Dover Corporation (DOV) Earnings Call Transcript & Summary

All right. I guess we're kind of successfully moving these things along. But very happy to have Rich Tobin, Chairman, President and CEO of Dover. And I think Brad is here as well, CFO, as well as Jack from Investor Relations. But Rich, thanks for being here. And I guess, do you have a couple of slides or you want to just like jump right into it?

Well, we're a little late, so I'll jump right in. I'll go and skip up until -- let's see, that's used, I guess 2 of the slides. You saw our results for the year and the guidance I can tell you. We'll get into the Q&A that we're tracking. As expected, the disposal of De-Sta-Co that we had announced in the back half of the year should close at the end of Q1. So we expect to have the cash flow there. The other update since we gave at the guidance is we entered into a $500 million accelerated share repurchase a week ago or so or 10 days ago. So that's been completed. So balance sheet is in a really good position. Our growth platforms, you can see from the CAGRs there, and we'll deal with that in the Q&A, are doing quite well. In terms of the performance of the group, we would expect this trajectory to continue on based on the guidance that we have out there and based on the order rates that we see so far. So it's early. It's only the end of February. So we just closed February, but so far, so good. I guess we can go right to Q&A, Steve, rather than me fill a bustering up here.

Great. Thanks. Thanks for that. Spirited introduction. On the orders, I think there's been a lot of focus here. And I know that in the last couple of years, it's been a little bit frustrating because that's all anybody cares about. But you've said that you'll be watching them closely now because the backlog is normalized, and that's going to be a leading indicator. I think they turn pretty quickly within the next quarter, at least. How are things kind of playing out so far through the beginning of March?

Yes. I mean when we gave out the results or the guidance for the year, we basically said we had 1 tough comp year-over-year, which will be Q1 because if you look at the trajectory of earnings in 2023, it was kind of high. And then in the back half of the year that we'd cut production to allow inventory to clear successfully that was reflected on our cash flow. So we said, look, really, what we're looking for is to kind of take away any of this discussion about back-end loading is what does order trajectory look like coming into the year. And as I mentioned in the opening comments so far, so good on the order rates. So we're pretty pleased for what we see, which is a reflection of all the hard work we did to clear channel inventory in the back half of last year.

And when you think about the conversion of those orders, do we -- if you do $100 million of orders this quarter? Are they generally are going to convert into revenue next quarter? I mean, I think for you guys, it's been a pretty quick -- quick turn.

Yes. I mean the longer cycle portion of our portfolio that had built up those enormous backlogs have depleted down and some of those businesses are actually cycling down. So where we're seeing the orders is the more short-cycle portion of the portfolio because we had cleared out a lot of both our OEM clients' and our distribution clients' inventory over time. So yes, I would expect the vast majority of what we take in into Q1 will be shipped in Q2 and the beginning of Q3, more of a normal cadence.

Right. And so you should see this kind of sequential step up pretty nicely from your -- on sales and earnings from 1Q to 2Q? If the orders sustain?

Yes. We should see the trajectory of that, and then we roll against much more favorable comps in the back half.

On a year-over-year basis?

Yes.

Right, right. So maybe just stepping back a bit and talking about these growth platforms. The revenues are starting to get somewhat meaningful. Maybe just walk through why you're excited about each of these.

