Dover Q1 2025 Earnings Report

Dover EPS Results

• Actual EPS: $2.05
• Consensus EPS: $1.99
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $1.95

Dover Revenue Results

• Actual Revenue: $1.87 billion
• Expected Revenue: $1.88 billion
• Beat/Miss: Missed by -$12.64 million
• YoY Revenue Growth: -0.90%

Dover Announcement Details

• Quarter: Q1 2025
• Date: 4/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 24, 2025
• Conference Call Time: 9:30AM ET

Dover (NYSE:DOV) provides equipment and components, consumable supplies, aftermarket parts, software and digital solutions, and support services worldwide. The company's Engineered Products segment provides various equipment, component, software, solution, and services that are used in vehicle aftermarket, waste handling, industrial automation, aerospace and defense, industrial winch and hoist, and fluid dispensing end-market. This segment offers manual and power clamp, rotary and linear mechanical indexer, conveyor, pick and place unit, glove port, and manipulator, as well as end-of-arm robotic gripper, slide, and end effector; winches, hoists, bearings, drives, and electric monitoring system; and radio frequency and microwave filters and switches, and signal intelligence solutions. Its Clean Energy & Fueling segment offers component, equipment, and software and service solution enabling safe storage and transport of fuel, cryogenic gases, and hazardous fluids, as well as operation of retail fueling and vehicle wash establishment. The company's Imaging & Identification segment provides precision marking and coding, product traceability equipment, brand protection, and digital textile printing equipment and solution, as well as related consumable, software, and service to packaged and consumer goods, pharmaceutical, manufacturing, fashion and apparel, and other end-market. Its Pumps & Process Solutions segment manufactures specialty pump, connector, flow meter, fluid connecting solution, plastics and polymer processing equipment, and engineered components for rotating and reciprocating machines. The company's Climate & Sustainability Technologies segment manufactures refrigeration system, refrigeration display case, commercial glass refrigerator and freezer door, and brazed plate heat exchanger for industrial heating and cooling, and residential climate control applications. The company was incorporated in 1947 and is headquartered in Downers Grove, Illinois.

Dover Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, and welcome to Dover's First Quarter twenty twenty five Earnings Conference Call. Speaking today are Richard J. Tobin, President and Chief Executive Officer Chris Winker, 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. As a reminder, ladies and gentlemen, this conference call is being recorded and your participation implies consent to our recording of this call.

[Operator]

If you do not agree with these terms, please disconnect at this time. Thank you. I'd now like to turn the conference over to Mr. Jack Dickens. Please go ahead.

[Jack Dickens, Senior Director of Investor Relations at Dover]

Thank you, Margo. Good morning, and thank you for joining our call. An audio version of this call will be available on our website through May 15, and a replay link of the webcast will be archived for ninety days. Our comments today will include forward looking statements based on current expectations. Actual results and events could differ from those statements due to a number of risks and uncertainties, which are disclosed in our SEC filings.

[Jack Dickens, Senior Director of Investor Relations at Dover]

We assume no obligation to update our forward looking statements. With that, I will turn this call over to Rich.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Thanks, Jack. Good morning, everybody. Let's go to slide three. Q1 was a good quarter. Adjusted EPS was up 19% over the prior year on excellent incremental margin conversion, driven by a healthy mix from our growth platforms, prior period structural cost actions, and positive price cost dynamics.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Adjusted EBITDA margin was up two forty basis points to 24%, a record result for Q1 with four or five segments posting over 100 basis points of comparative margin expansion. Importantly, organic bookings were up for the sixth consecutive quarter with book to bill north of one across all five segments, resulting in a sizable portion of Q2 revenue already in backlog. Overall, we were very encouraged by the start of the year. All of our efforts on portfolio construction, new product introductions and methodical cost and productivity actions are driving meaningful improvement in segment profitability and durable long term top line resilience. Let's go to slide five.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Engineered Products was down in the quarter on lower volumes in vehicle services and program timing in aerospace and defense. We intervened on the cost structure of vehicle service to support its margin performance going forward. Engineered Products and specifically Vehicle Services, the most exposed to tariffs of Chinese imported subcomponents, in our case, structural steel. We are out with pricing mitigation actions, but we'll keep a close eye on volume. The segment will be bolstered as the year progresses by calendarization of our aerospace and defense business.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

With the divestitures of Dosteco Environmental Services Group in 2024, our Engineered Products segment now accounts from 15% of our total portfolio, down from 25% in the prior year. Clean Energy and Fueling was up 2% organically in the quarter, led by strong shipments in clean energy components, transport and below ground retail fueling equipment. Robust order activity in below ground retail fueling signals a recovery after two years of lower volumes, a welcome outcome. We are also encouraged by the increasing quoting activity in clean energy components, particularly in recent wins in space launch and LNG infrastructure in The U. S.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

