Veralto Corp · NYSE:VLTO
Veralto — Q3 2023 Earnings Presentation
40 slides from Veralto's earnings presentation, Oct 26, 2023
Slide 1: Third Quarter 2023 Results
Third Quarter 2023 Results October 25, 2023
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements in this release, including the statement regarding the Company's anticipated fourth quarter and full year 2023 non-GAAP core sales growth, the Company’s differentiation and positioning to continue delivering sustainable, long-term shareholder value and a
Slide 3: Opening Remarks
Opening Remarks Jennifer L. Honeycutt President and Chief Executive Officer Q3 2023 Results | October 25, 2023
Slide 4: A leader in water and product quality
Veralto / A leader in water and product quality WATER QUALITY PRODUCT QUALITY & INNOVATION Water Analytics Marking & Coding ~60% Water Treatment ~$5b ~40% Packaging & Color in 2022 sales Strong Global Brands | Long Track Record of Innovation | Commercial Excellence 4 Q3 2023 RESULTS | 4
Slide 5: Q3 2023 key combined financial results
Veralto / Q3 2023 key combined financial results ADJUSTED OPERATING ADJUSTED ADJUSTED FREE CASH SALES PROFIT* EPS* EBITDA* FLOW* $1,255m $281m $0.75 $290m $232m core sales 22.4% adjusted 23.1% adjusted 113% conversion growth*of 1% operating margin EBITDA margin of GAAP net earnings Includes incremen
Slide 6: Q3 2023 core sales by regions and end market commentary
Veralto / Q3 2023 core sales by regions and end market commentary North America: WQ: core sales growth led by treatment and UV NORTH AMERICA (48% of Q3 sales) WESTERN EUROPE (22% of Q3 sales) HIGH GROWTH REGIONS (28% of Q3 sales) disinfection businesses; modest growth in analytics 498 PQI: modes
Slide 7: Financial Review
Financial Review Sameer Ralhan SVP and Chief Financial Officer Q3 2023 Results | October 25, 2023
Slide 8: Q3 2023 combined performance summary
Veralto / Q3 2023 combined performance summary YOY $ millions, except per share data Q3 2022 Q3 2023 Variance Sales grew +3% year-over-year: Core sales* +1.0% Sales $1,219 $1,255 +3% Currency: +1.5% Acquisitions & divestitures: +0.5% Core Sales Growth* 10.5% 1.0% Gross Profit $694 $723 +4%
Slide 9: Water Quality Q3 2023 and year-to-date performance
Water Quality / Q3 2023 and year-to-date performance ($ millions, variances versus prior year period) Q3 SALES Q3 ADJUSTED OPERATING PROFIT * +4% +3% $185 $191 $772 $741 YOY Change in Sales Q3’22 Q3’23 Core Growth* +16.5% +3.0% Price 24.9% 24.7% Adj. operating profit Currency (4.5%) +1.0% +5% M&A 0.
Slide 10: Product Quality & Innovation Q3 2023 and year-to-date performance
Product Quality & Innovation / Q3 2023 and year-to-date performance ($ millions, variances versus prior year period) Q3 SALES Q3 ADJUSTED OPERATING PROFIT * +1% (3%) $478 $483 $113 $110 YOY Change in Sales Q3’22 Q3’23 Core Growth* +3.0% (2.5%) Adj. operating profit Price 23.6% +2% Currency (6.5%) +2
Slide 11: Q3 2023 financial position
Veralto / Q3 2023 financial position ($ millions) Q3 2023 Cash from operations $243 Financial position summary: Capital expenditures ($11) Free Cash Flow* $232 • Strong cash generation Free Cash Flow Conversion* 113% • Resilient and capital-light business model As of September 29, 2023 • Gross lever
Slide 12: Q4 and FY 2023 Guidance
Veralto / Q4 and FY 2023 Guidance Annual Sales and Core Sales Growth* Q4 2023E FY 2023E ~$5b $4.9b Core Sales Growth* (LSD) to flat +LSD $4.7b 23.5% to 23.2% to Adjusted Operating Profit Margin* Core sales +8% +8% +LSD 24.5% 23.5% growth* rate $0.79 to $3.11 to Adjusted EPS* $0.84 $3.16 2021 2022 20
Slide 13: Closing Remarks
Closing Remarks Jennifer L. Honeycutt President and Chief Executive Officer Q3 2023 Results | October 25, 2023
Slide 14: Executive Summary
Veralto / Executive Summary Successful execution of spin-off Solid operating execution in dynamic environment Strong, investment grade financial position Expect to initiate a quarterly dividend of $0.09 per common share in Q4 2023, paid in arrears Focused on: Meeting commitments Contin
Slide 15: Long-term value creation algorithm and modeling framework
Veralto / Long-term value creation algorithm and modeling framework VALUE CREATION ALGORITHM LONG-TERM MODELING FRAMEWORK Core Revenue Growth MSD core sales growth + Margin Expansion 30% to 35% incremental OP margin + Strong Free Cash Flow ~100% free cash flow conversion + Acquisitions Disciplined c
Slide 16: Well-positioned for sustainable value creation
Veralto / Well-positioned for sustainable value creation ATTRACTIVE SECULAR GROWTH DRIVERS PREMIER FINANCIAL PROFILE and DURABLE BUSINESS MODEL PROVEN VALUE CREATION PLAYBOOK SAFEGUARDING THE WORLD’S MOST VITAL RESOURCES™ 16 Q 3 2 0 2 3 R E S U L T S | 16
Slide 17: Questions?
