AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 4/6 · 18/10/2026
Moat56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · The installed-base consumables and software model is operating at meaningful scale, with approximately 62% recurring sales. This supports a narrow structural advantage; switching friction is inferred rather than contractually quantified.
durability · 2/4 · Recurring demand supports persistence, but the passages do not establish long-term customer cohorts or protected compatibility. Existing lower-cost alternatives and limited intellectual property protection qualify durability.
customer dependency · 2/4 · Customers use proprietary instruments and recurring inputs in water measurement and treatment, and ongoing consumables demand is demonstrated. The economic cost of leaving and the availability of substitutes remain unquantified.
erosion resilience · 2/4 · Realized pricing and gross margin improvement show current resilience. PQI's weak core growth relative to pricing and declining operating profit show uneven performance. Disruption risks are possibilities, not proof of realized displacement.
Pricing power56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 3/4 · Price increases contributed 3.0% to second-quarter and 2.4% to first-half 2026 company sales growth. These are observed outcomes. PQI's pricing exceeding core growth limits conclusions about demand elasticity.
retention · 3/4 · Approximately 62% recurring sales, installed-base follow-on purchases and actual consumables demand provide strong indirect evidence of repeat demand. This assesses operating persistence rather than measured customer renewals; no retention rate is disclosed.
margin resilience · 2/4 · First-half gross margin improved from 60.2% to 60.6% despite input inflation. Operating profit grew more slowly than sales, and PQI operating profit declined. Cost absorption is therefore mixed across the income statement.
contractual freedom · 1/4 · The company explicitly reports that competition, customer cost containment and terms of certain contracts prevent full cost pass-through at times. Realized increases show some discretion, but broad contractual pricing freedom is not established.
Predictability—
Five consecutive annual periods are required for predictability; the accepted history is incomplete.
Financial strength85
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 76.63
- netDebtEbitGrade
- 89.95
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 73.54
- Debt / FCF (x)
- 2.64
- Net debt / operating income (x)
- 0.50
- Interest coverage (x)
- 13.30
- Current ratio (x)
- 1.67
Capital allocation—
Missing required inputs: operatingReturn, dilution. Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year average SBC / revenue (%)
- 1.23
- cashConversionGrade
- 100.00
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Operating cash flow reached $1,077 million in 2025 and $522 million in first-half 2026, with modest capital expenditures. First-half acquisitions of $620 million and repurchases of $434 million accompanied $719 million of net borrowing and higher debt. Cash generation is demonstrated; acquisition returns and repurchase value creation remain unproven.
incentive alignment · 3/4 · Actual 2025 equity awards allocated half of target value to PSUs, with the balance in options and RSUs. Disclosed multi-year vesting, stock ownership requirements, hedging restrictions and clawbacks support alignment. Paid annual incentives used earnings, core growth and free cash flow metrics. Individual holdings and long-term realized outcomes are missing.
execution · 2/4 · Cash generation and earnings improved, while Water Quality sales and operating profit grew. PQI profit declined and consolidated operating profit lagged sales growth. Execution is assessed from actual operating outcomes; these results do not isolate management's contribution or validate VES as a competitive advantage.
governance · 3/4 · Independent principal committees, shareholder-approved phased board declassification and an unqualified auditor opinion on internal controls provide concrete governance evidence. Declassification was still phased, and effective controls do not establish exceptional overall board effectiveness.
Evidence
This has resulted in a large installed base of instruments that drive ongoing consumables and software sales to support our customers.
Business overview: installed instruments and ongoing consumables and software sales · Filed 29/07/2026
As a result, our business generates recurring sales which represented approximately 62% of total sales during the six-month period ended July 3, 2026.
Business overview: recurring sales share for six months ended July 3, 2026 · Filed 29/07/2026
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.
Business: proprietary Water Quality instrumentation and treatment technologies · Filed 20/02/2026
In addition to instrumentation, our suite of water solutions includes elements used on a recurring basis such as chemical reagents, services and software.
Business: recurring reagents, services and software · Filed 20/02/2026
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.
2025 results: marking and coding growth and consumables demand · Filed 20/02/2026
Price increases contributed 3.0% and 2.4% to sales growth on a year-over-year basis during the three and six-month periods ended July 3, 2026, respectively, and are reflected as a component of core sales growth above.
Results of operations: realized company pricing contributions in second-quarter and first-half 2026 · Filed 29/07/2026
In addition, the Company’s competitors and customers have from time to time introduced, and may in the future introduce, low-cost products or consumables that compete with the Company’s products at lower price points.
Competition risks: introduction of lower-cost products and consumables · Filed 20/02/2026
New, disruptive technologies may emerge that displace the Company’s existing technologies.
