VLTO - Earnings call transcript Q3 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

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 Third Quarter 2024 Conference Call. [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

everyone. morning, Good us joining call. Thanks on for the webcast. me Executive Officer; are and Financial simultaneously Honeycutt, Senior Jennifer Chief and Chief being is call President our Officer. Today's and President With Vice today Sameer our Ralhan, Investors A replay of heading our webcast will the later under and section on today be website Events of available the the Presentations. related of we and quarter SEC third earnings presentation adjusted issued supplemental by this including to news will required available be financial call replay non-GAAP our A until X. Yesterday, information materials, measures. November or release the

Unless Our are all Form variances to the section website, These also the XX-Q was a otherwise on of also are slides. the under measures non-GAAP filed of noted, basis. available yesterday. materials in all heading www.veralto.com Reconciliations of provided Investors references in Earnings. year-over-year are Quarterly the appendix our webcast

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

Jennifer Honeycutt

VES of an of has X to of the performance, I our It profitable accomplishments and thank year future. for for what In that proud record These has over time, consistent growth a just a accomplished force call independent for our the culture and our strive results is for talented company. enables all are today. you ingenuity Ryan, team serving Enterprise track improvement establish and operations in testament is associates the we daily by you, with public us to our integrity. Thank since investments the ingrained powered to XX,XXX in success, System. talent, driving humanity we marketplace became and of Veralto am been impact joining unlock with all deliver differentiate enduring top It while customer continually improve deeply and purpose team to and as continuous culture. our

enabled capitalize past development. high-impact growth year, by the and across toolkit on focus simplified trusted our excellence tools, fortified the delivery the segments. During we food This thematic VES goods. fundamentals leadership water, the durable growth of support business better sales essential to safe us operational to XX% execution and drivers has clean and on our bolstered of Approximately both

the high. daily where customers Our aspects because they risk and products our value of support of operations failure is critical solutions

are well-established service us their and factors, Our high with customer leaders our broad intimate create growth businesses earned and large level from relationships. These help industries along cycles. recurring revenue authority, in of durable economic and insulate installed incredibly networks bases with

durability of the businesses. third Our our and power of the performance underscores VES quarter

marketing performance Our continue we and generation. world increase sales another with margin creation. the investments of to value robust teams our quarter core cash And and support across strong in growth, strong delivered innovation expansion executed well sales, to future mid-single-digit and

we're and gross is model and workflows criteria segment. connect a of XX%. Its safety food for meets new to to work believe software associates sales provider levers improve quarter, to TraceGains' our that highly opportunities regulations excited of stringent TraceGains, disciplined fourth the CPG have of accelerate customers and criteria. our Early purpose growth, XX% for approximately This team. while our source Esko's PQI than a on and we also X the annual We and compliance creation a investments, organic profile TraceGains time from fast-growing manufacturers. across application market. Synergies channel growth business develop these value market brands years. M&A cloud-based top to a complementary can cultivated PQI consumer VES new its meet for completed compliance. TraceGains and product network and both serves over TraceGains the grown strategy, pipeline disciplined development, they compound customer $XX products segment traceability. that to ingredient streamline to as processes shelf segments brands to direct consumer quality enables and with We revenue past and large consumer addition with efficiently Veralto market to the will This and margin key TraceGains' rate year, welcome believe TraceGains, brands our now to solutions and and solutions recurring TraceGains represent acquisition has XX% connect we for more efficiency. The and brands aligned recurring sales financial basis its more global with strengthens new the enable our to of line expand points leading a home expect our acquisition increasingly presence In pain to of brands we compliance beverage and ideal its consumer million packaging. inorganic exceed operating accelerate base, for of digital by relieve in is monitoring to

we creation with water, to continue goods safe seize essential that align long-term emerging evaluate trusted market additional our position deliver us with opportunities forward, strategic and clean to opportunities Moving commitment and value food, potential. to attractive

delivered financial QX contributing consolidated growth X.X%. growth volume contributing our pricing X.X% core at specifically results. and X.X% sales with We looking Now

financial broad-based Adjusted position. our goods by in across strong strengthening $XXX margin water continued $X.XX, North across XX% million for and basis share cash flow, operating key and markets consumer highlighted by we per demand was industrial and year-over-year XXX to end recovery treatment XX%. points adjusted free year-over-year grew to markets growth expanded earnings regions, further generated of We Our gradual America globally. packaged

