Vontier at Bank of America Conference: Strategic Growth Insights

On Tuesday, 18 March 2025, Vontier Corp (NYSE: VNT) presented at the Bank of America Global Industrials Conference 2025, offering a strategic overview that balanced optimism with caution. The company highlighted its proactive steps to mitigate tariff risks, drive margin expansion, and seize growth opportunities across various segments. While challenges such as inflation and tight budgets persist, Vontier’s management remains confident in achieving its financial targets.

Key Takeaways

• Vontier aims for 150 basis points of margin expansion by 2026.
• The company has significantly reduced its exposure to China tariffs from over $300 million to $50 million.
• Vontier’s Mobility Technologies segment is expected to drive margin expansion this year.
• The company focuses on diversifying its supply chain and manufacturing footprint to mitigate risks.
• Vontier plans to execute more than $75 million in share buybacks.

Financial Results

• 9% year-over-year bookings growth in the fourth quarter.
• $50 million exposure to China tariffs, down from over $300 million previously.
• $35 million exposure to Mexico tariffs, with over 90% dual-sourced.
• Mobility Technologies segment expected to expand margins over 100 basis points this year.
• Drive Software is targeted to exit 2026 at breakeven, with revenues around $50 million.
• Matco’s performance is anticipated to remain flat this year.

Operational Updates

• Vontier has reduced its global dispenser platforms from 32 to 8 and its manufacturing footprint by over 600,000 square feet.
• The company has streamlined Invenco software platforms from 34 to less than 10.
• Shell’s 13,000 site rollout of InFX is about halfway through, while Chevron’s 8,000 site rollout in the U.S. is a quarter complete.
• The environmental business is expected to grow in low to mid-single digits over the next few years.
• India is seen as a promising market with major tenders expected in 2024.
• Drive Software’s plugs under management are doubling annually, with over 100,000 plugs currently managed.

Future Outlook

• Vontier is confident in achieving 150 basis points of margin expansion by 2026.
• Steady growth is anticipated in the environmental business due to regulatory drivers.
• Dispenser sales are expected to see gradual upgrades due to the first EV dispenser replacement cycle and payment standard regulatory changes.
• Vontier plans to execute more than $75 million in share buybacks.

Q&A Highlights

• Analysts inquired about margin expansion, tariff risks, and growth opportunities in different segments.
• Management detailed strategies to mitigate risks and drive growth, emphasizing the need for improved consumer confidence to boost Matco’s performance.

For a more detailed analysis, refer to the full transcript below.

Full transcript - Bank of America Global Industrials Conference 2025:

Operator: This meeting is being recorded.

Andrew, Analyst: The fourth quarter was 9% year over year bookings growth, building momentum. What do you see from your customers and end markets?

Mark, CEO, Gilbarco Veeder-Root: So we saw a building momentum coming off the second half of last year. I think a good way to sort of follow that was sort of the booking rates that we were able to achieve and also our backlog increase. I think as we started this year, obviously, a lot looking forward into 2025 in terms of the new product introductions we were making, some of the newer positionings that we’ve had in the market that we saw good uptake on. Really no change to that. Obviously, all eyes are on what’s happening with tariffs and some of the macroeconomic uncertainty that it might be brewing based on reading the paper and the news cycle.

But we’re not seeing that showing up into our KPIs.

Andrew, Analyst: That’s good. And you’ve already quantified the tariff risk, $50,000,000 from China, Thirty Five Million Dollars from Mexico. Are you worried about potential indirect impact from tariffs? Or I think what we always when we go into the meetings, what investors bring up, what management bring up, it’s really the uncertainty potentially killing the animal spirits. That seems to be a broader concern because every company seems to have quantified what’s happening.

But just maybe A, the impact, B, maybe explain like what percent of your production falls under USMCA. And then as I said, just this uncertainty and what are the conversations the customers are like?

