The paragraph describes the start of the Fortive Corporation's First Quarter 2025 Earnings Results Conference Call. The call is facilitated by Brock, and after introductory remarks, there will be a Q&A session. Elena Rosman, the Vice President of Investor Relations, introduces herself and mentions being joined by Jim Lico, President and CEO, and the new CFO, Mark Okerstrom. While Mark is still settling in, Jim and Elena will handle most questions. The call includes non-GAAP financial measures, and risk information is available in SEC filings. They will make forward-looking statements subject to risks, and the call is then turned over to Jim.

Jim Lico provided an update on Fortive's first-quarter performance, highlighting a solid earnings per share of $0.85 despite slightly lower revenues. The company improved its gross and operating margins and enhanced cash flow through strong operational execution and disciplined working capital management. Fortive continued share repurchases and made progress towards strategic innovation, particularly in its Intelligent Operating Solutions and Advanced Healthcare Solutions segments. However, there was a noted delay in investments in Precision Technologies due to macroeconomic and political uncertainties. The company is adapting to these challenges and new tariffs with a strategy to reduce reliance on Chinese imports. Fortive is also advancing towards a company separation set for completion by the end of the second quarter, with Mark Okerstrom appointed as the new CFO.

Mark Okerstrom shares his reasons for joining Fortive, highlighting his admiration for the company's disciplined approach and the principles that define its operations. He is impressed with Fortive's strong portfolio and its growth potential, driven by market tailwinds. Okerstrom is excited by the opportunity to drive significant impact in his role as CFO, aiming to enhance returns and accelerate organic growth while maintaining financial discipline. He sees opportunities to improve capital allocation and strengthen relationships with investors, reinforcing his decision to join the company.

The paragraph provides a financial update on Fortive's performance in the first quarter. Core revenue declined by 2% due to macroeconomic uncertainties and foreign exchange headwinds, resulting in a total revenue decrease of 3%. The Intelligent Operating Solutions and Advanced Healthcare Solutions segments grew by 2.2%, but this was offset by an 8.4% decline in the Precision Technologies segment. Despite these challenges, Fortive reported an adjusted operating profit of $373 million and a 20 basis point margin expansion. Adjusted EPS grew by 2% year-over-year to $0.85, with adjusted free cash flow surpassing expectations at $222 million. The company also repurchased 2.5 million shares as planned. Core revenue growth for the new Fortive was 2.2%, aligned with expectations, and adjusted operating profit margins expanded by 80 basis points, supported by strategic investments for growth.

In the quarter, Intelligent Operating Solutions (IOS) experienced a 2% growth in core revenues with Fluke achieving a low single-digit increase, supported by stable industrial demand in North America. The company faced challenges in Europe and China, but new product developments, particularly in solar, EV storage, and data center products, fueled growth. IOS's Facilities and Asset Lifecycle group saw mid-single-digit revenue growth due to strong multisite retail product demand, although government spending cuts partially offset this. ServiceChannel benefited from new products and increased demand for outsourced solutions, securing a major retail client. The IOS segment's adjusted operating margins improved due to growth in software and recurring revenue businesses. Advanced Healthcare Solutions grew core revenues by 2.5%, with infection prevention seeing mid-single-digit growth after adjustment for fewer operational days. The unit saw success with new product launches and strong software growth at Provation, driven by SaaS conversions and cloud adoption trends.

In the paragraph, New Fortive's Q1 performance shows a mixed growth profile, with positive volume leverage and software contributions being overshadowed by growth investments, unfavorable foreign exchange, and fewer operational days, leading to a slight reduction in adjusted operating margins. While margins improved over a two-year period, the Precision Technologies (PT) segment reported an 8.4% decline in core revenue, attributed to lower orders and shipment delays. Specifically, Test and Measurement saw a sharp decline due to customer order delays amidst policy and macroeconomic uncertainties, particularly affecting China and Western Europe. Despite these challenges, demand remains strong in the communications sector, driven by AI data center growth. The PT segment's results exclude Fluke-related service revenue, which remains with Fortive, and differ from the stand-alone Form 10 report.

The paragraph discusses the continued strong demand for Sensors and Safety Systems in the utility and defense sectors, leading to supply chain pressures and increased backlog. Despite low-single-digit core growth due to supply chain and government approval issues, the segment is expected to see accelerated growth. Adjusted operating profit margins have contracted due to lower test and measurement volumes, but Sensors and Safety Systems see strong margin expansion. The policy and trade landscape has shifted recently, and to mitigate tariff impacts, the company has adopted a regional manufacturing strategy, reducing its reliance on Chinese imports by 70%. They anticipate a $190 million to $220 million gross tariff impact, primarily from China, and have developed countermeasures.

