Vontier Corporation (VNT) Q4 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. My name is Maria, and I'll be your conference facilitator this morning. At this time, I would like to welcome everyone to Vontier Corporation's Fourth Quarter 2020 Earnings Results Conference Call. [Operator Instructions] I would now like to turn the call over to Ms. Lisa Curran, Vice President of Investor Relations. Ms. Curran, you may begin your conference.

Thank you, Maria. Good morning, everyone, and thank you for joining us on the call. With me today are Mark Morelli, our President and Chief Executive Officer; and Dave Naemura, our Senior Vice President and Chief Financial Officer. We will present certain non-GAAP financial measures on today's call. Information required by SEC Regulation G relating to these non-GAAP financial measures is available on the Investors section of our website, www.vontier.com, under the heading Financials. Please note that unless otherwise noted, the presented financial measures reflect year-over-year increases or decreases relative to the supplemental normalized financial data also posted on our website under the heading Financials. These supplemental normalized financials are adjusted for estimated stand-alone public company costs. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. The supplemental materials describe additional factors that impacted year-over-year performance. All references to period-to-period increases or decreases and financial metrics are year-over-year. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, and actual results might differ materially from any forward-looking statements that we make today. Information regarding these factors that may cause actual results to differ materially from these forward-looking statements is available in our SEC filings and subsequent annual report on Form 10-K. These forward-looking statements speak only as of the date they are made, and we do not assume any obligation to update any forward-looking statements. With that, I'd like to turn the call over to Mark.

Thanks, Lisa. Good morning, everyone, and welcome to our fourth quarter earnings call. Before we get to the results for the quarter, I want to recognize our team's extraordinary performance, marking the end of a truly unprecedented year. The COVID-19 pandemic caused considerable economic, operational and personal challenges. And so I want to first thank our employees and business partners who made it possible through their dedication and tireless actions and continue to do so with the ongoing pandemic. Not only did the team work through significant headwinds, we are making the most of the opportunities in front of us as well as posting excellent results. Our team delivered another quarter of double-digit earnings growth and a strong finish to 2020. The Vontier Business System continued to drive outstanding adjusted free cash flow conversion of greater than 140%, core revenue growth of 8.5% and adjusted core operating margin expansion of 240 basis points. These top-tier results underscore the resiliency of our portfolio as key secular drivers and market share gains drove outperformance. A proof point of the quality of our business and strategic focus is that even when excluding the benefit of EMV in the quarter, we still delivered high single-digit core growth. Furthermore, we ended the year with backlog growth of 40%, reflecting accelerated EMV adoption at Gilbarco Veeder-Root as well as continued strong demand across the product lines at Matco. Importantly, we realized these results while continuing to position our portfolio for the future and investing ahead for profitable growth opportunities. Not only were we able to deliver high single-digit core revenue growth across the platforms, which exceeded our previous outlook, we also drove structural cost control and working capital productivity, which will continue to provide benefits into 2021. We're also making steady progress improving our innovation efforts by deploying lean portfolio management, launching growth accelerator sprint processes to gain market insights and adding talent focused on growth and product development. Our portfolio is strategically positioned across attractive markets. As secular drivers evolve towards increasing regulation and the growing need for clean, efficient mobility solutions, our enduring business model will provide even greater stability and growth through economic cycles. We remain focused on building a better, stronger Vontier by utilizing our balance sheet and deploying our significant acquisition capacity. With that, we are initiating our full year 2021 guide, which includes our core revenue growth expectation, ranging from a decline of 1% to growth of 1% and adjusted core operating margin expansion of greater than 25 basis points. This core growth outlook includes a more favorable view of the 2021 EMV headwind of $100 million to $150 million. Excluding the EMV impact, core revenue growth is expected to be mid-single digits despite our more challenging comps in the second half. Additionally, we anticipate full year adjusted free cash flow conversion of approximately 95%, reflecting the timing of tax payments and working capital headwinds resulting from a very strong 2020 performance. All this results in our full year 2021 adjusted diluted net earnings per share guidance range of $2.35 to $2.45. The guide amounts to a tale of 2 halves, reflecting the continued first half growth in demand for EMV ahead of the April adoption deadline in Q2, coupled with a favorable comparison due to the impact of the pandemic in the second quarter of last year. Where in the second half, we have basically the opposite dynamic as we benefited from the V-shaped recovery and accelerated demand for EMV and Mexico regulatory solutions. In sum, this equates to expectations of first half adjusted earnings per share growth of greater than 20% and a second half decline in the mid-teens range. As I outlined in October, we identified a number of profitable growth initiatives to help offset the anticipated impact of the EMV sunset. These include simplification and productivity actions as well as further penetration in high-growth markets, regulatory and innovation strategic imperatives and continued improvement in businesses such as Hennessy and Teletrac Navman. We've made important progress advancing these initiatives, and I'm confident we will deliver. As such, our guide reflects our ability to more than offset the top line and earnings impact from EMV and expectations of inflation. Dave will walk you through the key drivers and assumptions of our full year 2021 guide in his remarks. We're also initiating our first quarter adjusted diluted net earnings per share guidance of $0.52 to $0.55, which includes assumptions of high single-digit core revenue growth and adjusted core OMX of greater than 200 basis points. With that, I'll turn it over to Dave to provide the financial results. Dave, take it away.

