Good morning, and welcome to Dover's 2020 Analyst and Investor Meeting Webcast. In attendance from Dover Corporation today are Richard J. Tobin, President and Chief Executive Officer Brad Serapak, Senior Vice President and Chief Financial Officer and Andre Gaeleuk, Vice President of Corporate Development and Investor Relations Carl Buechner, President of Dover's Pump Solutions Group and Janelle Whitmire, President of Colder Products Today's presentation will include 2 videos, so all attendees who do not anticipate asking questions are encouraged to participate via the webcast link on Dover's website. As a reminder, ladies and gentlemen, this webcast and conference call is being recorded and your participation implies consent to our recording. If you do not agree with these terms, please disconnect at this time.
Thank you. I would now like to turn the call over to Mr. Gayluk. Please go ahead, sir.
Thank you, Gigi. Good morning, everyone, and thank you for joining our virtual meeting today. This webcast will be available for playback on our website through December 11, 2020. Dover provides non GAAP information and performance metrics. Relevant definitions and reconciliations between GAAP and adjusted measures are included in the presentation materials, which are available on our website.
We want to remind everyone that our comments today may contain forward looking statements that are subject to uncertainties and risks, including the impacts of COVID-nineteen on the global economy and on our customers, suppliers, employees, operations, business, liquidity and cash flow. We caution everyone to be guided in their analysis of Dover by referring to our Form 10 ks and Form 10 Q for the Q2 for a list of factors that could cause our results to differ from those anticipated in any forward looking statement. We undertake no obligation to publicly update or revise any forward looking statements, except as required by law. With that, I will turn this call over to Rich.
Thanks, Andre. Good morning, everyone, and welcome to our Investor and Analyst Meeting. The purpose of today's meeting will be to focus on our Pumps and Process Solutions segment, which as you know has been performing very well over the last several years. In particular, we will deep dive into our high growth biopharma business where we've made some interesting organic and inorganic investments recently and we see a long runway for profitable growth. When we initially planned this event, our intention was to have it coincide with the grand opening of our brand facility near Minneapolis.
But due to pandemic related restrictions, a prerecorded video will hopefully give you a glimpse of how our new best in class manufacturing and engineering facility coupled with some recent product acquisitions position us to sustain and accelerate our growth trajectory. Moving on to slide 3. Joining me today are 2 of our operating company presidents, both veteran operators with experience in driving growth and strong operational performance. Carl Buscher is the President of Pumps Solutions Group and Janelle Whitmire is the President of Calder Products Company. Today, I will provide a brief Q3 corporate performance update and then provide a high level view of our pumps and process solutions and biopharma businesses.
After that, Carl and Janelle will take us through more detail about their businesses. We'll do a brief Q and A at the end of the session. Okay. Let's jump into the quick corporate update on slide 4. I assume most people in attendance are familiar with Dover, but those of you that are new to the name, we are a $7,000,000,000 supplier of engineered and differentiated industrial equipment, components and software to a diverse set of attractive niche businesses or business to business markets.
Our strategy of participating in new attractive markets, coupled with strong operating track record, attractive cash flow and active capital deployment have historically resulted in superior shareholder value creation over long term horizons.
Despite
the challenging business environment thus far in 2020, Dover has demonstrated topline resilience and an ability to flex our cost structure to preserve profitability. This performance has been augmented by our multiyear effort to drive permanent cost efficiency programs across our portfolio. With the confidence of continued ability of our portfolios companies to execute well in the current environment, we were one of the few multi industrials to reinstitute full year guidance at the end of Q2. So let's go to slide 5 and I'll give you a short Q3 update on trading conditions. Demand conditions continue to improve sequentially across the majority of our markets.
Bookings while negative year over year are higher than our forecasted expectations and improving sequentially with book to bill turning above 1 in August. Also our absolute backlog remains higher than this time last year providing confidence of our revenue forecast for the full year. In terms of the individual business highlights, our above ground retail fueling, heat exchanger, aerospace and defense and biopharma businesses continue to deliver robust performance. Demand conditions are constructive in marking and coating, food retail and vehicle aftermarket. Our longer cycle businesses such as plastics and polymers and can making equipment continue to track as expected with limited disruption or shipment deferment.
Our expectation to deliver improved comparative margin performance in our refrigeration business remains on track. As a result of the Q3 top line trends, positive product mix, some of which we will highlight today and continued good execution on our year guidance, derisking any potential of unexpected demand dislocations in the Q4. This provides us a clear path achieve the top end of our full year guidance, which I would expect to refer the refined at the end of Q3. So with that, let's move on to why we're here today. On Slide 6, we are providing an update on our capital allocation execution toward the priorities we outlined in prior years.
We prioritize high ROI and high certainty organic investments to fuel growth and improve productivity. We've made significant investments over the last 2 years and these strategic projects remain on track despite moderate supplier obstacles associated with the COVID pandemic. 1 of the largest organic investments by Dover was by Dover was the new building for CPC to support growth. We are proud to announce the completion of this project, which provides CPC with significant growth capacity and an expanded set of capabilities. Janelle will talk more about this today.
Our investment to automate production of our door cases in Richmond is progressing as well. We are piloting production and we'll be gradually increasing volume through the next several quarters driving improvement in our margin performance. Inorganic deployment of capital is in Dover's DNA and remains a high priority. We have a solid track record of driving value through bolt on acquisitions. An important vector of our M and A efforts is enhancing our offerings to customers and upgrading our business mix through digital and software offerings and investments in markets with secular growth trends.
