Dover Corporation (DOV) Earnings Call Transcript & Summary

Thanks, everybody. Up next is Dover. We have CFO, at the front, Brad Cerepak; and CEO, Rich Tobin. These guys last week did a site visit in a 65-slide investor day. So all that stuff's online, and we're going to jump right into the Q&A. So Rich, thanks for joining us here. Appreciate it.

Great to be here, Steve.

Let's just start with what you're seeing broadly quarter-to-date as far as the macro is concerned, with a follow-up on orders on that.

Sure. It's pretty much as we described it at the end of January. We thought that the year was going to start off a little bit slow just because there were so many capital projects that were hung up from 2022. I mean we talk to our clients, the amount of CapEx to be deployed in 2023 is actually a robust amount, so the intent is there. But I will also tell you anecdotally, when we talk to our clients that most, if not all of their projects, were late or over budget just because of labor availability and inflation on inputs. So you've got this situation right now where everybody is in a position of trying to complete what was in process of '22. I think that there's some overall caution because of the macro. So everybody is playing the net working capital game a little bit on the inventory side. But having said that, the first quarter is tracking kind of the way that we described it at the end of January. So kind of that kind of scenario. Up until yesterday, like I said, capital plans were still robust for the year, and we'll see how that plays out. But right now, we don't see any indicators that say that that's not going to happen the way that we've accommodated in our full year forecast.

When it comes to orders, how do you expect those trends to play out as we go through over the course of the year? You've mentioned the backlog getting back to a normal place. What does that imply here? What would be on track from an orders perspective organic year-over-year in the first quarter? And then how does that play through when you think about the comps for the rest of the year?

Yes. I mean we spent the last 2 years talking about backlog and orders, and I don't want to revisit those conversations. But by and large, we were saying that backlogs were inflated because of supply chain constraints in a variety of the reasons coming out of the pandemic, and that we would expect as logistics constraints and supply chains normalize, that backlogs would deflate. So you would have orders to come down first, which we saw in the back half of last year, then you see backlog come down. And our expectation is backlog will slowly come down, but then orders will inflect back up and will go higher than one in terms of book-to-bill.

And are you seeing that here in the first quarter? I think your fourth quarter comp was pretty tough, down solidly kind of double digits. If the first quarter plays out in line with what you're seeing so far, is that orders comp worse or better than...

No. I think the optics of the first quarter should be fine for those of you that pick out on whether it's book-to-bill or backlog or whatever the -- we give out all 3, and I think that puts us in the minority. But yes, it's -- we're beginning to see orders inflect up while backlog is down but not severely down.

Right. So the order comps should get better...

Yes.

As you go through the year from the fourth quarter. The fourth quarter will be the bottom in the orders comp is what you're saying.

That's the way we would expect it to proceed for the balance of the year. Yes.

Okay. Got it. I know it's just optics, but like...

Yes. No, I know.

That's what we do. The big degree of what we do is optics.

That's why I'm here to clarify it. Okay.

Thanks for that. I had to kind of pull it out of you, but I appreciate that. Sticking with kind of the growth algorithm, 4% to 6%, I think, is -- people view is relatively strong. What is kind of the price and volume difference there? And how confident are you in the -- and how smooth that can be over the next couple of years?

Okay. In general normal inflationary times, we usually do 1% to 2% of price. So clearly, we're coming out of a cycle where it was a lot more robust for the reasons everybody understand. So if we're modeling in a relatively benign inflationary environment for the '23 to '25 period and one would expect that out of that growth, 1% or 2% would be priced, the balance of it would be a combination of volume and mix. Our track record speaks for ourselves. We just averaged 5% CAGR over the previous 5 years, and that's during a period where we were running into headwinds of refrigeration at the early portion of that time period being negative the first couple of years, and we ran into the roll-off of EMV. And then despite the handwringing about individual pieces of the portfolio, the total portfolio kind of cruised through. I would argue that the portfolio is better than it was over the past 5 years because of all the changes we've made to it and the investments that we've made. So clearly, what we're modeling in is what we've just done over the previous 5 years, so we've got a track record of delivering it. And I would argue that our portfolio is better and probably -- has probably got exposures to kind of growth vectors that we did not have earlier in the cycle.