I think that for the most part, they're all organic investments that we've made over time on both. I mean I can go through one by one. CO2 refrigeration systems, which is predominantly a European product, is now being mandated in California and increasingly in other states for new builds on retail refrigeration. So we did a lot of work over the past really 24 months of platforming that product for North American use. So we are the clear market share leader right now. We've retrofitted an entire factory down in Georgia to accommodate the production, so we're ready to go. So you can see on the CAGR there. I think that, that could be understated, quite frankly, as we move throughout the year. On the thermal connector side, that everybody -- our biopharma business, which has gotten a lot of discussion for obvious reasons, is actually a connector business at the end of the day. So while we've been done quite well in terms of market share on the biopharma side, we're spending a lot of R&D on thermal connectors that get sold into liquid cooling applications. We think that we've got a very interesting product in terms of winning the spec for all of this build infrastructure build-out. So we'll see how that goes, but I would -- we're taking orders now for that product, but I expect that to accelerate over the balance of the year. I know you're going to ask how big is the opportunity? It's hard to tell. So I think we'll update it quarter-over-quarter in terms of what the TAM is because right now, the TAM is a bit fluid. We're seeing some very aggressive numbers. We'll see how that goes as we move through the year. And on the heat exchange despite the...

Could this one be similar to what happened in kind of the biopharma on the COVID side? Or is that -- that's just a unique situation where it was urgent within a year...

Yes, I think that would be a bit aggressive. But in terms of what the TAM possibly is. At the end of the day, we'd rather see a steady climb into it than what we saw in biopharma. I think that we did a good job of having the capacity available and winning market share during the COVID period, but we'd prefer to see something kind of move up in a more orderly fashion in that regard, but it's hard to say.

And who exactly like, are you -- I don't mean names, but like what part of the chain are you actually supplying with these products? Like who are you which OEM, if you will, or not even?

Yes. We can't say, sorry. But I will tell you that we -- it's very much like the biopharma business where the spec is one by the chip manufacturer despite the fact that we'll sell the actual product to the systems builder.

Right. So the chip manufacturer says, "This is the one you're going to use with our chip, go supply him effectively." And then you guys contract with that guy.

That's correct. Same thing with biopharma, right? So the end user says, this is my design, the system builder, we actually sell the product.

Right, you sell actually to a Danaher in that scenario?

We do. Yes.

Yes, for the biopharma stuff.

Uh-hmm.

Okay. Who are the -- are these liquid cooling guys, are these brands that we know of at this stage? Or are they still like these companies are, Train acquired somebody, Vertiv acquired an engineer like it's -- these are really small companies. Are you -- are those the guys you're talking to?

No. We were talking to the actual chip manufacturer themselves.

Okay. But the guys who are making the liquid cooling.

Well, those are system integrators, okay? And so they're basically taking a system spec and then building out the facility itself.

Got it. Got it. Okay.

So we ultimately recognize revenue by selling to them, but on the specification that's determined by the chip builder.

Looking forward to this conversation every quarter for the next.

I'd like to tell you more, but it...

On a zero revenue business.

Well, it's not zero, but anyway. Go ahead. And on heat exchangers...

How big is it? Is it 10 yet?

It's more than 10.

Is it 100?

I think that's enough for now.

Okay. Sorry, North America heat exchangers.

Yes. Look, it's getting a lot of press right now. Look, there's some headwinds on just kind of capacity that's been built into the system and some delays in implementation. I'll leave it up to the HVAC guys to kind of -- but we are 1 of 3 suppliers of a key component into the system. We've got some headwinds right now, but we expect year-over-year, the business to be up.

You can be positive on this AI build.Like we can be positive about it. So...

We can be very positive about it.

So okay to be positive on this.

Yes.

All right. North American heat exchangers.

Well, like I said, we think that the product somewhat like CO2 will be increasingly adapted in North America. We've got standard capacity. It's built. I think it's the fastest-growing portion from a regional point of view on that. And that, again, is not just home hydraulic heat systems that is also data centers, again, and a lot of bigger applications also.

And so maybe this is a nice pivot into the European heat exchanger market, where things were booming. You guys added a bunch of capacity, I mean, tremendous engineering and product line, for sure, very differentiated. Nice duopoly, if you will. What are you guys seeing in the markets there because the OEMs have been negative near term, but pretty positive on their second halves. What are you guys seeing in European heat pump related?

