VLTO - Earnings call transcript Q4 2024

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Operator

My name is Margo, and I'll be your conference operator this morning. At this time, I'd like to welcome everyone to Veralto Corporation Fourth 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 me Executive Officer; are and Financial Honeycutt, Senior Jennifer Chief and Chief President our Officer. and President With Vice today Sameer our Ralhan, simultaneously is Today's webcast. call being will A replay of website Presentations. today later available and the the Events Investors our heading be under of section on webcast the will this A available February replay call of XX. until be also

financial required Yesterday, measures. adjusted and supplemental presentation news release, we issued earnings to our relating fourth including quarter by information and or SEC non-GAAP full year XXXX the materials

also Investors In full under and our slides. we provided Reconciliations XXXX addition, issued are the also year are Earnings. www.veralto.com, in first webcast our materials of appendix These available website, measures the all the Quarterly quarter section guidance. heading in non-GAAP the of of

to on are noted, Unless a references otherwise all basis. year-over-year variances

laws, call, the in forward-looking may we federal risks including are number of or anticipate forth make those of will filings. the and to uncertainties, future. that forward-looking a believe occur including the will regarding the we statements our statements or meaning These set During within in events subject SEC developments or statements securities

the Actual date over we may statements, they of statements as speak made, differ call the required by update as These except that, our any materially turn only to statements. with results forward-looking and obligation assume I'll do forward-looking forward-looking not are to that from any And law. Jennifer.

Jennifer Honeycutt

first execution as deliver doing attractive our their notable strong proud so, In full to business, stand public you X joining value analysis I'll strengthen performance. results on team company and Reflecting our in XXXX, Ryan, I'm quarter recap accomplishments today. then our with a for detailed for creation you, of and look you stakeholders. portfolio, our will our grow call of of all Sameer a QX back all accomplishments XXXX by Thank XXXX year take our followed guidance. and a thank our for a out. begin at through our fourth

we on our commitments. financial delivered First,

approach our to improve and earnings and Second, our with investments; increased to executing we increase allocation growth in portfolio capital demonstrated disciplined our conjunction dividend growth. strategic a actions third, we our

Let core year, adjusted margin of growth earnings guidance. growth, each per with operating for delivered expansion we on me above our these. our the sales and performance profit financial expand adjusted Beginning share initial

Enterprise the demonstrates outcome our This of fortified system. Veralto businesses, the by durability

Our leveraging on simplification high-impact year. drove and margin of focus growth expansion throughout sales tools and the VES

funnel Kaizen reflect commercial the and team's enhance from results focused tools leverage in to architecture, engagement Our management improve benefits our increased events and lead VES growth gained of generation.

increased year to with and volume growth combined This marketing increased penetration. and focus, demand VES Our partly R&D, new investments progressed. as strengthening on customer the sequential steady improvement us in market in to resulted sales, wins in attributable capitalize enabled

segments, mid-single-digit in both Across of second half we XXXX. the growth core sales delivered

On margin investments we accelerated to the drive strength creation. this growth of value expansion, and strong future underlying

high our sales accelerated expanded and in augmented efforts marketing opportunities. verticals our we Specifically, and with regions force direct return innovation

with innovation hires talent increased to in up basis year-over-year through R&D XX and new of points and internal X% programs, our full our We we enhanced development investment sales. year our expense about

offerings innovation the laser launched fourth and UV XXXX launches years. than throughout the more latest quarter. products breakthrough, launches next-gen technology dozen and new and X in system businesses launched and XXXX. technology marking now past steady Our over focus a in our Its of with coding. PQI to new cadence on led in across way product led color digital Videojet several a has marketing the the packaging

industry The customers. goals. is permanent strong coating enthusiasm product These sustainability substrates We their films was after first UV supporting our films the for for and the recyclability, laser November made see launched customers' in continue and packaging from usability, in levels further weight on enhances fastest-growing consistency laser to met the high-quality are and demand in in flexible QX. unit adaptability among to and plastics. some immediate This flexible due our lighter operations mono-material shipped coding high with optimized demand of shortly here

We are new excited other many laser this we solutions technology, along about with market brought last products to the UV and year.

key delivering year last allocation. increasing investments, commitments capital In and to growth addition financial executing accomplishment disciplined our our was our third

in ramped print as acquisition of took acquired $XX approximately PQI segment quarter sell agreement inspection we sales. Advanced TraceGains, an Technology, line XXXX, product we our [indiscernible] portfolio invested segments. across Water This to Technologies size in or steps improve annual both In the signed stake and our to Vision in million with in in activity first a fourth minority AVT, our

