Ecolab Inc. (ECL) Earnings Call Transcript & Summary

Great. Well, we'll go ahead and get started here. Good morning, everyone, and welcome to Ecolab's 2023 Investor Day. I'm Andy Hedberg and along with Karen Clark have the pleasure of leading Investor Relations here at the company. We're absolutely thrilled to have you with us today in Naperville. We've got an excellent day plan where we'll kick off with presentations by the executive team. Really highlighting the strong business momentum, top line growth and margin expansion opportunities that we see. There'll be a couple of opportunities for Q&A throughout the day. Immediately following the presentations, you'll get a chance to see some of our latest innovation set up in the back of the room there. Really highlighting the great technologies that we've come out with over the last year or so. After that, we're going to have a lunch with the team where we get to sit with and have more discussions with the Ecolab team here and then wrap up with a great tour of the Water University and customer experience center here at Nalco. But before we get to all that, everyone's favorite, the cautionary statement. Please take a moment to read the disclosures about forward-looking information, non-GAAP information and market share data on the slide shown here. Please note that this presentation and the accompanying slides include estimates of future performance. These are forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described in the Risk Factors section in our most recent Form 10-K. And now it's my pleasure to introduce Ecolab's Chairman and Chief Executive Officer, Christophe Beck.

Thank you so much, Andy, and welcome to everyone to our Investor Day. Always a pleasure to be in person together with you, and having the honor to share with you the progress we've made over the past few years, which have been interesting years, as we all know. But most importantly, so what are our plans for the future to ensure steady, strong double-digit EPS growth, which is our objective at the end of the day. But really doing it by focusing on our purpose, which is protecting what's vital. You're familiar with it. You've seen it everywhere around the building. And I think the best way to understand what -- what it truly means, protecting what's vital is to see a very short video that expresses it, I think, very well. So let's look at that. [Presentation]

So this is what's driving me. That's what's driving us, our 47,000 people around the world every single day, protecting people from infection, pretty timely, obviously, in this time of the year and protecting natural resources, starting with water. And it's also by focusing on our values over the past few years, that have helped us, as a company, get stronger and get back to the strong EPS performance that we've been used to as well and also making sure that we can keep on our trajectory that we have demonstrated for so many years as a company. They are better years than others every time we try to make sure that we build what's right for the future in order to deliver strong, steady mid-teens performance, as we've been used to as a company in the years past as well. So today, you're going to see a lot of things. But at the end of the day, it's going to be around 4 main things. I'll cover some of them today in some depth, and then you'll hear from the team, which is the best, obviously, to understand how the pieces come together. But the first one is really the business is having great momentum, and that's the best we can hope for when the world is slowing down. Whatever is going to happen in the years to come as well, it's all about controlling what we can control and that the company is doing really well. The second one is our growth opportunities keep growing. They've been growing for a very long time, 100 years. That's what we're celebrating this year, and we will keep adding to it as you would see it as well. Operating income margin, 20%. We've talked about that. So for many years, as you know. I think it's the first time ever that we have such a great line of sight on how to get there in the next few years. I'm going to cover that a little bit, and Scott and team are going to go much more in detail as well in order for you to get a better grasp on how we're going to get there the right way, which are all arguments ultimately for us to raise our level of confidence that we can deliver EPS growth in the mid-teens for the quarters and years to come. So let's jump in, starting with our business momentum. Well, it starts, we're a sales-driven company. We love sales. We love customers, we love serving customers day in and day out, and that's what's driving everything else by delivering our purpose. Organic growth has been good. The last few years, it's been driven by pricing. It's been driven by new business. It's been driven by innovation and it's been driven by new end markets. As you've heard over the past few years and we'll see as well today, like data centers, microelectronics, Life Sciences and so on. Those are growth markets that are contributing to the organic growth of the company. That's all leading to very strong operating income growth, which we are really pleased with, and you've seen it over the past few quarters, steady, strong, and that's where we want to stay in the quarters to come in order also to mitigate the headwinds that are out there that we can't control, obviously, like foreign exchange or interest or even inflation that we've experienced over the past 2 years. And I think the team has done a remarkable work at doing what we call value-based pricing, which is, as you will see and hear today, really driven by the value we are creating for our customers. And in other words, it's the amount of savings that we are generating for the total operation. But as you can see, so pricing is way ahead of our delivered product cost in a cumulative way, and that's going to stay that way as well in the years to come, much more on it in the next few hours. And what's important as well is we always do the right thing, the right way, as it's been demonstrated with all the awards that we've been receiving for the many years past and especially over the last 12, 18 months. And we're proud of really so trying every day to learn from others, to learn from our teams, how can we be the best company, the best team ever as we can be. While we grow fast, by growing our impact, which is our purpose. And that's why focusing on water, on climate, on food, on health are the objectives that we've set. Those are the objectives that our customers have that we roll up for our company and make sure that we take those as a commitment and that year in and year out, we stay on that road map until we reach our objective of 2030 and will redefine what happens next afterwards. But for us, it's as important as delivering our performance financial commitments as well. So good momentum. Second, our growth opportunities keep expanding, which is a good thing for all of us, for 3 reasons, mostly. The first one, the macro trends have been and will be in the future even more aligned with what we're doing, starting with population growth, more people traveling, eating, enjoying life while they need protection. They're generating as well impact on the environment that we need to help mitigate. Food security, water stress, which is becoming the #1 issue for the years to come, especially with new technology as well out there that requires a huge amount of water to produce chips to manage data centers. This is what we help do as well that the world can keep growing while reducing the impact on the environment, and impact in climate change because the more you reuse and recycle water, the more you reduce and recycle energy in the plant, it's up to 75%. So there is a direct correlation between energy and water. Those macro trends are helping us obviously grow for the years to come. Second, our TAM or our total addressable market has kept growing forever. And I think it's understated because there is so much more that we could add to it, but we are very picky on what are the end markets that we want to focus on? What are the innovations that we want to work on to make sure we can execute really perfectly well for our customers around the world. We add to it businesses like bioprocessing that came with Purolite. It's data centers, it's microelectronics and many others, and that's how our time keeps growing. But third, this circle the customer, circle the globe opportunity that is remaining a key opportunity for us and a key objective for our team that's ultimately driving penetration of all the solutions of the company within customers that we already have. This opportunity is $55 billion. For us, we see that as a huge opportunity. that requires great execution in order to capture as much as we can. And we have great examples of that. Pest Elimination that you will see from our friends, Nicolas Granucci as well, has been the CTC opportunity that we've grown to $1 billion today. We know how to make it work and our customers need it more than ever. The other driver of our growth opportunity is the fact that our model is driving more consumption as well. So from what we do. We bring to them the best of Ecolab. Our team anywhere around the world, bringing technology, know-how, data, digital, AI, all the technology that we can add ultimately to help our customers produce better outcomes, whatever those outcomes are at a reduced total operating cost by reducing the impact on the environment, reducing water, waste, energy and cost for our customers. So the more they invest in what we do, the better they perform, and obviously, the more we grow as well at the same time, they require newer technologies, higher margins, as you will see, a lot of innovations coming up as well. It's driving growth. It's driving margin as well as a model. And that's why it's so important that we perfect it day in and day out. Because at the end of the day, the very best companies out there being local, regional, national, global. Well, they come to us. The obvious company when it comes to water questions, to hygiene question, to infection prevention question and always more in life science as well as you've heard and you will hear as well today. So very proud of our leadership positions in all those fields. At the same time, we're not going to stay here. We're going to keep investing behind our businesses and our teams. We're going to keep investing behind the businesses that have brought us where we are today. Institutional is in a great transformation as an industry, and you're going to hear more from Greg Cook as well on that. Food and beverage with Chris Roberts. You're going to hear more as well. It's an industry that has made great commitments as well. This is requiring more of what we're doing. We need to get better at it. This is all generating more growth and more margins as well and the water business, which is a core business for us. We want to be the world's water company, we are, for all the right reasons, ultimately. But what's most important is to invest in new businesses as well, like Life Sciences, we started 5 years ago, adding Purolite to it, digital subscriptions, microelectronics, data centers and even new channels, not going to consumers. It's still a B2B. It's for the Pros, ultimately, working very well with our friends at the Home Depot. And we are investing behind our team. Our capabilities, 47,000 people in 172 countries, serving millions of customers in 40 different industries. We need to train those people, to help them work together, to get the right technology for all of them. That's why we're investing as well in R&D, where we have over 1,000 people. We have over 1,000 people working in digital and AI technology as well for a very long time in the company and making sure we expand our reach to be there where our customers need us the most. And we cover 1/3 of the world's food production, almost 1/4 of the power that's generated in the world and we protect the lives of almost 1.5 billion people, and this is just the beginning. So we have good momentum. Our opportunities are growing, that should lead to better margins and it will. I think the easiest way to think about margins, so for us is to look at operating income margin first and then gross margin. And you'll hear much more from Scott Kirkland, our CFO, in a minute as well on that. But the way I'm thinking about it in terms of OI margin, we're very close to our high watermark that we got in 2019, pre-pandemic, if I may say, in the third quarter as you will see and as indicated over the past call as well. And we have 4, 5 points gap to the 20% OI margin ultimately, which is coming almost entirely from the gross margin gap that we have versus where we are today and where we used to be at our, as we call it, high watermark. And that's why getting more progress on gross margin back to where we used to be. So we know how to get there. This is not the level of margin we haven't seen ultimately so brings us not only back to where we used to be and keep growing from here, but helps us get to the 20% over the next few years, which is our objective. How do we get there? Obviously, it's through value pricing, shared with you, it's making sure that pricing is based on value. You can see on that chart, and you hear more from Darrell Brown as well afterwards based on total value delivered, which is the dark blue bar here. It's the savings we're generating for our customers. That's been documented with our customers, that's been approved with our customers. And as you can see, it's a much higher number than the pricing that we're getting let alone the DPC or delivered product cost that we're getting as well. That's helping obviously drive our margin. Second, it's driving innovation. You'll see a lot today of innovation, Larry, our CTO; and Gail Peterson, our CMO, are going to share with you what we mean with innovation as well. It's not just product innovation. It's breakthrough innovation, it's platform innovation like Ecolab Water for Climate, it's Ecolab Science Certified, but it's also market innovation, getting into markets we were not really present in the past few years. That's all innovation that's driving higher margin because everything we do in innovation has to be accretive in growth and in margin, which is leading to a better place. A bit less inspiring. Well, it affects the businesses that are not doing as well as they sure. Health care being top of the list. And I promised a year ago that we would fix that business, and we will. And I like the progress that we're making. We announced cost restructuring earlier this year. We announced as well the refocus, the bifurcation of the 2 businesses, surgical and infection prevention, leveraging the firepower of institutional during the last quarterly call as well. And we will keep building that business in order to turn it into growth, profitable business, that's going to help obviously so for our margins. And last but not least, it's to keep shifting our portfolio as a company towards higher growth, higher-margin businesses. We've done it during our history as a company, just looking at the last 10, 13 years when we added Water, well, that was to really strengthen our portfolio. When we added Life Sciences, it's the same, and it's going to become a much bigger group for us in the future. It's higher growth, higher margin, that's going to help as well the profile for the many years to come, not just on the next few quarters. So good momentum. Opportunities that keep growing and at the same time, a natural link to improving our operating income margin towards the 20%, which is why our confidence level of delivering our mid-teens EPS growth for the quarters and years to come has only risen. Now I've heard it. You made a lot of comments on our so-called long-term ambition that has been set, I don't even know how many years back. It's more than 20 years back. So we've decided to share with you what's our most realistic view based on what we know today for the long term and for the next few years, '23, '24. The good news is that we expect for the long term our performance to be better than the actual performance of the past 10 years pre-pandemic. And in the next 2 years, '23 and '24, to be even better than that. Let's start so with sales. 4% was the average organic sales that we had between 2009 and 2019. We will move towards 5% to 7%. How do we get there? Pricing is going to move 1% up, volume is going to move 1% up as well through innovation, enterprise selling, all the things that you will see today and we are at a higher level of growth today. And we will be as well so on the high side in 2024 as well. So that's what I'm trying to say, we're going to be better in the long run in terms of organic sales, and we're going to be even better than that in '23 and '24. OI margin, shared with you, so our line of sight to get to this 20%. This is kind of execution for us to get to the right place. It's also partly depending on the market, but that's just a timing question. It's not whether we're going to get there. We're going to get there, as I've shared with you. And in terms of EPS, we're at 11% for the 10 years pre-pandemic. We're going to be between 12% and 15% for the long run, and we're going to be probably in the mid-teens in a steady, good situation in '23 and '24, '23 you've seen most of it in the second half, is off to a good start as well. So a good level of confidence that '23 and '24 should be in a very good place towards that objectives that we have. So for organic growth, margin and EPS. So I hope that it's answering as well your questions with all the comments that have been made as well on our so-called longer-term ambition to have something that you can count on, build on, not every year and every quarter is going to be made equal. We know that, but that's the longer-term trajectory that we want to commit to. So in summary, good business momentum, good opportunities, line of sight to get to the right place in terms of margin which are all boosting our confidence, obviously, for the second half of this year and for '24 and for the future as well. But the best is for you so you hear it from our teams, you're going to see 8 people here at the podium today from our corporate team, from our business teams. We'll have the opportunity as well, so to have Q&A, as you heard, so from Andy, after the corporate team, we're going to take 10 minutes on Q&A. We're going to have a short break. Then you're going to have all the business leaders as well sharing their plans with you. We can have again an opportunity to have Q&A. I'll give a close, then we'll go also for the Innovation Fair. You'll have an opportunity to discover the innovation that are coming on the market as well right now, then we will have lunch, other opportunity to have discussions with our team and then the tours this afternoon, which are optional for the ones who want to visit the Water University, the labs and our digital room, which is really cool, by the way. But let me introduce you our Chief Operating Officer and President; Darrell Brown, who is going to focus on how we're going to get that done from a commercial perspective. So with that, Darrell, the floor is yours.