It's been negative since mid-September of last year. So a lot of inventory buildup in the system and then you had some delays in the subsidy legislation throughout Europe, and this is a subsidized product. And without that subsidy, it tends to make demand kind of volatile. So right now, you've got a lot of flushing of inventory out of the system, which we think is transitory. We're not really seeing the orders yet. We're hearing the same thing that we're hearing everybody say right now that in the back half, it bounces up, but we're in the middle of trying to basically get the supply chain going again. Everybody can't wait till the second half of the year and start placing orders. So we're going to really have a good determination when we get into Q2 because we don't start ordering in Q2, you're not going to get them in Q3. So early days right now. It's more of having long discussions about trying to manage lead times and price and demand going into '24. But overall, it's a growing product line. Once we get on the other side of it, I think that we should be up year-over-year if it is -- if the back half is what everybody says it's going to be.

And you'll -- as a supplier with these lead times, you'll kind of know whether they have their plan by the middle of the second quarter, you'd have to start to see some orders, start getting orders, and they're obviously not seeing it on their end for the second half.

Yes. That's -- I mean, our lead times are 12 to 16 weeks. So there's a whole back up there. If you go -- if you want to produce in the second half, you got to start placing the orders in Q2.

And then how big is that particular business, the SWEP and then Europe within that? I think Europe is like 40% of that business.

Well, I mean, brave play heat exchangers that go into heat pumps is about 30% of the total business. And the total business is $400 million.

Yes. Okay. Just wanted to make sure we size that because you guys have a lot of different businesses, obviously. So okay. And then with -- we'll just kind of finish up on the DCST business. The other one that's a headwind this year is the can-making Belvac. What are you guys seeing at Belvac and any visibility on the bottom?

I think we're at the bottom now, right? We bled off an enormous backlog where we had over 2 years of production in our backlog. So can-making is a cyclical business, a bunch of capacity comes online. Everybody waits to fill up the capacity, then we basically cut our cost structure down, turn it into a pretty lucrative spare parts business for a while. We won't really -- I would say we're at bottom now, getting an idea of what the trajectory is going into '25. We'll start quoting probably mid this year to get an idea where we are, but it's going to year-over-year. It will be down this year, but we've known this for a couple of years now because of the fact that we've had basically all those orders in our backlog for years.

And then lastly, just on refrigeration. CapEx looks like it's stable, growing a little bit in refrigeration outside of the CO2 stuff, like in the more basic business. What's happening there at the display case business?

Well, a display case business, we've sized it. So we won't chase a lot of growth there. We're running that for margin. I think our Q4 margins were a record margin in the case business. So we will continue to run that for profit margin dollars as opposed to chasing volume there and then CO2 will be the driver of the growth. We would expect that we'd like over time to see the CO2 business to be of equal size of the retail refrigeration case business over time.

And so a lot of moving parts here. Some are down, some are pretty steady. There's a business that's up, the CO2 business growing nicely. Is this a margin expander this year you'd expect? Is there a negative mix impact from what's going on here? Price/costs margin...

Well, I mean, I think that if we do everything right here that margins will continue in consolidation, margins will continue to expand this year. I mean without getting, if you take a look at the slide, everybody gets hung up in terms of the cyclicality and anti-cyclicality of the business -- of the portfolio over time. We're used to this at the end of the day, where there's an accordion effect of the total portfolio. We know how to manage up when demand is high, and we know how to manage the cost structure down -- when it's coming down. Overall, we've been mixing up over time. So despite having our most lucrative product segment being down materially in biopharma over the last 2 years, our margins come up. So if anybody is overly concerned about Belvac dragging our margins down, I think that, that is -- it's just not big enough to materially move our margins. And if you look at what we've done on the M&A side, both on disposal and coming in, those have been accretive to margins. And the bigger acquisition that we did in Q4 of last year is significantly accretive to consolidated margins. So we've got plenty of tools in the tool chest to kind of manage some of the cyclicality of the longer cycle businesses with the reramp on the short-cycle side.

