Ecolab Inc. (ECL) Earnings Call Transcript & Summary

All right. Good morning. Hello, it's Greg Cook with Ecolab. I understand we're having some audio problems with Scott, the moderator. So in the spirit of time, I think we'll just start out, and if Scott can join us, then we'll circle back with Scott accordingly. So again, great to be with you. My name is Greg Cook. And before we get started, I thought I'd walk us through the traditional cautionary statement for you to review at your leisure. And it'll be available on the recording afterwards as well. So again, my name is Greg Cook. I'm Executive Vice President of our Global Institutional business, and I'm excited to be with you today to give you, first of all, an overview on Ecolab in total. And then I'm going to pivot a little bit and dive a little deeper into the institutional global business and the remainder of that. But here at Ecolab, we're excited. We are uniquely positioned on delivering what matters. And quite honestly, we're leveraging a lot of the industry trends to deliver and provide on what matters most, specifically centered around healthy environments, water scarcity, food safety and clean climates. And in doing that, we are helping our customers make a huge impact. If you look at just a sample of some of the things we have helped our customers do, just last year alone: we've saved over 206 billion gallons of water; conserved 28 trillion BTUs of energy; prevented more than 1 million food-borne illnesses; helped produce 45% of the global processed milk supply; cleaning 66 billion hands, you could read the slide, cleaning 1 billion plus hotel rooms and serving over 45 billion meals, not a small task and something we're extremely proud to do with our customers, but in the environment as well. And in doing so, we're making a huge impact. We, at Ecolab, are the industry leader in our segments. We're at $13 billion in total sales. We operate within quite a large and growing market segment with excess of $150 billion plus and continuing to grow. So we love the opportunities we've had to date. We love the future opportunities that we can chase and areas where we continue to develop to do that. And when we look to do that, we look to span across common platforms that span multiple businesses. For example, we always focus on the hygiene, infection prevention, water treatment, innovation, digital platforms, and we follow our proven and historical business model and operating principles as we expand across multiple segments, such as foodservice, hospitality, the Food & Beverage and processing area, Healthcare, Life Sciences and the industrial, commercial and water service areas. And in doing that, many people who have gotten to know us or recently got to know us, many times think of us as a product-driven company or businesses. That is true, but that is not all we do. And quite honestly, what differentiates us in the market and differentiates us from a competitive landscape is the expertise we bring to the breadth of our sales and service organization. For example, industry expertise in developing breakthrough technology that we then take to our teams globally with the know-how to introduce the teams -- our teams and our customers around the world. We leverage our largest in market industry -- or on-site expertise teams in delivering on-site sales and service. And then we take it all and bundle it together. Digital investments we've made, the technology we've developed, the know-how we have and helping our customers not only solve problems, but also look at predictive insights in ways that we can help them going forward. And we've got a long history of developing sales growth and delivering EPS growth. If you look at it, over the last 15-plus years, we've known and delivered consistent EPS growth and double-digit EPS growth, and we're extremely proud of that. But we also recognize that the last couple of years have not been the most easy in the industry. A lot of businesses within Ecolab have performed quite well. Quite honestly, some of the industries have been most squarely hit by the impact of COVID. If you look at the year of 2020, the Institutional division specifically, which is one of our largest divisions and accounted for, at that time, 20% of our total sales, was probably the most impacted business within the Ecolab portfolio. And the customers we serve were the most heavily impacted during COVID. The foodservice industries, the lodging industries, unlike previous economic events, weren't just slightly impacted; in many cases, they were fully shut down or restricted. And so we, as a company, had to deal with that and work with them during those challenging times, and we're quite honestly proud of how we did handle those times. And as we recover, and we move through COVID, sales recovery is nicely progressing and partially being offset by surging supply chain headwinds, but nonetheless, continuing to progress quite well. And when we look back at those couple of years and how we handled it, we're also extremely proud of staying true to what helps drive long-term growth. During that time period, we maintained our strategic focus on driving investments, investments in our people, investments in digital and investments around new growth platforms. We also built a