Veralto Corp
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ITEM 1. BUSINESS
Our Company
Veralto Corporation’s unifying purpose is Safeguarding the World’s Most Vital ResourcesTM. Our diverse group of leading operating companies provide essential technology solutions that monitor, enhance and protect key resources around the globe. We are committed to the advancement of public health and safety and believe we are positioned to support our customers as they address large global challenges including environmental resource sustainability, water scarcity, management of severe weather events, food and pharmaceutical security, and the impact of an aging workforce. For decades, we have used our scientific expertise and innovative technologies to address complex challenges our customers face across regulated industries – including municipal utilities, food and beverage, pharmaceutical and industrials – where the consequence of failure is high. Through our core offerings in water analytics, water treatment, marking and coding, and packaging and color, customers look to our solutions to help ensure the safety, quality, efficiency and reliability of their products, processes and people globally. Veralto is headquartered in Waltham, Massachusetts with a workforce of nearly 17,000 employees (whom we refer to as “associates”) as of December 31, 2025, of whom approximately 6,500 were employed in North America, 5,000 were employed in Western Europe, 500 were employed in other developed markets and 5,000 were employed in high-growth markets. Veralto defines high-growth markets as developing markets of the world which include Asia (with the exception of Japan, Australia and New Zealand), Latin America (including Mexico), the Middle East, Eastern Europe and Africa. Veralto defines developed markets as all markets of the world that are not high-growth markets.
Veralto Corporation is a Delaware corporation and was incorporated in 2023 in connection with the separation of Veralto from Danaher Corporation (“Danaher” or “Former Parent”) on September 30, 2023 as an independent, publicly traded company, listed on the New York Stock Exchange (the “Separation”). At the time of the Separation, Veralto Corporation consisted of Danaher’s former Environmental & Applied Solutions segment. The Separation was effectuated through a pro-rata dividend distribution on September 30, 2023 of all of the issued and outstanding shares of Veralto common stock held by Danaher as of September 13, 2023. Each Danaher stockholder of record as of the close of business on September 13, 2023 received one share of Veralto common stock for every three shares of Danaher common stock held on the record date.
Veralto operates through two segments – Water Quality (“WQ”) and Product Quality & Innovation (“PQI”). Our businesses within these segments have strong globally recognized brands as a result of our leadership in served markets over several decades. Our WQ segment provides innovative products and services that improve the quality and reliability of water with leading brands including Hach, Trojan Technologies and ChemTreat. Our PQI segment enables our customers to promote consumer trust in their products and help enable product innovation with leading brands including Videojet, Linx, Esko, X-Rite and Pantone. We believe our leading positions result from the strength of our commercial organizations, our legacy of innovation, and our close and long-term connectivity to our customers and knowledge of their workflows, underpinned by our culture of continuous improvement. This has resulted in a large installed base of instruments that drive ongoing consumables and software sales to support our customers. As a result, our business generates recurring sales which represented approximately 61% of total sales during the year ended December 31, 2025. Our business model also supports a strong margin profile with limited capital expenditure requirements and has generated attractive cash flows. We believe these attributes allow us to deliver financial performance that is resilient across economic cycles.
We also believe that the Veralto Enterprise System (“VES”) provides us with a strong foundation for competitive differentiation. VES is a business management system that consists of a philosophy, processes and tools that guide what Veralto does and measure how well Veralto executes, grounded in a culture of continuous improvement. VES processes and tools are organized around the areas of Operational Excellence, Growth and Leadership, and are rooted in foundational tools known as the VES Fundamentals, which are relevant to every associate and business function. The VES Fundamentals are focused on core competencies such as using visual representations of processes to identify inefficiencies, creating standard work, defining and solving problems in a structured way, and continuously improving processes to drive long term impact.
Veralto uses VES tools to improve our profitability and cash flows, which support our ability to expand our addressable market and improve our market position through investments in areas such as our commercial organization and research and development (“R&D”), including software and digital solutions. Our cash flows also
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support acquisitions to enhance our product capabilities and expansion into new and attractive markets, which we have successfully done through the acquisition of over 85 businesses over more than two decades.
Our two segments are described below:
Water Quality
Our Water Quality segment provides one of the most comprehensive portfolios of water analytics, and differentiated water treatment solutions that enable the reliable delivery of safe drinking water by public and private utilities - from source water to the consumer and back into the water cycle. In addition, we help improve the efficiency of processes and production operations of our customers and ensure that their wastewater discharge meets regulatory standards and their environmental and sustainability targets. Under our Hach, Trojan Technologies, ChemTreat, and other globally recognized WQ brands, we provide proprietary precision instrumentation and advanced water treatment technologies that our customers rely on to measure, analyze and treat water in residential, commercial, municipal, industrial, research and natural resource applications. In addition to instrumentation, our suite of water solutions includes elements used on a recurring basis such as chemical reagents, services and software. Together, these offerings help promote the quality and reliability of water and optimize our customers’ operations, decision making and regulatory compliance activities.
WQ focuses on what management believes are the most attractive sub-segments of the water value chain helping our customers address some of their most pressing and complex challenges, such as water scarcity, water safety, severe weather events and management of precious natural resources. Our businesses have been at the forefront of delivering breakthrough innovations to our customers. For example, Hach has been a leading player in the field of turbidity testing for over 60 years, pioneering the first regulated method and introducing multiple new generations of instruments and related products. Today, we have one of the most comprehensive portfolios of solutions allowing our customers to test the broadest range of analytical parameters and the ability to harness their data across installed assets. Increasingly, our customers leverage our digital solutions to support regulatory compliance, automate workflows and allow for remote operations and predictive capabilities to address new challenges posed by changing regulations and an aging and less experienced workforce.
Our key WQ brands provide solutions that our customers rely upon to manage critical operations involving water.
