Our next question is from Katie Fleischer of KeyBanc Capital Markets.

Just go back to the onetime adjustment in Invenco. Is there a way for us to think about what margins would have looked like this past quarter without the impact of that adjustment?

Yes. The inventory adjustment was $4 million. So that's about 130 basis point impact to Invenco's margins for the fourth quarter. So underlying margins would have been down slightly still year-on-year. Now Q4 last year at Mobility Tech a was a pretty tough compare from a margin perspective, and we did have some mix also that we called out between the different product lines that basis. But underlying margins for Mobility Tech would have been around 20% for Q4.

Okay. Great. And then on repair, how conservative do you feel like the outlook is for flattish growth in 2026. I know it's still really early to call on inflection in that business, but just given some of the improving trends that you're seeing there and some potential help from the macro environment, what's the upside to that growth outlook?

Yes. Katy, thanks for the question on repair. Look, the good news is we're definitely seeing some traction on the areas that make the most amount of sense given the K-shaped economy that's been playing out is for repair technicians to be more productive. I think we all recognize the backdrop on the repair market is pretty healthy. You've got a car park now that's almost 13 years old. I mean that's kind of ridiculous to see how many older cars are actually on the road, and that's really good for the sweet spot of repair and vehicle miles traveled are up.

Overall, it's a pretty good environment for repair. I think the problem we all recognize is that folks might be holding back from some of those repairs as well as the technicians are part of the working class it is also under pressure. And so if they can be more productive on the job site, then they're going to be willing to spend money in 2 areas that we've definitely made progress on our in the diagnostic area, where we have not sold to our potential on diagnostics. We've got a really good lineup and really good price point on the diagnostic line, and it's a very capable multiyear product line, and we're being a lot more effective with training and selling that. And you saw that happen in Q4. We think there's like that.

And then we've actually done really well on these productivity cards where you're able to organise your tools, bring them right into the job site right into work that's being done and the technician can be a lot more productive there. And so those are the 2 general categories we're seeing the uplift occurring. And I think when you look at that going into the year, it's a little bit hard to predict what's going to happen. I think we don't really know what's going on with the consumer this year. It's a little bit hard to predict how tax breaks might affect. And so I think from what we see right now, I think it's approved.

[Operator Instructions] Our next question is from Andrew Obin of Bank of America.

This is David Ridley-Lane on for Andrew. Just 2 quick questions and then a longer one. So just housekeeping what was book-to-bill in the quarter? And then also, just to confirm, it sounds like Matco Expo timing is again in second quarter of 2026.

Yes. So our orders were up low single digits on the back of a pretty strong Q4 last year. And book-to-bill was just under 1 for the year. For Matco Expo, yes, the sales will come in Q2. It's actually at the very tail end of Q1 for the last 3, 4 days of Q1. So the sales -- the bookings will start coming in, in Q1, but the actual sales from Matco Expo will be in Q2.

Yes. And David, we hope not to change that. I think it was a very painful for investors to kind of follow the changing of the timing from Q1 to Q2. So we're -- we promise you we're not going to flip back and forth on the macro timing. And the reason why we did push Q2 is that our franchisees, our distributors are really fond of better weather. Sometimes they bring their families on vacation there. And they were looking at a little bit better weather to do that, and it was something we really did a bit of hand ringing on, but we think it's more customer-friendly and distributor friendly. And so that's why we changed it, but we promised not to change it again.

Got it. Understood. We all like better weather. And then maybe I'm not understanding some of the dynamics here for gas stations, but I know the merchant acquirers will sometimes give these payment terminals the in-store terminals away as part of a multiyear agreement. So like First Data, we'll give you a Clover terminal, Elvan, et cetera. I get why you need to have the full suite of payments and hardware but this is -- is the right way to think about this kind of like a low average hardware product that allows you to win the above-average margin recurring revenue and sort of offer the full suite. How would you kind of size that up?

No. These aren't below average. We do definitely the hardware that we're providing, like [indiscernible], both outside on the dispenser, but also inside the store are good margin products. Usually, when a payment processor gives away hardware for freight, the swipe fee of the transaction fees that they're charging the merchant is a lot higher because they have to make up the money. Most of our larger customers and even the smaller ones take benefit of industry, the [indiscernible] Association has an agreement with merchant processors. So usually, they take advantage of lower rates, so they aren't getting the hardware for free.

And then really, when you start thinking about the connectivity between the different payment terminals on site, whether it's inside the store, outside the store, on the car wash, on an EV charger -- and really, you started bridging that to functionality like order of the pump when you start bridging it to functionality like loyalty, media, having that common payment device is extremely important, and that was what Mark was covering in the prepared remarks around unified payment layer that in with NFX and customers like Shell, where we've deployed this are seeing significant advantage with managing the complexity of payment regulation and other customers, which speed is very important to seeing significant improvement in speed of the transactions and increasing the throughput from a that perspective. So significant advantages to our unified payment solution.

One of the areas that we're hearing also at the event they're at this week is clearly the complexity of managing their assets and these are very successful storefronts that are going in. And sometimes, these customers had a pretty fast cliff and it's how do you manage your costs going forward? So whether somebody might get a free piece of hardware here or there, that's not predominantly what they're interested in. They're interested in the cost of that infrastructure and what that caused them the complexity by which it's being managed, the ability for a microservices software platform also be modular in a way where that can enable loyalty.

Loyalty is a big deal if they can engage with that. If they can engage through media to bring people inside the stores. There's big uplift that can happen from that. And then they're also predominantly really interested in the life cycle costs. These folks hang on to these people. These pieces of equipment for long periods of time, and they look at the life cycle cost management capability, it's not first cost that wins in the market segment that we're mostly focused on, it's really the life cycle cost that wins. And I think when you look at our offerings, we have real competitive advantages here.

Got it. And if I could squeeze just 1 more in. Can you -- I know there was part of your simplification plan, your decrease in the number of dispensers, the variance, the SKUs. Can you buy a GVR fueling dispenser in the United States without an Invenco hardware?

Can you repeat it again, maybe so I can understand.

I know you're decreasing the variance of fueling dispensers as part of your simplification efforts. And I'm just wondering for U.S. gas station, is there a with Invenco option and a without Invenco option? Or is Invenco now just there in the base? .

SPWell, Invenco is the name that we use for that technology suite and the payment kits. And I think it is a differentiating solution that we offer as part of this unified payment, and that's what customers get with that unified payment offering. So it's really part of the suite that we offer.

But we sell dispensers with payment integrated. There is no option in the U.S. to buy a dispenser without our payments.

There are no further questions at this time. I would now like to turn the call back over to Mark Morelli for his closing remarks.

Yes. Thank you. Thanks again for joining us on the call today. We're entering 2026 with some really clear strong momentum and we have a solid path above-market growth and attractive margin expansion in front of us, and I'm confident our teams will continue to execute along that path. We appreciate your continued interest in Vontier and look forward to engaging with many of you over the next several weeks. Have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Very good. Good afternoon. We'll go ahead and get started. I'm Rob Mason, the senior analyst that covers advanced industrial technology for Baird. Very glad to have Vontier up next. Vontier is driving leadership position in mobility technologies in the convenience retailing market, in particular, delivering a broad range of integrated solutions. We think that's resonating well with that customer base. That customer base is increasingly becoming larger and more sophisticated as well, and they've got a strong position there.

I've got Anshooman Aga with us to discuss Vontier as well as Ryan Edelman with Investor Relations. Anshooman, of course, is CFO. We're going to just kind of dive right into Q&A if that works for everybody. We will take your questions if you have any, send those up. We'll work those into the conversation via -- either send those up via the iPad or you can just raise your hand.

So we'll go ahead and get started. Anshooman, thanks again for being here.

Thanks for having us.

Maybe just to start, though, level set kind of post quarter, maybe if you could just do a quick tour around the larger portfolio. I think one thing that stood out to us really year-to-date is we've seen kind of core growth like 3% ex the Matco Tools business, is more like 6% or that's kind of our math. So maybe a tale of 2 halves or a tale of 2 cities there. But just kind of walk through what you're seeing as we got through the third quarter and into year-end.

Yes. Instead of talking about our segments to start off with, let's go at it slightly differently around our end markets. 2/3 of our revenue is focused around convenience retail. So that's basically our Environmental & Fueling segment, and a large part of our Mobility Tech segment serves the convenience retail end market. And that end market is continuing to perform really well.

When you think of some of the dynamics in that space, whether it's the large national and regional players continuing to build out and expand the store front. Also, if you look at their economics, their economics continue to get better as convenience stores are adding fresh food, expanded formats, additional dispensers and also the gas margins are good. On top of that, when you look at the fact that we are really helping bringing digitalization to this industry through our innovation and digitalization, both for enabling higher productivity, asset uptime, but also consumer engagement and revenue steering, that part of our business is doing well, and you talked about the higher growth ex Matco, it's really off the backs of that.

Our fleet business, again, this year has been pretty strong. We had a couple of big projects in the fleet business, fleet supported mainly by mobility technologies. And that's been a good driver for this year. And then repair, as you talked, while the long-term secular drivers are intact in that business, the buyers of our repair technologies tools are technicians, which have been impacted by the overall macro. But even there, we're starting to see signs of stabilization off the backs of a lot of initiatives that are under our control that we're driving.

And I commented earlier just around the core sales growth. I think year-to-date core orders maybe down a tick, flat to slightly down. That was our math. Correct me if I'm wrong. But I'm just curious if you've got any different perspective there if you exclude the Matco business on that order number, how does that look?

Yes. A couple of things on our bookings. One, our book-to-bill cycle is pretty short for most of our businesses. Additionally, if we do get a long-term contract, we only put 12 months of it in backlog or in bookings. So when you factor that in having a book-to-bill of roughly 1 keeps our backlog at healthy levels. Our book-to-bill is roughly 1 -- was 0.99 in the quarter, roughly 1 for the year. So bookings remain healthy.

Our pipeline continues to be healthy. As I talked about convenience stores, customers in our convenience retail business, driving both point solutions but integrated hardware, integrated solutions with connectivity is really making a difference for us and our connected mobility strategy is really shining through out there.

Yes. Just to park there a moment, just on that convenience retail market. Again, I mentioned upfront, the industry structure there is shifting, favoring more consolidation, larger players, more sophisticated presumably in that process. Where are you striking on their pain points in some of your solutions?

That's really a great question, Rob. So when you really think of the industry, especially around the convenience stores, they're in North America roughly 150,000 convenience stores. More than 50% of them are owned by single-site operators or they might own a couple of sites here and there. What's happening in the dynamic is the large national and regional players are growing at a faster rate at the expense of the single-site operators.

And we tend to have a higher market share with the large national and regional players. The other thing that's happening besides the large getting bigger, the formats are getting more modern and bigger. They have bigger -- inside the store formats, you have fresh food, where you have almost a cult-like following for some of the convenience stores like Wawa and Sheetz around their sandwiches. Casey's is the fourth or the fifth largest pizza seller in the country now.

Also outside the store, the gas margins have been really attractive. Post COVID, they've gone up materially, and they're staying at a pretty attractive rate. So you have this phenomena of attractiveness of a site, sites getting bigger, big -- larger players getting larger. And then you have the secular tailwinds around digitalization. As they have more assets, they need to have higher uptime, better remote management of their assets. They need to drive consumer engagement. This is where our connected mobility strategy with digitalization comes in and fixing one of the pain points.

Regulation is another big secular tailwind. There's significant regulation in our space. Fuel is regulated, both from an environmental perspective and then payments through the payment card industry perspective. The complexity and the velocity of regulation is always increasing. It's not becoming less. And this is a global phenomenon. And through our products, we're driving compliance with the latest certification, allowing connectivity so they can better remote monitor from a compliance perspective.

And we're making sure we're meeting the latest payment card industry standards and driving better solutions for our customers there. And the final is energy expansion. While everyone can debate about what form of energy might exist in 15 years, what we can't debate is the need for energy for transportation is going up. And with Vontier, we provide multi-fuel options for our customers, whether they're looking at traditional gas or they're looking at biofuels, compressed natural gas, renewable natural gas or electric charging with us providing the leading EV charging software where we are the second highest plugs under management globally, we provide multi-energy solutions for our customers in the right profit pools. So we're uniquely positioned to solve our customers' pain points.

Yes. How would you describe the state of the capital decisions coming out of that convenience retail market right now? Have they been on a steady cadence? Have you noticed any shortening of capital decision, the extending of capital decision? I'm trying to get at maybe the kind of visibility that you have based on their plans that you can see right now.

Yes. So if you think of the market between the large national regional players, most of them are talking about 2027, 2028 CapEx right now. So pretty good visibility. They know what they're going to build. They're working on site permits. When you look at the lower end of the market from single site to few site operators, their decisions tend to be a little bit closer, especially around site refresh. But again, just because of healthy gas margins because of the fact that inside the store, business is healthy. They're adding fresh foods. They're renovating sites and people have to stay relevant.

If you have 2 convenience stores at an intersection, where does the traffic go? Traffic goes to the one that has a modern format, new dispensers, better lighting, better signage, fresh food. So even if you're a single site or a few site operator to stay relevant, you're going to continue to invest. So that's what we're seeing in the space.

How do the -- those convenience store dynamics that we just talked about play across other geographic regions? Obviously, your revenue is more concentrated in North America, but you do serve other markets with those solutions. What's the state of the industry in those other regions? And what are you seeing?

Yes. So if you look and let's break out some of the developing markets versus the mature markets like Europe or Australia. Europe and Australia, a little more stable, flattish, I would say. Emerging markets do provide a growth opportunity. Let's take one, for example, India. There's a lot of investment going in. The car park is increasing, the need for fuel is increasing. They're going from, let's call them, kiosks, which were maybe 2 dispensers, unattended to more of a full-fledged U.S. format where you can go inside, buy food, et cetera.

But India and even markets in the Middle East, which are growing on a longer-term basis, tend to be a little lumpy in the sense that there will be tenders in the market. Last year was a good year for tenders. We had some in the Middle East. We had quite a few tenders in India. And then this year has been a little light on tenders. Now usually, when you win a tender, delivery is over 12, 18 months. But this year has been a little light on tenders, but so far, discussion is more tenders coming into market next year. So international can be lumpy, but when you look through a cycle, there is good growth in international markets in developing markets.

Okay. I think some of the secular tailwinds that Anshooman walked through, whether it's digitalization or the evolving consumer preferences and things like that, there are a lot of similarities in some of the more mature like Europe or Australia, U.K. included, where you're seeing the build-out of these larger hubs, leveraging more food convenience, foodvenience as the industry term. So there's a lot more technology advancement going in the mature markets versus some of the international markets as well.

Understood. Do you think that just -- does that lumpiness come into play next year around some of the tenders or the revenue -- the shipments on that? And I only raised that question, but just as I looked at your -- at least as it is defined, as you report high-growth revenue, it had a tick up for several quarters and then in the third quarter, it maybe stepped down. I don't know if that's just the third quarter perturbation or if that's -- the tenders kind of cyclic.

Quarter-to-quarter, it's a little bit lumpy. I'd look at it in aggregate and I look at it over the year. I think for the year, the growth will be roughly in line with our fleet growth. And again, next year, I think there will be growth in international markets. Quarter-to-quarter, there might be some lumpiness, but I think we take that into account, we feel pretty good about the overall convenience retail market growing next year globally. And quarter-to-quarter, the noise in the international markets will -- won't be material to move the needle for Vontier as a whole.

Fair enough. The Invenco business, that's a key part of at least what goes in store as well as what goes on the pump. A couple of drivers there that we're focused on FlexPay 6 and iNFX. FlexPay 6, in particular, seems like that's given you some nice tailwinds. Why is that relevant? Why is that -- the unified payment aspect of that, why is that important to your customers?

Yes. If you think of our Invenco business, really, if you can -- the set of products that we call Invenco, you can really think of 2 things. They're driving either payment -- unified payment or they're driving enterprise productivity. So FlexPay 6 is part of the payment suite of offerings we have. And it's connected hardware with software, which is really driving both consumer engagement and driving productivity for our customers. So just starting off with productivity, better remote monitoring, remote management.

While all of us are used to remote updates for our electronics in our space, every time you used to have a software update, you used to roll a truck to site. This is the first product that's brought remote software upgrades to our customers. Also, when you start thinking of a site which might have different payment technologies, every time you have a change in especially a monolithic architecture that a lot of our customers have where they've stitched together, think of a complex ERP for a large business.

Every time you have a change, you have to go through certification. The more payment devices you have, whether it's on the pump, whether it's inside the store, whether it's on the car wash or on the EV charger, it all adds complexity. By having one payment, FlexPay 6, which we're the only one which provides all of these assets, you drive down complexity. Having iNFX on top of it, which is modular in architecture, if you're changing something like a loyalty, doesn't change the architecture of your system, so you don't have to get your payment recertified.

So a lot of benefit from a productivity automation perspective out there. But really, also when you start thinking of consumer engagement, whether you're charging or you're getting your car gased up, you can put media on the dispenser and you can get media revenue by a third party or you can start looking at how do you improve conversion. We have a great customer of ours who experimented with free coffee on that screen.

People, they saw the conversion rate increase and the average basket size increase and their profit increased. But when you also think about, let's say, you're going at lunchtime to get gas, that's one transaction. You go inside the store to buy a sandwich. You go up to the kiosk, it's probably 5 screens to configure your sandwich, then you have to go pay somewhere else. That's probably not the best consumer experience for you.

What would be a nicer consumer experience could be you're at the dispenser, it recognizes you because of your loyalty. It comes -- preconfigured turkey sandwich comes up just the way you like it, one click to buy, one swipe fee instead of 2. By the time you're done getting gas, your sandwich is ready, either you go pick it up or they bring it out to the curb at the preassigned spot. That's what Flex -- the power of FlexPay 6 can bring. It's order at the pump. It's better loyalty. It's better engagement of the consumer. That's why we're pretty excited about what this can do for the industry.

Yes. How are customers adopting that? Is it just through new dispenser sales? Or is there a retrofit opportunity that you're attacking?

Yes. It's all -- it's both. So obviously, our customers [ at the ] dispenser is old, they're replacing the dispenser and a lot of them are buying FlexPay 6. But also, we sell payment kits where you don't have to replace the whole dispenser and you can just upgrade the payment from FlexPay 4 to FlexPay 6. So it's really an opportunity of both selling a new dispenser with payment embedded in there or upgrading your payment.

Yes. And again, if there's any questions, feel free to raise your hands, and we'll keep going here. Just around -- maybe it's iNFX. I mean you've kind of referenced some larger deployments may occur in 2026, maybe second half of '26. What's kind of the cycle there in terms of the sales cycle, the pilots that may be going? I don't know if you can give us a sense of how much activity is underneath that, expectations.

Yes. Just stepping back on iNFX, our iNFX wins so far, we did Shell and Chevron for all the U.S. sites, and we did Costco Canada, which was Unified Payments, which was both FlexPay 6 plus iNFX. We have a pipeline of opportunities, which include some pilots ongoing. These are a little longer sales cycles because you're dealing with payment. If payment isn't working, their site is down and they aren't generating revenue and profit.

So typically, it goes into a lab for a while, they'll evaluate it. You're going through testing with then you might roll it out for 1 or 2 sites if it's -- if they're moving from FlexPay 4 to FlexPay 6 at the same time, you're going through your payment certifications with your payment processor. After you've done a few sites, you'll do a smaller district, maybe 20 sites and then you'll go into a rollout with us. So we continue on our pilots with our customers. The pipeline is good. We think we have good potential for growth in this for a few years to come.

Yes. DRB, the vehicle wash system is the other bigger piece that's in the mobility tech segment. The newbuild activity, I think we've deduced has stabilized now, maybe that stabilized going forward. How do we think about the growth profile of the DRB business if, say, newbuilds are at a flattish level for the next few years? What's driving the growth on that side?

Yes. I think where we've seen a significant uptick recently has been on the Patheon conversions. Patheon is our new point-of-sale automation software that we offer in car wash. And we've had that out for about a little more than a year or so. And that conversion rate was slow to start, slow to adopt, but we've seen a big ramp in that recently. And I think that will be a big driver of growth for us going forward.

As you mentioned, the newbuild side has stabilized, still probably down a little bit this year versus 2024 levels, but should continue to stabilize through next year. And as you said, 60% of this portfolio is recurring. So that's been growing sort of low single-digit rates and the system side is the other 40%. We'll get some benefit from Patheon into next year. So something mid-single-digit-esque is probably the right growth rate for this business longer term, most likely including next year as well. Still working through the final plans on that, but...

Ryan talked about Patheon, some of what I was talking about on the convenience store side from a technology perspective, that plays out. Patheon's our cloud connected, moving from on-prem to the cloud drives higher automation and productivity for our customers, but also higher revenue. You're incorporating things like loyalty, customer relationship management, where you can do targeted marketing and drive and steer higher revenue. So a lot of the same themes from a technology perspective playing out. Yes.

Maybe just real quickly, just to touch on the Matco, the tools business. You said some kind of self-directed efforts to drive -- stimulate demand there. Can you touch on what you're doing there?

Yes. While the backdrop secular drivers are intact in that business, if you think miles driven is up, age of the car park is up, size of the car park is up, complexity of the car park is up. In the shorter term, technicians are impacted by the macro conditions, but we're very focused on stimulating demand in this environment. When you think the focus is around higher productivity, lower price point items from an innovation perspective and product vitality perspective, we also have some initiatives.

We do have 30% of the territory unserved through franchisees, so potential to add. We're being more targeted on the persona of people to target, where to target, how to target. We're also looking at stuff like store layout versus what's selling. So obviously, as the mix of what's selling changes, how do you design the stores better to dynamically and to help improve sales. So the team is working extremely hard on initiatives to try and stimulate demand and try and stabilize the business and turn it around even in this environment.

