DOV - Dover Corporation
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Q2 2026 Earnings Call
2026-07-23Operator: Thank you for your attention, your meeting will begin shortly. If you need assistance at any time, please press 0 and a member of our team will be happy to help you. Good morning, and welcome to Dover's Second Quarter 26 Earnings Conference Call. Speaking today are Richard J. Tobin, President and Chief Executive Officer Christopher Woenker, senior vice president and chief financial officer, and Jack Dickens, vice president investor relations. After the speakers' remarks, there will be a question and answer period. Press star and then 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. As a reminder, ladies and gentlemen, this conference call is being recorded. And your participation implies consent that our recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Mr. Jack Dickens, Please go ahead, sir.
Jack Dickens: Thank you, Katie. Good morning, everyone, and thank you for joining our call. An audio version of this call will be available on our website through August 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, discussed in our SEC filing We assume no obligation to update our forward-looking statements. With that, I will turn the call over to Richard.
Richard Joseph Tobin: Thanks, Jack. Good morning, everyone. Let's get going on Slide 3. We delivered another strong quarter with results that reflect the breadth of demand across the portfolio. All in revenue grew 7% or 5% organically with all 5 segments posting positive organic growth. Our top line performance continued to be led by our secular growth exposed markets, which now represent approximately 25% of the portfolio, which is complemented by broad based constructive trading conditions across most of our other end markets. Margin performance was solid. Adjusted EBITDA margin expanded 80 basis points to 25.9% as operational execution on incremental volume more than offset input cost inflation and facility consolidation costs during the quarter Incremental margins were 38% from 25% in Q1. The healthy product mix driven by our growth platforms. Adjusted EPS $2.74 per share, up 12% year over year. Marking another quarter of double digit earnings growth. Bookings were again the highlight in the quarter. Orders increased percent year over year and outpaced shipments. With book-to-bill at 1.06, extending strong order momentum of recent quarters and improving our visibility into the second half of the year. Our balance sheet remains a competitive advantage and we continue to invest capital behind our businesses. During the quarter, we advanced capacity expansion projects to support growth as well as productivity investments to drive margin improvement across the portfolio. Industrial M&A markets have improved this year and our acquisition pipeline is a number of interesting opportunities. In attractive end markets. Given our first half performance, the momentum in our end markets and the visibility we have in the second half, we are raising our full year adjusted EPS guidance. We are committed to delivering double digit adjusted EPS growth consistent with Dover's long term performance trajectory. Let's go to slide 5. Engineered products was up 2% organically. Growth was driven by strong demand in aerospace and defense components, fluid dispensing and industrial winches along with continued stabilization in the North American vehicle aftermarket. Margins expanded 100 basis points on favorable mix and proactive cost containment actions. Clean energy and fueling grew 9% organically with broad based strength across clean energy components and retail fueling equipment and software. Within clean energy, our order book has expanded meaningfully from cryogenic components used in LNG and space launch infrastructure driving momentum in that business. Retail fueling also remained healthy with particular strength in North American dispensers, software, and below ground equipment. Segment margin expanded 170 basis points on volume leverage and the integration benefits from recent acquisitions. Imaging and identification grew 3% organically with growth across core marking and coding equipment, consumables, spare parts, and serialization software, segment margin expanded 150 basis points on productivity and structural cost discipline. Pumps and process solutions grew slightly with strength in AI and energy infrastructure components single use biopharma and industrial pumps. Precision components benefited from robust demand for bearings tied to steam and gas turbines, Polymer processing had a tough comp in the quarter, which muted the segment's top line. We expect the business to return to growth in the second half of the year Segment margin expanded 170 basis points 35% I think a record or a best in class result driven by a mix of products delivered and augmented by M&A activity. Climate and sustainability technologies grew 8% organically, it is a bit of a tale of 2 cities here. Heat exchange was-- delivered their best quarter ever with particularly strong demand tied to liquid cooling. For data centers, we are actively working to double capacity for these products over the next 12 months. We also continue to see a welcome recovery in European residential heat pumps, had a tough quarter in refrigeration. Demand was strong across all the product lines, particularly CO2 systems, which is great, but raising output proved difficult in the midst of a complex facility consolidation while simultaneously ramping labor, While we knew that there was going to be some margin pressure from running redundant facilities through the transition, we frankly did not expect to fall short on our production throughput targets. that is on me. And it cost us on the top line in the quarter, probably about 1% to 1.5% of organic growth. We will get this fixed over the balance of the year and I expect to be reflected in the revenue growth rate and margin in the second half. Pass it over to Christopher.
Christopher Woenker: Thanks, Richard, and good morning, everyone. Let's go to our cash flow statement on slide 6. Year to date free cash flow of $320 million or 8% of revenue was up 23% over prior year. This improvement was primarily driven by operating cash conversion on year over year earnings growth, which more than offset working capital investments tied to accelerating top line growth. Consistent with historical trends, we expect cash flow generation to accelerate meaningfully in the second half, driven by seasonal working capital liquidation in the third and fourth quarters. Our full year CapEx estimate remains $190 million to $210 million and our free cash flow guidance remains 14% to 16% of revenue. With that, let me turn it back to Richard.
Richard Joseph Tobin: I am on Slide 7. Broad based booking momentum continued in Q2 with all 5 segments posting year over year growth. On a trailing 12-month basis, consolidated bookings are up 15% and book to bill is well above 1 providing further visibility and confidence in our outlook. The breadth of our order growth is important and points to continued top line strength in the second half. We are seeing particular strength in the areas we have highlighted as secular growth priorities, aerospace and defense, components for steam and gas turbines, and broader power generation infrastructure, single use biopharma, CO2 refrigeration systems, and a heat exchanger for liquid cooling of data centers. Where in many cases demand is outpacing supply and extending lead times and we are actively expanding capacity in those areas. We also have seen order improvement in parts of the portfolio that have recently been pressured, refrigerated door cases, and engineering services continued to recover from 20 year lows. As national retailers reengage in maintenance and replacement activity. In polymer processing, a book to bill above 1 in the quarter is an early signal of stabilization and about a better outlook for that longer cycle business as we look towards 2027. Turning to Slide 8, we highlight the breadth of our exposure across multiple secular growth end markets. These markets which now represent approximately 25% of our 2026 revenue, up from 20%, I think, at the end of Q1, are becoming increasingly visible across all 5 segments. Across the energy transition and power generation markets natural gas remains the most viable option for scalable reliable electricity. We participate the natural gas ecosystem through cryogenic components such as valves, and vacuum jacketed piping for LNG infrastructure and through precision components for reciprocating compressors, engines, steam, and gas turbines, or OEM lead times now extend for years. Our acquisition of Secora a year ago continues to meaningfully outperform its underwriting case, providing test and measurement equipment for high voltage wires tied to electrification, and increasingly for polymer coated fiber optic cables tied to data center build out. In data centers, the density of thermal requirements of new chips are driving a shift towards liquid cooling, as we all know, which directly benefits our connector and heat exchanger businesses, Through SWEP, we participate across multiple parts of the liquid cooling ecosystem, supplying braze plate heat exchangers in both coolant distribution unit and chiller OEMs Our OPW business is also capitalizing on this growth supplying couplers, adapters, and cryogenic cooling infrastructure as well as fiberglass trench systems, which were originally designed for retail fueling and are increasingly being specified for data center applications by hyperscalers. Demands tied to data center infrastructure remains exceptional with customers securing capacity well ahead of need. In CO2 refrigeration, we hold a first-mover advantage, a fully platform product offering and a recently retrofitted plant in Georgia that gives us differentiated scale and product performance. Importantly, industry adoption is no longer driven by regulation but rather by economic payoff and the total cost of ownership versus legacy refrigerants. We are also seeing robust growth across our exposure to semiconductor and electronics manufacturing where cryogenic components, flow meters, and specialized heat exchanges position us well against a durable multiyear investment cycle. In biopharma and medical, our single use connectors pumps and flow meters continue to benefit from investments behind new therapies, increasing production rates, and secular shift towards single use bat batch manufacturing. And finally, we have a growing exposure to space through our cryogenic components business, particularly vacuum jacketed piping and valves for launch infrastructure. as well as through our microwave products group which supplies radio frequency filters, amplifiers, and switches for satellites. All in, we expect to generate $50 million in revenue tied to space this year. With order rates signaling significant momentum going forward. These are the types of markets where Dover tends to win, technically demanding applications, with mission critical components, strong customer relations, and differentiated product performance. These are the hallmarks of a Dover business and support durable competitive positions attractive margins, and long growth runways. As a result, the majority of our acquisition capital over the past 5 years has been deployed in these areas and they continue to represent the most attractive opportunities in our M&A pipeline. Okay. Finally, let's go to slide 9. Our updated full year guidance is shown on the left and reflects the raise of our organic growth and adjusted EPS outlook. For the full year, we expect positive organic growth across all 5 segments. Similar top line trends that we saw in the first half of the year. The second, secular growth exposed markets should continue to lead the way complemented by solid broad based demand across most of our other end markets. The operating environment still has its share of uncertainty. Geopolitics input costs, and evolving trade and tariff background are factors that we are managing closely. That said, signals remain constructive across the portfolio. And the strength and duration of our order book gives a level of visibility that supports the guidance increase. We are staying disciplined in our operations, investing behind platforms where returns are most compelling, and maintaining balance sheet flexibility to play offense on capital deployment That combination of operating execution, durable demand, and disciplined capital allocation is what gives us confidence in the outlook and our ability to continue creating long term value for shareholders. With that, Jack, let's go to Q&A.
