Vontier - Earnings Call - Q2 2025

Executive Summary

• Beat and raise quarter: Q2 revenue $773.5M (+11.1% YoY) and adjusted EPS $0.79 both exceeded guidance; adjusted operating margin expanded 80 bps YoY to 21.1%. Strength in Mobility Technologies (+17.9% sales) and Environmental & Fueling Solutions (+16.2%) offset flat Repair Solutions; management raised FY25 adjusted EPS to $3.10–$3.20 and FCF conversion to ~100%.
• Estimate beats: vs S&P Global consensus, Q2 revenue beat by ~$39M (~+5.3%) and adjusted EPS beat by ~$0.07 (~+9.5%); Q3 guidance (rev $745–$755M, adj EPS $0.74–$0.78) brackets Street near the midpoint, implying flat core sales and flattish YoY margins in Q3. Q2 consensus revenue $734.5M* and EPS $0.7213*; Q3 consensus revenue $747.9M* and EPS $0.7688*.
• Mix and timing: $15–$20M shipment pull-forward from ERP go-live and a planned factory maintenance outage aided Q2; management noted tariff cost headwinds but maintained positive price/cost and ongoing mitigation actions.
• Capital allocation and leverage: $50M buybacks in Q2 (~1.4M shares), $105M YTD; net leverage 2.5x with LTM adjusted EBITDA ~$704.6M, supporting flexibility to pursue bolt-ons and repurchases.

What Went Well and What Went Wrong

• What Went Well

  • Mobility Technologies and E&FS outperformed: Mobility Tech sales +17.9% YoY with 180 bps margin expansion; E&FS sales +16.2% with 50 bps margin expansion, driven by dispenser and environmental solutions strength.
  • Strong product adoption and recurring revenue: “Over 50% of new dispensers leaving the factory with a FlexPay 6 unit,” NFX surpassed 1B transactions; recurring revenue ~40% in Mobility Tech (Invenco ~35%, Driivz largely recurring) and low-30s at Vontier overall.
  • Cash generation and balance sheet: Adjusted FCF $88.5M in Q2 (76% conversion), net leverage 2.5x; raised FY FCF conversion target to ~100%.

• What Went Wrong

  • Repair Solutions flat with margin pressure: Sales were flat YoY; segment margin -50 bps YoY to 20.8% on unfavorable mix and lower high-ticket demand, despite Expo offset.
  • Car wash softness (ERV/DRB): Lower demand as anticipated; industry project timing delays and mix weighed on Mobility Tech early in the year (notably in Q1), though software conversion improved modestly.
  • Shipment pull-forward clouds run-rate: ~$15–$20M revenue pull-in (MT $5–$7M) stemming from ERP go-live and a planned outage; implies a modest Q3 headwind as timing normalizes.

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to Vontier's Second Quarter 2025 Earnings Call. At this time, all lines are in listen-only mode, and following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, July 31, 2025, and a replay will be available shortly after. I would now like to turn the conference call over to Mr. Ryan Edelman, Vontier's Vice President of Investor Relations. Please go ahead.

Ryan Edelman (VP of Investor Relations)

Thank you. Good morning, everyone, and thank you for joining us on the call this morning to discuss our second quarter results. With me today are Mark Morelli, our President and Chief Executive Officer, and Anshooman Aga, our Senior Vice President and Chief Financial Officer. You can find both our press release as well as our slide presentation that we will refer to during today's call on the Investor Relations section of our website at investors.vontier.com. Please note that during today's call, we will present certain non-GAAP financial measures. We will also make forward-looking statements within the meaning of the Federal Securities Laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to risks and uncertainties.

Actual results might differ materially from any forward-looking statements that we make today, and we do not assume any obligation to update them. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available on our website and in our SEC filings. With that, please turn to slide three, and I'll turn the call over to Mark.

