DOVER Corp Q3 2025 earnings call

Thank you, Chloe. Good morning, everyone, and thank you for joining our call. An audio version of this call will be available on our website through November 13, 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 the call over to Rich.

Thanks, Jack. Good morning, everybody. Let's get started on slide three. Overall, we are pleased with Dover's third quarter results. Revenue was up 5% in the quarter, driven by broad-based shipment growth in short-cycle components, continued strength across our secular growth end markets, and very encouraging results from recently closed acquisitions. Order trends continued to positive momentum in the quarter, up 8% all in year-over-year, or 4% organically, providing good visibility for the remainder of the year and into 2026. Margin performance in the quarter was excellent, with a record consolidated EBITDA margin of 26.1%, up 170 basis points over the comparable period. As a result of positive mix impact from our growth platforms, solid execution, and our rigorous cost containment and productivity actions, all five segments posted margin improvements during the quarter.

All in, adjusted EPS was up 15% in the quarter and is up 17% year to date. Capital deployment remains a key driver of our double-digit earnings growth. This year, we increased our investments in high ROI capital projects focused on productivity and capacity expansions, as well as targeted footprint optimization. Our balance sheet strength is an advantage that provides flexibility and attractive optionality as we pursue value-creating bolt-on acquisitions and opportunistic capital return strategies. We have a constructive outlook for the remainder of 2025 and into 2026. Despite some macroeconomic uncertainty, underlying end-market demand is healthy across much of the portfolio and is supported by our sustained order growth. As a result, we are increasing our full-year adjusted EPS guidance from $9.35-$9.55 to $9.50-$9.60. Let's go to slide five.

Engineered Products revenue was down in the quarter on lower volumes in vehicle services, partially offset by solid performance in aerospace and defense components. Despite the organic volume decline, absolute segment profit improved in the quarter on well-executed structural cost management, product mix, and productivity initiatives. Clean Energy & Fueling was up 5% organically in the quarter, led by strong shipments in clean energy components, fluid transport, and North American retailing, fueling software, and equipment. Our recent acquisition of SiteIQ, a provider of remote site monitoring of fueling sites, is off to a good start. Margin performance, as expected, was solid in the quarter, up 200 basis points on volume leverage and a higher mix of below-ground fueling equipment and restructuring benefit carry forward. Imaging & ID was up 3% organically in the quarter with growth in our core marking and coding business and in serialization software.

Margin performance remains very good in the segment at 29% adjusted EBITDA margin, as management actions on cost to serve and structural cost controls continue to drive incremental margins higher. Pumps & Process Solutions was up 6% organically with growth in single-use biopharma components, thermal connectors for liquid cooling of data centers, and precision components and digital controls for natural gas and power generation infrastructure. SIKORA, which we acquired at the end of the second quarter, is significantly outperforming our underwriting case. Segment revenue mix volume leverage drove margin improvement on solid production performance and volume in secular growth exposed end markets. Revenue was down in the quarter in Climate & Sustainability Technologies and comparative declines in food retail cases and engineering services, which were collectively down 30% year to date.

Industry-wide, shipments of door cases are at a 20-year low, in part because tariff uncertainty has caused customers to delay maintenance and replacement upgrade spending. These projects cannot be delayed indefinitely, and encouragingly, we saw a material acceleration in booking rates in the quarter, which signals volume improvement moving forward. Meanwhile, the segment had record quarterly volumes in CO2 refrigeration systems, as well as double-digit growth in heat exchangers and accelerating demand for liquid cooling of data centers and improving sentiment in European heat pumps. Despite the lower top line, the segment posted 120 basis points of margin improvement on productivity actions and a higher mix of U.S. CO2 systems and brazed plate heat exchangers. I'll pass it to Chris.

Thanks, Rich. Good morning, everyone. Let's go to our cash flow statement on slide six. Year-to-date free cash flow was $631 million, or 11% of revenue, up $96 million over the prior year. Its increased year-over-year operating cash conversion more than offset an expected increase in capital spending. Free cash flow generation accelerated in the third quarter, in line with our expectations and with historical trends, and we expect a further step up in the fourth quarter, which is historically our highest cash-generating quarter. Our guidance for 2025 free cash flow remains on track at 14%-16% on strong conversion of operating cash flow. With that, let me turn it back to Rich.

Okay, I'm on slide seven. Let's provide a little more detail on the bookings in the third quarter. Q3 consolidated bookings were up 8% in total and 4% organically from the prior year. I call out the 25% bookings growth in Climate & Sustainability Technologies, a welcome sign as we expect the segment to return to growth in the fourth quarter on broad-based volume demand. On slide eight, we highlight several end markets that are key drivers of our revenue growth in 2025 and beyond. We are benefiting from major investments in power generation, electricity infrastructure, and artificial intelligence across multiple businesses. We are directly exposed to data center buildout by hyperscalers and the secular shift from air cooling to liquid cooling of new chip technologies.

