ECOLAB INC. (ECL)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management discussion and analysis (“MD&A”) provides information we believe is useful in understanding our operating results, cash flows and financial condition. We provide quantitative or qualitative information about the material sales drivers including the impact of changes in volume and pricing and the effect of acquisitions and changes in foreign currency at the corporate and reportable segment level. We also provide quantitative information regarding special (gains) and charges, discrete tax items and other significant factors we believe are useful for understanding our results. Such quantitative drivers are supported by comments meant to be qualitative in nature. Qualitative factors are generally ordered based on estimated significance.

The MD&A should be read in conjunction with both the unaudited consolidated financial information and related notes included in this Form 10-Q, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025. This discussion contains various Non-GAAP Financial Measures and also contains various Forward-Looking Statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statements entitled “Non-GAAP Financial Measures” and “Forward-Looking Statements” located at the end of Part I of this report.

Comparability of Results

Impact of Acquisitions and Divestitures

Our non-GAAP financial measures for organic sales, organic operating income and organic operating income margin are at fixed currency and exclude the impact of special (gains) and charges, the results of our acquired businesses from the first twelve months post acquisition and the results of divested businesses from the twelve months prior to divestiture.

Comparability of Reportable Segments

Effective January 1, 2026, the Company’s former Light & Heavy operating segment was divided into three new operating segments, Heavy Water, Light Water and High-Tech, which continue to remain in the Global Water reportable segment. The Global Water reportable segment includes Heavy Water, Light Water, High-Tech, Food & Beverage and Paper operating segments. The Global Institutional & Specialty reportable segment continues to include the Institutional and Specialty operating segments. The Global Life Sciences and Global Pest Elimination segments remain standalone reportable segments. After these changes, the Company has nine operating segments.

Fixed Currency Foreign Exchange Rates

Management evaluates the sales and operating income performance of our non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. Public currency rate data provided within the “Segment Performance” section of this MD&A reflect amounts translated at actual public average rates of exchange prevailing during the corresponding period and are provided for informational purposes only.

OVERVIEW OF THE SECOND QUARTER ENDED JUNE 30, 2026

Sales Performance

When comparing second quarter 2026 against second quarter 2025, sales performance was as follows:

•Reported net sales increased 10% to $4,415.4 million and organic sales increased 5%.

•Organic sales for our Global Water segment increased 4% to $2,098.5 million driven by accelerating growth in High-Tech, Food & Beverage and Light Water.

•Organic sales for our Global Institutional & Specialty segment increased 4% to $1,617.4 million driven by improved growth in Institutional and strong growth in Specialty.

•Organic sales for Global Pest Elimination increased 7% to $345.2 million.

•Organic sales for our Global Life Sciences segment accelerated 15% to $221.0 million.

Financial Performance

When comparing second quarter 2026 against second quarter 2025, our financial performance was as follows:

•Reported operating income increased 7% to $757.9 million. Adjusted operating income increased 10%.

•Net income attributable to Ecolab increased 2% to $534.9 million. Excluding the impact of special (gains) and charges and discrete tax items from both 2026 and 2025 reported results, our adjusted net income attributable to Ecolab increased 9%.

•Reported diluted EPS increased 3% to $1.90. Excluding the impact of special (gains) and charges and discrete tax items from both 2026 and 2025 reported results, adjusted diluted EPS increased 11% to $2.09 in the second quarter of 2026.

•Our reported tax rate was 22.3% during the second quarter of 2026, compared to 19.9% during the second quarter of 2025. Excluding the tax rate impact of special (gains) and charges and discrete tax items from both 2026 and 2025 results, our adjusted tax rate was 21.0% during the second quarter of 2026, compared to 20.8% during the second quarter of 2025.

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RESULTS OF OPERATIONS

Net Sales

Product and sold equipment revenue is generated from providing cleaning, sanitizing and water treatment products or selling equipment used in combination with specialized products. Service and lease equipment revenue is generated from providing services or leasing equipment to customers. All of our sales are subject to the same economic conditions.

The percentage components of the period-over-period 2026 sales change are shown below:

Amounts do not necessarily sum due to rounding.

Cost of Sales (“COS”) and Gross Profit Margin

Our COS and corresponding gross profit margin (“gross margin”) are shown in the table above. Gross margin is defined as net sales less cost of sales divided by net sales.