•Hach, the best known of our global brands in the WQ segment, recognized for simple and reliable tests, offers analytical measurement instruments, digital solutions and related consumables that test water quality; we serve over 149,000 customers, including small community water utilities, large public and private water utilities and industrial customers and help to ensure safe water for more than 3.4 billion people every day - approximately 40% of the global population.
•ChemTreat associates work alongside customers across many industries to understand their water challenges and tailor chemical treatment plans and dosing protocols to help optimize customers’ water usage and maximize reuse, and reduce water pollution; our solutions helped customers save over 88 billion gallons of water in 2025.
•Trojan Technologies offers UV and membrane filtration systems for water disinfection and contaminant removal; our systems support the treatment of 15 trillion gallons of water annually and in turn help to improve access to clean water for more than 312 million people every day.
Product Quality & Innovation
Our Product Quality & Innovation segment provides a broad set of essential solutions that brand owners in consumer packaged goods (“CPG”), food and beverage, pharmaceutical, and industrial sectors use to support product authenticity, traceability, quality control, regulatory compliance, accelerate speed to market, and reduce material costs and waste. Our solutions play a central role in helping our customers convey the quality and safety of their products and build trust with consumers. Under our Videojet, Linx, Esko, X-Rite, Pantone and other globally recognized PQI brands, we provide marking and coding, and packaging and color instrumentation, software, and related consumables. Our customers across consumer, pharmaceutical and industrial sectors utilize our offerings to bring products to market, mark packaging in compliance with industry and regulatory standards and convey the safety of products to customers. Our solutions also enable the effective execution of product recalls, thereby helping to mitigate public health risks. Our software solutions are designed to address higher-value, design-oriented portions of the packaging management value chain, such as digital asset management (“DAM”), marketing resource management (“MRM”) and product information management (“PIM”), that help our customers maximize efficiency of operations while generating an attractive source of recurring sales for us. We serve a majority of the
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top 25 global CPG brands and a majority of the top 20 pharmaceutical brands use PQI’s solutions, enabling confidence and trust in the brands and products consumers use daily.
Our PQI brands provide brand owners and consumer packaged goods companies with essential solutions that improve their ability to develop, maintain and ensure the authenticity of their brands.
•Videojet, our largest operating company within PQI, and Linx offer technologies that mark and code packaged goods and related consumables. Videojet is a leading provider of inline printing solutions for products and packaging with marking and coding systems used by many of the top global consumer brands. Printing billions of codes a day, our solutions help ensure transparency, safety, authenticity, tracking and traceability throughout the global supply chain.
•Esko facilitates the creation of new packaging designs through design software and imaging systems. Esko’s offerings are extensively used by established and emerging brands and their suppliers, with over 25,000 customers in over 140 countries. TraceGains, acquired in 2024, provides leading cloud-based software solutions that enable connected data and digital workflow management to help consumer brands meet increasingly stringent compliance and reporting regulations for food and beverage safety and traceability.
•X-Rite serves over 13,000 brands and suppliers across 140 countries by providing color management solutions that measure the quality and consistency of color and appearance on printed packages and consumer and industrial products.
•Pantone is the preeminent color standard in the design industry leveraged by designers, marketers and others in the creative community, not only to ensure color standardization but also to understand the impact of color on consumers.
Sales and Distribution
In 2025, Veralto generated $5.5 billion in sales derived from a business mix that is highly diversified by geography and end-market. Our business model is highly resilient with approximately 61% of our sales derived from consumables (e.g., reagents, inks and process chemicals), spare parts, services (e.g., maintenance and inspection), and software (including Software-as-a-Service, or “SaaS”, and term-based licenses). We serve a broad range of customers spanning the municipal, industrial, food and beverage (“F&B”) and CPG end markets, many of which are highly regulated. We generated 48% of our 2025 sales from North America, 23% from Western Europe, 2% from other developed markets and 27% from high-growth markets. We define other developed markets as Japan, Australia and New Zealand. We define high-growth markets as developing markets of the world which include Asia (with the exception of Japan, Australia and New Zealand), Latin America (including Mexico), the Middle East, Eastern Europe and Africa. Our strategic investments in these markets have scaled our presence in high-growth markets to approximately 5,000 associates with 9 local manufacturing facilities.
Veralto distributes approximately 18% of its technology and equipment products through third-party distributors. No individual customer accounted for more than 10% of sales in 2025, 2024 or 2023.
Acquisition Activities
Veralto views acquisitions as a key part of its growth strategy. These acquisition activities are intended to supplement Veralto’s core growth and support ongoing expansion of its business, including through new technologies, additional products, organizational strength and geographic breadth.
Sustainability
We are deeply aware of our responsibility to our stakeholders and the opportunities before us to make a global difference-through our innovative products, our impact on the planet, and our people-as reflected in our unifying purpose, Safeguarding the World’s Most Vital ResourcesTM. In particular:
•At our core, the products and services we offer are directly linked to the sustainability objectives of many of our customers. For example:
◦Our WQ segment offers products and services that enable municipalities to deliver clean water while helping industrial customers to be good stewards of water in their processes.
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◦Our PQI segment helps our customers safeguard everyday essentials by protecting the food supply chain, ensuring product quality, freshness, and consistency, while maintaining brand authenticity.
•Our leadership has conducted a sustainability prioritization assessment to inform our sustainability priorities.
•Informed by our prioritization assessment, we intend to set and communicate additional public sustainability goals and we expect to rigorously track our progress towards achieving those goals.
•Our sustainability program is organized around the three pillars of Products, Planet, and People. Coupled with strong corporate governance practices to provide oversight and management support, the sustainability program is positioned to iteratively prioritize initiatives using the insights we learn from engaging with our stakeholders.
•As delegated by Veralto’s Board of Directors, the Nominating and Governance Committee assumes primary oversight responsibility (interacting with the Audit and the Compensation Committees, as appropriate for certain matters) to provide oversight for Veralto’s sustainability program, including Veralto’s sustainability strategy, targets, and metrics. Veralto’s Board reviews our sustainability program at least annually.
