Deane Dray : I know there’s a continuous review, but are most of those cleanups done at this point?
Jennifer Honeycutt: Yeah. I mean, the two minor strategic actions we took amounted to about $20 million in annual revenue. We look at the portfolio on an ongoing basis and I would say that there’s nothing material that needs to be done from a transformation standpoint. But we will continue to sort of prune and invest as appropriate, where we see the growth opportunities and the required return on investment.
Deane Dray : Great. And then just second question, but a bit related, you mentioned filtration. I’d be interested in hearing a bit about Aria Filtra. I mean, this was a fabulous brand within Danaher as Paul Water, one of the leaders in membrane filtration. Just give us a sense of where and how are you positioning this business in Veralto, either strategically, kind of what end markets and what opportunities for growth do you have?
Jennifer Honeycutt: Yeah, you bet. Well, as you cited there, the Aria Filtra business is the rebranded Paul Water business, and we’ve actually pivoted how we’re investing in this business. We’re seeing very strong demand, particularly in critical applications for drinking water and portable reuse. So when it comes to recycle reclaim, it’s an essential technology, and certainly in the macro that’s become a more important part of water conservation. But we have repositioned this product line to allocate resources to highest return opportunities with more focus in North America and additional investments in mobile water treatment.
Deane Dray : Great. Thank you.
Jennifer Honeycutt: You bet.
Operator: And we’ll take our next question from Andy Kaplowitz with Citigroup. Your line is open.
Andy Kaplowitz: Good morning, everyone.
Jennifer Honeycutt: Good morning, Andy.
Andy Kaplowitz: Jennifer, Sameer, can you give us more color into what you are seeing in product quality focused markets? I think you had guided to download and mixing the digits Q4 yet, as you said you came in over 1% core growth. And core growth accelerated relatively significantly versus Q3. We know comparisons are a bit easier, but you did mention the early signs of recovery, particularly with food and beverage packaging customers. So could you elaborate on what you’re seeing? Have you seen continued recovery as we started Q1 here? And I know you suggested lessening the budget growth for the segment ‘24. Is it just a tough comparison that is leading you to guide to flatten down for Q1?
Jennifer Honeycutt: Yeah, so thank you for the question. You know, I think what we said here as we came out of Q3 that customer destocking had largely been completed. We are 75% direct-to-customers, short-cycle business, so we don’t have a lot of inventory sitting in a lot of intermediary depots. But what we did see in Q4 is the sales of PQI consumables by way of ink solvents and spare parts growing mid-single digits year-over-year, and we’re also hearing from customers in the market that some of the leading indicators have turned positive. Now, this is predominantly in certain sectors of the food and beverage markets. But as price and volume in consumer packaged goods and groceries and the like start to rebalance, those lines are coming back online, and we’re starting to see some of that volume start to increase as that equation rebalances.
So, we do think that we’ll continue to see a steady sequential recovery over the course of the year, but I think we’re being prudent and modestly optimistic about how to think about that.
Sameer Ralhan: And Andy, if I can just add a couple of comments as it relates to the guide. We expect steady recovery in the CPG market sequentially, but overall being cautious as we kind of look at the commentary from the CPG customers and also what we’re seeing in the channel. So from an overall year perspective, we’re modeling in low single-digit core growth for the business, but the volume is going to be a tale of two halves. Effectively at this point, from a guide perspective we’re modeling in low single-digit decline in the volume side, and that essentially means accelerating into positive low single-digits in the second half on gradual market recovery. So that’s how we’re kind of modeling it in the guide.
Andy Kaplowitz: Okay, very helpful. And then maybe a similar question on the Water Quality side. It was also there in your guide in Q4, but still has been slowing a bit year-over-year. Comps are getting a little easier. So are you still seeing some reticence on the part of U.S. municipal customers? I guess it’s more focused on HARP there, but is it really China just slowing you down for HARP? What’s going on in the U.S.? And do you have visibility toward Water Quality getting back over all the mid-single-digit levels of growth at some point in ‘24?
Jennifer Honeycutt: Yeah, I mean it’s probably the comp challenge, right. I think in the first quarter here is the last of our really tough comps on a year-over-year comparative basis. But in North America, we saw nice growth and continue to see nice growth for demand of our UV Trojan systems, and this is particularly related to reuse treatment for potable water. We see demand for analytics steady on a year-over-year basis, and saw some increase sequentially from Q3 to Q4. Europe, we see steady demand there coming out of Q4. I do think China is still a little bit suppressed in terms of its demand, although we’re seeing a sequentially stable demand throughout the third quarter here. Year-over-year demand was down in China just due to lower government funding relative to 2022, but we’re cautiously optimistic about the sequential improvement over the course of the coming quarters in China.
We don’t think it’s going to get any worse and we’ve had a positive start here in January right out of the gate. So it’s a little bit variable across the geographies, but we see good demand for where investments are happening.
