VLTO - Earnings call transcript Q1 2024

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Operator

My name is [ Shelby ], and I will be your conference operator this morning. At this time, I would like to welcome everyone to Veralto Corporation's First Quarter 2024 Conference Call [Operator Instructions] After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Ryan Taylor, Vice President of Investor Relations. Mr. Taylor, you may begin your conference.

Ryan Taylor

Good morning, everyone. on us joining for the call. Thanks today Executive Officer; me and Financial are Senior Jennifer Chief and Chief President our Officer. and President Honeycutt, Vice With Sameer our Ralhan, simultaneously is Today's webcast. call being will The replay of website Presentations. today later available and the the Events Investors our heading be under of section on webcast the will this A until X, replay call of XXXX. May available be

website, relating and Before to in are are under in the Investors by quarter news on a Unless first otherwise we issued we section begin, our non-GAAP required of all slides. or I'd are adjusted webcast heading available our of information Earnings. like year-over-year provided earnings any to basis. non-GAAP noted, supplemental the measures www.veralto.com presentation financial Reconciliations point all the variances materials Quarterly including SEC out that to of yesterday, appendix the These materials, release, the references measures.

law. And statements differ update any date only forward-looking statements, that may any that, assume Jennifer. as statements to the laws, subject developments turn obligation including During statements in with forth forward-looking made, by not I'll number the the set within may are or These over any believe events the they risks to make materially results and or of and SEC forward-looking of from a those we in regarding are occur future. as today. These filings. Actual securities forward-looking will that call, the that our anticipate we will statements the statements meaning to federal or forward-looking we speak uncertainties, of make we call including required do except

Jennifer Honeycutt

for all joining today. you our Thank call

quarter XXXX operating of solid stand-alone as marks The company. execution of first second a our consecutive quarter

improvement growth accountability We and focus basic fundamentals, through driving and are blocking and tackling. profitable greater steady, VES using continuous

points board. our growth and X% across earnings the profit adjusted and sales core growth driven delivered XX guidance we expansion, we QX, For exceeded X% of by basis operating year-over-year, adjusted margin

our seeing bookings of end secular demonstrates Water our reflects are to commitments. From key culture performance deliver trends continue Product And markets, CPG continue segment, Innovation quarter some modestly Quality continuous are verticals. our improve customers of quarter, and drivers expect to & to and beverage. Based notably, healthy steady of market North coding segment, recurring Equipment of in our our ability municipalities. Our large financial mid-single we digits an for see our sequentially consecutive on on year. across led seeing continue to packaged perspective, trends, PQI's started in we demand improving and we with across growth improvement sales recovery show year-over-year recovery grew and trends market rate growth for see at we In Quality the encouraging modest goods at positive we first particularly consumer core and America, in markets. Most first the revenue by in the our third to industrial signs signs food along to marking throughout results quarter. our late

are and we over year single-digit range growth of XXXX. adjusted margin Looking high our are at to operating deliver on XX to core toward basis trending full low guidance, pace sales improvement of XX the points our end of

our bit conversion part, modestly cash we is, grounded the will EPS later free commitments increased a on system. Veralto in to more full enterprise guidance. year in and our detail the ability have that large in result, a adjusted flow cover in deliver As Sameer in call. Confidence

the core Our continuous tenet or and leadership Kaizen. for VES of development. driving A operational proven growth, improvements is improvement system

value-accretive and Kaizen of is personally of The this growth. of enterprise During CEO CEO to favorite the system our a long-standing my March, first Kaizen of completed year. company. we drive a Veralto's year's as one CEO weeks purpose week stand-alone tradition week week Kaizen was

our high-impact immersed For results. X in yield worked to Gemba complex challenges countries. The associates cross-functional one executive the Veralto at and in some most week, the team companies XX work alongside across real we businesses X operating where teams solve happens of