Okay. Good morning, everyone. I'm Darrell Brown, Chief Operating Officer for Ecolab. And I'm excited to talk to you today about how Ecolab is enhancing customer value and driving volume and pricing. As you've heard from Christophe Beck, we have 3 major themes for today: Accelerating volume growth through aggressive new business gains, margin improvement beyond our high watermark by pricing for value, and ensuring we have the best talent aligned with the best investment opportunities around the world. I'll walk you through the 5 critical imperatives for growth, starting with the acceleration of our sales growth momentum, the work the teams have done to improve pricing and margins and how the teams have leveraged the biggest and best bets for innovation in outsized breakthrough innovation. I will also describe our winning go-to-market model that enhances our operating performance and the work we've done to strengthen the teams. Accelerating sales momentum has been a critical imperative for Ecolab and remains so today. In the first half of 2023, our net new business has been growing double digits. Our plan is to continue that trajectory for the entire year, setting ourselves up for a strong finish to 2023 and great momentum as we head into 2024 and beyond. Having a robust new business pipeline is key to future growth at Ecolab, both the 30- and 90-day pipeline show excellent opportunities to drive volume. With our 30-day pipeline, 60% above target, and our 90-day pipeline, 70% above target. With our shift to offense, we have been working harder than ever to Circle the Customer and Circle the Globe with our offerings and execute our enterprise selling strategy, which has been a fundamental growth pillar for Ecolab for many years. Ecolab is differentiated by its full suite of offerings that comprehensively covers all end markets. This allows us to enhance our Circle the Customer, Circle the Globe strategy and truly sell enterprise solutions to our valued customers. With our unique broad capabilities, we serve customers in industrial, institutional, healthcare and life sciences markets with comprehensive and integrated offerings in water, hygiene, food safety and pest elimination. With leading positions across these capabilities, we are able to deliver end-to-end solutions, delivering unmatched customer value. Leveraging the unique sales culture to drive growth is key to the successfully expanding our strategy of Circle the Customer, Circle the Globe. Our approach is underpinned by 4 critical components, focusing on the customer, driving bigger, better bets and innovation and offering service expertise and training for our customers. Our sales and service associates have deep insights and on-site expertise across the world and are committed to solving the most difficult and challenging problems for our customers, leveraging our extensive knowledge network and best practice sharing. Driving margins and pricing has been a major priority over the past few years as everyone knows. We have seen significant delivered product cost headwinds that needed to be addressed to ensure we deliver the utmost customer value, while driving pricing and, of course, securing customers for life. As you can see here, our total value delivered has consistently outpaced both pricing and delivered product costs over the past 4 years. Offering our customers outsized returns through our total value delivery has allowed us to stay ahead of the inflationary headwinds. We have achieved record structural pricing, secured our global customer base worked our way towards our high watermark in terms of margin and progress towards our 20% operating income margin target. Let me explain how total value delivery equation works. Delivering market-leading value for customers has its foundation in our total value delivery equation, which combines better business outcomes, improved operational drivers and accelerated environmental impact for a small relative cost, which we call exponential return on investment or EROI. Across the industries we serve, we target the EROI greater than 25%, which helps us drive strong pricing and volume as we take further share across these markets. Another key imperative to generate volume and increase our margin, of course, is innovation. In 2023, we have built the largest innovation pipeline in the history of the company. We are concentrating on our efforts on bigger, better bets across the end markets we serve. In 2023, we are projecting an innovation pipeline of greater than $1.3 billion. You'll hear more about our innovations from Gail and Larry shortly. Our market structure sets us up for scale, driving growth, margins and unlocking the best opportunities we have around the globe. We are organized around the mega markets of North America, Europe and Greater China and international markets across Latin America, India, Middle East, Africa and of course, Asia Pacific. To support our millions of customers across 40 industries in 170 countries, we leverage an extensive network of technology centers, manufacturing plants and our associates, including 1,200 scientists and 1,000 digital experts. Significant investments in digital technologies are allowing us to drive enhanced customer value, accelerating volume growth while growing the team at a slower pace. As illustrated in the pie chart, digital technologies enable our sales force to spend significantly more time on selling across the enterprise, leveraging demand remote services, insights and analytics, end-to-end customer to cash processes and a global service delivery model. This delivers better outcomes for customers and Ecolab, driving increased market share, better customer retention, improved selling capabilities, higher margins, higher growth and access to greater opportunity. Ecolab's unique capabilities across the globe allow us to offer our customers an enhanced experience. We have the right resources at the right time, performing the right actions. We are offering a single point of contact, which makes it easier for our customers to do business with us and solves problems faster. Accelerating our impact by enterprise selling also ensures a better associate experience, by giving our teams more time to sell and more job satisfaction, a win-win for both. Our team is stronger now than ever, benefiting from our keen focus on building more diverse, equitable and inclusive teams around the world. We're making great progress towards our 2030 DE&I goals and are on track to meet our 2023 commitments for women as well as people of color, and Black and African-American associates in the U.S. It's imperative for us to create a work environment where everyone thrives. We continue to set great involvement from our associates in our 2023 engagement survey among the 42,000 respondents, which is a 5% increase year-on-year. We saw an increase in overall engagement, retention and most importantly, inclusion. In summary, our focus on delivering the following impactful imperatives will ensure continuous high growth and accelerated margins and position us to transform opportunities into future success, accelerated growth, margin improvement, bigger, better, more impactful innovations, enhanced operating performance and an even stronger, more capable team. Thank you. And let me now hand over to Gail Peterson, our Chief Global Marketing and Communications Officer; and Larry Berger, our EVP and Chief Technical Officer, to tell you more about the breakthrough innovations we're bringing to market. Larry and Gail?

Well, thank you, Darrell. Larry and I are very excited to talk to you about innovation at Ecolab and how it is driving both growth and margin for the company and the business. Now Christophe mentioned earlier, we do think about innovation pretty broadly. We think about market innovation, enterprise innovation, breakthrough innovation and then finally, digital innovation. And today, I'm going to take you through the first 2 and then Larry will close this out with breakthrough and digital innovation. So market innovation. This is where we bring existing solutions and point them to a new end market or industry. Now we've done this throughout our history at Ecolab. It's always provided tailwinds and new pockets of growth for us. On the screen, you can see 6 that are more recent new market entries. One thing they all have in common, even though they are very different from one another, is they are all high-growth markets. They all use a lot of water or they have very high hygiene needs. So they map very well to Ecolab's capabilities in what we do. You're going to hear more about a number of these areas from the general managers later today. And then hopefully, you'll see how we're continuing to innovate in these areas at our innovation showcase later to keep providing growth for Ecolab. Now the second area of innovation is enterprise innovation. And this is where we really circle the customer with our best solutions, and we point them towards an enduring customer challenge that they might have. So with Ecolab Science Certified, there is a higher expectation for clean for our customers' customers. But our customers are facing very real labor challenges to meet them. Then in the case of Ecolab water for climate, there is this constant drive and push toward net-zero, but it's a challenging bar to hit. And even though the outcomes are quite different, what our enterprise innovation tends to have in common, they both are margin accretive. They get more solutions into more units and then we work that unit to the highest level of performance, and we make sure across the units, we're getting the collective enterprise to a high standard of performance. And so I'm going to first start with Ecolab Science Certified. Simply put it a program about more clean with less labor. And that is an outcome that matters to our customers for 2 key reasons. The first is it matters to their labor. Their labor wants to be more efficient that they also want to be in a clean and safe environment. And then their customers do have a higher expectation for cleaning and they don't want to have to worry about it anymore. And so you can see we have a number of customers on the program. You see some -- all of these customers are great, of course, I'm biased, but you've got McDonald's, you've got Weston, you've got Aimbridge. But over the history of the program, we now have tens of thousands of units and Ecolab Science Certified in there growing at double digits. And again, it allows us to get more units, more solutions into those units. It delivers real value to the customer. One example is that they have better health department, results went on this program. We see higher customer satisfaction that is, in fact, leading to higher customer retention. One of the reasons we think these leading brands want to partner with Ecolab is because we are talking to their customers in a meaningful way. Our latest data is really showing how our customers' staff are helping to deliver the enjoyment that their consumers want to see, but allowing them to do it without worry. So with that, could you play that ad. [Presentation]

So our other great enterprise innovation is Ecolab Water for climate. Now this is not for all of our customers. It's really for the select few that have made very advanced sustainability commitments. And this program allows them to make meaningful and measured progress today against those commitments and to do it in a profitable way. You can see a lot of our leading customers, these are all of our customers that have made really, really bold and advanced water commitment. And because we want to partner with them and be the good partner that Ecolab can be and because we care about the planet, we want to make sure they succeed and meet these goals and targets. And so the only way we can do that is making sure that they know, we, in fact, have a solution that can help them. And so with that, could you run the ad for Ecolab Water for Climate. [Presentation]

And so we have a really compelling message. But what's great about this program is because it's not for everybody, we know exactly the company is in our pipeline. So we can hyper-target their C-suite through account-based marketing and make sure we're over-serving the Board of Directors and the C-suite with the marketing that we're doing. And we want to make sure people know we are, in fact, a thought leader in the water space. And so we're writing articles, doing up ads on places like Fortune, Forbes, Financial Times, Bloomberg, to name a few, but all places where the C-suite frequents more. And then when the UN decides it's going to have its first water week that it hasn't had in nearly 50 years, we wanted to make sure we were there in a big way. So we had Christophe down on the floor of the UN assembly addressing the convenience. We had our marketing everywhere. If you flew in to Teterboro, if you came in through Grand Central Station, if you ordered an Uber Black, you would see our marketing. If you're walking around and you looked at the tops of the taxi cabs or the digital signage like the NASDAQ around either the assembly or other places where corporate events happen, we were there as well. And we're going to do it again next week actually at UN climate week. So you can see how these enterprise innovations really provide umbrellas for us to continue to innovate under and drive these platforms, the success of our company, build our reputation as a leading water and hygiene company. So with that, I'm going to turn it over to my good friend and CTO, Larry Berger, to talk about breakthrough innovation and digital.

Thank you, Gail. Very exciting. So I will talk about breakthrough innovation in digital. Gail has already covered the first 2, and I have a couple of closing remarks. I talk about our innovation engine broadly at Ecolab that drives our growth. So look, we operate in a target-rich environment, we're fortunate. Our innovation is tightly aligned with the 3 major growth drivers. These are secular trends. These are not short term. It's AI and streaming, biotech and green technology, and we are well positioned to win in all 3, and we are. So shown here, and I think Darrell showed this chart as well. This is our innovation pipeline over a 5-year horizon, and I want to call out a few points. First, we're really quite proud. This year, we will launch our biggest innovation pipeline ever, that's $1.3 billion year 5 revenue. The cumulative revenue over that 5-year horizon is about 2.5x to 3x. Second, we've been growing our innovation pipeline historically at roughly 2x organic top line. We'll continue to do that. We have good line of sight. Third, the growth of the innovation sales drives a very healthy vitality index. So the vitality index across the company is 30%. As you all know, that's the measure of sales derived from products and services launched in the previous 5 years. So that's very healthy. But what's most exciting on this chart, frankly, is the dark blue. We have pivoted from product innovation to something we're calling breakthrough innovation with a goal of breakthrough innovation comprising roughly 50% of all we do by 2025, and we're in a good place to get there. So what is breakthrough innovation? Quite simply, it represents our biggest and best growth opportunities. It brings together the best of Ecolab technologies as well, and it's very tightly aligned with the problems that matter most and the opportunities for us to create value for our customers. So I'm going to do a shout out. You've heard already a couple of references to the innovation showcase. You will note when you came into the room, we have these stations spread around the room. For those of you in the room, please, please make a point of visiting the innovation showcase. You'll have a chance to interact with the commercial teams, the technical teams and have a chance to deep dive in all of this, ask your questions and hopefully get excited about what we're working on here as well. And lastly, let me cover digital innovation. This is another exciting area of growth for us. We've been on this journey for a while, okay? And we already have established a leadership position in industrial IoT. So we continue to grow our digital impact 2 ways. The first is by growing the number of customers we serve, but secondly and equally importantly, the value of the solutions that we bring them. And we routinely monetize this through digital subscriptions and premium offerings. So think about a stack, we still connected chemistry, obviously, we then sell a digital subscription. And on top of that, our premium offerings, and I'll go through just a couple of those today. But it starts with the foundation, which is monitoring and control. And we are monitoring our customers' assets within their plants, not just connected to their plants, we're monitoring and controlling all the critical operations in their plants that utilize water. And we're collecting something like 90 billion data points. We do this monitoring at 6 global Ecolab intelligence centers spread throughout the globe. It's what we do to help our customers manage circularity of water, so reducing water and energy, driving performance and optimization, and we do that through a unique embedded set of sensors in each of these customer locations. So this is a foundation we charge for subscriptions. We have over 100,000 assets that we're routinely monitoring every day. So we take that, which is largely, I'll say, operational data and descriptive data, but we can do something really quite a bit more powerful with that, and we call that predictive analytics. This is an example of it, of a program in water safety intelligence. Quite simply, what we're doing here is we're not only monitoring the cooling tower and optimizing water use, we're also monitoring and reducing the risk of Legionella. I think many of you know what Legionella is. It's a waterborne pathogen. It's quite pernicious. It's difficult to measure. It needs to be done in an offline test. Here it is, we are recognizing markers in the stream, some proprietary algorithms and technology that allow us to see the early signals of potential Legionella growth. So the response time is greatly reduced. This is a huge advantage for our customers in many places has become the standard operating protocols. And lastly, let me talk about a journey we're on that we're really excited about, and that's our industrial asset intelligence. And again, a shout out, you'll have a chance to see some of that. This is an example in a power plant. And so what we're doing now is we're optimizing a cooling tower as well as other assets within that plant. It's often a heat exchanger or condenser, the chemical engineers love that kind of talk, okay. But the idea is we can co-optimize multiple assets within a customer location. And in doing so, we establish best-in-class. It's an important part of the methodology that we know what excellence looks like. We build that excellence within a customer location and then we look to replicate that across their network. So the basic foundation is established best-in-class, replicate it. It's a very powerful thing to do, particularly because our customers operate with a large heterogeneous base. But we know how to achieve excellence, we monetize this program, again, think about a stack. We have a routine connected chemistry, we have subscriptions. We get paid for intelligence platforms and on a journey to get paid also for a total value guarantees. So tremendous upside as we continue to grow these programs. So you've heard now about the 4 types of innovation. I won't reread the list here, but I will say that we're very excited about the role that innovation plays in driving growth margin and creating opportunities for Ecolab. It drives a lot of stickiness. It is a huge differentiator. We have really large moats around all of our major offerings, it's predicated on deep technology capability and strong relationships with our customers as well. So with that, I'll say thank you again. Please come see us. For those of you on the tour, you'll see some exemplifications of this and see some real-time data capture as well. So thank you, and I'll turn it over to Scott Kirkland, our CFO.

