Thank you, Angela. Good morning, everyone, and thank you for joining our call today. An audio version of this call will be available on our website through November 14, and a replay link of the webcast will be archived for 90 days. Our comments today will include forward-looking statements based on current expectations. Actual results and events could differ from those statements due to a number of risks and uncertainties, which are discussed in our SEC filings. We assume no obligation to update our forward-looking statements. With that, I will turn this call over to Rich.

Okay. Thanks, Andrey. We posted very encouraging results in a dynamic operating environment across our different end markets and geographies. Revenue and order rates improved sequentially in the quarter on normalizing lead times and inventories, improving demand across several end markets, and a return to normal seasonality. Our backlog continued to normalize in the quarter, in tandem with lead times as we shipped longer-dated orders from our books. Broadly speaking, margin performance in the quarter was exceptional, reaching an all-time high driven by productivity, cost controls, and disciplined pricing, which more than offset the negative product mix in Pumps & Process Solutions. The proactive structural cost actions we have undertaken over the last 12 months are paying dividends and should support strong margin conversion going forward. Our recent portfolio moves, the acquisition of FW Murphy and the sale of De-Sta-Co followed the portfolio intent and priorities that we reiterated at our Investor Day earlier in the year and continued our portfolio evolution towards higher-growth and higher-return businesses at attractive valuations. Our balance sheet position and cash flow are strong and provide attractive optionality as we continue to pursue bolt-on acquisitions in a more favorable M&A environment and evaluate opportunistic capital return strategies. We have reduced our EPS guidance for the full year and are now targeting the low-end of the previous guidance range. This is driven by continued lag in biopharma recovery that we expected to happen in the second half of the year, temporary cost and supply chain issues that I'll expand upon later, and a general trend towards inventory liquidation across supply chains as a result of macro uncertainty and prohibitive carrying costs. I'll cover the specifics in the segment commentary. Overall, demand remains good across the portfolio, considering the plentiful negative macro headlines. Our new product launches and capacity additions and identified areas of growth are all on track, and we expect that our fourth quarter production posture will help balance our channel inventories with prevailing demand, lead times, and inventory carrying costs by the end of 2023. We are increasingly convinced that our inventory position will be critical to the pricing dynamic and financial results moving into 2024. Going into 2024, we expect to see growth in our bookings driven by secular growth exposed in recovering end markets, and we expect to carry an elevated backlog into next year in select businesses. Between our demand outlook, flexible business model, and in-flight structural cost actions, we see a good foundation for value creation in 2024. Let's move on to the performance highlights on Page 4.

Thanks, Rich. Good morning, everyone. I'm on Slide 7. The top bridge shows our organic revenue decline of 2%. Both acquisitions and FX translation contributed positive 1% to the top line in the quarter. FX, which has been a headwind for the past year and a half, resulted in $0.02 of positive EPS impact in the quarter. Based on recent movement in the euro/dollar exchange rate, we now expect FX to be a $0.01 to $0.02 headwind in the fourth quarter. From a geographic perspective, the U.S., our largest market was down 7% in the quarter due to lower shipments in vehicle service, biopharma, LPG components, and belowground retail fueling. Europe was down 5%, and Asia was down 3%. China, which represents about half of our revenue base in Asia, was down 5% organically in the quarter. On the bottom chart, bookings were down year-over-year due to normalization of lead times and strong shipments against elevated backlogs. Now on our cash flow statement, Slide 8. Year-to-date, free cash flow came in at $688 million or 11% of revenue, representing an increase of nearly $400 million year-over-year. As discussed previously, with supply chains improving, we have begun actively working to liquidate our working capital balances in 2023. We accelerated our inventory reduction in the third quarter and expect the trend to continue as we plan to balance our inventory levels by the end of the year. Free cash flow generation has historically peaked in the fourth quarter. And again, we expect strong fourth quarter cash flow to finish the year. Our forecast for 2023 free cash flow is 13% to 15% of revenue. Let me turn it back to Rich.

