Vontier Corporation (VNT) Earnings Call Transcript & Summary

We're going to get started here. Appreciate everyone joining us. Welcome to Citi's 2025 Global Industrial Tech and Mobility Conference. We have over 140 companies here. We're starting very bright and early with Vontier Corporation. We've got Mark Morelli, who is the CEO; and Anshooman Aga, who is the CFO.

So I'm going to walk over here and I'm going to start by asking you a question about your Connected Mobility strategy. It seems like it's really gaining traction. It's something that I think you've talked about for a few years. We saw it again in Q4 in a business such as Invenco. It's sort of bridging a couple of your segments. So maybe you could talk a little bit more about the progress you've made and sharing an example of the connectivity that you're having between your businesses. How are the solutions you're offering going forward different versus what exists today?

Yes. I think it's something we're really happy about to be able to show proof points around our Connected Mobility strategy. I think what's really the most obvious is that folks can see that the convenience store format is expanding. You see it in your local neighborhood. You see it your stop along the highway. You see a lot of new convenience stores, very successful franchisees that are continuing to build out. And what we're bringing to market, particularly around the Invenco brand, where we've incorporated a lot there is a connected cloud-based set of solutions that really address the productivity of folks that are consolidating the industry, which is an ongoing trend and building out new footprints where they have to manage all those assets. And a great example of that is FlexPay 6 with iNFX when they work together. They bring the entire fuel dispensing venue on to the cloud, and they make that interaction much more manageable and seamless for the operators, which are the convenience store folks. And if you look at the 40% bookings growth last year with Invenco is indicative of that. I think we signaled this kind of early on with sort of rollouts with Shell, Chevron and Costco. And this is really gaining traction. A really great example is if you go to Wawa, as an example, and it knows your loyalty program, knows you buy Turkey sandwiches and you're on site and you connect to their system, they might offer you a free coupon for Turkey sandwich because you haven't bought one in a while. That might bring you inside the store. That conversion is really valuable to convenience store owners. They really value that conversion, but that's one example. And then you can extend the platform into car wash and electric charging, other touch points. So it's very scalable. It's microservices-based and the recurring revenue profile has increased really nicely and a good portion of that is SaaS operating business. So it's a great transformation. It adds a tremendous amount of value to our customers. And I think that innovation is really ringing through, and we love to be able to show these proof points now.

Very helpful, Mark. And then maybe I just wanted to sort of focus on the current for a second. Like you've talked about book-to-bill over 1, I think, for all 4 quarters of '24. But given this cross-current size, as you know, geopolitical, macro, to the extent you can talk about it, do you have visibility into another book-to-bill quarter in Q1? And given you have a number of short-cycle business, maybe just talk about what you're seeing so far in Q1, the understanding that you literally just reported?

Yes. So our Convenience retail and fueling markets remain strong and robust. We're seeing continued build-out in this market with the larger national and regional players continuing to not only consolidate, but build out new sites. They're also continuing to refresh the existing sites. And our innovation, as Mark talked about, is reading through, where we're providing digitalization for our customers. So we feel pretty good about our convenience retail and fueling business. Also on the car wash side and the repair solutions side, we're starting to see signs of stabilization in those businesses. So quarter-to-quarter, things can vary. We feel pretty comfortable that for the full year, book-to-bill should be greater than 1. And even for Q1, it should be somewhere around 1, plus or minus.

So Anshooman, this question is a good one for you. Like I'm all about sort of dispelling any confusion because we were just a week ago in earnings. So I think you guide to 46% plus EPS in the first half of the year, which means that earnings are basically flat quarter-to-quarter in the first half of the year because you gave us Q1 guidance. I think if you go back and look, there's a lot of seasonality in Q1 to Q2, maybe confirm that. But can you describe Why Q2 would be at or below Q1 as you just talked about, right, DRB starting to get better, Matco trade show in Q2? So like maybe just give us a little bit more color there.

