Good afternoon, everybody, welcome to Dover's 2019 investor meeting. I am Andrey Galiuk, Vice President of Corporate Development Investor Relations for Dover. Together with me here are Rich Tobin, President CEO, and Brad Cerepak, CFO of Dover. We'll begin the meeting with a presentation by Rich, then we'll open the meeting for questions. This webcast will be available for replay on Dover's website. Dover provides non-GAAP information, reconciliations between GAAP and adjusted measures are included in our investor supplement and other materials, which are available on our website. Our comments today may contain forward-looking statements, we caution everyone to be guided in their analysis by referring to our Form 10-K 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 would like to turn it over to Rich.
Thanks, Andrey. Good afternoon, everyone, and welcome to Dover's 2019 capital markets presentation. Because the presentation is going to be webcast, I'm going to have to stick to the script here so I'm not pointing at slides. When we get to the Q&A, it can be a little bit more interactive. For those of you who participated in or listened to the presentation we made a year ago, we announced at the time that we'd be focused on shorter-term tactical actions to be taken at Dover. We also promised to report on our progress and come back the following September with a broader update on portfolio strategy, so here we are today. With that, let's turn to slide three of the deck for an overview of the agenda. I'll begin with a short update on our progression towards achieving last year's objectives.
From there, we will cover the output of our portfolio assessment conducted with the management and the board of directors over the last 12 months, and our intention to align our external reporting with the new management structure. This is followed by a broader and deeper assessment of the new business structure, including competitive positioning, sources of value creation, and details and product and market exposures. I'll follow this with the key pillars of our strategy going forward, including operating model evolution, opportunities to create value on common business systems, our digital strategy, and operations toolkit. We'll wrap up on margin improvement roadmap, balance sheet strength, and capital allocation priorities going forward with some granularity around our inorganic intent by segment.
That's a lot to cover. I suppose that some of you are disappointed that we have a presentation prepared at all. Have no fear, I'll do my best not to filibuster and leave ample time for Q&A. Moving on. We are building off a strong legacy at Dover, clearly in terms of shareholder value creation, the portfolio is capable of producing attractive returns, as you can see from the chart in the upper right. We're committed to extending this legacy and recognize that our journey from here will be driven largely by organic growth, operational excellence, and smart reinvestment and capital allocation. Of important note, the bottom right of the slide is our full-year guidance for 2019 as updated at the end of the second quarter.
We have not updated our full-year guidance in this presentation, and any changes to guidance will be when we report Q3 in October. As I mentioned in my opening remarks, we have laid out some clear, measurable objectives last September, and it's important that we close this chapter with an update. We have delivered on our cost structure realignment, delivered healthy incremental margins, and reinvested a material portion of our savings into initiatives that will contribute meaningfully to our future growth and margin improvement. The biggest concern we heard last year was that our organic growth was going to suffer due to SG&A cost reductions and the organization turning inward to deliver the cost savings. Through Q2, Dover has delivered solid organic growth performance, as you can see on the slide. We have meaningfully invested in our businesses with a clear bias towards productivity and growth initiatives.
I'll cover a few later in the presentation. Finally, we have deployed in inorganic capital within the criteria that we had established, and we have a robust pipeline of similar nature. I'm pleased with this early performance. Our management team was challenged to deliver on some tough objectives. They accepted the challenge by understanding the importance of building a culture of delivering consistent returns through the business cycle. It also gives us confidence that by executing our SG&A initiative, that we have a roadmap for synergy extraction from our inorganic initiatives. Here is an update on the specific margin improvement programs in our Fueling Solutions and Food Retail businesses, which we announced last year. As you can see, we've made meaningful progress in DFS and expect to deliver 300 basis points in comparative margin expansion in 2019.
The margin journey does not end here, as there remains much to do, especially with our EMEA business. We are very pleased with the focused effort of the management team, and all the tools are in place to deliver accretive incremental margins beyond 2019. In DFR, we faced a much larger task with the impact of the demand cycle and a far more complex operational issue. The improvement journey from here will take longer, but we see a path to target profitability within the next 18 months. I'll give some more detailed color on where we are in this project from an operations perspective later in the deck, but there are two important data points to consider.
Market demand for the retail case and door product line has stabilized, and we see a clear path to exiting 2020 at our target objectives that does not require a significant increase in volume demand or product mix. Let's move on to slide nine, please. What have we done? We've transformed the portfolio and positioned it for growth. We have a long-term track record of superior shareholder returns. Portfolio transformation over the past decade has transitioned from a pure hold co model and resulted in a stronger portfolio with more growth exposure, less cyclicality, and more synergy from common ownership. We have completed an in-depth analysis of the portfolio, which confirms strategic and financial health and strong value creation potential for Dover's businesses, including two highly accretive turnarounds.
Clarity on what businesses we like, how we will drive sustainable growth, and how we add value as an enterprise. We intend to increase transparency around our businesses from here going forward with the adoption of the new segment structure in Q4. I've covered a lot of this in my opening remarks. Dover has an established track record of significant value creation across different timescales through organic growth, portfolio changes, and a dividend policy. Move on to slide 11. Over the course of the past decade, the portfolio has been rationalized significantly from 35 to 18 operating units with a substantial portfolio rotation away from various cyclical end markets. The benefit of this rationalization can be seen by rerunning peak-to-trough revenue changes or trough revenue changes and organic growth for the legacy versus current portfolio.
Clearly, the Dover portfolio is of far higher quality than the past and positioned to deliver consistent returns over time. As part of doing this work internally and comparing it to a peer group future revenue growth rates, it has become increasingly clear to us that Dover continues to drag some perception that its portfolio is highly volatile due to its legacy and market exposures. This implied volatility manifests itself into a lower organic growth rate outlook compared to its peer set. It's our intent to close that gap today in this presentation. I'll start with a few slides from the total portfolio review, and then we'll dive deeper into the individual businesses. Let's first take a look at the end market exposures. As you can see from the chart on the left, Dover's portfolio participates in large, diverse, growth-oriented end markets through defensible niche businesses that occupy leadership positions.
The exposure to commodity-driven or cyclical markets is low, and many businesses benefit from the robust secular trends around safety, compliance, productivity, consumerism, and energy efficiency. More important than the end markets themselves is the critical nature of the products to our customers, the significant barriers to displacement, substantial reoccurring revenue, and long product cycles. To further establish the value of the portfolio and the robustness and repeatability of its revenue streams, let's take a look at it split by nature. The current total portfolio is split 43% equipment, as defined as standalone systems such as a retail fuel dispenser or a digital printer for textiles. 26% of the portfolio is critical use components or subcomponents sold to system suppliers, such as compressor components or single-use biopharma connectors. The remaining 30% of the balance of the portfolio is made up of aftermarket parts, consumables, services, and software.
