The paragraph is an introduction to Fortive Corporation's Third Quarter 2024 Earnings Results Conference Call. The operator, Brock, opens the call and hands it over to Elena Rosman, the Vice President of Investor Relations, who introduces the key speakers: Jim Lico, the President and CEO, and Chuck McLaughlin, the Senior VP and CFO. Elena mentions the presentation of non-GAAP financial measures and the inclusion of forward-looking statements subject to risks, as detailed in Fortive's SEC filings. Jim Lico then begins his presentation, highlighting strong business execution resulting in high-end earnings and free cash flow, with 14% adjusted EPS growth and 12% free cash flow growth on a 3% revenue increase.

The company reports profitable growth driven by a high-quality portfolio, new product innovation, and a culture of continuous improvement. It highlights leadership in Advanced Healthcare Solutions and growth in Intelligent Operating Solutions, with double-digit order growth at Precision Technologies. The 2024 outlook anticipates continued earnings and free cash flow growth, with plans to accelerate strategy and spin off the Precision Technologies segment by 2025. The company increased share repurchases in the third quarter. Strong operational execution led to record third-quarter margins and increases in adjusted EPS and free cash flow year-to-date. Software businesses posted high single-digit ARR growth, and hardware orders also grew, supported by Fluke and Tektronix.

The paragraph discusses the company's strategic shifts and financial performance. They moved about $15 million in shipments out of the quarter due to customer spending delays and uncertainties, particularly for Gordian's state and local clients. Despite these challenges, the company focused on share repurchases, buying back approximately 4 million shares in the quarter, totaling 6 million for the year so far. The combined revenue for IOS and AHS grew by 4%, with a notable increase in operating margins. The Intelligent Operating Solutions segment saw a 3% revenue growth, supported by product innovations and acquisitions, although some shipment delays occurred. Fluke, a part of the segment, launched five new products in September and experienced high single-digit order growth. The segment also enjoyed strong SaaS growth and improvements in customer retention, driven by successful upselling and cross-selling efforts.

The paragraph discusses various company developments and growth expectations. The Accruent and RedEye teams are facilitating transitions to a cloud-based engineering document management system, while the Gordian Cloud Platform is gaining traction in the education sector. The company anticipates moderate growth for IOS with a slight operating margin increase. Advanced Healthcare Solutions saw significant margin expansion and revenue growth, driven by consumables and strong sales at ASP and Fluke Health. Innovation is boosting growth, notably with ASP's new sterilization product and Provation's data analytics tool launch. AHS is expected to see mid- to high single-digit growth and significant margin expansion. Conversely, Precision Technologies experienced flat revenue and a decline in core growth.

The paragraph discusses the financial performance and strategic developments within Tektronix and its associated brands. Acquisitions boosted growth despite lower core volumes, with operating margins improving due to productivity and mergers. Although Tektronix saw a decline in core revenues, orders increased, driven by investments in AI, particularly from companies like NVIDIA and TSMC. The company is expanding its market using innovation tools and plans to launch new products, including advanced oscilloscope probing technology and a triple channel power supply. While Qualitrol and PacSci EMC experienced double-digit growth amid expanding electricity demand and increased global defense spending, sensing technologies saw a slight revenue decline despite stabilized industrial market demand. Precision Technologies showed a trend where orders outpaced revenues following the pandemic.

The paragraph discusses the recent financial performance and outlook of the company. It highlights that after burning through excess backlog due to declining order rates in late 2022, revenue is normalizing with demand trends stabilizing. This has led to a return of order growth in Q3 and Q4 2024, indicating a gradual recovery for the company. Regional analysis shows strength in North America driven by recurring software, services, and consumables businesses, while European markets are stabilizing, and Asia experiences mixed results with weak demand in China but growth in other parts like India. Overall growth in Q4 and the full year is anticipated to be consistent with Q3, projecting approximately 3% revenue growth. Charles McLaughlin then takes over to discuss detailed guidance.

