Vontier Corp

Previous wording

Discussion and analysis of our financial condition and results of operations as of and for the year ended December 31, 2022 compared to December 31, 2021 is included under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed for the fiscal year ended December 31, 2022 with the Securities and Exchange Commission on February 17, 2023, as supplemented by the discussion herein of our new segments’ sales and segment operating profit.

Current wording

Discussion and analysis of our financial condition and results of operations as of and for the year ended December 31, 2023 compared to December 31, 2022 is included under the heading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed for the fiscal year ended December 31, 2023 with the Securities and Exchange Commission on February 15, 2024.

Previous wording

In the first quarter of 2023, we realigned our internal organization to align with our strategy, resulting in changes to our operating segments. Historically, we operated through one reportable segment comprised of two operating segments: (i) Mobility Technologies and (ii) Diagnostics and Repair Technologies. Subsequent to the realignment, we now operate through three reportable segments which align to our three operating segments: (i) Mobility Technologies, which provides digitally enabled equipment and solutions to support efficient operations across the mobility ecosystem, including point-of-sale and payment systems, workflow automation solutions, telematics, data analytics, software platform for electric vehicle charging networks, and integrated solutions for alternative fuel dispensing; (ii) Repair Solutions, which manufactures and distributes aftermarket vehicle repair tools, toolboxes, automotive diagnostic equipment and software through a network of mobile franchisees; and (iii) Environmental & Fueling Solutions, which provides environmental and fueling hardware and software, and aftermarket solutions for global fueling infrastructure.

Current wording

We operate through three reportable segments which align to our three operating segments: (i) Mobility Technologies, which provides digitally enabled equipment and solutions to support efficient operations across the mobility ecosystem, including point-of-sale and payment systems, workflow automation solutions, telematics, data analytics, software platform for electric vehicle charging networks, and integrated solutions for alternative fuel dispensing; (ii) Repair Solutions, which manufactures and distributes aftermarket vehicle repair tools, toolboxes, automotive diagnostic equipment and software through a network of mobile franchisees; and (iii) Environmental & Fueling Solutions, which provides environmental and fueling hardware and software, and aftermarket solutions for global fueling infrastructure. Our Global Traffic Technologies and Coats businesses, which were divested during April 2023 and January 2024, respectively, are presented in Other for periods prior to the divestitures.

Previous wording

We expect core sales to increase on a year-over-year basis in 2024 due to increasing demand across our portfolio. Our outlook is subject to various assumptions and risks, including but not limited to the resilience and durability of the economies of the United States and other critical regions, ongoing challenges with global logistics and supply chain including the availability of electronic components, the impact of international conflicts, including Russia-Ukraine and Israel-Hamas, market conditions in key end product segments, and the impact of energy disruption in Europe. Additional uncertainties are identified in “Information Relating to Forward-Looking Statements” in this Form 10-K.

Current wording

We expect core sales to increase on a year-over-year basis in 2025 due to increasing demand across our portfolio. Our outlook is subject to various assumptions and risks, including but not limited to the resilience and durability of the economies of the United States and other critical regions, the condition of global supply chains, including the availability of electronic components, the impact of international conflicts, including Russia-Ukraine and conflicts in the Middle East, market conditions in key end product segments, no significant changes in governmental policies or regulations and the impact of energy disruption in Europe. Additional uncertainties are identified in “Information Relating to Forward-Looking Statements” and “Risk Factors” in this Form 10-K.

Previous wording

We continue to monitor the macroeconomic and geopolitical conditions which may impact our business, including monetary and fiscal policies, changes in the banking system, international trade and relations between the U.S., China and other nations, and investment and taxation policy initiatives being considered in the United States and by the Organization for Economic Co-operation and Development (the “OECD”). We also continue to monitor the Russia-Ukraine and Israel-Hamas conflicts and the impact on our business and operations. As of the filing date of this report, we do not believe they are material.

Current wording

We continue to monitor the macroeconomic and geopolitical conditions which may impact our business, including monetary and fiscal policies, changes in the banking system, international trade and relations between the U.S., China and other nations, and investment and taxation policy initiatives being considered in the United States and by the Organization for Economic Co-operation and Development (the “OECD”). We also continue to monitor the Russia-Ukraine conflict and conflicts in the Middle East and the impact on our business and operations. As of the filing date of this report, we do not believe they are material.

