My name is Ashley and I'll be your conference facilitator this afternoon. At this time, I would like to welcome everyone to the Vontier Corporation's First Quarter 2020 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session.

[Operator Instructions] 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 Ashley. 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 David 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 at www.vontier.com, under the heading Financial. Please note that unless otherwise noted, 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'd like to turn the call over to Mark..

Thanks Lisa. Good morning, everyone, and welcome to our first quarter earnings call. Our continued successful execution and capital allocation drove strong earnings growth. We delivered adjusted earnings per share of $0.70, an increase of 11% year-over-year and above the high end of our guide.

Our team delivered another quarter ahead of earnings expectations, reflecting the continued progress and success of our profitable growth initiatives. And our DRB acquisition delivered robust growth in the quarter, highlighting the strength of our capital deployment and portfolio strategy to accelerate non-ICE business growth.

Furthermore, we leveraged our strong cash flow and balance sheet by deploying $442 million of capital in the quarter, including $257 million towards share repurchase with the balance towards energy transition acquisition investments.

I'm extremely proud of our team's dedication and tireless efforts to deliver results and to continue to advance our multiyear transformation, all while successfully navigating an exceptionally challenging and dynamic environment.

We strategically optimize our opportunities and continue to reposition our portfolio, while delivering impressive outperformance. We've invested to support our growth vectors, improved technology and business model innovation, including ESG commitments.

The success and runway of value creation underpins my growing confidence in our assumption for high single-digit non-EMV core revenue growth and continued high return capital allocation. The acceleration in non-EMV core revenue is driven by further progress with our profitable growth initiatives and acceleration of our platform strategies.

We are making important progress towards building a better, stronger, more focused growth portfolio. Before getting into the details of the quarter, I'd like to share some highlights from our recent CEO Kaizen event. As you are aware chip shortages have stressed supply chains around the world and we are navigating this challenge well.

But in keeping with our culture of continuous improvement, we focus one of our six CEO Kaizen teams to dive even deeper to identify new insights and countermeasures. A cross-functional team leveraged the Vontier Data and Analytics Hub to cross-reference thousands of component parts with third-party data to create a multiyear product health road map.

The findings from this exercise will further enable us to proactively redesign our technology solutions to minimize component shortages and optimize continuity of supply. Ultimately this smart analytics based approach increases our ability to serve customers and meet our financial commitments.

We will continue to leverage Vontier's capabilities to digitize our customers' workflows through connected hardware, software services and payment solutions. Moving on to the results for the quarter, double-digit revenue growth from both DRB and our core non-EMV businesses drove the operational beat.

Robust demand, strong price and cost actions combined with continued progress on our profitable growth initiatives more than offset the unfavorable mix impact from a decline of nearly $60 million in EMV revenue.

The rate of decline was greater than we had anticipated as the well-documented availability of electronic components impacted us in the quarter. Subsequently, we now believe the EMV headwind for the full year will be closer to $50 million, the top end of our prior assumption.

We continue to drive deeper deployment of VBS and build momentum with our profitable growth initiatives, which is driving the acceleration in non-EMV growth. We remain price/cost positive and delivered 80 basis points of gross margin expansion in the quarter.

This performance and execution rigor enabled positive operating leverage with adjusted core OMX of 20 basis points and 30% incrementals despite the challenging supply chain and inflationary backdrop. The demand environment remains strong with non-EMV total orders growth exceeding 20%.

This robust growth reflects the resiliency of our portfolio, technology leadership and secular growth drivers, as well as the continued momentum from the success of our strategy and initiatives since separation.

We are more deeply deploying VBS to face continued headwinds and will remain agile with price and other actions to position ourselves to meet the ongoing strong demand for our solutions. We expect to remain price cost positive and deliver margin expansion for the year.

This is a critical area where our team has executed exceptionally well and we've been consistently outperforming peers. Moving to the outlook.

Given our strong performance in the quarter and our previously announced $250 million accelerated share repurchase program, we're raising our full year 2022 adjusted diluted net EPS guidance to $3.20 and to $3.30 per share.