The paragraph discusses the company's financial expectations and strategic initiatives. It anticipates strong recurring revenue growth in IOS and Healthcare, with some market recoveries delayed until 2025 due to customer and macro uncertainties. Adjusted operating profit is expected to increase by 6%, leading to a margin expansion of 75 basis points, while adjusted diluted EPS is projected between $1.11 and $1.14. Full-year growth is predicted at 3%, with a 100 basis point increase in operating profit margins. The company plans to invest $20 million to $30 million in productivity initiatives, benefiting beyond 2025, and has revised its adjusted diluted EPS outlook to $3.84-$3.87. Free cash flow is expected to be around $1.4 billion, highlighting a track record of growth in earnings and cash flow over the past five years. Looking forward, the company is optimistic about stabilizing market trends and continued growth in recurring revenue, with potential challenges from geopolitical and macro uncertainties.

The paragraph discusses the company's optimism for strong growth and shareholder value by leveraging improved core growth, operational execution, and productivity initiatives. They plan to use 75% of their free cash flow for share repurchases to boost EPS growth by 2025, despite facing potential tax increases. Their past performance shows successful earnings and cash flow growth, and they are committed to strategy and value creation. They mention the progress on a spin transaction and express confidence in the growth potential of Fortive and PT NewCo. The company's culture of innovation and customer focus is highlighted as key to their success.

The paragraph is a part of a Q&A session during a company's earnings call. Nigel Coe from Wolfe Research asks about the company's fourth-quarter growth by segment, confirming his estimates with Elena Rosman and Charles McLaughlin. The segments discussed are AHS, PT, and IOS, with growth expectations being mid to high-single-digits for AHS, low single-digit decline for PT, and low single-digit growth for IOS. Nigel further inquires about the direct sales strategy for AHS consumables, its impact on customer share, Provation cross-selling, and potential impacts of IV shortages due to a hurricane on North American consumables in Q4. James Lico responds to these follow-up questions.

The paragraph discusses the positive performance in a specific market segment, highlighting a 9% core growth, strong execution by ASP, and margin expansion. The North American transition is noted as successful, positively impacting capital initiatives with several wins and mid-single-digit capital growth. Provation showed strong SaaS growth despite a license software headwind, which is expected to improve in the fourth quarter. Fluke Health experienced high single-digit growth. There is a minor challenge with IV bag supply in October, but overall transparency and execution with North American customers have improved, reflecting consistent performance across the board.

In the paragraph, during a financial discussion, James Lico acknowledges a slowdown in the IOS segment in Q3, with expectations for low single-digit growth in the following quarter. Despite some industrial growth, Fluke's progress was hampered by hesitation from calibration customers, primarily due to government uncertainty. This affected Fluke's performance, as the typical improvement in growth rates throughout the quarter was not observed.

The paragraph discusses the observed hesitance among channel partners to engage in major marketing programs due to macroeconomic uncertainty and a potentially lower growth industrial environment. Despite strong product innovation and high expectations, some government customers and jurisdictions are cautious with spending, affecting program uptake and inventory decisions. Fluke experienced high single-digit order growth, and global point-of-sale improved. SaaS growth at Gordian was in double digits, while procurement was affected by government uncertainty. Accruent saw teens bookings growth, and service channels also grew. The company anticipates winding down challenging comparisons at Gordian as it progresses into 2025.

The paragraph discusses expectations for organic growth and margin expansion across three business segments in 2025. Charles McLaughlin anticipates mid-single-digit growth with a 75 basis point margin expansion, while the tax rate is expected to rise from the current 11% to a range of 13% to 15%. James Lico adds that growth is expected in the IOS and Health sectors, with Health anticipated to achieve mid-single-digit growth. The potential for growth in the PT segment is acknowledged, though it is still uncertain.

In the paragraph, the discussion centers around the performance and future expectations for PT and EA segments. PT is experiencing double-digit orders growth, and the company anticipates this positive trend will lead to good growth into next year, albeit through a gradual recovery. The company is confident in achieving good earnings, aided by product restructuring and productivity improvements. In contrast, expectations for EA are more tempered due to challenging market conditions. The EA segment achieved $26 million in the quarter, and no significant uptick is anticipated for the rest of the year, though some backlog is expected to shift forward.

