Fortive (FTV) 1 Feb 232022 Q4 Earnings call transcript

My name is Julianne, and I will be your conference facilitator this afternoon. At this time, I'd like to welcome everyone to the Fortive Corporation's Fourth Quarter 2022 Earnings Results 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. [Operator Instructions]

to call like to now would turn over the Ms. I Relations. Vice President Rosman, of Elena Investor Ms. Rosman, your may you begin conference.

are President Thank you, Chuck Financial today's today Officer. on for McLaughlin, joining Lico, Julian, and President thank call. you, our Senior With and Officer; Chief Executive and everyone, Vice us Jim and our Chief us

We by of available are Investors section Regulation our non-GAAP at on measures today's on financial certain G present call. required fortive.com. website Information the

year-over-year period-to-period comparisons on Our increases operations refer to a or basis. on statements decreases continuing

call, we make materially events number occur a statements the any from will expect will During forward-looking including make that to differ may statements or or of forward-looking statements forward-looking risks regarding in or today. we These subject statements, the and future. developments we actual that are might anticipate results

as available XXXX. any these report annual ended Form including regarding factors forward-looking Information forward-looking we to they risk do These statements. our assume statements the December SEC filings, any the update not our in only obligation are made, XX-K of year XX, date and for that on is speak

With that, turn the call to I'd to Jim. over like

X. for Thanks, begin slide I'll thank Elena. you joining on Hello, and everyone, us.

guidance XX QX, gross free of cash delivering points basis per had gave XX% growth, expansion, growth, October. earnings performance we share operating Fortive in revenue respectively, growth, flow another ahead margin outstanding adjusted operating and and XX% quarter in the of XXX core of XX% all adjusted

by products which growth ARR markets our we for businesses revenue shareholders expansion relentless portfolio the of XXXX. is and evolution on core to hard in Our businesses, characterized The our our culture strong executing for by purpose-driven record in growth strong customers powered year. and supported in the focus software is drivers, contributing our within backlog X% secular play continued

a likely linger would growth, inflationary and our We overcame into Team team will performance more chain challenges, the power around key free continued is of and supply differentiator, possible of record without dedication flow Fortive believe XX,XXX contributing the have the margins cash the which not generation. been to System gross Our members world. XXXX. Business profitable

forward, targets on that outperformance As May. Investor strategies excited Day you are we've multiyear at our look we're on to made and our progress driving the we upcoming update in

Turning slide years. difficult the of against validate Fortive two-year in over investment to have and Even a on to accelerating thesis pursued XX% we that X. delivering the XXXX, a backdrop stack continue since growth basis, few last macro of XX% the core XXXX,

X,XXX margins margin to and transformation also opportunity the which basis approximately gross further to Our higher XXXX, points in expansion into portfolio of driven come. years margins has since translated improve has provides operating

$X.X We higher flow compound of and a Fortive also a free margins differentiator ability with key delivered off growth billion, our cash cash to creation underscoring value driver. XX%, approaching flow base,

In had we starting next year across show-me be will results highlight I more the summary, we said Solutions all with and a on few Slide our Operating delivered that which of would X. on Intelligent slides, in segments, detail XXXX strong

offsetting of rigorous quarter inflation operating margin growth in workflow, consecutive core more in of core Europe core FX China. regions, XXX had double-digit and in every combined Western FBS, headwinds. our XXs growth high all North third its good Double-digit drove and double-digit in points growth with in representing of basis expansion, application growth XX%, low mid-teens than growth. by revenue growth core America, revenue grew IOS We with

the electric growth, a energy, and and teens markets. performance renewables by vehicle supported and look calibration Looking workflow with position low backlog products reliability, at and continued success at solar strong by their our drivers connected new serving

region. every in strong remains POS

dollar retention in Industrial and strong slowing as double-digit growth EMEA grew Intelex. the end record contributions XXX%. Strong market both with EHS, approximately SaaS demand normalize. chains expect we Scientific of supply see net to from In teens revenue However, to drove by some quarter, revenue continue high with

XX%, approximately was key the quarter. record to of following at grew demand Meanwhile, and double-digit end create have chain of revenue Intelex growth. issues supply Scientific to FBS software another shipments the as resolution supplemented initiatives and strong accelerate Industrial quarter the by of upsell They higher iNet instrument successfully deployed third implementations SaaS expansion opportunities customers. posted low

shortages maintenance cycle. facilities through the and to revenues in life drive Vontier continued platform. order low higher QX. customer job as deferred again double-digits and company's had once to increased asset growth facility double-digit Moving volume We labor contracting

products. in digits, asset end-of-life enable just year Accruent despite of headwind continues quarter workplace management a growth SaaS another saw its growth sizable good grew revenue full recent in mid-single XXXX. mid-single-digit see double-digit from growth solutions taking And and to revenue Accruent their under to from success XX%. ServiceChannel by revenue focus go-to-market rate to

are SaaS revenue. first from reminder, that long-term headwind we a largely to more includes revenue recurring transitioning short-term a will change in As This base a create business model a pass-through the quarter. revenue better

we to margin. double-digit adjusted service strong remain However, a business above XXXX in expect XX% operating with channel growth

