Veralto Corp. 10-Q Summary: Q1 2026
Business Context and Reporting Period
This filing covers the quarterly period ended April 3, 2026. Veralto Corporation operates in two segments: Water Quality (WQ) and Product Quality & Innovation (PQI). The company provides technology solutions for water analytics, treatment, marking, coding, and packaging. As of April 3, 2026, the company had 245.6 million shares of common stock outstanding.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Sales (Revenue) | $1,422 million | $1,332 million |
| Gross Profit | $854 million | $805 million |
| Gross Margin | 60.1% | 60.4% |
| Operating Profit | $338 million | $322 million |
| Operating Margin | 23.8% | 24.2% |
| Net Earnings | $254 million | $225 million |
| Diluted EPS | $1.02 | $0.90 |
| Operating Cash Flow | $182 million | $157 million |
| Cash and Equivalents (Ending) | $1,431 million | $1,239 million |
| Total Debt | $2,662 million | $2,673 million |
Material Changes vs. Prior Period
- Revenue Growth: Sales increased 6.7% year-over-year. Core sales (excluding currency and acquisitions) grew 1.9%. Growth was driven by the Water Quality segment (+10.1% sales) and positive pricing actions (+1.9% contribution).
- Profitability: Net earnings rose 13% to $254 million. Operating margins contracted 40 basis points to 23.8%, primarily due to higher labor costs, transaction costs related to acquisitions, and fair value adjustments on acquired inventory.
- Acquisitions: The company completed the acquisition of In-Situ, Inc. for approximately $426 million in cash during the quarter. This resulted in a $7 million pre-tax gain from the step acquisition of a previously held minority interest.
- Cash Flow: Operating cash flow increased 16% to $182 million. However, investing cash outflows surged to $439 million due to the In-Situ acquisition. Financing activities used $332 million, driven by $300 million in share repurchases and $32 million in dividends.
- Balance Sheet: Cash balances decreased by $600 million quarter-over-quarter due to acquisition spending and share buybacks. Goodwill increased by $223 million related to the In-Situ acquisition.
Guidance, Outlook, and Risks
- Outlook: Management expects global growth in the Water Quality segment driven by municipal and industrial demand. The Product Quality & Innovation segment is expected to see improved growth later in the year, supported by consumer packaged goods markets and new product offerings.
- Restructuring Program: On April 27, 2026, the Board approved a restructuring program expected to incur total charges of $85 million to $105 million. This includes workforce reductions, site consolidations, and functional transformations, with the majority of charges expected in 2026 and 2027.
- Subsequent Acquisition: On April 7, 2026, the company acquired GlobalVision for CAD $270 million to be integrated into the PQI segment.
- Risks: Key risks include global economic conditions, trade tariffs, foreign currency fluctuations, and the execution of the new restructuring program. The company also faces an upcoming debt maturity in September 2026 ($700 million) and is evaluating refinancing alternatives.
Investor Verification Checklist
- Restructuring Impact: Verify the timing and cash impact of the newly announced $85–$105 million restructuring program on future earnings.
- Debt Maturity: Confirm the company's strategy for the $700 million senior notes maturing in September 2026.
- Acquisition Integration: Monitor the integration progress and financial contribution of In-Situ (Q1 2026) and GlobalVision (post-Q1 2026).
- Core Sales Trends: Track the divergence between reported sales growth (6.7%) and core sales growth (1.9%) to assess organic performance versus M&A and currency effects.
- Labor Costs: Assess the sustainability of the margin compression caused by incremental labor costs mentioned in the MD&A.