And Europe. Margin performance was robust in the quarter, up 180 basis points on a higher mix of below ground fueling equipment and tight cost controls. We expect this segment to be the leaders in margin accretion in 2025 on volume leverage, pricing and SKU management and positive product mix. Imaging and ID posted another solid quarter with organic growth 4% on strong wins in serialization software and broad based growth in core marking and coding across all geographies and product lines. Margin performance was robust as management actions on cost to serve and structural cost controls continue to drive incremental margins higher.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Pumps and Process Solutions was up 7% organically on double digit growth in single use biopharma components and triple digit growth in thermal connectors for liquid cooling of data centers. Precision components and industrial pumps also had solid results. As forecasted, the long cycle polymer processing equipment was down year over year in the quarter. Segment revenue mix and volume leverage drove margin improvement on excellent production performance and volume growth in biopharma and thermal. The outlook for the rest of the year is favorable in Pumps and Process Solutions, biopharma components and thermal connectors should continue their robust growth trajectories on secular themes and single use biological drug production and liquid cooling of data centers.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Our Precision Components business has a healthy exposure to the gas and steam turbine markets, which are performing well. Revenue was down in the quarter in Climate and Sustainability Technologies and comparative declines of food retail door cases and engineering services, which more than offset the record quarterly volumes in CO2 systems. We are encouraged to see year over year growth in our heat exchanger business for the first time since the fall of twenty twenty three. Shipments of heat exchangers for installation in European heat pumps still faced poor comp in Q1, but were up sequentially from Q4. Despite the lower top line, the segment posted 120 basis points of margin improvement and year over year growth in absolute earnings on productivity actions and a higher mix of CO2 systems.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

We expect improvement of segment performance over the balance of the year on the strength of CO2 refrigeration systems, robust growth at heat exchangers for liquid cooling of data centers and a continued recovery in heat exchangers for European heat pumps on improving end customer sentiment and normalized channel stocking levels. I'll pass it to Chris.

[Christopher Woenker, Senior Vice President & CFO at Dover]

Thanks, Rich. Good morning, everyone. Let's go to our cash flow statement on Slide six. Our free cash flow in the quarter was 109,000,000 or 6% of revenue. This was a $3,000,000 increase when compared to the first quarter of last year.

[Christopher Woenker, Senior Vice President & CFO at Dover]

Higher earnings and improved working capital performance were partially offset by the expected increase in capital spending on growth and productivity projects. The improved working capital performance was driven by strong collection activity positively impacting our accounts receivable balance, partially offset by investments in inventory ahead of seasonally stronger volume quarters in Q2 and Q3. The first quarter is traditionally our lowest cash flow quarter of the year. Our guidance for 2025 free cash flow remains on track at 14% to 16% of revenue on strong conversion of operating cash flow. With that, let me turn it back to Rich.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I'm on Slide seven. Here we provide a little more detail on the bookings in the first quarter. Q1 marked our sixth consecutive quarter of positive year over year organic bookings growth posting a book to bill above one. As shown in the segment detail on the right, the booking rates were broad based with strength in our secular growth exposed markets and encouraging trends as we move through the year. Let's go to Slide eight, which highlights several of the end markets that were driving our consolidated organic growth forecast.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Between end market data, our customer forecasts and our booking rates, we are encouraged by the outlook in the broader industrial gas complex within clean energy and precision components, single use biopharma components, CO2 refrigeration and inputs into liquid cooling applications of data centers, which include our connectors as well as heat exchangers. We have made significant organic and inorganic investments behind these end markets. Over 75% of the acquisition capital we've deployed over the last five years has been behind these markets and they remain some of our highest priority areas of investment moving forward. In aggregate, these markets now account for 20% of our portfolio and drive attractive margin accretion on expected double digit growth. Moving to nine, our organic investments remain our highest priority for capital deployment.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

We will continue to invest behind our existing businesses regardless of the near term fluctuations in the macro sentiment. Here, we show some of the most meaningful and high ROI projects for 2025. You'll see a healthy balance between growth capacity expansions behind some of our highest priority platforms as well as productivity and automation investments, including some rooftop consolidations. As the rooftop consolidation projects are completed in the second half, we will provide the roll forward benefit of the reduction of fixed costs. Going to slide 10.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

This slide delineates our current tariff exposure. Clearly, this is a bit of a moving target. And these are annualized costs based on twenty twenty four volumes. Nevertheless, it gives you the current situation and the prevailing tariff rates. Takeaway here is that we are a proximity manufacturer and the costs are embedded in our guidance.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I'll leave the rest to Q and A where I'm sure we'll beat this to death. Let's go to Slide 11. We have modestly trimmed our revenue and EPS guidance ranges for the full year to reflect uncertainty of the demand environment in the second half of the year because of the ongoing tariff negotiations. This is purely a top down mechanical adjustment at this point. Based on the trends in our order rates together with our backlog levels, we are in really good shape for Q2, but I think it's fair to say uncertainty in the tariff environment will have some impact on medium term demand.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