All 6 bolt on deals we have closed this year meet this criteria. 4 are focused on software and digital offerings and 2 on product line extensions of high growth spaces. As we mentioned during the Q2 results,
our
M and A pipeline remains robust and we are well positioned to continue enhancing our earnings growth through smart capital redeployment. Lastly, we remain committed to providing shareholder returns by regularly returning a portion of our strong cash flow. To this end, Dover has maintained its 66 year track record of uninterrupted dividend increases and we will continue growing our dividend. Turning to Slide 7. This tees up why we want to shine some more light on our pumps and process solutions business.
This segment has been an excellent performer both within the Dover portfolio and when benchmarked versus our peers. As we showed you last year, after decade long upgrading, our portfolio has demonstrated robust GDP plus growth and margin accretion through cycle. Pumps and Process Solutions stands out against that solid backdrop. As you can see, this is one of the fastest growing businesses with the highest margin profile and significant reoccurring like revenue sources. We expect this segment to be the most resilient in 2020 as well and they have a commendable margin performance year to date.
Moving to slide 8. We have 4 operating companies in the segment ranging in size from approximately $200,000,000 to $500,000,000 These are leaders in niche markets mostly focused on high criticality flow control applications. From a business mix perspective, the majority of the segment is compromised of components that represent relatively small cost compared to the value in use and total cost of the system. Many of our technologies are proprietary. For example, CPC's portfolio includes 85 patents and Emtek utilizes proprietary software in their flow controllers to optimize flow rates based on meter readings.
Furthermore, contributing to the stability and predictability of these businesses are significant replacement demand and a sizable stream of parts and services after initial install. As an example, nearly 2 thirds of the demand of our pumps comes from maintenance repair and goes toward replacing equipment in the field. Within our PPS segment, we have several high growth sub platforms that have been under development for several years. One of them is biopharma, which you're going to talk about today. But there are also growing applications and offerings like renewable energy, thermal management, medical and hygienic.
I'm not going to spend a lot of time on Slide 9 and we'll just point out that we have a number of product lines serving a variety of life science and hygienic applications that add up to roughly $300,000,000 business, serving addressable markets of over $2,000,000,000 On slide 10, we show you how we think about the growth avenues for this platform. Our biopharma business is an excellent example of that. We developed it organically from an industrial connector offering and Janelle will talk about another great example of driving growth through thermal management applications. To support these aspirations, we invest almost $10,000,000 a year in R and D across CPC PSG, which drives our organic product development and our inorganic opportunity identification. Quattroflow is a great example.
It offers new to the world positive displacement pumping technology. We also have our sights set on more opportunities just like it. Lastly, we continually look for ways to enhance our offering to existing customers through complementary solutions that go hand in hand with our core products. Emtek's is a great example and Carl will talk about it later in the presentation. We believe we can continue to drive substantial growth through this framework.
Moving ahead, let's dive into our biopharma business. We are really proud of what our teams have accomplished here starting from virtually 0. We made a few targeted inorganic investments that seeded the platform and the majority of the growth has come through excellent application of customer centric organic growth levers. This platform is growing at rates well into the double digits and at this pace doubles in size every few years. This is why we're feeding this growth with smart organic investment is a paramount priority.
We have moved Quattro Flow to a new facility a few years ago and now have built a greenfield site for CPC to support their growth into the future. On the next few slides, we'll give you a high level overview of our thesis for biopharma market participation and let Carl and Janelle take us through a more in-depth look. On slide 12, we lay out the growth drivers behind biopharma and single use production technology in particular. These drivers are well supported and have been playing out for a long time and importantly have runway to support future growth. First off, biologic drugs have been growing at a rate double that of traditional small volume pharmaceuticals.
They deliver successful novel therapies from multiple common elements and share of biologics in pharma pipelines been increasing with a steady stream of innovation coming out of the industry, including recently cell and gene therapies. Globally, the volume of biologics production is growing in double digits. Within biopharma, there are 2 main production methods, fixed stainless steel structures that require deep cleaning after each batch and single use production systems utilizing recyclable plastic components where possible such as bags, tubing, connectors and more recently pumps. Single use technology offers a clear operational benefits to producers and has been a technology of choice for the vast majority of new production capacity put in place. The results in single use offering growing above double digit base growth of biologics production.
Additionally, the single use nature of our products essentially consumables tied to the production volume as opposed to capital expense. On slide 13, we show that we partner with customers across the whole value chain of drug development and production. We start collaborating early in the R and D process and development stage and that makes our product a natural choice for manufacturing scale up phase. Slide 14 is the last one we'll cover before we get into the meat of the presentation is just a visual showing of the logic behind the platform we are building. As you can see, the offering we've built over time is not a random collection of products.
We aim to participate in high criticality components that operate on the same fluid path and often can be sold on the same sale occasion and can be engineered to work together and make the overall system safer and more efficient. This visual shows our pumps, connectors and flow meters on a continuous chromatography system. Importantly, we operate an OEM agnostic model that offers the most flexibility to our end customers. With that, I'd like to hand the presentation over to Carl Buscher to speak more about the biopharma business within our Pump Solutions Group. Carl?
Thanks, Rich. Let me start by briefly introducing Pump Solutions Group. PSG is a global pump and dispensing solution expert, enabling safe and efficient transfer of critical and valuable fluids with revenue of about $500,000,000 Our end markets include chemical processing, general industrial, liquid and dry bulk transport, downstream oil and gas, commercial cleaning and the rapidly growing medical and biopharma space. I've been with PSG for the last 9 years and President of the business for the last 6. To begin, I'd like to show you a short video about our Quattroflow pump offering and a recent acquisition, Emtek.