Quality. growth which of half core quarter, third X.X%, geography both X grew chemical our market Water chemical Looking treatment Quality, Water to and In single growth sales, this the total X% on all sales growth digits in for led by broad-based company perspective, high regions nearly grew industrial the which sales we major and solutions, in the growth continue America. water grew an food represents with in demand North capitalize core In with in across segments, at sales mid-single digits. strong across in processing. North by America, beverage was strongest growth From

sales North customers we're systems our to growth sustainability also North in This includes data which packaging well to in sales America such was Europe, help We activity businesses, The and both to strong consume reshoring at X.X% in segment calls. In or year-over-year marking marking partnering and up with on North segment, digits. onshoring achieve our color centers, X% sales in technology related headwind near third and sales core concentrated that their core to large company Water just strategic conservation, growing quantities Note them grew water quality coding. grew Western treatment growth over reclamation the total see X.X% company mid-single of average. with sales grew earnings from UV core quarter. coding and positioned actions PQI and as in an our America. for water America. investments QX goals the cooling. At Europe approximately in municipalities are water In prior water Quality in growth that our In water markets, continue treatment, water the we portfolio PQI included benefit XX mentioned we to Europe up Western in in for basis sales related high-growth Western analytics and with low-single point reuse. In digits

back Latin to total of investing led analytics, by America about of and a up our growth America guidance. At strong time, strong in than growth turn delivered to our company financial modest sales, details and represents third and region. of third to year on results in for China. quarter the Overall, water marking high-growth decline execution. we with and we EPS quarter for the America on the full in strength on commercial operational year. this Sameer And core sales guidance the and about our XX% of I'll more performance, provide quarter Within third see over markets, we the call of our raised now Latin the adjusted sales into We X% offset results water growth this coding. Latin terrific treatment are continue XX%, balance

Sameer Ralhan

results begin quarter. Thanks, $X.X year-over-year good for the sales everyone. on morning, sales Jennifer, Net just was consolidated in a over quarter. third modest grew a Currency grew X.X%. benefit to billion. our basis with Core X.X% the and I'll

by positive quarter, in line historical grew marks PQI. the contributed increased volume consecutive sales core segments. across driven Our second by growth both both in led at volume which with growth growth this in levels. segments, the X.X% quarter X.X% across volume Price with was This

profit Our productivity increased revenue both XXX expansion improved investing mid-single to costs. Adjusted increased XX.X%, profit operating margin grew our sales. year-over-year efforts of improved XX.X%. basis manufacturing and the margin and XXX profit $XXX well margins operating drive comprised growth. basis marketing margin through We digits expanded year-over-year as points year-over-year million. Gross XX% while at of our optimization. pricing XX% segments reduced Gross delivered and year-over-year, and expanded in and total strong profit productivity X% We cost benefits reflecting recurring sales pricing, as points to to to future adjusted improved

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

XX% year-over-year million Looking share was share adjusted of $X.XX. per or XX% flow cash earnings GAAP And for QX, at to per free earnings income. approximately $XXX grew net conversion

segment I'll water cover the quality. highlights, on, with starting Moving

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

strategically not the annualized to quarter. line In sales will The headwind quarter exited X% Water growth Quality resulted and small grew exits from we in X.X% and contributed lines year-over-year volume of Pricing sales these core fourth year-over-year. product headwind third for results. Core segment growth. in X.X% our points growth basis addition, core impact contributed XXXX to XX in has that the fourth approximately product quarter the

markets end UV in industrial demand municipal Our for volume end in growth strong was solutions systems by markets. treatment and treatment water our driven

also Water segment of Recurring grew profit operating XX.X%. points chemistries digits. strong sales to million, and single basis $XXX margin to year-over-year and X% We operating XX Adjusted reagents profit to increased high sales municipalities. increased saw in growth Quality across adjusted

core grew prior beverage and and up our in X.X% to color sales cost Core an sales expansion tailwind. the growth. price third XXX Moving optimization grew food segment year digits, improvement in and by quarter, the digits year-over-year increases high growth $XXX primarily pricing, sales basis-point sales of increased continued page, consumables business, portfolio. customer and over core margin sales X.X% quarter, software with with up XX.X%. recurring Recurring was year-over-year, this packaging PQI million XX% by In represents and sales year-over-year. strong The applications the across business, momentum at leverage year-over-year sales initiatives. was our Volume XX recurring in margin million period, third in revenue driven coating to subscription adjusted X.X%. profit driven equipment. single Currency adjusted delivered the a operating year operating operating That grew X.X% basis-point PQI's resulting in was the $XX this CPG a PQI of revenue. to base. marking The PQI's profit $XXX next period. operating led margin mid-single mix high prior our single in growth profit contributed positive was and down the the over by digits contributed growth million and adjusted strongest by in both of quarter. Breaking grew

quarter the of As profitability which foreign PQI third changes repeat power the Overall, a XXXX the further of by PQI, peso, reminder, for unfavorably did quarter was in it our quarter third was the earnings currency, strong of PQI's in demonstrates very which not Argentine in a XXXX. particularly impacted of devaluation the businesses.