Our reported gross margin was 44.1% and 44.8% for the second quarter of 2026 and 2025, respectively. Our reported gross margin was 43.8% and 44.5% for the first six months of 2026 and 2025, respectively. Special (gains) and charges included in items impacting cost of sales are shown within the “Special (Gains) and Charges” table below.

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Excluding the impacts of special (gains) and charges, foreign currency translation and acquisitions and divestitures within COS, second quarter 2026 and 2025 organic gross margin was 44.9% and 44.8%, respectively, and for the first six months of 2026 and 2025 was 44.5% and 44.6%, respectively. Our organic gross margin increased when comparing the second quarter of 2026 against the second quarter of 2025 as accelerating pricing offset higher commodity costs.

Selling, General and Administrative Expense

Selling, general and administrative (“SG&A”) expenses as a percentage of sales were 25.9% and 26.5% for the second quarter and first six months of 2026, respectively, compared to 26.5% and 27.4% for the second quarter and first six months of 2025, respectively. The SG&A ratio to sales in the second quarter of 2026 decreased as good productivity gains and the favorable impact of recent acquisitions more than offset growth-oriented investments in the business.

Special (Gains) and Charges

Special (gains) and charges reported on the Consolidated Statements of Income include the following items:

For segment reporting purposes, special (gains) and charges are not allocated to reportable segments, which is consistent with our internal management reporting.

Special (Gains) and Charges were $57.7 million ($50.5 million after tax) or $0.18 per diluted share and $115.4 million ($96.0 million after tax) or $0.34 per diluted share in the second quarter and first six months of 2026, respectively, primarily relating to our One Ecolab in

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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The following management discussion and analysis (“MD&A”) provides information that we believe is useful in understanding our operating results, cash flows and financial condition. We provide quantitative or qualitative information about the material sales drivers including the impact of changes in volume and pricing and the effect of acquisitions and changes in foreign currency at the corporate and reportable segment level. We also provide quantitative information regarding special (gains) and charges, discrete tax items and other significant factors we believe are useful for understanding our results. Such quantitative drivers are supported by comments meant to be qualitative in nature. Qualitative factors are generally ordered based on estimated significance.

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The discussion should be read in conjunction with the consolidated financial statements and related notes included in this Form 10-K. Our consolidated financial statements are prepared in accordance with U.S. GAAP. This discussion contains various Non-GAAP Financial Measures and also contains various forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statements and information set forth in the sections entitled “Non-GAAP Financial Measures” at the end of this MD&A, and “Forward-Looking Statements” and “Risk Factors” within Items 1 and 1A of this Form 10-K. We also refer readers to the tables within the section entitled “Results of Operations” of this MD&A for reconciliation information of Non-GAAP measures to U.S. GAAP.

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Comparability of Results

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Ovivo Electronics Acquisition

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On December 16, 2025, we acquired Ovivo’s electronics business (“Ovivo Electronics”) for total consideration of $1.6 billion in cash. Ovivo Electronics is a leading and fast-growing global provider of breakthrough ultrapure water technologies for semiconductor manufacturing. Ovivo Electronics is reported within our Light & Heavy operating segment. Acquisition and integration charges are recorded within special (gains) and charges. The remaining impacts of the Ovivo Electronics acquisition, including operating results, acquisition-related amortization and interest expense related to the transaction, have also been excluded from adjusted results.

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Impact of Acquisitions and Divestitures

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Our non-GAAP financial measures for organic sales, organic operating income and organic operating income margin are at fixed currency and exclude the impact of special (gains) and charges, the results of our acquired businesses from the first twelve months post acquisition and the results of divested businesses from the twelve months prior to divestiture. In addition, as part of the separation of ChampionX in 2020, we continue to provide certain products to ChampionX which are recorded in product and equipment sales in the Global Water segment along with the related cost of sales. Further, due to the sale of the global surgical solutions business on August 1, 2024, we have excluded the results of that business for January through July 2024 from these organic measures for the year ended December 31, 2024 to remain comparable to the corresponding period in 2025. These transactions are removed from the consolidated results as part of the calculation of the impact of acquisitions and divestitures.

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Comparability of Reportable Segments

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Effective January 1, 2025, the Company’s former Global Industrial reportable segment was renamed Global Water and includes the Light & Heavy (previously named Water), Food & Beverage, and Paper operating segments. The Global Institutional & Specialty reportable segment continues to include the Institutional and Specialty operating segments. The Company’s former healthcare operating segment moved into the Institutional operating segment. Global Life Sciences was elevated to a standalone reportable segment. The Global Pest Elimination segment remains a standalone reportable segment. After these changes, the Company has seven operating segments.