Thanks to world class brands committed to delivering innovative technologies that the world's toughest pumping application and flow control challenges. We've accomplished this by adhering to successful business strategies that include strengthening our foundation by investing in complementary components adjacent to our pump offerings that are critical to our customer success. Through this strategy, we've been focused on investing in our biopharmaceutical business, which is one of our fastest growing product lines.
We've been acquiring flowmeters off the market to marry up with our QUADTRO4 pump. We found ENTTEC to be a really interesting technology. It's noninvasive. It's highly accurate. We thought we could take that product, marry it to a Quattroflow pump and process controller And with some sophisticated algorithms, provide a more technologically advanced pumping flow control system for biopharma.
And we've been doing that now and our customers are very excited about it.
Headquartered in Finning, Germany, Emtek is a leading producer of innovative flow measurement equipment. The acquisition of Emtek enables PSG to extend our reach in the biopharma market beyond pumps to provide customers with best in class solutions in both upstream and downstream applications.
Thanks to Amtech's strong engineering background and its commitment to innovation and to research and development, we've been able to excel within the medical devices market over 3 decades. This background strategically positions us to fit naturally within to the biopharma industry, where there's a growing expectation towards quality, reliability and precision.
We acquired QuatroFlow and it was a perfect fit the application in biopharma, in chromatography. Its ability to maintain cell viability in the process was outstanding. And then things took off from there. We were started in the lab and over time we found our customers applying this technology models that takes us basically from the lab to full scale production manufacturing in single use. And today, that business is 10 times what it was when we bought it in 2012.
Truly unique in their method of operation, QUATRIFO quaternary diaphragm pumps mimic the human heart, which is the perfect model for the clean, safe, reliable and efficient transfer of biological materials. This operation helps maintain the viability of the cell to ensure the purity of the product while providing constant flow rates that can operate in conjunction with varying pressures.
Knowing the flow rate in your process is great. So combining the pump with the flow meter is really essential. We already had customers using the combination of Quattroflow with Amtech even before the acquisition. So it is a perfect fit.
As an end user, you want to have the best possible outcome in the process, ensuring your system runs as accurately, precisely and as reliable as possible. Combining our sensors with petroflow pumps and optimizing the technology between those two components, we can deliver a solution that exceeds these expectations and therefore will create a significant value proposition for our customers.
At PSG, innovation is at the heart of our operational excellence. As our global footprint and product pipeline continue to expand, we remain
So let's move to Slide 17 for additional detail about Quattroflow. I had recently joined PSG as the sales and marketing leader when we acquired Quattroflow in January 2012. So I've been involved with the Quattroflow journey from the beginning. It has really been exciting to lead the organization that drove the growth of this nascent new technology and overcome the obstacles that often accompany scaling up a small business. The Quattroflow business has grown tenfold since we acquired it and we continue to see strong growth momentum going forward.
On Slide 18, we highlight some of the advantage of this innovative pad protective technology. These pumps produce low pressure pulsation and consistent flow for the gentle handling of critical fluids under dynamic system pressure conditions. The ability to maintain cell viability at the customer's desired operating conditions improves yields and optimizes processing times. Other pump technologies are not as effective at higher system pressures and as a result QuatroFlow has been able to stake out a share in highly sensitive bioprocessing applications. When we first acquired the business, only a couple of pump models were available and the flow range was severely limited.
In addition, very few customers had tested and accepted the technology into their systems. Under Dover ownership, we've grown the business by focusing and investing in creating a scalable product line, while working with our OEM channels and end customers end user customers to drive industry specification. This has led to a great increase in the addressable market opportunity for the technology. And we also have been rapidly expanding range. The first model developed was a QF1200 and over the past 8 years, we've expanded the offering of both multi use and single use models to increase the applications we can serve.
The scalability of the product allows for the pump to be used in early R and D and process development stages as well as into full scale commercial manufacturing. This gives us an advantage as we partner with customers very early in a drug's development. During the R and D stage, we showcased the benefit of our technology and what it will provide throughout the lifecycle of the drug. Moving to Slide 20, here we highlight various bioprocessing applications where you might see Quattroflow. Bioprocessing is a complex multistage process that has varying system requirements throughout the process.
QuatroFlow's core applicability chromatography and filtration applications. We are also finding success now in other applications where end users are requiring improved flow accuracy, more process control and reduced processing times. Let's switch gears a bit and talk about Emtek on Slide 21. We acquired Emtek earlier this year and have already seen positive results from the integration to our platform. Emtek's roots are in flow metering in medical applications, in particular, heart and lung machines, life support machines and dialysis.
Prior to the acquisition by Dover, they had successfully entered the biopharma space with their non invasive flow meters and we started noticing the product being adopted by our customers. That's where we realized the opportunity to help Emtek accelerate growth through our global sales channels, but also to integrate the pump, flow meter and process controller to deliver even better flow control solutions to our customers. You can see this business has a nice growth trajectory doubling in the past 4 years and we will help improve that trajectory. Slide 22 provides an overview of the Emtek technology and product offering. The Emtek flow meters use ultrasound to measure the rate of fluid flow non invasively.
The sensors clap around the outside of the tube. This non invasive flow measurement technology is a great fit for medical and bioprocessing applications where there is 0 tolerance for contamination. The non invasive design also allows for quick and easy installation and has a compatibility with a broad range of tube sizes and materials. This in turn gives the customer flexibility in R and D during process development and when designing full scale production. MTech supplies clamp on transducers, flow measurement solutions and embedded in house developed software for a broad range of application needs.