Previous wording

Total sales and core sales within our Repair Solutions segment increased 6.5% and 6.7%, respectively, during the year ended December 31, 2023, as compared to the prior year, primarily due to strong demand in the tool storage, hardline and powered tools product categories.

Current wording

Total sales and core sales within our Repair Solutions segment decreased 2.8% during the year ended December 31, 2024, as compared to the prior year, due to a decrease in the hardline, tool storage and specialty tools product categories driven by macroeconomic impacts on service technicians’ discretionary spending, partially offset by an increase in the power tools product category.

Previous wording

Cost of sales, excluding amortization of acquisition-related intangible assets, decreased $92.1 million, or 5.2%, during the year ended December 31, 2023, as compared to the prior year and as a percentage of sales, decreased 130 basis points during the same period, primarily due to the decrease in sales in our Environmental & Fueling Solutions segment, as discussed above, and cost optimization, partially offset by the impact of recent acquisitions as well as increased costs from inflationary pressures.

Current wording

Cost of sales, excluding amortization of acquisition-related intangible assets, decreased $109.1 million, or 6.6%, during the year ended December 31, 2024, as compared to the prior year and as a percentage of sales, decreased 160 basis points during the same period, due to a $115.0 million decrease from the impact of recently divested and exited businesses and product lines.

Previous wording

SG&A expenses increased $15.3 million, or 2.4%, during the year ended December 31, 2023, as compared to the prior year and as a percentage of sales, increased 110 basis points during the same period, primarily due to an increase in costs associated with restructuring activities, variable and stock-based compensation expense and SG&A expenses from our recent acquisitions, and the impact of reserve-related adjustments to the Repair Solutions receivables portfolio, partially offset by a decrease in transaction and deal-related costs.

Current wording

SG&A expenses decreased $13.4 million, or 2.1%, during the year ended December 31, 2024, as compared to the prior year and as a percentage of sales, increased 30 basis points during the same period, due to a $18.6 million decrease from the impact of recently divested and exited businesses and product lines, partially offset by a $10.1 million increase from the impact of reserve-related adjustments to the Repair Solutions receivables portfolio.

Previous wording

R&D expenses increased $18.9 million, or 13.1%, during the year ended December 31, 2023, as compared to the prior year and as a percentage of sales, increased 80 basis points during the same period, primarily due to the impact of our recent acquisitions and continued growth investments in our Mobility Technologies segment.

Current wording

R&D expenses increased $14.2 million, or 8.7%, during the year ended December 31, 2024, as compared to the prior year and as a percentage of sales, increased 70 basis points during the same period, due to continued growth investments in our Mobility Technologies segment.

Previous wording

Operating profit decreased $34.5 million, or 6.0%, during the year ended December 31, 2023, as compared to the prior year, and operating profit margins decreased 50 basis points during the same period.

Current wording

Operating profit decreased $6.4 million, or 1.2%, during the year ended December 31, 2024, as compared to the prior year, and operating profit margin increased 40 basis points during the same period.

Previous wording

Segment operating profit is used as a performance metric by the chief operating decision maker (“CODM”) in determining how to allocate resources and assess performance. Segment operating profit represents total segment sales less operating costs attributable to the segment, which does not include unallocated corporate costs and other operating costs not allocated to the reportable segments as part of the CODM’s assessment of reportable segment operating performance, including stock-based compensation expense, amortization of acquisition-related intangible assets, restructuring costs, transaction- and deal-related costs, and other costs not indicative of the segment’s core operating performance. As part of the CODM’s assessment of the Repair Solutions segment, a capital charge based on the segment’s financing receivables portfolio is assessed by Corporate. Refer to Note 16. Segment Information to the Consolidated Financial Statements for additional information.

Current wording

Segment operating profit is used as a performance metric by the chief operating decision maker (“CODM”) in determining how to allocate resources and assess performance. Segment operating profit represents total segment sales less operating costs attributable to the segment, which does not include unallocated corporate costs and other operating costs not allocated to the reportable segments as part of the CODM’s assessment of reportable segment operating performance, including amortization of acquisition-related intangible assets, stock-based compensation expense, restructuring and other related charges and other unallocated income or expense not indicative of the segment’s core operating performance. As part of the CODM’s assessment of the Repair Solutions segment, a capital charge calculated based on the segment’s average gross outstanding financing receivables portfolio during the period and an estimated weighted average cost of capital is assessed by Corporate (the “Repair Solutions Capital Charge”). Refer to Note 15. Segment Information to the Consolidated Financial Statements for additional information.