Our core growth and adjusted core operating margin expansion assumptions remain the same at low to mid-single digits and 30 to 60 basis points, respectively. Importantly we're also maintaining our expectation for adjusted free cash flow conversion of approximately 100%.

As previously mentioned, our core growth outlook now includes an assumption for EMV to be a full year headwind of closer to $50 million. That said, we don't have enough new information to warn an update to our 2023 EMV expectation, given the range we previously provided.

I continue to have strong conviction in our ability to offset the EMV headwind and deliver earnings growth and strong free cash flow conversion in 2023. Dave will be walking you through our assumptions to do this in our road map for accelerated growth a little later.

We're also initiating our second quarter adjusted diluted net EPS guidance of $0.68 to $0.72, which includes assumptions of flat core revenue and adjusted core operating margin, against a very challenging comparison in the prior year period, where we delivered 33% core revenue growth and 450 basis points of adjusted core operating margin.

With that, I'll turn the call over to Dave for the financial results..

Thanks, Mark. Adjusted net earnings for the first quarter were $116 million, an increase of 7.6% from $108 million in the prior year period. This translated to adjusted net earnings per share of $0.70 and an 11% increase compared to $0.63 in the prior year period. The increase in earnings was driven by 5.7% revenue growth.

DRB's revenues were higher than expected and contributed to high teens non-EMV total revenue growth, that more than offset the supply chain impact to sales conversion. Core revenue growth was essentially flat, as continued supply chain challenges and component shortages constrained EMV sales by over $25 million in the quarter.

This shortfall was offset by low double-digit non-EMV core growth, as we saw solid demand in other developed markets, strength in alternative energy driven by CNG and ongoing strong demand in diagnostics and repair. Adjusted operating profit for the first quarter was $164 million, an increase of 8% compared to the prior year period.

Gross margin expansion of 80 basis points reflected our ongoing effective price cost management and the benefits of DRB and other higher-margin solutions, which helped offset the mix impact of the decline in EMV and production inefficiencies related to supply chain constraints.

The increase in operating profit and strong execution drove incremental margin of 30% and adjusted core operating margin expansion of 20 basis points, despite flat core growth, reflecting continued benefits from our profitable growth initiatives and early price actions. Looking at the top line performance of our two platforms.

In our Mobility Technologies platform, core revenue declined 2.4%, primarily reflecting lower EMV volume that was compounded by the impact of supply chain constraints. In addition, the prior year Q1 benefited from the previous Mexico regulatory driver.

On a reported basis, mobility technology grew 5.5% due to the impact of DRB, which does not become core until Q4 of this year. DRB delivered growth well above expectations and continues to benefit from their technology and consumer data thought leadership and market-leading position in a very strong end-market demand environment.

In our diagnostics and repair technologies platform, core revenue growth of 6.1% in the first quarter was driven by strong demand at both Matco and Hennessy. The demand backdrop remains healthy, which was emphasized by Matco's annual expo meeting in the quarter, where we saw record order levels.

We also saw momentum driven by our new product offerings, particularly in Matco's diagnostics offering. Looking at total company sales regionally, North America core revenue was flat as non-EMV revenues offset the substantial decline in EMV sales that Mark referenced and developed markets globally grew core revenue low single digits.

High-growth markets which are typically lumpy declined low double digits due to the Q1 impact of the prior year Mexico regulatory driver and a continued soft environment in China. Overall, we continue to anticipate mid-single-digit core growth for high-growth markets for the full year.

We remain focused on our profitable growth initiatives, advancing our efforts on simplification, new products and platform strategic growth areas, including retail solutions and alternative energy. The benefits of these actions will continue to accrue as we evolve the portfolio over the coming years. Moving on to the balance sheet.

We ended the quarter with a cash balance of $145 million and had no borrowings under our $750 million credit facility.

Our net leverage stands at 3.3 times adjusted EBITDA at the end of the first quarter, temporarily elevated due to the timing of large cash outflows related to our $250 million accelerated share repurchase program, as well as the acquisition of drives during the quarter.