And so when you think about the 25% margin that you've talked about longer term for the portfolio, where does this segment fit in that construct?

Yes, it becomes -- while it's dilutive right now only because of the size of the refrigeration business. But if the trajectory of CO2 business is what we believe it is, that becomes accretive to the segment over time. So it's a mix up.

So can that be close? Or I mean, you're probably not...

We will make more money in CO2 than we do in Belvac, for example.

You do.

We will.

You will. Okay. Got it. Okay. On the Engineered Product side, waste business, super strong right now. Is that sustainable into next year?

I think so. I mean we went -- what is not -- if you went to our Investor Day, you would have seen the slide that we did on it, but the amount of truck bodies that we've been selling has not increased since 2018. And that was because if you recall during the whole automotive manufacturers couldn't get chips. Well, the automotive manufacturers largely are the truck builders also and whatever available chips were going to trucks, they were going to more lucrative pickup trucks and the like. So we went through a period where we were in deficit of being able to source the trucks to build out the platforms. It was really great for our spare parts business over time because the fleet had aged significantly. But the fact of the matter is that chip issue was behind the truck manufacturers. Class 8 truck demand is coming -- is moderating somewhat. So the last person to get the supplies is kind of like the work truck segment, and that's what provides the truck bodies to our business. So there's a lot of pent-up demand in terms of refurbishing the fleet. So I would say that once we ramp up, we're going to run at capacity this year. And once we ramp up the capacity, we'd expect to stay at that level through 2025.

And then as far as the other parts of the portfolio, I think there was a little bit of pressure in vehicle service in China and Europe. I mean anything else moving around in that business that's notable within Engineered?

No, not really. I mean on the vehicle service side, pretty heavily levered towards Europe. So it's another year of waiting on Europe to kind of get its feet on the ground, but I don't think it's not going to get any worse. But we would expect to get a little bit better because of the fact that we had some issues with an implementation of IT system last year that won't repeat, knock wood, this year. The balance of the smaller business on the military side, which should have a really good year. So overall, I think if you look at the margin contribution in Q4 of DEP, we would expect that to continue through 2024.

And then the margins here. I mean you had the ERP issue last year, which hit you -- it's going to be an easier comp. There were some inventory dynamics about margins in the fourth quarter. Is it this one when you think about the '25, where do we stand longer term? Where do you see this one kind of coming in on that?

I think that Q4 subject to kind of intra-year seasonality is kind of the margin target we're looking at. So I wouldn't expect that in Q1 because we're ramping in production. But once we ramp up and get up there, we're over-absorbing on the fixed cost side. So I'd expect Q2 and Q3 to kind of look like Q4 did, which was I'd have to go back in my memory. It was -- historically, I think it may have been a high for that particular segment.

Right. And then longer term, this is one that can be solidly within the range?

Yes. Yes, if I run it correctly, sure.

Okay.

Well, I mean, can we get the entire segment to '25 EBITDA? We can grind up there, and we are, but it would take some time.

Okay. And then Clean Energy, it seems like you've gone through a lot there with EMV and you've done some portfolio management. That one seems to be on a pretty good track right now, maybe some inventory movements. Really a lot of margin expansion?

Yes. I mean if you go look at the back half margins last year, they were kind of disappointing because we basically cut production to let inventory clear. That is cleared. And the good news is the order rates in that particular business are moving up, which is great because now we get the production performance. And the revenue, we've been doing a lot of cost take out there, and we'll continue to do that through this year from a footprint point of view. Now that we're on the other side of EMV, we need to get this segment to 25% EBITDA margins. We think we've got a path to get it there, progressively.

And then what do you -- how do you think about that business longer term, because it obviously...

Well, EVs are not taking over the world. I guess they were 2 or 3 years ago, but I think that the installed base out there is super large. It is highly regulated business. You just can't get into it. And because everybody thinks EVs are taking over the world, nobody is getting into it. So I think from a market structure point of view, it's very attractive. Is it going to be the -- when we're talking about retail fueling now, is it going to be the growthiest portion of the portfolio? Probably not. But in terms of its margin contribution, we think it's going to be highly attractive from a cash flow point of view.