Previous wording

(a) Margin for corporate & other unallocated costs is presented as a percentage of total sales. Corporate & other unallocated costs includes amortization of acquisition-related intangible assets.

Current wording

(a) Margin for corporate & other unallocated costs is presented as a percentage of total sales. Refer to further discussion of Corporate & other unallocated costs below.

Previous wording

Segment operating profit for our Repair Solutions segment increased $0.3 million, or 0.2%, during the year ended December 31, 2023, as compared to the prior year, and segment operating profit margin decreased 170 basis points during the same period. The decrease in segment operating profit margin was primarily due to the impact of reserve-related adjustments to the receivables portfolio.

Current wording

Segment operating profit for our Repair Solutions segment decreased $29.3 million, or 17.2%, during the year ended December 31, 2024, as compared to the prior year, and segment operating profit margin decreased 390 basis points during the same period. The decrease in segment operating profit margin was due to a 130 basis points decrease from reserve-related adjustments to the receivables portfolio. The remaining decrease was due to the impact of lower volume and product mix, as service technicians have purchased lower price point products in response to the macroeconomic impacts on service technicians’ discretionary spending.

Previous wording

Corporate & other unallocated costs increased $2.3 million, or 1.1%, during the year ended December 31, 2023, as compared to the prior year, primarily due to an increase in costs associated with restructuring activities, intangible asset amortization and variable and stock-based compensation expense, partially offset by a decrease in transaction and deal-related costs. Corporate & other unallocated costs as a percentage of total sales increased 20 basis points during the year ended December 31, 2023, as compared to the prior year.

Current wording

Corporate & other unallocated costs decreased $16.5 million, or 8.0%, during the year ended December 31, 2024, as compared to the prior year, due to an $11.7 million decrease in costs associated with restructuring activities. Corporate & other unallocated costs as a percentage of total sales decreased 30 basis points during the year ended December 31, 2024, as compared to the prior year.

Previous wording

Interest expense, net was $93.7 million during the year ended December 31, 2023 as compared to $69.6 million during the prior year, an increase of $24.1 million, driven primarily by the impact of increases in interest rates on our variable-rate debt obligations, partially offset by a decrease in our outstanding debt obligations between periods.

Current wording

Interest expense, net was $74.7 million during the year ended December 31, 2024 as compared to $93.7 million during the prior year, a decrease of $19.0 million, driven by a decrease in our outstanding debt obligations and an increase in interest income between periods.

Previous wording

We are routinely examined by various domestic and international taxing authorities. The amount of income taxes we pay is subject to audit by federal, state and foreign tax authorities, which may result in proposed assessments. The Company is subject to examination in the United States, various states and foreign jurisdictions. We review our 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. The IRS started an examination of the Company’s initial U.S. federal income tax return for the post-Separation period in 2020. At this point, no material issues or adjustments have been identified. The Company remains subject to U.S. Federal income tax audit for 2021 and 2022. The Company is subject to tax audits for its state income tax returns for post-Separation 2020 as well as 2021 and 2022. The Company remains subject to tax audits for its separate company tax returns in various U.S. states for the tax years 2011 to 2022. Our operations in certain foreign jurisdictions remain subject to routine examinations for the tax years 2014 to 2022.

Current wording

We are routinely examined by various domestic and international taxing authorities. The amount of income taxes we pay is subject to audit by federal, state and foreign tax authorities, which may result in proposed assessments. The Company is subject to examination in the United States, various states and foreign jurisdictions. We review our 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. The IRS concluded examination procedures on the Company’s initial U.S. federal income tax return for the post-Separation period of 2020. No material adjustments were identified, as such the Company has released all uncertain tax positions associated with the U.S. federal income tax return for the post-Separation period in 2020. The Company remains subject to U.S. Federal income tax audit for 2021 through 2023. The Company is subject to tax audits for its combined/consolidated state income tax returns for post-Separation 2020 through 2023. The Company remains subject to tax audits for its separate company tax returns in various U.S. states for the tax years 2020 to 2023. Our operations in certain foreign jurisdictions remain subject to routine examinations for the tax years 2017 to 2023.