Yes, I'll start off by saying if you look at our historical seasonality, which -- especially when you're booking stuff less than a quarter out sometimes, when you look at our historical seasonality, we do about 46% of our EPS in the first quarter. We're guiding to a little higher than 46% for this year. So a slight improvement in seasonality. When you look at first half EPS at the midpoint of our implied number that we provided, that's a 5% growth year-on-year in EPS. And if you look at just the second quarter, what's implied is about a 13% growth versus Q2 of last year. From a quarter-to-quarter, from Q1 to Q2 sequentially, Matco Expo is in Q2, but Matco Expo is also the lowest price point event of the year. So when you compare Q1 gross margins to Q2 gross margins, there's going to be a little bit of a drag factor. Also, the expense of hosting, the Matco Expo shows up in the operational expense line. And then there's always seasonality in our business where some of the higher-margin markets where really payment is integrated into the dispenser. It's not integrated into the dispenser in all countries because some countries, you go inside the convenience store to pay or you go to a kiosk. There's differences where some of the markets that have payment integrated are higher in the back half of the year. So there's always some quarter-to-quarter seasonality. I think the important point is when you look at first half EPS is growing 5% for the full year, EPS is growing at the midpoint of our guide, about 6.5%. And we feel pretty good about where we're positioned not only in our end markets, but also a lot about our self-help and our productivity initiatives that I'm sure we'll talk about.

That's helpful, Anshooman. So maybe just stepping back, like it's interesting. Just a few years ago, your Environmental and Fueling Solutions business was viewed as somewhat of a melting ice cube and now it's sort of driving growth. So maybe talk about -- you guided to low to mid-single-digit growth this year, but your longer-term algorithm, you have for all your segments is low single-digit growth. But when you -- when Vontier was part of Fortive and it was a relatively fast-growing business, like mid-single digits, and I think you grew 6% in '24, so like why is it not a mid-single-digit grower, especially in the current environment where maybe we're not pushing the EV pedal so hard?

So I think our low single digit to mid-single digit makes a lot of sense. But I love the question because clearly, we've invested in that infrastructure going back since spin. I think we've been a believer in that infrastructure. We studied it pretty intently when we took the business on at spin, and we felt like there were legs to it based on the proof points that we see. I think one of the key areas here is that we're incredibly well positioned with high share with the largest convenience store players in the world, both regionally and also globally. And these folks continue to consolidate the industry. And as they consolidate and they build out their footprint, we're the brand of preference. And so that's an incredibly valuable position over the long term. The other thing that I think folks sort of get a little bit off track as they might see sort of the total convenience store market, which we do believe is growing at low single digits. But when you look at our position there, you look at the new products we're bringing to market, look at the pull-through that we're getting with the integrated systems, I think we are punching above our weight there. And I think it's a really good harbinger for also things to come. I think when folks think about the whole fueling infrastructure, including the below ground, where we pretty much have the Kleenex brand in below ground and how that's building out and you look at the international markets, which we've also been messaging some really great wins there on the international side, I think that low single digit to mid-single digit is a good way to look at that business.

Mark, just one follow-up there. Like what do you guys follow to sort of determine growth? Do you just -- you told me you're just talking to your customers recently. Like -- so I often get that question is like how do you track that sort of business?

So there's a lot of good data from NACS, National Association Convenience Store, which is a very large industry organization that they do a lot of work. And so we definitely know a lot of what's happening with same-store sales, with what's happening with CapEx spend, those kind of things. It is a little bit hard to read through to us. Part of the issue is that there is also a segment of the market that is mom-and-pop, some stores are closing, but then you have sort of the net adds. So the thing that is really germane to us is how we're positioned in that industry with the winners in the industry. So I think we do, of course, our own work there. And so we like the position that we're in. On the tunnel carwash side, there's also good ways of getting that data, too. So I think there's not super transparency in it, but I think good ways where we can back into it.

Sure. So you mentioned the car wash. So let's ask about that. I think DRB, you mentioned that tunnel market should be flat to slowing down, but recurring, which is 60% of that business could be up low single digits. So why couldn't DRB be up? And then the other business that's been more challenged is Matco, as you know. You mentioned a couple of times that technician sentiment was getting better. You do have easier comparisons in '25. So what are you looking for that might signal a return to growth in really both of those businesses?