As about acquired on call, early in fourth quarter. our the we talked was TraceGains QX

significantly products. It new provider is consumer recipes software for reduces customers market to workflow management digital solutions brands. help that and a digital connected and leading innovate new of for cloud-based time enable data solutions faster TraceGains

increase food Additionally, ingredient inputs and safety. it helps beverage for transparency to

is acquisition The our and critical and combination business, deliver The digitize workflows connected data development, with us opportunity digital well. to expands new our the as provides in packaging. greater offering product ESCO across they TraceGains to of value going compliance of with integration strategically consumer TraceGains brands

of in an product fourth AVT ESCO are agreement on growth customer is sell all And to the the sales the growth our core quickly entered TraceGains XXXX. has quarter Our team fronts. very investments. XX% integration we expected its on VES. to and in quarter, importantly, completed be This embraced Late sale response quarter been fourth team first has into line. at track with is exceeded TraceGains executing positive The year-over-year. the

focus margin gains will our and CPG example gross growth source-to-shelf our recurring rate, are its color the ownership on providing solutions stewardship our immediately workflow of of innovation. revenue. ABT PQI's for divestiture another core drive Both divesting portfolio. combination, and digital portfolio we and is trade In to new to packaging enhances provide acquiring and growth deals with accretive of focus believe necessary This customers, the ESCO's AVT

quality, actions taken we improve water to have portfolio. our also In

long-term previously have creation [indiscernible] value technology spin-off, oxidation exited electrochemical provider strategically since fourth As destroy In we with a in of discussed, the used including that water, a PFOS. aligned strategy. contaminants product investment Veralto's lines made to our were we minority X in quarter, not

proven developing our team Our track of and believe help developing contaminants. a has and for water over adoption will that meet A Axione oxidation [ quality We water [indiscernible] provides accelerate that technology partnership is strategy organic commercial technology solution fit-for-purpose a complex ] and contaminants our quality difficult-to-treat with emerging long to record electrochemical destroy promising customers challenges. of time. our in detect commercializing customers key technologies part solutions help growth

we portfolio with made in Overall, in the are we pleased progress curating our XXXX.

for pipelines segments we active are continue allocation. growth forward, expect and to value to disciplined in be full acquisition Moving and be creation lever. a we key capital our to both The approach

the packaged XXXX, key improved positive an in at last now highlighted end demand off globally. improved portfolio across this to are year, end strengthened for markets consumer financial goods trends our compared markets demand by year stronger we markets America and with Looking in treatment and North water a has our time Demand starting in position. industrial strong

fortified growth competitive sales advantages consistently core solid full system improve to And environments. macro believe the generation. to the durability earnings Veralto enable are and we of year grow we in with strong by Enterprise mid-single-digit XXXX, For incremental that the strong business cash growth low- targeting dynamic us are and is margins, our even

growth to core financial the high. sales an billion, Looking grew We year our of strengthening guidance year-over-year And our operating flow, share. Total we X.X% all-time metrics. X.X% of financial share XXXX. results at on X per our just exceeded and delivered grew free points adjusted we Notably, profit $X.XX position. adjusted of to with further earnings XX% expansion for million full sales under per margin $X.X $XXX all these cash generated XX initial

cash X.Xx. I'm growth both sales We on $X.X expansion pleased and positive growth we across with XXXX. year company in hand ended with contributed Every leverage net the operating with margin segments at Overall, core of volume. and the delivered billion

expansion. adjusted growth delivered operating sales operating XXX sales with points expansion. set annual profit and adjusted of margin margin our over profit basis highs Water operating core all-time delivered XX% Our with margin XX growth team sales core adjusted Quality and billion basis points X.X% of team They $X X.X% profit of PQI of with

margin They highs XXXX with all-time XX%. world the also I'm profit fourth $X across of capped solid support with teams a reached execution and of strong our proud off over our strong operating quarter operational of million commercial sales customers. We and in their results. adjusted in for

quarter, further was segments $XXX sales X% volume X%. year-over-year our by share free position. grew cash million financial growth generation growing earnings to flow and $X.XX core by X.X%, Core at with fourth grew per than the led in strong more Adjusted both strengthening sales

quarter, and our markets Looking the fourth by enterprise teams regions across growth geography investments tools the across in year. made at broad-based for and core was growth and and our sales key leveraging earlier end verticals the VES well, growth executed commercial

North strong treatment grew year-over-year. continue in X%, high America North digits solutions, capitalize quality, on nearly water and which single high-growth demand of North total low water grew single America. and our which In markets Europe, segments. sales chemical about both Western sales core In we XX% to our for comprise digits grew grew X.X% America, within

processing strongest growth generation. and growth with beverage, industrial perspective, the market an and From this end was broad-based chemical food power in