All right. I'm on Slide 9. We expect Engineered Products to generate moderate growth in the fourth quarter. Aerospace and defense should remain strong. Meanwhile, the auto strike will weigh on several businesses in the near term. Growth in our waste handling business, which is expected to be robust in the fourth quarter into 2024, will be reduced in the near term by the recent strike at a major truck OEM impacting deliveries. Shipments in the vehicle aftermarket are expected to be lower versus a record previous year as higher interest rates weigh on service shop's ability to finance CapEx. We expect margins to improve in the quarter on positive price/cost tailwinds and benefits from our recent productivity capital investments. Clean Energy & Fueling is expected to remain steady. Clean energy, LNG, and hydrogen components should continue their robust trajectory, and order trends in aboveground retail fueling point to continued post-EMV recovery. We expect channel destocking and interest rate-driven headwinds in the belowground fueling segment, LPG components, and vehicle wash to maintain through year-end. We expect stable margin performance as the $60 million in aggregate structural cost containment actions in retail fueling should offset the negative mix from lower belowground and lower car wash volumes. Imaging & ID is expected to be down organically against a difficult comparable period driven by slowing demand in Asia and a subdued outlook for textiles. Serialization software should continue its growth trajectory. Our new customer conversion margin performance should remain at attractive levels at this segment. Pumps & Process is expected to remain roughly flat organically in the fourth quarter. Precision components should continue growth tailwinds from energy transition projects. Polymer processing is booked for the year. The recovery in biopharma components has been very subdued. And although channel inventory levels are now below pre-pandemic levels, end customer demand has not recovered enough to drive 2023 growth, despite earlier forecasts indicating recovery. We have reduced our production and inventory levels appropriately and will remain in this posture for the balance of the year. This is generally a short-cycle business, and we can ramp as order rates recover in 2024. We expect year-over-year margin headwinds on negative mix in biopharma. And after several years of impressive topline growth, Climate & Sustainability Technologies is expected to moderate in the fourth quarter as demand for heat exchangers abruptly slowed in Q3 due to near-term uncertainty in European heat pumps. As a result, we are reducing production levels to allow for inventory to be cleared in the fourth quarter. Traditional refrigeration demand will retain its seasonality with reduced activity during the holiday season. But we continue to see robust demand for our CO2 refrigeration systems and are ramping up production and go-to-market efforts appropriately. We expect continued year-over-year margin improvement through year-end on productivity gains and improved mix.

Thanks, Rich. Good morning, everyone. On Slide 8, let me quickly discuss some of the moving pieces on the organic revenue side. The decline reflects both certain structural challenges in certain segments and normalizing lead times and strong shipments against elevated backlogs. The flows from acquisitions and foreign exchange both provided a lift in the quarter. Looking at cash flow, the free cash flow generation of $688 million represents an improvement year-over-year. Inventory reductions remain robust, and we expect further acceleration as we transition into Q4. While our forecast for 2023 free cash flow is at 13% to 15% of revenue, we remain focused on improving working capital efficiency.