Mark Morelli (President and CEO)

Thanks, Ryan, and good morning, everyone. Thank you for joining us on the call today. We delivered strong second quarter results with core sales, adjusted operating profit, and adjusted EPS exceeding our guidance, reflecting disciplined execution against a dynamic backdrop. Core sales growth of 11% was led by Mobility Technologies and Environmental Healing Solutions, which both grew over 15% in the quarter. Orders were up 8% organically, and our book-to-bill was approximately one in the quarter. We're encouraged by the market's acceptance of our new product introductions, validating the R&D investments we've made, strengthening our competitive advantage. The traction we are seeing demonstrates Vontier's unique position to capitalize on secular trends across our end markets. Our innovative solutions and deep domain expertise create a compelling value proposition for our customers, unlocking growth, improving productivity, and elevating their customer experience.

This is a testament to our team, who has been instrumental in focusing our business on process improvements and new product innovation. I couldn't be more thankful for their hard work and dedication. Adjusted operating profit increased 15% year-over-year with margin expansion of 80 basis points. This improvement reflects the benefits of ongoing simplification efforts and productivity gains driven by the Vontier Business System and what we call our focus and prioritization process, or our 80/20 initiatives. While tariff-related cost pressures are real, we were able to maintain positive price costs in the second quarter. We delivered another quarter of free cash flow conversion above seasonal norms. This enables us to maintain our dynamic capital allocation program with ongoing share repurchases at attractive levels and a bolt-on acquisition completed during the quarter.

We continue to advance our strategic priorities with an intensifying focus on operational discipline and commercial excellence, critical in navigating the current macro environment. These efforts are underpinned by our three-pillar value creation framework, with Pillar One centered on self-help and Pillars Two and Three driving sustainable organic revenue growth. Under Pillar One, optimizing our core, we delivered meaningful operational efficiencies in the first half, supported by our 80/20 process initiatives. At Vontier, we are driving further savings through product line simplification and lean manufacturing to countermeasure tariff-related cost headwinds. We've reduced labor costs by nearly 10% year-to-date at our Greensboro dispensary facility through increasing labor efficiency and reducing overtime. At the same time, we've identified incremental simplification opportunities, including actions to reduce the cost of quality by more than half over the next couple of years.

We're also moving forward on a number of opportunities to optimize our regional footprint in various international markets, ensuring we are aligning our resources to the most profitable regions and product lines. We're advancing an agreement to divest our European service business, which exemplifies this effort. At Inventco, we set up our global software factory last year, which reduced our overall engineering labor costs by 30%. Inventco is on track to double its engineering velocity this year while driving R&D efficiency through automation, the use of AI, and global scale. As it relates to tariffs, we've made significant progress on our mitigation initiatives year to date. From a supply chain standpoint, our primary focus is reducing our exposure to China, with several major projects underway expected to complete in the second half.

Within repair solutions, for example, we started the year with 20% exposure to China, with a goal of reducing this to less than 10% by year-end. We implemented pricing actions mid-quarter, and we expect the benefits to ramp in Q3 and Q4, with price expected to offset about half of our updated tariff exposure. Innovation has been a cornerstone of our Pillar Two expand the core initiatives and a key driver of above-market organic growth. Our disciplined investments in new product development are strategically aligned with powerful secular drivers, including digital transformation. This underpins our connected mobility strategy and positions us to capture evolving customer needs. The benefits are evident across our portfolio, but are perhaps most visible at Mobility Technologies.

As an example, the Inventco team has successfully accelerated adoption of the FlexPay 6 payment terminal, with over 50% of new dispensers leaving the factory with a FlexPay 6 unit. Our market-leading global dispenser base provides us with a sizable funnel of upgrade and replacement opportunities ahead. As we migrate customers to FlexPay 6 payment terminal, we enable flexible onsite commerce, which unlocks revenue growth potential for customers and enables recurring revenue for Vontier. We are actively expanding our recurring revenue base, a key strategic initiative for Vontier. Invenco's recurring revenue, which accounts for about 35% of the base, was up 17% year-over-year as the install base of NFX payment servers continues to ramp and as the feature set continues to expand.