Yes. I mean, to the extent our administration has introduced plans to try to improve spending, capital spending, tax incentives, et cetera, maybe that flows to Matco, maybe it doesn't. Any areas of the business, though, that you would identify that you might expect to see some benefit from stimulative measures?

Yes. So first of all, the depreciation -- sorry, the R&D capitalization versus expense helps us from a cash tax basis. So we definitely benefited from higher cash flow because cash taxes are going down. We'll probably see the benefit split between this year and next year a little bit.

Accelerated depreciation going to that, for the large national regional operators, whether they're on the convenience store side or on the car wash side, their plans remain intact. I don't think it makes a huge difference. But really, when you start looking at some of the smaller operators, where they're more focused on cash-on-cash returns, quicker paybacks, accelerated depreciation definitely helps.

Now if you're planning a new site, you're looking 12, 18 months out before it translates into an order for dispensers or our point-of-sale system on the car wash. So if we start seeing some benefit from it, I'd expect we'd start seeing it later next year in 2026 and 2027, but it definitely helps us accelerated depreciation. Also, there's talk about tax payments or tax refunds being a lot higher, Rob, I think we were discussing it last night. As there's more discretionary money or if there's more discretionary money, that should help the technicians and hopefully help Matco a little bit also.

Yes. Just on the fueling business, Environmental & Fueling segment, does the growth profile, do you think that looks next year? Would that look much different to the demand dynamics, I guess, I'm not asking for guidance specifically, but do you see anything different in the demand dynamics next year that would be different than this year?

No. It's -- I think if you look, demand is pretty healthy and constructive in the C-store convenience retail space. On top of that, our innovation is reading through. And also, if you think what we've been doing with our 80/20 program around simplification, it enables us to focus on the areas where there is growth with the customers that are growing, the products that are growing. So really simplifying our portfolio through 80/20 is also an enabler of growth for us.

Yes. Just on that point, you've talked about a lot of confidence just in terms of being able to deliver some margin expansion next year. Could you dig a little deeper into what's driving that to the extent it would be over and above maybe a normal incremental margin level?

Yes. Our Vontier business system is built around a culture of continuous improvement. And part of that is our 80/20 process. Internally, we call it focus and prioritization effort. And we're still in the earlier innings of the 80/20 effort. If you really think we started off with 32 global dispenser platforms, we're down to 15, and we'll be down in the high single-digit range, 8 to 10 range. What it's allowed us to do is improve our standardized components from 2% to 30%. It's allowed us to take out about 20% of our square foot from a manufacturing perspective.

It's lowered our sustaining costs, allowing us to invest more in new product development and to return to the bottom line. We're doing similar things with our software platforms. We're simplifying the organization. So all of that, along with strategic pricing gives us significant runway for improving our margins. Also from an R&D perspective, we feel we'll have better leverage as we continue to grow. R&D is not going to grow at the same rate as sales will probably be helped constant.

And we're also seeing benefits in R&D from the deployment of AI, where code generation of code -- 80% of our Invenco product engineers are using AI for code generation. We're doing a lot of automated testing with AI, which reduced or improves the cost of quality by 15% or so. We continue to optimize. We went from 18 R&D centers to 9. So we have over 1,000 software engineers now as a business. But the average cost of engineering has come down materially as we've gone to these engineering centers. So a lot of work already done, but a lot of work ahead of us to continue to expand margins, and we feel pretty good about it.

Yes. One thing I want to touch on real quick. You made an announcement, I think it was last month, just around sales force kind of commercial go-to-market unification, I guess, is the term I use. How impactful do you think that can be? How quickly? It seems like a big deal, but it's -- I know it's early days as well.

Yes. It's something I'll start off with what really matters is the customers. And our customers are extremely happy and positive about the change. In the old model when we went to market as each business, you could have 4 different people calling on the customer in the matter of a week with 4 different products. To some extent, our customers might buy siloed, but as you start thinking of integrated technologies and digitalization, all of these assets do need to come together.

An individual buyer might not be thinking of it at an aggregate level, but I can assure you for larger customers, the C-suite is thinking about it that way. The CIO, the CTO is thinking about it that way. So really, what we're doing is bringing our sales together, our go-to-market together, which allows for key account management, trying to drive better share of the wallet, but also at the same time -- as you're talking about our whole portfolio, you're also learning and getting that constant feedback on what the customers' pain points are across the portfolio, across their integrated set of products or assets, which allows us to be better and solving the high-value problems for our customers.

Yes. We need to break there. We're at time. There is a breakout session in Lavante. So if you have any questions to direct to the team, be just there.

Thank you, Rob.

Thanks, Rob.

Good morning, ladies and gentlemen, and welcome to the Vontier Third Quarter 2025 Earnings Call.

[Operator Instructions]

This call is being recorded on Thursday, October 30, 2025, and a replay will be made available shortly after.

I would now like to turn the conference over to [indiscernible], Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us on the call this morning to discuss our third quarter results. With me today are Mark Morelli, our President and Chief Executive Officer; and Anshooman Aga, our Senior Vice President and Chief Financial Officer. .

You can find both our press release as well as our slide presentation that we will refer to during today's call on the Investor Relations section of our website at investors.vontier.com. Please note that during today's call, we will present certain non-GAAP financial measures. We will also make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to risks and uncertainties. Actual results might differ materially from any forward-looking statements that we make today, and we do not assume any obligation to update them. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available on our website and in our SEC filings.

With that, please turn to Slide 3, and I'll turn the call over to Mark. .

Thanks, Ryan, and good morning, everyone. Thank you for joining us on the call today. I'm pleased with the traction we are seeing from our Connected Mobility strategy, which we outlined in greater detail at our Convenience Retail Showcase 2 weeks ago. We've realigned the organization to better execute our strategic vision. We're reinvigorating new product development and building significant competitive advantages. We're the clear leader in this space with some of the industry's most innovative integrated solutions. I'm encouraged by the progress we are making, which is reinforced in our customer conversations. . I'll touch on a few takeaways from our event in a few minutes.

Turning to the quarter. We delivered solid Q3 results in a dynamic environment. The quarter played out as expected, consistent with the preliminary numbers we shared at our investor event. Our sales, adjusted operating margin and EPS landed at or near the high end of our guidance. Our teams remain disciplined on execution, advancing our 80/20 simplification efforts and tariff mitigation actions while delivering on the critical needs of our customers. Core sales were essentially flat for the quarter, solid underlying performance at mobility tech and environmental and fueling was offset by ongoing macro pressure at our Repair Solutions segment.

Importantly, demand within the convenience retail end market remains constructive and contributed to the quarter's momentum, and we see the repair segment stabilizing sequentially. Our car wash business returned to growth a quarter ahead of expectations as customers are adopting our cloud-based [ Patheon ] solution. This solution, which we featured at our investor event, helped us secure some key wins in the quarter and has a growing pipeline of opportunities. And in convenience retail, our unified payment and remote asset management solutions are delivering real value for our customers, driving low double-digit growth across Retail Solutions.

We have generated more than $275 million of adjusted free cash flow year-to-date, and we've deployed roughly $175 million of that to share buyback so far this year. We also took a few targeted portfolio actions in the quarter, divesting 2 non-core assets and exiting a minority equity stake concrete examples of our 80/20 work in action. Our decision to exit these businesses is a result of regional simplification efforts to sharpen our product and go-to-market focus, improving the overall growth and margin profile of Vontier.

Given our solid execution year-to-date and the traction we're seeing in our end markets, we are raising the midpoint of our full year guidance, Anshooman will provide more details in a few minutes. I'm encouraged by the fact that core growth is now tracking above 2% for the year, particularly as we've absorbed the impact from 2 businesses that have reset over the last 12 to 24 months. We expect mid-single-digit adjusted operating profit growth and remain on track for roughly 10% adjusted EPS growth this year. This combination reinforces a solid value creation algorithm.

Turning to Slide 4. As many of you are aware, we held a successful investor event at the Annual National Association of Convenience Stores trade show 2 weeks ago, and use that forum to highlight the comprehensive platform we've built for convenience retail. We're now a more focused, higher performing business with a more synergistic portfolio and broader, more comprehensive solutions. Our connected mobility strategy differentiates us. We are delivering integrated site-wide solutions that combine hardware, software, connectivity and services to help our customers navigate complexity. This lowers their operating costs and unlocks growth through improving consumer engagement. These end-to-end solutions expand our total addressable market and create recurring revenue opportunities.

Our recently announced go-to-market strategy simplifies the sale and deployment of our differentiated solutions through key account managers while streamlining processes, reducing friction and speeding development with shorter sales cycles.

Moving to Slide 5. Our refreshed value creation framework rest on 3 pillars. Pillar 1 supports accelerating organic growth via connected mobility and innovation. Pillar 2 focuses on optimizing our core operations to drive improved and more consistent margin expansion through the Vontier Business System. And Pillar 3 guides how we deploy capital effectively, dynamically prioritizing the highest return options available. As we look toward 2026, each pillar will play a key role in delivering results. Assuming a similar macro backdrop extends through next year, we expect the convenience retail end market to be constructive as we discussed at our investor event. We target above-market growth, led by our convenience retail solutions, including accelerating growth in car wash. We have strong multiyear secular tailwinds extending into 2026 and beyond.

Repair solutions demand is likely to remain soft, though distributor inventories are lean, and we are seeing sequential revenue stabilization. We expect better operating margin performance in 2026 driven by underlying productivity improvements, increased R&D efficiency, continued 80/20 simplification efforts and more favorable mix as volumes at car wash and repair solutions normalize. On top of this, we expect modest margin accretion from the portfolio management actions we are taking. On capital deployment, our approach will be consistent with what you've seen from us, balancing organic investment with shareholder returns and balance sheet [ health ].

To summarize, our strategy is working. We delivered strong disciplined execution in Q3, converted that into cash, [ refined ] the portfolio and we're advancing our connected mobility strategy to capture incremental share gains. We will continue to manage near-term cost and tariff pressures while investing where we see the best returns and positioning the company for above-market growth in key end markets. I want to thank our teams for their focus and agility. Their dedication to continuous improvement through the Vontier Business System gives us confidence to raise our outlook and to keep executing with discipline.

With that, I'll turn the call over to Anshooman to walk through the quarter's financial details.

Thanks, Mark, and good morning, everyone. I'll start off with a summary of our consolidated results for the third quarter on Slide 6. We delivered results at the higher end of our guidance, demonstrating the resilience of our portfolio and the effectiveness of our operational execution.

Total sales of $753 million were largely flat with the prior year. Adjusted operating profit margin held steady and adjusted EPS increased high single digits to $0.78. Adjusted free cash flow of $94 million came in at 82% conversion including a modest net headwind related to the timing of cash tax payments made in the third quarter. On a year-to-date basis, we have generated over $275 million in adjusted free cash flow approximately 12% of sales.

Turning to our segment results, starting on Slide 7. Environmental & Fueling Solutions delivered core growth of approximately 2% and in line with our guidance of low single-digit growth. Our sequential Q3 performance reflects an exceptionally strong Q2 and driven by shipment timing tied to appliance maintenance outage and ERP go live. Despite these timing impacts, North America dispenser sales increased mid-single digits during the quarter. This was offset by softer performance in international markets related to timing of large tenders. These results measured against the prior quarter timing dynamics and a strong prior year comparison of 9% underscores the team's disciplined execution. Solid demand tied to new build activity from large national and regional players as well as healthy refresh and replacement activity continues to support growth in both above and below ground human equipment. Segment operating margin declined approximately 20 basis points. ahead of our guidance for a 50 to 75 basis point decline, supported by ongoing simplification efforts.

On Slide 8, Mobility Technologies core sales grew approximately 5%, and supported by high single-digit bookings growth. Core growth was led by continued strength at Retail Solutions, up low double digits in the quarter and car wash returning to year-over-year growth, up low single digits. We are seeing strong global adoption of unified payment and point-of-sale technologies, which together were up high teens in the quarter. that especially notable given these products grew nearly 50% in Q3 last year. And as Mark mentioned at the start, we are encouraged by [ poor ] growth in car wash inflecting positive, 1 quarter ahead of schedule. This was mostly the result of strong demand for [ Patheon ] software upgrades, which experienced mid-teens growth in the quarter. Mobile [ tax ] margins increased over 40 basis points versus the prior year, reflecting the benefits of simplification efforts and improved R&D efficiency, partially offset by unfavorable mix.

And finally, on Slide 9, Repair Solutions sales declined 7% versus the prior year as ongoing macro conditions continue to weigh on service [ technician ] spend. This was slightly ahead of performance we saw in the first half, and we are starting to see signs of stabilization. Sell-through of the truck once again exceeded sell-in, indicating continued destocking by our distributors. While high-ticket product categories, including tool storage and diagnostics remain challenged, we are seeing momentum and lower price point offerings. Segment margin declined approximately 50 basis points primarily related to lower volume, partially offset by stronger contributions from price cost.

Turning to the balance sheet and cash flow on Slide 10. We completed another $70 million in share repurchases in the quarter, bringing us to $175 million in buybacks year-to-date. Net leverage ended the quarter at 2.4x, we exited a minority equity position and completed divestiture of 2 small encore businesses. Our European service business, a part of [indiscernible] and a small point-of-sale solution to the oil and quick lube end market within Mobility Tech. In total, this netted us $60 million in proceeds. On a pro forma annualized basis, these transactions remove approximately $70 million in sales at approximately 10% adjusted operating margin.

Turning to our updated outlook assumptions for Q4 and the full year on Slide 11. For the fourth quarter, we project revenues in the range of $760 million to $770 million, with core sales roughly flat at the midpoint. Adjusted EPS is expected in the range of $0.82 to $0.86, up mid-single digits at the midpoint. Our Q4 outlook includes a net headwind of approximately $15 million in sales and around $2 million of adjusted operating profit related to the divestitures I discussed.

For the full year, we are raising the midpoint of our guidance range. We now expect sales of just over $3.03 billion at the midpoint, with core sales up 2% to 2.5%, reflecting continued strength within our Mobility Tech and EFS segment, which have more than offset the weakness seen in repair solutions this year. We're expecting operating margin expansion in the range of 20 to 40 basis points and now guide to adjusted earnings per share of $3.18 at the midpoint. We've updated our other guidance assumptions, which can be found on the right-hand side of the slide.

We entered the third quarter with a clear view of expected time and dynamics and our teams delivered accordingly. Our strategic priorities remain unchanged. We're focused on operational excellence, unlocking self-help opportunities and driving innovation across our portfolio. Throughout 2025, our teams have proactively mitigated the inflationary impacts of tariffs and navigated broader macro uncertainty to support margin expansion and continued growth. At the same time, we're taking meaningful steps to optimize our cost structure and expect solid margin expansion next year. With strong fundamentals and cash generation, I'm confident that we are well positioned to deliver consistent performance and long-term value.

With that, I'll pass the call back over to Mark for his closing comments.

Thanks, Anshooman. We are pleased with our results year-to-date, which have exceeded our guidance ranges and enabled us to consistently raise our outlook for the year. 2025 has been impacted by headwinds, including significant cost inflation and related economic uncertainty caused by tariffs. As Anshooman mentioned, our teams have responded well. I'm proud of the way we have executed against an incredibly complex backdrop. Our connected mobility strategy, deep domain expertise and broad service network provide us with a clear competitive advantage to capitalize on secular tailwinds across our 3 end markets. .

I'm also proud of the progress we've made to advance our strategy and align our organization, both of which lead to accelerating top line performance ahead. I want to take the opportunity to thank everyone who was able to make it to our Investor Showcase in Chicago recently. This was a milestone event for Vontier in terms of demonstrating progress and in illustrating the opportunity in front of us. This sets us up to better deliver long-term value creation for our shareholders.

With that, operator, please open the line for questions.

[Operator Instructions] And with that, our first question comes from the line of Jeffrey Sprague with Vertical Research.

Mark, I was wondering if you could give us a little more color on sort of what you're seeing on the order front and some of the kind of longer cycle aspects of the portfolio. You mentioned some project investment work in these international tenders you mentioned, how far do those reach out? Just trying to get an early sense of maybe the exit rate or the setup in the 2026 in some of those more visible parts of the portfolio. .

Yes, Jeff, happy to answer that. Look, I think what you've seen is the changes occurring at Vontier have led to some longer cycle type selling of digital solutions for our customers, and they tend to be quite significant in size. Their selling cycle is a bit longer than maybe selling dispensers, which are more shorter cycle and you've seen that run through our P&L. And also in our order book, our orders were just under 1% for the quarter. But if you look at it on a year-over-year basis and a 2-year stack, I mean, it's a pretty good level that we're running at.

We've also made some announcements for some orders that we'll be landing for next year as well. And I think when you -- I'll give you a really good example of this, in our car wash business that turned a quarter ahead of where we've [ told ] the Street, it's really on the backs of bringing this type solution to market. It's an enterprise software solution where the market for car wash is actually flat to even down from where we said it was, but we're getting a return to growth in that business because we're selling the solution and we're getting some really good uptake from our customers on that. And by the way, we see a really good pipeline of funnel of opportunities. So we see that business returning to growth in a really good setup. So I like our setup that we have for 2026, and I'm very encouraged. .

Great. And then just on these exits, how much more of this is there to do? Is there kind of -- I suppose there's always some kind of a valuation on the portfolio going on. But if you stepped up your activity there, should we view this as one-off or maybe more pruning as we look into next year.

Well, I think you should view pruning as really part of our playbook. We're constantly, as you indicated there, reviewing our portfolio and looking at opportunities. This is also a real outgrowth of element of [ EBS ], where we've incorporated 80/20 where we're evaluating and seeing parts of our portfolio that belong elsewhere. And when those things arise, sometimes it takes a while for those things to work through to find the right solution for them. I think you're seeing a culmination of some work that's been underway for a while. And I think you just look at us to constantly use that dimension to be able to enhance our growth profile and margin profile of the business. .

And your next question comes from the line of Julian Mitchell with Barclays. .

This is [ Jimmy Jake ] on for Julian Mitchell. So first off, I appreciate all the detail you've given on the slides. Maybe just speak to any color on Q4 sales and margins by segment, please?

Yes. Just from a Q4 perspective, as we said at the midpoint relatively flat year-on-year -- from a mobility technology perspective, that business is going to be relatively flat also in Q4 year-on-year coming off a very hard compare and also some project timing. Some of these technology projects have upfront hardware components and then you have recurring revenues. So it's the timing of the hardware component out there. Our environmental and fueling business should continue to post growth, low to mid-single-digit growth. And then for repair solutions, we're starting to see signs of sequential stabilization, which would put it down mid- to high single digits on a year-on-year basis.

From a margin perspective, mobility technologies in Q4 should have at the midpoint, roughly a 50 basis point margin expansion. If you recall, last year, Mobility Technology margins in Q4 were relatively strong at 20.7%, which was 170 basis points above the full year average. And despite the harder compare terms of operating profit margins, we think we'll get another 50 basis points in Q4 this year. [indiscernible] had a slightly easier compare from a margin perspective. We expect in Q4, we expect they'll be up closer to 100 basis points. And then repair solutions on the lower volume should be down about 50 basis points. Also, as a reminder, just we have about $17 million of impact in Q4 of the $70 million in terms of divestitures at roughly 10% of rating profit margin.

Got it. That's helpful. And maybe just switching gears a little bit. Could you speak to the general bullishness on retail fueling? One of your peers sounded pretty upbeat on CapEx in this space. So I would appreciate your thoughts here.

Yes. Happy to make some comments on that. And also, if any of you followed our [ investor teach-in ] that we had on convenience retail here recently. We are very constructive on the end market. If you take a look at Vontier, about 2/3 of our business is exposed to convenience retail. And we have a leadership position worldwide on retail fueling, which is an important element and part of that, and I think that's where you're going.

If you look at the announcements of the major players in this space, they're building out their footprints. And there's also consolidation that is occurring given that we've got 2/3 share or more in some of the larger market segments where these larger customers operate, they need the tools and capabilities to be able to operate more effectively, particularly when they're putting more assets in the ground and they're consolidating. And so this is a great backdrop for us in particular, I think, a really positive setup for 2026, but also I think the market is coming more our way with our technology solutions and market share. So I think it's a very constructive element of the secular drivers that are at work that really help out our portfolio.

And your next question comes from the line of Nigel Coe with Wolfe Research. .

Anshooman, [ maybe could you just peel back on the mobility lab -- you obviously, you called out some of the hardware if you just go into the subsegment level, expecting DRB I think, should be accelerating. ] So I'd be curious what of that math. .

We -- and Nigel, you were breaking up, but I think the question was around a little more color on Mobility Technologies being flat -- it's really coming off a very hard compare for [ Invenco ]. The business. had a very strong Q4 based on the timing of certain projects. We've been talking about not only the [ NFX wins ], which had hardware upfront, but also the vehicle identification system order which was really delivery -- large delivery last year, Q4 and also in Q1, Q2 of this year. So it's hard compares for us and Invenco in Q4, again in Q1, Q2. The good news is we do have a couple of large wins in [ Venco ], another one in the vehicle identification system and 1 end [ Indropayments ].

Now the timing of these usually after you win it, there's some development work with the customers certification through their networks before the rollout starts. And these projects, the rollouts will start in the back half of next year. So really -- so it's just a timing perspective. I think for these kinds of businesses versus looking quarter-to-quarter, if we look at an annual chunk, that's a better way to look at these. This year [ in Venco ] will grow well in the double digits. And next year, we feel pretty confident that [ in Venco ] should grow mid-single digits again on a hard compare.

