FTV - Earnings call 3 2023 | Fortive Corporation

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Operator

My name is Krista, and I'll be your conference facilitator this afternoon. At this time, I would like to welcome everyone to the Fortive Corporation Third Quarter 2023 Earnings Results Conference Call. [Operator Instructions] I would now like to turn the call over to Ms. Elena Rosman, Vice President of Investor Relations. Ms. your begin may you conference. Rosman,

Elena Rosman

Officer; and Thank measures are website Chief us fortive.com. our Financial Investors everyone, our on Executive joining the Officer. G We non-GAAP call. you, today's you, President Vice call. financial at and Chief Lico, today's Krista, Regulation on Jim With for are Information available our McLaughlin, by certain thank on us President Chuck of and present section and Senior today required

or refer to increases unless period-to-period specified. comparisons on otherwise statements Our decreases year-over-year

statements the forward-looking that might to During subject we statements, statements materially differ make regarding future. or call, year update the and to for not over available we statements. anticipate may XX, the XXXX. forward-looking regarding Information in Form today. on results any we are our XX-K or statements forward-looking a factors that only I'd that, the SEC With to from any report forward-looking developments number these turn filings, ended to call including are These we will forward-looking obligation made, December risk annual assume in that they our occur of speak as the make events risks, is statements expect any do including will like actual These or Jim. date and of

James Lico

see all begin Thanks, thank segments. to for of X. benefits Slide on I'll margin the portfolio Elena. expansion In growth and quarter, strategy us. and in everyone, continued the Hello, joining with our third we you core

substantial cash in points margins $XXX flow. free in free XX.X%, to XXX grew to our increased slowing by expanded earnings margins, revenue and basis XXX XX.X%. XX% care by Adjusted cash X% million. points earnings and adjusted operating gross flow share in of to Third and China. specific Sensing margins increased improvement per gross growth basis drove Adjusted operating quarter headwinds and tempered by X.X%, execution teams Strong health core parts was and in by

you and see, environment. our is delivering consistently System, strategy new enhanced products to results macro dedication Fortive a to can Business with innovative mixed despite us As the perform portfolio positions, allowing

we of to as X upside bolt-on in opportunities connected funnel of and our workflows M&A X drive the across segments as our expected as acquisition bolt-ons exemplified Elektro-Automatik X quarter. in other look As and are the by ahead, attractive adjacent the well XXXX EA

the left, were Slide our demand XX% to specifically as our X. to to begin reflects quarter. of how Point-of-sale stronger in year solid wanted supply have of Europe buffer product and we initial and in down mid-single with XXXX. even playing to leveraged as Turning We quarter. of backlog and orders thinking the highlight product normalization out on frame provided to channels in Western Hardware first secular and chains. did year orders believe in launches the the stack digit, we more trends X-year in hardware North normalized, remained expectations product on orders basis on continued up a over the China healthy which were half see while for drivers parts to slowing the is Beginning relative new Sensing third America traction the

ASP workflows. with Software and Core to and health high and weakness across continues and environment improve. inventory environmental health in and to bioprocessing the in the their safety in was quarter by third the demonstrate continue resilience The clearing asset facilities cycle, Invetech. continued in growth services customer life market single-digit our channel care constrained growth perioperative

create are And fund deployment X. that the free durable Xx performance year margin highlighted on attractive strategy our the the opportunities. Further M&A working over cash expectations of firepower operating delivering ahead Slide in core of to is company ample XX%, year. coming profit more are Turning evidence capital incrementals slide, to to our the the initial with into planned in flow adjusted growth quarter we right-hand a we and side mid-single-digit robust nearly growth XXXX accelerating the with with is margin our expansion delivering

Our innovation productivity investments need and continues on key the contributing in through-cycle leadership performance. our automation strategy solutions and including megatrends, portfolio benefiting our workflows energy from to transition connected positions digitization, customer build improved to the in and for

and deliver good accelerated Provation and added is win across the remote quarter, success several Fortive, AI-enabled in in and customer solutions rates with AI-driven the analytics to automate software GI predictive examples condition digitize vibration monitoring. providing their workflow, partnering accelerating enable and have third 'XX. And including: a We customer contributing AI to capabilities bolt-on in to their ecosystems. processes mid-teens acquisition, growth Fluke in strong DLI, Azima maintenance real-time

the also is transition are storage toughest in build-out grid of and modernization Fluke innovations. from solve both demand infrastructure. Fortive with breakthrough helping our and solar, EV customers' to and energy challenges electric strong equipment benefiting

Gordian In solidify with addition, Solmetric expand acquired data new leadership measurement market putting leading reprocess extension this monitoring to products, of sterilization our which ASP in allow solar and fast-growing the with environment, their energy are customers workflow, premium contracting the launching that efficiency. is order Fluke U.K. reconstruction allowing a biological distributed job cost to broadening will further position productivity. acquired provides products. In their in test them instruments indicators, NSR, position a to greater in high-precision on speed the surgical customers Further, and natural

X. Slide to Turning

to scale, modernization in the our growth in segment of data energy market million XXs and and in tool market. acquire the be addressable an We unparalleled number offerings global expands achieving of leading to a including complements of diversifies margins hydrogen be and of are growing specializes density $XXX EA grid Fortive our for measurement EA's and and their market, System electronic serves centers, efficiency creating power global Tektronix' synergies, Tektronix' It customers our agreement in pleased and fastest-growing estimated low Elektro-Automatik, storage, e-mobility, increase alternatives. enhancing manufacturing the expected areas creating and go-to-market to position markets, solving advanced to sustainable that end in power margins. and test in world. the EA Business announce revenue EA power challenges operating electrified high-power the and accretive resources, a is a in EA value shareholders. market a more commercial, With including valuable XXx accelerates will for expansion. Further, operational XXXX, solutions.

and and are attractive for earnings As drive commitment cash to for given to return our growth and ability EA reflects targeting a an result, summary, of Fortive that durable In higher acquisition as free profile accretion we our year the ramps to in we returns X robust delever, double-digit years flow. higher more come.

