Veralto (VLTO) 7 Feb 242023 Q4 Earnings call transcript

My name is Shelby, and I will be your conference operator this morning. At this time, I would like to welcome everyone to Veralto Corporation's Fourth Quarter and Full Year 2023 Earnings Results Conference Call. [Operator Instructions]

I will now turn the call over to Ryan Taylor, Vice President of Investor Relations. Mr. your begin may you conference. Taylor,

Ralhan, Thanks Good February Today's call. on be Chief replay call us today President Sameer the is simultaneously joining me morning, XXXX. webcast. Executive heading Chief today Officer. under XX, available and and will everyone. With President are on our Vice for Jennifer Events A available of of Financial section and Senior our being Officer; and webcast the Investors replay A the the will call our until of Presentations. be the website later Honeycutt,

webcast begin, related news out that under the release, to heading non-GAAP financial appendix all measures any we Investors the materials including are yesterday, the quarter and like provided presentation figures a all year-over-year by are Quarterly fourth basis. materials, on Earnings. adjusted available the Unless website, supplemental of or the our Before and our of adjusted to references to These non-GAAP slides. section in earnings information measures. in I'd G we variances are otherwise Regulation point noted, www.veralto.com, required issued Reconciliations SEC of

made, not obligation the and any make statements date federal are within statements, believe that subject required to in regarding only forward-looking forward-looking of statements including we make meaning they number except of forward-looking our will update materially are today. speak law. set the may uncertainties, differ from any or risks most SEC the we those to anticipate or and call, forward-looking assume the or statements results developments During by the recent in forward-looking filings. securities These future. do Actual as will statements as including any we that These forth we laws, statements events that may of occur a

turn I'll over to with And the that, call Jennifer.

historic was year call sales, level strong successfully we of for joining Danaher everyone, dynamic executed thank high Thank you from Veralto macro our record a and morning, XXXX earnings you, Ryan. a today. in for separation as flow single-digit our and Good delivered a environment. and cash free growth

demand perspective, segment level teams year-over-year in packaged profit held Innovation, flat Quality in goods our operating consumer of proud sales across business headwinds despite medicine Product and record and achieved of supply sales our And ensure and our for food world. and a China. peso. to Quality water, the I'm customers helping a resilient the from our From Water the despite grow chains and supporting their team of effort and our & in teams headwinds to improve Argentine while profitability safety

perspective, a sales margin with operating fourth stabilization markets saw segment across growth flow Innovation. expansion goods quarter, industrial both generation. segments, we cash From XXXX strong finished in a and and growth consumer in continued Product & solid Quality Water in delivering of Quality free signs markets robust and We core early packaged

and As we the strong about are we in are near-term our position cautiously markets. in financial begin XXXX, a trends end optimistic

improvement compounding continuous acquisitions on through cash earnings remain growth, and steady long the Over focused core and attractive term, yield sales operating we flow returns. that value-accretive

vital enduring of safeguarding to the tremendously purpose for world's unifying resources. on future while opportunities about our Our positive through create having also team world excited is shareholders value our an the significant most impact

our them and to ability We collectively. in achieve these confident are in unwavering commitments

at operating consecutive year-over-year X.X% remains grew margin EPS with year generation following $X to XXX%. Core X grew strong Adjusted full XXXX of results. years sales grew an core expansion. free than X.X% billion, cash basis flow our free growth, and at points cash X% delivered X% of conversion all-time Looking we and high. year-over-year XX Sales more adjusted flow

with more growth position in We hand and strong Argentine ended improvement pleased despite and a the net economy million XXXX I'm of we than the of peso. a markets, slower packaged the from devaluation Overall, with China cash the and in headwinds steady of X.Xx. on $XXX volumes consumer financial in goods delivered leverage year at lower

solid during to talent, our our delivering technology to solutions. XXXX, launched addition financial and portfolio In bolstered teams commercial performance, and our we new realigned continue leadership optimize several

process coding launched example to rigor continuous fortify year, new around the we and laser to products X A our early in technology great inkjet and in its highlight These differentiated technology Over have and launches started include past is our increased both and position. benefits. business, the which our see to Videojet, XXXX expand leading innovation marking offerings.