The chart on the left maps extremely well to the characteristics that Dover finds attractive with respect to business model, customer exposure, and financial profile, and provides the baseline from which we will allocate capital both organically and inorganically in the future. Over time, we aspire to increase the share of component aftermarket and digital revenue streams within the portfolio. While we were doing the hard work of unpacking the drivers of the strategic attractiveness of our operating companies based on market growth, structure, customer concentration, et cetera, we are also evaluating this light of the financial performance and building outlook for value creation runway going forward.
As you can see from the chart, all of the companies in the portfolio are projected to deliver above-market value creation in a GDP plus environment over time, largely as a result of their margin potential, low capital intensity, evidenced by its 20%+ cash return on invested capital across the portfolio. There are clear avenues for short-term value creation, particularly in DFS and DFR, that have been our priorities due to their scale in the portfolio and what we believe is a realistic performance objective. As mentioned previously, it is our intent to realize that value. Overall, there are many medium-sized, high-return businesses that need to be nurtured and pushed to steadily create value over time through market-driven top-line growth and incremental margin pass-through.
Several of the more mature businesses are embarking on business model changes, creating new avenues of growth by leveraging their established positions either directly or through their distribution channels. ESG comes to mind as an example that I'll cover later in the presentation. There are several very interesting high-growth, high-value portions of the portfolio that we need to be aggressive in scaling, both organically and inorganically. Our hygiene and biopharma platform comes to mind here. Portfolio assessment is a live process which we will revisit annually or if there is a dislocation in market structure.
While the exercise does indicate there are no burning platforms, we will be prudent portfolio managers and reserve the right to be opportunistically active within the portfolio. As part of the underlying portfolio work, it has become clear that the current Dover business segment structure needed to change to accommodate our new managerial structure and operating model. As such, effective with our Q4 2019 disclosures, we will be providing segmental information on five future segments from the current three. We thought long and hard about this, as the trend in multi-industrials has been towards fewer segments, not more. The natural tendency is to be reticent about the granularity of the information disclosed, especially given how smaller companies can swing segment results with the reduced scale of the individual segments. An increase also implies an increase in managerial layers, which is not the case here.
Ultimately, we have come down on the side that the operating performance benefits to be derived from commonality of business models, managing efficiency and decision-making speed, clear performance benchmarking, and better capital deployment efficiency, or the concept of competition for capital between the smaller segments trumps the negatives. We believe that our shareholders stand to benefit from the improved portfolio and performance transparency, as well as the sum-of-parts valuation improvement potential. I am confident the benefit outweighs any ramifications of quarterly growth rate or margin fluctuations versus estimates at the segment level. Before we move on to the individual segments and their constructs, it's important to rebase recent top-line performance from the data on slide 11 to the future new segment structure and benchmark it to global GDP. Clearly, the portfolio has capability to deliver GDP plus, with several segments participating in robust secular demand trends.
One last time before we move on to the segments and kind of the operating structure. One last time on growth. We have a clear formula to drive robust growth across a diverse set of businesses and markets. We will also employ this formula for determining business model fit and future investments. Here's where we are in the margin journey under future segment structure. We have made some real progress in margin accretion, especially since the spin of Apergy. We have line of sight on our larger near-term opportunities for value creation. As you've seen from the quarterly results since last September, we are driving healthy incremental margin performance, even without the SG&A cost reductions, which is a reflection of the healthy EBITDA margins in the majority of the portfolio.
Our current trajectory gives us confidence that we continue to grind margins higher from a combination of top-line performance, productivity programs, which I will outline further in the presentation. Let's transition here to the new segment structure and analysis of the competitive framework, business mix, and highlighted potential areas for value creation going forward. Fueling solutions should be the most easily comped of our segments in terms of competitive landscape as a result of the fact that its two largest competitors are public companies and well understood. You can see from the top right of the chart, we have an advantaged position in terms of market structure and geographic breadth. Our size and scale in the larger retail space allows us to pursue adjacencies beyond dispensers, which represent only 35% of revenue, and hanging hardware into such areas as payment, outsourced services, vehicle wash systems, and software.
The business has a robust recurring revenue profile as a result of its large installed base, with approximately 35% of the business being made up of parts, consumables, service, and software. As a full-service supplier to the fueling and convenience industry, our business has been evolving to incorporate suites of systems and software solutions for our customers, covering payment and loyalty programs, monitoring services for inventory management, safety, and compliance. Recall, the convenience store business derives profits primarily from retail, store, and car wash. While fuel is low margin and mostly for customer attraction. This dynamic creates significant opportunities for outsourcing and solutions that allow operators to focus on running their core retail store businesses. The monitoring of below-ground subsystems for safety, such as leak detection, maintenance, and inventory management across large retail franchises, has been proven to deliver significant cost savings to our clients.
These savings are from reduced downtime, improved inventory management, and reduced maintenance and compliance reporting costs. Our above-ground solutions, in addition to providing payment systems and software, are able to provide loyalty program management, infotainment commercialization systems, workflow, and back-office software. The systems and software business is $170 million in sales and is largely dispenser agnostic, mostly recurring revenue in nature, and growing at an attractive rate. We have material positions in both underground portion of the market, that is largely driven by regulatory compliance, and above ground and retail operations, payment, and loyalty. We expect system and software businesses to provide a significant runway of adjacent opportunities to create value above and beyond dispensers and have recently announced changes to our management structure to facilitate this transition.
Arguably, the least understood portion of the Dover portfolio is the Pumps and Process Solutions Group. I'll spend some additional time here. This is a $1.3 billion business made up of several premier platforms, all of which have leading market positions and provide critical engineered components to their customers. They have been grouped together due to their commonality of manufacturing systems, go-to-market strategies, and significant role of intellectual property in the business. From a market structure and competitive positioning standpoint, all of the businesses participate in highly fragmented markets, providing critical components to high-value systems and subsystems. These businesses have large installed base, brand equity, in most cases, specification-driven demand, as well as wide distribution and geographic coverage. This drives recurring revenues at 30% of the total.