And then on DII, that business has grown a little bit slower than I thought it would in the last couple of years. I guess that's consumer, food and beverage, CapEx, stuff like that. What's the outlook there? I know there's a ton of consumables, it's a great business.

It's a great business. Over time, it grows 1% to 4%. It's super high margin, very low working capital. What's good news now is we've got a direct public traded comp, so we can take some of the mystery surrounding the entire space away. Yes. I mean, look, at the end of the day, I would not -- it's global. So it's got a lot of FX running through it, which kind of makes the revenue jump around a little bit. So I would not get excited about revenue trajectory quarter-by-quarter just because of the fact that FX alone kind of makes it trundle around. But if you look at return on invested capital over the last 5, 6, 7 years, it's been phenomenal.

And then lastly, just on the -- sorry, stepping back on the Textile business. What's going on there? And is that business a keeper longer term? I mean how do we...

Well, it's no longer really hurting the portfolio from a growth and/or a margin perspective, but Textile has just not recovered since COVID in terms of fast fashion and the industrialization of textile business. It's just gone back to its old business model. We'll see over time what happens there, but it just doesn't move the needle anymore, quite frankly.

And then just lastly, on the Pumps business. Just give us an update on what you are seeing on the biopharma side. It seems stable, waiting for a pickup. What are your guys telling you that'll change?

Orders will be up in Q1. So that's great. We know that the inventory that has been in the system is largely depleted. I think what is important to understand about the biopharma business, it's a consumable business. So it's not absolutely levered to new builds of new systems. All we need is the systems that have been sold to run in the marketplace because those systems are consuming our products every day. So to me, it looks right now that the new build of new systems is still relatively slow. But because the inventory is cleared, the systems that are running out there, we're seeing a positive inflection in order rates, and it's not just the connectors. It's the Pump business that we have also. It's Malema that we bought a couple of years ago. We've got a whole suite of different products there. And, knock wood, across the board, I think we are positive in revenues in Q4 for the first time in 2 years. We would expect that trajectory to accelerate over the balance of the year.

So the orders are up at a meaningful enough amount for you to sound a little more positive in comp...

After a couple of years of them being down when they're up, we're going to be super positive about it, and we know what the margin contribution of that business is.

Right. Can that business get back to peak margins?

It never really diluted its margins that much. What you had was the dilutive effect of the business shrinking on the segment, but I think that the management team did an excellent job of preserving per piece margin. It's just not a lot of fixed cost in that business at the end of the day. So it's got a flexible business model. So we don't -- we never really gave up any margin, we just gave up volume. So on the other side, I would expect it to look the same.

Okay. And then -- sorry, any questions on the businesses? I think we're just going to move to some high-level discussions around the margins. Anyone? Okay. Just on the margin side, the moving parts this year. I think you said you're going to take about 1.5 points of price this year. Any need to push through incremental price at this stage? Just kind of have to check the box on that question.

Yes. I think that we're going to try to manage lead times through price. So right now, we just got on the other side, I'm talking about us, and I'm not talking about everybody. We went through this, we had some -- sooner or later, we had to pay the bill for the cost of capital for inventory moving up. We were pretty vocal about it last year that we were going to cut production to clear inventory in a way to protect pricing because if you -- the problem is to get over your skis in inventory and you want to move inventory, there's not a lot of levers to do it. So we feel really great about where we are in terms of channel inventory. Now we'd like to get the orders in because the longer we can build up lead times, the more efficient we can run the production machines. And right now, there's a little bit of push and pull between everybody recognizing that our lead times are down. So let's wait until the last minute to bring in any inventory because it costs a lot of money to have inventory. And so one of the ways that you can goose that system is to say, well, if you put your orders in now, I'll take the orders at x price. But if you wait until April, May, then we may do it otherwise. So in terms of price realization, we say it's going to be 1.5 points, but that is kind of a managed number of us depending on each individual business, how we manage kind of bringing the orders in and maximizing production efficiency with absolute price.

