Dover Corporation (DOV) Earnings Call Transcript & Summary

All right. Moving right along here. We have Dover up next and CEO, Rich Tobin. If anybody has any questions, of course, ping me on e-mail or IB or also log in through the event website. We'll be sure to get those answered. I'm going to pass it over to Rich for some opening comments here, and then we'll jump right into Q&A with a couple of minutes he leaves us after he goes through his presentation. Thanks, Rich.

Thanks, Steve. I only got a few slides. I'll hit them relatively quickly in case there's anybody on the call who's new to the story. So I'm on Slide 3. So that's -- for those of you new the story, that's -- and not familiar with the Dover portfolio, that just gives you an idea of our portfolio makeup. I'll move on to Slide 4, which is a slide, I think, that we've seen before, which is through-cycle value creation. This is the first downturn that we experienced during the COVID since the spin of the oil and gas assets that went into Apergy. Dover's portfolio, resilience is far better than the past through a combination of year-over-year robust productivity objectives, coupled with our ability to flex the cost structure allowed us to increase operating margin despite a pandemic headwind, as you can see from the graphs on the slide. Let's move to Slide 5. We exited 2020 on the left side with a healthy backlog, which translates into some robust guidance for '21, both on top and the bottom line. I addressed the margin improvement in earlier comments. And in the cash flow, as we would have expected a year of downturn, we responded to the pandemic by flexing down CapEx and working capital, which I think that's the best cash flow metric in Dover's history that was delivered in 2020. We can talk about the guidance for '21, but I don't want to steal Steve's thunder. That's one of his favorite subjects. We'll wait to the Q&A to get there. But I think I'm going to be convincing -- give you a convincing argument why we believe that the upper end of the range is surely possible in our guidance. Moving on to Slide 6. This is our capital allocation strategy, which has been the same since 2019. It was relatively balanced in 2020 with CapEx of $150 million, inorganic investment despite difficulties, doing due diligence of $320 million and capital return of close to $400 million, which was split between a dividend of $284 million and buybacks of $100 million. Our balance sheet is positioned to act aggressively for the right opportunity, which you can see in the dry powder. Moving on to Slide 7. I spend a lot of time here on this 4 core enterprise capabilities during the full year presentation. We get a lot of pushback of whether Dover is a cost-cutting story. We would argue that we have the tools to deliver productivity improvements year-over-year as part of the strategy using these 4 pillars. And moving on to Slide 8. I'll give you an update of where we are. Broad demand strength year-to-date, year-over-year bookings and backlog are up double digits, growing in all 5 segments. We've got particularly strong order intake in food retail as we had highlighted, can-making, heat exchanges, pumps in biopharma and industrial automation. Recovery underway in underground fueling vehicle services and sequential improvement in food service equipment, textile printing in the latter half of the year. Efficiency gains, pricing and mix are more than offsetting input cost inflation so far this year, so we feel good about our start, which makes us feel really good about our full year forecast. So that's my opening comments. But in filibuster, too long, Steve?

Not at all. Not at all. So I mean you're 2 months in and you're talking about the high end of the range for the year. I mean what was so different about the first 2 months that kind of changes the profile for the next 12?

Two things, one, the backlog has continued to grow basically at the same pace that we exited '20, which basically gives us more confidence in terms of being able to deliver the back end half of the year in terms of a revenue point of view; and the margin profile in Q1, which arguably would have been one of the tougher comps because it's sort of pre-pandemic, is actually quite robust. So we're building up the revenue, which makes us feel confident about the upper end of the range. And the margin and Q1 is tracking quite well, and that's a combination of a healthy mix of business that is coming through. And so this notion of how much temporary cost that was taken out in '20, how much is coming back in '21. And I think we've got both side of the equation correct right now. So still early days. I would tell you that we're unlikely to change the guidance at the end of Q1. But as our habit, I think it's likely that we'll adjust the bottom -- bring up the bottom, so to speak.

Got it. Okay. That makes a lot of sense. Refrigeration, you sound kind of more bullish on here. I mean I saw Kroger CapEx is up a lot. Obviously, not going to read through 1 data point, but looks like some of that pent-up spending is coming through. But how do we think about this business longer term? Is this enough to kind of change the trajectory? I mean, obviously, you're going to have some catch-up relative to COVID, but does this change the trajectory here of what this business is worth?