The paragraph discusses Fortive's strategic approach to overcoming market headwinds using their proven Fortive Business System (FBS). They are implementing strategic pricing, optimizing sourcing and logistics, and localizing manufacturing to mitigate challenges. These efforts are expected to take effect starting in the second quarter and aim to neutralize tariff exposure by 2026. The company previously managed supply chain challenges successfully using FBS tools, enhancing profitability and reducing working capital. For the second quarter, they anticipate adjusted EPS between $0.85 and $0.90 despite tariff impacts. Fortive expects steady growth in their IOS and AHS segments, with modest improvements in PT. Their guidance reflects a pragmatic approach given global uncertainties and tariffs.

The paragraph discusses Fortive's financial outlook for 2025, including an adjusted EPS range of $3.80 to $4, factoring in tariff impacts and demand changes. It anticipates a slight decline in PT core revenues due to reduced demand in Test and Measurement but is offset by new pricing strategies. The outlook for New Fortive remains stable, accounting for potential demand fluctuations and tariff countermeasures, with expected benefits from favorable FX rates and lower taxes. Post-separation, guidance will be provided independently for New Fortive and Reliant. Fortive has diversified its product portfolio, expanded into new markets, and increased recurring revenue, which now represents 40% of its business and is expected to reach 50% after separation. They are introducing new products like Fluke's solar tools and ASP's steam monitoring products, contributing to their growth and resilience.

The paragraph discusses the company's revenue growth outside of China, highlighting strong performance in various markets despite challenges in Precision Technologies. The company has maintained double-digit adjusted earnings and free cash flow growth over the past five years. It also provides an update on the company's separation plans, expecting the transaction to be completed by the end of the second quarter. Upcoming milestones include filing Form 10 with the SEC, appointing a CFO for Reliant, and hosting an Investor Day on June 10 at the New York Stock Exchange. The event will feature presentations by Fortive and Ryan, showcasing their independent businesses and strategies. An innovation showcase will highlight new products. The current President and CEO will retire after the separation, and he expresses gratitude to the 18,000 team members for their contributions.

The paragraph discusses the company's ongoing dedication to its strategy and performance, highlighting the achievements of the past five years and the plans to support customers and shareholders in the future. The company's consistent performance and focus on executing its strategy are emphasized, with mention of an upcoming Investor Day and the launch of Ralliant. The retiring executive, Jim, expresses gratitude for the past nine years and looks forward to future engagements, passing the discussion to Elena Rosman for questions. In the Q&A, Scott Davis of Melius Research acknowledges Jim's contribution and brings up the topic of tariffs, focusing on localizing production.

In Paragraph 12, Jim Lico discusses the company's strategy to manage its supply chain risks and future capacity needs. He indicates that rather than investing heavily in new capacities, the company is focused on accelerating pre-existing plans to adapt to market changes, particularly in the context of China-US exports. On the topic of Test and Measurement, Lico notes a significant decline in this business area, which isn't solely tied to economic recessions but also to delays and uncertainties in various geographic markets, including North America, as customers have paused their decisions.

The paragraph discusses the impact of tariffs on semiconductor and electronics companies, which are significant customers for the speaker's business. The speaker notes that while they hoped for a recovery in these markets in the second half of the year, they now believe recovery won't occur until 2026. The speaker emphasizes the importance of adjusting expectations based on first-quarter performance and fighting for revenue. Steve Tusa from JPMorgan asks about volatility in the Test and Measurement industry compared to the broader economy. Jim Lico responds by pointing to the industry's specific exposure factors.

The paragraph discusses how the economic uncertainty and tariff mitigation strategies have led to a pause in investment decisions, particularly in the R&D sector of electronics and semiconductors. Customers, facing uncertainty, have delayed their investments rather than canceling them. The company, which mainly operates in R&D, is seeing the impact of this more in markets tied to semiconductors and electronics, as well as government-related capital expenditures. Despite these challenges, there is optimism about improvement in orders in the latter half of the year. Additionally, in other sectors like industrial sensing, business remained stable, with the industrial core sector of Tek performing relatively well compared to other areas.

The paragraph discusses the performance and outlook for Fortive's business units, particularly the Sensing business and Fluke. The Sensing business shows growth in orders and stability, which is part of Fortive's industrial exposure. Fluke shows resilience, with strong North American sales driving its performance, while global sales remain stable. The conversation shifts to expectations for Q2, highlighting anticipated revenue growth and stable margins for both New Fortive and Ralliant, despite facing a significant tariff headwind. The paragraph includes exchanges between Jim Lico, Steve Tusa, and Julian Mitchell, with mentions of Elena Rosman's input on the Q2 outlook.