I'm on Slide 10. Our updated EPS guide reflects the near-term changes in demand and our production posture, temporary and isolated issues in the supply chain and costs related to acquisitions, integration, and divestment activities. We expect these headwinds to be partially offset by a lower effective tax rate in Q4 as a result of tax reorganization activities driven by upcoming regulatory changes. As I've highlighted, we believe our changed operating and production posture focused on reducing inventories and prioritizing cash flow over volume in reaction to the dynamic operating environment is critical to setting up 2024 outlook where we can maintain and expand operating margins. Let's go to Slide 11 and take a quick look at the inorganic moves that we made during the quarter. We are on Slide 12, where we summarized the two recently announced transactions that align well with our portfolio priorities and enhance the overall quality of Dover's portfolio through margin growth and recurring revenue uplift, all while reducing our exposure to automotive and China. Importantly, we were able to acquire FW Murphy at a lower valuation multiple than our sale of De-Sta-Co, and the after-tax proceeds from the De-Sta-Co sale more than pay for FW Murphy, preserving significant balance sheet capacity for additional capital deployment options. Slide 12 provides more color on the rationale for the acquisition of FW Murphy by our precision components operating unit, which is part of the Pumps & Process Solutions segment. FW Murphy brings a highly complementary product offering to our existing position in the reciprocating compression industry. FW Murphy Solutions capitalized on the growing adoption of advanced remote monitoring, control real-time optimization solutions as customers seek to reduce costs, improve uptime, and lower emissions. In combination with our best-in-class clean technology and our leading position in sealing and valve technology for alternative energy applications, including in hydrogen, the FW Murphy acquisition offers a compelling value proposition into a global industry where we see robust demand from energy transition investments. The FW Murphy acquisition provides a good segue into our next topic, which is to highlight, the recent developments in investment in sustainability-driven markets, starting on Slide 13. There has been plenty of interest around hydrogen as a result of the recent announcement of $7 billion in federal funding for multiple regional hydrogen hubs that are expected to also attract $40 billion in private funding and a roster of blue chip industry participants. Dover has established a position in hydrogen with the 2021 acquisition of Acme, which supplies flow control components for liquid hydrogen and other related products, which offers turnkey hydrogen refueling sites. Additionally, we are organically invested in extending DPC's gas compression components to participate in gaseous hydrogen applications. In short, there is no hydrogen economy without compression. We have great relationships with the industrial gas and hydrogen players and aim to participate throughout the whole value chain through transport and storage through end-use in collaboration with equipment OEMs. We are well-positioned to capitalize on growth in hydrogen and industry with a high focus on safety and regulatory compliance with high technological requirements for participation. Moving to Slide 14. The EPA recently finalized its rule under the AIM Act with a deadline for new installation of refrigeration systems to be compliant with lower GWP requirements by January of 2027. We believe this rule is a clear tailwind to our CO2 systems business. We have had a leading position in the European CO2 market for over a decade where we enjoyed steady double-digit growth trajectory. We were the early mover in transplanting this technology to the U.S., where we currently enjoy a technological lead and have the largest installed base and broadest differentiated offering. We have proactively expanded our capacity in addition and in participation of market growth and have been investing behind a platform-based product strategy to drive standardization, thereby reducing costs for ourselves and our customers, improving product quality and simplifying the sales process. Our global CO2 business is approximately $200 million in revenue. The U.S. market is in the early innings, and our business is on track for 30% growth in 2023 with a strong outlook. We are also excited about our new CO2-based heat pump offerings for industrial and district heating applications. It's early days, but we have an active pipeline of orders. And finally, on Slide 15, we show our latest views on heat exchangers since it has become a battleground topic. Our heat exchanger business supplies brazed plate technology, which is currently the most sustainable commercialized heat transfer technology for fluids. We have been the clear beneficiary of the sustainability and climate tailwinds across various applications with a lot of attention drawn recently from our participation as a key supplier to hydronic heat pumps. Heat pumps have emerged in recent years as a technology of choice to decarbonize residential heating, which is responsible for a significant portion of global emissions, with hydronic heat pumps as a primary technology to retrofit houses that rely on water-based heating. Legislative initiatives in the European Union and individual countries are driving the conversion of fossil fuel boilers with heat pumps. Recent uncertainties about subsidies in select European countries have weighed on near-term volumes, as I indicated earlier. Our exposure across multiple OEMs and geographies, and as such, we are not over-indexed to any product or customer concentration risk. We remain confident about the long-term growth prospects for heat pumps and our technology. It is important to note that European residential heat pumps represent only a quarter of our heat exchanger business. You see several solid growth vectors driven by sustainability tailwinds and continue to share gains from other legacy heat exchanger technologies. We have proactively expanded our capacity as we expect continued robust growth trajectory in heat exchangers, albeit with slightly lower rates in the near term as various dynamics in Europe slow down. I close my prepared remarks by thanking our global teams for driving our strong financial performance during the quarter. It's time for Q&A.

Our first question comes from Steve Tusa with JPMorgan. Please go ahead.

Hey, guys. Good morning.

Hi, Steve.

So I think you were a little more positive in early September than this fourth quarter guidance, understand maybe the world's changed a little bit since then. Maybe you could just discuss that. But then just looking ahead, thinking about perhaps a more cautious view of the world for next year. What's kind of a low-end assumption for next year when it comes to organic and margins? Just to kind of level set us on a case where perhaps the orders don't recouple as strongly to the trend lines or the trend lines are a little bit weaker. Like in your macro view, what does a more cautious outlook for next year bring for Dover? Because you've been talking about growth there as things recouple the trend. It seems like that would have changed over the last month or so.