We've nearly completed the initial deployment with Shell and continue to make good progress for Chevron and recently surpassed 1 billion transactions on our NFX payment servers. Invenco's solutions cater to executing fuel and in-store commerce, driving more consumer engagement through loyalty and media, and ensuring assets, physical and digital, are available when a consumer is transacting. We are enabling all this with leading-edge technologies that are transforming and enhancing the way convenience retailers operate their businesses. Environmental and fueling solutions delivered broad-based growth across both above-ground dispensers and underground environmental sensing and monitoring. Our environmental solutions business continues to capitalize on multi-year replacement opportunities, particularly through automatic tank gauge upgrades with an install base of over 350,000 ATG units globally.

Our new TLS-450 Plus connected ATG offers market-leading technology for advanced fuel management, enabling real-time monitoring, improved accuracy, and proactive maintenance that reduces downtime and lowers operating costs for our customers. Just this quarter, we were thrilled to be selected by one of the largest global C-Store operators in North America to upgrade their entire install base of ATGs across 4,500 sites over the next five years. Alongside the equipment upgrade, this customer will adopt Veeder-Root's new cloud-based device management software. This application will collect data from onsite environmental devices across their network and produce outcomes that improve uptime and asset reliability, as well as reduce maintenance costs. This integrated approach highlights our ability to cross-sell and deliver future-proof, scalable solutions that unify forecourt and site management, helping our customers maximize operational efficiency and make smarter decisions across their entire network.

It also highlights the meaningful progress we're making on our efforts to deliver fully integrated solutions and technologies by leveraging our relationships with some of the largest global convenience retail operators. Our commitment to new product development remains strong, with R&D investments hovering around 6% of total sales. We're redeploying resources freed up by our Pillar One 80/20 initiatives to create capacity for margin expansion and growth. This enables Pillar Two successes, including a focus on connected hardware and smart software that enables higher recurring revenue streams across the portfolio. Given our strong first half results, we're raising our full-year guide with adjusted EPS on track for high single-digit growth. While tariff headwinds and macro uncertainties are still expected to weigh on demand in the second half, particularly in repair solutions, key end markets such as convenience retail and fueling continue to show resilience.

We are confident we're on the right path to delivering sustainable above-market growth. As we navigate through the remainder of the year, we'll remain agile and focus on controlling what we can while delivering innovative solutions for our customers and driving value for our shareholders. With that, I'll turn the call over to Anshooman.

Anshooman Aga (SVP and CFO)

Thanks, Mark, and good morning, everyone. I'll start off with a summary of our consolidated results for Q2 and slide four. As Mark mentioned, we had a very strong second quarter with sales, adjusted operating profit margin, and EPS coming in at or above the high end of our guidance range. Sales of $774 million increased 11%, both on a reported and core basis. Recognizing we had a favorable prior year comparison in Q2, on a two-year stack basis, total Vontier core sales are up approximately 8%. Overall, roughly 70% of our portfolio outperformed in the quarter, reflecting the strong progress we are making in a resilient end market and the success of our new product introductions.

Relative to our guidance, we estimate sales outperformance benefited by approximately $15 million-$20 million related to favorable shipment timings, given a planned factory maintenance outage and a successful ERP go live both in the first week of July. Adjusted operating profit margin improved 80 basis points year-over-year, and adjusted EPS increased 25% to $0.79 above the high end of our guidance range. Adjusted free cash flow of $89 million increased significantly versus the prior year and reflects a seasonably strong 76% conversion to adjusted net income or approximately 12% of sales. Turning to our segment results, starting on slide five, Environmental and Fueling Solutions delivered core growth of nearly 16%, bringing first half growth to over 8%. Shipments of dispensers increased over 20% in the second quarter, with strong growth in both North America and the rest of the world.

We're seeing strong demand tied to new build activity from large national and regional players, as well as healthy refresh and replacement activity. Environmental Solutions also showed strong momentum, growing high teens in the quarter, fueled by new product launches and higher shipments of submersible pumps related to last year's India tender win. Segment operating profit margin expanded another 50 basis points, driven by volume leverage combined with strong self-help measures and disciplined cost management. On slide six, Mobility Technologies core sales grew 18%, driven by solid performance at Invenco, up strong double digits in the quarter on higher shipments of payment technology and enterprise productivity solutions. ERV sales declined in the teens year-over-year, relatively consistent with what we were anticipating. While the industry is experiencing some minor project timing delays, car wash operators are bullish regarding the CapEx plans going forward.