PT Technologies now in revenues driven by inflation expansion than XX%, China. Core XX% realization and of margin in another Turning offsetting Western greater America increased and FX. in adjusted higher in growth teens delivered both North price of high with Europe XXX Precision also quarter business. operating points X. delivered strong every Slide volume, to than more productivity growth growth and double-digit revenue basis

quarter record saw continued last business, following quarterly expected which highlights realization semiconductor at we've XX% price driven the mid-teens as growth, offsetting backlog, operating scopes. by as years. for and entry launches, robust driven and power continue growth Tektronix, demand utility and in sold slow new product strong share include: in We Sensing as another two revenues of gains orders QX and new seen softening. all industrial normalizes profit over Technologies across businesses the by Qualitrol's had and demand demand quarter in the benefit mainstream to Some

XXXX Scientific EMC growth availability. Setra Pacific and improvement. XXs capital approximately high of four in and Gems also points working expansion basis in by the of turns expansion capacity XXX and improved saw quarter, facilitated drove Combination materials margin

in Healthcare Solutions. seven now to Advanced slide Moving

the quarter, revenues in increased America all driven Western Europe base operating a region, single-digit some companies. North partially offset the higher China. in high expected, single-digit improvement in care X% By As and improvement major benefit broad a installed health across in reflected decline of mid-single-digit by growth hospitals, in our by low and decline

XX% The prior QX segment. the XXXX in the elective outlook levels. half on exit seen our year we was lowest January was China roughly rate volumes reflected normalized were and post-COVID for of roughly have which of levels, procedures

were points, inflation, partially M&A. Versus offset approximately by were higher down points impacted and additional by quarter basis QX. guidance, Notably, Solutions. margins effects versus driven primarily margins were In the favorable fourth fourth transactional lower quarter, by AHS up segment margins at basis unfavorably margins Fluke our XXX XXX Health

on initiatives, As starting the and to see will traction we we XXXX. their productivity pricing in team is deliver expect which recovery margin ahead, look

Some of other continued highlights improvements. with headwinds consumable with working of of strongest deliver finished QX the ended volumes gains the Even revenue the as with capital in China. year ASP ASP more share quarter to strong capital year inflationary and the core X% and than margins pressures, include; growth offset COVID

year drive While growth continues cross-sell hospital and inflationary challenges, with in net in opportunities. profitability to Setra labor Censis record and ACV pressured, remains mid-teens robust to and for QX offering SaaS new due the and

its having $X.XX XXXX. earnings Provation Lastly, ahead contributed expectations, is to on in return

continue customers health probation As we accelerated SaaS XXXX. our for setting to seeing growth, strong their across a are systems, up standardize them

them of mindset way makes life at Turning a drive to continuous for improvement accountable We high is slide a and across on powerful eight, hold the expectations. that Fortive deep delivering engagement Business teams System Fortive. our

As we brought Kaizen a reminder, over in and XXX CEO team October, our Innovent. together members

ISC, our company improvements a leaders in cash presidents, collaborated including our innovations Our and Tektronix, across Censis. margin, flow, of four Fortive and most growth, operating significant to number senior companies, leaders, operating breakthrough free segment and drive Fluke,

are success by sustaining past critical we the proud and to XX%, over stock-outs to this eliminating due over time components attribute results backlog. We're directly of it at Fluke, reducing event, having plastic bold change teams including, on reduced our

cost in conversion to time iNet material the and quality output Fortive redesign. the At system rental repairs product applied and ISC, reducing of improve we for dramatically customers, lean turnaround and

conversion XX% increasing documentation management, of building flow, altering our we by and material work procedures. installing part Tektronix, repair, to and to lean board circuit delivery applied standard on-time XS At

Censis, inefficiencies we year With customers. the In identify in reduction we waste, and to results ahead. applied in improvement new XXXX, value the and in across mapping transactional process accelerating resulting XX% to in expect significant onboard a stream Kaizen time activity

setting can work We continue page. as each a pillars progress our incredibly building that aspirational we as believe of results shown to powerful a sustainable future, holistic slide of taking our XXXX and see the approach proud have targets creating value deliver includes on the and to in actionable on more I'm towards nine. across in you done sustainability

with leadership core Fortive’s Leading Fortive promotions critical and FBS. culture component and today team, inclusive mission, advancing our is recent Strong of talent and commitment inclusion to is with diversity. top diversity, to a hires a diverse and Board and

in in spend, published points has We part Last increase increase representation, an from clear our we XXXX. our year, representation resulted diversity five senior levels. to by and this goals engagement up to believe gender scores, employee supplier diverse pack leader pre-pandemic by

by of ambitious of includes in protect achievement also goal early new XXXX. progress goal reduction of XX% gas how we our Our to the the It greenhouse planet. adoption emissions extends XXXX the our

purpose goals. services the is our that and of our revenue aligned shared we more to innovative services. sustainable pushes to our customers. And that from also have Today, products sustainable derived that development enable products sustainability award-winning It's approximately create products outcomes, sustainable us promote Nations' XX% for United and and

for that recognition year our meaningful company. the consecutive to commitment most in the drive by Newsweek to responsible Lastly, America's outcomes stakeholders most is reflected matter fourth as sustainable our and

