Veralto Corporation

Hello, my name is Nikki and I will be your conference operator this morning. At this time, I would like to welcome everyone to Rialto Corporation's second quarter 2026 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 Send the number 1 on your telephone keypad. If you would like to withdraw your question, please press star, then the number 2 on your telephone keypad. I will now turn the call over to Ryan Taylor, Vice President of Investor Relations. Mr. Taylor, you may begin your conference.

Good morning, everyone. Thanks for joining us on the call. With me today are Jennifer Honeycutt, our President and Chief Executive Officer, and Sameer Ralhan, our Senior Vice President and Chief Financial Officer. Today's call is simultaneously being webcast. A replay of the webcast will be available in the investor section of our website later today under the heading Events and Presentations. A replay of this call will be available until August 7th. Yesterday we issued our second quarter 2026 earnings news release, earnings presentation, Prepared remarks and supplemental materials, including information required by the SEC relating to adjusted or non-GAAP financial measures. These materials are also available in the investor section of our website, www.ferralto.com, under the heading quarterly earnings. Reconciliations of all non-GAAP measures are also provided in the appendix of the webcast slides. unless 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. And with that, I'll turn the call over to Jennifer.

Thanks, Ryan. I want to start by thanking our 17,000 associates for their efforts in delivering an excellent second quarter. In Q2, total sales grew 7.6% year-over-year, adjusted EPS increased 19.4%, and we generated robust free cash flow of $328 million. We delivered 4.2% core sales growth led by water quality at 5.7% and PQI at 2%. As expected, core sales growth in both segments accelerated sequentially from Q1 to Q2. We expect year-over-year core sales growth to continue accelerating in the second half to approximately 5% to 6%. Based on our Q2 performance and momentum across the portfolio, we raised our full-year adjusted EPS guidance to $4.35 to $4.43 per share, representing 12% to 14% growth year over year. We continue to advance long-term value creation through strategic full-time acquisitions, including last week's acquisition of Alpha UV, an India-based leader in UV water treatment solutions. I'm excited to welcome our new associates from Alpha UV to Veralto. and we also continue to opportunistically repurchase our shares. So far this year, we have repurchased over 5 million shares for approximately $480 million or just over 2% of the company. Overall, I'm proud of our team for their outstanding execution through the first half of the year and focus on our critical few, accelerating growth, optimizing costs and executing disciplined capital allocation. Looking ahead, with a strong balance sheet and robust cash generation, we remain focused on compounding long-term shareholder value through high-quality growth, VES-driven execution, and disciplined capital allocation. That concludes my prepared remarks, and at this time, we're happy to take your questions.

Thank you. And at this time, if you wish to ask a question, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2. In the interest of time, please limit to one question and one follow-up question. We will take our first question from Dean Joy with RBC Capital Markets. Please go ahead. Your line is open.

Thank you. Good morning, everyone.

Good morning, Dean.

Hey, we continue to really like this highly efficient release of your prepared remarks. and, you know, a really crazy busy earnings season. It's just such a great innovation. So thank you for doing that again and hopefully it's a best practice as far as we're concerned. So my first question, can we start with the core revenue guidance that's implied? And you referenced it here this morning, the impressive 5% to 6% for the second half. Maybe unpack the drivers and your degree of confidence in this acceleration. Thanks.

Yeah, thanks for the question, Dean. And it's great to have you leading off today. But before answering your question, I just want to say that we are grateful for your decades of thoughtful analysis within both water and industrial markets. I think all the way back to when Danaher acquired Hawk and VideoJet, where I was working at Hawk at the time when we had our investor conference out there. I think you were one of the first analysts that I met. So we wish you all the best in your next chapter.

Thank you, Jennifer. It's been a great run, and I appreciate all the support and insight you and the team have provided me over the years. So thank you for those comments. I still have my questions. Thank you.