Okay. That's a lot to take on this. Steve, let's give it a try. Look, I think if we look at our forecast for the year, we were just wrong about biopharma. I mean, we were getting indications from our customers that there was going to be some nascent recovery. We actually did see some order upticks, but quite frankly, it just never turned into much. So that's a little bit different than we were back in September. I think we just have to throw in the towel on biopharma demand, and it gets pushed to 2024. We didn't expect in terms of market dynamics was this UAW on trucks, right? We thought it would stay limited to the car sector. And unfortunately, what we were betting on is being able to ship quite heavily out of ESG in Q4. We'll actually have a good quarter in Q4, but it's not going to be as robust as our plans. I think I mentioned the heat exchangers. That was a little bit of an abrupt reversal and really didn't happen until almost the end of Q3. So about 30 days ago, everything looked good there. And I think that we've got a little bit of a pivot as what we understand is there's a lot of finished goods in the supply chain that need to be reduced from there. So at the end of the day, I think it slowed some, which leads into the next question. Our positioning now is to drive for cash because I think that the way we're going to be able to protect margins into 2024 is not to be long inventory. We had a lot of discussions around here about incentivizing revenue in 2024, driving revenue, but then you start touching on things like price and payment terms, and we're not going there. I mean, I think that the strategy that we have is to adapt quickly and efficiently to the market demand, bring down our inventory with the hope of – with the strategy of protecting margin into next year. And I think if you look at how we've handled demand this year, it's exactly what we've done. At the end of the day. I mean, we talked about it before. What we had seen over the previous two years was not a lot of unitary demand. You saw a lot of pricing going into the system, so we came into this year saying there's probably going to be less price and some unitary demand, but the important – and I think that we've done that in terms of managing, which is reflected in our margins year-to-date, is managing not getting oversupply and over our SKUs a little bit in terms of inventory, and that we're going to take that on for next year. Do you want me to make a call on the market next year? I think we're going to have to wait on that. Clearly, there's a lot of headwinds in the system. I don't want to get on a personal soapbox, but the amount of liquidity that's being withdrawn is going to show up somewhere. And this notion that we're all going to wait on the government to bail us out because of this wave of government spending coming, I find that a problematic strategy. So I think all of this is going to be triggered by monetary policy between now and the end of the year, which is going to allow us to predict growth into next year. What I can tell you is if we do what we're planning on doing in Q4, we will not be long inventory, and we're not going to get into a situation where if there are kind of topline headwinds that we're going to have to start playing price to drive growth.

So should we just think about flat as a starting point for next year?

No, I don't think so. I think that we're ahead of the curve. Remember, we're a component supplier into end market industries, right? So we're first at the end of the day. So I think that if we get this right, we've got topline growth next year, even in a pretty benign macro environment. I think that we can drive growth. And I think that's part of the reason that we covered some of those growth vectors in terms of our investment at the end of the presentation.

Great. All right. Thanks a lot.

Thanks.

Thank you. Good morning. Hey, Rich, maybe a question on restructuring and thinking fueling in particular. I think you had a lot of restructuring planned there for Q4, but it looks like you're guiding margins kind of flat, I guess, on a year-over-year basis. Could you speak to that? Maybe it's some of the absorption issues you're talking about on inventory, but love some more color on the margin trajectory there?

Sure. I think if you go back and look at the script, basically what it says is the restructuring that we took is going to protect margins into Q4 because we actually have a poor mix forecasted for Q4 because where we've been seeing the headwinds in Fueling Solutions is in the below-ground portion of the segment, and that is highly accretive to margins. We're basically – you heard me answer Steve's question there, we're taking the position of let's allow inventory to be drawn down even we would argue at this point below even normal levels between now and the end of the year and protect production performance into next year. So the restructuring benefit – the restructuring that we've done is actually protecting margins into Q4.

And on these questions of just kind of what's at the customer level, right, whether it was biopharma earlier this year, heat pumps, maybe now, some other pockets, how would you kind of square up your visibility and kind of comfort level on understanding what the right level of inventory is or when the customer demand equation might turn a little bit?