Thanks, Mark. Our adjusted net earnings for the fourth quarter were $147 million, an increase of 22% and from $121 million in the prior year period. This translated to adjusted net earnings per share of $0.87 compared to $0.72 in the prior year period. The double-digit increase in earnings was primarily driven by volume growth with strong fall through, which led to 240 basis points of adjusted operating margin expansion in the quarter. Core growth in the fourth quarter was 8.5%, driven by the continued strength of the EMV rollout in North America, regulatory-driven demand in Mexico and continued strong demand at Matco. The strong recovery that we experienced in the third quarter continued through the fourth quarter with both GVR and Matco experiencing double-digit core growth in Q4. And we also saw high-growth markets return to growth, posting mid-teens core growth. For the full year, we had core growth of minus 1.2%. However, we still continue to expand gross and operating margins for the full year, underscoring the power of VBS. The sharp recovery that we experienced in the full second half of 2020 reflects the resilient nature of our businesses in the markets they serve. Our adjusted operating profit for the fourth quarter was $201 million compared to $165 million in the prior year period, primarily driven by strong core growth and continued cost management in both cost of sales and operating expenses. We delivered gross margin expansion of 70 basis points, which contributed to the strong operating margin expansion, similar to the performance that we demonstrated in Q3 and a function of the team's continued application of VBS in what remains a dynamic environment. And although we have demonstrated prudent cost actions in this environment through the year, we have continued to fund our highest priorities to enable us to exit 2020 well positioned for more profitable growth. Our earnings growth continued to translate through to strong cash flow performance with adjusted free cash flow of $207 million, a conversion of 141% in the quarter. And while our performance in Q4 was strong, it is in line with normal seasonality. For the full year 2020, we generated adjusted free cash flow of $616 million or conversion of 147% of adjusted net earnings. A key underlying factor driving this outstanding full year free cash flow performance was how well our teams executed in this pandemic environment. Ultimately, the biggest lever in driving the free cash flow performance throughout 2020 was exceptional working capital management. We exited 2020 with working capital levels at a historic low. And while we anticipate maintaining top-tier working capital metrics, we expect to see some increase in inventory levels to pace with demand, which will likely increase working capital needs in 2021. Further, I will remind you that 2020 free cash flow benefited from only 3 federal income tax withholding payments, whereby 2021 will have 5 payments. This is a function of the timing of our spin and will create a headwind to free cash flow on a year-over-year basis. Nonetheless, we are extremely pleased with the work performed by many folks at the operating companies to leverage VBS to drive this cash flow performance. Looking at the top line performance of our 2 platforms. Mobility technologies had core revenue growth of 8.3%, led by low double-digit growth in GVR where we continued to see strong momentum from EMV demand and high-growth markets. As anticipated, we saw strong demand out of Mexico, driven by the fiscal security regulations we have previously mentioned and continued sequential improvements more broadly in other parts of the business, including a return to strong growth in high-growth markets. Overall, our high-growth markets, which are historically rather lumpy, grew mid-teens with India and Mexico being the main drivers. In our diagnostics and repair technologies platform, core growth was 9.2% and driven by the continued strong demand at Matco. Matco experienced low double-digit growth as we saw demand continue to accelerate from the strong performance that we saw in Q3. The technician employment environment remains healthy. And with new products coming online and having record net additions to our franchise base in Q4, we feel we are well positioned for 2021. We also exit the year with strong backlog in both platforms. Order growth exceeded revenue growth for the second quarter in a row with Matco orders growing in the low teens and GVR orders growing in the mid-teens. And we continue to work through both the momentum at Matco and ordering for EMV ahead of the upcoming deadline in April 2021. I mentioned the return to growth in high-growth markets, and we generally saw sequential improvement in most of our significant operating regions. North America grew high single digits as did our developed markets in total, and high-growth markets grew mid-teens after declining mid-single digits in Q3. Last quarter, we noted that we would begin a series of restructuring actions in Q4, aligned with driving targeted operational improvements. We recognized a charge of $4.8 million during Q4, which is excluded from our adjusted net operating profit. We anticipate additional actions over the course of 2021 with a total full year charge of around $20 million, which we will exclude from adjusted operating profit. Before turning it back to Mark, I will walk you through our 2021 EPS bridge. As Mark mentioned, our profitable growth initiatives are a key driver of earnings growth. At the midpoint of our guidance, we'd expect these initiatives, combined with an easier compare and price actions, will more than offset an EMV headwind of about $0.38. Also, the impact of the return of the temporary costs that we took out in Q2 of last year is expected to be offset by the benefits of the restructuring actions in Q4 of 2020 and those that will be completed during the course of 2021, along with other cost measures. We expect currency to be approximately $0.05 favorable. Lastly, below the line and other items are expected to be a headwind of about $0.12 to $0.13, primarily reflecting a higher tax rate. With that, I'll turn it back to Mark.