I think people are comfortable with a couple of the assets, whether it's -- obviously, the product ID business is pretty easy to pitch is world-class. The biopharma side of pumps and process, even the non-biopharma side of pumps and process, I think people don't quite appreciate how good of a business that is as well. I think on the retail fueling side, perhaps some of the food equipment stuff, there's not as much visibility into why those things should grow at above market rates. Maybe on food equipment, talk about the 2 different drivers of the refrigeration side, what's driving growth there and how sustainable that is? And then the can equipment, the Belvac -- the Belvac business.

Just to be clear, we sold our food equipment business. So it's...

Sorry, the Climate & Sustainability, technology, software, whatever you want to call it that business.

Look, I don't want to keep repeating myself about this presentation that we made last week, but the refrigeration business that gets a lot of attention, rightfully so, because of its dilutive nature on the portfolio, we've actually brought up the margins of that particular business to the target margins that we laid out back in '19. So from an EBITDA perspective, in total, it is a funding engine for the rest of our portfolio that we deploy capital to, number one. Everybody understands that business as being the refrigeration case. Everybody goes to the supermarket. I get it, but that is not the portion of the business that's actually growing. The portion of the business is actually growing is the CO2 systems business, where we're the co-leader in Europe. So we've got a significantly large installed base, and we're bringing that technology and IP to the United States, where presently it's being driven by legislation. It started in the state of California on new builds for supermarkets have to use CO2 technology. It's gone to Washington. We expect it to go to Massachusetts because it's going to look like if I can compare it to something, it's like CARB with automotive, right? It starts in California, then it finds its way under a variety of different regimes. We think that this has got significant potential such so that we are retrofitting a plant in Conyers, Georgia to accommodate the growth that we have there. On the can side of the business, everybody understands ESG and the recycle amount of aluminum versus PET plastic. PET plastic is a problem for big bottlers that -- it's probably going to take years to resolve, but the growth of kind of the capacity expansion that you see in a lot of like energy drinks and some of those vodka coolers and that my kids drink all the time. As you noticed, those are all in aluminum cans. They're not being put in plastic. So there's a growth there. Now that business likely does not have a every year equipment trajectory because it's going to be cyclical. I mean we don't argue that. But the way that business works is when there is capacity buildouts in aluminum cans, you win market share, you've got the installed base and then you sell spare parts into that installed base. And the spare parts business is highly accretive to the margin of the equipment itself. So we're probably during this next 3-year cycle going to make that transition between whole goods into a higher proportion of spare parts. Right now, I think that we're 80-20, so 80% capital equipment and 20% parts. We would expect over the next 3 years, depending on the cycle, get 60-40, maybe 50-50. So in that scenario, you could see revenue come down but margins inflect up meaningfully.

And on that business, is it a $350-ish million business for you guys?

About that.

And the backlog that you have there, do you have visibility through this year. So next year is kind of a meaningful decline, but the margins don't go down as much. I mean how is the...

I don't -- I didn't say a meaningful decline. I don't know. We have a backlog that gives us visibility for this year. By midyear this year, we'll have an idea what's setting up for next year. All I'm saying is that we're cognizant of the fact that it is tied to CapEx and it is a little bit cyclical, and it's tied to the profitability of the can makers at the end of the day. The third business that we have in there is heat exchangers through a company called SWEP. We're 1 of really 3 independent producers worldwide of brazed plate heat exchanger technology. So we're a co-leader in Europe. We've done very well over the past 24 months on the adoption of heat pump technology, which is legislatively driven in Europe. We believe that, that technology is going to be adopted worldwide. And as such, we are deploying $70 million of capital to double capacity in that business, which will progressively come online. I think we'll probably finish up in mid-2024 by getting the capacity installed.

And that business is roughly the same size as Belvac?

Roughly.

So you could see a scenario over the next couple of years where Belvac goes down, the mix changes, so your -- the margin looks better. SWEP is going to grow from my perspective. That's one of the best growth stories you guys have the heat exchanger side. And then the CO2 carries the load. So maybe this one is over the next couple of years at the low end of the 4% to 6%, but much better incrementals?

No, I think you're overcooking this Belvac story that no one ever cared about Belvac and still -- until we started making money at it. And now we're going to concoct this notion that Belvac is going to go down, and we're not going to be able to mop it up. The heat exchanger business and the CO2 business are going to outgrow the decline in Belvac and it's margin accretive.

My associate, I and Pat cared a lot about Belvac like 10 years ago, you can ask your predecessor.

I'm speaking to the group, not to you specifically, Steve, just for clarity's sake.

