My name is Britney and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to the Vontier Corporation's Second Quarter 2021 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the call over to Ms. Lisa Curran, Vice President of Investor Relations. Ms. Curran, you may begin your conference.

Thank you, Britney. Good morning, everyone, and thank you for joining us on the call. With me today are Mark Morelli, our President and Chief Executive Officer; and Dave Naemura, our Senior Vice President and Chief Financial Officer. We will present certain non-GAAP financial measures on today's call. Information required by SEC Regulation G relating to these non-GAAP financial measures is available on the Investors section of our website, www.vontier.com, under the heading Financials. Please note that unless noted otherwise, the presented financial measures reflect year-over-year increases or decreases. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties and actual results might differ materially from any forward-looking statements that we make today. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available in our SEC filings and subsequent quarterly report on Form 10-Q. These forward-looking statements speak only as of the date they are made. And we do not assume any obligation to update any forward-looking statements. With that, I'm pleased to turn the call over to Mark.

Thanks, Lisa. And good morning, everyone. We are very pleased with our second quarter performance. Thanks to our team’s strong execution and rigorous application of the Vontier business system. We delivered another quarter exceeding our guidance on all metrics. We achieved a 33% core revenue growth, 450 basis points of adjusted core operating margin expansion, and 69% adjusted earnings per share growth. The results were largely driven by growth in non-EMV solutions with better-than-expected growth in retail solutions and auto repair solutions. Core revenue growth excluding EMV was greater than 35%. Orders were strong, increasing nearly 40% year-over-year. Our backlog remains high with nearly 50% growth year-over-year and 20% growth sequentially. Our top operational priority has been navigating supply chain challenges. I'd like to recognize the tireless efforts of our teams. I'd also like to thank our network of supplier partners. Once again, this quarter, we've leveraged the Vontier business system to successfully manage tight availability. We've also increased prices to more than offset inflation. We continue to focus on our most critical profitable growth initiatives. In addition to our accelerated core growth, we saw margin expansion across the platforms through better focus and prioritization and we are gaining momentum. We're also making progress on the innovation front with new targeted high-growth market offerings, and the macro launch of the Maximus 4.0 diagnostic software. We've consistently made meaningful progress towards all of our operational and strategic goals since separation only nine months ago. In particular, we recently announced the acquisition of DRB, whose focus on technology and software solutions complements our existing point-of-sale and payment offerings. This also gives us critical scale, establishing a $500 million retail solutions portfolio. The addition of DRB enhances our growth and recurring revenue profile, profitability, and free cash flow generation. This is an important first step in diversifying our portfolio towards long-term secular growth drivers in attractive markets. While the acquisition is subject to customary closing conditions, including regulatory review, we anticipate closing this transaction in the third quarter, giving us approximately mid-to-high teens cents per share accretion to 2022. Over the years, the Vontier team has done a remarkable job of strategically expanding our portfolio. We've built a competitive advantage by offering a broader suite of products. As we more deeply embed ourselves in our customers' workflows, we focus these offerings on the highest value part of the workflows, leveraging the more intelligent electronic components of the system and connecting the convenience store with the forecourt. In the early 2000s, we strategically focused on point-of-sale systems, site control systems, and software systems. In 2017, we acquired a leading provider of hardware and software solutions focused on retail and site systems automation. Our systems are now more profitable and benefit from regular upgrade cycles. The future of the convenience store is bright and transforming. While operators will need to maintain fueling infrastructure for decades, it's clear that our customers will increasingly be investing in non-fuel retail including sustainable services like car washes. The DRB acquisition positions us well to continue to support our customers as they diversify their offerings. So you can see why DRB fits our strategy. I'm happy to share today that we plan to host a deep dive into retail solutions, including DRB this coming November. Stay tuned for more details on this virtual event. Moving to the outlook, we're raising our full year 2021 adjusted diluted net EPS guidance to $2.77 per share to $2.82 per share. This includes improved assumptions for high single-digit core revenue growth, and core adjusted operating margin expansion of greater than 125 basis points. This increase to our core growth outlook reflects mid-teens growth at Matco, improved non-EMV demand at GVR in developed markets, and includes a more favorable view of the 2021 EMV headwind of $75 million to $100 million. Excluding the EMV impact, core revenue growth is expected to be low-teens despite the challenging comps in the second half. As a reminder, this year's guidance reflects a tale of two halves given the pandemic comparisons in EMV dynamics. We are initiating our third quarter adjusted diluted net EPS guidance of $0.71 to $0.74, which includes assumptions of essentially flattish core revenue and core operating margin. With that, I'll turn it over to Dave to provide the financial results. Dave?