Thanks, Dave. There's no question that 2020 was a historic year that presented many challenges. I'm proud of our team for rising to the occasion and delivering safe working environments for our employees, substantial working capital productivity, operational execution and growth as we continued to invest in our future. The durability of our business model through economic cycles was certainly proven out this past year. We realized sequential improvement since last quarter in nearly all metrics, creating not only momentum, but also a high jumping off point as we head into 2021. I'm excited about our path forward, including the progress we've made since separation towards building out and resourcing our ESG programmatic initiatives and strategy. We're putting a lot of energy into this, and we welcome the opportunity to engage with all of our stakeholders on these efforts and to partner with you as stewards of your capital. To wrap up, 2021 is an important springboard to a multiyear transformation with a long runway of opportunities. As Dave highlighted, we are well positioned for the growth and comparison dynamics as we progress through the year. And while there is much work to be done, our teams are battle-tested, ready and believe that the best defense is a good offense. We will continue to invest in organic and inorganic opportunities and remain prudent and disciplined in our approach. We're also well aware of the evolving secular drivers in our markets and recognize the value of optionality, rapid decision-making and creative capital structures in this environment. And we remain hyper-focused on unlocking shareholder value for the long term. With that, I'd like to turn the call back over to Lisa.

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

[Operator Instructions] Our first question comes from the line of Nigel Coe of Wolfe Research.

This is Brian on for Nigel. If we could just maybe talk about GVR in the quarter, specifically in India, what drove that growth? Was it the new product introductions or just an improving macro backdrop and access to sites and things like that? And then also, how are you thinking about the outlook by geography into '21? That would be great.