from our operations to our we of notes. cash QX, now Turning quarter on sheet the cash interest and generated $XXX Cash third flow senior reflects cash from the balance payments In for flow. million operations. biannual

X.Xx. the $X expenditures. invested capital quarter income. third million on $X.XX $X.XX conversion of Free flow of net the was hand $XXX was was the billion. billion, in million gross At of We debt XX% and Net GAAP billion in leverage $X.X debt or was resulting end cash cash net also quarter, in

at capital acquisition, TraceGains M&A. remains was gross in quarter, still value a to a As the million. with price bias early this cash Jennifer deploy hand. we we long-term we deal forma continue strong, create $XXX towards for on to our financial shared, The and Pro fourth in acquired flexibility with position purchase of how shareholder have funded

We have opportunities an of both in Water attractive Quality pipeline and PQI.

as will in continue long-term create shareholder approach our we disciplined We to remain capital value. deploy to

Turning now for quarter. guidance the to our fourth

a We the level core in with are the on mid-single-digit third in consistent range year-over-year growth core targeting the sales of low growth we to of XXXX. quarter basis, second and reported

$X.XX XXXX We expect to about of guidance margin approximately expect sales per the basis represents quarter. fourth year-over-year on adjusted XX a is we acquisitions acquisition, year-over-year sequentially. XX% is QX adjusted points And flat in XX share. impact EPS profit the operating operating basis adjusted to basis margin This Including points $X.XX contribute to TraceGains our for the and of growth. improvement profit in of

full $X.XX the per share adjusted our full of Midpoint EPS of of up this growth $X.XX the share adjusted is remarks. $X.XX our I'll Jennifer raised concludes $X.XX EPS call guidance. guidance X%. That year guidance updated prepared year, to of over per represents a range point, remarks. closing Also For to we year-over-year at share. per to the turn EPS back prior from for midpoint, adjusted the this At my

Jennifer Honeycutt

well In we guidance. team. the we Sameer. of further drivers and margin growth capitalizing delivered and in EPS Thanks, our demonstrating company, the are of segments. we acquisition of the of high-quality across our quarter both talent of year the the business, adjusted power quarter, our and Based completed TraceGains. executing the growth the the the of the results, expansion strength quarter, we our VES on third at raised secular full Across third summary, on And outset durability fourth

continue market, within Our remains to framework disciplined strong valuation. we and our opportunities evaluate financial and strategic position additional company of

growth, happy creating to As and your we through prepared value look are sales concludes at continuous durable time, disciplined longer term, capital steady this we remain our committed allocation. That And to remarks. we take improvement questions.

Operator

Instructions] [Operator Citigroup. we'll Andy from first our question with take And Kaplowitz

Andrew Kaplowitz

reason QX core more even know at QX's continues bit want you're know recover, seems impacts conservative, some down guiding think I a in your have I QX. QX. But QX below just you in you year-over-year And growth. be guidance, growth like you I just versus margin, conservatism comp the why said is than would it adjusted Is to to there but for looking as minor PQI just a And bit negative margin difficult other any in Sameer, operating in the a QX? TraceGains of guide? be year-over-year little in QX there

Sameer Ralhan

year-over-year from three a Andy, kind the are really really, thanks. look it's it, basis, Look at it. when of on margin that things driving you perspective,

to the tied getting costs an you're a then they're run TraceGains, the going as costs to in see some of The the bps higher to as company. that that's of the first public as costs, to And of corporate one the is, of as the so year XX rate roughly some course, activities onetime related operating first impact well transaction impact QX.

So point, kind that's basis a another Andy. of XX

about equipment those some combined and after So engagement margin feel of as volumes mix sales, customers, sales back, it's we have impact of impact the XX really with almost the an that's on on going in margin. equipment bps really the of are good that, printer QX a the an to that that then coming

our XX% those kind the three for which margin view of really are the Andy, on So driving are things, QX.