Operator: Yes. As you mentioned, we’ve quantified our direct impact from Tier one supply chain. We buy about $50,000,000 from China, which by the way, used to be well north of $300,000,000 in the first Trump administration. We have been systematically moving production and supply chain out of China to derisk what we’ve been doing. On Mexico, we have about 35,000,000 that we buy directly from Mexico, Over 90% of that is already dual source, so we can move that around in short order.

So we feel that a Tier one supply chain risk has been managed and mitigated. Overall, obviously, we are watching the macro and order trends. There is a lot of uncertainty in the macro, but also the markets we compete in, we feel we have pricing power and we can price pass any cost inflation into the markets. We did that the last time around. And again, what we can’t mitigate through supply chain moves, etcetera, we would pass on through the market.

We also have significant part of our manufacturing in The U. S. For The U. S. And we have our largest factory for dispensers in The U.

S. In Greensboro, North Carolina. We do the underground manufacturing in Altoona, Pennsylvania. So we are manufacturing regionally. We have regional manufacturing in the Latin America and Brazil for Latin America, Germany for Europe, India for Asia.

So we are somewhat decentralized from a manufacturing perspective in region for region.

Andrew, Analyst: And it’s a startling statistic how much you sort of derisked your China exposure. So maybe where did that go?

Mark, CEO, Gilbarco Veeder-Root: Well, I think real credit goes to the team, a lot of hard work over the years. So I don’t think anybody should be surprised by what the Trump administration is doing from a tariff. We’ve been getting ready for this. And I think the world has been headed this way for a while. So I think it’s just and we’re maybe not like some of the other industries where we had so much work to do.

I mean, if you look at other industries where there’s just heavy reliance on manufacturing in Mexico for The U. S. Or in China for the rest of the world, that we were up against some headwinds but maybe not so much headwinds from some of the other industries that are heavily dependent on it. So I think it was a medium sized pot for us that we’ve been working on and not a long pot. So I think what we had to work with was pretty manageable.

I think we were able to really take advantage of that.

Andrew, Analyst: And did the China exposure was mostly Southeast Asia or?

Operator: A blend of Southeast Asia, some in The U. S. Oh, wow.

Andrew, Analyst: We have some

Operator: from U. S. Suppliers, for example, for our repair solutions, Matco business, which expanded and put in more infrastructure. So they’re providing us more and they’re doing it at a very cost competitive rates.

Andrew, Analyst: Excellent. And so at the twenty twenty three Analyst Day, you gave a target for 150 bps of margin expansion by 2026. And given the macro headwinds, ’24 margins were flattish at 21.4%. Is the 23 plus percent margin target by 26% still in the table?

Operator: Yes, we do see line of sight to our 150 basis points of margin expansion by 2026. Yes, last year was flat, but we’re seeing margin expansion this year, a lot of it coming out of our Mobility Technologies business. The Mobility Technologies segment will expand margins over 100 basis points this year. We’re in our relatively early stages of our Optimize the Core, which is pillar one of our strategy where we’re structurally simplifying the business and taking cost out. Think of it very much like an eightytwenty program.

We call it focus on prioritization. Couple of examples, we had started our global dispenser platforms at 32 global dispensers where we cut that by more than half and we’re on our way to eight global platforms. What that really does is it allows for standardized components, which went from low single digits, will be well north of 20% relatively soon. It reduces the amount of manufacturing footprint that we have. We’ve taken out over 600,000 square feet of manufacturing and distribution.

And it also reduces your sustainment engineering, which you can then reinvest in terms of new product development, but also improve margins. Same thing on the Invenco side, which is a part of Mobility Technologies. We started off with 34 different global software platforms. We’ve reduced that to about 18 and we’re on a journey to less than 10. Percent.

So structurally, there’s significant headroom for improvement and we continue to work on expanding our margins.

Andrew, Analyst: So I’m going to go fairly granular into the businesses that you have. But before I do, Mark, I know that you have sort of an overarching vision for the company, which I think it would be helpful if you framed your vision before I’m going to go fairly granular because I think it would really help us to bring together sort of top down with bottom up, which I think where we spend a lot of time.

