Veralto Corporation

Good morning, everyone. My name is Beau, and I will be your conference operator this morning. At this time, I would like to welcome everyone to Viralto Corporation's third quarter 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone. If you would like to withdraw your question, press star, and then the number two. I will now turn the call over to Mr. Ryan Taylor, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone, and thanks for joining us on the call. With me today are Jennifer Honeycutt, our President and Chief Executive Officer, and Sameer Rohan, our Senior Vice President and Chief Financial Officer. Today's call is simultaneously being webcast. A replay of the webcast will be available on the investor section of our website later today. under the heading Events and Presentations. A replay of this call will also be available until November 7th. Yesterday, we issued our third quarter 2025 news release, earnings presentation, and supplemental materials, including information required by the SEC relating to adjusted or non-GAAP financial measures. These materials are available in the investor section of our website under the heading quarterly earnings. Reconciliations of all non-GAAP measures are also provided in the appendix of the webcast slides. And as otherwise noted, all references to variances are on a year-over-year basis. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments, that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. Actual results may differ materially from our forward-looking statements. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements except as required by law. With that, I'll turn the call over to Jennifer.

Thank you, Ryan, and thank you all for joining our third quarter earnings call today. During the third quarter, we continued to drive consistent growth through strong top-line performance, disciplined operational execution, and rigorous deployment of the Veralto Enterprise System. For both the third quarter and year to date, our team delivered mid-single-digit core sales growth double digit adjusted earnings per share growth and over 100% free cash flow conversion. These results underscore our ability to successfully navigate a dynamic macro environment, particularly with respect to changes in global trade policies. Our steady growth and improvement this year is a testament to our durable business model and the critical role our technologies and services play in supporting the daily operations of our customers. Given the strength of our third quarter results, we raised our full year adjusted earnings per share guidance to a range of $3.82 to $3.85 per share. And we raised our full year free cash flow conversion guidance to approximately 100%. Our financial position continues to strengthen, giving us ample flexibility to evaluate opportunities to deploy capital within our proven framework. Our capital allocation bias is towards acquisitions and our pipeline of opportunities is comprised of a mosaic of attractive targets across both water quality and PQI. We continue to take a prudent approach to evaluating opportunities consistent with our disciplined market company valuation framework. I also want to highlight that during the quarter, we published our annual sustainability report. We have approached our commitment to sustainability with the same rigor and discipline that we apply to operating our businesses by leveraging our VES tools for continuous improvement to drive results. We have achieved significant milestones in developing innovative and sustainable products that not only meet the needs of our customers, but also support the health of our environment. Our commitment to excellence in product design and functionality ensures that we contribute positively to the world we share. In 2024, our products and services helped provide daily access to clean water for 3.4 billion people, treat and recycle 14 trillion gallons of water, save 85 billion gallons of water, and ensure product authenticity and safety by helping customers mark and code over 10 billion products each and every day. Additionally, we are making progress on reducing our own carbon footprint, an important commitment for many of our stakeholders. We are proud of the steps we are taking to support our environment and help our customers progress their sustainable journeys. The work we do helps customers deliver higher quality products, accelerate time to market, minimize resource consumption, and ensure compliance with relevant standards to improve overall operating efficiency. The essential need for our technology solutions, our durable business model, and the secular growth drivers across our end markets fortified by the Veralto Enterprise System enable us to deliver long-term sustainable growth. The third quarter 2025 marked our fifth consecutive quarter of mid-single-digit core sales growth and value creation algorithm. I am proud of our global team for the steady growth and improvement we have achieved while embracing our purpose, a reflection of our high performance culture. Looking at our third quarter results in detail, we delivered 5.1 percent core sales growth and 11 adjusted eps growth our commercial teams continue to drive outstanding execution leveraging their applications expertise to deliver growth through new customer wins and increase market penetration while also capitalizing on steady demand across our key markets Our core sales growth came in at the high end of our expectations and was broad-based across geographies in both segments. Water quality delivered 5.3% core sales growth and PQI, 4.6% core sales growth. In PQI, our marketing and coding business continued to see strong year-over-year core sales growth in both consumables and equipment. And in packaging and color, our ESCO team continued to drive core sales growth by expanding software solutions in the mid-market CPG segment. In water quality, we delivered mid-single digit growth across both water treatment and water analytics, with particularly strong growth in North America. Moving on to margin performance, adjusted operating profit margin came in at 23.9% in line with our underlying guidance assumption. Adjusted earnings per share grew 11% year-over-year to $0.994 above the high end of our guidance range. Looking at sales by geography and end market, growth was broad-based across key verticals and regions. In North America, which counts for 50% of our business, core sales grew 6.9%, led by high single-digit growth in PQI and strong mid-single-digit growth in water quality. Core sales in high-growth markets were at 4.3%, and core sales into Western Europe grew 2.5%. Taking a closer look at North America, core sales in PQI grew 9.2% over the prior year period. This growth reflects strategic pricing adjustments related to tariffs that were implemented in the second quarter, along with higher volumes of marking and coding equipment, related consumables, and ESCO software solutions. From an end market perspective, demand trends in PQI were in line with our expectations during the third quarter. PQI's volume growth through the first nine months this year has been strong relative to the market. This reflects the disciplined cross-functional execution and rigorous application of VES tools to deliver on our strategic initiatives. And overall, CPG demand was also in line with our expectations. At water quality, core sales in North America grew 6% year-over-year, with broad-based growth across water treatment and water analytics. In our water treatment business, we continued to capitalize on strong demand for our chemical treatment solutions, where core sales grew mid-single digits year-over-year. This growth was broad-based across most of the industrial markets we serve and was most pronounced in chemical processing and technology-related industries supporting artificial intelligence, including data centers. We are well positioned to capitalize on the rapid growth of infrastructure required to support AI growth. Our application expertise in water treatment is essential to helping deliver efficient water utilization and reduced energy consumption for hyperscalers and data center operators. We are also well positioned to capitalize on adjacent industries supporting AI growth, such as semiconductors and power generation. In our water analytics business, core sales into North America grew mid-single digits with growth across both municipal and industrial verticals. Our water analytics growth was primarily driven by demand for our laboratory instrumentation and related chemistries. In Western Europe, core sales grew 2.5% with both segments up year over year. PQI grew 3.7%, driven by marking and coding, and water quality grew 1.3%, driven by water analytics. In high-growth markets, core sales grew 4.3%, highlighted by strong growth in the Middle East, Latin America, and India. Core sales into China grew low single digits in both segments. Overall, we continue to deliver consistent top and bottom line growth in the third quarter. At this time, I'll turn the call over to Sameer for a detailed review of our financial results and an update on our guidance.