01—Abstract
Summary
Summary of the 10-K filed February 28, 2024. Cited figures are marked; the original filing is the authoritative source.
Veralto Corporation (NYSE: VLTO) filed this Form 10-K for fiscal 2023 following its separation from Danaher, completed on September 30, 2023, through a pro rata distribution to Danaher stockholders.
The Company operates through two segments: Water Quality (Hach, Trojan Technologies, ChemTreat), which generated $3,039 milliona of 2023 sales, and Product Quality & Innovation (Videojet, Linx, Esko, X-Rite, Pantone), which generated $1,982 million. Total 2023 sales were $5,021 million, up 3.1% from $4,870 million in 2022, with core sales up 2.6%. Recurring sales were approximately 59% of total sales.
Gross profit margin rose to 57.8% from 56.7%, while operating profit margin was 22.7% versus 22.8% in 2022. Net earnings were $839 millionb, or $3.40 per diluted share, compared with $845 million, or $3.43, in 2022. The balance sheet changed materially with the separation.
The Company issued approximately $2.1 billionc of U.S. dollar senior unsecured notes and €500 million of euro notes, and paid $2.6 billion to Danaher as consideration for the contributed net assets. Long-term debt was $2,629 million at December 31, 2023, cash and equivalents were $762 million, and the company has a $1.5 billion revolving Credit Facility that was undrawn at year-end. Operating cash flow was $963 million.
The Company declared its first quarterly dividend of $0.09d per share, paid January 31, 2024. The Company also disclosed a $15 million impairment of an equity method investment and interest expense of $30 million for 2023.
The filing's outlook for 2024 expects continued growth in North America, Western Europe and Latin America in Water Quality, partly offset by weakness in China, and stabilization in the consumer packaged goods market in Product Quality & Innovation with modest recovery in the second half of 2024. Investors should weigh the company's new leverage and its continuing indemnification obligations to Danaher against its recurring revenue base and cash generation.
02—Key points
Key Highlights
- Total 2023 sales of $5,021 million, up 3.1% from $4,870 million in 2022, with core sales growth of 2.6%
- Water Quality segment sales of $3,039 million (operating profit $730 million, 24.0% margin) and Product Quality & Innovation sales of $1,982 million (operating profit $472 million, 23.8% margin)
- Net earnings of $839 million, or $3.40 per diluted share, versus $845 million, or $3.43, in 2022
- Recurring sales represented approximately 59% of total sales in 2023
- Long-term debt of $2,629 million at year-end 2023, following about $2.1 billion of U.S. dollar notes and €500 million of euro notes issued in connection with the Separation; $1.5 billion revolving Credit Facility undrawn
- Operating cash flow of $963 million in 2023, and cash and equivalents of $762 million at December 31, 2023
- First quarterly dividend of $0.09 per share declared December 20, 2023 and paid January 31, 2024
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Veralto kept $0.17.
- Revenue$5.02B100.0%
- Cost of revenue−$2.12B42.2%
- Gross profit$2.90B57.8%
- Operating costs−$1.76B35.1%
- Operating income$1.14B22.7%
- Interest, other & tax−$301.0M6.0%
- Net income$839.0M16.7%
Where FY2023 revenue went
$5.02B- Cost of revenue: $2.12B, 42% of revenue
- SG&A: $1.54B, 31% of revenue
- Net income: $839.0M, 17% of revenue
- R&D: $225.0M, 4.5% of revenue
- Interest, other & tax: $301.0M, 6.0% of revenue
Kept 17% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 28, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $5.02B$4.87B | +3.1% |
| Cost of Revenue | $2.12B$2.11B | +0.5% |
| Gross Profit | $2.90B$2.76B | +5.1% |
| R&D Expenses | $225.00M$217.00M | +3.7% |
| SG&A Expenses | $1.54B$1.43B | +7.3% |
| Operating Income | $1.14B$1.11B | +2.5% |
| Interest Expense | $30.00M$0 | — |
| Net Income | $839.00M$845.00M | −0.7% |
| EPS (Basic) | $3.41$3.43 | −0.6% |
| EPS (Diluted) | $3.40$3.43 | −0.9% |
| Shares Outstanding (Basic) | 246.40M246.30M | 0.0% |
| Shares Outstanding (Diluted) | 246.80M246.30M | +0.2% |
05—Questions
Frequently Asked Questions
How was Veralto separated from Danaher, and what did shareholders receive?
Danaher completed the Separation on September 30, 2023, through a pro rata distribution of all Veralto common stock to Danaher stockholders of record on September 13, 2023. Each Danaher stockholder received one share of Veralto common stock for every three shares of Danaher common stock held. Veralto began regular-way trading on the NYSE under VLTO on October 2, 2023.
What drove the change in Veralto's profitability in 2023?
Gross profit margin increased 110 basis points to 57.8%, aided by pricing actions and lower material costs. SG&A rose to 30.6% of sales from 29.4%, reflecting growth investments, intangible asset impairments, higher labor costs and standalone public company costs. Operating profit margin was 22.7% versus 22.8% in 2022, and net earnings declined slightly to $839 million from $845 million, driven by higher operating expenses, standalone public company costs and interest expense after the Separation.
How much debt does Veralto carry, and what restrictions apply?
As of December 31, 2023, Veralto had approximately $2.6 billion of outstanding indebtedness, and the filing states that its Credit Facility requires a consolidated net leverage ratio of 3.75 to 1.0 or less. The senior unsecured notes include a limitation on liens and a change-of-control repurchase offer at 101% of principal if ratings are downgraded below investment grade. The Company's current credit rating is Baa1/BBB.
What does the company expect for 2024?
For Water Quality, management expects continued year-over-year growth in North America, Western Europe and Latin America, partially offset by weakness in China. For Product Quality & Innovation, management expects stabilization in the consumer packaged goods market with modest recovery in the second half of 2024. The filing notes these expectations are subject to the risks described in Item 1A.
What indemnification obligations does Veralto have to Danaher?
The separation agreement provides for uncapped indemnification obligations under which Veralto is generally financially responsible for substantially all liabilities relating to its business activities, whether incurred before or after the Separation. Under the tax matters agreement, Veralto may also be required to indemnify Danaher for taxes resulting from actions Veralto takes, including certain acquisitions of its stock or assets, during the two years following the distribution.
06—Continue