I've always cared about Belvac. Ticking down the list of the other -- I like that chart you guys put out with the exposure to components software and services and then the capital equipment side. And I think the capital equipment side is rightfully so in this environment, the focus. So I think just ticking down that list, talk a little bit about Maag and how we should view that business? Because, again, I'm trying to get at the 4 to 6 is the debate that's come away from your Investor Day. And I think that capital equipment piece is where people get most focused on poking holes in the 4 to 6. So what about Maag?

Maag is 50% capital equipment and 50% spare parts as we sit here today. So back to this issue about the installed base and then harvesting the installed base. We are 1 of 2 to 3, if we're kind of market participants that makes downstream forming and cutting and drying technology for polymer -- for plastics in total, which is a growth industry. So if you go take a look at CapEx that's deployed into expanding capacity and plastic production, look, China has gone through a pretty nice cycle. The Mid East is about to go on to a cycle to supply India. Like I said, it's -- we're one of a couple players in that marketplace. We don't see a change in terms of the dynamic. We think we've got the most wholesome technology offering. We've actually been a buyer in this space consistently over the past 4 or 6 years or so. So we think it's a defensible growth platform just on capacity expansion alone and the fact that there's a very lucrative stream of consumable wear parts on the installed base.

And that business is a few hundred million bucks?

More than that.

More than that $500 million?

Sort of.

Okay, but we'll go with $400 million. But this is all -- $450 million. So this is one -- this is...

You're getting hand signals from the floor.

So this is one, again, that you've seen it's a piece of capital equipment, but it seems like you've got some visibility on some secular growth drivers here in the next few years.

We just acquired a company in December of last year. So if we thought that it was cycling down in a meaningful way, we would have not done it or we would have bought it on the cheap. And I think we paid a fair price for it at the end of the day, but it's something that we believe that we'll continue to invest behind because there are -- there's a whole recycling play where I would -- I think -- I don't want to get the number wrong, it's probably 15% of our revenue right now in recycling. We think that there is ample opportunity for a variety of reasons. We own the space to get bigger in there. We've actually been looking quite actively in terms of expanding our offering away from the production side and into the recycling side.

Right. And I think the commonality here is really the -- these are pretty high-quality, high-share niche -- businesses in niche markets, like this is a differentiated technology versus that's specialized versus something that's more commoditized.

Yes. It's highly engineered and highly concentrated.

Right. So -- and then lastly, just on the Environmental Services group, the garbage trucks. You talked about some drivers there. I mean, how do we view this cycle for the next few years than what you're doing to blunt the impact of whatever may come there?

Sure. Our business has actually been shrinking since 2019 in the truck bodies. And the reason for that is we couldn't -- the industry couldn't get chassis because the big truck OEMs, because of the chip issues that they had diverted their chip production to Class 8 over the road because that's where all the margin is in OEM trucks. I know some troubling experience. So we've been at the short end of the tail on kind of specialty truck production. So we've actually been at a deficit. So everybody looks at that business says, "Well, okay, you're just -- you build the truck body that goes on the back of the truck," and that's what we do. We don't actually buy or sell the truck that our customer does, right? They deliver the truck to us and then we body-build it, and it goes out the door. So the fleet has aged quite a bit over the last 3 or 4 years. We've -- so that part of it has been negative volume. So we would expect there should be a refurbishment, if you believe that the chips are going to become more available. And then if you look at the way the Class 8 demand is, they're projecting a cycle down now, and that means that the big OEMs will basically divert more of their component capacity to specialty trucks. So we would expect volume over the next couple of years to go back up. We know this because we're a material contributor to spare parts consumption of the vehicles that are out there. And as they age, they consume more spare parts. And at a certain point, they get more expensive in the fleet than having a new truck, right? So new truck, most expensive, then it goes down as you depreciate the new truck, and then it inflects up when they start consuming spare parts in a meaningful way. And that's -- if we look at our own spare parts volume right now, we're on the up cycle now because the fleet is getting quite old. So we would expect and we talk to our customers like Republican Waste Management, they're getting ready to kind of intervene on their fleets themselves. Despite the fact that our bodies have been down, our revenue is actually up, and that is 2 reasons because of e-commerce platforms that we've implemented. Our capture rate on spare parts is quite high or higher than it was back in 2018. And then we've made some acquisitions on the software side that have been very successful in terms of safety and compliance, route mapping on the truck and dynamic billing, meaning I pull up to a container, I can take a picture of it. If it's overflowed, I can bill you for that overflow, which just wasn't -- the OEMs weren't capable of in the past. So we've had -- from an attachment rate point of view, it's been very, very successful.