Well, it's going to be worth a lot more than it was in 2018, for sure, just on margin profile alone. But we are getting conviction that we are entering into at least a 3-year cycle here. I don't want to talk about anything further than that. But based on the way that we've seen, the backlog developed and what we've seen with our customers in terms of their CapEx plan, it's not as if a Kroger can just basically do all their stores at the same time. They don't have the people to do it either. So these tend to be multiyear refurbishment plans. So we think that we're, like I said, getting some conviction that we're going into at least 3 years of improved demand that we've seen over the previous quarter.

Is there any reason why this can't be -- I guess back in the day, it was high volume kind of standardized products, which you can really mint if you have the market share and you can sell to 1 or 2 customers. I would think that's kind of the biggest hurdle to getting this thing, the refrigeration back to where it was or can you get there?

Well, look, I mean, I -- when we talk about refrigeration, we just tend to talk about the door cases because that's the easiest part to understand. That is about 40% of the revenue at the end of the day. That's where we put the CapEx. That's where we needed to intervene on the margin side. So we've capacitized ourselves that -- using a strategy of, are we going to increase capacity? No, is the answer. Basically, what we're going to do is maximize mix from here, at the end of the day, just to maximize profitability and margin because it's not -- this is not a business that it costs a lot to add incremental capacity, so we don't want to contribute to getting one of these -- the cycle goes up and everybody lays in capacity and then pricing comes down. So we've got a fixed notion of -- in our customer base, what we'd like to supply year-over-year. We're trying to manage expectations in terms of lead times and quality, which is a little bit different than in the past when you were just running for volume. So we've got that driver, which is a fundamental change in terms of what we think that we can extract from our profitability on that part of the business. The other part that we're working on is on the systems and the distributed portion of the business, meaning the conversion to CO2 on the bigger systems, where we arguably are a leader in that technology space. And on the single -- like think about a case that's got its own system built in, whether that is propane or CO2 or something else. So that's -- we would argue kind of a change in mix. We think that we've got the product and the technology to gain share there. I think it's purely going to be a question -- we just need to manage the pricing and profitability because we recognize that California putting in its regulation, generally speaking, that's kind of the precursor because of ESG, it's going to go that way. It's going to attract a lot more competitors. So we think that we've got -- we're on the front foot. I think it's just going to be more of us managing the pricing and profitability dynamic rather than just chasing the top line.

Is the California mandate -- I mean I know HVAC had a mandate in 2023. They were phasing out some of the refrigerants there. But they've kind of pushed that back, and now it looks like it may even be a national standard in 2025. Is refrigeration on a different glide path than that?

Yes. I don't want to -- I can -- I would tell any interested investors that we did a press release on it, probably at the end of the year before I get over my skis. But my understanding is it's all new builds. State of California has to be CO2 or some type of non -- whatever you want to call it, that's the new standard without me driving deep into it. So it's all new builds.

And is that a price -- is that -- if that goes national -- obviously, California kind of sets the tone nationally when it comes to this kind of stuff. Is that a -- how does that work? That's obviously -- is it a more expensive system for the customer? Is it -- how do the financials of that actually work for you guys? Because it's not a -- maybe there will be a pre-buy ahead of that. I don't know if it's a more expensive...

From an operating cost, Steve, I'd have to go check with our guys. But from a -- what we sell on the system side, right now, it's more expensive but it's not being produced at significant scale. We've got a lot of expertise in it because we've owned Advansor for several years, so we're one of the market leaders in Europe in CO2 systems. So it's just -- we've been transferring that technology to the United States over the past 24 months. Now what we need to do is kind of manage the pipeline, which is it's growing on a percentage basis quite healthfully, but it's not like a flood right now. We're working out how we're going to operationalize kind of the build of these systems because it's a lot of purchase components and a lot of labor cost. And it's a question of how do you extract your margin out of the IP at the end of the day.

So can this be -- can the refrigeration business be a high-single-digit grower for the next 3 years with getting margins back to kind of where they were at the prior peak?

Well, clearly, it's going to be -- it's arguably going to be a double-digit grower this year. That's for sure. And our estimates, it will go down into high single digits, mid-single digits and then sit there. Then it becomes a question of adoption rates. Does CO2 become a national standard? Do our clients just decide for ESG reasons that they're going to convert, anyway? I mean if you think about it, if you had an old system today in Pennsylvania, do you go and just replicate that old system or do you say to yourself, you know what, I'm going to go to CO2, there's some economies of scale that I need to have for maintenance repair, why don't I just start doing it proactively? It's early days, so I don't want to make a call on that, but it's contributing to our backlog today. It's just up to us to maximize the margin out of that product.