Yes. Happy to do so, Brian. Yes, India returned to growth. As you know, it's been a lumpy business. It's been impinged by a number of things, COVID being one of them, for sure. And certainly, the access to the customer site, as you mentioned, is kind of a big deal so we can do installations. But I think kind of that will even out. But more importantly, we've got a great product there called Latitude, that's well positioned into the marketplace. It's doing really well. We've responded very well to the tenders in the market, and we picked up tenders, and so we've got a good backlog there to serve off as well. So I think our position in India is kind of unique, and I think we're beginning to capitalize on that, which is great to see. To get to the second part of your question about the geography, the -- when you walk around the world, if you look at the developed markets, we're looking at high single digits. The Matco and GVR in North America grew high single digits as well as Western Europe had mid-single digit growth, and that was a sequential improvement. And then when you look kind of at the developing markets, as David said, that also had sequential improvement, mid-teens growth. Mexico also grew because there was a great secular driver there that's played through, that's continuing to play through in Q1. India was up sequentially, and China was a little bit down. So with that, Dave, do you want to talk about 2021?

Yes, that's great. We talked about some of the dynamics with EMV, and frankly, some of the compare issues that we'll have next year or this, year 2021, compared to 2020. And those really are North America-driven with both EMV and some of the strength we saw to Matco. And so when we look forward, we think most of the growth for next year will be driven outside the U.S., and we'll see some of those headwinds offset, but more of the growth coming from outside the U.S. from those -- the headwind of EMV and the compare being North America-centric. With that, we do anticipate growth in high-growth markets and continue to see recoveries in other areas, including developed markets outside the U.S. as well.

Our next question comes from the line of Andy Kaplowitz of Citigroup.

Mark or Dave, could you update us on your work on business simplification using VBS and what's baked into your '21 guidance? You obviously reported strong incrementals in Q4. It did look like they were closer to 50%, which seems like you're guiding to again in Q1. I think you've told us before to think more about 30%. So are you finding more opportunity than you thought to increase productivity as you reduce complexity? Have you increased profitability faster in some of your smaller businesses? And does that mean we can start thinking about higher inherent incrementals going forward?

Yes. Andy, I love that question. What we really found through digging into our portfolio here is that we have more opportunities. And this simplification initiative really is about how we kind of ferret out the areas where we can do better. And I think the separation really shows that focus works, and the deeper application of VBS here and the tools that we're using is really uncovering that. I think you're beginning to see some of that coming through. I think I'm very encouraged by what we see into next year as we get our backs fully behind some of these opportunities. In terms of the total guidance, I think I'll leave it to the guide numbers we put out there. But net-net, I'm just very encouraged on what we're seeing, and I think there's an excellent runway of opportunities ahead.

Our next question comes from the line of Julian Mitchell of Barclays.

Maybe just a question around the narrowing of that EMV headwind versus what you'd said before, what drove that? And do we just assume a sort of bigger headwind in 2022? And also, I think you'd said you had a high $0.30 headwind from EMV this year in '21. That implies, I think, a very, very high decremental margin, maybe 50% plus. Just wanted to double check if I'd misheard that.

Yes. Let me -- I'll start with the question, and I'll turn it over to Dave, too. So first of all, I think we're getting a little better visibility. So for us to kind of narrow that range on a bit of an improved outlook to the $100 million to $150 million is certainly good news. But I think this is the difficulty that we're up against: One is the adoption rate is really hard for us to tell. So the other 2 is we had a better jumping off point. It was a lower number in terms of jumping off point. I think we have built a better backlog. And part of that, too, is we were gaining share. And then the other thing that's kind of difficult here is that you've got a mix between what's called EMV kits and dispensers, and that's also hard to call. And then you've got the smaller network retailers, and there's thousands of these folks that sell through 2-step distribution, and so it's a bit of a call in terms of total adoption rate on it. So I think what we're doing as we're working through this problem, we're -- as much transparency as we can, we're updating you on where we are and what has changed in terms of what we're seeing and then what our outlook is. So it's pretty hard to call even what happens after April, but I think we're doing the best we can. I think we're confident in what we see. But as we get smarter, as some of these dimensions become better known, then we'll certainly update you as we go through it. Dave, do you want to add anything on that?

Yes. I think on the decremental margin piece, Julian, I think you're right around it there, about 50%. These products in the U.S., with the reasonably higher technology component, tend to come off at a little bit higher rate. But also, as we said in the guide, our profitability actions, our growth initiatives and -- collectively are offsetting that impact. So we feel pretty good about that.