Trojan's achieve UV to municipalities our water as We customers from systems secular also related strong goals. primarily in reuse. we drivers continue reclamation for in strong at continues water to growth America, Veralto and to reuse benefit sustainability see help their North conservation,

centers, to to events for given large scarcity more includes It expect term, today, trends these weather of usage increasing water and from data industries Over processing. such water frequent drive and of industry, consume the opportunities coupled water also as we from long continued traditional generation secular food power cooling. quantities with growth the ranging beverage which severe

mid-single-digit in to packaging QX Both improving by This PQI, was customers analytics sales. and color market businesses end and market growth from in demand in and also At combination and and marking strong treatment grew PQI's coding. from from penetration equipment water a North reflects are of strategic largely activity core industrial in increased CPG poised initiatives. America in growth X.X% benefit driven our growth both in America. America North with sales North our

driven largely saw X.X% in commercial launches PQI. by sales execution in VES X.X% Europe, sales In in growth wins quality analytics Specifically, led in growth new momentum excellence. X.X% was Western new America, growth commercial our year-over-year, sales growth water we of Western North focused water continued and team. with product strong Europe driven Videojet core by The customer on and by differentiated

our across X.X% solid core led markets, fourth drove year-over-year high-growth similar to PQI we Latin in In sales PQI drive China businesses. to America color coding marking India. growth growth quarter, quality. water and continued sales and core growth in both offset In the quarter packaging and performance, Additionally, in increased and PQI in by China, was our third however, sales lower by

due to This lower were quarter fourth ongoing UV system is into level in of strong exceptionally soft quarterly our water QX Total sales demand processing, primarily the a average analytics, for China which XXXX. with were company for in the of installations in for chip line and year.

our demand in We grow do at low expect XXXX. to for in as products continue not stable and levels China to sales China do

XXXX fourth execution, fourth future quarter over turn quarter solid to I'll creation. to while value the Sameer and on provide commercial time, back strong our call delivered we in this continuing results invest financial to At the details of Overall, guidance. on results

Sameer Ralhan

XX Jennifer, Total of Currency and year-over-year sales TraceGains. basis growth, to sales driven fourth begin point for grew X.X%. by year-over-year headwind everyone. Core and our the primarily Thanks, with basis a on results basis quarter. over billion. a X.X% was XX contributed morning, consolidated good grew points acquisitions $X.X I'll

levels. growth was line primarily X.X% year-over-year. in core growth contributed volume, by grew historical this which Our sales Price quarter, X.X% driven with

with Our grew The of digits comprised our mid-single year-over-year total levels. and revenue percentage is XX% recurring in of recurring XXXX sales. revenue line

million. improved and specifically nonrecurring primarily Gross However, coding XXX Gross by X% to it $XXX profit testing is year-over-year pricing. year-over-year increased points marking instrumentation equipment. and down revenue, sequentially XX.X% growth in sequential high margin water primarily profit and single-digit due driven to basis to

Adjusted operating operating and adjusted margin profit at was year-over-year, flat profit increased X% year-over-year XX.X%.

X.X%. quarter, On sequential year-over-year we a year-over-year investments of fourth percent mentioned, direct XX our Jennifer to basis. basis sales as a and the in increased or marketing $XX efforts both points increase in sales to a basis, and on continued R&D As million

on cost our by quarter addition, increased sequential million In optimization this a in basis. $X investments about

These investments are our plans. aligned with growth strategic

share. for to Looking QX, share at adjusted EPS X% per earnings grew $X.XX year-over-year per

a and stronger, a in corporate As came EPS more due expenses compared to to offset from lower tax rate. adjusted than lower our benefits primarily guidance, headwind currency. These

foreign our approximately million profit during U.S. headwind our about earnings guidance adjusted about per of and strengthening million primarily $X This or or adjusted of $X.XX to to assumptions. due share dollar led expectations, X% quarter the sales, the of in headwind a guidance to to currencies. compared resulted as As $XX translation to compared to operating to

fourth GAAP quarter, free net $XXX generated flow of million the conversion we cash or XXX% In robust income. of

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

year-over-year. basis Quality volume Water $XXX total growth Our X.X% up Water quality's Divestitures headwind. year-over-year X.X% year a the basis. Pricing versus sales X.X%. sales segment core sales, Currency which prior grew Core points of XX delivered point contributed growth led by on was year-over-year. million XX a reduced by period. basis was grew X.X% sales

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

growth instruments Water mid-single million, was marking reagents a chemistries margin municipalities. analytical Adjusted grew saw year. highest and adjusted digits also was operating growth year-over-year. quarterly year-over-year and margin of to We digits performance sales this single profit X% good sales operating and up XX.X% equipment low in to profit $XXX and increased Recurring quality's volume

to next page. the Moving

equipment across sales in single in growth and low were single sequential the marking year-over-year headwind Core mid-single recurring the a PQI PQI's X.X%. grew Sales and [indiscernible] contributed million X.X% to primarily driven with contributed point PQI's year-over-year in grew largely the coding momentum by acquisitions marking digits sales. segment grew portfolio. basis, our equipment. up high by Price grew up X.X% digits, XX a systems. On driven quarter. the was equipment growth in $XXX X.X%, year-over-year Currency positive sales digits, to basis volume with revenue and core increases sales fourth quarter.

beverage in business consumables our in customer within In color subscription by grew equipment. Marking mid-single software business, year-over-year, core and and packaging grew digits, both strongest recurring growth led at and by driven applications Breaking mid-single growth growth our down was CPG coding The this sales revenue. and and by food sales core base. digits both

resulting of was up in was basis operating year represents PQI's benefit primarily repeat. over million QX adjusted the Argentine fourth XXXX margin the the adjusted due period, in prior margin in profit million peso improvement prior operating a margin to profit That operating point $XX the over favorable currency $XXX year in not The XX.X%. period. XX as adjusted expansion quarter, profit devaluation did