Mark, CEO, Gilbarco Veeder-Root: Yes. I appreciate the opportunity to do that. Look, if you look at the business since then, we’ve repositioned ourselves pretty significantly. And the best way to think about it is what we call serving the mobility ecosystem. It’s the movement of data, goods, people along the roadway and things that are connected by the roadway.

And that mobility ecosystem is a very vibrant $35 plus billion industry, quite growthy, and a lot of pretty significant trends there related to the fundamentals around digital transformation, more sustainability from options and fueling, whether it be petrol and the choices there to be more sustainable right through to electrification and gaseous fuels. Our two major customers there are convenience store operators. It’s the stop in your local neighborhood. It’s the stop along the roadway as a major vertical where we’re selling a lot of products into. So when you get into these granular questions you’re going to ask us, we’re number one or number two of all critical technology selling into that mobility ecosystem.

The other major customer there is the fleet operator and how they manage their fleets through their fleet depots by being more sustainable but also managing their assets and their costs. So I think when you look at the backdrop, they’re quite relevant. And then the third major customer is around repair and repair technicians, which we sell mostly in The United States given the artifacts of repair technicians work for both OEMs as well as small mom and pops, and they buy their own tools, and that’s who we sell to. So the transformation underfoot has positioned us quite well for what we see as longer term secular drivers where investment is going in and the profit pools that we’ve put in place are really good profit pools and provide us that optionality on fueling and fueling infrastructure as well as that digital transformation.

Andrew, Analyst: Thank you. And having laid the solution, so why don’t we talk about retail solutions? And for the folks listening in or here, it’s one of sale payments and automation software, roughly maybe 50% of revenue. So you have generally 6% market share of your fuel dispensers, but maybe 15% share for your software platform. You continue to win over some larger chains, I think Chevron, Shell.

So how does the client pipeline look, right? Because I think that’s sort of getting a fair share, that’s a big part of that story. Can you just talk about that?

Mark, CEO, Gilbarco Veeder-Root: Yes. I think what we started laying some breadcrumbs around was the real opportunity for these convenience store operators to manage their infrastructure better, both from a productivity perspective, but also how they attract consumers onto their site. And a great examples of that are are which you just referenced was Shell thirteen thousand site rollout of InFX, which is that site management software that starts with also managing their fueling but also can expand into their other operations and then followed on by an 8,000 site United States rollout with Chevron. And by the way, those rollouts are going pretty well, about halfway through the Shell rollout now and about a quarter of the way through the Chevron rollout. We also followed that up last year with an announcement with Costco in Canada, which obviously, Costco has been a great customer of ours, but also looking for some of those productivity benefits through their fueling operations.

And so I think what that’s really indicative of is the opportunity for us to serve the industry with a new to the market offering where they’re able to manage things more effectively on the cloud. It’s recurring revenue business for us. It’s a great business model. But folks would not be doing that if it didn’t offer a pretty significant savings for them and a return on investment. And I think it’s just indicative of the runway ahead that we have with bringing these new products to market and where we can serve not only The U.

S. Markets but also other markets worldwide.

Andrew, Analyst: Excellent. And just maybe just going back to what’s your fair share. Is there anything that would prevent you from getting your market share in retail software up towards your hardware market share over time?

Mark, CEO, Gilbarco Veeder-Root: No, there’s nothing. In fact, if you look at one of the artifacts to the industry that’s also in our favor is that we have the majority share with the largest convenience store operators, both globally as well as regionally. And these are the folks that are making the investments in the industry. These are the folks that need the tools to manage these assets. These are the folks that are also consolidating the industry.

And when these regulatory drivers hit, whether it be new security of payment by the way, you’re happy to know, Andrew, that we’re now advancing Payment Card Industry six standard, which will obsolete in April of twenty twenty six. So once again, a new security of payments Yeah.

Andrew, Analyst: We’re going to talk about that. Yeah.