As a note, we set our forecast using prevailing exchange rates at the beginning of the quarter and have not adjusted our forecast for any fluctuations in foreign exchange since then, in particular the euro dollar rate. Clearly, at current spot rates, the translation headwind is reversing to a tailwind with the euro rallying over 5% to the dollar in the past month. Due to the short term volatility in foreign exchange, we have chosen to wait until the end of the second quarter to see where it settles. A final note on the current environment tariffs, like any changes that occur in the macro environment, there's a tendency to focus on the negative implications. While we have spent countless hours over the past month on tariff costs and the supply chain implications by business and region and developing mitigation plans, one must not ignore evaluating competitive positioning.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

We are a proximity manufacturer with our cost and revenue based aligned. We have manageable supply chains. We will implement solutions to offset the cost implications of tariffs and we will push hard for market share gains where we believe we are strategically advantaged, be that on a cost or geographic footprint basis. Dover proved during the pandemic that it can play defense and depend margins in a challenging demand environment. We entered this year with exceptionally good momentum from a product and portfolio perspective and an advantaged balance sheet position that allows us to opportunistically play offense in capital deployment.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

We will weather this tariff tumult, and I would argue that our business leaders are positioned far more on offense than defense at present. Let's go to Q and A.

[Operator]

Thank you. And with that, we'll take our first question from Jeff Sprague with Vertical Research. Please go ahead.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

Hey, thank you. Good morning, everyone. Yes, Rich, let me start the dead horse beating here. Just on the tariff side, I wonder I guess this question is there's going to be some fungibility, right, in what you do on cost. But I'm trying to get a sense of what you're doing new incremental to offset tariffs versus what you already had in flight.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

I mean, sounds like the $60,000,000 reshoring thing you called out is one of them. But just thinking about sort of the cost versus pricing dynamics that you're doing here, and again, how much might have been sort of in the plan now and is going, towards tariffs as opposed to potentially upside that we could have had to 2025?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Yeah, I think when we were doing all the conferences in the quarter, it was all Mexico and Canada. Then we saw this Chinese issue with the rate. It was a little bit of a surprise to say the least. As I mentioned in the commentary where we have the exposure, we're out in the market with pricing presently. There's a little bit of a lag effect depending on where we are from an inventory position.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

But yeah, we'll cover that largely with price. But back to what I said at the end in terms of competitive positioning, There are instances where we believe that we're advantaged, meaning that a smaller proportionality of our bill of materials is subject to tariffs. And in cases like that, we will take advantage of the cost position that we have vis a vis some of our competitors that have been importing built up units. If you take a look at the chart on 10, other than China, that's the big number. And of that big number, 60,000,000 is on one particular product line.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

And that product line, you can see in our first quarter results, we've been a little bit careful. And that's why the volume's down, because we wanted to get the pricing out there. So, I know the question's going to come in the Q and A here. Well, why are taking revenue down if all the pricing is coming through? As I mentioned before, the risk here is not price cost.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I think that we've got tailwinds on mix. And I think that we're on the front foot in terms of getting the price out there. It's really it's volume, right? And it's volume in the second half. And I think that look, I did it.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

It's not in our forecast and it's not built in a spreadsheet. I basically said, let's clip off about one percent because we're probably going to have project drift because of all the delay that we've seen around these tariffs.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

And then just and understood. Thanks for clarifying that. And then just to kind of pick up then, as you mentioned kind of on the conference circuit, right? Through January and February, things seem to be progressing better. It sounded like March was okay or maybe better than okay given the book to bills.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

But maybe just kind of talk about how you exited the quarter. And did you see any sort of behavior change anywhere from your customer base kind of post the April announcements?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Yeah. I mean, the incremental margin in the quarter was phenomenal. And I guess, I think I would argue we probably outperformed a little bit there, because the margin mix was so healthy. Yeah, the order rates, I think, like you talk to clients, like I said before, there's this view of, yeah, we want to do the projects, but where everybody's kind of getting nervous a little bit and there's a little bit of a drift there to say. But in terms of our order rates and our shipment rates, we actually accelerated through the quarter.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

So, like I said, that's why I'm making it. It's a sentiment adjustment I'm making, not tangible data of customers saying, yeah, I was gonna probably want it in Q2, but now I want it in Q3, that type of thing. Our Q2, based on our backlog, should be right on what our forecasts were going through Q1.

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

Got it. Thanks. I'll leave it there. Appreciate

[Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners]

it.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Thanks.

[Operator]

Our next question comes from Andrew Obin with Bank of America. Please go ahead.