Operator: Thank you. Star and then 1 on your telephone keypad. If you would like to withdraw yourself from the question in queue, please press 2. We ask that participants limit themselves to 1 question and 1 clarifying question. We will pause for just a moment to allow everyone the chance to queue. Our first question will come from Jeffrey Sprague with Vertical Research. Your line is open.
Jeff Sprague: Hey, Richard. On the refrigeration related issues, I guess, throughput issues, That 0.1 to 0.5 you are talking about, is that on a Dover consolidated basis And then really the bigger part of my question, has that caused a disruption in deployment at the customer? Your customer expecting stuff to deliver, and it is not at the store, and create some competitive issue for you.
Richard Joseph Tobin: Yes. it is a consolidated basis. Yeah. Look. We have been late on some deliveries. I think that demand in certain categories is outstripping the capacity of the industry. So I do not think we have caused that many problems, but yeah. But, look, We knew that we were gonna have margin pressure because this was quite the project to close 1 plant and fit it into another 1. So we thought the redundant capacity the training of the workforce was going to pressure the margins a little bit. I think that this part was the throughput has been, disappointing. We have got all hands on deck To catch up in Q3 and Q4. But I am not aware of us losing any market share to date. But it is clearly a situation that nobody likes to do these projects. I think for the long term, it is the right thing to do. But these projects are hard.
Jeff Sprague: And that other plan is now closed? The 1 that I have-- Not totally.
Richard Joseph Tobin: I would say 3-quarters. Mhmm. And then, just on the pump and process, Mhmm.
Jeff Sprague: How weak was polymer? Because it sounded like everything was good except that, and it was enough to make the segment flat. Was there some issue there too in the quarter?
Richard Joseph Tobin: it is like it just tends to be lumpy. If you remember Q4 of last year, polymer is what drove the big beat we had in revenue there. So we expect we were not expecting much. But, you know, it just tends to be lumpy and it was detrimental to the top line. But having said that, if it had delivered more, it would have been detrimental to the consolidated margin. So even with the loss of the revenue, the profit actually came in slightly above what our expectation was. The good news is that Polymer is north of 1 in book to bill exiting Q2.
Jeff Sprague: Got it. Okay. Thank you. You are welcome.
Operator: Thank you. Our next question will come from Scott Davis with Melius Research. Your line is open.
Scott Davis: Good morning, guys. Scott?
Richard Joseph Tobin: Richard, I have not heard yourself you flogged yourself in a call. For a while, and you do not make a lot of operating mistakes. So kudos to you to own it. Look.
Scott Davis: I have to ask. Is the EPA mandate that pushing the CO2 stuff out to the right, is that changing anything for your customers? Are they are they more likely to kind of delay or pause, or are they just too far down the road now?
Richard Joseph Tobin: No. I-- we were unable to meet our Delivery obligations in CO2 during Q2. Yeah. So I am not really aware that. Think we talked about this last quarter, Scott. I think that for us, we are not losing any market share. Our backlog looks terrific. The adoption rate is actually accelerating. We actually are pleased that there is not a time based mandate I do not think that I do not think the industry could have met it even if it was there. So now this turns into something that is over a multiyear period. it is actually better for us.
Scott Davis: Okay. I understand. So look, I am looking at this cryogenic cooling opportunity that in on the data center slide. And it seems kinda new. I do not remember you talking about that in the past, but again, these quarters kinda blend into each other, so maybe you did. What is that product, and what is the can you kind of explain the opportunity there for us a bit?
Richard Joseph Tobin: Oh, I if you think about our legacy well, there is 2 things. We bought a bunch of companies in the cryogenic space. That specialize in valve connectors and piping. Because of the amount of cooling that is needed, in data centers, a lot of those products are becoming viable in data center applications. Now we bought them because of natural gas and LNG, kind of where we live, but we are pivoting now recognizing the opportunity there. So it is relatively new. that is probably why we have not talked about it before.
Scott Davis: Sounds good. I will pass it on. Thank you, guys. Appreciate it.
Richard Joseph Tobin: Thanks. Good luck. Thanks.
Operator: Thank you. Our next question will come from Amit Mehrotra with UBS. Your line is open.
Amit Mehrotra: Thanks, operator. Morning, gentlemen. Richard, I wanted to ask about orders Obviously, book-to-bill of 1.06 is great in the context of a typical 2Q. But it was down in absolute dollars sequentially. Which is not something that I would sort of triangulate with early innings of ISM recovery, momentum in some of the structural growth. which now make up over a quarter of your business, I would love to get your perspective on that. Am I reading too much into it? Are orders still good? Or how do you sort of translate a lot of the commentary on momentum building but actually down sequential absolute orders.
Richard Joseph Tobin: I do not wanna get into the mathematics of book to bill and everything else, But remember, as revenue rises, you know, the bogey becomes larger. Right? So you know, what we have highlighted in Q1 is that it was going to come down because you had all these it is the beginning of the year.
Amit Mehrotra: You have all these come in and that we would said, Let's not panic as if it drifts down from Q1. As long as it stays above 1.
Richard Joseph Tobin: So to us, we are above 1 and we are above 1 across the entire portfolio, which does not happen often. I think, historically with the Dover. So it is as broad base as it is gonna get. Yeah. No.
Amit Mehrotra: I understand the math around book to bill. I guess the point I am trying to make is that, you know, the numerator of that calculation actually went down sequentially. And I do not know if that is there is something more to read into that. Or not.
Richard Joseph Tobin: I think that we are just picking at issues Right now, our book to bill is solid. And like I said before, the context of Dover can so we because we touch so many different end markets, it is rare that we see it above 1 across the portfolio. So it is, by definition, broad based. Okay. that is fair.
Amit Mehrotra: And then just a quick follow-up. The capacity increase you are doing in SWEP, can you maybe quantify that? Because it is definitely seems to be a capacity constrained market and maybe just kind of quantify that in terms of how much capacity, when is it going to come on, and maybe that will help us translate to some revenue opportunity as well.