Thank you, Larry and Gail. Innovation is fascinating, especially for a finance guy. So thank you. Very excited to be here with you today. And also, I just wanted to say thank you for your interest and ownership of Ecolab. As Larry said, I'm the CFO. I've been in this role the last couple of years, but I've been with Ecolab going on 18 years and very excited to be here with you. So today, I'm going to talk about our financial priorities, including the path to our 20% operating income margin that Christophe referred to earlier. And I'll also talk about our strong balance sheet and strong cash generation model as well as our commitment to shareholder returns. As Christophe mentioned earlier, the last few years in the world have certainly been challenging, and of course, we were not immune. So from 2019 to 2022, our operating income margin declined 400 basis points from 16% in 2019 to 12% in 2022. That included a 600 basis point decline in our gross margin driven largely by the unprecedented inflation that we faced and that you heard about. That was partially offset by some very good SG&A productivity, which you'll hear more about and with the strong momentum that we have that Christophe had talked about that you heard from Darrell and with relatively modest incremental SG&A productivity, which you'll hear more about as well, we feel more confident than ever about hitting our long-term 20% operating income margin objective, which I'll talk more about here in a minute. So key to the gross margin recovery, as Christophe talked about recovering that gross margin at 600 basis points, we've already started to improve it this year, will be our long history of delivering positive pricing. They both talked about it. We have this long history of driving positive pricing by the value we create for our customers. You'll hear more about it from the business teams as well today. We delivered positive pricing well in excess of deliver product costs have for many years. We delivered positive pricing even when delivered product costs go down. We do this by the value we create for our customers. So going back to the beginning of 2021, we've seen this unprecedented inflation, but we've delivered cumulatively that $2.3 billion in pricing, amazing execution by the team, really amazing. And we did this despite the fact that we had 40% delivered product cost inflation during that period, as we have during other cycles, which is part of our playbook, we covered the dollar impact of that delivered product cost inflation within the first year despite a 40% increase. And we did that, obviously, by the value-based price we do, but also, I would say, by being more disciplined than ever about not only delivering, creating the value, but also communicating that value to the customers, been more disciplined than ever with that. And frankly, a process that we will continue to do in a more scalable way leveraging the digital tools that we've deployed over the last several years. So talking on gross margin. It's a big part of getting to the 20% OI target as we talked. So key to that will be that value-based pricing. And we've hit the dollars impact to that. But as we have during other inflationary cycles, we will start to recover the marginal impact as that inflation subsides. We're always chasing it a little bit, covering the dollars in the first year. And that's on the path to getting back to our pre-pandemic gross margins of the 44%, which you see here. And we've got a little bit of ways to go there, be about 40% in the second half of this year. And we will do that through a combination, as I've talked about, as Darrell talked about, the value-based pricing we deliver to our customers. We will be helped by that with the recovery of our high-margin institutional business, which Greg Cook will talk more about later. We will also benefit from the growth of high-margin businesses like Life Sciences, which Hayley Crowe will also talk about. And then additionally, we will continue to optimize our global supply chain, which frankly has been a -- become a greater competitive advantage over the last few years. It's been a great story by that team as well. And I referenced this briefly before, our SG&A productivity has been a great story the last few years. We've done this while maintaining the team, as Christophe mentioned, and investing in the business. Some of those investments are the great innovation you'll see today, and I hope you take advantage of that Larry and Gail had mentioned, really fascinating. But we also, during this period, continued to invest in digital technology, which you'll hear more and more about today. And those digital technologies were for the benefit of our customers, but we also leverage them for our own operations as well and helped us to deliver this great productivity, which you see here since 2019 delivered 250 basis points of SG&A margin improvement. And foundational to that and passionate about this I am, has been our global SAP platform, which we've been deploying for many years. It's foundational this, and I'll talk more about that in a second. But 10 years -- about 10 years ago in 2011, following the acquisition of Nalco, we had only about 35% of our sales transacted through SAP. And we've continued to deploy this platform globally. And by the end of this year, we'll be at about 85% of our sales on SAP and continue to grow that number. And in that period between there, the rest of our businesses and geographies operated on various instances of various ERPs, frankly. And I'll tell you why that's important. That becomes foundational to transforming the way we work. The ERP platform that we're deploying globally enables us to invest and leverage these other scalable digital solutions. And those solutions, as I mentioned, help drive customer value and customer experience, but they also help improve the experience of our own teams. The combination of that is really key to unlocking which Christophe had mentioned before, this $55 billion of sales opportunity with customers that we already serve today. And we do that, as Darrell referenced, by increasing the time that our teams have to sell. On top of that, we also get the benefit of being able to deliver functional G&A support at global scale. As a result, we will continue to invest both in deploying SAP as well as these digital tools to drive new levels of SG&A productivity as we move forward on the path to our 20% operating income margin target. Here's the building blocks. As I said, getting back to our pre-pandemic gross margins of the 44%, we're going to do that through a combination of this value-based pricing, which we've always done very well but have become even more disciplined about it in the last few years. We'll benefit from growth of high-margin businesses like Life Sciences, that you'll hear more about today. The recovery of the institutional business, which Greg will talk about has already started. And the combination of those is getting back to that pre-pandemic gross margins and then by transforming the way we work, leveraging the digital tools we have, leveraging the ERP platform that we're deploying, we will continue to drive incremental SG&A productivity. And that is why we have such great confidence that the 20% operating income margin target is more realistic than ever. I'll move over and talk a little bit about our balance sheet and our cash flow generation model. So we've had this long history of strong double-digit earnings growth that you've heard about 11% for many, many years. And that strong earnings growth has been created very strong free cash flows. In addition, our businesses are relatively light in terms of need for CapEx. We've had CapEx of about 5% to 6% of sales for many years. And within that, about half of that CapEx is product dispensing or other equipment at customer sites very highlighted to sales growth. In addition, we continue to look at opportunities to optimize working capital, leveraging the digital tools, the SAP platform that we've deployed to optimize working capital. And as a result, the combination of those, we have a very strong cash-generating model, with free cash flow conversion pretty consistently in that mid-90s, 90% to 100%. That strong cash generation as well as our very disciplined approach to capital allocation has resulted in a very strong balance sheet, which is very important to us. We've targeted for a long time, what we describe as A range metrics, meaning that our targeted leverage ratio is about 2x net debt to adjusted EBITDA. And we've been at that level, as you can see in this chart for many years. Over the last few years, we've been a little bit above that target following the Purolite acquisition in 2021, but as you'll see, following the Nalco acquisition, we continue to reduce that target and believe that we can get back down to our target leverage metrics over the next couple of years, like we did following the Nalco acquisition in 2011. And the reason this is important that very strong balance sheet enables us to make strategic investments in the business, which is very important for the long-term growth. And that's why it's so important to us to have this strong balance sheet. Those strategic investments include these value-accretive acquisitions, like Nalco or Purolite, some of the larger deals we've done over the last 10 years, but also the more than 40 smaller technology or geographic extensions that we've done over the last 10 years. And we have a very good track record of driving great returns and well demonstrated performance through our acquisitions. So in addition to the great operating performance and the strategy, very committed to shareholder returns. Here, you will see that the cash we've returned to shareholders over the last 10 years, which we're very committed to. Over the last year alone, we returned more than 100% of our free cash flow to shareholders through a combination of dividends and share repurchases. And over the last 10 years, as you'll see here, we've returned in cash to shareholders, $10 billion through a combination of dividend and share repurchases. So we will continue to be guided by these financial priorities, some of which you heard from Christophe today, and I also discussed, including our improved P&L targets that you see here, our free cash -- strong free cash flow conversion of this 90% to 100%, our strong balance sheet and our target leverage ratio of 2x net debt to adjusted EBITDA, and remaining consistent about our free cash flow priorities, which has been after we invest in the business, which is always job #1. We'll continue to grow the dividend in line with EPS growth, make the value-accretive acquisitions. As I said, we've done more than 40 over the last 10 years and what's left over, do share repurchases. So in closing, I feel very confident, as you heard from Christophe, you heard from me, about our ability to drive strong margin expansion. Like we did in Q2, where we had 130 basis points of gross margin expansion in Q2 alone, on the path to returning to our 44% gross margin and on the path to getting to our 20% operating income margin objective. We have a very strong free cash flow generating model and are very disciplined and want to maintain this very strong balance sheet, which enables us to invest back in the business and ultimately are committed to those strong shareholder returns and returning cash to shareholders. So with that, thank you, and I'll turn it back to Andy for Q&A.

Thanks, Scott. We're going to begin the first Q&A session. So we'll get the team reassembled up here. If you have a question, Karen and myself will be walking mics around. So those on the webcast can hear the question.

Thank you, Andy. We'll have Karen and Andy walking around with the mic. Good opportunity to ask kind of enterprise question now. We're going to have some business specific afterwards. As you know, especially with what you've heard, good momentum, good confidence for the quarters to come. And I feel really good, especially for Q3, but I'm going to come back to that afterwards. So with that, I think, first one [ Dave ].

David Begleiter, Deutsche Bank. Christophe and Larry, AI has become a very popular topic lately. I know you use AI on your digital innovation already, but can you discuss how AI is driving innovation, growth and margin expansion at Ecolab?

So let me start with it, Dave. And it's obviously a very fashionable topic now to talk about digital and AI. Just some background, we've been 30 years on digital technology, starting with 3D TRASAR especially in our water business. We have over 1,000 people working in that technology, not only in the U.S. but in Europe, in China and especially in India as well. It's always been to help drive our outcome in the most automated way that our customers can have a certain outcome that drives ultimately this total value delivered that you've heard from the team as well earlier today at a lower possible cost. And that's been the driving promise that we've had. That's been so for our customers. So it's really driving growth through technology that helps them get better outcome at a lower total cost. The second is really helping us, as you've heard from Darrell drive the productivity of our organization. This is true for the field force. This is true for the enterprise. SAP has been a big driver so for us, Dave. And for the front line, the fact that we can automate all the transactional work that are not worth of engineers, of physicists, or chemists that we have around the world. Well, we can have them spend way more time on driving value for our customers and driving more growth. And last but not least is really to improve the customer experience, that our customers are having. You've heard it from Scott, that you have 1 Ecolab experience, you are knowing what's happening around you. You can be Walmart, you know exactly what's happening in your stores, everything that we're doing as a company. And our team knows as well at the same time what the others are doing as well. So it's really this 1 customer, 1 Ecolab experience. It's driving growth. It's driving productivity and it's driving experiment, which is really our guiding principle. I'd like to have Larry maybe build on that as well.

So I think Christophe covered it well. Maybe one thing I would amplify is we're launching these things we call the intelligence platform. And we gave 1 example today in industrial asset. But that same methodology of establishing best-in-class and replicating it. We're really quite privileged. We have all the unique operating data and so we can take that same methodology into restaurants, into biopharma processing, data centers, food and beverage. So the idea is to bring out the best in operating conditions and leverage it. And we do that with AI, and we do that largely with proprietary algorithms and unique technology.

Thank you, Dave. Next one.

Yes, John McNulty, BMO. So you made a point around breakthrough innovation and really moving more toward that, which sounds like you're moving more from singles and doubles to home runs. How do you change an organization's investment to focus on the home runs, like what is the process that's getting you comfortable that you can move more toward breakthrough big type innovation for small onesies and twosies?

The biggest difference, I would say, John, is starting with the customer in mind. We've always done that, obviously, so for 100 years, but it's been product-based. How do we get a better product to do the job? We've shifted over the last few years. This whole outcome that we're seeing in breakthrough innovation today, what is the outcome of the work that we've done in the last 3, 4 years. It hasn't happened just the last 3, 4 months, obviously. It's really understanding what are the challenges that our customers need to solve. It can be getting to net-zero as a commitment that high-tech company might make. It might be understanding how can you produce a computer chip in Arizona where places are being invested in, in order to produce high-tech products as well. How can we have an offering that is helping them produce chips at the lowest cost with no water around basically? It's a different type of question that we try to solve for our customers. That's driving ultimately those breakthrough innovation that are comprehensive, bringing all the capabilities of the company, plus the ones we don't have yet today, which is obviously the idea of innovation to solve a comprehensive customer problem. But I'd like to have Gail or Larry to build on that because it's been a great journey for us, which I think is going to be game changing on our margin profile going forward.

Yes. I think, Christophe, you hit the nail on the head with where the starting point is. But I think from an organizational standpoint, what we've really done differently is Larry and the teams have looked across all -- everything in our pipeline and evaluated it against a high bar. And then we've resourced these and stayed very focused on them, making sure we're tracking how the performance is doing, asking the team what else do they need to make sure these are successful. So I think one of the big differences in the last, call it, 18-ish months is the operational focus against these programs.

Mike Harrison with Seaport Research Partners. You talked about the drivers of getting OI margin up to 20%. Can you talk at all about the timing? And do you expect that to be kind of a linear process? Or do you expect some kind of a step change at any point?

Great question, Mike. So I'll have Scott obviously build on that. But basically, we know the road map to get there, as you've heard it from Scott. The exact timing is also depending, obviously, on market condition. The faster inflation is going down, the faster we're going to get to this 20%. What I really like is that our volume is picking up steam. We have very good momentum going into the second half of the year. Pricing is in a very good place, as you've seen as well. You've seen productivity is improving as well at the same time. And delivered product cost has peaked and is easing. How fast that's going to happen is going to impact, obviously, the speed at which we're going to get to the 20%, but I think it's going to happen in the next few years. Is that Scott?

Yes. I'm not sure I have a lot to add to that. I agree with that. The timing is in the next few years, I think there will be lots of progress. I don't know that it will be linear. Certainly, there's external factors we'll have to deal with. But as you saw, the pricing that we have, where we've exceeded -- well exceeded on a dollar basis, and that's going to be one of the big drivers as we talked about the OI margin. There's more than just pricing and inflation of that, too. right? As we think about the growth in the high-margin businesses, which are going to be a big piece of that. We have a lot of tools in the toolkit, as I would say, to get to that 20% operating income margin target. As we think about how to continue to leverage these digital tools to drive productivity, I think it only adds to that. So I think the time line that Christophe gave is over the next few years, I think we'll make significant progress to get to that run rate.

What I really like to know, Mike, is that margin is usually the hardest to get. And that's where we have the best line of sight. It's very mechanical. It's getting back to gross margin that we used to have. So it's not something that is aspirational. This is something we used to have. And it's really showing that, that's the next threshold to 20%. It's not that we're going to stop there, obviously, we're going to keep building on that as well. So the hardest is probably where we have the best line of sight and getting the organic growth going, it's where we're the best at. So it's a very good combination of things to create value.

John Roberts, Credit Suisse. Which is bigger, Ecolab Science Certified or Water for Climate? Which will be bigger? And has Ecolab Science Certified sort of plateaued out now in terms of penetration?

It's a great question. I'd love to hear, obviously, Gail's view on that. I think both are going to be big. Today, Science Certified is bigger because we started early on. It was kind of brainchild of COVID, as we now also started in 2020. Ecolab Water for Climate started a year plus go. But it's really answering both customer needs. One was really, how can I help our customers really make sure that their guests feel safe back then and now can operate as well at the highest level of performance. On the Ecolab Water for Climate, it's the net-zero drive of our customers. It's really hard to get there. No one is better positioned than us to bring all the capabilities of the company to help those critical customers get to net-zero So today, Science Certified is not plateaued. If anything, it's going to keep growing. We are, by far, the leading program in the U.S. Most of the others ultimately are far behind us as well. We have some of the best brands, as you've heard from Gail as well that are endorsing and keep endorsing that program as well. I think we are at the beginning of that journey, and that's true for Water for Climate as well. But Gail, you have certainly a view on that?

Yes. No, I think it's a great question. And I agree with what Christophe said, really what's helping us continue the momentum behind Science Certified is this pivot toward it's high clean with less labor. And that labor is an enduring challenge across these markets. So we do continue to expect that program to grow. With regards to Ecolab Water for Climate, Christophe just hit the nail on the head. A lot of these publicly stated commitments, not the level of progress that our customers want to see against those goals. And so the fact we can add a solution today that can help them start on the journey. I think we're going to start to see that really pick up over the next few years.