QUESTIONS? Q3 2023 Results | October 25, 2023
Slide 18: Appendix: Reconciliations of Non-GAAP Metrics
APPENDIX Reconciliations of Non-GAAP Metrics This presentation contains information regarding the Company’s financial results that is calculated and presented on the basis of methodologies other than in accordance with accounting principles generally accepted in the United States (“GAAP”). These non
Slide 19: Reconciliation of GAAP to Non-GAAP Financial Measures
VERALTO CORPORATION RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTAL FORWARD-LOOKING INFORMATION THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 29, 2023 AND SEPTEMBER 30, 2022
Slide 20: Table of Contents
TABLE OF CONTENTS Page 1 Sales Growth (Decline) by Segment, Core Sales Growth (Decline) by Segment 3 Forecasted Core Sales (Decline) Growth, Adjusted Operating Profit Margin, and Adjusted Diluted Net Earnings per Share 4 Segment Sales, Operating Profit, Adjusted Operating Profit, Operating Profit Ma
Slide 21: Sales Growth by Segment, Core Sales Growth by Segment
VERALTO CORPORATION Sales Growth (Decline) by Segment, Core Sales Growth (Decline) by Segment % Change Three-Month Period Ended September 29, 2023 vs. Comparable 2022 Period Segments Product Quality Total Company Water Quality and Innovation Total sales growth (decline) (GAAP) 3.0 % 4.0 % 1.0 % Impa
Slide 22: Sales Growth by Segment, Core Sales Growth by Segment (2022)
VERALTO CORPORATION Sales Growth (Decline) by Segment, Core Sales Growth (Decline) by Segment % Change Three-Month Period Ended September 30, 2022 vs. Comparable 2021 Period Segments Product Quality and Total Company Water Quality Innovation Total sales (decline) growth GAAP 5.5 % 12.0 % (3.5)% Impa
Slide 23: Forecasted Core Sales Growth, Adjusted Operating Profit Margin, and EPS
VERALTO CORPORATION Forecasted Core Sales (Decline) Growth, Adjusted Operating Profit Margin, and Adjusted Diluted Net Earnings per Share The Company provides forecasted sales only on a non-GAAP basis because of the difficulty in estimating the other components of GAAP revenue, such as currency tran
Slide 24: Segment Sales, Operating Profit, Adjusted Operating Profit
VERALTO CORPORATION Segment Sales, Operating Profit, Adjusted Operating Profit, Operating Profit Margin, and Adjusted Operating Profit Margin ($ in millions) Three-Month Period Ended Nine-Month Period Ended September 29, September 30, September 29, September 30, 2023 2022 2023 2022 Sales (GAAP) Wate
Slide 25: Segment Sales, Operating Profit, Adjusted Operating Profit (continued)
VERALTO CORPORATION Segment Sales, Operating Profit, Adjusted Operating Profit, Operating Profit Margin, and Adjusted Operating Profit Margin ($ in millions) Three-Month Period Ended Nine-Month Period Ended September 29, September 30, September 29, September 30, 2023 2022 2023 2022 Other Operating P
Slide 26: Net Earnings, Operating Profit, Adjusted EBITDA: Three Months 2023
VERALTO CORPORATION Net Earnings, Operating Profit, Adjusted EBITDA, Net Earnings Margin, Operating Profit Margin and Adjusted EBITDA Margin ($ in millions) Three-Month Period Ended September 29, 2023 Product Quality Water Quality & Innovation Other Total Company Net Earnings (GAAP) $ 205 Interest E
Slide 27: Net Earnings, Operating Profit, Adjusted EBITDA: Three Months 2022
VERALTO CORPORATION Net Earnings, Operating Profit, Adjusted EBITDA, Net Earnings Margin, Operating Profit Margin and Adjusted EBITDA Margin ($ in millions) Three-Month Period Ended September 30, 2022 Product Quality Water Quality & Innovation Other Total Company Net Earnings (GAAP) $ 218 Interest E
Slide 28: Net Earnings, Operating Profit, Adjusted EBITDA: Nine Months 2023
VERALTO CORPORATION Net Earnings, Operating Profit, Adjusted EBITDA, Net Earnings Margin, Operating Profit Margin and Adjusted EBITDA Margin ($ in millions) Nine-Month Period Ended September 29, 2023 Product Quality Water Quality & Innovation Other Total Company Net Earnings (GAAP) $ 639 Interest Ex
Slide 29: Net Earnings, Operating Profit, Adjusted EBITDA: Nine Months 2022
