Veralto (VLTO) Q1 2025 earnings summary

Executive summary

• Q1 2025 sales rose 6.9% year-over-year to $1.33 billion, with core sales up 7.8% driven by volume and price, and broad-based growth across both PQI and Water Quality segments and geographies.

• Adjusted operating profit reached $333 million (25.0% margin), up 9% year-over-year, and adjusted EPS grew 13% to $0.95, surpassing guidance.

• Net earnings increased to $225 million, with recurring revenue comprising 61% of total sales and supporting a resilient business model.

• Integration of recent acquisitions and strategic initiatives, including TraceGains and Aquafides, is progressing well.

• Countermeasures to mitigate tariff impacts include pricing actions, supply chain shifts, and new U.S. manufacturing capacity.

Financial highlights

• Gross profit increased to $805 million, with gross margin improving 40 bps to 60.4%.

• Adjusted operating profit margin expanded to 25.0%, an all-time high, and adjusted EBITDA margin reached 25.8%.

• Free cash flow was $142 million, up 39% year-over-year, with operating cash flow at $157 million.

• Net earnings margin was 16.9%; free cash flow margin was 10.7%.

• Cash and cash equivalents stood at $1.24 billion, with net leverage at 1.1x and gross debt at $2.63 billion.

Outlook and guidance

• Full-year 2025 adjusted EPS guidance reaffirmed at $3.60–$3.70, with core sales growth targeted at low- to mid-single digits.

• Adjusted operating margin expected to be flat to up 50 bps for the year; free cash flow conversion targeted at 90%-100% of GAAP net income.

• Q2 2025 guidance: core sales growth in low to mid-single digits, adjusted EPS of $0.84–$0.88.

• Guidance incorporates estimated tariff increases and related countermeasures.

• Management expects the benefit of extra days in Q1 2025 to be offset by fewer days in Q4 2025.