Mark, CEO, Gilbarco Veeder-Root: And but when you look around the world, there’s all these security payment standards and also sustainability issues around vapor recovery. So we’ll talk about that too. But folks have to address those issues. And as they’re addressing those issues, the larger players are very good at deploying capital. They’re flushed with investment ability from a balance sheet perspective.

And this absolutely gives us that higher share market opportunity to go after with our new offerings as well because folks are really interested in investing in that with their infrastructure. So we like the setup that we’re sitting at. Yes.

Andrew, Analyst: And but should we expect something because I think Chevron and Michelle that really showed the power of the installed base. Costco Canada, over the next twelve to twenty or four months, is it reasonable to expect another sizable customer to come onboard?

Mark, CEO, Gilbarco Veeder-Root: Absolutely. Our pipeline is growing, and we’re doing pilots with other customers. We’re not disclosing them at this point. But I think as those pilots continue to advance, as they as the industry can look at these other proof points that are out there, that also greases the skid for

Andrew, Analyst: other larger So relatively high degree of confidence that we should see something next? That’s twenty four months. One hundred percent. I’ll take that. That’s a good number.

So you launched a new FlexPaste six hardware payment terminal. You’ve just explained to us why this is the pin pad at the fuel dispenser. So what’s the key selling point here? And what’s the biggest

Mark, CEO, Gilbarco Veeder-Root: differentiation versus competitors? So there’s a couple of things, one of which is we just talked about security of payment and the sunsetting of that in The United States. That’s a great driver, and we think those drivers don’t stop. Right. The second one is that this it’s all in the cloud.

So think about think about your phone and how many security or software upgrades you get to your phone that is just done over your over the air. Well, a payment technology on a dispenser, every time there’s a new software update, historically, you would have to roll a truck Right. On-site to be able to do that. This is really the now the leading technology out there where now you can do over the air updates Yep. Or any number of software updates that we see that are coming out, including media and enhancements for how you bring consumers into the store, not only security.

So there’s a plethora of opportunities for us to be able to leverage off that infrastructure. So it’s a real game changer for the industry when you think about it, including transaction speeds that are much faster and we’re improving the quality of the experience by our direct customers as well. So it’s a very significant upgrade for the industry, and we’re really happy to be advancing. And as a consequence, we’re seeing really good uptake around it.

Andrew, Analyst: Excellent. Thank you. So maybe we can talk about environmental 10% of revenue. Your tank, gauges and pumps are about $300,000,000 3 50 million dollars revenue business. You have an installed base of 350,000 tank gauges.

We’re now entering a replacement cycle for this above average margin business. So maybe can you talk about the length of the cycle and what type of of an uplift we’re expecting? Because I think, right, as when we’re talking above ground, we were waiting for this for a while and it seems to be happening. So just maybe how excited should we get?

Mark, CEO, Gilbarco Veeder-Root: Well, I think there’s nothing like the EMV upcycle that we saw. So and we actually like that because that provided a very lumpy set of returns over a couple of years. But it is a good steady driver for us. So what we’re talking about is our environmental business. It’s below ground.

It’s also Veeder Root brand. That’s the Kleenex brand for the industry worldwide. And there’s a number of regulatory drivers that are impacting markets around the world, both Brazil, India. We got some real strong uptake there in India as well. And then The United States, but one of the advancements we’re doing around this is a new tank gauge called the TLS four fifty plus where we’re advancing the state of the art for vapor recovery.

And we’re obsolete in our three fifty, which is a real driver. We’ve also been adding to our product line with a new three horsepower pump, which is below the ground. What’s happening actually is when new tanks are going in, they’re going in with larger tanks. So instead of multiple offerings off multiple pumps, you can put one larger pump in there that saves them money. And so that’s a real benefit.

But one of the other drivers that we’ve been talking with you about, Andrew, is that thirty years ago, there was, in The United States, sort of a lock, stock, and barrel changeout regulated by the EPA because these were steel based tanks that were leaking and leaching into groundwater in your local neighborhoods. Horrific newspaper stories that were written about that in the day. And so folks replaced them with resin based tanks who were not susceptible to rust, which was a real benefit. But now thirty years on, that infrastructure is aging. Right.