We maintain our commitment to investment-grade credit ratings and expect that our leverage will remain at or below three times net leverage by the end of 2022, while also having over $400 million of further capital to deploy towards additional share repurchase and/or accretive M&A.

We have about $240 million remaining under the previous share repurchase authorization that was put into place in 2021. And as Mark noted, we anticipate ongoing deployment as market conditions warrant.

These assumptions on leverage and capital deployment capacity do not consider any additional capital raised through any divestiture activity or monetization of any of our 16% stake in Tritium, which as of quarter end had a fair market value of $215 million. Our adjusted free cash flow conversion during the quarter was 34%.

Historically, we would have anticipated conversion of around 40% to 50% in the first quarter, but this quarter was made worse by unusually poor sales linearity from the impact of the supply chain constraints. Had we achieved sales linearity similar to what we averaged in the prior year, free cash flow conversion would have been greater than 50%.

We expect to see the conversion rate increase over the remaining three quarters, despite our expectations that linearity driven by supply chain uncertainty will be a continued challenge, particularly in Q2.

Regardless, we still anticipate adjusted free cash flow conversion for the full year of around 100% and we continue to have ample liquidity to execute on the capital deployment priorities that I previously mentioned. Turning to the outlook assumptions.

For full year 2022, we are maintaining our core revenue guide of low to mid-single-digit growth, despite our expectation that EMV will be closer to the high end of the range or a $50 million headwind and core operating margin expansion of 30 to 60 basis points.

Our confidence in delivering these results reflects continued execution on our profitable growth initiatives and price cost management, partially offset by inflationary pressures, ongoing supply chain, and logistics constraints, and mix, driven by lower EMV and other regulatory driven sales.

We are raising our adjusted earnings per share range to $3.20 to $3.30, reflecting our updated share count, continued execution, and growth in our core non-EMV business.

Taking a closer look at some of the other assumptions we now expect full year 2022 weighted average share count to be approximately $163 million which reflects the expected impact of the $250 million accelerated share repurchase. Our assumption on the full year effective tax rate remains at 23%.

Moving on to the second quarter of 2022, we expect core revenue growth will be flat as the strong demand environment is offset by lower conversion of high-margin sales resulting from ongoing supply chain constraints and component shortages.

Adjusted core operating margin is expected to be flat, reflecting growth investments in inflationary Harrison in the prior year as Mark referenced. As he stated, this translates into adjusted earnings per share of $0.68 to $0.72 in the quarter.

Overall, our teams delivered an impressive start to the year and positioned us well to deliver our full year expectations for core growth margin expansion and another year of double-digit earnings growth. Before turning it back to Mark, I'd like to call your attention to slide eight.

We previously provided a view of the 2023 EMV impact and where we see the offsets and that view has not changed. However, in order to better dimensionalize our conviction in our ability to meet growth outlook we provided last quarter, I'd like to walk you through a more detailed view of our key assumptions.

We believe that the traction we have demonstrated on our profitable growth initiatives coupled with our platform strategies in retail solutions digital technologies and alternative energy collectively provide us with high single-digit non-EMV core revenue growth which will offset a significant amount of the 2023 EMV revenue headwind.

This is consistent with the non-EMV core growth that we have demonstrated in recent quarters and should be further aided by DRB when that becomes core in Q4. Any remaining growth gap would require only a modest amount of inorganic contribution to offset.

Most importantly, post this EMV period, we expect to have a re-baseline core revenue growth rate of mid-single-digit plus at accretive margin and continued strong cash flow which positions us well to deliver compounding earnings growth ahead of revenue growth. With that, I will turn it back to Mark. .

Thanks Dave. I'm extremely proud of our employees and encouraged by our ability to deliver against our most important strategic and financial commitments.

We're continuing to build upon our track record of strong execution by focusing on our critical few priorities and our profitable growth initiatives are showing up in robust non-EMV core revenue and bookings growth as well as margin expansion.

Our portfolio diversification strategy is underway and DRB, which is delivering highly profitable growth is a great example of our disciplined capital allocation. This positions us well to be at the forefront of solving next-generation mobility and transportation infrastructure challenges.