The paragraph discusses the financial outlook for the Precision Technologies and Healthcare segments of a business, focusing on the impacts of tariffs, countermeasures, and currency fluctuations. Although Precision Technologies is expected to see a mid-single-digit decline, an improvement is anticipated from the first quarter, with margins initially affected by tariffs but expected to improve later in the year. In the Healthcare segment, margins typically start low in the first quarter but are expected to grow sequentially throughout the year, with the highest margins in Q4. While there were some foreign exchange headwinds early in the year, these are not expected to recur, and growth investments will continue alongside margin increases.

In the paragraph, Jim Lico discusses the company's global manufacturing strategy and how it helps mitigate tariff impacts and competitive imbalances. The company has manufacturing facilities in the US, Southeast Asia, China, and options to move production to protect intellectual property, like within NATO countries. Competitors also have diverse manufacturing locations, often in Southeast Asia and Europe. This flexibility allows the company to adapt to tariff changes and maintain profitability, as evidenced by their successful businesses like Provation.

In the article paragraph, the discussion focuses on the acceleration of strategies at Tektronix to counteract tariffs, particularly through optimizing the global supply chain and manufacturing plans. The aim is to align these plans with product launches to reduce reinvestment and effectively mitigate the tariffs by the fourth quarter. The conversation also touches upon the lower-than-expected core growth rate for AHS due to fewer operational days, which was anticipated by the company. A question is posed about whether the tariff figures presented are annualized or in-year rates and the extent of tariff offsetting projected for 2025.

In the paragraph, Elena Rosman and Jim Lico discuss the financial impact of tariffs on Fortive's business, specifically mentioning a $200 million impact expected in 2025 at the midpoint. They aim to offset about 80% of this impact. Jeff Sprague asks for clarification about U.S. exports to China, which are identified as manufactured products with less than 2% revenue impact. Lico explains that these are primarily related to intellectual property and technology, with mitigation strategies like manufacturing outside the U.S. and China. The discussion then turns to expectations for tariffs resuming after a 90-day hold on July 9, with Fortive taking a conservative approach by assuming an increase in tariffs for the rest of the year, affecting global numbers as well.

The conversation involves Jeff Sprague, Jim Lico, and Elena Rosman discussing the financial assumptions and impacts of tariffs, particularly with respect to China and Mexico. Jeff Sprague highlights a $200 million figure assumed under the original rates and mentions the impact on China, while Jim Lico notes that mitigation efforts focus on Mexico, although they lack manufacturing there. In the discussion with Brad Hewitt, Elena Rosman avoids giving direct growth and margin guidance due to the uncertainty of tariff effects but provides directional insights, estimating low-single-digit to mid-single-digit growth for New Fortive and a decline for the PT segment, altering initial flat growth expectations to a low-single-digit decrease.

In the paragraph, Jim Lico, Elena Rosman, and Brad Hewitt discuss various aspects of Fortive's financial performance and outlook. Lico notes a focus on de-risking in government spending while Rosman comments on expected sequential margin declines in the second quarter due to reduced demand and tariffs, with an improvement anticipated in the second half. Hewitt inquires about core growth in FAL, to which Lico responds that ServiceChannel performed well, showing strong numbers, while Gordian faced some customer hesitancy but largely met expectations. Lico adds that state and local agency activity in the second quarter is crucial and highlights strong procurement figures from Gordian in the first quarter.

In this discussion, Jim Lico and Andrew Obin address the performance and differentiation of Tektronix's business. Lico notes that despite some uncertainty from municipalities and government agencies, they posted a strong mid-single-digit growth and are optimistic about the business trajectory for the rest of the year. Obin clarifies that Tektronix orders were positive in the first quarter, with Test and Measurement down and Sensing and Systems up. Lico explains that Tektronix differs from competitors like Keysight and Anritsu by focusing more on the R&D lab segment and having less exposure to telecommunications communications and RF products, with less emphasis on software compared to competitors.

The paragraph involves a discussion about capital expenditures (CapEx) and manufacturing strategies within a company. Andrew Obin questions whether the CapEx for 2025 will change after company actions. Jim Lico responds that CapEx will remain flat due to their low CapEx model focused on final assembly and testing. He mentions that while there might be some prioritization shifts, relocating manufacturing will be done with partners to keep costs low. Andy Kaplowitz from Citigroup then thanks Jim and introduces a question about shipping delays in the defense sector, noting it's not a new issue for the company. Jim Lico acknowledges the question but the response is not included in the excerpt.