Slide Turning X. to

innovation ability a Fortive to demonstrating our culture week. outstanding operating and in our of System our Business and be X our Week. profitable continues results for growth. completed CEO business recently We improvement This event hallmark. Kaizen to continuous us, drive to annual our powerful enabling is We're differentiator in a deliver companies

leaders, As driving margins, a together our and company most our many senior members breakthrough of and and growth, cash leaders XX XXX improvements Fortive always, bring segment flow team including we over teams significant with total in our operating free of innovations. presidents

mechanical ServiceChannel customer growth Intelex event X benefit their each for the Tektronix single conversion Qualitrol, improvement to mid-single bring operating diagnosing results breakthrough dosimetry Margins and and breadth revenues expansion. growth of beginning their in growth leads, well strong productivity. bookings on XXX details success the continue portfolio customers, markets, new with driving with secular from core include: high-margin now our quarter Slide regions. with with events Provation onboard new had price Intelligent as in evolution quarter this deployed power across a margin productivity failures. EHS an of more year's customer. iNet to with were see customer ISC introductions time improve had And both Operating wins benefits another in growth XX% of IOS Highlights acoustic core expected a faster to XX%. digit realized good Solutions than expertise provide significantly traction revenue also basis technical a of from AI of continued our growth Fluke performance as XXX% and double-digit strong growth. to channel its by and by recent at with adjusted digit ACV most the number time response with core internal of with in realization low our and defense growth. Some in Fluke secured as order solid Copilot, grew reporting, a results. I Kaizen portfolio at the ARR buffered and software marketing segments, their to leveraging points MecQ, customer in and applications of demand to normalization. Fluke another for Health up in SaaS sustained revenue Business double-digit customers quarter. and driving the and highlights efficiency NPI X. EMA and experience. including launch included: a enabling Fortive continued automation revenues of more the will X% to and over reduced emphasize continues XXX% grew imager In in System first-to-industry product sizable calibration improvements aerospace to quarter summary, more ISC reducing on Xx Solutions the

an strong grew Award. as Industrial management Scientific order cross-selling asset digit, for software platform single high penetration Facility to utilize and customer and ServiceChannel driven to its continues job Exceptional large continued provide Gordian, provider Petroleum, their overall in addition, Zavery revenues and recognized which projects. largest with In customers subscriber Corporate our manage contributing and innovations strength procure iNet Marathon SaaS. several more launched to Accruent SAFER market cycle University growth. drive Systems Partnership to secured included releases their Gordian software both their and by facility life infrastructure with contracting agreement with

productivity Precision revenue Technologies to core of X% strong price reported and benefits. basis reflecting now XX points, X. margins XX.X%, and Slide Turning operating realization expanding adjusted growth

continued and challenges at applications. Tek stack normalize the XX% the to Some in highlights America, a batteries, EVs and include: customer XX% and revenue X-year for digital end This on were investments single-digit design XXXX. new of over low industrial backlog margin power reflecting of order solutions growth solve robust the and power Double-digit core greatest is off Tek continued in test of China. at measurement North orders proliferation operating included declines expansion. delivering to quarter and executing growth in outstanding Tektronix

customer improvement we through as of orders the strong we Further, benefits utility full quarter monitoring in solutions. expect in U.S. meaningful sequentially see deal reflected weekly orders did was improve China months advancements, in reported transformer However, Pacific time moved Lastly, sales to large for in coming quarter and lower-than-expected capacity a Sensing, the of continue growth everything. Sensing and from included investments we [indiscernible] continued double-digit slowing This as Technologies customers orders to patterns from it and a record growth to quarter in prioritize Scientific activity Elsewhere another as on Qualitrol. at improve Kaizen to manufacturing execution deliver lead revenue with another in asset revenue and compute backlog. AI-enabled semiconductor the of electrification and normalization, channel operational quarter. saw returning EMC growth

Solutions. inventory and revenues Healthcare higher-than-expected in underlying up X%, demand, channel by ASP. Moving U.S. Advanced now to sterilization Slide improved reflecting partially XX offset were Core

quarter, For Latin digits, less driven Adjusted basis America growth almost adjusted points. and high core in points basis total in markets by AHS margins $XX Elsewhere, robust XXX over the high-growth up as by in by increased million basis in by impacting well profit growth XXX growth Asia. as year-over-year. XXX single resulted the operating saw good margins third operating points impact revenue, revenues

as benefits We are on the initiatives well margins. reflected the productivity in seeing traction actions of higher as pricing

revenue and include expansion business business new standardize dosimetry highlights project partially the SaaS revenue Census core cross-selling as leading both from in subscription mid-teens, its increased CensiTrac its benefiting by traction software growth timing. Blue to Additional customers opportunities continued in solution. high increasing with single-digit on grow their in as offset its quarter Solutions was continued tracking instrument logo slightly

accounting the the Invetech, slower-than-expected in third also half growth approximately continued in quarter. saw We in weakness the segment of for market

build another ASP APAC growth, adoption SaaS excellent and had Provation growth now quarter, transition expect steam further by Lastly, the quarters portfolio includes their global ramp quarter over the monitoring is recently XX% complete, which new to expand sterilization initial launched will ASP's as accelerate EHS. of products, several they of of logo and driven success. Previewing channel continued fourth we over This the reach.

on to our consumables I'll Chuck, outlook continue ramp provide color realization who'll productivity driven our and on over expect XXXX We margins to more third XX. in to QX XXXX, actions. growth, by it price and pass With quarter and that, financials Slide starting

Charles McLaughlin

a America. revenue and growth growth We generated everyone. North which included core year-over-year in single-digit of X.X%, Jim, hello, Thanks,