Our results and momentum show the runway of opportunities inherent in our business given the attractive secular drivers underpinning long-term growth. And as the growth roadmap that Dave outlined demonstrates we are taking advantage of the strategic optionality inherent in our businesses to build a better stronger more focused growth portfolio.

Further to that point, as I said before, we view successful portfolio management as both addition and subtraction. We regularly evaluate our market exposure and how each of our businesses is positioned within those markets.

We have subsequently identified some areas that are not aligned with our long-term strategic direction and/or they are dilutive to Vontier's performance and we have initiated the process to potentially divest these assets. Given the timing and other uncertainties of such transactions, our 2022 guidance assumes we own them for the full year.

Ultimately, we expect the combination of these portfolio changes will be accretive to our core revenue growth and operating margin profile. Furthermore, we expect to redeploy the divestiture proceeds to more than offset the related earnings per share dilutive impact.

To wrap-up, I want to reiterate that while we believe continued M&A will be part of our strategy to continue our multiyear portfolio transformation we are not dogmatic in our approach. Given the strength of our cash generation we'll balance investing in organic and inorganic opportunities along with returning capital to shareholders.

Our view is they are not mutually exclusive. We will remain nimble and act when we see opportunities to generate strong returns. I am confident in our growth and transformation strategy towards solving next-gen mobility and transportation infrastructure challenges. And I have great conviction we're on the right path to unlock significantly more value.

With that, I'll turn the call over to Lisa..

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

Thank you. [Operator Instructions] We will take our first question from Julian Mitchell with Barclays. Please go ahead, your line is open..

Hi, this is [indiscernible] on for Julian. So, just looking at the EMV headwind. I know you saw us for Q1 is nearly $60 million headwind.

How should we think about the cadence of that headwind for the balance of the year? Because I think you guided a $50 million headwind overall for 2022?.

Yes. Thanks for the question. The biggest headwind will definitely be in the first quarter. And I think as the compare gets much easier in the second half of next year we might even grow in the third -- sorry in the second half of the year we might even grow in the third and the fourth a little bit.

So, it really kind of flattens out and this -- the big amount of the decline is really the first. .

That's helpful. Thank you. And then one follow-up I had was -- looking at the slide where you talked about profitable growth initiatives.

What are the -- and you listed a bunch of them simplification restructuring strategic pricing et cetera, what are the kind of main buckets that we should be focused on within that?.

Yeah. Thank you for that question. Let me give you a little bit of color there. We've got some great traction off a simplification program that really is centered off a product line simplification. And just to give you an example on that, we've got 32 fueling dispensers worldwide, as part of GVR. And we have a program to bring that to eight.

And we'll make measurable progress on that, this year. As well as the strategic pricing, that we started actually more than a year ago and this was before inflation had really taken off, and we had developed real strong momentum on pricing, even in a very low inflationary environment. So we don't anticipate getting back on that strategic pricing.

And while, we've added on to that, quite appreciably with more structural pricing and of course surcharges on top of that. But it's clearly an area that we have I would say early innings in both of that. Another category to key off and we've been discussing is, the growth in high-growth markets.

We think that our offerings pertain particularly well, as we move up the technology stack and folks in high-growth markets look at more benefits due to automation and environmental concerns, regulatory drivers on those will drive us in high-growth markets can be lumpy in the near-term, but it certainly is paying off for us in terms of that focus on the longer-term.

Matco franchisee growth is part of our profitable growth initiatives. As you know, we've got about 30% of our territories in North America, that are not penetrated with our distribution coverage and that represents a pretty good runway of opportunities for us that we're going to continue to mine.

And then another area for you to key off is the turnarounds in Teletrac Navman and Hennessy where they're below fleet margins and growth. We're making really good solid traction on that, good traction also in Q1. And we'll continue to make progress there.

So when you add those up, I think you've got a portfolio of what we call profitable growth initiatives that have been demonstrating good payoff. And we have more-and-more confidence we'll continue to do so..

Got it. Thank you..

And we'll take our next question from Steve Tusa with JPMorgan. Please go ahead. Your line is open..