The best way for us to grow is to capture this $55 billion because those are customers we already have, customers that we already serve. It's the cheapest and easiest to get there. Those 2 programs are at the end of the day, penetration programs, because they need the whole Ecolab in order to deliver that promise.

Shlomo Rosenbaum from Stifel. I just want to focus a little bit just on the revenue targets. Just historically, I mean, forever, you guys have been talking about 6% to 8% growth. And today, you're talking about 5% to 7% growth. Is there really any change in your outlook? Or is it more kind of a level set of -- this is what we have historically done more. And therefore, we just want to put it in the realistic range because the 20% margin seems like there's really a very big focus on that, and that's kind of the one thing that seems like it's a little bit lower than what we've seen before.

Yes. So finishing with where you ended or starting where you ended. So the 20% margin is we're going to get there. I'm not too worried about that. The growth profile here. For me, it's raising the bar. We used to have what we called an ambition, a stretched ambition. We've had many discussions with you about that. I want to have objective ranges that we expect to deliver. This is a big difference. It's kind of a commitment that we're making. Again, not every quarter or every year is going to be the same. But over the long term, this is the range that we're going to be in. So the 5% to 7% well, it's quite a bit higher than the 4% that we had pre-pandemic as well. And that's driven first by the pricing. As you've seen, so the TVD, total value delivered, is working really well, resonating very well with customers. You could see the pricing we could get as well, which is going to add at least a point to the pricing profile that we had in the past. And in terms of volume, it's adding 1 point as well to what we used to have as well in the past. So you get the pricing of 2% to 3% and you get a volume of 3% to 4%. This is better than what we've done for a very long time. So it's an acceleration of that performance, Shlomo, as an objective, not as an ambition, that's important to keep in mind. And for the EPS, it's the same thing. The ambition of getting to 15% or even more than that, which is going to be the case in the quarters to come, pretty sure about that as well. Well, it's to have that as an objective to be within that range, which is higher than the 11% we had the 10 years pre-pandemic, if we can call it that way. So in both cases, organic growth and EPS, it's raising the bar as an expectation, not just as an ambition. I think Andy is just behind you, yes.

Josh Spector with UBS. If I could sneak into first, just -- sorry, near term, if I could ask on 3Q, with what you showed before, are you cutting your guidance to the lower end of the range for 3Q in terms of EPS growth? Or was that just illustrative? And then just longer term, thinking about the value-based pricing in the slide that you showed, it's pretty interesting. But it looks like the multiple of the customer value was almost 3x the pricing at the start of the chart in 2019 and now it's closer to about 2x at the end of the chart. I'm just curious what's the dynamic that drives some of that? And is it energy related or something else?

Yes. So 2 things. First, your question on Q3. There is -- the long-term target is 12% to 15%. The guidance I gave for Q3 was 12% to 19%. And in Q3, we will clearly be on the higher end of the 12% to 19% for delivery in the third quarter. So just to be clear on this one, Q3 is coming up very nicely. Volume is also turning very good in terms of nice improvement like that in a world that's not exactly so accelerating as well. So on both sides, Josh, on the one hand, volume growth improving in the third quarter and the EPS delivery on the higher end of the 12% to 19% range. So glad I could clarify that. The question on TVD is not every quarter is created equal. You need to remember that the total value delivered is something where we need to have a customer agreement as well at the same time. This is not just a number that we put out there. It's really being in agreement with the customers. Some quarters it depends on how many customers we've had those discussions. Some other quarters, we're going to have more. That TVD is going to accelerate in the quarters to come. This is not something that has peaked, if anything, that's something that's picking up steam as well going forward. And that's going to drive, obviously, this value pricing we talk about, which is going to drive organic growth and EPS delivery as well. Darrell, any comment on the journey on TVD with the team, how it's going?

Look, it has been a journey for us. Absolutely. I think the teams have done a really fabulous job over the last couple of years, particularly as we've seen some really historic inflationary headwinds, which, of course, we've had to price against and to make sure that we get the pricing against those deflationary headwinds, we needed to demonstrate an enormous amount of value. So I think the teams have done a great job pricing against the DPC, but also making sure that we have a consistent flow of value conversations with our customers. I think generally, as we think about our pricing activity against DPC, if we could hold our margins, it will be a 2x multiple. We look to do a lot better than that with the value story that we have with our customers because they expect it. So I think it's been a really terrific journey. I think the teams have done a marvelous job capturing a lot of value, which has played nicely into the Ecolab story of Customer for Life. Because without those value stories and without that signed off value capture from the customer, I think we would have seen much higher retention rates over the last couple of years than we've seen.

Let me share an example of that we just experienced over the last few months. In Industrial, we don't name customers without their permission, it's way too early, where we got an incremental $100 million new business with an existing customer, but with many more sites and applications. We committed to deliver $100 million, the same number as the sales in total value delivered, and we guaranteed 50% because we are so sure about it. So saying it's $100 million incremental sales, we're going to deliver $100 million of TVD. We're going to guarantee $50 million no matter what and our internal ambition is even to go higher than the $100 million. That's been a real example of what we've done over the past few months, which is showing so how TVDs can be impactful for our customers and for our performance as well. Maybe 2 more questions, and then we'll go to the break. Andy is in the back there.

Chris Parkinson from Mizuho. You've been getting 2% to 3% pricing since before I was born. And just given the explicit quantifiable value-added proposition, sorry, for all the buzzwords, especially in your water business, is there any differentiating thought process around extracting the maximum amount of price, especially on all the innovation slides? It seems like you have a lot of great products. I mean you're kind of sticking with what you've had for decades. But just given how quantifiable that is and the value proposition is that identifiable? Are you comfortable as CEO, just what you've been accomplishing and especially over the last 2 years, which has been fantastic. But is there a different thought process, perhaps a little bit more aggressive on a go-forward basis?

Yes. So Chris, the truth is that a pre-pandemic pre-2020, the average was 1.4% of pricing. So it is [ 1% to 2% ]. That's what we've delivered as a company. That's something we wanted to raise. We've really demonstrated with TVD now that we can get much higher than that. We will take that in steps in terms of the commitments I'm making to you all in the spirit of under promising and over delivering. That's why if we were 1% to 2% in our pricing model, which was in our ambition of the 6% to 8%, by the way as well, moving to 2% to 3% is a first step. And internally, as you've seen, we've delivered much better than that, the last few years. The examples we talked about, the total value delivery, the innovation, the new business with higher margin are going to help secure the 2% to 3%. And Chris, if we can get better than that, we will go for more than that, for sure.

ROIC is a metric that was noticeably not there in your slides today unless I missed it. Is that a metric that just comes up less often throughout the organization these days? Or did I just miss it? And can you just give us your updated thoughts on how you're thinking about ROIC now and moving forward?

I'll let Scott obviously talk to that. We talk on an annual basis of ROIC, not quarter by quarter. Obviously, this is a core metric for our corporate teams. So for sure, we spend a lot of time on that, and I like a lot the progress that we're making here. So Scott?

Yes, you probably hear us talking less about it, certainly internally, because for us, we know how we drive ROIC is through OI margin improvement. And how we improve those OI margins, that will have a big impact on ROIC. So it's something we've always committed to especially after these acquisitions to continue to drive at least 100 basis points of ROIC improvement going forward. And I think we're well positioned to do that, and it will be through this. And if we hit that 20% operating income margin objective, it should be even better than that. So it's something we're very focused on. But we also know to keep it clear and simple internally as well for the teams, we know because we're not very capital intensive, it's OI margin that's going to drive that. And with the right outcome there, we will like where we end up on ROIC.

[indiscernible]

It's really on the 100 basis points because as you know, as you do in acquisitions in the short term, it has an impact on that. So for us, it's really continuing to drive that accretion in ROIC.

And getting the 100 basis points, Tim, is what we've committed to, and it's still unchanged. It's really making sure in the spirit of excellent execution in the company to focus on a few things. We are a sales organization. So ultimately, it's getting the growth going, that's the sales growth. It's getting the margin right and then so getting our invested capital, working capital down, well, it's not a work that our sales organization needs to focus on. This is supply chain. This is the finance team, and I like a lot the progress that we're making here. So if we make more money, reduce our invested capital, obviously, good things are going to happen. One more.

Jeff Zekauskas from JPMorgan. What I was hoping you would do, Christophe, is tell us how you're thinking about the institutional business? That is, if you look at the volume growth rate in the past based on pre-COVID trends, it might be 1 rate of growth. And -- and what we've seen is we've seen trends toward dining in rather than dining out. I think at McDonald's now maybe 10% of their volume is dining in versus 25% in the past or that's where they want to move it. So when you look at the volume characteristics of the institutional business going forward, are they at the same rate as the way you saw them pre-COVID in the past? Are they faster? Are they slower? What do you make of the volume progression of this division in the future?

I love that question, and you and I have had many discussions on that. Jeff. That's not a new one. I don't want to steal a Greg's thunder, obviously, but I'm really pleased with what I'm seeing in institutional. Honestly, in 2020 during COVID, it was hard to be overly optimistic on how the hospitality industries or restaurants and hotels would be doing in the long run. Interestingly enough, what happened has been an improvement of that industry. They're doing, for the most part, quite well, both hotels and restaurants is not going to stay at this huge growth level that they are right now. But it's going to be better, I believe, than where it used to be. Interestingly enough, so the true fact is that 1/3 of the traffic today is 3D as they call it. So it's drive-through, delivery and digital ordering. I think I've got that right, the famous 3D. So it's roughly 1/3, and it's true for the quick-serve restaurants that you mentioned as well so without being too customer-specific. Interestingly enough, those customers have as well learned to make much more money which they really like, interestingly enough, not too hard to understand. Obviously, they've managed to reduce their costs because they got less service provided as we all experience are doing our own beds in expensive hotels. And the price of the rooms have gone up. That drives much better margins, obviously, for restaurants and hotel. They have no ambition to change that. Interestingly enough, that's generated a totally different discussion with us. Because now it's how can I keep my high margin by automating labor. At the end of the day those are labor intensive industry, and it's removing the waste in food that they have as well at the same time. This is playing exactly to what we're doing as a company. For 100 years, it's an industry that hasn't changed much. I mean, restaurants and hotels are kind of the same until 2019. They've changed a lot in the last 3 years, which is exactly what we are providing for them, automation, insights. I was talking to a customer lately here in town, pretty large QSR company, without naming them, with yellow arches. And basically saying, well, I'd like to understand what would be my performance if my 40,000 units were at the performance of the best-performing unit, pretty simple question, hard to answer. This is what we do. We're serving 95% of those units around the world. We can provide that insight and execute against it afterwards. So at the end of the day, Jeff, if I have some question mark about the future of hospitality during COVID, I'm much more bullish today than I was back then. So you'll see more from Greg. I think that business is on fire. So with that, we'll have an opportunity then afterwards for another Q&A after all the businesses. we are perfectly on time. So let's get a break here. Let's come back at 9:40. So I'll -- take coffee, doughnuts, you'll get the help as well from the team if you need anything special as well for you as well. So 9:40, be back here, and then we'll get to the businesses. Thank you. [Break]

Hey, everyone, begin to take your seats. We're going to get started here in about a minute. All right, everyone, we're going to get started here with the business presentations. First off, we've got Nick Alfano, who's going to talk more about our water business.