•At the managerial level, Veralto’s Senior Vice President of Strategy & Sustainability, who reports directly to our President and CEO, oversees our sustainability program and the Veralto Sustainability Council and is responsible for reviewing and approving Veralto’s sustainability reports. Veralto’s Sustainability Council develops and drives our roadmap of sustainability initiatives. This council and its working groups include representation from our WQ and PQI segments, as well as the corporate human resources; environment, health, and safety; VES; procurement; investor relations; finance; IT; corporate communications; and legal functions.
•In addition to outreach conducted as part of our prioritization assessment, we engage with stakeholders to inform our priorities and goals and the strategies through which we can achieve them. We intend to proactively solicit the voice of our stakeholders, including through associate surveys, meetings with investors, collaboration with our customers and partners, and participation in industry associations.
•We are evaluating opportunities to make an impact through collective actions such as sustainability-focused partnerships, initiatives, industry alliances, and grant-making opportunities.
•We will continue to leverage VES to help us achieve our sustainability goals and facilitate continuous improvement in our sustainability program.
The following discussion includes information common to all of Veralto’s segments.
Materials
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Financial statements
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide material information relevant to an assessment of the Company’s financial condition and results of operations, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources. This MD&A is designed to focus specifically on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of future operating results or of future financial condition. This includes descriptions and amounts of matters that have had a material impact on reported operations, as well as matters that are reasonably likely based on management’s assessment to have a material impact on future operations.
This MD&A is designed to provide a reader of the accompanying financial statements with a narrative from the perspective of management. This MD&A is divided into seven sections:
•Basis of Presentation
•Overview
•Results of Operations
•Financial Instruments and Risk Management
•Liquidity and Capital Resources
•Critical Accounting Estimates
•New Accounting Standards
•Separation from Danaher
This MD&A should be read together with Part I, “Item 1A. Risk Factors” and the accompanying Consolidated and Combined Financial Statements and Notes to Consolidated and Combined Financial Statements (“Notes”) included in Item 8. of this Annual Report on Form 10-K. This MD&A generally discusses 2025 and 2024 items and year-over-year comparisons between 2025 and 2024. Discussions of 2023 items and year-over-year comparisons between 2024 and 2023 are not included, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) in Part II, Item 7 of the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2024 with the Securities and Exchange Commission on February 25, 2025. This MD&A includes forward-looking statements. For a discussion of important factors that could cause actual results to differ materially from the results referred to in these forward-looking statements, see “Information Relating to Forward-Looking Statements.”
BASIS OF PRESENTATION
The Company completed the Separation from Danaher Corporation (“Danaher” or “Former Parent”) on September 30, 2023, the first day of its fiscal fourth quarter of 2023 (the “Separation”). Before that date, Veralto’s businesses were comprised of certain Danaher operating units. The Separation was completed in the form of a pro rata distribution to Danaher stockholders of record on September 13, 2023 of all of the issued and outstanding shares of Veralto common stock held by Danaher. Because September 30, 2023 was a Saturday, not a business day, the shares were credited to “street name” stockholders through the Depository Trust Company on the first trading day thereafter, October 2, 2023. Veralto’s common stock began “regular way” trading on the New York Stock Exchange under the ticker symbol “VLTO” on October 2, 2023.
OVERVIEW
General
Refer to “Item 1. Business” for a discussion of Veralto’s strategic objectives and methodologies for delivering long-term shareholder value. Veralto is a multinational business with global operations. During 2025, approximately 56% of Veralto’s sales were derived from customers outside the United States. As a diversified, global business, Veralto’s operations are affected by worldwide, regional and industry-specific economic and political factors. Veralto’s geographic and industry diversity, as well as the range of its products and services, help limit the impact of any one industry or the economy of any single country on its consolidated operating results. The Company’s
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individual businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and the outlook for the future.
As a result of the Company’s geographic and industry diversity, the Company faces a variety of opportunities and challenges, including rapid technological development in most of the Company’s served markets, the expansion and evolution of high-growth markets, trends and costs associated with a global labor force, consolidation of the Company’s competitors and increasing regulation. The Company operates in a highly competitive business environment in most markets, and the Company’s long-term growth and profitability will depend in particular on its ability to identify, consummate and integrate appropriate acquisitions and identify and consummate appropriate investments and strategic partnerships, develop innovative and differentiated new products and services with higher gross profit margins, expand and improve the effectiveness of the Company’s sales force, continue to reduce costs and improve operating efficiency and quality, effectively address the demands of an increasingly regulated global environment and expand its business in high-growth geographies and high-growth market segments. The Company is making significant investments, organically and through acquisitions and investments, to address the rapid pace of technological change in its served markets and to globalize its manufacturing, research and development and customer-facing resources to be responsive to the Company’s customers throughout the world and improve the efficiency of the Company’s operations. The Company defines high-growth markets as developing markets of the world which include Asia (with the exception of Japan, Australia and New Zealand), Latin America (including Mexico), the Middle East, Eastern Europe and Africa. The Company defines developed markets as all markets of the world that are not high-growth markets.
Business Performance
The Company’s overall revenues for the year ended December 31, 2025 increased 6.0% as compared to 2024. Core sales for the year ended December 31, 2025 increased 4.7% as compared to 2024. Currency exchange rates and acquisitions, net of divestitures increased reported sales by 1.2% and 0.1%, respectively. For the definition of “core sales,” refer to “—Results of Operations” below.
Geographically, the Company’s sales during 2025 in developed markets increased year-over-year by 6.4% driven by increased sales of 5.9% in North America and 8.0% in Western Europe. Sales in high-growth markets increased 4.8%.
The Company’s core sales during 2025 in developed markets increased 4.8% year-over-year driven by a 5.3% increase in North America and a 3.8% increase in Western Europe. Core sales in high-growth markets increased 5.1% driven by mid-single digit increases in Latin America and low-single digit increases in China.
