Ecolab (ECL) Q2 2026 earnings call transcript

It is now my pleasure to introduce your host, Andy Hedberg, Vice President and Ambassador Relations for E. G. L. A. P. Thank you, Mr. Hedberg. You may begin. Thank you, and hello, everyone. Welcome to E. G. L. A. P. 2nd quarter conference call. With me today are Chris. Bex, E. G. L. A. P. 2nd Chairman and CEO, and staff work on our CFO.

The discussion of our results, along with our earnings release, and the slides referencing the quarter of the results, are available on E. G. L. A. P. 's website at E. G. L. A. P. com slash Investor. Please take a moment to read the fashionary statements in these materials, which state that this teleconference and the associated supplemental materials include estimates of future performance.

These are forward-looking statements and actual results could differ materially from those projected. Factors that could cause actual results to differ are described on the risk factor section in our most recent form, 10K and in our posted materials. We also refer you to supplemental blue hearings for shared information in the release.

With that, I'd like to turn the call for Chris. Bex, for his comments.

Thank you so much, Andy, and welcome to everyone joining us today. While we delivered another strong quarter with XR-18 performance across our business, adjusted E. P. S. grew 11%, driven by XR-18 organic sales growth of 5%. Stable organic growth margin and continued strong productivity. This performance reflects the strengths of our gross model, and most importantly, the power of our global team to deliver for our customers every day in any environment.

Last quarter, we talked about the second quarter being a short transition period. We entered the quarter with commodity costs increasing and the expectation that they would remain high through the year. We started the quarter with very little surcharge pricing, but expected benefits from the surcharge would progressively build through the quarter. That's exactly what happened. We moved quickly to implement the global energy surcharge, backed by incremental customer value, as we always do.

As a result, pricing strengthened to 4% in the second quarter, and we expect the second half to be in our targeted 5% to 6% range. This is allowing us to offset the impact of rising commodity costs on our margins and E. P. S. this year. Our global team executed extremely well through this transition period. In just one quarter, we have solved increasing commodity costs, continued to win your business, grew volumes, stabilized organic growth margin, and delivered double-digit E. P. S. growth.

Importantly, momentum continues to strengthen across the portfolio. Volumes grew 1%, despite the nearly 1% headwind from customer operations disrupted by the conflict in the Middle East, excluding this underlying volume growth accelerated from the first quarter.

Growth in our core business is strengthened with food and beverage accelerating to 7% growth. Institutional specialty growing 4% and growth in like water improving, all supported by strong new business from our one E. G. growth initiative. At the same time, performance in heavy water and paper improved.

Our growth teams continue to show strong momentum delivering strong double-digit growth. Life sciences accelerated to 15% growth, driven by very strong share gains in value processing and farmer and personal care, and improved performance in purification.

We have been investing in Thailand, capabilities, capacity, and breakthrough innovation for years in this high growth business, and those investments now are clearly paying off.

In value processing, we continue to take market share with the innovative rising technologies we've launched over the last few years. As a result, our business continues to rapidly scale as customers move their drugs into commercial manufacturing.

Life sciences margin performance was exceptionally squar, delivering a mid-20% operating income margin, giving a strong indication of the high margin profile this business has. During the quarter, we benefited from very strong sales growth and a spike in bioprocessor. While underlying operating income margin is expected to remain in the mid-20s, reported margin in the third quarter is expected to be in the high teens as we continue to invest in these high growth, high margin business.

Equal of digital grew 27%. Reflecting strong adoption of software and connected solutions that help customers optimize performance in real time. Recent launches of solutions like dish IQ, aqua IQ, kitchen IQ, and CIP IQ are performing very well and are expected to continue to have drive long-term growth of more than 20% for equal of digital. Best elimination also delivered a strong quarter with 7% growth, driven by share gain from a one-color growth initiative and continued expansion of our test intelligence platform.

We've deployed nearly 800,000 connected devices at customer sites and continue to expect to reach one million connected devices by your end. With the unique insights from past intelligence, we aim to deliver nearly 99% best-free environments for customers on the platform.

And grossing global high-tech accelerated to 29%, reflecting very strong demand across both microelectronics and data centers, driven by the rapid build-out of AI infrastructure.

We further strengthened our position in this market with the acquisition of Coolite systems, which close on July 2nd. Coolite is up to a very strong start. With year-to-date sales flows prior to acquisition of more than 100%.

With this addition, global high-tech is now approaching one-and-a-half billion dollars in sales, annualized sales up from approximately 150 million in 2021. This reflects the strength of our strategy and sustained investments to capture the long-term opportunity in advanced computing.

At the heart of AI is water. Water is required to produce, to power, and to cool chips. We are now the only company with integrated solutions across that value chain. And with all the talks around data centers and AI infrastructure, the world truly needs companies that can help build data centers the right way. With one of them, and we committed to lead that journey.