strong new product pipeline and built out new businesses like Life Sciences, global high tech, transportation and our animal health business. And we also remained extremely focused on driving new business wins even in a challenging environment and executing on much-needed pricing actions, all while staying focused on strategic acquisitions as well when the opportunity to expand our portfolio. This is an example of the most recent acquisition of Purolite, all with the focus of returning back to double-digit EPS growth that we've been known for historically. So if I take a moment now and pivot away from the total company and focus more on the institutional global business, as I mentioned earlier, institutional is one of our larger businesses within the portfolio. And where we sit today, the institutional business accounts for 25% of our total company sales. And when you look back at the institutional business, quite honestly, the Ecolab company and portfolio was built around the institutional business. In fact, next year, we'll be celebrating our 100 years of service and serving customers in the industry. And over those years, we've grown to service over 800,000 locations around the world. And in doing so, we have helped many of our customers expand their footprint from a regional footprint to a global footprint. And in doing so, we've expanded our footprint to being in over 130-plus countries around the world. And we do that with a differentiated ability of servicing our customers and servicing them differently through chemistry, dispensing and personalized service, while, at the same time, utilizing data-driven insights and expertise training. When you look at the markets that we principally serve, we are largely centered around the foodservice, lodging, long-term care and facilities segments. And in serving segments, we leveraged the anchor platforms such as warewashing, laundry facilities, housekeeping and floor care products. And we're proud of the customers we serve. I mentioned earlier that we've helped many customers expand from local to regional and regional to global customers. And here, you see just a sample of many of the global customers that we enjoy partnerships with today, many of which didn't start as global companies. You look at the array of restaurants from lodging customers to distribution partners around the world, all proud to be part of their programs and to help them expand, and in turn, we've expanded with them. So if you look at the institutional sales at a very, very high level, currently, our sales by region split 70% in North America, with the balance falling in Europe, Middle East, Africa, Asia Pacific and Latin America. And when you take those sales by region and split them by market segment, approximately 50% of our sales are within the foodservice facilities, 25% in lodging, 15% in facilities and 10% in the long-term care markets. And just like I referenced earlier, our strong consistent performance centered around EPS. The institutional divisions, as we look here specifically at the U.S. division, has also had quite a strong historical performance of delivering on sales growth. And even during challenging economic times such as 9/11 and the Great Recession, we have been impacted. We've been able to mute that impact in general and focus our attention on growth and getting back to our historical growth rates during that time period. But also, like I mentioned during the EPS slide, the institutional was probably the hardest hit, with our customer segments being, in many cases, shut down immediately during the COVID period. And you see that in the 2020 results. However, as we refocus our efforts on growth in sales, and as markets are beginning to reopen, our attention has turned from more locations, more accounts, more solutions, and we're back on the path of growth in 2021 and expect the same in 2022. And if you look back over historical times, and if there is some sort of positive that comes out of that challenging time such as COVID, I would say that is around the -- it emphasizes the Ecolab principles that have been unique to us, but quite honestly, has been enhanced. We've always stood for hygiene standards. And during the COVID period, it only enhanced the level of importance when it comes to hygiene standards across our customers and across consumers. And we've responded with the Ecolab Science Certified program to highlight that certification, to highlight the cleanliness on behalf of our customers and to give customers the assurance when they do return back to a normal way of life. Digital adoption. We've invested a significant amount of money in developing digital enhancements and digital solutions for our customer and for our teams, and during the period of COVID, has only accelerated the adoption of that, both with customers and with our teams, allowing us to provide more insights to our customers, while, at the same time, driving productivity within our teams. Labor. Labor has always been a challenge within the restaurant and the lodging segment, in particular. It's a high turnover type of labor. As you can imagine, during the periods of COVID, when entire labor staffs were downsized or, in some cases, eliminated, and during periods of reopening, having to rehire the labor. Ecolab's strong