Competition risks: potential technological displacement · Filed 20/02/2026
The intellectual property rights that we obtain, however, are not always sufficiently broad and do not always provide us a significant competitive advantage, and patents may not be issued for pending or future patent applications owned by or licensed to us.
Intellectual property risks: limits on competitive protection · Filed 20/02/2026
Price increases in the segment contributed 3.0% and 2.5% to sales growth on a year-over-year basis during the three and six-month periods ended July 3, 2026, respectively, and are reflected as a component of the change in core sales described below.
PQI results: second-quarter and first-half 2026 pricing contributions · Filed 29/07/2026
Core sales in the Product Quality & Innovation segment increased 2.0% and 0.5% year-over-year during the three and six-month periods ended July 3, 2026, respectively.
PQI results: second-quarter and first-half 2026 core sales growth · Filed 29/07/2026
In addition, due to the highly competitive nature of the industries that we serve, the cost-containment efforts of our customers and the terms of certain contracts we are party to, when prices of raw materials, key components, other commodities and labor rise we are not always able to pass along cost increases through higher prices for our products.
Supply and pricing risks: competition, customer cost containment and contract restrictions on cost recovery · Filed 20/02/2026
Cost of Sales and Gross Profit Three-Month Period Ended Six-Month Period Ended ($ in millions) July 3, 2026 July 4, 2025 July 3, 2026 July 4, 2025 Sales $ 1,474 $ 1,371 $ 2,896 $ 2,703 Cost of sales (572) (549) (1,140) (1,076) Gross profit $ 902 $ 822 $ 1,756 $ 1,627 Gross profit margin 61.2 % 60.0 % 60.6 % 60.2 % Cost of sales increased by $23 million or 4.2% and by $64 million or 5.9% on a year-over-year basis during the three and six-month periods ended July 3, 2026, respectively, as compared to the comparable periods in 2025, driven primarily by higher year-over-year sales volumes, increased labor costs and price increases due to inflation.
Results of operations: gross margins and input cost increases · Filed 29/07/2026
1 Table of Contents VERALTO CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS ($ and shares in millions, except per share amounts) (unaudited) Three-Month Period Ended Six-Month Period Ended July 3, 2026 July 4, 2025 July 3, 2026 July 4, 2025 Sales $ 1,474 $ 1,371 $ 2,896 $ 2,703 Cost of sales (572) (549) (1,140) (1,076) Gross profit 902 822 1,756 1,627 Operating costs: Selling, general and administrative expenses (514) (442) (962) (861) Research and development expenses (73) (67) (141) (131) Operating profit 315 313 653 635 Nonoperating income (expense): Other income (expense), net 1 — 8 (6) Interest expense, net (27) (28) (51) (55) Earnings before income taxes 289 285 610 574 Income taxes (48) (63) (115) (127) Net earnings $ 241 $ 222 $ 495 $ 447 Net earnings per common share: Basic $ 0.98 $ 0.89 $ 2.01 $ 1.80 Diluted $ 0.98 $ 0.89 $ 2.00 $ 1.79 Average common stock and common equivalent shares outstanding: Basic 245.2 248.2 246.4 248.0 Diluted 245.8 249.9 247.5 250.0 See the accompanying Notes to the Consolidated Condensed Financial Statements.