Richard Joseph Tobin: I am gonna talk in general terms because there is a competitive aspect about capacity. So it is coming on sequentially. Over the balance of the second half of the year. Into 2027.
Amit Mehrotra: And would your growth in the second quarter have been higher if that capacity was there? I assume the answer is obviously yes to that.
Richard Joseph Tobin: Yeah. Yeah. Yes. Okay.
Amit Mehrotra: Alright. Thank you. Appreciate it. Thanks for taking the question.
Operator: Thank you. Our next question will come from Nigel Coe with Wolfe Research. Your line is open.
Nigel Coe: Thanks. Good morning, everyone. So Rich, thanks for quantifying the impact of the production issues during the quarter.
Richard Joseph Tobin: Just is this fair to assume that I mean, it sounds like you are all hands to deck to try and get that back the second half.
Nigel Coe: Do you think it is realistic to assume it comes back in the second half of the year and then any kind of guess on sort of the total margin impact of production deal running of plants on the segment during the quarter.
Richard Joseph Tobin: And I am just curious, again, the recovery in those margins in the back half of the-- yeah. Our expectation that throughput will increase sequentially over the balance of the year and that throughput will be reflected in the fixed cost absorption directly into the margins. I prefer not to quantify it, but I think that we have given you an idea before what our expectation is of we are talking about the refrigeration business now in terms of Yeah. Yep. Margins. So as we increase throughput, and we go and we close down the last of the redundancy costs that we have out there. Naturally, those margins will lift. So our expectation is a profitability point of view that H2 will be materially different than H1.
Nigel Coe: Okay. And then just, you know, you kind of beat yourself up on this 1 issue, but if we look at the other 4 segments, incremental margin performance was a lot better than I think, even your plan had for 2Q. So maybe just self assess on where you outperformed or over delivered with your plan. You know, mix productivity like price cost would have been helpful, but maybe it was. And then are you confident with, you know, the refrigeration recovery You know, it sounds like there is gonna be some restructuring savings coming through the back half of the year. Are you confident there is a pathway to, you know, mid-30% plus type incremental margins in the back half of the year?
Richard Joseph Tobin: Okay. Where to start? I would point to slide 3 in the deck. I mean, I know we can-- my job is to focus on the parts that we improve. If we step back for a moment, that is green lights all the way down the p and l all the way down to EPS. Do not think we have anything to apologize for there. We had a missed opportunity in refrigeration. On the top line, but, you know, that is why people do not have the to do those projects because this is the-- you have got to pay in the short term for the long term benefit, and we are convinced that our plans will be fruitful once we get done with this transition. The incremental margin's up from, what did I say, 25 up to what is it in this quarter? 38. 38? So that is more a reflection of everything else. Take away the drag of refrigeration right now. Everything else in the portfolio is up. So that is because every portion of the portfolio has got a plan to deliver earnings growth year over year. there is a variety of different ways we are going about it. So if you look at engineered products, for example, got a little bit of a muted top line. Because we are doing that ourselves. We are not chasing dilutive sales in vehicle sales group. And I think the management's done a great job of maximizing profitability as opposed to we were looking for the turnaround for all of the restructuring that we did in the cryogenic components business. Which is in clean energy, look at the margin expansion that we are getting there. And we expect a lot of those themes just to continue as we go through the balance of the year. So to me, when we catch up on refrigeration, we are going to get a top line bump, and it is gonna be a little bit diluted to consolidated margins, but that is not how we run the company and trying to protect that. So, if I look objectively, at the trajectory of the portfolio right now, sure, we got a couple things to fix. But do not think anybody was ever counting on DPPS delivering 35% margins.
Nigel Coe: Yep. Okay. Thanks, Richard. Thanks.
Operator: Thank you. Our next question will come from Deane Dray with RBC Capital Markets. Your line is open.
Deane Dray: Thank you. Good morning, everyone.
Richard Joseph Tobin: Deane, we are gonna miss you. Go ahead.
Deane Dray: I appreciate that. Appreciate it. Hey. Maybe just circling back on the heat exchangers, How do you land on 2x capacity as the right number?
Richard Joseph Tobin: I mean, we have seen some of the folks in liquid cooling quadrupling capacity. So, you know, is 2x the right number? And is this brownfield? Is it greenfield? And just this is an extended question. I apologize. But everyone's focused on what the margin impact as you bring on new capacity is because it is never, you know, at peak efficiency on day 1. So if you calibrate it, what sort of impact it will have on incrementals? I know there is a lot there. Thanks. Yeah. Oh, that is okay because it is actually a very good question. Number 1, the beauty of the business is that it is very hard to ramp capacity in it. And so there is very few companies that can do it. So the defensive nature of that business is it is hard to ramp capacity.
Deane Dray: Number 1.
Richard Joseph Tobin: Number 2, we have been ramping capacity into this demand cycle over the previous 2.5 years, let's say. And so our margins have actually been lower than they could have been because you are adding fixed costs in advance of revenue recognition. Right? So that is dilutive to margins over time. So if you go back and look, of the previous 2 years and I were to show you margins and heat exchangers, you would say, I see the top line growth, but it is not converting. Well, the reason was is you are deploying CapEx in advance of that volume. What you see now is the volume demand is inflected so much that you are actually getting both. So the margins are expanding because the revenue is accelerating in excess of the capital we are deploying.
Deane Dray: that is really helpful. And, I am gonna end it there on a good question, and I wish you all continued success. Thanks. Yep. Good luck, Deane. Thanks, Deane.
Operator: Thank you. Our next question will come from Andy Kaplowitz with Citigroup. Your line is open.
Andy Kaplowitz: Andy. Richard, you mentioned the industrial M&A markets have improved.
Richard Joseph Tobin: Maybe you can double click on what that means. Do you think you can find good targets at reasonable valuations this year? And then your stock obviously seems relatively inexpensive. So how do you weigh the opportunity to do repurchases and other ASR versus acquisitions? No different than we do any year, Andy. I my comment on it is assets coming to market has improved. Over the previous 2 or 3 years. So just you know, the big question was, why were multiples so high? Was it because of dearth of assets? Which is driving multiples up or corporate balance sheets or blah? But, you know, if we strip out all that noise, there are more assets Can you create value depending on what the prevailing acquisition price is? Remains to be seen. But you know, we are looking at a variety of different things that if we can get it for the appropriate price, we are happy to execute on it. If we cannot, I know. You know, our stock is from a multiple point of view, cheap. If we do not do anything in M&A, we are not gonna sit on another year of consolidated cash flow, and then we would cycle back and do something related to capital return. But I think that our posture has changed since the end of last year, we said we were more inclined to do for capital return. The reason for that was there were very few assets available, and the multiples that we are prevailing in the market were very high. what is changed since then is there is more assets coming available and so we would like to keep our powder dry to see whether we are gonna choose to participate in that. Helpful.
Andy Kaplowitz: And I am just curious if you could talk a little bit more about clean energy, sort of what you are seeing between retail fueling and clean gas for the business? You mentioned space launch already, Richard. So organic growth has obviously stepped up pretty significantly over the last couple of quarters. Where is that step up in most concentrated Is it in things like space launch? Do you see good durability still in the retail fueling cycle? More color, I think, would be helpful.
