Veralto Corp

Previous wording

You should read this discussion along with the Company’s MD&A and audited financial statements and Notes thereto as of and for the year ended December 31, 2023, included within the 2023 Annual Report on Form 10-K, and the unaudited financial statements and related Notes as of and for the three and six-month periods ended June 28, 2024 included in this Quarterly Report on Form 10-Q (this “Report”).

Current wording

You should read this discussion along with the Company’s MD&A and audited financial statements and Notes thereto as of and for the year ended December 31, 2023, included within the 2023 Annual Report on Form 10-K, and the unaudited financial statements and related Notes as of and for the three and nine-month periods ended September 27, 2024 included in this Quarterly Report on Form 10-Q (this “Report”).

Previous wording

The Company operates through two segments – Water Quality (“WQ”) and Product Quality & Innovation (“PQI”). The Company’s businesses within these segments have strong globally recognized brands as a result of its leadership in served markets over several decades. Through WQ, the Company provides innovative products and services that improve the quality and reliability of water through leading brands including Hach, Trojan Technologies and ChemTreat. Through PQI, the Company enables customers to promote consumer trust in products and help enable product innovation through leading brands including Videojet, Linx, Esko, X-Rite and Pantone. The Company believes its leading positions result from the strength of our commercial organizations, our legacy of innovation, and our close and long-term connectivity to its 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 the Company’s customers. As a result, the Company’s business generates recurring sales which represented approximately 61% of total sales during the six-month period ended June 28, 2024. The Company’s business model also supports a strong margin profile with limited capital expenditure requirements and has generated attractive cash flows. The Company believes these attributes allow it to deliver financial performance that is resilient across economic cycles.

Current wording

The Company operates through two segments – Water Quality (“WQ”) and Product Quality & Innovation (“PQI”). The Company’s businesses within these segments have strong globally recognized brands as a result of its leadership in served markets over several decades. Through WQ, the Company provides innovative products and services that improve the quality and reliability of water through leading brands including Hach, Trojan Technologies and ChemTreat. Through PQI, the Company enables customers to promote consumer trust in products and help enable product innovation through leading brands including Videojet, Linx, Esko, X-Rite and Pantone. The Company believes its leading positions result from the strength of our commercial organizations, our legacy of innovation, and our close and long-term connectivity to its 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 the Company’s customers. As a result, the Company’s business generates recurring sales which represented approximately 61% of total sales during the nine-month period ended September 27, 2024. The Company’s business model also supports a strong margin profile with limited capital expenditure requirements and has generated attractive cash flows. The Company believes these attributes allow it to deliver financial performance that is resilient across economic cycles.

Previous wording

During the three-month period ended June 28, 2024, the Company’s overall revenues increased 2.8% and core sales increased 3.8% compared to the comparable period in 2023 with growth in both segments. Currency exchange rates and acquisitions, net of divestitures, decreased reported salesby 0.8% and 0.2%, resp ectively. For the six-month period ended June 28, 2024, overall revenues increased 2.3% and core sales increased 2.8% compared to thecomparable period in 2023. Currency exchange rates and acquisitions, net of divestitures, decreased reported salesby 0.3% and 0.2%, respectively. For the definition of “core sales” refer to “—Results of Operations” below.

Current wording

During the three-month period ended September 27, 2024, the Company’s overall revenues and core sales increased 4.7% compared to the comparable period in 2023 with growth in both segments. Acquisitions, net of divestitures, increased reported sales by 0.1%. For the nine-month period ended September 27, 2024, overall revenues increased 3.1% and core sales increased 3.4% compared to the comparable period in 2023. Currency exchange rates and acquisitions, net of divestitures, decreased reported sales by 0.2% and 0.1%, respectively. For the definition of “core sales” refer to “—Results of Operations”below.

Previous wording

Geographically, the Company’s sales in the three-month period ended June 28, 2024 in developed markets increased year-over-year by 3.5% driven by increased sales of 5.8% in North America, partially offset by decreased sales of 0.4% in Western Europe. Sales in high-growth markets increased 1.1% year-over-year. For the same period, core sales in developed markets increased 3.5% driven by an increase in core sales of 5.4% in North America. Core sales were flat in the three-month period ended June 28, 2024 in Western Europe. Core sales in high-growth markets increased 4.4% driven by high single-digit increases in Latin America.