As offset acceleration recurring in Sensing over and in of [indiscernible] software Western which and Jim streams, in moderation offset growth our Tektronix mentioned, XX% was growth revenue up the some was Europe software revenue we saw in products. growth businesses. slightly hardware more than by normalizing as

continued in Japan low digits, saw India, prior was decline half Asia anticipated a China double-digit had by up which in as in and strength offset up lapped we than single years. high the China. would slow in mid-teens outside growth second more growth in We

was For the in XX% over Tektronix down quarter. China example, in

However, a it basis. on was stack X-year still up XX%

quarter. grew slowing single We the digit in high procedure as also continued saw given improved while environment, macro the AHS electric volumes Sensing, in current

gross increased grow performance higher show by driven the points this despite $X.XX price of and and free On portfolio XXX margins up the growth X-year benefits the initiatives last effectively a we reflecting reflecting executed benefits on XX% earnings the an basis increase expense. initiatives $XXX highlights We evolution, year-over-year points the to last the basis cash XX% earlier stack over years, X-year to XXX manage and or years and third basis, XX.X%. higher of FBS prior tax expanded Adjusted Adjusted a X margins impressive basis XX.X% realization. gross basis, record and of the a quarter. up a interest increased our XX. the Adjusted share operating was application productivity XXX points stack working per Slide flow basis continued to they earnings as and strong million, to over margins Turning continue are we X Earnings cap. XXX are for to X% points year XX% year. operating in over

remainder for now Slide the outlook XX guide to the on of the Turning and year. the

around delayed $X.XX X% quarter, to fourth the by X%. XXX adjusted expense in of X.X% are following a includes macro expected Invetech. the are the our operating China in remediation the October. diluted to cybersecurity range basis growth earnings to revenue range share be of adjusting plans in to For additional are we and to representing reflect of and in corporate related expected and $X is incident early to points, in be growth Core $X.XX, approximately caution anticipated the Adjusted to onetime per recovery margins million increase profit X% to range

our an the also plan We million to $XX which proactively fund quarter, excluded with fourth in incremental of in from productivity expected accretive EPS outlook are adjusted benefits initiatives XXXX.

Finally, $XXX XXX% representing net approximately conversion income. free cash flow of adjusted we million, expect of of

the to recap. year Turning full

beginning played we revenue, in moderating some pricing our the elevated in year. rates coming reiterating the the our with are order upside of expected recurring products of for of which have of market buffering, set resiliency XX% at at guidance by demand midpoint high and as the is we earnings new We driven throughout normalize backlogs the outlook as XXXX, businesses, innovations, tailwinds of end largely the hardware secular year. customer Things expansion driving roughly in carryover out

of Adjusted a diluted in margins the range we pass core closing increase share segments. to approximately earnings to flow our of income of and growth of it flow remarks. With that, adjusted basis expansion expected be the $X.XX XX% to margin back Jim profit As free conversion to Core in to guidance now adjusted each is free $X.XX, for representing we cash with result, XXX having a $X.XX expected provide is the anticipated margin. I'll approximately now and some year and points. of have X% as billion, net in year, growth to raised twice reported per expect our cash continue XXX%

James Lico

margin in pace expansion. of evolving we continued of with to start profile. continues in deliver ability and deliver continued incremental despite the care, adding is robust Thanks, to discrete Chuck. backlog, What resilient In modest differentiate the excess macro to we the our The of solid the Fortive consistency of expansion trends. we product a Consistent industry expect reflects durability to buffer to headwinds. up our strength core wrap alignment I'll flow will demand growth high-growth XXXX XXXX FBS through-cycle we mid-single-digit growth free secular drive XX. our and execution growth of power our and strong vitality environment. reinforcing see and portfolio as health margins to a on Slide sustained lap XXXX, and growth, margin believe to growth cash recovery customer stronger

our to demand we Lastly, how our license go-to-market value recurring, increase and expected capabilities XX SaaS generation strengthen performance in shareholders. efforts differentiated to in for revenue XXXX. This and software to me and creation and growth brings other and strong Slide our drive drive is

we gross demonstrating free continuous and sustained cash another of throughout XXXX, underscore our As margins, relentlessly System drive the strong are finalize margins record improvement of flow. to Fortive we results year Business power portfolio. execution, the The delivering operating

showed we we our As cash May, Investor free flow next billion double share and of expect by in at per our Fortive roughly years. generate more Day over the than X formula, to earnings executing the $X

turn this quarter, shareholders. premier it acceleration compounder a exceptional Our company Elena. higher-growth value and back to delivering capital Fortive deployment, a cash further as as flow positions With of demonstrated that, to I'll

Elena Rosman

questions. we Thanks, Jim. formal That ready to are our take concludes now comments. Krista,

Operator

the [Operator Instructions] Barclays. Julian question from comes line of Your first Mitchell from

Julian Mitchell

sort the of just Precision guidance around with start has Tektronix. how business, to moved wanted just the Maybe

it getting months for seemed and market come now a year and down. guide revenue So ago, worse you Tektronix the the few raised measurement like the was has test and

getting that of sort organically being us late some in that with downturn suddenly China simply be revision? And very it now QX was segment? PT QX, what us for understand, context such a of history us the give down tells help that the duration segment caused should sales bad just maybe maybe So in PT

James Lico

look I When digit, And look it, to Jim. it's I at you where where the we you're when high we're for at right. we were. of think Julian, think, kind single Yes. I that And now, year we're Tek. at think at back for

little saw, in obviously it of -- probably step China is strength in of X-year We question you we're good really answered what think more the a a have down sort China. I basis. in we and a on bit

all stack. But Pareto the a to bar of from you we're the say -- suggest normalization. little But of like several as that that number X-year couple more That's Tek news part what PMIs little distributor maybe customers last call we're bit aspect that in that quarters and was I we've I on a a would we the semiconductor have a direct in of they've and in inventory, what to bit on some down, not push-outs I I a around a bit industry-based, broad-based. large on think where would cautiousness more necessarily what big -- is China probably over biggest coming the think saw with as coming we I orders calling is really third China. The China, conversation caution it we've than think into index did really saw really been, quarter what well. been number a factors it of we We of know, XX% it. single little good would some seen, anything. the were related -- on

get XX-day now see regard. the than have that look our they We'll I third. been in fourth orders were a And been. than consistent little actually better think in they we've better funnels bit Tek the in quarter in

in in decent of point POS and of actually actually and We continue example, well. QX America good. an to China was a North pretty good Europe, I as be as will -- in probably think number So sale we're places,

I if little [indiscernible] will get in we high would low year. a say better trend of So Tek, probably respects, get start towards bit I'd the stay at many just third as China the centered on end the high to quarter point

Julian Mitchell

you broad thoughts sort How quarter. overall? down flips any then this And got You've quickly positive? PT are assuming on sales that of organic

James Lico

Yes.

around cyclical. strategically to Tek I think rate, lot what work been we that of it less move -- thought done make we've been PT we've has talking about try that a to in growth

an Our the relative example, quarter, business as the I which third is, service in to a a up business, environment stabilizing think, sort was good little of X%, bit.