Thanks Mark. Adjusted net earnings for the second quarter were $104 million, an increase of 70% from $61 million in the prior year period. This translated to adjusted net earnings per share of $0.61, compared to $0.36 in the prior year period. The double-digit increase in earnings was primarily driven by strong broad-based volume growth, which led to 450 basis points on adjusted core operating margin expansion in the quarter. Core revenue growth in the second quarter was 33% against the prior year Q2 that declined 21% in the height of the pandemic impact. This growth was driven by broad-based non-EMV growth of greater than 35% and augmented by the continued strength of the EMV roll-out in North America. In GVR, core revenue and bookings grew more than 25% and more than 35% respectively, while Matco had more than 50% core revenue and bookings growth. High growth markets were also a significant contributor in the second quarter, growing core revenue more than 25% year-over-year, led by continued progress in India and Latin America. Importantly, we saw the strong Q1 end market demand continue in Q2. Adjusted operating profit for the second quarter was $151 million, growth of 66% compared to the prior year period, primarily driven by strong core revenue growth. Through our team’s execution of portfolio profitable growth initiatives and continued management of dynamic supply chain and inflationary environments, we drove approximately 70 basis points of gross margin expansion and 450 basis points of adjusted core operating margin expansion more than offsetting almost $20 million of temporary cost reduction actions in the prior year Q2 that have returned to the business this year. In the second quarter, we generated adjusted free cash flow of $45 million, a conversion of 43%. This uncharacteristically low conversion rate, which is expected to be the low point for the year reflects two items which we communicated on our call last quarter. First, we paid an incremental federal tax payment of approximately $30 million in the quarter, which was a dynamic from our spin in Q4 of 2020. And second, we built approximately $30 million of net working capital while continuing to satisfy strong demand conditions and run at outstanding working capital levels. We ended Q2 with working capital dollars at 6.2% of last 12 months sales, an increase from Q1 levels of 5.6%, but still at a very low working capital level historically. Adjusting for the impact of the extra federal tax payment, our adjusted free cash flow conversion was approximately 70% in the quarter. Our year-to-date adjusted free cash flow conversion is 95%, consistent with our communicated guidance for 2021. Additionally, our net leverage stands at 1.7 times adjusted EBITDA down from 1.9 times in the first quarter and down from 2.6 times at the time of our spin in October of last year. This deleveraging has been enabled by strong earnings growth and free cash flow conversion. Looking at the performance of our two platforms, mobility technologies had core revenue growth of 26%, primarily due to more than 25% core growth in GVR and GTT, partially offset by low single-digit decline and Teletrac Navman. The strength in GVR continues to be multifaceted. We saw greater than 35% core growth in non-EMV sales, driven by retail solutions, aftermarket, and environmental solutions, and more than 25% core growth in high growth markets. We continue to see strong demand from EMV in North America in the months immediately following the deadline. As expected EMV dollars declined sequentially from Q1, but did grow on a year-over-year basis. Core revenue growth at our diagnostics and repair technologies platform was 57%, driven primarily by continued strong demand at Matco and Hennessy. Matco experienced more than 50% core growth. This was driven by continued strong demand environment and a growing distribution base, reflecting our fourth consecutive quarter of strong net franchisee additions following the pause