Okay. That's pretty helpful [indiscernible]. Maybe on environmental. [ As a previous question alluded, it sounds that the U.S. is sort of in the new CapEx cycle -- just maybe talk about Internet, I think there's a bit more noise. Just curious how you see developing over the next 12 months to ].

Yes. So environmental is a good growth driver for us on an annual basis, and I think the growth continues into next year. U.S., obviously, were supported by the time replacement cycle that we talked about. Also international, we've been seeing growth. Now international growth, there's sometimes timing of tenders that pause a little bit up and down in a quarter-to-quarter. But again, from an annual basis, environmental globally is an area that we feel strong about. There's continuing regulation in this space. And there's not a slowdown of regulation, the amount of regulation, the complexity of regulation keeps increasing.

Also with our connected offering where instead of having on-prem connectivity. Our new solutions provide cloud-based connectivity where for larger customers, being able to monitor the whole fleet centrally is a big advantage. And we're seeing some of that play out. So we feel pretty good about our environmental business.

And your next question comes from the line of Katie Fleischer with KeyBanc. .

Just to kind of circle back on Mobility Technologies. Again, I was wondering if you could give a little more detail about the margins. I think earlier this year, you had expectations for that segment to grow over 100 basis points year-over-year with the operating margins, and it sounds like that's coming down a bit. Just wondering what's driving that difference there? .

Yes. Katie, just let's take Q3. We had expected margins in Mobile Tech to be up 100 basis points. And they were up less than that. But it's also lost small numbers, 40, 50 basis points, you're talking about $1 million to a little over $1 million. And in our [ ANGI ] business, we had some higher costs and timing of projects that caused that roughly $1 million, $1.5 million of lower profit versus our expectations. If we hadn't had that, we would have been right around 100 basis points we were expecting. So a little bit of headwind at our [indiscernible] business that we're working on [indiscernible] and fixing. .

Okay. That's helpful. And then I know you're not ready to guide for 2026 yet, but you made some comments about expectations for operating leverage to improve next year. How should we think about those comments in relation to the long-term targets that you guys have out there? .

Yes, Katie, this is Mark. Look, I like our setup for 2026. I'm cautiously optimistic, as you said, it's a little bit too early to give guidance as we're heavily into the planning cycle right now. There is some color we can give. I think we're positioned to accelerate growth. I think our market leadership on convenience retail being 2/3 of our exposure there looks good. And then other elements of our business are stabilizing like in the repair solutions side and importantly, part of convenience retail, the car wash business is inflecting up. And then on the margin side, I think we anticipate better drop-through than what we've seen because we're accelerating some of our ABS initiatives, particularly around 80/20.

Do you want to add some color, Anshooman?

Yes. Just putting some numbers around what Mark referenced. While early to give guidance, if you go back to our convenience retail showcase, 67% of our revenue, the market is growing 3% to 4%. We think we can outgrow that market a little bit. So that would put roughly 4% to 5% maybe growth for our convenience retail part of our portfolio, which is 67%. For the remaining, which large part of it is our repair solutions part of the business. We're starting to see signs of sequential stabilization which still puts pressure on a year-on-year basis, especially in half one for us.

The U.S. consumer is still stretched, especially at the lower end, and our technicians are those consumers. So we still see pressure in that business, but stabilizing sequentially. So best case, as of now, we aren't giving guidance, but flattish on the remaining part of our portfolio.

Our normal drop-throughs on growth are typically 30% to 35%. We feel strongly that we'll outdo those given the fact that we have a lot of the 80/20 simplification, all part of our [ VBS ] system in terms of continuous improvement. So we could see the drop-throughs north of 50% next year approaching almost twice of what our typical drop through of 30%, 35% would be. So somewhere in that range.

Katie, I'll just also add, as you guys start modeling just a simple reminder that we do have a $500 million bond that comes up next year in April, and that is at 1.8%. So I don't think we'll be getting another 1.8% coupon. So it's probably some headwind in interest expense next year, too. .

And your next question comes from the line of Andrew Obin with Bank of America. .

This is David Ritalin on for Andrew. On repair solutions, look, you have a publicly traded competitor out there, spent on tools. [ I'm not going to make too much of 90-day performance ], but year-to-date, their segment tools segment is down 1% and [indiscernible] is down 8%. So what explains kind of the gap that you're seeing versus your peers? .

Yes, David, this is Mark. Look, I think on a quarter-to-quarter basis, you're going to see some ebb and flow. First of all, we have a lot of respect for our company......

Those were year-to-date numbers. .

Yes. I think if you go back to last year, you'll see we also gained share as well. So I think there is some ebb and flow. And they're on the backs of Expo that they just had this quarter. But we do think that the overall market for repair, and if you look at the comments that are out there, is a good backdrop, but the consumer is under a bit of pressure, which I don't think is any news. And I think the real efforts that we have there is getting better vitality for some of the lower price point items. We started the year raising price, and we've hung on to some of that price that we've raised. And now we're pivoting back to some of the lower price items.

So I think the good news is we're seeing sequential stabilization in the business. And I think we're really focused to get an uplift on this business for next year .

Got it. And just for clarification, I think you said was -- were your comments on orders that book-to-bill being around 1%? Or were you saying orders were up 1% year-over-year organic in the .

No, that was a book-to-bill.

Book-to-bill level.

Book-to-Bill was just under 1% for the quarter, hovering around that around 1% for the year and we expect to end the year roughly at 1%.

And your next question comes from the line of Rob Mason with Baird. .

It's good to see the recovery there in DRB. Mark, there's -- in the past, M&A activity in that space seemingly has had a positive dynamic on the business. We've seen industry sources suggest more of that activity could start more consolidation activity actually could start to happen. I know there's maybe 1 [ hot higher ] profile thing out there. But the -- just in general, I'm just curious if you're picking that up. And does that inform your pipeline as maybe those larger customers where you're strong, you start planning that out?

Yes, absolutely. I think our strategy in the car space is to win with the winners. So some of the bigger players out there, some of the more savvy operators in the space are actually making moves to further consolidate. These folks need the tools to be able to operate their footprint. The complexity they're dealing with, not only on the cost management side, but also how they can more effectively attract consumers to their car wash. We have a great tool with that, with Patheon. Customers see excellent returns. And if you have more than 100 car washes, that's even better.

So as you scale these are the tools you need to scale, and that's why we're getting tracking in the space ahead of the overall market turn. And I think we feel really good about the pipeline and what we've got in the pipeline and the engagements we have with customers. So it's -- I think it's a real example of our connected mobility strategy beginning to pay off for us and real proof points around it. So we're really excited about what we're seeing there. .

Good, good. Going back to the event a few weeks ago in [indiscernible], new products around the tankage and capitalize on that replacement cycle. But one of the things that kind of came out of the conversations was your installed base, those products are just very durable. I'm just curious if there's any other incentives that you can point to that can help customers accelerate the replacement cycle around that product -- new product that you introduced? .

Yes. We absolutely do. I mean this is a piece of business here that we really drive a tremendous amount of leverage off the massive installed base. This is pretty much the brand of record, if you look at underground equipment, how it been done on a worldwide basis. And so particularly on the upgrade cycle in the United States. A couple of things we do. We package solutions. So it's easier for folks when they're looking at a complete underground retrofit, we don't make or sell the tanks, but you can package up the tanks with the piping and the sensors and make it a lot easier for them to be able to do that.

We also help them on interest rate issues that might come up when they're making a total retrofit solution there. And so we're very engaged with our customers on how they move that forward. I think the really good news about this secular driver for us is that it's a pretty steady driver that's in its early innings. It's not this massive driver that's going to drive a whole bunch of revenue in a couple of quarters. I think it's going to be a pretty steady replacement cycle over the next 5-plus years, which I think is great. That's the kind of driver that regulatory drivers that we like, and I think we're just well positioned there to win. .

I'll also add, while Mark covered directly the question in terms of the incentives and how we help drive that there's a significant value proposition of having connectivity and asset management, asset monitoring, which our solution provides switch to old solutions did not provide. So when we talked about last quarter, one of our large customers doing a phased fleet-wide upgrade. It's because of the value proposition that our connectivity or new pack offering provides and it's also the latest [ Card ] certification that we provide -- so a lot of benefits, but also to Mark's point, we also are stimulating demand with lot of these actions. .

And your next question comes from the line of [ Andy Caletti ].

This is actually Jose on for A&D. Maybe going back to repair solutions, the margins there seem to be stabilizing and you pointed to strong price cost contribution in the slide. And I think [indiscernible] was the business that was the most exposed to tariffs for you. Can you talk through how the customer reception has been on those price increases and what you're expecting kind of moving forward? .

Yes. I'll jump in, and I'll let Anshooman also talk about repair as well. Look, there's no question that the tariffs have sort of been more significant for repair solutions. But if you look back over a couple of year basis, even from like [ Trump 1.0 to Trump 2.0 ], we have really worked very hard to source in region for region. And I think in our setup when we placed this year is we source and manufacture 75% in region for region, which is a pretty significant change over the last couple of years. So we've made a lot of progress. I think we're going to be on our target of getting less than 10% of product source from China by the end of this year. And so I think that, I guess, long body of work has really been paying off for us.

But no question, there has been headwinds there on cost and some of the supply chain-related issues. I think as we get into next year and hopefully, we see the tariffs stabilizing. And I think I'm really proud of the management teams for our ability to manage that and offset that. I think the pricing that we went out with earlier in the year, we've seen some drop-through on that price increase that we've made. We're not making any further price increases at the moment. But we did pick up some on the price. And I think as we get into next year, as we continue to work through the tariffs adequately well and then we'll have better year-over-year compares on the tariff issue as well. Do you want to add some color there, Anshooman?

Yes. We in our gross margins have been pretty flat at repair year-on-year, which basically we passed on the cost of the tariffs. Generally, we've been okay passing through that some places, it's a little more targeted where we have to make decisions around portfolio, et cetera. But large part of it as Mark talked has been moving supply chain and trying to optimize our cost position also because of leveraging a more not only U.S. supply chain but also other countries outside of China. We will be under [ $150 million ] of procurement from China by the end of this year on a run rate basis. So our teams have done a really good job mitigating some of the higher tariff exposures. .

Got it. Helpful. And then maybe kind of turning over towards cash. I did see that you slightly lowered the conversion to 95% for the full year from your 100%. And at the event a couple of weeks ago, you talked about targeting over 90% conversion through '28 which is a little bit lower than the 100% you guys talked about at your previous Investor Day. So I was wondering if you could touch on what's contributing to that? And maybe elaborate on any working capital opportunities that you're working on. .

Yes. If you also noticed, our tax rate is creeping up a little bit from [ 21% to -- 21% to 21.5% ] for this year. Part of it has to do with the [ R&D law change ], we probably will take a lot of the cash benefit over 2 years because it does impact the tax rate when you take that so that's part of the 100% going to 95%, just managing our overall tax rate. So we're splitting some of the tax benefit over the 2 years versus taking it all in 1 year. .

In terms of greater than 90%, I think that's a pretty good cash conversion as you're going to have growth in the business, working capital kind of grows with your growth rate. So one way to think about it as a cash conversion of 100 minus your growth rate is a pretty good target to go for. Greater than 90% gives us some buffer, I would say, but we feel very strongly that we have a really good cash conversion profile in our business.

And I'm showing no further questions at this time. I would like to turn it back to Mark Morelli for closing remarks. .

Yes. Thank you. Thanks again for joining us on today's call. we're exiting 2025 with fundamentally stronger operations, improving trends across our core businesses and clear momentum on our connected mobility strategy. We're delivering differentiated solutions in attractive end markets and we're committed to creating long-term value for our customers and returns for our shareholders. Importantly, our shares remain meaningfully discounted to peers, underscoring the upside as we continue to execute. We appreciate your continued interest in Vontier and look forward to engaging with many of you over the next several weeks. Have a great day.

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.

All right. Good morning, everybody. We're going to go ahead and get started here. So, first off, I want to say thank you to everyone who could be here with us in Chicago today, and thank you to those of you listening on the webcast. We know it's a busy time for all of you, so we appreciate your interest in Vontier, and we appreciate you taking the time today.

So just to give you a little lay of the land, we're here at NACS, which is the National Association of Convenience Stores, largest annual trade show of the year. It's sort of a massive show, a lot of excitement going on, a lot of folks here. But we wanted to bring you here just in an effort to help address a lot of your questions. We get a lot of questions, Mark, Anshooman and I when we're with you around the businesses, how they come together and just broadly more detail about the convenience retail end market. So we're hopefully going to spend a lot of time on that today. And our intent is to really help educate you here on this end market. We want to give you a better understanding of our strategic vision. We want to share with you our conviction for the growth drivers in this end market and how we're creating significant opportunities and competitive advantages that position us to lead the evolution of this end market.

So, I won't cover these next two slides, but please read through them at your leisure. And I want to go through the agenda a little bit here. So, we're going to kick things off with a quick video after me. We'll bring Mark up. He's going to give you a little bit of a strategic overview of Vontier. Then he's going to double-click into convenience retail a bit. And then we're going to have a number of our business leaders come up, four separate business leaders to walk you through various parts of our verticals within convenience retail.

We'll have a quick Q&A session, 10, 15 minutes, and then we'll follow that with a break. And then we have an exciting industry panel. We have some folks here with us today that will help give you a little bit of an outside perspective. So you're not just hearing from us how excited we are. And then we'll come back with a brief financial update from Anshooman, another Q&A session in the end. And then we'll -- for those of us here in the room, we're going to head down to the show floor and do our booth tour. For those of you on the webcast, we'll be cutting our webcast right after the last Q&A.

So, thanks again. Appreciate you being here. I'm going to bring up Mark, like I said, before we do that, I'm going to start with a quick video. Thank you.

[Presentation]

Well, folks, welcome. We are so happy to have you with us here in Chicago as well as joining us by the webcast. What a better time than now to do this. Vontier is a business of transformation. We just passed our fifth year anniversary and a lot has changed. A lot we can be incredibly proud of in terms of where we came from, what the company is today and the hard work that's gone into it. But not only that, bringing you here to Chicago for such an important event for us also marries our two worlds. It's been a bit difficult with investors to try to explain our story. And we've been on this journey. It's been complicated. We've had the pieces, we've had the assets that we've had. But now when you look at our portfolio, so much has changed and what a better place to bring you than the next show with more than 20,000 visitors that are going to be here today, what an incredibly vibrant industry, and we can show our strong businesses, our strong brands and make it real world for you all.

So you have a very good practical understanding of where we're going. So I couldn't be more excited to have you with us today. And we're going to talk about a lot of stuff, and you're going to see a lot of things that we're really excited about.

So, the first is, I hope that you recognize that Vontier is a more focused company. It is purpose-built, it is leveraging strong secular drivers, and it is a performance-oriented company that we are incredibly proud has a strategy that strings things together, and we have a vision and a mission that also works. And a big part of that is how we're positioned in our markets. We're going to have a little bit of a departure on how we talk about our businesses. We're great at talking about our opcos and our businesses and our brands. But what maybe you'll see different today is that we're starting to bring this together around vertical markets. And importantly, the convenience store vertical market is so important to us that you can see that real world in live. And it's that positioning in markets that is truly differentiating for us. We have strong depth and breadth, and that provides a capability for us to create more leverage in the industry and where we can also compete.

Shortly after we launched, we talked about our Connected Mobility strategy. Our Connected Mobility strategy is more at work today than it ever has been, and it is our guiding light for the future and where we go. So what you will see today is the advancement of our Connected Mobility strategy, and we're doubling down on it because it's what's driving growth, it's what's driving margins. It's what's driving differentiation, and it's how we compete. And in fact, that's how we can deliver outperformance and continued growth in this industry and beyond.

We have an updated tagline. And we're excited about this tagline because it is about Powering the Way the World Moves. Look at what we do. We provide energy. Energy is about power, but it's multi-energy. But powering is also about connected smart hardware and software. And that powering is a big part of how we provide value to our customers. It's high-value problems that we're focused on. It's not technology for the sake of technology, and it leverages our unprecedented depth and breadth in this industry in a unique way to bring this forward for differentiation.

What you will see also when you visit the booth later today is that we're bringing this under the Vontier umbrella brand. And so we're very excited with our refreshed Vontier brand launch and our tagline. A lot of work has gone into it, a lot of thoughts gone into it. It makes a ton of sense for us. I think it will make a lot of sense for you.

Many of you know Vontier. We're a $3 billion company. These are our reporting segments that I think you're quite familiar with. I think they hold together. If you may remember and you've stuck with our story for a period of time, you may recognize that we reported in one segment not that long ago. When we segmented our business, we're providing more openness, more transparency, and we think that this is the right framework where we can also provide you with the level of granularity and transparency into our business where you can follow our results on a quarterly basis.

But the other framings are also really important, and we're going to be talking about these other framings, particularly on vertical market segments or end markets. And we serve three end markets. I'm going to get into that a bit more before we just do a deep dive, but look how big the convenience retail is for us. 70% of our business is serving convenience retail with our businesses and brands. What a more perfect place for you to be here today where we can help explain that and make that real for you. And then we have a good geographical coverage. Most of our coverage, even though we're a global business, and we're proud of that is in the United States and also less than 1% of our revenue is coming from China.

When we look back on our journey, I am incredibly proud of what we're able to do here today and we can do in our business that we couldn't do at the time we launched in October of 2020. My gosh, has the world changed since then? And also has Vontier changed? We spun with a great legacy of brands and businesses with an outstanding market leadership in a business system with a deep, rich heritage around that. We couldn't be more proud of those assets that we inherited and had.

But at the same time, we have to look at reality. We're a spin of a spin. Our businesses needed attention and investment and needed a strategy to hold our businesses together. And in fact, many pieces of that portfolio didn't fit, and we divested them, which are no longer part of our portfolio. And then we put capital to work with strong returns. Part of that was through M&A, and we're very proud of the M&A that we've done, and we believe we're posting really strong returns from those assets. And more importantly than that is also an excellent strategic fit. So our Connected Mobility strategy is more at work today than it ever has been.

But what enabled us to do that funding? What enabled us to reposition the business. It's not just the strategy work we did. It's the investments that we've done, particularly around new product development and innovation. And we had to self-fund this. And the way that we did this, not only a responsibility to improve margins that were already strong margins, it was through an 80/20 process. We incorporated that into our strong business system, and we started executing that in early innings. I will also say today that we have a long runway of 80/20 initiatives.

But how else were we going to fund this? We couldn't go to investors and say, come back years later. We already had headwinds from COVID. You all remember the EMV challenges that we had where it was a great strong secular tailwind turning into a secular headwind. So we had a lot of things we had to work through. I couldn't be more proud to be able to show you the innovations that we have today, where those seeds were planted in our infrastructure many years ago that are coming to fruition as we speak today.

Part of that is on the software side and more than doubling our software engineers and creating the software factory has been incredibly important. to the value propositions that we're adding to our customers today and as we go forward. You're going to hear a lot about our products there. You've heard about products like iNFX and HUB. And I think you're going to also when you tour our factory -- or excuse me, our floor down on the convention floor, you also see very practically how they work, and you can hear from folks on the industry panel.

Importantly, the market that we serve is this $30 billion mobility ecosystem market with higher recurring revenues. But a big piece of our story is how do we frame it from a customer-back centricity. And more simplistically, we serve three attractive end markets in this $30 billion mobility ecosystem. And these three markets, we like them. We like them all because they've got great secular drivers. We're going to spend a lot of time on convenience retail today.

I don't want to double-click on it too much at the moment because we're going to spend a couple of hours here together going deep there, but great secular drivers that we can leverage and our position is unique in that industry. But also, we're not talking much about fleets today. That's for another teach-in day or about repair, but these have strong secular drivers as well. Look at what fleet operators can leverage from Vontier. Look at our market leadership positions, look at the problems they're trying to solve. A lot of those same problems are the same. And in repair, there's a great backdrop from repair. If you read the articles recently about the average price of a new vehicle is more than $50,000 and the average age of the fleet continues to grow. It's almost 13 years. So what happens when you have an aged fleet. It needs more repair. The sweet spot of repair is opening up and it's more vibrant than it ever has been. It's a little held back from the consumer, but the backdrop with strong secular drivers are there, and it is an attractive longer-term market.

Many of you may know this, but if you don't, it is really important to understand. If you look at these three vertical market segments, our positioning here in some of the most critical spots in the mobility ecosystem is strong market leadership, #1 or #2. What does that mean when you have such a strong depth and breadth? What do customers rely on you for? We have a responsibility not only to bring these siloed brands forward, but we have leverage that we can create when we work across brands in a way that makes it better for our customers and is truly differentiating.

And when you look across those three segments, there are three strong secular tailwinds that I want to bring a little bit of focus to. And the reason why is I think some of them can also be misunderstood. The first is digitalization. What is it? It's about the capability for folks to leverage technology in unique ways that they can better their environment from a productivity perspective or how our customers attract consumers to their sites. It's essentially how they compete on their business from a profitability perspective and drive revenue into a very competitive space for them. And so digitalization for convenience retail is important.

It's also important in our other two segments and fleets as well. It's a function of what technology is able to do. But what it is not is technology for the sake of technology. Folks are out there making these investments, whether we talk about AI or we talk about more smart connected products, there's a lot of leverage here that people can get to solve real-world problems. I want to make sure that we really understand this through our conversations that we have today is that we are advancing this in the right way that makes sense for our customers. We are focused on solving customer problems, not advancing technology for the sake of technology.

The other thing that is really relevant for all of our businesses is around regulations and compliance. Many of you may know the story from spin and you know about EMV. Wow, that was the mother of all regulatory compliance things that hit the business, a massive tailwind that turned into a massive headwind right about the time we spun. And I think the misconception when you look back to 2020, 2021 and even early 2022 was the belief that, my gosh, nobody is ever going to have to replace another dispenser again. I can't tell you how many times that we've been in conversations with investors and trying to explain what we believe the value proposition was sort of post-EMV world. And we can understand maybe the confusion because it was such a dramatic industry event.