Sensing. growth much that as We low work And a there double-digit single-digit of as business. know, you we've haven't We've called done years. a in couple here had for

So we anticipated that normalization there.

over days seen to XX slowing. I sort I more what think is we've call the would of what last XX

so QX And really Sensing. number is in around really the PT

that's out times pushed that's OEMs direct that that Typically, is have of orders of Some some sort blanket lead down. of our some into China, coming 'XX. of some

quarter a automation, and it of I the think, is And a U.S. of that, also continues. slower. Europe, HVAC mentioned, in Some about We Europe, then call, little slowness. that little China. bit as principally talked second I on

really So the the relative PT the guide. is that of story in fourth in to quarter the change kind

Julian Mitchell

a without as quick litany natural any channel X that which just very in issues And entitlement the of sort we it do years. the few see get back of digit-plus mid-single It's health you sort we growth that's negatives? sounds it like sort for 'XX? transition, Is through a of finished, onetime follow-up, to get of care. been Once a

James Lico

out get think $XX channel It mean, of I third we'll digit, we'll we see characterize about sure, Yes. more maybe the of for quarter. from million. just ASP to than in mid-single we transition, I an sort what was we saw $X 'XX. do million Obviously, about called out guiding But this anticipated for perspective.

demand. When we X-year direct. the it on mid-single-digit in the what for is why third in second, go inventory we we had the second of It on sort out fourth. growth to strategy lack And take those and of the channel have was about stack, and really some see of we adjustments a is the visibility natural really third, really

about into we there feel Obviously, the situation the us, channel I have noise anticipated. more we So that. good when bit position behind health would Obviously, proud we really us prefer in bit a where more expansion take strategically, feel We see little we're today, But stand we think, you margin I more much about noise talked fourth the We'll to see good in in the think as 'XX. points, some margin not the well. consistency. has work done. team quarter, not -- And where well than we a about that for third, little a certainly quite should the that. But stand set that continued improvement. of is frankly, basis we've XXX better up

I think even we good on expansion. a revenue, little bit margin less had

So really, will for when a think into you and of kind us much walk sets we better good look a at it QX certainly what up 'XX. be

Operator

Your from comes Steve question JPMorgan. the line of next Tusa from

C. Stephen Tusa

the about What's X have just So $XXX where we stand like hardware on past, the status of backlog? on that guys the you the at million was backlog all do the that, point? hardware X in talked

James Lico

Yes.

it's I come us But think $XXX think, you tried from up to to Steve, million. down. I $XXX take million quarter last

the think million sort a we more that's I $XXX We of in we rate. fair that's second said thought, $XXX might $XXX statement. We what in depends between quarter. how on the order the said million, that's think maybe million-ish, range-ish I end year the and

backlog of that into as excess 'XX is doesn't the lock pushed so million. into that that dramatic with of just as it Some we'll number. But necessarily over $XXX blanket still orders mean

think EMC, the -- But still to backlog, to and the questions. high conversation related much Sensing, in had in China, not we around which backlog. doesn't just I really Julian's So where I we that's obviously $XXX as bit a principally answers include a that of of with million-plus has very China very, as stand is today anticipated, little Tek

'XX. going we policy still an insurance think I So have into

C. Stephen Tusa

the what discuss more of then Invetech? at that the you drivers little of business maybe happened And just Can quarter? a for

James Lico

was one. business a over the taken second guide that bioprocessing couple you've extent. really step this -- down the down certainly, and guide thought as we centered taken of and I We diagnostic days our we've thought some core we're a not more to mostly own We where us. would it manufacturing health engineering overzealous. the half certainly for high market. care is now of to I think market. a bit out, Yes, is. But It's bottom it not design, sort how certainly that and last that heard Certainly, We on think for And that's turned bottom a little . think little bit was

market it seen really centered where into resources, I know, That's certainly the sort today, the stands think XXXX. around hospitals. some But As you reflects. what care health we've of customers the engineering guide core projects push

C. Stephen Tusa

One you? -- feel last X if costs, for a you. have recessionary Does guys are playbook you so? do you for to And this

James Lico

Steve, this recessionary the Yes. don't the I I thanks mean, day, -- I I for think, because really question in know it if of think the at end full. yet is

we've those seen PMI in that rates margin we're order of bit of of And we've that's We I that. of been the quarters expansion think in where been number the X I around think over guide second last some less third couple being a we it's been and prepared was the original why slow, of quarter, the pockets on to some year, things indexes reflected having and come in and little places. of back other described for industrial slowing a if on But good quarters. I think the of revenue. so That's that production the some number. following

productivity next be little we good. bit caution be for think could little year opted to And environment. again, prepared our in but prepared of a abundance of bit. a view any As we've still we of said remarks, maybe And the

a as we think out said, in have things of I played the that number the strategy.

strong. continues Software was really It good to the in be quarter.

good. continue businesses to be services Our

sale and Fluke better in saw a I were think, recession if we in shape, You maybe pretty point is good. than their of

call be but yet necessarily it and of we'll things, there's prepared it. So I think for pockets I wouldn't

Operator

Vertical Partners. comes question line Research next the Jeff Your from Sprague from of

Jeffrey Sprague

first. just back kind of Can to we maybe Tek come

visibility are inflect Tek? moving in Like down comps you do but them positively driving on that the at that of to the now what elaborate the other So Can you're just is way? expecting QX. orders orders quarter, kind on improving or in just what's have maybe you

James Lico

Yes, couple of it's things. a

few we've think Tek is in for orders seen quarters a I #X slowing now.

comp. some so is it And of

right. still very working a really and over unprecedented You're that We still started numbers the order so few last in The off of the history some X- the see are strong, we're level good, X-year frankly, slowing. dollar stacks order company to -- years. are just very, quite raw of