The article discusses the company's progress in diversifying its business beyond mobility, highlighting a significant seven-digit order from a utility. While the synergy efforts are going well, the markets related to electric vehicles (EVs) and mobility are experiencing slowdowns, tempering expectations for a near-term recovery. The company anticipates recovery to begin in the latter half of the next year and into 2026. In response, proactive restructuring is underway. Despite a weaker performance from Fluke this quarter, orders remain stable, possibly indicating future growth, whereas Tek is experiencing positive order inflection, raising questions about when this might translate into revenue, possibly around mid-next year or early 2025.

The paragraph discusses the current performance and outlook for Fluke and Tek businesses. Fluke is highlighted as a durable company with positive order trends and expected low single-digit growth, partly due to successful execution in its Fluke Networks division. Despite industry challenges, Fluke's industrial business continues to perform steadily. The company anticipates future growth as industrial production improves. Tek is also experiencing a positive shift in orders, which is expected to contribute to growth in the upcoming quarters. The text emphasizes caution due to uncertainties and the need to navigate through budget considerations and global challenges.

The paragraph is an excerpt from a conference call where participants discuss financial strategies and organizational updates. Jeffrey Sprague from Vertical Research Partners asks about share repurchases, noting the company's cash situation and querying future plans. Charles McLaughlin clarifies that the cash isn't stranded, explaining that they used 75% of projected free cash flow for share repurchases in the third quarter and plan to adjust in the fourth quarter. Jeffrey also asks James Lico about the company's progress toward a planned spin-off, to which James responds that they are making good progress in staffing teams for the initiative and are on track with their plans, despite only starting a few weeks prior.

The paragraph discusses a review conducted by Chuck and the team, indicating they are on track for their goals for the fourth quarter of 2025. Key events in the next 60 days will influence the timeline. The team is open to evaluating inbound offers for parts of their portfolio but won't comment specifically on M&A activities. Jeffrey Sprague asks about pricing, and Charles McLaughlin confirms a 3% rate for the company, expected to be the same in Q4. James Lico notes that while volume remains negative, it improved from Q2 to Q3, indicating some recovery in demand.

In the paragraph, a conversation during a call includes James Lico addressing questions from Scott Davis of Melius Research. Scott asks about whether the shift in sales mix towards companies like NVIDIA affects the company's interactions with customers regarding their needs and payment expectations. James responds that they provide high-end, tailored solutions for such customers and don't experience any margin issues. Scott then inquires about whether customer delays in spending might be due to macroeconomic uncertainty, possibly linked to pending political factors like elections, tariffs, or governmental policies. James acknowledges that such uncertainties could be contributing to these spending delays, especially in markets involving government entities.

The paragraph is an excerpt from a conversation about the financial performance and regional growth of Fortive. It discusses the uncertainty at state and local levels as the election approached, with specific issues noted in places like New York City. There is macroeconomic uncertainty affecting performance, such as PMI (Purchasing Managers' Index) concerns and a continued reluctance for inventory buildup, which didn't meet expectations despite promotional efforts. This reflects customers' lower growth expectations. The discussion includes commentary from Scott Davis and questions from Andy Kaplowitz about regional performance, noting strong mid-teens growth in Europe and slight growth in Asia, contrasted with challenging conditions in China, where revenue was down by high single digits. The global growth of Fluke's point-of-sale in September is mentioned as a positive indicator of overall market conditions.

The paragraph discusses the business performance across various regions and sectors. Asia, excluding China, shows potential growth, while China's healthcare market faces challenges, specifically in consumables revenue. North America is expected to perform well due to recurring revenue and robust business segments. Europe faces comparison challenges but shows strength in health. The discussion transitions to the AHS segment, where past challenges are being addressed. Despite previous disruptions, AHS is expected to achieve mid-single-digit growth and improve margins, suggesting a positive outlook going into 2024 and beyond.

The paragraph discusses the benefits and progress of a strategy in a business, emphasizing the potential for mid-single-digit growth and improvements in margin expansion. It highlights new product introductions, particularly in high-growth markets and North America, and mentions using tools like FBS for consistent commercial performance. There's excitement about innovation, including expanding biological indicators in 30 countries and launching AI products through Provation. The company expects continued positive results, with strong healthcare margins at 27%. The paragraph ends with appreciation from Andrew Kaplowitz and a transition to a question from Andrew Obin of Bank of America.