However, industry regulation is happening worldwide. And this is not political football folks. This is about keeping water clean. This is about security of payment. This is about governments that want to collect their tax revenue. All of these kind of regulations drive our industry, and there is a steady drip, drip, drip of regulation worldwide that drives our industry. We invest in that with engineering capability and talent, and we leverage that to make not only the world a better place to live, but also it makes a great business, and it makes a better business for our customers as well. So compliance and certification is a big part of that, and that is an ongoing driver. So ask us questions about that. We're really happy to continue to illuminate that path ahead.

The other thing is about energy expansion. And what is that? That is that, and I think we get it, when it comes to road travel, when it comes to how we enable the mobility ecosystem, it requires more energy, not less energy. And our portfolio is about how we serve the multi-energy future. Now I'll tell you, we're not great at predicting elections, and we're not in the business of predicting elections. But today, we're positioned to be able to provide the right portfolio, the right choices in the right profit pools regardless of the decisions that governments make that advance those technologies. We're very proud of our ability to grow the EV infrastructure. We're incredibly proud of making investments on the petrol-based infrastructure when a couple of years ago, it was not very well thought of. When we really understood that this is going to be around for a long period of time, and we stepped forward and made investments, you see the fruits of those investments that we've made today.

Folks, it's not about an energy transition. It's about energy expansion. It's not about knowing what government is going to be in office and what they're going to preference. It's about having the right portfolio that people can have that choice regardless of what government is in office, and we're in the right profit pools where we're creating returns for investors.

Let's hear from our customers around this, too, because these secular drivers are about solving the customer problems. Here's a couple of different quotes here that we can leverage on. On digitalization, it's also about integration. It's about the lack of actionable insights. A folks love to talk about AI today. It seems like that's all that we hear on Squawk Box every morning is a new story on AI. It's in the press all the time. But the practical reality of having the data and turning that into something that is actionable is very real and very tangible for our customers. We have the benefit of our leading positions to sit on a lot of data. That is just a right to play. The key is how do we turn that from our integrated smart products and application software into actionable insights. Regulatory and compliance is a major drag for our customers in terms of their cost to be able to comply.

One of the things that's also differentiating for us is our depth and breadth in the industry creates application knowledge. And that application knowledge means that we can help navigate this field better than anybody else on a worldwide basis so that our ability to provide solutions and compliance can help our customers navigate this in a much more cost-effective way, and it creates a lot of value for all of us. So we deeply are entrenched in this area, and we work closely with our customers and regulatory bodies to help advance the industry. And then, of course, energy expansion, folks are wrestling with that because you see that patchwork out there. How do you manage fleets? How do you manage the car park? How do you provide solutions that are also integrated and seamless to bring that together in sensible ways. We're incredibly well positioned to do that.

When you think of our business, you think of the opportunity to create value. And our three-pillar framework might be recognizable to you, but it's changed a little bit. I'm going to walk you through this. We have this three-pillar strategy that we think drives shareholder value. And the first one we really want to spend time on is an accelerating growth. I think it's the piece of our story that maybe is the most understood. And if you see and understand the underpinnings there and you see the work that we're doing, I think that we can really understand that the value creation potential from how our stock is traded is clearly has some strong underpinnings.

We have strong margins already, but our 80/20 process or something internally we call FPP or focus and prioritization has a lot of legs, and we're going to talk a bit about that today and about deploying capital. Deploying capital is something we take seriously and returns on how we deploy capital, we feel incredibly accountable for, and we're very disciplined on how we do that.

But before I get into that, let me just touch on our mobility strategy here. And this is a strategy we launched a little while ago, but I think it holds a matter of fact, better today than ever before. The analogy I want to make for you is think back on Industry 2.0, Industry 3.0, Industry 4.0. Remember where we were trying to connect the assets on the factory floors, and we're saying, this is about better asset management and real capabilities going to be driven here. Nobody has really put that together for the mobility ecosystem. You all read all these announcements and you see this incredible infrastructure that's being built out worldwide.

Look at all those assets that are being put in the ground. Look at all of that capability that needs to be managed better. And they're very disparate and they're changing due to regulation and they're changing because of the dynamics of acquisitions where the larger players are buying some of the smaller players. Sometimes the larger players are buying the medium players. And that creates an incredible patchwork by which how do you manage this? And when you think about we're probably at mobility ecosystem 2.0.

The industry has not had the tools and capabilities to be able to manage this. And when you imagine a mobility ecosystem 4.0, look what can be put to work. So they have better productivity of their assets. They have better asset management. They have higher uptime, better results, and they have more connectivity to their customers to be able to make them more specific to each individual customer and attract them to their sites through loyalty programs. So when we look across the mobility ecosystem, this is what we think about on connect managed scale, and we're going to give you real-world examples about that and how that works in a very seamless way.

We're going to spend time on it, particularly when we're integrated with some of the solutions here with Austin Lieb at the end, but it's about how energy is being delivered. It's about more investments that are being made on the forecourt. But not only that, think about it with all of our touch points and all of the opportunities to make a payment transaction, whether you're a car wash, whether you're inside the store, whether you're paying at the pump. Why can't that be unified? Why are there so many different payment transactions and capabilities? Why can't that accrue to the same loyalty program? And why can't that whole infrastructure work in a more seamless, more intelligent way where it can provide itself with new software updates that come over the air.

If you think about those kind of things, it kind of makes common sense. In today's day and age, why aren't those capabilities exist. What we're talking about is putting that infrastructure in place. And what does that do for asset management and compliance? What does that do from an end-user capability? They can bring more products to market with open system architecture much more fluidly. They can reduce their cost of operations. They can increase their uptime, and they can speed to market new products. All of that is capable with a more modern capable infrastructure. We are not creating rocket science here folks. We're taking really well-tested capabilities from other industries that this industry deserves.

Let me give you an example. Many of you heard about our rollout with iNFX and our Invenco brand products for Shell. It's now been rolled out to more than 12,000 sites. And what does it really provide? It provides the critical infrastructure. It's not about a single dispenser. It's about how they work in concert in unison. It's about how you can order at the pump. It's about how that infrastructure can move forward and it can comply with regulation and not be so burdensome for Shell. It was so valuable to Shell, they even rolled it out to their franchisees that were not company-owned assets because of their ability to manage this infrastructure with an open system API-based infrastructure. We're through the growing pains of the early innings on that, and we're talking with Shell about how we also expand that. So it's about bringing these concepts to this industry that haven't existed before.

Another one is around fleets. And we're not going to spend time talking about fleets here today much, but I do want to tell you that some of those same kind of things are at work. We have something called the vehicle identification solution. It's at work in the Middle East, and we roll this out on countrywide rollouts. And it's the integration of when you have a fleet vehicle, when you sign up for that fleet vehicle, where it has an RFID capability, recognizes the vehicle, it recognizes the pump, it makes a secure transaction. That prevents fraud. That makes there's a secure payment that's at play. Governments love that. And so there are governments that have actually endorsed this technology and have rolled this out countrywide. Look at the number of transactions that are being processed here. What a great business and a great business model.

So when you think about this, what do these kind of examples do and what we're going to share with you today is not only do we have an attractive market, it expands the businesses that we're in. It expands the TAM. It expands our recurring revenue. And in fact, when you combine this with our 80/20 processing capabilities, we get greater leverage with scale, and that means we scale on platforms that provides more -- better economics for us and for our customers because they can leverage a scaled platform.

So how do we get here? We got here because of our focus on strategy and for our investment. In fact, the left-hand side of this chart is quite indicative of something in our playbook that we're incredibly proud we're able to pull off. If you can start simplifying your product lines, and by the way, we have a lot more room to move on this as well, you can pull out your sustaining costs and you can channel that, one, drop to the bottom line for investors to get expanding margins, but also that gives you the firepower to self-invest on some of what you see what's at work and at play today. And look at the right-hand side, our product launches since launch have gone up by an order of magnitude. Without our ability to create our own self-help story here and to invest, we wouldn't be able to be positioned where we are today and be as optimistic about how we're positioned in the future.

And here are great examples. We're going to talk about Patheon today and how that's going to drive revenue into the future. In fact, when you look at our Car Wash business, many of you follow our story, you know it had a great run-up and now it's taken a step back with some of the higher interest rates. It is now on a quarter-by-quarter sequential basis on the mend and returning to growth, and it's off the backs of innovation. Interest rates haven't changed much. The new tunnel builds are not going up by a whole amount, but we're providing innovation to the industry, and this innovation is driving growth. It's what customers need to be able to serve that better.

Retail solutions, we're going to talk about that. We're going to talk about automatic tank gauge. You're going to be experts on automatic tank gauge by the end of this. And then also on the repair side, we're also making important investments. What we can leverage here is our innovation capability and our high vitality to industry as the #2 player.

So when you look about the second pillar that we talked about, which is optimizing, we also recognize that we have delivered real value through 80/20. And these are some real practical examples for you to think about because they are real world. But we are still relatively early innings on the deployment of this. The complexity that we have with a number of SKUs, the complexity that we have around product lines and how we push that out to other parts of Vontier are very real. They're very tangible, and this is going to be a gift that's going to keep on giving.

When it comes to deploying capital and returns on capital, we've generated more than $2 billion of cash since spin. And we put that to work in share repurchases, but mostly acquisitions. And what we're incredibly proud of is our ability to do this in a very disciplined way where we pride ourselves on having returns on our capital deployment. So it's something that is dynamic. We don't have a formula around our capital return deployment -- or excuse me, our deployment of capital, but it's something we take very seriously. And I think when you look over a multiyear basis, what is the real differentiator that we can provide as a company is strong returns on capital. So this is something that is very much alive at work. When you think about M&A, think about bolt-ons, when you think about M&A, think about high returns. And of course, we've done a fair amount of stock buybacks because I feel like and I still feel like our company is significantly undervalued.

So what are we talking about? How do I summarize this for you? Certainly, it's about attractive end markets and a large and expanding TAM. Certainly, it's about having an unmatched portfolio of leadership positions, but it's about how we differentiate and what do you do with that to create further value, not just for ourselves and our shareholders, but more importantly, for our customers. How do we deliver that value through integrated solutions. You're going to hear a lot about that today because that's where the puck is going, and that's where we're skating. And it's about high outcomes, reducing complexity for our customers, lowering costs and being a trusted partner as we go forward.

We just announced a reorganization of our business. What's been behind that reorganization of our business? It's about how do we serve our customers better? How do we reduce some of this complexity? How do we bring solutions to them that work more in unison? And why don't they have one throat to choke when they're buying so many different product lines from us. We can step forward with our organization, and we can embrace the trends we see. And it's our responsibility to act as that trusted partner to be more customer-friendly. We've got a great opportunity in front of us, and I couldn't be more excited about it.

So let's talk about convenience retail. That's what we're here to see and understand and what a better place to see it than at NACS show. This is an international show. You're going to see a lot out there. It's very dynamic. It's a great industry to be in, but it's not something that folks think much about. It touches people's lives on a regular basis, and it's something that we all rely on around the world on a regular basis, but it's not something folks think much about.

How do we define it? Certainly, it's the stop at the convenience store. And it's about aboveground and belowground fuel pumping technology and capabilities, and you see those represented there. But it's also about inside the store and the retail solutions that we find. But our definition of convenience retail goes beyond the convenience store. Our definition of convenience retailing is about convenience retailing. It's your stop along the highway or in your local neighborhood to consume a service. It's roadside retailing. What also that incorporates in our definition is car wash. We see a lot of independent car washes has been very growthy in a number of years, and we believe in that infrastructure. And a lot of EV charging and alternative energy is also about that stop along the highway where it may not be at a convenience store. I think more and more, it will be at a convenience store, but charge point operators also operate autonomously. It is that stop on-the-go retailing, which is our definition. And that's what we're here to talk with you about today.

So let me frame it a little bit before we get into some more of the deep dives. First piece is, my gosh, what a changing dynamic and vibrant industry. About 1/3 of all bricks and mortar is retailing, is convenience retailing. This is the most frequent in convenience retail from an individual of anyone. It's not a destination per se, although Buc-ee's might be for some, but it's your stop on your way to somewhere else where you're picking up something. And in fact, it's incredibly growthy, incredibly resilient and historically has been.

I'll show you in the next chart, but our growth projections are very respectable 6%. And those formats are changing. And one of the big areas is around what happens inside the convenience store. 60% of the revenue comes from inside the convenience store, and these nonfuel sales are quite resilient and growthy. And in fact, even during periods of downturn, this is the critical infrastructure. It's growing at 4% historically. And the average, look what's happening look at the infrastructure out there, the average footprint is getting bigger. There's more dispensers per site that are going in, and it's more about food convenience.

Why is that? There's three things at play. The first is the proximity. And whether it be yourself or whether it be contractors coming to your home or somebody on the go traveling on a trip, it is about proximity. There's 150,000 convenience retail sites in the United States alone and nearly half of all Americans live within a mile of a convenience retail. Now sometimes we speak with analysts who may not own a car or might live somewhere in the suburbs and they might go to work in the city.

One thing to also recognize is that contractors love the convenience retail. Format as well. And you may not necessarily leverage it yourself as an end user, but Americans leverage this a lot as end users. It is also critical infrastructure. Look at times of need, whether it be around COVID, it was open. It was a critical infrastructure. Many towns and rural locations, it might be the only place that is open for you to get convenience store items. And at the same time, in times of relief or where you need relief such as hurricanes, this infrastructure is relied upon and it's innovating beyond fuel.

Look what's happening here at the show, look what's happening in announcements. I have teenagers. I talked to other folks that have teenagers. When I was a teenager, I used to go to the mall. I talked to other folks and the teenagers go to Wawa. It is a changing format. It is something that is very vibrant in terms of the food offerings. And folks are really connected to those food offerings, whether it be barbecue at Buc-ee's or whether it be pizza at Casey's, depending on where you live or you saw the recent announcement of racetrack buying Potbelly, food convenience is a big deal. It's about creating leverage from that stop with great hot food items that are there that attract folks to the site. And that also creates a lot more loyalty to their brands.

So whether you're talking about your corner type convenience store that is also about 2,000 square feet and dispenses gas or whether you're talking about a multipurpose rural site with around 5,000 square feet with more of like a tunnel car wash capability or an in-bay car wash capability or curbside service or something we call a real mobility hub, which is a large-format store that could be upwards of 15,000 or Buc-ee's, which can be 60,000 square feet. This is a vibrant changing format that is very attractive. And the most important thing is folks that are making that investment are the winners.

Take a look at this data. This is really interesting. If you look at the largest operators in convenience retail or convenience stores, the largest operators only represent about 150 organizations compared to the almost 70,000 small mom-and-pop retailers. But look where the growth is. The growth is where folks are making these investments. They're consolidating the industry and they're putting new formats to work. It's the largest market from a dollar perspective. It's growing faster and folks, that's where we have 2/3 share. So we love serving mom-and-pops. But if you're not able to make investments in this industry, consumers are going to more and more stop at these more modern convenience store formats, and this is our sweet spot. We win in this market with the winners.

Let's take that theme forward. Look at car wash. Same thing. 40 organizations represent the national and regional players. And the single site or township, as we call them in that industry is an order of magnitude larger. However, the balance of the market is into the larger players, where we have higher share. That is also where the industry is growing. We are winning with the winners. And when you look at our technologies and our capabilities, we are best suited to keep winning with the winners because that's where we're focused on solving their high-value problems and bringing it together from an integrated network.

So when you go out there and you look at all the data points on how this industry is growing, it is the winners that are growing in this industry. And it's our ability from our position, our ability to compete and put our new innovation and products to work that make a real difference. And that's what's exciting for me is you get to see that firsthand here today.

Let's look at the competition. How do we compete globally? We have some great competitors on a global basis. But when you break them down into competition and fueling, we have some great competitors there or when you break them down into competition on environmental, which is below ground, we have some great competitors there or retail, we have some great competitors there. But what does this chart tell you? It tells you that nobody is competing with us across the spectrum of convenience retail.

So what does that mean? That means that these siloed approaches, while it might create a lot of value, and we do have leadership positions in all these markets, it's our ability to bring this together in a unified way that creates real value for our customers that is truly differentiating. And so this is truly unique to us in the industry. In some sense, it's the strategic positioning we have the leverage, but we have to bring that forward in tangible credible ways. And the way that we unlock those is through connect managed scale across our solutions, and that's what we're going to talk with you about today.

So, what's next? I'm going to introduce Mark Williams, and he's going to talk about Forecourt. But before I do that, it's important because everything that I talked about, we're going to break it down. We're going to give you real examples about it. We're going to give you a chance for Q&A. So whether you're here in the room or whether you're joining us online, please compile your Q&A. We're going to have a break after these presentations for Q&A. We're going to do an industry panel, and then we're going to do our financials. We're going to ask a lot of the modeling questions after that Q&A as well.

So, with that, let me turn this over to Mark Williams, who's our new President of our Integrated Forecourt and Retail Solutions business for convenience retail. It's a multi-brand responsibility. Some of the best leading brands in the industry are represented by Mark does, and it's a global business.

So, with that, come up to the stage. Mark?

Thank you. Good morning. I'm Mark Williams. Like Mark said, I'm the President of our Forecourt Solutions business. I've been with the company for going on 20 years now, a number of different roles, but most recently as the Chief Operating Officer for our Environmental and Fueling Solutions business.

I'll start with a brief overview of what we mean when we talk about forecourt and retail solutions. Forecourt is comprised of fueling or above ground and environmental or below ground. Fueling represents the fuel dispenser and the embedded payment terminal that most consumers interact with on a weekly basis and where we have #1 share globally.

Environmental represents the solutions we provide to ensure that the on-site storage and movement of fuel is done safely and efficiently and is traceable. The core product line here is the automatic tank gauge or ATG, which gives retailers network-wide visibility to their underground fuel inventory via the intelligent device that's on the wall inside of every fueling site and that's tied to connected sensors, which measure the liquid volume in the underground storage tanks. We have #1 market share globally on ATG as well. Other core environmental products include the submersible turbine pump, which physically pumps the fuel from the underground storage tanks up to the fuel dispensers and solutions around fuel quality, leak detection and vapor recovery.

Lastly, retail solutions represents our technologies used inside the convenience store. The point-of-sale system where customers pay for their goods inside the store is the largest offering, and we have #2 market position here. The point-of-sale market is attractive because of the various integrations required with all of the different site systems across the site, which makes it a sticky beachhead with our customers. It's also not an easy market for others to get into because of all of the integrations required with the payment terminals of the dispenser as well as other touch points as well as all of the certifications required on all of the major oil company payment networks. You have to have all of those to be able to be broadly available with your point of sale. Other retail solutions technologies include our food service ordering equipment, kitchen management systems and self-checkout terminals.

The market we play in is attractive and has proven resilient over time. That resilience is driven by a number of key factors. First is the footprint of C-stores. The sheer density of C-stores puts them in close proximity with customers and consumers need to fuel their vehicles brings them back repeatedly to those C-stores. Also, the forecourt has really -- or the industry has really continued to innovate beyond the old cokes and smokes model and has broadly expanded the array of products they sell as well as moving really credibly into food service. Mark talked about that a bit, but you can find rabid fans of Sheetz and Wawa that will debate for hours over who has the better sub or you look at the fact that Casey's is now the fifth largest chain in the U.S. from a pizza perspective, the industry has become very credible from a foodservice perspective. Also, convenience stores have driven significant innovation on their loyalty programs. And that paired with the increased breadth that they sell today, plus their growing presence and really credible food service has helped them take share from other retail verticals.

Third, the consumer demand has really continued to shift to a need for convenience. That ongoing shift to high-frequency shopping occasions with a premium on convenience plays right into our industry strengths. All of this together has resulted in consistent industry profit growth in both profits and sales. Convenience stores processed more than 160 million transactions a day. With that level of volume, our customers place a major focus on consumer engagement, both to build loyalty and to drive impulse sales. The industry has really started to leverage digital media to reach their consumers to drive consumer behavior and the average in-store basket sale is now up over -- or in-store basket size is now up over $8.

We approach the market through five core segments: national accounts, major oil affiliates, regional accounts, hypermarkets and travel plazas and small and single-site operators. As a note, the site count that you see on major oil affiliates isn't incremental to the other sites. With a few small exceptions, the major oil companies don't own sites directly. Rather, their presence is spread across the other segments as they work to sign up dealers to sell their fuel. We still call on them directly, though, as both because they influence their dealers' purchase habits and because we see them as a growing customer directly for our retail technologies.

While we segment the market as you see it on the chart, I'll simplify it a bit and talk about the bifurcation between smaller retailers and larger retailers, and Mark touched on this. Small and single-site retailers are the largest segment of the industry by site count, representing roughly 60% of the sites in the industry. The segments on the chart above the small and single-site retailer segment are collectively comprised of larger retailers. And while they represent the other 40% of sites, they represent more than 2/3 of industry spend, and it's where we have 2/3 share. These larger retailer segments are where the industry growth is coming from. Our alignment and share with the large retailers who are driving the industry growth really positions us well to capture an outsized share of industry spend.

Because the segments have different compositions and needs, we tailor our go-to-market approach by segment. From a go-to-market perspective, we leverage a mixed direct and channel model, calling direct on our national accounts and leveraging our distribution channel to reach the small and single-site retailers. For the segments in between, we leverage a hybrid model working directly hand-in-hand with our valued channel partners.

