Fortive Corp Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Robert Mason - Robert W. Baird & Co - Analyst : Yes. Hi. Happy Friday. Usually not saying that on a Fortive conference call. So just maybe to start. Jim, could you dig into the product side of the business and thinking this is more around, I'll say, IOS and AHS, New Fortive. When you framed out 2025 or made some initial comments back in October, I'm just curious around, has anything changed evolved as you've tightened up the plans? You made a comment around China softer, but just some perspective there around the product side.

Question: Robert Mason - Robert W. Baird & Co - Analyst : Understood. And maybe just as a follow-up specifically and maybe this touches on some of PT because you do have more government exposure there, are you seeing anything post-election around the flow of funds that you're trying to account for in the planning just within your various government exposures?

Question: Robert Mason - Robert W. Baird & Co - Analyst : Great thanks so much. Thanks, Rob.

Question: Julian Mitchell - Barclays Investment Bank - Analyst : Hey, good afternoon. Maybe just a first question on the Precision Tech organic sales guide. So just there's a bunch of moving pieces but just trying to understand that improvement in year-on-year organic sales from the first quarter to the balance of the year. Maybe help us understand how much of that is a function just of selling days versus easier comp versus some end market improvement that you've embedded maybe in China or somewhere else. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 5:00PM, FTV.N - Q4 2024 Fortive Corp Earnings Call And also, I suppose the orders conversion into sales, you've had six months of decent orders. It sounds like that will persist. Are we seeing those orders convert into sales already? And it's just the mismatch is just a function of different comps? Or are these somehow kind of longer-dated activities in the order book that will come into revenue later than normal?

Question: Julian Mitchell - Barclays Investment Bank - Analyst : That's helpful. Thank you. And then just my follow-up would be around the tariff potential there, and any way in which you could size perhaps share of purchases or COGS or something like that from some of the countries that may be affected in terms of US tariffs?

Question: Julian Mitchell - Barclays Investment Bank - Analyst : Great thank. You.

Question: Nigel Coe - Wolfe Research - Analyst : Hi. Good morning, good afternoon. So, Chuck, I think this might be your last earnings call. I'm sure you're going to miss this whole process, but thanks for all the help over the years, and good luck with your retirement.

Question: Nigel Coe - Wolfe Research - Analyst : A couple of quick ones here. Just the date head within 1Q, we've heard this from some other companies. Is this just the leap year in the prior year quarter or was there something on Chinese New Year? Any more color there? And then just FX has sometimes had an impact on margin conversion, I think, mainly within AHS. So any sort of peculiar sort of things to kind of flag with this dollar strengthening?

Question: Nigel Coe - Wolfe Research - Analyst : Okay. Yes, 200 basis points, yes. That's what I was thinking as well. And then just a follow-on with the spin. Just wondering if there's any more visibility on public company costs and stranded costs from the spin. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 5:00PM, FTV.N - Q4 2024 Fortive Corp Earnings Call

Question: Nigel Coe - Wolfe Research - Analyst : Okay. Thanks, Jim.

Question: Stephen Tusa - JPMorgan Chase & Co - Analyst : Hey guys, how's it going? Chuck, thanks for all the help over the years and best of luck.

Question: Stephen Tusa - JPMorgan Chase & Co - Analyst : So just on the product businesses, back to the tariff question. Did you guys see any kind of preordering ahead of the change in administration and potential tariffs? And I'm just curious as to how the quarter played out sequentially by month kind of adjusting for seasonality in a way, if you could. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 5:00PM, FTV.N - Q4 2024 Fortive Corp Earnings Call

Question: Stephen Tusa - JPMorgan Chase & Co - Analyst : Got it. And then just last one on the -- as a follow-up on the Tektronix, the T&M side of PT. Which verticals are you seeing the best order rates in? Which ones are kind of picking up here the most?

Question: Stephen Tusa - JPMorgan Chase & Co - Analyst : Got it. Okay, thanks a lot. Have a great weekend.