And again, can you get back to that peak? Or should we think about something just short...

In terms of total revenue?

For peak margin for refrigeration.

Yes. Yes. Look, I mean, our target right now is mid-teens, right? We've got to 12 in third quarter last year. I'd like to see us do better than that in Q3 of this year.

Yes, yes. Okay. That makes a lot of sense. On the other businesses within RF&E, I don't think they get a lot of airtime. I mean the -- I never thought people would be talking so much about Belvac. That was one of my most favorite subsidiary from 15 years ago. But there's definitely something going on there. I mean how big will that business be this year? And it seems like there's a bit of a secular story on that one.

Yes. It's going to be twice the size it was in '20 this year. We are sold out, so we're taking orders for '22 today. We...

That's how -- that, I know it's lumpy. But I mean that's a pretty big lump if you were...

Yes. Well, look, I mean, at the end of the day, right, we invested in capacity expansion in '19, but we did it because we believe that there's a secular trend because of ESG that's going to go -- that plastic to aluminum was becoming real for ESG reasons, so we had expanded our footprint in Virginia and made a pretty big investment in the business. And then we got COVID and then we got everybody drinking beer at home and then you've got the capacity constraints in can production globally. So if you go take a look at the big can producers, every one of them has basically announced some pretty big CapEx greenfield expansions, so that's what's coming to the pipe right now. So it is kind of lumpy now just because there's an imbalance between demand and supply. That will correct itself over time. The question is how durable is this PET to aluminum conversion. Because even if you take 5% of PET and convert it into aluminum, that would tell you that there's a significant long tail in terms of what the build-out is required on aluminum cans. Now that's going to be subject to aluminum prices in the future and everything else. We believe that bottlers and the retail companies are interested to make that conversion. It's a big capital expense at the bottling side, and that's going to take some time to work its way through the system. But again, we'll cut off our capacity expansion in Belvac at some point and then just maximize profitability from there.

And it's already a pretty -- I mean I recall that business being very profitable regardless.

Yes. It's margin accretive to the segment for sure.

Yes. Yes. I mean I remember it being north of 20.

Yes. On the machine side of it, it is. We're doing a lot of turnkey now, where so it's -- you're basically getting engineer revenue when you're not marketing up as much. But then again, if we continue to grow, we're just going to absorb all of that fixed cost build-out that we did in '19 probably at the second half of this year. So yes, I mean '20 is not a bridge too far for Belvac by any stretch of the imagination.

Right. And I think on that front, if you are doing more turnkey and food and beverage automation is an interesting thing in the long-term market in general, is there an opportunity to kind of like, I don't know, buy in smaller machines that may go -- may be adjacent to where Belvac is, become a little more of a solutions provider on that front, like what -- kind of trying to do?

We haven't gone and taken a look at conveyance yet. We have bought decorators. So if you think about Belvac's business, it's a forming business of the cylinder, but there's equipment on both sides of that forming line. So we've gone post kind of traditional Belvac and bought into decorating. You could go pre-entering and look at washing systems and a variety of other equipment and then a big expense in these build-outs as conveyance, which we've started to explore into. But yes, I mean, to the extent -- but there's one integrated supplier into that space, and it's owned by a can company today. So is there a space for independent turnkey solution for the balance of the industry? Sure, there is.

Does this belong -- does that business belong in a segment with product ID to better kind of highlight what it is?

No. I mean we do a lot of work with our printing guys doing the serial numbers on the cans and everything else, so no. I mean, look...

I don't mean it operate together. I think it gets buried a little bit in Refrigeration & Food Equipment. I mean it's more of an automation at play.

Yes. I understand. But...

Display case type of business?

I understand. I think that, that will resolve itself over time. I know exactly what you're asking, and I think that we've got a solution for that. We just need time for it.

Like I think one of the problems you guys have with investors is that with -- especially with kind of the lack of work that's being done out there, it's hard to kind of like thematically figure out like what this portfolio wants to be in 3 to 5 years. And just as Dover has always been, it's been a collection of like really like good niche, high-margin, decent growth businesses. And when something gets thrown into the refrigeration bucket, all of a sudden, it becomes a display case, right? And something like this is like a very interesting long-term automation asset that would be certainly a thematic on which you could build, which people are kind of wanting you guys to do, just my two cents.

Yes. I don't disagree. I think the accountants around here would have a heart attack. We just went from 3 to 5 segments. And then if I walk out of here and say, guess what, we're going to 7...