Additionally, significant share of sales in these businesses is derived from stable replacement demand from a large installed base as opposed to first-fit installs. For example, more than half of the demand for PSG pumps comes from replacing their installed base within a very loyal customer base, averse to switching critical suppliers. In terms of end market exposure, our served markets are both broad and from an end user perspective, and global in terms of distribution and revenue. Our Pump Solutions Group, or PSG, carries a range of positive displacement pumps, employing both rotary and reciprocating technology. With a market opportunity size of approximately $8 billion with a diverse end markets from petrochemicals and wastewater to food and beverage, there are significant areas to leverage the brand equity of our Blackmer, Neptune, and Wilden franchises.
We have recently merged our Hydro dosing pumps business under the PSG umbrella due to technology commonality and to give it access to building our position in hygienic applications. I'll cover CPC on the next slide. Our Maag business is a platform of technology offerings to the plastics processing and recycling industry, which is made up of polymer and extrusion pumps franchise, specialized industrial pumps, dryers, filters, and pelletizing and recycling systems. The market size of these specialty applications is approximately $3 billion. It's highly fragmented, providing numerous consolidation and adjacent technology opportunities in pumps, systems, and control software. We are particularly excited with the secular growth trends in recycling systems. Dover Precision Components' business is made up of leading component suppliers, predominantly in the HVAC, industrial compressor, and power generation markets.
Highly engineered fluid film bearings, magnetic bearings, compressor valve and packing cases, and bearing isolators are co-engineered mission-critical components built to exacting tolerances. Our large installed base provides significant opportunity for maintenance, repair services, and monitoring services. Clearly, this is a premier growth platform to be exploited in the portfolio. It should be quite clear why this segment fits together. Markem-Imaje is a well-understood asset coupled with adjacency company Digital Print. Both businesses employ advantage positions in their respective market structures, and revenue profiles by products are strikingly similar. With reoccurring revenue at 65% of sales and moderate levels of capital intensity, they are high-value businesses in the portfolio and attractive platforms for both organic and inorganic investment. Both businesses have different paths to future success and value creation as a result of differences in competitive framework and scale.
It is clear that there are a significant opportunity to leverage the commonality of the two platforms operationally in ink production, consumables distribution, service, and training. In short, DDP has runway to leverage the large global footprint of MI to expand its global reach at a low marginal cost. Dover Digital Printing is a combination of premium textile digital printer manufacturer, MI, proprietary ink supplier, JK, and color management software, Caldera. DDP has been successful in establishing its position at the premium end of a $1.1 billion textile printing market, growing at a CAGR of 13% since 2016. Recall that Dover has built this platform through a series of acquisitions in 2014 and 2015.
With the launch of the Mini Lario platform this summer on the heels of market success seen by the industry first industrial scale LaRio printer, and progress in bundling together printer and ink solutions, there is significant value creation opportunity for DDP. As the TCO of large single-pass, high-speed digital printers become increasingly recognized for multiple color applications in textile manufacturing, it's expected that the market penetration will increase, and our product line will be extended in other textile production adjacencies. Services and software are increasing focus of the Imaging and ID platform as the businesses diversify from hardware and consumables into total solution providers. For instance, Markem-Imaje has 17,000 installs of its CoLOS software that helps customers significantly improve the efficiency and quality of their packaging lines.
The total software and service business is approximately $100 million and growing nicely. This is a significant area for both organic development and inorganic opportunity. Moving on to slide 26. The Engineered Products segment is a collection of well-established industrial businesses with leading positions in their respective markets. If I refer you back to slide 16 in the deck, I would call your attention to the fact that this group of businesses has delivered the best organic growth rate of the five segments from 2016 through 2019. The segment is made up of two large positions in VSG and ESG. Both are market leaders with longstanding market positions, large installed bases, and in the case of VSG, global presence and footprint.
Coupled with the smaller niche businesses of TWG, these businesses have commonality in their respective industrial footprints and processes that will be leveraged from an operational and supply chain perspective. OKI, DESTACO, and MPG, leaders in their respective niche markets of adhesive dispensing and soldering solutions, material handling solutions, and aerospace filters and switches, have been brought together under common management to accommodate the uniqueness of the respective operating models and to extract synergy savings and to develop unique growth pathways. Despite being viewed as industrial assets, both ESG and VSG have begun to leverage their advantaged market positions to pursue emerging and adjacent digital businesses. In the case of ESG, with the acquisition of 3rd Eye in 2016, the business has begun to aggressively build out a digital platform encompassing autonomous handling, asset and safety monitoring, and fuel and contract compliance solutions.
This suite of services has been proven to generate significant ROI to our waste hauling customers. It also provides growth pathways for us to pursue in adjacent fleet types. The 300% growth rate in SaaS software and hardware is impressive, and it's still early days, but we are very encouraged by the ramp and adoption rates. In VSG, we're leveraging our significant installed base, brand recognition, and scale of distribution to enter into the data capture and ADAS calibration. In cooperation with our Dover Digital team, we have deployed cloud services, gathering valuable data from cars handled on VSG equipment. As auto is becoming increasingly guided by sensor technologies, the calibration and servicing of driver assistance systems in the repair shop is an interesting opportunity to be exploited.
When we look at the relative market positions of the four businesses in the refrigeration food equipment segment, it's clear that they are advantaged in their respective markets. Food Retail and Belvac enjoy large installed bases, providing spare part revenue streams and short cycle replacement, as well as refurbishment opportunities. SWEP is one of the worldwide leaders in brazed plate heat exchangers, a sub-market size of $800 million in the greater $8 billion heat exchanger market. BPHE technology is winning share versus competing in older technologies because of its superior operating efficiency performance and adoption rates driven by environmental regulations. SWEP is truly a global manufacturer with a manufacturing footprint in EMEIA, NAFTA, Asia PAC, making it well-positioned to supply the growing and consolidating HVAC industry.
We have been investing in the business recently, including capacity expansion, productivity programs, and line extensions to ensure that we have the scale and cost possession to meet this secular trend. Belvac is a high-return business with a large installed base, providing for 40%+ revenue stream of maintenance and spare parts. The new build portion is tied to can-making capacity expansion and CapEx cycle, which makes the business inherently lumpy. In the past couple of years, Belvac has been in the unenviable position of the tail wagging the dog, so to speak, as global can making has not been at a capacity build cycle. We believe this is going to turn around as can-making capacity appears to be tightening, and we believe the secular shift trend from PET bottles to aluminum cans is due to environmental concerns. This trend is in early innings but is becoming pronounced.