VERALTO CORPORATION Net Earnings, Operating Profit, Adjusted EBITDA, Net Earnings Margin, Operating Profit Margin and Adjusted EBITDA Margin ($ in millions) Nine-Month Period Ended September 30, 2022 Product Quality Water Quality & Innovation Other Total Company Net Earnings (GAAP) $ 629 Interest Ex
Slide 30: Trailing Twelve Month Adjusted EBITDA, Gross Leverage, and Net Leverage
VERALTO CORPORATION Trailing Twelve Month Adjusted EBITDA, Gross Leverage, and Net Leverage ($ in millions) Three-Month Period Ended September 29, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Net Earnings (GAAP) 205 209 225 216 Interest Expense 6 5 — — — Other Nonoperating (Income) Expense —
Slide 31: Other Non-GAAP Adjusted P&L Measures: Three Months 2023
VERALTO CORPORATION Other Non-GAAP Adjusted P&L Measures ($ in millions, except per share data) Three-Month Period Ended September 29, 2023 Net earnings for calculation Diluted net Earnings of diluted earnings per Gross profit Operating Operating before income earnings per common Sales Cost of sales
Slide 32: Other Non-GAAP Adjusted P&L Measures: Three Months 2022
VERALTO CORPORATION Other Non-GAAP Adjusted P&L Measures ($ in millions, except per share data) Three-Month Period Ended September 30, 2022 Net earnings for calculation Diluted net Earnings of diluted earnings per Gross profit Operating Operating before income earnings per common Sales Cost of sales
Slide 33: Other Non-GAAP Adjusted P&L Measures: Nine Months 2023
VERALTO CORPORATION Other Non-GAAP Adjusted P&L Measures ($ in millions, except per share data) Nine-Month Period Ended September 29, 2023 Net earnings for calculation Diluted net Earnings of diluted earnings per Gross profit Operating Operating before income earnings per common Sales Cost of sales
Slide 34: Other Non-GAAP Adjusted P&L Measures: Nine Months 2022
VERALTO CORPORATION Other Non-GAAP Adjusted P&L Measures ($ in millions, except per share data) Nine-Month Period Ended September 30, 2022 Net earnings for calculation Diluted net Earnings of diluted earnings per Gross profit Operating Operating before income earnings per common Sales Cost of sales
Slide 35: Other Non-GAAP Adjusted P&L Measures: Footnotes
VERALTO CORPORATION Other Non-GAAP Adjusted P&L Measures ($ in millions, except per share data) A Amortization of acquisition-related intangible assets in the following historical periods (only the pretax amounts set forth below are reflected in the amortization line item above): Three-Month Period
Slide 36: Operating Profit Margins and Year-Over-Year Core Operating Margin Changes
VERALTO CORPORATION Operating Profit Margins and Year-Over-Year Core Operating Margin Changes Segments Product Quality Total Company Water Quality & Innovation Three-Month Period Ended September 30, 2022 Operating Profit Margins (GAAP) 23.40 % 25.00 % 22.80 % Third quarter 2023 impact from operating
Slide 37: Cash Flow, Free Cash Flow and Conversion Ratio
VERALTO CORPORATION Cash Flow, Free Cash Flow, Operating Cash Flow to Net Earnings Ratio and Free Cash Flow to Net Earnings Conversion Ratio ($ in millions) Three-Month Period Ended Nine-Month Period Ended Year-over-Year Year-over-Year September 29, 2023 September 30, 2022 Change September 29, 2023
Slide 38: Statement Regarding Non-GAAP Measures
VERALTO CORPORATION Statement Regarding Non-GAAP Measures Each of the non-GAAP measures set forth above should be considered in addition to, and not as a replacement for or superior to, the comparable GAAP measure, and may not be comparable to similarly titled measures reported by other companies. M
Slide 39: Statement Regarding Non-GAAP Measures (continued)
VERALTO CORPORATION Statement Regarding Non-GAAP Measures • We calculate adjusted EBITDA by adding to operating profit amounts equal to depreciation and amortization and making the other adjustments reflected in the applicable tables above, which allows us to calculate and disclose such measure by s
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