Dover Corp Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Steve Tusa - JPMorgan Chase & Co. - Analyst : Hey, good morning. Brad, congrats, and thanks for all the help over the years. You've definitely seen a lot there, a lot of change, so congrats on the run. The slide last quarter talked about 40% conversion and $25 million of restructuring benefits. This slide says 40% plus. Are you still assuming the $25 million of restructuring benefits? And I don't know, there's a lot of up arrows on that margin slide. So just maybe help calibrate us a bit on the margin drivers and price cost? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:00PM, DOV.N - Q4 2024 Dover Corp Earnings Call

Question: Steve Tusa - JPMorgan Chase & Co. - Analyst : Got it. And price cost, what do you guys assume for price in the year? And will that spread be positive?

Question: Steve Tusa - JPMorgan Chase & Co. - Analyst : Okay, great. Thanks a lot. Thanks again, Brad, congrats.

Question: Nigel Coe - Wolfe Research LLC - Analyst : Thanks. Good morning. Brad, I'm sure you're going to get a lot of congratulations and all that. But you've been at Dover for a long time. You've been the one sort of constant for the last like 15 years. It's quite a moment here, so congratulations.

Question: Nigel Coe - Wolfe Research LLC - Analyst : So Rich, you mentioned January. And whenever you mentioned sort of within the current period, there's talks of tension. I'm just curious if you think the tariffs or the potential tariffs is causing any sort of unusual behavior around the supply chain that you touch?

Question: Nigel Coe - Wolfe Research LLC - Analyst : Okay, okay. And then just a quick question on the margin outlook. You mentioned CEF is going to be the margin leader. I'm just curious if you could just maybe just -- if I could just ask if the 20% plus handle would be reasonable there just based on what we saw this quarter? And then similar being with DPPS just given the exit rate, will a [30%] handle be reasonable for this year?

Question: Nigel Coe - Wolfe Research LLC - Analyst : Okay, very nice. Thanks, Rich.

Question: Andrew Kaplowitz - Citigroup Inc. - Analyst : Good morning, everyone. Brad, thanks for all your help. Congrats. Rich, book-to-bill over one again in Q4. Are you thinking '25 is another year where all or most of your quarters could achieve book-to-bill at or over 1? And I know you're expecting an inflection in CO2 orders. It looks like you've got that, and you mentioned double-digit expected growth in that business is expected to continue. But given recurring other DCST businesses, at least in terms of orders, it seems like you expect DCST bookings momentum to continue. Maybe you can comment on that.

Question: Andrew Kaplowitz - Citigroup Inc. - Analyst : Got it. And then can you give us a little more color into how you think about earning -- earnings cadence through the year? It seems like we start out pretty slowly in terms of organic growth in Q1 given DCST and DEP could start slowly in terms of growth, but more color on Q1 on the trajectory for the rest of the year would be helpful.

Question: Andrew Kaplowitz - Citigroup Inc. - Analyst : Appreciate the color.

Question: Joe Ritchie - Goldman Sachs & Co. LLC - Analyst : Hey, guys, good morning. And Brad, thanks so much. Wishing nothing but the best.

Question: Joe Ritchie - Goldman Sachs & Co. LLC - Analyst : Maybe let's just -- I'll just hone my question on DCST. Rich, maybe talk a little bit about like what you're seeing in that European heat pump market now expecting growth in 2025. I think you maybe mentioned inventories have also stabilized there. Just give us some color on what you're seeing there.

Question: Joe Ritchie - Goldman Sachs & Co. LLC - Analyst : Got it. That makes a lot of sense. So as you think about then kind of like the right starting point for margins for that segment, given that you got that big hit in the fourth quarter. How do you think about then the margin trajectory in 2025? It would seem like you should get some pretty good margin expansion in that business. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:00PM, DOV.N - Q4 2024 Dover Corp Earnings Call

Question: Joe Ritchie - Goldman Sachs & Co. LLC - Analyst : Great to hear. Thanks, guys.