All right. Thank you, Andy, and good morning to all. My name is Nick Alfano, and I've been with Ecolab for 28 years. holding leadership positions in both the global F&B and the global water and light business. Today, I'm responsible for the Industrial business for the company. It's my pleasure today to speak to you on the large water business in the company and the enormous potential for continued growth and value that we deliver to our customers. I'll also get specific on the 2 core dedicated water businesses, heavy and light and talk about the opportunities for growth there. But first, some context on the size of the water business in the company and what we have in the 2 core dedicated water businesses. So you see 2 numbers on this slide. The first is $10 billion representing company revenue that touches water in all of our businesses. You see that most of what we do touches water. And in fact, 70% of our revenue is derived from water. At $10 billion in water sales, this makes us the #1 water company in the world. The second number is $3.5 billion, and that represents the sales of the 2 dedicated core water businesses that we call heavy and light water. These are growing and profitable businesses. And in the case of light water, we drive tremendous enterprise selling synergies with the F&B division as we strive for 100% water penetration in that base. So this is how the heavy and light sectors break out by end-use segments. On the heavy businesses, we provide both water and process side solutions in downstream, chemicals, mining and for the mining, it's both traditional and new mining operations like lithium extraction, which I'll talk about later, power generation and primary metals. Light is shown as well with the water side of the F&B plants, intensified focus on manufacturing, hospitals, healthcare facilities and commercial buildings in our institutional segment and then our high-growth global high-tech business, which focuses on data centers and microelectronics, otherwise known as chip manufacturing. The model combines highly trained on-site experts, 3DT connected chemistry and controllers and the ability to drive analytics and insights via customized digital offerings like water flow intelligence and water quality intelligence, which are focused on water identification, and optimization in our customers' operations. So our opportunity is large with roughly a 9% share of the business in the heavy and light water space. We have attractive growth drivers in large innovation projects, as you've already heard, which are directed at emerging customer needs, the highly differentiated Ecolab Water for Climate offering which optimizes all water streams in plants and our constant focus on entering new segments like we did with Global High Tech in 2021. When we enter in new segment, we look for global opportunities where we can leverage the scale we have in our enterprise model. This was especially evident in our high-tech segments where the customer needs are similar, leaving with the need to conserve water and ensure continuous production. Now water sales have been strong and accelerating with a 5% compounded annual growth rate and we are now focused on volume growth across all customer segments, as was mentioned before. Our target is 5% to 7% organic, as also was mentioned, and we've achieved our pre-pandemic OI margin rate in 2023, and the goal is '28, is 18%. Margin growth through new innovation and digital offerings will drive accretion noted on the slide. and we'll continue to price for value delivered with strong TVD in each customer location, as was already mentioned by Darrell. Now we like the market trends across all segments which give us attractive growth opportunities in this business. But what I'll do is I'll focus on a few here. So for example, in mining, with the explosive growth of EVs, the need for lithium, copper and nickel is huge. And this is an opportunity to help customers with direct lithium extraction both from hard rock and from brine solutions. This also presents an opportunity for specialized Purolite resins to extract lithium. In Global High Tech, the U.S. CHIPS Act has incented big chip manufacturers to make chips in water-scarce areas of the United States. These same companies are large customers of ours in Korea and China and we help them produce quality chips and manage challenging water and wastewater issues. Since ultra-pure water supply is critical to manufacturing of every chip, we must continue to broaden our offering there, as was mentioned by Larry. So overall, climate regulations and global water scarcity, especially in large industrial users, pose excellent growth opportunities for us. So speaking of water scarcity, what you see on the slide is less than 1.2% of earth's water is usable freshwater and it's rapidly depleting. As you can also see, by 2030, demand will exceed supply by 56%. So many of our customers simply don't have enough water to meet their future production goals and this is why our value proposition includes water reduction, water reuse and water recycle and incorporates innovation and digital solutions like our offering called Water Flow Intelligence. Late lastly, one large international steel producer recently turned to Ecolab to manage all water operations in a water-starved area in order to meet growing demands for their products with the same incoming water rate. We know that industry consumes 59% of water use in high-income countries and only 150 companies use 1/3 of that water. For this reason, Ecolab was a founding member of the Water Resilience Coalition, which now numbers 36 companies. The group of 150 companies are all current Ecolab customers. So we are in a very unique position to not only help them achieve their production and savings goals but to also help provide water access for 300 million people by 2050, which is also a stated goal of that coalition. And as you can see here, our customers are taking the commitment to water and climate seriously and many in the F&B, chemicals, paper and pharma space have definitive goals by 2025 or 2030. The customers shown are all Ecolab partners who are highly engaged in optimizing water and energy in their plants. In the case of the food companies noted on the slide, we incorporate enterprise solutions in both water treatment and cleaning and hygiene optimization to achieve the stated targets. These are excellent examples of how our enterprise selling model works for the benefit of our customers. In both cases, the initial selling model included an end-to-end management of all water in their plants and the incorporation of 3DT connected controllers. Now speaking of the Water and Energy Nexus, this is key to the way that we sell to our customers. So if you think about it, every drop of water in a plant needs to be cooled, heated and transported, which requires energy. So reducing the amount of water, therefore, reduces the energy consumption and frankly, that's a very large item on our customers' P&Ls. So our value proposition, as I mentioned before, of reducing, reusing and recycling water is good for the planet, good for our customers' business and drives growth and margin accretion for us. One of our digital offerings, Water Flow Intelligence is directed at identifying all the water in the plant so we can look for optimization opportunities, which in turn affects energy consumption. Because of the huge increase in customer water and energy commitments, we created Ecolab Water for Climate, which was mentioned a little bit earlier. And Ecolab Water for Climate is a holistic offering designed to reduce, reuse and recycle water across a customer's enterprise. So what I'd like to do is kind of tell you how it works, okay? So first, a highly skilled audit team provides a detailed assessment of every unit operation in the plant with the goal of identifying water use and optimization potential. Next, our local field reps and technical specialists in the plants work the opportunities and tally up the savings for the customer on specialized dashboards. Then 3D TRASAR connected controllers, monitor chemistry usage and continuously optimize the water, especially during upset conditions. We have over 25,000 connected controllers in the water business today. Ecolab 3D looks for insights in the data collected and then suggest the proper actions for the customer based on their operating conditions. We deploy AI models and data science to drive best-in-class performance. Then as mentioned before, all of that data flows via the cloud into our Ecolab Global Intelligence Center, which gives 24/7 visibility to both our customers and our reps and can solve an issue before it becomes a major problem. The end result enhance productivity, reduced water energy and improved profitability for our customers. No other company has the comprehensive capability of Ecolab Water for Climate and the specialized experts needed to deliver the outcome. So the power of our model has been mentioned before is the ability to scale it to our customers' enterprise. Because of the model I just explained in Ecolab Water for Climate, we can deploy it across a variety of operations from data centers to food plants to hotels. In these operations, -- we collect and curate data, so we know what best-in-class performance looks like. This is important as customers highly desire benchmark information on how their operation performs versus similar plants. Then we deploy end-to-end solutions to drive what our customers need in all of their operations. Using a specialized dashboard in our financial impact, digital offering, we quantify the value with this enterprise approach. So this model provides excellent stickiness and retention with customers and allows us to continue to deploy new innovation as customer needs evolve. This, in turn, drives margin accretion for the business. So here is how our model of operations come together in a plant. In the example shown, a typical data center which has multiple servers generating a lot of heat, that heat must get dissipated in order to allow the data center to operate. We like the data center market because it's growing rapidly, uses a lot of water and must maintain 100% uptime, which is perfectly aligned to our model. Here you see how the various offerings from pretreatment of the incoming water, cooling water for key process equipment, managed operations and humidification systems and consulting and digital programs that optimize every -- optimized water and energy consumption. And then over to the right, the data shows the large annual savings in water, energy and greenhouse gas emissions, which yields a healthy return on investment. So data centers, and you'll see it over there in the -- when you move over to the Innovation Fair, are a very lucrative segment within our light business and provides great growth and highly attractive margins. So another market in our high-tech portfolio is microelectronics, and we're excited about this due to the growth and attractive margins. Microelectronics plants are large, use a lot of water and generate a lot of wastewater, which must be treated to remove impurities to meet local regulations. Additionally, the plants are moving to water scarce areas of the U.S., which makes our offerings more important. So let's take a look at the video, highlighting our innovation, which you will later see in the innovation showcase. [Presentation]

So in summary, we're excited about the large and growing water business in the company. As the world's #1 water company, we will continue to leverage our scale for continued growth. As I detailed, our impact is great in driving excellent outcomes on the Water Energy Nexus via our end-to-end model. We like our ability to deploy breakthrough innovation to drive margins and we will continue to enter new segments to drive growth as evidenced by our entry into the high-tech space in 2021 and the direct lithium extraction market this year. So thank you for listening today. And now I'm pleased to introduce Chris Roberts, EVP and GM of our Global Food & Beverage business. Chris?

Thank you, Nick. Good morning, everyone. My name is Chris Roberts, and I'm the Executive Vice President and General Manager of Global Food & Beverage business. I've been in Ecolab for 3 years, but I have over 30 years of experience across sales, marketing and general management positions across the food industry. Today, I'll share the food and beverage story and strategy as it relates to how we'll deliver sustained and accelerating growth in volume and margins while we create value for our customers. Now as you all know, Oops, wrong way. Here we go. As you all know, the food in Ecolab's Food -- and beverage -- global food and beverage team works across 6 key segments, delivering superior outcomes in water management and food hygiene, better than anyone else in the industry. We do this by focusing on 4 key platforms: cleaning and antimicrobial, water management, engineering and digital and analytics and insights. In the end, these result in superior food hygiene for our customers, reduce water usage and optimize operational costs. This is how we're able to deliver quantifiable value for both our customers and for Ecolab. Now although we do have a leading market position, there is still a tremendous growth opportunity. Our playbook for growth aligns tightly with our customers' most critical needs. And they are, as you've heard before, solving the water scarcity challenge, continuing to produce safe food and using digital tools to drive productivity. Consistent with the Industrial segment, the food and beverage business has a solid track record in delivering organic sales and operating income growth. Most importantly, we see a path forward to continuing this trend by using innovative products and technologies that enable our team to solve our customers' most pressing needs. Now our Food and Beverage business is well positioned to win in an evolving food marketplace, where customers are increasingly focused on cost, sustainability is critical to both our consumers and our customers and everyone's attention is on constantly changing food safety requirements. In addition, our customers are quickly adopting digital tools that provide insights into how they can improve productivity. When you take these together holistically, the food industry is focused on managing water commitments and staying on the forefront of delivering the complexity of clean. The Ecolab Food and Beverage team is uniquely qualified to leverage our enterprise scale and capability to deliver these outcomes that create tangible value for customers in an environment that is increasingly dynamic and complex with water at the very core of our growth opportunity. Water is critical to food and beverage customers and as Nick shared with you, 150 manufacturers represent 33% of the water usage. 30% of that 150 are large food and beverage processors. And when you think about the fact that given that 75% of the energy and manufacturing is driven by water use. The food industry has communicated time-bound water and climate goals. Now achieving these commitments are critical importance to our customers because they are linked to the equity of their brands. That's why we're focused on working with them to reduce water consumption and more importantly, this is why the industry's water challenge is such a great example of the power of our enterprise selling capability and our value proposition at work. Let me provide an example. While others are just getting started, Ecolab's journey to become the #1 provider of water management and food hygiene solutions began over 10 years ago when Nalco Water and Ecolab merged. Since that initial combination, we've developed and deployed numerous product, technology and process innovations that are superior to all other innovations. Our food and beverage global solutions model is the epitome of our experience and investments. On the surface, it's simply the combination of our industry-leading hygiene and water reduction capabilities powered by our digital solutions. But the secret sauce or the real power of the FBGS proposition lies in the integrated team whose focus is on the delivery of superior hygiene and water reduction outcomes to the largest food and beverage companies in the world. We do this by circling the customer with one contact, one contract and effectively delivering one Ecolab. This capability and the opportunity to close the water penetration gap is at the core of the $2.5 billion global opportunity, which is the driving force behind our long-term growth. with the largest customers in our portfolio. Given the water challenges our customers are confronted with, our Ecolab water for climate program is both well timed and in sync with our customers' most critical needs. It begins with a total plant assessment, followed by focused execution by our field teams and is supplemented by our 3D technologies, which continually gather data and deliver actionable insights to our customers' manufacturing sites. All of this is monitored by our world-class global intelligence centers, which have unique real-time visibility to our customers' operations around the world. This enables us to circle the customer everywhere it matters throughout the world. Taken together, we are able to create a road map to guide our customers through this water reduction journey by activating our process, technology and team targeted to the specific water challenges, a customer faces. And we do this with the objective of enhancing productivity, reducing water and improving profitability. Here's a live example of how this comes together in one site of a brewery customer. We start with the technology we deploy throughout the plant to deliver outcomes and monitor our food, hygiene and water management programs. Now this technology provides us with real-time feedback utilizing our 3D TRASAR technologies as was referenced before. In this case, by implementing our processes, technology and team, we've been able to deliver tangible value in a short period of time. For context, we're delivering these results in less than 25% of this customer's manufacturing plants. So when you step back and think about this on a broader perspective, the potential in just this one customer who has protect production sites around the world is sizable. More importantly, this is why we're excited about the volume growth and margin expansion opportunity that exists in our total customer portfolio. Another example, which shows how we're focused and work to solve a critical challenge is in the area of food hygiene. Let's take a look at the video, and then I'll talk about it a bit more. [Presentation]

Now in this case, our 3D technology, which will be able to ask questions about and see during the product showcase portion of our program, reduce operational complexity while improving food safety and ensuring high food quality. Similar to the previous example, the payoff for the customer was meaningful, especially when you put this into the context of this being the value created in one location of a franchise bottler who operates production sites across North America. So I'll end where I began. First, Ecolab's Food and Beverage business is a strong global franchise with the exciting and achievable growth upside. Second, we'll continue to build our track record of growth -- our track record of growth by leveraging Ecolab's superior water for climate, food hygiene and digital technologies. Finally, we're well positioned to create unmatched value. After all, we've been doing it for over 10 years. We've been addressing a customer pain point or customer pain points with an integrated solution while protecting what's vital around the world. In the end, our objective is to be our customers' partner of choice by leveraging our superior capability to deliver water and hygiene solutions for quality, sustainability and performance better than anyone else. And we'll do this while delivering margin expansion and profitable growth for the Ecolab enterprise. Thank you. And now I'd like to bring up Greg Cook, the man on fire.