Yes, yes. We're getting to your question right now. So, you know, obviously we saw some sequential acceleration between Q1 and Q2. We feel really good about the momentum coming out of the first half of the year and the durability of the growth drivers here in the second half. I'll just cite two key drivers in each segment. I think in water, our industrial market demand continues to be strong, and this is really on the back of the data center demand and the associated ecosystem there, including power, mining, and semiconductor. Secondly, for water, we've got ongoing scarcity clearly exacerbated by climate change, which is propelling water recycling and reuse, giving us good opportunity to sell solutions into that space. For PQI, we continue to see strong demand for digital workflow solutions as CPG brands look to improve product compliance, traceability, and time to market. And we see ongoing steady demand for our marketing and coding solutions, clearly supported as well by easier comps in the fourth quarter. So based on where the funnels were at the end of Q2, we feel really good about the momentum and confident in the second half guide for core sales growth.

and maybe Dean I'll just add one more point as you look at the second half growth of five to six percent we expect it to be led by volume with pricing moderating slightly but still be at or slightly above the high end of the range so this will be a volume story in the second half of the year

Great to hear all of that. And then just a second question on capital allocation. It's been really nice to see the balanced approach here. You've been opportunistic on some bolt-on acquisitions and the buybacks coming through. Sameer, can you just give us a sense of how you're looking at these opportunities? What does the funnel look like? You've made some pretty obvious creative deals here. What's that pipeline look like? And in the meanwhile, can you do more buybacks? Thank you.

Thanks, Dean, for the question. Yeah, if you kind of look at the capital allocation from a framework, Dean, there's really no change. Our first bias is, of course, towards M&A to create long-term value. And we will be opportunistic on the buyback side. And if the valuation state, there's a disconnect between the free cash flow generation of the company and the public market value, we will be out in the market. from a share buyback perspective. But otherwise, from M&A's side, the funnels are pretty good being on both sides of the house. So we're in active cultivations and pretty actively looking at things. But as you know, M&A is episodic, so we'll stay patient and disciplined.

Great. And again, thank you for your kind words, and I wish you all continued success.

Thank you, Dean.

Thank you. Our next question comes from Scott Davis with Milius Research. Please go ahead.

Hey, good morning, everybody. Good morning, Scott. I guess with Dean leaving, I'm going to have to actually learn what the water business is finally. I need to just call him if I need help. So maybe he'll be kind enough to give me his home number and I'll just call him in future quarters. Anyways, he will be missed by us as well. He was a great colleague and friend. But anyways, guys, getting back to business, you talked a little bit about the opportunity around data center, PowerGen, Summit Labs, and I think it's reminding in there too. Is there any way you can kind of size that if you combine those or even help us understand anything about really how we can think about the TAM and those business opportunities or how – How big of a potential tailwind that may be to your top line in industrial water treatment?

Scott, as you're going to look at overall, it's demand and the revenue that you're getting from the data centers and the associated ecosystem. It's still a small number on the high-tech side, but overall, from a country perspective, it's becoming pretty interesting as you're going to move forward. But at the Boralto level, it's still a little small number at this point, so we've been not public on that number yet.

I mean, you can think of, you know, Chemtree Solutions in there to be, you know, strong double-digit growth, right? That team has been firing on all cylinders. It is still a smaller part of our overall business, but continues to be a really, really good grower, along with some other sort of industrial reshoring and nearshoring activities. So we're seeing lifts kind of across the board.

Okay, fair enough. And then you guys in the past quarter kind of talked about this cost out plan. Given kind of the recovery you're seeing in some of your markets, is there maybe you can update us on what you're planning on doing there and the timing and such?

Yeah, the program is on track, Scott. So we are well on our way. We started executing some things. Impact as far as the savings are concerned in this year, we're going to see a very small lift, maybe 2.4. That's baked into the guide. It's a very small number. We're talking 2 million at this point. The biggest benefit we'll see is in 27. But overall, there's no change as far as if you're referring to any lift in the business. And is that impacting the cost optimization program? Absolutely not. We're fully committed and progressing well. Okay.

Best of luck. I appreciate it. Thanks. Thanks, Scott.

Thank you. We will move next with Jeff Sprate with Vertical Research. Please go ahead.