that we saw during the height of the pandemic. Looking at total company sales regionally, the growth was again truly broad-based. As I mentioned, high growth markets grew core revenue more than 25%. And our developed markets in total had core revenue growth greater than 30% led by greater than 35% growth in North America and low double-digit growth in Western Europe. We continue to make progress on our profit improvement actions that will better position the company in the back half of this year and in 2022. We recognized the restructuring charge of $3 million in the second quarter. This is part of the approximately $20 million charge that we continue to anticipate for the full year. This charge is excluded from our adjusted net operating profit. We continue to expect to have these actions substantially completed in the year, positioning our exit rate to achieve the full benefit of these actions in 2022. Before discussing our outlook and assumptions, I want to provide additional color on the EMV outlook. As we have previously stated, this is a very fluid situation, and we continue to execute extremely well powered by VVS, as evidenced by our continued backlog strength, booking strength, and our agile ability to manage supply constraints. We currently expect the headwind associated with EMV to be in the range of $75 million to $100 million for the full year 2021, down from our prior estimate of $100 million to $150 million. We will continue to assess the situation and provide updates as appropriate. When we entered 2021, we highlighted that the quarterly trend of our year-over-year growth in the year would be impacted by the strength of the V-shaped recovery that we demonstrated last year and the roll-off of EMV as we pass the adoption deadline. The net impact of these two compounding dynamics is that we expect second half adjusted earnings per share to decline high single-digit percent compared to the prior year period. In contrast to the 54% adjusted EPS growth we just completed in the first half of 2021. Having said that, we expect the second half revenue and earnings to be higher than our first half performance, a seasonality that we would directionally expect to see in our business. But the growth dynamics are highly impacted by the comparison factors that I mentioned. Taking a closer look at our 2021 outlook assumptions, starting with the third quarter, we expect core revenue growth to be flat to slightly negative, and adjusted core operating margin to contract by approximately 25 basis points. This dynamic is primarily reflecting the difficult comps related to the strength of Matco, EMV, and Mexico fiscal regulation in the prior year period, consistent with the tail two halves and translates into adjusted earnings per share of $0.71 to $0.74 in the quarter. For the full year 2021, we are increasing our core revenue guide to high single-digit growth compared to our prior outlook of low-to-mid-single-digit growth, which equally reflects the better-than-expected demand in non-EMV solutions and our favorable revision to the EMV outlook. Additionally, we are increasing our core operating margin expansion target to greater than 125 basis points in 2021 reflecting continued execution on our profitable growth initiatives in cost management and partially offset by persistent but manageable inflationary pressures, supply chain constraints, and mix. All told, this translates to $2.70 to $2.82 of adjusted EPS growth of approximately 12% to 14% year-over-year and an 8% raise at the mid-point of our prior guide. We continue to expect adjusted free cash flow conversion will be approximately 95%, reflecting continued working capital management at all-time low levels and the low capital intensity of our business model. Overall, the second quarter capped off a robust first half of 2021 and supports another meaningful raise to our full year 2021 expectations for core growth, margin expansion, and earnings growth. With that, I'll turn it back to Mark.