Richard Joseph Tobin: Sure. Let's go to the retail fueling since been in the portfolio for some time. it is broad based across the board. I think that I am very, very pleased for management. They have done a lot of work in terms of 8.02 thousand and getting the portfolio the way they want it. And I think in terms of they have been rewarded for during the down cycle that we had several years ago. They continued to invest in their product. Portfolio. We think that we have got an advantage now, and we are seeing that in terms of the demand. On the other part of the portfolio, which is which is mostly made up of acquisitions that we made over the past couple years. I am pleased for that group also. It was an incredible amount of heavy lifting that we had to do in terms of facility consolidation. I mean, you heard my comments about refrigeration. These are not easy to do. And that is been a multi year effort. So we are not only seeing the bet on the end market demand, inflecting the way we want it, We are also seeing the margin which had been disappointing during that transition period beginning to inflect up. So both sides of the house are doing quite well.
Andy Kaplowitz: Helpful color, Richard. Thanks.
Operator: Thank you. Our next question will come from Andrew Obin with Bank of America. Your line is open.
Andrew Obin: Hey. Good morning. Hey.
Richard Joseph Tobin: Can we just talk a little bit about what is happening? Biopharma orders in second quarter, how are you different than Danaher and other capital equipment providers? Yeah. We get that question all the time, Andrew. I think you could add Danaher, who is our customer. And Thermo Fisher and Sartorius, the ones that basically are material participants. the marketplace. From our part, we are doing well because the management teams have been doing great in terms of new product introduction. And for the and you have to realize that the vast majority of our revenue stream is either replacing existing product but it is a consumable. So it is not selling new systems so much. it is as long as the systems are running in the marketplace. So it is 2 things going on. There is activity in the space. And those systems are running and they are consuming. So if you look at kind of the OEMs, they are saying that their consumable business is good. that is our stream there, number 1. And number 2, I think we have we have introduced over the last and just this week, as a matter of fact, we have introduced a variety of new products into the space that have been very successful.
Andrew Obin: Thank you. And then just maybe a simplistic question. If I look at your year over year bookings growth starting in third quarter, sort of high single digits around 10. Twenties. Teens. Why is not there, you know, just why is not there more sort of torque in revenue growth to sort of what is happening on the booking side?
Richard Joseph Tobin: that is an interesting question in itself. I am not talking up revenue. Right? Bookings because here we are sitting here and we are getting feedback. Well, it is disappointing on the top line. Well, it is well within the band that we gave in guidance. So if I talk up the revenue, we can explore possibilities of beating the top line of revenue, for sure, not gonna get in a situation where estimates outrun basically what we are telling you. What we are giving you now is an upgrading on our estimates for the full year Let's stick to that. You know what? If we get to the end of Q3, and orders are continuing to chug along at the pace that they are coming in at, then we are happy to revisit it at that time.
Andrew Obin: So maybe I will just stick 1 in. So how is July on orders?
Richard Joseph Tobin: You know what? I do not know. I do not think we have closed it. So hard to say. Thank you.
Operator: Thank you. Again, as a reminder, that is star 1 if you would like to join the queue. Our next question will come from Mike Halloran with Baird. Your line is open.
Mike Halloran: 2 questions here. Let's just kind of stick with the last 1. Maybe Richard, you can talk about how you are seeing lead times. How aggressively are those extending across the portfolio here? that is part of your visibility in the second half of the year as we stretch into next year and maybe just put it in the context of history?
Richard Joseph Tobin: Our lead times overall are in balance. Except where we have had execution problems, where that is been let out. So if you look at book to bill, there is an argument to be made that number is a little bit helped by the fact that we could not get the product out. Right? So it is sitting in backlog. To a certain extent. And more orders are coming in people are afraid we are trying to get it out. I think the only area where we see elongated orders starting to move into 2027 is the long cycle portion. Of the portfolio. It is not material. Terms of our total backlog. But in areas like heat exchangers, people are trying to out there to secure supply. So you are you are beginning to see it. So it is not a reflection of our lead times. it is a reflection of demand outstripping supply capacity in the market as a whole in total.
Mike Halloran: Okay. That makes sense. And then maybe just a higher level question. How are you thinking about the durability of the cycle? Obviously, a lot of your comments have been about how you do not see green across the portfolio as often. Or very often like you are right now. What are the factors that give you confidence there is durability once you get past the second half of this year and we think about out years?
Richard Joseph Tobin: The cycles that we are participating in clearly have visibility into 2027. So it is a question of how long's durability. The durability question. So, look. We can, in the grand scheme of things, you know, we are not a data center play. We participate in data centers but proportionally, it is what it is with the portfolio. it is kind of like space launch infrastructure. it is kind of like biopharma has been in the past 5 or 6 years. You know, I am not aware of any business right now where it looks like it is short cycle demand that may end in 26. So we are getting ready to do our strategic plans around here in August and September. I fully expect the numbers or the velocity, the trajectory, may change some. But I do not see anybody going negative moving into 2027.
Mike Halloran: Thanks, Richard. Appreciate it. Thanks.
Operator: Thank you. Our next question will come from Joe Ritchie with Goldman Sachs. Your line is open.
Joe Ritchie: Joe.
Richard Joseph Tobin: Hey, Joe.
Joe Ritchie: So I had the same question as Obin. On the order conversion into revenue. I guess maybe I will ask it this way. Is there any reason to believe that the conversion will not translate into much faster earnings growth or organic growth given what you see today and then all assuming that the trends kind of consistent, could stay fairly consistent?
Richard Joseph Tobin: Well, I mean, the problem with that question is that on a 12 month basis, 1 can when 1 could take the figures and say, here's the conversion and here's what I get. We always have to be a little bit careful because a lot of what we have is short cycle. While over a rolling 12 month basis, it will meet the trajectories that we expect. There may be quarter quarterly volatility for thousands of different reasons. Right? So that is why we always have to be a little bit careful of getting ahead of our skis. We are not making paper clips here. Right? So yeah. I mean, look, the bottom line is we are really pleased with the orders. it is up to us to convert on the orders, and we will maximize the revenue within days, not weeks, not months, not quarters. Right now, that is telling us this is what if we look at the math and we have got to rely on these businesses and what the forecast is, this is what it looks like. But I guess, like I said to Andrew, we are gonna get to the end of Q3, if orders continue to surge and book to bill remains what it is, then we will revisit that to the extent that we can convert we can convert it out of the manufacturing base. So I think we have to be careful about just doing the math on backlog as if there is excess capacity sitting there waiting, and then there is timing difference of when somebody actually wants to take to take delivery on something.
Joe Ritchie: Yeah. that is that is fair enough. And then I guess just given the issues that you kind of have-- you have already talked about on the refrigeration side, I am just curious, like, what your level of concern is on the capacity ramp in SWEP Well, we always have concern, but less so.
Richard Joseph Tobin: SWEP is the highest automated business that we have in the portfolio and the issues that we have had in refrigeration have been largely driven by labor ramp. Super helpful.
Joe Ritchie: Thanks, Richard. Thanks.
Operator: Thank you. Our next question will come from Christopher Snyder with Morgan Stanley. Your line is open.
Chris Snyder: Thank you. I think you guys talked about in Q1 that customer started placing orders for braze plate heat exchangers further into the future than maybe they were in 2025. Did that continue here into Q2? And then can you just maybe talk about your plans to add capacity there? What is the time line for that capacity to come on? And would you expect that those lead times start to come in as that capacity comes on over the next 12 months or whatever that may be. Thank you.
Operator: Hello? Please hold on the line. Hello? We have now moved to the backup. Please connect. We have moved to the backup.
Richard Joseph Tobin: I guess this is the last question, so let me answer it real quick here. The answer to the question is yes. And the capacity will come on sequentially over the back half of 2026 going into 2020 Thank you.
Chris Snyder: And, Kai, if I could squeeze in a follow-up on this backup line?
Richard Joseph Tobin: Sure.
Chris Snyder: Is there anything you could talk about on Q3? Mike, is it fair to assume like similar to the full year, low double digit EPS growth And is it also fair to assume that Q3 organic is better than Q4 just given how much more difficult that Q4 comp is? Thank you.