The paragraph discusses record growth in a business sector, highlighting the challenges in meeting demand due to government validation processes affecting shipments. Despite these challenges, the company is optimistic about its manufacturing capacity and supply chain resiliency efforts to meet future demand. It notes strong performance in North America, particularly in consumables and software businesses, and reports good results from their Asymmetry and Fluke sectors. The company also acknowledges previous expectations of a downturn in China but remains positive about growth prospects in North America and Western Europe.

In the paragraph, the speaker discusses Fortive's market outlook, highlighting that North America remains a strong market, while China and Western Europe are facing challenges. They note that China is expected to be down high single digits for the year, influenced by pricing and tariffs, and Western Europe is experiencing slowing markets, particularly for Ralliant. Conversely, high-growth markets outside China, including Latin America and India, are performing well and seeing investments. The conversation then shifts to a question from Chris Snyder of Morgan Stanley, who asks about the company's price-cost recovery and the distribution of the $160 million growth from price changes over the coming quarters.

In this paragraph, Jim Lico addresses a question from Chris regarding the mitigation of tariffs by 2026. He clarifies that the mitigation will be measured in dollar terms rather than percentage terms due to the significant impact on gross margins. Lico notes that there will be a degradation in gross and operating margins and mentions specific figures regarding the tariff impacts in the second quarter. The approach for mitigation involves a combination of pricing strategies and surcharges, with most being true price adjustments. The implementation of these pricing actions, especially on a global scale, requires time, impacting the timeline of mitigation. Lico expresses confidence in their actions due to the strength of their brands, innovation, and technology, and notes that customers understand the challenges posed by tariffs. Chris acknowledges and appreciates this detailed explanation.

In Paragraph 27, Jim Lico discusses the performance and future expectations for EA Elektro, which became organic in the first quarter. He acknowledges that this transition caused pressure on PT organic in Q1, contributing to headwinds in the Test and Measurement sector. The business is expected to generate between $20 million and $25 million per quarter. Despite initial expectations of mid-single-digit growth for the year, growth may be closer to flat due to investment reductions in the European automotive sector and overall uncertainty in the global automotive industry. Recent announcements, such as the one from GM, highlight the challenges faced by automotive businesses, and Lico anticipates this trend to persist throughout the year. Chris Snyder and Deane Dray of RBC Capital Markets also participated in the discussion.

The paragraph discusses a conversation involving Jim Lico, who addresses concerns about managing costs and restructuring in response to headwinds at PT. He mentions a $20 million restructuring announced earlier in the year and proactive cost reductions to manage decrementals. The focus is on mitigating tariffs and implementing pricing strategies in the marketplace as primary actions to address challenges. While some restructuring has been done, the emphasis is on pricing and tariff mitigation as more effective solutions. Additionally, there is a mention of investment in growth, with uncertainty about adjustments across different segments.

In the paragraph, Jim Lico discusses ongoing growth investments, particularly in Fortive's New Fortive and Healthcare segments, with an emphasis on research and development. Fortive has received several 510(k) approvals, which are regulatory clearances, and continues to invest in innovation, particularly in the New Fortive area. These investments are projected to be around $10 million or more, with more information expected at an upcoming Investor Day in June. Andrew Buscaglia from BNP Paribas Asset Management then asks about software trends and how they are affecting margins. Jim Lico responds by indicating that there is no significant tariff impact on their software businesses.

The paragraph discusses the positive performance of the Facility and Asset Lifecycle software businesses, noting successful innovation and commercialization efforts. Although there is some uncertainty with certain customers, significant large orders were secured. The Healthcare segment, particularly Provation, had strong quarters, highlighting the high-margin nature of Provation's business. The potential impact of tariffs on input costs is mentioned, suggesting a possible benefit in pass-through business areas like Gordian and ServiceChannel. The situation is expected to develop in the latter half of the year. The paragraph concludes with a mention of Andrew Buscaglia's comment on a larger-than-expected buyback during the quarter.

In the paragraph, Jim Lico discusses the company's strategic actions and strong position ahead of a planned business spin-off, expected by the end of the second quarter. The leadership team, led by Tammy and Olumide, is prepared, and a new CFO will be announced shortly. The company has improved its balance sheets and maintains an investment-grade rating, having repurchased 2.5 million shares to utilize free cash flow. As the spin-off approach, further details will be shared at Investor Day. Both businesses aim to operate as independent, focused entities. Jim Lico expresses confidence and excitement about the upcoming months and reassures his continued involvement in the process.

The paragraph expresses pride in the team's performance, especially over the past month, in facing challenges and effectively implementing countermeasures. It highlights the continued strength of their free cash flow and its significance in positioning the company well for future endeavors. There is anticipation for upcoming developments involving two independent companies, with detailed discussions and updates planned for an event on June 10. The message ends with gratitude to participants and a closing from the teleconference operator.

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