[Andrew Obin, MD - Equity Research at Bank of America Merrill Lynch]

Yeah. Thanks so much. So just a question about bookings. You've highlighted six consecutive quarters of year over year bookings growth. But second quarter comp is tougher and I do appreciate that on a two year stack, it's maybe not as tough.

[Andrew Obin, MD - Equity Research at Bank of America Merrill Lynch]

But how should we think about just sustainability of bookings growth? And I do appreciate that there may be an air pocket on bookings related to tariffs, but maybe near term, how do you see that?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I would expect to be over one for Q2. That's my expectation right now. We get crazy about this. Bookings are a little bit lumpy sometimes. A lot of it is predicated on what happens in the last week of the quarter.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

So I wouldn't flip out if somebody goes below one. But right now, on the momentum that we have on bookings going into the quarter and what we know we're quoting on and stacking up there, should be okay by the time we get to the end of Q2. But like I said, that's we're going to see if we can plow through negative sentiment over the next whatever days we have left here, sixty five or eight days left in the quarter.

[Andrew Obin, MD - Equity Research at Bank of America Merrill Lynch]

Gotcha. And as we think about just sort of your just pure math on removing percentage point of volume, but then also EPS impact, if you put it together with the beef, we sort of get decrementals on revenue sort of around 40%. Obviously, then there's this FX cushion. So should we just think it as a sort of margin of safety that you've built into forecast, or are there sort of signs to this 40% decremental number?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

There's not. More precise signs. There's not. It was mechanical in nature, and it was basically $100,000,000 revenue at 38% margin or something like that.

[Andrew Obin, MD - Equity Research at Bank of America Merrill Lynch]

Okay, okay, exactly. Thanks so much.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Thanks.

[Operator]

Our next question comes from Scott Davis with Melius Research. Please go ahead.

[Scott Davis, CEO & Chairman at Melius Research LLC]

Hey, good morning, guys, and welcome, Chris, to the call. Thanks. Rich, the other kind of second derivative of all this chaos is potentially M and A valuations getting a bit lower. Is that something you're kind of I mean, it's probably a little too early to say you're seeing signs of it, but is it something you're anticipating?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Well, we've only had one meaningful transaction in multi world, and the valuation was pretty robust at the end of the day. I can tell you anecdotally that I'm aware of a few processes that have been pulled because of uncertainty. So maybe we're going to have to wait until we get a little clarity on the tariff tumult and then we'll see when assets come back and the like. I will tell you for ourselves, we're working on a bunch of stuff. A lot of it is proprietary, so it's not in the public domain of of whisper stuff out there.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Will valuations come down? I guess so. But not from what we've seen. But we've just got such a limited amount of data so far that it's hard to tell.

[Scott Davis, CEO & Chairman at Melius Research LLC]

Yeah, that doesn't surprise me. Hey, not to climb in a minutiae here, but, would you be willing to share the actual growth rate in the thermal connectors, that you had in the quarter?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I think that we said it was up 50%, I think, something like that.

[Christopher Woenker, Senior Vice President & CFO at Dover]

Over 100%.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

What's that? Excuse me. It was over 100%.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Comparative growth, not sequential. That would comparative.

[Scott Davis, CEO & Chairman at Melius Research LLC]

That's a big number. All right. I'll pass it on.

[Scott Davis, CEO & Chairman at Melius Research LLC]

Thank you, guys. Good luck. Thanks.

[Operator]

Thank you. Next, we'll go to Steve Tusa with JPMorgan. Please go ahead.

[Steve Tusa, Managing Director at JP Morgan]

Good morning.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Hi.

[Steve Tusa, Managing Director at JP Morgan]

Do you can you opine on like what your second quarter internal plan roughly looks like?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

No. It's embedded and it's embedded in our full year guidance.

[Steve Tusa, Managing Director at JP Morgan]

Okay. Does it look like it's around consensus?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Yes.

[Steve Tusa, Managing Director at JP Morgan]

Okay.

[Steve Tusa, Managing Director at JP Morgan]

And then just on your kind of tariff mitigation, I mean, everybody's kind of giving a little bit of color on the split of what they're planning to do. I mean, should we think about it as, first of all, how much of a hit will it be in the near term? And then I assume you're going to kind of work through it in the third and the fourth quarter. And then how much of that is price and how much is kind of these mitigation activities?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Okay. Well, look, clearly, if we put all the regions into the manageable category with the exception of Chinese imports, just if you look at the quantum on the slide, that we can make up a variety of different ways, whether it's productivity or price, or hopefully both. On the China One, we will make up largely in price. But I will tell you that we are aggressively negotiating with our suppliers in China about what the split is. So a couple of things.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I get that the percentage tariff rate right now is extremely high. I don't believe that that is going to last for the balance of the year. So this is just math, number one. And number two, like I said, whether we take the full brunt of the tariffs or not, that's up to our negotiations between what little bit of supply base that we have in China left and our vendors, and ourselves. I can tell you that anecdotally, at worst, we'll share it.