Most recently, Pepsi and Coke announcing that Aquafina and Dasani, two top bottled water brands, will now be sold in aluminum cans and bottles. Despite the recent downturn in profitability, we are actually embarking on a sizable investment in Belvac between 2019 and 2020. UB is progressing well on consolidation of its four facilities to two and expects to be complete by the year-end, realizing the reduction of fixed costs and labor efficiency. From here, we can concentrate on the benefits of line balancing, SKU reductions, et cetera, and we expect to realize this potential progressively through 2020, particularly at Randell. I'll address the DFR automation in an upcoming slide, but let's address some of the changes in the market in retail refrigeration and how we respond to them from a product perspective.
Small format retail has been a growth area for the business, and we've responded to the unique needs of that segment by introducing new product formats such as grab-and-go case and distributed refrigeration systems that are more prevalent than centralized systems in small stores. As you can see from the performance of the KPIs of our SoloChill solution, we are responding to the smaller distributed format trends in the industry and are tracking well on share realization. We have also been working on unique initiatives with a company called Cooler Screens that is based here in Chicago and uses Dover's proprietary door technology for their integrated digital display offering. This proprietary door is an enabler for Cooler Screens' digital solution that displays pricing, merchandising, advertising, and other solutions which can deliver significant return on investment to retailers and brand owners.
We are very encouraged with the early trials and encourage you to take a look at the beta sites installed at Walgreens and hopefully soon at other large retailers. Let's transition to the go-forward portion of the strategy. I hope it's abundantly clear now that we viewed Dover as a high-value portfolio and see clear path to drive superior value creation through a strategy grounded in GDP plus growth, continued improvement in returns, and smart, productive reinvestment and capital deployment. We've covered the growth profile in prior sections extensively, so this section will expand on two other legs of our strategy, improved execution to drive returns and capital deployment. Yesterday, we announced our new segment structure and operating model to our company presidents.
This has been a work in progress over the last 16 months as we essentially removed the management layer and begun to reinvest those resources into our digital and operational capabilities. We expect our operating companies to have a self-funding mindset, and the corporate center is no different. We will run a lean center. As you heard during the segment presentations, we have purposely bundled the businesses for commonality of business model or technology to make our decision-making processes faster and more efficient, especially as it relates to operational efficiency improvements and measurement, digitization strategy, and capital allocation. As noted on the bottom right side of the slide, our operating company management retains in charge of their customers, products, and business strategy. They are also the cultivators of proprietary deals, which remains our preferred avenue of inorganic investment.
What the center drives is Dover initiatives that allows us to extract productivity savings across the portfolio. I will address three of these areas in the following slides. Dover Business Systems is a centralized back office designed to handle high volume, repetitive, transactional work in finance, HR, and IT. As you can see from the chart below, the penetration rate by process is still relatively low versus the opportunity. There has been hard work done over the past year in terms of infrastructure and systems deployment, where we feel now we are ready to increase the penetration rate and drive productivity benefits across the portfolio, as you can read on the right end of the slide. This is a unique multi-year opportunity for Dover.
I addressed the funding mechanism of our Dover Digital Labs running last September and some of the individual digital business initiatives in the portfolio review section today. Our leadership has been making steady progress. We have stood up Dover Digital Labs in Boston and have moved quickly to begin piloting customer-facing applications off common infrastructure with some compelling pilot results, as you can see on the right-hand side of the slide. By leveraging a central resource for IoT and connected product initiatives, we are able to reduce redundancy of support infrastructure and manage proliferation of common parts, such as sensors, to keep our total projects cost competitive. Finally, by centralizing IT infrastructure management, we can begin to extract scale benefits from common systems, from telephony, hosting services, software licenses, et cetera.
We expect to derive material savings in this area in 2020 and believe this is a multi-year opportunity to drive efficiency. We use what we have done in digital as a playbook of what we have embarked upon within central operations functions, which has been traditionally a challenge to Dover due to complexity of portfolio and the disparity of the IT systems. One of the largest benefits of this resegmentation is our ability to adopt common managerial frameworks for operational improvement across the portfolio. As you know, we've already begun this, especially in automation and footprint projects, but we are now going to systemize this approach across the common platforms. It's not as if we're starting from ground zero here, as many of our operating companies have robust continuous improvement programs embedded in their day-to-day operations.
As you can see in some of the results in the margin improvement trajectory presented earlier and the solid conversion margins. Our intention is to get common systems and measurement tools in place so we can train our managers, employees, and build our operational talent pool. That brings us to slide 36, which a bit of a semi-recap. I went over our initial focus. We completed the SG&A cost reduction across the businesses with $100 million net cost takeout, which resulted in $0.53 of EPS accretion. 2020 in flight, we are initiating a set of actions resulting in another $50 million in net cost takeout through footprint rationalization, IT centralization, center-led digital and operational optimization. It's a bit of misnomer, but we consider all four of those to be multi-year avenues for synergy extraction.
DFR and DFS margin improvement execution are covered, and we expect to execute on a deal pipeline that I'll cover in a moment. In the future, we expect to sustain 25%-30% plus core incremental margins, consistent execution with strong incrementals, smart inorganic cash deployment that will result in portfolio and mix improvement, reinvestment for compounding returns, and rigorous synergy capture. Moving on to slide 37. This is an update from the slide that we used last September. Strong cash flow across various economic conditions is Dover's strongest asset. We have rerun a similar exercise of future firepower at target leverage as we did last year, and are reiterating our cash flow guidance as a % of revenue. Don't get nervous about the 8%, we're clearly targeting the top.
It's clear that we have ample cash flow and balance sheet strength to fund our organic and inorganic aspirations while maintaining a prudent balance sheet policy. Our capital allocation priorities remain intact. The dividend in absolute terms is solid and will continue to grow. Our priority is to invest organically, sustaining our productive assets, investing in productivity projects and organic growth initiatives in capacity, innovation, and R&D. These projects are in our control to manage and have proven track record of the highest value creation. We will be opportunistic inorganically and will remain disciplined with our value creation criteria, business profile criteria, and as described in the right hand of this slide. We will be transparent with the industrial rationale and the performance over time. We have a diverse portfolio and multiple platforms from which to build scale, as you've seen earlier in the presentation.