Hey, thanks. Good morning, everyone. Maybe just two quick ones from me. First on the on the volume pickup that you expect in the back half. Do you see that being led by equipment or consumables? Can you maybe unpack that a little bit?

It's a combination of both. Jeff, on the water side, it's going to be pretty balanced across both sides, but PQI side is pretty interesting. If you look at the PQI side, really the key building blocks The first one is going to be driven by the Digital Workflow Solutions. Over there, as you know, we book and, you know, based on the ACVs of the contracts that we've been booking, we have pretty good solid visibility into the second half recovery in the Digital Workflow Solutions. Marketing and coding continues to be very strong. So the year-over-year confidence will look very good as you're going to look at what, you know, the Q4 impact last year. and then on the color validation and certification instrumentation side we started seeing the funnels improving in the velocity improving over there as well so we should start seeing an uplift in the second half of the year so when you look at both on the PQI side and the water quality side it's pretty broad based it's not tied to any product line and then when you look at your price capture you know it actually is very solid in my opinion for a

Business that's not metals intensive and I don't think had a lot of sort of tariff related pressure. Is that primarily reflective of price capture in consumables or how are you doing on the equipment side in terms of getting some incremental price?

Yeah, I mean, our philosophy is every product has to earn the right to be in the portfolio. So we take a balanced approach and we've been surgical about where and how. and how much we increase price. Obviously, we look to cover inflationary impact, impact of tariffs, etc. But you see balanced price redrew on both consumables and equipment. It's a little bit higher on consumables given the captive nature of those products.

Right. Great. Thank you.

Thanks, Seth.

Thank you. Our next question comes from Mike Halloran with Perth. Please go ahead, still any filter.

Hi, morning everyone. Good morning Mike. So, a couple here. So, can we talk a little bit about back half margin progression, what the assumptions are, and any help you can give by segment and how that tracks the quarters?

Yeah, Mike, as you're going to look at the margin side, we will see a sequential improvement on the margin, right? In the guidance, we kind of laid that out. But we should expect roughly 25 bits of margin expansion in Q3. And for the whole year, it's going to be 25 to 50. So Q4, we're going to see a nice margin uplift. especially in the PQI side because that's where we saw some of the impact from the fixed cost adoption side and then the line moves and duplicate product production lines that we had on the marketing coding side. So think about margin expansions to roughly 25 bps in Q3 and for the full year 25 to 50 basis points of Q4 will be, you know, not for 50 as you can think.

Any nuance by segment here?

Q4 will be largely led by PQI but on the water side it's going to be steady on what we've seen so far.

Thank you. And then just on the PQI side of things, you know, talk about what you're seeing on the equipment side and how we're debating on the packaging and color side in the back half of the year. and maybe touch on what you're seeing on the workflow solutions that gives you the confidence and acceleration and the frankly secular opportunity you're seeing on that side.

Yeah, so we've got a decent ramp in NPQI here in the second half. It's really driven by three things. The first is we're seeing strong demand and bookings of our digital workflow solutions with the integration of ESCO, TraceGains, and now Global Vision. We also see steady demand in marketing and coding. It's bolstered by an easier comp in Q4. And we do see recovery in our packaging and color equipment. We've exited Q2 with better funnels and stronger service growth, and so we've got good confidence in kind of the second half acceleration of core growth there. We also have a number of new product launches that have come to market here for PQI as a function of our increased investment at the time of spin. So flywheel of innovation is accelerating. We've got a number of good innovations coming to market. Thank you. Appreciate it. Thanks Mike.

Thank you. Our next question comes from John McNulty with BMO Capital Markets. Please go ahead.

Yeah, good morning. Thanks for taking my question. Maybe just a quick one on the pricing side. I think Sameer, you've said back half, you're not assuming much in terms of further price acceleration. Is that a function of the comps are a bit tougher or is that a function of you just don't see the need for it at this point, just given the cost may have stabilized? I guess, how should we be thinking about pricing as we kind of progress through the rest of the year?