We still expect ERV to inflect positive later this year as new build and replacement activity continues and as we drive higher customer conversion to our Patheon software platform. Conversion rates for Patheon contributed to approximately a 2% increase in software revenue for ERV in the quarter. Mobility Tech's operating profit margin increased over 180 basis points versus the prior year on strong volume leverage and cost savings from Pillar One initiatives. On slide seven, repair solution sales were flat compared to the prior year as ongoing market pressures offset the gains expected from the annual Matco Expo. Sales trends post-Expo confirm that we experienced elevated pre-buy activity. Sell-through off the truck was down mid-single digits in the first half, but exceeded sell-in, suggesting distributors were destocking. Tool storage and hard lines declined in the quarter, offset in part by strength in specialty, power tools, and branded merchandise.

While higher ticket product categories remain under pressure, we continue to see solid demand for lower price point tools that improve technicians' productivity. We made clear progress in focusing our offerings on these categories, with their new product vitality up nearly 50% year-over-year for the first half of 2025. Two notable examples of these lower price point offerings are the new folding clip lifter and the ready tool cart. These products were developed after extensive voice of the customer work and performed well through Expo and the remainder of the quarter. Segment operating profit declined $700,000 on flat revenue, reflecting mixed headwinds offset in part by Pillar One actions that drove cost savings in the quarter. Turning to the balance sheet and cash flow on slide eight, our net leverage ratio stepped down sequentially to 2.5 times, highlighting the health of our balance sheet.

We completed another $50 million in share buybacks in the quarter, bringing us to $105 million in the first half. Over the past three plus years, we have now completed over $730 million in share buybacks, representing 15% of our shares outstanding. Turning to our updated outlook assumptions for Q3 and the full year on slide nine. For the third quarter, we project revenues in the range of $745 million-$755 million. At the midpoint, we expect core sales to be roughly flat. Adjusted EPS is expected in the range of $0.74-$0.78, up mid-single digits. Both the top and bottom line reflect the impacts of the shipment timing dynamics I mentioned earlier. As Mark mentioned at the start of the call, we are raising our full-year guidance. Operationally, our outlook for the second half is mostly unchanged.

Our full-year sales guidance range is now $3.02 billion-$3.07 billion, reflecting our strong operational performance and a tailwind from FX relative to our prior guide. Strength within our fueling and Inventco business is more than offsetting our outlook for repair solutions. As we have communicated previously, Inventco's core growth will begin lapping more difficult comparisons, with this business having grown 25% on average over the past four quarters. As we look into next year, we still expect Inventco to achieve attractive mid to high single-digit core growth, supported by a strong pipeline of opportunities for unified payment and enterprise productivity solutions. Operating margin expansion is expected to be in the range of 20-40 basis points, which incorporates lower drop-through on FX. We still expect to fully mitigate tariff headwinds within the year, with encouraging progress made in Q2.

We now expect adjusted earnings per share of $3.15 at the midpoint, at the high end of a prior guide and equating to 9% growth year-over-year. You can find our other guidance assumptions on the right-hand side of the slide. Based on our first half performance and the recent passage of the Big Beautiful Bill’s, we are raising our free cash flow conversion target to approximately 100%. Our teams are well prepared to execute in any environment, and the end markets we operate in have proven to be resilient over time. We have a solid runway of self-help opportunities through our Pillar One actions, and we are confident in our growth trajectory. Our balance sheet is in good shape. We're generating strong free cash flow, and we're returning capital to our shareholders. With that, I'll pass the call back over to Mark for his closing comments.