Thanks, Dave. To wrap up, this quarter we made significant progress on our critical priorities to drive profitable growth and on advancing strategically and financially beneficial M&A. Profitable growth initiatives are delivering ahead of plan. Our DRB acquisition diversifies our portfolio aligned with our retail solution strategy, presents a compelling runway of expansion opportunities, and offsets the EMV headwind now upon us. Yet we know our work continues. We're building momentum and remain committed to disciplined deployment of capital, driving accelerated growth, and creating value as we continue our transformation. Recognizing it's Friday at the tail end of earnings, I'll turn the call over to Lisa so we can get to your questions.

Thanks, Mark. That concludes our formal comments. Britney, we are now ready for questions.

We do ask that you please limit yourself to one question and one follow up. We'll take our first question from Andrew Obin with Bank of America.

Yes, good morning.

Hey, good morning, Andrew.

Just the question we've been getting sort of EMV headwinds this year grow from $100 million to $150 million to $75 million to $100 million. But effectively, this means that 2022 will face when it's $25 million to $50 million greater headwind. So I appreciate that you're not providing ‘22 guidance. But should we think about better demand this year? Is it go forward of the same total opportunity? Or is the total EMV opportunity larger than you thought? Thank you.

Hey, Andrew, it's Dave. Just a couple of points. Generally speaking, we do see the size of the pie increasing as we continue to take share, and we're seeing favorable mix in how people adopt EMV. We are seeing more dispenser sales and less just kit retrofits. Having said that, with our updated guide for the year of $75 million to $100 million, like we said, we see the ‘22 impact similar to that. So the overall pie is increasing a little bit. But we've also said historically that we needed to get past the adoption deadline to see how the many, many small customers would adopt EMV. And I think what you see is us beginning to get some clarity, or at least opinion at this point on how that will happen, which is probably a little more rapid than we had previously anticipated. Thanks for the question.

Got you. Really appreciate it. And just a question for Matco. Can you just help us with 50% order growth in Matco, but the guidance seems to imply mid-to-high teens growth in the second half? You guys did highlight the fact that you have comps, but still this is a business, what orders turn into sales, I guess pretty quickly to see if you can help us for that? Thank you.

Sure, I’ll address your question, Andrew. The underlying market conditions are strong, and we're seeing continued buying from technicians, which is encouraging. We are particularly heartened by our strong performance in net franchisee additions. It's worth noting that around 30% of our territory in North America and Canada is still not penetrated by our franchise distribution, which is somewhat unique for us in the market. We are successfully adding new franchisees. Additionally, our sales are being boosted by a vibrant product offering that keeps customers engaged. One example I mentioned earlier is our recent Q2 Matco Expo, which we held in person and indicates there’s robust demand. We believe this momentum will continue.

Hi, good morning.

Hey, good morning, Steve.

Can you just talk about maybe some of the moving parts in free cash going forward and just some of those puts and takes?

Certainly. Referring back to the second quarter, we were aware of the additional tax payment this year, resulting in five tax payments for 2021 compared to only three in 2020. We anticipated a $30 million incremental payment. Our conversion rate was slightly lower than expected, even with that tax payment, due to some building in working capital. In Q1, we saw our working capital at 5.6% of LTM sales, which is unsustainably low. We managed to increase it by about $30 million, which was a bit more than we had estimated. Looking ahead, the key factor for the rest of the year will be working capital and our ability to maintain these levels. I believe we will stabilize around the mid-sixes range, which will ultimately influence free cash flow conversion for the second half. As I noted earlier, our conversion for the first half was 95%, which we expect to maintain in the second half, assuming we manage to keep these historically low working capital levels in check.

Yes, it makes total sense. Can you talk about what's going on in the telematics business just trend-wise?

Yes, certainly this is Mark. We will continue to make progress in the telematics business. One of the areas that we've been focused on that we make good progress on is on the reduction in churn. We're also measuring ARR, which of course, is annual recurring revenue. And we're on a five-month growing trend of ARR, which is a pretty big departure in the past as we continue to build out our TN360 offering. At the same time, we're reframing the business to focus more on profitable growth. Because we think that the ability to scale this business and reframe it in that light, and pick up some margin opportunity is pretty important for us. We've added a new President, his name is Alain Samaha, he is an industry veteran that has years of driving software, business expansion and organic growth as well as M&A. So we're really happy to have him on Board. He's just now getting settled. But we're going to keep you posted on this, we believe is a very attractive space and we believe the turnaround continues.

Great. Thanks a lot. Appreciate it.

Thanks.