And as a consequence, they might be prone to leaking and insurance rates go up after ownership for thirty years. And so that provides a tank upgrade cycle, which weren’t early innings on in The United States. And we don’t make tanks. We have partnerships on the tank installations, but we make all the smart sensors, pumps, technology that go on it. And so we’re pretty early innings on a pretty steady upgrade cycle over the next foreseeable future for underground unit.

Andrew, Analyst: So as we think about $300,000,000 dollars to $350,000,000 revenue. So what’s the good growth rate and how long do you think it’s going to be sustainable for?

Operator: I think the growth rate in this environmental business is low to mid single digits over the next few years.

Andrew, Analyst: Okay.

Operator: It’s going to be a steady growth across the world because of some of the regulatory drivers that Mark talked about. So not a super cycle like we had with the EMV, but steady progress and steady growth over the next few years.

Mark, CEO, Gilbarco Veeder-Root: And this is not political football, Andrew, United States or a number of things that are. Right. But clean water and drinking water has never come into the sites of saying that’s not good regulation.

Andrew, Analyst: But Canada likes clean water?

Mark, CEO, Gilbarco Veeder-Root: I think everybody likes clean water. And I think the administration of the United States has been behind regulation that also protects these type of things as well.

Andrew, Analyst: Got you. But I should assume that this is if things go well, this could be mid single digit grow or dropping in a very nice incremental even where the profitability is.

Operator: Yes. This the environmental portfolio is definitely incremental to our profit margins. Margin accretive. So it has margin accretive and equate business.

Andrew, Analyst: Excellent. So maybe we can talk about fuel dispensers. And you’re so closely associated with fuel dispensers and it’s just only at this point it’s 22% and North America is even less. So maybe we can start, can you just tell us where you are just in terms of geographies? Just help us zoom out and just talk about the fuel dispenser business because there’s absolutely this association with Gilbar, Cavita Root, equals fuel.

The company is so much bigger. And I think North American fuel dispenser at this point are just not that big, but maybe help us just put in perspective where was it, where is it now and what are the other key geographies we should be thinking about?

Mark, CEO, Gilbarco Veeder-Root: Yes. I’m going to let Xtremen sort of give you some more detailed color. But I think if you just sort of step back from the time that we spawned, we were one reporting segment. Yes. And I think it was pretty hard for folks to unpack that.

Of course. But we’ve resegmented the business because we wanted to offer more transparency to investors about where we’re actually making our money, where the growth opportunities are. And we love the dispenser business, and we think that it’s going to grow probably more than what people have expected. And we know that And

Andrew, Analyst: that’s a near term comment or longer term comment?

Mark, CEO, Gilbarco Veeder-Root: It’s actually a longer term comment. And we think there’s a lot of reasons for why that infrastructure is quite important and that even the sustainability of some of the petrol based fuels is going to be around a lot longer than what people think. But at the same time, we offer a lot of great options for fuel optionality. And I think we can say today that we’re extremely well positioned in the right profit pools for the options that people look at for refueling. And that’s something we couldn’t have said at the time of the spin either.

But to unpack the dispenser question, maybe Anshoom can do that?

Operator: Yes. So our Environmental and Fueling segment, which is about a $1,400,000,000 segment. So if we disaggregate that about $300,000,000 plus is the environmental below the ground business. We have about $200,000,000 little north of $200,000,000 in aftermarket parts, about $200,000,000 in service. So now you’re talking about just dispensers being somewhere around $600,000,000 7 hundred million dollars in revenue, North America being the larger part of that.

And people go back to the EMV days where this business was because of the super cycle was about the peak to trough was about $500,000,000 But now that the peak to trough has gone, it’s more steady state. The underlying fundamentals of this business remain very healthy. We’re continuing to see build out of new C store sites, more modern sites with more dispensers. And the underlying market in North America is growing low single digits. We believe we continue to gain share because we structurally advantage as we have a higher share with the large national and regional players that are going faster at the expense of the mom and pops.