Mark Morelli (President and CEO)

Thanks, Anshooman. Vontier had great performance in the first half, delivering results that surpass our guidance ranges and substantiated our strategic priorities. We have the right strategy, we're executing well, and our portfolio transformation is taking hold. I couldn't be more proud of our team's execution against an incredibly complex backdrop. Our focus on innovation is gaining traction, validating the differentiated value propositions we're bringing to market. While we are mindful of the macro environment, we have leading positions in traditionally resilient end markets, and our strategy is well aligned with the needs of the strongest operators in the industry. Our connected mobility strategy, deep domain expertise, and broad service network provide us with a clear competitive advantage to capitalize on secular trends across our mobility ecosystem.

We have significant runway of self-help opportunities ahead, with strong free cash flow and prudent capital allocation, all of which position Vontier well for the future. With that, operator, please open the line for questions.

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speaker phone, please lift the handset before pressing any keys. Also, please be reminded it is one question with a follow-up. One moment, please, for your first question. Your first question comes from Julian Mitchell from Barclays. Please go ahead.

Julian Mitchell (Equity Research Analyst)

Oh, yes. Good morning. I suppose, first off, I just wanted to try and understand, as we think about sort of the revenue outlooks into the second half, you know, how is what's dialed in for sort of repair? Have you seen a sort of short-term stabilization in that business as it's been under pressure for a couple of years? Dialing into the fourth quarter sales, should we expect EFS to be sort of flattish year-on-year just because of the very tough comp?

Anshooman Aga (SVP and CFO)

Thanks, Julian. Yeah, just from a second half perspective for repair solutions, we have a guide of down mid to high single digits. We're starting to see some signs of stabilization, but it's still a little early and hard to call an inflection in that business. We continue to see the lower price point items that are leading to productivity for the technicians do well, but we're still seeing declines in some of the higher priced items. That's why we're basically calling for that business to be down mid to high single digits. However, 80% of our portfolio, which is really environmental and fueling and mobility technology, is both doing really well. Both the markets are resilient, and the innovation that we've been investing in is paying off, and we're seeing really good traction in those businesses.

Mobility technologies should be up mid-single digits plus to high single digits for the year. EFS should be up mid-single digits for the whole year. Overall, both those businesses are trending slightly better than our last guide, and we're very proud of the team in terms of innovation and also our go-to-market, which are competitive strengths for us.

Julian Mitchell (Equity Research Analyst)

That's helpful. Thanks very much, Anshooman. On the margin front, I think when we look at it, you had a pretty good performance in terms of most of the businesses. It looks like repair is sort of finding a floor perhaps now. Maybe help us understand kind of what's the scope for repair margins to move up from here. They're quite a bit below where they were a couple of years ago. What do we need to get those moving higher? Do we expect the other two divisions to be sort of flattish half on half in the second half?

Anshooman Aga (SVP and CFO)

Just starting off with repair solutions, yeah, the margins are perhaps stabilized. To your question of what would it take for those margins to increase, obviously, as the market improves and some of the higher price point items start selling better, that will be a tailwind from a mixed perspective. Also, over the last two, three years, bad debt had been a challenge for us. Write-offs, delinquencies, all are stable, but towards the lower end of where they typically trade over a longer term period. As the health of the consumer improves and some of the delinquency rates come down and the write-offs come down, that'll be a tailwind to margins over time also. I think there is definitely room for margin expansion in the midterm in repair solutions, just given those two dynamics.

Obviously, Pillar One actions where we continue to look at both 80/20 initiatives and productivity initiatives play a good part in terms of driving margin expansion for the business.

Mark Morelli (President and CEO)

Hey, Julian, this is Mark. One other item is the backdrop on repair. We think it continues to be a good backdrop. We think that our repair solutions business is mostly impacted by the consumer or the working-class American. That is, you know, it's a bit of a choppy market for them right now, so their buying behaviors are favoring more value-oriented items, specifically on productivity, which we've got a great lineup for. I think what you mentioned is absolutely true. I think that business is stabilizing at this point. I think the backdrop that we're looking at is sort of an inflection upward. It's just too early for us to tell exactly when that'll happen.

Anshooman Aga (SVP and CFO)

Julian, just on the other two segments, we still expect mobility technology margins for the full year to be up about 100 basis points. There will be a little bit of sequential increase in the margin quality in the back half for them. EFS margins will be up slightly year-on-year. That should give you some color for the other two segments on margins.