Yeah, thanks for the question. First of all, I think on the pricing, we expected it pretty strong, right? You know, even in the second half, we should expect the pricing to be slightly above the high end of the range. So overall, from an absolute basis, you know, we still expect to be pretty good. As far as the moderation point that I said earlier from a Q2 to Q3 and Q4, Billy John, that is a comp. It's a lapping up. As you know, we introduced price increases last year. When the tariffs started happening and then we had our regular annual price increases in as well. So in the first half of the year, we've seen impact of both. And as we get into Q3, we'll get back to our normal price increases.

Got it. Okay, fair enough. And then maybe just to dig a little bit deeper into the data center opportunities and how you're targeting that. I know we saw earlier, I guess, in the second quarter, there was a new partnership with Dow and some of their chemical solutions for the data center opportunities. I guess Should we be expecting further types of partnerships and how are you looking to grow out that business? What are the avenues that you can take? And also, I guess, can you speak to potential M&A opportunities that you might see that help further target that market for you? Thanks.

Yeah, great question, John. Yeah, we continue to engage in partnerships across the enterprise. We're excited about our partnership with Dow to help serve liquid cooling applications and data centers. But this is normal course of business for us as we look to extend our value into these high growth areas. you know relative to other applications and so on you know look we can't talk about anything specifically that's in the funnel but we like how we're positioned here and as far as you know M&A and partnerships are concerned you know we're gonna we're gonna look to our power alley of serving the operating environment of the customers workflow where you know there's a good sticky razor razor blade kind of relationship. And, you know, we are the right custodian to deliver the kind of value that those customers want. So I think we're well positioned here. We're looking at lots of things. And, you know, you'll know when we know as far as any assets that come into the portfolio as a function of that.

Thanks very much for the call, Eric. Thanks, Sam. Good night.

Thank you. We're going to move next with Nathan Jones with Stifel. Please go ahead.

Morning, everyone.

Good morning, Nathan.

I guess I'll start in the packaging and color side of the business. You talked about ESCO, trade savings, and global and the impact that they're having together. Can you maybe talk a little bit about how you're leveraging H1 in order to generate better sales and how that factors into the outlook in the second half and then you mentioned in your scripts environmental monitoring workflows which I think plays into in-situ and OTT and maybe how they fit together to drive additional sales as well. So maybe just sales synergies around the acquisition basis, the short way after.

Yeah, so, you know, obviously we continue to stitch together assets here that deliver more value to the consumer product goods digital workflow. And, you know, everything from sort of Package design integrity through compliance, regulatory compliance, ingredient traceability, checking for accuracy of the print that's actually rendered on the package. All of those things are critical workflows. for brand owners. And to the extent that they can be seamlessly integrated is where the real value is derived. In fact, at our most recent trade show, Esco World was able to demonstrate packaging design changes that normally span months. and some cases down to a few days. So there's real value in that workflow just in terms of stitching those things together. Bear in mind that Global Vision has been a long-standing partner of ESCO, and so the integration of those solutions is pretty straightforward. But TraceGains is also providing real value to this workflow in terms of ingredient traceability, regulatory changes, and making sure that products are fit for purpose and meet all the regulatory affairs and compliance requirements. So, yes, we are seeing good value there. We see good brand uptake of those solutions, and we see that accelerating here in the back half of the year. Relative to your question in the environmental workflows, yes, we are speaking to the combination of in-situ and our odd products, and as we had mentioned previously, the two of those really fit together like Legos. One is strong in analytical quantity. One is strong in analytical accuracy. So quantity and quantity are both covered in those environmental workflows and they provide important intelligence here for the integrity of water as it comes into the influence into water treatment plants. So knowing what is coming, how much is coming, whether it's clean or dirty, are all critical factors particularly as you get more environmental aberrations, severe weather events and so on. Integration is progressing well there, and we're liking what we're seeing.

Andrew, just one thing on the environmental side, Nathan, I'll add, is you're going to look at the synergy numbers that you're going to talk about on the commercial side when we announce the deal. Early days, the team is educating phenomenally well, and they'll be a well-head on the commercial synergy side, numbers-wise.