Chuck, our our pass and With financials provide who XXXX more that, to outlook. fourth color it I'll over quarter will on

revenue of begin were everyone. points. XX, with generated hello, quick core growth our We approximately of divestitures quarter four and X.X headwinds of Jim, fourth net Thanks, performance. a XX%. growth. year-over-year I contributed FX recap on Acquisitions will points of slide

quarter revenue businesses, favorable with across our the and revenue up products revenue contributions was Turning each in low volume North pricing, of to grew geographies. in mid-teens, in of broad-based core partially regions. saw our decline by America Europe strength major double-digits hardware We a offset another double-digit healthcare. with growth Western

and America growth quarter, Western North in Europe the In bookings fourth expected. as slowed

impacting low Intelligent Asia revenue in and procedures growth driven China in dramatic in by than in drop Operating elective offsetting China, Solutions. XX% a Precision Technologies, Solutions more with HealthCare high-teens, Advanced robust increased

a saw broad-based high-growth with we Lastly, performance mid-teens markets core growth. our in

we realization of as Adjusted demonstrate the to volume proposition higher more Turning solutions gross and operating show products continued value margins performance the to price highlights by points increased than XX and offsetting slide for inflation. XX, basis fourth to XX.X% quarter. strong our

points basis to basis. XXX a up a expense. XX.X%, to share higher per points higher two-year earnings basis strong increased XXX stack and on $X.XX, offset XX% tax by productivity, expanded margins volumes profit and reflecting interest on operating Adjusted Adjusted partially fall-through

were Normalized earnings XX%. the yielded for flow working full cash million $XXX in Strong another capital quarter quarter, and our $X.X tax free collections taking standard. up year of flow the of initiatives benefits the cash billion. the year-end FBS-driven Free in to was cash

outlook wanted the turning I provide context XXXX XX. on Slide guide, Before some to to on our

another customer that expect and innovations. be market will in by new secular margin segments year of expansion We strategic our growth tailwinds, each and driving supported of XXXX expansion

driving expected Our efforts, increase double-digit recurring demand the work did sales are and of XX% revenue generation license roughly at we to from growth. benefit XXXX SaaS and revenue our strengthen in businesses go-to-market to

of Elevated backlog realization actions normalize XXXX, the and carry along expected engineering increased businesses, in over hardware as contributing gross sourcing to moderating into XXXX. value driving at of with particularly rates demand expected benefit in above-trend order derisk pricing Further, is margin is expansion. to year to XXXX Tektronix, savings pricing another our products

the our expect these are the countermeasure to strong environment. incremental of slowing the initiatives in margins, macro also operating initiatives including Project productivity paybacks year average We to expected yield half actions to to related year. first one

included with outlook into and carryover the second these earnings for half, benefits benefits XXXX. have margins in our We

profile, earnings we believe a reflects weather and resilient summary, XXXX to In we environment. more the expect as evolving macro outlook our revenue

the XX. to Slide now on guide Turning

XXXX revenue the in growth with the introducing are expect We guidance. full year, range Starting of we X% core X.X%. to

exchange foreign X% under a revenue. headwind just outlook Our on of year-over-year reflects

expected net is in expense. representing tax $X.XX margin. cash and of approximately the interest the And XX.X%. diluted flow expected $X.XX X% $X.XX, XX% to margins of EPS operating range billion, free profit which XX% of net in XXX% Adjusted income XXX% to X%, a free to with includes to of X% to is up to to increase guidance be Adjusted higher and XX%, range flow cash conversion adjusted

For the Adjusted to first XX%. margins with of profit X.X%. is growth headwind X%, X.X% increase X% the in quarter, range FX with we operating anticipate of X% to expected to revenue to of core XX.X% an

up year-over-year which Adjusted diluted pulled cash of net $X.XX, seasonal free to interest forward approximately variations. guidance normal to flow into as X%, reflecting tax well collections EPS million, as that and cash QX of $XXX X% $X.XX and includes the higher our stronger

now Turning to XX. Slide

expecting to step-up approximately second million first second less We a $XXX you of of half are half XX-XX a the in than growth, we of reflects which saw XXXX. revenue half of revenue year, split compare to last of it's core which the increase when half,

software healthcare other a we the driven in lap new step-up largely as and rate increase and ramp lockdowns in acceleration The in products, XXXX revenue COVID by recurring of is China streams. in advanced growth an

earnings second decline abnormal year becomes year is interest expected bigger usual down pay the us half we to progresses, as step-up seasonality FX of giving free and the for cash available flow account half. in interest and second in first half tailwind as a debt with EPS to the as a expense FX than

summary, to and profile decelerates XXXX stack linearity In accelerates on reflects a second first half, a it two-year growth to similar core half outlook revenue basis. our while

it pass provide With that, some I'll remarks. closing Jim back to to

Thanks, the team XX. profile. our proud contributions year incredibly slide a differentiate Chuck. In make resilient I'm on up I'll summary, of of and XX,XXX Fortive more further XXXX for members our now financial record to wrap

also XXXX page as double-digit solving productivity it toughest our product and investments two quality revenues reflects benefits after strategy, the we to outlook customer on again customers' market scale strengthen years hardware our on are expectation reflects As slowing an robust our develop normalizes for our be growth we that display as but the of have software made that new the position, in will resiliency turn and accelerate demand of XXXX, challenges. safety, orders, innovations

free continuous we again seeing improvement power System deployment. benefits us the of through strong to compound As allowing more our of growth flow, are disciplined cash you've Business the the profitable capital also XXXX, unleashing Fortive today, returns deliver heard to and culture, in

a of sustainable and a environment. formula desirable in outperform industry-leading Fortive When to portfolio almost creation for favorably together, taken creates free to this flow trends, value best-in-class generation high-quality brands any margins with secular enabling cash powerful and leveraged execution,

turn With that, back Elena. it I'll to

questions. comments. That we Jim. Thanks, Julianne, formal concludes our take will now

[Operator Instructions]

Our first ahead. Tusa from JPMorgan Steve go from question Chase. Please comes

line is open. Your

Hey, good afternoon.