Kaizen this increasing Hach demand. Hachs and initiatives example, in experience efficiency, year's customer engagement accelerate improve sales growth and key Videojet to stakeholders customer Success we in event. From CEO and drive make-to-stock immediate to incremental which our the commitments track perspective, delivery real-time Kaizen fortified The America at key solutions facility North practitioners and reinforce ability North results. benefits include a to year's that all yield products for week consumables. Improving event Veralto, the on-time meet conversion optimize big lean For increasing we to customer at at are are picture included week, rapidly to our of using of that deliver following and America buying continuous sustaining proven growth any results, EMEA this of is these implemented a tools by distribution improvement. Kaizen on

increases quarter. price businesses. by both the mid-single and Core increasing year-over-year, our segment of X.X% volume the grew Quality recurring the our treatment by in for Water results water year-over-year, financial industrial to both quarter. digits recurring XX% sales segments our delivered modest in to sales growth in now across our total growth percentage led Notably, segments of sales Turning led sales

growth exceeded within and segments, due to better-than-expected core strong we compared consumables. execution particularly expectations to As both volume our at guidance, commercial sales

million optimization. of over strengthening margin through front, was our $X.XX up the cash end operating points share productivity position. further we of year-over-year X% cost of delivered our and and expansion per execution, financial the XX range, price free we basis margin Adjusted above adjusted high guidance profit EPS improvements flow, generated $X.XX $XXX primarily On and

processing, for chemical beverage, mining down see water by high-growth America grew in geography we in in X% Looking America, food industrial with year-over-year core Western sales growth first North verticals, in and over sales flat sales treatment the about businesses growth quarter. including North now and continue In strong at markets generation. to power our X%. across Sales Europe and

core in treatment see year-over-year, to we my also end QX as Sameer the Europe financial sales Apart We believe core modestly core for China first municipal and steady high-growth Water sales mentioned for in were low we UV essentially year-over-year Western And in segments. In markets, Europe, strategic by headwind projects our concludes In opening this performance. at was down these of flat segment growth Despite portfolio UV review over America were timing detailed were turn Western due call. time, has quarter and to market call year-over-year customers of to actions India both environment remarks. I'll continued items, China in our in stabilized. That as the a in the year-over-year QX, strong X sales decline in our primarily offset in our for Latin that systems. single-digit demand earnings Quality anticipated. system from

Sameer Ralhan

everyone. our consolidated I begin the morning, will results first for Slide Good quarter with on X.

modest profit on XX of in Water while profit in and profit adjusted sales material segments basis contributed with margin sales QX both basis aggregate increased January. Core was This as line. due points quarter in X% Volume was a to volumes reduced of line This divested $XXX modest we operating quarter, expansion is commodity during billion. growth than growth in benefits and well to down filter X% increase future segment was the Gross year-over-year levels. Price price expectations. a primarily XX.X%. year-over-year. marketing to consumables higher a million. that in growth. the strong sales with points year-over-year points profit divestiture XX%, year-over-year. this as operating XXX our of X.X% $X.XX First improved historical increased margin We net in offset investing year-over-year Salsnes costs. Adjusted Quality product productivity our product line expected, XX also and was a about basis approximately Currency sales line in efforts and X.X%. X% to benefit, by increased expanded grew Salsnes was pricing drive delivered quarter. basis better to margin the was to Gross small reflecting

basis year continue with ongoing are to over the plans also increased sales, These investments. R&D fund growth and XX investment we growth of period. to We points our prior to investments expect up strategic our aligned X.X%

EPS is to year. the earnings incur not for year-over-year share prior free grew was our due cash $X.XX, that year flow per cash at decline did interest payments Looking prior last X% $XXX spin-off. and from to down we QX. This primarily Adjusted to million,

on Moving on, I X. highlights, Quality starting Slide will cover Water with the segment

the Water the Quality and $XXX on sales, delivered X.X% segment of divestiture period. basis versus year neutral point of Our XX prior a million sales up quarter Currency was this had year-over-year impact on Salsnes basis.

to this segment in the divestiture, in small quarter In we exited addition XXXX. product our lines fourth Quality of Water strategically

Despite headwind Water stack XX core for points about period, this the volume we prior Water approximately call year-over-year these to Exiting was XXXX. growth XX bringing for as the contributed growth X.X% year-over-year. This sales growth in mentioned Quality core this growth segment to quarter. product growth points up since in year core for XX% core segment grew earnings on Quality the February, sales to the X%. As QX volume compared the in is X-year core quarter basis of and lines sales X.X% in to first headwind, Pricing sales resulted previously basis

first North execution in operating municipalities solid RECONNECT in America. markets municipal year's markets. Recurring pricing in for million sales across or mid-single XXX profit reagents year-over-year Our margin treatment in segment productivity. UV million. points increased in end profitability basis solutions Adjusted and was our XX.X%. at $XX increased Adjusted highlighted increased grew instruments strong treatment analytical our in profit operating water The to end growth quarter increase volume chemistries systems by used driven of improved X% reflects sales and this the demand and digits, $XXX by industrial to