excited Videojet uptime while In new Focus changeovers products increased its which and superior seamless laser, solving about potential. XXXX new codes. contrast growth These intervention. which innovation increased pigmented demonstrate enabling on Smart no our manual prints Videojet new technology, the flexibility are customer without delivering problems, C, for allowing their product launched maintenance, with XXXX, focus inkjet, in codes launched high-quality we features And crisp, color our

and volume due top sales food expansion Turning X.X% and EPS turn XX QX. goods X% end packaged We started consumer growth and of by now where our to better-than-anticipated positive. core results markets strong for teams points adjusted with demand, growth. growth our Core of particularly the our X.X% to adjusted year-over-year guidance in execution beverage exceeded delivered segments to both of in financial operating margin

are It's in We are to we part saw that encouraged early XXXX. here. latter stabilization we the stages important recognize of of recovery in by the the of still signs

in and demand the progresses. sequential this improvement year outset cautiously in markets XXXX remain are steady We optimistic as about CPG of the prudent our expectations at of

anticipated, QX. sequentially, year into up X% core a better delivered year-over-year were nice to from prior QX segments down sales China recovery margins XX.X%. grew XX both QX period, strong in particularly our operating extent, and and sales the expanded X% for growth points only treatment Adjusted price growth to X% water to than and, a through also continued applications. lesser execution volume solutions, basis industrial profit Versus

delivered EPS share per through expansion high underlying guidance million of execution, in and Enterprise generated $XXX quarter, of by improved was the price Adjusted million fourth over conversion. operating margin the $X.XX driven cost XXX% we optimization and $XXX free was XX.X% or end performance We $X.XX System. range. of cash our at above the Veralto sales strong EBITDA Adjusted flow just

Enterprise performance and Our QX environment the testament macro to commitments reflects navigate is System. through meeting financial delivering our a a dynamic to ability Veralto results and our

at Western in America, Europe. over water we decline highlighted continue high-growth our the by North about grew more quarter. X% now markets, geography North in Water core see by In growth growth to Looking in and businesses. X% than fourth sales X% in for America a strong We treatment year-over-year Quality, offsetting

discharge steady with America, across example by customers strong ChemTreat Aria from customer industrial regulations product continued and broad-based in grew in to industrial end Filtra line drinking of driven its in also UV wins. continued at demand we Trojan, growth see execution new value-accretive high in is and customers municipal wastewater and contaminant water. digits for destruction markets renewed primarily North on sales serving see the North continue And growth focused in great systems a growth. growth strategy single driving This Trojan our America. to

equipment. decrease sales flat America and coding core in color modest of hardware and in and packaging growth were by as sales was marking North PQI, a In offset

of and analytics Europe, hardware Western from Demand in In and saw steady declines we both Western in Europe treatment also packaging color equipment. across sales industrial and moderate customers. was water municipal

decline and low America digit strong double-digit Fourth into the year-over-year. growth China. in in in quarter X% Latin a and And sales X% up single high-growth Middle East markets offset were growth India

For high-growth represent of led America X.X% total more growth growth than X/X These year, delivered and our a by sales. Latin X% the the growth strong were across sales Sales XXXX, regions the in X Western markets single-digit and the core offsetting we in in growth with year-over-year Europe. X India in full in decline in regions, East more X% North America, Middle high China. up in than

remarks. our Sameer a call opening performance. this time, over quarter review And financial the my turn at concludes of fourth I'll to for detailed That

good everyone. morning, and Thanks, Jennifer,

results our Fourth net to with fourth basis for Slide the begin on grew sales quarter a consolidated year-over-year $X.XX I'll X.X% on quarter X. billion.