Hi, Steve.

year, Can of key quarter you expansion about that? iOS, talk -- for -- just for margin the building the the for kind first of kind full sequentially from blocks through the the

Yes. of to role Hey, we a that. we And as A we'll so couple things. Steve, progress, continue play obviously, it's -- that. see One, Jim. in

those in some the quarter. of that, little noted, we the can talk first We lower asset cycle, growth that life about but -- As a will bit expand. margins

actions the along driving in coming of margin to well this -- the will gross productivity be initiatives. the we've with a of of that software as progression certainly lot businesses continued a back price just piece expansion continue our helpful as revenue So, there got

just we've normal So, big I in the dramatic terms you more half got Those wouldn't of the see half you drivers of terms anything are revenue. seasonally to from of the growth, realization, in outside that don't through as think probably go price first year. productivity anything initiatives traction get normally second

all of And obviously assume year? being then this $XXX through? that the million gets then washed this what's excess And backlog should we that out that washed pace

to do that got order all here. getting just beyond got resilient moderate is based it why Steve, It's course, order wouldn't pretty we could on is we've they're Chuck. but we no, -- think gets -- rate. where of expect Actually, resolved. we we've out If we the -- It's a rates going think forecast the be, depends modeling, still washed reasons the better. still it. it's one in not that -- really It's chain this our of supply

like So can we'd get cut all and But out. it we it we -- the flip in it switch sounds would half. just probably

Okay, lot. Thanks a great.

Steve. Thanks

ahead. Barclays. go Our Julian next Please comes from from Mitchell question

open. line Your is

just product Hi. wanted afternoon. start on Good I with more the orders. hardware some detail to

were those And QX. commentary. QX. sounds low like up think mid-single maybe then I digit single It slowdown you've got So up this they're

XX, also about the talked slide And improving year. then on through you orders

about to second So half? is single, trying the first say don't down way last the to you're that ended know, low in up that, half, think orders, I grow the maybe they're year in

because low year up The whole if look PT And organic up mid. at the the to slide digit. a you're double on guide, then is sales that's as XX, informs starting I year that what

sales organic about just, thinking the down. the orders flowing six-month lag? or a flat that we're the implying how of, you're through in kind that with So year Is it? Is

is I Well, flattish we the think, of for orders of would XXXX for businesses. think second half first, those basically

fourth little along where right a the So bit relative and we down in thought. to --

third call, the first we came remember you some If in yes, half. the we in, also for saw that second orders from half the said, quarter

what just around would kind backdrop that's it an ending where So of we from backlog in thought year. the of and we be described,

So the that order in Chuck backlog, that saw. helps as of with obviously, the -- slowing obviously some down the we described, just

be the Julian. first to product to We in relative those expect same businesses, half the orders around

in about second those the first pick quarter to a starts it think then quarter being second things. -- quarter And But of those probably up a businesses. obviously mitigates bit. you probably So and little backlog negative number

what easier I second pickup that in because of just the of is comp, XXXX. described Some an obviously, of half

in improvement back a Tek. well, think is stays sensing will year little the bit through as a faster. sensing, back probably typically the through flat little a And not improvement big come in a of probably Fluke year comes there's And little bit but we

you QX. in is PT an just have easier in Julian, the comp remind only And we thing I'd

start So when as the not when as through at you year. dramatic it's look $X you -- move standpoint, you

In -- fact, trajectory it PT be think from would I an there that upward sequentially. in we'd quarter expect $X standpoint, would each

Thanks. a look you're maybe bit within And what flesh out PT expecting. we at little more when maybe Tektronix,

mid-single. that is it kind up are been say, high-teens of look three in, The for I months. right You've the teeth in what's of six happened now got like first the people feels if destocking lot have But growth electronics, year quarter. even and guess of a I or at

by the the protected you us of half. means Tektronix, revenue descent I of that channel bit help looks like a Maybe just year. back in understand And the it a through understand That Tektronix. kind on So, maybe backlog again, in you gradual sort in you're inventories implies see have down guide where the business?

kind wanted Just things confirm couple to there. of of a

Yes. the for It's Well, think, higher prepared a we'd last number one, over we on the rate normally obviously what in as of Tek. couple than I order stuff, the XX% expect said years. little growth back growth remarks, bit

the a So, to or what you that it’s to normalization start mid-single-digit full see moderation back in a year, growth.

when I a all ever those more making business terms centers, than driving much distortion business of have business. terms much way data you before, about anticipated more of industrial electronics in doesn't lot the just from as The customers, about out of of IoT, consumer would moving that are think drivers seeing influence talked we of very playing say in today really where much we've things it the the resilient. you're anymore, with power, the

business. dissolve a described those of we've think It little really but things to it have does large all So, bit, are I moderates continue think off I the that really, numbers. the really

here. a the be with So year We'll we're decent still is think as was the of ago. couple what end backlog, better. could a just questions mid-single-digit bit growth calling little for Chuck describing year a out It I

no look when at So, almost business the channels very healthy year, for I the we think inventory. have

continue to see point-of-sale we strength. So good

of that really past some is but a And situation extent, some fulfilling whatsoever. isn't channel just due to there inventory

think I we're And good place. so in a

we've the of big is of but years. a Orders little heavy will couple had of comps slow sort that bit, some over last just the that

in we're we'll as place place, XXXX a think think good we exit well. So we a good and in

you. That’s great. Thank

you. Thank

from comes Please from question go Davis Scott Melius Research. next ahead. Our

Your line is open.