Together with the Vivo and Coolite team, our global high-tech platform is expected to grow more than 25% annually, reaching 4 billion dollars in sales by 2030, with an operating income margin of 25%. These targets represent an increase from our previous expectations of more than 20% growth and 20% of our margin reflecting the acceleration we're seeing in this business.

Global high-tech is now a largest growth engine. On a pro-former basis, including our Vivo and Coolite, our sales growth would have been approximately 7% in the second quarter, demonstrating already the two points of incremental growth these businesses will add to the overall company.

The rapid growth of global high-tech and our other growth engines continues to shift the collapse portfolio to higher growth, higher margin businesses. In 2025, our core businesses represented about 70% of our sales, growing low single digits with oil margins just about 20%. Our growth engines were approximately 15% of sales, growing low double digits with oil margins of nearly 20%. And our underperforming businesses represented about 15% of sales with low single-digit sales declines and oil margins in the mid-10s.

In 2026, performance has strengthened across all three groups. Our core businesses are not growing mid-single digits with oil margins getting further above 20%. Our growth engines are growing in the low teens with oil margins of nearly 20% as we continue to invest heavily behind these attractive high-growth opportunities. At the same time, our underperforming businesses are stabilized while maintaining operating income margins in the mid-teens.

What is the most encouraging is that all parts of the portfolio are moving in the right direction. Our core is performing well, our growth engines are scaling faster, and our underperforming businesses are improving. As a result, the mix of our business continues to shift toward faster-growing higher-margin markets.

Looking ahead to 2027, we expect this trend to accelerate further. Our core businesses should continue to deliver strong performance while our growth engines, which I expected to approach 25% of the collapse say, continue to compound that double-digit rates and play an increasingly important role in driving growth and margin expansion for E. Colab. That future is already taking shape today.

We're preparing to introduce a breakthrough innovation at Super Compute, a new integrated end-to-end cooling platform combining cool ITs, liquid cooling technologies with E. Colab's 3D trace of digital capabilities to optimize water, power, and compute performance at scale.

We will be posting an invested day at Super Compute in Chicago on November 17th, where we will share more about the growth opportunities ahead and how they will strengthen our long-term performance.

As we move into the second half, we expect continued momentum. Pricing is anticipated to strengthen to the 5 to 6% range as energy surcharge benefits are fully realized. Volumes are expected to continue to grow as strong new business wins, more than a set ongoing disruption in the Middle East. As a result, we expect organic sales growth of 6% to 7%, helping drive an adjusted operating income margin of 19% in the second half, keeping us on track to deliver our 20% of our margin next year.

With this momentum, we're increasing our outlook for 2026, where we now expect EPS in the range of 8.05 to 8.25, rising 7% to 10% versus last year. This range reflects strong underlying performance and a short-term impact from non-cash monetization and financing costs from the cool IT acquisition. Beyond this year, we continue to expect adjusted EPS growth, including cool IT, to accelerate over strong 12 to 15% growth rejection.

In closing, our business continues to strengthen, with the core improving and growth engine scaling. With this, our portfolio is shifting faster toward higher growth, higher margin, and markets. Just as importantly, our team continues to execute at the very high level to deliver our customers every single day. We've never been better positioned to deliver long-term organic sales growth of 5% to 7%. Expand operating income margins well beyond 20%, and continue strengthening our EPS growth algorithm.

So, thank you for your continued trust and investment in your lab. I'll now turn it back to Andy for tuning.

Thanks for talking about some of our formal remarks. Operator, would you please begin the question and answer period?

Yes, Tim. You understood that right. So we've been very consistent, by the way, on making sure that we stay on our commitment of delivering 20% operating income in 2027. So that remains unchanged. I'll ask as well, Scott, to add some color to it in a second. But before we get there, our expectation and everything that we're doing is ultimately so to drive our commitment of 5% to 7% organic sales growth, the 20% margin, and the strong 12% to 15% earnings per share growth.

And ultimately, our job is to make sure that everything we're doing, well, not only leads us to that, but leads us to beyond that. And that's especially true for the 20% in 2027. And I spent together with the team a lot of time as well to think how do we get beyond the 20% after 2027. And the vast majority of our businesses today are already either close to 20% or beyond 20%. So we know, well, how to do that. The second half of this year, the adjusted OI margin will be at 19% as well. So all leading nicely towards the 2027 story. It's going to be important to keep in mind that the first half and second half of 27 will be a tale of two stories because of the laughing, obviously, of the cool idea acquisition that closed early July, so the 12 months meet next year and then the second half of 27.

In other words, so the second half of 27 will be even stronger. But as mentioned before, so my objective is really so to not only deliver on those commitments beyond 26, but really making sure that we get beyond the 20%. That we can strengthen these five to seven on the organic and also on the earnings per share, the 12 to 15. Well, I guess that's going to get stronger as well with time that Scott, you want to add any color to that.

Yeah, the only thing Tim that I would add is that next year's you might remember the now go amortization falls off. And so that's also as part of what you said, how do you reconcile that that we do get the benefit of annualizing the cool IT andization, but offset by the now going position.