Moving to the next page.

highlighted PQI software to and subscription we in revenue. decline, in period. lower digits anticipated sales delivered in essentially the increasing in sales growth mix guidance. of with a Packaging portfolio, less as Core largely were year-over-year and were quarter, Color, to across our as contrast, however, customers the price increases of sales growth declined volumes. Recurring and of than modestly, sales grew in XX% reflecting million from compared prior QX mid-single offset for CPG single was QX. year first low decline had recurring year-over-year, by coding the by up were X.X% basis digits sales modestly PQI up segment the versus what XXXX. This X.X% on sales demand $XXX marketing In flat recurring Our In

was as PQI the demonstrates and million earnings a year the operating sequentially quarter operating strong businesses. resulting signs remain This adjusted consumable and third Jennifer modest quarter that of to CPG we improvement. We with equipment see for year-over-year As sales mentioned, of will CPG pockets bookings digits XX%. improve recovery of for profit margin power optimistic up in in PQI showing the adjusted in was mid-single $XXX of profit performance cautiously continue progresses. consecutive the markets first volumes margin these

$X.X cash our summary, financial about we further of quarter, Turning and on was capital million. to we the in Note, cash generated towards $XXX operations and how gives we end our million and expenditures. quarter create in capital liquidity. ample billion $X.X $XXX of the flexibility from shareholder cash XXXX was was our the resulting in which long-term we prior hand strengthened cash with was us not did invested bias now deploy spin-off. At our $XX $XXX to quarter. gross during balance this in debt sheet In included M&A. net debt million In flow. position in flow a leverage interest and billion incur Free to cash payments, have This QX Net million value of of X.Xx. million the QX, $XX

our for the guidance with full expectations our updated XXXX. for Beginning to now Turning year.

that sales level single-digit segments. We're in sales targeting Jennifer low of to basis on and quarter-to-quarter we at growth modestly points our increases track deliver price, pre-pandemic From enterprise As growth core the a guidance consistent perspective, assumes our XXX historical with both XXX levels. XXXX. to core sequential target through are mentioned, of year-over-year

points high are Looking of XX the remains end operating at of on we trending target our this to performance, adjusted range. this margin, improvement Based XX profit our towards QX basis year.

share. we year $X.XX year, to increased adjusted share, our have range prior on of range up and improvement $X.XX to $X.XX EPS view current per guidance of guidance a Given our margin the per QX from to our $X.XX results full for

In flow cash guidance addition, a we range our to XXX% conversion to increased XXX%. free of

this EPS for share. That my adjusted $X.XX I'll concludes At back is $X.XX per the up call for to with targeting time, low QX basis, growth of approximately QX, Looking digits guidance turn closing remarks. guidance a before XX% we single to for the questions. sales margin we call remarks and year-over-year open for are core our on in adjusted operating our Jennifer XXXX at prepared

Jennifer Honeycutt

In summary, which of as elevated enterprise, our increased of accountability execution. a levels across stand-alone has company, focus, discipline level and have the we all

our environment and gradually are investing future continuous improves. end as in growth We driving improvement market

and quarter. start We positive margin XXXX are strong to in off a growth expansion solid in with the first

financial attractive returns. we a take approach Our and strong with deployment strategic position to with disciplined acquisitions continue focus primary our to remains capital on

Looking vital continuous to all capital excellence, remarks. want ahead, to resources. That we improvement joining remain prepared most on and for again commercial while I create questions. thank focused shareholder we're allocation call. at And driving to world's safeguarding time, our you the value concludes our happy your this take disciplined

Operator

our Scott with with Davis Melius Research. from Scott Davis take Melius [Operator question our from take first Instructions] We'll first Research.We'll question

Scott Davis

as about think level would think the a gross How mix you do up XX% you of entitlement? guys of think you of about high a The this or as watermark when think number But margin a about is step of really businesses into it? it new you have. more about pretty we kind should incredible

Sameer Ralhan

Maybe one, mix. margin I'll look you perspective, as take got Overall, that to of Scott. of deliver a comes at down it some

it's code. ZIP think XX% still in kind to the going be XX% of I to

coming side. year, kind and rest we the the XX% XX% a the starts call of on PQI margin earlier, sort the Water us ZIP helps But in that good sides to be that year both the mentioned the consumables in and as Quality Jennifer second of in at really saw of back should kind the in rebound As on we equipment both code. half the of side, of