In the discussion, James Lico responds to Andrew Obin's questions regarding the company's pricing strategy, which achieved a 2.9% price increase this quarter, outperforming peers. Lico attributes this to the company's strong innovation leading to higher gross margins and R&D expenses. He expects the company to maintain its pricing advantage due to its innovative capabilities and the favorable environment for innovators. Regarding Tektronix's high single-digit core order growth, Lico mentions that while part of it is due to comparisons, the growth in total dollar orders is a positive sign, hinting at revival in sectors like semiconductors.

The paragraph discusses a conversation between Andrew Obin, James Lico, and Jamie Cook regarding a company's financial performance. It highlights the company's involvement in electrification, data centers, batteries, and next-generation designs, with improvements seen in places like Korea despite challenges in China. The company experienced a recovery in order delays, contributing to financial improvements. Jamie Cook asks about the strong PT margins despite disappointing organic growth, seeking an explanation for the high margins, which seem unusually high outside of a fourth quarter context.

The paragraph discusses the company's financial outlook and strategies for achieving earnings growth by 2025. Chuck McLaughlin and James Lico elaborate on various factors influencing operating margin expansion, emphasizing restructuring efforts and the strong performance of the EA business. They highlight that while the target is an EPS number of 450 by 2025, it should not be considered guidance due to lower-than-anticipated revenue figures. The company expects continued earnings and cash flow growth, driven by IOS and AHS recurring revenue. Historical performance metrics such as a 125 basis-point margin expansion and consistent profit and EPS growth are cited as indicators of future potential.

The paragraph involves a discussion during an earnings call about financial targets and restructuring plans. Jamie Cook asks about proactive restructuring strategies above normal levels and their associated payback timelines, mentioning segments like solar. Charles McLaughlin responds that they're targeting specific areas with an anticipated payback within a year. Deane Dray further inquires about deferred decisions among calibration customers, wondering how regulatory obligations impact this. James Lico explains that despite policy uncertainties, there has been significant growth in regulatory and replacement-driven areas for Fluke's calibration business.

The paragraph features a discussion between Christopher Snyder of Morgan Stanley and James Lico about the growth and order rates of certain segments within their business. Snyder asks if the growth in orders is mainly due to military and government orders being delayed from Q2 to Q3, or if there is a broader improvement. Lico responds that in areas like Qualitrol and EMC, the growth is genuine and market-driven, whereas in Tek, it's more substantial than just delayed orders. Snyder further inquires about organic growth and order rates for the latter part of the year and into 2025. Lico suggests that while organic growth might be less than order rates in the second half of the year due to backlog burn, revenue at PT should eventually align with orders by 2025.

In the discussion, James Lico addresses a question from Joseph O'Dea regarding delays in shipments from Q3 to Q4 or beyond for the Qualitrol business, which has shown strength. Lico clarifies that the delays are not due to lack of customer demand, as both Qualitrol and EMC had record quarters and strong demand profiles. Instead, the delays are attributed to sensing coming in slower and a combination of supply chain issues and factory capacity constraints, with the defense side being more affected by supply chain problems. Despite these issues, strong demand is expected to continue into 2025.

The paragraph discusses the growth and innovation at AHS driven by the acquisition of Provation, particularly focusing on the transition from licensed software to a SaaS model. This transition is propelled by hospitals moving their operations to the cloud and the increasing adoption of AI, making them ready for AHS's Apex solution. The company is seeing strong growth in its SaaS segment and anticipates this trend will continue. Additionally, converting their maintenance stream to Apex has been successful. Looking ahead, Provation's growth rate is expected to accelerate further, especially in the fourth quarter and continue into 2025.

In the closing remarks of a conference call, Jim Lico expressed gratitude to participants during a busy earnings season and highlighted the company's strong performance in a low-growth environment, emphasizing robust execution, operating profit, and EPS growth. He credited the success to the company's innovation capabilities and the effectiveness of their systems (FBS). Lico also mentioned excitement about future opportunities with new innovative products across major business areas, signaling promising prospects for 2025. He concluded by thanking everyone and looking forward to future engagements.

This summary was generated with AI and may contain some inaccuracies.