Thank you.

Good afternoon, Christopher. I was just hoping within high tech, could you just help us with the current mix of the business between data centers and micro electronics or how you want to rake it out and kind of, you know, just some more color on your confidence and getting to that four billion target, I guess.

Yeah, I'm. So I live obviously since we don't go much in detail. So for the size of the business right now, but it's it's roughly one and a half billion annualized saves. So right now when you have our legacy business micro electronics and data centers within legacy. And then, and then, which is in micro electronics and each of them is roughly half a billion today of annualized sales. That's how you get to the one and a half billion. And for perspective, we were 150 million, just a few years back. So this is a platform that we've built over the last few years, extremely rapidly.

And the very good news is that all three elements are growing so very nicely. You've heard about the legacy business growing 29%. We've all expected to deliver some meetings for this year and cool idea being north of hundred percent. So if you added all up, so you get to a very good place over trajectory of 25% growth for the next few years leads you to the four billion by 2030 and feel quite confident that that's very realistic.

Thank you.

Just wanted to follow up on the global high tech. So you mentioned the integrated end to end cooling platform that you plan to launch at the super compute. I was just wondering if you could help or discuss how that can help drive more cross selling opportunity across all the different global high tech offerings that you have. Thanks.

Thank you Ashish. Well, generally, as we mentioned, when we did the acquisition of cool IT, adding cool IT to the data center multiplies between three and five times the sales opportunity that we have compared to legacy in a data center. So much bigger, obviously, than what we had before. So that's the penetration of solutions opportunity. But the most interesting part is when you put all the pieces together from a CDU integrating, 3D trays are controlled technology to a 3D trays are coolant to cold plates that are integrated in that system. And ultimately, an end-to-end optimization system to reduce the power used to cool while using zero net incremental water, because everything is within the system is the biggest upside of users for our customers.

And with everything that's happening right now in the AI infrastructure and data center pushback in the communities. Well, as mentioned, the world needs a company that can help this industry scale fast while doing it the right way both in terms of cost performance and in terms of impact in communities and natural resources. So I think that we very uniquely placed here to do that. And it took us just two weeks basically to get the 3D trays are technology embedded in the next generation of the CDU so for cool IT. It's a good example of how the two teams have come together. So it's going to be really good to share with all of you and with customers, obviously, a super compute how everything comes together.

And last thing I'd say, we really don't get it from an ecosystem perspective. We will not be owning everything. We don't want to get into a lot of hardware, obviously out there, but we want to be the platform that ultimately all the other elements come around in order to truly maximize cooling, minimize the water and energy usage and maximize ultimately the uptime. And performance of the data center as well. So a typical legal story with outcome of the operations is the main objective we have.

Thank you.

Thanks for taking my question and congrats on some really solid results. Just wanted to ask or dig a little bit deeper on the life sciences side of the business. And clearly, there's a lot of interest on the bio processing side. We've seen a number of drugs hitting the market or starting to hit the market. At the same time, you've outpaced the other major competitor in the space by a decent amount. So I guess can you help us to think about how much of it is just the end market growth, how much of it is share gain and how much of it may be just some of the capacity unlocked that you've been working on as well.

Thank you, John. Very pleased with the life sciences team. It's been a few years in the making. As you know, we started that business in 2017. It was less than 100 million. And today it's close to a billion. So 10 times the size of where it was back then. We made the acquisition of pure light in 2021 and the COVID implications on the markets have been a little bit difficult to manage for all industry, by the way. But when I look back and think about what the team has done in how to build capacity capabilities, relationship with customers trust that we can really be the best partner in the future. Well, I'm super pleased with what the team has done.

We were not on the trajectory. We had initially planned, as you know, since the acquisition of pure light, but we have always been growing when the rest of the industry was not. So not in line with what we had expected, but better of that competition. The very good news right now, John, is that we're not only outperforming the market and competition, but we're biking on with our returns expectations that we had set early in that process.

So really happy with the trajectory, the returns, the work that's been done by the team. And ultimately, the most important element is to listen to our customers that are really pleased with the agility of the team, the innovation strength of this team being very entrepreneurial need to be as close to them what they need short term in order to deliver the life savings drugs that they trying to bring to the market. We knew we would not become in the short or medium terms of the largest life science player in the industry, but our objective to be the best performing and the best partner of our customers. I guess that we're pretty close to that ambition right now.

So early, but good news for the future. Thank you.

When the business was required, you mentioned perhaps a 30% type annual growth rate model going forward. Given the hundred percent plus growth rate in the first half of the year, should we update our models to a higher growth rate over the next few years here for cool IT?

So really like this acquisition. That's one of those, one of many where a business or before you embark on such a journey. I had my set of sleepless nights and when I look back, well, I'm really saying I'm glad we did it because this is the best technology in the market, the best performing business as well. So in direct relationship with cooling technology and I've been so impressed with the team that I've met at cool IT and how these two teams are coming together.