Net earnings for the year ended December 31, 2025 totaled approximately $940 million, or $3.76 per diluted common share, compared to approximately $833 million, or $3.34 per diluted common share, for the year ended December 31, 2024. The increase in net earnings in 2025 as compared to 2024 was driven by increased sales, resulting from positive pricing actions and higher volumes, partially offset by higher cost of sales. Refer to “—Results of Operations” for further discussion of the year-over-year changes in net earnings for the year ended December 31, 2025.
Outlook
The Company anticipates 2026 results will be driven by the following expectations in each of the Company’s reportable segments:
•Water Quality: we continue to expect global growth led by positive secular growth drivers across municipal and industrial markets globally, and disciplined commercial execution. Segment performance is expected to benefit from municipal demand driven by recurring revenue from large installed base, while industrial demand is driven by regional end-market dynamics.
•Product Quality & Innovation: we expect continued global growth driven by steady demand in the consumer packaged goods market globally. Segment performance is expected to benefit from large installed base and new product offerings that help our customers convey the quality and safety of their products and build trust with consumers.
The potential effects of tariffs and prospective changes in trade policies remain uncertain. The Company’s objective is to implement appropriate countermeasures designed to mitigate the impact of these items, and other forms of macroeconomic volatility. Regardless of market conditions, the Company leverages the Veralto Enterprise System (“VES”) to support its customers, promote growth and drive continuous improvement.
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The Company’s outlook for 2026 reflects our current visibility and expectations based on current market factors. Our ability to meet our expectations are subject to numerous risks, including, but not limited to, those described in “Item 1A. Risk Factors” within this Annual Report.
Acquisitions
On January 22, 2026, the Company completed the acquisition of In-Situ, Inc. (“In-Situ”), for a cash purchase price of approximately $427 million, net of cash acquired. The Company believes this business will complement the Water Quality segment. In-Situ is a global leader in environmental water measurement and monitoring solutions with a leading portfolio of water quality sondes, water quality sensors and data management solutions that help customers monitor and measure the quality or quantity of surface and groundwater.
RESULTS OF OPERATIONS
Non-GAAP Measures
In this report, references to the non-GAAP measure of core sales refer to sales calculated according to GAAP but excluding:
•sales from acquired or divested businesses (as defined below, as applicable); and
•the impact of currency translation.
References to sales or operating profit attributable to acquisitions or acquired businesses refer to sales or operating profit, as applicable, from acquired businesses recorded prior to the first anniversary of the acquisition less any sales and operating profit, during the applicable period, attributable to divested product lines not considered discontinued operations. The portion of revenue attributable to currency translation is calculated as the difference between:
•the period-to-period change in revenue (excluding sales from acquired/divested businesses (as defined above, as applicable)); and
•the period-to-period change in revenue (excluding sales from acquired/divested businesses (as defined above, as applicable)) after applying current period foreign exchange rates to the prior year period.
Core sales growth should be considered in addition to, and not as a replacement for or superior to, sales growth, and may not be comparable to similarly titled measures reported by other companies. Management believes that reporting these non-GAAP financial measures provides useful information to investors by helping identify underlying growth trends in the Company’s business and facilitating comparisons of the Company’s revenue performance with its performance in prior and future periods and to the Company’s peers. Management also uses these non-GAAP financial measures to measure the Company’s operating and financial performance and uses core sales growth as one of the performance measures in the Company’s executive short-term cash incentive program. The Company excludes the effect of currency translation from these measures because currency translation is not under management’s control, is subject to volatility, and can obscure underlying business trends. In addition, the Company excludes the effect of acquisitions and divestiture-related items because the nature, size, timing and number of acquisitions and divestitures can vary dramatically from period-to-period and between the Company and its peers, and can also obscure underlying business trends making comparisons of long-term performance difficult.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of each non-GAAP financial measure to its most directly comparable GAAP financial measure.
Throughout this discussion, references to sales growth or decline refer to the impact of both price and unit sales and references to productivity improvements generally refer to improved cost efficiencies resulting from the ongoing application of VES.
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Sales Growth and Core Sales Growth
2025 vs. 2024 | 2024 vs. 2023 | |||||||||
Total sales growth GAAP | 6.0 | % | 3.4 | % | ||||||
Impact of: | ||||||||||
Acquisitions/divestitures | (0.1) | % | — | % | ||||||
Currency exchange rates | (1.2) | % | 0.3 | % | ||||||
Core sales growth (non-GAAP) | 4.7 | % | 3.7 | % | ||||||
2025 Sales Compared to 2024
Total sales increased 6.0% on a year-over-year basis during 2025 as compared to 2024 primarily as a result of a 4.7% increase in core sales resulting from the factors discussed below by segment. Currency exchange rates and acquisitions, net of divestitures increased reported sales by 1.2% and 0.1%, respectively, during 2025 as compared to 2024.
Price increases contributed 1.9% to sales growth on a year-over-year basis during 2025 as compared to 2024 and are reflected as a component of core sales growth above.
Business Segments
Sales by business segment for the years ended December 31 are as follows:
($ in millions) | 2025 | 2024 | 2023 | ||||||||||||
Water Quality | $ | 3,321 | $ | 3,138 | $ | 3,039 | |||||||||
Product Quality & Innovation | 2,182 | 2,055 | 1,982 | ||||||||||||
Total | $ | 5,503 | $ | 5,193 | $ | 5,021 | |||||||||
Sales and operating profit at the business segment level are discussed in detail below. For information regarding the Company’s sales by geographical region, refer to Note 4 to the accompanying Consolidated and Combined Financial Statements.