X.X%. and were contributed Our currency core up sales X.X%

in on which year We fourth continue to pricing, sales execute quarter prior period. the the contributed over growth to X% well

see profit, adjusted points X% can gross XX increased XX.X%, was the margin points on Gross this XX.X%. margin to million. profit XX $XXX benefit and prior basis operating which expanded in up quarter. from our X% to Adjusted a You operating profit year-over-year fourth year-over-year basis basis year increased

cash on U.S. As Jennifer in led declined quarter offset Argentine relative we in in to a region to the the by the the further the dollar. Late fourth a mentioned, Argentine reduced significant was the peso XX% headwind the peso our quarter, segment. QX. of that value PQI This in than devaluation and more hand of significant

was basis, or to headwind million points profit basis for year-over-year headwind adjusted XX was the point the the a full $XX or On operating And impact basis fourth to profit margin. it $XX year, adjusted our the a total quarter million of operating margin. XXX

XXXX cash and $XX in We million approximately $X Argentina. with ended million of of accounts receivable

further of of quarter, We year-over-year $X.XX in serving Argentine quarter. continue the and peso from net EPS $X.XX above our the share to this X% impact of to fourth Despite while devaluation country. high of end guidance in we devaluation impact $X.XX adjusted our needs adjusted was EPS range. headwind, the The mitigate delivered options the approximately customers in earnings fourth per evaluate the up the the

the cash million XXX%. We free also delivered strong cash conversion representing $XXX flow, We of conversion generated quarter. cash flow of free in

I'll with the Moving cover to chart, Quality. segment starting the next highlights, Water

a to Our a grew compared of X%. prior on just Water sales sales, in X% the was X.X% million benefit. X-year about growth core delivered core as period, over Currency segment year-over-year X.X% a basis. Core Quality growth for year Quality Water to bringing stack X.X% up $XXX year-over-year

contributed sales Pricing QX X.X% core XXXX. growth in to

both at our to see strong industry, where steady continue Trojan's industrial treatment and the ultra-pure in across for demand markets semiconductor manufacturing markets growth with ChemTreat in UV solutions water of water. high and systems demand requires for municipal chips We

expected, in budgets in now water year-over-year to consistent continue profitability where increased for productivity. been and primarily On in be in Adjusted operating reflects consecutive key across in China funding. basis analytics And pricing quarters. note, water up X the sales was Quality all for and The X% sequential municipal experienced government lower businesses we demand XXX China, XX%. segment increase a impacted execution Water in have year-over-year reductions as by points strong analytics, positive operating to improved with profit margins

profitable For Water with XX.X%. the sales profit Quality X% and points delivered margin basis adjusted up core full operating to growth XX steady, year, up

basis. sales XXXX both with annual Jennifer operating all-time $X Water billion $XXX As levels of Quality over and million, year mentioned, for adjusted on marked high a record profit an

next to Moving page. the

PQI declines delivered was the Our X.X% offset million quarter, benefit versus the to from sales Core up X.X% X.X% of more related markets. CPG prior $XXX from segment than fourth modest benefit. period. volume sales year in pricing as quarter, grew year primarily X.X% prior the Currency at

came While and demand assumptions. our steadily improved still year-over-year, in customers from quarter better during than down the CPG guidance

Additionally, over in prior sales quarter. into came anticipated, than up the X% better China year

and major From both sales in in product coding perspective, growth sign. marking encouraging X% the an with grew color solutions with product year-over-year mid-single line across core a digits recurring every sales packaging at about year-over-year. PQI's grew and line, solutions segment and

we early sequential are and continue the food markets, begin end increased We cautiously about signs as our to demand across and said, from of we recovery volumes led PQI's here are optimistic by CPG of customers. beverage XXXX. still stages in stabilization That see