Andrew Kaplowitz

out side, of there of growth like similar kind just sort QX? call the anything just to And Sameer, to

Sameer Ralhan

that a continues. of for year-over-year is the of are China, very end Andy, package, kind And think overall recovery good are And of kind perspective. the sort just It's steady. saw on consumer industrial of guide QX, the the you that the kind perspective, QX reminder, feel steady you encouraged. start demand we markets America from what flat in saw about looking in patterns seeing China. all look, a We to our again, strong when marketplace. side similar that water around PQI. watching. a on just of think Similar are so I It's kind from commentary -- the growth we as Europe North side, was when you in the a think I And sequentially a is we

going last that's to little an So be of bit a QX impact, year.

quarter. no, that's kind little it's QX a of almost of So an bit impact. a But a like

Andrew Kaplowitz

Got you thought it. you solutions. is can in how TraceGains, a Obviously, revenue synergies know mentioned And into is TraceGains going to color growth give process Jennifer, PQI? we little drive us then But your help to fast. expecting through customers you with of source-to-shelf more take more enhances beverage growing term that? maybe the you growth. and are you food that allow about How TraceGains core near share overall do and already to in market think your

Jennifer Honeycutt

Thanks The the We're development increasingly and about which for to time traceability. brands customers. integrate Yes. regulations question. that also excited two TraceGains. the to ingredient new compliance for reduce They data beverage with provide critical a address and product improve solution packaging the safety synergy stringent connect food for integrity are pain help the with allows manufacturers and and points us cloud-based really workflows. market, and Esko helps It

food a in since this XXXX. In strong terms sales grower their and we We customers journey. beverage digitization early of the as double-digit there, to continue outlook about of expect in would delivering momentum being been they've terms growth think

profile there. the feel bringing macro to business mandates, our good and forward consumer growth Esko with with So this really synergy in getting drive and about safety of regulatory we improve drivers, momentum

Operator

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

Michael Halloran

of seeing the here. change and thought So is on around the about then into the side moving behind I how underlying through sequentially a talk improvement the content into pieces side process first know it Any the just improvement. confidence and in about CPG And things? on gradual far quarter you're on the Any trends so talked one, coming change? 'XX? that XQ the you has maybe tone give that

Jennifer Honeycutt

think to I be slow recovery the we mean we continue I see and Yes. as also encouraged by but steady. it ongoing CPG, in

just of are indication to fifth is at of calls, as an our growth consecutive prior coming lines single-digit growth back early in revenue are and recurring in high two here also online completed are sales, that technology PQI. that And aging upgrading mentioned they're we've consecutive of that that mid- quarter quarters their seen equipment owners we've it printer in that suggests being now year-over-year indicators we've and that refurbished brand replacing Some are this out. the printers

up, So here. generally recovery. And any is what it's points, Beverages a improving and confident dramatic little seeing going are down. mixed. relative we're negative. continued to submarkets, we but to are see not We snacks that is we're at-home market but think of elective good, still slow little pretty is We're see a strength sequentially. the kind food gradual. bit spend is bit inflection data It robust

the so by indicators, encouraged execute the in recovery still to expect early days market to are but And we well. continue we and

I innovations are newest and product think momentum. gaining recent launches our also

Michael Halloran

fill-in is left But inorganic? see to in organic and what on more offering? curious now color you're Helpful. air in what's the of And that then and feel the versus have that is pocket you think What assuming TraceGains offering. Appreciate in left workflow of When are trying broadens side the where there, do that digital you that. to you out inorganic. like accomplish, the still the fill that you things, about just gaps? I'm packaging

Jennifer Honeycutt

it's what have looking are to to positioned mean, the I tick to pain CPG and they to customer and make There think a And solve and flows of that really, Yes. those information. unmet that tie needs for some sort do is of data sure said we're in points. needs digitization well we're address disaggregated journey lot I as of we early, customers.

excited optionality and do more we're the in and that see about organically in future. space, we So both the inorganically,

Operator

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

Jeffrey Sprague

having capitalize comment you and simplified wanted wonder about little the durable that I a durable you've on if Veralto you positions and having just you could remarks, the VES of business trends? tool your I capitalize to to more start to bit how things better and on done the that made to think kinds prepared I to VES a in the adapt growth you Jennifer, guess growth set system able on trend. talk that make better

Jennifer Honeycutt

over look once I I so giving growth really hard improving were sort we Yes. ago, of in mean new profitability development which access terms we product little material markets, took think and a to the to on. a came over and tools us at a of profile, year accelerating

whether thinking each tools. visual approach excellence and good critical growth every to around of it's regardless where and of a and VES in these green disciplined the red tools so organization. you're subsequently fortified you're very with how what problem-solving function that way. We've fundamentals. narrowing simplification are select that really course that And call X you're every how focused correcting tool really day, tools, was management operational the tools to terms of X And relevant the the are know or set you every along business and that the it's in field and we leadership and sit tools And in tools, you or winning sit

really Nathan, sure narrowed by And being all tool the about set critical way and we've is this, functions, focus. so drive view used that and think discipline on. VES the to everyone, the is we've all made so to to businesses And