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Fixed Currency Foreign Exchange Rates

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Management evaluates the sales and operating income performance of our non-U.S. dollar functional currency international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. Fixed currency amounts are updated annually at the beginning of each year based on translation into U.S. dollars at foreign currency exchange rates established by management, with all periods presented using such rates. Public currency rate data provided within the “Segment Performance” section of this MD&A reflect amounts translated at actual public average rates of exchange prevailing during the corresponding period and is provided for informational purposes only.

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EXECUTIVE SUMMARY

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In 2025, we delivered record sales, operating income margin, adjusted diluted earnings per share, and free cash flows. Our team generated strong organic sales growth in Global Pest Elimination and Global Life Sciences, and good organic sales growth in Global Institutional & Specialty and Global Water. Organic operating income grew by double digits, as strong value pricing and improved productivity were partially offset by investments in the business.

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Sales

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Reported sales increased 2% to $16.1 billion in 2025 from $15.7 billion in 2024. When measured in fixed rates of foreign currency exchange, fixed currency sales increased 2% compared to the prior year. Organic sales increased 3% compared to the prior year.

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Gross Margin

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Our reported gross margin was 44.5% of sales for 2025, compared to our 2024 reported gross margin of 43.5%. Excluding the impact of special (gains) and charges and the Ovivo Electronics acquisition included in cost of sales, our adjusted gross margin was 44.5% in 2025 and 43.5% in 2024. Our gross margin increase reflected strong value pricing.

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Operating Income

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Reported operating income decreased 2% to $2.7 billion in 2025, compared to $2.8 billion in 2024. Adjusted operating income, excluding the impact of special (gains) and charges and the Ovivo Electronics acquisition increased 11% in 2025 as strong value pricing and improved productivity were partially offset by investments in the business. Organic operating income increased 13% in 2025.

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Earnings Attributable to Ecolab Per Common Share (“EPS”)

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Reported diluted EPS decreased 1% to $7.28 in 2025, compared to $7.37 in 2024. Special (gains) and charges had an impact on both years. Special (gains) and charges in 2025 were primarily related to One Ecolab, while in 2024 they were driven primarily by the gain on sale of the global surgical solutions business and restructuring expense. Adjusted diluted EPS, which excludes the impact of special (gains) and charges, discrete tax items and the Ovivo Electronics acquisition increased 13% to $7.53 in 2025 compared to $6.65 in 2024 which reflected good organic sales growth and robust operating income margin expansion.

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Balance Sheet

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We remain committed to maintaining “A” range ratings metrics over the long-term, supported by our current credit ratings of A-/A3/A- by Standard & Poor’s, Moody’s Investor Services and Fitch, respectively. Our strong balance sheet has allowed us continued access to capital at attractive rates.

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Cash Flow

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Cash flow from operating activities was $3.0 billion in 2025, compared to $2.8 billion in 2024. We continued to generate strong cash flow from operations, allowing us to fund our ongoing operations, investments in our business, acquisitions, debt repayments, pension obligations and return cash to our shareholders through share repurchases and dividend payments.

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Dividends

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Dividends declared per common share in 2025 were $2.68 per share. In December 2025 we increased our quarterly cash dividend by 12% to $0.73 per share, representing our 34th consecutive annual dividend rate increase. We have paid cash dividends on our common shares for 89 consecutive years. Our outstanding dividend history reflects our long-term growth and development, strong cash flows, solid financial position and confidence in our business prospects for the years ahead.

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CRITICAL ACCOUNTING ESTIMATES

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Our consolidated financial statements are prepared in accordance with U.S. GAAP. We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are disclosed in Note 2, “Significant Accounting Policies,” of the Notes to the Consolidated Financial Statements (“Notes”).

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Preparation of our consolidated financial statements, in conformity with U.S. GAAP, requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are considered to be critical if they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

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Besides estimates that meet the “critical” estimate criteria, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues or expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, even from estimates not deemed critical. Our critical accounting estimates include the following:

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Actuarially Determined Liabilities

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Pension and Postretirement Healthcare Benefit Plans

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The measurement of our pension and postretirement benefit obligations are dependent on a variety of assumptions determined by management and used by our actuaries in their valuations and calculations. These assumptions affect the amount and timing of future pension contributions, benefit payments and expense or income recognized.

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The significant assumptions used in developing the required estimates are the discount rates, expected returns on assets and projected salary and health care cost increases.

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