Question: Brett Linzey - Mizuho Securities USA LLC - Analyst : Thanks. Good morning, and best of luck to Brad.

Question: Brett Linzey - Mizuho Securities USA LLC - Analyst : I wanted to come back to the bio orders, really strong. I guess, any detail in the nature of the applications you're winning? And any concentration, is there one to two customers? Is it fairly broad based? And then how should we think about that delivery schedule?

Question: Brett Linzey - Mizuho Securities USA LLC - Analyst : It makes sense. And then just a follow up on the liquid cooling, very strong demand, again, obviously, with everything that's going on. But maybe talk about that specification process with those partners. And how large has the total addressable market for Dover grown over the last couple of years? And where do you think your share of that can run? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:00PM, DOV.N - Q4 2024 Dover Corp Earnings Call

Question: Brett Linzey - Mizuho Securities USA LLC - Analyst : Appreciate the detail.

Question: Michael Halloran - Robert W. Baird & Co., Inc. - Analyst : Hey, good morning everyone. And congrats, Brad. So just another high-level question here. Just to make sure I understand the cadence through the year. And in answer to the earlier question, the thought process then if I think about typical earnings by quarter, relatively normal or a little subdued in the first, and then build it up in the back. But then related, are you basically assuming the underlying demand dynamics are relatively stable with current levels, not improving, not getting worse, but relatively stable in normal sequentials? Is that the thought process?

Question: Michael Halloran - Robert W. Baird & Co., Inc. - Analyst : Yes. That makes sense. And then just an update on the M&A side. Any change to what you're seeing from a backdrop, actionability, and the amount of content that might be in the market at some point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:00PM, DOV.N - Q4 2024 Dover Corp Earnings Call

Question: Michael Halloran - Robert W. Baird & Co., Inc. - Analyst : Thanks, guys. Helpful as always.

Question: Julian Mitchell - Barclays Capital, Inc. - Analyst : Hi, thanks. Good morning. Brad, thanks for all the help. If we think about just the segment level, I want to start with clean energy and fueling. It seemed like you did see some very encouraging signs exiting the year in below ground and vehicle wash. And as we're thinking about the 2025 guidance, maybe help us understand kind of how much of the business now is that clean energy components piece, which has sort of come together fairly recently? And how does the growth there differ this year versus the more traditional parts of DCEF?

Question: Julian Mitchell - Barclays Capital, Inc. - Analyst : That's helpful. Thank you. And then secondly, on engineered products, there's been a lot of change in the business mix there. Aerospace and Defense, a big old -- waiting now within DEP. And maybe remind us of kind of the main exposures there because it looks like the volumes there were down in the fourth quarter but should grow this year as a whole in DEP. Maybe kind of remind us sort of what's moving around in that? And what's the visibility on that second-half improvement in the A&D shipments at DEP? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:00PM, DOV.N - Q4 2024 Dover Corp Earnings Call

Question: Julian Mitchell - Barclays Capital, Inc. - Analyst : Great. Thank you.

Question: Jeff Sprague - Vertical Research Partners LLC - Analyst : Hey, thanks. Good morning, everyone. And congrats, Brad, hate to admit it, but we go back to American Standard, Honeywell Allied.

Question: Jeff Sprague - Vertical Research Partners LLC - Analyst : Almost to high school. Maybe a CFO question to start, just on kind of interest income. Thanks for that color. I assume rates are a little bit more favorable on sitting on cash than maybe you thought if you were thinking about the Fed. Maybe address that if that is, in fact, helpful. And then also, I just wanted to clarify, that guide that you're talking about is really only accounting for cash on hand. It doesn't look like you're giving yourself any credit for just a very solid free cash flow generation you're expecting in 2025.