I love it. I love it. Thank you, Chris. Thank you very much. Well, welcome, everybody, and welcome to everybody online. It's great to be with you. My name is Greg Cook. I've been here for 26 years, effective last week and had a phenomenal opportunity to have growth opportunities in multiple functions across the business, multiple divisions across the business, leading our global and corporate account sales teams for institutional, leading multiple regions around the world and now back to institutional. And as Christophe mentioned earlier, and if you look around the pillars, you see, obviously, it's our 100th year anniversary. And I will tell you that we, in particular, are extremely proud that year 1 started in institutional with one product, one customer and one division. But what we're more proud of is that over that time period, we have evolved, we've changed. We've taken advantage of opportunities. We have faced some hard times, we've recovered, and we have grown and it has grown into the business we see today. So if you look at the institutional and specialty sector, which I'm proud to lead, it's comprised of basically 6 segments: full-service restaurants, QSR or the quick service restaurants, food retail, the lodging industry, long-term care and then public spaces. And those 6 segments are anchored with basically 6 key platforms. The warewashing program like detergents you'd see in the back of the house, the laundry program, surface hygiene, floor care, auditing services and insights. And all 6 of those platforms are centered around driving maximum outcomes, minimizing impact of the customer location and optimizing costs, a long way of saying delivering customer value. All right? And we operate within a huge market, and we've got a huge opportunity to grow. You see we operate within a $40-plus billion market space. And we really have 3 key areas where we're focused on driving growth. We will adapt, take advantage of opportunities, and we will transform the business to take advantage of growth opportunities. We will drive new location penetration, and we will continue to drive penetration within existing customers, which you've heard about earlier today. And we have been -- you heard through Larry, and we will continue to develop, implement and sell breakthrough innovation to segments we serve today and very likely new segments that we'll look at entering. So the growth has been strong. We've got a 4% CAGR if you look back over 2019, which even includes the COVID periods. And our overall sales -- organic sales growth is in that 4% to 6% range. We talked earlier about operating income dollars. We have said, we have repeatedly said that our number 1 objective is recovery operating income dollars first and then we will recover operating margins. And the way we exited Q4 of 2020 and the performance we've seen in the first quarter and second quarter of this year gives me even more confidence that we will exit this year equaling that of 2019 when it comes to operating income dollars. That has been a massive focus for us. And we will flip our focus laser sharp on getting back to operating margin levels of 2019 and with the target of exceeding that going forward. So as talked about earlier, this has been a very dynamic market that we operate in. If you look at the full service restaurant segment, Off-premise has risen. On-premise has decreased. Locations have closed, and I'll talk more about that later. From a QSR perspective, the drive-through and the digital ordering system, the 3Ds that Christophe mentioned, has gained momentum. Retail has seen convenience delivery. Lodging has gone through procedure changes. Long-term care has had policy overhauls and public spaces had seen slow to limited return to office, which is starting to pick up. What is common across all those segments is the labor challenge was acute and the labor challenge is still prevalent within all of these segments. Inflationary pressures, although have eased are still inflationary pressures. Information intelligence, the AI segment has picked up, which is a good thing and continued focus on sustainability. What I will say is all of these things play within our wheelhouse. These challenges make good players better and better players great, and these challenges actually have troubled suppliers, not so good. So quite honestly, this has been a competitive advantage for us right here. And Christophe mentioned earlier that these segments have adjusted. They've changed their way of doing, and they are actually in a pretty good space. But these headwinds still face them, which is where it plays to our strength. So let me talk a little bit more about some of these challenges and how we've pivoted to meet this new reality. If you look at this chart, and if you wouldn't mind, let me just set it up for a second. This is the institutional business targeted around the Food service segment, which really represents a good chunk of our business and is representative on this. If you look at the market as a whole for locations that have opened net of locations that have closed, the segment is down almost 10%. If you look at that from an Ecolab perspective over that time frame, we are basically almost back to 2019 account levels. Our objective has been to take market share. And I think you can see here the team has done a nice job on executing about taking market share. The next set of charts is when you look at demand, so despite the segment being down 10% almost. The dine-in traffic, as was talked about earlier, is down almost 35%. Off-premise delivery has increased on-premise seats and seats is down roughly 30% to 35%. So we've adjusted that too. But if you look at that entire time period from an Ecolab sales perspective, with new unit gains with solution penetration with pricing power, we are at 112% of over 2019 sales level was. And we're on that journey as we continue. And then we've also focused acutely on our SG&A side of the business. We have leverage, as Scott mentioned, the digital investments that we've made not only in making our customers better, but in making our teams better, we have leveraged those investments to make the team more productive, same time. So driving SG&A synergies, which is getting back to our confidence level of getting back to 2019 operating income levels. So I talked about our growth target of getting to 4 to 6 and really, when you look at that growth trajectory, we're going to drive performance in 3 key areas. We are going to look at driving productivity through new channels and new models to drive productivity to our team, which means selling more. We're also going to look at account penetration and customer gain penetration. And we will do that by also leveraging innovation and introducing new innovation to our teams and to our customers. So I'll touch on each one of these 3 in a little more detail. So we have been transforming our teams. We have been leveraging digital that we invested in during COVID and pre-COVID. And so we have, in an effort trying to free up the time of our teams to spend more of their time selling than administrative side. And I will tell you, when I was leading the global corporate account team, nothing bothers a salesperson more than spending a good chunk of their day on sales and not actually visiting customers to sell. So we have aggressively looked to either eliminate or redirect the administrative side of a role to allow them to spend more time calling on customers and in a customer's location identifying opportunities and selling solution penetration. At the same time, we have been enhancing the strength of our service team, and we've been looking to do that by Remote Assist, which was talked about earlier. Great technology that allows our customers, in some cases, get a faster response by a nonservice person fixing their problem faster or giving our service team heads up on what needs to be done when they get there, making them more effective, quicker customer resolution and overall doing it in a lot faster way. We're also looking at expanding the touch points of our service team, making them more efficient and more effective. And we're also providing on-demand digital training with our teams to help them and also our customers to help them identify things when we teach them that they can reiterate when we leave. So great progress being made with the team. Gail did a fantastic job about talking and leveraging Ecolab Science Certified. A program that initially started as a response to COVID has quickly evolved into a program cell. Gail talked about all the fantastic aspects of Ecolab Science Certified. Sales-based program, compliance, operational efficiency, brand protection. Customers do like it. It does lead to consumer confidence. It does lead into location confidence, brand standard, but I'll tell you who else loves it is our teams. It is a fantastic way of bundling a program in a communication with the customer that gets across the value. So it really is one that resonates with customers. And I will tell you the reason it resonates with customers is because it resonates with our teams. So fantastic work on that program, more to come. And then the third side is leveraging innovation that we have in developing new innovation. So the Dish machine. Dish machine is nothing new to our business. actually, we were the ones who introduced it largely within our business years ago. It is an anchor of a location. It is a program that our team anchors and builds around to drive a program. It's what makes us sticky. It's what makes our service team valuable. So that is nothing new. What is new is how we continue to evolve the Dish machine. We are working aggressively on digital technology that gains more insights with all the pilots and programs we're rolling out in China, which is a fantastic landscape to try new things. We've been leveraging Internet of technology. We've been leveraging proactive, reactive technology on how we respond and actually how we can potentially make the Dish machine cheaper. What that's going to allow us to do is to expand that into new geographies and in many cases, smaller footprints, which will allow new opportunities and new value for customers. So -- and what I like is another anchor within a location, which is fantastic. We're taking that machine technology, and we're leveraging and combining with it our Solids expertise. We talked about how labor has been and labor will continue to be a challenge within our customers. For those of you who had a restaurant or a hotel and you noticed the bar, you noticed many times years ago, people washing Glassware was done many times manual, grab a glass, dish, dip it, dip it, dip it, let it dry. People don't want to have time to do that. Number one, they may not have the labor to do it. Number two, they may not have the time to do it. So we have combined our Solids technology with an under counter machine that takes basically the longevity of a solid program, which dissolves over time, eliminates the need for labor, eliminates the need for space, which is also a challenge and combines really our expertise on the machine side, our patented technology and expertise on the solid side and combines it to provide results, reduce labor and better operational costs for the customers. On our side, it drives better margins. And then later today, you'll see we've also combined that technology in a different way. We've combined it to expand our footprint and our coverage to smaller spaces and new footprints with what we're now calling ready dose, which is like a tablet application, which unlike the Dish machine, where we dissolve the detergents to dissolve over a period of time, we've taken innovative technology, and Larry can talk in more detail about this. That actually dissolves rapidly at a customer within a spray bottle, which allows application of a product on demand, where other products dissolve over time. So we've taken that to save labor. We've opened up new opportunities for market space. And we've also opened up to the team a new opportunity to drive new solutions within customers. And then just like we learned from the Dish machine, we've got a fantastic partnership with Miso that allows us to take the labor challenge it, apply it with an operation with automation and learn to see where other opportunities are going to exist for further automation and further opportunities through this partnership. So both of these, you're going to see in more detail during the innovation show. But for now, we've got a quick little video on ready dose to give you kind of a highlight. [Presentation]

All right. Great. And both that and the Miso will be, again, the innovation thing first. So stop by. There's some great information there. Let me go back here. All right, just like you've seen before, we've got a lot of great innovation. We've got people who love to circle the customer. Here's an example of a property like you saw with Chris in a food and beverage plant, where we take this philosophy in concept to a lodging customer. And we look to blanket that customer with our breadth of solutions and programs that we provide, Ecolab Science Certified. So here you see at a property, we go across from front of the house, the housekeeping categories, the pool and spa in the property, a laundry facility, surface and quality and then obviously, the restaurant at a location. And we cover all of those locations with our breadth of solutions and programs, obviously targeted driving overall results and lowest total cost for the customer. At the same time, we blanket it with our overall cross-divisional programs, Pest Elimination, Nalco Water, EcoSure, Lobster training, a full breadth of programs and products that our teams are educated on and comfortable in driving across not only that property, but the entire chain as we go through. So again, the teams are also excited. And we're delivering like it shows on the far right, the EROI to go along with it. That number one gets us customers, keeps us customers and secures our pricing and our margins within these locations. All right. So we close it up, I do feel extremely confident in where we're at. I may not have said we're on fire, but I will say we're on fire right now is the team is back to winning. And I will say this team has been bread to win. So you can imagine the last couple of years in the face of an economy like this, that has not been the most enjoyable time for the team. But what I will say is that the team has delivered. The team has done extremely well. The team has gotten pricing when they've needed pricing, and they've been focused on driving penetration and solutions and volume through competitive gains because when the market turns and the market has turned, you get leverage on all 3 of those categories. So we have transformed the business, and we will continue to transform the business to take advantage of opportunities that we're faced with. We will drive penetration both within existing customers and to gain new customers, and we will use Ecolab Science Certified. Again, the team loves that as a program to talk to our customers. And we will continue to leverage innovation and drive new breakthrough innovation as we drive on our path of getting to that 4 and 6 on top and the 22 on the bottom. So based on that, I'd like to turn it over to my good friend, Nicolas Granucci, and one of the businesses I love being in the Pest Elimination business.

Thank you, Greg, and good morning, everybody. My name is Nicolas Granucci. I've been with Ecolab for 21 years, starting our food retail business, had roles in QSR in institutional in the U.S., based in the U.S., based in Europe and more recently based in China. Today, I'm excited to represent the Pest Elimination business, which is a strong and consistent growth platform or like we'd like to say, pest is best right? Pest elimination is not pest control. We focus on the commercial segment of the market where a single pest incident had a large impact. So merely controlling is not nearly enough. Our goal is to eliminate the possibility that pests will even get into these buildings in restaurants, in food retail, in food manufacturing or in hotels. And we do this with science-based innovation, in equipment and in service protocols, leveraging the large amounts of data that we gather together with our other Ecolab services so that we can deploy our expert service in the most impactful way. When we do this, we eliminate the possibility of pests and provide -- in a more productive way so that we can provide a great return to our customers. The commercial pest industry is large, at least $15 billion. So we're just getting started, and we have a long opportunity to grow. And we capitalize on this opportunity with 3 major growth strategies. First of all, like I mentioned, enterprise selling, you heard about Circling the Customer by introducing pest services to other customers that are already customers of another Ecolab division. By expanding our expertise and capabilities into new segments in the commercial pest control, where we can have the most impact and we can add the most value. And finally, by continuing to leverage digital technology and data for value for our customers and for productivity. I will touch on these 3 strategies shortly here. Before I do that, we have strong growth momentum, both growing the top line and also expanding margins over time. This momentum, along with the large opportunity in front of us gives us the confidence to continue to deliver and continue to grow and continue to deliver on our long-term targets and ambitions. Also, with very low capital intensity, this business provides a very strong return on invested capital. We are very well aligned with a number of macro trends in this industry. As populations grow older, and standards of living rise across the world, the need to prevent illnesses carried by pests will only continue to grow. Likewise, the expectations of guests and the potential impact of social media of pest incidents will only continue to grow. The regulatory environment is evolving and will continue to evolve around the use of pesticides and pest practices, and that will play to our advantage because customers will want to partner with companies that will ensure their compliance in this space. As climate change makes the world a bit harder. This is expanding the geographical areas where pest will live and survive. And it's also expanding the breeding seasons and the seasons of high activity, only increasing the pressure that our customers face regarding pests. And finally, labor markets continue to be tight. So we have an advantage with a superior employee value proposition attracting the best talent in the industry and also our ability to use data and digital to deploy large service teams in the most productive way. Like I mentioned before, enterprise selling or circling the customer is a primary growth strategy. This is showing that our current sales are largely focused on 4 main segments where we can have the most value. It's also showing that there's at least $3 billion of incremental opportunity just by introducing pest to customers that already do business with another Ecolab division. We capitalized on this opportunity by working very closely together with assisted divisions, first and foremost, to deliver more value to our customers when we work together for our customers and also by capitalizing on new -- introducing pest to new customers. We also work to expand our segments and our capabilities and skills into the places where we can make the most difference and expand our target markets. We protect food from the moment it gets transported or stored earlier in the supply chain to where it's processed, distributed all the way to consumption and retail. And not only we do this with traditional pest elimination, but with our new capabilities in fumigation and decontamination, we are able to expand our value to our customers into store product tests and antimicrobial decontamination in food plants. This is, in turn, increasing the size of our available opportunity and opportunities to grow. Finally, more and more, we leverage data and digital solutions and digital innovations to provide greater value to our customers. Here's just 1 example. Think about it. We deploy millions and millions of devices across the world, devices that either monitor or bait or trap pests ranging from rodents to cockroaches to flies. And these millions of devices today, by and large, need to be checked on a regular basis, in person and manually. When we connect more and more of these devices to the cloud, we can access that information 24/7. We can leverage our digital control centers across the world so that we can build predictive models more and more driven by AI so that we can predict, prevent pest issues and deploy our valuable service in the most impactful way at the right time to the right location. The result is clear. Better pest elimination to our customers, meaning prevention or faster resolution, better experience for our team, making them more engaged and improving retention there and large productivity for our -- productivity improvements to our business. And like we've heard before, value equals growth. When we combine everything we do, the impact is superior customer value. This is just one example of a large franchised restaurant chain, where at the time of this case study, we were only servicing about half of their units, and we were able to use. So this gives us a unique opportunity to really see it side by side. We were able to use external data sources like Yelp and Health Department Inspections to show the customer how 99% of pest activity mentions or complaints in Yelp were coming from the locations that were not serviced by Ecolab. And when you look at health inspections, the units that we were servicing were having less than half of the violations related to pest activity. So very clear demonstration of the difference in value, which allowed us, in turn, to accelerate our growth within this franchise chain. In summary, 3 growth strategies we will work with the rest of Ecolab to continue to introduce pest to more and more customers and drive higher value to them. We will continue to expand our technologies, our capabilities and our segments to grow faster, and we will continue to accelerate leveraging digital technologies not only for value to help our customers, but also for business productivity. Thank you so much for your time. And right now, I will introduce Hayley Crowe, which will talk about our wonderful Life Sciences business.