Of note, our distribution channel represents a significant competitive advantage for us, especially on fuel dispensers where the industry model is exclusive. We're aligned with the best and largest distribution channel partners that continue to invest in their businesses to scale with the industry. And you'll be hearing from one of our leading channel partners on the industry panel coming up here in a bit.

If we take a deeper dive into the national account segment and larger regional accounts, again, that's where we have particular strength and the strongest share, driven by our history of technology leadership, reliability and the strength of our service network. Our alignment with the larger retailers helps us get an outsized share of industry spend as these segments spend at a higher or more frequent rate than smaller retailers. Not only do these retailers typically either replace or upgrade their equipment on a more frequent basis, but they also drive the majority of all consolidation in the industry with roughly 8,000 sites acquired over the past five years.

These acquisitions typically have two benefits for us. First, the acquiring company will often change the spec to our equipment for the chain that they purchased, resulting in go-forward competitive conversions. And second, there's often some level of short-term spend required to bring the acquired sites up to the spec of the acquirer. Additionally, this segment also drives the heaviest portion of new-to-industry site builds, also resulting in outsized spend. It is worth noting not every convenience store will win in the future. And you've probably seen this in some of your towns, right? What you'll often see is a large modern convenience store is built and then within a couple of months, you might see one or two sites, either corner or within a few blocks shut down as they lose their volume.

It's our alignment with the retailers that are driving the industry growth and doing the acquisitions and building the new stores that really provides us a really compelling opportunity. And as these larger retailers continue to grow through acquisitions and new site builds, they grow more sophisticated, and that allows us an opportunity to deepen our relationship and stickiness with them, leveraging data-driven technologies to help them better run their complex businesses.

We've seen continued strength -- we've seen continued strong investment by our customers and expect that to continue with a handful of key drivers. There are more than 800 new-to-industry stores and raise and rebuilds annually and another 4% to 6% of existing fueling infrastructure is just refreshed annually as it ages. In addition, there are periodic but frequent regulatory and compliance upgrade cycles, typically either environmental or payment regulations and retailers continue to invest in existing sites as innovation drives further upgrades.

I want to pause for a moment, and Mark touched on it a bit, but I want to pause and really hit on the importance of the regulatory and compliance mandates to our industry. There's a consistent flow of regional mandates around the globe that drive consistent spend cycles and that are really important to our business. There are PCI payment regulations, fiscal and anti-fraud regulations and environmental regulations around leak detection and vapor recovery among any number of other regulations.

The key point here is, and Mark talked about this, the regulations are typically not around kind of political hot potatoes. And so there's a lot of consistency around the regulations, and it provides a stability to the regulations such to the regulatory cycle. And then we're deeply engaged in helping shape and drive those regulations.

Both fuel margins and inside store margins have been strong, allowing our customers to fund the significant ongoing investment. And in talking with our customers, there's strong confidence that this positive margin environment will continue to persist.

I'd highlight here one more time how our strong alignment and share with larger retailers really positions us well from an outsized -- an outsized share of industry spend. As you look across the slide, larger retailers open the majority of new stores in the industry. They refresh and remodel their existing stores more frequently. They're more proactive on compliance upgrades, and they continue to lead the industry forward on consumer engagement and operational efficiency technology upgrades.

We drive competitive advantage by bringing integrated hardware and software solutions to market that help our customers solve their high-value problems, which in turn makes us sticky with them. As one simple example, the fuel dispenser is actually now a pretty heavily integrated solution. There's an integrated payment terminal, which integrates into the convenience stores point-of-sale system and payment network. It's also integrated into the site's forecourt controller, which controls the flow of fuel on the site.

Not only does the payment terminal process the payment transaction and trigger the fuel flow, but it also serves as a great customer engagement point for our retailers to reach their consumers during the two minutes when their customer is literally tethered to the dispenser with a hose. We provide the media software and solutions that allow our customers to reach the customer -- their customers with tailored messages and offerings. Additionally, we integrate remote management into the software, allowing larger retailers to remotely monitor and manage their dispensers to both reduce downtime and service costs as well as to remotely deploy software.

And I'll pause there for a second because I think that's something we all take for as advantage as consumers, right? We're all used to our phone. You get frequent software upgrades pushed to your phone and you don't even think about that. But if you back up just a handful of years ago, that wasn't possible on most gas pumps or fuel dispensers. With the technology that we have now, we can remotely push the software updates, whereas a handful of years ago, you would have to roll a truck to that site to do the software upgrade. So we really focus on continuing to bring connected technologies that help our retailers optimize their operations and reduce their costs.

One other note on the benefit of the integrated solutions. We have a common payment platform that we can embed anywhere on the site, whether it's into the fuel dispenser, the EV charger, car wash entry terminals or in-store at the point of sale. And that's attractive to retailers for a handful of reasons. First, it gives them a common consumer interface, which they can use to create a common user experience for their retailers so that, that customer touch point at the site is consistent, whether it's from a payment flow or a loyalty program, it's a consistent user experience across all of the different pay points, and our customers see a lot of value in that. Second, it makes it a lot easier for our retailers to deploy upgrades, applications, new software, whatever it is, to push that out to all of their different payment points across their site and across their network. And third, and we'll spend more time on this during the booth walk-through, it drastically reduces the certification burden that our customers face.

Our environmental suite of integrated products spans a wide array of products and solutions to help a retailer drive compliance and manage their fuel inventory with real-time remote monitoring to drive uptime and reduce risks and costs.

The automatic tank gauge, where we have #1 share globally is the primary offering in the environmental solutions stack. Our Veeder-Root tank gauge is really you can think of it as the Kleenex brand for automatic tank gauges globally, and we have more than 350,000 installed worldwide. Again, it's really a smart or intelligent device sitting on the wall of every fueling site out there with connected sensors in the underground tanks to allow retailers to effectively measure and manage their underground fuel inventory.

Other offerings within our environmental stack include water protection solutions, fuel quality solutions, leak detection, vapor recovery, the submersible turbine pump that again pumps the fuel up from the underground tanks to the dispenser and remote connectivity solutions tying it all together for network-wide management.

We also offer an array of retail technology solutions for retailers. And this graphic, I think, does a really good job of just highlighting how complex a convenience store is these days. There's just a ton going on. When you think about the fact that a modern convenience store has something around 70 to 100 revenue-generating assets and typically only a couple of employees on site and in an environment where store level employee turnover is north of 100% on average, it really highlights the opportunity to win with technologies that help retailers streamline their operations and simplify their business. Our solutions enable a unified consumer experience, engage customers to grow revenue and reduce costs and operational complexity.

As I mentioned earlier, our payment solutions allow us to provide payment points anywhere on site with a common user experience and common certifications and to route to payment processors through common integrations with our electronic payment server. As part of that common user experience, we make it easy for retailers to leverage their loyalty programs and digital commerce applications on that common payment system anywhere across the site.

We also offer media solutions that enable our retailers to reach their consumers across any number of display touch points across the site. We have remote management and reporting solutions available for the in-store assets integrated with our similar fueling and environmental remote management solutions, driving further efficiencies for our customers. As retailers look to reduce cost or sometimes just redeploy where their labor is, we also offer self-checkout terminals.

Before wrapping, I'll talk through just one example of a customer who's using our integrated solutions to great benefit. Town Pump is a good customer based out of Montana with more than 100 sites, and they're spread across a very broad geographic footprint. And that's the biggest challenge they have, servicing their sites across that broad geographic footprint. Service techs often have to drive up to 6 hours each way to service their site, creating a significant cost burden as well as extended site downtime. The opportunity with Town Pump originally started as a payment retrofit opportunity as they were looking to get ahead of some upcoming payment regulations. As we work through their needs with them, however, they quickly understood how integrating remote management with the fuel dispenser would increase their site visibility and allow them to reduce the number of costly site visits required to maintain their sites.

Not only does the remote management solution allow them to remotely address a wide array of their issues, but it also allows them to remotely deploy software updates across their entire estate of assets. Between the remote issue resolution and that remote deployment of software, Town Pump estimates the elimination of 75% of their previously needed site visits. The payment terminal paired with the remote connectivity now provides us our next opportunity to work with Town Pump as we work with them on a potential media rollout across their sites to give them a touch point to reach their customer with messages.

Before I wrap, I'll highlight just a few key messages again. Vontier stands as the leader in forecourt and retail solutions, and we work with the best retailers in the industry to address their fueling, environmental and customer engagement needs. Our leading market share with the scaled growing players ensures that we will grow as they lead the industry in consolidation and investment, both in new stores and new technologies. Market investment is also supported by new store builds, regular refresh cycles, regulatory compliance and ongoing innovation and technology upgrades. Our integrated solutions help retailers boost revenue, cut costs and accelerate innovation while expanding Vontier's available market.

Appreciate the time, and I'll turn it over to Andy Bennett here to talk about the energy expansion.

Good morning. Great to see everyone. My name is Andy Bennett, and I have responsibility for convenience retail here at Vontier. And it's great to have the opportunity to talk to everyone this morning.

I wanted maybe just to give a little bit of my background prior to joining Vontier. So most of my career, I've been working at bringing hardware and software together in an integrated way. Spent a little over a decade at Schneider Electric, where we're building really hardware and software solutions designed for the energy industry. And when you pull those things together, that's, of course, a technology challenge, but it's also really a people challenge, right? You're taking folks from two blocks of life and getting them to coordinate. More recently, I had responsibility at IBM running what's called AI applications. And that's everything IBM does inside of asset management and the IoT set of applications. And so for me, I think these were pretty important experiences because it's allowed me to think about how do we get hardware and software to work together, which, of course, is at the heart of what we're doing in convenience retail here at Vontier.

For the last three years here at Vontier, I've had responsibility for the Driivz business unit. That's the software business that focuses on EV charging. And Driivz as a company, Mark mentioned earlier, that's a #2 position in the market. That's right behind Tesla. It's not exactly an exact comparison because we're #1 when it comes to making pure software in an agnostic way for the industry. So Driivz has really experienced some great, great growth over the last few years.

But anyway, as we jump forward to convenience and retail, hopefully, a little bit of that background explains what I'll be focused on. I'll come back to that and talk a little bit about that towards the end of this presentation.

But what we want to talk about here this morning is this concept of the energy expansion that's taking place in the market today. We know that traditional fuels are going to continue to be dominant. That's without a doubt the case. But we also know that this expansion is creating great market opportunity. So, today, when we think about EVs and alternative fuel sources that we have available to us, that's about a $2 billion TAM that, of course, we want to be participating in. For us, of course, it's about thinking about how do we bring sustainable biofuels to the industry, everything we do in compressed natural gas and obviously, the things that we're doing inside of EV charging.

So that growth will take place over the next few years. That mix is going to change, right? So if you look at this chart, we say great in a few years, maybe somewhere like 10% of that is a mixture of EV and other sources of energy. But I don't know. I mean maybe this is right, maybe it's wrong. If we were to go back five years ago, what would this chart say? Well, some industry analysts said there'd be no more fueling and it would be all EVs. Well, that's clearly not the case. So it doesn't really make much of a difference to us from a Vontier perspective, what this mix looks like. The bottom line, and I think the most important takeaway is we have solutions no matter what that mix looks like, okay? So that is a really important place for us to be today in the marketplace.

So looking forward, another important point is just from our perspective, it's an all-the-above model, right? It's not a will it be EV and will it be traditional fuels. We need to be prepared and we are prepared as a company for all of the above. So lots of great things happening in the marketplace that will continue to help this growth. There's a lot of support from a regulatory standpoint.

When you think about some of those renewable fuels, we have things like the federal renewable energy standard, California low carbon fuel and then the clean fuel protection tax credit that was part of the original IRA. Everyone knows that NEVI funding was here and then it went away and then it came back. Well, it's back. And so that's another $4.8 billion here in the United States coming back to fund that infrastructure, which is a great thing. But again, regardless of which way policy swings, we're going to have the right solutions. And of course, convenience and retail is at the absolute epicenter of deploying all those types of fuels.

Okay. So looking forward here a little bit because we're not -- this isn't necessarily something we're waiting on and already convenience retail are doing a lot of great things in this area. We already have a lot of efforts going on today in biodiesel. You can think about vegetable and cooking oils that are being reused and put into fuel types, and this is really starting to take off. That is going to continue to grow for sure. And then in EV charging, even with some reductions in some of the OEMs that are producing cars, we're still seeing greater than 20% growth in Europe for charging, right? We're still seeing high, high single digits or even double-digit growth in EV charging here in the United States. So those are going to continue to grow and all sorts of convenience and retail are already jumping on this opportunity. It's going to be really important.

So why do they have an advantage? Because I would argue convenience retail has a distinct advantage and definitely has an advantage over some of the folks that do this in isolation. The first thing is they have the best locations already, and that's pretty critical, right? They're already in that position. You heard Mark talk about this earlier, 90% of the U.S. population today lives within about 10 miles of a convenience store. That's a great thing. That's a great place. That's a great piece of infrastructure to have. They already have the on-site amenities. So if you're driving an EV car and if you go to charge what we call on the go, you're going to be there for 15 to 20 minutes. The opportunity for you to go in and buy food has increased. We also know through data that when those drivers go in to buy food or things within the convenience store, they tend to actually buy the higher-margin items. So this is a great thing for convenience and retail to take advantage of.

And then the last point, there's a distinct advantage that convenience retail has when it comes to supporting the new infrastructure for things like EV charging. They have multiple sources of revenue. They have that food, but they also have fueling and that helps them support what could be a very expensive set of infrastructure. So all those things, we think, put convenience retail in a unique and advantaged position in the marketplace.

So what do we do in this area here at Vontier? We already have a lot of solutions today around biodiesel. You'll see that when you guys get a chance to come up to the booth a little bit. You see what we're doing with DEF and some of the dispensers that think about how do you deal with biodiesel, what are the environmental conditions associated with that. ANGI, of course, very much focused on hydrogen. And so everything we do with compressors, controllers and those dispensers are a big part of our total marketplace. Today, in the United States, a little bit more fleet focused. But in Europe, we certainly see that for the car park as well. And then obviously, we look at this and ultimately, we know that this gives all sorts of fuel optionality for our customers.

For customers that are looking at a turnkey EV offering, this is something that we bring to market. And essentially, what this does is allows us to think about the charger, the installation, the site selection, ultimately, the field service and the management of that entire solution for a convenience retail space. It's a great quote there from one of our customers that basically looked at not just the ability to get going with EV charging, but also the ability to have this managed and have a single, single sort of payment scheme. So you don't have to think about how do you charge at that EV charger -- excuse me, use a credit card versus at a pump versus inside versus, of course, in the car wash. So great success and huge movement for us in this area today.

Driivz, of course, is a software platform that we build for the EV charging industry. When we bought Driivz, the thesis was pretty simple, right? We wanted the experience of charging a car to be as easy as it is to fuel your car with gas. And I'm sure most of you know the industry has had to move in that direction. This has been a frustrating thing for a lot of charge point operators. And that's our objective, is to make that as easy as possible for those drivers.

So what does Driivz do? Driivz is fundamentally a software platform that sits behind white label by large charge point operators. It allows them to manage the complexity of billing and tariffs. If you're in Europe, you can imagine you're driving around, you might drive from different stations and you want to have roaming capability, you might pass borders. So there's a lot of complexity associated with the billing of EV charging and the reconciliation of that billing. It's also, of course, built so that drivers can get to the right chargers. There's a driver experience portal.

But fundamentally, what the platform is designed to do is to look at the state of the network. Are my chargers working? Are they up? Are they running? Are they actually delivering electricity to these vehicles? And if they're not, what the platform is doing is it's using self-healing algorithms. It's using artificial intelligence to look at error codes and constantly solve in a proactive closed loop by closed loop being without any human intervention, right? The whole concept is fix the problem before anyone knows about it, don't have to deploy a truck, don't have to send someone else out to flip a breaker. That costs a lot of money. So that's what the platform is doing.

We have run over a terawatt of energy through the platform to date. And to give some sort of view of what a terawatt is, that would be like the equivalent of 1,000 nuclear power plants running. It'd be about 1 billion homes, 1 billion U.S. homes, which use a lot of energy. So, clearly, energy is a big part of what we also need to think about. I'll kind of hit that in a couple of slides here.

So why do we win with Driivz and what's working here? I got asked this question a couple of times last night at dinner. It kind of comes down to these three things on the left. Driivz has been around for almost a decade. And very early on, the decision was made not to make a shrinkwrap bunch of software, but to build software that was fundamentally designed to be scalable, meaning not tens of chargers, but tens of thousands or hundreds of thousands of chargers on the platform that also needed to be flexible and interoperable. And what I mean by that is when you target the #1 CPOs in the world, when you target these really large companies, they're going to have lots of other systems, right?

So you have to build software that was designed from its infancy to integrate with those other systems. It's not trivial, right? It means a lot of open APIs, means thinking about what sort of systems you'll have to integrate with and then standardizing that. And then, of course, obviously, if you look at any leader board, many of them published this concept of a charge point management system, we're clearly #1 in terms of all feature functionality out there in the market.

So those customers that you see there, EVgo or Shell or Circle K, Mer is one of the largest charging companies in Europe to give you some reference point there. Most of them had something. A lot of times, it's a homegrown thing. They decide to build their own thing. And then over time, it doesn't work or it doesn't scale or has too much complexity. And so they move over to Driivz. Also, you'll see a company there by the name of Element. Element is a really large provider of technology to fleet companies. So Driivz is continuing to have great success in fleets. We're not going to talk about that today. But one of the reasons why is because the software allows for people to charge in depots when they're on the go, right, DC fast charging and of course, when they're home, right? Because a lot of drivers take those vehicles home at night, but they need -- there needs to be some reconciliation to pay them back for that charging.

So a little bit about the energy consumption. To give a frame of reference, I talked about that terawatt of energy earlier. But if you think of a grocery store with all the refrigeration and storage, it uses a lot of power. But convenience retail is starting to become a pretty significant consumer of electricity. And that's an important concept because electricity is getting more expensive. Certainly, you get more expensive because of data center consumption as well. But we're talking about 4x more energy consumption, right, at almost 2 megawatts for a normal convenience center.

So a lot of what we have focused on over the last three years, four years within Driivz is how do you embed complex energy management into the platform. And what I mean by energy management is it's software, again, that's sort of behaving a closed loop, and it's looking at all the energy consumption taking place at a site. So what you might do is you might have a battery on site and therefore, when energy is inexpensive, you charge that battery up. when energy gets more expensive, you discharge that battery. That energy management system might also throttle back the actual charging and a lot of that's invisible to Driivz.

But ultimately, what you're doing is you're trying to reduce those demand side charges. Utilities can cost a lot of money when you're at peak points, right? They can also have penalties associated with that. We also have customers in Europe that are already taking that energy consumption behavior and they're using it to actually bid into the frequency markets. They can adjust their behavior, they can bid ahead of time and they actually make money on the way they use energy.

And one of the things we know, and this is just an interesting takeaway, if you just plug in a bunch of chargers and you let them go and let people charge without active energy management versus actively managing that energy, you actively manage it, you can charge about 6x as many cars in that same period of time because of those efficiencies. And what this means is for large companies or companies that have sites, they're saving about $50,000 per site per year by using active energy management.

Okay. So we obviously already have a great track record looking back here. If you think about all the things we're doing with renewable and biodiesel, some incredible growth, 13% plus growth over the last four years. And of course, with the EV side of what we do, we think about the plugs under management, those are the charging plugs, over 90% growth in that market. So really well established, but also really, really, really strong growth rates in this area.

So to wrap up, we know energy demand is going to continue to grow. But more importantly, we know the mix is going to continue to change. I think the important takeaway there is, again, we don't know what that mix is going to exactly be. But what you see is we have the breadth of solutions to go solve that either way.

Convenience stores are clearly in just a fantastic spot to go capitalize on this, right? If you think about biodiesel and everything associated with that, they already have the infrastructure in place. They already have the locations. That's a relatively easy move. And so they're going to absolutely gain and do well in this area.

And maybe just a last comment. And I got asked this question last night at dinner, and it was around our differentiation. And I think what you're going to see here today, and hopefully, you'll see at the booth, right, is that there's a lot of folks that have fantastic point solutions in this marketplace. There's absolutely no company that has all those point solutions but has the integrated software that pulls it together that has integrated asset management to pull that all together. And more importantly, it's absolutely no company other than us that has that and has the ability and all the technology to deal with this changing fuel type that's going to take place over time. We already have GVR dispensers. We already have the ATGs. We already have ANGI doing CNG. We have Driivz and Connect owning the EV market. And of course, we have everything we do in Invenco to pull that all together. So it's a pretty incredible time. It's incredible to be part of convenience retail. It's great to meet everyone. Thank you for the time. Appreciate it.

Good morning, everyone. My name is Devon Watson. I have the pleasure of leading the Car Wash Solutions team for Vontier. I've been in the software industry for about 25 years, most of that time helping companies move from on-prem software to the cloud, and that's a storyline you're going to see repeated here. I spent the last 10 years at a company called Diebold Nixdorf, which is the global leader in ATMs. And while I was there, I ran product, I ran strategy, I was Chief Marketing Officer and led the banking division, all of which is very similar to the car wash, right? It's mechanical devices installed out at scale, driving consumer experience and payments for our customers.

There's really two sides of our business. We have tunnels and we have in-bay. The tunnel is basically a conveyorized factory. You drive your car up, you start to move along that 80- to 120-foot tunnel to go through all the steps of washing. The in-bay is often attached to a convenience store. It really -- you drive in and then the devices move around you. They have two slightly different business models. The tunnel is really focused on the subscription, right? So they're after a membership model, drives a lot of revenue. And we've seen a big boom of that over the last several years, right?