Now David, it's been two or three weeks that we together very early and we're getting to know each other, starting to work together with customers. So it's so early that we're not in a position to change anything. But if I look at the trajectories, well, they're better than what we had thought. That's the good news. But when we did our plans for the next four, five, ten years, a lot can happen. And that's why we've picked a trajectory of 30%, which I think is the right one. True, that the first half of this year for cool IT has been way better than that. Acceptance by customers of the latest technologies of cool IT is extremely good.

And even better, when we come together with CQL app, so that's an even better sign. And that's the reason why we'd like to be together with you in November at Super Compute. It's basically we will have four, five months of working together with cool IT. We better understand how it works, what's to like, what we need to work on, what's the new type of trajectory.

So truly to change right now, but give us the time, the next few months to really get the teams together, making it really well work together with the customers. And in November, we would sit together to share with you how do we see 27 and a year is beyond.

Thank you.

First of all, just kind of how you see the trajectory of some of the bioform applications versus some of the purification and resins. You know, how much this is attributable to basically the beginning of the ramps in both King of Prussia and Wales. And then also, probably from wrong, but a lot of that business initially started off in larger scale in Europe and it seems like you've been making a lot of investments in leeway with partners in the United States. So I'd love to kind of just drill down to just anything that you can do to basically increase the probability of the street sustaining this type of growth and trajectory, especially relative to the, you know, 27 margin targets.

Thank you. So it's been a few quarters now that life science has been on the high end of the expected performance, which is a very good sign. And I've been very open. So with you that the early years of that journey, we were growing going faster than the industry, but we were not growing as fast as we were expecting for hours expecting. But that's a time behind us and it gave us the opportunity to build those capabilities and these capacities that we needed around the world. We just opened our latest one of the biggest plans in China a few weeks ago. That's going to give us a big footprint in a market that's going really well for life science, the industry and for us, by the way, expanding as well around Asia in Europe, the core of pure light.

So came from Europe as well, both Eastern Europe and waves, as you mentioned, so for bio processing and capacity as well in North America that we've kept building and that we will keep building. It's always been part of our strategy to be on each of the three continents, North America, Europe and Asia, and we're almost there. And it's never going to be enough because it's growing fast. That's a good problem to have as well. We have great ease as well that we had to build bio processing.

If the fastest growing one, it is a very interesting, very technology leading type of business that we will keep at the anchor in the bio technology industry. But I'd like to add as well, our whole pharma and personal care business that's focused on contamination control, basically making sure that the environment where the drugs are being produced is as healthy as it can be. This business is doing extremely well as well at the same time.

And the purification in business that's kind of lower grades in type of products, but still in the same platform, we were capped by capacity constraints.

As you know, that's changing with the opening of the plant in China. So that's going to help us as well sustain the growth trajectory of that business and going forward. So we're in a place where we have very good momentum. Our long-term target was 10 to 12% by the way, so we are at that range right now emerging. So to get to worth 30% of our target, we will get there. We see the line of sight to get there, but I want to make absolutely sure that we keep investing in capacity and capabilities in the meantime in order to get the business that has not only the critical mass, but the right momentum to keep winning in the future.

By science, which is ultimately what's most important for our customers and each working really well. Thank you.

I wanted to ask a little bit about your old economy stuff. I was struck by your comment that you think paper could see some modest growth here in the third quarter. I mean, do you feel like we're past the bottom in some of these categories or is it just maybe less bad and pricing is helping? Or can you just help us frame what's going on in some of your older economy stuff? Thank you.

I'm going to call that whole economy, but it's more for traditional businesses. So for sure, we know that those businesses are not going to grow as the growth engines do. That's why we have that differentiation, by the way, between growth engines, double-digit type of business, our core business, which is the key of our company. I cannot think this mid-single and then you have the lower growth businesses that I've called with some affection underperforming because they were underperforming for a while. And to your point on paper, what's the good news is that it was fairly positive in YouTube, which is a big deal obviously for that business after more than a year being in negative territory impacted by the industry that was not doing great.

And then an industry that was consolidating because of that. So we lost a lot of paper mills as well. And when we lose a paper mill that has a big impact. And I will say it's because they use a lot of other solutions. And we can see that the last six months that consideration stopped, opposed, and that things are getting slightly better any year as well.

We are a bit better than the industry, so we're gaining share, which is a good thing as well. So very positive in YouTube for the paper team. But I feel really confident with the great leadership that we have there to get even more positive in Q3 and beyond. So I'm cautiously optimistic with that business and saving good margins, by the way, important to keep that in mind. But yeah, they improving and they're in positive territories or their generating value for shareholders, which is the first step towards greatness.

Thank you.

Can you just dig in a little bit on bio processing? Are you mostly winning share in the early stage preclinical? Or are you also getting equivalent share gains in the later stage commercial? I'm really, I'm trying to dig into your capex. You're talking about big capex. I think was the word you use. Are you trying to get your capex additions ahead of your growth rate so you can go into adjacencies?