[Steve Tusa, Managing Director at JP Morgan]

Okay. And then just one last one. You said it was kind of like a top down approach. I mean, zero one zero is kind of rounding error in the end. How did you what is your macro assumption to a degree?

[Steve Tusa, Managing Director at JP Morgan]

I mean, like, why not zero two zero dollars why not zero three zero dollars Like,

[Steve Tusa, Managing Director at JP Morgan]

is

[Steve Tusa, Managing Director at JP Morgan]

your what I'm just trying to get a gauge of how well you can manage in the context of a downside economic scenario. Like what are you actually thinking from a top down? Or was it just like, hey, you know what, dollars $0.01 0, let's just strip it out?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Yeah, it was mechanical at the end of the day. And like I said in the commentary, what I could have done, I could have given you a bridge and then rerun FX and said, damn, the torpedoes were holding guidance for the year. I don't know what the derivative of the demand environment is gonna be in the second half. So, I basically, so it wasn't like we ran Q3 and Q4 casts into these types of scenarios. I just basically clipped it right off the top.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Now, do I have a variety of different measures baked in there? Sure. Is all the pricing that we've assumed, the incremental pricing, is that assumed in our forecast right now? No. So, to the extent that it sticks and volume remains where we think it's going be, that's upside.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I don't want beat the FX thing to death. I would tell you that Q1 corporate costs were high. We don't expect that to repeat over the balance of the year. So, there's a variety of different items that we have. What I can say is I think what we've proven in the past is in a downside scenario, we can flex our cost base relatively quickly.

[Steve Tusa, Managing Director at JP Morgan]

Got it. I don't want to ask about the torpedo reference, but thanks a Our

[Operator]

next question comes from Julian Mitchell with Barclays. Please go ahead.

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

Hi, good morning. Maybe I just wanted to push you a little bit, Rich, on the organic sales assumption. Because I understand you've taken a more cautious view, but you're not seeing anything yet that's concerning from customers. But in the first quarter, your organic sales were up overall around one point and the full year is guided at the midpoint So I understand you've sort of lowered the original assumption for organic sales growth for the year, but it's still an acceleration versus the first quarter.

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

So maybe sort of help us understand which businesses you're most confident in will see that step up in growth, please?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Well, yeah, Julian, as you know, if you go back and look at the seasonality of our portfolio, we tend to be relatively low growth and build inventory in Q1 and then step it up in Q2 and Q3. And then Q4 is always a little bit depending on what our view is about the following year, whether we run production performance. You've heard that speech before. So seasonality says that we should jump in Q2. Like I said, Q2 from a backlog perspective, we can see it.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

So, unless we start getting cancellations around here, I think that we're confident in terms of what the step up is in Q2. We'll watch order rates going through Q2, which will give us clarity on the top line for Q3, but it's a little bit early to tell. I don't even think we have even anecdotal data yet in as we get as we're in Q2 right now, but I'm not hearing anybody squealing that their order rates are falling off a cliff. So, we feel really good about Q2 because of the backlog. So that would support what our assumptions were for Q2.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

So basically, what I did was trim off the back end of the year just because of we need to see get some visibility.

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

That's helpful. Thank you. And then just a second question on the operating margins and the tariffs. So just to understand, is the main assumption that the net dollar tariff effect for the full year is around zero? And just if that's a firm wide number, is there any aspect whereby you may be negative in a given quarter?

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

And any color on which segment you think might have the biggest tariff risk?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

How do I want to respond to that? Okay. I understand what you're saying, right? If we were net neutral for pricing and tariff costs, it's dilutive margins. But that has an underlying assumption of, first of all, if you look at those numbers and you back out that the Chinese number is a full year number, we've already got a quarter under our belt that didn't exist, and we don't expect it to last for the balance of the year.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

What are we talking about here at the end of the day in terms of if that was the scenario? To me, that gets eaten up in mix in every segment, maybe with the exception of market mimes, which it's relatively easy to calculate at the end of the day. So I'm not if any kind of movement in margin is going to be on intra segment mix far more on price cost because of tariff.

[Julian Mitchell, Equity Research Analyst at Barclays Investment Bank]

That's great. Thank you.

[Operator]

Next, we're going to take our question from Michael Halloran with Baird. Please go ahead.

[Michael Halloran, Associate Director of Research at Robert W. Baird & Co]

Hey, good morning, everyone.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Good morning.