-- really of it sense, fourth year. started to that is in in much the issue. comp a quarter of So We slow there last

we in it there's pretty a then call that that dramatic bit I'd a maybe some just it. And a even better. good. bit little the better. that's yes, call seen -- was we've little think slightly wouldn't bit signs little it maybe early -- gets quarter, better, it in a I of So but China get

had QX think see we things well. some those we'll from We as order push to QX. So

on big things So seeing some things it. are comp. might and in counting the better, of little a about bit it We're majority we we're that suggest that's talking might is improvement. not be a step-up reflected But how

Jeffrey Sprague

inventory And realignment on ASP. in this

numbers there's misjudged into the some QX. of your hangover totally you is additional we and channel understand QX or don't what some in you maybe Like kind bit that So into in your a QX hangover still? visibility it baked what's have

Charles McLaughlin

make of to we'd we nothing change. if have wish the wanted the which this make visibility we in Jeff, we it And size I minutes work able that's few we bigger reasons No, been we one QX. was why said, this shipping the to, we're We that -- we distributors. this ago, But there's make to We're mentioned anything to done Jim out It than as -- to don't want everything. the of is as baked some why into a had QX. But gate. properly Chuck. through confident change. is

to are digit so QX. ASP is we to be going we what -- And see mid-single in in

Jeffrey Sprague

a is ground some maybe of with wrestled And one. do issue, the just quick cyber there? This we're issue kind open-ended this to totally we dealing or have

James Lico

back are We've did contained the network quarter. the some Those definitely the costs We've downtime incident the in the issues. $X.XX, and implementing That's first infrastructure measures. calling Yes. We facilities. We in we issues talked roughly disruption what mitigated have experienced around guide. we the investigation. think a what that's We've from mitigated a final million We're relative some $X up mitigate can We completed -- some to running. called North we out. in them. have cyber about mitigate we're remediation American that. We that,

So this has material believe the quarter. we incident impact on a don't

stand. we where that's So

Operator

Your next RBC question Dray comes from the line from Markets. of Deane Capital

Deane Dray

Can of Looking how the a kind we struck Is of that at me wrong but it seem doesn't products, And leverage me similarities in and lot franchise. there's acquisition? of of there's maybe of things of to benchtop, I'm maybe to talked Tektronix start the release a application with on you in EA terms just is lot elaborate it distribution? the their that. there. overlap product you want kind about the One

franchise Tek leveraging does out So how the here? play the

James Lico

been our we see really continued and driving lot applications if Yes. There's is an how that's And about on not the units. We've those were quarters mainstream power and of a of overlap. really even measuring in EA-type of bunch is market Tek been talked will. And number you're we product right, application the to product, oscilloscopes there a growth -- backs sourced just you Deane, but for the of also and at almost in overlap, of probes our every strength. one describing, a that's

market. at their think channel and with parts go-to-market direct world. with and those of seeing from applications and direct many They cases, that's in a were So we both Europe, understanding we EA seeing that in and go the Germany partner the will the point. right mostly to relative around connect or, relative tremendous that EA leverage We'll own many of to capability. we're see go-to-market. is a mostly We to in countries there that our distributions be can a call lot XXx a others It in capability, we at in cases regard point to

and And good product software-like very So a margins. we think about of strong we the It's really software-like we help obviously good growth. feel the growth very synergies. accelerate lines. It's the market expansion It's continued business. had got can

Deane Dray

in be good be hearing, typical themes follow-up in the not, are that two of as might I'd just seeing Fluke about interested Great, And hear. sell-in then a And cadence you sell-through, not? that broke by play broadly, the out in you then in exit the deteriorating growth or how for to there? that's orders, areas is recessionary the a did if what fashion cadence or quarter or it did And the month? quarter, revenue you out versus some how the more

James Lico

America the pretty we respects, backlog got point-of-sale bit. out we economy. to best probably XX in to I and last some the the as X-year think played But pretty POS, does over by it consistently. It fulfill at in a large, is to about Fluke pretty months, look place in came mean, because XX I consistent. an U.S. stacks We consistently, although at Yes. when look as distorted North think example, little

I have that little But broadly through. China, a that we think Fluke. where China, think it understanding at kind of as of looked we slower -- probably thing, not good was was a we got and when that's I we as went just and

the it. So say I later was through a early how in anticipate part their though, was month. better the the bit see that's hand, September growth actually we in say, it would I little order Tek, would on quarter. than other the did of was

I a little places. But back really there And that's how change Sensing the coming within and so about OEM dynamic maybe few in is though, customers those China. to really markets really half, we was bit I the described in of specific -- think a maybe think really what biggest a where second less, in

those think saw. are changes really we I the big that X

Operator

Obin from Bank line from Your the of Andrew next comes America. of question

Andrew Obin

question on sort decision PT guess buy to the of and EA. I a

X Can Tek of about of the at a sort one area business is what it and thinking clearly, making Where Tek. attention I the paid And there's didn't questions just acquisitions here of company's a excited? the there talk of you're one about evolution a we'll like of the is back a it think for X, right? bet go this road down years you the all and And is to report you years capital being Danaher, gets it, have sudden, a with that were overall? key the that you're EA. for about seeing deployment? But and NATI, how sudden at Press thinking well. this was of you're lot all

James Lico

are that them being volatility. more which rate play but few Yes. no. in business because ago, the last one, I you businesses I And bit out tape. say, that old and good, that's good at from look of returns when right, over the we performance Thanks, And years. profitability think number several of others, some a of much while Andrew. of years Yes, little strategy returns challenge has that's would had and that the bit less those exactly but think we over with a of one business the good couple into of services, attach seen a Tek about the the us the now The That's feel And come of a very returns video early the little getting gives more higher you've back were days. the good. of business. a the are in getting I volatile, out been last

we good That's deliberate the very market the good us. secular been for relative not a as been in think a very And It drivers was terms to specific. our around that within large market trajectories company, I we've power electrification. we've narrative very EVs. think just business of had

challenge think around to That's that an data the talk more our more the the on of last as had We that brings as brings own about brings success much got to renewable success that, the challenge the platform people It's of over had. it around success that, energy -- the challenges grid, the exceptional storage. oscilloscope that's and to we've few that centers, mainstream in exceptional in use it mobility. much years. line we've and markets storage. And those the that Sometimes, relative

us for the But bit frankly, and about what excited that to XX% can that last bolt-on. we've is immediately 'XX, talked profitability. So an to it. -- And cash this. a and business. is it think, to of EPS the to me a flow, I've about about we're it target. as got tell to and a that -- a the what it to deal had it returns that's what is and only really interesting, free investors, decades XXXX we we've good for industry to the we've of continue to see I that for think over had M&A about hopefully, the hours, known fact will what we -- quite EPS natural a EA at us good understand financially talk very opportunity in XX% high-value but I extension when growth we're I for I what the company. think is. We see excited And But of people rate what and you not happens brings highlighted XX EA. actually, about think little about described, it's Tek, And our help strategically gets targets we accretes them addition that Tektronix' I've and it's great have And It get kind to it it folks obviously XX%,