Or should we be thinking about this capex cycle as this is kind of the run rate that you'll be continuing? Into the 2030s because that's just how fast the end market is growing.

So a few things. Key Lawrence. First, bear with me. I'd like to be careful into how much details I'm going on the sensitivity of the competitive situation. There's very few players in that industry. We know each other very well. We all understand that what we do well is sustaining lives around the world. So I'm very careful. So I'm going to talk about that. But generally we have a very good position now across the whole spectrum between early innovations, clinical trials or various stages and commercial drugs. The team has done very well in terms of jumping ahead the queue in some cases to make sure that we were covering the whole chain. And as you know, it's a type of approach you need to have a lot early in order to get a few big ones later.

So that's the rule of the game, obviously. In life science. And now we are ideally positioned as the team has done in order to make sure that we can sustain and accelerate the growth in the future. The question on our investments.

We've clearly been investing ahead of the growth in that business. That's why we were talking about reporting growth in the mid teens and the line growth in the mid 20s. Well, those 10 points where investments ahead of the growth as we want to see that business driving 30% years type of margin at cruising speed. But I don't want to get too quickly ahead of that. This is an industry of perfection.

The quality of the products of the team of the delivery of the innovation. It takes time. It takes depth. It takes passion and commitment to get it done. But as you can see now, so the underlying margins are getting so closer to the reported margin, which is a good thing. Chitu was a little bit of an extreme because we had a spike in bio processing. It's not every quarter created the same, but generally the trajectory is very good. So I like our competitive situation. And as mentioned before, we don't have the ambition to become the biggest. We want to become the best life sciences business in the industry.

Thank you.

So just wondering if you can tell us where you are in that journey, given it sounds like the growth rate of cool IT is really moving, maybe faster than originally thought.

So generally, directionally, absolutely no change. What you've said, you're still valid with one small exception, which is a good one is that the growth seems to be faster than what we had expected for all the reasons I mentioned before. The leading edge technologies that cool IT is having the combination of equal and cool IT coming together, providing the market with something that no one else can provide in terms of higher performance, no water and less energy to do the same job as well. So generally for the company, I don't see peak changes, but for our high tech business, we might have to go faster, which is exactly what we'd like to see and you'd like to see, I guess as well.

But the thing else, maybe Scott, if you'd like to add any perspective on CapEx in general. Yeah, just more broadly, as Christoph talked about, we will invest ahead of growth in the growth engines, but expect that the CapEx as a company to remain similar to where we're at now for the next couple of years. And we've talked about this for a little while, like we've made around the 7% the next couple of years, because we are investing ahead for the global ITech business in life science. But then as we scale these growth engines, we'll continue to evaluate it, but we're always going to take advantage of these tractor returns.

Thank you.

I guess, can you share details on what is contributing to the increased traction there and how much acceleration do you expect to see within this business over the coming quarters?

So, for the beverage, which is one of those core businesses that we have, that I think is one of the best global businesses we have is one of the best teams around the world. Serving a very sophisticated industry of consumer goods, companies with big brands everywhere around the world. So it's a business I love. And I love it even more looking at the performance that this business is driving. You mentioned 7%. If you remember, so our long term target for this business is 5% to 7%. So they are at the higher end of that range. And why that?

So it's not just two teams playing nice together to serve the customer. It's an integrated team with experts in food safety and experts in water working on the same team for the same customers anywhere around the world.

So that's been the main driver. The execution has worked really well. We're spending what we've done in North America now around the world that will take some time, but it's also driving some good runway of momentum. So for the years to come. And last but not least, it's what you're hearing as well on the market producing safe food. Well, it's something that is pretty top of mind for everyone right now being in restaurants being in retail.

And what we're doing is even more in demand than what it was in the past. Thank you.

Maybe talk to the margin contribution then why not push through a faster transition to the subscription model given the value proposition of the offerings. Thank you. So what you said is absolutely true as well on what you said of pushing for more faster. We're speaking the same language here. There's a lot of execution that needs to happen, obviously in between. But I'm very pleased with the progress that we've made over the last couple of years. As you know, it's a pretty new business as a business, not as an activity.

Because we've been on digital since we invented 3D tracer and just for memory. It was invented in 1991. So it's been a long time that we've been in connected devices. But they were obviously not connected to the cloud to mainframes and all the complicated technology that we had. So today, that's the good news. Well, we have hundreds of thousands of connected devices and thousands of customer locations around the world. So we have a great install base with a good critical mass that only a few companies have out there. But we know that for almost 30 years of that journey, we were doing that for free without going for subscriptions and making sure that we were remunerated for the value and the offering that we are providing for our customers.