This R&D, offset benefit investments was increased a partially and by sales acquisition. Tracking equipment with mix along in and from of sales, higher the dilution marketing

year, For of basis the full operating adjusted core PQI growth margin points and expansion. XXX sales delivered profit X.X%

we a to our was commercial in we for and year execution good XXXX. enter and it market continue momentum Overall, positive PQI environment as very end see

million of balance sheet QX, in $XX operations. In to cash $XXX cash generated our capital now We invested Turning and flow. million we expenditures. from

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

a quarter, shared, TraceGains Jennifer price acquired $XXX early purchase we As in gross fourth million. the of at

deal funded cash with The hand. was on

increase that as To This Board grow our increase consistent deploy and how capital. invested quarter, approximately these our point, fourth dividend. is to strong dividend investments, a $XX in Water the a interest our also approach in is of our we establish in have approved our position we in We to financial flexibility XX% Directors the earnings. Technologies. to continue after Even we minority million with vaccine quarterly

M&A. long-term Over shareholder through value to the remains create our term, however, long bias

remain create and to capital PQI. as We continue opportunities We of have deploy value. approach in attractive in shareholder our we to both long-term water an disciplined quality pipeline

to our full Turning now XXXX, guidance expectations our for the year. for beginning with

the XXXX. historical low of targeting the a are in we our We our consistent basis Consistent At XXX year-over-year midpoint range growth core the with in full core to pricing sales XXX assuming with of range the on year sales mid-single-digit points. assumes growth guidance, are This to basis. range.

potential from divestitures acquisitions is by to contribution net the neutral the expect largely AVT as TraceGains We of be impact growth divestiture. sales to and offset

guidance assumes the as currency of X% December headwind the XX, that full currency for year. sales is total year-over-year Our approximately rates remainder basis. of assumption, Based on year prevail on this XXXX, to a

line our per roughly in through falls share. adjusted This an of million. in with headwind This margin, operating adjusted to headwind resulting profit profit earnings dollar approximately operating $XX represents $X.XX

run rate $XXX $XXX at Our a million to expense annual full million. guidance corporate between assumes

Looking targeting margin company around XXXX. segments XX%. in at total both incremental at points improvement basis XX assumes to profit adjusted and operating This of XX expansion margin, margins we're

Our adjusted $X.XX in the the to share for year XXXX is range share. full per per guidance EPS of $X.XX

of tax an assumes This approximately effective rate XX%.

$X.XX the Excluding headwind. share per currency

the the guidance growth are growth and net range to support flow targeting at adjusted about about capital investment represents XXX% range. assumes of Our and conversion high year-over-year working This we income. the CapEx the X% modest of at X% of our X% GAAP growth. XX% EPS between of midpoint a end X.X% in free to to cash And sales

XX.X%. now translation core range EPS per to be XXXX, range share. approximately Looking in to adjusted We at X% expected XXXX anticipate mid-single-digit QX we is guidance the both grow to adjusted year-over-year low operating $X.XX margin across profit And segments. to in sales. to our of headwind $X.XX Currency is XX% sales QX to expect for

Jennifer the prepared back this $X.XX turn concludes call over assumes a point, At This my to remarks. for remarks. currency headwind. I'll That closing

Jennifer Honeycutt

and portfolio. We strong and public we more off future markets as outlook technology commitments, in the for enter year XXXX, positive steady, our a invested a the drivers growth confident our on XXXX delivered and are throughout with durable term, our across end momentum strong our we will summary, provide a markets Longer In first Sameer. company. our solutions the we In thematic Thanks, that our essential improved growth. enterprise. need on end capped

continue to will leverage bolster agility to drive the through our we And macro environments. Enterprise dynamic the System power continuous improvement Veralto of and

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

We biggest prepared in safe concludes the customers for goods. us take our future help front water, essential we're And clean to the about and time, at of trusted ahead of bright delivering happy opportunities world's questions. and are the your solve Veralto challenges food remarks. in some to That excited this

Operator

take Instructions] first Andy from Citigroup. Kaplowitz our question from very [Operator We'll

Unknown Analyst

Nathalia is This Andy of [indiscernible] behalf Kaplowitz.

I grown you ask if give to of you question XX that you're how do a schemes First thinking margin trade down segments expansion. in is both want you in that XX bps to I range? color bit or have They've more break bps could terms down about more into your And weighing

Sameer Ralhan

Natalia, Yes, is kind very it's margin this I about think Sameer. the think similar. you as of expansion,

back company kind a single step mid-single a our segments, very are low take to the just core guide at you for segments at look digit. look of place, growth would should in and and similar the I fact, contributing digit how In the overall both

expansion pretty also similar a coming from perspective, contribution And margin the from both segments.