And maybe just a follow-up around sort of broader portfolio thoughts, I guess, in 2 respects: One is maybe some of the markets you're looking to buy in, in EVs or telematics, very, very frothy valuations. So are you kind of changing at all how you think about acquisitions? And also then on that point on electric vehicle-related valuations in the market, does that change how you think about the stakes in things like Tritium and Driivz and how to crystallize that value?

Yes. So first of all, we couldn't be more excited about these very growthy markets. It's fragmented. As many of you know, it's about a $27 billion TAM that we operate in. And we are excited about the portfolio opportunities around smart cities, around telematics and adjacencies and logistics and supply chain and building out the portfolio around the convenience store and truck stops. Because as many of you know, we're not just a fuel dispensing business. We've gotten into kind of the retailing side with point-of-sale and with SaaS opportunities there. As well as e-mobility, I think represents an opportunity. So I don't think there's any sort of new updates there. We're certainly in the market doing strategy work. We've got a full strategy team now engaged in working on that stuff and very exciting to kind of peel the onion on that. And then as we kind of move forward, it's the continued cultivation. And the M&A is pretty much the same. And we're looking at bolt-ons, near-in adjacencies, strategic acquisitions. And we've got a great balance sheet to be able to untap that. I think the thing that you mentioned there about EV and the valuations, I mean, certainly, we're seeing valuations, and we're obviously paying attention to what's happening in the marketplace. The great thing is that we've got these 2 minority investments: one in Tritium, which as many of you may know, is a DC fast-charging company there; and the other is in Driivz, which is a software company around managing -- energy management in the space, too. And so that provides us really a front-row seat where we're able to really learn. And keep in mind, it's very early innings in the market.

Our next question comes from the line of Jeff Sprague of Vertical Research.

Just 2 from me, please. Just first back to EMV, understand the whole kind of riddle or question on where adoption ends up. But based on where you ended the year and what you have on backlog -- and backlog, we would assume would obviously be delivered, where does that roughly leave adoption, assuming nothing else happens?

When we look at our installed base, we have converted about a little over 70%, about 71% of our install base. We would count -- we would then count the backlog and next year's activity. So we'd be over 80%, probably the mid-80s exiting 2021 based on kind of the midpoint of the range we put out today.

Great. And just a follow-up on the minority stakes, and again, it's nice to have kind of a little play there. But what are the dynamics around those businesses if the majority owner wants to kind of go elsewhere? The risk of these things maybe like trading away from you, so to speak. It's unclear if your ambition is to ultimately buy these things outright or they're just kind of channel-and-partner plays, right? But back to the earlier question, some of the stuff is super hot. You could potentially just see this going elsewhere at some frothy valuation.

Yes. It's difficult to hypothesize here, Jeff. We -- the terms -- the actual terms of these agreements are confidential. But we also have commercial arrangements with these folks that are outside of the existing maybe terms of our ownership. So it's hard to hypothesize, particularly in a market that's this early stage and, frankly, this kind of exciting. But having said that, I understand that -- I think we all agree on the dynamic, that we're seeing a lot of activity in this space. And ultimately, we like our optionality, and we like our position being in these assets.

The other thing there I'll just throw in is our revenue, that we actually sell for -- what we call e-mobility, which is mostly electric charging of Tritium products today. And it's mostly Central Europe. It's about $25 million. So it's grown a lot this past year and it's -- really represents excellent learning. And I think that's kind of the best way to describe at this stage is that we're learning a ton. But the market's evolving quickly. It's an exciting market, and we're looking for the best ways to untap that.

Our next question comes from the line of John Walsh of Credit Suisse.

Maybe circling back to the question around capital allocation. Just wanted to get your sense on how you're balancing kind of being able to find these deals where you can kind of hit that 10% ROIC threshold versus share repurchase. It looks like you are guiding for some dilution in the share count in 2021 relative to at least what you did here in Q4 on an average diluted basis.

Yes, we are, and part of that is a little more impacted by the spin where now we're seeing the impact of stock-based compensation come in just beginning from the spin date. That's the dynamic that you see there. But when we think about capital allocation, I think it's fair to say that M&A definitely remains our highest priority. Ultimately, John, we're focused on shareholder return, and we think M&A is our preferred vehicle to get there. Having said that, there could be times when share repurchase makes sense. But I think the right way to think about us is M&A definitely remaining our priority in terms of adding shareholder value.