So simplified mentioned, we're focus way as selectively creating we forward. and develop needs here. them as business tools I will going when new excited -- about the And sort I of of the

Nathan Jones

decretive on that be there's X? hit to business you And what a XXXX? expansion margin double-digit comment achieve go investments of some just to think you to in that then terms into that whether TraceGains in I to or drive algorithm is accretive need planned TraceGains. earnings Maybe year should growth. by of on talk the out X to Can And ROI then I've got about gross

Jennifer Honeycutt

Yes.

solid digits I we growing growth Obviously, the double history. recent been like profile they've in really here here. think

an seen here, Sameer. their phase continue will to We growth. specifically, They have continue invest invest to are turn that early maybe but numbers and we to the to them over business, to fuel I'll

Sameer Ralhan

Yes, XXX% growth to right now going we're stands from the that as is to the and continue Jennifer. at growth. given the Nathan, you're make investments Thanks, we'll that 'XX it the seeing drive look perspective, TraceGains to that way that

We modestly small to just expect be acquisition. a there's But in it dilutive. perspective, put pretty to

So -- best it's not and it's going 'XX growth to going to But at back have EPS guide. in 'XX. a minimal through when 'XX on come talk walk bridge the we February impact we'll about

Operator

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

Deane Dray

situation. food fast an contamination company food but major able do positioned you as of on have of emergency I'm basis? does asking food through Veralto to hypothetically, case comment to on kind trace the how kind a it, going in use chain not specifically to a work a be There's a and identify that

Jennifer Honeycutt

Deane, control we've portfolio detection. a water know, of broad relative side. on that you contaminant the as Most solutions Well, and to got of sits

Today, of good to is there bear to to side play food in business. an we most waterborne technologies We a acute it this a we when play if don't comes than sort was certainly, really space. But of issue, the of sits might as heavily inorganic things. of outbreak. analytics it to the of that do have Some our of transferable bring side the on food-borne outbreak

that the we've And well and of play got TraceGains, the think to So water addition positioned going excited think we space a anything water. we're how about here we're and relates that about we in with market certainly forward. good

Deane Dray

Salmonella what of producer, Yes, the traceability much just around that's of that so traceability bar data shipment chain, you're across there's but and And contaminant actual what analytics Jennifer, appeal and the was, chain I'm the Veralto. of about of so not the part asking there's on part food codes, forth. the

Just would hypothetically, how that work?

Jennifer Honeycutt

prepared do And you're mean chain series and thinking are I cycle, to the to about or contaminants absolutely. food we traceability that. brand food and through TraceGains information, manufacturers, following well the gets right? our in how the codes, if traceability actually of a sourcing that's have contaminant of a materials. off them Yes, ingredient for gone business ring-fence lot important codes the raw them give where market. traceability date terms to marking incredibly and identify and products where you coding quarantine of But to for they're and how those and frankly, pull will us

positioned So we're well here.

Deane Dray

was looking I for. what exactly That's right. All

for So then a I or follow-up that. and appreciate Jennifer. Sameer just And

referenced acquisition criteria. as your I Investor really out You for know, the What all And at the far all a set TraceGains expected and wasn't disciplined that laid because you as are ROIC double-digit haven't you this hurdles Day. it of the and we give business, rather just is extended expectations But versus -- different think we get as a versus are SaaS acquisition us it's about sense a prospective acquisitions? industrial of set hurdles a what M&A?

Sameer Ralhan

the on ROIC and an know, complexity we deeply of company rooted right as metrics always it's growth, is It you the M&A margin, valuation. the point from And view, we the kind opportunity set, accretion the striking Hey, Deane, acquisitions. like framework, in is I ROIC opportunities. are perspective, at say flow look of deal. financial of From which take that as cash all one. from an our on as market perspective. I'll things would very depending balance It's the all about What evaluate important kind depends all the

by are will is a example, achieve is by And a it's be X. that capital year large or acquisition, we we a year at, if if to acquisition, cost ROIC X great TraceGains of capital of technology be for for that X. looking a For a that, bolt-on cost we'll example example, small expect to -- it's close