Julian Mitchell (Equity Research Analyst)

That's great. Thank you.

Operator (participant)

Thank you. Your next question comes from Nigel Coe from Wolfe Research. Please go ahead.

Nigel Coe (Managing Director)

Thanks. Good morning, guys. I think, Anshooman, you called out $15 million-$20 million of pull ahead in EFS. I think there was also a small pull ahead in MT as well. Maybe I'm wrong there, but maybe size that. Just based on your sort of full-year outlooks by segment, it seems like the second half, you know, that flattish outlook, it seems like it's sort of bifurcated between low to mid-single digit growth for EFS and MT and down mid to high for repair. Just want to make sure that's correct.

Anshooman Aga (SVP and CFO)

Yeah. We did benefit from the shipment timings of about $15 million-$20 million. That was a combined number between both EFS and Mobility Technologies. Mobility Technologies was probably $5 million-$7 million of that. The benefit was really because of the timing of our go-live of our ERP system at one location and a planned outage for maintenance at another factory where customers requested us to pull in some of the shipments because we were down the first week of July. While there can be some quarterly timing differences, we do have a pretty good 2% core growth for the year despite some of the headwinds we've had in repair solutions. Both EFS is growing about mid-single digits for this year. Mobility Technologies is growing mid-single digits plus to high single digits for the year. Really strong performance with those businesses.

Our EPS is growing high single digits, free cash flow conversion of about 100%, and a free cash flow yield of about 7.5%. Overall, pretty strong metrics or numbers for the year for us.

Nigel Coe (Managing Director)

Agreed. Yeah, couldn't agree more. Inventco continues to grow very strong, as you highlighted. Can you maybe just kind of help us size where that business would like to be in 2025 in terms of revenue base? How does the sort of the backlog stroke project funnel look for Inventco? Just broadening out the conversation a little bit, you know, the recurring revenue portions of Driivz, Inventco, portions of DRB, where does the recurring revenue base for Vontier stand today? Thank you.

Anshooman Aga (SVP and CFO)

Yeah. Overall, Inventco will be over $600 million this year, probably somewhere around $625 million, $630 million from a revenue perspective. As you mentioned, we've seen some exceptional growth at Inventco for the last four quarters. Growth has been over 20%, averaging about 25% a quarter. We are definitely going into some more difficult comps, but we still expect good annual growth. I think next year we should see mid to high single-digit growth in this business. Just really the innovation that we're driving in this business, bringing our microservices-based architecture, digital solutions that help with both productivity but also with consumer engagement, really starting to read through. From an overall Mobility Technologies perspective, about 40% of our revenue is recurring. DRB is about 60%, and Inventco is about 35%, and all of Driivz is recurring in nature. Overall, we get to about 40% for Mobility Technology.

At a Vontier level, we're probably in the low 30s right now from a recurring revenue, and we include spare parts and stuff like that in our recurring revenue number.

Hey, Nigel, I want to add a couple of comments here as well. I mean, not only do we think there's some really good proof points that our investments are paying off for our connected mobility strategy, you know, smart hardware, connected application software. We gave some really good proof point examples. NFX continues to go forward with a ramping install base and new customer pipeline that is developing. We talked about our environmental or underground offerings. The other piece that also was mentioned was Patheon in the car wash space. As we continue to post these proof points and grow scale here, our integrated solutions are also at higher margins, as you know, and that can also help us overall with Vontier margins. We're really pleased with what we're showing. Just as another proof point here, we've got over 1,200 software engineers now at Vontier.

Mark Morelli (President and CEO)

The portfolio is substantially different than it was at the time of spin.

Nigel Coe (Managing Director)

That's great. Thank you very much.

Mark Morelli (President and CEO)

Thanks, Nigel.

Operator (participant)

Thank you. Your next question comes from Andrew Obin from Bank of America. Please go ahead.