Current wording

Geographically, the Company’s sales in the three-month period ended September 27, 2024 in developed markets increased year-over-year by 5.4% driven by increased sales of 6.2% in North America and 4.8% in Western Europe, partially offset by decreased sales of 3.3% in other developed markets. Sales in high-growth markets increased 2.8% year-over-year, driven by mid-single digit growth in Latin America partially offset by low-single digit decreases in China. For the same period, core sales in developed markets increased 4.8% driven by an increase in core sales of 5.5% in North America and an increase in core sales of 4.2% in Western Europe, partially offset by a decrease in core sales in other developed markets. Core sales in high-growth markets increased 4.5% driven by high single-digit increases in Latin America partially offset by low-single digit decreases in China.

Previous wording

Geographically, the Company’s sales in the six-month period ended June 28, 2024 in developed markets increased year-over-year by 3.3% driven by increased sales of 5.3% in North America and 0.4% in Western Europe while sales in high-growth markets decreased 0.4%. For the same period, core sales in developed markets increased 2.9% driven by an increase in core sales of 4.8% in North America, partially offset by decreased core sales of 0.5% in Western Europe, while core sales in high-growth markets increased 2.1% driven by mid-single digit increases in Latin America.

Current wording

Geographically, the Company’s sales in the nine-month period ended September 27, 2024 in developed markets increased year-over-year by 4.0% driven by increased sales of 5.6% in North America and 1.8% in Western Europe, partially offset by decreased sales of 5.6% in other developed markets. Sales in high-growth markets increased 0.7% year-over-year, driven by mid-single digit growth in Latin America partially offset low-single digit decreases in China. For the same period, core sales in developed markets increased 3.6% driven by an increase in core sales of 5.1% in North America and an increase in core sales of 1.0% in Western Europe. Core sales in high-growth markets increased 2.9% driven by mid-single digit increases in Latin America partially offset by low-single digit decreases in China.

Previous wording

The Company’s net earnings for the three and six-month periods ended June 28, 2024 totaled $203 million and $387 million, respectively, compared to $209 million and $434 million, respectively, for the three and six-month periods ended June 30, 2023. The decrease in net earnings during the three-month period ended June 28, 2024 as compared to the three-month period ended June 30, 2023 was driven by standalone public company costs, interest expense post Separation from Danaher, and select investments in sales and marketing growth initiatives. The decrease in net earnings during the six-month period ended June 28, 2024 as compared to the six-month period ended June 30, 2023 was driven by standalone public company costs, interest expense post Separation from Danaher, select investments in sales and marketing growth initiatives and a loss on a sale of a product line. Refer to “—Results of Operations” for further discussion of the year-over-year changes in net earnings for the three and six-month periods ended June 28, 2024.

Current wording

The Company’s net earnings for the three and nine-month periods ended September 27, 2024 totaled $219 million and $606 million, respectively, compared to $205 million and $639 million, respectively, for the three and nine-month periods ended September 29, 2023. The increase in net earnings during the three-month period ended September 27, 2024 as compared to the three-month period ended September 29, 2023 was driven by higher sales, gross profit and a gain on the disposition of a product line offset bystandalone public company costs and interest expense post Separation from Danaher. The decrease in net earnings during the nine-month period ended September 27, 2024 as compared to the nine-month period ended September 29, 2023 was driven by standalone public company costs, interest expense post Separation from Danaher, select investments in sales and marketing growth initiatives and a net loss on the disposition of product lines. Refer to “—Results of Operations” for further discussion of the year-over-year changes in net earnings for the three and nine-month periods ended September 27, 2024.

Previous wording

Looking out over the balance of 2024, in the Water Quality Segment, the Company continues to expect positive secular growth drivers across industrial markets particularly in North America, along with steady demand at municipalities. In the Product Quality and Innovation segment, the Company expects to see steady, modest recovery in the consumer packaged goods markets as the year progresses. In any end market environment, the Company leverages VES to drive growth and continuous improvement.