Great. And then maybe as a follow-up, a lot of focus on EMV. I'm sorry if I missed it. How -- what did the point-of-sale business do within GVR in the quarter? And then how are you thinking about the growth for that part of the business into '21?

We didn't talk specifically about point of sale. As you know, we have a good position in the U.S., and I think we did well there. I don't have the exact percentage growth on that product. But when we are talking EMV, just to be clear, we're talking about the dispenser and the payment system embedded in the dispenser, so outside the thing you put your credit card in. We like our point-of-sale position. We like our position in the U.S., which is strong, and I knew we grew well there. And outside the U.S., we have some new products coming online, so it's an exciting space for us. But I think to the heart of your question, point-of-sale is not considered part of this EMV dynamic.

Our next question comes from the line of David Raso of Evercore ISI.

My questions are about the guide. The backlog is up 40%, you mentioned, at the end of the year. Do you have a backlog growth rate for ex EMV? Really, I'm trying to figure out the growth for non-EMV. It was up high single digit in the fourth quarter, but you're expecting to slow to mid-single. And I'm just trying to figure out that dynamic. And then second, on the guide for EPS, it seems like you're implying the back half of the year is about $1.40, which means the first half of the year is $1. And given you gave first quarter EPS, you're implying the second quarter EPS is below the first quarter. And I'm just trying to make sure that's what you're trying to imply. And then lastly, the balance sheet usage, cash flow. Is any balance sheet use of cash flow really in the guide?

Going back to these components, maybe starting with your point around the guide, David. So look, we talked about the tale of 2 halves. And the first half is going to be quite a bit stronger here, both on the easier compare, but also because we're seeing the EMV volumes come through. And note that we'll see some permanent costs come back in the second quarter. So there's still some puts and takes. So we're not guiding EPS by quarter beyond the first, but there are some dynamics that probably impact the second a little worse than -- that aren't necessarily there in the first. And the volumes coming out of your backlog, kind of tying it to your first point, are ultimately, we'll see a lot of that strength coming through the first quarter. So the first quarter is definitely going to be very strong, to your point. Now the point about backlog that you point out, EMV was a big driver of the significant growth in backlog. But we had good growth in Matco, and we had good growth in other parts of GVR as well that were not U.S.-related. So I think that without having the exact number parsed out in front of me, I think it's pretty fair to say that we're seeing growth in backlog, albeit not at that rate. So there's also some other timing effects here happening in the first half. That's really a little bit due to the pandemic. Historically, we would have our expo at Matco, which is, frankly, a big driver of demand and cost. We would have that in the first quarter, and we're moving that to the second. I don't think all of the revenue will necessarily move to the second because we'll still do a lot of that online. But it's a very important event for that organization that pulls along a lot of costs, and that will be in the second quarter as well. So I think directionally, you're correct without trying to necessarily put a dollar on it.

I'm just trying to -- and also the third question about the balance sheet cash flow usage, what's implied in the guide? Or is it more just no usage implied and you can do what you want with the lower net debt in your model? I'm just trying to figure out what's in the guide for the balance sheet usage.

Yes. So we talked about -- Mark talked about conversion -- free cash flow conversion of about 95% next year. And we had a big working capital tailwind this year. And we anticipate, as I was saying, a little bit of a headwind next year. So we anticipate a little lower -- well, significantly lower free cash flow conversion year-over-year. But as you know, we tend to point people towards about 100% conversion, so it will be around that. So we see things kind of normalizing with some trade-offs from some of the benefits in 2020. As far as capital allocation for M&A, we're not implying anything in our guide around doing any deal. So this would be kind of a purely organic guide. M&A would be upside, like it always is for us.

So no repo, no M&A, just simply the 95% cash flow conversion and whatever that cash would bring on interest income or whatever, short-term debt reduction. There's no active use of the cash flow or balance sheet for M&A or repo.

That's right. That's right.

