Veralto (NYSE:VLTO) Q4 2025 Earnings call February 04, 2026 08:30 AM ET Company ParticipantsAndy Kaplowitz - Managing DirectorBrad Hewitt - VP of Equity ResearchDeane Dray - Managing DirectorJacob Levinson - Director of Multi-Industry ResearchJennifer Honeycutt - President and CEOJohn McNulty - Managing DirectorNathan Jones - Managing DirectorRyan Taylor - VP of Investor RelationsSameer Ralhan - SVP and CFOConference Call ParticipantsRyan Connors - Managing Director and Research AnalystWilliam Griffin - Man ...

Veralto (NYSE:VLTO) Q4 2025 Earnings call February 04, 2026 08:30 AM ET Company ParticipantsAndy Kaplowitz - Managing DirectorBrad Hewitt - VP of Equity ResearchDeane Dray - Managing DirectorJacob Levinson - Director of Multi-Industry ResearchJennifer Honeycutt - President and CEOJohn McNulty - Managing DirectorNathan Jones - Managing DirectorRyan Taylor - VP of Investor RelationsSameer Ralhan - SVP and CFOConference Call ParticipantsRyan Connors - Managing Director and Research AnalystWilliam Griffin - Man ...

Veralto (NYSE:VLTO) Q4 2025 Earnings call February 04, 2026 08:30 AM ET Speaker1Hello, my name is Nikki, and I will be your conference operator this morning. At this time, I would like to welcome everyone to Veralto Corporation's fourth quarter 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press Star, then the number one on your te ...

Financial Data and Key Metrics Changes - Total sales grew 6.4% year over year to $1.37 billion, with core sales growth of 4.8% driven by broad-based volume gains across both segments [21][22] - Adjusted earnings per share increased 9.4% year over year to $0.93, exceeding guidance due to better-than-expected sales volumes [14][23] - Free cash flow generation was strong at $323 million, an increase of $83 million year over year, reflecting effective cash management [30][31] Business Line Data and Key Metrics Changes - Water Quality segment sales reached $825 million, up 6.2% year over year, with core sales growth of 5% driven by strong demand for water analytics and treatment solutions [24][26] - PQI segment sales grew 6.8% year over year to $546 million, with core sales growth of 4.6% supported by recurring revenue and equipment shipments [27][29] Market Data and Key Metrics Changes - Core sales growth in Western Europe was 6.3%, led by double-digit growth in water quality, while North America saw core sales growth of 5.6% [14][16] - High growth markets experienced over 6% core sales growth year over year, with notable performance in Latin America and India [20] Company Strategy and Development Direction - The company raised its full-year adjusted earnings per share guidance to a range of $3.72 to $3.80, reflecting stable demand and positive macroeconomic conditions [10][32] - The capital allocation strategy remains focused on acquisitions, with a commitment to invest in emerging technology-oriented businesses [11][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic macroeconomic environment, citing strong secular growth drivers in water quality and essential goods [36][37] - The company anticipates continued strong performance in the second half of the year, supported by robust demand and effective execution of its business model [36][58] Other Important Information - The company announced a €20 million commitment to invest in Emerald Technology Ventures Global Water Fund II, enhancing its innovation and technology development efforts [11] - Adjusted operating profit margin for the quarter was 23.7%, with expectations for margin expansion in the second half of the year [22][33] Q&A Session Summary Question: Can you provide more details on core water quality growth by region? - Management indicated that their water quality business is resilient to fluctuations in government funding, driven by secular trends such as water reuse and sustainability goals [44][45] Question: What is the impact of tariffs and pricing on PQI margins? - Management explained that margin compression was due to acquisitions, timing of pricing actions, and investments, with expectations for gradual improvement in the second half of the year [48][51] Question: How is the company positioned in the UK water utility market? - Management expressed confidence in capitalizing on opportunities in the UK, leveraging direct sales to customers to identify and act on local opportunities [105][106]