Well, good morning. My name is Hayley Crowe, and I'm the EVP and GM of Global Life Sciences and Purolite. I've been here for about 5 years, but my entire career has been spent in the Life Sciences space. And I'm really excited to talk to you today about Ecolab Life Sciences, our newest growth engine. So first, what is Life Sciences at Ecolab. It consists of 3 major areas: 1 being pharmaceutical manufacturing, okay? So this is the space like big pharma, you know today, Pfizer with the COVID vaccine. The second area we focus on, which also has manufacturing processes very similar to pharmaceutical requirements is personal care and personal care are things where they manufacture like makeup and toothpaste, creams that you may use on your body. And then the third 1 is essential water purification, which Purolite has given us an awesome opportunity to really get after the ultra-pure water space. And the way that we work with our customers is by delivering product quality, compliance and safety and sustainability. And these new markets are high growth and very high return. So if we look at the market opportunity, it's pretty big, and we've got a lot of room for growth. The way that we've been looking at this market is that it's growing in the double-digit range, and we've got great innovation that is enabling us to get after that. And you'll see it in some of our innovation showcase later today, there is a stuff in the back, and we'll walk you through some of the cool stuff we're doing. The other thing that's really interesting about it is we've got a very unique value proposition where we pull together the enterprise opportunity across Ecolab, where we're able to help our customers with very high drug product quality, and optimize their plant productivity. We've been pretty consistent in our growth. We've had double digits over the last few years since the inception of Life Sciences. I can say that we, unfortunately, have not been immune to the COVID wave this year and probably will have a transition year next year. But during that time, we've taken the opportunity to truly invest into our operations, and that's included investing in capacity. We've invested in talent as well as looking at our innovations. And so as we look at this year, it's really been pressurizing our margins. However, as we look into the future, we do aim to get back to the double-digit growth rates as well as improving -- getting back into some superior margins. So one of those high-growth markets is biopharmaceuticals. And the growth in biopharmaceuticals is in the double-digit range at this stage. And you might say, well, what's a biopharmaceutical, what's a conventional drug. Historically, you may know conventional drugs as kind of chemically derived. So think about that pill you take. There's a big push into personalized medicine. And you saw one of the biggest biopharmaceuticals with the COVID vaccine. But there's a lot of other biopharmaceuticals coming out very, very rapidly right now, treating things like cancer and Alzheimer's. And so there's an opportunity to truly get after this new market, high-growth area. Some of the players you may have seen that also play in this space are companies like Danaher, Sartorius and Thermo. They've got standardized solutions that they've developed over the years in the space. But we've got unique innovations that have really enabled us to be agile and look at new areas for growth in these markets. So if you think about what is it that we actually offer in the space. A lot of our foundational offerings truly improve our customer outcomes. And so one of the original foundations was our cleaning and sanitization. So we have fantastic programs where we have expertise in how to clean rooms, specifically for pharmaceutical manufacturing, and there are solutions and programs around that. A second area, which we heard a lot about earlier is water. So water purification. If you think about that vaccine that you get, 99% of that is water, ultra-pure water, it's going into your body. We have a true opportunity here with our Nalco Water Solution, specifically looking at getting ultrapure water into those vaccines. We added Bioquell a few years ago, and that added an additional opportunity in decontamination. So you can imagine when you are doing maintenance on these clean rooms, these very highly clean spaces. You need a higher level of clean that gives true decontamination in the space. But sometimes there's problems that arise too, and you need something a little bit higher and Bioquell's a key technology that can help get all of the regulations back into play so that they can continue to do drug purification. And last and the least our addition of Purolite. It's given us an opportunity to truly be right into the middle of the process. The resins that we produce are used for the drug purification itself. And then I'll talk a little bit more about that in a minute to talk to you about like what are resins and how it works. So our capabilities are completely aligned into the macro trends that are in the space right now. There's a huge push for sustainability. Our Ecolab total plant solutions are perfectly aligned to deliver process quality and high process quality, specifically in drugs, obviously, is a high need for our customers and now Nalco water helps deliver that water. Our Bioquell solutions are perfectly aligned to a push and a move to more personalized medicine and smaller manufacturing locations. So instead of the historical very large space, stainless steel, huge, huge rooms, now there's a push into a modular smaller, more mobile manufacturing space, and our Bioquell isolators are perfectly positioned for that. And then last but not least, as I've mentioned, the double-digit growth in biopharmaceuticals and the Purolite resins being directly in line to do the purification of those products is perfectly positioned. So let's talk about the resins for a minute. The biopharmaceutical resins are an extremely high value product. Just a gallon of this product, and you'll see some of it in the back, and don't worry it's a product that can't be used. Just a gallon of this product is worth its weight in gold. So 1 gallon of product is equivalent to a kilogram of gold or an entire truckload of industrial resin. And what is a resin. Some people have asked, is it a filter? Is it a membrane. No. It's neither. So let me describe kind of how we make the resin, and I think it will give you an idea of how important it plays in the purification step of drugs and drug quality. So in our case, in biopharmaceutical resins, we start off with a small sphere made of seaweed. This sphere then has a program protein attached to it. And you take a cell soup, which is where they grow the drug itself and they pour it over top of this resin. And as it goes through the drug of choice, binds to the actual protein program or the protein programmed protein 2Ps. And it gives it a high level of purity and high level of drug quality. Okay, so just to give you an idea how important this is, it takes a drug purity from 25% to 99% purity in a single step. So our resins are a key part of this process and the most important part of the drug purity process. And we'll show you we've got some like blown up resins in the back with some program protein, so we can show you what they look like if they were on our scale. So we've also had to invest in capacity to fuel the growth. We've done this for a number of reasons. It enables our customers to have security of supply in more than 1 location. And this has become extremely important post COVID. It's also brought applications labs with our scientists working with their scientists closer to the locations. And also it's given the ability to grow ahead of the demand. And so we've had expanded capacity at our Wales facility, and we have 2 new pharma plant locations opening relatively soon in King of Prussia and in Ladenburg, Pennsylvania. So when you pull all the solutions together, we have a unique position here to deliver very high value to our customers. If you think about across the solutions I mentioned, the Ecolab process, the Nalco Water process, the Purolite products and the Bioquell Environmental Decontamination, we've been able to improve our customers' drug product quality at the highest productivity. And so at the end of the day, it enables everyone to have the highest return. So what's it look like in practice? So like you see in the other slides, this is an example of a pharmaceutical plant. And you can see we have a lot of touch points today that go across the enterprise solution and circling the customer. So in a single biopharmaceutical manufacturing plant, you can see we have cleaning and decontamination services. We have water treatment on the facilities portion. We can automate decontamination in areas where they may need extreme clean. We have new digital solutions for pharma intelligence on compliance, which you can also see in the back today. And last but not least, you've got the Purolite resins directly in line for the drug purification process. And so when we pull that all together into a total value delivered to our customers, we're able to deliver higher drug product quality and safety, compliance as well as audit readiness because there's a lot of regulatory authorities that come in here, obviously, sustainability across the way and then also operational excellence. And we've done this through a lot of innovative solutions. So I'm going to show you a video about our next-generation bioprocessing, which is one of our newest innovation programs in Ecolab. [Presentation]

So in addition to our bioprocessing resin innovation, Purolite has also given us a platform for growth across other new high markets. So when we take microelectronics, you heard from Nick earlier that it's a high-growth market where we have a great opportunity to truly help our customers deliver value. Purolite resins are used directly in the chip manufacturing process during the ultra-pure water area where the chips are located, but also the resins are used at the affluent area for recycle and reuse. In electric vehicles, they use a lot of lithium and a lot more to come over the next 10 years. And Purolite resins are used directly in lithium extraction from brine. And in the nuclear space, where we have a lot of already good business within Ecolab, the resins that we use in nuclear water are directly engaged in the ultra-pure water portion, the primary water in the reactors to keep our reactors safe. So with that, we are building a $1 billion-plus growth platform for Ecolab. It's a fast-growing market with really great margins and double-digit growth across the region. It's a fantastic opportunity for us. As we look into the future, we'll get after this opportunity through innovation, through increased capacity and through M&A and organic sales. So in summary, Ecolab's newest growth engine Life Sciences is part of a large growth market. It's growing double digits. We've got a history of demonstrated performance and superior margins. And last but not least, Ecolab has a unique value proposition for both the Life Sciences and the industrial portions of the business. So with that, I'll thank you, and I'll hand it back to Andy.

Thanks, Hayley. I appreciate that. We're going to get the rest of the business leaders assembled back up here for the second Q&A session. Again, if you've got a question, raise your hand, we'll get a mic so those online can hear it. .

Thank you, Andy. So I've been 16 years in the company. So you've heard so many of our business leaders and leaders in the corporate world. So I have been a long time here working in the U.S., in Europe, in China, many places to help the company grow. And I've never been more proud of where we are and more bullish about where we're going because of the momentum we have, the innovation we have, the new businesses, as you've heard from Hayley and the team as well, the digital and AI driving productivity and most importantly, the team that we have. So let's take 10-15 minutes on questions on the business, and then we'll move on innovation. .

Thank you, Kevin McCarthy with Vertical Research Partners. This question really harkens back to Darrell's presentation, but I think it's relevant to many of these businesses. And it has to do with your pipelines. So I think that Darrell showed that your 30-day pipeline was 60% above your target and your 90-day pipeline was 70% above. Can you just help us translate that into what it means for your efforts to accelerate sales growth. Where might those numbers be versus history? And what would it mean in terms of flow through and actually delivering the sales maybe the folks on the days here can speak to what their pipelines look like as well .

Yes, absolutely. So Darrell is the only one not on stage, obviously here. But the guys who are truly selling are on stage, obviously, which is even more important, and I might maybe so. Pick on Greg since he is on fire today. So to talk about that as well. And this year, generally well, we are accelerating our organic growth, not only because of the pricing over the past few years, but most importantly because of the new business. When we talked about offense in the last year or so, it was really focusing on new business. And new business is totally new customers. It's new locations within customers and it's more solutions within current locations, which is the cheapest and easiest way to drive growth. And that's why what we call grow to win pipeline in our internal language is the single most important metric that we have, which is what Darrell just shared with you. Then afterwards, it takes time to implement that in the businesses. In some of the businesses, it goes quicker, pest elimination is a bit quicker than institutional and industrial takes much more time because you need to install a lot of things in those plants around the world. That's the tricky news. The very good news is that it takes a lot of time to uninstall as well afterwards. And that's one of the small reasons, not the big reasons why customers stay with us for life, as we call it as well, they get great results, improved performance every year and at the same time, it's complicated as well to get away and to change. So new business is the main reason why we believe that organic growth in the future is going to be quite a bit faster than where we used to be. So with that, maybe, Greg, so just maybe your perspective on institutional since you've gone quite a bit that ...

I will. And I'll draw my time in corporate accounts leading that team and now leading the team in a different role. But instead of on fire, we prefer to say in fuego going forward. Okay. My team will love to hear that. Here's what I would add on to what Christophe said, is the team has gotten laser-focused on driving new business, similar to what they did was execution on pricing. So the team has been always trained at that new business, new business, new business. The part that I would add on to is what I'm really pleased about, not only is the grow-to-win metric of the 30-day to 90-day is the balance of the pipeline across all the regions. So the balance between North America, Europe and China, the mega markets in driving balanced growth as well as incremental growth across that, which is going to drive to other leverages in multiple regions across the world. It also leads very, very well to our global customer perspective, grow here, grow there because we're everywhere. So I'd say those 2 things in addition to what you said, Christophe, afar areas where we're very pleased on the progress we've made with the corporate account teams.

Thank you, Greg.

Hi, Andy Wittmann from Baird. I guess my question is for Hayley in the Life Sciences. Hayley, just the margin goal that you have set at 30% comparing to around 20% this year is obviously the biggest jump in margins of any of the segments we saw presented today. Obviously, late last year, you brought on some capacity, you've got some more capacity coming on this year. I guess the visibility to say 30% is my question. Is it just bringing on that capacity and getting to scale where there other drivers in the business that you need to accomplish to be able to achieve that margin?

So let me start first here just to enter a continuity as well with the messages that we've given. We're in a year of transition in the industry of pharma, Life Science, as we all know, quite pleased with where we are compared to most others as well. We have that key question Andy I'm saying, okay, do we keep plowing ahead with our investment capacity, plant supply chain, products and capabilities people in other words. And the decision we've made a year ago was to say, we will not change anything because if anything, Andy in the long run we see more opportunities than we saw a year ago. And it takes years to build plants and to build capabilities as people. So we said, let's keep driving that. And most of the difference between the [ $30 million and the $20 million ] ultimately is coming from those 2 elements. But I'd like you to build on that maybe. .

Yes. In addition to that, we've got some pretty game-changing innovations that we just demonstrated here, and we'll show you in the back as well that will enable us to get after the opportunity. So we're excited about that as well.

I thought the statistics that you showed with water demand outstripping supply by 56% is pretty radical. I mean, that's not too far away 5 years and I was thinking if that was another commodity liquid like oil, you can only imagine what the ramifications would be, probably see like $300, $400 oil and you see regulations kick in, maybe some geopolitics. I assume you're in a pretty good position to gauge that. But how do you -- I mean, that seems like something that could be really big as far as the tailwind in your business. How are you kind of seeing this play out over in the next couple of years?

Yes, it's a great question. So let me start, and then I'll pass it to you, Nick. There's the macro question, the whole planet, 56% gap by 2030, a few years down the road, we're going to live that. We're going to experience it. And we experienced it this summer as well, which has been the hottest in the last 100 years, as we know. But that is a little bit like macro, like global. When we talk to customers, high tech customers, the fabs, for instance, so the data centers. Most of those new investments are made in places where there's no water. Arizona, in Nevada, in India, in Singapore, in places where there's no water. Those guys experience it real time right now that there is no growth without water. And that's why when they come to us, it's to have a solution where they can operate, keep growing with no or low water. It's a journey to get there. But for us, it's one of the most bullish bet, I think that we've made the last 10 years, and it's coming very real for our customers right now because they experience it every single day, even in the United States. But with that, Nick, maybe as well your perspective and a few examples as well of what you've learned and heard from customers.

Yes. So it's a good question. And I think the light bulb has now going off with our customers. I mean, they see it. You saw on the slide some of the customers that have already made definitive commitments out to 2025 and 2030. They're doing that because they know that if they don't do that, like Christophe said, they will not have the water to make their products. I mean that's an acute issue. Secondly, you saw a lot about Ecolab Water for Climate. That's why we did it, right? Because in some of these very large customers that have been declarative, they've said to us I don't want to go to 1 plant. I want to go to all of them, enterprise-wide. So that's why we created the offering to reduce, reuse and recycle the water, but they know. I mean, so to your point, it's definitely on our mind. It's definitely in our customers' mind, and we see it as a very large opportunity.

Let me give you an example, Tata Steel. It's public. So it's not private information. They've declared they want to double their steel production in the next few years. They're not going to have more water to do that. In India, it's pretty known, especially where they operate. There is no or low water over there. And we've talked about that a year plus ago saying, help me get the plan to double my steel capacity while using less water than we are today. We're perfectly on track to deliver that for them. You can imagine how much total value delivered that's generating for them. It's not the cost of water. It's obviously the incremental steel sales that they're going to get that's going to make the big difference. And that's a real case happening right now.

Steve Byrne, Bank of America. When I listen to the 5 of you, there's a common theme of kind of cross-selling products, getting more wallet share out of your customers in -- for functions that are really -- not really in the area of expertise, our customer. Where do you go from here? What else could you provide your customer and maybe something along the lines of air quality comes to mind, is that an opportunity? And then maybe secondly, why go down the path of Purolite with such a specific biopharma resin doesn't seem to fit quite honestly?

So let me start with that, and I'll have Nick maybe talk about pest elimination. So 2 parts here or three. Air quality, so many have asked that. It was a very standard question during COVID. This is not center of the attention for us. It's important from an infection prevention perspective. There is a lot of companies doing work on air quality. It's a very hardware capital-intensive business. This is not the model that we want to get in. So air quality might be a white space down in the future, not short term, Steve. We have plenty of other opportunities as you could see this morning, which brings me as well to Life Science, being able to deliver an end-to-end offering to customers to ensure a safe drug while producing at the lowest cost, while reducing the impact on the environment, it's what we're doing in every single business. This is true in beer production as well. The technology is different, obviously, and the risks are different as well at the same time. The margins are different as well at the same time. And as you've heard as well earlier, so from Larry, when you think about the 3 main growth trends out there, green technology, biotech and AI digital. Well, those are the 3 that we are in, and I want to really be on that wave going forward. So Life Science has been a great success story so for us, building that for the future, I think, is one of the best bets that we could make, and it will pay off in a very good way. Now in terms of circle the customer, enterprise selling, driving penetration, many words obviously for that. There's not 1 better example than the Pest Elimination business. We've built a $1 billion franchise mostly organically. It started with a small acquisition and then afterwards being mostly organically by working together in order to serve the customers better than its ever been including pharma, as we were discussing as well last night. But with that, maybe, Nick, why don't you share a little bit how you work and how you drive past penetration in all the businesses.

Yes. Thank you. Like you said, Pest is probably the best example of building on enterprise selling and leveraging relationships. What I really like about it is that it's not just relationships and introductions, we do deliver higher value to our customers when we work together with Institutional, with Food and Beverage, with Life Sciences because working together, we get to understand better the customer. We know what's really happening, and we can leverage those insights and those relationships to provide a better result to the customer. Also on your question about new offerings, that's a little bit of what I was going after with fumigation and decontamination. It is within the pest elimination scope, but working with those customers in for beverage, we realized that there were areas of needs where we didn't have the expertise and the capabilities, so we develop that so we can provide more comprehensive value and grow faster. Andy, you want to go to John.

Maybe you could discuss the non-life science part of health. So I think last quarter, you said surgical products in the U.S. will be separated from other hospital products and talk about the European restructuring?