Emtek can supply a single flow measurement device for a laboratory environment or can provide a complete flow station for multiple commercial scale processing units. For end customers end use customers who desire more accuracy and or an all in one cleanroom packaged tube set solution, we are now developing a truly single use flow measurement device. On Slide 23, we show both the key bioprocessing applications currently addressed by MTech meters and prospective applications we are targeting. With Quattroflow, the technology can be used throughout the lifecycle of a drug. Emtek's standard offering is currently well positioned to penetrate upstream process development applications and downstream chromatography filtration and filling applications.
As biomanufacturing processes become more sophisticated, end users need to improve the control of their manufacturing processes and we believe we are well positioned to help meet customer flow sensing needs. Hopefully, you can tell that we're really excited about our future in the biopharma market and we see a clear runway to continue innovating and expanding our addressable market. Moreover, we have our sights on other opportunities like Emtek to grow inorganically in this space. Thank you for listening to our story. I'll now hand over things to Janelle.
Thanks, Carl. We'll now transition to Colder Products Company. Let's begin on Page 25 with a quick CPC profile. We are one of the smaller operating companies at Dover, but one of the fastest growing for a reason. Fitting into that Dover profile that Rich talked about, we supply highly engineered connectors for biopharma, medical, industrial and thermal management applications.
We make sterile connectors for the biopharma market that are single use and thousands of other low pressure companies many of which are used in medical applications that are also single use. And the beauty of our business model is for many of our customers we are designed into their equipment from the beginning, so there is an annuity, a recurring nature there. Dover acquired CPC in 2,005 and the business has grown fourfold since then, making it a really nice growth story that I will tell you about today. But to begin, let's talk about our recent facility expansion. We're really excited about our new building.
CPC had been stationed across several buildings and the setup was operationally not very efficient. Plus with the growth we've experienced, we were bumping literally into physical capacity limits. And since reliability of supply is paramount in this industry, it was imperative for us to expand. We now have the capacity to double and triple production. Additionally, the facility includes a large clean room, larger and redundant to another nearby that we will continue to keep operating.
This will accommodate spikes and growth in demand like the one we are seeing during the COVID vaccine development sprint. Now let's take a look at the video featuring our new building.
For more than 40 years, CPC has adhered to its successful business strategy. We work closely with our customers. We design high value products, and our product is critical to our customer success. Applying that strategy, we've built and sustained category leadership and low pressure fluid couplings or connectors across thousands of diverse applications. Recently, we moved into a new global headquarters designed to fuel our future growth.
How do we transform these small connectors into a business? Connectors are everywhere fluid needs to transfer from one space to another. They connect tubing and manage the flow of fluids in a wide array of applications such as medical devices, biopharma manufacturing, cooling of electronics, and more. CPC designs and manufactures premium connectors that are used across the globe. They're among the most highly engineered and tested connectors on the market.
Customers recognize their value. They choose CPC connectors for their critical points of connection, the precise point where they can't afford a failure or a leak. Creating an essential component that's used in a multitude of applications gives us unique advantages.
CPC sells our products into a wide variety of industries. By doing that, we really get exposure into our products to really solve those customers' needs and really have a focused effort into those hyper growth markets.
Simply stated, our business strategy is market intimacy plus innovation equals growth. Insights gained from market intimacy signaled us to place more focus on our biopharmaceutical business. It now encompasses our fastest growing product lines. It's also how we identified a new emerging market, thermal management, liquid cooling of high performance computers and data centers, as well as electric vehicle charging stations. As we enter a market, our connector expertise and innovation earn us a strategic partner role at the front end of customers' designs.
We get into their original design and stay with them as they grow. As a specified product, we have to provide our customers with assurance of supply. Our new building was designed with that in mind.
CPC's new headquarters and manufacturing facility meets the industry expectation for supply chain assurance in a couple of key ways. 1, it provides additional clean room capacity. And number 2, it provides redundant manufacturing to our existing clean room facility that will continue to run. We can have the most innovative product, we can have the best quality, but if we don't give our customers the right product when they want it through their preferred channel, we can erode their confidence in CPC.
Our new headquarters and production facility will help us fulfill other part of the equation, innovation. Innovation permeates everything we do from design to manufacturing. The headquarters is larger, more efficient, and boasts several features built to nurture our inventive culture.
I'm excited about all of the new test capabilities in our new headquarters. This is going to allow CPC to continue to set the bar in all the markets we play in and meet their high expectations. We have a vast variety of test capabilities across mechanical testing, fluidic testing, thermal management testing, as well as material analytics. We also built a standalone lab for our development teams. There's extensive 3 d printing.
We have finite element analysis capabilities as well as a variety of other prototyping tools we use in the development phase.
We have collaborative design spaces, which enable subject matter experts from across different disciplines from engineering design, manufacturing technologies, quality, product management, sales to all be at a common space.
Our business strategy and commitment to innovation have paid off. With industry expertise and customer dedication, our connector solutions have become standard in many industries. With double digit sales growth, a diversified customer base, and products in demand, our future is bright. We embrace the opportunities. CPC is primed to rise to new heights.
And we are primed for growth. On Slide 27, you can see the evolution of our product design in the markets we serve. From CPC's founding, we have earned a reputation as the innovative specialist supplier of high performance companies and connectors and our current portfolio of over 85 U. S. Patents is a testament to that reputation has led customers to turn to us when they have a new challenge in their equipment design.
And that's what got us into the biopharma business when in 2,002 a customer asked us to figure out a way to connect a disposable bag to a stainless steel bioreactor. That's when we launched SeamThru. In 2009, building on some early traction, we launched AseptiQuik, which enables sterile connections in non sterile environments. With that success and intimate knowledge of the industry, we knew we could score with the genderless aseptic quick that offers increasing operational efficiency and flexibility. From that introduction in 2013, it is now our fastest growing product line and opening avenues for growth in our other aseptic products.