Yes. I think we're getting a lot better at it. At the end of the day, where we sell through distribution, we have visibility, right, because we've just got a material position within distribution, so we can see pretty much stocking levels. At the OEM level, it becomes a lot more difficult. At the end of the day, we're relying on the OEMs to basically tell us their own position. So let's take heat exchangers. Up until 45 days ago, it was still a demand capacity deficit of give us everything you've got, and then all of a sudden, for reasons that I tried to cover, the market came to a halt because there's a recognition of the seemingly a lot of finished goods in the chain now that need to be bled off. So like I said, if it's distribution, I think that we've got a pretty good handle on it. When it's OEM, we just have to take the signals from them.

I'm sorry, just a quick one for Brad. Does the tax rate bounce back to 20-something next year? Or what should we expect going forward?

Yes, Jeff, the things we're seeing here in Q3 and into Q4 on taxes will not carry into next year. So said differently, I think our 2024 tax rate is going to be much like we saw earlier in this year when we gave guidance, somewhere in that 20% to 22% rate.

Right. Thank you.

Good morning. This is David Ridley-Lane on for Andrew Obin. Rich, how would you characterize the excess backlog at this point in time, and how that kind of interplays into the revenue you'll see versus the bookings trends that you need?

I don't think that we have excess backlog anymore. I mean, I think that we're – by the end of the year, we will have drawn down our longer cycle backlog, particularly in Belvac and MAAG, which drove a lot of it. I think it will end up being a little bit higher than kind of on average in terms of its aggregate, if you go back and look over the last five years, but that is more related to portfolio – general portfolio mix as opposed to anything else. So like I said, at the end of the year, we think that we'll be in balance between our inventory and our – either the customer distribution inventory, I would expect the long-cycle business backlogs to be done that reduction to be done by the end of the year.

Got it. And then I know it's tough to ask about bookings, but do you see bookings sequentially increasing in the fourth quarter then?

I've got to go back and take a look. I mean, I would say flat. If I think about where bookings are coming from, we got a lot in ESG at high dollar value because quite frankly, we're booking well into 2024 in that particular business just because of supply constraints. Flat, I would call it right now. I think that there's an overall caution with the macro – everybody recognizes that lead times have been vastly reduced. So I think that there's going to be a lot of hurry for bookings in Q4, but we would expect a pretty large acceleration in Q1, if we’ve got.

Understood. Thank you very much.

Welcome.

Hey, good morning everyone. Two here. So first, on the inventory side, you're obviously bringing your inventory down a fair amount pretty aggressively, more so than what we're hearing elsewhere. Do you have the same sense of urgency in the channel when you look at your channel partners? Or do you think they're lagging the pace of your inventory drawdown?

No. I think that our channel partners are, in certain cases, below normal holding patterns. And that is because of the cost of carry with interest rates. So if you think about a typical distributor who's got $100 million of inventory, a working capital loan that they would have been able to have 18 months ago was probably 2% or 3%. They're probably paying nine now, right? So there's a dynamic now because of higher interest rates of everybody trying to liquidate working capital because of the cost of that working capital, that’s included, by the way. And we're in a little bit of a standoff in certain end markets where we would argue that inventories are down too low, but we are not going to incentivize revenue into the system either through price or through terms. We're just going to sit tight and we'll cut our own production into Q4 because that's just harvesting demand that's in 2024 into 2023.

So the comment that you made to the previous question about order having a better chance to turn positive in the first quarter, I'm guessing part of it is the comments you just made that inventory flush through the channel essentially normalizes by year-end, and you should have a lease normal throughput, if not a little bit more, given where inventory levels are in certain channels?

That's correct. I mean, if you look at the topline revenue trajectory in some of our businesses, you have to take destocking into it. That's not a reflection of end market demand. It's end market demand minus destocking.

Great. And then on the DPPS side, maybe just kind of parse out the moving pieces there. Obviously, you have the continued destock on the biopharm piece, creating some pretty easy comps in the next year, but a lot of your other pieces are a little bit more IP sensitive. So maybe just talk about some of the moving pieces you're seeing on that side.