Yes. So when we talk about the group or the segment as we report so is Life Science and Healthcare together. The easiest way to think about it, 1 is for pharma, that's Hayley's business and the other 1 is hospital. So quite different. It's both healthcare at the end of the day, but hospitals and pharma, one is industrial. The other one is more institutional like. That's one way to think about it. 5% of the company important to keep in mind. Once we will have solved healthcare, John, there will be another one that we will improve as well at the same time. There's always a kid that's doing less good than most of the others. I'm not expecting to be all in the green at any point, obviously here. I like a lot the progress that we're making on Healthcare. So the cost restructuring was something that was important to make, really making sure that we get the right cost structure behind the business performance that we have. And we did it. The team did it in a very straightforward execution focused way while taking care of our team. The second one, separating surgical from infection prevention makes the business much simpler, and it gives us much more options for the future as well, which I want to keep depending on where we want to go with healthcare. And it's going to move fast. It's a question quarter after quarter. It's not going to take years to get to the right place, just to be very clear on healthcare. And when we think about infection prevention, having institutional, which is thousands of people in the United States, obviously, so driving the infection prevention business, just imagine the extension of the reach that we're having. We had over 100 people in healthcare. Now it's over 3,000 people that are selling. So those products, the reach is totally different, obviously, and at the same time, at a much lower cost because it's a small business getting on a big business that used to serve hospitals as well in a housekeeping, in a restaurant, in laundry, the traditional institutional offering that we have. So more reach at a lower cost that's the best path for me, so to get an infection prevention business for hospitals that is kind of growing, profitable and that has a future. And the surgical business, a very different business and I'm open to any option here on what's right. We always have the best owner mindset. It might be in our company or it might not, like we've demonstrated with other businesses as well in the future. But we're going to do that when we know more. And I'm going to share with you every quarter the progress that we're making on healthcare, as I promised.

Dave Begleiter, Deutsche Bank. Christophe, on Purolite, it's been almost 2 years since the acquisition. Can you provide some details even quantify how the business has done, and as Life Sciences get bigger, it gets bigger, when do we get a separation of Life Sciences from legacy Healthcare?

Let me start with the second part. When time is right. It's not going to take a lot of time. The fact that we have hospitals and pharma together was right in the early days, it's not right in the future. So we won't do that in the middle of the year. Obviously, that would confuse us and confuse you probably at the same time as well. So that's going to happen in the near future. I don't know exactly when, but in the next year or 2, let's put it that way because we have to do it for the reason I just mentioned. Purolite, we are in the building mode. And as you've heard from Hayley before, we're uniquely positioned with the technologies that we have. It's an industry that is in a transition right now '22, '23, probably part of '24 as well post COVID investment interest rates and all that. I've spent quite much time with customers together with Hayley and the team as well. The future has never been more interesting, so for us with what we do with the smaller one that can really adjust to what the big pharma companies truly need. That's the advantage we have compared to competition. And as Hayley mentioned as well, 2/3 of Purolite today is a water purification business. Lithium, power generation, green technology, as you've heard as well, which is going much better than we thought as well, which is an interesting problem. So there, we're getting maxed in terms of capacity because it's all it would be growing less fast than it is today. So we'll need to build even more here. And on the pharma side, you've heard it. So the fact that we're building capacity and plant is a good sign for the future. We would not do that if we wouldn't have a line of sight of good stuff happening. But maybe Hayley, just a few colors on what you're hearing from some of our largest customers.

Yes. As we mentioned earlier, definitely '23 has been a transition year for most of our major customers coming off the post-COVID wave. But as I also mentioned, there's a large opportunity from a market perspective for new pharmaceutical drugs coming out over many, many years to come. And there's a demand from it, from ourselves, quite frankly, to get patient care out. So the opportunity remains very good looking into the future, and we're excited about our offering and the value we deliver.

We love building new businesses. You've been following us for quite a while, building past was not the straight line to heaven either. Building the water capabilities, driving FPGS, as you've heard as well from Chris Roberts, this is real work. It's really building the capabilities, getting the teams together, building relationship with customers. We know it works, but we know it's real work as well to get there. That's why I feel really good with where we're heading, like a slow-mo may be.

Shlomo Rosenbaum from Stifel gen. Christophe, can you talk a little bit about what you mentioned in the beginning of the day about that total customer value customer work to do, where you committed to $100 million of value. How prep is that now what is your ability to go ahead and do that in the future in order to drive more revenue growth? And what kind of risk are you willing to take in order to do that? Maybe you can just expand on that a little bit.

The interesting thing is not much risk, big opportunity. The example I gave with the $100 million, our teams has more than that. And it was a first move. So for us to say we're going to guarantee a big chunk of it for a large company. That makes a big difference, obviously, $50 million, so 50% of $100 million. It was a good learning for us. The last few years, Shlomo, we've really learned how much true value we're creating for our customers. There is the total value delivered. That's the dollar value, but it's not only that as well. We were talking about hotels and restaurants. When they let 75% of the people go during COVID, we did not -- they could not have reopened at the speed that they did without Greg's team. Nicholas's team to be there in the restaurants and in the hotels around the world to help them train new people to get it reopen, to get all the upside that they got. They are immensely grateful for what we've done and thank God, we did it. That's not in the TVD, obviously, but that's the trust that we keep building with our customers, which is why we haven't lost customers while we drove $2.5 billion pricing, as you heard as well, so earlier today. So we've learned a lot that we're creating much more value than we thought to our customers that were even more important for our customers than we ever thought and that TVD, well, is a major driver for us for the future. So when we say the 50% of the [ $100 million ], I have zeroed out, but like 0 that we're going to deliver that. That's why committing for [ $50 million ] when we commit -- I mean, guaranteeing $50 million out of the $100 million commitment we're going to get it done. We're going to get better even than the [ $100 million ]. It's been a great learning and no other competition partners out there is doing the same. I think this is 1 of the elements that makes me very bullish for the future. We're learning at the same time, Shlomo. So I want to do that in a very thoughtful manner.

I'm Patrick Jackson with RBC. I have 1 follow-up on Purolite for Hayley. I was wondering if you could share any thoughts you have about how you see the opportunity ahead for PFAS remediation. And are there any industry verticals where you see us as demand for these solutions or room for growth?

So maybe 2 things and then you jump in. We don't have a PFAS problem just to start with it since I'm getting that question, so quite a bit. And with Larry Berger's team, it's always thinking, well, what's the next PFAS out, because you never really know. So what could come up. And I love how we're approaching that issue as well that we don't know for the future and making sure that we minimize or eliminate any risk that we might have. On the other hand, obviously, it's offering solutions for our customers to remove PFAS. There's not only PFAS, by the way, microplastic is the other one that's going to pop up, which is a big issue out there. All of us are eating, 1 credit card of plastic every single week, just to put it in perspective to make you feel a bit better as well here. Well, that's something that we need to remove as well so from products that are getting into our customers' products. So we are building capabilities here. Purolite is one of them. You might want to make a few comments, Hayley, on that, even though it's early.

Yes, of course. So while PFAS remediation is, we do have resins in that space today. The larger portion of our growth opportunities is what I mentioned during the presentation. So we see new growth in kind of higher growth markets, definitely in the semiconductor space, the chip space, additionally in kind of clean energy, so nuclear and others. And then last, but not least, certainly in kind of the electric vehicle, lithium extraction, but also carbon capture is another area.

These are by far the biggest opportunities we have out there. And there are no risk as well there. So no legal exposure as well, which is important as well in here, extracting lithium, so from brine, while that's something that we will need always more power generation, macro electronics, this is a real need with real solution, with a real team that can offer that to our customers. So PFAS, one of the options for the future, not center of the plate. So for us, even though we're working on it as well. Maybe 1 last question, Andy.

Josh Spector with UBS. I wanted to ask about the new channel opportunity. You highlighted that earlier as another growth potential. You have the program with Home Depot. I'd be curious how big you could see that potentially getting, but maybe more interesting? And are there other opportunities? Or is there a shift in strategy in Ecolab to go into other avenues. So when you talk about ready dose in institutional, obviously, that plays to a lot of CPGs are trying to do in terms of shipping less water, reduce packaging, et cetera. Is that a revenue stream that can increase your algorithm or different than how you've approached that versus the last 5, 10 years?

Yes. Great question. Let me take this one, 0 change in strategy. We've been working with Sam's Club with Walmart for many years in Food Service products, which are professional itself. Those are restaurants. Those are small hotels. Those are not chains by definition, that are going, so to some clubs their own needs. For us, it's important to serve the smaller ones because those are the smaller ones that are becoming bigger in the future. We've grown over the last 100 years, Josh, like that with smaller customers that are becoming bigger ones or smaller leaders in smaller companies that are becoming the leaders of the industry. We've experienced that a zillion of times in our industry. It's really being able to address the needs of the pro in the food service arena. What we're doing with Home Depot is exactly the same thing for the cleaning contractors, not the same, obviously. So those are the cleaning contractors. Those are small operations that cannot afford the service that we are providing, but it's a big deal for Home Depot, as we all know, Pro is a big chunk of the Home Depot future for us, while it's ideal to get future customers and for them to address current customers' needs as well. So it's a 0 change of strategy. It's not to move an IRR into the consumer business, needs to capture more of the B2B, which includes what we call the PROs, which are the smaller companies that are businesses, not individual consumers. We can't exclude Josh that few consumers are going to buy that as well. That's always the trade. But ultimately, I think that that's a business that has a lot of potential. Home Depot wouldn't have selected this one as their #1 innovation if they wouldn't see good potential for the future. I think we'll have to conclude here. We'll have plenty of time to talk together as well. During the innovation session afterwards and during the lunch as well. So let's make sure that we can answer all the questions that we might have. So before I close, I'd like to thank you all our business leaders that are doing the work and delivering to the great performance that we've been delivering over the last 3 quarters and last few years. So, thank you to everyone here. So a few closing thoughts here before I pass it over to Andy to get to the innovation section, which is a really fun tour that you will see. And you will see other of our teams as well, the ones behind the scene that are generating that innovation, that are thinking about how to sell to our customers. We want you to see. So how are we thinking, how we are developing, how we're executing and how we're capturing value as well from our customers because they benefit from so much value of those innovation. So for me, I'd like just to say a few things in closing. As mentioned before, I've been 16 years in this company, in many businesses, many places around the world in easier times and in tougher times like we have all done, obviously. And I've never been more proud of the performance we have in right now and more bullish about where we're going in terms of performance and in terms of impact for all our customers. And for a few reasons. First, we have strong momentum. The operating income growth is obviously the main indicator for us that our business is not only growing, but generating more cash, and this is the way we drive our teams. It sales new business and driving more margin, which drives our operating income, which mitigates, obviously, whatever happens on the FX or interest front, which might be a good thing or a bad thing depending on the year, we've all experienced that. But as you've seen, we had a very good progression of our quarterly performance as well quarter after quarter. And when I think about the third quarter of this year, I feel really good. So I wanted to make sure that we corrected as well if there was any misunderstanding, the 12% to 15% was the long-term performance, the 12% to 19% is the range that we provided. So for Q3, 0 change and the way we're looking Q3 shaping up will be on the upper end of this 12% to 19% in Q3 with good momentum as well from a business perspective. So very good Q3, which is a good indication for how Q4 is going to look like and how 2024 is going to look like as well and more in a second. Second, we have huge opportunities. Many we've talked about, many will talk about during the innovation, but the single most important are these $55 billion of penetration that we can get from existing customers. We've talked about pest elimination. Water is another one. Obviously, water is important in institutional can become a significant driver in institutional. Think about beverage quality. For instance, this is important. For the consumer goods companies selling to the restaurants and the hotels, obviously, the quality of the water that's getting mixed with this syrup ultimately to generate a better product or a less good product, which drives a lot of margin for those customers. That's the second, obviously, a penetration opportunity that we have. Think about the whole audit programs that we have. The example I shared with you as well, having a customer knowing, well, out of my 40,000 locations, what's my best one. And what would be my potential if the 40,000 were at the best performance everywhere around the world. What would be their impact? What would be the food safety level? What would be the guest satisfaction that we have. This is another penetration opportunity that we have to capture obviously, way more of this $55 billion. When we think about the operating margin, many discussions as well in the break as well on that. The 20% will get there. The key question was how much time is it going to take you to get there? I said, a few years because I know what I can control. I don't know what I cannot control, which is the inflation component. But what I can say, it's not going to be 5 years, so anything in between. And it's going to be 1 year either. So a few years and less than 5 is probably the best way to frame it. And which is an additional reason why we have confidence that our performance in the future will be much better than where we were pre-COVID, which was a good one to begin with, obviously. And in '23, '24 we're going to be even better than that. And when I think about 2024, when I think about EPS range, the 12% to 15%, and as I've said earlier today, '23, '24 is going to be better than that. Well, in '24, our EPS growth will most probably be north of 15%. We'll see how the market evolves, obviously, more to come. I'm usually not providing guidance as well that early. But since I wanted to give you a clear view of where we're going longer term, shorter term this year, next year, giving you an indication how we see '24. Well, it's all out of the momentum that we're seeing in Q3 that's going to feed into Q4, and that's going to help us, obviously, to get very good year in 2024 because we are a long-term business. As we discussed earlier today, we sell new business, new customers, new solution, new units, it takes time to install that. Once it's there, well, it's here to stay for the long run. So I feel good where we are, where we're going and especially for the near term of '23 and '24. So we have all it takes to win. We have the right opportunity, we have the right momentum, we have the right capabilities and most importantly, we have an unbelievable team. When you think about what Darrell showed, we have 47,000 people in our company, 42,000 took the time to answer a 50 question that we do at least once a year, our engagement survey, people in plants, people in the field, people in distribution, people in the lab, 42,000 took the time. And every single time, we all stand how are you doing, how engaged are you? how included in our company, do you feel? How you have the feeling that we're hearing what you're saying, what customers are telling you telling us ultimately it keeps getting better. We can talk about a lot of things in our company for 100 years. We've been a people company serving people who are serving people needs. We will always be a people company. If our team is doing well, everything is going to be fine. And having facts like that, as you've heard from Darrell earlier today, for me, is the best indicator that we're in a good place and that the better days are even ahead of us after 100 years being in the business. So a big thank you. So obviously, to our team, that's done an unbelievable job, so over the last few years, not always been easy, but we did the right thing, the right way, and I would do it exactly the same way. And a big thank you to all of you for joining us today in person and for being on our journey for the many years that many of you have been close to us. So thank you. I'll pass it to Andy, who's going to give us a little bit direction for the innovation fair, then the lunch and then the tool for this afternoon, Andy.

Thanks, Christophe. Well, I just want to echo Christophe's comments, really appreciate all of you coming to be with us today. As Christophe said, now is the opportunity where you'll get to see some of the breakthrough innovations that the team discussed in the presentations our marketing people, our R&D people would be back there to help give you more insight. So please take advantage of all that. For those of you who have online, thanks for joining us today, and hope you have a great rest of your day.