XXX PQI's devaluation the unfavorable quarter, margin profit profit the impact impact the operating for profit adjusted point XX.X%. headwind fourth operating fourth resulting quarter basis the full basis to in and for basis resulted of year-over-year million That adjusted of a was on in year. These the points operating adjusted peso. of $XXX Argentine XXX results a from the include margin in headwind

and profit from expanded low the XX%. profit Excluding fourth adjusted about devaluation, peso margin digits double operating underlying PQI's year-over-year the grew Argentine to operating quarter, impact for the

drivers grew digits to profit XX%. profit underlying on underlying of margin benefits And high and cost improved flat the full sales were actions expanded for the from optimization operating PQI's profit pricing execution and margin adjusted single primary in year, the performance. and Strong about

to China we devaluation result currency PQI within the the lower For these able considering and consumer and in great were in a teams building as challenging a XXXX. full profitability significant withstand The headwinds for were with Argentina. positive to turn in year-over-year, enter XXXX from momentum PQI customers, the great sales a destocking flat packaged the and essentially segment headwinds at goods result volumes year, economy

now our flow. cash to balance and Turning sheet

operations capital million flow During million from invested the Free $XXX quarter, we the million in in flow generated resulting $XX was conversion XXX%. free cash cash quarter cash expenditures. in and of $XXX of

demonstrates the Beginning in flow cash that not any again quarter Note our cash strong interest costs of have the to did QX XXXX. $XXX related we $X.X in This in and payments was X.Xx. payments million. free At XXXX, third was generation gross capabilities was $X.X we interest will first have of debt in businesses. resulting quarter. billion hand billion cash net on debt year-end, leverage Net and

have financial In create shareholder long-term we flexibility we ample our position and summary, liquidity. This us further to in the gives strengthened how value. deploy during quarter capital

secular and cash both flow growth businesses in value drive know, through you ROIC investment strategic long-term drive our growth with as in acquisitions creation. drivers opportunities, organic bias, Our is to aligned growth high earnings that of in compounding and

Within line with for of shareholders. $X.XX capital capital quarter. framework, the framework, cash also fourth declared to we flexibility allocation a In maintain to per our we our return dividend share

Turning guidance across with our year-over-year assumes now for growth our basis. single-digit full of the grow on both for expect segments. to core to digit year, This sales XXXX. single a our low we expectation low Beginning

are prepandemic XXX with XXX to price, points historical targeting basis of We consistent levels.

Our guidance reflecting $XXX full of annual stand-alone the rate costs. other expense of assumes and about run corporate million,

peso. more benefits adjusted the margin, assumes improvement XX at of offset targeting XX level expenses. Looking Argentine XX this year. operating profit stand-alone than from improvement we lower corporate to margin points to basis across operating from are basis XX to of headwind of rate and businesses company the approximately exposure the benefit points profit full XX-point a These run points basis XX and This

the guidance rate year that relatively for the guidance quarter-to-quarter growth sequential $X.XX full XXXX, is range half tax second core first sales EPS the XXXX a digits. From in per year-on-year growth improves perspective, around an in $X.XX core in of to low effective steadily with up year core and assumes the to XX%. adjusted through sales half, sales assumes growth This our Our flat share. per of the share mid-single

we Quality QX now in level, to modestly negative. flat year-over-year. flat At we approximately segment XXXX, expect expect sales flat positive to Water core sales be sales PQI be Looking to at to core be and core modestly in to

sales core tough a a XXXX, XX% reminder, As was in in Quality QX Water growth resulting year-over-year comparison.

resulted Water which sales Quality, range per EPS the portfolio guidance in small the operating quarter. basis to QX XXXX points the to is the XX and profit adjusted We lines of shutdown share. of pruning for of our Additionally, growth of in represents headwind in anticipate XX.X%, product $X.XX margin XX% core for adjusted $X.XX the segment to

up remarks this That turn Jennifer questions. I'll concludes my open back time, prepared the closing for for At call to before we the remarks. call