I think you just stick it with that.

Look, you know what, I think that your point is absolutely well-taken. It's one of the biggest struggles we have around here with investors that don't spend a lot of time with the story of understanding the portfolio. I think that we've got a longer-term view in terms of regrouping that we could contemplate. I just don't want to be doing it every year because then the comparables become hard and everybody just throws their hands up in the air.

Well, if you do it every year, maybe you can get a 50 multiple. I mean that's kind of what's happening these days.

You know what, I think that if we've got just a realistic expectation of outside of the forecast year growth rate from anybody, we'd be happy. Because when we take a look at Dover, it's here comes to forecast, all right, they got a reputation being, let's say, so-called conservative, now I'm going to take the top end. But I have no idea what's going to happen in the outer year, so let's slap a 2.5% growth rate on it. I mean that's the -- I think we fixed to a certain extent the story around our ability to grind out incremental margins here. It's now we need to do a much better job on the top line.

Yes. And I think, again, that comes down to the next step of the story, in my view, is you've gained the operating credibility, the balance sheet will get there because you're generating strong free cash. And then the next question is, okay, what do we do with the cash? And I think you would have a green light to go do acquisitions. And if somebody said they're going to go do an acquisition in Refrigeration & Food Equipment, people would generally say, I don't know how fast that grows, it's Walmart, it's whatever; whereas if you said, oh, they have this product ID and machine automation business that they're going to look to add to over time because they have a very nice position there, that is an unbelievably different multiple propositions in my view. Again, just ...

Yes. Look, I agree with you. I think that we've done a bunch of bolt-ons. We spent $300-plus million in a pandemic year. But they're smaller companies, so it's -- it doesn't -- we don't -- we're really not -- it's not necessary to get to pack the story around it. But if we were to do something more material, let's say, $300 million, $400 million in revenue, which we look at all the time, by the way, that would be the catalyst to do a repackaging, right? For that kind of capital deployment, we'd have to go back and say, it's not just a bolt-on into one of these segments, and that's the story. We would come and say, look, here's how it fits together with some amount of specificity. I mean that's really why we did that presentation on the biopharma pump side last year, right? It was to say, everybody looks at this as an industrial pump business. We get the same old questions about what's your exposure to upstream oil and gas year after year. So it's up to us to begin to carve out kind of the stories. We're going to do probably 2 more of them this year under the same vein.

They're great. They're great. Very helpful. Just to wrap up the Food Equipment and Refrigeration side. SWEP, again, some pretty good technology there. I think there is significant exposure to kind of non-res HVAC and a little bit of industrial refrigeration. What's kind of the long-term or intermediate term kind of story there on SWEP?

We did a pretty big -- tried to do a pretty big investment in SWEP, we had on the books in '20. We expanded our production capacity in Sweden, and we got done during the pandemic. We had another one slated that we just couldn't move the people around to do. So I think that the manager of SWEP was on the front foot in terms of how they want to invest from a product point of view. We think that we have a real leadership position in industrial heat pumps, which is providing a significant portion of the growth, so you're talking about the dimensions of this product getting a lot larger than you would. If you follow HVAC and everything else, they tend to be small units so that the individual ticket price is significantly larger. That's where we've expanded production capacity, and we'll continue to do so. Yes, we're going to have a really -- we're going to have a really good year this year in SWEP.

Do you supply all the majors there, like the Tranes, the JCIs, the Carriers?

Yes. You would be very familiar with our customer list, if you saw it, whether it's...

And what's your market share there? I think you guys have a pretty like unique product with a decent market share, right? I mean how fragmented is this market?

It's not overly fragmented, and we really don't give out the market share percentages, but it's not overly fragment. I mean it's a relatively consolidated marketplace.

Yes, that's what I thought. I thought your product has all been pretty unique. And then just one last one on the Food Equipment side. I mean that's probably the most cyclical business you had. Any signs of life there as we reopen?

It's better, but we don't see a material change in profitability this year like we see in refrigeration. We'll grind its way up, we're hoping, for the second half. Quoting activity is getting better. But until we kind of open the schools and open up the sports stadiums and everything else, it will get sequentially better just because it's going to bottom in Q2 but it's not as if it's going to inflect up the way the refrigeration is from what we can see today.

So probably more of kind of a '22 -- late '21, '22 late cycle type of business?

Yes.

Okay. On imaging and ID -- actually, one more on that, one margin-wise. Any concerns around inflation and raw material pressures? And are you able to kind of pass those through?