Operator

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

Brian Lee

for Maybe one Sameer. first

of volumes expect couple to backlog the I PQI, sales to that? start meaningfully in into, equipment strength more you margin PQI you XXXX, kind that quarters? to guess, in good XQ, through have and given seeing for on into you're Can mentioned should implications. we the a seem have slight You of going like then And margins equipment quantify but visibility they're flow some level some maybe more the persist

Sameer Ralhan

your for question. Thanks Brian. Thanks,

a the good quarters kind of now equipment getting, first really right -- teams engagement signals to in that perspective, next of we the all we equipment few we and from have side, we over As customers at feel expect happen XXXX. are look that we about all, the the growth the recovery expect the the with

margins to and right, XXXX, really what in bit of gross going -- the And as kind the is steady side. VES. kind the all VES on from From a simplified mix but you quantify it's changed quantify a a was what We're will perspective. look at But recovery earlier, on normalize bit. perspective, be helps the in things have of slow Jennifer things said it attacking a to where be. a to again, impact equipment that things have a margin quite were more we way may So the a these gradual little little

impact So we'll but mitigate can, going to bit any it as gross we much have impact the an is on a of as little margin.

Brian Lee

helpful. That's Great. Okay. China. just And then maybe on

think headwind this as I it called You a modest X%. on growth out quarter,

sequential, a going year. it's be saying flat but tougher last comp you had to QX You're from

the near bouncing in the of Just little any a to any a pickup state stimulus it on see China there? the as you're potentially while? in Just just along back, in with on sort there what some the state taking for ground seeing out potential of can sort if you views for kind of step China. brewing of term the is this a of Is kind just of you speak bottom

Jennifer Honeycutt

and from as we words, for in year-over-year. have your Yes. perspective, of were I aggregate Thanks is year To modestly, here QX. kind no or demand we question. kind bottom. in level, segment the anticipated about X% think On change the a the an really meaningful we bouncing in China, But trends down playing out profile. sales different along of two We use are Yes.

We are PQI in manufacturing seeing industrial there. their markets both in reignite CPG over as activity recovery they modest and

growth So of of we opposite. are Quality Water the bit kind a little In seeing modest there.

Trojan year. then last orders funding of challenges certainly, continue business We we in significant a had from pretty And our year-over-year number out from municipal at see go semiconductor on perspective, a to customer projects sites.

of half here some XXXX. semiconductor see second that in we lining sort here is for in activity. strong if The is silver strong is here, in the demand and good So orders going XXXX still news, they had a not that there to U.S. very repeat

business of So a that occurring. not In more really in we're overall expecting near a term, of little any improvement. It's be kind where same. terms the of shift just of bit to is going

Operator

We'll take BNP. with from question Buscaglia Andrew our next

Andrew Buscaglia

the little how to differential It and good, I with like treatment. the bit or out bit months with treatment? wanted Quality, those playing below you little the just margin solid. a next the lagging analytics dig over Water into different forecasting. very And kind -- treatment start impact? is if but behind could what I and wondering also how Margins progressed margin I'm out was maybe sales you of analytics a XX looks that do see maybe And with

Sameer Ralhan

Yes. I'll take that one.

Andrew. good a margin the as the the But but huge kind end There's us, little more tends industrial growth a the at right, seen businesses. higher If Analytics growing industrial you It's really the higher you've treatment not right. slightly be on some a delta, a know, markets. you're for hand, of a margin. and you treatment it steady margin has from to business from chemical side, look other perspective, Analytics than been nicely.

nothing a as XXXX. other only the growth We'll growth the Andrew, a that of major. of opportunities said, say an be we little and impacts. I about as So business mix for we're sort we see has thing means quarter-to-quarter would think going in bit is really, making impact, investments, to that the but

are much it. for sales wouldn't read But the investments into those side. and impact. really the that, too beyond making on getting I That's those marketing growth We opportunities, up

Andrew Buscaglia

Okay.

if been you of Okay. does in year. a markets that in terms lot can low such context, I'm feel business a to CPG term, upside. but lot a all big some a this this and cycles. great Because And single-digit like wondering PQI analysts cycle swings recovery? story past versus has understanding of the ones ton a have How myself to long terms of don't have these be of of but tend

you do do out see cycle? what So guys -- this how that playing you

Jennifer Honeycutt

history had business. years, XX if really sort the look We you past contraction. periods we've its like at I over of PQI X the And think only of Yes.