But also we continue to innovate in the space, which differentiates us. Mark talked about the benefits of Flexpace six and unified payment, which not only is on the dispenser, but it can start bringing the whole footprint together because you could have the same payment device, not only at the dispenser, but at the Car Wash where we are the leading provider of the point of sale and control software for Car Wash inside the convenience store where we have a strong market position with the point of sale. But also with EV charging where we provide the EV charging software, network management software, but we can put our charger on our payment on a third party charger. So as unified payment comes together across the mobility ecosystem, that’s where we continue to innovate and win and that also bodes well for our Dispenser business.

Andrew, Analyst: And on the Dispenser business, just maybe sort of last year, I think, your Dispenser sales were up low single digits. Can I ask you why is it not doing better? And the reason I’m asking because the EMV cycle took so long that if you just think about the replacement cycle, we are about a point where all these beautiful above ground dispenser, you should start repairing them down.

Mark, CEO, Gilbarco Veeder-Root: Actually, they are we have a histogram, if you will, that looks at that population, and we actually just lapped it last year. We’re you’re now beginning to replace some of the first generation EV that went in Right. From a population perspective. And then aftermarket parts, which we gained share Right. Of dispensers during the EMV upcycle, You can see our aftermarket has been growing higher than that and very healthy growth rate.

So but I’ll let and Shuman comment on our growth rates.

Andrew, Analyst: And just on aftermarket, just to go back. So aftermarket is just it’s the structural share gain, and that’s it’s just going to be structure. It’s just going to be better going forward, right?

Mark, CEO, Gilbarco Veeder-Root: Well, it is a structural benefit that we have. And we took the lumps, if you will, when we were taking share in EMV and then that rolled off. Right. So that was a bit painful. But we knew that the long term benefit of having that installed would pay for itself.

And then we really focus on the aftermarket because we didn’t feel like we were getting our fair share of that. So we were very purposeful about going after that. We were very intentional about our share gains saying, Hey, this is a great opportunity for us to be able to go mine this aftermarket for many decades to come. And I think you’re seeing that flow through in some of our Yes.

Andrew, Analyst: And I’m sure maybe about the growth, like as we lap EMV, why not better than low single digits?

Operator: Yes. This year, we’ve guided to low to mid single digits. Some of it is market share gains. But over time, I think as Mark mentioned, the first eMV dispensers are starting to get to a point where the replacement cycle is starting. I think last year was about the low point in terms of the newness of the Dispenser Park, so to speak, and it’s starting to age now.

And as it ages over the next few years, it will create a better opportunity for the replacement and refresh cycle also. Again, we don’t expect it to be a compressed cycle like it was with EMV. This will be just a natural extension. And part of that upgrade cycle is going to be the regulatory changes. For example, Mark talked about the payment card industry PCI four, which is the standard fourth generation standard that’s being end of life from a sale perspective in April of twenty twenty six.

So a lot of those customers that had dispensers with our FlexPay four PCI4 product, they’ll start upgrading their dispensers with our latest payment technologies. So this is just a gradual upgrade cycle that will benefit for many years to come.

Andrew, Analyst: And just on the international side, I think you signed for large tenders in India in 2024. We used to watch there watch those. I think maybe as you got more diversified, maybe a little bit less focus on that. But just I think we’ll be additive to growth. Can you quantify the contribution in 2025?

And more broadly, how is the international fueling business trending?

Operator: Yes. India is a good market for us and an important market for us because they’re continuing to invest and grow their infrastructure. They’re looking to modernize the infrastructure. And there’s also a lot of regulation out there, for example, to bring in a higher content of ethanol into their petrol mix, which is more corrosive, which means the need a new set of product offerings out there. They had issues with fuel theft, which required innovation to provide new technologies to prevent fuel theft.