Richard Joseph Tobin: Yeah. I do not-- we do not give out quarterly guidance, so I am gonna have to pass on that 1. Alright. Fair enough. Thank you. Thanks.
Operator: Thank you. This concludes our Q and A period. And the Dover's Second Quarter 2026 earnings conference call. You may now disconnect the line, and have a wonderful day.
Jack Dickens: Thank you, Katie. Good morning, everyone, and thank you for joining our call. An audio version of this call will be available on our website through August 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, discussed in our SEC filing We assume no obligation to update our forward-looking statements. With that, I will turn the call over to Richard.
Richard Joseph Tobin: Thanks, Jack. Good morning, everyone. Let's get going on Slide 3. We delivered another strong quarter with results that reflect the breadth of demand across the portfolio. All in revenue grew 7% or 5% organically with all 5 segments posting positive organic growth. Our top line performance continued to be led by our secular growth exposed markets, which now represent approximately 25% of the portfolio, which is complemented by broad based constructive trading conditions across most of our other end markets. Margin performance was solid. Adjusted EBITDA margin expanded 80 basis points to 25.9% as operational execution on incremental volume more than offset input cost inflation and facility consolidation costs during the quarter Incremental margins were 38% from 25% in Q1. The healthy product mix driven by our growth platforms. Adjusted EPS $2.74 per share, up 12% year over year. Marking another quarter of double digit earnings growth. Bookings were again the highlight in the quarter. Orders increased percent year over year and outpaced shipments. With book-to-bill at 1.06, extending strong order momentum of recent quarters and improving our visibility into the second half of the year. Our balance sheet remains a competitive advantage and we continue to invest capital behind our businesses. During the quarter, we advanced capacity expansion projects to support growth as well as productivity investments to drive margin improvement across the portfolio. Industrial M&A markets have improved this year and our acquisition pipeline is a number of interesting opportunities. In attractive end markets. Given our first half performance, the momentum in our end markets and the visibility we have in the second half, we are raising our full year adjusted EPS guidance. We are committed to delivering double digit adjusted EPS growth consistent with Dover's long term performance trajectory. Let's go to slide 5. Engineered products was up 2% organically. Growth was driven by strong demand in aerospace and defense components, fluid dispensing and industrial winches along with continued stabilization in the North American vehicle aftermarket. Margins expanded 100 basis points on favorable mix and proactive cost containment actions. Clean energy and fueling grew 9% organically with broad based strength across clean energy components and retail fueling equipment and software. Within clean energy, our order book has expanded meaningfully from cryogenic components used in LNG and space launch infrastructure driving momentum in that business. Retail fueling also remained healthy with particular strength in North American dispensers, software, and below ground equipment. Segment margin expanded 170 basis points on volume leverage and the integration benefits from recent acquisitions. Imaging and identification grew 3% organically with growth across core marking and coding equipment, consumables, spare parts, and serialization software, segment margin expanded 150 basis points on productivity and structural cost discipline. Pumps and process solutions grew slightly with strength in AI and energy infrastructure components single use biopharma and industrial pumps. Precision components benefited from robust demand for bearings tied to steam and gas turbines, Polymer processing had a tough comp in the quarter, which muted the segment's top line. We expect the business to return to growth in the second half of the year Segment margin expanded 170 basis points 35% I think a record or a best in class result driven by a mix of products delivered and augmented by M&A activity. Climate and sustainability technologies grew 8% organically, it is a bit of a tale of 2 cities here. Heat exchange was-- delivered their best quarter ever with particularly strong demand tied to liquid cooling. For data centers, we are actively working to double capacity for these products over the next 12 months. We also continue to see a welcome recovery in European residential heat pumps, had a tough quarter in refrigeration. Demand was strong across all the product lines, particularly CO2 systems, which is great, but raising output proved difficult in the midst of a complex facility consolidation while simultaneously ramping labor, While we knew that there was going to be some margin pressure from running redundant facilities through the transition, we frankly did not expect to fall short on our production throughput targets. that is on me. And it cost us on the top line in the quarter, probably about 1% to 1.5% of organic growth. We will get this fixed over the balance of the year and I expect to be reflected in the revenue growth rate and margin in the second half. Pass it over to Christopher.
Christopher Woenker: Thanks, Richard, and good morning, everyone. Let's go to our cash flow statement on slide 6. Year to date free cash flow of $320 million or 8% of revenue was up 23% over prior year. This improvement was primarily driven by operating cash conversion on year over year earnings growth, which more than offset working capital investments tied to accelerating top line growth. Consistent with historical trends, we expect cash flow generation to accelerate meaningfully in the second half, driven by seasonal working capital liquidation in the third and fourth quarters. Our full year CapEx estimate remains $190 million to $210 million and our free cash flow guidance remains 14% to 16% of revenue. With that, let me turn it back to Richard.
Richard Joseph Tobin: I am on Slide 7. Broad based booking momentum continued in Q2 with all 5 segments posting year over year growth. On a trailing 12-month basis, consolidated bookings are up 15% and book to bill is well above 1 providing further visibility and confidence in our outlook. The breadth of our order growth is important and points to continued top line strength in the second half. We are seeing particular strength in the areas we have highlighted as secular growth priorities, aerospace and defense, components for steam and gas turbines, and broader power generation infrastructure, single use biopharma, CO2 refrigeration systems, and a heat exchanger for liquid cooling of data centers. Where in many cases demand is outpacing supply and extending lead times and we are actively expanding capacity in those areas. We also have seen order improvement in parts of the portfolio that have recently been pressured, refrigerated door cases, and engineering services continued to recover from 20 year lows. As national retailers reengage in maintenance and replacement activity. In polymer processing, a book to bill above 1 in the quarter is an early signal of stabilization and about a better outlook for that longer cycle business as we look towards 2027. Turning to Slide 8, we highlight the breadth of our exposure across multiple secular growth end markets. These markets which now represent approximately 25% of our 2026 revenue, up from 20%, I think, at the end of Q1, are becoming increasingly visible across all 5 segments. Across the energy transition and power generation markets natural gas remains the most viable option for scalable reliable electricity. We participate the natural gas ecosystem through cryogenic components such as valves, and vacuum jacketed piping for LNG infrastructure and through precision components for reciprocating compressors, engines, steam, and gas turbines, or OEM lead times now extend for years. Our acquisition of Secora a year ago continues to meaningfully outperform its underwriting case, providing test and measurement equipment for high voltage wires tied to electrification, and increasingly for polymer coated fiber optic cables tied to data center build out. In data centers, the density of thermal requirements of new chips are driving a shift towards liquid cooling, as we all know, which directly benefits our connector and heat exchanger businesses, Through SWEP, we participate across multiple parts of the liquid cooling ecosystem, supplying braze plate heat exchangers in both coolant distribution unit and chiller OEMs Our OPW business is also capitalizing on this growth supplying couplers, adapters, and cryogenic cooling infrastructure as well as fiberglass trench systems, which were originally designed for retail fueling and are increasingly being specified for data center applications by hyperscalers. Demands tied to data center infrastructure remains exceptional with customers securing capacity well ahead of need. In CO2 refrigeration, we hold a first-mover advantage, a fully platform product offering and a recently retrofitted plant in Georgia that gives us differentiated scale and product performance. Importantly, industry adoption is no longer driven by regulation but rather by economic payoff and the total cost of ownership versus legacy refrigerants. We are also seeing robust growth across our exposure to semiconductor and electronics manufacturing where cryogenic components, flow meters, and specialized heat exchanges position us well against a durable multiyear investment cycle. In biopharma and medical, our single use connectors pumps and flow meters continue to benefit from investments behind new therapies, increasing production rates, and secular shift towards single use bat batch manufacturing. And finally, we have a growing exposure to space through our cryogenic components business, particularly vacuum jacketed piping and valves for launch infrastructure. as well as through our microwave products group which supplies radio frequency filters, amplifiers, and switches for satellites. All in, we expect to generate $50 million in revenue tied to space this year. With order rates signaling significant momentum going forward. These are the types of markets where Dover tends to win, technically demanding applications, with mission critical components, strong customer relations, and differentiated product performance. These are the hallmarks of a Dover business and support durable competitive positions attractive margins, and long growth runways. As a result, the majority of our acquisition capital over the past 5 years has been deployed in these areas and they continue to represent the most attractive opportunities in our M&A pipeline. Okay. Finally, let's go to slide 9. Our updated full year guidance is shown on the left and reflects the raise of our organic growth and adjusted EPS outlook. For the full year, we expect positive organic growth across all 5 segments. Similar top line trends that we saw in the first half of the year. The second, secular growth exposed markets should continue to lead the way complemented by solid broad based demand across most of our other end markets. The operating environment still has its share of uncertainty. Geopolitics input costs, and evolving trade and tariff background are factors that we are managing closely. That said, signals remain constructive across the portfolio. And the strength and duration of our order book gives a level of visibility that supports the guidance increase. We are staying disciplined in our operations, investing behind platforms where returns are most compelling, and maintaining balance sheet flexibility to play offense on capital deployment That combination of operating execution, durable demand, and disciplined capital allocation is what gives us confidence in the outlook and our ability to continue creating long term value for shareholders. With that, Jack, let's go to Q&A.