Scott Davis

up it different raise a has system made you tweaked to on what little things following even to a business on a that assets of have bit been I to when the for made, Danaher just accountability. comment And level high a understanding Jennifer, How increasing tightening you accountability. drove about have the you level? always think here? that just you changes that kind you And have always pretty of

Jennifer Honeycutt

it's think think like Yes. a the I were on provide side enterprise a I more of mean sciences $X there business, level an across focus I in factors focus to billion these obviously, sort many us with always has exclusively large life businesses, allows to whereas and equal of very, diagnostics very more smaller, Danaher. challenging Danaher nimble previously

level way the just to how of some we're And so the raised only we've things of by but here using not we've of -- that VES, we're expectation done maturity few. Every those we've using result, little business that And a visibility on is really the and a operating, little the tools is we're bit focusing to different. elevating a of Their our is focus on performance we're each sure that businesses. level fit-for-purpose in the evolutionary bit toolbox of of make we as tools different. critical VES

Scott Davis

year. the on this Good Congrats quarter. luck

Operator

Kaplowitz take from Andy we'll Citigroup. next And our question with

Andrew Kaplowitz

Jennifer at America you mentioned I and recovery recovery. to are Sameer, see about North signs the know you how feeling and PQI Europe, you continue this Western of point?

late in the on in food QX? could Have trend. elaborate I that back through you equipment segment that of you that rest are beverage seen in demand equipment how quarter. started, China-related in recovery in year? the think, that about coming for follow the talked And you and You factoring growth Maybe

Jennifer Honeycutt

online food lines always there. coming previously markets, And and mothballed the Yes. consumable they're refurbishing that revenue first. And We're to stream encouraged this they're in with customers a downturn, seen as getting stream we by how of in performance or particularly those a CPG that's running, equipment. beverage, around ramp result Is were will the revenue see the mid-single-digit from that sort recover back revenue. particularly really quarter recurring we've of sequential PQI growth consumable third our QX, regard those here

And equipment always leading see growth. that our so we

to side, Now of quarter. some on the pockets first see equipment growth did nice late we relative orders the in

the is first, And so we by to sequentially and with encouraging this would of consumables recovery. maps recovery have very closely seen pattern equipment followed what

Sameer Ralhan

are more customers half, encouraging, recovery in we're Andy, anything March, second cautious this the quarter were in are as teams good only into half from but the second than mentioned, guide that second other while the in having the Jennifer add point. at building perspective, a thing equipment with we discussions I the on would those and owners, the building still equipment very we're business side in

Andrew Kaplowitz

Hach similar Is then of business the talked of industrial talk And see the do maybe that strengthening North you there impacting maybe about you Quality side on helpful. Water for side, higher -- a Very side anymore? rates, while on resilience you've now. municipalities spend? Maybe question the any Obviously, a Are risk of the that. American about spend seeing

Jennifer Honeycutt

Yes.

set Andy, it's thing nice OpEx-focused an businesses. business, largely our is the So of about

to cycles So steady we high when interest And terms operate levels they of were the at testing see relative their impacted the will on down we municipal plants. and integral approval activity. and investment. There of water following going lock being CapEx to that We as in be pandemic because to those execute are kind that that there. And required minimally improvements. are in end spend more They execute plants on continuum by. their project And of operating means backlog. refurbishing rates, on the value starting getting municipalities for of analytics

well. here demand of So have water reuse municipalities. to opportunities a here And reclaim to continuing see variety in we we recycling, and continue also activities that's as recover good

So muni to forward recover there. by are we're execution encouraged that the starting continued markets look to and

Operator

Sprague our question Research take Jeff from with Vertical We'll next Partners.

Jeffrey Sprague

Obviously, kind kind a Hey side equation. here year. of solid quarters of the of probably of out a couple Jennifer, on just of just M&A the box first the

think line it spin. of the time to So the given about

segment And actionable. Just do things the you coming the is lean pipeline are they how Do one towards other? wonder see or that together.