Good morning everybody, this is Brian Lau on for Nigel. So maybe first wanted to talk about the backlog a little bit. So it's up 20% quarter-over-quarter and flattish year-over-year sales, guidance 3Q and imply maybe high single-digit growth quarter-over-quarter. And I think the last couple of quarters, the backlog has been more weighted towards the Matco build. I'm just curious, are you baking in some conservatism for maybe some unforeseen supply chain headwinds? Or can you just reconcile the backlog versus kind of quarter-over-quarter implied revenue growth?

Yes, thank you. The backlog is certainly high at the moment; we started the year strong and have seen bookings outpace revenue in the first half. We expect this to moderate as the year progresses, bringing the backlog down to approximately where it was at the beginning of the year. While it remains high, we anticipate a reduction over the course of the year. We are taking into account some supply chain constraints, but I wouldn't label it as overly cautious. I believe we are managing things realistically in the second half, just as we did in the first. The demand for Matco, especially in EMV and other areas of GVR, is strong. The growth in orders and backlog is widespread, and we have strategies in place to address this as the year moves forward.

Great. Can you provide an update on the year-to-date percentage for the franchisee you had with Matco? Additionally, how are the ramp-ups for all the franchisees added during the pandemic tracking, given that they were onboarded virtually? Are their key performance indicators trending as you would expect based on historical data?

Yes, I'll take the first part and then pass it to Mark. We have added about 38 net franchisees in the first half of the year. This is significant for several reasons. Firstly, we experienced positive franchisee additions in the first quarter, which is typically a period of more attrition than additions, so that's a great outcome. We also had a strong second quarter. Over the past four rolling quarters, we have achieved 94 additions in the last 12 months, which is quite impressive. Our usual target is around 50 or more in a 12-month period, so this is a very positive result. I will now pass it to Mark for the next part.

Yes. So part of your question there was, how do we work on building that out? And we’ve actually had to change that quite a bit. You can imagine going to this virtual environment, we used to sit across the kitchen table and sign up franchisees. And so the issue is clearly that it's had to deploy to a more virtual format. And given that it's more virtual, we've had to be able to make traction there more digitally, but we think it's a very effective model. And we're deploying that on the growth and it's really working out for us.

Hey, good morning, guys.

Hey good morning, Andy.

Mark, you mentioned that your profitable growth initiatives are ahead of plan, maybe you could give us a little more detail around what you mean by that. I know you already mentioned improving businesses such as Teletrac Navman. But what is actually ahead of plan across the portfolio, and then you obviously delivered low 30% incremental this past quarter, even as temporary costs came back. So when you think about your longer term, incrementals, which I think you've said is closer to 30%. Do you think at this point, do you have the potential to deliver consistently better than that?

Yes, so let me take the first part. And I'll turn over Dave, for the second part. So thank you for that question, by the way. We have very down selected what we say is our kind of critical few growth, profitable growth initiatives. And a lot of that you're seeing kind of read through one of those really pays off, actually a couple of those really pay off on the non-EMV growth, which I think if you also compare historically, is clearly got some momentum behind it. But really, specifically to your question, it's on retail solutions, and how we build that out in high growth markets, as well as in the diagnostic and repair both at Matco and Hennessy. And Hennessy is reframing their business has seen some strong growth and as you know, is below sort of fleet revenue and margins. And so we're seeing really good traction there. We also have a critical initiative around gaining share with EMV, and I think we're doing pretty well on that one as well.

Hey, I'm Dave. In the second quarter, we experienced low incrementals due to the one-time cost reductions from the previous year. If we adjust for that, the incrementals would have been closer to 40%, aligning with our historical performance. We have discussed that our business typically operates at a mid-to-high 30s incrementals rate, and we believe we can exceed that as we make significant strides with our profitable growth initiatives. I think this growth is sustainable in the long run, especially as we continue to pursue acquisitions that enhance the financial metrics of the company. I anticipate we will see ongoing sustainability and improvement moving forward.

That's helpful guys. And then Mark, can you give us a little more detail on how fast the GVR is growing in the margin potential of the business? I know you said EPS accretion in the mid-to-high teens for ‘22. But to get to ROI save 10% by your 5%, I think we would have to grow decently fast or in the shorter term and or have high incremental, so maybe give us more color regarding how the business is growing in ‘21? What kind of incremental margin could this business generate over the next few years?