So we're looking at a number of leading indicators there. The -- there's no question, and let's just take the car wash one first is this was an overheated market right after we acquired it, which has been a great acquisition for us. It did perform a lot better and that outperformance sort of corrected a bit. I think we're pretty confident on the number of car wash builds out there. The pace of improvement is also going to be really predicated off sort of the interest rate environment. And I think people can kind of range bound what that interest rate environment might be. So I don't know there's a whole lot of mystery in that. The area that is a little bit difficult for us to call is while it's stabilized, which is great, it's poised for that rebound. We just don't know the pace by which how that will flow through to further investments in the market. That's one factor. The other factor is that we've been in the process of launching a new cloud-based point-of-sale system, which really helps operators to be more effective with attracting more customers to their site. And we love that platform. It's still in its early stages of sort of development and rollout. And sort of that uptake on that, we've got a blue chip customer now that is grabbing hold of that and is now rolling that out. We think that's a great backdrop. So we love the backdrop on it. We just don't know that pace and rate by which it will improve. Also, on the repair side with Matco, clearly, that business has been down. The great news is, if you look at our Q4, it sort of bounced up a little bit. I would consider that definitely a good sign of stabilization of the market. The backdrop on repair is really good. Folks continue to need repair in their vehicles. The age of the vehicle is now out to 13 years. The folks are not buying as much new cars anymore, given the price point. You look at the price point of new vehicles, right? Average price points are in the mid-50s. That's a lot of money for a new car. And so that age of that car park, as it gets extended, that increases the population of repair. The sweet spot for repair is a vehicle over 5 to 7 years old. So that population continues to get bigger. More hybrid vehicles on the road, that's dual drivetrains, that's great. Complexity of repair is going up because the new vehicles are also more. So if you look at the backdrop of repair, great backdrop. The issue that is impending the growth there is the technicians' sentiment to buy. The technicians are obviously a great example of the working class in America. They buy our tools and productivity solutions. And when there's a little bit things that crimp their pocketbook, they might cut back on the spend, and that's what we've been seeing clearly high-priced items. So the market is poised to catch up to the backdrop of that strong repair market. The question is when? Clearly, inflation is moderating. We think sort of relief, short cycle is on the way. The question is, what's the timing of it. Really difficult for us to call. What we do know is that high-priced items like toolboxes continue to be more of a discretionary item. Folks are preferencing lower price items that are productivity solutions. So a good backdrop on that as well. We just can't call that pace. So I think a good way to look at it is until we see further signs of how that market catches up to that strong backdrop of repair that I think our guidance is appropriate.

Just following up on that, Mark and Anshooman, like you guys, I'm sure, monitor like past dues or charge-offs or whatever. Like what does that tell you about the health of the market, would you just say?

Yes. So our past dues and past dues over 60 days are pretty stable. The -- if you think of a normal band, they've been trading at about the higher end of the band, but they've stabilized. We aren't seeing anything deteriorating any further. So I would say it's stable at this stage. Obviously, the improvement as the real income of technicians improve, inflation comes under control, you're going to see that start improving and move back towards the middle of the band that they normally trade at, but they are stabilized.

Okay. Great. I'm going to open up to the audience in a little bit. If you guys have any questions, we can go and get a question from you. But let me ask you one more question about the markets, and then I'll go into some other fun stuff. So let me ask you about mobility tech. You talked about it a little bit already, but you talked about FlexPay 6 rollout in Canada. First of all, within the Shell and Chevron deals, we know that Shell was a bit ahead of time from Chevron. So maybe you can update us on how much of that deployment is left. But I'd also be curious to get your thoughts on what you think a realistic percentage of C-stores that can move toward your type of platform, like how penetrated are you?