Operator: Thank you. Star and then 1 on your telephone keypad. If you would like to withdraw yourself from the question in queue, please press 2. We ask that participants limit themselves to 1 question and 1 clarifying question. We will pause for just a moment to allow everyone the chance to queue. Our first question will come from Jeffrey Sprague with Vertical Research. Your line is open.
Jeff Sprague: Hey, Richard. On the refrigeration related issues, I guess, throughput issues, That 0.1 to 0.5 you are talking about, is that on a Dover consolidated basis And then really the bigger part of my question, has that caused a disruption in deployment at the customer? Your customer expecting stuff to deliver, and it is not at the store, and create some competitive issue for you.
Richard Joseph Tobin: Yes. it is a consolidated basis. Yeah. Look. We have been late on some deliveries. I think that demand in certain categories is outstripping the capacity of the industry. So I do not think we have caused that many problems, but yeah. But, look, We knew that we were gonna have margin pressure because this was quite the project to close 1 plant and fit it into another 1. So we thought the redundant capacity the training of the workforce was going to pressure the margins a little bit. I think that this part was the throughput has been, disappointing. We have got all hands on deck To catch up in Q3 and Q4. But I am not aware of us losing any market share to date. But it is clearly a situation that nobody likes to do these projects. I think for the long term, it is the right thing to do. But these projects are hard.
Jeff Sprague: And that other plan is now closed? The 1 that I have-- Not totally.
Richard Joseph Tobin: I would say 3-quarters. Mhmm. And then, just on the pump and process, Mhmm.
Jeff Sprague: How weak was polymer? Because it sounded like everything was good except that, and it was enough to make the segment flat. Was there some issue there too in the quarter?
Richard Joseph Tobin: it is like it just tends to be lumpy. If you remember Q4 of last year, polymer is what drove the big beat we had in revenue there. So we expect we were not expecting much. But, you know, it just tends to be lumpy and it was detrimental to the top line. But having said that, if it had delivered more, it would have been detrimental to the consolidated margin. So even with the loss of the revenue, the profit actually came in slightly above what our expectation was. The good news is that Polymer is north of 1 in book to bill exiting Q2.
Jeff Sprague: Got it. Okay. Thank you. You are welcome.
Operator: Thank you. Our next question will come from Scott Davis with Melius Research. Your line is open.
Scott Davis: Good morning, guys. Scott?
Richard Joseph Tobin: Richard, I have not heard yourself you flogged yourself in a call. For a while, and you do not make a lot of operating mistakes. So kudos to you to own it. Look.
Scott Davis: I have to ask. Is the EPA mandate that pushing the CO2 stuff out to the right, is that changing anything for your customers? Are they are they more likely to kind of delay or pause, or are they just too far down the road now?
Richard Joseph Tobin: No. I-- we were unable to meet our Delivery obligations in CO2 during Q2. Yeah. So I am not really aware that. Think we talked about this last quarter, Scott. I think that for us, we are not losing any market share. Our backlog looks terrific. The adoption rate is actually accelerating. We actually are pleased that there is not a time based mandate I do not think that I do not think the industry could have met it even if it was there. So now this turns into something that is over a multiyear period. it is actually better for us.
Scott Davis: Okay. I understand. So look, I am looking at this cryogenic cooling opportunity that in on the data center slide. And it seems kinda new. I do not remember you talking about that in the past, but again, these quarters kinda blend into each other, so maybe you did. What is that product, and what is the can you kind of explain the opportunity there for us a bit?
Richard Joseph Tobin: Oh, I if you think about our legacy well, there is 2 things. We bought a bunch of companies in the cryogenic space. That specialize in valve connectors and piping. Because of the amount of cooling that is needed, in data centers, a lot of those products are becoming viable in data center applications. Now we bought them because of natural gas and LNG, kind of where we live, but we are pivoting now recognizing the opportunity there. So it is relatively new. that is probably why we have not talked about it before.
Scott Davis: Sounds good. I will pass it on. Thank you, guys. Appreciate it.
Richard Joseph Tobin: Thanks. Good luck. Thanks.
Operator: Thank you. Our next question will come from Amit Mehrotra with UBS. Your line is open.
Amit Mehrotra: Thanks, operator. Morning, gentlemen. Richard, I wanted to ask about orders Obviously, book-to-bill of 1.06 is great in the context of a typical 2Q. But it was down in absolute dollars sequentially. Which is not something that I would sort of triangulate with early innings of ISM recovery, momentum in some of the structural growth. which now make up over a quarter of your business, I would love to get your perspective on that. Am I reading too much into it? Are orders still good? Or how do you sort of translate a lot of the commentary on momentum building but actually down sequential absolute orders.
Richard Joseph Tobin: I do not wanna get into the mathematics of book to bill and everything else, But remember, as revenue rises, you know, the bogey becomes larger. Right? So you know, what we have highlighted in Q1 is that it was going to come down because you had all these it is the beginning of the year.
Amit Mehrotra: You have all these come in and that we would said, Let's not panic as if it drifts down from Q1. As long as it stays above 1.
Richard Joseph Tobin: So to us, we are above 1 and we are above 1 across the entire portfolio, which does not happen often. I think, historically with the Dover. So it is as broad base as it is gonna get. Yeah. No.
Amit Mehrotra: I understand the math around book to bill. I guess the point I am trying to make is that, you know, the numerator of that calculation actually went down sequentially. And I do not know if that is there is something more to read into that. Or not.
Richard Joseph Tobin: I think that we are just picking at issues Right now, our book to bill is solid. And like I said before, the context of Dover can so we because we touch so many different end markets, it is rare that we see it above 1 across the portfolio. So it is, by definition, broad based. Okay. that is fair.
Amit Mehrotra: And then just a quick follow-up. The capacity increase you are doing in SWEP, can you maybe quantify that? Because it is definitely seems to be a capacity constrained market and maybe just kind of quantify that in terms of how much capacity, when is it going to come on, and maybe that will help us translate to some revenue opportunity as well.
Richard Joseph Tobin: I am gonna talk in general terms because there is a competitive aspect about capacity. So it is coming on sequentially. Over the balance of the second half of the year. Into 2027.
Amit Mehrotra: And would your growth in the second quarter have been higher if that capacity was there? I assume the answer is obviously yes to that.