Thanks for the question. We believe there is a high single-digit growth rate in place. This is primarily driven by their main business of implementing point of sale systems that utilize an existing controls infrastructure. They enhance this by integrating into customer workflows, which involves using digital data analytics for initiatives aimed at customer retention. They emphasize maximizing productivity through recurring business models. Additionally, they manage payments, another high-growth segment that is both sticky and adds significant margin.

Hi, thank you for the time. I was curious, the incremental EMV opportunity, you're speaking of a larger pie, how is the profitability of that business versus some of the early part of the EMV?

Yes, thanks, Dave. Hey, it's similar, in some cases maybe even not better. As we move through EMV adoption, obviously, some of the largest customers that have adopted earlier have some better volume-based agreements. So as we move through this, on average, the customer profitability remains solid. And as the pie increases, that we work through this kind of the latter parts of adoption here, I'd say the profitability is the same, if not a little bit better than what we experienced kind of in the earlier stages.

2022, that decline being similar to ‘21, a pleasant surprise, but I'm just trying to understand in a way that would way it plays out quarterly. Next year's ‘22 sales are they almost reaccelerating. But the math can almost get there. And what you expect in the second half of ‘21, do EMV sales are steady through ‘22 or even pick up a little bit sequentially.

Yes, David, I think we are not in a position here at this stage in the game to give you the shape of EMV within the year, next year. I think, as we've gotten past the deadline, I think we have a good feel for the behavior of the smaller customers. So I think we're able to kind of call next year as best we can at this stage, we look forward to in the second part of the year coming back and giving folks an update. But I think we wouldn't dimensionalize it further than that at this stage.

Okay. And lastly, on DRB for next year, just looking at the credit agreements last night and kind of what the margins came in at. This was obviously more of a growth acquisition than a margin improvement. But just to be clear, it does seem like you're assuming similar margins next year for DRB equal to what kind of came in, right? So this is not about margin expansion next year on DRB, this is just top line, does that type and get to that accretion number need margin improved?

Yes, I think you're correct in the short term. We view this as a promising growth opportunity. This is focused on growth. However, over time, as mentioned before, we see potential for significant margin expansion. While this is primarily a growth strategy, there are some benefits that come from it. With the strong growth we anticipate from this business, we expect to see margin opportunities as well. We have some exciting new products and capabilities that will contribute to this effort. All of these factors will work together over time to help us achieve a favorable outcome within the next five years.

Hi, good morning. Maybe just a question on capital deployment and acquisitions, post DRB. Maybe give us some thoughts as to what kind of leverage level you think you'll be at pro forma with that and how comfortable you are doing acquisitions in the 12 months following the close of DRB?

Hi, Julian. Hey, it's Dave. So post DRB, assuming the closes, as we anticipate here, in the third, we should be around three times that leverage well within kind of the metrics that we talked about. And without further M&A, we would continue to de-lever and be below three times again by year-end. But having said that, we would have capacity to do additional M&A within the existing balance sheet here. We've always said that we could go above three times clearly within our stated objectives with line of sight to come back below three times in a reasonable amount of time. We've also talked about doing different types and sizes of deals, we continue to cultivate that remains to be a decent pipeline out there. So we're not out of the market by any stretch. There's a number of attractive properties of different types and sizes that we continue to work through. And for the right deal, we would get it done. Having said that, we're thrilled to have deployed this amount of capital on this asset. And we think it's a great start, very consistent with how we've always talked about starting something that's accretive, diversifies the business, but is in a space that's not kind of known to us in the near adjacency.