So, two to three years ago, the industry driven by low interest rates, pretty cheap building costs, pretty cheap labor in general, was building around 800 new tunnels a year. We've now seen that stabilize at around 500 tunnels a year, and we see that pace continuing on for many, many years to come. Reason being the industry can absorb that, right? At 800 tunnels per year, it's hard to run a really good wash. At 500 tunnels a year, the industry can drive quality, excellence and really get those washes to perform.

Both of these segments are undergoing transition, right? The tunnel car wash market is getting more sophisticated with the membership model. The in-bay car wash is becoming a more integral part of the retail consumer experience, and that means it needs to be joined together with everything else happening in the forecourt and in that C-store.

So the modern car wash, this is really a complex operation. If you think about the front end, you're talking about a retail store right? You drive up, our cameras see the car coming. We know if you're a repeat retail visitor. We know if you already have a membership or not. You're going to interact with a payment station. It's going to ask you for your phone number or e-mail address so that we can market to you. You might get greeted by an attendant who's using a remote tablet to take your payment, ask you questions, et cetera. The front end is really that retail store, and that data at the point of sale is getting passed into CRM systems that we also provide to do targeted marketing, loyalty promotions and things like that.

There's then the factory, right? So there's a number of devices as you move through that car wash. You have blowers, you have jets, you have brushes, et cetera. We don't make those mechanical devices. but we control all of the digitization of how that factory automation happens. So think of us as an end-to-end digital provider for that front-end point of sale and consumer engagement and for the factory automation on the backside.

This is a great market, right? We love everything about it. Our clients are successful. They're profitable. They're growing, and they're very durable. And I'll unpack that a little bit in the next slide. And because we benefit both from upfront sales of smart devices, payment stations, license plate reading technology, et cetera, and Software-as-a-Service, we really win when our customers win. So as they drive same-store sales, they want to buy more products to help keep that cycle alive and continue to build the business over time, and we can sell them the next product. So it's a very virtuous link that we have with the customer base.

The segment is extremely durable. If you look at the chart on your left, in a good economy, people buy a new car. You want to keep that new car clean, shiny, dry, so you can show it off your friends. In a bad economy, the car becomes a major asset that you do not want to have rust and fall apart. Either way, you're going to go get that car taken care of, keep it clean, keep it cared for.

The other thing that we really like about this segment providing tailwind is that the move to subscription services is benefiting car wash, right? This is something that we see play out across many industries, the move from do-it-yourself to do it for me. How many people wash their car with their kids? There's one good parent. I don't either. Millennials don't seem to own hoses and nobody else wants to use the hoses either, right? There is a clear trend towards going to these membership-based models and do-it-for-me. And that means same-store sales are growing with our customers, which is fantastic.

The car wash industry is also starting to go through consolidation and professionalization. Historically, it's been very much a mom-and-pop industry. And over time, we're seeing more acquisitions, more build-out with those top operators. And we're winning with those winners. So DRB has a great market share in both segments. But as our customers grow, as they acquire, we're winning disproportionately there, and that's a great thing. The reason is, as you become a larger and larger operator, your problems multiply, right? More sites, more problems. All of a sudden, it's very, very difficult to run legacy software on-prem, right? You need cloud-based solutions, you need consolidated reporting, you need more standardization, okay?

The best operators relentlessly standardize. The last thing you want is a hodgepodge solutions and different types of technology. You want to consolidate that. You want to move it to the cloud so you can scale and operate efficiently.

So the big idea in our business is really owning the brains of the car wash, okay? Like I said, we don't do the blowers, motors, jets, mechanical devices. We provide the digital infrastructure. And the best way to think about that is plus. okay? Patheon is our next-generation point-of-sale solution. Beacon Catalyst, our CRM and loyalty app products. And by bolting those together, Patheon plus Catalyst, now we're making a seamless consumer journey. It's cloud-based, it's omnichannel.

If a consumer comes up and wants to interact with a kiosk, great. We're going to ask for their customer information. We're going to create a record. We're going to start to sell them to a membership. If a consumer downloads the mobile app and wants to drive up to the site with a prepaid code, great. We got you for that, too. If a customer wants to go online, change their membership, maybe even cancel it, guess what, we're going to catch that, and we're going to offer you a different rate to remain a member. So we're surrounding the customer with the technology end-to-end. And I'll tell you a little bit about how that's working for our customers in terms of retention, how it's boosting stickiness and how it's driving same-store sales.

The other plus on this chart is key. We're taking the front-end tools, Patheon Catalyst, that retail store, and we're bolting it to the factory. And Sgt. Sudz is a recent acquisition of ours. We bought this company in June, and it controls that factory line, okay? So now we're bringing together both the way that you manage your customer base and the way that you manage the final bits of the customer experience, which is the actual car wash itself to complete that digital chassis.

Breaking down Patheon a little bit more. So with Patheon plus our Catalyst and Beacon technologies, we're really changing the outcomes for our right? We've done studies very, very deep, looking at how car wash performs using kind of the legacy technology, whether it's from us or a competitor and using this new tech stack that's cloud-based, it's omnichannel, it's very flexible. And the results are just astounding, right? We're seeing 10% membership growth by being able to really market to those customers in super segmented personalized ways. When Devon shows up to the site, we know who Devon is. We know if he's been there before. We know if he used to be a member and now should be part of a reacquisition campaign. That's driving great membership growth.

We're also seeing big reductions in churn. The way that we manage churn is in two buckets, right? It's involuntary and voluntary churn. Involuntary churn is your credit card needed to be updated, right? Sometimes that can be handled automatically in the background. That's great. Other times, you might need to prompt that user, hey, it looks like you got a new credit card, update your information. We can do that online. We can do that via mobile, et cetera. And then finally, we're growing total revenue by bringing people back to the site with a more holistic bit of marketing tools bolted right into that point of sale.

These are things that you just cannot achieve with legacy competing offerings. So that's creating this end-to-end ecosystem for the digital car wash. And we're -- fundamentally, we're moving our customers from legacy environments where it's a disjointed consumer experience. You might not have a mobile app. You might not have a website, right? These things create confusion for the customer, complexity for the operator and complexity is the enemy of profitability. We're moving them to a world where they have built-in capabilities for marketing. Everything is omnichannel. Payments are built in throughout, so you can pay in app online on a web page on your phone at a pay station, et cetera. And we're giving the customer real-time access to data and telemetry about how that wash is operating.

So I'll get a little more technical here. This is that other plus that you saw on the prior slide. This is how we go from running the retail store at the front end of that consumer experience to the factory at the back end, where all of a sudden now motors, pumps, blowers, et cetera, need to fire. Again, those aren't what we build. Those are kind of a commodity. We handle the digital piece.

So when you pull up to a site, you go to the pay station, you decide that you want the extra shiny wash. That's going to be $25 because that's a premium wash. We send that information to our tunnel controller. Our tunnel controller says, the extra shine wash contains the following steps as you go through the tunnel and then sends that to the motor controller, which actually sends electricity to all of these -- if you didn't pay for the extra tire shine, it's not going to turn on that device. And by bringing that all together, now our customers have the full brains of the car wash from one provider, right? That's a great link between the retail store and the factory automation component. This isn't easy, right? Running a good car wash is hard. Having all these digital tools makes it a lot easier to do.

So we really like the position we're in. We're seeing continued growth within the tunnel car wash market, that 500 sites a year that I mentioned, and we're winning a fantastic share of that. So we're continuing to grow the number of sites under management. At the same time, we're growing our recurring revenue on top of it. And this is where we've seen the sequential growth that Mark mentioned. We're really proud of what we're doing with Patheon, bringing our customers to next-generation cloud-based tool sets, and it's building that ARR base, and it's allowing us to both expand share of wallet and expand the size of wallet because as our customers drive more same-store sales, there's more money to spend on the next capabilities, the next features to really have great consumer experience and a great operation on site.

So, in conclusion, this is a fantastic market, fundamentally attractive capabilities in terms of the secular growth trends. We're seeing consolidation in the marketplace that benefits us. We're winning with those winners. And we have the right portfolio to really drive accelerated growth for our business and on the competitive vector as well.

So, thank you very much, and I'll turn it over to Austin.

Hello, everyone. My name is Austin Lieb, and I am the Chief Product Officer for Convenience Retailing. I spent the last three decades transforming product and tech organizations at Mobil Oil, Pfizer and Ingersoll Rand, driving innovation, share gain and margin expansion. Since I've joined Vontier, I've been acting as the Chief Product and Technology Officer for the Environmental and Fueling Solutions business. What excites me most about this industry is the tremendous opportunity there is to drive digital and an integrated transformation.

As you heard before, convenience retailing is vibrant. We're under a profound transformation where formats are evolving to large mobility hubs with expanded offerings. But the industry is at a point of inflection where siloed systems and disconnected data visibility is impacting retailers' ability to simplify operations and increasing complexities are raising costs to unlock the full potential of these sites, the forecourt, the retail site, the car wash, and we have to operate as an integrated unified ecosystem. And Vontier is uniquely positioned to provide differentiated value propositions to our customers as we have the broadest set of products in our portfolio. We have the largest installed base with over 1 million assets connected. We've got the strongest channel and the most trained technicians. We are winning and have credibility with the targeted segments in the market, and we are embedded in a highly regulated market with stringent payment and environmental requirements. At Vontier, we are ready to drive the integrated digital transformation.

Customers are facing challenges. They're facing challenges with the complexity of their format evolution, but they're also facing challenges with how tech solutions are delivered to retailers from vendors. Retailers live in tech silos. They've got disconnected systems that increase costs, slow innovation and fragment the consumer journey. Every broken journey is a lost revenue opportunity. Data fragmentation is also a major barrier. Retailers can't optimize their site operations or leverage insights to effectively reduce costs without enterprise and network level visibility. And compliance is becoming more complex, increasing certification costs, security risks and operational overhead. This is why our mission matters. We are creating an integrated unified mobility ecosystem that simplifies operations, increases uptime and delivers a consistent, seamless experience from fueling to the store to car wash.

Why now? Well, there's multiple converging forces. First, with the complexity of the format evolution, new sophisticated solutions are needed to meet retailers' evolving requirements. Second, the technology has matured. The tech that's required in order to deliver an integrated mobility hub is available now, and it's available at the right economics. And third, standing still, the risk has never been higher. Retailers that don't integrate systems have fragmented consumer journeys, increased operating costs and lost revenue opportunities. This is the moment to act, and Vontier is leading the digital transformation.

So what is our big idea? It's delivering an integrated ecosystem that solves our customers' pain points. Solutions articulated on the left side of this slide. At the center is connectivity. That is the core of our integrated ecosystem. Our mission is to connect Vontier's broad set of devices and scaled software, both on-prem and to the cloud to solve our customers' high-value problems. This includes boosting in-store conversion through integrating media into the dispenser, simplifying compliance and lowering certification costs through unified payment and driving uptime and total cost of ownership through remote resolution. All examples I'll break down later.

But we've made a tremendous amount of progress. This isn't just an idea. It's happening now. You'll see it at the booth. We spent a lot of time breaking down monolithic legacy systems into modern, open microservices, cloud-connected architectures. This enables us to easily develop, deploy and maintain solutions in the market, and it also provides scalable, secure and future-ready solutions. As Mark mentioned before, today, our customers carry the burden of integration. They're stitching together point solutions provided by different vendors with our integrated solution, Vontier changes that equation.

Our integration happens at two levels. First, on-prem, where we're connecting devices and software to deliver outcomes on the site. Here's the reality, right? There's a lot of technical work to integrate. It takes thoughtful design and development to ensure seamless communication between all the pump electronics, the payment terminals, the various different software applications like the 4-core controller. But that integration enables us to speed new features to market, and it also unlocks real meaningful value for our customers.

A great example of how they're getting value, while a consumer is at the dispenser, right? Retailers can leverage advanced media features like tailored promotions, interactive coupons or loyalty-based personalization in order to drive and convert to in-store purchases. At the booth, you'll see some of our new advanced features with the integration to point of sale. Consumers can order in-store offerings at the pump.

But another key point of how we're integrating is we're really building modular building blocks that drive flexibility for our customers. If a consumer -- a customer still has useful life in their dispenser, they don't have to upgrade their entire dispenser. They can modernize and maintain compliance through a payment upgrade kit or deploy media to improve the consumer experience at their own pace, site by site. These are great examples of how our integration is enabling our customers' ease of deployment of our solutions as well as how they extract value from our solutions.

The second level happens at the network level. This is where we're providing connectivity and unlocking real-time visibility across retailers' networks. Our next-generation cloud platform, the hub, it's making it happen. It's built on a modern, scalable technology with open architecture for extensibility. And it collects all the data from the equipment at the site, providing one pane of glass, a unified user experience for our customers so they can have visibility and control assets across their network. And it's also designed to expand, expand across all of Vontier's portfolio, future acquisitions as well as strategic partnerships where we can add additional value. And again, double-clicking on where is the value coming to the customer, it's really remote diagnostics and remote resolution.

If a customer can deploy software upgrades remotely or troubleshoot and triage challenges at the site without ever rolling a truck or use automated workflows to ensure that a technician has the right parts for a first-time fix. As we talked before, remote sites, they've got to send a service tech 6 to 10 hours each way. If you can eliminate that second trip, that's a game changer. So this is why our network level integration is really critical to unlocking the full value of our connected ecosystem.

Another really powerful example of a network-level platform is unified payment. Retailers spend hundreds of thousands of dollars and thousands and thousands of resource hours managing certifications across multiple points of sale, multiple payment terminals and multiple acquirers like Fiserv and Chase and complexity has been compounded through acquisition and consolidation. So national accounts and major oil companies have a significant number of software and device configurations to manage.

It can take up to nine months of real heavy technical work to roll out a new payment terminal across each unique configuration. But our differentiated architecture changes all that. Since our indoor payment terminal and our outdoor payment terminal are built on the same architecture and integrated into our iNFX application platform, we reduced significantly the number of configurations and therefore, significantly reducing certification efforts. Also with one unified payment platform, it covers every transaction from fueling to EV, to car wash to in-store, simplifying compliance, saving costs, delivering a seamless consumer experience, but also allowing our customers to shift their investment and resource time to more critical growth initiatives.

Enabling the Connected Mobility strategy happens across three pillars. First, at the physical level, we've got smart devices with edge compute capability, connectivity and interoperability through harmonization of chipsets and operating systems. We've got, at the digital level, scaled software through our state-of-the-art software factory. We build modern modular architectures that are easy to deploy and upgrade. And then at the intelligence level, that's where we have unified data and application platforms. So the HUB and iNFX, which we'll talk a lot more about at the booth. They're providing connectivity at the site, unlocking advanced analytics and predictive insights.

And so just bringing that to life in a real example. Smart device. A great example is our TLS 450+. It's our next-generation automatic tank gauge. It's a master sensing and measurement edge device. Retailers use it to maintain environmental compliance, manage inventory. It meets the latest security standards as well as it provides remote connectivity. It's also built on a microservices architecture where selects quick deployment of new features to the field.

Scaled software comes to life with our Veeder-Root Device Management application, which we love acronyms here. We call it VRDM. That provides site visibility to alarms for leak detection, low inventory, water levels in your tank or a faulty sensor. But the beauty really happens at the intelligence level where the TLS 450+, the VRDM application interact on the HUB, which really turns insights into actions with advanced features like remote software upgrades, predictive maintenance, automated and smarter workflows as well as enterprise-wide configuration changes.

But to bring this really to life, let's dive into a national account. One of our national accounts has over 500,000 alarms a year. They have a whole call center who spend 24/7 just calling sites trying to diagnose and resolve these challenges. And then for the ones they can't resolve, they have to send a service truck and they're losing revenue, they're not fueling at a dispenser and having challenges at site during that time. They believe with this unified solution, they're going to save $20 million over the next few years. Now that's measurable ROI.

And so that is one example, but we are really attacking complexity and cost head on and delivering meaningful outcomes for our customers, lowering total cost of ownership by eliminating siloed systems and reducing truck rolls through remote resolution, improved operational efficiency through automation and smarter workflows, seamless consumer experience through personalized media and integrated loyalty. And we're also reducing the complexity of compliance through unified payment, but also maintaining compliance for critical equipment for our customers by ensuring we meet critical safety, payment and environmental standards.

And then lastly, we're able to deliver features to the market much faster. And so our customers benefit from that. And we've seen real measurable outcomes that we've calculated with customers, getting at least 50% cost reduction through remote resolution, a 75% acceleration in certification. And we're not only delivering features to market 2x faster, our customers have been able to accelerate their deployment 200%. So this is how our integrated system translates to measurable outcomes with our customers.

And jumping back to a slide that Mark talked about earlier. This approach also unlocks a lot of growth and efficiency within Vontier. First, expanding our target addressable market from $30 billion to $40 billion by pivoting from products to solutions and outcomes. Second, driving reoccurring revenue. We have a target to hit 40%, and we're getting there through new software-based and services revenue streams. And then third, improving profitability through simplification.

Talked about a -- we moved from 11:1 edge controller platforms. Yes, this provides value to our customers. But for us, it drives significant efficiency with engineering, where those folks are no longer working on managing complexity, we're shifting their time and energy to focus on innovation. So this is how we grow, improve margins and deepen customer stickiness.

So as we close, the message is clear, sites are evolving to multiservice destinations where integration is more critical than point solutions. Our customers need flexible and scalable architectures to optimize their operations, lower cost, but also to adapt to their continued evolution. And our integrated solutions allow us to achieve quicker innovation to market, better consumer experience and lower cost to customers. But integration, it's no longer optional, it's strategic. It's a lever that unlocks higher margins, reoccurring revenue and defensible market share. With the integration of our smart devices, our scaled software and our unified platforms, the transformation is not just possible, it's economically compelling.

And with that, I'm going to pass it to Ryan Edelman to kick off Q&A.

Why don't we go ahead and get started in the room here with some questions. It's Julian first, sorry.

Maybe a question around Slide 36. It's a very helpful one that goes to those five different sort of verticals, fueling and environment and so on. So maybe help us understand kind of what -- is there any way of quantifying the advantage that you see from being much broader than all the rivals? There's always this debate about best of breed versus one-stop shop. Maybe help us understand whether it's growth rate or margins or pricing or something what value you're extracting from having that.

Yes. So, first of all, we don't think there's a substitute for having the right leadership in a siloed position. And we think that, that's the bedrock by which you need to fundamentally compete. And if you look at a lot of our customers, they also buy in silos. And so the industry is really structured around silos. So I think it makes a lot of sense that that's where the basis of competition is. But I think more and more that there is a competitive advantage that can be derived by integrating across. And if you listen to customers and what they're up against, consumers when they go on the site, they don't use your products necessarily in that silo sense.

They might buy a sandwich, pump gas or get your car wash. Why can't that accrue to the same loyalty program? That's just a very practical example of why don't solutions work better across the capabilities. And if you look at what these larger players are doing in the industry, they're buying a lot of these products from us. So when you listen to their feedback, too, like why don't I have to go to four different places within your company to try to get answers to try to get stuff to work together. So I think the dynamic of competition is changing. And I think it's based on real-world practical examples to bring that together.

So to answer your question is, yes, I do believe that it will result in better growth for us because we can provide additional solutions to market that layer on top of. But there's no substitute for having the right solution within the silo, and I think that's the basis to compete.

The other element here, too, is that we want to offer our customers choice. We believe in open system architectures, too, where they should be able to buy best-in-breed, but we should also be able to provide best-in-breed where that makes sense for us or we leverage a partner to provide best-in-breed. But there's no substitute for having best in breed. We're not trying to lock them into a monolithic infrastructure that they can't get out of. We don't think -- we think that's an antiquated way of doing business, and we believe in that open system architecture model.

Mark, you mentioned at the beginning, convenience retail, $11 billion market, low to mid-single-digit growth. But you also mentioned you recently changed your alignment at the company. So maybe talk about sort of what that means. And you said you're aligning around vertical markets. Like you're already growing, if I look at EFS or mobility, like mid-single digits. So why wouldn't you grow faster, maybe significantly faster than the market over the next couple of years?

Well, that's a great question, Andy, and that's the same question I have for my management team. Now look, I think we're really excited about this reorganization. And what makes us so excited about is the feedback we get from customers. We started a process, maybe it was about a year ago, NACS last year, and we started getting some feedback from our customers about how complicated we are doing business with, about how siloed we are. And I think it's a little bit of an artifact of that OpCo type structure where we hold deep accountability by business. And we really like that model that we've inherited.

But at the same time, when you start looking at our strategies and where our products show up, it makes a lot of sense to get the feedback that we've gotten from our customers around that. And it kind of through the summer, we engage in a process where we have our Vontier Business System. We go to Gemba, we listen to customers. We have teams of folks. And we really created from a pretty wide swath of management being involved with this problem solving around customer back, and we really said, we really have a significant opportunity here. And so we've reorganized based upon that. The later months this summer, we really brought it to fruition really in the last couple of months. And what you see is a reorganization globally based on products, where we bring brands together for solutions.

And we don't think we compromise on our siloed leadership and capabilities. We've got real depth, real capability there that we're not giving up. But it's this coordination across our businesses, so we have accountability across our businesses to bring these solutions together better. And why can't we have a one throat choke for a key account or global account manager. It makes a lot of sense when you see great customers buying all of our solutions that we should be able to bring that together in a better fashion.

Make that complexity our problem, not our customers' problem. And that's what the industry is forcing our customers to do. They're forcing them to integrate these solutions. You're forcing them to live with these silos. That should be our problem to be able to break that down and solve that for them. And so we're very excited about our new structure, and we're fundamentally excited about it because of the customer feedback we get when we explain to them.