Previous wording

The OECD agreed among over 130 countries on the Pillar Two proposals which establish a global minimum effective tax rate of 15% for multinational groups with annual global revenue exceeding €750 million. Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two proposals, including the European Union (“EU”) Member States which unanimously adopted the EU Pillar Two Directive, providing for a minimum effective tax rate of 15%. EU Member States are required to enact the EU Pillar Two Directive into their national laws by December 31, 2023, with effective dates of January 1, 2024 and January 1, 2025, respectively, for different aspects of the EU Pillar Two Directive. We do not expect the EU Pillar Two Directive to have a significant impact on our financial statements.

Current wording

The OECD agreed among over 130 countries on the Pillar Two proposals which establish a global minimum effective tax rate of 15% for multinational groups with annual global revenue exceeding €750 million. Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two proposals, including the European Union (“EU”) Member States which unanimously adopted the EU Pillar Two Directive, providing for a minimum effective tax rate of 15%. As of December 31, 2024, various EU Member States have enacted Pillar Two legislation. The Company performed an analysis of the impact of the legislation, and we expect no significant impact to our financial statements.

Previous wording

Our effective tax rate for the years ended December 31, 2023 and 2022 was 22.0% and 23.9%, respectively. The decrease in our effective tax rate during the year ended December 31, 2023, as compared to the prior year, was primarily due to favorable impacts related to tax credits, non-taxable income, and business reorganizations and divestitures which were offset by an increase to uncertain tax positions.

Current wording

Our effective tax rate for the years ended December 31, 2024 and 2023 was 15.2% and 22.0%, respectively. The decrease in our effective tax rate during the year ended December 31, 2024, as compared to the prior year, was primarily due to favorable impacts related to business reorganizations and divestitures and a decrease to uncertain tax positions.

Previous wording

Our effective tax rate for the year ended December 31, 2022 differs from the U.S. federal statutory rate of 21.0% primarily due to the effect of recurring items including state taxes, foreign derived intangible income and foreign taxable earnings at a rate different from the U.S. federal statutory rate. Additionally, there were favorable impacts related to non-taxable income.

Current wording

Our effective tax rate for the year ended December 31, 2024 differs from the U.S. federal statutory rate of 21.0% primarily due to the effect of state taxes, foreign derived intangible income, and tax credits. Additionally, there were favorable impacts related to business reorganizations and divestitures and a decrease to uncertain tax positions.

Previous wording

Comprehensive income increased by $50.0 million during the year ended December 31, 2023, as compared to the prior year. Comprehensive income for the year ended December 31, 2023 includes a gain on the sale of the Company’s Global Traffic Technologies business of $34.4 million. Comprehensive income for the year ended December 31, 2022 includes a gain on previously held equity interests from combination of business of $32.7 million which relates to a gain recognized on our interest in Driivz prior to acquiring the remaining outstanding shares, unrealized and realized losses on equity securities measured at fair value of $8.7 million and $3.1 million, respectively, and unfavorable foreign currency translation adjustments of $77.1 million.

Current wording

Comprehensive income decreased by $2.4 million during the year ended December 31, 2024, as compared to the prior year. Comprehensive income for the year ended December 31, 2024 includes an unfavorable foreign currency translation adjustment of $49.6 million and a gain on the sale of the Company’s Coats business of $37.2 million. Comprehensive income for the year ended December 31, 2023 includes a gain on the sale of the Company’s Global Traffic Technologies business of $34.4 million.

Previous wording

We are exposed to interest rate risk through fluctuations in interest rates on our debt obligations. As of December 31, 2023, we had $700.0 million outstanding of debt that was subject to variable interest rates. As a result, increases in interest rates could increase the cost of servicing our debt and could materially reduce our profitability and cash flows. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.

Current wording

We are exposed to interest rate risk through fluctuations in interest rates on our debt obligations. As of December 31, 2024, we had $550.0 million outstanding of debt that was subject to variable interest rates. As a result, increases in interest rates could increase the cost of servicing our debt and could materially reduce our profitability and cash flows. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities.