Thanks for that. Excuse me, thanks for that. I guess the follow-up question is, It's just a housekeeping one, I guess, around margins. You had the IEPA tariff refunds in each segment. Can you talk about what the margin expansion was X the IEPA refunds? And I think the guidance contains no more IEPA refunds in it. Any chances that there will be more coming ahead?

Yeah, thanks, Nathan, for this question. As you look at the refund side, effectively, we got roughly $15 million in PQI, $6 million in water quality. Overall impact of the tariff refunds on the margin expansion on the adjusted OP was 110 basis points. So excluding that, the margin effectively came in pretty much in line with the guidance statement overall of the company and for each segment as well. So really no surprises on the margin side. And as far as the future goes in the second half of the year, you're actually right. We have not included any further benefit from tariff refunds in the second half. but based on the flyings that we have done, we can have another two cents per share for an impact benefit but the timing is highly uncertain so we have not added that to our guidance for the second half.

Thanks for taking the questions.

Thanks, David.

Thank you. We will move next with Andy Kaplowitz with Citicorp. Please go ahead.

Good morning everyone.

Good morning, Andy.

Jennifer, can you give us a little more color on how to think about the mix of water quality moving forward? For instance, how big is your overall industrial exposure at this point? Is it getting as large as your municipal exposure? And it looks like you're saying that industrial markets are growing at least in high single digits. It seems like it's more broad-based growth outside of data centers. So can you talk about the durability of that growth moving forward?

Yeah, we're really pleased with our industrial growth. And if you look at our overall water business, about 50% of our water revenue comes from industrial applications. So it's really quite significant. Most of that industrial revenue comes from North America. We're really seeing the benefits not only of these discrete vertical markets like data centers and the feeder industries there, but also in the nearshoring and the reshoring efforts. We see growth being catalyzed here by Thank you for joining us. They're looking to make sure that they insulate themselves from any points of failure along their value chain there. Being integral to the operating environment, Making sure that we help customers avoid critical points of failure allows us to continue to see really sticky business there on the municipal side. And the other 40% really is revenue associated with continuing to upgrade equipment and deploy new technologies and so on. So I think it's really balanced across the portfolio. Certainly there's a higher driver of growth coming from our industrial markets. but Muni is holding up really well as well.

Sanford, maybe I could double click on the Muni market because I'm sure you get asked the question a lot. I think you called it steady. You know, you reminded us of the recurring growth. Can you continue to grow in that business, you think, over the next several quarter of years? You know, I do hear municipalities worried about tight budgets. Can you do that? Can you grow in a more tight budgeting environment?

Yeah, I mean, the way to think about this is the budgets for operating a water plant are not elective, right? Water plants have to continue to operate, treat their water, because communities and industry is relying on that water. So we don't see real aberrations or fluctuations in federal funding, obviously. Utilities, municipalities are going to be judicious with their spend, but we absolutely believe that we can continue to grow and grow at mid-single digits or better in this space. Bear in mind with new technologies, more efficient ways of running plants, more software deployed to get You know, intelligence out of how well that system is running. Those are all opportunities for continued growth.

Yeah, and if you're going to think about our muni business, right, definitely on the analytics side is where you see the consumable side. But let's not forget on the Trojan side, we have pretty nice exposure on the muni to our Trojan business. And the bid activity that you see in the wastewater side, especially of the muni, is pretty, pretty solid. um so overall demand as you're going to think in the growth of a mini business you should look at both angles both from one from the analytic side from the heart side at the same time from a trojan business as well this has been going pretty nicely appreciate all the call guys thank you thank you thank you we will move next with Ryan Connors with North Coast Research please go ahead

Thanks for taking my question. I wanted to talk about Chemtreat a little bit. You've talked about pricing, various points in the call, but it looked like we were going to get some relief there in terms of input costs, headwinds, oil prices had come down. It seems like that volatility has picked back up. Can you just talk in more detail about the specific price-cost dynamics in Chemtreat? I know you mentioned the team's firing on all cylinders from a top-line perspective, but can you talk about price costs and margins? with the volatile raw materials here in Chemtree.