Jennifer Honeycutt

everyone's topic, favorite think. Yes. This is I

spin, days XXX today. post think, I are We

say, strong a have a and very, Quality Water considering. in we early number side very a opportunities process with So that both here. robust pipeline the the days it's But have still of activity, to PQI side, I we're of

consistent our we're come to here, markets, sure heritage at going strong going companies valuation. disciplined making that and sure are with within stay and the We they that markets making those after the focus on right right

We financial growth portfolio bias M&A continue continue going history. drive bit can inherited businesses in will improvements that is we or utilize our in model, to today. as here We they more the is as like VES catalyst the if and that to from that Businesses to M&A we operating those opening actionability have the similar And a VES, our that certainly, profile always, and continued can relative margin. And we But the to for in durability towards important up discipline an forward. rigor see have do episodic. have maintain little year progresses. opportunities

encouraged we so that. And are by

Jeffrey Sprague

and maybe then for unrelated And Sameer.

margins Given that mix consumables year. QX lot is it until the maybe would get that kind whole half really equipment second sequentially revenues? higher doesn't of be shift on a versus down into the we of the to QX sequentially Why

Sameer Ralhan

As to is we show us. from really second activity is the trade thing the go for quarter this being first ends ends quarter QX up heavier seasonally a -- QX, up -- Jeff,

operating expenses to go I up applies do and would segments. us that's of QX QX. the -- So both seasonally for the kind in just And say,

fact the is The corporate just of other that some spending.

of from at perspective. a said corporate expenses, the very want we we February, just right, beginning and cautious stand-alone judicious company year in as be the bring the you to in As

that to ramp to rate the in impact that as pacing of just you as did make up. mentioned, lastly, SG&A on we're quarter, We're I quarter. some QX, run going we more side. start we just So move And into is investing second in going the some would second in say, investments. seeing slowly of and Jennifer And are how the

things driving a really X those it's decline. combination that's the So sequential of

Jeffrey Sprague

one it Does or other? towards bias the segment

Sameer Ralhan

the across universal pretty it's No, board.

Operator

next our from Baird. Halloran question take from We'll Mike

Michael Halloran

here up following essentially you with the less an you what I on as on centralization way bit to how guess is with to company, came we part up the to of there as a So that resources. a lean prioritized perspective whatever, incremental more done M&A had then here build than stand-alone and you've any that when question, anything functionalities in organizational Danaher? So Jeffrey's And the had change integrated see is at muscle to you that do today? have build little you became is obviously, side, in your did second R&D resources, processes from

Jennifer Honeycutt

bringing does of very were standing and those were within and and a Insofar tax executing and require have a development it. our talent sustainability for clearly, M&A taken top in sit But muscle corporate long-standing sort on Previously, within building those the we corporate my in staff Danaher operating support individuals Both M&A. So that trajectory, up the companies building to functions organization all our -- function. respect with stand-alone of treasury deliberate strategy in of on as us. care strategy function and histories themselves. company of to the

be the so leadership performed We ways effective our have strong to due able upskilled within integrating on. the operating capability of for to at look companies and diligence,

following a to actually both So spin bit ramp spin the the we of here the and spent quite time in itself. up

Michael Halloran

one just green far specific areas relatively Water there on and as of How the is had an and a assumption through side see we areas. we together as embedded for to much some starting PQI as in Quality And from the is specific or the guidance putting the normal talking from second kind perspective? Are is year recovery or in shoots context? the get that improved some sequentials, backdrop just commentary of here an

Sameer Ralhan

Essentially, guide take just of one. sequentially built this at that pretty I'll you it's this Hey point. yes, improving gradual kind a the quarter-by-quarter Mike, into

of building I near consumables second As for this trend in more slowly the the of what really year. side, -- earlier, building point equipment term it's in really still on is more the half said is side, that really kind the we're

from a be the QX math some coming you will better. the sequentially That's a helping how be it's moderate works. pretty backdrop back, side little going of QX, equipment but to basis, macro on there's year-over-year up, but imagine, So a kind can of the bit us as of going

Operator

from Dray Deane take Capital Markets. next with question RBC We'll our

Deane Dray

the in I color and Water could. the get in in specifics to a all prepared question remarks. I'd like specific I if appreciate your very slides Quality,

regulations the the no right you testing on that. per now, really as pushes utility afford that limits. X a prohibitively is to PFAS, really technology spec, use new EPA parts expensive it's can trillion -- still So the mass And have

any is you incredible ago. test industry are now, So more the to seeing economical be X of going closer, all of what closer any all might over weeks to this demand as as is because a be