Previous wording

A hypothetical 100 basis points increase in market interest rates as of December 31, 2023 on our variable-rate debt obligations as of December 31, 2023 would increase our annual interest expense by approximately $7.0 million.

Current wording

A hypothetical 100 basis points increase in market interest rates as of December 31, 2024 on our variable-rate debt obligations as of December 31, 2024 would increase our annual interest expense by approximately $5.5 million.

Previous wording

We face transactional exchange rate risk from transactions with customers in countries outside of 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 our functional currency or the functional currency of an applicable subsidiary. We also face translational exchange rate risk related to the translation of financial statements of our foreign operations into U.S. dollars, our 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, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the accumulated other comprehensive income component of equity. A 10% change in major currencies relative to the U.S. dollar as of December 31, 2023 would have resulted in an impact to equity of approximately $85 million.

Current wording

We face transactional exchange rate risk from transactions with customers in countries outside of 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 our functional currency or the functional currency of an applicable subsidiary. We also face translational exchange rate risk related to the translation of financial statements of our foreign operations into U.S. dollars, our 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, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the accumulated other comprehensive income component of equity. A 10% change in major currencies relative to the U.S. dollar as of December 31, 2024 would have resulted in an impact to equity of approximately $87.0 million.

Previous wording

Currency exchange rates negatively impacted reported sales for the year ended December 31, 2023 by 0.6% as compared to the prior year, as the U.S. dollar was, on average, stronger against most major currencies during the year ended December 31, 2023 as compared to exchange rate levels during the prior year. If the exchange rates in effect as of December 31, 2023 were to prevail throughout the year ended December 31, 2024, currency exchange rates would not have a material impact on our estimated sales for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Current wording

Currency exchange rates negatively impacted reported sales for the year ended December 31, 2024 by 0.8% as compared to the prior year, as the U.S. dollar was, on average, stronger against most major currencies during the year ended December 31, 2024 as compared to exchange rate levels during the prior year. If the exchange rates in effect as of December 31, 2024 were to prevail throughout the year ended December 31, 2025, currency exchange rates would negatively impact estimated sales for the year ended December 31, 2025 by approximately 1.2% compared to the year ended December 31, 2024.

Previous wording

The assumptions used in evaluating our exposure to credit losses associated with our financing receivables portfolio involve estimates and significant judgment. Holding other estimates constant, a hypothetical 100 basis points increase in the expected loss rate on the financing receivables portfolio would have resulted in an increase in the allowance for credit losses of approximately $6.0 million as of December 31, 2023.

Current wording

The assumptions used in evaluating our exposure to credit losses associated with our financing receivables portfolio involve estimates and significant judgment. Holding other estimates constant, a hypothetical 100 basis points increase in the expected loss rate on the financing receivables portfolio would have resulted in an increase in the allowance for credit losses of approximately $5.0 million as of December 31, 2024.

Previous wording

•Voluntarily repaid $300.0 million of the Three-Year Term Loans Due 2024;

Current wording

•Voluntarily repaid $150.0 million of the Three-Year Term Loans Due 2024 and the Three-Year Term Loans Due 2025;

Previous wording

•Repurchased 2.8 million shares for $74.7 million in the open market.

Current wording

•Repurchased 2.7 million shares for $99.7 million in the open market.

Previous wording

Cash flows from operating activities were $455.0 million during the year ended December 31, 2023, an increase of $133.8 million as compared to the prior year. The year-over-year change in operating cash flows was primarily attributable to the following factors:

Current wording

Cash flows from operating activities were $427.5 million during the year ended December 31, 2024, a decrease of $27.5 million as compared to the prior year. The year-over-year change in operating cash flows was primarily attributable to the following factors:

Previous wording

•The aggregate of accounts receivable and long-term financing receivables used $6.9 million of operating cash flows during the year ended December 31, 2023 as compared to using $76.9 million in the prior year. The amount of cash flow generated from or used by accounts receivable depends upon how effectively we manage the cash conversion cycle and can be significantly impacted by the timing of collections in a period. Additionally, when we originate certain financing receivables, we assume the financing receivable by decreasing the franchisee’s trade accounts receivable. As a result, originations of certain financing receivables are non-cash transactions.