Richard Joseph Tobin: Yeah. Yeah. Yes. Okay.
Amit Mehrotra: Alright. Thank you. Appreciate it. Thanks for taking the question.
Operator: Thank you. Our next question will come from Nigel Coe with Wolfe Research. Your line is open.
Nigel Coe: Thanks. Good morning, everyone. So Rich, thanks for quantifying the impact of the production issues during the quarter.
Richard Joseph Tobin: Just is this fair to assume that I mean, it sounds like you are all hands to deck to try and get that back the second half.
Nigel Coe: Do you think it is realistic to assume it comes back in the second half of the year and then any kind of guess on sort of the total margin impact of production deal running of plants on the segment during the quarter.
Richard Joseph Tobin: And I am just curious, again, the recovery in those margins in the back half of the-- yeah. Our expectation that throughput will increase sequentially over the balance of the year and that throughput will be reflected in the fixed cost absorption directly into the margins. I prefer not to quantify it, but I think that we have given you an idea before what our expectation is of we are talking about the refrigeration business now in terms of Yeah. Yep. Margins. So as we increase throughput, and we go and we close down the last of the redundancy costs that we have out there. Naturally, those margins will lift. So our expectation is a profitability point of view that H2 will be materially different than H1.
Nigel Coe: Okay. And then just, you know, you kind of beat yourself up on this 1 issue, but if we look at the other 4 segments, incremental margin performance was a lot better than I think, even your plan had for 2Q. So maybe just self assess on where you outperformed or over delivered with your plan. You know, mix productivity like price cost would have been helpful, but maybe it was. And then are you confident with, you know, the refrigeration recovery You know, it sounds like there is gonna be some restructuring savings coming through the back half of the year. Are you confident there is a pathway to, you know, mid-30% plus type incremental margins in the back half of the year?
Richard Joseph Tobin: Okay. Where to start? I would point to slide 3 in the deck. I mean, I know we can-- my job is to focus on the parts that we improve. If we step back for a moment, that is green lights all the way down the p and l all the way down to EPS. Do not think we have anything to apologize for there. We had a missed opportunity in refrigeration. On the top line, but, you know, that is why people do not have the to do those projects because this is the-- you have got to pay in the short term for the long term benefit, and we are convinced that our plans will be fruitful once we get done with this transition. The incremental margin's up from, what did I say, 25 up to what is it in this quarter? 38. 38? So that is more a reflection of everything else. Take away the drag of refrigeration right now. Everything else in the portfolio is up. So that is because every portion of the portfolio has got a plan to deliver earnings growth year over year. there is a variety of different ways we are going about it. So if you look at engineered products, for example, got a little bit of a muted top line. Because we are doing that ourselves. We are not chasing dilutive sales in vehicle sales group. And I think the management's done a great job of maximizing profitability as opposed to we were looking for the turnaround for all of the restructuring that we did in the cryogenic components business. Which is in clean energy, look at the margin expansion that we are getting there. And we expect a lot of those themes just to continue as we go through the balance of the year. So to me, when we catch up on refrigeration, we are going to get a top line bump, and it is gonna be a little bit diluted to consolidated margins, but that is not how we run the company and trying to protect that. So, if I look objectively, at the trajectory of the portfolio right now, sure, we got a couple things to fix. But do not think anybody was ever counting on DPPS delivering 35% margins.
Nigel Coe: Yep. Okay. Thanks, Richard. Thanks.
Operator: Thank you. Our next question will come from Deane Dray with RBC Capital Markets. Your line is open.
Deane Dray: Thank you. Good morning, everyone.
Richard Joseph Tobin: Deane, we are gonna miss you. Go ahead.
Deane Dray: I appreciate that. Appreciate it. Hey. Maybe just circling back on the heat exchangers, How do you land on 2x capacity as the right number?
Richard Joseph Tobin: I mean, we have seen some of the folks in liquid cooling quadrupling capacity. So, you know, is 2x the right number? And is this brownfield? Is it greenfield? And just this is an extended question. I apologize. But everyone's focused on what the margin impact as you bring on new capacity is because it is never, you know, at peak efficiency on day 1. So if you calibrate it, what sort of impact it will have on incrementals? I know there is a lot there. Thanks. Yeah. Oh, that is okay because it is actually a very good question. Number 1, the beauty of the business is that it is very hard to ramp capacity in it. And so there is very few companies that can do it. So the defensive nature of that business is it is hard to ramp capacity.
Deane Dray: Number 1.
Richard Joseph Tobin: Number 2, we have been ramping capacity into this demand cycle over the previous 2.5 years, let's say. And so our margins have actually been lower than they could have been because you are adding fixed costs in advance of revenue recognition. Right? So that is dilutive to margins over time. So if you go back and look, of the previous 2 years and I were to show you margins and heat exchangers, you would say, I see the top line growth, but it is not converting. Well, the reason was is you are deploying CapEx in advance of that volume. What you see now is the volume demand is inflected so much that you are actually getting both. So the margins are expanding because the revenue is accelerating in excess of the capital we are deploying.
Deane Dray: that is really helpful. And, I am gonna end it there on a good question, and I wish you all continued success. Thanks. Yep. Good luck, Deane. Thanks, Deane.
Operator: Thank you. Our next question will come from Andy Kaplowitz with Citigroup. Your line is open.
Andy Kaplowitz: Andy. Richard, you mentioned the industrial M&A markets have improved.
Richard Joseph Tobin: Maybe you can double click on what that means. Do you think you can find good targets at reasonable valuations this year? And then your stock obviously seems relatively inexpensive. So how do you weigh the opportunity to do repurchases and other ASR versus acquisitions? No different than we do any year, Andy. I my comment on it is assets coming to market has improved. Over the previous 2 or 3 years. So just you know, the big question was, why were multiples so high? Was it because of dearth of assets? Which is driving multiples up or corporate balance sheets or blah? But, you know, if we strip out all that noise, there are more assets Can you create value depending on what the prevailing acquisition price is? Remains to be seen. But you know, we are looking at a variety of different things that if we can get it for the appropriate price, we are happy to execute on it. If we cannot, I know. You know, our stock is from a multiple point of view, cheap. If we do not do anything in M&A, we are not gonna sit on another year of consolidated cash flow, and then we would cycle back and do something related to capital return. But I think that our posture has changed since the end of last year, we said we were more inclined to do for capital return. The reason for that was there were very few assets available, and the multiples that we are prevailing in the market were very high. what is changed since then is there is more assets coming available and so we would like to keep our powder dry to see whether we are gonna choose to participate in that. Helpful.
Andy Kaplowitz: And I am just curious if you could talk a little bit more about clean energy, sort of what you are seeing between retail fueling and clean gas for the business? You mentioned space launch already, Richard. So organic growth has obviously stepped up pretty significantly over the last couple of quarters. Where is that step up in most concentrated Is it in things like space launch? Do you see good durability still in the retail fueling cycle? More color, I think, would be helpful.
Richard Joseph Tobin: Sure. Let's go to the retail fueling since been in the portfolio for some time. it is broad based across the board. I think that I am very, very pleased for management. They have done a lot of work in terms of 8.02 thousand and getting the portfolio the way they want it. And I think in terms of they have been rewarded for during the down cycle that we had several years ago. They continued to invest in their product. Portfolio. We think that we have got an advantage now, and we are seeing that in terms of the demand. On the other part of the portfolio, which is which is mostly made up of acquisitions that we made over the past couple years. I am pleased for that group also. It was an incredible amount of heavy lifting that we had to do in terms of facility consolidation. I mean, you heard my comments about refrigeration. These are not easy to do. And that is been a multi year effort. So we are not only seeing the bet on the end market demand, inflecting the way we want it, We are also seeing the margin which had been disappointing during that transition period beginning to inflect up. So both sides of the house are doing quite well.