Can you give us a little bit of lessons learned with some of the struggles around the shell, just given that seems to be a nice playbook if you can roll that out to the larger accounts. So kind of lessons learned -- and then also, again, we're all trying to quantify a little bit your ability to leverage your capabilities that are broader than anybody else. Can you give us an example, quantify in some way a traditional large site. These larger sites are being developed. But what percent of that revenue you already have customers doing the breadth, right, tank gauges, dispensers, payment systems, EV, just to get a sense of if you did get two of the four, three of the four, what kind of dollar content bump we get?

Yes. So let me take the first one and then the second one, I'll answer and also I'll turn it over to my colleagues here, maybe Austin and Mark will be able to answer about the kind of revenue bump.

So the first question was around Shell and what were the lessons we learned here. Look, I think there's an incredible lesson around not only having the technology capability, but also having the service network to be able to stand behind this and the depth that we have in the industry. So think about we acquired Invenco. They had the microservices technology. You've talked to some of our management team, yes, we had to do some work to get it to where it really needed to be.

But fundamentally, why didn't Shell roll out that solution? You combine that with a company like Vontier and GVR and now you've got a real depth and breadth to be able to support the rollout across the United States and every one of their convenience stores. So it's not just having the right technology. It's -- or having the best technology. It's having that depth and breadth to be able to support that in the industry. And there's nobody better to be able to support these kind of rollouts for us.

But there's growing pains when you roll out these technologies. You're not just putting a dispenser on site and the dispenser might go down. Think about it, you have all their payment rails. If you bring down their system, you bring down their capability to process payments. That is a critical technology for them. And so our ability, our technology capability, and we've brought in people that have run the cyber airline system in the past or have done this at scale in other technologies where you bring up a network with high reliability and you have to be able to provide the software updates in a way and patches in a way that you keep a high reliability up there. And so you need to stand behind that. Those launches can be painful as you might realize, but we're through those kind of growing pains. And I think when you look at Chevron that's rolled out at 8,000 sites, folks like that are now looking at, well, what comes next? How do you expand that network of APIs on site. And so I think we've really earned our strides to be able to do this in the industry and stand behind that. So that's one.

The other thing is what kind of uplift can we get. In many ways, our opportunity is a land-and-expand opportunity. What I just described at Shell was a land and expand opportunity with iNFX, starting with the payment around the dispenser and those payment rails and bringing that to fruition around the dispenser. But think about that open system architecture, that's the backbone. So it's a land and expand opportunity.

When you look at what's happening in the convenience retail, we might have a pocket of strength somewhere. It's a real land and expand opportunity for us, not only within the United States, but also globally because look what's happening in convenience retail on a global basis, it's turning from a fueling kiosk into a modern convenience retail. So a lot of our solutions are not just based on winning with the winners, it's about landing and expanding in the industry.

Exactly. And I'll give you a few examples.

[indiscernible] the number for -- he told me right now the larger sites that starts to really dominate roll organic and rollout. What is the average revenue on that site if you have your, say, the dispenser strength is number one, [indiscernible] catching up, tank gauge, some of the new technology rolled out yesterday sounds interesting. Can you help us at all -- what we're getting 150,000 on the big sites, and that could come 450,000. If we had 3 of the 4 categories. I'm just trying to get a sense of the outgrowth versus the industry.

Yes. Let us come back to you on absolute numbers. What I would say is if you anchor it off the fuel dispenser, where we have #1 share, and that's probably the single biggest purchase that a retailer makes when they open a new site. If we add on all of the other technologies upfront, whether that's tank gauge, the submersible turbine pump, the point of sale, you probably have the opportunity to add rough numbers, 30% to 50% incremental revenue upfront to a site if we're able to attach the full set of suites amongst what we're talking about.

But then I think it's also a matter of the land and expand that Mark was talking about. I think a lot of the upside is that ongoing revenue that you get. So, yes, there's the upfront sale. But as we have these integrated solutions that we actually tie together with remote connectivity, it's the ongoing recurring revenue that I think gets us really excited, whether it's the remote connectivity for the remote management -- asset management systems, the iNFX microservices, the media applications. Once you have all of those physical touch points locked down on site, it's a lot to grow off of from an application going forward.

So, yes, we absolutely see growth of share across those stacks with #1 share in dispensers, #1 share in ATG, #2 share in point of sale, growing share in chargers. But you're absolutely right, there's a lot of sites out there that don't have all of our equipment. So step one is tie them together in a way that they work really well, so they buy all of our equipment and let us come back with better numbers. But I'd tell you, if you're building on to the fuel dispensers, you probably have another 30% to 50% upside. But then on top of that, I think what's at least from my perspective, really compelling is the ongoing piece circle on top.

Yes. And just to build on what Mark said and jumping a little bit back to what Julian's question to ask is when you look at unified payment, which we talked about, right, that's a true differentiator. And as part of that, we're going into -- we're expanding the footprint of our payment terminals going indoor to retail, integrated into car wash, integrated into EV. And you'll see that at the booth.

In addition, on the Veeder-Root side, and you also see -- we'll have some discussion at the booth. We've got 350,000 automatic tankages consoles on the mall. 120,000 of those are 30-year-old technology. And the economics of it is much easier for a retailer to upgrade a controller because if they switch to a competitor, they've got to replace all the probes and sensors sometimes break up concrete at the site.

But then the ATG's integration into the submersible turbine pump and the advanced analytics and the cloud connectivity also drives that connectivity on-prem, where we're seeing a lot of customers that are loyalists to our ATG to then the potential opportunities to convert them to our STPs and then the recurring revenue for folks that are loyalists of our entire platform with the advanced features that we are launching at the hub, which you'll see today where we've got a lot of interest, which drives that reoccurring revenue.

So, Anshooman, I think, a comment, and then we're going to try and wrap it there to stay on time.

Yes. Just to be more specific, reasonable sites would have opportunity for just upfront over $200,000 of revenue and then all the recurring revenue is software maintenance, SaaS services like iNFX, maintenance, spare parts. So the recurring revenue keeps giving. And then there's the maintenance cycle as the payment industry standards changes, they might buy a payment kit. After 10 years, they might replace the dispensers all over again. The ATGs will be replaced over time.

So it's a site that continues to keep on giving because we're bringing out new technology. We're bringing out integrated connected technologies. So as we're doing remote monitoring, there's a fee for that. So there's -- it's always a plus, plus, plus.

All right. So we're going to wrap it there. For now, we'll come back. Nigel, hopefully, we can hold that question. We'll have a little bit more time later. We're going to take a quick break while we reset the stage for our industry panel. We'll be back here in like five minutes.

[Break]

We're going to get started back in the room here with our industry panel. We've got a great group of folks here assembled to kind of give you their perspectives. Moderating our panel, as I may have mentioned earlier, I may not have forgotten now, is Elaine Kanak. She's our Chief Marketing Officer for overall Vontier, and she's going to lead us through the Q&A. So Elaine?

Great. And I'm joined on stage by Dan Munford. He's the CEO of Insight Research and Global Convenience. We've got Elaine Mohr, who's the GM of Operations for Shell Mobility Americas; and Tracy Long, who is the CEO of D&H United, now United Uptime Solutions. So thank you all for joining us. Super excited to have you here.

We're going to start by talking about industry trends. So Tracy, I'm going to start with you. Do you want to share with us what your outlook is for the industry growth for the next two to three years? And any distinctions you see between new to the industry sites versus site refreshes.

Thanks so much again for having me on the panel. It's a pleasure to be here. Look, I've been leading this company now for about three years, and I have only seen growth progress each year that I've been here, both for NTI and for retrofit upgrades. From an NTI perspective, I mean, I think the ROI for our end customers is really still strong. And almost every one of those large strategic accounts that Mark talked about has put out a multiyear NTI growth plan. And I've only seen those revise upward when I look at it over the last 12 months. So that continues to be strong.

On the retrofit upgrade side, Mark Williams talked about a lot of the trends, right? M&A, maybe was -- it slowed down a little bit at the beginning of this year, but it's back with a vengeance. And when that happens, we see a lot of need for upgrades and name changes and bringing those sites that were just acquired up to the standard of the acquirer.

And then the other thing we're starting to really see an impact from is in the late '90s, there were some regulations that came into play that required the whole industry to replace their tanks. The tank typically has a 30-year-ish lifespan. So really over the last 18 months, we've started to see demand for those tank replacements start to increase as well. So all of those tailwinds, I think, are leading to some really healthy growth rates.

That's great. And from an industry consolidation perspective, you mentioned that. What do you see the outlook on that going forward? Do we expect more of the same?

I think it's only going to continue to increase. And it has a lot of impact on our industry. I think most are positive. You guys talked a lot about them today, right? As our end customers get bigger and more sophisticated, they're investing more in technology and in thinking about how they control their assets in a better way. They also get much better at procurement, much more professionalized from a procurement perspective.

And while that might hurt some of us upstream from a pricing perspective, I think net-net, it helps us because they really start to value partners who can help them drive this concept of uptime and help them drive their own revenues and their own business growth. And so I think that this is a good thing from a professionalization perspective for the whole industry and will continue.

Yes. And I think we agree that as our customers start to think about solutions and rather than individual products, that's good for everyone. So, Dan, you're really a thought leader in the space, and you've spoken a lot about food convenience and the sort of emergence of C-stores as viable alternative to quick-serve restaurants. Do you want to talk about what's driving that and the prevalence around the globe?

Sure. Well, I mean, we -- I guess, optimism and opportunity is a short answer. But the -- we've got a very good global radar screen for the best operators globally. So we're tracking -- we have three competitions that help us track who -- what the leaders are doing in many of the developed -- most of the developed markets globally, best EV hub in the world, best foodvenience store in the world and the new one, which is smartest store in the world. And it's not a survey globally, but it does show you where -- what the best operators are investing in and where they're seeing success. And clearly, the opportunity that they're going after is you can fuel your car once every couple of weeks, but you fuel your body 3x a day.

And there are huge opportunities in food convenience, as we call it, food service as it's known for our sector. We're in the right place to do that, and we're increasingly getting the right capabilities operationally to do that very well. So it's interesting. I think we're at an interesting point in the industry actually.

Yes, I agree. And how do you see this influencing retailers' purchasing perspective and their investment strategies? And what kind of pain points are they running into? And how are they managing those?

Well, I think, again, if you look at the leading operators globally and look at what they're doing, I mean, you could take Applegreen as an example, Circle K as an example, they're making significant investments. I think since 2014, Applegreen have spent -- have invested $1 billion in the U.S. market. Massachusetts, I think they spent $750 million in the Massachusetts market. In Europe, we see Circle K acquiring Total in multiple European countries. Obviously, Germany is a big move, and they spent $3.8 billion on that.

So those operators have got huge confidence that they can take existing sites that perhaps haven't been sufficiently optimized and optimize those sites. And obviously, food is one of the big opportunities within that. But there are lots of other opportunities as well. I mean some really interesting stuff this morning on car wash and the opportunities in car wash. I mean one of the things anecdotally on car wash is why people are washing their drugs are washing their cars more because there are more sensors on the cars. So the car will tell you the sensor is not working, so you go and wash it. So I think technology is driving opportunity.

That's great. And Tracy, how about you -- what kind of changes are you seeing in capital expenditures from retailers? And how do you see that transitioning year-to-date? And what might be driving that?

Yes. I mean, as I mentioned, we're seeing, from our perspective, capital budgets increase, right? Our C-store customers allocating more money to NTIs to M&A to upgrading and retrofitting, particularly on this beginning of this tank wave that we're starting to see. So that's really positive.

Now I will say this year, kind of in response to the economic environment, we have seen them pull back a bit on their maintenance budgets, right? So they're looking to see where can I cut costs, where can I use mobility technology to help me with that? Where can I use some of my in-house technicians to do some of the easier service work. So that's, I think, something you see ebb and flow with what's going on in the larger economy. But from a capital budget perspective, we're only seeing increase.

Yes. And that's great. I think looking to reduce maintenance costs is a great selling point for some of our remote connectivity solutions. So, Elaine, you've got 13,000 Shell sites across the United States. It gives you a really unique vantage point on the industry. Do you want to talk about how you see technology fueling growth in the space?

Sure. I think we celebrated 100 year as a Shell oil company. I've been with the company for 29 years, might be almost 20 years ago. So as long as we've been around, what -- we've been known for quality fuel. I'd say if we're looking into the future and say, what is the biggest bet we're making is around loyalty. And broadly, loyalty, what that means for us and herein lies the opportunity and the challenge around technology is there are companies even within our industry that have done really well. But by and large, we have been on the slower end in terms of making that transition that the customers have come to experience and know about their everyday transactional experience, right?

So what I mean by loyalty is we've got to get away from the encore dispenser transaction, that physical transaction that we've relied on successfully over the years and take that to an off-site experience. And I think if you can get that transaction into the hands of the people's phones, that unlocks the next level of loyalty that I think we're going to be embarking on.

So, that is easy to say because I think in so many verticals outside of ours have done it successfully. It's the way in which you target customers, it's the way in which you attract them, send promotions. It's the way in which you integrate. I heard payment in the earlier panel discussions. It's got to be seamless and automatic and simplified, right? So the payment gets integrated in there. And in cases, when you show up to the site, you don't even have to pick out your wallet. It just is on your phone. It opens up the dispensers, which, by the way, is a technology that we do have. It's not widely prevalent in the use of our customers. But -- so all of that is technology driven, and there is not one thing that we're thinking of, and we have a very ambitious plan around all of those things.

But the other side of, I think, the industry as we look to what does that mean and how challenging, how difficult of a task is that is around the fact that, yes, the beauty is we have one of the largest, if not the #1 market share in terms of count in the U.S. So on one hand, we're trying to create one brand proposition that we can make a promise to the customers that they can expect the same consistent offer every one of these 13,000 locations. On the other hand, we go to market in a distributorship model or wholesaler model as we call it.

So we've -- and the beauty of that benefit is that we're partnering with the best people in the industry that know exactly what type of sites, offers, capabilities are right for those local markets. And they all have very diverse needs and ways and systems that they're structured around. So we've got to create the technological solution to unify all of those local wholesalers who we want to partner with, we want to continue to partner more with to be able to integrate with the Shell national offer that we have. And so that we're offering a national brand and a national footprint and presence, but coupled with the solutions that are specific and unique to those local markets that also work.

So when I say all those things, there's not one thing that is not driven by technology. So I think that is where technology is coming to play.

That's great. And you've just talked about a lot of operational complexity. So, Dan, I'd love you to talk about how you see as convenience stores become these multi-energy, multi- amenity sites, what kind of complexity does that introduce for operators? And how are they solving for that?

I mean we should think about the store manager in that environment. It's become an incredibly overloaded role, hasn't it? I mean -- so obviously, from a technology point of view, it has to be made simpler for the store team.

You can have the right technology, of course, and you can have the right fresh food offer. But I think the real challenge, and again, obviously, it's a challenge for the whole team, not just the store manager and the business is around having the right people in your business to operate that. And again, as has been mentioned this morning, turnover rates are often across the industry, very high. And so as the business has become more and more complicated and as food service particularly becomes an important factor, it's hard to do that.

So where you see the best businesses differentiating themselves, it's the ones that can hang on to their people. I mean, QuikTrip, for instance, we just saw with QuikTrip on Monday. We were hosted by the division operations manager. He's been in the business 25 years, and he started off as a clerk. He knows every aspect of that business. And obviously, QuikTrip are paying more or less double the industry rate. So they -- and they -- and obviously, the other thing is they're developing those people, they're training them. They're giving them a career in the industry. And obviously, as we become more complex businesses, this becomes really, really significant, I think, as a point of differentiation.

Yes. Yes, that's great. Elaine, Shell was one of our launch customers for our new microservices architecture and FX. Do you want to talk about that decision-making process? What went into that and how you decided to move forward?

Yes. I'm very excited about this partnership. I was at the -- almost at the very beginning stages of this decision-making and the journey that we've been on.

I remember when I first introduced what partnership this meant, what we're trying to accomplish and was introducing it into the -- inside the organization, I needed to find a really common sense nontechnical way of explaining microservices architecture, really for me probably than anybody else.

But I -- and the way that we launched that made sense, I think, light-bulb moment for a lot of people within our company was we were in this monolithic architecture structure for a long time. And the most -- single most important reason why we needed to go to this was because of what I was translating microservices to modular, if you will, right? It was this notion that in order to go to market in the speed in which we needed to do it, we needed the capability to be able to do multiple things at one time.

We couldn't just put one item and think all of our resources and time required to develop one solution and then think about what to do next. We needed the capability that this solution brought, which said, you know what, we've got to tackle the car wash solution issue. We've got to tackle the loyalty integration that has to happen between local third-party loyalty programs and Shell fuel rewards programs at the dispensers. We've got to automate some of the processes that our wholesalers have to go through every day as part of their settlement processes. We -- I mean, there's a long list of things that we want to accomplish. And this microservices solution really was the idea that started our pipeline building for all the benefits that we're now working on that we're delivering, and we've started to deliver on those. So that was primary the biggest reason.

And then I would say the secondary was going to the cloud. And I remember presenting this concept like who's not in the cloud these days, right? Who is not in the cloud? So I think it was an obvious benefit that people related to. But specifically for us, that meant I heard in the earlier panel, somebody talking about stability. In our network, stability when you're talking 13,000 sites is everything. We do not want to bring down transaction, which is about 75%, probably increasing percent of transactions that are done on credit cards today, right? Surprising that there's still 20%, 25% of cash transactions, but we can't afford to bring down a network of 13,000 sites, not for a day, not for an hour, right?

And when we do, and you had blitz, it is incredibly painful. So the cloud technology was a way in which for us to start to see our network before things could pop up and have some proactive monitoring capability and observability into our assets and be able to prevent and make some really smart important choices about what type of alert systems do we to create and be able to have visibility into so that we could potentially prevent any of the downtime that could be coming our way. So that was a huge benefit as well. So those, I would say, are the two main reasons.

That's great. And are you seeing any early benefits that you want to share with the group?

Yes, so many. I would say the one feature that we've already launched is the Mashgin self-checkout solution integrated to our entire network. So we've got about 25 sites that are participating today between the two POS systems that we operate from.

The beauty of the Mashgin example is, historically, in this monolithic architecture system that we had, the idea of introducing a third-party POS system was quite not just complex, but risky. It took a lot of time, but it would -- we would making that investment decision with a lot of uncertainty, whether is it going to actually work? Is it going to be worth the effort, time and energy and resources having to support that POS system with all the investment that needs to go in to have the adoption rate with our customer base, with our wholesalers that take that choice.

So what this solution brought is now we have a proven case of introducing essentially a third POS option into our network relatively easily. So that's the real game behind the match gen adoption. Even if we don't get the uptake of the aspirational numbers, right? In time, I believe self-checkout will be just like grocery stores. All the gas stations will eventually adopt and the adoption rate will come and all of those things. But I think the capability in terms of technology is having done this really easily, and we couldn't have done it without the Invenco partnership, right?

Yes, that's great. I think of the iNFX platform as kind of the app store for convenience retail, where we've got our apps. We love it when you use our apps. We also want to make it really easy to use other apps. So that's great. So, Tracy, your company announced a new name. Congratulations. You're now United Uptime. So tell us a little bit about what drove that decision-making process and what it means to you and your customers.

Yes. So thanks. It's hot off the presses. We just did it on Monday. So we are one of the largest channel partners in the forecourt space for Vontier. And we have 1,300 employees who go out every day and install and service and do compliance services for convenience stores and travel centers. And we have really seen a change in the way that our customers talk to us over the last three years.

So, traditionally, it's always been help us control our maintenance budgets, help us make sure that we don't run out of money by September or three months before the end of their fiscal year, help us think about this from a cost perspective. And what we've noticed really a lot over the last 18 months is a change to talking more about uptime. So help us get up and running so we can get back to the business of making more money and satisfying our own customers' needs ourselves.

So we did some value proposition work about a year ago, and every single customer we talked to mentioned the word uptime in their interview. In fact, it was mentioned at least 8x here this morning, I lost count after about eight, but it is how this industry is speaking today. So we decided, let's put it in our name. And that's what we did. We're making a commitment to helping the whole industry think more about uptime.

That's great. So, United Uptime, formerly D&H, has been a long-time partner of Vontier, and we very much appreciate that. Do you want to talk about why you continue to partner with Vontier?

I mean it's simple. They're the industry -- they have the best brands. They're investing in the technology that's going to take the whole industry to the future. And then more recently, they've made their commitment to customers and channel partners very apparent in this reorganization and trying to do business in a more business-friendly manner. I worked at many large companies in my past, JCI, Tyco, GE, and you're always hard to do business with when you're that big. But for a company to realize that and really say that they're going to invest money in becoming easier to do business with, that means a lot. So those are some of the reasons.

That's great. Thank you. So we're going to close out by talking about the future. Elaine, what's next for Shell? And how do you see technology continuing to play a role in unlocking productivity and revenue growth?

Continuation of the things I mentioned, right? We're now moving into Phase 2 of what we call the projects that are going to be enabled with the Invenco solution and our partnership. So many things on that road map that I could talk for hours. But I heard some conversation earlier about, for example, car wash. It turns out that surprisingly, 30 -- more than 30% of car wash transactions at a gas station occur when customers drive up directly into the car wash instead of going to gas -- to pump gas and going into the C-store.

So by not having that car wash terminal payment processing capability linked to the rest of the sites and having that capability linked to our loyalty program and the platform, it's a very disjointed disconnected experience and opportunity list. So that's one of the examples of the things that we're going to be working on so that it's fully integrated. It processes payment just like you would at the pump, just like you would inside the store, and it would roll in all the loyalty capability and the ability to create schematics together and so on and so forth.