well what this up. prior recoveries kind up recovery various say And in hold recovery recoveries down tends fast through of was of prior it to and is really cycles. to So comparing economic I a more would V-shaped fast

in by we've seen I that leading seen that's think gradual that's our and quarters grow, the terms more continues consistently to and we CPG to it's published steady customers -- equipment see growth. the from what a sort U-shaped supported But two V-shaped. revenue then recurring by we continue also of pandemic out sales improvement, our we've the of from volume and post indicators demand of that and of is be top progressive sequential than encouraged so sequential

again, points, see to by I race what wins here. but a it's going market in we're slow the think encouraged see huge today. and certainly We're we inflection the So not steady any

Sameer Ralhan

for ready we're question. Shelby, the next

Operator

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

Andrew Krill

years could to wanted I America little think strong wondering you like you if margins sort if has any growth. the Latin a investment was going than then you do this the to so color average? it's of and And there forward? accelerated company the through? of kind sustainable of why I expand maybe been here, on sudden finally all on different coming back are And a of that's any like this much think go

Jennifer Honeycutt

focus over highest with years couple in our for And the last performance America. the region investments the We've really the here of been to growth We've capturing team at sort we've you of this commercial of course watched Andrew. some the opportunities. Thank closely question, Yes. here. made Latin

onshoring reshoring And also customers that good there business us of to changes the insulate their help so seeing in sort around and look what utilities how I or they some think benefit That's of see that serve those serve constraints any giving model in we the opportunity is from might activity in risk themselves privatization China. But of benefit to customers some Brazil. some us water some as starting some and from we're diversify see them geographical we're of effectively.

to So reason to I a for is think stay on. us this focused continue

in prepared America us. sales, Latin growing well and our it's of we our for represents remarks, As total you XX% said know,

Andrew Krill

Anything similar on of the they're just the Or assume margins? we kind average? company should to

Sameer Ralhan

think nothing I Andrew, different. similar, dramatically very It's

Andrew Krill

the back broader M&A it. discussion. pipeline going Got And then to

Just the a in number the wondering of of a TraceGains did you through, you would And you think if is to came -- I with larger, think can maybe if bolt-on? bolt-ons, I just theoretical as there company foot gas deals your guess, is handle And of per there expect kind terms number? take the a year? like limit you off to

Jennifer Honeycutt

intersection here. we activity we about this to and playbook of to don't able can sizes Quality necessarily limits and are Thanks feel we well is engagement prepared don't It Funnels find or and and We the heavily PQI execute our market we of or set the of stands various the we're control that We engaged and house. for when size. area. the deals be timing for number But of we in can the way thresholds and to digest to deals be company we say excited both reason by sides as is what in episodic. and question. here for what M&A very continue right fairly valuation. have of scale full of to bring both Water level M&A on

but have an when about. We we're criteria. and go that the opportunity our after deals meet able any is excited this will again, we're thresholds we capitalize don't on that to as area stringent So preset

Operator

from next Giordano with take question We'll Cowen. TD our Joe

Joseph Giordano

know Price and growth But I pretty than was I back is Water are some the average which if the on had I and at there. Quality. to look the assume just strong. of margin wanted you takes fleet puts I mentioned some good. lower touch divestments, on there. margins Sameer year-on-year it pretty

So it in onetime that the at away bps what, kind talk just year-on-year. like XX you this like quarter leverage keep more of the was through go were obviously, lack of and leverage growing are to like pace? you quarter Can the there, up if if in the might anything,

Sameer Ralhan

I'll Joe, one. Yes, that take

still side, takes, puts and from a you is but right, close the a If little perspective, margin we at the quality fall-through of bit on to the look XX%. talked water

to only for you the the long-term So onetime good. peso side and XXXX, we're then as in you from in going I said, through ourselves over are Argentine item, close we It's to growth. And think growth been really and the so X we forma we in about kind there's marketing X how has about the time, XX%. that's PQI, you when perform that Even you future making the little XX%, XX%, pretty been if through to QX, algorithm can sales that XXX%. And even was fall that also, if business investments And fall perspective on pro capture in impact. as they're of a think think thing that, close. the PQI a we think has in the orient about to as move

through. So a net-net kind level, a fall XX% we of at are the company

good. of some And puts margin kind of 'XX ['XX] takes been has laid the we on and fall-through overall So as out move the the (sic) kind of into side.

thing one-off are nothing that impacting of there's kind items here, So Joe, the margins.