So we’re very proud of our team in India. They’ve done a phenomenal job, not only in terms of innovation and bringing new features to market, but also from a design to cost perspective. We’ve localized more of a supply chain. We have an important factory in India. And not only did they really work on innovation and bringing important technologies to market, for example, dealing with the more corrosive ethanol content, dealing with security of payment, but they did it in a very cost effective manner, which allows us to serve the Indian market with attractive margins.

And we’re very proud of the wins they had both above the ground and below the ground, where we won all of the major tenders that we participated in last year in India.

Andrew, Analyst: And maybe, yes, let’s just sort of hit the high growth area. So first, maybe let’s start with Drive Software, right? I think you’ve sort of commented that I think it’s grow over 50%. I think you’ve commented that we’re better than breakeven now. So what kind of growth a, am I these are the right numbers, right?

Operator: It’s not breakeven yet. We said it’s going to exit 2026 at breakeven. Okay.

Andrew, Analyst: So it’s 2026. Okay, got you.

Mark, CEO, Gilbarco Veeder-Root: Yes. We’re continuing to invest forward in that business. And the reason why is the margins are outstanding. The business model is a full SaaS business and the plugs under management are at the rate of doubling every year. We’re now number two in the market with plugs under management with over 100,000 plugs being managed with that infrastructure.

And I think it’s a great example of getting into the right profit pool. So it’s an asset light business model. And it’s also a business model that can grow or does grow based on a per transaction fee with per charge. So very attractive,

Andrew, Analyst: I think And how big is it now?

Operator: It go ahead. So last year, it was just under $20,000,000

Andrew, Analyst: Okay, okay. So I was talking about I’m thinking $20,000,000 so $26,000,000 40 million dollars breakeven. $50,000,000

Mark, CEO, Gilbarco Veeder-Root: is okay.

Operator: It’ll exit $20,000,000 20 6 million dollars out

Andrew, Analyst: of $50,000,000 breakeven. Okay, gotcha. And after that, the incrementals are sort of SaaS like incrementals?

Operator: Yeah. The gross margins in this business are north of 70%. Obviously, you want scale the operating cost as revenue scales at the same rate. So very attractive margins as this business Sorry,

Andrew, Analyst: I have my timeline off. Okay, that makes sense. And then ENGIE, right, I think largest scale supplier of natural gas and hydrogen, $100,000,000 revenue in $24,000,000 So last year, you expanded into Europe and there is significant government support for the European Union, Green Deal, RepowerEU. So how quickly do you think you can ramp up in Europe given

Mark, CEO, Gilbarco Veeder-Root: where we are? So I think here’s a business that has done really well since spin and I think has the right legs to continue to grow. The Angie sells to fleet operators. So think of the customers being in The United States, Waste Management, GFL, UPS. These are folks that have worked to decarbonize their fleets, and they need a technology partner like ourselves.

So we’re the leader in doing that. We thought that there’s when you look at the fueling options, compressed natural gas, biogas leverages the same technology, decarbonization. Going into hydrogen, there are spots where hydrogen infrastructure is making sense. You mentioned Europe. So we thought that leveraging our leadership position there plus also our channel presence with Gilbarco Viteroute in Europe, which is a strong channel presence and country presence.

We can also leverage that for growth. We are seeing some uptake. It’ll be interesting to see how it goes, but we are also quite bullish on our opportunities in The United States with this multi fuel future. So I think that the positioning there is good for fleet operators because if you look at the backdrop, fleet operators largely have not decarbonized. Right.

I mean, the vast majority of fleet operators worldwide, 98% are still based on, like, high flow diesel and their ways to decarbonize that. But these other technologies that are available by the way, we love selling high flow diesel pumps as well. We’re the leader in doing that worldwide. But at the same time, decarbonization through ANGI offerings, we think, represents a strong business opportunity.

Andrew, Analyst: So let me hit on MatCo because it is sort of the way people think about it economically since they’re part of the business. So arguably, unarguably, tough environment for MatCo last year as other technicians fell the pinch of high inflation and tighter budgets. Competitors Snap on and Mac tools saw similar revenue declines. So how do you think about the upside risk and downside risk to your outlook of relatively flattish?

