Q4 2023 Fortive Corp Earnings Call

My name is Christina and I'll be your conference facilitator. This afternoon at this time I would like to welcome everyone to Ford F Corporation's fourth quarter and full year 2023 earnings results Conference call all lines have been placed on mute.

To prevent any background noise.

After the Speakers' remarks, there'll be a question and answer session. If he would like to ask a question during that time simply press Star then the number one on your telephone keypad.

If he would like to withdraw your question press the pound key.

I would now like to turn the call over to MS. Elena Rosman, Vice President of Investor Relations. It's Rossman you may begin your conference.

Elena Rosman: Thank you Christina and thank you everyone for joining us on today's call with US today are Jim Lico, our President and Chief Executive Officer, and Chuck Mclaughlin, Our senior Vice President and Chief Financial Officer.

Elena Rosman: Represent certain non-GAAP financial measures on today's call information required by regulation G are available on the investors section of our website at Ford is dot com.

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

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

Elena Rosman: Information regarding these risk factors is available in our SEC filings, including our annual report on Form 10-K for the year ended December 31 2022.

Elena Rosman: These forward looking statements speak only as of the date that they are made and we do not assume any obligation to update any forward looking statements with that I'll turn the call over to Jim Lico.

Jim Lico: Thanks, Elena Hello, everyone and thank you for joining us I'll begin on slide three.

Jim Lico: Florida delivered outstanding operating performance again in 2023.

Jim Lico: <unk> formula for value creation.

Jim Lico: Our transport portfolio businesses, delivering consistent through cycle performance, reflecting a more durable company with mid single digit core growth in 2023, despite a mixed macro environment.

Jim Lico: Strong execution by our teams drove another year of record margins with adjusted gross margins now approaching 60% and adjusted operating margins nearing 26%.

Jim Lico: Throughout 2023, we focused on unleashing the full power of FBS reflected by record participation in kind dividends.

Jim Lico: Our largest ever CEO, Dave <unk>.

Jim Lico: <unk> of these cases, where tremendous including an average of 50% productivity and 50% lead time conversion improvements.

Jim Lico: Our industry, leading free cash flow generation funded accretive capital deployment, including our best year executing on bolt on acquisitions.

Jim Lico: Salary and our growth strategy across all three of our segments.

Jim Lico: We also opportunistically bought back shares and increased our dividend enhancing shareholder returns.

In summary, we remain committed to our strategy and its success is evident given the consistency of our results which are highlighted on slide four.

Jim Lico: We built for them to drive growth drive progress and drive value for.

Jim Lico: Walking on our evolution, we made significant steps again in 2023 towards our vision of a premier company.

This includes 5% core growth and a 160 basis points adjust.

Jim Lico: Adjusted operating margin expansion.

Jim Lico: The benefits of our portfolio transformation are reflected in our progress today, averaging rule of 35 performance over the last five years.

Jim Lico: <unk> is driving commercial success as we expand into new growth markets speed innovation cycles, and maximize investment returns across our three operating segments for.

Jim Lico: For example, in 2023, and we saw 33% increase in our revenue attainment on new product launches.

Jim Lico: Any of these new products are contributing to the approximately 60% of our revenues that positively impact climate health and safety concerns and aligned to the UN sustainable development goals.

Jim Lico: Our operating companies are seeing a greater than 20% acceleration in software development time through the use of journey, improving our ability to deliver more value to customers our.

Jim Lico: Our culture of innovation learning and continuous a permit is contributing to gains in our industry, leading employee engagement scores are critical component of our sustained success.

Jim Lico: Lastly, our acquisition performance contributed to our record free cash flow in the year underpinned by industry, leading net working capital performance and accelerated returns on invested capital.

Jim Lico: On slide five you can see how our portfolio is strategically positioned to increasingly benefit from secular growth trends.

Jim Lico: Every day, we are helping our customers harness the power of emerging automation and Digitization technologies, streamline crucial workflows and embrace the energy transition.

Jim Lico: Some highlights in the fourth quarter include.

I O S.

Family or multi product calibrated are providing the broadest workload coverage across some of the fastest growing markets.

Jim Lico: <unk> recent bolt on and Red hat is helping to transform customers' digital experience with a modern centralized hub for engineering document management solidifying your <unk>, leading position in that market.

Jim Lico: In P. T. Tektronix is harnessing the power of open source software with the first release of its Python native drivers to help our customers automate their instruments and accelerate their testing times.

Together with EBITDA, which closed in early January Tektronix is expanding its addressable market, adding complementary performance solutions to their best in class electronic test and measurement suite, serving the fastest growing areas of the power market.

Jim Lico: In Hs Landauer is helping customers reduce energy usage waste and carbon emissions with their new digital dosimetry solution and ASC launched their new sterilization monitoring products in North America, and Asia, helping customers achieve greater efficiency and assurance as they work to keep up with rising clinical plan.

Jim Lico: Turning to slide six at a spotlight on M&A performance. Our two most recent large deals provide an excellent example of the afford a flywheel for value creation in action.

Jim Lico: In 2021, we accelerated our segment strategies with the acquisitions of service channel information.

Jim Lico: These two world class software offerings are creating compelling value for our customers and Florida.

Fully embrace the power of FBS to drive double digit growth and significant margin expansion.

Jim Lico: For example service channel exited 2023 with adjusted operating margins in the mid 20% up from breakeven when it was acquired.

Jim Lico: <unk> delivered 112% net dollar retention in the GI solutions up approximately eight point since its acquisition.

Jim Lico: The execution of our disciplined acquisition strategy is strengthened by the value of MBS creates and is a critical component of how we achieved sustained results over time.

Jim Lico: You see that reflected in their industry, leading net dollar retention as our innovation and customer centricity tools are helping them retain and grow their existing base.

Jim Lico: Turning to slide seven our ability to deliver differentiated results enabled by our world class business system.

Jim Lico: Cross border, we leverage FBS to better understand our customers accelerate innovation expand market share profitably improve operations and forged the leadership skills, we need for the future.

Jim Lico: One of the best things about <unk> is that we never stop improving.

Jim Lico: As our portfolio evolves, we are expanding the tool set and capabilities that allow us to set and deliver on high expectations. As you just saw in the service channel and probation examples.

Jim Lico: In 2023% for our center of excellence for software data and AI expanded its capabilities to further support digital transformation and drive innovation next gen products and productivity across border.

Jim Lico: Quarter, our success is how our leaders immersed teach and lead from the front with MBS together, they make Kaiser and the way of life for our 18000 team members reinforcing our strong culture of inclusion where everyone's contribution matters.

Jim Lico: Looking at the chart on the right what is unique and differentiated about Florida is the breath of results that are compounding over time.

Jim Lico: Since 2019, we have a sustained our target of mid single digit through cycle core growth we have delivered.

Jim Lico: Outstanding margin expansion above our annual commitments, we've converted more revenue to income growing adjusted EPS at 14% compounded rate and converted more income to cash compounding free cash flow at an average of 19% over time.

Jim Lico: With that I'll turn it over to Chuck to provide more color on our fourth quarter financials, and our 2024 outlook starting on slide eight.

Chuck Mclaughlin: Thanks, Jim and Hello, everyone. We ended the year with a high level of performance generating earnings growth of approximately three times revenue.

Chuck Mclaughlin: Core revenue growth of 3% in the quarter reflected an acceleration in iOS and healthcare, partially offset by anticipated slowing.

Chuck Mclaughlin: Precision technologies achieved record margins in the quarter and full year driven by the strength of our brands accelerated innovation.

Chuck Mclaughlin: And the benefits of our productivity initiatives highlights.

Chuck Mclaughlin: Highlights of our fourth quarter performance include 220 basis points of adjusted gross and operating margin expansion adjusted earnings per share of <unk> 98, reflecting poor operational Pete at the midpoint with earnings up 11% year over year and free cash flow was 413 million.

Chuck Mclaughlin: Dollars down versus the prior year as expected and up 56% on a two year stack basis for the year core revenue growth was 5% exceeding our initial outlook of 4% adjusted gross margins expanded by 180 basis points to 59, 5%.

Operating profit grew 11% margins expanded by 160 basis points.

Chuck Mclaughlin: Adjusted EPS of $3 43 grew 9% and we delivered on our free cash flow forecast of one 5 billion, which represents 32% growth on a two year stack.

Chuck Mclaughlin: Turning to slide nine I'll now provide highlights on the fourth quarter performance of each of the three segments beginning with intelligent operating solutions Q4 core growth was 6% reflecting continued momentum across the segment.

Chuck Mclaughlin: With stable Pos trends in all regions, and new logos and customer bookings contributing to strong growth.

Chuck Mclaughlin: Adjusted operating margins expanded 300 basis points to 34, 2% driven by margin expansion in all businesses accretive software mix and price realization and productivity initiatives.

Overall, we have seen better durability and fluke throughout the year, given the benefits of innovation and customer adoptions and key growth verticals.

Chuck Mclaughlin: Environmental Health and safety continues to see strong net growth at ISC and double digit SaaS growth in analytics.

Chuck Mclaughlin: <unk> is an asset lifecycle of double digit core growth throughout most of 2023 driven by continued strength in SaaS.

Chuck Mclaughlin: Tributary to record margin expansion.

Chuck Mclaughlin: Moving onto precision technologies core revenues in the quarter were slightly ahead of expectations down 1% driven by lower sensing revenues more than offsetting growth in power food and beverage and aerospace and defense markets.

Chuck Mclaughlin: Adjusted operating margins expanded 270 basis points to 29% enabled by favorable price and productivity benefits funded throughout the year.

Chuck Mclaughlin: Additional highlights include Tektronix, which had a record year with 9% core growth up 25% on a two year stack basis, reflecting the benefits of our focused innovation in vertical markets growth initiatives.

And while sensing technology revenues were down low single digit in 2023, they were up low double digit onto your stack.

And ended the year with a return to growth in two of our four businesses.

Chuck Mclaughlin: Now on to advanced Health care solutions.

Chuck Mclaughlin: Q4 growth was 3% driven by an acceleration to mid single digit growth at ASP, excluding AMETEK Hs core growth would have been approximately 6%.

Christina: My name is Christina, and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Fordov Corporation's fourth quarter and full year 2023 Earnings Results Conference. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star and then the number one on your telephone key.

Chuck Mclaughlin: Adjusted operating margins expanded 160 basis points to 25, 7% driven by flow through on consumables price realization and productivity additional highlights include at ASP.

Chuck Mclaughlin: We are through the North American channel transition from indirect to direct driving 7% consumables growth in the quarter. Our software businesses continued their pace of double digit SaaS growth with new logos success at census, and probation, we expect to sustain this momentum in 2020.

Christina: If you would like to withdraw your question, press the pound. I would now like to turn the call over to Ms. Lena Rossman, Vice President of Investor Relations. Ms. Rossman, you may begin your question. Thank you, Christina. And thank you everyone for joining us on today's call. With us today are Jim Lico, our President and Chief Executive Officer, and Chuck McLaughlin, our Senior Vice President and Chief Financial Officer. We will present certain non-GAAP financial measures on today's call. Information required by Regulation G is available on the Investors section of our website at fortis.com.

Turning to slide 10, you can see total growth in the fourth quarter of 4% was driven by expansion in the core with minor contributions from FX and bolt on acquisitions.

Chuck Mclaughlin: By regions, we had mid single digit revenue growth in North America, driven by growth in all segments, including stronger growth in consumables benefiting EHS.