in hope XXXX. a sounds I channel you think Elena. like and well. maybe If I look I offset. you accretive at in rates growth that be probation meaningfully think step-up the back tailwind comments said, are came you accretion $X.XX you. notes, Chuck on given the It an like on XXXX? couple SaaS would that in I and guys did But Jim of service businesses Is make adjustment pennies would service Hey, the of my be better. though nice a We for just channel, know some those that as

in in you that, got more the there, at, in came All And are service build nice $X.XX you Faster give profitability to We us on rates I a that and We would that would $X.XX expect Scott, XXXX. growth that XXXX. tailwind. think, in right. grow I as in first Yes. channel expected. going things. half also

on the a to the service quarter And little than to Scott, we -- This grew did be have business. year XX% just why the channel we to remarks. a add about full in is first in But bit really maybe on talked business we we prepared That's SaaS basis. the anticipated. the revenues thing, as pass-through revenue incredibly year almost in the more strong continue

this growth strong past really So year.

a along. bit platform SaaS much and been that We've a analytics little of better offering well. to a move now data pass-through But strength all there business which the -- we're revenue we'll got less is business model, a has the but as

do to in hit year. We'll the quarter the full model to really regard. an and through first that -- the going we to, but bit hit that even we in simply better that XXXX the little of really So the We in place raise business going because P&L get needed half, as start is through transformation XXXX, got well. intended profitability be the in kind considerably a the what we're in of, does really first

And helpful. I All right. it That's was think Jim.

imagine think normal, in -- China as, just I'm crazy. which which like You mentioned -- of is in that back I would pick sounds the finished I January? in in procedures still kind of... the But but of discretionary reopening, you are number, I that that aggressively, would reopening But that -- your reading are at just the the still XX% seeing you a that XX% pretty remarks it year know. the stuff XQ seeing timing don't up that here

you December, exactly was right. really low. it in got Yes, particular, mean I

that speaks strength think X% to weather growth I world. we revenue the on strength quite of segment. about the regions of AHF, talked of to the storm other in that the able the were because of We the is frankly, line that we had

think, think in So going January, improvement. XX where of ago. it's about we we see right, we're were point. about picking We're XX% ago, so of of seeing we a A to a ramp. continued week, now but weeks But low it's But improvement. year half in should up we probably you're was couple some the to that

to anticipate the Chinese kind that of throughout will and But things, on of this we New certainly side the see just as China we'll that. continue of Again, always the gets year, other started to to we Year get better normal, view we do. as holiday, improve a back

it Okay. luck. Well, Thank you. I’ll pass best of on.

All right. Thanks, Scott.

question comes go Research. Sprague from Jeff Our Vertical ahead. Please next from

line open. Your is

Hey, Jeff.

there you're of a out day, there Hey, Hello. on Jim, everybody. lot your right, well instruments out speculation aware, national process a interest. and there's Good Thanks. as going Hey. about for

Anything interest your hardware-related you? the for you deal and at appetite you're say, us you've to any sure limited expressed or deals? give past fairly there large make might on color but want in you on I'm any for sense what any could

Yes.

So, and company number I we know news. one, think, obviously, the have read the

or particularly one. wouldn't We any public right. that in, on involved comment exactly we'll you're involved So not process a in be

time. we've meeting mean XX I this. NI say would I so. ago Dr. T a remember years or But long known can I for

know a we well. time. with and long We have Tektronix partnered them So at them for

and our think a about small hardware large, what said all there we've of was software. I funnel of was balance strategically deals, So

-- So balance is incredible now, know. we an right can as place you the sheet

But disciplined. going We're we to make every to great to we're in we're to that things. to But regard. going do, are and at playing around we'll strategically, So And that. broadly want very accelerates, our that think approach, more we that in how of what place sure we're it opportunities I'll us. certainly -- be good relative leave M&A, it we a a offense I in do we approach situation well place ahead

just Thanks gears. that. And Great. for then shifting totally

kind the in do point inflationary this just to put year? place of as out impact and be XXXX? pressures actions through AHS. cost finer price or and in the have kind we you little other At point, see on you of Maybe cost the Just of kind move how to neutral a back the playing balance margin over better of the

Yes.

XXXX working So year. the a around favor think, to in AHS, in specifically relative more of that -- I of headwinds kind called out the quarter. I onetime are a We we couple think there's our number of things

Number will for a in saw in not our thing anticipate that the fourth America continue get we're structure. had good -- growth quarter, calling it necessarily America, everything and will believe North America. do good North better. but we we perfect We one North margin is that's and And that in getting

we're And to into your and on little call this seeing in Things it to traction. number and see year. just a more bit starting point, about longer, get two, then the we're We've that that. price talked takes the fourth to a are that realization starting little

to that things And The productivity. really really embraced team a they've -- number leadership drive FBS, then finally, has team and has of adopted really productivity.

either additional as the inflation see don't we well. So,

will, inflation if the and you we see those of through year. incremental actions deeper this combination we the the margin point So don't have structure, at getting into deeper and

XXXX, ask, of gross in margins much the margins place better. that grown here starting business So, in the obviously, two need operating would kind and better AHS make we of but market XXX And in over actions have feel -- last we like to continue kind years. we're to a just from both I a we points the about basis

challenges, we from the call I those despite launch we're good a path where are place. that So, in today.

you. Thank leave it I'll there. Great.