Yes. So Shell was our first announcement, 13,000 stores. We're about halfway done. We'll be done. We're sort of in that acceleration in the rollout phase. So we should be done in Q3-ish of this year. Chevron was a little bit behind. They're about -- that was an 8,000 count order. And we're about 1/4 of the way through. That will be done by the end of this year. So those rollouts are going well. I think the real proof points that this technology is really valuable to our customers. I think when you look at it, we also announced the Costco rollout in Canada, which is just a fraction of their footprint, which is also indicative of great customers willing to invest, but they're doing it because there's really strong paybacks here for that infrastructure. And if you look at about 140,000 count C-store within the United States alone that has petrol-based, you're looking at a pretty small fraction of that. Right now, easily, we could go after half that footprint in the United States plus expand internationally. Internationally is certainly a bit smaller in terms of the sophistication of the C stores, but clearly, that opportunity is there. And then keep in mind, this is really around that fueling infrastructure and then you can expand that in effect into all those other applications like car wash, electric charging, a lot of other type elements that this infrastructure is really built for and suited for. So I think it's a sign of good things to come. The other thing, too, folks can look at sort of the new construction rates that are out there and the announcements folks have. These are multiyear commitments. Even though they buy in short cycle from us and they purchase in short cycle, when you look at some of these innovations around their infrastructure, we call it their critical infrastructure, this is really linked more to their build-out of their new infrastructure and then converting their entire infrastructure over. So it's a bit more of a long cycle sale. When you look at technology like this, and we clearly have a strong pipeline of new customers coming down the pike.

Any questions from the audience? I know it's early. Maybe we haven't had our coffee yet, but anybody? All right. Well, while we're going to go get some coffee and while we do, I'll ask another question. So we do cover a broad set of companies. And one thing that I've really seen over the last couple of years is this sort of focus on 80/20. But I think some investors might forget that Vontier is doing something similar with its focused and prioritization process, and other simplification initiatives that, for instance, have allowed you to significantly reduce things like fuel dispensers. I think the Invenco software platform and the fuel dispenser gone from 34% to 18%. Maybe provide an update on the progress Vontier has done here. One thing that you noticed is gross margins for the company are mid-40s, right? And 30% to 35% in your long-term underlying incremental. So is that actually conservative when we think about that sort of longer term?

So I think our guidance this year is higher incrementals based on the momentum that we see. Look, there's a lot of runway of opportunity here. And I think it might not be easily seen for folks, but let me try to unpack this. When we spun, we spun as a set of operating companies, they were separate brands, not really linked. And we try to figure out which is the best way that we can add value in the marketplace and we started working on this Connected Mobility strategy. We invested in it. And that -- it's really a cross-fertilization across our businesses. So one area of pickup is how do our operating companies work more and concert with each other as sort of a one Vontier. And so this concept of FPP also extends into our centers of excellence and how do we leverage those. A great example of that is the number of software platforms that we have. We had a lot of software that was being done independently in the businesses, and think about this 32. I don't know why 32 keeps coming up for us, but 32 dispenser platforms, but also 32 software platforms as well. That's not scalable. None of that is really scalable. And when you think with a broader lens on that and when you apply more analytics around 80/20, then you say, wow, there's a lot of low-hanging fruit here. So we're beginning to pick those up. We're seeing the momentum in that. Really encouraged by it because not do I believe that there's an opportunity to drop to the bottom line, there's an opportunity for us to focus more on growthier aspects of our business and investing in those growthier aspects and letting go more of the de minimis elements of your businesses and product lines. And so a great example of this, too, was how did we focus in India on getting orders around that using our ability to focus on what really was important. We localized there. We focused on our VBS with getting better quality. And as a consequence, we've been able to win some pretty major orders with some really important customers there. So really happy with what we're seeing, and I think you're seeing that read through in our operating margin guidance for the year.

Helpful. And so maybe following up on that at your Analyst Day in '23, you talked about 150 basis points of margin improvement by '26, which I think requires a pretty big jump in '26 given you've got the '25 guidance out there. I know growth hasn't been as good as you thought in a couple of your higher-margin businesses. But you talked a lot about simplification, self-help in general. So what could you do to help Vontier reach that target? Do you see that target is still viable? Or do you need better growth to get there?