Jennifer Honeycutt

question, per towards Deane. Great Yes. We a detection knew that X the headed here. EPA was of limit parts trillion

fundamentally hundreds that that's So news new the ] for line difficult us. phenomenally to GC there municipality gallons run not of of are problem the back, tens, water. meantime, compliance fit-for-purpose this is a news through but water right mass What and time is new you a this XXXX, to couple in solve centralized sample a to answers [ not Right way. for if is thousands for the complex spec, with is in discharged of set solve weeks way come has later. In now, lab, of the Salsnes

for space. we're still developing here. of probably years there expertise long are and we here game couple to applications, in with you're readily being PFAS got to beds, available when require certainly, the a capture of activated out this as portfolio treatment do investing being a of is a area. unit the say, We terms other imminent, options, them we've are side, refresh are can carbon what both but as of identifying over technology We of believe but solutions that a test We've And say innovating just moving detection would either. you one here there. the technology right destruction I great a some plant. broad at in XX-year that now, in particularly PFAS in destruction. that products not right and has are of well. But got We have play is UV terms those landfill. fit-for-purpose like a history this out itself happens the Hach winning addresses going not water that on you both. And place think in fit analytical analytics There not granular frankly, to is there, resin And purpose

going investing are of it's here, be a to number organic open options are a activities to and well. in journey as So but we long inorganic

Deane Dray

to well. the and you've But -- well That's opportunity. And And versus glad that the fully a color. something for everything comments lower of to I'm angle customers. appreciate demand mention and on just XX% that a the this, destruction molecules. on a an there's overall customer getting -- that the question given of as we've the boost I appreciate deal between really is a know echo you there'd and really about your how There's practicality the to direct I further a to would I wanting big demand Hach able is. you to especially I'll Danaher and think be And question, as the suggested on industry I margin consumables a distribution that that's be when reagents would then where follow-up And business the that just might heard helpful. of the time line Scott's of that's so hear just that one ways because as level model you that that threshold remember cost hit that more well. gross complexity And which

direct, that a does have use just that stand? Or it's Is not know something where in stand? but practical that will you explored? to some where because just does distributors nonstarter? countries, I that is Just you've

Jennifer Honeycutt

great we selling of technological to We direct. areas have use staffing that insight of solved to it's problems long-standing the And processes, have where analytics think and I a right, flywheel sales our capability the have sauce needs. it's up that from I that organizations product consider of new product and be would organization to solve don't full needs, we process critical Deane. the actually continue knowledge. And analytics creates countries. portfolio because and innovate mean distribution feedback good their us tend applications customer intimacy mass secret unmet, I loop control, think to sell will and thing the development service Yes. you're direct. be that us to for We our that evolve that be do help businesses in they're terms They and customer in yet their part to give the unmet what the of to their it's our to insight certain

a teams lots in factories So pushing VES, are we result away, are standpoint. of spot buys. direct We to right? working a far and model from are pressures, will, and and fewer benefit margin operating there's by good from of procurement teams steer The sort if just are doing great not inflationary think mix. here just The running of on on sales better, execution, you applying delivering inclined margin virtue our job as a back we're of doing opportunity

other without a to margin relative number had we So of compromising sauce the pull that levers intimacy. secret of we customer can

Operator

from Andrew We'll with take Bank. Krill next Deutsche our question

Andrew Krill

I wanted going back to specifically. and ask on costs price -- more price to

raws heard give I think on you're Just to several continue we've there? be us inflationary. companies like can transportation, assuming all from certain update an you what labor, pretty

And there a dollars? can the would by basis margin like guide difference is there's be just or helpful. cost if segments? And any you on stay really big the assuming positive, anything price So

Sameer Ralhan

from future norms. Essentially, the one. price modeling from line in that perspective, and guide take I'll in price, with a historical Andrew, a we're perspective look

XXX to So points. it's XXX basis

to perspective little a off, outlook I things high an came course, from of quarter, But XXX is points to basis in perspective, the bit as that think a guide towards way model. of good the This on XXX end range. rolling we are

and mix those stuff Deane question going the say the think and discipline a of gross things that, and differentiator. And has kind to of buy the think all manage operating saw us That's the really over big Scott a VES margin think, from really kind I that helping well. side. We to materials way the a side down the that us that's QX. as circuit of look, and in uplift broad we had material to reflected big the I of kind been I On in it's pretty some that from plastics tied semiconductor, the would boards raw of side, nature of commodities.