Well, I think that overall, it's underestimated, the amount of profit loss that we've had on the biopharma reduction. To the extent that we're clocking at record margins in the quarter, while eating this pretty bad sandwich here, I think that – quite frankly, I think we're pretty proud of that. So to the extent that it's pushed into 2024, at the end of the day, the comps get pretty favorable once we get into Q1 of next year. The balance of the underlying business, Precision Components, where we basically bought FW Murphy into, look, we're behind energy transition. We're betting on gas in total, LNG, hydrogen, you name it. Order rates there, we expect to be really good. I think MAAG on plastics and polymers, we've driven down a lot of that backlog. That's probably the one business that's probably going to be weaker next year, but I think it gets completely offset by DPC and by FW Murphy and some amount of bio.

Great. Appreciate it.

Hey, good morning guys.

Good morning.

Rich, you've talked about being proactive regarding cost set. But if economic conditions stay somewhat difficult, what kind of opportunities do you have to deliver the kind of margins you just delivered in Q3? And then I think you were fearful at the beginning of the year that pricing in industrials might erode a bit. Have you seen any erosion or do you expect any erosion in your markets? Or would you still expect resilient price-cost moving forward?

We're always working on efficiency and structural cost takeout at the end of the day. So that's just part and parcel to the business model here. Look, in a dire demand environment, if I point back to how we performed during the COVID period, we've got the ability to flex the cost structure, we don't want to, other than kind of productivity and efficiency driven not from a demand point of view. As it relates to pricing, look, I think there was a comment in the script, but if you go back and look is that we fundamentally believe that inventory position is going to be incredibly important as it relates to pricing as it goes into 2024. And that's why we're taking a little bit of hard medicine here between now and the end of the year of not incentivizing demand through pricing action. We've done a lot of hard work of moving the margins up here, and we're keeping these margins.

Helpful, Rich. And then maybe just a little more color into the puts and takes you're seeing in DCST. You mentioned the slowdown in the heat exchangers, but the strength in CO2 systems, you mentioned as well, and you did deliver strong margin. Do you still see DCST as a growth segment for you in 2024? And how would you assess margin potential from here, given what you just report in Q3?

Look, I think that the heat exchanger is temporal, right? I mean, we went through this incredible amount of demand. I don't know if we were clocking it up until a month ago, but it was very high demand that we had there. I think this is just a little bit of an inventory clearing thing. So we expect growth out of the heat exchanger business next year. I think that we did our highest margin quarter in refrigeration in the last five years here. We don't think that, that's – we're going to give back there. Now just recall, though, that Q4, we have to take production down due to seasonality there, all right? So that has some amount of impact on margins. But the trajectory on refrigeration, coupled with CO2, which is margin accretive, we would expect margins to increase there next year. Clearly, we're going to – that will likely offset the negative input from Belvac, which we expect will run off its backlog next year and have a little bit of a down year in 2024.

Appreciate all the color.

Thanks. Good morning guys.

Joe.

Just a few quick follow-ups on just the inventory dynamics because, I mean, Rich, you've been doing this a while. It typically – based on what we've seen, it typically takes longer than a quarter to normalize inventory. And so just any color on your confidence on being able to get inventory where you need it to be by the end of the year? Or is there a good likelihood that some of this kind of spills into 2024?

Well, I mean, when we're talking about total inventory, we're talking about our own inventory, which we're in control of, which is reflected in the cash flow that we're signing up for, right? That takes working capital liquidation, a big chunk of that is inventory. I think if you look at the $600 million of free cash flow during the quarter, a material chunk of that was our own inventory reduction. When we're talking about channel inventory, like I said before, we've been – the channel inventory in a lot of our end markets has been coming down progressively over the year. And now we're adopting a posture between now and the end of the year in certain businesses to allow that inventory to clear rather than trying to push revenue into either channel inventory or OEM inventory and because the only way you can do that is to start modifying commercial conditions, and we're not doing that. So should it clear, we believe that we're on the front foot here. And so we think we'll be in balance in kind of most of our end markets by the end of the year. And then it just becomes a question of what does growth look like next year and how much confidence there is in the end markets of how much that channel and how quickly they build it back. But we feel good about the trajectory we're on. So that – it's an end-of-the-year phenomenon based on current demand rates.

Got it. Okay. That's helpful. And then I guess just a real quick one on just 4Q in DPPS. So I think you called out flat growth in the segment. So sequentially, revenue is down a little bit. I'm curious just from a margin standpoint, similar revenues – similar margins for Q3? How do you think about the margins in 4Q for DPPS?