Hey guys. Good morning..

Good morning, Steve..

Good morning, Steve..

So on like supply and all the constraints that are out there, maybe just talk about, how you guys are managing those perhaps differently? And if there are any items that stand out that are a little more, tight outside of the normal semis if at all?.

It's mostly centered on the semi area. And I would definitely say this environment going back now for quite some time has been challenging. We've been really on it with deeper deployment of EPS. We use a lot of visual metrics in that. As you can see, we continue to have Kaizen's on it.

We talked about a CEO Kaizen that I participated in, last month and that CEO Kaizen is really focused on continuous improvement. I think we're facing some of the same issues that everybody else is facing. And we've just been really pushing hard with the teams to make sure that we get in front of it.

And we're going to continue to be committed to doing so. And I couldn't be more proud of the team's performance there. It's a tough environment. There's no question about it. But we're doing well and we're committed to doing so..

And then, when it comes to pricing, any further increases scheduled for the next couple of quarters, or are you now at where you need to be from that perspective? And what do you expect the spread to be kind of for the year?.

Yeah. I'll kick it. I'll turn it over to Dave as well. The pricing is dynamic. I wish this inflationary environment like most of us would moderate a bit. But we are going to continue to be nimble on the pricing front.

We've layered on to our strategic pricing initiatives from last year into like I said more structural, and also we're, having to add surcharges to backlog. So I think we've been ahead of the pricing element which has positioned us well. But you can't just back off on this and just say we are where we are and cost. I mean, you just got to be dynamic..

Got it. And then, you guys mentioned alternative energy in the slides.

What do you mean there?.

Yeah. Thanks for that question. We had a press release, where we discussed our alternative energy approach of investing $500 million over the next five years on organic as well as organic opportunities and our drives acquisition was part of that. So let me just highlight two aspects really quickly for you.

Drive is centered on the electric charging infrastructure for delivering a, cloud-based operating system software for highly recurring revenues at excellent margins in a very growthy space. So we think we parked ourselves in really a great spot of the value chain. The other element of this is about dispensing things other than petrol.

We actually are making great progress with our CNG dispenser a business called Angie as you might imagine in this backdrop and environment, it's getting quite a bit of growth. And we also anticipate that to grow out as part of the alternative energy structure. And the great thing about that is it higher pressure.

It's an excellent lead-in for us on hydrogen. We think we have a right not only to play but also to win in hydrogen because of the infrastructure basis of it and the technology that's really close to what we already do. So when you think of alternative energy you need to think of all of those elements..

Right. All right congrats on really good execution..

Thank you..

Thank you..

And we'll take our next question from Andrew Obin with Bank of America. Please go ahead. Your line is open..

Yes. Good morning. Just going back to slide 8, I guess a couple of questions. What is the base year for slide 8? And the issue -- by our math the $250 million buyback alone adds $0.15 to EPS. And this slide assumes spending $750 million.

So we're just trying to figure out why do you only get an incremental $0.05 to $0.10 from a further $500 million in spend. That's the framework we have.

I want to make sure it's correct that that's sort of where we come out?.

Yeah. Andrew. It's Dave. So 2022 would be the base year here -- so the benefit to 2022 from the Q1 ASR that we did would be in the base. That's what's assumed here in the capital deployment..

Okay. That makes it a lot easier. So it's even on top of that. That's excellent.

And just on Diagnostic and Repair Tech, backlog almost doubled year-over-year, but do you expect to be able to work the backlog down in 2022? And just comment on, supply chain specific to that and also pricing there?.

Sure. So we've certainly -- I'll take the last part. We've certainly been pushing the envelope there on pricing and we'll continue to do so. Obviously, our backlog being up is something that's got our attention. And we're working a set of countermeasures to bring that down. We are continued to work through a tough environment there.

But the great thing about that backlog is that we think is pretty sticky. We just had our expo in Q1, for Matco which was very well received and a lot of folks and attendance there. And I would say the strength out of that has also led to our backlog increase. And so we're going to continue to push every envelope we have here to work that down..

Okay. Terrific. Thanks a lot..