-- were multiple today. So we you trading a at that look when at at that

deal, opportunity it about we the good think be and to that feel addition really PT. on. Tektronix an the to good really team great and feel and outstanding It's we So about will bring a we to to team,

Andrew Obin

into I from we software, And that but this visibility down if And right? a of but to high what just double have of and life year-end on slowed key sort asset digits just single-digit apologize down it, I on facility it We and growth. missed 'XX? follow-up specific, to much business And guess, do cycle, headwinds I reaccelerating single digits? took into were the how sort high

James Lico

moderation a expansion shape. had. margin a bit I a right think FAL It's we've It's in it's in more first slowing I it. it as great great part it, we we to We that is little into a had Obviously, now. but never Gordian read of had margin but as half, of than shape and great bit -- been a so little anything expansion, story That IOS story. relative anything, really wouldn't is just IOS has good We of FAL -- that a is call would had business an in really and that little, year-to-date is slowing. exceptional I Yes. not great a

about setup It's -- in a of ServiceChannel's going things really So a to I It's a about end anything think trajectory. 'XX. number to We great it. feel talked for of good than good FAL on good good the wouldn't The along. read we're in really the a be we on Accruent. is place. at in the day, business going I are that humming

Andrew Obin

good placehold So term? still for long a this business is XX%-plus

James Lico

Yes.

said strong bit little -- I double you high in can get you to might around think years of every low in a dial a XX%, and sort it going you on bit plays while, yes, But that XX% move a of single X%, that to the little it's way success out mean, to service come. do we've nonrecurring that of bit for little have in be I percent once probably a comps. the in the that business kind in

Operator

of from Research. Scott Davis Melius question next comes Your line from the

Scott Davis

asked so can numbers? you have that margin are that that disconnected on apologize. we some got can this payback? you direct? question, to if earlier that proportionately be in I did see -- But going channel someone would getting, capture adjustment distributors Or costs Is of clarify there the change? going you I margin this imagine to a add to in were but you I

Charles McLaughlin

margin North that show see this was the going a the distributor. to is in Scott, It's through Yes, about you'll there's on price Chuck. start to X% that. up in QX. revenue component And America that

Scott Davis

think, think of placeholder new increase every it's of one marketplace? this and that the pricing imagine price is where you sort your how dynamic in we in you it Or out with to but live about kind by it? strategy, you guys when and world SKU, go And some good. is I capture January can not X, think Okay, about

James Lico

No.

We so about few had be I but probably innovation, I for rewarded have than always several the over we price. our last that -- to ultimately a And we'll as which value capture to capability. think have we've bring price. we can continue higher businesses, perspective. on we the it's we margin were -- about hardware good more it about obviously innovation whether gross dates. if unprecedented think years, If We think think price from will

products I really and only think that testament innovation over our our to is FBS to a is have a last but not ability gross launch trajectory -- margin to the few testament good tremendous also years good value. it's

So normal. say continuing I than think 'XX say than would in the going And we just But to it's normal. would pricing be -- going pricing environment for to I I I is better 'XX. better anticipate wouldn't would better than say it's opportunities. look those

metric in mentioned, think been to the getting more continue in quarters. really And we more care will get You'll hardware about built into the related more dollar 'XX. into often health pricing net that few as then side care. We've and health a a price talk is as little We last retention. price software the on Chuck see our bit little that over we'll bit businesses. But well that

that we -- just be yet will feel 'XX, guide that about. can optimistic continue optimistic we get not in scenario are things price. of number We're a a for So we to but

Scott Davis

luck year, for rest Best the Super of helpful. of guys.

Operator

Your next Nigel of question Research. from Coe comes line from the Wolfe

Nigel Coe

fiber. corporate on like It on $X.XX obviously Look, here. like $X.XX it's seems mathematics just or XQ, the on $X.XX just So with maybe FX. the

$X.XX figure pretty forward move or XQ. confirm whether of consumers to on is just And about think deterioration this trying whether are $X.XX them. like just we're yourself a guidance There's in just curious weak short obviously maybe I chips that, I'm Tek FX But out from on all destocking. in or cycle demand that Just

You've holding and destocking. inventory obviously been buffer

that, perspective would any on Jim So have you be helpful.

Charles McLaughlin

FX think I I one? first the on -- quarter. little there take I don't the bit fourth why $X.XX wouldn't Nigel, say a in impact is

out. remediation on the a And to think effects cost in note probably one is for I ]. is than X you just site. did little the $X.XX some corporate [ that there less there close But it's or efforts

James Lico

bit. little a Nigel,

didn't did of inventory on I I over in broadly of think levels little read of in question their everything and but bit couple maybe level China would the think your China. We the say correction the we do inventory I about perspective I place Tektronix a kind inventory and components it. as if around market, you of they things some our about in in like biggest I that. next some and bit saw TI little guide channel a I lowering said, terripart quarters. was inventory the will, track -- embedded a from caught just

elevated little down. Lead We we're say demand times are -- I as comes come a levels wouldn't inventory bit. at down

where goes. of I partners the really we're a We feel sets are up. think decision that the we've with in order general, that demand talking But relative about we complex those how number in the in in really pretty things like in managing with into of individual to I Obviously, the projections where inventory. But we're channel is a dialed good demand. of The all the Tektronix. kind in was that place regional of we guide describing call earlier -- embedded biggest those complexities think

let So know. I But let answer, that's if if know. missed me the it, me

Nigel Coe

taking were like just No, in you if down curious no. ship particular, inventories I'm but...