Current wording

•The aggregate of accounts receivable and long-term financing receivables used $56.0 million of operating cash flows during the year ended December 31, 2024 as compared to using $6.9 million in the prior year. The amount of cash flow generated from or used by accounts receivable depends upon how effectively we manage the cash conversion cycle and can be significantly impacted by the timing of collections in a period. Additionally, when we originate certain financing receivables, we assume the financing receivable by decreasing the franchisee’s trade accounts receivable. As a result, originations of certain financing receivables are non-cash transactions.

Previous wording

•The aggregate of other operating assets and liabilities generated $6.8 million of cash during the year ended December 31, 2023 compared to using $93.1 million in the prior year. This difference is due primarily to working capital needs and the timing of accruals and payments and tax-related amounts.

Current wording

•The aggregate of other operating assets and liabilities used $30.7 million of cash during the year ended December 31, 2024 compared to generating $6.8 million in the prior year. This difference is due primarily to working capital needs and the timing of accruals and payments and tax-related amounts.

Previous wording

Net cash provided by investing activities was $69.3 million during the year ended December 31, 2023, driven primarily by proceeds from the sale of our Global Traffic Technologies business and equity securities, partially offset by payments for additions to property, plant and equipment. Net cash used in investing activities was $329.9 million during the year ended December 31, 2022, driven primarily by the cash paid for the acquisitions that closed during the period and payments for additions to property, plant and equipment.

Current wording

Net cash used in investing activities was $11.4 million during the year ended December 31, 2024, driven by payments for additions to property, plant and equipment, partially offset by proceeds from the sale of our Coats business. Net cash provided by investing activities was $69.3 million during the year ended December 31, 2023, driven by proceeds from the sale of our Global Traffic Technologies business and equity securities, partially offset by payments for additions to property, plant and equipment.

Previous wording

We made capital expenditures of $60.1 million and $60.0 million during the years ended December 31, 2023 and 2022, respectively.

Current wording

We made capital expenditures of $82.7 million and $60.1 million during the years ended December 31, 2024 and 2023, respectively.

Previous wording

Net cash used in financing activities was $387.8 million during the year ended December 31, 2023, driven primarily by the voluntary repayment of $300.0 million of the Three-Year Term Loans due 2024 and repurchases of the Company’s common stock of $74.7 million. Net cash used in financing activities was $347.9 million during the year ended December 31, 2022, driven primarily by repurchases of the Company’s common stock of $328.0 million. We also refinanced $600.0 million of our term loans and made borrowings and repayments under our revolving credit facility, which had net zero impact to financing activities during the year ended December 31, 2022.

Current wording

Net cash used in financing activities was $392.3 million during the year ended December 31, 2024, driven by the voluntary repayment of $150.0 million of the Three-Year Term Loans due 2024 and Three-Year Term Loans due 2025 and repurchases of the Company’s common stock of $224.7 million. Net cash used in financing activities was $387.8 million during the year ended December 31, 2023, driven primarily by the voluntary repayment of $300.0 million of the Three-Year Term Loans due 2024 and repurchases of the Company’s common stock of $74.7 million.

Previous wording

As of December 31, 2023, we had $1.6 billion in aggregate principal amount of registered notes and $700.0 million in aggregate principal amount outstanding of term loans. Our obligations to pay principal and interest on the registered notes and term loans are fully and unconditionally guaranteed on a joint and several basis on an unsecured, unsubordinated basis by Gilbarco Inc. and Matco Tools Corporation, two of Vontier’s wholly-owned subsidiaries (the “Guarantor Subsidiaries”). Our other subsidiaries do not guarantee any such indebtedness (collectively, the “Non-Guarantor Subsidiaries”). Refer to Note 11. Financing to the Consolidated Financial Statements for additional information regarding the terms of our notes and the term loans.

Current wording

As of December 31, 2024, we had $1.6 billion in aggregate principal amount of registered notes and $550.0 million in aggregate principal amount outstanding of term loans. Our obligations to pay principal and interest on the registered notes and term loans are fully and unconditionally guaranteed on a joint and several basis on an unsecured, unsubordinated basis by Gilbarco Inc. and Matco Tools Corporation, two of Vontier’s wholly-owned subsidiaries (the “Guarantor Subsidiaries”). Our other subsidiaries do not guarantee any such indebtedness (collectively, the “Non-Guarantor Subsidiaries”). Refer to Note 10. Financing to the Consolidated Financial Statements for additional information regarding the terms of our notes and the term loans.