Yes. I think we still see the target viable. As Mark mentioned, there's significant runway in our self-help program with our focus on prioritization process. And that's starting to read through in our results. This year, the reported incrementals at the midpoint of our guide are about 60% or slightly north of 60%. Also in 2024, while margins flat, we did consciously decision to step up R&D as a percentage of sales. That's obviously not going to go up, that will be flat. So as sales increase, we'll get some benefit with R&D being relatively flat year-on-year. So we still see a path to the 150 basis point margin expansion given the self-help opportunities that we have ahead of us.

That's helpful. And so maybe just current events. Give us a little bit more color into your global supply chain. I know you were asked a couple of questions on the call. But if I'm just going over, right, you're baking in a point of price in '25. I would assume you're thinking modestly positive price versus cost. That's what, let's say, in the 35 to 50 basis points of margin improvement that you've got for guidance. I think you said in your earnings call that you reduced sourcing from China down to $50 million. Mexico is $35 million. I don't believe Vontier is any manufacturing in Mexico and China, but how are you treating steel and aluminum tariffs? How do you deal with the tweet every day?

Yes. As you said, I think things are still uncertain and changing in the world of tariffs. But tariffs aren't -- this isn't the first time around for tariffs. And also, there were significant supply chain disruptions post COVID. So what we've been doing is structurally working on our supply chain resiliency, both from a tariff's perspective, but also from a sourcing perspective. If you start thinking of China, we've gradually, over the years, worked down our supply chain -- supply base coming out of China. We have about $50 million that will come out of China this year. And a lot of it's for our Matco business, and we continue to work that down. If you think of Mexico, we have $35 million, as you mentioned, that comes from Mexico. 90% plus of that is dual source already. So if there are tariffs in Mexico, we can move that supply chain. It takes a few months to scale up the second supplier in Southeast Asia, but we can scale that up pretty quickly and balance our supply chain. From a tariff's perspective, on steel and aluminum, we buy about $28 million of raw steel and aluminum. And in the U.S., all about $1 million of it was U.S. sourced. Now previously, when there were tariffs put on steel, the price of U.S. steel went up also. So we also -- what we've demonstrated in our history since spin is we've been price/cost positive throughout our track record every quarter. So if there is higher steel prices, we will pass it through. If there are tariffs, we will pass it through to our customers and remain price/cost positive.

Mark, I just wanted to ask you actually a follow-up there. Like you and I were talking about how you see customers all the time. Like does this come up in conversation like you're talking to your customers last week, can you talk about, can you can quote what's going on in Washington or like not really? Or like how do they sort of address it with you curiosity?

Well, I think it comes up probably in almost every conversation that we have. The -- there's just a lot of uncertainty out there, which is why I think folks have been a little cautious on the outlooks in the market only because there's a level of unpredictability of what might happen next. I think the things that we're seeing so far either favor us or we're able to manage through appropriately. I think the hard thing is to really know what will happen next and how that will play through in markets. I'm not really talking about our industry specifically, but just generally, and then what are the knock-on effects of that might be a little hard to predict. So I think we're just dealing with a little more uncertainty with what folks are sort of hearing and how they feel like that ripples through, which is why I think it's appropriate to be -- while we are quite optimistic on what we see, we're also a little bit more balanced with that outlook because I think it's prudent given that I think nobody really knows what can happen next in the outlook. The backdrop on many things we see, many of the secular drivers are good, really good for us. But we're just a little more cautious given the uncertainty there.

Helpful. And so I want to go back and maybe look at some less heralded pieces of your business. Retail business overseas, you mentioned India, your aftermarket business in EFS. You've experienced both good momentum in those types of businesses. I know your international piece tends to be a little harder to predict. But maybe talk about what the landscape looks like over the next few years in international EFS. How much -- how closely should we pay attention to your aftermarket business, for instance, like more color would be helpful.