And so then on the cost side, it's not necessarily about you kind of reacting to inflation, if you will. I mean what are you guys seeing on inflation? I know there's some labor inflation out there. Steel has bounced around quite a bit, there's been some volatility. How do you guys look at that?

Yes. I mean, yes, there's some labor for sure. We have gone -- went -- this is past tense, we went proactively long on some commodity group metals that we have exposure to. So we bought long on copper when EV rolled over. It was a buying opportunity there. We went on stainless steel also. So we feel good about that. Logistics costs seem to be okay right now. I know the airlines are here, but I mean, I think it hasn't fed through trucking at all. Our supply chains are relatively short. So for us, logistics costs are inbound and outbound truck freight for the most part. And right now, if you go back and look over the last couple of years, those costs are manageable. So at the end of the day, if we can offset inflationary input costs with productivity as a breakeven, then we get the price and then it's volume conversion from there.

And on the mix basis, all these moving parts of SWEP being down, Belvac being down, but then some of these growth businesses being up, maybe biopharma being up a little bit. Is mix positive, neutral, negative when it comes to the volume?

Yes. I mean, we don't look at it quarter by quarter. We look at it kind of mixing up by business. Yes. I mean, yes, I think that we play our cards right, that we will mix up and have margin accretion year-over-year. It's not getting all worked up about segmental volatility in the interim.

Right. So you've got the price a positive and then the mix the positive and then productivity offsets inflation.

That's the goal.

That should be a pretty good incremental then for whatever revenue you're getting this year?

I hope so. I hope so. We'll see how it all turns out. But at the end of the day, the watch item for us was orders into Q1, the dispense of the issue that everybody has of back-end loading, which I can read the research reports now. So to the extent that the order trajectory looks good, that is a real good precursor of, okay, I have to be less worried about the volume. And now let's go take a look at mix effect and kind of total productivity.

So do you think that with this pricing strategy that you're influencing the order rates and that you're...

I hope so.

So you think you're pulling forward orders into the first quarter?

Pulling, we're not making paper clips, okay? So all I'm trying to do is build through pricing is to build backlog, which allows us to run the production machine more efficiently. It's very difficult to run the production machine when you're taking in orders and trying to split them out the other end in 30 days. So what you basically look at is what's the trade-off between running the production and absorbing the fixed overhead versus 1 point or 1.5 points in pricing. That doesn't apply to the entire portfolio at the end of the day. But in certain aspects of it, those are types of the things that you do with pricing to allow yourself to deliver total margin at the end of the day. The good news for us is we're not over our skis at all in terms of inventory so I'm not nervous about everything, but we think that we're in really, really good shape that we don't have to liquidate inventory through price at all.

Right, right. So these are kind of like -- there's not a successive March 30. I mean are you saying, hey, March 31 order now or forever hold your piece? I mean is there any of that like going?

No, it's -- well, it's more of the lead time is 16 weeks. If you order within a lead time, your price is x, you know what if you show up at 8 weeks. We'll try to accommodate you, but you're going to get a surcharge for it.

Yes. So I mean that's kind of like supply-demand, I guess, is how I would characterize that?

No. Well, it's the gain -- no one wants to -- no one cared about holding working capital over the previous 3 to 4 years, right? Now all of a sudden, everybody cares about working capital because the cost of carry on working capital has gone up significantly. So if you're in the distribution business, okay, then you were getting working capital loans from a bank such as this one at 2% or 3%. Working capital loan for a distribution business now, assuming you can get one, is 8%, 9%. And if you've got $100 million of inventory and you're a reasonably small, medium-sized enterprise, that's not meaningful at the end of the day. So that's what's causing this big tug of war. And on top of that, there's a recognition of lead times vis-a-vis coming out of the COVID period have dropped significantly. So that whole notion of, I got to order a year in advance because supply chain, blah, blah, blah, that's done. So we're just going through a little bit of transition period. Entirely manageable as long as your inventory is in good shape. If your inventory is not in good shape, then, good luck.