Unknown Analyst

whole VEF Got and balancing you DDR specific helpful. is efficiencies it do to enhance investments And just I'm increasing it. further progression for implemented has second with you And to since performance? the involved XXXX been what of and you the the improving initiatives opportunity have then the of margin in how about [indiscernible] question ask in I want expansion those see how drive margin are margins? most the cost a under where That's growth curious

Jennifer Honeycutt

the for question, Natalia. Thanks

execution, really how of had just drove amounts XXXX big have in about feel we we think tool considerable we Certainly, very good margin honed set drive discipline. VES our we in but factory a to growth expansion also commercial I in push good

bringing narrow did really tools. we that over and those post-spin, and a VES from the were Danaher application focus the in things the drive the depth tool use of So set in of competency to greater

in X sit and to those in that sitting everyone, fundamentals are tools or a fundamentals an There operating our sit you're whether you are relevant X company. function to

factory-focused there for optimization. about so our product accelerate And commercial good feel new both deployment applications, development we and

Operator

next Capital Markets. comes RBC from Our Deane Dray with question

Deane Dray

know years. You many all for covered I have Danaher

it's So about whenever year-end, sign. I Danaher that's read a hear because at of good the investments done growth playbook really out

a doing new from of getting jump a You're it the you're year. strength. to position start way There's

So that quarters couple if of the I'm bit. sequentially And look assuming past down all. to you I applies a at margin

the say it size the fair you Is to investments right the impact it growth that, about anything way? that about of am And can impact? benefits? thinking that's And I the

Jennifer Honeycutt

Thanks, Yes. Deane.

us nearly Danaher. some As here room at spent you in have a the know, lifetime of

And playbook very is the familiar. there so

opportunity to a will growth turn took it's on areas here the spot your talk up that I'll back rest in the to think of Sameer the to And We maybe of -- it continue question. think us so for the we I reinvest right. set in over strong to business about that's on. good

Sameer Ralhan

in in at quality PQI of so growth the of the is margin, well. The water Thanks, similar the right, you up it of you about Jennifer. coming higher, driving as the X back, points the kind as a really really actually well to if kind look sequential Yes, basis you're the second [indiscernible] Deane, really look dilutive little equipment think going at great to sales was mix the the to as equipment PQI? one XX margins, roughly right? is first XXXX sets But

future grows, know, Again, as the you recurring revenue installed growth. as base our

the it's in you're you So about as are R&D, very kind last to hit sure was really, to a all, actions you point that the and investments very these deliberate to going have we in great intentional, optimization, commercial think make that XXXX. ground that running as of cost maintain outlined, things

playbook as So very Jennifer similar. said, I think, also is

really in a in and the start while first investing well really to full if as marketing, XXXX, as up basis you're in while those And all while positioning a the company, year going year, full us delivered zoom you XX in creation. out investing is for XXXX. points can we year full year as public focus full sales Our R&D, things long-term value ramping

the we expansion. good feel about So margin

Deane Dray

and be actually helpful, We've question, deal. appreciate first that's specifics. vaccine second That's ask looks this to oxidation about all really might of investment those in marquee And I kind tempted interested talking electrochemical I in about TraceGains more the the because the promising. technology really But I'm

before. already technology it destruction because And other PFAS it the molecules. with they've application They're like proven spoken established. [indiscernible] and have on-site could complex looks good for

So look, it's early. that. still I get

I'm for most great interested using a can be more a pound $XX the in you strategy really M&A significant capital. here the as road. investment that's proxy because this payoff spending potentially million a R&D, for of because with down smart have way candidates, make investment like pound, for Does to your funnel your candidates

Jennifer Honeycutt

Yes. allocation, we the long-term capital value. we create different relative at all number shareholder modalities sorts to Thanks have levers Look, for pull of to look of there question, a and Dean. to

to feel in serve. that about just level way of relative we making markets investment that we the technology, good proving up to sure think relative the I our the in it matures right

opportunities engage team very technology a science capable other canvassing the or for that acquisition. minority partners, to that's a and competent be investment that outright good constantly got we've with market and And be

on table there. everything think I So is the

Operator

Baird. comes our from question And Halloran next Mike with

Michael Halloran

think you as you year, were then? has period the time? the developed this coming So Or you're pretty changed versus today trends I over the as let's time a we of earnings. kind because just this seeing end What's sounds top. constructive we new with and into sit think like of been loose here of It that last talked is there XQ start markets continuation a anything just

Jennifer Honeycutt

businesses in I on Mike. the centers, steady data power clean think back they about the continuation it's We've We're require what and Europe that in lot of continues. particularly so a water drivers the the very water analytics serve. generation well, growth strength population seen, talked that a largely of given industrial secular good, a in U.S. on. our and industries, thirsty of as seeing the we've that for number

X quarter mid-single-digit think continued side, sixth that I expected sales recurring And now the the of We year-over-year revenue. than consecutive the the on of equipment of fact, we equipment in PQI CPG to growth better strength coming here equipment see sales actually high the always markets. single-digit consecutive And revenue We know growth. in saw seen precedes in of then sort that, we've with, in recovery the in fourth recurring quarter. quarters

we So think the we and continued enter set the with given macro we're momentum. here up well year