So the future is in continuing to develop our capabilities as a Shell brand so that when we go out to the market and we try to compete for the business of partnering with the best in the market, in the industry that they're coming to the table and saying, only when you can integrate my solutions here, only when you can adopt my own loyalty program there and only when you can offer this that we would be able to meet that challenge and create those custom solutions. So super excited about all of those opportunities.

That's great. And Tracy, we've chatted a little bit about the energy expansion. How do you see the role of electrification and traditional fuels going forward?

Yes. I mean, I think I agree with everything that was said here by Austin and Andy and others, right? It's only going to continue. And while we feel like we might have seen a bit of a slowdown lately, as you guys pointed out, it's still growing high single digits, maybe double digits. We've seen over the last 12 months, an demand from the likes of Circle K, EG, Pilot, Love's, they're all gung-ho and moving forward with installations. And it's the C-store space, I think, is really leading the charge right now. That's great.

That's great. And Dan, you're on the leading edge of kind of the biggest and most innovative retailers. Do you want to talk about what emerging trends you see on the horizon and what's next for the industry?

Well, obviously, all of the above. But I think one other thing which we're noticing a lot of interest in is looking at how you go to market and looking at how consumers buy things and what motivates them. And if you look at the Far East and you look at social commerce and how important that's become marketing departments, and this is a global trend, and we're seeing it in -- certainly in Europe increasingly, marketing departments are becoming social media departments.

And the retailers that are -- obviously, so retailers are -- this is an opportunity, but it's also a problem because often, it's the independents in markets that are able to adapt quickest and become trend leaders as well as trend followers. And by social media, I'm really talking about TikTok and Instagram video particularly and how important they are with Gen Z, if you look at Gen Z, how important they are.

Certain retailers are actually -- big retailers can do this or doing this well. Marks & Spencer is an interesting example in the London market that's really become trend leading. And I think this is going to be increasingly important. We need to get a handle on this as an industry. And obviously, in order to be successful, you have to have a product offer that's exciting. You have to have the right products that you sell, but you also have food service is also really important here. So I think we call it viral food convenience is a big opportunity for our industry.

That's great. Well, big thank you to all of our panelists, and thank you all. So, thanks, guys. That's it for me.

I'd like to thank participants. It was a really great and engaging panel. It was great to hear about the strength of our industry from Dan and Tracy. And Elaine, I think what I took away from what she said, she talked about automation. She talked about integration. She talked about cloud. Hopefully, that's something that you've taken away from the presentation so far this morning, where we're talking about integrated connected solutions. They talked about the vibrancy of this industry. And hopefully, for the people at least that are here, as they walk the floor of the exhibition, you'll see how vibrant it is and what a great place it is to be. And Tracy, she talked about us having the best brands. I couldn't agree more with her. It's a phenomenal business.

So we're sitting here on October 15, and no discussion would be complete without talking a little bit about our preliminary results. As a reminder, these are preliminary. We're still going through a close process, and they are subject to change as we complete our quarter-end procedures. Having said that, we expect sales to be slightly above the midpoint of our previous guidance. When we take it at a segment level, our Enterprise and Fueling Solutions business and our Repair Solutions business is squarely in line with our guidance, right where we expected them to be. Mobility Technologies is at the better end of our expectations or guidance range, and it's off the backs of DRB or our Car Wash Solutions business.

Last quarter, when we talked at our Q2 earnings call, I talked about the inflection of the Car Wash business, how we are seeing sequential growth, how we expected another quarter of sequential growth in Q3. And we expected Q4 to be our first quarter of return to year-on-year organic growth. I'm extremely pleased to say that we returned to organic growth in DRB one quarter earlier, and we had low single-digit growth in DRB in Q3. This is off the backs of our Patheon solution, which is a cloud-connected solution, which provides greater integration to the CRM, which provides greater visibility to our customers in terms of reducing churn, increasing revenue and reducing operational costs. We're seeing great market acceptance of that.

From an operating profit margin perspective, some small puts and takes between segments, but we'll be at a better end of our guidance on the operating profit margin, which translates from an EPS perspective that we'll be near or at the high end of our guide. More details around our earnings call on the 30th of October. I hope to have you guys on there. But I'd also like to take this opportunity to say that I'm extremely thankful and proud of our teams. This is another quarter of strong execution that they delivered on, and I couldn't be happier with the performance.

The technology showcase is centered around convenience retail, which is about 67% of our revenue. When you look at that from a reporting segment perspective, a vast majority of Enterprise and Fueling Solutions and over 60% of mobility technology serves this space.

What you've heard today is our convenience retail market is very attractive. It's delivering resilient growth on the backs of industry consolidation, larger footprints with fresh food formats, healthy fuel margins, energy expansion. Vontier is a leading provider in this space with unparalleled depth and breadth of our portfolio and domain expertise. The industry is evolving and our customers require connected integrated solutions. And we are uniquely positioned to deliver and solve the high-value problems for our customers and win in this space.

We have significant opportunity to create value with this portfolio and this team, and we're excited about executing on our three-pillar framework. Mark talked about the three-pillar framework. Our goal here is to deliver top quartile returns. We're focused on our Connected Mobility strategy, and we have increased the velocity of new product introduction innovation to drive profitable growth. We have significant margin expansion opportunity in front of us, a deeply embedded culture of the Vontier Business System of continuous improvement, which we supplemented with 80/20 program, and we're diligent around capital deployment where we are making conscious choices around the highest return options to deliver value for our shareholders.

Convenience retail is an attractive market. We expect this market to be growing 3% to 4% through a cycle. Our customers are looking for integrated connected solutions to support their revenue yield management and operational efficiency. You've heard multiple examples of our solutions today in this space, whether they range from digital payment and consumer engagement to connected environmental solutions or our energy expansion offerings. This allows Vontier to be strategically positioned to gain share and outgrow the market by about 100 basis points and deliver mid-single-digit revenue growth.

A couple of great examples of this is our Payment and Media business, which is gaining real momentum and changing the game from our customers. You heard about simplified payment certification. Payment certification could take 12 to 18 months for our customers. And there's a constant loop of payment certifications. This really helps them. over-the-air updates, not new to our mobile devices, but new to this industry. Enhanced consumer engagement. You heard Elaine talk about Shell and the loyalty program. It's about loyalty. It's about ordering at the pump. It's about revenue steering. The chart depicts two of our parts of our Invenco business that are around payments and consumer engagement, and they're poised for mid-single-digit growth to high single-digit growth over the next three years. There's also significant margin expansion opportunity here as we gain traction around our productivity initiatives and increase our mix of recurring revenue.

As you heard from our teams today, an important offshoot of integrated connected solutions is higher recurring revenue. Currently, about 31% of our revenue is recurring in nature. We're seeing good growth in our SaaS, Software-as-a-Service, software maintenance upgrades revenue along with aftermarket parts and service. This is the result of our focus on new product development and furthering the adoption of integrated solutions for our customers. We're still targeting about 40% revenue from recurring sources by 2028.

The driver of our performance culture is the Vontier Business System and our focus on continuous improvement. As we discussed at our previous Investor Day, we introduced 80/20 to our VBS toolkit. Internally, we call it the focus and prioritization process or FPP. Over the last three years, we made significant runway with our 80/20 program and VBS and expanded margins despite the roll-off of EMV and the normalization of margins after the COVID or the post-pandemic boom at Repair Solutions. More importantly, we have a significant runway of opportunity in front of us to clearly expand margins over the next years.

Looking at a couple of examples. We've set up and streamlined global engineering centers. This has allowed us and enabled us to rapidly expand our software capabilities, including the use of AI. We've increased the velocity of R&D. The number of new product launches has increased tenfold since spin. And we've done this while lowering the average cost of engineering by 20% to 25%.

Simplification is another core component of our 80/20 process, and we made significant progress on that. Our global dispenser platforms have gone down from 32% to 14%. We've standardized components, both on the electronics and on the mechanical side and have gone from 1% to 30%. Our number of software platforms is down from 30% to 20%. The even better news is we have significant opportunity to drive this further. We can drive the hardware dispenser platforms down to 8%, the software platforms down to 6%. The standardization should be around 50%. This leads to significant benefits from a manufacturing footprint perspective, significant benefits around procurement, around sustaining cost, around manufacturing cost, and it all creates capacity for profitable growth for us.

Since spin, we've generated roughly $2.1 billion, $2.2 billion of cash, and we've deployed approximately 100% of that. We've done that in a balanced way using our disciplined capital allocation policy, which is dynamic in nature. We will always go to the highest return option. Of the $2.1 billion that we've reinvested, we've delivered a 12% ROIC on that investment already. Our capital allocation priorities remain unchanged. We will always go to the highest return option. evaluating buybacks, which remain extremely attractive at our current valuation, along with bolt-on acquisitions.

We're focused on building a portfolio that's aligned with our strategy, our core competencies. It's accretive to our financials and positions us to win. Our M&A criteria hasn't changed. We look for markets where we have the right to win, where there are barriers to entry, where we can build a leading market position with sustainable competitive advantage. We're very disciplined around the financial hurdles. We look for double-digit ROIC within three to five years of the acquisition, and we look for the deals to be accretive to our EPS. A great example of this is Sgt. Sudz. It's a leading provider of smart motor controllers. And as Devon talked about, it completes the digital brain of the car wash. It's been five months. The integration is going well. And I'm happy to say after five months, it's actually running ahead of our acquisition case, something you also saw with the Invenco business.

Also part of our portfolio optimization is we've divested some noncore assets. The latest one at the end of Q3 was a European service business. This was a highly competitive, fragmented business, low growth, about $60 million of annual revenue that we have divested. Portfolio management is driven with purpose. We're building a business that's focused, scalable and positioned to lead.

We remain committed to our investment-grade balance sheet. We've, over the last three years, reduced leverage from 3.3x to under 2.5x. We've built a balance sheet that gives us optionality, optionality to invest, optionality to return capital and to navigate this dynamic world that we live in.

Our free cash flow conversion is a real differentiator. We'll generate roughly $450 million of free cash flow this year. And over the next three years after that, we'll generate roughly $1.5 billion of cash with over a 90% free cash flow conversion rate.

Our largest market that we talked about today, convenience retail is a relatively niche market which characteristics might not be fully appreciated. But hopefully, for at least the people here, you'll get a better appreciation of the market and how it's a core part of the U.S. and global consumer fabric.

We believe our performance compares relatively well to our industrial peers. We've been outgrowing on -- from a growth perspective. Our margins are attractive, but more importantly, there's room for further expansions of margins, and I'm pretty confident over the next years, we'll close the gap. Our free cash flow profile is very attractive. When we look at our free cash flow as a percentage of sales, 12% to 13%. When you look at our free cash flow yield at extremely attractive 7.5%. But we're trailing our peers from a valuation perspective.

In short, Vontier is a differentiated industrial company. We're delivering above-market growth, set to expand margins, generating strong free cash flow, and we're doing this at a valuation that offers significant real upside.

What you've heard today is a story of transformation of execution and opportunity, both for the broader convenience retail end markets, but for Vontier. We're focused. We have leading market positions. We're accelerating growth, and we're disciplined around execution and capital deployment. We're doing it with a team, a global team that is phenomenal, and I'm really proud to be a part of. That's what excites me every day when I come into work and gives me the optimism about our future.

With that, I'll open it up to questions and answers and invite Mark and Ryan back on stage. Thank you.

All right. We're also going to bring Andy Bennett back up. He couldn't get enough the first time. So just in case you wanted to ask him some more questions. And we left off with Nigel last time. So please go ahead.

I've holding this for an hour or so. It's actually a different question. Maybe just on the margin point. You mentioned 35% sustainable margins with upside from simplification. Everything you laid out there suggests that simplification could be significant. So I'm just wondering how do we think about that? How do we quantify the simplification payback potential?

And then just on top of that, I know there's been significant investments in Invenco, Driivz. How does that investment spending kind of look over the next few years.

Yes. I'll start off with the second part of your question first. It's a little bit easier. So we've stabilized our R&D percentage of sales. And actually, it could be a little bit of a tailwind going forward. So the investment isn't going to step up anymore. If anything, we'll start seeing some scale benefit as these businesses continue to grow.

Yes, you're right. There's significant margin expansion opportunity or opportunity driven from our simplification. We're third innings, fourth innings in our simplification journey, and we're going to continue to drive it. There's obviously the element that part of it will be returned in our results to shareholders. Everyone sitting up here is a shareholder. And then part of it is continued reinvestment in the business. While we aren't updating our longer-term guidance, I think the 30% to 35% incrementals are a little on the conservative side. And I think over the next years, we have opportunities to outdeliver that.

Can I get one more question.

Sure.

So, on the regulatory side, you called out regulation as one of the four big drivers of the business effectively. Can you just maybe highlight maybe top three regulatory drivers over the next few years?

Yes. So one of them is called payment card industry, which is an industry setting body that really regulates North American security of payment, and they're sunsetting version 2. They're currently on version 6, and that will sunset here in the next year plus, which means that, that technology out there will be obsolete. The second one is the underground tank cycle. You may remember us talking that the underground tanks about 30 years ago were replaced lock stock and barrel is a pretty incredible story of the industry really. These were steel-based tanks that were rusting and leaching fuel into groundwater and neighborhoods. I mean, how horrific could that be? And they -- 30 years ago, about they replaced these with resin-based double-walled tanks.

The problem now is they're 30 years old and folks are -- have a hard time getting them insured. The infrastructure is currently aging underground. And the good news is that neither of those two regulatory drivers are relevant from a huge upswell in volume. I think it's going to be a constant sort of steady drip of volume that's going to come in, which is exactly the kind of regulatory drivers we like.

And then the third one is just the security of payment sort of internationally. I mean we can't get out of a conversation with customers about how do you secure their network, how do you secure their payment. There is constant regulation that is advancing that technology. And you see lots of regulatory drivers from governments being involved in securing that payment. And we talked about it in the fleets example. We're talking about it in our recent offerings in India. I mean it's just pervasive around the world in terms of what we're going after. And that means that folks that are trying to break into networks are constantly at work, and we're constantly trying to keep them out.

Rob's hand right down here.

Yes. Of course, we've heard a lot about the integrated platform strategy articulated today. I guess, Mark, as you think about -- and it makes a lot of strategic sense for sure. As you think about some of just the tactical challenges of your customers to adopt that or adopt it more quickly, what are the top two or three areas that you're trying to fight against from a more of a tactical standpoint?

So there's a couple of areas that customers have to get through, one of which is they want to see somebody else doing it and whether it works. Nobody wants to be the first to adopt new technology and be the guinea pig there. But look, we have some great examples. You've seen customers step forward, roll out some of these technologies at scale. And they're through the hard phase of the growing pains of adopting those new technology, which are normal in any technology.

So I think one is that we are now establishing real-world proof points at scale in the industry with adoption of some of this capability. And you hear quite unscripted or on rehearse, they're interested in extending this to beyond what they've currently bought it for into sort of the Phase 2, which is a great sign that we've digested some of those key learnings.

The other issue is that folks also not only want to see it out there, they also want to pilot it. And so we have a number of real pedigreed customers out there that are adopting and piloting some of these technologies. And they -- these are not short-cycle sale opportunities. It's much easier for us to sell dispensers, quite honestly, and turn them more quickly. Some of these sales are longer cycle sales. And so folks want to be able to pilot it. And it's kind of like rolling out an ERP system, if you will, for some folks. It's a pretty big investment and needs to be planned for.

So these kind of things can make our profile, particularly in early innings, a little bit lumpy, but we're working to even that out as we try to accelerate adoption of some of these technologies. But overall, I think it's pretty clear that these are the kind of things the industry needs. And it really opens our land and expand opportunities of already a deeply embedded set of technologies and capabilities and enhances our portfolio.

All right. Just a reminder as we're getting the next question to the folks on the webcast, feel free to submit any questions on the portal there. I do have my laptop or my iPad, so I'll take those when we can.

Katie, I think you were next.

So we talked a little bit about M&A, but I'm curious how you think about the mix of the portfolio evolving over time and where you see the greatest opportunities to allocate capital in terms of those different segments?

Yes. So most of the acquisitions, as you would expect, would be in our mobility technology part of our business. It's really when you start thinking about Connect managed scale, having connected hardware plus software around that space. From an end market perspective, convenience retail is an attractive end market, but so is fleet. As Mark had a slide up and briefly touched on it, that's a high-growth market also.

So you could really expect acquisitions in those areas. Again, we are cultivating our pipeline, the markets we like, but we also will remain very diligent in terms of what we pay for these assets. We need to not only have a good strategic fit, we also need to have a good financial return. And with our current stock price, buybacks offer a really good return. So you are always competing on those.

Now it doesn't mean we don't do M&A. We just did the Sgt. Sudz. When we're doing Invenco. When we were doing buybacks, we did the Invenco acquisition also. So for the right asset at the right price where it makes both strategic and financial sense, we'll definitely pull the trigger and do M&A.

Andy, down front.

So you guys know Invenco at times has had some chunky wins. So like as you look forward, do you see sort of more of a broadening in terms of like as you're talking about delivering a full solution, obviously, you're comping against strong growth over the last year or so. So how do you get to sort of that more consistent, let's say, mid- to single-digit growth moving forward?

Yes. So we talk a lot in the management team about that to try to line up some of these orders so that we don't have a period where we would lapse into sort of retrenchment. We've had four quarters of 20% growth at a scale business, not the -- we rebranded the Invenco brand into our -- a lot of our retail solutions use that brand. So it's a business, $0.5 billion growing at that rate, which is good.

But we don't want to see a quarter where it goes back minus 20%. So there's a lot of conversations with lining up some of these orders where we're going to see more steady growth. So we spend a lot of effort to try to make sure that we try to create that glide. The great news is we've got lots of opportunities in the pipeline.

The thing that's a little bit tricky is some of these are longer cycle sales that we spoke about with Rob's question. And so sort of getting the pilots in there, convincing customers that this is a risk we're taking where the returns are absolutely there and very real for them to move forward with their infrastructure is just something that we're getting better at, and that's just something we have to prove out.

I'll add that I think the better way to look at Invenco is going to be on an annual basis. I think on an annual basis, the business can sustainably deliver mid- to high single-digit growth going forward, even coming off the strong comps of this year. Now quarter-to-quarter, half 1 will be probably a little more challenging because of this really strong growth in half 1 this year. Half 2 will be easier comps. And overall, the growth will be mid- to high single digits. But quarter-to-quarter, you can have a little bit of movement here and there. But the businesses, as Mark said, got a lot of strong opportunities, pipeline with pilots going on.

Maybe just one quick one on the near term. Like it seems like you're positively surprised on DRB, at least a little, right? And so DRB and Matco, as you know, more of the interest-sensitive names as you talked about, interest rates are come down. Is it really only self-help for DRB? Or did you see like a little bit of market improvement? And I guess we were kind of worried that macro is going to be worse for longer, but it seems like it's okay. So maybe some comments there.

Well, let me answer that and I'll let Anshooman jump in, too. Look, the DRB story for us, certainly, markets are not catering, excuse me. And that's helpful. And I think what's happened in the industry is that some of the maybe more marginal players that kind of moved in with a bit of a view that car wash is like passive income, like you grab a street corner, put something down, you're going to like print money. I'm being a little bit facetious with that comment, but not too far off base.

But the real serious operators are the ones that say, hey, look, we know that it's about running a good car wash. -- and you're going to get much better returns on that street corner and for your whole network of operations if you do that. And those are the people that are really partnering with us, and they've not been superly thrown off by the trend that occurred there. So you've seen the marginal players get out, which is healthy for the industry. And you see the real serious players continue to move forward and consolidate. And these are the folks that need the tools that we have, which are self-help, our innovation that is provided. So it's a little bit of equal footing, I would say.

But if we didn't have these new offerings, they wouldn't be buying something to make their businesses better. And so I think it's a really a combination of both. And we still have the tailwind to come of improving interest rates, which could further buoy that market with more tunnel builds, more site builds as construction might come back more into the space, but that's not really what's driving it.

Yes. I'd agree. Our pipeline around Patheon and really the solutions out there is getting larger, and that's where we saw some of the wins.

Now on Matco, their results were in line with expectation, but it's still a little early to call any inflection out there. Let's see how the market develops. Obviously, interest rates coming down would help. If inflation stays under control, that would help, but it's a little early to call that inflection.

I do have one from the webcast as we're slowing down here in the room. Looking at the margin opportunity going forward, can you give some sense of contribution from things like simplification versus increasing mix of recurring revenue?

Yes. Simplification is a multimillion dollar opportunity ahead of us that we're going to continue to drive. The other tailwind, obviously, we'll have is as our SaaS businesses scale more, think of Driivz, think of iNFX and others. Those have software-like margins, which also provides a tailwind.

Now some of these businesses are relatively small to the overall Vontier revenue, so they don't move the needle that much from an operating profit margin near term. But when you start looking longer term, and I've made this statement before, and I'll repeat it. Longer term, I have conviction that our mobility technology business longer term has the same margin potential as a very strong, very attractive EFS business. There is no reason structurally market portfolio-wise it's why the margin profile should be any different.

All right. Now we're running close to time here. So I think I will turn it back over to Mark for some quick closing remarks. And then as soon as he's done, we are going to lose the folks on the webcast, and I'll come back on and give some logistical information for our booth tour. So, Mark?

Well, folks, thank you for being here. I'm so excited to see you all here. And hopefully, it's been a good learning experience for you with not only how the Vontier portfolio has changed since spin, how it's better positioned, more focused, more resilient with a strong management team and very importantly, a deep rich heritage in the business system. Our Vontier Business System is alive and at work and drives tremendous value.

So, for the folks that are going to be with us this afternoon, thank you also for your time and effort. I hope that this is illuminating for you. It's exciting for us to have you, and thank you very much for being here. Have a great day.