Cost of Sales and Gross Profit
Year Ended December 31 | |||||||||||||||||
($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
Sales | $ | 5,503 | $ | 5,193 | $ | 5,021 | |||||||||||
Cost of sales | (2,204) | (2,088) | (2,120) | ||||||||||||||
Gross profit | $ | 3,299 | $ | 3,105 | $ | 2,901 | |||||||||||
Gross profit margin | 59.9 | % | 59.8 | % | 57.8 | % | |||||||||||
Cost of sales increased $116 million, or 5.6%, on a year-over-year basis during 2025 as compared to 2024 driven primarily by higher year-over-year sales volumes and incremental materials and labor costs, partially offset by improved productivity.
Gross profit margins increased 10 basis points on a year-over-year basis during 2025 as compared to 2024, driven by positive pricing actions and higher volume as discussed below and to a lesser extent the net positive impact from the gross profit margin of recent acquisitions. The gross profit margin increase was partially offset by incremental year-over-year materials and labor costs, and the impact of product mix.
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Operating Expenses
Year Ended December 31 | |||||||||||||||||
($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
Sales | $ | 5,503 | $ | 5,193 | $ | 5,021 | |||||||||||
Selling, general and administrative (“SG&A”) expenses | (1,756) | (1,644) | (1,536) | ||||||||||||||
Research and development (“R&D”) expenses | (266) | (253) | (225) | ||||||||||||||
SG&A as a % of sales | 31.9 | % | 31.7 | % | 30.6 | % | |||||||||||
R&D as a % of sales | 4.8 | % | 4.9 | % | 4.5 | % | |||||||||||
SG&A expenses as a percentage of sales increased 20 basis points on a year-over-year basis during 2025 as compared to 2024 primarily due to incremental labor costs and sales and marketing growth initiatives.
R&D expenses as a percentage of sales slightly declined by 10 basis points on a year-over-year basis during 2025 as compared to 2024.
Operating Profit Performance
Operating profit margins were 23.2% for the year ended December 31, 2025 as compared to 23.3% in 2024. The following factors impacted year-over-year operating profit margin comparisons.
2025 vs. 2024 operating profit margin comparisons were unfavorably impacted by:
•Costs incurred during 2025 related to certain strategic initiatives - 20 basis points
•Reduction of the tax indemnification related to the Separation from Danaher - 20 basis points
•The net dilutive impact during 2025 of acquisitions and dispositions - 10 basis points.
2025 vs. 2024 operating profit margin comparisons were favorably impacted by:
•Transaction costs incurred during 2024 related to the acquisition of TraceGains - 10 basis points
•Higher 2025 core sales, partially offset by incremental labor costs, sales and marketing growth initiatives, and the impact of product mix - 30 basis points
WATER QUALITY
The Company’s Water Quality segment provides proprietary precision instrumentation, consumables, software, services and advanced water treatment technologies to help measure, analyze and treat the world’s water in municipal, industrial, commercial, residential, research and natural resource applications.
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Water Quality Selected Financial Data
Year Ended December 31 | |||||||||||||||||
($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
Sales | $ | 3,321 | $ | 3,138 | $ | 3,039 | |||||||||||
Operating profit | 844 | 768 | 730 | ||||||||||||||
Depreciation | 26 | 25 | 24 | ||||||||||||||
Amortization of intangible assets | 10 | 16 | 21 | ||||||||||||||
Operating profit as a % of sales | 25.4 | % | 24.5 | % | 24.0 | % | |||||||||||
Depreciation as a % of sales | 0.8 | % | 0.8 | % | 0.8 | % | |||||||||||
Amortization as a % of sales | 0.3 | % | 0.5 | % | 0.7 | % | |||||||||||
Sales Growth and Core Sales Growth
2025 vs. 2024 | 2024 vs. 2023 | |||||||||
Total sales growth GAAP | 5.9 | % | 3.2 | % | ||||||
Impact of: | ||||||||||
Acquisitions/divestitures | (0.2) | % | 0.3 | % | ||||||
Currency exchange rates | (1.0) | % | 0.4 | % | ||||||
Core sales growth (non-GAAP) | 4.7 | % | 3.9 | % | ||||||
2025 Sales Compared to 2024
Total Water Quality segment sales increased 5.9% on a year-over-year basis during 2025 as compared to 2024 primarily as a result of core sales growth driven by the factors discussed below. Currency exchange rates and the impact of acquisitions, net of divestitures increased reported sales by 1.0% and 0.2%, respectively, during 2025 as compared to 2024. Geographically, the increase in reported sales was driven by an increase of 9.5% in Western Europe, 5.5% in high-growth markets, and 5.0% in North America.
Price increases in the segment contributed 1.5% to sales growth on a year-over-year basis during 2025 as compared to 2024 and are reflected as a component of the change in core sales growth.
Core sales in the Water Quality segment increased 4.7% on a year-over-year basis during 2025 as compared to 2024. Geographically, core sales growth was driven by increases of 5.2% in North America, 4.8% in high-growth markets, and 4.0% in Western Europe. Core sales growth in high-growth markets was driven by mid-single digit core sales increases in Latin America, partially offset by low-single digit core sales declines in China.
The increase in core sales was driven primarily by the ultraviolet water disinfection and filtration business and the chemical treatment solutions business, and to a lesser extent the analytical instrumentation business. Core sales in the ultraviolet water disinfection and filtration business increased 6.0% in 2025, driven primarily by the municipal end-market. Year-over-year core sales in the chemical treatment solutions business increased 5.3% as a result of higher core sales across most major end-markets. Core sales in the analytical instrumentation business increased 4.0% as a result of increased core sales across North America and Western Europe.
Operating Profit Performance
Operating profit margins were 25.4% for the year ended December 31, 2025 as compared to 24.5% in 2024. The following factors impacted year-over-year operating profit margin comparisons:
2025 vs. 2024 operating profit margin comparisons were favorably impacted by:
•Higher 2025 core sales driven by positive pricing actions and materials cost saving initiatives, partially offset by incremental labor and raw materials costs and the impact of product mix - 100 basis points
2025 vs. 2024 operating profit margin comparisons were unfavorably impacted by:
•Costs incurred during 2025 related to certain strategic initiatives - 10 basis points
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PRODUCT QUALITY & INNOVATION
The Company’s Product Quality & Innovation segment provides equipment, consumables, software and services for various marking and coding, traceability, printing, packaging design and quality management, packaging converting and color and appearance management applications for consumer-packaged goods and industrial products.