So we changed that two years ago. That was a change for customers, not a change for the industry because that's what tech companies are doing for a living. As well as making sure our teams know how to do that. The customers realize that, yes, they pay for something that is something that we're used to. It's new, but it's driving as well, incremental value. And that's why we've introduced internally that playbook, which we call the 100 model Eric, which is basically to say we want to connect 100% of the customer locations. 100% of the applications within those customer location and that 100% of them generate revenue.

If you add all that, it drives a potential value of 3 billion. So 3 billion is the revenue we could generate doing exactly that within our current customers. We had 500 today. And that's why growing towards the 3 billion is the job number one. We all like that we like to grow even faster and I guess we get there at some point. And what's even better is that the 3 billion opens 10 incremental billion to it for applications that we haven't sold yet or customers that we haven't sold yet. So early on that journey, but on a very good trajectory so far.

Thank you.

Yeah, thank you, Shlomo. It feels like for the short term for the next few quarters that the 1% run rate seems to be the right one. As you said, we were closer to 2 without the impact of the Middle East, but okay, we live in any perfect world and there will always be something somewhere obviously happening. We were all hoping that the Middle East, we saw it so much earlier, doesn't exactly the case right now, so we're living with it. And that's why I'm saying, okay, the 1% trajectory is a healthy trajectory that I really like, but it's 1%, is obviously the company average. So you have the ones that are way ahead of that, and those are the growth engines in ITAC, in life science, in past, but also food and beverage has had some very good track records in volume.

And then you have the other extreme of the paper and heavier industries that were in the negative territory. So that's the beauty of the ecological portfolio that ultimately, whatever happens in one business or one region in the world, we can keep a steady momentum, which I believe the 1% for the next few quarters seems to be the right assumption to make. And things improve out there, okay, it's going to be better, but directionally, I think it's going to be 1, 1 plus trending in the right direction.

And the Aviva in Cool IT, by the way, which are not in those numbers because they're not organic by definition. Well, they add almost 2% points to eat as well. So you have this 1 plus the 2 plus or minus the Middle East that talked about, you get to some very healthy type of volume growth, which is exactly the place we wanted to be. Thank you.

And then the second part of the question is, how is structural pricing progressing and thoughts in second half here. Thanks.

So we've always been pretty good at pricing. I think that we've become really good at value pricing because of all the practice that we were given to the last few years to manage through that. Let's not forget stepping back as well as the ECLAP for a very long time had an approach of getting so the incremental cost back in dollars, your one and the margin, your two.

So two years cycle. And now in G2, we managed to do both within three months, which is really a major change of the model. And that's mostly driven by his value pricing approach driven by his total value delivered that we providing to customers that customers are seeing that, yes, they pay more. But they're getting more as well. And that they are in a better place financially, which is where we laser focused to deliver today. It takes some time to get it done the right way. But the fact that our retention of customers has remained super stable during all those years. Well, it's a good indication that the approach is the right one. It's good for customers.

It's good for ECLAP. It's good for shareholders as well at the same time. So, can you question on energy surcharge versus pricing? It's always any perfect science because some of the businesses go straight into structural price. Others go in energy surcharge and move then afterwards in structural price. Honestly, I don't really care so how the whole thing is happening as long as we get to the right place for us and for the customer as well. And we accepted Q2 with 5% of pricing. So, when we're talking about 5 to 6% in the second half, well, it's the exit trajectory of the second quarter. So, it's pretty solid, to say the least, which is why I feel quite good that we can get this positive cross margin, organic cross margin in the second half because the team is really good at it.

We have all the systems, the processes, the customers understand that. And we can manage almost any situation that's happening in the world that we can't predict, but we demonstrate that not only we can do it, but we can get it done in pretty short term timing as well.

Thank you.

And do you spend the margin improvement or do margins go up as you deploy digital and agenic AI? Well, John, it's going to be a sequential work year first on the top line. So, our targeted trajectory is six to eight percent. So, with the seven percent, we kind of like in the middle of the targeted range, which is always an important first step to me delivering on our promise first and then improving from it. The ambition of the team, which is an exceptional team, by the way, that we have its best elimination.

The grades are transforming the business, great innovation, working with the largest customers in the world in a difficult environment. The transformation they're doing is remarkable. I'm so impressed with everything that they're doing. So, it's going to drive top line and ultimately even stronger. That's going to be the other good. But back to the question on margin. It's a bit like the life science question. When we get into new technologies, new innovation, they suddenly to create the right foundations first before we really get the benefits of it. So, yes, in the margin of best elimination and in the operating income growth, you have investments behind so fast intelligence.

But I'm going to continue, as I've said, so 800,000 connected devices will be now out of one million by the end of the year. No other company is there around the world. Well, that requires efforts and investments. But ultimately, we know it's going to pay off balls of top line and on bottom line in one of the businesses with the highest margins and the highest return as well at same time. So early investments and ultimately better returns down the road.

Thank you.