What seems like a simple product from the outside is really decades of R and D and intellectual property that make customer demanding applications perform flawlessly. As you can see, the story of CPC Growth is really a story of continuous customer centric innovation based on market knowledge and pushing the boundary of where our technology can be applied. A bit more about leveraging our industry knowledge on Slide 28. Our biopharma business unit is a great point at a great point in its growth story. We are well positioned with leading drug manufacturers and OEMs who drive the specification to use CPC products in their production processes.
We are prepared to participate in the next waves of innovation and production of vaccines, cell and gene therapies, as well as feeding continuous growth in single use applications. We also have a material presence in various medical applications that involve transfer of fluids, which can be gases or liquids such as dialysis, ventilators, laser surgery systems and disinfectant systems. These applications have secular growth tailwinds behind them as well. Our next growth frontier is thermal management where leak free sealed connectors are required in a variety of demanding applications such as data centers and electrical vehicle charging. Traditional HVAC methods are insufficient and liquid cooling is a technology of choice.
Whenever you have liquid transfer in a constrained electronic environment, leaks are unacceptable and robust non spill technology is enviable. We will touch on this industry in a few slides. Turning now to Slide 29, we'll discuss CPC's biopharma offerings and why we win. In short, connectors and companies are all that we do application expertise and investment are second to none. Quality of the product, ease of use and reliability of supply matter greatly in this industry, especially with its significant growth.
We meet those criteria and another key consideration in the industry. Most connector suppliers also compete on integrated systems with the very OEMs that are looking for connectors. Because we make connectors, we are not competing on other product lines to be included in a specification set. We call this being market neutral or OEM agnostic. Choosing CPC has been an easy proposition.
There's the reputation for quality and reliability and then the choice isn't complicated by price or supply bundling other components decisions. We that to that add the benefit of the fact that many of our aseptic connectors are genderless, which reduces inventory costs and simplifies operator training. Our growth strategy is built around both push and pull marketing. We're a recognized leader in the space, so we are often pulled into new customer opportunities through our extensive distribution network. However, we also maintain close relationships with end users and our partnerships allow us to stay on the cutting edge of innovation and push new applications to grow the market opportunity for or get in at the beginning of a customer's development cycle, creating a loyal customer and strong partnership for years to come.
The mantra, win the spec, is embedded in our culture and is a significant driver of our growth. Turning to slide 30, we'll now talk about the opportunity in thermal applications, which shares a number of parallels with our biopharma business about a decade ago. We had developed technologies over the years to service this sector with the growth in computing. However, similar to our biopharma business, our business really took off when a customer approached us for a customized solution that used liquid coolant because air conditioned cooling was no longer an effective option. In creating the product and developing industry know how, we quickly learned there was a significant commercial opportunity and we were able to broadly market our technology to customers in the space, including data centers and cell towers.
With our close partnerships with end users, we not only have a seat at the table, but are at the forefront of driving innovation in the space, including a move towards thermoplastic connectors from the traditional brass and stainless steel. We are very excited about the potential for this business line. With that, I'll pass it back up to Rich for wrap up.
Thanks, Janelle. So I hope this short overview gives you a flavor of what we're building in the biopharma space. This business is less than 5% of total Dover revenue, but with organic growth rates we've been achieving with an additional investment, our aim is to triple this business in the future. I hope the examples we provided demonstrate how we organically expand our addressable markets and take our products into new applications. Also, we wanted to underscore the importance of long term value creation potential from smaller inorganic bolt ons, which may seem unimpressive at first, but can drive substantial growth leveraging the scale and synergy of being part of a larger enterprise.
We will continue investing behind this platform and other similar high performing businesses at Dover and we believe that it will create significant value to our shareholders in the future. So thanks for your time today despite not getting to visit the facility that hopefully we can soon. We'll open it up to Q and A, Andre.
JJ, let's move on to the Q and A.
Our first question comes from the line of Steve Tusa from JPMorgan. Your line is now open.
Hey, guys. Thanks for making this interactive. It's great to be able to chat a bit about this stuff. Just curious as to I got to go back and see how much you paid for Quattroflow. Can you just remind us of what kind of returns you're getting on this deal?
And when you look at kind of the one you just did, the Emtek deal, with this type of growth, what kind of cash on cash returns that you're going to get? These seem like they're very high return types of things that they're growing this fast.
Sure, Steve. I mean, you know that we have a hurdle of 10% return on invested capital for inorganic investments. I mean, Quattroflow was done some time ago. Yes. But with the growth and we haven't calculated it recently, but with the growth rates and where it is from a margin profile, I can pretty much guarantee that it far exceeds that return threshold.
Emtek is new, based on what we can tell. I mean, I don't want to put Carl on the spot to forecast over the next 3 years for Emtek, but our expectation again, because of the margin accretion and because the underlying growth that we can expect in the space that that one will also significantly exceed the 10% return on invested capital threshold in 3 years.
How much did you pay for that one again, Emtek?
We didn't say. I think you're going to
have to go look at our disclosure at the end of the year. It's not a lot, I'll put it to that way.
Okay. I'll have to expand the effort, then.
Well, look, I mean, it's yes, I know it's go ahead.
When you mentioned you talked about some of the better markets early on in the presentation. Maybe you could give us an update on some of the ones that you were a bit that had a bit less visibility. I know food retail was one that was uncertain. Maybe there's waste handling. Just maybe on some of the more questionable markets, where you stand on those?