On SWEP, generally speaking, there's in the supply contracts just because of the nature of the business there, raw material cost inflator's built in.

Yes. For the whole segment, just in general?

Yes. Well, look, we're going to find out whether who's got pricing power and who's going to follow in refrigeration. We've put out a pretty robust price increase. Hopefully, the rest of the industry comes along. And if you're not going to do it now, you're never going to get it, right? Supply -- demand is outstripping supply. And everybody is familiar with the narrative that raw mats are going up on sheet metal, which is a piece in there.

And your assumption for the year is neutral on price cost, just remind us what that is? Or is it a headwind?

Yes, neutral, but I think that we've got everything in our arsenal that says it should be better than neutral.

Got it. Got it. So your good revenues that you're thinking about today, raw materials are not a reason for you not to convert reasonably well on those...

I mean we'll see. I mean right now -- I'll go back to my earlier comments in terms of margin profile that we see. It looks good, and that is because the transitory cost not coming back fully. And the fact that raw materials and pricings are probably working their way to the system, right? You're not going to see the raw material inflation until it starts coming out in inventory to a certain extent. And there is always a lag time between the price increases and then realization and then there's this issue of how much of your backlog is trying to get in front of what everybody in the industry thinks the dynamic is going to be. We'll take it any way we can get it because at the end of the day, if I have to give up 1% of price but I've got a massive backlog that I can manage, I can make up that one, right, just out of raw productivity and fixed cost absorption and being able to plan production better. So there's a lot of trade-offs involved right now between net price increases and what we believe is the trajectory for raw material and labor costs. We should be positive at the end of the year, but we'd have to take it quarter-by-quarter.

Right. Makes sense. What are you seeing in imaging and identification, maybe between digital printing and Markem-Imaje?

Markem-Imaje had a really good year last year. Unfortunately, when you look at it from a segment point of view, because the textiles -- the digital textile printing had such a tough year, it unfortunately did not highlight all the good work from a margin point of view that Markem-Imaje did. They're going to do well, right? I mean they're exposed to consumer goods production. The economy is coming back, so the mix is really good because consumables is quite high. I think that this is the year we're going to be making some tangible progress on -- we bought a company that does laser printer -- some laser technology. That this is the year that we're really going to get out there, and I think that we can win some share in the marketplace. And we did an acquisition into track-and-trace technology. That is going to start to get some traction this year also. So the core franchise is what it is, which is a kind of mid-single-digit grower between demand and some -- and a healthy mix. Our job in Markem-Imaje to invest in kind of inorganic adjacencies, which we did, which is part of the $300 million of inorganic last year. On the digital printing side, it's the activity, at least from a quoting point of view, is getting a lot better. The amount of consumables on the ink side is getting better. But it's not -- I wouldn't call it robust. I think year-over-year, we'll do better in digital printing, but it will be levered towards the second half of the year.

Right, right. So still a little bit of recovery tailwind there in '22 for digital.

Yes. Look, I mean I think the way that we've set up our view this year is -- in that particular segment, we think that Markem-Imaje is going to have another good year. The comps are going to get better for textile printing, but kind of like full year expectation run rate for textile printing is '22.

Right. Pumps & Process, you mentioned some of the attractive growth on the bio side -- biopharma side, health care side. What's going on in the rest of the business there? How do we think about kind of growth there over the medium term? And then what is the margin entitlement for this segment longer term?

I don't know. I mean I look at the -- I don't know yet. If you look at the margin expansion between '19 and '20 even in a pandemic year, it was robust. I will tell you that the lion's share of that is based on mix. A large proportion of that is based on biopharma, which is very accretive to margins and, to a certain extent, on Maag that had -- that entered '20 with a robust project pipeline. So in the combination of those 2 pieces, they were able to offset the demand decline that we saw in the Precision Components business, which is basically exposed to compressors at the end of the day, which had a difficult year. I think management did great protecting the margins, but there were a -- from an absolute profit point of view, it had a tough year. And then in the fourth quarter, the industrial pump side started to return. We've seen that into Q1. So having said all that, if the mix trajectory continues, then we would expect to see margin expansion in '21 over '20. But if for whatever reason compression components was to take off in the second half, it would actually be dilutive to that margin trajectory, but it doesn't matter because the absolute profit is going to go up. So trying to manage the portfolio to a target margin, but based on what we can see so far, despite a significant expansion of margins between '19 and '20, we think we have some room to go here.