[Michael Halloran, Associate Director of Research at Robert W. Baird & Co]

So could you just give any thought process on if you're seeing any difference between your OpEx steady state consumable type businesses versus more your CapEx longer cycle type pieces in terms of orders or commentary from customers at this point?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Yes. I mean, the CapEx ones are the ones we're keeping a close eye on, right? So the volume churn, maybe that's not the right word on kind of the flow businesses, we just watch that on a daily basis and then we just take a look at it. The ones that we really got to keep a look on is our customers' CapEx projects that we are a precursor or a component supplier into it. And that's where the concern is.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Is everybody just going to keep going along? Are we going to run into a situation of, I'm worried about the macro and I want to see some clarity and do things get delayed a little bit? So that's the part that we're working on the most. And that's really the reason that we gave a little bit of haircut to the total volume for the year. Because if you get another month or so of drift, you're not going to be able to make it up in the balance of the year.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

So clearly, right now, the flow portion of the business is going well, but we'll keep an eye on it. It's the one that we really got to pay attention to is customer CapEx, where we're a supplier into it.

[Michael Halloran, Associate Director of Research at Robert W. Baird & Co]

And is the implication there, Rich, have you seen a little bit of drift in the CapEx piece? Or are you just worried that the drift will come?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I'm worried, right? Can't see it in the order rates, right? So we just have anecdotal conversations with all of our business leaders that are talking to these customers of and all the customers are saying, no, not everything's on path, everything's on path. But experience says, when you get into a situation like this, could you get some drift? Sure, right?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Is it going to be meaningful over the long term? It's irrelevant at the end of the day, but we're just trying to be prudent.

[Michael Halloran, Associate Director of Research at Robert W. Baird & Co]

Yep. Nope. Makes sense. And then just on the inventory side of things, how would you characterize your inventory and then your content in the channel? How would you characterize that inventory level?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I think we did a great job at inventory. We actually have more inventory than we would like. But I think we were on the front foot of bringing in a bunch of inventory, either because of issues around tariffs or buying forward, because metal pricing was quite good for us in Q4. So, we basically had our businesses postured going into this year of let's stack up on some inventory because if demand is good and we get the top line of 5%, let's make sure that we're able to work the supply chains and everything else because we know we can bleed it off in the back half of the year anyway. So right now, with exception on the structural steel around Vehicle Services Group, which we will take our time because it may be prudent to wait to see if we get a tariff settlement, and then just catch up on the volume in the back end of the year.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

That's the only one I can think of where we're we're being careful around tariffs as it relates to inventory.

[Michael Halloran, Associate Director of Research at Robert W. Baird & Co]

Makes sense. Really appreciate it. Thanks.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Thanks.

[Operator]

We'll take our next question from Nigel Coe with Wolfe Research. Please go ahead.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

Thanks. Good morning. So look in the spirit of sweating the small stuff here, if we look at the top line guide, the point cut to the top line, if we decompose that between price and volume, is it is there like a two point cut to volumes and maybe a point higher price to offset the tariffs? And then if we then take that thought a little bit further, would that mean maybe a three to four point cut to the volumes in the back half of the year? Just trying to judge how conservatively your position in the back half of the year.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Nigel, I don't know, Like I said, it's a mechanical adjustment. It's not a spreadsheet where we basically said, let's see all the price increases. And then on static volume, it is more or less, let's just take 1% off at current conversion margin and be done with it. I can't predict mix from a portfolio this diverse over the next three quarters and split it between price and volume. If volume stays at what we thought it was going to be going into the year and we get price, then clearly that's some upside.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

But getting all this price, is that gonna have a detriment on volume? And who knows at this point? So I think that we need to get through another quarter here and maybe get some clarity of where we are on this tariff tumult. And then we can start breaking this down into individual cells on a spreadsheet. But it's inclination rather than some mathematical adjustment.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

Okay. No, that's very clear. Thanks, Rich. And then just a couple

[Nigel Coe, Managing Director at Wolfe Research, LLC]

of quick

[Nigel Coe, Managing Director at Wolfe Research, LLC]

ones. Margins obviously were great. Normally 1Q is the low point. I realize mix is an issue, but would you expect 1Q to be the low point for PPS? And then did we detect a glimmer of hope in European heat pumps?

[Nigel Coe, Managing Director at Wolfe Research, LLC]

Just any thoughts there.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Yes, it's a glimmer of hope. So sequentially up. If you remember, our orders were up in Q4 on heat pumps, albeit off of a pretty low base. So European heat pumps has outperformed our internal forecast for the last two quarters. So we'll take it as good news there.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Now, that's being augmented by that phrase, heat exchangers goes into a variety of different applications. But yes, we were seeing orders, which is good news because that means that inventory in the system has been largely depleted at this point. What was the first question?

[Nigel Coe, Managing Director at Wolfe Research, LLC]

The PPS margins.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Oh, PPS margins. I think you have to be careful with that because MOG was down because it had a bad comp. So as MOG and DPC come up, they're great margin businesses, but they're dilutive to that. So I think you'd be a little careful about whether that thing keeps going up. I hope it does, But you do have a mix effect on the balance of the portfolio.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

You have to be careful.

