• Total Sales: Grew 3.4% year-over-year to just under $5.2 billion for 2024.
• Core Sales Growth: 3.7% for the full year 2024.
• Adjusted Operating Profit Margin Expansion: 80 basis points for 2024.
• Adjusted Earnings Per Share: Increased 11% to $3.54 per share for 2024.
• Free Cash Flow: $820 million generated in 2024.
• Cash on Hand: $1.1 billion at the end of 2024.
• Net Leverage: 1.2 times at the end of 2024.
• Water Quality Core Sales Growth: 3.9% for 2024.
• Water Quality Adjusted Operating Profit Margin: 25% for 2024.
• PQI Core Sales Growth: 3.3% for 2024.
• PQI Adjusted Operating Profit Margin: 27% for 2024.
• Fourth Quarter Core Sales Growth: 4.6% year-over-year.
• Fourth Quarter Adjusted Earnings Per Share: Grew 9% to $0.95.
• Fourth Quarter Free Cash Flow: $263 million.
• Fourth Quarter Total Sales: Grew 4.4% to over $1.3 billion.
• Fourth Quarter Gross Profit Margin: Improved 170 basis points to 59.6%.
• Fourth Quarter Adjusted Operating Profit Margin: 23.8%.
• Water Quality Fourth Quarter Core Sales Growth: 4.9%.
• Water Quality Fourth Quarter Adjusted Operating Profit Margin: 25.5%.
• PQI Fourth Quarter Core Sales Growth: 4.1%.
• PQI Fourth Quarter Adjusted Operating Profit Margin: 24.9%.
• 2025 Full-Year Core Sales Growth Target: Low- to mid-single-digit range.
• 2025 Full-Year Adjusted EPS Guidance: $3.60 to $3.70 per share.
• 2025 Q1 Adjusted EPS Guidance: $0.84 to $0.88 per share.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Veralto Corp (VLTO, Financial) delivered core sales growth, adjusted operating profit margin expansion, and adjusted earnings per share growth above initial guidance for 2024.
• The company increased its growth investments, particularly in sales, marketing, and R&D, with R&D expenses up 40 basis points year over year.
• Veralto Corp (VLTO) executed disciplined capital allocation, including the acquisition of TraceGains and a minority stake in Axine Water Technologies.
• The company reported strong demand for its new products, such as the 7920 UV laser marketing system, which supports sustainability goals.
• Veralto Corp (VLTO) ended 2024 with a strong financial position, including $1.1 billion in cash and a net leverage of 1.2 times.

Negative Points

• Currency fluctuations posed a 2% headwind to total sales, impacting adjusted operating profit and earnings per share.
• The company faced ongoing soft demand for water analytics in China, affecting sales growth in the region.
• Sequential margin contraction was noted in the PQI segment, partly due to higher equipment sales and investments in R&D.
• Veralto Corp (VLTO) anticipates a 2% currency headwind to sales in 2025, affecting operating profit and earnings per share.
• The company expects free cash flow conversion to be below its medium-term target in 2025 due to increased CapEx and working capital investments.

Q & A Highlights

Q: Can you provide more color on how you're thinking about margin expansion in your segments, particularly with the impact of TraceGains on PQI? A: (Sameer Ralhan, CFO) Both segments are expected to contribute similarly to margin expansion, with core growth in the low- to mid-single-digit range. TraceGains does weigh on PQI margins, but overall, we anticipate similar contributions from both segments.

Q: What specific initiatives have you implemented under the Veralto Enterprise System (VES) to drive cost efficiencies and enhance margins? A: (Jennifer Honeycutt, CEO) We've honed our VES toolset to drive growth and margin expansion, focusing on commercial execution and factory discipline. We've narrowed the focus of VES tools to drive greater depth of application and competency, which has been effective in both commercial and factory optimization.

Q: How are you using M&A as a strategy for R&D, particularly with your investment in Axine? A: (Jennifer Honeycutt, CEO) We use M&A as a proxy for R&D to create long-term shareholder value. Our investment in Axine is to prove up the technology and ensure it matures appropriately. We have a capable team constantly looking for opportunities, whether through minority investments or acquisitions.

Q: Can you discuss the recovery path in the CPG market and how far it is from normalization? A: (Jennifer Honeycutt, CEO) The recovery is progressing, with mothballed manufacturing lines being reactivated, requiring spare parts and consumables. We've seen six consecutive quarters of recurring revenue growth and three quarters of equipment sales growth, indicating we're well into the recovery, with potential for new builds ahead.

Q: How do you view the impact of tariffs on your business, particularly with sourcing from China, Mexico, and Canada? A: (Sameer Ralhan, CFO) We haven't factored sustained tariff impacts into our guidance. We've diversified our supply chain globally and feel well-positioned to manage any disruptions. Our exposure in Canada is primarily through Trojan, and we've localized consumables to mitigate risks.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.