Yeah, Ryan, it's a little bit of a concrete study, actually, right? Look, in concrete, we've been working very closely with the customers, given some of the chemical inputs to see how we kind of make sure we can preserve the margins and get the right value for the solution that we deliver to the customers. Overall, as you kind of think about in that business, the dynamic, yes, some of the paths can move with the pricing. But at this point, frankly, we have not seen any sort of a change as yet. Our goal is to make sure when the input side is so volatile, we're preserving the dollar margin. So that's one of the biggest focus for us as we can think about. And the discussions with customers that the country is having is pretty real-time. I mean, we've got phenomenal digital solutions to make sure our sales teams are fully armed to have those discussions.

Got it. Thank you. And then one more on the PQI side. Just curious whether, you know, we've had this really high-profile recall situation with the cyclospora infections with the lettuce outbreak. Just curious whether for your teams there, whether that type of situation creates an uptick in kind of interest and selling opportunity for people to get biscuits when something like that is front page news like that, whether that's kind of an opportunity for a bit of an uptick in interest and opportunity.

Yeah. Great question. The answer is absolutely. And while cyclospora is the latest public health risk, Any kind of bacterial or parasitic outbreak is not actually uncommon. You can go back to E. coli and peanut butter, botulism and infant formula. These kinds of episodes happen. And our PQI franchise is ideally positioned with ESCO, TraceGains, and Global Vision providing integrated workflows to help with regulatory compliance, ingredient traceability, and packaging accuracy. while our coding and marketing businesses aid in the date, lot code, and distribution traceability. So it's an end-to-end solution really for brand owners to ensure that they have product that is safe for public consumption. So together our portfolio of solutions really provides that source-to-shelf intelligence to make sure that brand owners can protect public health.

Understood. Thanks for your time.

Thanks, guys.

Thank you. Thank you. Our next question comes from Andrew Creel with Deutsche Bank. Please go ahead.

Thanks. Good morning, everyone. Could you give us an update on what you're seeing on electronics inflation, including memory, with all of the demand on those products from data centers? Is there anything very unusual from a cost perspective or availability perspective? And can you remind us which products are most exposed to those in Burlington? Thanks.

Thank you Andrew, great question. Our exposure in the electronics scene really comes to our instruments where we do use memory, we do use boards. These costs overall, when you kind of step back, Andrew, a pretty small fraction of the cause. We're definitely seeing high prices, just like everybody else in the industry and frankly broader economy. But the impact at the world level at this point is on material. And from our perspective, the procurement teams are working pretty actively. I wouldn't say that at this point we've had any Issues of sourcing, it's a matter of pricing, but it's a small number that we are able to pass through. At the same time, look, this is where from the R&D team's perspective, they are looking at things as well as to how we can design and optimize things in a higher memory, a higher semiconductor price environment as well. So those actions are helping mitigate the impact as well. So it's not a material impact on the world, the level is a punchline.

Great, very helpful. And then switching gears, the Alpha UV deal, I think didn't get a ton of airtime. Maybe can you just give us some more on the growth rate? I believe the prepared remarks said double-digit growth this year. Is that sustainable? And maybe any help on margins now and where they could go as you use VES and integrate the company? Thanks.

Yeah, we're really happy to welcome Alpha UV into the portfolio. This is a highly synergistic addition to our Trojan business, which continues to expand our footprint globally. Alpha itself has a strong portfolio of competitive fit-for-purpose solutions, along with an established commercial presence in India. and you can think about this as being a similar type of transaction relative to Aquafetus which is the UV business we acquired in Europe and part and parcel to the geographic expansion that Trojan is doing. I think Alpha also gives us an opportunity to expand in other high growth markets with their portfolio. So Trojan, Aquafetus, and Alpha all sort of fit together nicely to cover a variety of UV treatment applications, high flow, low flow, different kinds of water matrices and so on. So, again, small business in India, but a double-digit grower, and we do believe that that's sustainable going forward.

Thank you.

Thanks, Andrew. Thanks, Andrew.