We will stick to markets we understand and businesses that we have institutional knowledge of how to operate. We have ample authorization for share repurchases for excess cash that cannot be deployed within our return criteria. Moving on. Here's a quick update on some of the material organic investments. I hope that the first two are self-explanatory, given the color we provided on the high-value businesses in our pumps and process solutions portfolio. Both are on track to deliver significant long-term value to their respective segment. Our DFR automation project continues with beta units coming offline by the end of the year. We expect full production to progressively come on stream in the first half of 2020. As part of the project, we are also fundamentally changing the business model in terms of SKU simplification, with the intent to significantly reduce base models and operational complexity.
We are making good progress, as you can see from the stats. We need to change the cost structure, and that's important. We also have a real opportunity to materially improve the quality and the time to serve, and that's what our customers really care about. A high-quality product that's easy to maintain, that can be delivered on time to meet complex build and maintenance installation schedules. As I mentioned early in the presentation, we have line of sight in reaching our margin goals exiting 2020 in a stable demand environment. I covered our overarching M&A criteria and valuation philosophy earlier. This slide breaks down priorities and intent by segment and the market structure in which they operate.
As I mentioned during the recent earnings call, I do expect the portfolio to be different in five to 10 years, mostly through high-value additions that enhance the portfolio along the vectors described on the right-hand side of this slide. At a high level, we'll remain within our circle of competence with a bias towards reinvesting in high-value fluid related and imaging and ID businesses, and will add disproportionately to growing and stable components, aftermarket, and software side of the business across the wide portfolio. Wrapping up. This strategy lays a foundation for continued outperformance, revenue growth targeting GDP plus, revenue stability at 30% reoccurring and highly repeatable with the intent to expand. Short-term margin expansion in the $50 million net cost takeout and 25%-30% incremental EPS growth targeting double digits.
Free cash flow at the center of the range at 10% of revenue, total shareholder return in top quartile. The final slide, after 41 or 42 minutes. Just reiterating where we are in terms of strengthening our execution and delivering on our commitments. If we go back, I'll ad-lib a little bit here. If we go back to September, what I asked of everybody was to give us a chance to go execute, and we thought there were things that we could do operationally to gain some credibility in terms of our ability to deliver. I believe that we've done that over the last 12 months. I believe that we've done a fundamental look at the portfolio. Clearly, we have opportunities to increase margins and grind out margins higher. That's clear just by comparing them to some of our biggest competitors, quite frankly.
I think that we've got the pillars to drive that expansion over time, and I think that our businesses, in terms of winning in the marketplace, in terms of their customer relations and products. You can see that our operating management has done a fantastic job in terms of their overall positioning. It's just a matter of us winning in the marketplace if we're picking the right markets, and then driving a layer of execution behind it over a multi-year period. That finalizes the presentation. Do you have any statements you need to make before we go open the Q&A?
I don't have to make them.
Okay, good.
We'll open to Q&A. We'll pass the mic around.
All right.
Start left front, maybe, and then kind of alternate.
Thanks. Yeah. At this point, we're going to open the floor up to questions. We do ask, though, that you do identify yourself because we do have folks, of course, on the webcast. If you could just identify yourself before you ask the question, that would be very helpful. We have a question right here. We'll start
Thanks. Julian Mitchell. Just the first question around how the cost of goods sold or footprint optimization plan is trending. I think you talked about $14 million of savings next year. I guess that's within that $50 million total. How do you feel about where that 14 number can go in the long run?
Yeah. We get trying to monetize the footprint aspect of it. Look, there's significant runway, but it is a multi-year journey, right? We're in the midst right now of fundamentally trying to change the retail refrigeration business, which is a big project for Dover, at the same time, standing up a greenfield plant and our highest growth, highest margin business within our Pump Solutions Group. We've got significant runway. I think that the potential is high in our components business, where we have a lot of small plants. These are highly engineered solutions, so we've got to be really careful about the timeline of doing it. My expectation, if we're targeting something like $50 million a year, $20 million of that on a compounding basis over a year could come from footprint. I think that's a realistic objective.
Is there a follow-up, Julian, on that?
Sure.
Don't give them extra.
Go ahead.
One quick one. When you're thinking about the portfolio in aggregate, you've got two of the five new segments earning mid-20s EBITDA margin already. Is that where you'd like overall each of Dover's businesses to be eventually when you're thinking about a portfolio five years out?
Optimally, yes. Clearly, we've got portions of the portfolio that have some catch-up potential, and while we have certain parts of our portfolio that are best in class in terms of their margin performance. I think that hopefully it was somewhat eye-opening by de-linking the Fueling Solutions Group from the pumps business, for example, if you take a look at the margin there. That's an aspirational mid-20s% EBITDA. Sure. If we get it right over time. How we get there, I think we have a variety of different avenues, but we'll pursue kind of an overarching organic strategy and build our way there. If we can help that out by portfolio pruning in or out, we'll consider that also.
We'll try to get both sides of the room. Rebecca, if you'd like to go to your side of the room, please. Thanks.
Steve Tusa from J.P. Morgan. First of all, just to clarify the $50 million, we're taking the base for 2019 and then adding $50 million worth of EPS to 2020?
Yes.
There's no offsets or anything like that?
No.
Okay. Second of all, you guys have a nice perch on the economy. How do bookings look so far throughout the course of the quarter, seeing anything in September that's interesting? There's mixed messages from the macro, obviously. Just curious as to what you guys are seeing in your more economically sensitive businesses.
Nothing unique, clearly China is, the longer this drags out, is going to become an issue. Other than that, our bookings are right where we thought they would be at the end of Q2. We've been progressing well in that regard. Other than China, the only thing of kind of macro concern is euro-dollar, if that continues under the trajectory that's going now. We'll live with it at the end of the day, it doesn't change our competitive position, clearly, we do have a significant pool of euro revenue.
Lastly, just on capital deployment. Your stock is not expensive at face value. You mentioned the sum of the parts opportunity, potentially. If the acquisitions don't come through and the stock doesn't re-rate, given what you guys have talked about today, will you kind of plow excess cash, and is there a commitment to plow excess cash into buyback so that your balance sheet doesn't get too under-optimized, if you will?
Yeah. I don't know if we wrote it on the slide since there's been so many slides, but I think that we had the concept we won't sit on cash. It's a negative carry. If we're unable to execute, we've got the authorization to return value to shareholders.
Another question. We'll go to this side here.
Joe Ritchie, Goldman Sachs. Rich, on slide 14, where you laid out all of the different pieces of your portfolio and how they stack from a ROIC perspective.
You mentioned earlier no burning platforms, but you do have a few that are relatively close to your cost of capital. What are the plans to either grow those over the next 12 months or potentially think about divestiture opportunities?