James Lico

of know capital inventory lot for given the into will guide be been because our working a certainly We was. you really actions inventory, it was We different company. inventory. revenue has performance than down so I build looking good. and a little us, is about thing our fourth The didn't X on our quarter this taking the

own, of inventories. of But been big big building lean working terms we So we're manufacturing, in on haven't sort necessarily frankly. inventories certainly having that. the on our That's quite

good sorry, question. really So

Nigel Coe

then follow-up was No, was a to around sort type but question, showing XX my good thought a And of of I I one. in Yes. right. growth this growth, a that. revenue Slide the XXXX slide And variability ultimately, is that's rate. think quick mid-single-digit

really 'XX, we coming same margins? And year big for is to thing, I'm So frame as the does just you're spirit curious, does incremental the the of incrementals. apply question the off a same

] Does north sort levels? Or on be you can confident the 'XX below might 'XX that build you mean margins XX% we're are of think XX%, perhaps? of XX% [ in that I range, natural So

Charles McLaughlin

Nigel, And very been saw some XX%. productivity a That did as with and normally, you margins year early XX% I the incrementals to then about has do 'XX it's couple we'd think of more more. that the with to are think us good. we things think about things do and in

incrementals we little be will more no, elevated would always actions then So taking XX% right a expect bit it forward. because moving And the we're of now. that

elevated we So them the taking would done that will what here on we're in the to be from we be and because half. build would what of actions we've expect second they here,

James Lico

And think what cycle. is were Nigel, slide said what hopefully, digits is we is really to because growth, we mid-single relative core trying the helpful through I that to articulate

years of bit couple little a XX%-like after growth, So talking this of about been quarters. of for X having -- would a anticipate we normal we've

of in about. the second half that consistently that little seeing a consistent year. We're the We about have normalization. We bit about of with mostly very what that talked talked we very,

of that preparation in fact a business. of run seeing the slowing in I that's relative second bit second in that we the mentioned, because of mid-single-digit we're about. of some grower the think just would talked bit for we've in good means able normalization here And think even year the to at Sensing, difference margin China of how and But a of drive as through half little we look really half what because been things I a little we've prepared consistent been the the expansion cycle. the I think difference with our year. very again, with Chuck And how to we

Operator

comes the question Kaplowitz from Citigroup. next line Andy from of Your

Andrew Kaplowitz

'XX you keys QX as for strong. ASP think I and one relatively go So of being consumables into and 'XX is the coming back

that's the case I consumables talked guess you've if demand? is But into the from consumables underlying China this anything, stop I the what U.S. recording at think in improving. stronger I and visibility and would about in procedures elective ramp-up, ASP point. surmise the would your

Charles McLaughlin

from that's we're just probably in there. little look couple in X in you China actual of adjustment using the did anticorruption a Jim things that, stuff you we We transition definitely when X% world. X-year already QX, consistently where QX you XX% customers take around But Andy, thing A because our QX, the when of talks we have generally through inventory world. there QX do QX were this the stack, But America. understand QX, how consumables in thought and elective So improving slowed are XX%. procedures, bit around North the when It's when is up the rather the X%, products. And growth out. about from that just

we're we already So think that use seeing the. at actually to going what's and

stop there and that sense. if me Let see made

Andrew Kaplowitz

strategy? should thinking the short that how totally medium then you Fortive term? now? and And about you bolt-ons, own from M&A VA you just No, M&A could to of Jim, the we the over And small Yes. are your higher environment the more about terms makes talk maybe After thinking in gears, how announcement you're higher of rates expect tempo shifting M&A had a little balancing of bit X a sense.

James Lico

half. May, our unique second some said I we'd we really And situations. us. were consistently point. But and active. is busy. I communicate opportunities in of the I of been to probably thought fact think the what been tried I call, was second We've in what we try we've -- I think I done -- -- been to really the Investor it's think think for Day get X we -- things that drawn already when I we we outline the We've that that maybe our were front tried X in the when But active, at around to had Well, I that quarter parts really had looking in in

for differences. looking was a pay robust of down I We've step a in price think peer massive prices. companies everybody number seen

were to with we've of unique had bit those relationship unique Azima, a little situations, think a we've is situations. them a I able places Those do what X like find long-term been partnership. bolt-ons where and

all ROICs. company. tool to in things unique EA a really is very mentioning These tool is for product good call, high high-growth that test Solmetric, are technology was which do the actually a and able are It's a the solar business sort And We've the amongst and as really extensions They their we've of applications. I players play for their while. similar. it known known in known market. earlier that are we're ability measurement to really with well in

strong -- about we would opportunities been the they that we've are. look context demonstrate do returns, that to think us think for plan that. also And continue and of there, But things, they're trying that's are we'll out. talk we'll makes we We'll these what and what think I is continue And what hard so looking I you'll those for I see. to do think that to within to

have which active, to returns. opportunity sometimes like but they come this we be unique get looking quarter. bunches I So think, similar to did we'll are, we situations for quarter, really in they those higher remain very opportunities is where But seen will an that what this we've

Andrew Kaplowitz

my of first question. sort And Chuck, follow Jim. up great, on just That's to

You it. other You your thing the QX don't make just to need up a right? have getting ramp consumables It's margin, better? already

Charles McLaughlin

right. exactly that's Yes,

Operator

Joe comes Your the TD from of line next Cowen. from Giordano question

Joseph Giordano

I look year this high bit going I little start if Like below something be XXXX, maybe average AHS. that. back, right, to wanted back on of is going is think range, like a I like to the growth and X% to kind

things confident there? that's a care only really portfolio since X despite like really time pretty that's you're that is of health mid-single modeling mean, the people what's like going and now. get and much the forward only kind makes know us on everybody. entitlement of there's what happened digits-plus But surprised changes 'XX that different to I not So I lot certainly in

James Lico

had in reiterate all the Well, given that. what and little we a noise, and the number China that fact regional bit had Chuck were about obviously I noise for then for a think we in situation, is of consumables while a certainly embedded that. all lot won't created it of and that kind behind just was U.S. of years, the one, I a comment but several COVID

You know it.