Current wording

During the fourth quarter, in the Water Quality Segment, the Company continues to expect growth driven by positive secular drivers across industrial markets, particularly in North America, along with steady demand at municipalities globally. In the Product Quality and Innovation segment, the Company expects to benefit from continued gradual recovery in the consumer-packaged goods markets. In any end market environment, the Company leverages VES to drive growth and continuous improvement.

Previous wording

Total sales increased 2.8% and 2.3% during the three and six-month periods ended June 28, 2024, respectively, compared to the comparable periods in 2023, primarily as a result of core sales growth driven by the factors discussed below by segment.

Current wording

Total sales increased 4.7% and 3.1% during the three and nine-month periods ended September 27, 2024, respectively, compared to the comparable periods in 2023, primarily as a result of core sales growth driven by the factors discussed below by segment.

Previous wording

Currency exchange rates and acquisitions, net of divestitures, decreased reported sales by 0.8% and 0.2%, respectively, during the three-month period ended June 28, 2024 compared to the comparable period in 2023. Currency exchange rates and acquisitions, net of divestitures, decreased reported sales by 0.3% and 0.2%, respectively, during the six-month period ended June 28, 2024 compared to the comparable period in 2023. Price increases contrib uted 2.0% and 2.1% tosales growth on a year-over-year basis during the three and six-month periods ended June 28, 2024, respectively, and are reflected as a component of core sales growth above.

Current wording

Acquisitions, net of divestitures increased reported sales by 0.1% during the three-month period ended September 27, 2024 compared to the comparable period in 2023. Currency exchange rates and acquisitions, net of divestitures decreased reported sales by 0.2% and 0.1%during the nine-month period ended September 27, 2024, respectively, compared to the comparable period in 2023. Price increases contributed 1.8% and 2.0% to sales growth on a year-over-year basis during the three and nine-month periods ended September 27, 2024, respectively, and are reflected as a component of core sales growth above.

Previous wording

Cost of sales decreased by $15 million or 2.8% during the three-month period ended June 28, 2024, as compared to the comparable period in 2023. Cost of sales decreased by $33 million or 3.2% during the six-month period ended June 28, 2024, as compared to the comparable period in 2023. For the three and six-month periods ended June 28, 2024, the decreases in cost of sales were driven primarily by the impact of lower year-over-year material costs and improved productivity.

Current wording

Cost of sales decreased by $1 million or 0.2% and by $34 million or 2.2% on a year-over-year basis during the three and nine-month periods ended September 27, 2024, respectively, as compared to the comparable periods in 2023, driven primarily by the impact of lower year-over-year material costs and improved productivity.

Previous wording

Gross profit margins increased 230 basis points on a year-over-year basis for the three-month period ended June 28, 2024, as compared to the comparable period in 2023. Gross profit margins increased 220 basis points on a year-over-year basis for the six-month period ended June 28, 2024, as compared to the comparable period in 2023. For the three and six-month periods ended June 28, 2024 the increase in gross profit margins were driven by positive pricing actions and to a lesser extent lower material and improved productivity.

Current wording

Gross profit margins increased 200 and 220 basis points on a year-over-year basis for the three and nine-month periods ended September 27, 2024, respectively, as compared to the comparable periods in 2023, driven by positive pricing actions and to a lesser extent lower material costs and improved productivity.

Previous wording

SG&A expenses as a percentage of sales increased 190 basis points for the three-month period ended June 28, 2024, as compared to the comparable period in 2023. SG&A expenses as a percentage of sales increased 210 basis points for the six-month period ended June 28, 2024, as compared to the comparable period in 2023. For the three and six-month periods ended June 28, 2024, the increase in SG&A expenses as a percentage of sales was driven primarily by the increase in the Company’s SG&A expenses exceeding the increase in the Company’s sales, due to continued investments in sales and marketing growth initiatives, as well as the costs to operate as a stand-alone company.

Current wording

SG&A expenses as a percentage of sales decreased by 10 basis points and increased by 130 basis points during the three and nine-month periods ended September 27, 2024, respectively, as compared to the comparable periods in 2023. The decrease during the three-month period ended September 27, 2024 was primarily driven by core sales growth driven by the factors discussed below by segment exceeding the increase in the Company’s SG&A expense. The increase during the nine-month period ended September 27, 2024 was driven by the increase in the Company’s SG&A expenses exceeding the increase in the Company’s sales, due to select investments in sales and marketing growth initiatives, as well as the costs to operate as a stand-alone company.

Previous wording

R&D expenses as a percentage of sales increased by 20 basis points and by 20 basis points, respectively, during the three and six-month periods ended June 28, 2024 as compared to the comparable period in 2023, driven by growth related R&D initiatives.

Current wording

R&D expenses as a percentage of sales increased by 40 basis points and by 30 basis points during the three and nine-month periods ended September 27, 2024, respectively, as compared to the comparable periods in 2023, driven by growth related R&D initiatives.

Previous wording

Operating profit margins increased 10 basis points from 23.1% during the three-month period ended June 30, 2023 to 23.2%for the three-month period ended June 28, 2024.

Current wording

Operating profit margins increased 160 basis points from 21.8% during the three-month period ended September 29, 2023 to 23.4% for the three-month period ended September 27, 2024.

Previous wording

Second quarter 2024 vs. second quarter 2023 operating profit margin comparisons were unfavorably impacted by:

Current wording

Third quarter 2024 vs. third quarter 2023 operating profit margin comparisons were favorably impacted by:

Previous wording

•Second quarter 2023 impairment charges related to customer relationships - 40 basis points

Current wording

•Third quarter 2023 impairment charges related to a tradename in the Product Quality and Innovation segment - 50 basis points

Previous wording

•Second quarter year-to-date 2023 impairment charge related to customer relationships in the Product Quality and Innovation segment - 20 basis points

Current wording

•Third quarter year-to-date 2023 impairment charge related to customer relationships and a tradename in the Product Quality and Innovation segment - 30 basis points

Previous wording

•The impact of incremental costs associated with operating as a stand-alone company, incremental labor and sales and marketing growth initiatives offset by higher 2024 core sales and incremental year-over-year cost savings associated with material costs, restructuring and continuing productivity improvement initiatives - 10 basis points

Current wording

•Higher 2024 core sales, foreign currency exchange rates and cost savings associated with continuing productivity improvement initiatives, partially offset by the impact of incremental costs associated with operating as a stand-alone company, incremental labor and sales and marketing growth initiatives - 30 basis points

Previous wording

•Costs incurred as a result of the Separation from Danaher - 10 basis points

Current wording

•Transaction costs incurred during the third quarter 2024 related to the Company's recent acquisition described in Note 15, and costs incurred as a result of the Separation from Danaher - 10 basis points

Previous wording

Total segment sales increased 2.8% during the three and six-month periods ended June 28, 2024 compared to the comparable periods in 2023, primarily as a result of core sales growth driven by the factors discussed below. Geographically, sales growth was driven by North America, which saw increases of 6.7% and 6.5% for the three and six-month periods ended June 28, 2024, respectively, compared to the comparable periods in 2023.

Current wording

Total segment sales increased 3.6% and 3.1% year-over-year during the three and nine-month periods ended September 27, 2024, respectively, compared to the comparable periods in 2023, primarily as a result of core sales growth driven by the factors discussed below. Geographically, sales growth was driven by North America, which saw increases of 7.1% and 6.7%, and Western Europe, which saw increases of 5.7% and 2.7% for the three and nine-month periods ended September 27, 2024 respectively, compared to the comparable periods in 2023.

Previous wording

Price increases in the segment contributed 2.4% and 2.5% to sales growth on a year-over-year basis during the three and six-month periods ended June 28, 2024, respectively, and are reflected as a component of the change in core sales growth.

Current wording

Price increases in the segment contributed 2.1% and 2.3% to sales growth on a year-over-year basis during the three and nine-month periods ended September 27, 2024, respectively, and are reflected as a component of the change in core sales growth.

Previous wording

Core sales in the Water Quality segment increased 4.0% and 3.4%year-over-year during the three and six-month periods ended June 28, 2024, respectively. Geographically, core sales growth during the three-month period ended June 28, 2024, was driven by increases of 6.1% in North America and 2.0% in high-growth markets, driven by mid-single digit percentage core sales increase in China and low single digits core sales increase in Latin America, offset by decreases of 0.6% in Western Europe. Geographically, core sales growth during the six-month period ended June 28, 2024, was driven by increases of 6.1% in North America offset by decreases of 1.2% in Western Europe. Core sales were flat during the six-month period ended June 28, 2024 in high growth markets.

Current wording

Core sales in the Water Quality segment increased 4.0% and 3.6% year-over-year during the three and nine-month periods ended September 27, 2024, respectively. Geographically, core sales growth during the three-month period ended September 27, 2024, was driven by increases of 6.7% in North America and increases of 3.7% in Western Europe, offset by decreases of 1.0% in high-growth markets. The core sales decrease in high-growth markets was driven by low double digit percentage core sales declines in China offset by high-single digits core sales increase in Latin America. Geographically, core sales growth during the nine-month period ended September 27, 2024, was driven by increases of 6.3% in North America and increases of 0.4% in Western Europe. Core sales were flat during the nine-month period ended September 27, 2024 in high growth markets driven by mid-single digit decreases in China offset by low single digit increases in Latin America.

Previous wording

The increase in core sales in the three and six-month periods ended June 28, 2024 was driven by the chemical treatment solutions product line and, to a lesser extent, the analytical instrumentation and ultraviolet water disinfection product lines. Core sales in the chemical treatment solutions product line increased 7.8% and 6.4% year-over-year in the three and six-month periods, respectively, as a result of increased core sales across most major end-markets. Year-over-year core sales in the analytical instrumentation product line increased 2.7% and 2.3% for the three and six-month periods ended June 28, 2024, respectively, driven by all regions except Latin America. Core sales in the ultraviolet water disinfection product line increased by 2.2% and 2.7%, respectively, for the three and six-month periods, driven by demand in the municipal and residential end-markets.

Current wording

The increase in core sales during the three and nine-month periods ended September 27, 2024 was driven by the chemical treatment solutions product line and, to a lesser extent, the analytical instrumentation product line. Core sales in the chemical treatment solutions product line increased 9.0% and 7.3% year-over-year in the three and nine-month periods ended September 27, 2024, respectively, as a result of increased core sales across most major end-markets. Core sales in the analytical instrumentation product line increased 2.4% year-over-year for both the three and nine-month periods ended September 27, 2024 as a result of increased core sales across North America and Western Europe.

Previous wording

•The impact of incremental costs associated with operating as a stand-alone company, incremental labor and sales and marketing growth initiatives offset by higher 2024 core sales - 30 basis points

Current wording

•The impact of incremental year-over-year costs associated with labor, sales and select marketing growth initiatives offset by higher 2024 core sales - 10 basis points

Previous wording

•Higher year-to-date 2024 core sales and incremental year-over-year cost savings associated with material costs, net of the impact of incremental year-over-year costs associated with labor and sales and marketing growth initiatives - 80 basis points

Current wording

•Higher year-to-date 2024 core sales and incremental year-over-year cost savings associated with material costs, net of the impact of incremental year-over-year costs associated with labor and sales and marketing growth initiatives - 50 basis points

Previous wording

Total segment sales increased 2.7% and 1.5% year-over-year during the three and six-month periods ended June 28, 2024, respectively, primarily as a result of changes in core sales driven by the factors discussed below. Geographically, sales growth was driven by North America which saw increases of 3.7% and 2.1% for the three and six-month periods ended June 28, 2024, respectively, compared to the comparable periods in 2023. High-growth markets also experienced increased sales of 5.4% and 2.1% during the three and six-month periods ended June 28, 2024, respectively, compared to the comparable periods in 2023. Sales growth in Western Europe was flat and 1.3%during the three and six-month periods ended June 28, 2024, respectively, compared to the comparable periods in 2023.

Current wording

Total segment sales increased 6.3% and 3.1% year-over-year during the three and nine-month periods ended September 27, 2024, respectively, primarily as a result of changes in core sales driven by the factors discussed below. Geographically, sales growth was driven by North America which saw increases of 3.7% and 2.6% and Western Europe which saw increases of 5.7% and 2.7% during the three and nine-month periods ended September 27, 2024, respectively, compared to the comparable periods in 2023. High-growth markets also experienced increased sales of 9.5% and 4.6% during the three and nine-month periods ended September 27, 2024, respectively, compared to the comparable periods in 2023.

Previous wording

Price increases in the segment contributed 1.4% and 1.5% to sales growth on a year-over-year basis during both the three and six-month periods ended June 28, 2024, respectively, and are reflected as a component of the change in core sales growth.

Current wording

Price increases in the segment contributed 1.4% to sales growth on a year-over-year basis during both the three and nine-month periods ended September 27, 2024, and are reflected as a component of the change in core sales growth.

Previous wording

Core sales in the Product Quality & Innovation segment increased 3.4% and 1.8% year-over-year during the three and six-month periods ended June 28, 2024, respectively. Geographically, core sales growth during the three and six-month periods ended June 28, 2024 was driven by increases of 3.5% and 1.7% in North Americaand increases of 6.9% and 3.7% in high-growth markets, respectively. The core sales growth in the high-growth markets during the three and six-month periods ended June 28, 2024 was driven by low double digits and low teen core sales increases in Latin America partially offset by flat core sales in China. Core sales were flat in Western Europe during the three and six-month periods ended June 28, 2024, respectively.

Current wording

Core sales in the Product Quality & Innovation segment increased 5.7% and 3.1% year-over-year during the three and nine-month periods ended September 27, 2024, respectively. Geographically, core sales growth during the three and nine-month periods ended September 27, 2024 was driven by increases of 2.5% and 2.0% in North America and increases of 10.6% and 6.0% in high-growth markets, respectively. The core sales growth in the high-growth markets during thethree and nine-month periods ended September 27, 2024 was driven by low double digit core sales increases in both periods in Latin America and mid-teens and low single digits core sales increases in respective periods in China. Core sales were in the mid and low single digits in Western Europe during the three and nine-month periods ended September 27, 2024, respectively.

Previous wording

From a product line perspective, core sales in the marking and coding business increased 3.6% and 1.2% year-over-year during the three and six-month periods ended June 28, 2024, respectively, driven by higher consumable demand in the industrial and consumer packaged goods end-markets. Core sales in the packaging and color solutions business increased 3.0% and 3.2% year-over-year during the three and six-month periods ended June 28, 2024, respectively, driven by improving capital spending across the consumer packaged goods and industrial end-markets.

Current wording

From a product line perspective, core sales in the marking and coding business increased 4.6% and 2.3% year-over-year during the three and nine-month periods ended September 27, 2024, respectively, driven by higher consumable demand in the industrial and consumer packaged goods end-markets. Core sales in the packaging and color solutions business increased 8.2% and 4.8% year-over-year during the three and nine-month periods ended September 27, 2024, respectively, driven by increased demand across the consumer packaged goods and industrial end-markets.

Previous wording

•The impact of higher 2024 core sales and cost savings associated with restructuring and continuing productivity improvement initiatives, partially offset by incremental labor and sales and marketing growth initiatives - 80 basis points

Current wording

•The impact of higher 2024 core sales and cost savings associated with continuing productivity improvement initiatives, partially offset by incremental labor and sales and marketing growth initiatives - 540 basis points

Previous wording

•The impact of second quarter year-to-date 2023 impairment charge related to customer relationships - 50 basis points

Current wording

•The impact of third quarter year-to-date 2023 impairment charges related to customer relationships and a tradename - 80 basis points

Previous wording

•The impact of higher 2024 core sales and cost savings associated with restructuring and continuing productivity improvement initiatives, partially offset by incremental labor and sales and marketing growth initiatives - 20 basis points

Current wording

•The impact of higher 2024 core sales, foreign currency exchange rates and cost savings associated with continuing productivity improvement initiatives, partially offset by incremental labor and sales and marketing growth initiatives - 170 basis points

Previous wording

For a description of the Company’s other income (expense), net during the three and six-month periods ended June 28, 2024 and June 30, 2023, refer to Note 6 to the accompanying Consolidated and Combined Condensed Financial Statements.

Current wording

For a description of the Company’s other income (expense), net during the three and nine-month periods ended September 27, 2024 and September 29, 2023, refer to Note 6 to the accompanying Consolidated and Combined Condensed Financial Statements.

Previous wording

Net interest expense of $30 million and $58 million was recorded for the three and six-month periods ended June 28, 2024, arising from our outstanding indebtedness, which was incurred in September 2023. Before the Separation, Veralto depended on Danaher for all of its working capital and financing requirements under Danaher’s centralized approach to cash management and financing of operations of its subsidiaries. As a result, with the exception of cash, cash equivalents and borrowings clearly associated with Veralto and related to the Separation, the Company recorded no interest expense in the Combined Condensed Financial Statements for periods prior to the Separation.

Current wording

Net interest expense of $27 million and $85 million was recorded for the three and nine-month periods ended September 27, 2024, respectively, and net interest expense of $5 million was recorded for the three and nine-month periods ended September 29, 2023 arising from our outstanding indebtedness, which was incurred in September 2023. Before the Separation, Veralto depended on Danaher for all of its working capital and financing requirements under Danaher’scentralized approach to cash management and financing of operations of its subsidiaries. As a result, with the exception of cash, cash equivalents and borrowings clearly associated with Veralto and related to the Separation, the Company recorded no interest expense in the Combined Condensed Financial Statements for periods prior to the Separation.

Previous wording

The effective tax rate for thethree-month period ended June 28, 2024 differs from the U.S. federal statutory rate of 21% principally due to the geographic mix of earnings described above, net discrete expense of $3 million related primarily to the tax impact of uncertain tax positions, partially offset by excess tax benefits from stock-based compensation. The net discrete expense increased the effective tax rate by 1.1% for thethree-month period ended June 28, 2024.

Current wording

The effective tax rate for thethree-month period ended September 27, 2024 differs from the U.S. federal statutory rate of 21% principally due to the geographic mix of earnings described above, net discrete expense of$1 million related primarily to the tax impact of uncertain tax positions, partially offset by excess tax benefits from stock-based compensation. The net discrete expense increased the effective tax rate by 0.3% for thethree-month period ended September 27, 2024.

Previous wording

The effective tax rate for the six-month period ended June 28, 2024 differs from the U.S. federal statutory rate of 21.0% principally due to the geographic mix of earnings described above, the unfavorable impact of a non-deductible loss on the sale of a product line of $3 million, net discrete expense of $4 million related primarily to the tax impact of uncertain tax positions, partially offset by excess tax benefits from stock-based compensation. The net discrete expense increased the effective tax rate by 1.3% for the six-month period ended June 28, 2024.

Current wording

The effective tax rate for the nine-month period ended September 27, 2024 differs from the U.S. federal statutory rate of 21% principally due to the geographic mix of earnings described above, the unfavorable impact of a non-deductible loss on the sale of a product line of$3 million, net discrete expense of$5 million related primarily to the tax impact of uncertain tax positions, partially offset by excess tax benefits from stock-based compensation. The net discrete expense increased the effective tax rate by 1.0% for the nine-month period ended September 27, 2024.

Previous wording

The effective tax rate for thethree-month period ended June 30, 2023 differs from the U.S. federal statutory rate of 21% principally due to the geographic mix of earnings described above, partially offset by net discrete benefits of$1 million related primarily to excess tax benefits from stock-based compensation and changes in estimates associated with prior period uncertain tax positions. The net discrete benefits reduced the effective tax rate by 0.4% for thethree-month period ended June 30, 2023.