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : Thanks. Good day, everyone. How are you doing. Good to catch-up. A couple of loose ends here. Just on the days, can we just have the number? Like how many days are we talking about here? It sounds like it's 2-ish? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 5:00PM, FTV.N - Q4 2024 Fortive Corp Earnings Call

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : Yeah. And you think it affects, what, 60% or 70% of your business, is that the right ballpark?

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : Okay. Yes, I think it might impact things in distribution but maybe not. If people want it, they'll catch it up. Okay, that's helpful. Thank you. And then just on China, I think you said down mid-single digit. I think that was a 2025 estimate. Can you just kind of level set us on how much China -- what China did in 2024 for the year and in the quarter?

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : And then just maybe finally for me on sort of the flat AOP for Q1. I take it that's still some margin pressure in PT and then some upward trajectory in the other two segments, but anything you'd say there that kind of get us in the right ballpark? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 5:00PM, FTV.N - Q4 2024 Fortive Corp Earnings Call

Question: Jeffrey Sprague - Vertical Research Partners - Analyst : Great thanks a lot.

Question: Scott Davis - Melius Research - Analyst : Good morning out there. But, hey, I don't think you addressed it in prepared remarks but maybe you did but this is for Chuck. The tax rate seemed to be pretty volatile for the size of the company. Is there -- any particular reason why that's been hard to pin down?

Question: Scott Davis - Melius Research - Analyst : Okay, so I get it. All right. So if you wanted to mark-to-market kind of where we are with Provation and ASP, let's just take those two businesses. What do you guys think the new realistic kind of long-term growth rates are? I mean, we know what you thought they were when you did the deals but it's been a few years now. So if we just mark-to-market now and you said, okay, over the next five years or even longer, what would you expect to be kind of the entitlement potential growth rates of those two assets now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 5:00PM, FTV.N - Q4 2024 Fortive Corp Earnings Call

Question: Scott Davis - Melius Research - Analyst : Yes, consistent. Okay, I'll pass that. Thank you guys. Best of luck this year. Good luck, Chuck.

Question: Andrew Obin - Bank of America - Analyst : Yeah, good morning. Hi, how are you. Just the first question, maybe talk about your digital, your software assets, Gordian, Accruent service channel. Where are we in those growth rates? And what do those look like exiting the year and going to 2025?

Question: Andrew Obin - Bank of America - Analyst : And can we just talk about sort of utilities and power vertical? It seems structurally, things are changing there over the long term. How is the conversation changing with the customers? Do you need to add capacity? Do you have the right exposure? If you could expand on that because that's a big topic. Thank you. Thank you.

Question: Joseph Giordano - TD Cowen - Analyst : Hi, guys. Thanks for taking my questions. When I benchmark Tek versus your peer group, do you think you guys have just more structural exposure to things like EV in China than some of your competitors do? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 5:00PM, FTV.N - Q4 2024 Fortive Corp Earnings Call

Question: Joseph Giordano - TD Cowen - Analyst : Okay. And then just on PT margins in the quarter, like I think they were expected to ramp pretty considerably, and they were down sequentially on higher revenues. Just curious any color on that.

Question: Joseph Giordano - TD Cowen - Analyst : Q4.

Question: Joseph Giordano - TD Cowen - Analyst : Okay. Thank you, guys.

Question: Andy Kaplowitz - Citigroup - Analyst : Hi, good morning, everyone. Chuck, thanks for all your help. Chuck or Jim, maybe you can update us on how you're thinking about price versus cost in 2025. There's obviously some tariff-related uncertainty, but I would imagine that the material cost inflation has been relatively benign. So what's embedded in your expectations for 2025?

Question: Andy Kaplowitz - Citigroup - Analyst : Helpful. And then in AHS, I think in Q3, you had double-digit consumables growth. It was mid-single digits in Q4. I know you talked about the difference in days in Q4, Q1 that's probably the big reason. But did you see anything in AHS that actually slowed or was it really just a day? Is there a difference -- a bigger difference in growth between US and, for instance, Europe and China in AHS?

Question: Andy Kaplowitz - Citigroup - Analyst : Appreciate the color.