strategically, margin is we segment today the we was do the because described to look the think ASP's of the speaks margins I very think you the which the XXX are third in seeing sort growth what right fact really now. of and that are get thing just we're as channel in stand starting in of that these Chuck kind the to believe strong. through the points basis margins to where better situation, expansion quarter up onetime rest I of really And segment

care described point to but would year, and So better better. said 'XX. better the market we about we've a 'XX it. be be than in little launch and would be than 'XX would And health bit would feel I the be wouldn't it great good 'XX the 'XX, just 'XX, relative earlier be better as how It

we to So think that -- we continue see to continue that.

a gives that's the skepticism nature going, today question. But I equipment quarter what and again, stand confidence. some bit was anticipated, -- given in saw we XX%. the growth, what we the this more got here good inventory puts high-growth think in third of so obviously, the us quarter I markets. little that with And So we've we the Growth as understand, the situation in but than fact was that

in a get really years. parts few feel behind And quarter of needed that and with 'XX shape. behind order now do we So in the happen. now -- shape, we those the the needed in into the a and that's to and other we've into world we fourth drag better of business change things channel been the to America us, on in to North us. walk the we've better number we make that I got That's think last got And

Joseph Giordano

you on last backlog just then about. And for that me hardware enough. the talked Fair

I give like year. of [ so said around end what, think you last or ending was quarter, it the [ at the ] XXX or probably XXX-ish take, ],

year like by business as we a now? of So under quarter I like orders the guess, pretty then right revenue rough $XXX numbers small we're like exit total the million And talking percentage there. a

like when down orders? revenue -- start dollars So of inflecting of catches percentage rather have orders does dollars -- need to orders to the the have than like before like to to we

James Lico

things. a is $XXX over that we Yes. created not an remember, couple number. excess is Yes, of backlog -- $XXX backlog million million number, one just Number we've about created a

super us $XXX circumstances, to couple we think in pretty the think had million we million, then to normal deplete We maybe that's because said $XXX to we it, a $XXX we call $XXX-ish of $XXX said from that I we of be half the natural. deplete can was don't So in under naturally year. million, -- precise now here. million likely backlog get We million. about That's second to $XXX would million -- and just created years,

And $XX some in somewhere and China. neighborhood mostly to so talked about the in it's about think of is corrections call the that pushed story probably into $XXX million And already of difference. inventory got I that it million We call. it's 'XX of some the in really that earlier Sensing

of little from a reconciles for that hopefully, numbers perspective. that you So bit a

Operator

line the from of Joe comes Fargo. question Wells next Your O'Dea from

Joseph O'Dea

on inventory as seems you think the a just Tek start wanted Fluke more isn't it well, I versus you're Fluke kind seeing explain between And what And which bit in in you're surprising. kind seeing little and like of I of to ways -- so it could it rationalization. Sensing? differences but it the

whether mark that's that they tied so different the there they're lead and led longer destock be managing function Sensing in the more understand terms times were And of bit more paths in down some a of forward trying effect. serving? end through to that's little a of why whether marching of buying, Just to might to Tek

James Lico

you Yes. or about backlog? Joe, are talking inventory

Joseph O'Dea

inventory. about talking I'm

James Lico

more much -- really rate. backlog correction the could would -- answer our as inventory be but I is OEMs Okay. story but inventory really a is it Well, really what I in really that, miscommunicated I much I it we say I I Sensing as had big really relative think not have of If most And is saying, inventory think that is here. had we're out. to pushing might don't it the just

that verticals. The of automation, specific mostly really of is X think in that China we little specific much global backlog orders I companies Europe as of sort in bit equipment customers. we verticals with more being reduction, it's some kind the X OEMs, really HVAC kind and specific issue a automation, excess could a which of of medical of in changing majority about, order than you with semiconductor, in in talked basis industrial supply, X a think as in of demand that on

bit in channel, a and in really to Sensing, excess and if that So but relative story. And relative I America of to little was backlog had was POS. change trying Fluke, mostly a -- that North bit little a a in big But our really to suggest to suggesting Tek, anticipate Joe, that's little is, that's Tek demand's still really really I bit big Europe, not but the number normalizing just what bit I at good more. we inventory in yes, little would pretty And China. a at

times see -- in down, anything lead see changes as come normal continue that, nothing we point inventory some if So to this anticipate at don't we we'll but dramatic.

Joseph O'Dea

growth about ask That's potential next get and and kind of X that that But what solid some over the number growth terms maybe of looking then mean, and helpful. ROIC kind the EA is seems like the of in kind and growth maybe compelling. double-digit thinking wanted revenue the target. incrementals And to next XXx there it we're there go-to-market years? details see what you're of to any I incrementals over you just to think at revenue for to about years, really on revenue pretty I strong how of

Charles McLaughlin

XX% that fall think low to we've examples Really digit or Jim -- we've incrementals X talked going cash earlier, XXXX flow, I the we next out in gets other double years. with here mentioned [ think going we EPS strong that be like about XX% the through. us got It next $X.XX of as free ] Joe, to given our some out. math X-year That's get over it's Yes. of about we're

James Lico

growth I synergy as opportunity given than rate would obviously that's and the just add, expansion. well, upside they've a lower there's anticipated. go-to-market We the think And

So to continuing it we the like the about to look in talk near term. business, we forward and

Operator

Lico the turn over Jim I remarks. to closing call now will for

James Lico

and and you appreciate the that. energy and with of to the Krista, obviously we everyone, enthusiasm time We forward questions. many we'll some thanks, -- call. Thanks, some and for have taking have follow-up look of We the

we in on But that I a tried think the see say bit from what think few the success. some more long-term X what maybe we've obviously, what sustainability the than We changes also to little up saw line. and third set is in normalization saw quarter, we you in that we'll half. said day revenue business I to to is continue and the a drive anticipated. But margins for the continue that second we

to number expansion a taking great we'll road, 'XX. consistent did, the think see obviously months. of forward strongly. everyone. margin up we've follow-up. Thanks, the set that I finishing day. we we that you cash We get think We'll here saw year guide the with Have free the to here the a on we in continue We Well, deals forward you and your to next was look strategy very outlined. flow, the look out to the few for

Operator

This concludes you may today's and disconnect. participation, you for your conference call. Thank now

Fortive (FTV) 25 Oct 232023 Q3 Earnings call transcript