Michael Halloran

the then of understand for foundation gave Appreciate the the lot the moving all I for guide color. that. Great. year, about think a And when pieces, you

Just sit -- cadencing trend that. assumption year as your quick be to look questions X consistent hold in just related through the [indiscernible] today? is And to of the One, that seasonality? kind of kind or is expected markets normal things Or like? assumed what improvement is here with there two, the we any end

Sameer Ralhan

kind the the of Yes, from at top consistent. Mike. as you it's the perspective, look guide pretty line, growth side, going be to

some to good enter CPG a we We water from the really about good perspective, going trends. trends are Those from continuing. right, XXXX. seeing feel markets we're said just Jennifer perspective, As as

as So overall, of we QX whole a on don't overall, in seasonality the seasonality maybe more equipment lot kind know, about from a side, good little a pull-through you of of not as have are we XXXX, seasonality we feel a perspective, instrument and the whole trends our side, in continuing into business. But the numbers. their but budgets, coming managing lot pretty people see

Operator

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

Nathan Jones

expansion the 'XX around margin of basis 'XX R&D or I in got comparing investments a margins. XX up couple points. questions ramped

is So and you're in. been 'XX points growth give some you similar start the margin So just without Maybe extra us would that, 'XX on not revenue XXX [indiscernible] there. for basis anticipating maybe where more that expansion in in color can like up I'll guidance have XXXX. got you

Sameer Ralhan

off start I'll Yes, Nathan, with that.

of make. factory operations commercial the from of to As and we of Jennifer you're the going 'XX, continue bit expansion and get to offset the the functions from 'XX said, down the load broad-based, all investments cans to margin way some at a was that course, pretty to really, did as trade a the 'XX, right, little look by

be to cost I from still we positive positive. As continue. it's price into that XXXX -- move expect differential we a expect perspective, we to mean

the will X% similar very be in Nathan, level, sales. a roughly of R&D

So commercial is the that really targeted continue the that's on expect investments -- continue side, And to drive stuff trend growth. will the to we in really we some and in as sales marketing really XXXX. the

like So the be basis out it's XX XX kind to points. that's board. of of still across broad-based panning pretty to kind going the how

Nathan Jones

change I I ask you margins. relatively at incremental incremental of then originally, XX% year, in talked about talked guys out, XX% think probably small to Each on incremental one Jennifer, to And guess a the XXXX. business margins. growth. when spun margins you But had I'll it's mid-single-digit about XX% low

you can higher? a Any What's is this comment Or year? that is it if wondering that? structurally driven one-off structurally on, higher Just now? video

Sameer Ralhan

to you're if view. XX Nathan, long-term look at XX, a that's to Yes, right, going

make to what expect growth continue in as investments to We In the have the XXXX, to marketing, the R&D we teams our position sales, feel about well, business future really able right? right to good for deliver. been

delivering XX% have we're feel and fall-through are that XX%, about of close We to be of laid what all we given in north XXXX, XXXX, have investments we on going visibility for the kind the out XX%, right? pretty to good into doing

to investments, year-over-year, if to things XX depending keep. the some you a long-term value creation So I think But on frame, is X about will think the of the change. XX good

Operator

And with Jefferies. next, Boroditsk to we'll Saree go

Unknown Analyst

talked touch I path about several little last bit CPG James the like continue is the a you on on here like mean, wanted I recovery for quarters. over gradual market Saree. to more. This

of [indiscernible] what Like in still more provide market? a normal like color like So missing is how the the percentage the from little normalization state last far can on you are And path? recovery industry? the like from like we revenue bit

Jennifer Honeycutt

Yes. will be is the I spare parts, way the lines market then at those CPG back that the look I is and upgrades. mothball mean we recovery think equipment manufacturing of will turned by on, consumables followed require

are at build. seeing we're yet point per se expansions not where We new the and line

So extension would sort be another recovery. of that the of

and to on of seen back equipment happen. that high new But in so growth given prospect consecutive which quarters X seen we've are those means parts, builds well lines sales. us mid- year-over-year of recovery filters the that revenue coming with using should It single-digit we've consecutive X the ahead and still consultant, And in we're into suggests on. of growth, recurring fact that quarters spare of the

Unknown Analyst

Got little better Great. a I portfolio here. to like optimization initiated understand I And guess bit it. wanted

are much margin are what will in do you like like spaces So top Like here? affect initiative do? that potentially can like some line left the still how to And XXXX? how this

Jennifer Honeycutt

are tasked Yes. to earn being every its stewards the think making think to portfolio way sure that in has of good of is independent the I this enterprise right in got below we'll terms are product lines And and with products and that that The portfolio. an operating part as of about we the be of line that product we've where look changes profit, And portfolio are fleet better make terms in than are or core growth services there. average. the fleet at we average to the

them may portfolio over assume that be changes those may that right looking higher we our margins. them to But track. it outright. attenuate improve be the to may I always and It rates divest Now increasing safe towards be portfolio we and and moving them time, nominally think we're that investment growth it's to on the additional get