XX great results cash and delivered sales XXXX. profit free solid our margin growth, to a flow of points to dynamic Thanks, macro XXXX, expansion amid and core public a spin-off Sameer. off as a operating we and In conversion, summary, we XXX% executed a comparison In operating company. a successfully relative backdrop against from tough X.X% are start Danaher adjusted

we are our focused strategic Going executing on improvement driving forward, capital continuous that shareholders. creates delivering and long-term commitments, value allocation for disciplined

an and XXX% available we from capital growth are value creation. operational of strategic increased As our benefiting for with independent focus company,

secular businesses, VES of Veralto our combination sustainable, will differentiates with the to the drivers consistent playbook positions track leading value balance our and that our shareholder our deliver powered record. creation strength historical end us the our value. and essential confident proven the technology long-term durability provide The by of of brands, are growth for solutions and steady We markets strong our growth need of sheet,

look and purpose, we And our to build as we Resources. are inspired Vital the by unified our shared Most future, Safeguarding World's

having enduring ahead our diverse want remarks. That drive and team I is opportunities for challenges value by prepared the excited our customers biggest talented Our environment. a our thank about of to solve while helping concludes shareholders future call. for again positive joining bright the on to world's you the impact creation some

questions. to your happy this time, take at we And are

question we'll Instructions] our from Melius with Davis [Operator take And Scott Research. first

a like for been ramp? if Any what China there you? is or a you we're think bit big next color for not sequential It too, you in the closing are in your folks on sense of guys. so Looks sloppy on still little else surprise. But has a everybody telling of a here bottom any what quarters couple

markets in nice manufacturing. of to fourth we China our I Trojan seen year-over-year. We saw little Yes. We the mean, as came bit anticipate than in semiconductor now down, systems, they better quarter market. some in expected, think did have chip how that be I consecutive were quarters municipal were really growth in But UV we related a X to and stability anticipating.

in I bottom sequential performance for steady pretty think the second we're I going think anticipate XXXX, XXXX. improvement forward the much near of half stability and we

a half, same. We'll during improve see the year-on-year year. expect which bit So the throughout the more first we decline of sales of little the to balance

maybe start Scott, second from half And to the for in be for the Jennifer the guide little we way stabilizing But China will look year, is the add headwind us. effectively, model half, and positive. of of it's the said, bit I it a Yes, going just sequential we first improvement. can perspective, of kind as

to So about our that's how think of guidance. China in we're terms going

just returning Still, just want for to the your imagine And I this, focus around Okay. capital. know remarks, potential Helpful. don't in prepared is returning changing Sameer, M&A. I would mentioned about you -- I gears, overread then but -- something

and in about pipeline that the of M&A So you perhaps guys or of thinking transactions just what part and how you're on feeling equation. XXXX likelihood an on are an update potential

Yes.

ongoing M&A. in M&A the with remains towards strong we bias But PQI to being capital the in pipeline number did return Water an for Quality I of quarter a considered. We have obviously, $X.XX opportunities dividend. continued the fourth shareholders, think our announce and both of

So to Danaher be a of from company in as said to we're right inherited the approach going the maintain, we've right the disciplined terms we price. it's got that before, right at market,

we're a like In terms And of but assets VES. business of margin we we different of we terms in in that the the of do that variety kinds improve we of have targets do profile whole terms at, have through durability that expansion operating use of a of the businesses similar like valuation, model. looking can

So yes, are deployment. committed capital value fully shareholder we to long-term through

Freudian of slip. and in 'XX, luck on start. Best congrats the

of coming through, you. That's XX years Thank Danaher Scott.