Consolidated condensed earnings: sales, operating profit, earnings and share counts · Filed 29/07/2026
12 Table of Contents Detailed segment data for the three and six-month periods ended July 3, 2026 and July 4, 2025 is as follows: Three-Month Period Ended Six-Month Period Ended ($ in millions) July 3, 2026 July 4, 2025 July 3, 2026 July 4, 2025 Sales: Water Quality $ 908 $ 825 $ 1,782 $ 1,619 Product Quality & Innovation 566 546 1,114 1,084 Total $ 1,474 $ 1,371 $ 2,896 $ 2,703 Operating profit: Water Quality $ 228 $ 211 $ 438 $ 409 Product Quality & Innovation 119 134 263 280 Other (32) (32) (48) (54) Total $ 315 $ 313 $ 653 $ 635 Depreciation and amortization of intangible assets: Water Quality $ 16 $ 10 $ 30 $ 18 Product Quality & Innovation 13 9 23 20 Total $ 29 $ 19 $ 53 $ 38 Capital expenditures: Water Quality $ 10 $ 8 $ 16 $ 16 Product Quality & Innovation 2 8 8 15 Total $ 12 $ 16 $ 24 $ 31 Identifiable assets by segment as of July 3, 2026 and December 31, 2025 are as follows: ($ in millions) July 3, 2026 December 31, 2025 Water Quality $ 3,356 $ 2,651 Product Quality & Innovation 3,249 2,810 Other 1,953 2,232 Total $ 8,558 $ 7,693 13 Table of Contents Reconciliations of total segment sales to total segment operating profit and of total segment operating profit to total consolidated earnings before income taxes, for the three and six-month periods ended July 3, 2026 and July 4, 2025 are as follows: Three-Month Period Ended July 3, 2026 ($ in millions) Water Quality Product Quality & Innovation Other Total Sales $ 908 $ 566 $ — $ 1,474 Less: other segment items (680) (447) (32) (1,159) Segment operating profit $ 228 $ 119 $ (32) $ 315 Other income (expense), net 1 Interest expense, net (27) Earnings before income taxes $ 289 Three-Month Period Ended July 4, 2025 ($ in millions) Water Quality Product Quality & Innovation Other Total Sales $ 825 $ 546 $ — $ 1,371 Less: other segment items (614) (412) (32) (1,058) Segment operating profit $ 211 $ 134 $ (32) $ 313 Other income (expense), net — Interest expense, net (28) Earnings before income taxes $ 285 Six-Month Period Ended July 3, 2026 ($ in millions) Water Quality Product Quality & Innovation Other Total Sales $ 1,782 $ 1,114 $ — $ 2,896 Less: other segment items (1,344) (851) (48) (2,243) Segment operating profit $ 438 $ 263 $ (48) $ 653 Other income (expense), net 8 Interest expense, net (51) Earnings before income taxes $ 610 Six-Month Period Ended July 4, 2025 ($ in millions) Water Quality Product Quality & Innovation Other Total Sales $ 1,619 $ 1,084 $ — $ 2,703 Less: other segment items (1,210) (804) (54) (2,068) Segment operating profit $ 409 $ 280 $ (54) $ 635 Other income (expense), net (6) Interest expense, net (55) Earnings before income taxes $ 574 14 Table of Contents NOTE 6.
Segment results: Water Quality and PQI sales and operating profit · Filed 29/07/2026
50 Table of Contents VERALTO CORPORATION CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS ($ in millions) Year Ended December 31 2025 2024 2023 Cash flows from operating activities: Net earnings $ 940 $ 833 $ 839 Noncash items: Depreciation 42 40 39 Amortization of intangible assets 36 38 48 Stock-based compensation expense 74 65 55 Loss on product line dispositions 6 15 — Impairments and other charges 6 — 15 Change in deferred income taxes (49) (74) (25) Change in trade accounts receivable, net (50) 3 2 Change in inventories (6) 3 52 Change in trade accounts payable 8 (29) (1) Change in prepaid expenses and other assets (40) (48) (54) Change in accrued expenses and other liabilities 110 29 (7) Net cash provided by operating activities 1,077 875 963 Cash flows from investing activities: 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) Cash flows from financing activities: 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) Payment of dividends (109) (89) — Proceeds from borrowings (maturities longer than 90 days) — — 2,608 All other financing activities (15) — — Net cash used in financing activities (102) (65) (135) Effect of exchange rate changes on cash and cash equivalents 53 (37) (11) Net change in cash and cash equivalents 930 339 762 Beginning balance of cash and cash equivalents 1,101 762 — Ending balance of cash and cash equivalents $ 2,031 $ 1,101 $ 762 Supplemental disclosures: Cash interest payments $ 138 $ 137 $ — Cash income tax payments $ 235 $ 293 $ 113 See the accompanying Notes to the Consolidated and Combined Financial Statements.
Audited cash flows: 2023–2025 operating cash generation, investment and financing · Filed 20/02/2026
4 Table of Contents VERALTO CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ($ in millions) (unaudited) Six-Month Period Ended July 3, 2026 July 4, 2025 Cash flows from operating activities: Net earnings $ 495 $ 447 Noncash items: Depreciation 23 20 Amortization of intangible assets 30 18 Stock-based compensation expense 40 40 Loss on product line dispositions — 6 Gain from the step acquisition of previously held minority interest (7) — Change in trade accounts receivable, net (10) (30) Change in inventories (20) (27) Change in trade accounts payable 4 1 Change in prepaid expenses and other assets (40) (25) Change in accrued expenses and other liabilities 7 46 Net cash provided by operating activities 522 496 Cash flows from investing activities: Cash paid for acquisitions, net of cash acquired (620) — Payments for additions to property, plant and equipment (24) (31) All other investing activities (1) (20) Net cash used in investing activities (645) (51) Cash flows from financing activities: Payment of dividends (64) (54) Proceeds from the issuance of common stock in connection with stock-based compensation 5 13 Payments for repurchase of common stock (434) — Net proceeds from borrowings (maturities longer than 90 days) 719 — Net cash provided by (used in) financing activities 226 (41) Effect of exchange rate changes on cash and cash equivalents (15) 54 Net change in cash and cash equivalents 88 458 Beginning balance of cash and cash equivalents 2,031 1,101 Ending balance of cash and cash equivalents $ 2,119 $ 1,559 Supplemental disclosures: Cash interest payments $ 57 $ 57 Cash income tax payments $ 91 $ 56 See the accompanying Notes to the Consolidated Condensed Financial Statements.