Financial Data and Key Metrics Changes - Total sales grew 6.4% year over year to $1.37 billion, with currency providing a 150 basis point tailwind [20] - Adjusted earnings per share increased 9.4% year over year to $0.93, exceeding guidance due to higher sales volumes [22] - Free cash flow generation was $323 million, an increase of $83 million year over year [22] Business Line Data and Key Metrics Changes - Water Quality segment sales reached $825 million, up 6.2% year over year, with core sales growth of 5% [22][23] - PQI segment sales grew 6.8% year over year to $546 million, with core sales growth of 4.6% [24][25] - Water Quality's adjusted operating profit increased 11.5% to $214 million, with a margin of 25.9% [24] - PQI's adjusted operating profit was $140 million, flat year over year, with a margin of 25.6% [28] Market Data and Key Metrics Changes - Core sales growth in Western Europe was 6.3%, led by double-digit growth in water quality [13] - North America saw core sales growth of 5.6%, with both segments generating growth above 5% [13] - High growth markets experienced over 6% sales growth year over year, with high single-digit growth in PQI [13] Company Strategy and Development Direction - The company raised its full-year adjusted EPS guidance to a range of $3.72 to $3.80 per share, reflecting stable demand and macroeconomic conditions [9][31] - The capital allocation strategy remains focused on acquisitions to fuel long-term shareholder value [10][30] - The company is investing in emerging technology-oriented businesses, such as a €20 million commitment to Emerald Technology Ventures Global Water Fund II [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic macroeconomic environment, citing strong demand for technology solutions [34] - The company anticipates continued growth driven by secular trends in water reuse and sustainability [42] - Management noted that the infrastructure supporting technology and AI growth will strain water capacity, positioning the company well to meet these needs [15] Other Important Information - The company achieved mid-single-digit core sales growth for four consecutive quarters, demonstrating the durability of its business model [7] - Adjusted operating profit margin was 23.7%, consistent with underlying guidance assumptions [12][21] Q&A Session Summary Question: Can you provide more details on core water quality growth by region? - Management indicated that their water quality business is resilient to government funding fluctuations, driven by secular trends in water reuse and sustainability [41] Question: What is the impact of tariffs and pricing on PQI margins? - Management explained that margin compression was due to acquisitions, timing differences in pricing actions, and investments, with expectations for gradual improvement in the second half of the year [46][49] Question: How is the company positioned in the current M&A market? - Management stated that the M&A pipeline is active, with a focus on identifying attractive markets and companies, while maintaining a disciplined approach to capital allocation [62] Question: What is the outlook for the UK water utility market? - Management expressed confidence in capitalizing on increased spending opportunities in the UK, leveraging their direct sales approach [102] Question: How is the company addressing the challenges in the Chinese market? - Management noted that while water quality sales in China have been flat, they are executing well within available opportunities [94]

Financial Data and Key Metrics Changes - Total sales grew 6.9% year over year to over $1.3 billion, with core sales growth at 7.8% driven by broad-based volume gains across both segments [25][26] - Adjusted operating profit margin expanded 50 basis points year over year to 25%, an all-time high, with adjusted earnings per share growing 13% year over year to $0.95 [11][27] - Free cash flow increased by 39% year over year to $142 million, primarily driven by growth in earnings [32] Business Line Data and Key Metrics Changes - Water Quality segment sales increased 6% year over year to $794 million, with core sales growth of 7.4% driven by strong demand for water treatment solutions [28][29] - PQI segment sales grew 8.3% year over year to $538 million, with core sales growth also at 8.3%, led by volume growth of 6.7% and price increases contributing 1.6% [30][31] Market Data and Key Metrics Changes - Sales growth in Western Europe was robust at nearly 11%, with double-digit growth in both segments [13] - North America saw sales growth of approximately 8%, with high single-digit growth in both segments, particularly in water quality [16][17] Company Strategy and Development Direction - The company is actively deploying countermeasures to mitigate changes in the global trade and tariff landscape, including strategic pricing roadmaps and shifts in manufacturing footprint [9][19] - The recent acquisition of AquaFetus for $20 million is expected to enhance the company's UV treatment portfolio and expand its ability to serve European customers [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the dynamic macroeconomic environment, citing the essential nature of their products and the durability of their business model [8][38] - The company reaffirmed its full-year 2025 adjusted EPS guidance of $3.6 to $3.7 per share, with expectations of low to mid-single-digit core sales growth [34][36] Other Important Information - The company has a strong financial position with gross debt of $2.6 billion and cash on hand exceeding $1.2 billion, resulting in a net leverage of 1.1 times [33] - The company completed its second CEO Kaizen week, focusing on continuous improvement and operational excellence [22][23] Q&A Session Summary Question: Can you provide more color on the sequencing of tariff mitigation? - Management indicated confidence in mitigating tariffs, with gross exposure estimated at 3.5% of sales, and emphasized ongoing optimization efforts [44][45] Question: Have you seen any changes in customer confidence based on demand indicators? - Management reported strong demand remains for the PQI business, with no indications of softening in order patterns [47][48] Question: Can you discuss price elasticity in relation to consumables versus equipment? - Management noted a surgical approach to pricing, with 80% of sales tied to essential goods, indicating a sticky relationship with customers [55][57] Question: How do you view the impact of tariffs on competitive positioning? - Management expressed optimism about leveraging their asset-light manufacturing model to gain market share amid market dislocations [91][92] Question: What are the implications of the recent EPA announcement regarding PFAS? - Management remains excited about opportunities in PFAS analysis and treatment, with no immediate impact on forecasts [60]