[Nigel Coe, Managing Director at Wolfe Research, LLC]

Okay. Thanks, Rich.

[Operator]

Next, we'll go to Joe O'Dea with Wells Fargo. Please go ahead.

[Joseph O'Dea, Managing Director at Wells Fargo]

Hi, good morning. Can you just expand on the proximity manufacturer considerations here, where in the business you would have some of the bigger advantages, any positions where you would view yourself as being a little bit disadvantaged?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Not without giving out a lot of proprietary information about our view of the competitive stack by business. I can just tell you that we have competitors that import fully built up units of product that compete with us where we manufacture in The United States and maybe have some components that are imported. But as a percentage of the bill of materials, it's significantly lower. So we're on the lookout to take advantage of that. And that will all be around pricing, right?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Because everybody's going to go out a bunch of pricing and the signaling. And then you're gonna max, then you're gonna start doing the calculations between market share gains and price cost and a variety of things like that. So we do that work every year around here. So when things like this happened or when it happened back in 2020, we have different strategies by business relative to the cost basis of their competitors.

[Joseph O'Dea, Managing Director at Wells Fargo]

And then on vehicle lift, to expand on that dynamic a little bit to try to understand how much is you're managing the timing of demand for moves in the manufacturing base versus underlying CapEx demand trends where there's a little bit of a pause? It doesn't sound like you're seeing much pause in the businesses, but just trying to understand how you're managing timing.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Yeah. If you remember how this whole tariff thing lifted off, it was all around auto and all around NAFTA and auto is the one that bore the brunt of it, number one. And number we had big discussions, it seems like a long time ago, was probably like sixty days ago, about the consumer and inflation on the consumer. And this is a particular product that unlike the vast majority of our portfolio that has got auto and consumer exposure. So you would expect the reaction there to be the quickest.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

And we've seen that in terms of volume. Coupled on that, now we've got it happens to be the one business that we have that's got a higher exposure in terms of imported components, particularly from China. So some of that is market and some of that is self inflicted from a timing point of view. We put a bunch of pricing out there, and we'll see what happens in terms of demand and price cost going forward.

[Joseph O'Dea, Managing Director at Wells Fargo]

Got it. Thank you.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Yes.

[Operator]

We'll take our next question from Joe Ritchie with Goldman Sachs. Please go ahead.

[Joe Ritchie, Managing Director at Goldman Sachs]

Hey, good morning guys. Joe, good morning. I know you don't want to give us a 2Q guide, but let me just kind of ask a question on organic growth because it is the one quarter that you guys have a great deal of visibility on. So is it fair to say that the growth rate you're expecting at this point in 2Q would be above the 2% to 4% range for the year?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

No. I don't think so.

[Joe Ritchie, Managing Director at Goldman Sachs]

Okay. Okay. But within the range?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Yeah. Fair enough.

[Joe Ritchie, Managing Director at Goldman Sachs]

Okay. And then I and then I wanted to just ask a question. I know we don't usually spend a lot of time on DII, but I think I heard you say that you expect it to be the the the greatest margin expansion story for the from the segment perspective this year. Just talk us through some of these structural cost actions that are occurring in the business and maybe what the ballpark expectations are for margins this year?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Let me answer the DII question. That's not where we expect the largest margin expansion. That would be in clean energy and fueling where we expect the largest absolute margin expansion from a year over year point of view. Now, DII on the other hand, if you go back and look historically in terms of the margin, I'm doing this out of my head, but it almost seems like it's about 100 to 125 basis points of margin expansion per year over the last five years if you strip out kind of COVID year where it's all over the place. So not to take away anything from the management team of DII, which has done a fantastic job in terms of their cost to serve on relatively lower single digit volume growth that the absolute profit or cash flow generated by that business has been exemplary.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

On the clean energy side, that's where we've done the restructuring in the prior year. So you've got the roll forward. What we tried to signal here on that slide about our CapEx projects, we told you that we're doing a bunch of acquisitions and that we were going to begin to intervene on the footprint in 2025. We're ready to get that all kicked off. And as we kick it off largely in the back half of the year, we'll give you the restructuring charges and we'll give you the roll forward benefit going into 'twenty six.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

So it's a combination of volume that we're getting. We've a really healthy mix as opposed to the previous year in that segment. And then you've got roll forward restructuring benefit this year and another set of roll forward coming for next year. We're going to get that business to 25% EBITDA margin.

[Joe Ritchie, Managing Director at Goldman Sachs]

Got it. Super helpful. Thanks for the clarification.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Thanks.

[Operator]

Our next question comes from Andy Kaplowitz with Citigroup. Please go ahead.