Product Quality & Innovation Selected Financial Data
Year Ended December 31 | |||||||||||||||||
($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
Sales | $ | 2,182 | $ | 2,055 | $ | 1,982 | |||||||||||
Operating profit | 549 | 529 | 472 | ||||||||||||||
Depreciation | 15 | 14 | 15 | ||||||||||||||
Amortization of intangible assets | 26 | 22 | 27 | ||||||||||||||
Operating profit as a % of sales | 25.2 | % | 25.7 | % | 23.8 | % | |||||||||||
Depreciation as a % of sales | 0.7 | % | 0.7 | % | 0.8 | % | |||||||||||
Amortization as a % of sales | 1.2 | % | 1.1 | % | 1.4 | % | |||||||||||
Sales Growth and Core Sales Growth
2025 vs. 2024 | 2024 vs. 2023 | |||||||||
Total sales growth GAAP | 6.2 | % | 3.7 | % | ||||||
Impact of: | ||||||||||
Acquisitions/divestitures | 0.1 | % | (0.4) | % | ||||||
Currency exchange rates | (1.5) | % | — | % | ||||||
Core sales growth (non-GAAP) | 4.8 | % | 3.3 | % | ||||||
2025 Sales Compared to 2024
Total Product Quality & Innovation segment sales increased 6.2% on a year-over-year basis during 2025 as compared to 2024 primarily as a result of core sales growth driven by the factors discussed below. Currency exchange rates increased reported sales by 1.5% during 2025 as compared to 2024. The impact of acquisitions, net of divestitures decreased reported sales by 0.1% during 2025 as compared to 2024. Geographically, reported sales increased by 8.0% in North America, 6.6% in Western Europe, and 4.0% in high-growth markets.
Price increases in the segment contributed 2.6% to sales growth on a year-over-year basis during 2025 as compared to 2024 and are reflected as a component of the change in core sales growth.
Core sales in the Product Quality & Innovation segment increased 4.8% on a year-over-year basis during 2025 as compared to 2024. Geographically, core sales growth was driven by increases of 5.8% in North America, 5.4% in high-growth markets, and 3.6% in Western Europe. Core sales growth in high-growth markets was driven by mid-single digit core sales increases in Latin America and mid-single digit core sales increases in China.
From a product line perspective, core sales in the marking and coding business increased 5.2% on a year-over-year basis during 2025 as compared to 2024 driven by increased demand for consumables and new equipment in the industrial and consumer packaged goods end-markets. Core sales in the packaging and color solutions business increased 3.8% on a year-over-year basis during 2025 as compared to 2024 driven by increased demand across the consumer-packaged goods and industrial end-markets.
Operating Profit Performance
Operating profit margins were 25.2% for the year ended December 31, 2025 as compared to 25.7% in 2024. The following factors impacted year-over-year operating profit margin comparisons.
2025 vs. 2024 operating profit margin comparisons were unfavorably impacted by:
•The net dilutive impact during 2025 of acquisitions and dispositions - 20 basis points
•Incremental labor and materials costs and sales and marketing growth initiatives, partially offset by higher 2025 core sales - 50 basis points
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2025 vs. 2024 operating profit margin comparisons were favorably impacted by:
•Transaction costs incurred during 2024 related to the acquisition of TraceGains - 20 basis points
OTHER INCOME (EXPENSE), NET
For a description of the Company’s other income (expense), net during the years ended December 31, 2025 and 2024, refer to Note 7 to the accompanying Consolidated and Combined Financial Statements.
INTEREST COSTS AND FINANCING
For a discussion of the Company’s outstanding indebtedness, refer to Note 12 to the accompanying Consolidated and Combined Financial Statements.
Net interest expense was $96 million during 2025 as compared to $113 million in 2024, arising from the Company’s outstanding indebtedness, which was incurred in September 2023, partially offset by interest income from higher average cash balances in 2025 compared to 2024.
INCOME TAXES
General
Income tax expense and deferred tax assets and liabilities reflect management’s assessment of future taxes expected to be paid on items reflected in the Company’s Consolidated and Combined Financial Statements. The Company records the tax effect of discrete items and items that are reported net of their tax effects in the period in which they occur.
The Company’s effective tax rate can be impacted by changes in the mix of earnings in countries with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, accruals related to contingent tax liabilities and period-to-period changes in such accruals, the results of audits and examinations of previously filed tax returns (as discussed below), the expiration of statutes of limitations, the implementation of tax planning strategies, tax rulings, court decisions, and changes in tax laws and regulations, and legislative policy changes. For a description of the tax treatment of earnings that are planned to be reinvested indefinitely outside the United States, refer to “Liquidity and Capital Resources” below.
The following table summarizes the Company’s effective tax rate:
Year Ended December 31 | |||||||||||||||||
2025 | 2024 | 2023 | |||||||||||||||
Effective tax rate | 19.9 | % | 23.3 | % | 23.4 | % | |||||||||||
The Company’s effective tax rate for 2025 differs from the U.S. federal statutory rate of 21.0% due principally to the Company’s earnings outside the United States that are taxed at rates different than the U.S. federal statutory rate, and state taxes, partially offset by a net discrete tax benefit of $21 million. The net discrete tax benefit related primarily to the reduction of the tax indemnification related to the Separation, excess tax benefits from stock-based compensation and a release of a valuation allowance on deferred tax assets.