Thank you..

And we'll take our next question from Vlad Bystricky with Citigroup. Please go ahead. Your line is open..

Good morning, everyone. Thanks for taking my question..

Good morning, Vlad..

So I just wanted to get some comments from you on how you've seen production trends through the quarter and here into April. Core revenue basically, flat in 1Q, which was kind of at the upper end of your range, despite what we know was going with an challenges early in the quarter and then just ongoing supply chain volatility.

So can you just talk about how you saw production trends through the quarter and what you're seeing into April? And then whether you're seeing any impact from the China COVID lockdowns across the business more broadly?.

Yeah. Vlad, let me start and then hand it over to Mark. In Q1, we definitely saw linearity shift towards the latter part of the quarter. So that's something we did pretty well in 2021 even managing through the difficult environment we were able to improve linearity. And that really read through was a lever helping cash flow over the course of that year.

So when we talked about free cash flow being a little lower the conversion in the quarter, even from what we would historically see on a seasonality perspective is really driven by that linearity. And you nailed some of the big pieces. Early in the quarter, we saw some Omicron impacts for sure.

Like everyone else, we saw that abate as the quarter progressed, but then really the supply chain challenges become a little more challenging and issues specific to us in the second half of the quarter. But ultimately, the effect was to move sales later in the quarter.

And frankly, more to come on Q2, but out of the chute, I think we're going to see an environment not too dissimilar. We're going to work through it like we did in the first quarter..

That's helpful, Dave. I appreciate the color. Just one follow-up for me. You talked about the potential exits of some smaller businesses and product lines.

Are you able to give us any color on sort of the scale of parts of the portfolio you're looking at as well as any commentary on kind of the time line that you're thinking about in terms of actioning any units you do ultimately decide to move forward with?.

Yeah. I think it's too early to characterize size here. I think there's a handful of things we're looking at as Mark characterized, as we've worked through a set of priorities identifying some things that maybe don't meet the strategic profile going forward and might be more successful somewhere else.

I think from a timing perspective, really second half of 2022 beginning and really carrying into at least the first half of 2023, as we work through some of these. But as you know, it's a lot of work. And as Mark noted, we're just commencing. So definitely more to come in the coming quarters. .

Right. That's helpful. I appreciate it. I'll be back in the queue..

[Operator Instructions] And we'll take our next question from Andrew Buscaglia with Berenberg. Please go ahead. Your line is open..

Good morning, guys. On that potential divestment side of things.

Do you got to talk about which segment that would fall under or characterize what -- I don't know any other detail like what I guess you're not as committed to?.

Yeah. I can't give a kind of color on that. Obviously, we want to get out ahead of any announcements here. But I would say that when we -- the company bond, we spun with what we had.

And as we've been working through our profit growth initiatives where we can get traction in areas as we sort of indicated in our prepared remarks that we think might better belong somewhere else and not part of our portfolio. I think that's a little bit of what you're seeing here is that realization and that work kind of reading through.

And so I think it's important for us to indicate and dimensionalize that in a way that we believe is both critical it's sensical -- and -- but it's about as far as we can go in terms of how we can illuminate that, but more to come for sure..

Okay. And maybe I'm reading too much into this, but you kind of -- the language you used around the Tritium stake kind of offering up that is an option to monetize.

I guess the thoughts on why you'd want to monetize that and then realistically, if that's something you're looking to do?.

Yeah. I think we talked about it is if we monetize some portion of so I think remains to be seen, right? But obviously, it's an alternative that's out there for us or slowing to lock up into the summer. But it's an opportunity for us going forward. I think that was our point. If we do monetize that..

Okay. Okay. Thank you..

You bet..

And we'll go next to Nigel Coe with Wolfe Research. Please go ahead. Your line is open..

Thanks. Good morning, everyone..

Hey, good morning, Nigel..

Good to hear you. So the acquisition in the quarter I guess that was drive.

Was that the entire $185 million on drives? And I think it was -- maybe just talk about that business in terms of where that is today? And where do you think that can go revenue margin profile over the next sort of medium term?.