David Ridley-Lane (Equity Research Analyst)

Hi, yes. This is David Ridley-Lane on for Andrew. Any initial commentary from the field or conversations you're having with customers about the potential benefit? Part of the one Big Beautiful Bill was the accelerated depreciation that came back on. Is that a needle mover for some of your more sophisticated customers?

Mark Morelli (President and CEO)

Yeah, go ahead, Anshooman. You want to answer that one?

Anshooman Aga (SVP and CFO)

Yeah. Obviously, looking at the Big Beautiful Bill, the first benefit for us is around free cash flow where the R&D expense can now be expensed versus capitalized and depreciated over time. That led to us raising our free cash flow guidance from about 90% to about 100% for the year from a conversion perspective. The benefits to some of our customers are going to be around the accelerated depreciation where both on the equipment they're buying, but also for production buildings, there's some accelerated depreciation available. It's a little early to say what that means in terms of speeding up decisions, and the benefit probably would be, given the permit cycle and construction cycle, the benefit would probably be next year. It's definitely good for our customers, especially the smaller operators which are more cash-based and that don't have strong balance sheets.

It's definitely good for business, but I would expect some of the benefits to read through more next year because of the timing of getting some of these projects started.

Mark Morelli (President and CEO)

Yeah, one segment of customers that we're particularly paying attention to is around DRB because these tend to be smaller type customers where this kind of effect could read through. Just a little color on where we are on DRB. We definitely saw sales inflect higher in Q2, and we think that was really important because it was the first time in five quarters that we had higher sales. We definitely see some very encouraging signs there in the marketplace. Anything else like what we're just talking about would certainly pile on and help that. We expect the build to be about flattish, but on the backs of also launching and ramping our Patheon, we know there's good returns here, and we're encouraged on what we're seeing for a return to growth in this business.

David Ridley-Lane (Equity Research Analyst)

Got it. I think we understand there's an underground tank replacement cycle. Your underground business, I think, is growing mid-teens this quarter. Again, sort of sustainability of that. Do you have these conversations? Do you see a pathway to maintaining that growth for a while here?

Mark Morelli (President and CEO)

Yeah, you know, that's a great point you're bringing up. I'm glad you brought it up. It was pretty early innings on that tank upgrade cycle. When you look at the install base, you look at the opportunities to do that, and we're also seeing international opportunities. We've also invested in our underground business or our environmental business, as we call it. We've come out with new products, including the four horsepower pump. We think we've got some real innovations here that really enable folks to manage that asset base. We talked a little bit about it in the call, but us launching some enhanced offerings on maintenance asset management for that is definitely a plus. Keep in mind, this is really the first time something that industry can do an over-the-air update for security reasons and for improvements in the software.

We continue to advance that offering, and I think we're showing that it's really appreciated. I think the backdrop on a real driver like the underground upgrade cycle is definitely going to be a tailwind for some time to come.

David Ridley-Lane (Equity Research Analyst)

Thank you. Just one quick numbers one, what was book to bill in the quarter?

Anshooman Aga (SVP and CFO)

Book to bill was just about one. Orders grew about 8% year-on-year, and book to bill was just about one.

David Ridley-Lane (Equity Research Analyst)

Thank you very much.

Mark Morelli (President and CEO)

Thanks, David.

Operator (participant)

Thank you. Just as a reminder, if you do have a question, please press star one. Your last question comes from Rob Mason from Baird. Please go ahead.

Robert Mason (Senior Research Analyst)

Yes, good morning. Thanks for taking the question. I wanted to go back to the discussion we had on Inventco. I am aware that you probably hit some tougher comps in the second half of this year, but it does sound like you're confident about some re-acceleration as you move into 2026 at mid to high single digit growth. I'm aware you've got some pilots out for NFX as well. Are you counting on some of these pilots to convert to drive that mid-single to high single, or how are you thinking about that?

Mark Morelli (President and CEO)

Yeah, thanks, Rob, for the question. Good morning. The really encouraging thing here is we're seeing real uptake of this technology. The thing that's a little bit hard to call is the timing on some of these orders. As you can see, they're pretty large orders. The good news is you're dealing with more recurring revenue. The thing that has to be worked out is when do these things come online? When does the ramp down of the last delivery occur? From a quarter-to-quarter basis, it could be a little bit uneven, but I think on a year-over-year basis, you're seeing real traction here. I think that's really the way to look at it is how do we, you know, continue to even this out over time as we build scale? That's clearly something we're focused on.