sense of training has been a huge asset to our customers as people have onboarded new people. We've always been consistent as well in delivering innovation to help reduce labor within our customers' environments. And we see that only progressing as we go forward. And obviously, we've seen a renewed emphasis on sustainability and focus, which has helped us to innovate in reducing water use, energy and waste as well. And we do that across multiple, multiple platforms. We do that by innovating the best-in-class solutions across chemistry, across engineering and dispensing equipment and like I mentioned, digital, real-time data, predictive analytics and connectivity with our customers. A couple of examples. We talked about digital. We have invested probably the most within our segment and within the company in delivering innovative technologies that help empower our customers and empower our teams, making customers' insights even greater. Delivering on-demand, handheld training access has been key as customers have been reopening and hiring new associates. We're trying to maximize the impact to our customers by providing insights on real-time usage, while, at the same time, giving our teams more insights of what's happening at a customer's location, which makes the insights and the capabilities they provide even that much more powerful, all in all, while we transform the customers' experience and create greater and greater value. We also do that through breakthrough chemistry. We have always been known for innovating chemistries that attack customers' problems. What is the challenge? What's the solution we can provide? We've got a number of examples on the left. But the point being is, we will take innovation to drive savings at a customer, whether it be labor, a food-borne illness, labor shortages, operational efficiencies, and we take 1 solution and break it into multiple application uses, take 1 solution, turn it into potentially 4 applications. Those 4 applications then are broken across multiple segments in the multiple geographies and regions that we serve, in essence, taking 1 solution to multiple touch points within our customers, all with the intent of providing value and savings for our customers, while driving increased solutions per account within our customer base and helping us gain new solutions and new customers at the same time. We also do that across the industry and making sure that we capture savings both within the properties that they operate and the impacts that we have. Here's an example of just one case study we've done with a large global hospitality partner with our Ecolab exponential return on investment, our eROI tool, which is used to capture the total impact that we're having at a customer's location. Whether it be through water consumption savings, energy savings, productivity enhancements or asset protection, we are able -- and this example for us specifically, to quantify to a customer when delivering over $10 million of total value, greater than 25% return on their investment when it comes to the Ecolab program, all of which to driving sustainable outcomes to their properties and for their users. So when you look at the outcomes and all of our efforts in going through this, we love to think of Ecolab as a growing industry, a growing company. And our objective is to grow, but not only grow, but to exceed the industry trends. And here, you see within the foodservice segment, we like to track ourselves against on-foot traffic, which has obviously been impacted during the COVID period. And with the innovative technology, our field service capabilities, we have been able to grow total sales faster than that of on-foot traffic, i.e., exceeding market trends. So for that, we're excited about the opportunity that we've got in front of us. We're excited to be back on the path of growth. We're excited to chase our growth ambition of 6% to 8%, and we like the market that we operate in. We operate in a $28 billion plus market. And when you look at the $25-plus million opportunity that still faces us, it's split between almost $10 million of solution and penetration that's available within already existing customers, and another almost $15 million available with customers that we have yet sold but are on the path of selling. So we love the opportunities that are in front of us. We love the opportunity for growth, and we love the opportunity to execute on it. So as we look at the institutional business, I would say, in summary, the sales and OI momentum is strong. We operate in a huge market that remains strong and growing, with $25-plus billion of opportunity. The industry challenges that we have faced in the recent past have only strengthened our overall value proposition and the conversations we're having with customers and their guests that they look to serve. We've strengthened the business model and strengthened our competitive advantage, and we look to deliver on our long-term growth ambitions. So I'd like to close it up by saying that is our story. As you can tell, we're quite bullish about our future. We're quite bullish about the outlook. I'd like to thank you for your time, and I'd like to let our IR team know if any of you have any questions. All right. I appreciate your time. Thanks, everybody.