Previous wording

As of December 31, 2023, we held approximately $340.9 million of cash and cash equivalents that were held in either operating accounts or invested in highly liquid investment-grade instruments with a maturity of 90 days or less with an annual effective rate generally around 5.0% as of December 31, 2023. Approximately 50% of our cash was held outside of the United States.

Current wording

As of December 31, 2024, we held approximately $356.4 million of cash and cash equivalents that were held in either operating accounts or invested in highly liquid investment-grade instruments with a maturity of 90 days or less with an annual effective rate generally around 4.5% as of December 31, 2024. Approximately 55% of our cash was held outside of the United States.

Previous wording

We also have purchase obligations which consist of agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction. As of December 31, 2023, we had purchase obligations of $205.9 million, with $198.6 million payable in the next 12 months.

Current wording

We also have purchase obligations which consist of agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction. As of December 31, 2024, we had purchase obligations of $241.9 million, with $235.6 million payable in the next 12 months.

Previous wording

As of December 31, 2023, the Company had guarantees consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds of $79.2 million. These guarantees have been provided in connection with certain arrangements with vendors, customers, financing counterparties, and governmental entities to secure the Company’s obligations and/or performance requirements related to specific transactions.

Current wording

As of December 31, 2024, the Company had guarantees consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds of $81.4 million. These guarantees have been provided in connection with certain arrangements with vendors, customers, financing counterparties, and governmental entities to secure the Company’s obligations and/or performance requirements related to specific transactions.

Previous wording

Goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and intangible assets acquired less assumed liabilities. In accordance with accounting standards related to business combinations, neither goodwill nor indefinite-lived intangible assets are amortized; however, certain definite-lived identifiable intangible assets, primarily customer relationships, acquired technology and trade names, are amortized over their estimated useful lives.

Current wording

Goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and intangible assets acquired less assumed liabilities. In accordance with accounting standards related to business combinations, neither goodwill nor indefinite-lived intangible assets are amortized; however, definite-lived identifiable intangible assets, primarily customer relationships, acquired technology and trade names, are amortized over their estimated useful lives. We assess the goodwill of each of our reporting units for impairment at least annually as of the first day of the fourth quarter or more frequently if events and circumstances indicate that goodwill may not be recoverable.

Previous wording

As part of our 2023 annual impairment analysis, we elected to apply the qualitative goodwill impairment assessment guidance in ASC 350-20, Goodwill, for all four of our reporting units as of the assessment date, or approximately $1.7 billion of goodwill as of the assessment date. Factors we considered in the qualitative assessment included general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying value of the net assets of our reporting units, information related to market multiples of peer companies and other relevant entity specific events. Based on our assessment we determined on the basis of the qualitative and quantitative factors, that the fair values of the reporting units were more likely than not greater than their respective carrying values, and therefore, a quantitative test was not required.

Current wording

As part of our 2024 annual impairment analysis, we elected to apply the qualitative goodwill impairment assessment guidance in ASC 350-20, Goodwill, for all three of our reporting units as of the assessment date, or approximately $1.7 billion of goodwill as of the assessment date. Factors we considered in the qualitative assessment included general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying value of the net assets of our reporting units, information related to market multiples of peer companies and other relevant entity specific events. Based on our assessment we determined on the basis of the qualitative and quantitative factors, that the fair values of the reporting units were more likely than not greater than their respective carrying values, and therefore, a quantitative test was not required.

Previous wording

Certain customer arrangements, including our SaaS product offerings, include multiple performance obligations, typically hardware, installation, training, consulting, services and/or post-contract customer support (“PCS”). The Company allocates the contract transaction price to each performance obligation using the observable price that the good or service sells for separately in similar circumstances and to similar customers, and/or a residual approach when the observable selling price of a good or service is not known and is either highly variable or uncertain. Allocating the transaction price to each performance obligation may require judgment.

Current wording

Certain customer arrangements, including our SaaS product offerings, include multiple performance obligations, typically hardware, installation, training, consulting, services and/or post-contract customer support (“PCS”). The Company allocates the contract transaction price to each performance obligation using the observable price that the good or service sells for separately in similar circumstances and to similar customers. Allocating the transaction price to each performance obligation may require judgment.