And then lastly, just on the retail fueling side, how do we think about the profile of that one for the next couple of years now that EMV is moving to the past?

Yes. I mean there's a couple of pieces here. It's not retail fueling anymore. And I think that we were not trying to play games in terms of what we call the segments. There is a retail fueling piece of that business. We discussed EMV around here forever. We're beyond EMV now. We've harvested all the profits out of EMV. We've redeployed those profits into our investments into clean energy, and we can kind of pivot back to that in a moment. So the core retail fueling base, in total, we are the market leader because we've got a meaningful above ground and below ground position. We've begun -- we've, I'd say, completed the synergy extraction of bringing Wayne and Tokheim together. So we're on one platform now as opposed to running basically 2 different companies with 2 different industrial footprints with 2 of everything, we're down to 1 now. It's taken us 3 years to get that done. So we believe that we can run that retail fueling business very, very efficiently. Nobody is getting in that business. The installed base is global, and it's massive, and it's highly regulatory driven. So we believe that we can extract profits out of it for 15 to 20 years. At the same time, as I said before, we recognize this EMV transition, so we harvested the profits out of the retail fueling business, and we spent $900 million doubling down into our components business. Especially the entry into cryogenic valves through a couple of acquisitions that we're quite pleased about because it's a business that we know how to run and the CapEx that is going into kind of global gas. And when I say gas, to everything from propane to hydrogen. We think that, that infrastructure is going to be the winner in North America at the least, and we're a meaningful player. And again, it's regulatory driven. So we -- what everybody thinks about is ICE exposure and EVs are taken over the world, I think that our total revenue of petroleum dispensing technology is less than 30% of the revenue of that segment, which was not the case back in 2018, not even close.

Right. So I mean, to me, a lot of these capital equipment businesses are -- there is not an imminent sort of cyclical element. I mean they are cyclical, but there's a lot more going on from a secular perspective in these niche markets than I think people appreciate.

True. We could be here all day. I mean, I think -- I would call your attention again to the presentation. If you just sit back and say, well, that's capital goods and the comps were that are x, go look what we did with the garbage truck body business, right? It should, for all intents and purposes, cycle down. And it didn't because it is a niche of a very concentrated customer base, and part of what we're paid for is to find revenue streams that are ancillary to that base of business that you have, not just sit there and say, "Oh, it's cyclical and it's going to go up and down," right? And quite frankly, if that was -- anything in our portfolio that was absolutely cyclical that did not have avenues for profit extraction, we'd sell it.

On the margin side, you guys gave the 25% to 35% incrementals. You kind of spoke to the high end of that range. Maybe talk about the differences between the low and the high and your confidence on that.

I've got...

You delivered the high.

Yes, we delivered the high. We delivered the high. We have to accommodate some macro, right? I don't want to come out in year 1 and "Oh, got you. You missed." So we have to accommodate some of that. Clearly, there is a mix of margin that we have in our portfolio. We don't manage the business by saying, "Oh, you've got to stop growing because it's dilutive." Right? If we're getting good returns out of the business, we're not going to stop the business from growing despite the fact that it's diluted to the consolidated margin at the end of the day. So I've got to accommodate. We're not -- we -- I wish we could forecast our revenues of 18. It's not even 18, different businesses, probably a lot more than that when you think about the subsectors. We're not going to get it right in terms of the growth. So we are clearly targeting the high end of the range. Our portfolio, we just did higher than the higher end of our range. So -- but the reason that there's a range there is because of the macro, accommodating the macro and accommodating we're not going to get it right in terms of which pieces of the portfolio is going to grow or not. Like I'll give you an example. If we have a significant inflection back up in biopharma, then we're not going to have a problem with high end of the range.

And you're seeing on that business, you talked about that business kind of bottoming out here and looking better?

Yes. I mean all the [ bad news ]; we know that the inventory that was in the channel is depleting. As much as we can see, the order rates, we're getting some orders now. We went through a period where our order intake was pretty low because everything came to a little bit of a halt. I mean I'm not going to apologize for the fact that when the demand was there, that we had the capacity first. We won significant market share. And what you have to understand about this business is it's not a commoditized product. It's a spec'd in product. So to the extent that you have it available, you get spec'd in into the system itself. So despite the profit volatility or the -- my favorite term over-earning, it's going to inflect back up at some point. Is it going to go inflect? Is it going to go right back to COVID size? Probably not. But the core business is growing above 20%. So sooner or later, it should get there.

