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.