[Andrew Kaplowitz, Managing Director at Citi]

Hey, good morning, everyone. Rich, just

[Andrew Kaplowitz, Managing Director at Citi]

following up on DPVS. You mentioned a tough comp at MOG in Q1 and Pumps and Process still put up 7% revenue growth and over 30% margin. So I think given MOG comps get easier now in Q2, does Pumps and Process potentially continue to accelerate here? And I think you said in the recent past that biopharma was trending up higher than your low teens forecast for '25. I think today you talked about thermal connectors up triple digits.

[Andrew Kaplowitz, Managing Director at Citi]

Are those businesses going to continue to run hotter for the rest of the year, you think?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Not at the rates that it's going at. I mean, we're kind of in the liftoff phase. Going to look, if we can post 35% operating margins and 7% growth for the balance of the year, it would be a fantastic result. I think that just the compounding effect of that growth just gets tougher and tougher. And you run into market limitations and capacity limitations of the market at the end of the day.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I think that we're really, really and the gain on share of those particular product lines in the two sides. But I don't think let's not overlay something that's not realistic in terms of an acceleration from here.

[Andrew Kaplowitz, Managing Director at Citi]

That's helpful. Maybe just looking a little more closely at DCES, because I think in the recent past, you've mentioned you expect your cryo related businesses, net selling, to grow double digits. What are you seeing there? I know you're forecasting mid single digit for the year. Last quarter, you started at 2%.

[Andrew Kaplowitz, Managing Director at Citi]

That's obviously not bad. But is there anything holding that business down on the

[Andrew Kaplowitz, Managing Director at Citi]

revenue side?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

That's a flow portion of the business, and then it's got a project related portion of the business. The flow part of the business is doing well when we talk about the cryogenic component side of it. Then you've got project side. And the project side is the whole retail fueling side is project related, which we did terrifically, which drove the margin in Q1.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

We expect that to kind of go through, but we have to be a little bit cautious on the project side because that goes into that's customer CapEx at the end of the day and we're trying to get some clarity on where we go from there. But the setup itself in terms of the margin mix of where the demand's coming from and the structural cost takeout makes us feel pretty good no matter what the back half dynamic is in that particular business.

[Andrew Kaplowitz, Managing Director at Citi]

Appreciate the color.

[Operator]

And

[Operator]

our last question comes from Brett Linzey with Mizuho. Please go ahead.

[Brett Linzey, Executive Director at Mizuho Financial Group, Inc.]

Hey, good morning. Thanks. Just want to come back to price. So the incremental price not fully baked in the guide, but I guess in terms of what you've announced to the channel and customers, do you have all the price out there that you need to mitigate the tariffs for this year?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I hope so. If we could get some clarity on what the tariffs are actually going to be for the year. We just put out pricing last night. I got an email. So I think the vast majority of it is out there, but it's a little bit of a moving target under the current circumstances.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

And then price is always signaling at the end of the day and there's a lag time in price. So it's not as if we raise prices tonight, we got to burn the backlog off and you know the drill. So I think everything that we know about is out there. We'll see about realization.

[Brett Linzey, Executive Director at Mizuho Financial Group, Inc.]

Yes, makes sense. And then maybe just shifting back to FX, so headwind flipping to a tailwind here and understandably, there's the gyrations you don't want to mark to market. But I guess if you were to strike the line today, how are you thinking about the net impact with all the hedges and everything in terms of the tailwind at today's rates?

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

I think the last time we ran it, for what we trimmed out of the guidance, we'd put it right back on FX. Yes. Believe it or not.

[Brett Linzey, Executive Director at Mizuho Financial Group, Inc.]

All right. Got it.

[Richard Tobin, President, CEO & Chairman of the Board at Dover]

Yes. Thanks a Thanks.

[Operator]

You. And that concludes our question and answer period and Dover's First Quarter Twenty Twenty Five Earnings Conference Call. You may disconnect your line at this time and Have a wonderful day.

Participants

Executives

• Jack Dickens, Senior Director of Investor Relations
• Richard Tobin, President, CEO & Chairman of the Board
• Christopher Woenker, Senior Vice President & CFO

Analysts

• Jeffrey Sprague, Founder and Managing Partner at Vertical Research Partners
• Andrew Obin, MD - Equity Research at Bank of America Merrill Lynch
• Scott Davis, CEO & Chairman at Melius Research LLC
• Steve Tusa, Managing Director at JP Morgan
• Julian Mitchell, Equity Research Analyst at Barclays Investment Bank
• Michael Halloran, Associate Director of Research at Robert W. Baird & Co
• Nigel Coe, Managing Director at Wolfe Research, LLC
• Joseph O'Dea, Managing Director at Wells Fargo
• Joe Ritchie, Managing Director at Goldman Sachs
• Andrew Kaplowitz, Managing Director at Citi
• Brett Linzey, Executive Director at Mizuho Financial Group, Inc.