Operator

BNP. Andrew Buscaglia with next to We'll go

I So high-level ask a to want question. you

stock but that the of down Trump got good the couple You the a stock on great for had year months of administration means a had the end of you've your towards is it a stock, sort about think concerns that guys the year I and also in pretty it around and broke to what think, now. year,

concerns quality, kind but can for PQI bad I'm hear arguments of and different around wondering, just both morphed wondering, thoughts or then this your what this water was it segments So it into sides. on first, under administration? both for means you is what I'm are good latest it for

Jennifer Honeycutt

and fairly safety regulations operating are of are the from to to a and We're of in never affiliation. style regardless water, environment, our and these health Yes. It's portfolio XX% important to of tied us protect that issues that. help standpoint, to a are food out goods. sales public do essential certainly But but everyone political dynamic been

still so is on water a So up water, are of and because environment operation feel say cleaning that wastewater I industrial we I would clean and on, be the the endemic water discharging to going side, like think of sort we to of need.

the need clean As going as we've got water. to on planet, they're long people

PQI And focused the can to lot and the the some distributing the what they there food formularies safe, sort what side, right? to are a of supply safety consumers to safety on is On of inherent so health chain, recalled we on securing that are -- traceable their a the have brands in or need is and event are issue. that the a of there we be ingredients have that consumer need or public product ensure

provide think both provide So These to public information. and strength services we've many as the cases, in and not in services of we businesses. current economic products essential safety got these provide, health only the we in and products But well. even customers benefits environment,

is set not CapEx-intensive businesses. of this Again, So a

products need on services are daily and of focused going the and to we We believe, essential operations our are, the remain. there

Andrew Buscaglia

is along around tariffs, might maybe how your thoughts part tariffs? of -- tariffs, around Canadian guidance you And those lines, And around your that comment latest and disruption implies can the you? China, impact Mexico with Okay. latest some

Sameer Ralhan

sustained the from impact guidance, the dynamic sort you materials of have But very from a step globally. any Look, we kind And back, situation. not Yes. it's reflected our and tariffs. we of fluid if a procure

supply restrictions the and the and fortify supply made the our about to that chain manufacturing that over pretty We over through good years operations have things happened, chain. years global really a feel changes the have we have position X, last footprint. X And the

overall, good. eye but like things changes, pretty feel we be guide. an you I feel coming of there's pretty the keeping into say, baked sustained are we on a tariff you level will just good. if But hey, that the out, So not guys that's

Operator

from We'll McNulty Markets. next take Capital with BMO John our question

John McNulty

just water a the couple side. on Maybe

were relatively of power you on the and Those striking side. the growth you beverage some is in was really So it highlighted seeing food and where the that stable market.

Or So about? kind drove making if be I so, that the things Was understand is us the it investments should the you of we of help bulk America? there of that thinking to what North that? you've can share are some And guess, in been gain?

Jennifer Honeycutt

are I to the there experienced in respect our we reality is markets X a participate and we that in agility coming markets have But pivoting to a the we with from. good over think sales XXXX. that And mean the well-diversified force is, is certainly of you shift I the growth where in time, business. industrial cite Yes. growing strong our set water

most we've products to industrial of continue U.S. about to the Generally, in we year-over-year comes markets, up need so the particularly our and been feel and production on. and our services, and good for as back reshoring

John McNulty

data to can that data cool the of whether agnostic Got growing use. enough. also you're cooling terms maybe question some it. side. one And speak as there's -- increase to then direct center of just around growth opportunities the center you guess, data how centers of in you're Fair forward on excitement and There's I from chip going in some seeing an just to general the side. the

Jennifer Honeycutt

regularly that team tied broad-based, and a applications, say predominant sort potential points a the be focus think would -- that growth business. in believe I ground mid-single-digit needed really here the technology centers to growth Yes. have we and customer I be would driver, here. meaningful centers the of to to our sort But single to the It's mean base power technology run and to have right? is pain say on those certainly is algorithm understand of we strong our not and potential I very actually throughout industry science will that's be our generation growth a treatment going to continue canvasing data I water-cooled us for changes.

Operator

Krill Andrew Bank. next, Deutsche And with we're going to go to

Andrew Krill

flow, know XXX and medium-term XXX% your below was little target a XX% cited. is the guidance, free of at capital cash Looking working to extra I

So we that's year onetime you that factors or call for any on in XXXX, kind below are there be a keeping thinking just we XXXX XXX% and to so. of back what's out event XXX% you'd other that should this get And

Sameer Ralhan

yes, GAAP income. net you're in Yes. pretty XXXX to if Andrew, a free look at had this, flow cash year a we with conversion, of the conversion going XX% solid

little kind move years, really CapEx to going are X we've is because CapEx of guided to know, below. X, the as which there you like reasons bit close X And XXXX, the on been, the last As been of historically of least -- you're at is things of we side, into for one X% a revenue. our

are of to again X.X%. to physical mostly we X% We've making base XXXX. our growth tied guided asset that towards sort in of That's some in the investments

stewardship good Some of a asset is base. the just

the you flow the only on kind CapEx at going looking conversion. that's free of to So impacted X% X.X% if just X% cash to of revenue,

in bit modeled pretty And from we've in, tariffs working the all other seeing. working from that you're one support higher are dynamic the living given world we chain the a we built to supply the things manage just little and capital macro is that the business just in that a perspective, capital