And our Markets. we'll take Dray next from Capital with question Deane RBC

in It you the the Maybe we'll Veralto was that just of frictional be? really transitional those costs a European did shutdown like portfolio. some and still now of what with filtration question I housekeeping outlier line portfolio through kind there the But might business. the of running what more frame you being P&L, still frame company. and Can be start some terms timing of services? know for a frictional of characterize are new an And separation just that us be might in that might costs

let the function. Yes, start well much rate should as stuff. cost seeing as QX, pretty Deane, Like on run frictional as I basis of the that corporate in the guide, we the said company start starting kind me stand-alone cost on the just think we

kind in in you corporate have really rate. other million of the that $XXX the represents So guide run the

or frictional pretty of major sort beyond costs, the there's much that, onetime as So well. done cost no

said On a was side, separation clean we very [TSS] this as have a from [TSA] the perspective. Deane, earlier,

of minimal together. dollars, very is like it terms in it's So rounding

kind think remaining So of I cost, any about any se. frictional wouldn't per

Water basis said, -- points and portfolio it's the side as side. on portfolio the the Quality XX on side, impact, we On up

earn as Danaher the of you really the took $XX took did up is place $XX-ish kind of as regular geography just comes hurdle some of again, math, its capital lines the product a back, action some it of some million minor the that that some good of filtration million, every kind just can not has inherited lines stewards of down headwind that and sitting product meet So portfolio." actions. assets do combinations of from And a saying, to to we portfolio a "Hey, frankly. in But cleaning we so product cleanup, line the we sort

are point? this most know a continuous cleanups but of I there's at those done review,

transformation took ongoing Yes. We at strategic revenue. amounted the in sort would on about basis. that annual a on I million return material mean, investment. that where will we X $XX needs an minor the and appropriate opportunities the we prune the to of to continue as nothing see and there's we portfolio be look say And invest standpoint. growth required actions done from But I to

question but Great. a bit And second related. then just

hearing one brand mentioned mean, as this I'd within interested filtration. be membrane in Danaher a Filtra. leaders about filtration. You a of Aria fabulous Pall the bit was I in Water,

in Just do how strategically give and what of a Veralto, kind of either sense and are you for positioning have? you us opportunities where business markets end this growth what

and Well, rebranded this Yes, We're Filtra the Water as in Pall how in actually we've applications for is reuse. potable cited you business critical demand, very seeing strong water business, business. investing bet. and particularly you drinking we're there, Aria pivoted the

comes this But that's mobile product highest we line important North opportunities in focus to technology. of conservation. recycled additional more treatment. water return investments America water in resources, have in So with certainly the the it macro, part and repositioned to becoming it's an And more reclaim, essential allocate when

Kaplowitz we'll And take Citigroup. from our Andy question with next

color said, did to you And beverage product guided seeing digits in yet and growth. of more core the growth are you're food X% over to you markets? comparisons recovery, bit accelerated know We Sameer, particularly mid-single easier, packaging customers. you core what into had a as significantly you signs mention early versus came relatively you in us Jennifer, but focused I give can low quality think in QX, down QX.

just guide the you continued know single-digit elaborate for on to segment So seen that a flat tough to it leading you seeing? you you're And you QX? I down Is suggested could as QX to we Have for here? is growth comparison what 'XX. recovery low started

Yes.

the for you thank So question.

we what here completed. largely think I been that has we destocking customer of as came said out QX,

are We XX% direct-to-customer short-cycle business.

in have digits don't by consumables year-over-year. inventory a of spare And lot of also indicators hearing solvents in way parts the see in did the market sales QX we we PQI lot that from So But believe of a turned positive. and ink, leading depots. we're intermediary mid-single is customers have sitting of the what growing of some

sectors Now see start those packaged this markets. coming rebalances. food is volume in and But consumer to and predominantly are rebalance, starting and goods the certain that to price back that in of beverage as and online, volume like groceries we're some and to increase the equation of lines as start

that the recovery do see sequential we'll think to but to continue about we So of how the modestly and I a that. optimistic we're year, steady about prudent think course being think over