There's no question really encouraging signs here for strong organic growth with really good drop-through.

Anshooman Aga (SVP and CFO)

Rob, I'll also add it's not just NFX that's going to help drive some of this growth. Our new FlexPay 6 from a payment perspective is really making a lot of positive traction in the market. Once you start looking at unified payment, which is FlexPay 6 plus NFX, you're also going to start seeing more offerings related to consumer engagement in there, which is going to help with some of the growth. Just a continuation of our strategy to bring digitalization and innovation to the space is going to help Inventco drive some of the growth next year.

Robert Mason (Senior Research Analyst)

Right, right. To circle back to DRB, it's good to see maybe a little bit of a turn there. I think in the quarter you also completed a smaller acquisition in the space. I'm just curious, how is that impacting the outlook financially? Understanding it's relatively small, what's the contribution strategically of that opportunity or add-on?

Mark Morelli (President and CEO)

Let me talk about the strategic contribution here. If you think of our real value proposition in car wash, it is that we provide the brains for the car wash. It's the area that really drives productivity for the car wash operator and enables them to scale a lot of their assets. It enables the larger car wash operators in particular to focus on how they attract more consumers to the site. We know from surveys and talking to customers that recurring revenue for them, which is on the subscription, is actually up for car wash right now, which is great. Our technologies really help enable that and customer pull. This small acquisition is a bolt-on that really adds a smart controller.

When that works with their point-of-sale system, which we're the leading provider in, you can provide more productivity and more insights in how they can manage their car wash and their car wash footprint better, which is exactly what the operators are looking to do. When you look at our Inventco acquisition, it was a pretty small acquisition, but it really ignited a lot of growth. We think we have some real potential here as we continue to build out this more tech-enabled way by which you drive productivity and enhance consumers to the site.

Anshooman Aga (SVP and CFO)

From a numbers perspective, the 2024 revenue for the acquisition was about $7 million in revenue and $1 million in EBITDA. It is relatively small and does not move the needle that much this year from a revenue perspective. As Mark said, it is very strategic, which allows us to be the brains of the car wash, but also lots of upside opportunity on this as we go forward.

Robert Mason (Senior Research Analyst)

Sure. Just the last question real quick. I may have missed this juggling other calls here, but did you talk about maybe the month-to-month trends that you were seeing in Matco? I guess I'm thinking more on sell-out off the truck. I know Liberation Day was kind of a shock back in April, but I'm just curious how the progression went here through July.

Anshooman Aga (SVP and CFO)

Yes, just when we look at sell-out, the sell-out was about down 5% for the first half. There have been some ebbs and flows during the first six months. Sell-in was lower than that. Our channel partners, our distributors, actually lowered inventory on the truck. When we look at the month of July, the sell-out off the truck is better than what the year-to-date trend was. The good thing at the end of July, inventory levels on the truck are now back to what they were last year at the end of July. Inventory levels have definitely come down. Hopefully that bodes well for us and the industry. Again, a little early to call an inflection given just the macro uncertainty and the health of the consumer.

Robert Mason (Senior Research Analyst)

Understood. Thank you.

Operator (participant)

Thank you. There are no further questions at this time. I will now turn the call back over to Mr. Mark Morelli. Please continue.

Mark Morelli (President and CEO)

Yeah, thank you, Kells. Thanks for joining us on today's call. I'm encouraged by the progress we're making, and I'm really confident in our team's ability to navigate near-term uncertainty and advance our strategic initiatives. We're delivering differentiated solutions in attractive end markets, and we're committed to creating long-term value for our customers and returns for our shareholders. We appreciate your continued interest in Vontier, and I look forward to engaging many of you over the next several weeks and at our investor event in mid-October. Have a great day.

Operator (participant)

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect. Have a great day.