And I believe you have said that you expect orders to be up all 4 quarters. I believe you said that on the call, right? This is not like, hey, we've got a -- we're going to -- yes, orders are great this quarter, but look out for 2 and 3Q?

Well, look, you did actually very good work on it. I'm going to compliment you that if you go back...

Thanks. Thanks for that.

You're welcome. So if you go back and look, we led in backlog coming out of COVID. We at Dover Corporation, coming out of COVID in kind of our multi-industrial space built an enormous backlog and as soon as we saw it, we were out there yelling about the fact that at some point, orders are going to come down as we believe this backlog off. And then when orders came down, everybody treated it like it was the end of the world. So now because we've gone through a 24-month period of bleeding off backlog with orders down, we're pretty confident if our revenue guidance is correct that we should be positive in orders for the entire year.

Right. Okay. And then just, lastly, on the portfolio. What's the latest and greatest there? You guys have definitely done a bit of heavy lifting. What's the desire to do more of that?

Well, I don't want to go back in time here. But when we spun off Apergy back in 2018, we said that we were going to spend 80% of our time lifting the margin of the core portfolio and to rescale the corporation to allow us to have optionality on that portfolio because you just can't shrink yourself into profitability. You can, but then you put yourself in a balance sheet box over time where you lose optionality on the balance sheet. So today, we are larger than we were pre the spin of Apergy. We're much more profitable than we were pre the spin of Apergy. And if you look at our balance sheet and our firepower now, which is on the slide here, we've got significant optionality on M&A and/or portfolio construction, which arguably we would not have had back in '18 and '19, either because of scale reasons or because we had not driven the portfolio up to where its fair value was. So right now that's just a lot of hard work right there on one slide, meaning that if you take the businesses and go back and look at what the margin profile some of them were back in '18 and '19 or what they are now, if we were to monetize them, we think that we would get fair value for them as opposed to just carving things out of the portfolio to make the consolidated margin come up. And from a balance sheet point of view, I think that we can be entirely optimistic in terms of scale of our endeavors and/or having optionality in terms of bigger moves, meaning we could do something like Apergy. We've got the ability to do something like Apergy again if we thought that, that would create value for shareholders.

And I guess if you're not doing a big spin, which obviously would be transformational, do you have an eye towards avoiding dilution as you do things? Are you willing to say we'll take $0.05 to $0.10 off the number to get a bit of a higher multiple, like how do you view that trade-off?

We don't -- yes, well, that's the investor banker one, right? Just go sell this, your margin goes up, you trade up 3x, okay? I think that's not impossible, but I don't think it's as simple as that. And I think that we've been very, very good stewards of capital up into this point, and I would expect us to be the same going forward from here, but I'll just point to the fact that the disposal that we did in -- we're going to close it in the next couple of weeks or so finally. It was an asset that was in our Engineered Products segment. From a summer parts point of view, no one had a trading at 14x. So we checked all the boxes, we created value from the portfolio. We look at each individual piece of this portfolio of what we think it's capable of delivering in terms of return on invested capital. And then we overlay what we think about that from a strategic positioning point of view. And if we think that it's peaked in terms of its return on invested capital or we think that strategically, it's not an end market that we prefer, that we're in a much better position to monetize it. And I think if you look at what have we monetized it for, I think it's hard to argue that we were not -- we were giving premium value, especially when we compare it to what has been trading in the Dover portfolio.

Any last questions here on portfolio or anything like that? Okay, Rich, thanks a lot.

I appreciate it. Thanks.