They're either – it will be immaterial up or down, right, subject to mix.

Hey, good morning. Yes. I just wanted to ask a question on the portfolio. I guess as you consider additional pruning, is there a way to maybe quantify what percent of revenue could be under review? And certainly understand M&A is episodic, but are you seeking to find comparable sized acquisitions to offset? Or how should we think about this portfolio shuffle?

The portfolio – the whole portfolio is under review all the time. Look, no. Look, we don't go around and say, we've got a business that's got $200 million revenue, let's go buy $100 million to $200 million revenue. No one can orchestrate that. But I think that we've gone over Brett, a lot about where our priorities are. To the extent that we could make a change to our portfolio that we did without touching our balance sheet, I think is a positive. So to the extent that we could do that repeatedly, that would be great, but that's subject to a lot of timing differences both in and out at the end of the day. But just as an overall comment, what we did this quarter in M&A is what we would like to do progressively every year.

Got it. Makes sense. Just shifting back to heat exchangers and the destock in Europe and Asia. I guess, does this slow the rollout of some of those capacity additions or change the way you’re at least thinking about the near-term from a capacity standpoint? And then what is your level of visibility there in terms of these imbalances that have maybe skewed more negatively here?

No, I think the capacity is coming on sequentially. These are highly automated plants. So it's not like we've got to ramp employees. It's – they're almost blackout plants at the end of the day. So we needed the standing capacity. Remember, heat exchangers is 40% of the revenue. So I get it, it's getting a lot of headlines, and that's why we wanted to address it. Our visibility is, as I mentioned, is not great because it's an OEM sale mostly for us. So up and to the point where they decide they want to slow down, that's what we find out. And the slowdown that we've been called out for the balance of the year manifested itself over the last 45 days or so. So are we worried about the capacity investment? Absolutely not. We think that the technology is fundamental. It's going to grow over time. There's been a massive amount of capacity in heat pumps that's been announced. It always seems a little bit implausible. So I think at the end of the day, the market reset is going to be on the finished goods, not so much on the consumption of the heat exchangers.

Okay. Great. Appreciate the insight.

Hi. Good morning. One element I just wanted to circle back to in context of the inventory discussion is around the free cash flow margin guide. So I think that it's very high still for this year, but maybe move down a little bit and that's despite the good progress on the inventory liquidation that you cited in Q3. So maybe just any sort of color around the moving parts inside free cash flow, and it has been very volatile. So any sort of thoughts on maybe next 12 months as it's more sort of normalized?

Well, it's been volatile only because of the amount of demand that it was there. And to meet that demand, you had to basically an expansion of everybody's balance sheet from an inventory point of view. I think that when we put out the guidance for this year, we basically said now that we're in a more normalized market that we were going to bring inventories down. I think we're making really good progress on raw materials. I think by cutting production in Q4, we should clear WIP and finished goods, then it's all about receivables from here to the end of the year.

Well, it's part of it. But as we went – if you go back and look at what our commentary has been over the course of the year, we've indicated it's tough to bring inventories down, but we did that in Q3. We see that continuing into Q4. As we look back, and the actual good performance in Q3, receivables, given the timing of sales, actually built in the quarter a bit. So that liquidation is due to come here in the fourth quarter. And I think we'll see very robust cash flow again, based on the commentary that we already provided that fourth quarter is always seasonally strong. But I think given the actions we're taking, it will be even more robust in line with our guide.

Yes. Between cash flow and the proceeds of the disposal, which we'll receive in Q1, we're in a very healthy cash position.

That makes sense. Thank you. And maybe just to follow-up on the question around the sort of the sales outlook. So I think it's very clear and the right thing to do that you're sort of underselling into the channel, if you like, short-term, to make sure channel partners have low inventories entering the new year. When you sort of take that comment plus the improvement in some order figures you've seen recently, does that make you sort of confident around the revenue growth outlook despite what the backlog has done? And so we should sort of take the low inventories in the channel plus the orders movement, that's a better determinant of sort of sales into early next year than perhaps what the backlog has been doing recently?