Mark, CEO, Gilbarco Veeder-Root: So we’ve guided to a flat MATCO this year even though we’re going to be running into the back end of this year some easier compares.

Andrew, Analyst: Okay. So is that margin of safety?

Mark, CEO, Gilbarco Veeder-Root: Well, I don’t know about margin of safety per se, but I think it’s a guide that we’re pretty comfortable with right now. And, you know, we’re just facing the Matco Expo in April Yeah. Which is that’s a major selling event for us that occurs once a year. We do have other selling events, but none at the size of that. It’ll be quite telling how we get through that event.

But so far, demand has been hanging in there. Keep in mind, the backdrop for repair is pretty good.

Andrew, Analyst: Right. Well, that you would think because the age of the cars keeps going up and out.

Mark, CEO, Gilbarco Veeder-Root: 100% correct. And so the time from a five year old vehicle to the end of its life is what Andrew just described is the sweet spot of repair. So that is representative of the repair market. And that goes up as the age of the car park continues to get longer. People are not buying as many new cars as they once did under some of the economic pressures.

But also the complexity of repair keeps going up. Whether it be an ICE vehicle, electric vehicle, hybrid vehicle, this all adds to the complexity of repair of the car part. And so that’s also a backdrop. So we think that this franchise model is very sticky. The brand is very sticky.

They are buying tools mostly related to productivity, and they’ve dropped it in terms of the price point.

Andrew, Analyst: Right. The mix, it’s mixing down. Right? And you wait it you so what would it take for it to mix? Because that’s the question.

Right? Like, what does it take for them to get mix up? Does do the interest rates have come down? Like, what’s the magic thing for the mix to go back?

Mark, CEO, Gilbarco Veeder-Root: It’s not really an interest rate story. It’s more of a consumer confidence story. So The US is more related this is part of the working class in this industry.

Andrew, Analyst: Right. Oh, that’s yeah.

Mark, CEO, Gilbarco Veeder-Root: And repair technicians are fully at work, but they’ve had a period of inflation that’s been hard for them to be able to recover from. But there’s still one of the major drivers that we take control of this is offering product vitality, 25% of what we offer every year. And MatCo is new that year. So part of the MatCoExpo is launching our products and getting some vitality out of that. We did really well versus competition by introducing Milwaukee brand in the last couple of years, which has served us really well from a gainshare perspective.

And so I think as we look at this macro expo, we’re going to be looking at more product vitality, more fit to purpose in this kind of market, which we hope will bode well for us with macro this year. And this is a base of workers in The United States that are also fond of the new administration. Right. And so, hopefully, they’ll be looking at this as opportunity.

Andrew, Analyst: But Macro Expo would be a big tell as to what’s going on.

Mark, CEO, Gilbarco Veeder-Root: It will be. Yeah.

Andrew, Analyst: And will it happen before you report or after?

Mark, CEO, Gilbarco Veeder-Root: It’s in April.

Andrew, Analyst: So before we report. Okay. Okay. So when you report, you’ll know what’s happened. Right.

That would be useful. And just maybe we’re a little bit over time. Last question, capital allocation. What do you think about buybacks, M and A? How do you balance that?

Operator: Yes. We’re dynamic in our approach, I. E, we always go towards the highest return option for our shareholders. If you look at the last three years, we did the Invenco acquisition, which was north of 20% ROIC by year two. We grew the business, improved always compete buybacks with M and A, with internal investments.

And at the end of the day, at the share price, we believe buybacks are very attractive use of our capital. And while our guide embeds $75,000,000 of buybacks at this price, you could expect it’s going to be more than the $75,000,000 and we’ll have done a significant part of the $75,000,000 in Q1.

Andrew, Analyst: This is terrific. Thanks so much. It’s a pleasure.

Mark, CEO, Gilbarco Veeder-Root: Thank you, Andrew. Thanks

Andrew, Analyst: for having us and for taking

Operator: Thank you, Andrew.

Andrew, Analyst: Thanks so much.

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