Yahoo Finance Veralto Corp (VLTO) Q1 2024 Earnings Call Transcript Highlights: Key Financial Metrics and ...
Revenue: $1.25 billion, up 1.8% year-over-year.
Net Income: Not specifically mentioned, but adjusted operating profit increased 5% year-over-year.
Earnings Per Share (EPS): Adjusted EPS $0.84, up 8% year-over-year.
Free Cash Flow: $102 million, with a conversion guidance increase to 100%-110%.
Gross Margin: Increased by 220 basis points year-over-year to 60%.
Core Sales Growth: 1.8% year-over-year, driven by price increases and modest volume growth.
Operating Profit Margin: Expanded by 90 basis points to 24.5%.
Market Capitalization: Not mentioned in the transcript.
Same-Store Sales: Not applicable as Veralto does not operate retail stores.
Store Locations: Not applicable as Veralto does not operate retail stores.
Release Date: April 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: The 60% gross margin is a pretty incredible number when you really think about the mix of businesses you have. But should we think about this as kind of high watermark or would you think about it as more of a step up into a new level of entitlement? How do you guys think about it? A: (Sameer Ralhan - Veralto Corporation - Senior VP & CFO) Overall, as you got to look at margin perspective, some of it comes down deliver of a mix. I think it's still going to be in the 58% to 60% kind of ZIP code. As Jennifer mentioned on the call earlier, we saw good sort of a rebound in the consumables in both sides that really helps us on the margin side, both in the Water Quality and PQI side. But as kind of equipment starts coming back at the rest of the year and the second half of the year, we should be in that 58% to 60% kind of ZIP code.
Q: Jennifer and Sameer, how are you feeling about the PQI recovery at this point? I know you mentioned North America and Western Europe, you continue to see signs of recovery. You talked about equipment demand coming back late in the quarter. Maybe you could elaborate on that equipment trend. Have you seen follow through in that food and beverage recovery that started, I think, in Q4? And how are you factoring in China-related growth in that segment for the rest of the year? A: (Jennifer L. Honeycutt - Veralto Corporation - President, CEO & Director) Yes. We're really encouraged by the PQI performance here in Q1, particularly around our consumable revenue stream or recurring revenue. Is this the third sequential quarter that we've seen mid-single-digit growth there. And with regard to sort of how those markets, particularly in food and beverage, recover from a downturn, we will always see the consumable revenue stream ramp first.
Q: Hey Jennifer, just first on just kind of the M&A side of the equation. Obviously, a couple of quarters out of the box here probably kind of a solid year. So to think about it given the time line of the spin. Just wonder how the pipeline is coming together. Do you see things that are actionable. And do they lean towards one segment or the other? A: (Jennifer L. Honeycutt - Veralto Corporation - President, CEO & Director) Yes. This is everyone's favorite topic, I think. We are 207 days post spin, I think, today. So it's still early days here. But I have to say, we have a very, very robust process and a strong pipeline of activity, both in the Water Quality side, the PQI side with a number of opportunities that we're considering.
Q: I'm going to follow up on Deane's question on distribution, but I'm going to come at it from the PQI side because I would have thought there might actually be some more opportunities to leverage the distribution model and maybe reduce the cost to serve on the PQI side than on the water side, potentially maybe in lasers where there's not the same kind of consumable revenue or some of the smaller customers that maybe don't need thatkind of super high level of service from you guys. So any commentary you could make on maybe the potential from that side of the business to leverage distribution a bit more? A: (Jennifer L. Honeycutt - Veralto Corporation - President, CEO & Director) Yes. I mean I think it's probably the same answer as for water. I mean we do have distribution and we do consider use of distribution depending upon where we're selling in the world and what types of products are in the portfolio. This is something that we always consider in terms of when we when we decide to make investments and which product lines actually require a more significant level of applications, knowledge and insight.
Q: So I just wanted to check on the Water Quality side, you're talking about really strong industrial demand in your guide -- you did much better than your guidance. I'm wondering what changed, I'd say, from December, January to what transpired throughout the quarter? And then just the sustainability around that? What's driving that really? A: (Jennifer L. Honeycutt - Veralto Corporation - President, CEO & Director) Yes. I mean I think we still see pretty strong industrial output here, particularly in North America. I think as we mentioned in our prepared remarks, we do see food and beverage coming back, which across the portfolio is the largest continuous industrial segment that we play in. But likewise, chemical processing, mining and power generation all continue to be strong.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