Between our thermal CPC connectors, which primarily connect to the back of the server rack manifolds and directly to the chip, as well as our large and XL heat exchangers from SWEP that are key components in coolant distribution units and chillers, we expect to generate over $100 million in revenue in this year alone. A recently closed SIKORA acquisition expands our exposure to electricity infrastructure through measurement and inspection control solutions for high-voltage polymer-coated wires and cables, a direct beneficiary of growing electrification trends and demand from customers for product quality assurance and improvement. All this electricity has to come from somewhere, and natural gas remains the most viable option for scalable, reliable energy for the foreseeable future.

Our precision components and OPW Clean Energy businesses participate across several points of the natural gas infrastructure value chain, including gas and steam turbine components, midstream gas pipeline engines and compressor infrastructure, and valves and vacuum jacketed piping used in liquefaction and gasification of LNG. End market data and customer discussions indicate a very bright future for these businesses. Our single-use biopharma components platform has returned to its long-term double-digit growth trajectory on volume demand and new product launches. Continued advances in biological drugs and therapies, coupled with an industry shift towards single-use manufacturing processes, are fueling sustained high-quality growth for our products. In CO2 refrigeration, we maintain a clear market leadership position in the U.S., supported by a fully platform product portfolio and a retrofitted plant in Conyers, Georgia, that provides strong competitive moats in product performance, lead times, and scalability.

Economic and regulatory tailwinds are driving the transition to CO2 systems as large national retail chains accelerate their adoption with a line of sight of continued double-digit growth into 2026. A significant majority of the acquisition capital deployed in the past five years has been directed towards these high-end growth markets, which remain top priorities for continued investment. Collectively, these markets now represent roughly 20% of our portfolio and are contributing meaningfully to our margin expansion. Moving to slide nine, our investments in center-led functions and ongoing focus on productivity improvement are key drivers of our margin expansion. We have made significant progress building out our shared back-office services, digital capabilities, and internal engineering services through the India Innovation Center.

These center-led functions enable our operating companies to concentrate on what matters most. Serving customers, driving new product development, and responding to market-specific needs while leveraging Dover's global scale and balance sheet. This structure remains a core competitive differentiator of our operating companies, and we extract cost synergies from our existing and acquired portfolio companies. Our Dover Business Services, Dover Digital, and Innovation Center are now fully developed and integrated across the organization. With these operations fully built out, we expect meaningful scale and scope benefits as we continue to grow organically and through acquisitions, further reducing average transaction costs and driving attractive margin accretion. We believe that our shared back-office services will be the largest non-product beneficiary of artificial intelligence implementation. An important part of our business model is to drive productivity through targeted efficiency and fixed cost reduction programs.

On the right are some of the key ongoing projects that we had highlighted in previous quarters, including our recently announced transition of the Anthony Glass door manufacturing from Sylmar, California, into our existing Hillphoenix refrigerated case facility in Richmond, Virginia, a move expected to deliver significant benefits. These initiatives are projected to contribute $40 million in incremental carryover benefit in 2026, with additional benefits extending into 2027. Let's finish up on the outlook slide number 10. We expect Engineered Products to improve sequentially in the fourth quarter on double-digit growth in aerospace and defense components and improving market trends and competitive dynamics within Vehicle Services. Our outlook in Clean Energy & Fueling remains solid across most of the businesses. North American retail fueling is starting another capital deployment cycle, and the outlook in clean energy components is positive as well.

Vehicle wash continues to experience some headwinds, although we would expect that to recover in 2025. Imaging & ID should continue its long-term steady growth trajectory, given its significant recurring revenue base and solid underlying demand, with an additional upside from serialization software. We forecast this segment to continue its single-digit organic trajectory. The outlook for Pumps & Process Solutions is strong and broad-based, with attractive top-line forecasts across single-use biopharma components, thermal connectors for liquid cooling of data centers, and precision components for natural gas infrastructure. Bookings and backlog trends in our long-cycle polymer processing signal improving conditions, and the business should return to growth in the fourth quarter for the first time in over two years.

Finally, Climate & Sustainability Technologies should grow in the high single digits organically in the fourth quarter on continued strength in CO2 refrigeration systems and heat exchangers, as well as growth in refrigerated door cases from improved booking rates. The full-year guidance is on the left. We expect acceleration at our top line in the fourth quarter, driven by our secular growth businesses and sequential recovery in certain capital goods end markets. We are well positioned as we begin to transition into 2026, and our advantaged balance sheet provides attractive optionality to selectively play offense to continue driving shareholder returns. Pass it back to you, Jack.

Okay, I guess, Chloe, before you get to the script on questions, if I could just interject quickly. We've had a lot of pickup in our analyst coverage over the last 12 months. If we could please limit the Q&A to just one question, we would greatly appreciate that. I'll turn it over to you, Chloe.