Sure. Embedded in I think that we said at the end of Q2 that was embedded in our full year forecast was for food retail and textile digital printing to remain trading conditions are going to remain difficult through the end of the year. And I don't think that we're going to change that stance between now and the end of the year. So those 2 in particular are down significantly. I think that we've done a very good job in the 2 particular segments that they participate in of offsetting that loss of profits through better margin performance.
And I think that in the printing and ID side, we've done really well in terms of the margin performance, largely as a result of some cost cutting and good mix that we're getting out of the consumable side. So we've done well there. And despite the fact that food retail, we are projecting to be remain subdued, We expect the segment margins in DRFE to actually improve between now and the end of the year, driven by better margin performance out of the refrigeration unit and Belvac.
Okay. And then one last one just on the details. You guys said that this biopharma and hygienic business is like a $300,000,000 business. You said it's about 21% of sales. That gets you at $300,000,000 spot on.
That gets you to north of $1,400,000,000 in sales. That's up year over year. I don't think that's necessarily what you're trying to say. There's probably some rounding going on. So is this a business though, the pumps and process segment that can kind of claw back to flat by the end of this year?
That was a really complicated question. I think that you misunderstood a portion of it. I think that we're saying that it's $300,000,000 in total. I'll go back to the slide here, so I don't misstate anything. That if we go to slide where is it?
Yes, it's slide 9.
Yes, it's a 300,000,000 dollars platform on Slide 9.
Yes. And then Slide 8 says 21% of sales.
Well, it's $300,000,000 in total and the biopharma and medical piece of that $300,000,000 is a piece of that $300,000,000
$20,000,000 So 20 percent of
the $300,000,000 and that's the part that's growing at double digit.
Okay. Got it. So this segment in total will still be down this year revenue wise?
This segment in total will I don't think that we've given forecasts on the segment itself, because this is a sub segment or a sub platform.
Total segment.
Yes, this sub platform will be up year over year. I think what we said in terms of the segment goal or PPS is we made no comment on revenue, but we were aiming to despite having some headwinds on the precision component side of delivering year over year full year profit increase.
Got it. Okay, great. Thanks a lot.
Thanks, Steve.
Thank you. Our next question comes from the line of Scott Davis from Melius Research. Your line is now open.
Hey, good morning guys and thanks Rich for doing this. Hi Scott. Rich, are your M and A deals more likely to be in kind of your higher margin segments? Or I mean, clearly, probably a couple of businesses that you don't have an interest in. But you filtering down deals based on what your current business mix looks like or could you add a new platform?
I don't think that I think that we would add some I would 2018 about we got a little bit of stick back in 2018 about going into a capital intensive phase and we said, well, look, you know what, there's nothing wrong with organic investment. And one of the investments we called out was a greenfield capacity expansion in a high growth area that really our view was not a lot of investors knew about. So today was to kind of give more color around here's a sub segment, our pumps and process solution is not just all industrial pumps. And as you can imagine, the questions we answer all the time about oil and gas exposure and blah, blah, blah. This was something that we'd like to highlight because we want higher returns and we're trying to invest smartly behind growth.
So I don't envision us creating a new segment in total. The 5 that we have are broad enough. We'd like to create sub platforms within those segments. Yes, this got big enough. Clearly, 5, 6 years from now, you could split it in half again.
But I don't see that right now. But go ahead with the question for Janelle.
I know this is minutiae, but is there Carl and Janelle, can you give us geographic breakdown of your businesses and perhaps just clarify whether what's sold direct versus through distribution?
Yes. Thanks for the question. This is Janelle. Geographically about 60% of our business is in North America and the rest of our business is the rest of the world. Distribution as an overall CPC business is about 55% of our business through distribution and the rest of it is direct.
This is Carl. So roughly half the business is in Europe. The Americas is our next largest region and then Asia. And we're split about fifty-fifty with direct and distribution.
Okay, super helpful. Thank you. Good luck, guys. And Janelle, thank you.
Thanks, Scott.
Thank you.
Thank you. Our next question comes from the line of Andy Kaplowitz from Citigroup. Your line is now open.
Good morning, guys. Thanks for the presentation. Hi, Andy. Rich, given your commentary to Scott, how do you think about pumps and process overall the overall segment moving forward with the growth you're seeing from Karl and Janelle's business? Do you see the overall pumps and process business having the capability to meet or beat that mid single digit growth that you've been recording over the last few years over the next few years?
And if we look at that 35% recurring that you highlighted, is that just a stop toward higher recurring related growth over time?
Well, I mean, one is kind of a shorter term question and one is more of a strategic Let's deal with the yes, I mean, I think our mid single digit growth rate is over long periods of time. So you're going to get years of outperformance and then years of underperformance. Let's take COVID out of the mix, right, and call that a one off. But our DPC business because of its energy exposure is retarding the growth rate that we have within the segment, but we've got faster pieces of the portfolio. So on like the CPC business that we're talking about today.
So on average, over 10 year horizons, we would like to see mid single digit growth, but you're going to get years of outperformance clearly and hopefully in 2021 because to the extent that DPC comes back next year and the rest we expect the trajectory in this particular sub segment to remain as it is this year, then you could see some outperformance.
Got it. And then for Karl and Janelle, how has the PSG under CPC competitive landscape evolved over time? I mean, I know the businesses are younger at Dover, but I think Dover does tend to have number 1 or number 2 businesses across its portfolio. So maybe you could just frame the competition for us, how consolidated the market are these markets and what's the opportunity here?
Yes. So the competition for CPC and the biopharm business is fairly fragmented and with our innovative leading connector, we are number 1 for sterile connectors.