First-half 2026 cash flows: acquisitions, capital expenditures, dividends, repurchases and borrowings · Filed 29/07/2026
16 Table of Contents Fair Value of Financial Instruments The carrying amounts and fair values of the Company’s financial instruments were as follows: July 3, 2026 December 31, 2025 ($ in millions) Carrying Amount Fair Value Carrying Amount Fair Value Debt Obligations: Current portion of long-term debt $ 700 $ 701 $ 700 $ 706 Long-term debt 2,679 2,721 1,973 2,045 As of July 3, 2026 and December 31, 2025, short and long-term borrowings were categorized as Level 1.
Financial instruments: debt balances at July 3, 2026 and December 31, 2025 · Filed 29/07/2026
Treasury regulations. 62 2026 PROXY STATEMENT COMPENSATION DISCUSSION AND ANALYSIS Long-Term Incentive Awards Equity Award Mix With respect to each of the NEO 2025 annual equity awards one-half of the target award value was delivered as PSUs) one-quarter as stock options and one-quarter as RSUs (please see “Grants of Plan-Based Awards” table for the grant date fair value of the awards granted to each NEO).
Compensation discussion: actual 2025 executive equity award mix · Filed 27/03/2026
The Compensation Committee regularly reviews external executive compensation practices and trends to incorporate market best practices: WHAT WE DO WHAT WE DON’T DO Four-year vesting requirement for stock options and RSUs; three-year performance period for PSUs No tax gross-up provisions (except as applicable to management employees generally such as relocation policy) Incentive compensation programs feature multiple, different performance measures aligned with the Company’s strategic performance metrics No “single trigger” change of control benefits Short-term and long-term performance metrics that balance our absolute performance and our relative performance versus peer companies No US defined benefit pension programs Rigorous, no-fault clawback policy that is triggered even in the absence of wrongdoing, in addition to a robust policy allowing recoupment from executives engaging in detrimental behavior No permitted hedging of Veralto securities Minimum one-year vesting requirement for 95% of shares granted under the Company’s stock plan No long-term incentive compensation denominated or paid in cash Stock ownership requirements for all executive officers No above-market returns on deferred compensation plans Limited perquisites No overlapping performance metrics between short-term and long-term incentive compensation program All Veralto executives have adopted sustainability performance objectives aligned with Veralto’s purpose of Safeguarding the World’s Most Vital ResourcesTM Independent compensation consultant that performs no other services for the Company 2026 PROXY STATEMENT 53 COMPENSATION DISCUSSION AND ANALYSIS Risk Considerations Risk-taking is a necessary part of growing a business, and prudent risk management is necessary to deliver long-term, sustainable shareholder value.
Compensation discussion: vesting periods, ownership requirements, hedging prohibition and clawbacks · Filed 27/03/2026
TANAKA Vice President, Securities & Governance and Secretary 108 2026 PROXY STATEMENT APPENDIX A Reconciliation of GAAP to Non-GAAP Financial Measures As described in more detail in the Compensation Discussion and Analysis section of the Company’s Proxy Statement, the 2025 annual cash incentive awards paid to the Company’s named executive officers were based in part on the Company’s 2025 performance with respect to three metrics, Adjusted Earnings per Share, Core Revenue Growth and Free Cash Flow.
Compensation appendix: financial metrics used for paid 2025 annual incentives · Filed 27/03/2026
Our shareholders approved the phased declassification of our Board of Directors that provides for the annual election of directors after a sunset period starting with this Annual Meeting.
Corporate governance: shareholder-approved phased board declassification · Filed 27/03/2026
All members of our Audit, Compensation and Nominating and Governance Committees are independent as defined by the New York Stock Exchange listing standards and applicable SEC rules.
Corporate governance: independence of principal board committees · Filed 27/03/2026
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 20, 2026 expressed an unqualified opinion thereon.
Independent auditor report: unqualified internal control opinion · Filed 20/02/2026
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.
Business overview: management explanation of market positions and customer connectivity · Filed 29/07/2026
We also believe that the Veralto Enterprise System (“VES”) provides us with a strong foundation for competitive differentiation.
Business overview: management assertion of VES competitive differentiation · Filed 29/07/2026