Let me just jump in on that one, too. I think what this really shows, this is really in our sweet spot of what we've been telling you about it's near-end, it fits our strategy. It's got great financials. And I think that if anything, we're continuing to build out our pipeline here, I think it's indicative that we have things in our pipeline. And I think there's other good things in our pipeline that we continue to cultivate and we continue to work on it. But keep in mind, it is strategy-led. And I think that we're just building off some momentum here, that we kind of had in the business all along and have to kind of reinvigorate, but we're really pleased on the progress we're making here.

Thanks very much. And then secondly, just on the sort of base business, diagnostics and repair technologies, overall I think you had 40% growth or so in the first half year-on-year, maybe just clarify for me sort of that piece overall, what's dialed in for the second half of the year-on-year, and how you're thinking about that pace of sort of growth normalizing maybe second half revenue versus 2019 and how you're trying to think about those types of dynamics when you're forecasting it?

This is where we experienced a significant part of the V-shaped recovery last year, especially at Matco, which rebounded well after a challenging second quarter, showing high single-digit growth in the third quarter and continuing that momentum into the fourth quarter. Historically, we haven't seen such high single-digit growth levels in this set of businesses, particularly in the first half of this year. However, the end market is very strong. The number of distributors actively working has increased significantly, and we are not only adding franchisees but also seeing a high number of distributors in the field. Additionally, our credit metrics with end consumers are solid. We overcame that tough comparison and still expect decent growth in the fourth quarter, despite those challenges. Over time, we've indicated that these businesses tend to exhibit low to lower mid-single-digit growth, and we expect to return to that normalization. Nonetheless, we believe the strong end market will persist, which is what we are anticipating for the year. Looking back, last year’s second half was exceptionally robust.

Great, thank you.

Thank you.

Hi, good morning.

Hey good morning John.

Good morning.

Hey, wonder if we can come at the mobility tech question a little bit differently as we look forward. So you talked about the strong non-EMV orders. So just wanted to understand a little bit better about how that order conversion to sales looks for that part of the business. And then, as we look to next year, appreciate the update on the EMV headwind. Are there any countries obviously this year we've had Mexico create a comp issue? Is there anything outside of EMV we should think about as remodeling next year?

Yes, a couple of points there, John. So I think this is a very broad brush. But when we think non-EMV within GVR within mobility tech, so let's just talk about kind of GVR, I think we'll see a little faster conversion of backlog. And that has to do with probably the place where we have the most activity given the advent of EMV is here in North America. So I think outside North America will be able to turn backlog a little bit faster than we otherwise would. As far as compare items, it's just the last year at least in 2021, 2020 had a pretty odd shape to it. And vary by region. So we saw North America come back very fast both with EMV and Matco. And that creates kind of a lot of this tale of two halves dynamic that we've talked about. But we then saw in the fourth quarter, some emerging market or high growth market activity come back quickly, particularly in India. So you've got Mexico that kind of flowed through Q3, Q4, and again Q1 of 2021. As we shipped that out, you had very strong recovery in India in the fourth quarter of last year where we had I think about 80% core growth, we saw some pent-up demand flow through. And then of course the overall EMV dynamic is going to have its own shape. I think those within the mobility tech arena are the big compare items we need to think about.

Great. So if you put them all together, I mean, should we expect mobility to be up next year?

Well, look, I want to hold off on getting too far into next year. And until we've dimensionalized the nature of EMV. So more to come on 2022 as we get into towards the end of the year here.

Great, worth a shot. Could you discuss pricing that exceeds inflation? Regarding the pricing strategies you’re implementing, do you believe these are sustainable? Or are they more of a surcharge due to commodity or component inflation that might need to be adjusted later? How should we approach price capture if we experience some deflation from current levels? Thank you.

Thank you for the question. I believe this is very much about strategic pricing. We began implementing this in the fourth quarter of last year because we noticed strategic pricing activities even before the significant inflationary pressures started to build. Our actions are not simply reactive; they are part of a deliberate strategy. As we've observed increasing inflationary pressure, we've adapted our approach. Overall, I believe what we've implemented is responsible and strategic, and I think it's quite fitting. Therefore, I expect that a significant portion of this pricing will remain stable.