Got it. Okay. So kind of normal volume on -- like volume leverage there?

Yes. I mean if you think about the incremental margin targets that we put out, they're at the upper end of the range.

Got it. Okay. That makes sense. Engineered products is still kind of an interesting collection of -- it's kind of a diversified within the diversified. What do we make of this one longer term? How do we characterize this one longer term strategically?

Yes. Look, I mean, look, the 2 large pieces in there are the Environmental Solutions Group, which I believe does not -- from a summer parts point of view, does not get its due. There are very few comps, and the comps that are out there are large capital goods suppliers. I would tell you that the margin profile of the body-building side, coupled with the software services, is better. So I think I see a variety of sum of parts analysis there. So I think that, that asset itself is undervalued. We believe that that's a growth business. Refuse, I mean, grows every year. We've got very good relations with the bigger private operators out there, which we believe that are going to be consolidators over time, which we think is also good for us. It's actually a market that, from a structure point of view, there's not a lot of competition. So -- and we're a leader, so it's just managing that over time. And the other piece is vehicle services group. I think that we've got a relative new management team in there. I think they've done a real good job in terms of margin expansion. I think that there is a real opportunity in terms of fixed cost reduction through footprint consolidation which will be kicking off in the second half of this year, so we're making a pretty material investment in our main North American production site this year, kind of to do sort of what we did with refrigeration in terms of changing the profit profile. And once we've got that under our belt, I think that we have an opportunity to do some footprint consolidation there, which would be helpful to the margins. On top of that, I think that management is doing a good job of moving into kind of growing areas within -- in the segments of getting into ADAS. So think about when you crash your Tesla the next time, all those sensors have to be recalibrated, which is a new and growing portion of the business. And I think that our guys have done a good job of getting in the front foot there. So it's just not lifts and tire changers. It's -- we think that we've got some growth avenues in there. And I would expect that particular business to have a good year this year, both top line and margin.

And entitlements on the margin, is that, again, kind of like just leverage on volume?

Yes.

Yes. Okay. Got it.

Now there's some mix in there, but it's most -- this particular year, it's going to be a leverage on volume.

Will you add to this? Will you look to add to this segment with acquisitions? Or are you more likely to prune?

I think that we would add, but I don't think -- I think that we would not add in the traditional equipment side. I think that there's some really interesting portions of collision around data that can be captured. And I know everybody says data, but there are some -- just think about what you do with ADAS and insurance companies and a variety of other things in terms of the data. We are on the shop floor, and then we think that we've got some interesting opportunities for data capture there in either monetizing that into a reoccurring revenue stream or at least basically solidifying our position where we have some pricing power on the traditional equipment side.

Right. And then lastly, I waited to the last 2 minutes to ask about EMV. On the retail fueling side, what's the latest update on that front?

Well, I think that when we did our best attempt to stop this notion of the black hole that is traditional combustion sucking up every asset in its space around it with our presentation in November, look, we said that we were going to -- that it was a $50 million headwind for '21, so let's start there. Well, we completed an acquisition on December 29 around carwash that basically replaces all of that headwind from a top line point of view. The demand for EMV components is -- remains the same, and we saw in the second half of this year going into this year. So whether we want to make an argument that it opens up an issue in '22, I don't think that it does nor is it insurmountable. What's more interesting to us is the return of the below ground demand, which is really the portion of the portfolio that's suffered. I mean if you look, we expanded margins in that business last year despite the most profitable piece of that business had a really tough year. OPW, because of access rights and a variety of other things, really had a tough year, right? So when OPW starts to come back and it is, that is accretive to DFS segment margins.

So that's not the black hole kind of people think of it as?

No. No. Look, we think that we've got a product portfolio that is a winner. We think that we've got margin opportunity. It's less than 40% of our business. It's gas station fueling pumps. We would expect to bring that portion of the business down over time to, let's say, a manageable 25% through getting into ancillary services around it. And one of the bigger acquisitions we did at the end of the year was on, let's just call it, POS for carwash for lack of a better definition for it, which we think is a very interesting -- and this notion of having an ecosystem at a retail operation, that's part and parcel to plugging carwash into that ecosystem. And we think it's a growth area, and we think it's margin-accretive.

Makes a lot of sense. I think we're out of time. I appreciate the in-depth business discussion. Always enjoy it. And best of luck over the course of the final weeks of the first quarter, and we will talk in April.

Thanks, Steve. Good to see you.

Yes, good to see you, too. Thanks.