Thank you. We're almost next with Andrew Buscaglia with DNP Paradox. Please go ahead.

Hey, good morning, everyone.

Good morning, Andrew.

So you guys sound rather positive, I think, on the past acquisitions you've made. I know that's I've paid some rich multiples for them and people are looking for signs of synergies coming through. So would you say that they are tracking ahead of their application in terms of either growth or synergies? And could you just give us some more color on that, please?

Yeah, we've been really pleased with the deals that we've brought into Veralto since spin. And I think what you see is we've accelerated in terms of deal volume, both in number and overall relative size. It's been balanced between PQI and water. We really like the spaces that we're in with both of those segments. And I would say the vast majority of these deals have provided near-term synergies around sales acceleration and combining product portfolios, going to market with joint sales teams and the like. So we certainly, at least to date, have really focused on accelerating our overall growth profile and these deals are doing exactly that. There is opportunity clearly for ongoing cost optimization and getting more margin out of of these different assets. And that's all baked into integration plans and transition going forward, but we're really pleased with what we've seen in the top-line growth acceleration.

And, Andrew, you've seen that in the guidance, right, in the confidence that you have in the second half, and then as you're going to move forward, you know, part of that is driven by the growth profile of the transactions that you've done.

Yeah. Yeah, exactly. That's fair enough. Thank you. Yeah, I know everything's kind of picked over at this point, so I wanted to ask a little more of a higher level question. I get questions on your data center exposure in water, but I think there could be an interesting AI angle and TQI. I'm wondering if you see AI changing demand for things like inspection and marketing industries I cover as well. But yeah, what's your take at this point on AI influencing PQI?

Yeah, you're seeing that. Look, Andrew, as you know, as part of the global vision, we laid out a little bit of that as well, right? So in a digital workforce solution more so, we are definitely seeing that. We are offering the AI application, you can take kind of a layer kind of an application on top of the solution. that we provide to the customers. So you're definitely seeing more on the digital workflow solution side of the PQI. I mean, it's going to be expanding more and more and we're making the investments even organically and from our talent perspective on that side as well. So we're already offering products on that side to the customers.

Yeah, and Global Vision is squarely in that space, right? Right. You know, what Global Vision brings to the table is a deterministic inspection engine, right? And it's designed to produce the same answer every time. because in regulated workflows, brand owners can't tolerate any room for error. So these are reliable, repeatable processes with proprietary data sets that will render the accurate answer every time, right? And, you know, the ESCO... TraceGames and Global Vision teams are effectively all working together to employ AI throughout that workflow because it will allow more mistake-proofing and faster time to market while meeting regulatory requirements and traceability criteria.

Yeah, interesting.

Okay, thanks Jennifer. You're done.

Thank you. We will move next with Borneo Lee with Goldman Sachs. Please go ahead.

Hey, good morning, everyone. Thanks for squeezing me in. I know a lot's been covered, so maybe a quick one from me, and I'll take the offline. Just on high growth markets, you know, maybe some comments around the outlook there, potential for further reacceleration and growth in Northern North America and Western Europe. You have been really strong throughout the year on a relative basis, so if you could maybe touch upon kind of what you're seeing out there and the forward outlook for the high growth markets. Thanks.

Yeah, so high growth markets were relatively flat. We see a little bit of a tale of two cities here between PQI and water. Thank you for joining us. We'll be right back. The sales are a little bit down year over year. They're improving sequentially. I think we see underlying demand that remains strong, but we do see some timing delays in projects that are there. Again, We continue to watch and focus on execution between these different markets around the world. And we're pleased with what we see in recovery in China for PQI. Still waiting for water to recover there in terms of traction. And then we're watching Latin America closely.

All right. Thank you. Appreciate the comment.

You bet. Thanks, Brian. This is Ryan Taylor. We appreciate everybody that was able to engage with us on the call. At this time, we have hit our 45 minutes for the call, so we're going to have to cut it off here. As usual, I'll be available for follow-ups throughout today and over the course of the next several days. We thank everybody for joining us, and we'll talk to you next time.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.