Our next question comes from the line of John Inch of Gordon Haskett.

I'm wondering if we could talk a little bit about just M&A process. I know you've talked about this in the past, and you've talked about this kind of as Vontier was going public. But I just want to -- maybe you could lay out a little bit more on the process and how this is working. I know you have a couple of senior folks driving this. And I know one of you mentioned the smart cities initiative. But how are you -- if you think about ex -- obviously, you can get into some adjacencies the C-suite -- or c-stores and other things with respect to gas stations. But how are you thinking about the world of -- like you guys have a pretty blank canvas, right? I mean it strikes me that you have a very wide opportunity to look at a number of different things and criteria, possibly even a little overwhelming. How are you narrowing this? Just maybe you could talk about that, please.

Yes. So it is a pretty exciting field. And if you think about our penetration in some of these, GTT, while a small business, it still puts us into 90,000 intersections in the United States. In terms of fleet monitoring management, we're on 0.5 million vehicles that are being monitored. And then if -- you spoke about the convenience store with about 260,000 refueling sites globally within the average of every 3 to 4 dispensers per fueling site. So there's a lot of data coming in, and the ability to sort of monetize that is also pretty exciting. But I think you brought it up right. I mean it's growthy. These are fragmented. They're all very excited. And then how do we narrow the field is something that we wrestle with a lot. We've got a team of folks working on this bubbling up priorities. And as you know, both -- you want to be convinced of the strategy in the space as well as you want to be looking at what's in those spaces in terms of properties, and M&A can be quite episodic. So there's a number of factors that we look at. The good news is that they're all relatively near in. Like we have a reason to be in these places. We have something to leverage in these places. And we have something to leverage across these spaces, too, which is also very exciting. So I think that does give us optionality. I will absolutely say that we have a disciplined, rigorous approach when we think through these things and through capital allocation as well. It's a bit of the heritage that we get, both through the cultivation aspect as well as the executives that we have onboard that really think through these kind of things. And we like to say no a lot in this process, too. That means we're just ferreting out the best of the best opportunities at this given time.

Mark, what would you say are Vontier's core competencies that would lend themselves to you targeting future acquisitions that are not immediate or obvious adjacencies to both Matco and GVR?

Yes. We have an excellent core competency in solving high-value problems with customers in this space. Our brands are well recognized. We've got a lot of depth in how we serve our customers there. And then when you look across the businesses, there's pretty significant scale that we can also leverage. And then the other competence we have also is on this sort of M&A allocating capability that is deeply entrenched in the business and also the application of VBS and how we can apply that to new acquisitions. So we've got a lot to work with here, and so I'm excited to leverage it.

Our next question comes from the line of Julian Mitchell of Barclays.

So just one follow-up. I didn't hear much mention of telematics. Maybe I'd missed it, but just wanted to check how did that perform in Q4 and also what's embedded in that guide for this year relative to the mid-single-digit growth ex EMV.

Julian, it's Dave. In the fourth quarter, I think we saw the progress we were looking for, and we remain on track. As you know, it's a SaaS business, and it was down in the fourth quarter, but that was more a function of kind of flushing through some churn revenue in the prior year. And as we've talked about earlier, we've seen churn moderate. It's a SaaS business. It takes time to change. But what we're looking at is the forward indicators of the rate of churn and some of the operational priorities we're looking to make. We've talked about really starting to see that flow through the P&L more in the second half of next year. So it doesn't have a big effect on the guide next year because it moves slowly. But I would say, we're definitely still focused on the operational priorities we've talked about and feel like we're on track with those.

Ladies and gentlemen, that was our final question. I'd like to turn the floor back over to Mark Morelli for any additional or closing remarks.

Yes. Thank you, Maria. I'm incredibly proud of this team's ability to come together and execute with these headwinds and more importantly, take advantage of these opportunities that have been in front of us. And I'm also very excited about this road ahead. This ability for us to springboard into this multiyear transformation is very compelling to us as a management team. We're very engaged on it and couldn't be more excited to see what happens on the road ahead. Thanks, folks, for joining us today in today's call, and have a good day. Bye now.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect.