Veralto (NYSE:VLTO) released second-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.
Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.
The full earnings call is available at https://event.on24.com/wcc/r/5416059/F7EC9F6D54E19AB17809683E216FD208
Summary
Veralto Corporation reported a 7.6% year-over-year sales growth in Q2 2026, with adjusted EPS up by 19.4% and a robust free cash flow of $328 million.
The company raised its full-year adjusted EPS guidance to $4.35 to $4.43 per share, representing a 12% to 14% growth year-over-year, and expects core sales growth to accelerate to 5%-6% in the second half.
Strategic initiatives include the acquisition of Alpha UV to enhance UV water treatment solutions and ongoing share repurchases totaling over 5 million shares for approximately $480 million.
Operational highlights include strong performance in the Water Quality segment, driven by industrial market demand, and the PQI segment's steady demand for digital workflow solutions.
Management expressed confidence in their growth drivers, highlighting strong industrial market demand, successful bolt-on acquisitions, and a balanced approach to capital allocation.
Full Transcript
Nikki, Operator
Hello, my name is Nikki and I will be your conference operator this morning. At this time I would like to welcome everyone to Veralto Corporation's second quarter 2026 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press Star then the number one on your telephone keypad. If you would like to withdraw your question, please press Star then the number two on your telephone keypad.
I will now turn the call over to Ryan Taylor, Vice President of Investor Relations. Mr. Taylor, you may begin your conference.
Ryan Taylor, Vice President of Investor Relations
Good morning everyone. Thanks for joining us. On the call with me today are Jennifer Honeycutt, our President and Chief Executive Officer, and Sameer Ralhan, our Senior Vice President and Chief Financial Officer. Today's call is simultaneously being webcast. A replay of the webcast will be available in the Investor section of our website later today under the heading Events and Presentations. A replay of this call will be available until August 7th.
Yesterday we issued our second quarter 2026 earnings news release, earnings presentation, prepared remarks and supplemental materials including information required by the SEC relating to adjusted or non-GAAP financial measures. These materials are also available in the Investor section of our website www.veralto.com under the heading Quarterly Earnings. Reconciliations of all non-GAAP measures are also provided in the appendix of the webcast slides.
Unless otherwise noted, all references to variances are on a year-over-year basis. During the call we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties including those set forth in our SEC filings. Actual results may differ materially from our forward-looking statements.
These forward-looking statements speak only as of the date that they are made and we do not assume any obligation to update any forward-looking statements except as required by law. And with that, I'll turn the call over to Jennifer.
Jennifer Honeycutt, President & CEO
Thanks Ryan. I want to start by thanking our 17,000 associates for their efforts in delivering an excellent second quarter. In Q2, total sales grew 7.6% year over year, adjusted EPS increased 19.4% and we generated robust free cash flow of $328 million. We delivered 4.2% core sales growth led by Water Quality at 5.7% and PQI at 2%. As expected, core sales growth in both segments accelerated sequentially from Q1 to Q2. We expect year-over-year core sales growth to continue accelerating in the second half to approximately 5% to 6% based on our Q2 performance and momentum across the portfolio.
We raised our full year adjusted EPS guidance to $4.35 to $4.43 per share representing 12% to 14% growth year over year. We continue to advance long-term value creation through strategic bolt-on acquisitions, including last week's acquisition of Alpha UV, an India-based leader in UV water treatment solutions. I'm excited to welcome our new associates from Alpha UV to Veralto and we also continue to opportunistically repurchase our shares. So far this year we have repurchased over 5 million shares for approximately $480 million or just over 2% of the company overall.
I'm proud of our team for their outstanding execution through the first half of the year and focus on our critical few: accelerating growth, optimizing cost and executing disciplined capital allocation. Looking ahead, with a strong balance sheet and robust cash generation, we remain focused on compounding long-term shareholder value through high-quality growth, VBS-driven execution and disciplined capital allocation. That concludes my prepared remarks and at this time we're happy to take your questions.
Nikki, Operator
Thank you. And at this time, if you wish to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue by pressing star two. In the interest of time, please limit to one question and one follow-up question. We will take our first question from Dean Dre with RBC Capital Markets. Please go ahead. Your line is open.
Dean Dre, Analyst at RBC Capital Markets
Thank you. Good morning everyone.
Jennifer Honeycutt, President & CEO
Good morning, Dean.
Dean Dre, Analyst at RBC Capital Markets
Hey. We continue to really like this highly efficient release of your prepared remarks. And you know, really crazy busy earnings season. It's just such a great innovation. So thank you for doing that again and hopefully it's a best practice as far as we're concerned. So my first question, can we start with the core revenue guidance that's implied and you referenced it here this morning, the impressive 5% to 6% for the second half? Maybe unpack the drivers and your degree of confidence in this acceleration.
Jennifer Honeycutt, President & CEO
Yeah, thanks for the question, Dean, and it's great to have you leading off today. But before answering your question, I just want to say that we are grateful for your decades of thoughtful analysis within both water and industrial markets. I think all the way back to when Danaher acquired Hach and Videojet, where I was working at Hach at the time when we had our investor conference out there. I think you were one of the first analysts that I met.
So we wish you all the best in your next chapter.
Dean Dre, Analyst at RBC Capital Markets
Thank you, Jennifer. It's been a great run and I appreciate all the support and insight you and the team are providing me over the years. So thank you for those comments. But I still have my questions.
Jennifer Honeycutt, President & CEO
Thank you. Yes, yes, we're getting to your question right now. So, you know, obviously we saw some sequential acceleration between Q1 and Q2. We feel really good about the momentum coming out of the first half of the year and the durability of the growth drivers here in the second half. I'll just say two key drivers in each segment. I think in Water, our industrial market demand continues to be strong and this is really on the back of the data center demand and the associated ecosystem there, including power, mining, and semiconductor.
Secondly, for Water we've got ongoing scarcity clearly exacerbated by climate change, which is propelling water recycling and reuse, giving us good opportunity to sell solutions into that space. For PQI, we continue to see strong demand for digital workflow solutions as CPG brands look to improve product compliance, traceability and time to market. And we see ongoing steady demand for our marking and coding solutions, clearly supported as well by easier comps in the fourth quarter.
So based on where the funnels were at the end of Q2, we feel really good about the momentum and confident in the second half guide for core sales growth. And maybe, Dean, I'll just add one more point. As you look at the second half core growth of 5% to 6%, we expect it to be led by volume with pricing moderating slightly but still be at or slightly above the high end of the range. So this will be a volume story in the second half of the year.
Dean Dre, Analyst at RBC Capital Markets
Great to hear all of that. And then just second question on capital allocation. It's been really nice to see the balanced approach here. I mean you've been opportunistic on some bolt-on acquisitions and the buybacks coming through. Sameer, can you just give us a sense of how you're looking at these opportunities? What does the funnel look like? You've made some pretty obviously accretive deals here. What's that pipeline look like? And in the meanwhile can you do more buybacks?
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Thank you. Thanks, Dean, for the question. Yeah, if you kind of look at the capital allocation from a framework, Dean, there's really no change. Our first bias is of course towards M&A to create long-term value and we will be opportunistic on the buyback side. And if, you know, the valuation stage—there's a disconnect between the free cash flow generation of the company and the public market value—we will be out in the market from a share buyback perspective.
But otherwise, from an M&A side the funnels are pretty, pretty good, Dean, on both sides of the house. So we're in active cultivations and pretty actively looking at things. But as you know, M&A is episodic so we'll stay patient and disciplined.
Dean Dre, Analyst at RBC Capital Markets
Great. And again thank you for your kind words and I wish you all continued success.
Jennifer Honeycutt, President & CEO
Thank you, Dean.
Nikki, Operator
Thank you. Our next question comes from Scott Davis with Melius Research. Please go ahead.
Scott Davis, Analyst at Melius Research
Hey, good morning everybody. Jennifer, Sameer, Ryan.
Jennifer Honeycutt, President & CEO
Good morning, Scott.
Scott Davis, Analyst at Melius Research
I guess with Dean leaving I'm going to have to actually learn what the water business is finally. Just call him if I needed help, so maybe he'll be kind enough to give me his home number and I'll just call him in future quarters. So anyways he will be missed by us as well. He was a great colleague and friend. But anyways guys, getting back to business, you talked a little bit about the opportunity around data center, power gen, semi fabs and the future, mining in there too.
Is there any way you can kind of size that if you combine those or even help us understand anything about really how we can think about the TAM in those businesses or opportunities, or how big of a potential tailwind that may be to your top line in industrial water treatment?
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Hey Scott, as you look at overall demand and the revenue that we're getting from the data centers and the associated ecosystem, it's still a small number on the high-tech side but overall, from a country perspective, it's becoming pretty interesting as we move forward. But at this level it's still a small number at this point. So we're not public with that number yet.
Jennifer Honeycutt, President & CEO
I mean you could think of ChemTreat solutions in there to be strong double-digit growth, right? That team has been firing on all cylinders. It is still a smaller part of our overall business but continues to be a really, really good grower, along with some other sort of industrial reshoring and near-shoring activities. So we're seeing lift kind of across the board.
Scott Davis, Analyst at Melius Research
Okay, fair enough. And then you guys in the past quarter kind of talked about this cost-out plan given kind of the recovery you're seeing in some of your markets. Is there—maybe you can update us on what you're planning on doing there and timing and such.
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Yes, the program is on track, Scott, so we are well on our way. We started executing some things. In fact, as far as the savings are concerned, in this year we're going to see a very small lift maybe in Q4—that's baked into the guide. It's a very small number. We're talking $2 million at this point. The biggest benefit we'll see is in '27. But overall there's no change as far as if you're referring to any lift in the business, and is that impacting the cost optimization program?
Absolutely not. We're fully committed and progressing well.
Scott Davis, Analyst at Melius Research
Okay, best of luck. I appreciate it.
Jennifer Honeycutt, President & CEO
Thanks. Thanks, Scott.
Nikki, Operator
Thank you. We will move next with Jeff Sprague with Vertical Research. Please go ahead.
Jeff Sprague, Analyst at Vertical Research Partners
Hey, thanks. Good morning everyone. Maybe just two quick ones for me. First, on the volume pickup that you expect in the back half, do you see that being led by equipment or consumables? Can you maybe unpack that a little bit?
Jennifer Honeycutt, President & CEO
It's a combination of both, Jeff. On the water side it's going to be pretty balanced across both sides. But PQI side is pretty interesting. If you look at the PQI side really there are three building blocks. The first one is going to be driven by the digital workflow solutions over there. As you know we book and based on the ACVs of the contracts that we're booking we have pretty good solid visibility into the second half recovery in the digital workflow solutions. Marketing and coding continues to be very strong. So the year over year comp is going to look very good.
As you're going to look at the Q4 impact last year and then on the color validation and certification instrumentation side we started seeing the funnels improving and the velocity improving over there as well. So we should start seeing an uplift in the second half of the year. So when you look at both on the PQI side and the water quality side, it's pretty broad based. It's not tied to one for any product line.
Jeff Sprague, Analyst at Vertical Research Partners
And then when you look at your price capture, you know, actually is very solid in my opinion for a business that's not metals intensive and I don't think had a lot of sort of tariff related pressure. Is that you know, primarily reflective of price capture in consumables or how are you doing on the equipment side in terms of getting some incremental price?
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Yes, I mean our philosophy is every product has to earn the right to be in the portfolio. So we take a balanced approach and it's, you know, we've been surgical about where and how and how much we increase price. Obviously we look to cover, you know, inflationary impact, impact of tariffs, et cetera. But you see balanced price through on both consumables and equipment. It's a little bit higher on consumables given the captive nature of those products.
Jeff Sprague, Analyst at Vertical Research Partners
Right, right. Thank you.
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Thanks, Jeff.
Nikki, Operator
Thank you. Our next question comes from Mike Halloran with Baird. Please go ahead.
Mike Halloran, Analyst at Baird
Morning, everyone.
Jennifer Honeycutt, President & CEO
Morning, Mike.
Mike Halloran, Analyst at Baird
So thanks a couple here. So just can we talk a little bit about back half margin progression, what the assumptions are and then the health of the PQI segment and how that tracks the quarters?
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Yes, Mike, as you're going to look at the margin side, we will start we'll see a sequential improvement on the margin right in the guidance we kind of laid that out. But we should expect roughly 25 bits of margin expansion in Q3 and for the full year it's going to be 25 to 50. So Q4 we're going to see a nice margin uplift, especially in the PQI side because that's where we saw some of the impact from the fixed cost absorption side and the line moves and duplicate product line production lines that we had on the market coding side. So think about margin expansion to roughly 25bps in Q3 and for the full year, 25 to 50 basis points. So Q4 will be north of 50. As you can think.
Mike Halloran, Analyst at Baird
Any nuance by segment here,
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Q4 will be largely led by PQI. But on the water side it's going to be steady on what we've seen so far.
Mike Halloran, Analyst at Baird
Thank you. And then just on the PQI side of things, you know, talk about what you're seeing on the equipment side and that headwind abating on the packaging and color side into the back half of the year and maybe touch on what you're seeing on the workflow solutions that gives you the confidence and acceleration and the frankly secular opportunity you're seeing on that side.
Jennifer Honeycutt, President & CEO
Yeah, so we've got a decent ramp in PQI here in the second half. It's really driven by three things. The first is we're seeing strong demand in bookings of our digital workflow solutions with the integration of Esko, TraceGains and now GlobalVision. We also see steady demand in marketing and coding. That's bolstered by an easier comp in Q4. And we do see recovery in our packaging and color equipment. We exited Q2 with better funnels and stronger service growth.
And so we've got good confidence in kind of the second half acceleration of core growth there. We also have a number of new product launches that have come to market here for PQI as a function of our increased investment at the time of spin. So flywheel of innovation is accelerating. We've got a number of good innovations coming to market.
Mike Halloran, Analyst at Baird
Thank you. Appreciate it.
Jennifer Honeycutt, President & CEO
Thanks Mike.
Nikki, Operator
Thank you. Our next question comes from John Pagnolti with BMO Capital Markets. Please go ahead.
John Pagnolti, Analyst at BMO Capital Markets
Yeah, good morning. Thanks for taking my question. Maybe just a quick one on the pricing side, I think Sameer, you've said back half, you're not assuming much in terms of further price acceleration, I guess is that a function of the comps are a bit tougher or is that a function of you just don't see the need for it at this point just given the cost may have stabilized, I guess. How should we be thinking about pricing as we kind of progress through the rest of the year?
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Yeah, thanks for the question. First of all, I think on the pricing we expect to be pretty strong, right. Even in the second half we should expect the pricing to be slightly above the high end of the range. So overall from an absolute basis, you know, we still expect to be pretty good. As far as the moderation point that I said earlier from a Q2 to Q3 and Q4, really, John, that is a comp. It's a lapping up. As you know, we introduced price increases last year when the tariffs started happening and then we had our regular annual price increases in as well.
So in the first half of the year we've seen impact of both and, and as we get into Q3, we'll get back to our normal price increases.
John Pagnolti, Analyst at BMO Capital Markets
Got it. Okay, fair enough. And then maybe just to dig a little bit deeper into the data center opportunities and how you're targeting that I know we saw earlier, I guess in the second quarter there was a new partnership with Dow and some of their chemical solutions for the data center opportunities. I guess should we be expecting further types of partnerships and how are you looking to grow out that business? What are the avenues that you can take?
And also I guess, can you speak to potential M and A opportunities that you might see that help further target that market for you? Thanks.
Jennifer Honeycutt, President & CEO
Yeah, great question, John. Yeah, we've continued to engage in partnerships across the enterprise. We're excited about our partnership with Dow to help serve liquid cooling applications and data centers. But this is normal course of business for us as we look to extend our value into these high growth areas, you know, relative to other applications and so on. You know, look, we can't talk about anything specifically that's in the funnel, but we like how we're positioned here.
And as far as, you know, M and A and partnerships are concerned. You know, we're going to look to our power alley of serving the operating environment of the customer's workflow where, you know, there's a good sticky razor, razor blade kind of relationship. And, you know, we are the right custodian to deliver the kind of value that those customers want. So I think we're well positioned here. We're looking at lots of things and you'll know when we know as far as any assets that come into the portfolio as a function of that.
John Pagnolti, Analyst at BMO Capital Markets
Thanks very much for the color.
Nikki, Operator
Thank you. We will move next with Nathan Jones with Stifel. Please go ahead.
Nathan Jones, Analyst at Stifel
Morning everyone.
Jennifer Honeycutt, President & CEO
Good morning, Nathan.
Nathan Jones, Analyst at Stifel
I guess I'll start in the packaging and color side of the business. You talked about Esko, TraceGains and GlobalVision and the impact that they're having together. Can you maybe talk a little bit about how you're leveraging each one in order to generate better sales, you know, and how that factors into the outlook of in the second half. And then you mentioned in your, in your scripts environmental monitoring workflows, which I think plays into In-Situ and OTT and maybe how they've fit together to drive additional sales as well.
So maybe just sales synergies around the acquisition basis the short way asking.
Jennifer Honeycutt, President & CEO
Yeah. So, you know, obviously we continue to stitch together assets here that deliver more value to the consumer products goods digital workflow and, you know, everything from sort of package design integrity through compliance, regulatory compliance, ingredient traceability, checking for accuracy of the print that's actually rendered on the package. You know, all of those things are critical workflows for brand owners and to the extent that they can be seamlessly integrated is where the real value is derived from.
In fact, we've at our most recent trade show, EskoWorld, was able to demonstrate packaging design changes that normally span months into weeks and in some cases down to a few days. So there's real value in that workflow just in terms of stitching those things together. Bear in mind that GlobalVision has been a longstanding partner of Esko and so the integration of those solutions is pretty straightforward. But TraceGains is also providing real value to this workflow in terms of ingredient traceability, you know, regulatory changes and making sure that products are fit for purpose and meet all the regulatory affairs and compliance requirements.
So, yes, we are seeing good value there. We see good brand uptake of those solutions and we see that accelerating here in the back half of the year relative to your question in the environmental workflows. Yes, we are speaking to the combination of In-Situ and our OTT products and as we had mentioned previously, the two of those really fit together like Legos. One is strong in analytical quality, one is strong in analytical quantity. So quality and quantity are both covered in those environmental workflows and they provide important intelligence here for the integrity of water as it comes into the influent into water treatment plants.
So knowing what is coming, how much is coming, whether it's clean or dirty are all critical factors, particularly as you get more environmental aberration, severe weather events and so on. So integration is progressing well there and we're liking what we're seeing.
Sameer Ralhan, Senior Vice President & Chief Financial Officer
And just one thing on the environmental side, Nathan, I'll add is as you kind of look at the synergy numbers as we kind of talked about on the commercial side when we announced the deal in the early days, the team is executing phenomenally well and the deal well ahead on the commercial synergy side, numbers wise.
Nathan Jones, Analyst at Stifel
And for that. Excuse me, thanks for that. I guess the follow up question, just a housekeeping one I guess around margins you had the IPA tariff refunds in each segment. Can you talk about what the margin expansion was ex IPA refunds and I think the guidance contains no more IPA refunds in it. Any chances that there will be more coming ahead? Thanks.
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Yeah, thanks Nathan for the question. As you look at the refund side effectively, we got roughly 16 million, 10 or so in PQI, 6 million in water quality. Overall impact of the tariff refunds on the margin expansion on the adjusted op was 110 basis points. So excluding that margin effectively came in pretty much in line with the guidance statement overall as a company and for each segment as well. So really no surprises on the margin side. And as far as the future goes in the second half of the year, you're absolutely right.
We have not included any further benefit from tariff refunds in the second half. But based on the filings that we have done, we can have another $0.02 per share impact benefit. But the timing is highly uncertain so we have not added that to our guidance for the second half.
Nathan Jones, Analyst at Stifel
Thanks for taking the questions.
Nikki, Operator
Thanks, Nathan. Thank you. We will move next with Andy Kaplowitz with Citigroup. Please go ahead.
Andy Kaplowitz, Analyst at Citigroup
Good morning everyone.
Jennifer Honeycutt, President & CEO
Good morning Andy.
Heidi, Analyst
Jennifer, can you give us a little more color on how to think about the mix of water quality going forward? For instance, how big is your overall industrial exposure at this point? Is it getting as large as your municipal exposure? And it looks like you're saying that industrial end markets are growing at least in the high single digits, it seems like it's more broad-based growth outside of data center. So can you talk about the variability of that growth moving forward?
Jennifer Honeycutt, President & CEO
Yeah, we're really pleased with our industrial growth. And if you look at our overall water business, about 50% of our water revenue comes from industrial applications. So it's really quite significant. Most of that industrial revenue comes from North America. And so we're really seeing the benefits not only of these discrete vertical markets like data centers and the feeder industries there, but also in the near-shoring and the reshoring efforts.
We see growth being catalyzed here by strength in those industrial markets. That said, we've got plenty of analytical instrumentation and products and services that go into that space. But the municipal markets are also holding up well. Right. As a reminder, 60% of our revenue is recurring revenue. We sit in the operating side of the customer's plant where, you know, they're looking to, you know, make sure that they insulate themselves from any points of failure along their, you know, along their value chain there.
So being integral to the operating environment, making sure that we help customers avoid critical points of failure allows us to continue to see really sticky business there on the municipal side. And the other 40% really is revenue associated with continuing to upgrade equipment and deploy new technologies and so on. So I think it's really balanced across the portfolio. Certainly there's a higher driver of growth coming from our industrial markets, but muni is holding up really well as well.
Heidi, Analyst
Patrick, maybe I could double click on the muni markets because obviously we get, I'm sure you get asked the question a lot. I think you called it steady. You reminded us of the recurring growth. Can you continue to grow in that business, you think, over the next several quarters, years? I do hear municipalities worried about tight budgets. Can you do that? You continue to grow in a more tight budgeting environment?
Jennifer Honeycutt, President & CEO
Yeah, I mean the way to think about this is the budgets for operating a water plant are not elective. Right. Water plants have to continue to operate, treat their water because communities and industry is relying on that water. So we don't see real aberrations or fluctuations in federal funding. Obviously, you know, utilities, municipalities are going to be judicious with their spend. But we absolutely believe that we can continue to grow and grow at mid single digits or better in this space.
Bear in mind with, you know, new technologies, more efficient ways of running plants, more software deployed to get, you know, intelligence out of how well that system is running. Those are all opportunities for continued growth.
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Yeah. Andy, as you're going to think about our muni business, right. Definitely on the analytics side is where you see the consumable side. But let's not forget on the Trojan side we have pretty nice exposure on the muni to our Trojan business. And the bid activity that you see in the wastewater side, especially the munis, is pretty, pretty solid. So overall demand, as you can think in the growth of our muni business, you should look at both angles.
Both one from the analytics side, from the Hach side, at the same time from a Trojan business as well, which has been growing pretty nicely.
Heidi, Analyst
Appreciate all the color guys.
Nikki, Operator
Thank you. Thanks, Heidi. Thank you. We will move next with Brian Connors with North Coast Research. Please go ahead.
Brian Connors, Analyst at Northcoast Research
Great. Thanks for taking my question. Wanted to talk about ChemTreat a little bit. You've talked about pricing at various points in the call, but it looked like we were going to get some relief there in terms of input cost headwinds, oil prices had come down. Seems like that volatility has picked back up. Can you just talk in more detail about the specific price-cost dynamics in ChemTreat? I know you mentioned the teams firing on all cylinders from a top line perspective, but can you talk about price, cost and margins with the volatile raw materials here in ChemTreat?
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Yeah, Brian, I'll take on the ChemTreat side. You're actually right. Look, in ChemTreat we've been working very closely with our customers, given some of the chemical inputs, to see how we kind of make sure we can preserve the margins and get the right value for the solution that we deliver to the customers. Overall, as you kind of think about in that business dynamic, yes, some of the pass-through can move with the pricing, but at this point frankly we have not seen any sort of a change as yet.
Our goal is to make sure when price, when the input side is so volatile, we are preserving the dollar margin. So that's one of the biggest focus for us as we can think about. And the discussions with customers that the ChemTreat team is having, it's pretty real time. I mean we look at our phenomenal digital solutions to make sure our sales teams are fully armed to have those discussions.
Brian Connors, Analyst at Northcoast Research
Got it. Thank you. And then one more on the PQI side, just curious whether, you know, we've had this really high-profile recall situation with the stylospora infections with the lettuce outbreak. Just curious whether for your teams there, whether that type of situation creates an uptick in kind of interest and selling opportunity for people to get diskets when something like that is front page news like that, whether that's kind of an opportunity for a bit of an uptick in interest and opportunity.
Jennifer Honeycutt, President & CEO
Yeah, great question. The answer is absolutely. And while cyclospora is the latest public health risk, any kind of bacterial or parasitic outbreak is not actually uncommon. You can go back to E. coli in peanut butter, botulism in infant formula. These kinds of episodes happen. And our PQI franchise is ideally positioned with Esko, TraceGains and GlobalVision providing integrated workflows to help with regulatory compliance, ingredient traceability and packaging accuracy.
While our coding and marking businesses aid in the date, lot code and distribution traceability. So it's an end-to-end solution really for brand owners to ensure that they have product that is safe for public consumption. So, you know, together our portfolio of solutions really provides that source of shelf intelligence to make sure that brand owners can protect public health.
Brian Connors, Analyst at Northcoast Research
Understood.
Jennifer Honeycutt, President & CEO
Thanks for your time. Thanks, Owen.
Nikki, Operator
Thank you. Thank you. Our next question comes from Andrew Krill with Deutsche Bank. Please go ahead.
Andrew Krill, Analyst at Deutsche Bank
Hi. Thanks. Morning everyone. Could you give us an update on what you're seeing on electronics? Inflation, including memory, you know, with all the demand on those products from data centers, is there anything, you know, very unusual from a cost perspective or availability perspective? And can you remind us which products are most exposed to those in Veralto?
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Thanks. Yeah, thanks Andrew. Great question. Our exposure in the electronics chain really comes to our instruments where we do use memory, we do use boards. These costs overall, when you kind of step back, Andrew, are a pretty small fraction of the cons. We're definitely seeing high prices just like everybody else in the industry and frankly broader economy. But the impact of the level at this point is not material. And from our perspective, look, the procurement teams are working pretty actively.
I wouldn't say that at this point we've had any issues of sourcing. It's a matter of pricing, but it's a small number that we're able to pass through at the same time. This is where from the R&D team's perspective they're looking at things as well as to how we can design and optimize things in a higher memory or higher semiconductor price environment as well. So those actions are helping mitigate the impact as well. So it's not a material impact to the Veralto level is the punchline.
Andrew Krill, Analyst at Deutsche Bank
Okay, great, very helpful. And then switching gears, the Alpha UV deal I think didn't get a ton of airtime. Maybe can you just give us some more on the growth rates? I believe the prepared remarks said double-digit growth this year. Is that sustainable and maybe any help on margins now and where they could go as you use V and integrate the company?
Jennifer Honeycutt, President & CEO
Yeah, we're really happy to welcome Alpha UV into the portfolio. This is a highly synergistic addition to our Trojan business which continues to expand our footprint globally. Alpha itself has a strong portfolio of competitive fit-for-purpose solutions along with an established commercial presence in India. And you can think about this as being a similar type of transaction relative to Aquafetis, which is the UV business we acquired in Europe and part and parcel to the geographic expansion that Trojan is doing.
I think Alpha also gives us an opportunity to expand in other high growth markets with their portfolio. So Trojan, Aquafetis and Alpha all sort of fit together nicely to cover a variety of UV treatment applications. High flow, low flow, different kinds of water matrices and so on. So again, small business in India, but a double-digit grower and we do believe that that's sustainable going forward. Thank you. Thanks Andrew.
Sameer Ralhan, Senior Vice President & Chief Financial Officer
Thanks Andrew.
Nikki, Operator
Thank you. We will move next with Andrew Buscaglia with BNP Paribas. Please go ahead.
Andrew Buscaglia, Analyst at BNP Paribas
Hey, good morning everyone.
Jennifer Honeycutt, President & CEO
Good morning, Andrew.
Andrew Buscaglia, Analyst at BNP Paribas
So you guys sound rather positive I think on the past acquisitions you've made. I know that you paid some rich multiples for them and people are looking for signs of synergies coming through. So would you say that they are tracking ahead of their expectation in terms of either growth or synergies? And could you just give us some more color on that please?
Jennifer Honeycutt, President & CEO
Yeah, we've been really pleased with the deals that we've brought into Veralto since then. And I think what you see is we've accelerated in terms of deal volume both in number and overall relative size. It's been balanced between PQI and water. We really like the spaces that we're in with both of those segments. And I would say the vast majority of these deals have provided near-term synergies around sales acceleration and, you know, combining product portfolios, going to market with joint sales teams and the like.
So we certainly, at least to date, have really focused on accelerating our overall growth profile and these deals are doing exactly that. There is opportunity clearly for ongoing cost optimization and, you know, getting more margin out of these different assets and that's all baked into integration plans and transition going forward. But we're really pleased with what we've seen in the top line growth acceleration.
Sameer Ralhan, Senior Vice President & Chief Financial Officer
And Andrew, you've seen that in the guidance, right, in the confidence that we have in the second half of that as we're going to move forward. You know, part of that is driven by the growth profile of the transactions that we've done.
Andrew Buscaglia, Analyst at BNP Paribas
Yeah, yeah, exactly. That's fair enough. Thank you. I know everything's kind of ticked over at this point, so I wanted to ask a little more of a higher level question. I get questions on your data center exposure and water, but I think there could be an interesting AI angle in PQI. I'm wondering if you see AI changing demand for things like inspection and marking and coding. We're seeing this in some other adjacent industries I cover as well. But yeah.
What's your take at this point on AI influencing PQI?
Jennifer Honeycutt, President & CEO
Yeah, you're seeing that. Look, Andrew, as you know, as part of the Global Vision, we laid out a little as well. Right. So in digital workflow solutions more so, we are definitely seeing that. We are offering the AI application agent layer applications on top of the solution that we provide to the customers. So you're definitely seeing more on the digital workflow solutions side of the PQI. I mean it's going to be expanding more and more, and we're making investments even organically and from our talent perspective on that side as well.
So we're already offering products on that side to the customers. And Global Vision is squarely in that space. Right, right. You know, what Global Vision brings to the table is a deterministic inspection engine. Right. And it's designed to produce the same answer every time, because in regulated workflows, you know, brand owners can't tolerate any room for error. So these are reliable, repeatable processes with proprietary data sets that will render the accurate answer every time.
Right. So. And you know, the Esko, you know, TraceGains and Global Vision teams are, you know, effectively all working together to employ AI throughout that workflow because it will allow more mistake-proofing and faster time to market while meeting regulatory requirements and traceability criteria.
UNKNOWN Analyst
Yeah. Interesting. Okay, thanks, Jennifer, you got.
Nikki, Operator
Thank you. We will move next with Bernie Lee with Goldman Sachs. Please go ahead.
Bernie Lee, Analyst at Goldman Sachs
Hey, good morning everyone. Thanks for squeezing me in. I know a lot's been covered, so maybe a quick one for me and I'll take these offline. Just on high growth markets, you know, maybe some comments around the outlook there, potential for further reacceleration in growth. I know that North America and Western Europe have been really strong throughout the year on a relative basis. So if you could maybe touch upon kind of what you're seeing out there and the forward outlook for the high growth markets.
Jennifer Honeycutt, President & CEO
Yeah. So, you know, high growth markets were relatively flat. We see a little bit of a tale of two cities here between PQI and Water. For our China business, we've got strong growth in PQI and we've got a little bit of shrink on the Water side. Let's say Latin America as well continues to see good order rates, but sales are a little bit down year over year, and they're improving sequentially. I think we see underlying demand that remains strong, but we do see some timing delays in projects that are there.
So again, you know, we continue to watch and, you know, focus on execution between these different markets around the world. And, you know, we're pleased with what we see in recovery in China for PQI, still waiting for Water to recover there in terms of traction. And then we're watching Latin America closely.
Bernie Lee, Analyst at Goldman Sachs
All right, thank you. Appreciate the color.
Ryan Taylor, Vice President of Investor Relations
Thanks, Brian. This is Ryan Taylor. We appreciate everybody that was able to engage with us on the call. At this time, we have hit our time limit, our 45 minutes for the call, so we're going to have to cut it off here as usual. I'll be available for follow-ups throughout today and over the course of the next several days. We thank everybody for joining us and we'll talk to you next time.
Nikki, Operator
Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
Login to comment