Yeah. I don't want to go into. We had the option of naming them by opco, but we decided not to do that, other than the ones that we had called out for specific margin improvement. I know what those are. That is more a growth-related issue than an EBITDA issue at the end of the day. Clearly, if we can't find an avenue where we can grow them at GDP plus over time, then we're going to have to action that part of the portfolio.
Okay. Maybe kind of going back to the $50 million number for next year. You mentioned on the margin a couple things, a little bit worse since the quarter. If things were to get even worse than that, and we do have, call it an industrial recession, what other actions do you potentially have at your fingertips to potentially offset some of weaker growth environment?
Look, these are relatively flexible businesses because of their scale. We've got the ability to action our cost base relatively quickly. Take a look what we did on the SG&A initiative. We did that in a time where we were growing the top line. We've got that room plus in a market downturn.
Rebecca, do you want to go to that side, please?
Thanks. Jeff Sprague from Vertical Research. Just back to the 50.
Everybody loves the 50. Okay.
I love it in two ways.
I just want to confirm you're saying it's 50, and then we're thinking about incremental margins on top of the 50. You are?
Mm-hmm. Uh-huh.
To the earlier question, you actually said $50 million a year.
I would imagine at some point, the restructuring and the incrementals start to blend together. Maybe give us a little bit of further vision on the next waves of restructuring. Maybe it's some of this business service stuff that's under-penetrated, just the magnitude of the opportunity.
We're going to get me parsing the $50 million. I knew it. If we say that the roll-forward portion of the $50 million is 20% or $20 million of that is footprint, just as a proxy. The footprint you're going to see. We're going to take a charge and then we're going to basically say, "This is what the payback of the charge is," because it's going to be a material event. The balance of that $50 million is not footprint on the come, so to speak. I thought I was being pretty explicit in terms of what the opportunity was in terms of some of the digital programs and a reduction of our SG&A or our customer-facing portion of the business, and what we think that we can extract out of IT over time. Which you're not going to see.
It's just we're going to take it out and it's going to roll from the portfolio. I think that the SG&A, we committed that we were going to come back every quarter because that was part of this notion of we need to gain some credibility to do what we said, and we came back and we've done it every quarter of showing you in EPS terms. I'm not going to come back every quarter. You're going to see it in the margins over time in the 50. I think if you go back and look at the transcript of kind of the three pillars of value creation, which is in operational value creation, I think I referred to all three of them as being multi-year efforts, and we think that the quantum that we see in 2020, we can get on a sustaining basis over time.
When you'll see it is if we do something on the footprint, clearly.
I guess I would add to that in 2019, as the year is playing out, if you think about the SG&A takeout, total conversion on volume has been over 50% across the portfolio. If I take out that amount and you think about this 25%-30% that we're saying incremental margins going forward, we are within that range in 2019. You take the $50 million next year plus our confidence that we continue in good GDP growth environment at a 25%-30% incremental. That's the way you should be thinking about it. The question is, what's the top line?
Next question.
Back to the 50.
Yeah, Nigel Coe.
I do actually have a question.
Sure.
The $50, last year was $134 gross and then $34.
investment, $100 net. Is there a net off against our $50 or are we investing?
No. We gave you the net figure this time.
Right. Okay. There is a gross, you're not going to give it to us again.
Mm-mm.
Then just on the resegmentation, so bravo on the full disclosure. Are you going to be giving us margins and CapEx? Are these full segment disclosures you're going to be giving us?
You'll get margins at the end of Q4.
Yeah.
Okay? CapEx by segment, I haven't really thought about it yet.
Well, we'd get that in the 10-K normally.
Yeah.
Just full disclosure.
In our quarterly, I don't know if we'll get there. We'll just give you gross CapEx probably.
Yeah.
What we intend to do is in the fourth quarter, we'll give you the history up through three quarters, and then when we report fourth quarter in January, we'll be showing the new segments going forward at that point. We will endeavor to get that out here in the tail end of the fourth quarter.
My final question is, if you're running at 20% EBITDA margins, presumably going to low 20s, maybe even mid-20s aspirationally.
Why wouldn't free cash margins, obviously depending on leverage, but why wouldn't free cash margins be mid-teens or better?
Yeah. That's where we get caught between doing this presentation and having intra-year guidance out there. We didn't change the percentage of revenue just because we didn't get a good crosswalk between what we're saying publicly about 2019 guidance and this presentation. I think that your point is well taken, and as margins expand, we would expect that metric to expand with it.
Next question. Scott there, Rebecca.
Thanks.
Can you identify yourself, please?
Oh, sure. It's Scott Davis. Going to five segments, Rich, is that somewhat meant to constrain the M&A effort around those five segments, or you're willing to go to six segments or seven, or is there some upper limit?
No
to what you think is reasonable?
I think the 5 is appropriate. I think when you dig into the segments, we were trying to get operational or market commonality. When we talk about operating systems across a diverse portfolio, you have to tailor them to the nature of the business at the end of the day. How are you going to measure performance in printing and ID is going to be different than one of the more industrial businesses, clearly, because the drivers are completely different. I don't expect to carve this portfolio into more segments, nor do I expect to create new segments through M&A. I think that we've got a wide enough breadth of avenue and opportunity that these 5, we would hope, they would all grow organically and inorganically over time.
Is there an expiration date on the fix-it-up job with refrigeration? If you can't get to where you need to get, should we be patient out to the end of 2020? Is it into 2021?
I'm trying to remain patient myself. I think that we've made a commitment and we've made an investment. We want to deliver on those margins. If we can get it to 15, the return on invested capital improves in that business significantly because it doesn't consume a lot. Clearly, and when we comp it against the balance of the portfolio, to the extent that we could monetize that over time, we'll see. Up until that point, I hope we're never put into a position where we have to capitulate, I guess is my answer.
Thank you.
We had a question up here.
Andrew Obin. Just a question on the dividend payout ratio.
Who do you benchmark against? I would've expected a higher rate of growth.
You want a high rate of growth.
No.
-in the dividend payout ratio?
Not dividend. You're sort of saying that you're going to grow dividend low single digits, right? As you think about your dividend payout ratio, who did the board and who did you guys benchmark against? That's the question.
I don't think that we benchmarked it, quite frankly, because there's a signaling effect on the dividend. I think that we're committed to grow it over time. As we grow it over time, if we have to update the payout ratio in terms of percentage, we'll do so. I think the commitment is that throughout this next cycle, that the absolute value of that dividend will go up.