So let's just take the aftermarket for Environmental and Fueling. I think it's a real testament of us. We used the FPP process early on with this opportunity. And we said, look, we're underserving the aftermarket element of this business. We're not getting our rightful share here. And at the same time, we are investing in -- if people remember that security of payment big upswell on EMV in North America, we invested to try to gain share in that segment, knowing that it would also drop off, and it did drop off. It was quite painful that it did. But now what we're left with is a bigger installed base and think about you've got a 2-year warranty, and those products are now coming off warranty. So wow, what a great opportunity to mine that opportunity. And we've been working for this now for a couple of years, and you're beginning to see that read through. So there's real legs to our aftermarket, maybe not quite growing as much as it did last year, but still really strong growth, excellent profitability. We're also applying FPP in a way of trying to get rid of some of those de minimis elements of the product line that you sell and you package them more in the kits, which raise the overall price points that people have to buy for, reduce the number of SKUs. You can eliminate some of your labor around that and your stocking inventory. So real legs to that, for sure, particularly as we expand internationally. And then I gave you that India example. International was great, both above ground and below ground. Real pockets of strength there that folks are investing in the infrastructure for the long term. Countries are stepping in, in the Middle East with how do you do more security of payment. Also in Latin America, security of payment is an ongoing issue that folks address. Clearly in India where we've installed about 2/3 of the refueling infrastructure there has real legs for that to continue to build out, and we're a highly valued brand there, both above ground and below ground. And we're investing in ways where it's a challenging market, for sure, but we're finding creative ways of bringing our cost structure down, localizing, designing for better costs so that we get acceptable margins out of that business. And I think you see that overall reading through on a global basis, a great global business to continue to build off.

So I know visibility is always a little tough international, but I should think of it as a growth business over the next few years, more or less.

Absolutely. It can be a bit lumpy, no question about it. We're still going to serve these India tenders now through the balance of this year and, of course, more to come to market. But we also announced out of the Mobility Technologies, security of payment technology that is clearly reading through in the Middle East, and we've been rolling that out, which has been outstanding. So I think it's about laying up these opportunities. We have a growing pipeline of them and trying to even them out best we can. But overall, no question, a growth business.

Excellent. So you used to get as one of your first questions, your EV strategy. Now I'm going to ask it as one of the last questions. But maybe you can talk about Drives, your current EV strategy. Where is Drive in its gestation period and journey to profitability? How are you thinking about potential growth on that side of the business?

So really happy with where that business has come from. When we thought about how do we position ourselves to leverage where we are really strong in this mobility infrastructure because we are a leader #1 or #2 in most of what people need when they stop along the road of highway and also fleet operators, by the way, same situation there. And we thought about electrification. We thought about it really hard, and we, 3 years ago, made this acquisition of Drives because it represents the right profit pool. It's an asset-light model with something that we think had a lot of extensibility. The problem was it was pretty small at the time, so sub-$5 million. But now when you're -- when it's growing at the rate that it is, and we're #2 worldwide right now with plugs under management with about just under 110,000 plugs, that's a real position of value that's been building SaaS business model, $20 million, just under $20 million now. But if you look at exit rates in 2026, where you're going to be looking at a $50 million run rate business at SaaS margins, clearly being appreciated by the charge point operators at scale. That's where it's growing is the folks that are the most impactful charge point operators worldwide are gravitating to the Drives platform and infrastructure because they know that it works and it gives them the solutions they need to be able to manage a network of chargers. It's also accruing more to convenience store owners that want to be charge point operators. Look at Circle K says, "Look, I don't want a charge point operator on my site. We want to be our own charge point operator." And that then accrues to our real strong customer value proposition to convenience store operator. So great crossover there. So it's an outstanding business model that's been growing really nicely. It's going to be accretive to margins here shortly as well, which is a great testament. And when you look at the entire infrastructure and choices that people have to decarbonize, it can be of a petrol-based way of providing more sustainability through better vapor recovery, more security of payment. But also when you start blending this with solutions on electric charging, I think these trends are going to play out over a long period of time, and I think we're positioned incredibly well to capitalize on that.

Mark, I just want to clarify one thing you said because it's interesting. Like -- so gross margin is usually pretty high with this kind of business. When you say SaaS margins, I think that, but that you're saying operating margins in '26 could be accretive for Drives?

In '26, they should exit at breakeven plus rate and at about a $50 million run rate. Now once you start thinking beyond 2026, the margins will start picking up pretty quickly because you're dropping 70%, 80% gross margins, but not really scaling your operating expense at that level. So really accretive starting 2027.