Andy Kaplowitz: Helpful color, Richard. Thanks.
Operator: Thank you. Our next question will come from Andrew Obin with Bank of America. Your line is open.
Andrew Obin: Hey. Good morning. Hey.
Richard Joseph Tobin: Can we just talk a little bit about what is happening? Biopharma orders in second quarter, how are you different than Danaher and other capital equipment providers? Yeah. We get that question all the time, Andrew. I think you could add Danaher, who is our customer. And Thermo Fisher and Sartorius, the ones that basically are material participants. the marketplace. From our part, we are doing well because the management teams have been doing great in terms of new product introduction. And for the and you have to realize that the vast majority of our revenue stream is either replacing existing product but it is a consumable. So it is not selling new systems so much. it is as long as the systems are running in the marketplace. So it is 2 things going on. There is activity in the space. And those systems are running and they are consuming. So if you look at kind of the OEMs, they are saying that their consumable business is good. that is our stream there, number 1. And number 2, I think we have we have introduced over the last and just this week, as a matter of fact, we have introduced a variety of new products into the space that have been very successful.
Andrew Obin: Thank you. And then just maybe a simplistic question. If I look at your year over year bookings growth starting in third quarter, sort of high single digits around 10. Twenties. Teens. Why is not there, you know, just why is not there more sort of torque in revenue growth to sort of what is happening on the booking side?
Richard Joseph Tobin: that is an interesting question in itself. I am not talking up revenue. Right? Bookings because here we are sitting here and we are getting feedback. Well, it is disappointing on the top line. Well, it is well within the band that we gave in guidance. So if I talk up the revenue, we can explore possibilities of beating the top line of revenue, for sure, not gonna get in a situation where estimates outrun basically what we are telling you. What we are giving you now is an upgrading on our estimates for the full year Let's stick to that. You know what? If we get to the end of Q3, and orders are continuing to chug along at the pace that they are coming in at, then we are happy to revisit it at that time.
Andrew Obin: So maybe I will just stick 1 in. So how is July on orders?
Richard Joseph Tobin: You know what? I do not know. I do not think we have closed it. So hard to say. Thank you.
Operator: Thank you. Again, as a reminder, that is star 1 if you would like to join the queue. Our next question will come from Mike Halloran with Baird. Your line is open.
Mike Halloran: 2 questions here. Let's just kind of stick with the last 1. Maybe Richard, you can talk about how you are seeing lead times. How aggressively are those extending across the portfolio here? that is part of your visibility in the second half of the year as we stretch into next year and maybe just put it in the context of history?
Richard Joseph Tobin: Our lead times overall are in balance. Except where we have had execution problems, where that is been let out. So if you look at book to bill, there is an argument to be made that number is a little bit helped by the fact that we could not get the product out. Right? So it is sitting in backlog. To a certain extent. And more orders are coming in people are afraid we are trying to get it out. I think the only area where we see elongated orders starting to move into 2027 is the long cycle portion. Of the portfolio. It is not material. Terms of our total backlog. But in areas like heat exchangers, people are trying to out there to secure supply. So you are you are beginning to see it. So it is not a reflection of our lead times. it is a reflection of demand outstripping supply capacity in the market as a whole in total.
Mike Halloran: Okay. That makes sense. And then maybe just a higher level question. How are you thinking about the durability of the cycle? Obviously, a lot of your comments have been about how you do not see green across the portfolio as often. Or very often like you are right now. What are the factors that give you confidence there is durability once you get past the second half of this year and we think about out years?
Richard Joseph Tobin: The cycles that we are participating in clearly have visibility into 2027. So it is a question of how long's durability. The durability question. So, look. We can, in the grand scheme of things, you know, we are not a data center play. We participate in data centers but proportionally, it is what it is with the portfolio. it is kind of like space launch infrastructure. it is kind of like biopharma has been in the past 5 or 6 years. You know, I am not aware of any business right now where it looks like it is short cycle demand that may end in 26. So we are getting ready to do our strategic plans around here in August and September. I fully expect the numbers or the velocity, the trajectory, may change some. But I do not see anybody going negative moving into 2027.
Mike Halloran: Thanks, Richard. Appreciate it. Thanks.
Operator: Thank you. Our next question will come from Joe Ritchie with Goldman Sachs. Your line is open.
Joe Ritchie: Joe.
Richard Joseph Tobin: Hey, Joe.
Joe Ritchie: So I had the same question as Obin. On the order conversion into revenue. I guess maybe I will ask it this way. Is there any reason to believe that the conversion will not translate into much faster earnings growth or organic growth given what you see today and then all assuming that the trends kind of consistent, could stay fairly consistent?
Richard Joseph Tobin: Well, I mean, the problem with that question is that on a 12 month basis, 1 can when 1 could take the figures and say, here's the conversion and here's what I get. We always have to be a little bit careful because a lot of what we have is short cycle. While over a rolling 12 month basis, it will meet the trajectories that we expect. There may be quarter quarterly volatility for thousands of different reasons. Right? So that is why we always have to be a little bit careful of getting ahead of our skis. We are not making paper clips here. Right? So yeah. I mean, look, the bottom line is we are really pleased with the orders. it is up to us to convert on the orders, and we will maximize the revenue within days, not weeks, not months, not quarters. Right now, that is telling us this is what if we look at the math and we have got to rely on these businesses and what the forecast is, this is what it looks like. But I guess, like I said to Andrew, we are gonna get to the end of Q3, if orders continue to surge and book to bill remains what it is, then we will revisit that to the extent that we can convert we can convert it out of the manufacturing base. So I think we have to be careful about just doing the math on backlog as if there is excess capacity sitting there waiting, and then there is timing difference of when somebody actually wants to take to take delivery on something.
Joe Ritchie: Yeah. that is that is fair enough. And then I guess just given the issues that you kind of have-- you have already talked about on the refrigeration side, I am just curious, like, what your level of concern is on the capacity ramp in SWEP Well, we always have concern, but less so.
Richard Joseph Tobin: SWEP is the highest automated business that we have in the portfolio and the issues that we have had in refrigeration have been largely driven by labor ramp. Super helpful.
Joe Ritchie: Thanks, Richard. Thanks.
Operator: Thank you. Our next question will come from Christopher Snyder with Morgan Stanley. Your line is open.
Chris Snyder: Thank you. I think you guys talked about in Q1 that customer started placing orders for braze plate heat exchangers further into the future than maybe they were in 2025. Did that continue here into Q2? And then can you just maybe talk about your plans to add capacity there? What is the time line for that capacity to come on? And would you expect that those lead times start to come in as that capacity comes on over the next 12 months or whatever that may be. Thank you.
Operator: Hello? Please hold on the line. Hello? We have now moved to the backup. Please connect. We have moved to the backup.
Richard Joseph Tobin: I guess this is the last question, so let me answer it real quick here. The answer to the question is yes. And the capacity will come on sequentially over the back half of 2026 going into 2020 Thank you.
Chris Snyder: And, Kai, if I could squeeze in a follow-up on this backup line?
Richard Joseph Tobin: Sure.
Chris Snyder: Is there anything you could talk about on Q3? Mike, is it fair to assume like similar to the full year, low double digit EPS growth And is it also fair to assume that Q3 organic is better than Q4 just given how much more difficult that Q4 comp is? Thank you.
Richard Joseph Tobin: Yeah. I do not-- we do not give out quarterly guidance, so I am gonna have to pass on that 1. Alright. Fair enough. Thank you. Thanks.
Operator: Thank you. This concludes our Q and A period. And the Dover's Second Quarter 2026 earnings conference call. You may now disconnect the line, and have a wonderful day.