Great. Thanks for taking the questions.

Thank you.

Yes, good morning. Just to follow up on that last question around price. I'm just, maybe I missed it. But did you quantify what price contributed in the second quarter? And what that curve looks like as we get through the second half?

Yes, let me comment on the pricing for the full year. And then we'll give you the quarterly number here in a second. We're currently forecasting greater than 2% price for all of 2021. And this is up about 50 basis points, based on our last guidance of 1.5%. And then the quarterly pricing here, we'll get to in a second.

Yes, it wasn't too far removed from there in that time to 2.5%.

Okay. Just a follow-up question about DRB, Mark. As you conducted your due diligence on that business, could you elaborate on how you define it and discuss the competitive landscape and their positioning within the industry?

They are very strong and hold the position of market leader in a $900 million total addressable market, with about a 20% market share. The number two player is significantly behind. What primarily drives their success is their point-of-sale system, which tends to be very sticky. Their brand is prominent in the industry, and they excel at building additional digital offerings like analytics, customer retention, increasing asset productivity, generating recurring revenue, and facilitating payments. Overall, it's a robust business model.

And we will take our next question from Andrew with Berenberg, Your line is now open.

Good morning, guys.

Good morning.

To achieve your 10% return on invested capital with DRB, are you assuming you will need to consider mergers and acquisitions?

No, that would be just from the purchase of the asset as opposed to incremental M&A within that asset.

Okay.

To clarify, the calculation does not include the value of the tax asset we are removing. The total purchase price is 965 minus 130 for the tax portion, resulting in a residual of 835, which we consider the investment for measuring return on invested capital.

Okay. This business aligns well with your existing POS operations. Can you discuss some of the synergies, particularly the more significant ones, and how this business compares to the number two competitor? Will you be competing for deals with them?

Yes, absolutely. The advantage we gain from our current operations lies in our expansion of services within convenience stores, including car washes. We cater to some of the same customers in the car wash sector as we do in convenience stores, which creates sales synergy. While we may see some cost synergies as well, what truly excites us isn't just this synergy, which we view as relatively minor. Instead, it's the new capabilities that position us to enter the rapidly growing tunnel car wash market. This represents an infrastructure opportunity that aligns well with our model, as it's widely accessible and fits the transaction types we commonly engage in at convenience stores. We're very familiar with this endeavor and see significant growth potential. I really like this aspect. Now, can you please remind me of the second part of your question?

Yes, how does it compare to your competitor, and can you also compete on deals with them?

Yes. So first of all, as a competitor, you're going to certainly compete in the marketplace. But what makes us unique, is that since we are controls in specifically hardware agnostic, which means we put our controls and capability in software, regardless of the hardware that's in a car wash. And when you look at the hardware, think of the brushes, think of the automation, there's folks that go out there and do that. Our number two competitor in the market actually is owned by somebody that owns hardware and software. So we think this makes us quite unique for us so that we can sell out there more broadly speaking to the general market. And, of course, a lot of this is based on the scale that you've got the capability you've got, we've got an outstanding product offering. And we have a new cloud-based offering that they're currently launching called Pantheon, which we think is also unique to the market. So there's a lot of good things happening at DRB.

Yes, the tunnel car wash is a standalone facility that you would recognize as a drive-to location, not affiliated with any other formats like convenience stores. This format is actually experiencing faster growth in the United States, and we hold a very strong leading position in it. Furthermore, there is consolidation happening in the car wash industry, similar to what we observe in convenience stores, where larger strategic players are acquiring smaller, fragmented ones. This trend benefits DRB, as it positions us even more strongly alongside the major players in the market. Got it. All right. Thank you.

And we have no further questions at this time. I will turn the program back over to Mark Morelli with any additional or closing remarks.

Yes, thank you, Britney. Appreciate it. I just want to thank the Vontier team for our strong momentum and for embracing our core value driven to win. Certainly appreciate your participation today and have a good weekend. Bye now.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.