Yeah, thank you. So two very different questions. Let me start with the second and then I'll go to the first one and then I'll ask Scott as well as to add to the return question. So under on institutional really pleased with the steadiness. The 4% in institutional specialties in other restaurants, hotels, and specialty retail and quick serve. Well, allows us to capture consumers going to whatever segment cheaper or more premium depending on the economic state of the country, wherever our customers operate. So in a place where wherever people are going, we capture that girls. So the 4% I think is a pretty good steady type of performance for that business, keeping in mind that food traffic in the U. S. even restaurant is down 5%.

You're over here right now. So the growth of the 4% versus the minus 5 in the restaurants is quite remarkable. So it's not a growth of life science of digital or GHT, but for such a traditional industry, we clearly gaining share and we're gaining margin as well at the same time. Because that business is in the low 20s to meet 20s type of operating margin. So a very strong solid business with a franchise that's unmatched as well around the world. So INS, I'd love them to grow even faster, but honestly, I think that they are in a darn good place where they are now. And second or first, you question, when you talk about organic versus non-organic, well, the results of girls that we had in the second quarter, especially if you're just for the Middle East, well, that growth of all you was not acquired.

That was organic. Yes. Now, cool idea of evil, which have been acquired are going to add a couple of points to the overall company. It's always been kind of a combination of two thirds or 80% poor growth and 20% M&A, we're going to keep on that path as well, Jeff. And it's working quite well.

I like this well, the return profile of it, but I'd like to ask Scott to comment on that. Jeff, as we talked about, obviously, the specific cool IT, but with all deals that we look at the specific investment or asset returns. And as we've talked about with cool IT, the returns in this are well above our cost capital.

And then more specifically, if we think about just the company as a whole, we've talked about our ROC for a long time. Obviously, our ROC set up a point in time measure. And when you have a significant acquisition like this, that will have a dilutive impact in the short term. But we still have a very focused on our ROC and growing our ROC organic ROC as we define it by at least 100 basis points a year. And feel very good about that is we think about the impact of cool IT that will take a year and a half or so to annualize because of the denominator. But expect to get back to pre acquisition levels on our organic ROC by 2028.

I'd like to make a comment on life science as well. So just aligning what I said before. Jeff, we're set. What's the return expectation that we have so for that business. Early on, we were not on track for two, three years as we know. And that was the absolute focus for the team to get back on the fairly promised return of the business. And the business is back on that track. So we take it super seriously.

Thank you.

So a few comments here, and I'll pass it to Scott as well a bit more. So first, it's always with the latest information that we update you. We don't stay stuck to assumptions that were made in March that the world has changed quite a bit. Obviously, so in the meantime, so it's fresh information when we talk together.

Second, I don't want to explain to you, so how it works to get margins in positive territory. Since we have roughly 50% gross margin, well, you need double the price versus the cost that you're getting. And when you need to do that in three months, not in a chemical business, but in a service technology expertise type of business. This is a remarkable accomplishment, and especially when you need to do it over and over again, while keeping building more growth with more customers without losing any as well at the same time. So that's the simple math of the protecting gross margin. And as I said before, it took us two years to do the same work as we do in three months to die a few years back.

And last point, I'd say we do it in ways that are always constructive for our customers, which means that they get the savings in their operations higher than the incremental price that we are asking from them as a share of the benefits. That they're getting as well at the same time. So it's going to leave, ultimately, that's the good news.

Once the delivered product cost is going to stabilize, well, then you get a much better gross margin because we never give the pricing back in a model, not because we just stay stuck on it, but because the value we're generating to our customers, well, we may within the customer operations.

So that's why every time that there is an economic cycle going up in inflation, not only we manage it well, but second, it leads to a net incremental margin on our trajectory, which is why if you look at the last 10 years, our gross margin has kept going on. But as we see it here today, we're expecting these high single digit commodity prices for the balance of the year, right? So if you look at that, and then all the other thing I would say, and we talked about this earlier, if you look at the gross margin, you also have the impact of a Vivo. So we had a reported gross margin. We have organic gross margin.

You know, Vivo, as we talked about in Q2, excluding Vivo on organic basis, our gross margins were stable. So there's that call 60 basis point drag just for a Vivo, and you'll see that same type of sort of difference in the second half. So that may be part of the math.

Thank you.

So I'm just really curious, like, what gave you the confidence then at the start of July to raise your 2030 expectations there so much? Was it a Vivo or something else organic? Or is it that you saw the backlog on Cool IT? Just help me understand that, please.

So a few things here. First, when we share a new target with you, we want to be sure. We're sure it can be of what we're sharing. So with you and we're together with Cool IT since the first week of July. So that's been just a few weeks and you've gone too much before you close, as you know as well. So we're getting to know much more when we look at the trajectory of both businesses.

Cool IT and OVivo and our core business, by the way, which has been doing really well for quite a long time now, and especially in the second quarter. Well, we ended up in a position where we can say the minimum has to be a visit. And we don't need to go much into math and to say, okay, we can move up the floor, which means that the middle of the range is going up as well. At the same time. But this is also the reason why we want to have an invested day at Super Compute in November, because we firmly believe it's not only where the market is going, but most importantly, our businesses are leading those technologies that will be better than what we had initially planned, which is a good problem to have.