Jeff. Thanks

comes Nigel question go Research. Coe Please from next ahead. from Our Wolfe

Your line open. is

Hi Nigel.

morning the way, very everyone. how them be guys, Thanks, competitive to in good going you is you? happy, [indiscernible] By basket. put are Hey that

out follow-up leverage So, do deal? to high news levels. just is for Instrument will -- Jeff's philosophically your the the we're Where math on want Because there. on National question, a based on get to of doing very obviously, issuing you equity stand

prepare wondering, to equity right would opportunity? what is leverage the to biopsy? just the philosophically, you ceiling And for you the So, for issue go

rating. felt want Nigel, investment-grade We've maintain an to it's we always Chuck.

deal so I've been we the said that type mandatory anything that we've been we've convert. done equity this do pointed just hasn't needed point. the the And where to past, And that. wouldn't It jeopardize at table. want something, would do in situations instruments, has out always on of that any never in we off equity -- like

that's plan? How are backlog then like plan. to half kind other SaaS very service XQ intra-quarter, It the touch the drawn just And out then of of SaaS to Okay, back event. be first discrete you FY we channel And surplus sort of going look transitions maybe at it's of tend eat planning sort your much that into just a of sort million These transition. companies. helpful. seems to when XXXX underpinning $XXX on maybe

why curious would just short-term? be so So, that

take get out of clear, assumptions this to this But -- of still get better. Nigel, what it the first that's in about is expect And consider included would half year chains part. probably we we to more excess this backlog if that talking for take to I'll be the We supply is in guide. excess. up we're the

year. a more supply constrained there's it's by So still chain throughout there, but this little

revenue question, QX back of and to SaaS Nigel amount in service over getting transition. we channel has just business But a pass-through as of large continued a the it good. SaaS well wouldn't It's XX% with be revenue. grew on The -- of I this so just think XXXX the

And so you customer. if we have about a think it,

electricians. Some facility or through passing they of pain our of amounts have that number maintenance contracts costs We're have. the of plumbers a

We're just of less doing that.

SaaS other in we're some with a And so the it's really sense. that benefits. That not though added replacing transition solution, traditional

it's And so short-term that's we -- why transition. a

frankly, quite one-time losing from we any didn't this make It's pass-through some and really of money kind going on. revenue of

and see So opposed not would conversion revenue -- revenue. going it's company. SaaS as that. to I of service short-term channel it This a see SaaS what to is to XXX% of sort revenue see license that's We're as traditional why is you'd that,

Right.

Okay. Thank you.

Thank you.

Thanks.

from question ahead. Citigroup. comes Please Andy from next go Kaplowitz Our

Your line open. is

guys. afternoon, Good

Hi Andy.

Jim, segments Chuck mentioned second planned the initiatives increased you productivity benefits in all and that half of primarily XXXX.

these think could size bigger us more give for initiatives maybe you if us? already to undertake and in but these mentioned color I initiatives any around the you And there's of little sort AHS, what initiatives? then are FBS cost a

of half, first $XX expect to million $XX structural See the cost Andy, some put get to $XX up cost. these things. Yes, million after of in we'd to

there'll outside those, Some few looked likely some of but be the of up, are them a of U.S.

just we're than we there. go-to-market a always convert and margins. there to regions that We've to we And thinking to I'm our dealer thought want here there some a Maybe was improve approach after are our approach, cost that rather getting direct that. needed health in that

then color you. We've be talked can And Jim, Europe by it. us looks you give China continued what strong has outside into is to AHS, and for about It region? Western like seeing but strong. you're AHS more of Got

talked for slowing are to about normalizing? North what Europe that thinking cautious your orders you of supply are of You America, start more more and little in are XXXX? XXXX? in customers are but a function So chain Western Or

it's Yes, interesting.

seen inevitably think conservative Tek where layoffs we've it several the last those more I start and for PMI given and the customers some always we've things, of a thought is. some months little out XXXX the that of would just

that's That's one. order a planning kind from That's so one. number an number perspective. of assumption And

starting Now and have say, good I our we their pretty predominance North businesses particularly of America. situation. obviously, story. the about backlog American think we pretty North if with that mentioned Andy, we're also it in health most regionally, a America good would we -- you to had here that going knowing resilient, is revenue And be of the I have given the fact software North ASP care, streams

Europe So, weaker for probably that year, number North things. of broadly, to given and going a say Europe be more a America I pretty is Western would area just resilient the

supply chains to bit Some back is normalizing little of normal. that a

going China be just bit it to as little well. a weakness of of all is good Some is

year.

of year. quarter because actives should the will Healthcare to the China first better in through in continue be weak but the get

play, that's of and that's the sort assumptions of our planning forward. regional So kind going

to that sort early -- Obviously, year the still planning But here. it's think lot I that's was of assumption. to our days. a play out of fundamental

Appreciate it, Jim.

Thank you.

Our ahead. go next question Stanley. Please comes from Josh Pokrzywinski from Morgan

Your line is open.