I if just as of add comments guide. a Andy, it And can the couple relates to

the customers the we CPG We expect what also look of from at being overall seeing steady as sequentially, in but market recovery cautious the in kind commentary the channel. and we're CPG

an is year we're growth be tale perspective, business. the -- the volume from halves. for So overall core a low single-digit going X to And of but modeling in

point, single the recovery. single-digit volume side, that the kind guide of we're at accelerating -- on this low in positive in Effectively digits that's decline perspective, on low essentially modeling market going a gradual second into half to means and from

we're So guide. of that's kind in modeling how it the

guided has a bit QX, on side. a was still also question Water Okay. the Quality easier. little you slowing been Very comps but helpful. It than year-over-year, maybe are similar then in getting a better And

on reticence And do for I of U.S.? you growth China some in Quality, seeing are the But guess focused is it to in levels So going part you still really Hach? getting municipal point just of on overall it's Water have you at towards slowing 'XX? customers? U.S. some the Hach down more What's visibility in mid-single-digit there. back

and Yes. first nice here cited the the comparative you see QX related growth for we North I comps QX. think and a our from potable out coming saw quarter We basis analytics is UV of year-over-year right? of challenge, treatment America, to basis. growth sequentially in this But comp I to particularly Trojan and for our steady systems, demand demand is to QX. on see water. some last increase a of nice tough see year-over-year steady there mean for demand on we Europe, reuse continue saw really in

a terms Year-over-year of do demand third any and but improvement lower suppressed China is here. the optimistic in I we're throughout of funding going it's in although sequentially coming its demand the don't seeing about we're quarters sequential cautiously think gate. over stable relative to the had just in think to government We down still quarter due was China. course the bit demand, the to little XXXX, out January of get worse in positive here right we've a start China

demand So are happening. investments variable it's a for good see we little bit across the geographies, where but

tends QX have kind strong, be the on you're I budgets QX, institutions portfolio people point is, of and similar also, the to is just And one Quality, do of the of to would Water how Andy, budget. our where finishing bit. a are any up, the are as one making to comp, are as about a little it's quick very about a and most Quality beginning the municipalities going Jennifer QX decisions, that Water the spending think little we kind add But year, just they as in think not seasonality. reticent mentioned. And see to Yes. of tough does

lot, to mind a of bit it's and little not QX Water into but seasonal into Quality, as element a something that's there's keep well the guide. that's in So whole kind baked of

Mike Baird. Halloran with question next our take we'll And from

about? given Maybe point pieces for similar you the you think there And the the adjust quarter, different to? about Is about pattern margins that X the have segments? and a thinking about we were way about kind how you of fourth think around Should think the then pattern the you're level? do do you 'XX follow could the deval, you into think everything. if right from through a a moving revenue on how to to How cadence just talking and margin Is conversation separation XXXX? the year jump-off

that take one. I'll Mike, Yes,

you're from to to As into we profile, strong pretty of to going going improvement the In the the sequential kind biggest look to rate QX a we're margin XX through finish to of year. There's corporate a the to QX, XX going move deliver expect the XXXX, QX. at But full we we the basis the year, cost. be imagine, as had run probably of as on a can points. you standup impact see and sort for

to in going compare on a year-over-year a QX have tough that's So basis.

some making both year, headwinds the to that and going expansion, for we marketing run PQI about are XX think the kind growth investments But overall, deliver expect of and the Quality towards oriented initiatives, which sales more of points you select QX. margin in kind costs. roughly impact of in rate corporate XX Water from also side basis and million expenses and to as to side, that's of $XX includes to full standard company going We're come

will it. to XX of how is XX% we be about So the roughly the points fall-through XX% of basis margin think

year? that. expense And this, to What's interest might this expected and the missed be have I Okay. I appreciate

income. run includes modeling rate $XXX interest That a a a us. you purposes. $XXX is bit benefit assumption expense, little of think Interest on should of, overall, the for Mike, basis a Yes. from million for roughly But million good

Jones And with our Stifel. question next we'll from take Nathan

PQI. on first Question

you Can consumables? would see equipment start recovery typical to consumables bit it side see would think a you before first. talk in you time lag improvement a that little improvement the in what about that from be makes I on sense the

Yes.