I would the having we pressures think of there. buy are sure doing are the making operating discipline, smart really, inflationary going less say, I forward,

make managing the it's can the also side. but have big well, operating which managing, are a discipline really we are minimizing on impact smart to We about them sure buys, market really any

it's So way lot pricing. doing discipline market value say of the discipline. pricing, all there's the and price side, I We're a from starts all operating in in used the would showing side for up that the

Andrew Krill

XXX%. cash for And free XXX% the flow boosted it's to see year follow-up a the conversion, conversion to nice then on for from

into be very insight XXX%. you X to changed was ahead, more Danaher of maybe conversion consistently lower like any should XXX% what give And we quarter? looking kind over through a thinking legacy like cost like Just as of

Sameer Ralhan

Yes. we conversion a Andrew, at just right, if on any as on reminder, do you kind look basis conversion, GAAP cash give right, metrics. adjusted flow of the the free of the metrics, not

XXX%, That to think conviction for or full based stock-based the when margin a range you going getting that, but should XXX% essentially, compensation, by So is this on the share year us. that guidance XXX% for bit I towards over side. we amortization stuff, the compensation little a more the and be all little the on really quarter look XXX% at the add really just on driven

be points that divestiture. there's As the GAAP high flowing a there mentioned, XX flows our that net Jennifer the And the noncash conviction. charge to kind down, that's of the to tied on well, basis which is gave in a margin right, quarter as sales will also, end more us towards this income, to XX

that's just cash was the adds and as flow it But overall, operating better perspective, to kind performance. well. from conversion a So math of

Operator

Nathan our with Stifel. from take question Jones we'll next And

Nathan Jones

kind side maybe come of to actually question and I'm of you on the more opportunities of or that on follow high be thatkind maybe PQI going distribution, distribution I'm there's need customers the to but service some it cost Deane's going because same the revenue PQI on level at I in leverage super might there don't to the the lasers would to of have maybe on reduce serve side, thought than up the model guys. from consumable water smaller from side the not potentially where some

that of more? maybe potential commentary on a So could to make bit any side leverage business distribution the from the you

Jennifer Honeycutt

have portfolio. And where probably of water, like use it's I what and the types in do think you we tell in insights I gained world that and investments which more in innovation. understanding way a packaging the on customer for are and actually spurs terms in insight. But is customer mean deal from of who's knowledge the a distribution for of on when direct side side. something I to depending are to lines do make that of marking the This products significant we color always and require level as product Yes. our consider we consider any will coding in we pretty when decide a and the answer upon of same significant kind we're be there distribution mean it actually or problems of applications, we water. great and I selling

call last launched X products the these You additionally and year. will customer recall from back our Videojet are They another for the to innovations fourth quarter, X launched that of on first quarter new feedback. direct in

I to planning selectively course model insights those strategic in face. customer that problems to think the every we our direct do of intimacy they I towards relative cycle. it consider that have here little a do a So untapped bit we required and use of biased the to creates continue be But some because distribution,

Nathan Jones

market is business. eye the certainly on in right over be I a a growth years industrial and wanted bull's potential market, your water quality in for the X, markets, has significant next that's to and which I ask a XX, a of reuse follow-up recycle lot would think, XX

reuse in trends what to on there seeing Veralto commentary industrial opportunities on you're some what for maybe recycle are those going the So and and markets, play markets? in

Jennifer Honeycutt

it's would This quality deal is our water and say, great absolutely. of potential great interest I and company, and businesses. is pan-operating activity, in both that see reuse. growth one across question, a And recycle We a

of less ChemTreat, in amongst can saying, We fact, used deployed and customers. with can XX% field kinds of Trojan water my do Hach, use them us. great of intersection in to have do coming And amongst the increasingly, the to help recycle reduction and of in conversations portfolio can applications. But "Look, amongst sweet have the that's got ESG I've importance the So those to sales all company and the play We've are of virtue relative solving got They've XX% water by a not has product the be to applications. our in said, folks of themselves that both us process. are recycling. And me those spots got -- those to that just great it, these and for right? So you space.

be to continue excited we so the space. about And

Operator

we'll our question Buscaglia BNP Perles. Andrew with take And from next

Andrew Buscaglia

on much So you're I'd your Quality Water to demand your really strong January And better quarter? driving that throughout What's around I just side, changed, check December, guidance. just in about industrial really? the from guide you to wondering wanted the transpired what than say, the that? I'm talking what -- sustainability did then

Jennifer Honeycutt

in here, strong industrial Yes. I pretty mean see America. output particularly North I think we still

that's do little respect likewise, the opportunity, see and that great across all relative portfolio so the be is play as we food in. microelectronics the mentioned particularly segment world in mining its remarks, opportunities see around processing, to power Act coming strong. We which a more the our and industrial on. back, as and relationships, reshoring to with well I becomes we continue generation largest CHIPS we think fractured continuous bit trade and to But as chemical providing activity the prepared and so do beverage

we macro see our in for a So America do environment North good industrial sector. particularly here,