Yeah. Thanks for that question Nigel. Look, we're excited about this space because this is the operating system software for electric charging. As you see and just off that last question on Drive is really a white label software opportunity that we have about 20% of the share. It's a relatively small offering right now.

But having 20% of what's called a white label software market is a leadership position in that marketplace. And what we believe is that folks like charge point operators like folks on the go or a destination where you're going to see lots and lots of chargers are going to have to manage this network of chargers.

And not everybody is going to want to write their own software. They're going to want to license it from somebody. And that's exactly the position that drives is in. So we think it's a great, great asset for us and we think we can see strong growth over the coming years. And we think it positions us well.

Not only is this a right to play in this market we really believe it gives us the right to win..

Great. Thank you. And my follow-on is you've maintained the $300 to $350 million of headwind from EMV.

Just curious how does this business tend to track? Is there any kind of sort of dislocation or benefit from higher gas prices or -- is it sort of irrelevant from a retail perspective?.

No, it's interesting. Now when gas prices go up, folks that are in convenience retailing that are also backward integrated into the petrol supply chain actually benefit from that and you can see more investment dollars coming into how they build out their infrastructure. So I don't think it's necessarily a bad thing.

So we'll -- but as we go to the right here there's no question there's strong demand for that footprint as it continues to build out..

Nigel, one point. As we see petrol prices increase, we definitely see some momentum in our CNG business. Mark talked about that as a key focus area as part of the energy transition. So we definitely see that.

And then with moving to gas prices you do see profits get captured at the C-store and as we've seen robust demand is probably helping that as we work through 2023 you noted the headwind, which is kind of the sunsetting of the EMV tailwind. So we'll get through in 2023 and higher gas prices are probably helping fuel that demand. .

And then a quick one maybe just a quick update on Teletrac Navman. That's one of your initiatives to offset that headwind next year.

So just wondering where we are in that turnaround?.

Yes continue to make a good progress there. You know the management team has added some important additions which continue to build out our offering with TN360 is gained some strength in the market. Continue working through the term. And so yes, steady improvement as we go.

Good OpEx - -excuse me, all max improvement in the quarter two and we're continuing to book really solid for that business. I would say not real step change performance quarter-to-quarter but continues steady improvement..

Okay. Thanks a lot..

We'll take our next question from Joseph Donahue with Baird. Please go ahead. Your line is open..

Hey, guys. Thanks for question.

Could you talk about how private market valuations are looking for you?.

I'm sorry.

Can you repeat that question again?.

Could you talk about how private market valuations are looking?.

In relation to our acquisition funnel is that the question….

Yes exactly.

We've heard some commentary people aren't seeing them come down?.

Yes. Look, I think, its dynamic. Right, I think that's fair on average to say that there's pretty -- still pretty high expectations out there. But we'll see how it evolves. So it's still a dynamic environment. But I think with the interest rate environment and the other uncertainty in the markets, it's definitely an evolving situations.

We're keeping a close eye on. .

Got it. Okay. Kind of following on for that.

Would you say that -- there is still room for you to fill some gaps in your portfolio solutions for EV?.

Yes. You know, the EV market is so nascent, I mean, look at the penetration for it. It's in many markets its hardly of the ground and you know, as you know range anxiety out there for mobility infrastructure because of the changeover for energy particularly electrification as well as gas is clearly a big opportunity.

As we run that out over time, we'll consider that. But I think what we did was we put in place a parameter of our $500 million. So you can kind of know how we're thinking about our organic as well as inorganic. And so we love our position of drives and there's clearly opportunities around that but nothing more at the moment.

We've got a lot to work with I would say as is. .

Got it. Thank you..

And it appears that there are no further questions at this time. I'll turn the call back over to Mark Morelli for any closing remarks. .

Yes. Thank you, Ashley. Look our combination of solid execution through profitable growth initiatives as well as the disciplined capital allocation really gives us greater confidence on the path that we are on.

We are committed to building a better, stronger more focused growth portfolio solving NextGen mobility and transportation infrastructure challenges. So thank you for joining on today's call. .

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at anytime..