Yes. So for us in biopharma, we have several competitors, but they have different technologies. Typically, 2 pump or prostaltic pump is what we're competing against. And so if you want a Quattroflow pump, you want it because it does a better job in performance because it's much more expensive than those technologies. So that's how we compete in biopharma.
Thanks guys. Appreciate it. Thanks Andy.
Thank you. Our next question comes from the line of John Inch from Gordon Haskett. Your line is now open.
Thanks. Good morning, everyone. Good morning, Rich. Can we just pick up on that competition theme a little bit and talk about the China dynamics, in terms of the importance of China today as a growth market. Obviously, it's big in terms of biologics and pharma in terms of that country's aspirations.
And also, I just want to know kind of competitively are there risks in terms of IP and the risks that you're probably seeing maybe reverse engineered by the Chinese or how do you see pros and cons of that market?
Yes. So for us, in the majority of this is Janelle with CPC. The majority of our products, well, all of our biopharma products are manufactured in the U. S. And we sell highly through distribution into our APAC markets.
With our very strong patent portfolio of over 85 patents, obviously that's just our U. S. Number. We have over 200 global patents. We are pretty well positioned in terms of taking advantage of the growth that's happening with bio in Asia specifically overall, but feel pretty well protected as well.
Yes, this is Karl. A lot of our larger all of our larger customers are either doing business in China or planning to do business in China very, very soon. And yes, there are folks trying to copy product, but the way we make manufactured product and the quality that we have it in our customers are likely to take a chance on something that's not from the direct OEM. We've not seen any risk of that yet. And the other part is that we're innovating with Emtek and Quattroflow together, coming up with different solutions for our customers that control the process better.
And so I think we're staying ahead of any risk of competition that way as well.
Well, can I also just sort of follow that up with the sale process, how sort of short cycle versus long cycle is this? Like how much visibility do you have? Maybe you could both just describe kind of how this is working and sort of how this fits into backlogs that have levels of predictability?
Yes, I think it's
a little mixed. We do have projects we're working with our OEMs that a little bit longer cycle, but the activity has been very robust in the market space. And so we're seeing a lot of money flow and investment into this area. And so we're seeing a lot more diverse customer range and needs coming much more rapidly than they used to. So, a little bit of both, I think.
Yes. And I'll just follow-up a little bit on that. We do, as mentioned, you have both a push and a pull strategy. So we are working directly with the end user, directly with the drug manufacturers. And so in those cases, where we're on the specification, we won the specification, we visibility to in terms of some of the variation of the orders that come in.
So I would say the end market drivers are not necessarily economic per se, right? I mean, if we were to I understand the kind of structural growth drivers, but if you were to think about growth drivers in these businesses ex a share gain, but just say call it market, what exactly are those? Is it just sort of investment spending by drug companies? Is that kind of how you for instance on the biopharma stuff, is that how you gauge this or maybe there's other ways to think about intermediate term growth drivers?
So just so I understand the question is what is driving the growth in biopharma?
Well, intermediate term and in particular for the end markets that you guys are serving. That's not entirely clear to me anyway.
Yes. So I think there's 2 major growth drivers in biopharma, right. One is just the overall growth in biological drugs and biological manufacturing. So it's very strong pipelines in a lot of these end users in terms of new drug that are in development, new drugs that are being launched. Obviously, vaccines are included in that.
And then the second growth driver is really the transition of manufacturing these drugs from stainless steel manufacturing to single use plastic components in manufacturing. So again, biologics is growing quite rapidly overall, but then this transformation that's taking place and how they manufacture these drugs is driving growth above just the biologics growth.
Yes, perfectly stated. Exactly.
Okay. Just one final one here. In terms of the equipment and components business, I was noticing, so you've got this diagram this out, you've got your pumps, your flowmeters, your connectors. Can you talk about maybe the frequency of the bundling of all 3 versus and I'm not talking in terms the part sales, right, but the frequency of the bundling versus say the one off and sort of what are the penetration trends or drivers kind of as you kind of look forward? And also what's missing, I mean, in terms of these machines, are there some obvious other product markets that you could actually be adding or those are the 3 sort of primary things that kind of cover you at least for the space that you want to compete at?
Yes, this
is Karl. There's not a whole lot of bundling happening between PSG and CPC. We do leverage our sales channels to make introductions and get FaceTime with customers when they used to be FaceTime with customers. But within PSG, the whole point with Emtek was to do more bundling of pumps and meters to provide better process control. So we're really kind of just starting that.
So there's not a whole lot of it going on right now, but we expect that to be very successful.
Okay, good. Thank you very much. Appreciate it.
Thanks, John.
Thank you. Our next question comes from the line of Julian Mitchell from Barclays. Your line is now open.
Thanks. Good morning. Maybe just trying to stick to 2 questions. So the first one is just around any color you could give on PSG and CPC pricing power and profitability in the 2 businesses?
Yes, I'll take that for the 2 operating company presidents, Julian. No, I'm not going to give you any look, we these two businesses and the products compete on product engineering. So in terms of pricing power per se, it's more fit for use and it's competing against other products as opposed to pricing it appropriately versus its competitors. But the margin is accretive to the segment and that's part of the reason that we're highlighting the businesses in addition to the growth rate.
Thank you very much. And maybe one follow-up, and I suppose this could be for Karl or Janelle or for you, Rich. Circling back to that Slide 8, you have about just under 15% of sales in the overall DPPS segment coming from service plus consumables. How do we think about that share expanding over time? How critical is PSG and CPC to that?
And are there sort of specific initiatives across the businesses or across the segment in aggregate to help push up that share if that's something viewed as desirable?
Well, I'll let the 2 of them answer on their unique businesses. But I think it becomes because these are single use platforms or single use products, they can be considered consumables. And that's part of the reason that we like it. But I'll let the 2 operators answer of what they think.