Josh. Hi,

that well. on in everybody and hardware a not, Morning, just guide getting where something every don't is do is Hi. here, I to conversion backlog bit within dead down. a of afternoon, have even about only little weighted. horse want clear excess We to sort the backlog comment on but that beat the half know that Not Tek this quarter. how of it's what's I like sort Chuck, you depends. but more backlog fungible hope of be this worked I

I you could guide year, fully a that's backlog that governor work down other volume the basically of about how a still to like Is understand if think are close that that sort this be But can like guys on to to calibrated? in you no am way And then providing down basis fair way? double the orders there's digits. hitting

we are much way is of constrained that's thinking mean, there. more, so But what the seeing in get is the I we it's chain seeing not can't we're we've more down here supply reason it. Yes. got backlog I'm what material

change that. guidance. our with $XX say. down revenue would I necessarily agree doesn't you go that more, orders if what million That's So

Got it.

out, as going that's a intact. to as just that it's add backlog you it going yes, depends you the pointed -- on And little bit more where was said, business I --

where how does the go relative can it matter off. orders make to we down it So

part ought it. is as certainly the out that think -- planned that of But decline. that go So additional to policy, we isn't extra to some half of an again insurance

And Maybe step inventories. supply to thinking of Jeff I Got I I that That's kind and probably would guess price some also -- sort bullet chain. kind just about think on were better, year working it get then Sprague’s of there taking a imagine back maybe related was but on down cost. effect of total some you're frictional it. costs question helpful. last

is versus absorption Or as how tailwind costs? those would year? of of those you hit there offsetting two sort like balance frictional absence for the some headwind So, a sort to net this of

take some while. would standards to there a Well, that There for the this that go us spot here it costs be I going probably buy are for some costs sure. embedded are way. with away are But from XXXX, in

have we're like gross been, more price grow I have going to is in XXXX than we real cost think the in margins we did thought we XXXX.

too -- in as the So shown think sense, quarters, factory we've not a the media we're I had that over perspective. worried be going to from we're last absorption several

We'll the down won't lower, you're focused If that. in a be sure is going or really like worry if that's about making -- number commodities things on we be will direction, that of our are that metals, plastics, year. that is some from saw of that electronic to will little but components. bit of sort a this we take majority buy And ourselves longer wean of inflation

after that aggressive think I get everything. super regard. So, we're we -- in We'll to plan

look think the will have We margins see that continue But as take good. to you're throughout great year but while. the chain gross a teams, I going to it supply little

guys. Got Best of it. helpful. Super luck,

Thanks.

Please next ahead. from question go Deane comes Dray Our RBC Markets. Capital from

Your line open. is

Dean. Hi,

we've in quarter you. XQ is spotlight over cash the here? average. flow significantly on looks Can the Thank It put Fortive the free that fourth like Good by is day, everybody. delivered seen we your above only company

through mentioned into there also initiatives And Chuck, could collections from But capital working us pulled was the the quarter about fourth first a you quarter. that? some take reference you

was the dynamic what there? So

a had as working things really long stand challenge. the done year but and ASP great, at it you it's there. been -- our is It it's lot always working of couple of a Yes, have capital know, a always a companies was all is is, work actually our operating -- we've a been all of we have across focus up we've that

couple I good place. what had think there. building ones. were really that's So they But weren't a about We we really talking of

we guide, on sometimes that. -- wouldn't have you it pulling a little and show much be in little stronger $XX they some I a time. could came late a get about thinking a in I'm and your receipts, as time, think We early. we really maybe just just say we little really in came thought so did is really, up in probably There strong this come million sometimes QX, a had

or check our flow cash free after that. about do we all can't they sometimes cut whether -- -- really much just that's It's with pleased You along. when were the year New but Year's before performance very

million. Yes, came it $XXX looks -- in at it

cross-selling. a right Jim, follow-up that's cross-selling. some you then you So question And sweet for in having on the spot in sensing success all. mentioned

the what's do that Just kind through there? How how much going opportunities? you of take what track on us cross-selling? is encouraged, And are

you Yes. places, -- number slow, is, out. little When seen in book. the know as of think particularly I loan things one a starting when you Dean, seen new little -- a get year we've I couple know a we've

a take you day. is But New and people XX maybe month to bit something grab business. so an maybe cross-selling to close up-selling days can on harder as do logos the to extra every little a or maybe to

there little going out in is the are a our And ambiguity The more dollar are that out. year -- net much more like the there's as things to Presidents our move to maybe drives a tuned sales to times bit how are really little so retention. bit really more where very this and teams really motion play cross-selling conditioned to

of We about talked about over we've got XXX. number got places individual couple are we're a XXX it in businesses we've over a well that -- of now,

to is retention. dollar is the metric used that -- cross really we net drive So

drive year then well. gross up-selling And so what early those really the get renewals, on and we're drive retention cross-selling the and is as in up pushed

focus customer at So, with those start -- from well has here I number us year. we're big That's of for a success tools efforts, the that process think support perspective, a FBS the a organizations. of

Thank That's you. really helpful.

you. Thank

go Joe comes from next from question Our Please Fargo. Wells ahead. O'Dea

Your line is open.

Joe. Hi,

that mean, kind macro through But Thanks taking on as normalization backlog you to front start go wanted you're do my about out how orders more questions. think the what think chain corrects. as for I supply and talking other about is I coming of you Hi. you on just side? the more know just

you're soft-landing type backlogs so then seeing on how industrial of of is just other sort that we growth it's see think the there that see or kind what of PMI, and do confidence side? we on And the of and environment production normalize general, of you in outgrowth structural growth sort when and kind

think rate on growth Yes. Joe, really have we long-term rate this the I think mid-single-digits. May. I our Investor is think through really we will to it detail give a back. growth opportunity on It cycle this to really how Day about an in the of what lot goes But move really

on strong of years than last got historically. a in years. things That's been of number has better and two of demand average portfolio really growth the XX% we've a the we backs two from So done perspective just