And on the margin front, should most of these gains be reflected in gross margin? Or is there kind of split between SG&A and growth?

It depends on the business, right? So we've been taking restructuring charges in retail fueling that we discussed about because we're now pivoting that business to kind of be more in a profit maximization mode because it's probably not going to grow that much over time, but we think that we can inflect the margins up significantly. So you would expect that we can run it more efficiently on the SG&A side. We did -- a big part of our presentation is what we're doing in terms of back office and the total productivity that we're taking across the portfolio, which should have a positive effect on SG&A. But even if we took a more conservative stance and said that all that work just offset inflation, whether that if it's labor inflation through SG&A, that would be good enough to a certain extent, most of what we concentrate is on gross margin, and that's factory floor productivity and that's our pivot to positive mix.

So mid-40s plus kind of gross margins over the long term, I mean, is that something that you guys could ultimately achieve someday?

Yes, I think we'd have to do some portfolio pruning to get there. But yes, for sure.

On free cash flow. How do we think about a normalized level of working capital as a percentage of sales?

Yes, it's been kind of volatile between COVID and supply chain and flopping back and forth. I mean, we've got a very robust target this year, only because we're going to have to deplete the working capital build that we went through during this run up to seize opportunity and buying, I mean, we were buying all the copper sheet we could get our hands on for the heat exchanger business, just to give you an example. So our target this year is we are going to liquidate a portion of our balance sheet, which is the inventory and bring it down. I think it's -- I think our target is like 16% of revenue, 16%, 17% of revenue. Normal, I think our peak year before that was 13% between margin expansion and continuous improvement and just grinding out working capital from a productivity point of view. We would expect that we can just edge that up over time. So 13% being the floor. So 16%, 17% this year, 13%, 14% being normal, and then we grind up from there.

Got it. On that -- on the margin side of that, just taking a bit of a step back. Can you just remind us of what your price assumption is this year? And then what are you seeing on -- of the inflationary side on the flip side of that?

I don't remember if we disclosed pricing as part of our revenue guidance. It's a piece of it. So I don't want to get sideways here. There is a piece of -- we're price cost positive, I guess, this is the way I can answer that question. That's our assumption for 2023. What we're seeing on input cost, logistics costs are back to acceptable, I guess, is that the way should you describe it? It's come down quite a bit from peak. We don't see a lot going on in terms of energy pricing because that's really what's going to flex it from here. The days of ships being loitering out in L.A., and that's all over. If you look at what's going on at container rates and kind of LTL over the road. It's kind of back in an acceptable range that we can deal with it. Steel pricing is a little bit of an odd one because it's coming back up. I'm not entirely sure whether that's in preparation for this deployment of infrastructure spending or not or if somebody trying to front run something that might have to go on with tariffs. It's not problematic, but we went through -- it was quite high, which everybody priced for, then it came down. And now it's edging up a little bit. We'll see how durable that's going to be. It's not problematic to our forecast at this point.

So it sounds like the inflation side is generally in line, maybe a little bit of opportunity on freight.

Yes. We had to do so much post-COVID at the direct labor side of it that our increases this year relative to '22 are relatively small. I mean, they went up quite a bit for all the reasons we can understand. That was actually baked into our results pretty much last year. So there's not a bunch of inflationary headwind from '22 to '23 on the labor side.

And as far as the inventory and kind of efficiency dynamics, a lot of companies are liquidating inventories, you would think that would be a bit of a headwind on the margin. But then again, as you were kind of managing that whole process of building the inventories, there was all sorts of inefficiency that was going on. I mean is that the right way to think about that trade-off kind of on a year-over-year basis.

I think if you go look at our trailing results, you can see the mismatch between pricing and input costs and the timing of the inventory turn and you can go back and look at our results over the last 6 quarters, where we were saying, "Well, these are high for these reasons, but these are low now, but don't worry because the price is going to catch up." And then you saw like in the capital goods portion of the portfolio year-over-year, we're up 400-plus basis points in margin. And that is that price inventory roll, right? But make no mistake, over a 24-month period, 18-month period, you're neutral to slightly positive price cost. You just -- depending on the amount of inventory and how long the supply chain was, different businesses are either more volatile or less volatile. Where we are today, all of that dynamic is out. The -- but the reason that we called Q1 to be slow is because -- make no mistake, because of the uncertainty of the macro, everybody is being careful in working capital us included. So we need to accommodate that in terms of our own forecast.