Yes. I mean, you can see from Slide 25 for CPC that about 70% of our overall business is recurring or single use applications. So that consumables for CPC is really a big part of who we are and really the markets that we play
in. Yes, same
thing here. On Slide 17, we talk about single use chambers being 62% of the revenue. By far, once you're installed on an application with the base pump, the recurring revenue from those chambers is significant. I think Amtech is a little bit different. It's really not a single use device yet.
So a significant part of their business is still the initial sale.
I see. Thank you.
Thanks, Julien.
Thank you. Our next question comes from the line of Andrew Obin from Bank of America. Your line is now open.
Hi, guys. Good afternoon.
Hi, Andrew.
Just a question, if you look at the competition in the biopharma in the space, it seems that all the big guys, Thermo, Danaher, Sartorius, sort of buyers rather than sellers and whatever is available, it probably comes in very big chunks. Is there opportunity to buy from sort of bigger, more integrated players in terms of businesses that they're not focusing on? Just trying to understand what's the opportunity for a more focused niche player like yourself to grow through M and A given that it's a very strategically attractive space for a lot of competent companies?
That is a good question. We have not seen a lot of that because I think they have been very busy acquiring themselves and integrating, but one would could envision that as part of the integration of some of these bigger deals that there could be attractive pieces to come out. But to answer your question other than theory right now, we don't see that. Mostly what we see is smaller companies that have developed unique devices that fit into the industry and that really is the locus of this presentation to a certain extent that Emtek was a very small company when we bought it. And we envision that we can grow it substantially once we put it in the wider portfolio.
Same thing with CPC quite frankly when it was bought and how it's developed over time. So to answer your question, it's a possibility, but for what we see right now, it tends to be smaller product engineering firms that have attractive products that we're aware of just because we occupy the space.
And just a follow-up question. So I think the whole thesis on Dover has been is that if you look under the hood, there are a lot of these great companies like you guys are talking about today. How many as you were guys thinking about this Analyst Day, how many other businesses are like this inside Dover that you could sort of highlight that I think both sell side and buy side don't quite understand. I know that you have sort of highlighted this has been one of the themes that you highlighted to us before, but just are there other businesses with similar growth and return parameters and site over that you could highlight down the line
to us?
There are. We are going to do another product focus one between now and the end of the year once we get all the information bundled up. And really this is look, we did this because we were noodling around here how to deal with Investor Relations under a COVID no travel ban. I believe it was just inappropriate to do kind of a Dover Investment Day or what we've done in the past just based on I've been here a couple of years now. We've gone through the portfolio review.
So the natural way to move this would have been to do it focused on smaller sub platforms in the portfolio that we think deserve some recognition. So we could probably do at least 2 or 3 more of these. We're definitely going to do another one between now and the end of the year. And then depending on the feedback we get from this one, it may be reoccurring. We'll do 1 or 2 a year.
We'll see.
This is fantastic. No, it's really helpful. Thank you so much.
Thanks, Andrew.
Thank you. The last question comes from Joe Ritchie from Goldman Sachs. Your line is now open.
Thanks. Hi, everybody, and appreciate all the details.
Thanks, Joe.
So just, I guess my first question, you referenced some of the acquisitions that you did year to date. Obviously, there were a couple of software deals in there. And when you peel back this business, it looks like you're already driving pretty good recurring kind of consumables piece of your business. And just if you can maybe just talk a little bit more about the deals that you did on the software side, what did they get to in this space specifically that you didn't necessarily have?
Well, look, I mean, not to jump on some macro theme. I look at it in multi industrial world where software has taken kind of paramount importance. I mean, look, the software deal that we did in marking and coding was a near adjacency of track and trace. It was a logical extension of the great position that we have in consumer goods. We believe that track and trace technology, which has largely been in pharma, is going to begin to be adapted from a variety of different products for a variety of different reasons.
And we thought we had the entree to expand it just because of the penetration that we have in high value consumer goods. So that was the logic other than let's go around and start buying software companies because somehow that's popular now in industrial world. So same thing with Softpack that we did on ESG. That was part and parcel to an acquisition we did several years ago that was getting into camera technology. It's allowed what is probably considered to be an industrial bodybuilding business and it's changed that business, I would argue significantly in terms of how it's perceived by our customer base.
So it's kind of smart add ons to get away from price sensitivity and discussing what steel plate prices are all the time and changing the business model. And then the smaller well, Emtek, we talked about Solaris was a product line extension because we needed some additional products in laser. Zantac is control systems, which is just built around the leading position that we have in polymers and processing. And then VHSS is scanning technology. We've done a lot of work in automotive aftermarket on sensing technology and that was just a line extension from there.
So it's not we're not going around and saying we need to buy software, we need to buy consumables. Clearly, there's a logic because of the reoccurring revenue streams there that you would like to do it. But for us, it's line extensions and building off where we think that we have strength in terms of the market structure.
Got it. That makes a lot of sense, Rich. And maybe just my one follow-up question and this may be a little bit of an unfair question tough to answer. But have you guys tried to size what the vaccine opportunity is for this business or maybe even broader across your Dover portfolio?
Yes. We were talking about that this morning that that question is likely going to come up. We can't, Joe. I mean, look, we are what we are. We are very small compared to the customers that we supply who are in a much better position to answer those questions than us.
Fair enough. Fair enough. It's worth a shot, but appreciate
all the color too.
All right. Thanks.
Thank you. That concludes our question and answer period and Dover's 2019 Analyst and Investor Meeting. You may now disconnect your lines at this time and have a wonderful day.