So if anything, it's going to be better than what we just communicated, but we're going to do the right work. We're talking about the next three, four, five years to come, and that requires some in-depth work on all those businesses. But generally, the direction of travel for all of those, well, is quite a bit better than what we had expected. So expect good news in November. Thank you.

So Mike, I would not call that helpful or harmful. We're talking a little bit or a lot about people being impacted by what's happening again here. We're experiencing those situations too often in our country and around the world. And that's why we exist. Actually, it's to reduce and remove that risk as much as it's possible for every one of us eating food or infection prevention in general.

So we feel for everyone that's being impacted by what's happening in our country right now. So there's a few key questions that you had impact and demand on our business. Now, no change of consumption at all. And in S&B you've seen as well, so no change either. What's true, however, is every time that something like that happens, customers come to us, spend a lot of time with our research and development team, with our scientists to really understand, what is it? How does it work? How does it impact us? How can we solve it?

There is no one in the world that has more knowledge and expertise in infection prevention at any collapse. So customers are clearly coming to us, which is a good sign. So in the case of the end-users, the restaurants in that case, I think that they've done a very good job.

And in the specific case that we're talking about, they've been exemplary. How they've taken care of their guests, of their employees, of their processes. We've been very close to them as we always do, but we stay behind the seat. In terms of news, we've worked with a lot of producers as well out there to make sure that they were learning from it, that we could make sure that the risk was going down for all the other ones as well. And the one that's being talked about in the media right now is not one of our partners or customers or comment on them. But I think ultimately that the next phase, and that's a big business opportunity so for us, is to connect the producers with the end-users, being restaurants or retailers, which is something that hasn't been done much so far, and we uniquely place because we protect a third of the world food production, and we serve even more of the end-users, retail, and restaurants and hotels.

So connecting the two in the future will be a new business opportunity for us. Thank you.

Thanks. It's been very well received, actually. It's the first time in my business history. I have to admit that I see and hear customers not only wanting to be in the queue, but to be ahead of the queue because there's limited capacity as we know out there. Well, that's the situation of Cool IT, or EVOL2, by the way, in a different part of that industry. It's a very unique place to be, and that technology that you're talking about, so on the Gold plate is one of the elements, but there's many more in terms of CDU, in terms of 3D tracer, in terms of coolant as well that we've developed and will be developing as well.

Everybody is looking for the latest and to have that as soon as they can. So a very new experience for us where you need to manage supply more than demand, but I guess that's a good problem to have.

Thank you.

So a few questions into that. So the visibility for the foreseeable futures over 26th at the end of the year, as you're calling it, is pretty clear. So yes, we feel good about the trajectory for the year, which is a very good way to start. Obviously, so an integration. And for the years to come, as mentioned before, we've considered in all our mass and projections of 30%. So growth rate for the next 10 years.

So we'll do the work to really understand what's the right number for it. And we share that with you when we get together at Super Compute in November. But generally that sounds like a good news. A second question on the go-to market. It's mostly two different drivers. The first one are the cheap designers and cheap manufacturers, because the cold plates and technology of cooling for each individual chip is cheap related.

And that needs to be developed together with the cheap designers and all manufacturers, depending on who that is out there. So they're very close to them. And this is a huge strength of that business. At the same time, they're very close to the hyperscalers as well that are interested in optimizing the overall including performance of the data center that goes beyond obviously individual chips when you put all of them together in one rack and then afterwards in one data center, the physics look very different.

And that's the relationship with the hyperscalers. So it's to be very close to those two constituents and quality and E. coli, by the way, are very strong at that type of relationship. So that's the way the model works. It's developing together with the hyperscalers and the chip industry. And that's going very fast. Every week there's something new that's happening very different than many of our businesses.

And the last question on the backlog and pipeline, we're learning as we are working closer together with them, they have very good sales metrics. We have on the more traditional E. coli side similar, but a little bit different sales metrics. So we're going to try to learn from each other. And that's also something that we'd like to share with you in November. We've been three weeks together, so that's very early.

So always going to come November. So since it's the last question, just wanted to recap briefly. We had a very strong quarter in due to, you know, tough and complicated environment. As we all know, really happy with the team that's been able to protect gross margin in three months versus two years in the past, while accelerating the organic growth as well as the business.

Second, the second half looks promising for the company, especially as a trajectory so for 27 and the years to come as well, where I believe that we are really being in a better position. So to deliver on our growth ambitions, our margin ambitions, and earnings growth ambition. And ultimately where we need to focus over time is how do we improve from there even further, which is where I spend my time, where the team is aligning around.

And I think that we're in a very good place as a company, especially when we're looking into the future because we have the best team in the industry. So thank you again for all your time and your commitments to E. Cola. All the best.