Question: Christopher Snyder - Morgan Stanley - Analyst : Hi. How is it going guys. I appreciate the questions. I wanted to ask on PT orders. Great to see that double-digit positive for the second quarter in a row. Are orders going higher in absolute terms? Because I know the comps are negative. And then with that, anything

Question: Christopher Snyder - Morgan Stanley - Analyst : Thank you for that. Really appreciate it. And then maybe just following up. I was surprised to see Precision Tech organic growth were lower in Q4, I think, down mid-singles versus Q4 down 3% just because we are seeing that positive order momentum. It doesn't seem like the days impact is all that material for Precision Tech based on some of the prior commentary. So I guess, is the -- is Q1, is that down mid-single reflecting EA Electro now coming into organic? And with that, what is the expectation for EA Elektro in 2025? Thank you.

Question: Christopher Snyder - Morgan Stanley - Analyst : Thank you for that. I really appreciate it.

Question: Deane Dray - RBC Capital Markets - Analyst : Thank you. Good day, everyone. I also want to wish Chuck all the best.

Question: Deane Dray - RBC Capital Markets - Analyst : Hey, Chuck, before you ride off into the sunset, I want to put the spotlight on net working capital. And at 6%, that puts Fortive in among the elite. And so I was hoping you could just parse out how that looks New Fortive versus Ralliant? Did I say that right, Ralliant?

Question: Deane Dray - RBC Capital Markets - Analyst : How does that break out? I would imagine the more software part of New Fortive skews that lower, but just directionally, can you help us there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 5:00PM, FTV.N - Q4 2024 Fortive Corp Earnings Call

Question: Deane Dray - RBC Capital Markets - Analyst : So similar question for the two. I was not expecting Ralliant to be that low on the net working capital, which is a positive obviously. But just what does that mean for Ralliant's free cash flow, after both companies, kind of free cash flow cadence on an annual basis based upon that? It's got to be both very comfortably above 100% conversion.

Question: Deane Dray - RBC Capital Markets - Analyst : Great. And just to clarify on your software business collectively, are you at the negative working capital level?

Question: Deane Dray - RBC Capital Markets - Analyst : Have. Great, thank you for all that color.

Question: Jamie Cook - Truist - Analyst : Hi. Just two quick follow-ups. One, within PT, I think last quarter, you noted some improvement in semi. Can you just talk about what you saw specifically in the fourth quarter and your expectations for 2025? And then my other question, congrats on the spin happening earlier. Just because we get questions on it, I assume the probability of anything happening on PT, an inbound offer, we can just assume that sort of put to bed and not on the table? Thank you.

Question: Jamie Cook - Truist - Analyst : Thank you.

Question: Joseph O'Dea - Wells Fargo - Analyst : Hi. Thanks for taking my questions. A fair amount of focus on China, but just if you could talk a little bit about regional expectations specific to Fluke really, and how you think about the growth opportunity within the guide if we think about it from North America, Europe, China kind of perspective, what type of growth you think you can do in Fluke? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 5:00PM, FTV.N - Q4 2024 Fortive Corp Earnings Call

Question: Joseph O'Dea - Wells Fargo - Analyst : And then on the Sensing side, just any color on what kind of growth you expect out of Qualitrol? Trying to get a little bit of perspective on whether those capacity constraints, what kind of an impact they have on growth constraints? And then also within Sensing, just anything on Hengstler and demand trends in Europe, whether there's anything encouraging there?

Question: Joseph O'Dea - Wells Fargo - Analyst : Indeed it is. Thanks a lot. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 07, 2025 / 5:00PM, FTV.N - Q4 2024 Fortive Corp Earnings Call

Question: Scott Davis - Melius Research - Analyst : Good afternoon. Good morning for you. And thank you for taking the question. And Chuck, good luck and be happy.

Question: Scott Davis - Melius Research - Analyst : A couple of questions around, first of all, on -- my questions are actually all around margins. So in the quarter, was price cost your typical spread, 50, 100 basis points? Is that fair?

Question: Scott Davis - Melius Research - Analyst : Okay. And then could you remind us what the restructuring savings will be? What's the plan there and how they layer into earnings as the quarters progress?

Question: Scott Davis - Melius Research - Analyst : Thank a lot.