Question: Jeff Sprague - Vertical Research Partners LLC - Analyst : Right, thanks. And then Rich, on DII, just maybe a little bit more color there, right? Demand trends are giving us a solid green pie, but we're growing low single digit. I'm guessing it's just sort of the fashion and fabric or whatever you call that piece of the business is really still lagging and holding back the base. Is that what's going on? Maybe a little more color there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:00PM, DOV.N - Q4 2024 Dover Corp Earnings Call

Question: Jeff Sprague - Vertical Research Partners LLC - Analyst : So the low single-digit growth just reflects then what's the normalization on the equipment side, after a little bit of a bump?

Question: Jeff Sprague - Vertical Research Partners LLC - Analyst : Okay. I was talking about the outlook, but good to go. I'll leave it there. Thanks a lot.

Question: Andrew Obin - BofA Securities, Inc. - Analyst : Good morning. Yes, we'll try and congratulate Brad on his retirement. It was a pleasure. Thank you.

Question: Andrew Obin - BofA Securities, Inc. - Analyst : Well, that's good. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:00PM, DOV.N - Q4 2024 Dover Corp Earnings Call

Question: Andrew Obin - BofA Securities, Inc. - Analyst : Well, I'm binge watching Severance these days. So just '25 outlook for growth in vehicle wash. It's much better than the commentary from peers, and I would also say above-ground is turning. Do you think you're gaining share, or is it a real turn in the market, right?

Question: Andrew Obin - BofA Securities, Inc. - Analyst : Excellent. Thank you for your expansive answer. And just a simple question for Calder. Do you think that business can double this year given sort of the underlying growth in liquid cooling?

Question: Andrew Obin - BofA Securities, Inc. - Analyst : Relative to '24. (multiple speaker) No, just -- sorry, just the liquid cooling part. Sorry, just the data center. Yes, the data center part, sorry.

Question: Andrew Obin - BofA Securities, Inc. - Analyst : Thank you. It's good to have happy, optimistic reach back. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 2:00PM, DOV.N - Q4 2024 Dover Corp Earnings Call

Question: Scott Davis - Melius Research LLC - Analyst : Hey, good morning, guys. Congrats. I'm sure you're going to miss that flight out on Monday morning or Sunday night out in Chicago. I've spent some frequent flyer miles our way, I guess. You probably have plenty. But anyways, I think you guys have covered most of the terrain here. It's been a lot of minutiae too. But if we back up a little bit, is the refrigeration story just about CO2 in '25? Or is it really also just about pent-up demand that there was a -- it's been a pretty long period, I think, of underinvestment from your customers. Is that a correct assessment?

Question: Scott Davis - Melius Research LLC - Analyst : Okay, fair enough. And then just a small question. I guess I've never asked this before, but if you had to split up your CapEx between kind of maintenance and growth, how would you think about what kind of that base level of maintenance CapEx is in the numbers?

Question: Scott Davis - Melius Research LLC - Analyst : Okay, good color. Thanks, guys. Best of luck this year, all right?

Question: Deane Dray - RBC Capital Markets - Analyst : Thank you. Good morning, everyone. I get to do the last congrats to Brad. And wish you and your family all the best. Also, we go way back.

Question: Deane Dray - RBC Capital Markets - Analyst : Maybe just to start, Rich, on the two bolt-on deals, how did those come about? Where do they fit? What's kind of the attraction there? And how much of that pipeline that you're looking at fits that category?

Question: Deane Dray - RBC Capital Markets - Analyst : All right. Good to hear on that. And then data center came up a whole lot in the Q&A prepared remarks in your slides. My guess is those were already written prior to the Monday sell-off. And Rich, you've already said your short-cycle business, it's 45 days, so you're probably not looking any for out than that. But just in terms of managing this business, do you feel like there's any sea change in terms of data center CapEx? And I know you can't size the TAM, but is the TAM potentially getting smaller and more competition? Just kind of how might the competitive dynamics have changed since Monday?

Question: Deane Dray - RBC Capital Markets - Analyst : Excellent. I appreciate that color. Thanks.