Last one on capital deployment. What's kind of next for Dover portfolio-wise? What do you want to be a couple of years from now, 3 years from now? You have some opportunity to deploy, you've said $5.5 billion of capital if all goes according to plan. It's a pretty big percentage of your market cap. If you don't find anything every year, you're buying back stock like you did this year? Or what's kind of the headset on capital deployment?

Well, I mean we go back and look over the past 4 years. We got stopped out on a variety of different very interesting assets because of valuation, right? So if there is any good news of coming out of the free money time is that valuations unfortunately, are corrected. We don't buy public companies, right? So we went through a period where public valuations came down as interest rates went up. I'm not telling you guys something you don't know. But we buy private companies generally and private companies. It's usually a lag effect. We'd like to call it sellers' remorse, right? The salad days of paying 18x EBITDA for medium growth industrial companies are probably over, and we're seeing that now in terms of what's coming to market now in terms of valuation. PE is a little bit on the sidelines right now because a lot of what we compete, the size of the companies that we buy, we compete with PE. And so funding right now to PE is a little bit tight, to say the least. So we'd like to be on the front foot at the end of the day. I think back to the question you asked about growth, it's not the same portfolio. If you looked where we deployed the capital, by and large, where we've deployed capital grows faster than the core portfolio and is at higher margins. So if we continue to do that, that's a good thing. And to the extent that we continue to scale, that gives us optionality to be -- to consider what we'll do with portions of the core portfolio that possibly we can monetize.

Yes. So a portfolio mix shift, higher quality stuff.

That's the intent.

So in a mild recession, 5% revenue decline, low end of the incremental [indiscernible] decremental of 25-ish. Is that kind of the high-level mindset for what you guys would look to do and how you [indiscernible] recession?

Yes. I mean we'll use the same playbook that -- we don't want to get it back out again, but we'll use the same playbook that we used in 2020 where we protected margins. These are smaller industrial companies. There's not a lot of fixed cost there, it's not like running an auto company where revenue goes down by 10% and you go negative fixed cost absorption and the asset is the fan here, right? These are -- the beauty of the business model, I would argue, is because we're not overexposed to any different particular end market and the companies are small and flexible that we can flex up and flex down. No one likes to do it, but we can do it. And I think we pretty much proved it in '20 where we flexed down protected margins and then flexed up and then gain market share. So that would be -- we've got to call the market for a lot of different companies, but I can tell you that it's just a lot easier to do than a big vertically integrated cap goods manufacturer, that's tough. I mean our supply chains are generally short, and our fixed cost in the grand scheme of things are not burdensome.

Any questions out there? None.

[indiscernible]

Question is on the availability of craft labor and which ones are getting impacted by shortages.

Part of the reason that we've been -- one of the reasons we've been deploying a bunch of capital -- I mean [ the list ] versus historically. I think that since I've been here, we've been deploying more capital than Dover -- CapEx than Dover has in the past is that we've upgraded the -- our industrial footprint and the capability of the footprint. And part of doing that, if you modernize that capital equipment, you can run more machines with less labor, which allows you to pay your skilled labor more. And that's been part of the business model that we've been using now for 4 or 5 years. So if you think about some of the companies that we have like precision components, which are heavy machining, a lot of the work we've done there is we've actually increased output and reduced headcount, and that is through capital deployment.

One more here.

You mentioned propane and hydrogen earlier. Could you give us an idea how Dover will participate in any kind of time line?

We're meaningfully participating right now. So we are a material player in the propane space in regulator valves. We are a material player in cryogenic valves for CO2 and vacuum jacketed piping, which is actually a pretty small industry today, but you're basically taking cryogenic technology that's been developed for LNG and CNG like colder gases. We've been doing that portion of it inorganically. And then on the compressor component side, we are a material participant in the conversion of natural gas pipe compressor technology to accommodate CO2 to the extent that we just built a purpose lab out in Houston for the big OEMs to go and test the technology on.

[indiscernible]

We'll invest behind this probably for the next 10 years, but it's not a small portion of our revenue of that particular segment. I mean we spent $900 million in M&A at the end of '21 on it.

Great. Rich, Brad, thanks a lot.