Just one of the business questions on EMV. What % of the base is upgraded now?
You know what? I don't know. Can we deal with that at the end of Q3?
We absolutely can. The other question on free cash flow, you did say, and maybe I didn't hear it, you did say upper end of eight to 12?
Yeah.
Is that aspiration?
We had that big panic last September.
Is that where you're going?
about the eight number, and I think that our target, like any of the targets we give out, is at the upper end.
Okay.
Right? We did mid target last year, right? Which was a funny number because of all the restructuring cash charges we had. We're not on path to have that now, and we're clearly targeting the higher end of it.
Thank you.
One right here. Go ahead.
Thank you. Andy Kaplowitz. Rich, I'm curious about your comments on Belvac, because it's been kind of slow, as you know, for a while. Maybe talk about visibility into that business. It is a high-margin business. You mentioned this sort of change in some of the key customers. Do they kind of just tell you, and then you have good visibility for the next year, so you do this? How much of a bet are you making on that business?
For Belvac, we're making a big bet, but in terms of the consolidated group, we are not. Just to be clear. I think the only reason I mention is because we believe that Belvac is going to turn because the macros behind that business and the shift from PET to aluminum look very good. If you look at the can makers, they're running at practical capacity right now, so something's got to give. There's The Wall Street Journal articles about users complaining about the pricing of aluminum cans, right? That's always a good checkpoint for us. We're going to make an investment in it because we think we can grow behind it. That's the only reason I mention is because, quite frankly, it's been down, and we've been in the unfortunate position more because of the margin performance of refrigeration than we're running around explaining Belvac.
Quite frankly, if we can get refrigeration to our margin target, Belvac doesn't wag the dog, so to speak. Having said that, we think that there's some interesting value creation opportunity in that business.
Can I ask you about the $30 million actually that you spent in the 130, in the sense that a lot of the presentation today was about digital and connected truck, all that kind of stuff. What have you seen since you invested that money in terms of the acceleration in growth? You've talked about software at ESG in terms of the growth. How much could that contribute as you go over the next couple of years into that sort of guidance of GDP plus?
I don't want to monetize it because I'd be swagging it, and I'm not going to do that. I think what I have seen that is critically important is that if you put a guiding structure at the center, you don't have a lot of small operating companies that all have aspirations to digitize their business in a certain way because they recognize the adjacency opportunity and kind of the stickiness of those kinds of streams. By having a kind of a governance center and by building them off common platforms, we see the speed of adoption and the cost of that adoption, the payback has been significant.
Next, Rebecca.
Thanks. Mick Dover. Just to follow up on that point. It struck me through your slides, you repeatedly referenced recurring revenue, and you also talked a lot about digital.
When you're framing your incremental margins, though, 25%-30%, these are pretty normal manufacturing incremental margins.
How do you think about your change in the business?
They were actually kind of high, but that's okay, Mick. Anyway, yeah.
Well, okay.
Yeah
Should we see a change in your incremental margins as you're building up more of this recurring revenue and software type business?
Part of grinding these margins up over time, we hope to be getting operational efficiency that more than offsets inflationary input costs. Doing a good job in capital allocation in terms of product mix, which to your point, if done correctly and successfully, gross margins and software tend to be very high. As those businesses scale, we'd be the beneficiary of that. Having said that, I think that we also need to be clear, how can I say this, that we look at software as an add-on to our established positions and products and not as a strategy by itself. I would not expect for us to run headlong into standalone software space. I think that anything that we do in software will be intrinsically linked to the core business that is pursuing that adjacency.
Okay. Then lastly, a clarification on the $50 million again.
I'm not going to give a mile next year. Go ahead.
SG&A versus cost of goods sold.
I don't know.
50/50.
50/50?
Yeah.
The scales of justice answer.
50/50.
50 on the 50. Maybe somebody can use that as a headline. Okay. Yeah.
Next question.
The 50 out of our entire COGS is not like a Herculean effort. At the end of the day, I think it's important for us to kind of give a number out there outside of the hope of revenue growth. Before we start parsing this number, and if I compare that to our total cost of the corporation, it's something. At the end of the day, as compared to inflation on labor and the hard work that we need to do just to offset that, to retain the 25%-35% margin performance, it's small potatoes, quite honestly. It's more of a message send, both internally and externally, that we've got a mindset here that we can grind out margin performance without having to rely on revenue. A lot of times, the market's going to dictate the revenue growth.
Okay. Thanks. Walt Liptak. Going back to the segments, I wanted to ask about the changes that you just announced. Was there a cost savings related to that? How disruptive was that to leadership and management of the businesses?
Far so good in terms of disruption. I made in the earlier comments when we had made the presentation last September, there was some pushback of, "Okay, I get it on the cost takeout, but the revenue, let's be careful about the revenue going forward because the corporation's going to turn inward." We said, "You know what? We're not touching the customer-facing portion of SG&A, and we believe we can protect the top line based on market conditions while taking the cost out at the end of the day." I think that's the similar situation that we're in right now, that we are investing and will continue to invest in building up our digital resources. We're going to be standing up a bigger group in terms of our operations group. That's not going to be massive, but it's going to be a cost.
I look at it this way. What we've done in terms of the reduction of a managerial layer is just being redeployed for central resources. Net, it's not a savings, and it's more or less what we tell our operating companies to do. You've got changes in strategy, fair enough, but you've got to self-finance those changes in strategy, and that goes for the center also.
Are there going to be any changes to incentive comp as a result of the new segments, the new managerial structure?
Not materially.
Okay. That 25%-30% operating leverage, is that across the board or somewhere?
That's in consolidation.
That's in consolidation.
Right.
The different segments will have different targets that they're
Absolutely
going for. Okay.
We have a question at the front of the room here. Come up.
This is Ivana from Gordon Haskett. You talked about digitalizing distribution. Is that completely rolled out now and we're waiting to see the benefits?
I think if I call your attention back to the slide, it will tell you where the opco is, where we've just begun to stand it up.
Okay.
It's relatively nascent. It's got a significant runway, but we need to beta test these. Once we build the scale and the infrastructure in the back, then we progressively roll through with the priority on the distribution side of the business.
Are there any of the businesses that disproportionately benefit that have higher % of distribution?
The answer is yes. I don't really want to go opco by opco. I think if you go back and go through the materials and you go back in terms of that 43 minutes of narrative there, that I tried to signal the business model, whether it's direct or distribution, as we went through the individual segments.