Those the things. really are X

to it normalize XXXX, we things up. of be course, As expect post back

Andrew Krill

Okay. Makes perfect it's a good segue.

and would Trojan has -- great. pain your Just region on you're so be not region sales? would a China, in what of point case those Mexico believe following is like like up exposure And sourcing for business be do can Canada? maybe some I or quantification meaningful just size you any How tariffs. from particular any for pretty help there where

Jennifer Honeycutt

Yes. Andrew. tools several countermeasures scenarios. for Thanks with supply VES materials the certainly diversified semi-finished started proactively ago, to and a goods chain to diversified accordingly. us different Certainly, number We the question, deal of raw manufacturing source full years got decade globally. we've for and We locations, a the provides

in our Relative Ontario. exposure headquartered Canada you to what appropriately And obviously, on as we're is is exposure, focused which cited, primary control. in Trojan controlling we

also disruption opportunity We gain any provide to localize there for an have in us in actions It would the gives consumables that customers. U.S. serving supply agility to and taken derisk spare see. parts to Trojan we more

X% told, to are the way sales sales total I of less U.S. annually. about the think all is this Trojan's think to our than those for all annual

we to So and ES rigor. we've sort weather the of our we're side with respond well agility and think to positioned storm on the got here

Andrew Krill

without it is of is bit big Is a think I peers. because China some that's XX% bigger on mostly region for imbalance? quick real sales in fair a than that export just like And region Great.

Jennifer Honeycutt

China. actually spent diversifying longer around chain of what in our have a period we We've supply Yes. time

good that we spent China well last deal wouldn't But have positioned see might of there. again, China able as the well to be several any chain for and which any a we to diversifying by certainly headwinds that in disrupted tariff have supply changes. address we're years think We be

Operator

And we'll from take Sachs Brian our last Lee with Goldman question

Brian Lee

couple it higher side, to moving part be the kind the the of off, contraction that back seem go equipment Can point to questions. back I of bridge. on first explain you wanted deconstruct seems it, for doesn't entire mix margin of margin to When factors. basis know PQI Just across to sales. a XXX us sequentially, different the basis I of into the we of XXX kind points guess,

Sameer Ralhan

on PQI almost this million as a making remarks, as about $X of well would little The of we investments is I that's basis basis took Sameer. as course, that Brian, growth earlier, business. future the X the Majority the basis. first cost Yes, than that's of we a we my one, about are kind prepared next to third I and sequentially one drive in XX as kind the sequential is higher highlighted optimization is of tied the in the PQI, is actions you're points of think up outlined to a more going R&D XXX-ish point, some trace gain, kind dilutive right, is to on talked say that of for basis. the -- to sequential I in the a

base really installed the as sequential the equipment which us PQI you a added help And future to recurring tied actually of higher again of On last the expand then revenue. sales, majority mix one, for is jump basis, well.

basis are So laid things of out. you you the them that gap we the points up, X kind balance XXX those add out

Brian Lee

great. year spill to same I helpful. if of those Okay. margins assumptions. to bps at know with your guide, look of it some guess year a some low guess, of that guide off to part growth. through I down Super FX few QX of do then are year-on-year going the the factors I That's I full of early but margin fair over And single-digit be year. the tens QX growth implies implies FX, assume the the despite the is

play happening of walk what's margin the through the seeing QX margin to the just So of cadence, the kind does of that either in through out year? What gains back QX? rest start repeat off maybe you are of

Sameer Ralhan

kind of Yes. Really, No, is these it at to the is QX, of be stuff we say should going to little on R&D, growth you over upfront a Brian. drive continue we're sequential optimization of sure make as would I things think that. we capitalizing lot Not right? move a to right from basis, it's going spilling have whole investments make anything cost consistent to be, next nothing to is look to to a at from higher so a on highlighted, QX spilling are as is as Look, going business, be level. a from there's over, QX. traces I dilutive into bit we And that's to moving this year

and are QX we nothing maybe from from that, of will a investments kind that trends PQI seeing that's mix higher be. equipment continues, sales Those over the bit than QX. moving of then more on And little impact in spilling but the that, of to or

Operator

to for Mr. call the turn I'll remarks. time, final Taylor this at And you. Thank back over

Ryan Taylor

as if the like reach appreciate concludes engagement our call. so Thank quarter for on follow-up around Thanks, be follow-up We'll to talk out anything us to XXXX. or guide Margo, will everyone, for you next the you'd and on interest for the me and the much, to call. ask usual, questions, to time. joining We that thanks, and you just

Operator

And Thank program. conclude does Thank this participation. for you. your you today's

disconnect at You may any time.

Veralto (VLTO) 5 Feb 252024 Q4 Earnings call transcript