The Company’s effective tax rate for 2024 differs from the U.S. federal statutory rate of 21.0% due principally to the Company’s earnings outside the United States that are taxed at rates different than the U.S. federal statutory rate, and state taxes, partially offset by a net discrete tax provision of $6 million. The net discrete tax provision related primarily to changes in estimates associated with prior period uncertain tax positions and audit settlements offset by excess tax benefits from stock-based compensation.
The Company’s effective tax rate for 2023 differs from the U.S. federal statutory rate of 21.0% due principally to the Company’s earnings outside the United States that are taxed at rates different than the U.S. federal statutory rate, and state taxes, partially offset by net discrete tax benefits of $12 million. The net discrete tax benefits related primarily to excess tax benefits from stock-based compensation
On July 4, 2025, an act to provide for reconciliation to title II of H. Con. Res. 14 (known commonly as the One Big Beautiful Bill Act (“OBBBA”)) was enacted into law. The OBBBA includes eliminating the requirement to capitalize U.S. R&D, permanent extension of certain provisions of the Tax Cuts & Jobs Act of 2017 and other corporate tax impacts. The Company has considered the impact on the Consolidated and Combined Financial Statements and concluded it is immaterial.
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The Company conducts business globally, and the Former Parent filed numerous consolidated and separate income tax returns in the U.S. federal and state and non-U.S. jurisdictions. The non-U.S. countries in which the Company has a significant presence include Belgium, Brazil, Canada, China, Germany, the Netherlands and the United Kingdom. Excluding these non-U.S. jurisdictions, the Company believes that a change in the statutory tax rate of any individual non-U.S. country would not have a material effect on the Company’s Consolidated and Combined Financial Statements given the geographic dispersion of the Company’s income.
The Company is routinely examined by various domestic and international taxing authorities. In connection with the Separation, the Company entered into certain agreements with Danaher, including a tax matters agreement. The tax matters agreement distinguishes between the treatment of tax matters for “Joint” filings compared to “Separate” filings prior to the Separation. “Joint” filings involve legal entities, such as those in the United States, that include operations from both Danaher and the Company. By contrast, “Separate” filings involve certain entities (primarily outside of the United States) that exclusively include either Danaher’s or the Company’s operations, respectively. In accordance with the tax matters agreement, Danaher is liable for and has indemnified the Company against all income tax liabilities involving “Joint” filings for periods prior to the Separation. The Company remains liable for certain pre-Separation income tax liabilities including those related to the Company’s “Separate” filings.
The amount of income taxes the Company pays is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis. Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions and the expiration of statutes of limitations, reserves for contingent tax liabilities are accrued or adjusted, as necessary. For a discussion of risks related to these and other tax matters, refer to “Item 1A. Risk Factors”.
COMPREHENSIVE INCOME
Comprehensive income increased by $382 million in 2025 as compared to 2024, primarily driven by gains from foreign currency translation adjustments and to a lesser extent higher net earnings, partially offset by unrealized losses on net investment hedges and pension and post-retirement plan benefit adjustments. The Company recorded a foreign currency translation gain of $220 million and an unrealized loss on net investment hedges of $60 million in 2025, compared to foreign currency translation losses of $139 million and an unrealized gain on net investment hedges of $26 million in 2024. The foreign currency translation gains during 2025 were primarily driven by the weakening of the U.S. dollar against most major foreign currencies in the period. The foreign currency translation losses in 2024 were primarily driven by the strengthening of the U.S. dollar against most major currencies in the period. Foreign currency translation adjustments reflect the gain or loss resulting from the impact of the change in currency exchange rates on the Company’s foreign operations as they are translated to the Company’s reporting currency, the U.S. dollar. The Company recorded a pension and postretirement plan benefit loss of $2 million in 2025 compared to a loss of $4 million in 2024.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company is exposed to market risk from changes in interest rates, foreign currency exchange rates, and commodity prices as well as credit risk, each of which could impact its Consolidated and Combined Financial Statements. The Company generally addresses its exposure to these risks through its normal operating and financing activities. The Company may also use derivative financial instruments to manage foreign exchange risks and interest rate risks. In addition, the Company’s broad-based business activities help to reduce the impact that volatility in any particular area or related areas may have on its financial statements as a whole.
Interest Rate Risk
The Company manages interest cost using a mixture of fixed-rate and at times variable-rate debt. A change in interest rates on fixed-rate debt impacts the fair value of the debt but not the Company’s earnings or cash flow because the interest on such debt is fixed. Generally, the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise. As of December 31, 2025, an increase of 100 basis points in interest rates would have decreased the fair value of the Company’s fixed-rate term debt by approximately $97 million.
Refer to Note 13 to the accompanying Consolidated and Combined Financial Statements for discussion of the Company’s cross-currency swap derivative contracts.
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Currency Exchange Rate Risk
The Company faces transactional exchange rate risk from transactions with customers in countries outside the United States and from intercompany transactions between affiliates. Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than the Company’s functional currency or the functional currency of its applicable subsidiary. The Company also faces translational exchange rate risk related to the translation of financial statements of its foreign operations into U.S. dollars, the Company’s functional currency. Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, the Company is exposed to movements in the exchange rates of various currencies against the U.S. dollar. In particular, the Company has more sales in European currencies than it has expenses in those currencies. Therefore, when European currencies strengthen or weaken against the U.S. dollar, operating profits are increased or decreased, respectively. The effect of a change in currency exchange rates on the Company’s net investment in non-U.S. subsidiaries is reflected in the accumulated other comprehensive income (loss) component of stockholders’ equity.
Currency exchange rates positively impacted 2025 reported sales on a year-over-year basis primarily due to the weakening of the U.S. dollar against most major currencies during 2025. Strengthening of the U.S. dollar against other major currencies compared to the exchange rates in effect as of December 31, 2025 would negatively impact the Company’s sales and results of operations on an overall basis. Any further weakening of the U.S. dollar against other major currencies compared to the exchange rates in effect as of December 31, 2025 would positively impact the Company’s sales and results of operations.