Okay. No, that's helpful. And then maybe, Anshooman, just asking on free cash flow, you've got a little bit of higher CapEx I think in '25. So maybe you can elaborate on what you're doing there? And how would you characterize your working capital opportunity? You're 90% plus for '25. A little bit below your longer term 100%.

Yes. And 2025, we've guided to 90% plus of free cash flow conversion. The biggest headwind to cash conversion for us remains cash taxes. Cash taxes will be about a 6 to 7-point headwind for us. Largest part of that is tied to the fact that from a U.S. perspective, we can't expense R&D, we have to capitalize and amortize it for U.S. tax purposes, not for GAAP purposes. So that remains a headwind through 5 years of -- when they change the tax IRS rules. CapEx is a little bit higher, but we're managing through that. Some of it is paying down some of the technical debt we had from an infrastructure perspective. But from an opportunity perspective, we did have about a $30 million build in inventory in 2024. Part of that was higher inventory we carried ahead of tariffs. Obviously, that will start coming down. So we do have some opportunities. The rest of working capital, we'll continue to manage it. It's part of our BBS culture and try to optimize performance and that goes to cash conversion also. We've historically had a pretty good cash conversion, and I don't see any reason why we won't in 2025 also.

Okay. So I'm going to get to capital allocation in a second, but I just want to ask you this question because I'm going to ask every company at this conference again. What are the top 2 or 3 innovations and structural changes affecting your company over the next 5 years? Are there any emerging industry trends that are perhaps being overlooked in the current discourse?

Well, I think we're showing with these proof points that are beginning to read through is that this industry that we serve, which is around convenience retail and fleet operators, where it's most obvious are really benefiting from the opportunities for digital transformation. They put a lot of critical infrastructure to work. To be able to manage that critical infrastructure, the digital element of that is pretty huge. So it's that connected hardware, application software scaling on the cloud. And I think there's real solutions that we can innovate around, and it shows that it can be quite a growthy market when you can put these solutions to work. And it integrates our position in a very unique way because we have such a strong leadership in this mobility ecosystem. So I think we're -- it's really in our wheelhouse to be able to do this. And so we're really happy to see that innovation. At the same time, folks are looking for opportunities to further be more sustainable and decarbonized, whether it be the petrol infrastructure, whether it be compressed natural gas, going to biogas or fuel blending, whether it be electrification and all these we have leadership stakes in. And the innovation that we're providing there to work hand-in-hand with ongoing regulation that is better for the environment, but also better for these operators. Different markets are going to advance at different rates. I don't think that's the important thing is to guess which one. It's -- the important thing is to have this innovation ready for those markets when they're willing to adopt it. And I think that's what we're showing with this portfolio. That's what we're showing with the proof points that we're offering is that as an innovative leader in this industry, we're driving the industry forward and we are in a very good growth position, very good margin accretive position for the future. So I love this market. I love the opportunities that represents to us, and I love our position here worldwide with our ability to compete.

And in the last minute, just quickly about your capital deployment. It seems like you're mostly focused on repurchases, debt pay down, your leverage target is in pretty healthy shape. So maybe talk about if there are any deals out there that are reasonable versus the hurdle rates you set internally? And are there any white spaces that you really want to go after?

Yes. So our acquisition pipeline, which we continue to cultivate is strong. But at the end of the day, we will remain very disciplined around our capital allocation. We say it's dynamic, i.e., we go towards the highest return option for our shareholders. And we believe our stock is significantly undervalued when you look at how we perform financially to the multi-industrial averages. Especially when you start looking at profitability, you start looking at free cash flow conversion, free cash flow yield. So buybacks remain attractive. But at the same time, we're building out our opportunities. And with M&A, there's a buyer and a seller, and there needs to be a meeting of mind in terms of value. And we are not going to overpay. We'll be disciplined around it. The one example we often give is around the Invenco acquisition, when it came to market, they wanted twice as much as we finally paid about a year later. So we remain disciplined through that process, and we are committed to remain disciplined through any acquisition process.

Well, thank you very much, guys. It's great having you.

Thanks, Andy. Thanks for having us.

Thank you.