Got it.
The group that way specifically.
The benefits, would they be included in the $50 million, or would they be in incremental margins?
I'm going to get the $50 billion million by down to the million. Yes.
They seem like an. It seems like would be.
It's not going to be overly material in terms of the benefits. I put that in kind of the grinding out of margin performance over time.
Got it.
Rather than kind of specific businesses.
It's got a growth element to it, too.
Over there. Mm-hmm.
It's Jeff Sprague again. Just a couple. Since you did this kind of unpacking of the business and going back and looking historically.
just wonder that component sleeve that you didn't call aftermarket, but suggested it's sort of aftermarket-like with replacement, how that sort of stuff actually behaves in a downturn. Is that really short cycle, comes down quickly?
I think it's purely a question of the reoccurring portion of the components business is larger than the built-up systems business.
That's all. Right? If you think about compressor valves and things like that, we supply into new builds, but a lot of what we do is refurbishment, replacement, and maintenance, right? That's why we separated the two.
Yeah. Thanks for all the granularity. Just on your dispenser business.
you'd give us a rough cut geographic mix of the dispenser business?
How about in Q3?
Q3?
Maybe.
All right. Perfect.
One more question right over here.
Hi, Mustafa Allok from Bloomberg Intelligence. Just revisiting your re-segmentation Engineered Products, you grouped together this stack called PWG, MPG, OKI together. They're quite different businesses. I was wondering what kind of plan you have there for optimizing cost and the rationale behind putting them in one group.
Well, we split engineering, if I can get the name, they're all changing, Engineered Systems in two. What we did was put those smaller businesses under one common management, all right? They're unique businesses to themselves, and how we run them is going to be different than we run PWG, VSG, and ESG, which tend to be bigger industrial businesses. If I took you around in the plants, they look very similar, right? They're building up big built-up units as opposed to MPG, which is a military contractor that makes specialized products. It's more of a managerial grouping than anything else. Next question up here.
It's Andy Kaplowitz once again. Rich, just two follow-ups on DFS. You said that we can all see the public competitors in terms of what their margins are. Assuming that you hit the sort of 16%, 17% margins by the end of the year, what still needs to be done to get the margin to equal sort of what the competitors is? There are different business mix at all.
I would've hoped that you said, "Now that I see OPW and DFS together, look how big the margin is, and anything that we get on the dispenser side is gravy versus the comps that are out there." I'll answer your exact question. Look, I think I was pretty forthright. They've made a really good improvement, right? The management really put their nose down and proved that through operational grinding it out, look what we see in terms of 300 basis points in a 12-month period. We think that OPW is best in class in terms of margin, we'll commit to incrementalism on the OPW side, it's not like there's a margin gap and arguably OPW is the margin leader versus its competitors. We still need to work on the dispenser side, for sure.
I think that we and management believe that there's some room to run there, and that's why I said we believe we were going to exit at our target margin, but we're not done yet, at least on that half of the business.
Then just one follow-up on the pumps business. You mentioned that people, maybe the market doesn't understand it fully, and you talked about 40% recurring. When I look at the end market exposure rate, a lot of it is chemicals, oil and gas. How do you-- Maybe it's a follow-up to Jeff's question. How do I think about the cyclicality of that business, or how do you, it's had 7% orders growth, which has been good, but should we worry about that business?
I think that would arguably be the one that you should worry least about. These are not large pipeline pumps, right, that are going to flex up and down based on new builds and everything else. These are smaller pumps at the end of the day with a different technology that are in chemical plants and in refineries. Whether you're a believer that there's going to be a capacity reduction utilization across that complex, which based on input costs, one would argue that the U.S., where most of this business is, from an input cost point of view, is the low-cost producer now in all of those base chemicals and fertilizer and the balance of it.
To the extent that 50% of the revenue stream of the bigger or the pure play pump business is replacement, it's not a bad place to be when it's covering those margins. Look, it's not riskless by any stretch imagination, but I would've thought that when we showed the exposure to end market, you'd get a lot more comfort because then generally people look at pumps and fall out of the chair screaming oil and gas. Anyone not?
Two more.
Anyone not have a chance to ask a question yet? Go ahead, Rebecca.
Thanks. Good morning, Rich. Larry De Maria. Curious, obviously a number of the brands and companies are large global, they're top players. There's a few niche businesses too, such as Unified Brands. Is that a sustainable position for companies like that now that you've gone through the operating model, et cetera? Or does that have to get bigger through M&A?
I don't think it needs to get bigger to improve its performance, and we're in mid-flight and doing a lot of work of reducing the fixed costs. I think I put UB in with some of the other businesses that we're in the midst of operationally turning around. We'll be done with the physical footprint by the end of this year, and then we're going to need another year to do this SKU reduction, particularly in Randell. Our brand-new facility in Mississippi will be up. It's running now, but it'll be completely up and running by the end of the year. We're going to go back to Michigan and really work hard on the Randell business, where, quite frankly, the margins need to be improved.
In fact, just to follow up, thank you for that. You're targeting 30% plus recurring revenue, and you're already there. Maybe I missed this earlier, but is there an actual higher number we should be looking at, closer to 40%? Can you get there?
I'd like to see how it develops over time, because then I'm predicting revenue across the portfolio over a time series. I think that there's a recognition that we would like it to be larger, but I don't think it's an operational imperative to kind of, by all means, get there. I think that it's kind of a sustained multi-year effort at the end of the day.
Final question. Did you have one front and center right here? Okay.
Just a question in terms of the new segment breakdown. Have the leadership decisions been made, and have the announcements been made? I didn't see any announcements. When should we expect them? Are these going to be internal candidates, or are you looking also externally?
The last announcement was a retirement that you should have saw last week, so that was the last of the segment presidents. Yesterday, we had all of the opco presidents over in Downers Grove and took them through the new organization and the operating model and everything else. It's nothing external. It's all done internally. The only thing that needs to be done is the central operations resources need to be built up over the year, but that's not going to be something overly significant. It'll end up being the size of Digital to a certain extent.
Thank you for all the questions. Rich, if you have any final comments?
Thanks for coming to Chicago. You made our life easier, considering we had all our presidents here. As usual, if you've got follow-on questions, see that man at the end of the table.
Andrey, I'll leave it to you to close the meeting now, please.
Yeah, this concludes our meeting. Thank you all, and we look forward to speaking with you in October.
Thanks.
Sooner.