The Company has generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this transactional exchange risk, although the Company from time to time partially hedges its net investments in foreign operations against adverse movements in exchange rates through foreign currency denominated debt and cross-currency swaps. Both positive and negative movements in currency exchange rates against the U.S. dollar will continue to affect the reported amount of sales and net earnings in the Company’s Consolidated and Combined Financial Statements. In addition, the Company has assets and liabilities held in foreign currencies. A 10% depreciation in major currencies relative to the U.S. dollar as of December 31, 2025 would have reduced foreign currency-denominated net assets and equity by approximately $71 million. Refer to Note 13 to the accompanying Consolidated and Combined Financial Statements for information regarding the Company’s hedging of a portion of its net investment in non-U.S. operations.
Commodity Price Risk
For a discussion of risks relating to commodity prices, refer to “Item 1A. Risk Factors.”
Credit Risk
The Company is exposed to potential credit losses in the event of nonperformance by counterparties to its financial instruments. Financial instruments that potentially subject the Company to credit risk consist of cash and temporary investments, receivables from customers. The Company places cash and temporary investments with various high-quality financial institutions throughout the world and exposure is limited at any one institution. Although the Company typically does not obtain collateral or other security to secure these obligations, it does regularly monitor the third-party depository institutions that hold its cash and cash equivalents. The Company’s emphasis is primarily on safety and liquidity of principal and secondarily on maximizing yield on those funds.
In addition, concentrations of credit risk arising from receivables from customers are limited due to the diversity of the Company’s customers. The Company’s businesses perform credit evaluations of their customers’ financial conditions as deemed appropriate and also obtain collateral or other security when deemed appropriate.
The Company enters into derivative transactions infrequently and typically with high-quality financial institutions, so that exposure at any one institution is limited.
LIQUIDITY AND CAPITAL RESOURCES
Management assesses the Company’s liquidity in terms of its ability to generate cash to fund its operating, investing and financing activities. The Company continues to generate substantial cash from operating activities and believes that its operating cash flow and other sources of liquidity will be sufficient to allow it to continue to invest in existing businesses, consummate strategic acquisitions, make interest payments on its outstanding indebtedness, and manage its capital structure on a short and long-term basis.
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Shelf Registration Statement
On October 24, 2024, the Company filed a shelf registration statement on Form S-3 with the SEC (the “Shelf Registration Statement”) that registers an indeterminate amount of debt securities, common stock, preferred stock, depositary shares, subscription rights, purchase contracts, units and warrants that may be issued in the future in one or more offerings. Unless otherwise specified in the corresponding prospectus supplement, the Company expects to use net proceeds realized from future securities issuances off the Shelf Registration Statement for general corporate purposes, including without limitation repayment or refinancing of debt or other corporate obligations, acquisitions, capital expenditures, and working capital.
Stock Repurchase Program
On November 25, 2025, the Company announced that its Board of Directors approved a share repurchase program (the “Repurchase Program”) authorizing the repurchase of up to $750 million of the Company’s common stock from time to time on the open market (including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended), in privately negotiated transactions or by other methods, at the Company’s discretion. The program does not obligate the Company to acquire any particular amount of its common stock, has no expiration date, and will continue until otherwise suspended or terminated at any time for any reason. The timing and amount of any share repurchases under the program will be determined by members of the Company’s management based on its evaluation of market and business conditions, and other factors.
During the year ended December 31, 2025, the Company did not make any share repurchases.
Please see Note 17 to the accompanying Consolidated and Combined Financial Statements for further information on the Company’s share repurchase program.
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Overview of Cash Flows and Liquidity
Following is an overview of the Company’s cash flows and liquidity for the years ended December 31:
($ in millions) | 2025 | 2024 | 2023 | ||||||||||||
Net cash provided by operating activities | $ | 1,077 | $ | 875 | $ | 963 | |||||||||
Cash paid for acquisitions, net of cash acquired | $ | — | $ | (363) | $ | — | |||||||||
Payments for additions to property, plant and equipment | (63) | (55) | (54) | ||||||||||||
All other investing activities | (35) | (16) | (1) | ||||||||||||
Net cash used in investing activities | $ | (98) | $ | (434) | $ | (55) | |||||||||
Proceeds from issuance of common stock in connection with stock-based compensation | $ | 22 | $ | 24 | $ | 4 | |||||||||
Net transfers to Former Parent | — | — | (147) | ||||||||||||
Consideration paid to Former Parent in connection with Separation | — | — | (2,600) | ||||||||||||
Proceeds from borrowings (maturities longer than 90 days) | — | — | 2,608 | ||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-07-17 | Honeycutt Jennifer | President and CEO | Sell | -7,097 | $95.00 | -$674,215 |
| 2026-05-01 | Skeete Bernard M | Chief Accounting Officer | Sell | -300 | $88.21 | -$26,463 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-07-30 10-Q expected by 2026-08-13 (in 1 day)
- ~2026-10-31 10-Q expected by 2026-11-14 (in 94 days)
- ~2027-02-16 10-K expected by 2027-02-20 (in 202 days)
- ~2027-05-01 10-Q expected by 2027-05-15 (in 276 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-07-28 8-K Earnings Release; Financial Statements and Exhibits
- 2026-06-01 8-K Material Agreement Entered; Other Events; Financial Statements and Exhibits
- 2026-05-28 424B5 Prospectus Supplement
- 2026-04-29 10-Q Quarterly Report
- 2026-04-29 S-8 Employee Benefit Plan Registration
- 2026-04-28 8-K Earnings Release
- 2026-02-20 10-K Annual Report
- 2026-02-03 8-K Earnings Release; Financial Statements and Exhibits
- 2025-11-25 8-K Other Events
- 2025-11-03 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-10-29 10-Q Quarterly Report
- 2025-10-28 8-K Earnings Release
- 2025-08-07 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-07-28 10-Q Quarterly Report
- 2025-07-28 8-K Earnings Release