X company certainly around I say typically think customer. couple individual depends generally, It I it's of that the it's But a and quarters. quarters. would upon

follow up to filtration. that where lead of A Are of the we questions wanted build that model, you on comments change some that made I have strategy a me at there. Aria up? the leverage model of talking you're the couple kind Deane's in about business? business sort of kind in able that that then of the kind there water water-as-a-service thing strategy you kind to testing Is we're to footprint about about the And outsourced to question looking of Okay. of

mean, our look to of that certainly along. That business customers the certainly opportunities every needs is where it something considered of take meet but align the currently the fully could conceivably and will the its with moving be sort in course not in of remains be I at -- and are. be strategy purview, Yes. to position the a to portfolio

Yes. The really more strategy point, combination. around Nathan, around is geography focusing product

this is just I strategy. in want complete a highlight change [wholesale] that. So to not

cost. And just on last the price one

that, to margins to said you Are points slightly accretive that's You in XXX neutral basis XXXX. or assuming XXX to margins?

maybe think slightly I Nathan. No, overall, positive,

overall and margin, through the optimization to the as think helpful the far frankly, a of at I a basis. into XX improvement look going price think to you when XX will holistic combination I of just have to it's On just contribution initiatives basis, cost of pace a It's margin. as well. improvement to the at continuous be come look it volume, going bake of some and that are holistic as

of XX%. through in pretty healthy result will a So fall that

Krill [Operator Instructions] with our We'll from next Andrew take Deutsche Bank. question

I maybe back pretty on a by versus and the number. very there's down business mentioned going around segment margins? But to wanted get help corporate a add just a seasonal anything know costs. big this And guide go little the we else it the XQ on I XX% just sequentially XX% in sequentially Argentina to isn't any more margin seems if bit XQ of XX.X%. you like to like and back

take Yes, that one. Andrew, maybe I'll

only at As margin things X sequential are of at specific kind there you look play. the QX, to

one is and corporate ramp-up the The first company the the costs standalone costs. of

have for to us, be the know, an that's QX to year-over-year As going impact. it's in compare toughest you going

bring related the Even costs we to to costs. were stand-alone going we're how some pretty the in in company of in QX, judicious

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will and of of I second impact. at think look those make, should that in benefit the landscape flowing both Quality in as half there's the we year. of opportunity investments select we investments growth And start the the the P&L want kind through PQI, Water to some

if of the kind of back XX driving we basis we otherwise margin. say, a step to that that's overall, look X going those expect it. the lastly, we things and have margin materials good And combination is said, a as XX to There's deliver year, right? full QX kind again And pretty always of nothing major just little delivering year, much water, and beginning to I start is at feel slower would really or stronger, impacting to the points, is the decrement, that. at of So and given about I

sometimes can margin I good step at quarter-to-quarter, there year. some the but in and think variance, back be to the So full just it's look

the I much Great. can Any lot know it is on that you And think a way quick the then benefit comments versus and in focused be on innovation follow-up. discussion of I in there's segment new this how a of other? XXXX? products quantify And might year. for of the more a just intro one

Yes.

across been sales we're do well. model to the as part X% through think our a problems. board, and go from carrying case R&D high generally of as standpoint spend an I focus as of solving forward terms see are the X% driving where that and the that think has acute on we more independent dollars return I of on those stand-alone investments of to what innovation. customer compelling and about That history strategically we the have company, in really

average So and you as about Water across think PQI. both can spread that evenly Quality being

this presenters will time. our remarks. we program [Operator I any over Instructions] back no to closing or have the And questions at for that it turn further now appears additional

to is time. and talking fourth call we year your quarter engagement Shelby. earnings Taylor. on joining you Ryan us just We This today. look full Thanks, your and want appreciate next our you. everybody I Thank forward support, thank and to to for

Thank your That concludes today's teleconference. for participation. you

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