Yes. I mean at the end of the day, everything that's in our control – for 2024, I think that we're taking the right move. So we discussed managing channel, right, from an inventory point of view. The reason that we highlighted some of the investments, we think that those are growth vectors that those businesses are going to grow despite the macro, right, that they're not subject to kind of general sentiment at the end of the day, or interest rates or anything else just because they've got demand there. So yes, we're – knock wood, we're feeling positive about our setup going into 2024 based on how we've managed and will continue to manage in 2023.

Thank you. Good morning, everyone.

Good morning, Dan.

Hey. I was hoping to get some color on the retail fueling. It just sounds like there was a bit of a disconnect between below-ground and above-ground, below-ground seem to be fueling effects of higher rates and maybe some destock, but you weren't seeing that above the ground. But just can you square those, please?

Sure. We had – in 2022, we had a great year below-ground and a bad year above-ground. So if you think about kind of the time it takes to build sites or refurbishment sites, you had kind of capacity that got built and then they finished the job on the top this year. Below ground now is in a bit of a headwind because of the fact that if you think about like a retailer, a retailer is going to spec in the product that they want at a fueling site and then going to go contract the installation. And part of the problem is it's no longer labor anymore, and it's no longer product availability. It's the fact that those contractors need working capital loans in order to do these projects and the cost of those loans now is probably quintupled over the last year or so. It was very nice for everybody would be talking about 5%. 5% is a baseline. You're a contractor, you need a working capital loan, you're paying nine or 10. And so that is putting a little bit of a drag in terms of getting that work done. Number one. And number two, just a general comment, as I gave the example before, a lot of that underground business, at least the recurring revenue portion of it is sold through distribution. The carrying cost of that inventory has gone up quite a bit, and you basically see almost an over-liquidation of inventory in the chain because they know that our lead times are down low, so they're taking their inventory down because they don't want to pay the carrying cost. At some point, that's got to give, and we're not incentivizing through price or terms to push that inventory back into the system. We'll deal with that on the come when we get into 2024.

All right. That's really helpful. And then just a follow-up on the geographies. What were the surprises and maybe you're seeing some of the macro begin to be felt on the U.S. side was down 7%. But what surprised you there?

I think it's more and more – look, no one came into this year thinking that Europe was going to be robust. It hasn't been. I think that CO2 systems and heat exchangers are running counter to that argument. CO2 is actually performing quite well. The heat exchanger issue, like I said, up until 45 days ago, you couldn't make enough of them to supply heat pump demand, and that just came to quite a halt here, I think in recognition that there's too much inventory in the chain. We were not very hopeful about China, and China has been poor. And I think in the U.S., it's just the general – what I just answered, I gave you the example a second ago. In the U.S., you can't raise rates at the rate we're doing and not to have knock-on effects in terms of the carrying cost, and that's what we're seeing now.

Our final question comes from Nigel Coe with Wolfe Research. Please go ahead.

Thanks, guys. Thanks for fitting me in. So going back to the non-core kind of the portfolio review, I mean, obviously, there's a parlor game about trying to guess which assets might not meet the cuts going forward. But De-Sta-Co wasn't one of those assets. I think already seen as potentially non-core. So I'm just curious given the decent growth, obviously, very good margins, what was it that led that asset to being sold?

I think that the growth was okay, at least in my tenure here. The end market exposure, both from – the end market exposure and the geographical exposure, we did not find attractive.

Too much Europe I assume?

Too much auto and too much Asia.

Too much China, yes.

Okay. And then just on buybacks, you did an ASR last year. You've got a fair amount of financing flexibility if you get your free cash flow forecast with the sale as well. I mean, any thoughts on buybacks at these levels?

Yes. I mean, look, buying back our stock at these levels has become very attractive. I think that we've got a lot of moving parts right here in terms of delivering on the fourth quarter and the cash flow. And then we've got an outbound on the acquisition and an inbound on the disposal. After all that is settled, we'll clearly be in a very healthy balance sheet position. And I'm sure that capital return discussion will come to the forefront.

Okay. I leave it there. Thanks, guys.

Thanks.

Thank you. That concludes our question-and-answer period and Dover's third quarter 2023 earnings conference call. You may disconnect your line at this time and have a wonderful day.