Joseph Giordano

the on Water to CapEx, It's then of even light to -- like needs if you was low. and Quality, sales kind it's extremely organization? long-term can just pretty it's the apply And percentage talk I of of CapEx Okay. about all still still the

X So as percentage? what of add should TraceGains And X that then out balance kind afterwards. a just quick on

Sameer Ralhan

R&D down through you projects, to to pan I on investments from comes on if It's the how the model. of year. about But the you commercial to is a for the a perspective. little right strength timing It The us. a from is see running We're asset-light But you that. really should the on X% to out Yes. X% CapEx, to X% the CapEx way going about side. is thinking business, a driving X% this the they're side. P&L then -- light depending and side impact -- think how it's pretty where CapEx a values look right? capital-intensive and mean as side, at the business you not very That's the we really the really are the know,

Joseph Giordano

last then on And TraceGains. Okay. just

totality this You are I'm Esko. that these Like being mentioned standpoint, TraceGains -- Esko get to through like from customer to work? you platform are experience a pitched to like independent what curious, with curious I'm customer from the that combination does able be from -- a have Or just is shelf? to the whole going the as source of to just are you are separately? how offerings the

Jennifer Honeycutt

Yes. Thanks the for question.

One TraceGains be expanded the about at to mid-market got has working the and that will this great see they're more the sort customers served. of think is integration wallet, way strength level want think, to digital that is challenges enterprise with they their customers of we the level. way got of of serve solutions at think has at The great that do thing I will two Esko the in cross-pollination and today. I share kind of catalyze them strength give to sort we

the about will of So going by It the region. it feel we will combination vary but good forward. by vary customer, two

Operator

Karas Damian from question next our take UBS. We'll with

Damian Karas

this, I sales? quantify if did the how the quarter you third exits sorry missed product of much Sameer, a Water Quality to were headwind

Sameer Ralhan

repeat that? can I'm you sorry, Damian,

Damian Karas

The exits. product Quality Water

Sameer Ralhan

the on Damian. growth side, roughly It's XX points basis

Damian Karas

that segment. total were so requiring bps. there's company XX to wanted ask the a in month. to threshold for finalized to the copper the systems in lead some you I regulations earlier lower guys, water XX helpful. updated That's XX drinking and

the you curious a have XX expect of address? business? is to I of could happen years kind think that I way that waits good a minute mean, requirement. sooner everyone is type think of kind on the to change that, your think meet later? last you the to Would impact Or just something implementation until that? than there rather that there's if to that's Just meaningful about

Jennifer Honeycutt

Xx this this the in in to about the decades market. So think of menu X We've broadest else innovation portfolio space. anyone way is business the our is to the got of Damian, analytics with

copper. positioned with associated technologies well our We with are detecting lead already and

we there be So business of this course frequency on to which unless be normal just the would margin, there business. get testing, is in an validate, in of that expect just the running to increase may we the

what we're got for well marginal So place. a of may I sales. There huge of be increased testing, wouldn't with already opportunity time this of here technologies. just our increase in positioned think verify as in you've existing period to sort But about a

Operator

our Brad Hewitt question Wolfe from We'll with take last Research.

Bradley Hewitt

should of pipeline to XX% frame of more time we distribution as think how XX% years as the it X of required to targets get TraceGains? to more get So the that expect the you the about time X-year the the think for kind majority ROIC to we are about broadly, you M&A ROIC? funnel to relates rather Would in than X- the

Sameer Ralhan

bunch Quality we as time, well. pretty you're talked to full mosaic think the a bolt-ons the broad some Water longer kind Yes, of As right? the as range, about, going on a and transactions really Brad, to earlier, of and are side. both technology our And at of sides larger be there going pipelines are on but a same it's PQI investments, which of the are of opportunities it's pretty

other. -- should it's quicker I bolt-on the a say it's side, wouldn't the be or on skewed range. X closer pretty on the broad way So

Bradley Hewitt

about how think And implies what the then for path important multiples do Okay. for multiples That's And to quality how between you entry helpful. your M&A? process triangulation in business XX% that the are ROIC? decision-making entry curious versus and

Sameer Ralhan

business, the fuel input, It's we value how Look it's margin of Brad. growth to VES. said, the application the can can expansion about what you as the with or and creation, really entry multiple the drive the do we

all doing which our things. value drives long-term creation. transactions, combination a So say focus I portfolio, our it's adding to is would those of things ultimately

from of kind starts that. everything So

Ryan Taylor

Thanks, joining is for the Taylor. everybody, This Brad, call. Ryan thanks, and

the are talk to engagement time, you our We really going next this you Please we'll time. I'll available further hour for time. the to today, me so if conclude be any joining call out we're call any and We questions. at to have support reach the follow-ups. for appreciate and and

Operator

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

now disconnect. may You

Veralto (VLTO) 24 Oct 242024 Q3 Earnings call transcript