of stabilization get we we and things number the as see around the in product We on of kind of continued that continued the we macro businesses the healthcare businesses we've digit success of into certainly in strength for a to would backs But that some just that of had would and XXXX, continue improvement as obviously normalize our see. software. mid-single our

are be are that really really rate. going pillars combination what of growth drives mid-single-digit to sort those And

we as here, rather than things said, sooner later. hopefully normalize As

And it. think to the comments, mentioned you prepared some then some of in Got I actions slowing. counter the

on happening anything on be that sure expand front, might the You're you what not could there? cost but

as are things. years, think And front that estate described, footprint. real Well, of slower really across things to Chuck maybe on deals few lease we our than the little couple it the the of segments. a of to next continue certain over consolidate closed product rooftops, a with do we kind continue it's as Certainly, some I a yes, at number really looking lines

are things a those number what really of about. talking So we're

and bit on supply of chain. little given we've rate, But after growth, XX% growth, focused here, talking about. things, as of really things couple focused a on of traditional of an be getting more maybe and kind the we're be a those more accelerated start years what It's now we after may normalize the some things, that's to to back we're want ahead to in sense,

you. Thank Great.

Thank you.

you. Thank

Cowen. Joe Giordano from Our will come from question Please last go ahead.

Your line is open.

Joe. Hi,

like to Particularly, the in orders PT and strip Hey, doing? things you Fluke just hardware Tek. stuff I guys. look on the how here. want are couple the on follow-up AHS let's a of more out and Hey, and

here. half orders year. start get -- point a What to better? year that of over guess like the Fluke guide the And confidence the up of second gives orders suggest revenue period time the that lowest said, kind of of in you like XX% exited you I you just the Tek were

it is relatively orders expanded like like they that of because declines over you just So, in like short see could normal the time? going plus felt from or Is XX magnitude to reasonable levels? at which

Well, strong. as of we're we really those still said, some the note, declines is point-of-sale going we first I half, in And might to think see as described. I

strong. that we Fluke stayed has quite question scenario coal frankly, at and mine Fluke. point-of-sale Tek, Fluke's get So And around in a normally

to number So, moderate high of we impact down. make historical is not could significant kind whatsoever backlog relative is But it last relative look relative issue a the such will the macro to think comps and working that of quite as certainly negative, any on at where we're the that that really, moderation you're to perspective. moves few both but some years the frankly,

probably stayed rough is but -- the Sensing in we'll as example, sure, yes, right some we improvement we OEMs through And probably -- are So, of the it now. some comps know half get of the for little doing that second what we year. think an -- a

the parts we on in we China. be balance, half. Tek, industrial, So, Sensing, a total of like But prepared little like we some when industrial bit some and in Fluke, think and the look at still automation of in second there'll the of the world mentioned sum improvement remarks places

more some is what be backlog of But an anticipated. bit as couple necessarily policy deliver we those things really insurance than big need we've It a as improvement against on may to don't a questions, we the got described. we a little declining talked we

Okay.

of mask a of mean I more I it's dollars, thing. guess? dollar saying think comp you're than So, a more

growth and started chain orders backlog. burn pass-through that numbers at revenue day. over bigger frankly, right. That's supply I than right. the the quite to creation of a of backlog, much about That's pretty couple we've a And because in issues which the we mean our years as significant we're really talked the bigger throughout bigger some last of looking rates were down

Okay. And then me. for last just

You far. like where I think like hurdles of do you be theoretical were component scenarios on what of would about, return But is so guess, part your M&A that how purchase, about theoretical a where it? situation in talked equity you in -- if equity was the a call a

what to discipline think talked our Well, trying XX% to think for the hurdles continue think to are. And kinds deals, are our -- clear about be of and to going return I day will here we're first convey I ROIC We've relative of hurdles all, we the return is word the it's be about various we'll that. M&A. to of continue

what think we've we'll I been trying is disciplined. situations to which describe in be

what certainly we've channel, seen example you've of service in patient think returns recent I done the an for that and numbers that, beating first-year strong most is M&A the as that. of XXXX their

years are But also ago. Gordian that deals six outstanding just did eMaint five, like that and and performing Landauer. we the

do discipline balance on around our really discipline think place in accelerating I around perspective capital. from a And deploy places sheet returns a in much I can be great strategy our So, we that. would focused we're and to where more

guys. Thanks

you. Thank

closing today. We Jim call I like are remarks. all turn out over of to Lico questions for to would time the for back

for number a appreciate and you're week We Leanne everyone you, us this with the of with we thanks today. things. busy really know -- spending Thank time

you System us certainly of I and building accelerate. tool of to numbers, the sense Business full be and real today in showing FBS the think the what us a -- XXXX. the going year of pride a said think what you heard real the and to power saw the for through quarters year We is Fortive use is did in I from we what XXXX

economic ability the that time. acceleration something in show some any perspective of And examples sort in-person in-person to to tried you of try Kaizen that. fact a convey and we of from and events important demonstrate getting cultural is an really to We that from deliver back into to that's us

in our work guidance seeing We're our and what improvement our into that our you're strategies as back you, what to to share our in culture we with regard portfolio in and year We look and business this in of strength see to get think, continued continuing I XXXX. May system. forward is in the you'll the

to made day. it happen around everybody. you our Have thanks world XX,XXX the who to calls, soon. happen care. the every Thanks, Take teammates Special and we'll a and make We day. that forward see great follow-up look

your participation. for you Thank call. conference today's concludes This

may now You disconnect.