Andrew Buscaglia

to things wondering Yes, high. lot can some Quality margins portfolio? they about yes. see you where comment little not you're those should got especially is your a are on could questions Is long really -- as of thinking A lot are there you to M&A. lot I'm enough sounds where you your How Water that's if like. are term, where deals? of generally And margins, out this M&A margins of in or adding we a expect stay quite you you there it add accretion on Obviously, interest if lies. not

Sameer Ralhan

it create when past, M&A, synergies, create add we stated companies look a at to and approach differentiated We Yes, really what's VES the margin, look to can in of that very to Andrew, disciplined of as drive markets, and core down and we how we at the respect really the multiple businesses to metrics, into it rigorous really we acquired that do the can financial a kind is comes valuation with are -- we've right? overall value. it factors, ROIC, and combination around portfolio apply the follow things the growth

part ultimately, the that a So our rigorous these and it that's of combination to creation different of value we potential on really process. at kind comes down all of financial factors based look as

the So I wouldn't really the focus versus It long-term combination under they of how will on metric see value. comes one really create other. to all

Operator

Lee from Goldman question next with our take Brian Sachs. We'll

Brian Lee

on call. covered the been has Lots

on equipment the a guess, how remind then us the strength equipment on what I visibility just maybe maybe does mix consumables, like how are it your to move Can you mix the seeing in sound to in you're remind of few but margins the context relative out them, And extend bookings? So year. implications? PQI. backlog You that follow-ups, far recent us and alluded also you in does through then will kind PQI we implications about grow think of for should as margins? the And

Jennifer Honeycutt

the Yes. right? see is I short-cycle we in the I frame, XX-day visibility to for think mean, business. This time what is here equipment XX-

to patterns, recovery. and so first and and as inks see packaged goods a pretty decline confidence brought back of online we equipment is in where these available do is So our then cycles typical lot which forth. see and second product of and beverage a lines food expansions, around right, line intuitive consumer spare of parts, of and following solvents, are consumables on funds the the history, We so in when recovering equipment sort are here equipment half upgrades of

of kind do you and that consumables projected half year. the of in the we've So the a see back equipment guide of here in rebalancing

accounted we've so for And that.

Brian Lee

And then just one Quality. on Water

ESG your from in you footprint couple Jennifer, demand somewhat a reuse, were ago, a of an water customers. from growing water of recycling subset about think I the talking, questions

We're I low U.S. grid growing here seeing in a also levered think growth gen of on customers and the the power there's to growth. especially. subset industries

seeing First really time positive some in while inflection. a

of to that of a there's mix of sense So bit. the vantage opportunities how microelectronics can if like the growth it Maybe just a there. you seems just your technologies, the you you And different much sector, speak then us point, from kind it product volume could sets is? little incremental give have

Jennifer Honeycutt

into is treatment are high-purity and So benefits in analytics water. the -- exceedingly But and of space. as of so that in reshoring the manufacturing be -- in that China. that UV Trojan of North to on the of there requirements That that be or built CHIPS microelectronics really onshoring America is Act business most equipment ones seen the given wafer fab. pockets water fabs ultra-high-purity here and from systems other our But semiconductor for as business nice get sold treatment a that to result pure has for sort UV in growth the well we've as some continue sells

Sameer Ralhan

at on that of bid teams earlier that a tied semi seeing and kind side the UV I system. point treatment you're that add the pretty as the our activity to for the had seeing, as we're the only activity Brian, well on the to then Nathan to that's reuse bid -- are side municipal is on going the other healthy look would And thing

sides. is That into So pretty the activity good actually both the business. kind back on bid of tie Trojan

Operator

or that no call for over I will appears questions to turn time. closing the we have additional back it remarks. at further And Ryan any this Taylor now

Ryan Taylor

joining time and your Shelby, engagement. appreciate really We for Thanks, everybody, today. us thanks, and

As next at you next talk, again, throughout And you the to our me. and days to time, we'll please should reach available be normal, so call. time. weeks, follow-ups this Thank conclude out and and for we'll you want join coming today much I'll

Operator

you teleconference. participation. your today's Thank for concludes That

disconnect. now may You

Veralto (VLTO) 24 Apr 242024 Q1 Earnings call transcript