Current wording

The effective tax rate for thethree-month period ended September 29, 2023 differs from the U.S. federal statutory rate of 21% principally due to the geographic mix of earnings described above, partially offset by net discrete benefits of $6 million related primarily to excess tax benefits from stock-based compensation and changes in estimates associated with prior period uncertain tax positions. The net discrete benefits reduced the effective tax rate by 2.2% for thethree-month period ended September 29, 2023.

Previous wording

The effective tax rate for the six-month period ended June 30, 2023 differs from the U.S. federal statutory rate of 21.0% principally due to the geographic mix of earnings described above, partially offset by net discrete benefits of $6 million related primarily to excess tax benefits from stock-based compensation and changes in estimates associated with prior period uncertain tax positions. The net discrete benefits reduced the effective tax rate by 1.1% for the six-month period ended June 30, 2023.

Current wording

The effective tax rate for the nine-month period ended September 29, 2023 differs from the U.S. federal statutory rate of 21% principally due to the geographic mix of earnings described above, partially offset by net discrete benefits of $12 million related primarily to excess tax benefits from stock-based compensation. The net discrete benefits reduced the effective tax rate by 1.4% for the nine-month period ended September 29, 2023.

Previous wording

In 2024, comprehensive income decreased $39 million for the three-month period ended June 28, 2024 as compared to the comparable period in 2023, primarily driven by losses from foreign currency translation adjustments and to a lesser extent higher net earnings in the prior year period. Comprehensive income decreased $128 million for the six-month period ended June 28, 2024 as compared to the comparable period in 2023, primarily driven by losses from foreign currency translation adjustments and to a lesser extent higher net earnings in the prior year period. The Company recorded foreign currency translation losses of $29 million offset by an unrealized gain on their net investment hedge of $3 million for the three-month period ended June 28, 2024. The foreign currency translation losses were driven by the strengthening of the U.S. dollar against most major foreign currencies in the period, compared to gains of $7 million for the three-month period ended June 30, 2023, primarily driven by the weakening of the U.S. dollar against the euro in the period. The Company recorded foreign currency translation losses of $65 million offset by an unrealized gain on their net investment hedge of $12 million for the six-month period ended June 28, 2024. The foreign currency translation losses were driven by the strengthening of the U.S. dollar against most major foreign currencies in the period, compared to gains of $28 million for the six-month period ended June 30, 2023, primarily driven by the weakening of the U.S. dollar against the euro 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.

Current wording

In 2024, compre hensive income increased $142 million for the three-month period ended September 27, 2024 as compared to the comparable period in 2023, primarily driven by gains from foreign currency translation adjustments and to a lesser extent higher net earnings during the three month period ended September 27, 2024. Comprehen sive income increased $14 million for the nine-month period ended September 27, 2024 as compared to the comparable period in 2023, primarily driven by gains from foreign currency translation adjustments during the nine month period ended September 27, 2024. The Company recorded foreign currency translation gains of $88 million offset by an unrealized loss on their net investment hedge of $18 million for the three-month period ended September 27, 2024. The foreign currency translation gains were driven by the weakening of the U.S. dollar against most major foreign currencies in the period, compared to losses of $62 million for the three-month period ended September 29, 2023, primarily driven by the strengthening of the U.S. dollar against the euro, Swiss Franc, British pound, and Canadian dollar. The Company recorded foreign currency translation gains of $23 million offset by an unrealized loss on their net investment hedge of $6 million for the nine-month period ended September 27, 2024. The foreign currency translation gains were driven by the weakening of the U.S. dollar against most major foreign currencies in the period, compared to losses of $34 million for the nine-month period ended September 29, 2023, primarily driven by the strengthening of the U.S. dollar against the euro, Japanese yen, Chinese yuan and Canadian dollar 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.

Previous wording

•Operating cash flows decreased $91 million, or 20%, during the six-month period ended June 28, 2024 as compared to the comparable period in 2023, primarily driven by cash interest payments of $57 million, cash tax payments of $142 million, and lower net income offset by changes in net working capital.

Current wording

•Operating cash flows decreased $110 million, or 16%, during the nine-month period ended September 27, 2024 as compared to the comparable period in 2023, primarily driven by cash interest payments of $137 million, cash tax payments of $209 million, and lower net income offset by changes in net working capital.