Chuck Mclaughlin: Western Europe revenue was up slightly as growth in software was offset by normalizing growth in hardware clocks.

Chuck Mclaughlin: Asia saw continued strength in India and Japan.

Lena Rossman: Our statements on period-to-period increases or decreases refer to year-over-year comparisons, unless otherwise specified. During the call, we will make forward-looking statements, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks, and the actual results may differ materially from any forward-looking statements that we make here today. Information regarding these risk factors is available in our SEC filings, including our annual report on Form 10-K for the year ended December 31st, 2022. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements. With that, I'll turn the call over to Jim Lico. Thanks Elena.

Chuck Mclaughlin: However was more than offset by high single digit decline in China.

Chuck Mclaughlin: As a reminder, we anticipated growth in China would be down as we lap outside growth in prior years.

Chuck Mclaughlin: Turning now to slide 11, we are introducing 2020 forward guidance, starting with the full year, we expect growth of 6% to 8% with core revenues up 2% to 4%.

And acquisition contributions of approximately $215 million.

Chuck Mclaughlin: Adjusted operating profit is expected to increase 10% to 13% with margins of approximately 27%.

Chuck Mclaughlin: Adjusted diluted EPS guidance of $3 73, and $3 85.

Chuck Mclaughlin: Up 9% to 12% include a 13 headwind from higher interest expense associated with funding of the acquisition.

Jim Lico: Hello everyone, and thank you for joining us. I'll begin on slide three. Ford has delivered outstanding operating performance again in 2023 for our proven formula for value creation, our transform portfolio businesses delivering consistent through cycle performance, reflecting a more durable company with mid single-digit core growth in 2023 despite a mixed macro environment. Strong execution by our teams drove another year of record margins, with adjusted gross margins now approaching 60% and adjusted operating margins nearing 26%. Throughout 2023, we focused on unleashing the full power of FBS, reflected by record participation and kindness, putting our largest ever CEO kind of. The results of these kaizens were tremendous, including an average of 50% productivity and 50% lead time conversion improvement. Our industry-leading free cash flow generation funded a creative capital deployment, including our best year executing on bolt-on acquisitions, accelerating our growth strategy across all three of our sectors. We also opportunistically bought back shares and increased our dividend, enhancing shareholder returns.

Chuck Mclaughlin: The effective tax rate is expected to be approximately 14% to 15% in line with the average of the last two years and reflecting the benefits of the acquisition.

Chuck Mclaughlin: Free cash flow is expected to be approximately $1 $38 billion, representing conversion in the range of 100% to 105% of adjusted net income and 21% free cash flow margin.

Chuck Mclaughlin: For the first quarter, we anticipate revenue growth of 3% to 5%.

Chuck Mclaughlin: Core flat to up 2% driven by the continued momentum in our iOS in Hs segments, partially offset by a low to mid single digit decline in PT.

Chuck Mclaughlin: Adjusted operating profit is expected to increase 6% to 10% with margins of approximately 24, 8%.

Chuck Mclaughlin: Adjusted diluted EPS guidance of 77.

Chuck Mclaughlin: The Avi.

Up 3% to 7% includes a <unk> <unk> headwind from higher year over year interest in free cash flow of approximately $180 million, reflecting normal seasonal variation.

Chuck Mclaughlin: Moving to slide 12, and the outlook for 2024 by segments. You can see we expect positive growth and operating margin expansion in each segment in 2024 supported by our alignment secular tailwind new product introductions salting from our robust innovation efforts. The continued resilience of our soft.

Jim Lico: In summary, we remain committed to our strategy, and its success is evident given the consistency of our results, which I'll highlight on slide 5. We look forward to dry growth, dry progress, and dry value. Reflecting on our evolution, we made significant steps again in 2023 towards our vision of a premier company. This includes 5% core growth and 160 basis points. Adjusted Operating Merge and Expand.

And other recurring revenue businesses.

Chuck Mclaughlin: We expect the delivery of the remaining approximate $100 million of excess backlog and our hardware products businesses.

Chuck Mclaughlin: Another year of FBS, driven execution and the carryover benefits of the productivity initiatives that we executed in 2023.

Jim Lico: The benefits of our portfolio transformation are reflected in our progress today, averaging Rule 35 performance over the last five years. FBS is driving commercial success as we expand into new growth markets, speed innovation cycles, and maximize investment across our three operating segments. For example, in 2023, we saw a 33% increase in our revenue attainment on new product launches. Many of these new products are contributing to the approximately 60% of our revenues that positively impact climate, health, and safety concerns and align to the UN Sustainable Development Goals. Additionally, our operating companies are seeing a greater than 20% acceleration in software development time through the use of Gen AI, improving our ability to deliver more value to customers. Our culture of innovation, learning, and continuous improvement is contributing to gains in our industry-leading employee engagement scores, a critical component of our sustained success.

Chuck Mclaughlin: By segment for the year, we are planning iOS to continue its momentum with mid single digit core growth and another 100 basis points of margin expansion drivers include stable demand and NPI traction in the hardware products and continued <unk> growth supported by strong 2023 SaaS bookings.

Chuck Mclaughlin: We are planning for PT revenues to be up 10% at the midpoint in 2024 with core growth up slightly reflecting the benefits of the.

Chuck Mclaughlin: Acquisition, and normalized <unk> of orders in hardware and products businesses in 2023.

Chuck Mclaughlin: We expect EBITDA to be accretive to adjusted operating margins in 2024, and together with the benefits of our productivity initiatives, we expect PT margin expansion of over 100 basis points.

Jim Lico: Lastly, our acquisition performance contributed to our record free cash flow in the year, underpinned by industry-leading net working capital performance and accelerated returns on invested capital. On slide five, you see how our portfolio is strategically positioned to increasingly benefit from secular growth. Every day, we are helping our customers harness the power of emerging automation and digitization technologies, streamline crucial workflows, and embrace the energy transition. Some highlights in the fourth quarter include In iOS, Fluke's new family of multi-product calibrators is providing the broadest workload coverage across some of the fastest growing markets. Fou's recent bolt-on of Red Hat is helping to transform customers' digital experience with a modern, centralized hub for engineering document management, solidifying your current leading position in that market. In PT, Tektronix is harnessing the power of open source software with the first release of the Python native drivers to help our customers automate their instruments and accelerate their testing.

Chuck Mclaughlin: The team's outlook also reflects the realignment of AMETEK into sensing technologies group as we explore strategic alternatives for <unk> design and engineering business.

Remainder of Ametek's includes product revenues that are aligned more closely to our automation businesses and sensing for comparison purposes. We have provided pro forma segment results for 2023 in the appendix.

Chuck Mclaughlin: And IHS, we're planning mid single digit core growth.

Chuck Mclaughlin: With operating margin expansion of over 125 basis points, driven by volume price realization and productivity.

Chuck Mclaughlin: We expect an acceleration in the growth that asps driven by their improved channel position NPI and procedure volumes.

Chuck Mclaughlin: And new logos SaaS migrations are expected to drive continued software growth in healthcare.

Before opening it up for questions I'll pass it back to Jim for closing remarks.

Jim Lico: Thanks, Chuck I'll start this wrap up on slide 13.

Jim Lico: I am incredibly proud of the contributions of our 18000 team members to make 2023, another record year for Florida over.

Jim Lico: Together with EA, which closed in early January, Tektronix is expanding its addressable market, adding complementary performance solutions to its best-in-class electronic test and measurement suite, serving the fastest-growing areas of the power market. In AHS, Landauer is helping customers reduce energy usage, waste, and carbon emissions with their new digital distribution, and ASP launched their new sterilization monitoring products in North America and Asia, helping customers achieve greater efficiency and assurance as they work to keep up with rising, Turning to slide 6 in the spotlight on ME. Our two most recent large deals provide an excellent example of the forwarded flywheel for value creation and action. In 2021, we accelerated our segment strategies with the acquisitions of service channel and probation. These two world-class software offerings are creating compelling value for our customers and Fortum. Fortum has fully embraced the power of FBS to drive double-digit ARR growth and significant margin expansion. For example, Service Channel exited 2023 with adjusted operating margins in the mid-twenties, up from break-even when it was acquired. And probation delivered 112% net dollar retention in this G.I., up approximately eight points since its acquisition.

Jim Lico: Over the last couple of years, our success executing our strategy to build a more resilient company reflects our strong foundation and enduring principles.

Jim Lico: Underpinned, our unique and compelling culture.

Jim Lico: Talking about the operating rigor and leverage of FBS tools to innovate and drive growth across our segments.

Jim Lico: In addition to higher core growth the deals we've done are contributing to our multiyear track record, including strong performance again in 2024.

Jim Lico: Since 2019, we are sustaining 7% revenue growth delivering.

Jim Lico: Delivering 120 basis points of adjusted operating margin expansion per year, driven predominantly by higher gross margins.

Jim Lico: Compounding earnings and free cash flow double digits.

Jim Lico: Net working capital as a percent of sales nearly in half building, 50% more free cash flow per dollar of revenue.

Jim Lico: This is a testament to our portfolio transformation and the power of FBS fueling our current and future success and with a $60 billion served market, we have substantial runway to accelerate growth organically and inorganically.

This brings me to slide 14, and how we drive differentiated performance and value creation for our shareholders.

Jim Lico: With a consistent and compelling 2024 outlook, including 6% to 8% total growth and over 100 basis points adjusted operating margin expansion in every segment.

Jim Lico: The execution of a disciplined acquisition strategy is strengthened by the value FBS creates and is a critical component of how we achieve sustained results over time. You see that reflected in their industry-leading net dollar retention, as our innovation and customer centricity tools are helping them retain and grow their existing base. Turning to slide 7, our ability to deliver differentiated results is enabled by our world-class business, which is cross-border. We leverage FBS to better understand our customers. Accelerate innovation, expand market share profitably, improve operations, and forge the leadership skills we need for the future. One of the best things about MPS is that we never stop improving it.

Or on track to our 2025 targets of $4 50 of earnings.

Jim Lico: One $6 billion of free cash flow.

Jim Lico: We're confident in our ability to differentiate our performance and believe our outlook is appropriately balance remaining agile to deliver for customers and shareholders should the environment differ dramatically.

As we showed at our 2023 Investor day executing the 4% Formula we expect to roughly double our earnings per share generate more than $8 billion of free cash flow over the next five years.

Jim Lico: Our M&A funnel remains strong and our acceleration of capital deployment as demonstrated in 2023 further position supportive as a higher growth cash flow compound or in a premier company delivering exceptional value to shareholders.

Jim Lico: As our portfolio evolves, we are expanding the tool set and capabilities that allow us to set and deliver on high expectations, as you just saw in the service channel and probation. In 2023, the Ford Center of Excellence for Software Data and AI expanded its capabilities to further support digital transformation and drive innovation, next-gen products, and productivity across Florida. Part of our success is how our leaders immerse, teach, and lead from the front with MBS. Together, they make Kaizen the way of life for our 18,000, reinforcing our strong culture of inclusion for everyone's contribution.

Jim Lico: Now I'll turn it back to Atlanta, Thanks, Jim that concludes our comments Kristina we are now ready for questions.

Kristina: Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad and we'll pause for just a moment to compile the Q&A roster.

Kristina: Thank you. Our first question comes from the line of Steve Tusa from Jpmorgan. Your line is open.

Chuck Mclaughlin: Looking at the chart on the right, what is unique and differentiated about Fortis is the breadth of results that are compounding over time. Since 2019, we have sustained our target of mid-single-digit through-cycle core growth. We have delivered outstanding margin, Bob, our annual committee. We have converted more revenue to income, growing adjusted EPS at 14% compounded, and converted more income to cash, compounding free cash flow at an average of 19%. With that, I'll turn it over to Chuck to provide more color on our fourth quarter financials and our 2024 outlook, starting on slide eight. Thanks, Jim. And hello everyone.

Steve Tusa: Good morning, guys How's it going.

Yes.

Steve Tusa: Just the the kind of trend and in the shorter cycle businesses Tek and fluke maybe.

Steve Tusa: Maybe just an update on where you stand book to Bill how the revenue did this quarter and then how youre thinking about how the year plays out next year.

Jim Lico: Yes, Steve it's Jim.

Jim Lico: Number one.

I would differentiate fluke and Tek here I think I think we certainly as.

Jim Lico: We saw mid single digit growth at fluke in the quarter, we saw growth in orders.

Jim Lico: <unk> sales in the mid single digit around the world. So I think we're seeing the real benefits of the number of transformation things that we've done from an innovation perspective also with some of the M&A work we've done.

Chuck Mclaughlin: We ended the year with a high level of performance generating earnings growth of approximately three times revenue. Core revenue growth of 3% in the quarter reflected an acceleration in iOS and healthcare, partially offset by anticipated slowing in precision technologies. We achieved record margins in the quarter and full year, driven by the strength of our brands, accelerated innovation, and the benefits of our productivity. Highlights of our fourth quarter performance include 220 basis points of adjusted gross and operating margin expansion, adjusted earnings per share of $0.98, reflecting $0.04 operational beat at the midpoint, with earnings up 11% year over year, and free cash flow was 413 million, down versus the prior year as expected, up 56 percent on a two-year stack. For the year, core revenue growth was 5%, exceeding our initial outlook of 4%.

Jim Lico: And in good shape, and I would say tech.

Jim Lico: <unk> was low single digits in the quarter, but quite frankly off a 20% growth comp from Q4 'twenty. Two so still saw some good performance. There we felt really good about the quarter. They produced as well as certainly the year. The tektronix had an unprecedented a record year as we said in the prepared remarks. So as we go into next year I think it's.

Jim Lico: Yes.

Jim Lico: More of the same at fluke.

Jim Lico: Really seems the resilience and durability activity that we've talked a lot about over the years playing out there.

Jim Lico: Pat will probably have a quarter, they're thinking about their fifth quarter.

Jim Lico: Negative bookings and obviously, we've been working off backlog, there and we would anticipate that that book to bill their turns positive and probably probably Q2. So.

Jim Lico: We feel good North America was really good for Tek, we're a little bit of slowing that we saw was in China.

Chuck Mclaughlin: Just gross margins expanded by 180 basis points to 59.5%, adjusted operating profit grew 11%, and adjusted operating margin expanded by 160 basis points. Just the DPS of $3.43 grew 9%. And we delivered on our free cash flow forecast of $1.25 billion, which represents 32% growth on a two-year stack. Turning to slide nine, I'll now provide highlights on the fourth quarter performance of each of the three segments, beginning with intelligent operating. Q4 core growth was 6%, reflecting continued momentum across this segment, with stable POS trends in all regions and new logos and customer bookings contributing to strong ARR growth. Adjusted operating margins expanded 300 basis points to 34.2%, driven by margin expansion in all businesses. Creative Software Mix and Price Realization and Productivity.

Jim Lico: We talk a little bit about our China growth in total in Chuck's prepared remarks, but obviously part of that Tech is one of our bigger businesses in China part of that story is as the tektronix there. So I'll pause there and if you've got any follow up I'll certainly cover it and then just how much price do you assume in the for the guide for 'twenty 'twenty four.

Speaker Change: I'm more thinking about 2% to 3%.

Speaker Change: Okay, great. Thanks, a lot.

Speaker Change: Thanks, Steve Thanks, Steve.

Speaker Change: And your next question comes from the line of Nigel Coe of Wolfe Research. Your line is open.

Thanks, Good morning.

Actually good afternoon.

Nigel Coe: For my first let's not get into that conversation.

Nigel Coe: Just on the on the re class of.

Nigel Coe: And the tech to PT.

Nigel Coe: Small business it seems like margins are relatively.

Nigel Coe: Depressed, maybe six 7% margin.

Chuck Mclaughlin: Overall, we have seen better durability in fluke throughout, given the benefits of innovation and customer adoptions and key growth verticals. Environmental health and safety continues to see strong INET growth at ISC and double-digit SAS growth at Inlet. Thank you, driven by continued strength and sass contributing to record margins. Moving on to precision technology, core revenues in the quarter were slightly ahead of expectations, down 1% driven by lower sensing revenue, more than offsetting growth in power, food, and beverage, and aerospace and defense. Just that operating margins expanded 270 basis points to 29, enabled by favorable price and productivity benefits funded throughout the year. Additional highlights include Tektronix, which had a record year with 9% core growth up 25% on a two-year stack, reflecting the benefits of our focused innovation and vertical markets growth initiatives.

Nigel Coe: I was wondering I think Chuck you went through some of that looking at that just maybe talk about you know.

Nigel Coe: What this achieves this re class.

Nigel Coe: And maybe just in terms of the importance of this ASP.

Nigel Coe: The Hs acceleration.

Nigel Coe: Like how is that benefiting sort of the outlook for Hs because what are you assuming that in the tech recovers.

Chuck Mclaughlin: Trying to think about Hs on a like for like basis here.

Chuck Mclaughlin: Yes.

Thanks for the question Nigel I'll take the margin question first.

Speaker Change: We're talking about the business expanding our 25 basis points, but thats on a like for like basis. If you really look at where we ended with AMETEK.

Speaker Change: Probably to 250.

Speaker Change: Basis points, but.

Speaker Change: Business is generating margin expansion of 125, and that's what we've got in the guide I.

Speaker Change: I think the rationale for switching it is the.

Speaker Change: Design engineering piece, just isn't as big as we thought it was going to be.

Speaker Change: It's not.

Speaker Change: But not really moving forward and so the part that is now the majority of this business really fits better incentives.

Chuck Mclaughlin: And while sensing technology revenues were down low single-digit in 2023, they were up low double-digit on into your stack and ended the year with a return to growth in two of our four businesses. Now on to Advanced Healthcare Solutions. Q4 growth was 3%, driven by an acceleration to mid-single-digit growth at ASP. Excluding the tech, AHS core growth would have been approximately 6%. Adjusted operating margins expanded 160 basis points to 25.7%, driven by flow through on consumables, price realization, and productivity.

Speaker Change: Yeah, Nigel I would just add and we called out in.

Speaker Change: In the slide materials that in the TAC was a headwind in the quarter for health care to the tune of about 280 basis points, that's probably the largest year over year headwind that's in the tech had seen.

Speaker Change: It wouldn't expect the size of that to continue but probably still in the 1% to 2% range had it continued to be in healthcare throughout 2024, but thats now reflected in beauty.

Speaker Change: Okay. That's helpful and then maybe just on the transition.

Chuck Mclaughlin: Additional highlights include: at ASP, we are through the North American Channel transition from indirect to direct, driving 7% consumables growth in the quarter. Our software businesses continue their pace of double-digit revenue growth, with new logo success at census and probation. We expect to sustain this momentum in 2022. Turning to slide 10, you can see that total growth in the fourth quarter of 4% was driven by expansion in the core with minor contributions from FX and Bolt-on-X. By region, we had mid-single-digit revenue growth in North America driven by growth in all segments, including stronger growth in consumables benefiting AHS. Western Europe revenue was up slightly as growth in software was offset by normalizing growth in hardware. Patients have continued strength in India and Japan, however, this was more than offset by a high single-digit decline in China.

Speaker Change: ASP consumables, just confirm that's now fully behind US there's no lingering impact that sounds like it is but maybe you know I think we can see the clear sort of margin benefits that we should see coming through from capturing that distributor margin, but maybe talk about the opportunities to drive better growth and having that direct customer connection.

Speaker Change: What do you see this as a potential for revenue.

Speaker Change: Benefits.

Speaker Change: Well Nigel I would say number one yes, we are definitely fully through it. So you saw the benefit of that I think.

Speaker Change: As we said in the prepared remarks consumables in North America were up about 7% consumables.

Speaker Change: Around the world were up about 4%. So good performance. There we think mid single digit guide for Asps for the full year is a good number certainly opportunity to go and on the margin front, which we're going after we're just with the team last week, we actually had them.

Speaker Change: With with our board meeting there and we have the team.

Speaker Change: For an operating review highlighting the level of innovation talked about in the prepared remarks, we now have a new set of consumables around steam sterilization that are going to now be in the U S and Asia that are certified.

Chuck Mclaughlin: As a reminder, we insist that payday growth in China would be down as we lap outside growth in prior years. Turning now to slide 11, we're introducing 2024 guidance, starting with the full year.

Speaker Change: A number of opportunities here to continue to improve the growth those are obviously all in consumables.

Chuck Mclaughlin: We expect growth of 6% to 8% with core revenues up 2% to 4% and acquisition contributions of approximately $215 million. Adjusted operating profit is expected to increase 10% to 13% with margins of approximately 27%. Adjusted diluted EPS guidance of $3.73 and $3.85, of 9-12% includes a $0.13 headwind from higher interest expense associated with funding the EA acquisition. The effective tax rate is expected to be approximately 14.5 to 15%, in line with the average of the last two years and reflecting the benefits of the EA acquisition.

Speaker Change: Which obviously have higher higher fall through so we'd like to guide here overall health up 125 basis points in margin expansion mid single digit growth. We think that's a great launch point. It certainly certifies I think a lot of the things we've been saying about the direct North American strategy and certainly more broadly around the strategy at Asps and how.

Speaker Change: We will just be a real durable grower for <unk> and 'twenty four.

Speaker Change: That's great. Thanks, Jim.

Speaker Change: Thanks Nigel.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: And your next question comes from the line of Julian Mitchell of Barclays. Your line is open.

Chuck Mclaughlin: Free cash flow is expected to be approximately 1.38 billion, representing a conversion rate in the range of 100 to 105% of adjusted net income and a 21% free cash flow margin. For the first quarter, we anticipate revenue growth of three to five percent, with core flat to up 2% driven by the continued momentum in our iOS and AHS partially offset by a low to mid single-digit decline in PT. Adjusted operating profit is expected to increase six to 10% with margins of approximately 24.8%. Adjusted diluted EPS guidance of $0.77 to $0.80, up 3% to 7%, includes a $0.04 headwind from Moving to slide 12 in the outlook for 2024 by segments, you can see we expect positive growth and Operating Margin Expansion in each segment in 2024. Supported by our alignment secular tailwinds, new product introductions resulting from our robust innovation, the continued resilience of our software and other recurring revenue, and the expected delivery of the remaining approximately $100 million of excess backlog in our hardware products. Another year of FPS-driven execution and the carryover benefits of the productivity initiatives that we executed in 2023.

Hi, good morning.

Julian Mitchell: Just wanted to.

Julian Mitchell: Check on the sort of margins in the first quarter.

Julian Mitchell: So realize it's not a big sequential decline in sales, but you got to have a very heavy sort of sequential step down in margins. There in Q1, 100% or so kind of drop through so is that reflecting maybe something on mix.

Julian Mitchell: Any of the businesses in the first quarter versus the fourth.

I'm just trying to understand may be on precision in particular, how their margins are starting out the year in Q1.

Julian Mitchell: So the biggest thing is theres, just a seasonal step down in revenue dollars from Q4 to Q1 in that.

Julian Mitchell: That's what gives you normally.

Julian Mitchell: Normally seasonal step down and the margins point out that our Q1 guide is up 75 basis points.

Julian Mitchell: Good.

Julian Mitchell: Spansion there so I think we're seeing pretty good performance across.

Julian Mitchell: The segments margin expansion too, yes, I would just say that guide represents record.

Julian Mitchell: Operating margins in the first quarter from Florida. So I think when you just look at it we do have some expenses that start back up at the beginning of the year, obviously salaries and some of those things theres, a little bit of that but at the end of the day. If you just step back record that'll be a record first quarter in the history of Florida.

Speaker Change: Thanks, very much and then my follow up would just be.

Typically I suppose you gave guidance for year, one and then someone else about year, two but if I look at slide 14, you do have that I guess it seemed medium term.

Jim Lico: By segment for the year, we're planning iOS to continue its momentum with mid single-digit core growth and another 100 basis points of margin. The drivers include stable demand and NPI traction in the hardware products and continued ARR growth supported by strong 2023 SAS. We're planning for PT revenues to be up 10% at the midpoint in 2024, with core growth up slightly reflecting the benefits of the EA acquisition and normalized station of orders in hardware and products businesses in 2023. We expect EA to be accretive to adjusted operating margins in 2020. And together with the benefits of our productivity initiatives, we expect PT margin expansion of over 100. CT's outlook also reflects the realignment of Invitec into sensing technologies as we explore strategic alternatives for Invitec design and engineering.

Speaker Change: When you gave it but you've got that full 50 ish or maybe it's 430, excluding capital deployment number for 2025.

Speaker Change: And obviously a year from now that will be a formal guide whenever you end up giving not a medium term aspiration. So I guess I'm trying to ask kind of how given it is only 11 months away now that period.

Speaker Change: How seriously should investors treat that number 450.

It does require a fair amount of M&A over this year, so any thoughts around.

Speaker Change: The M&A market backdrop.

Speaker Change: Youre acquisitive peers was saying, it's maybe looking a little bit better now.

Speaker Change: Yes.

Speaker Change: A couple of things I think when you look at our history in it in terms of double digit EPS growth.

Speaker Change: And the compounding of free cash flow I think it's not enormous leap to get to that $4 50. Its why we put those numbers out there a year ago, and we reiterated the guidance and on the presentation. So we obviously feel good long way away lack of happened Budd, but we feel good about it I think relative to the M&A market. We just closed a quarter, where we did basic.

Jim Lico: The remainder of Emmetex includes product revenues that align more closely to our automation business; in sensing, for comparison purposes, we have provided pro forma segment results for 2023 in the. In AHS, we are planning mid-single-digit core growth, with operating margin expansion of over 125 basis points driven by volume price realization and product We expect an acceleration in the growth at ASP driven by their improved channel position, NPIs, and procedure volume, and new Thanks Chuck.

Speaker Change: Five deals between including kind of closing in the early part of January.

Speaker Change: Across the board in every segment variety of different sources from private equity to private ownership founder led companies.

Speaker Change: Good breadth across a number of our workflows.

Speaker Change: So we feel really good about the M&A environment and we just demonstrated really good progress against the M&A environment is starting off really well.

Speaker Change: And when we start we now think that's going to be accretive in the year only right. After closing it. So we've seen really good things there. So I would say the empire. What we've done we're really proud of that work. Good work that has set us up well back to your comment about 25, both EBITDA and those other deals are going to be helpful. In 'twenty five for sure and quite frankly, when you look.

Jim Lico: I'll start this wrap-up on slide 13. I am incredibly proud of the contributions of our 18,000 team members. May 2023 will be another record year for Florida.

Jim Lico: Over the last couple of years, our success executing our strategy to build a more resilient company reflects our strong foundation and enduring principles that underpin our unique and compelling culture. Talk about the operating rigor and leverage of FBS tools to innovate and drive growth across our segments. In addition to higher core growth, the deals we have done are contributing to our multi-year track record, including strong performance again in 2021. Since 2019, we are staying at seven percent revenue.

When.

Speaker Change: When you look at the environment that we're in right now probably a little bit better certainly we've demonstrated that and we want to continue to has always as you know Julien. We're we're always busy and we're excited about the opportunities that are in front of us, but we're also incredibly excited about the teams that have just joined.

Speaker Change: That's great. Thank you.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Jeff Sprague of vertical research. Your line is open hi, Jeff.

Jim Lico: Delivering 120 basis points for adjusted operating market expansion per year, driven predominantly by higher gross market, compounding earnings, and free cash flow double digits cut net working capital's percent of sales nearly in half, yielding 50% more free cash flow per dollar of revenue. This is a testament to our portfolio transformation and the power of FBS, fueling our current and future success, and with a $60 billion CERB market, we have a substantial runway to accelerate growth organically and inorganically. This brings me to slide 14 and how we drive differentiated performance and value creation for our shareholders, with a consistent and compelling 2024 outcome, including We are confident in our ability to differentiate our performance and believe our outlook is appropriately balanced, remaining agile to deliver for customers and shareholders should the environment differ dramatically.

Jeffrey Todd Sprague: Hello, everyone.

Jeffrey Todd Sprague: Just a couple from me just back on Asps and the consumables growth.

Jeffrey Todd Sprague: 7% sounds pretty healthy.

Jeffrey Todd Sprague: There is some kind of I.

Jeffrey Todd Sprague: I don't know kind of channel fill and the direct model that had to happen.

Flipped from distribution to direct.

Jeffrey Todd Sprague: So something abnormal about that number what are you expecting for consumables growth.

Jeffrey Todd Sprague: In the U S for 2024.

Speaker Change: We'll be in the mid single digit range, there theres, probably a hint of catch up from Q3 there.

Speaker Change: But not a lot of inventory build we would expect it to be mid single digit for them across the board.

Speaker Change: And obviously I wouldn't want to be a predictor of 7% every quarter, but but as we said we validated the strategy I think in Q4 with what we want to do as I mentioned with the team last week. They are incredibly optimistic about where they stand today and where they stand for the year and in the future years as well so.

Speaker Change: I think we're in a good place.

Speaker Change: And then just on ebay, obviously, then on it in Q4, but any color on how it how it grew in Q4.

Jim Lico: As we showed at our 2023 Investor Day, by executing the forwarded formula, we expect to roughly double our earnings per share and generate more than $8 billion of free cash flow over the next five years. Our M&A funnel remains strong, and our acceleration of capital deployment, as demonstrated in 2023, further positions Ford as a higher growth cash flow compounder and a premier company delivering exceptional value to shareholders. With that, I'll turn it back to Elena.

Speaker Change: Can you just.

Be a little more specific on what you expect for growth in 2024 again to the BD and M&A, but kind of the underlying growth in the business in 2024.

Speaker Change: Yeah.

Speaker Change: First of all we closed the first week of January we're off to a good start 100 day plan as scheduled we got our <unk> set up with integration. Our teams are really excited about about the work we can do together as you'll remember Jeff when we announced the deal. We said we'd have the opportunity to take our our big Tektronix Salesforce and sell those solutions we started.

Elena: Thanks, Jim. That concludes our comments. Christina, we are now ready for questions. Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then number one on your telephone keypad, and we'll pause for just a moment to compile the Q&A roster. Thank you. Our first question comes from the line of Steve Tusa from JP Morgan. Your line is open. Good morning guys, how's it going? So just the kind of trend in the shorter cycle businesses, tech and fluke, maybe just an update on where you stand, book to bill, how the revenue did this quarter, and then, you know, how you're thinking about how the year plays out next year. Yeah, Steve. It's Jim.

Speaker Change: Our annual sales kickoff side over the last couple of weeks lot of excitement about that relative to specifically to your question December was a record order months for the business. So so they ended the year strong and.

Speaker Change: There's a tremendous amount of growth opportunities there in front of us they've got a good backlog situation. So we feel good we feel good about the revenue base for the year and what that can grow obviously won't be in our core, but but until 'twenty five, but but we feel good about the growth relatively we now think this is up.

Speaker Change: Probably a mid single digit ROIC in 'twenty, four which is up from the original thesis around the deal. So we're already ahead of the game.

Jim Lico: I think number one, I would differentiate Fluke in tech here, I think, I think we certainly have some, you know, we saw mid single digit growth at Fluke. In the quarter, we saw growth in orders, point of sales in the mid single digit around the world. So I think we're seeing the real benefits of the number of transformation things that we've done from an innovation perspective, also with some of the M&A work we've done, and in good shape and I would say you know tech was low single digits in the quarter but quite frankly off a 20% growth comp from Q4 22 so still saw some good performance there we felt really good about the quarter they produced as well and certainly the year that Tektronix had is unprecedented the record year as we said in the prepared remarks so as we go into the next year I think it's it's I think more of the same at Fluke we've really seen some resilience and durability activity that we've talked a lot about over the years playing out there, Tech will probably have a quarter, they're in about their fifth quarter of negative bookings. And obviously, we've been working off backlog there. And we would anticipate that book to bill there turns positive in probably Q2. So we feel good.

Speaker Change: Growth should be good and we think the business is probably in the 190 to 195 $195 million range, Thats, probably where it will be for the year. So so we're in a really good place with the business that has a good team as I mentioned before.

Speaker Change: It's going to that's why I think when you step back and look at the deals we did to the previous question. We feel good about the year, 6% to 8% overall growth for the year stands up obviously <unk> being one of the big parts of that but the other acquisitions, adding some as well.

Speaker Change: And then just I'm, sorry, a little quick housekeeping ones to.

Speaker Change: The design piece of Intertek.

Is that divested business or you're just winding it down.

Speaker Change: How big is that piece.

It's in the $20 million range of revenue breakeven so its.

Speaker Change: We're going to look at it we're looking at a number of options I think we've got there are buyers out there for sure. The team. The team is working on some different things so the other part.

Speaker Change: That business is called silver motion. So as you can imagine it really was originally in our sensing and automation businesses.

Speaker Change: It's really it half life science.

Speaker Change: Customers, but it's but like our other sensing businesses quite frankly it has it has more of an industrial aspect too from an OEM perspective that business has done pretty well over the last few years. So we anticipate keeping that as part of the portfolio, but we're going to look for options on the other side.

Jim Lico: North America was really good for Tech, where a little bit of slowing that we saw was in China, as we talked a little bit about our Chinese growth in total and Chuck's prepared remarks. But obviously, part of that growth is one of our bigger businesses in China, part of that story is, is the Tektronix there. So I'll pause there. And if you've got any follow-up, I'll certainly cover it.

Speaker Change: Thank you very much.

Speaker Change: Thanks, Jeff.

Your next question comes from the line of Deane Dray from RBC capital markets. Your line is open.

Jim Lico: Yeah. And then and then just how much price do you assume in the guide for 2024? It's worth thinking about two to three. Okay, great. Thanks a lot.

Deane Dray: Good day everybody.

Deane Dray: Hey.

The word destocking didn't pop up in any of your prepared remarks, which is a relief.

Any color there in terms of inventory in the channel fluke sell in sell through any.

Jim Lico: Thanks, Dean. Thanks, Steve. And your next question comes from the line of Nigel Coe of Wolfe Research. Your line is open. Thanks. Good morning. Not too well. Actually, good afternoon from outside.

Deane Dray: Any issues there.

Speaker Change: Yeah I think.

The second part of your question mid single digit.

Speaker Change: Pos growth at fluke around the world in the fourth quarter, some good solid growth.

Speaker Change: Down from the double digit we've seen for a while but but so I think that would be that we take that number pretty solidly little bit of destocking attack.

Chuck Mclaughlin: Let's not get into that conversation. Just look at the reclassification of Inditech to PT. I mean, it's a small business. It seems like margins are relatively depressed, maybe 6%, 7% margin. Just wondering, Chuck, you went through some of the logic of that. Maybe you could talk about what this achieves, this reclass, and maybe just in terms of the importance of this ASP, or rather AHS acceleration, kind of like how is that benefiting the outlook for AHS? Because, you know, were you assuming that Inditech would recover?

Speaker Change: In the U S.

Speaker Change: Single digit millions, but a little bit and in some in China, maybe more broadly I would say that thats. We now think China is likely to probably not to grow in.

Speaker Change: In the year Thats embedded in our guide and some of that is going to be just I would say less destocking than it is just conservative on the part of Chinese distributor Chinese channel partners to sort of see how the macro evolves out there over the year, but again, that's embedded in our guidance.

Chuck Mclaughlin: I'm just trying to think about AHS on a leg-length basis. Um, thanks for the question, Nigel. I'll take the margin question first. We're talking about the business expanding by 125 basis points, but that's on a like-for-like basis. If you really look at where we ended with Emitech and upward, we're up probably to 250 basis points. But the business is generating margin expense of 125, and that's what we've got in the guide. I think the rationale for switching it is that the design engineering piece just isn't as big as we thought it was going to be.

Speaker Change: So just to clarify on China, that's flat for the year is the expectation.

Speaker Change: Toothpaste downloads.

Speaker Change: Probably down low single for the year.

Speaker Change: So that would that would be our anticipation at this point a couple.

Speaker Change: Couple couple couple of things Theyre, just starting what we've seen thus far is customers.

Speaker Change: A little bit more Conservatives I mentioned as you know Deane we've talked about this over the years you really don't know China till you see March you get out you get to after the Chinese new year see how channel partners and customers are going to going to unfold for the year, we've seen more conservative NIST up to this point in the year, so our anticipation.

Chuck Mclaughlin: No, not really moving forward, and so if the part that is now the majority of this business really fits better. Um, yeah, Nigel, I just add, and we called out, in the slide materials that Invitech was a headwind in the quarter for healthcare to the tune of about 280 basis points. That's probably, you know, the largest year-over-year headwind that Invitech would expect the size of that to continue but probably still in the one to two percent range had it continued to be in health care throughout 2024, but that's now reflected in. Okay, that's helpful.

Speaker Change: The year sort of progresses, we had a really tough comp in the first quarter in China, We had great growth in China last year in the first quarter, but we would anticipate for the full year.

Speaker Change: The China would probably be down about low single digit great.

Speaker Change: Great and just one clarification for EAA I believe you said that you were targeting 100 basis points of margin improvement for this year and that it would be.

The Tech sales force would be selling.

Jim Lico: And then maybe just on the transition, you know, ASP consumables, just confirm that's now fully behind us, there's no lingering impact there, sounds like it is. But maybe, you know, I think we can see the clear sort of margin benefits that we should see coming through from capturing that distributed margin. But maybe talk about the opportunities to drive better growth and you know, having that direct customer connection, you know, what do you see as a potential for revenue benefits? Well, Nigel, I would say number one, yeah, we're definitely fully through it. So you see the benefit of that.

EAA: Did they come with the sales force at all and where is that 100 basis points did idea of any kind of manufacturing efficiencies what are the drivers around the improved margins.

Speaker Change: So deane a couple of things to impact there.

Deane Dray: Got it.

Deane Dray: Come with 40% incremental margins I think the 100 basis points.

Deane Dray: Is about core growth that it adds to tech is what we called out we would expect with volume growth.

Deane Dray: Yes.

Deane Dray: Does it go from $40 41, yes, it wouldnt be super surprising for them, but I think that was more about the impact on core growth.

Jim Lico: I think, you know, as we said in the prepared remarks, consumables in North America are up about seven percent, and around the world, we're up about four percent. So, pretty good performance there.

For everyone for Ed Tech and then on the sales force I think.

Jim Lico: We think this single-digit guide for ASP for the full year is a good number, and certainly an opportunity to go. And on the margin front, which we're going after, we were just with the team last week. We actually had our board meeting there, and we had the team there for an operating review highlighting the level of innovation and talking about the prepared remarks. We now have a new set of consumables around steam sterilization that are going to be available in the US and Asia that are certified.

Deane Dray: Jim.

Deane Dray: If they came with about a sales force of roughly 40 folks we can ask that with tektronix, we have the ability to sell that solution across the board. The teams are working through the cross selling strategies and one of the things. We said when we announced the deal was that we thought a real opportunity primarily outside of Europe to really accelerate.

The business through through the addition of the Tektronix Salesforce.

Deane Dray: So as Chuck Chuck mentioned already a very profitable company.

Jim Lico: So there are a number of opportunities here to continue to improve the growth. Those are obviously all in consumables, which obviously have higher fall throughs. So we like the guide here, overall health up 125 basis points in margin expansion and mid single-digit growth. We think that's a great launch point. It certainly confirms, I think a lot of the things we've been saying about the direct North American strategy and, certainly more broadly, around the strategy at ASP and how health will just be a real durable grower for Florida in 25. That's great. Thanks. Thanks, Nigel. And your next question comes from the line of Julian Mitchell of Barclays. Your line is open. Hi, good morning.

Deane Dray: They had great growth to two two.

Deane Dray: There are good growth company, great growth company, and even with their size they add growth to tektronix of PT.

Deane Dray: So we're excited about that opportunity, obviously thats not the core for the year there'll be in 'twenty five, but so far we really feel excited we're really excited about the business joining for <unk>.

Speaker Change: Thank you.

Thank you.

Speaker Change: And your next question comes from the line of Andy Kaplowitz of Citigroup. Your line is open.

Andrew Kaplowitz: Good afternoon, everyone.

Andrew Kaplowitz: Hi, Andy.

Jim or Chuck maybe just a little more color on the expected Hs improvement in 'twenty four but could you talk about fluke health than they were discontinuing product lines in 2003, as you know, which is causing some noise or they over the hump here in 'twenty four and when you look at Asps I know Youre still building out your overall international infrastructure and supply chain are you.

Chuck Mclaughlin: I just wanted to check on the sort of margins in the first quarter. So realize it's not a big sequential decline in sales, but you've got a very heavy sort of sequential step down in margins there in Q1, you know, 100% or so kind of drop through. So is that reflecting maybe something on mix in any of the businesses in the first quarter versus the fourth? I'm just trying to understand, maybe with precision, in particular, how their margins are starting out the year in Q2.

Andrew Kaplowitz: Over the hump there in terms of progress and how much restructuring is helping your margin in 'twenty four.

Speaker Change: Well I'll take the first part of that yes.

Jim Lico: Yes look how it will probably be in the in the mid single digit range for the year, So pretty close to the segment growth, maybe a little bit less in the first quarter and a little bit better first half and a little bit more in the second half so.

Jim Lico: But they are for some of the some of the things that you described as well.

Chuck Mclaughlin: I'm, Nigel, the biggest thing is there's just a seasonal step down in revenue dollars from Q4 to Q1. And that's what gives you a normally seasonal step down in the margins, pointing out that, you know, our Q1 guide is up 75 basis points. So that's, that's pretty good expansion there.

Jim Lico: With regards to the margin expansion.

Jim Lico: Probably the bigger issue.

Jim Lico: Bigger driver behind the margin expansion.

Jim Lico: Hello.

The growth in ASP, and the topline growth getting through that.

Jim Lico: Distribution.

Jim Lico: And shut in having consumables in North America show up like they did in Q4.

Jim Lico: So I think we're seeing pretty good performance across the segments in March. Yeah, I would say, you know, that guide represents record operating margins in the first quarter for Florida. So I think when you just look at, you know, we do have some expenses that start back up at the beginning of the year, obviously, salaries and some of those things, there's a little bit of that. But at the end of the day, if you just step back, that'll be a record first quarter in the history of Florida. Thanks very much.

Jim Lico: Probably if I had scored 80% of what's driving the margins there.

That's helpful guys and then maybe just a little more color on price versus cost expectation in 'twenty. Four I know you said price Chuck but one of your industrial peers report today and reported quite Rocky results in terms of its handling of the global supply chain. It seems like sort of is handling supply chain quite well.

Jim Lico: Pricing, obviously remains sticky, but could you elaborate what you're baking in for price versus cost and how you would read the predictability at this point of the global supply chain.

Jim Lico: And then my follow-up would just be, You know, it's typical, I suppose, you give guidance for year one, and then someone asks about year two. But if I look at slide 14, you do have that, I guess it seemed medium-term when you gave it, but you've got that 450-ish, or maybe it's, you know, 430, excluding capital deployment number for 2025, and obviously, a year from now, that will be a formal guide, whatever you end up giving, not a medium-term aspiration. So I guess I'm trying to ask kind of how, given it is only 11 months away now, that period, you know, how seriously should investors treat that number of 450, which does require a fair amount of M&A this year. So any thoughts around, you know, the M&A market backdrop? One of your acquisitive peers was saying it's maybe looking a little bit better now. Yeah, a couple of things. I think when you look at our history and in terms of double-digit EPS growth and compounding free cash flow, I think it's not too difficult to get to that 450.

Speaker Change: Well I think there is a couple of things in terms of the inflation, we're seeing we're seeing that come down and Thats why youre seeing the price, we're putting into the market come down, but we will expect to stay ahead as we always do on the price cost to supply chains continue to get incrementally better every quarter, but that doesn't mean they are back to what we.

Speaker Change: He would call normal and problems can.

Crop up from time to time, but we think that.

<unk>.

Speaker Change: Incrementally better is what we what we see there remember were not opened big commodity exposures that can cause maybe some of our peers or are there other companies that we have a pretty good line of sight and great.

Speaker Change: Every months, Jim and I are meeting with the Opco teams hearing hearing what we're seeing on inflation, but is trending the right way.

Speaker Change: Meaning the rate of inflation is coming down and I would just I would just add the proof points are.

Speaker Change: Gross margin expansion over the last several years has been very consistent I think that speaks to our ability to manage the situation not just on the price side, but on the cost side.

Jim Lico: That's why we put those numbers out there a year ago and we reiterated them in the guide and on the presentation. So we obviously feel good. Long way away, a lot can happen, but we feel good about it. I think relative to the M&A market, we just closed a quarter where we did basically five deals including kind of closing in the early part of January. So it's, you know, across the board in every segment, variety of different sources from private equity to private ownership, founder-led companies, good breath across a number of our workflows. So we feel really good about the M&A environment and we just demonstrated really good progress against the M&A environment. EA is starting off really well and where we start we now think that's going to be a creative in the year only right after closing it so we've seen really good things there so I would say the environment what we've done we're really proud of that work good work gonna set us up well back to your comment about 25 both EA and those other deals are going to be helpful in 25 for sure and quite frankly when you look at when you look at the environment that we're in right now probably a little bit better certainly we've demonstrated that and you know we want to continue to as always as you know Julian we're we're always busy and and we're excited about the opportunities that are in front of us but we're also incredibly excited about the teams that have just joined board, That's great. Thank you. Thank you. Your next question comes from the line of Jeff Sprague of Vertical Research, your line is open. Thank you. Hey, hello, everyone. Hope you're doing well.

Speaker Change: And we're working capital continues to get better.

Speaker Change: As we noted as a percent of sales. So we're doing that while not having to have significant increases in working capital in fact, our working capital is getting better. So I think what we'll see this year Andy just to add on to that is is that our teams have done a really nice job. We were just with all of our teams couple of weeks ago and they are doing a really nice job of design savings as well so.

Speaker Change: Only on the negotiated savings, but also looking at looking at our designed what we call our.

Speaker Change: Value engineering effort and our value I think we'll have a right now our plans for value engineering would be our cost reductions out of value engineering will be at a record 24.

Speaker Change: When we deliver on that through the year. So number of things. We're doing to continue to stay ahead of price cost knowing that probably price wasn't going to be able to stay at those levels that we had over the last few years, we've always been a good price company. So we'll continue to get our fair share, but but I think what we're also trying to do is really push our teams hard on that on the opportunities on the cost side.

Speaker Change: As well.

Speaker Change: I appreciate all the color guys.

Speaker Change: Thanks, Andy.

Speaker Change: And once again, if you do have a question you May press star one to enter the queue again, if you do ask a question. Please press star one at this time to enter the queue.

Speaker Change: And your next question comes from Scott Davis of Meles Research. Please go ahead.

Speaker Change: Thanks.

Scott Reed Davis: Thanks, Jim and Chuck in Atlanta.

Scott Reed Davis: I'm not very good at the Star one thing.

Scott Reed Davis: So it's a skill I guess, but anyways.

Scott Reed Davis: A lot of questions have been answered, but I am kind of.

Scott Reed Davis: Just curious on service channel and probation. If you combine those deals combined they're pretty darn important to the long term growth story, but.

Jim Lico: Hey, just a couple from me on ASP and the consumables growth. 7% sounds pretty healthy. Is there some kind of, I don't know, kind of channel fill in the direct model that had to happen?

Scott Reed Davis: Pretty dilutive the first year.

Scott Reed Davis: And change but.

Scott Reed Davis: Where do you think youll be in 2024 versus the deal model and those things combined we believe.

Scott Reed Davis: Back.

Jim Lico: What are you expecting for consumables growth in the U.S. for 2024? We'll be in the mid-single-digit range. There's probably a hint of catch-up from Q3 there, but not a lot of inventory build. We would expect it to be mid-single-digit for them across the board. And obviously, I wouldn't want to be a predictor of 7% every quarter.

Scott Reed Davis: And the positive on those things in.

Scott Reed Davis: And I would imagine they compound rate I mean, the growth is so.

Scott Reed Davis: It should be high enough for the margins high enough that the returns on capital kind of go through kind of hockey stick at some point are we there yet and when you think about 2024.

Scott Reed Davis: It's Scott.

Scott Reed Davis: First of all from a topline standpoint, and really the bottom line. We think we're on track to running ahead, so, but I think when you're talking about dilutive as the rates come from low single digit there in mid single digit territory.

Jim Lico: But as we said, we validated the strategy, I think, in Q4 with what we want to do. As I mentioned with the team last week, they're incredibly optimistic about where they stand today and where they stand for the year and in the future years as well. So I think we're in a good place. And then just on EA, obviously on it in Q4, but any color and how it grew in Q4, and then you just be a little more specific on what you expect for growth in 2024, again, to be in M&A, but kind of the underlying growth in the business in 2024. Yeah, we, first of all, closed for the first week of January.

Scott Reed Davis: Accelerated going forward. So we think those two are right odds, but accretive to the top line growth.

Speaker Change: So let me stop there and see if I understood that part of the question.

Kind of I guess, I guess kind of my point and perhaps you can do this after is that when he announced those deals. It was I think that the language Jim used at the time.

Speaker Change: Youll be really happy we own these assets someday just given the growth rates and I'm just kind of curious if you feel the same way.

Jim Lico: We're off to a good start. The 108 plan is scheduled. We've got our Obeah room set up with integration.

Speaker Change: Yeah, maybe just to give you a little bit I think we anticipated if I remember correctly in the first year 10 cents of accretion we ended up with 12 of accretion. So so in the first year, we over delivered delivered on the accretion side as Chuck mentioned.

Jim Lico: Our teams are really excited about the work we can do together. As you remember, Jeff, when we announced the deal, we said we'd have the opportunity to take our big Tektronix sales force and sell those solutions. We started our annual sales kickoffs over the last couple weeks, and there was a lot of excitement about that. Relative to, specifically to your question, December was a record order month for the business, so they ended the year strong.

Speaker Change: We're incredibly happy with these businesses, maybe just to take your point you can see on the and that's why we really put them on the chart. When you look at the growth rates in the businesses.

Speaker Change: They're very strong probation was already a very high margin business one of the highest in Florida are already service channel. Obviously was a breakeven business. So there were some concerns could we get that business into the sort of accretive margin rates that we see is so strong in in Florida is obviously an iOS similar.

Jim Lico: And, you know, there's a tremendous amount of growth opportunities there in front of us. They've got a good backlog situation, so we feel good.

Jim Lico: We feel good about the revenue base for the year and how that can grow. Obviously, it won't be in our core business until 25, but we feel good about the growth. Relative to, you know, we now think this is, you know, probably a mid single-digit break-even in 24, which is off from the original thesis around the deal. So we're already ahead of the head of the game.

Speaker Change: We're obviously, they're in the Florida side and they are approaching the iOS side. So so we feel really good in that regard and the other part of it we're trying to really make a point of depth in the.

Speaker Change: The prepared remarks, Scott and I know you understand this but it's really how FBS has really made a difference here you see the net dollar retention, where that's at now the AOR growth.

Jim Lico: Growth should be good. And we think the business is probably in the 190 to 195, 195 million range, and that's probably where it'll be for the year. So, we're in a really good place with the business. It's a good team, as I mentioned before, and it's going to, you know, that's why, when you step back and look at the deals we did in the previous question, we feel good about the year's six to 8% overall growth for the year stands up, obviously EA being one of the big parts of that, but the other acquisitions adding some as well And then just, I'm sorry, a little quick housekeeping one, too.

Speaker Change: Really FBS is really made both teams have.

Speaker Change: It really embraced FBS on the growth and innovation front. They are at their they've done a nice job in that in a short period of time, and that's where that's how you see these.

Speaker Change: Net dollar retention numbers, which are obviously extremely good and the business is well positioned for the future and to your point also.

Speaker Change: We don't stop at 10% rates right, they're going to continue and when you. If you've got 110 to 100 plus percent net dollar retention margins and this structure and growing interest rates. Obviously, the Reits are going to go above 10% in the out years.

Jim Lico: Just this design piece of Inditex. Is that a divestible business, or are you just winding it down? And how big is that piece?

Yes that makes a lot of sense, just real quick guys does invert and vet Tech get worse before it gets better just partially just given sprague's question on kind of the wind down or the sale of.

Jim Lico: It's in the 20 million range of revenue break evens. So, you know, we're going to look at we'll look at a number of options. I think we've got there are buyers out there for sure. The team The team's working on some different things.

Speaker Change: The design business, but.

Speaker Change: But these things.

Speaker Change: Selling into some pretty tough markets, but does that end up getting a little bit worse before it gets better in 'twenty for.

Jim Lico: So, you know, as you can imagine, it really was originally in our sensing and automation businesses. It's, it really has life science customers. But it's, like our other sensing businesses, quite frankly, it has more of an industrial aspect from an OEM perspective.

Speaker Change: Are we already there.

Speaker Change: I think we're going to run into some.

Speaker Change: For comparison in the second half and so it will stop being this.

Okay.

Speaker Change: Tough compare for us and I think that.

Speaker Change: Yes, we need some of the dynamics of those markets to recover keep in mind. This is a business that's less than $100 billion in total.

Jim Lico: That business has done pretty well over the last few years, so we'll anticipate keeping that as part of the portfolio. But we're going to look for options on the other. Thank you very much.

Speaker Change: So it's not.

Speaker Change: So not quite as impactful as bringing some of that some of these other maneuvers.

Jim Lico: Thanks, Jeff. Your next question comes from the line of Deane Dray from RBC Capital Markets. Your line is open.

Speaker Change: And.

Speaker Change: ASP right now I would say Scott embedded in the P T core growth outlook.

Speaker Change: For Q1, there was about a 1% headwind to core growth in <unk> in the top.

Jim Lico: Thank you, good day everybody. Hey, um, the word de-stocking, wrap up in any of your prepared remarks, Any caller there in terms of inventorying the channel, fluke, sell-in, sell-through? Yeah, I think to the second part of your question, mid-single-digit POS growth at Fluke around the world in the fourth quarter, so good solid growth, you know, down from the double-digit we've seen for a while, but still, I think that would be that we take that number pretty solidly. A little bit of de-stocking in tech in the U.S., single-digit millions, but a little bit I would say that that's, we now think China is likely to probably not grow in the year. That's embedded in our guide, and some of that is going to be just, I would say, less destocking than it is just conservativeness on the part of Chinese distributors and Chinese channel partners to sort of see how the macro evolves out there over the year. But again, that's embedded in our So just to clarify on China, that's flat for the year is the expectation. Probably down low single for the year.

Speaker Change: Okay.

Speaker Change: You guys had a leveling out.

Speaker Change: It's a statement that you have had a good quarter when we have to pick on $100 million business right. So I'll pass it on thank you.

Speaker Change: Thanks Scott.

Speaker Change: Thank you and your next question comes from the line of Rob Mason from Baird. Your line is open.

Robert W. Mason: Yes. Thank you.

Hello, I may have missed this Jim but how do you think about your overall software growth in 'twenty four relative to the 2% to 4% core growth how does that rollout.

Robert W. Mason: Yeah, we feel really good about it Rob I think when you look at it not only maybe starting with 23, we have really good really good growth in 'twenty three we'll have high single digit software growth of 24. So when we look at the AAR numbers. They are good obviously, we're just talking about service channel probation in the previous questions, but I think across the.

Robert W. Mason: Our board is going to have high single digit growth. So we feel good about where it's at and I think it's a testament to the strength of how FBS is really adding value and it's a testament to those businesses and the work they're doing we didn't talk a lot about AI, but we'll start to see as we get into <unk> into 'twenty late 'twenty four and 'twenty five.

Jim Lico: So that would be our anticipation at this point. A couple of things there, just starting what we've seen thus far is that customers are a little bit more conservative, as I mentioned. As you know, Dean, we've talked about this over the years; you really don't know China until you see March, you get to after the Chinese New Year, and see how channel partners and customers are gonna unfold for their year. We've seen more conservatism up to this point in the year.

Robert W. Mason: How some of our data analytics and AI solutions are also going to help the growth rates. There. So we're not we're in a very good place and I think the strategy is playing out the way, we anticipated which is it.

Robert W. Mason: Those businesses would have more durable higher growth rates and ultimately that would that would benefit Florida not only on the growth side, but on the margin front you certainly saw that in 'twenty three we absolutely see that with our double digit EPS.

Robert W. Mason: Kind of numbers that will show in 'twenty four.

Jim Lico: So our anticipation is that the year sort of progresses. We had a really tough cop in the first quarter in China, we had great growth in China last year in the first quarter, but we would anticipate for the full year that China would probably be down about most. Great, and just one clarification for EA. I believe you said that you were targeting 100 bases of Margin Improvement for this year and that it would be the tech sales force that would be selling it. Did they come with a sales force at all? And where is that 100 basis points? Is there any kind of manufacturing efficiency there? What are the drivers around?

Speaker Change: Very good.

Speaker Change: Just as a follow up specific to sensing.

Speaker Change: How would you how some of your semi cap customers are certainly starting to tee up.

Expectations around a better 'twenty five.

Speaker Change: I assume that you didn't mention that in market, specifically aerospace defense food and beverage maybe do better this year, but how are you thinking about that market turning in that business for your semi cap equipment.

Speaker Change: Yes, well first thing.

We're about six quarters.

Speaker Change: Negative order rates. So we don't anticipate to see the overall order rate start to change the book to Bill there probably in and around one in the second second half for sure probably starting in sometime in the second quarter. So we start to see things move we didn't talk about it but the number maybe more broadly about sensing.

Jim Lico: So Dean, a couple of things to unpack there. One, we got EA, and they come with 40% incremental margins. I think the 100 basis points is about core growth that it adds to tech, which is what we called out. We would expect with volume growth that there's, Did it go from 40 to 41? Yeah, it did.

Speaker Change: One of the things we saw in the fourth quarter was rather than guess 12 month blanket orders, which we would typically get with Oems. We got three months blanket orders are so we will we will see that those orders pick up probably in the second half.

Jim Lico: Super surprising for them, but I think that was more about the impact on core growth for everyone in EdTech. And then on the sales force, I think Jim can give it. Yeah, I mean, if they came with about a sales force of roughly 40 folks, we 10x that with Tektronix. We have the ability to sell that solution across the board. The teams are working through their cross-selling strategies.

Speaker Change: So that's the state of the state of the World relative to the SME index, It where it's at we're starting to see the green shoots of customers that are starting to talk about orders in our businesses that maybe in the earlier stages there.

Speaker Change: Little bit a little bit et cetera, a little bit in our keithley business at tektronix.

Speaker Change: Starting to see customers talking about the second half of this year. So we think that just overall will start to see some things we're not anticipating a big step up there we'll have to we'll let the fact patterns determine that but we do anticipate at least seeing some of that turn in the second half of the year.

Jim Lico: And one of the things we said when we announced the deal was that we thought there was a real opportunity, primarily outside of Europe, to really accelerate the business through the addition of the Tektronix sales force. So, yeah, as Chuck mentioned, already a very profitable company. They had great growth.

Speaker Change: Very good thank you.

Speaker Change: Thanks, Rob.

Jim Lico: They're a good growth company, a great growth company, and even with their size, they add growth to Tektronix and PT. So, we're excited about that opportunity. Obviously, that's not the core of the year.

Speaker Change: Your next question comes from the line of Andrew Open from Bank of America. Your line is open yes.

Speaker Change: Yes.

Andrew Burris Obin: Hi, how are you good afternoon.

Jim Lico: That'll be in 25. But, but so far, we really feel excited. We're really excited about the. Thank you. And your next question comes from the line of Andy Kaplowitz of City. Your line is open. Good afternoon, everyone. Hi, Ambie.

Speaker Change: Andrew.

Andrew Burris Obin: Yes, just maybe and I don't know if but.

Andrew Burris Obin: When you were talking before something you were specifically referring to sensing or tech.

Speaker Change: Maybe just confirm.

Speaker Change: What's happening with Teck.

Speaker Change: Book to Bill and what kind of exit rate.

At Teck right just sort of you know if you look at the peer orders quayside Matti you still have orders down let's call it mid teens.

Jim Lico: Jim or Chuck, maybe just a little more color on the expected AHS improvement in 24, could you talk about fluke health? They were discontinuing product lines in 23, as you know, which is causing some noise. Are they over the hump here in 24? And when you look at ASP, I know you're still building out your overall international infrastructure and supply chain. Are you over the hump there in terms of progress and how much restructuring is helping your margin in 24? Why don't I take the first part of that?

Speaker Change: So to understand correctly, we're thinking that based on the feedback we're getting on the comps.

Speaker Change: Revenues will be up low to mid single digits next year right is that the right framework.

Speaker Change: For Tektronix, we think business will be about low single digit for the year.

Speaker Change: So just just from a revenue perspective, we've had five quarters of negative orders there, we'd probably see that.

Chuck Mclaughlin: Yeah, flu health will probably be in the mid-single-digit range for the year, so pretty close to segment growth. Maybe a little bit less in the first quarter and a little bit better— or first half and a little bit more in the second half. So, they are going through some of the things that you described as well.

Speaker Change: In the first quarter, we will start to see things turn the book to Bill starts to turn in and around the second quarter. There. So just just to kind of give you a sense and that's.

Speaker Change: We've had aerospace and defense has been good continues to be good.

Speaker Change: But it's mostly broadly around electronics and things like that so some semiconductor customers as well so.

Chuck Mclaughlin: You know, with regard to the margin expansion, probably the bigger issue, the bigger driver behind the margin expansion at health is the growth of ASP and the top line growth getting through that distribution, you know, and shot, and having consumables in North America show up like they do. I think that's probably, I had to score 80% of what's driving the margin, helpful guys, and then maybe just a little more color and price versus cost expectation. I know you said price Chuck, but one of your industrial peers today reported, you know, quite rocky results in terms of its handling of the global supply chain. You know, it seems like Ford is handling its supply chain quite well. You know, pricing obviously remains sticky, but could you elaborate on what you're baking in for price versus cost and how you would rate the predictability at this point in the global supply? Well, I think there are a couple of things.

Speaker Change: Comments I made around sensing semi.

Speaker Change: I also made the comment about cheaply, which is the most of it most of the exposure we have in tektronix relative to semi.

Speaker Change: We think the business is a good place obviously low single digit for the fourth quarter against a 20% comp from a year. Prior so still a good place record year for Tektronix from a revenue perspective, and probably a quarter or two here of absorbing continued to absorb some of the some of the market.

Dynamics, we described and but the business in a good shape and exit rate into 25, probably in a good place.

Speaker Change: And where are we on book to Bill sorry.

Speaker Change: Well I think again.

Speaker Change: Fourth quarter, probably eight five probably always below one in the fourth quarter Gotcha, and then just just a broader question because it's certainly been a weird 23, and it seems like 'twenty four is going to be a strength as well.

Chuck Mclaughlin: In terms of the inflation we're seeing, we're seeing that come down. And that's why you're seeing the price we're putting into the market come down. But we will expect to stay ahead, as we always do, on the price cost. As for supply chains, they continue to get incrementally better every quarter. But that doesn't mean they're back to what we would call normal, and problems can crop up from time to time.

Speaker Change: But.

Speaker Change: I think at your analyst day, and I was just sort of going back to Julians question.

Speaker Change: You did outline.

Speaker Change: The 25 target, but you also our client longer term targets right.

Speaker Change: If you look at 'twenty five target was sort of I think CAGR of 12, 5%.

Speaker Change: Longer term targets 13, 5% right were printed 9% EPS growth last year.

Chuck Mclaughlin: But we think that, you know, incrementally better is what we see there. Remember, we're not open to big commodity exposures that can cause maybe some of our peers or other other companies that we have a pretty good line of sight on and great, you know, every, every month, Jim and I are meeting with the Opco teams hearing hearing what we're seeing on inflation, but it's trending the right way. And meaning the rate of inflation is coming down. Yeah, and I was just I would just add the proof points.

Speaker Change: This year, our target is 9% to 12% I totally get out there is there is a cushion here right in <unk>.

Speaker Change: The way, we're probably going to do some M&A, but from your perspective, what needs to sort of go back to normal change from a macro standpoint, what's the biggest lever.

Speaker Change: That needs to change right to sort of get back to a quote unquote normal where you guys can sort of accelerate EPS growth from what we've seen last year and what you're sort of guiding to this year or is it all just M&A sorry for an extensive question, but yes.

Jim Lico: You know, our gross margin expansion over the last several years has been very consistent. I think that speaks to our ability to manage the situation, not just on the price side but on the cost side. And our working capital continues to get better, and as we noted, as a percent of sales. So, you know, we're doing that while not having to have significant increases in working capital because working capital is getting better. So, I think what we'll see this year, Andy, just to add on to that, is that our teams have done a really nice job. We were just with all of our teams a couple weeks ago, and they're doing a really nice job on design savings as well.

Speaker Change: Well I think when you look at our track record over four years and what we tried to do is not take any one particular year.

Speaker Change: Because when you average them out when we're talking about the out years here, we're talking about.

Jim Lico: So not only on the negotiated savings but also looking at our designs, what we call our value engineering effort, and our value. I think we'll have a right now our plans for value engineering would be our cost reductions out of value engineering will be at a record in twenty four when we deliver on that through the year. So a number of things we're doing to continue to stay ahead of inflation costs, knowing that probably prices weren't gonna be able to stay at those levels that we had over the last few years. We've always been a good price company.

Speaker Change: The average rate and when you look at the average they're not too different future versus prior history. So I think what passes a bit falloff here. If you look at the success. We've had over the last four years relative to EPS growth that you sort of fast forward.

Speaker Change: With continued to use our free cash flow, obviously, we had interest expense a little higher last year than we anticipated, which is why that number with single digit will delever through the year.

Speaker Change: So that has some some improvements as well, but I think at the end of the day. We're in a very good place relative to those targets and I think this reflects it. So there is there is obviously the macro is always in the geopolitical situation is probably always one of those things you think about but thats why we said in the prepared remarks that we've got some <unk>.

Jim Lico: So we'll continue to get our fair share, but I think what we're also trying to do is really push our teams hard on the opportunities on the cost side as well. Preach it to all the color guys. Thank you, Annie.

Christina: And once again, if you do have a question, you may press star one to enter. Again, if you do have a question, please press star one at this time to enter. And your next question comes from Scott Davis of Mellius Research. Go ahead. Thanks, Jim and Chuck and Elena. I'm not very good at the star one thing.

Speaker Change: Mario is to continue to be agile and dynamic based on what the economic.

Speaker Change: Situation looks like it's the best way to SaaS. So.

Software and healthcare is going to continue to compound at higher rates of growth and higher rates rates of margin expansion and thats going to continue to mix up the portfolio, particularly if you take a longer period of time like in 28. So I would say those are the dynamics you've got to see continue to see those businesses continue to get better.

Christina: This is a skill, I guess. Anyways, a lot of questions have been answered, but I'm kind of curious about the service channel and probation. If you combine those deals, you know, combined, they're pretty darn important. Long-term growth story, pretty dilute of the first. For more information, visit www. FEMA.gov, Where where do you think you'll be in 2024 versus a deal model in those, Will you be back? and the positive on those things. And I would imagine they compound, right?

Speaker Change: They will this year like they've been doing and then continue to do the things that we've been doing relative to productivity and innovation that will continue to help us work through.

Speaker Change: In the various markets secular drivers that we've attached ourselves to broaden the workflow.

Speaker Change: The last thing I'd say, Andrew is the five deals that we did over the last 30 years.

Speaker Change: Now three months or so they all have an opportunity to continue to accelerate our compounding theyre all attached to good growth drivers theyre additive growth growth year in part from a margin perspective from a bolt on standpoint, they're all making their associated businesses better over time and when you take a few years out they are going to become a bigger part of that so some of them are small, but if you take.

Chuck Mclaughlin: The growth is so, should be high enough, the margin's high enough, terms on capital kind of go, kind of hot, Are we there yet? about 2024, um it's Scott a number of things first of all from a top line standpoint and and really the the bottom line we we think we're on track to running ahead so um but I think when you're talking about diluti as the roiks come from you know low single digit they're in mid single digit territory and it's Dupont, So let me stop there and see if I understood that part of the question. It kind of I guess I guess kind of my point and perhaps we can do this after is that when he announced those deals it was, language jim used at the time is You'll be really happy we own these assets someday, yeah maybe just to give you a little bit i think we were we we anticipated if i remember correctly in the first year 10 cents of accretion we ended up with 12 cents of accretion so so in the first year we over delivered delivered on the accretion side as chuck mentioned um we're incredibly happy with these businesses maybe just to take your point you could see and that's why we really put them on the chart when you look at the growth rates in the businesses um they're they're very strong probation was already a very high margin business one of the highest in ford of already service channel obviously was a break-even business so there was some concern could we get that business into the sort of accretive margin rate that we see is you know that's so strong and in in ford of and obviously in ios and we're we're we're obviously there and the ford of side and they're approaching the ios side so so we feel really good in that regard and the other part of it we were trying to really make a point in that in uh in the prepared remarks scott i know you understand this but it's really how fdf has really made a difference here you see the net dollar retention where that's at now the ar growth the the really fds has really made it both teams have have really embraced fds on the growth and innovation front they're at they're they've done a nice job in that in a short period of time and that's where that's how you see these you know these net dollar retention numbers which are obviously extremely good and and the business is well positioned for the future and to your point also they don't stop at 10 percent rights right they're going to continue and when if you've got 110 to 100 plus percent net dollar retention margins in this structure and growing at this rate obviously the rights are going to go above 10 percent in the, That makes a lot of sense. Just real quick guys, does InVetTech get worse before it gets better? Partially just given Sprague's question on kind of the wind down. Design Business.

Speaker Change: Two year three year out period, you're in you're in.

Speaker Change: There'll be additive as well so and then as I said that the M&A environment is still it looks like it continues to get better here and we're excited about that.

Speaker Change: If I could just squeeze in one more should we start to think about Florida is increasing dividends ambulant some framework around share buybacks, maybe offsetting share issuance as long as we're there.

Speaker Change: Well in terms of the dividend.

Speaker Change: <unk> tried to signal is that as our free cash flow and earnings per share increase are you will see our dividends.

Speaker Change: Increase on the same.

Speaker Change: Same trajectory.

Speaker Change: With share buybacks, what we did is we restart two where we had to.

Over the last two years, we've been opportunistic.

Speaker Change: Buying some shares back when we just went back to the level. We had two years ago doesn't M&A is still the priority.

Speaker Change: Thanks, so much.

Speaker Change: Thanks, Andrew.

Speaker Change: Thank you. Your next question comes from the line of Joe Giordano from TD Khan. Your line is open.

Joseph Giordano: Hi, Thanks for taking my questions.

Joseph Giordano: Just a couple one on the M&A side and capital deployment kind of piggybacking on what Scott was talking about.

Joseph Giordano: You highlighted formation and you highlighted.

Joseph Giordano: Service channel and I think it's pretty clear as to how companies like that can lever op growth in that you can accrete to EPS and what they can do to margins I'm, just curious and like to avoid some of these things because I think like on provision the math was something like a needed to grow 15% a year and have margins expand to like almost instead of mid <unk>.

Joseph Giordano: <unk> from the mid Thirty's or something like that to hit like a seven 5% return in year five like it looks like at least that slide suggests it's under those targets. So like how do you evaluate where you are in ROIC on deals like that.

Joseph Giordano: So.

Joseph Giordano: First of all we look at our ROIC and go back to looking at.

Where the revenue needs to be March started upgrade on probation has talked about and we're running ahead of where we thought we'd be on the top line. So.

Joseph Giordano: Maybe talk offline and exactly what the original assumptions were but thats, what we know we're at for both of those deals and so where we.

Joseph Giordano: We're on track or ahead of where we thought we'd be a couple of years yet.

Speaker Change: I think so.

Speaker Change: So I think that's that's as simple as I can put it.

Speaker Change: Jonathan maybe just add on is there is the reason why we highlight that these two companies two years out is because when we bought the companies. There were some skeptics quite frankly people didn't think we could get service channel margins into the <unk> as quickly as we did people Didnt think the probation would grow during COVID-19. The way. It did so yes, I wouldn't I wouldn't necessarily say effort.

Chuck Mclaughlin: Thanks for watching. Are we already there? I think we're going to run into some easier comparisons in the second half, and so it'll stop, a tough comparison for us, and I think that, you know, we still need some of the dynamics of those markets to recover. Keep in mind this is a business with less than 100 million customers in total, and so, God. It's not quite as impactful as...

These were slam dunks, because there were some doubters out there and I think what we tried to do in with.

Speaker Change: With two years in this suggests.

Speaker Change: To demonstrate.

Speaker Change: That pace.

Speaker Change: Exactly where we thought we were in case. We're ahead of the game. We were ahead of the game first year out as I mentioned in the previous call relative to EPS. So these businesses are in good shape and as we highlighted back in May. These are this is consistent with a number of the other deals and that's really what you see in 'twenty four is the portfolio durability based on the success.

Chuck Mclaughlin: Some of these other movers like EA and, I would say, Scott, embedded in the PT core growth outlook. You know, for Q1, there's about a 1% headwind to core growth in PT due to a little bit more confined, leveling out.

Of those deals so I would just add that into the broader the broader view of M&A and how it's continuing to add ROIC continue to get better and its adding more durability and capability of the organization and then just to clarify this came up earlier, but the combined like and certainly for probation is already.

Chuck Mclaughlin: It's a statement that you've had a good quarter when we have to pick on a hundred million dollars. So, good job. Well, passing on, thank you.

Speaker Change: In the mid single digit or.

Speaker Change: 24.

Speaker Change: Range right.

Speaker Change: Thanks, a lot maybe.

Jim Lico: Thanks guys. Thank you. And your next question comes from the line of Rob Mason from Baird. Your line is open.

Speaker Change: Piggyback on that.

Speaker Change: You've done deals now across like SaaS type deals than you've done in hardware centric deals as you kind of run FBS through these businesses I mean, it's flex different muscles that you need to use depending on these are you finding like one type of deal somewhat easier to accomplish the goals that you set up.

Jim Lico: Oh, yeah, right. Thank you. Hello. I may have missed this, Jim, but how do you think about your overall software growth in 24 relative to the 2 to 4 percent core growth? How does that stack up?

Speaker Change: At the outset.

Speaker Change: Well I would say certainly hardware deals is something we've been doing for 20 years and there is a there is the <unk>.

Jim Lico: Yeah, we feel really good about it, Rob. I think when you look at not only maybe starting with 23, we have really good growth in 23. We'll have high single-digit software growth in 24. So when we look at the ARR numbers, they're good. Obviously, we're just talking about service channel probation in the previous questions, but I think across the board, FAL is going to have high single-digit growth. So we feel good about where it's at. I think it's testament to the strength of how FBS is really adding value.

Speaker Change: Use your muscle framework, there is a lot of muscle around that you saw that and even with some of the COVID-19 challenges in Asps. Our continued ability to do things like really improve the free cash returns on the business because of working capital. So I would certainly say that thats.

Speaker Change: Those are things that we've done for a long time, but I think this is really one of the reasons why we put it on the slide is is that we've really built tremendous capability around software FBS for software and we didn't talk about it but we've now got in Fps suite of AI tools, which are really helping drive innovation drive.

Jim Lico: And it's a testament to those businesses and the work they're doing. We didn't talk a lot about AI, but we'll start to see, as we get into late 24 and 25, how some of our data analytics and AI solutions are also going to help the growth rates there. So we're in a very good place, and I think the strategy is playing out the way we anticipated, which is that those businesses would have more durable, higher growth rates. And ultimately, that would benefit Ford not only on the growth side but on the margin front. You certainly saw that in 23.

Speaker Change: <unk> activities or the software broadly, but also for the software business. So we've really I am really proud I said in the prepared remarks around how thats. The Fps as it ended up itself is getting better and that really means more broadly. It's really it is I think what we're really proud of is the fact that if you look at the forward of the portfolio.

Speaker Change: Palio today FBS means as much at our software business, where our health care business, our traditional industrial business FBS means being.

Jim Lico: You absolutely see that with our double digit EPS kind of numbers that we'll show in 24. Very good. Just as a follow up specific to sensing, how are you, how are some of your SEMICAP customers, you know, are certainly starting to tee up expectations around a better 25? I assume that's, you know, you didn't mention that in market, specifically aerospace defense food and beverage maybe do better this year. But how are you thinking about that market turning in that business for you, SEMICAP equipment? Yeah, well, you know, in sensing, we're about we're about six quarters, of negative order rates so we would anticipate to see the overall order rate start to change the book to bill there probably in in around one in the second second half for sure probably starting in sometime in the second quarter so we start to see things move we didn't talk about it but the number maybe more broadly about fencing one of the things we saw in the fourth quarter was rather than get 12 month blanket orders which we would typically get with OEMs we got three month blanket orders or so we we will we will see that those orders pick up probably in the second half so that's the state of the state of the world relative to the semi-index and where it's at we're starting to see the the green shoots of customers that are starting to talk about orders in our businesses that are maybe in the earlier stages there a little bit of jet a little bit of cetera a little bit in our Keithley business at Tektronix we're starting to see customers talking about you know the second half of this year so we would we think that you know just overall we'll start to see some things we're not anticipating a big step up there we'll we'll we'll let the we'll let the fact patterns determine that but we do anticipate at least seeing some of that turn in the second half, Very good. Thank you.

Being different tools, it may mean different applications, but the rigor and discipline is exactly the same.

Speaker Change: Thanks, guys.

Speaker Change: Thanks.

Speaker Change: Thank you and we do have time for one last question again this will be our last question of the day. Your line comes I'm sorry. The question comes from Joe O'dea from Wells Fargo. Your line is open.

Joe Ritchie: Hi, Thanks for fitting me in.

Joe Ritchie: Hey, Jeremy first question Hi.

Joe Ritchie: First question just related to sort of the price volume composition of organic and implying volumes kind of flat to up 1% for the year and I'm trying to understand where kind of the upside risk might sit on the volume side and whether the embedded assumptions are more sort of moving sideways and there can.

Joe Ritchie: Some upside risk on maybe easier short cycle comps in the back half of the year, just how you've thought about that volume piece of the equation and if theres anything embedded within that.

Joe Ritchie: Things getting better over the course of 'twenty four.

Joe Ritchie: Okay.

Joe Ritchie: I think when you look at it and I'll take the hardware businesses here. When you look at the hardware businesses Theres not a big inflection point as we go through the year. So.

Joe Ritchie: Robley.

Joe Ritchie: I would say, we don't see a big volume need we don't need a big volume inflection as we go through the year simply because of that I would say secondly, we're not really expecting a lot of restocking here. So I would say theres, probably some volume upside to two restocking. If we were to see that but I would say, we're certainly not counting on.

Joe Ritchie: And if it was probably more second half dynamic data.

Joe Ritchie: Okay.

Speaker Change: Makes sense and then on the productivity front.

Speaker Change: Can you just talk about the the margin contribution you anticipate from productivity in 'twenty, four and the degree to which that's kind of carryover from from 'twenty three actions or additional actions to drive more productivity gains in 2024.

Jim Lico: Thanks, Rob. Your next question comes from the line of Andrew Obin from Bank of America. Your line is open. Yes. Hi, how are you?

Jim Lico: Good afternoon. Hi Andrew. Yeah, just maybe, and I don't know if when you were talking before sensing, you were specifically referring to sensing or tech. But maybe just confirm, you know, what's happening with tech from book to bill and what kind of exit rate are we at with tech, right? Just sort of, you know, if you look at the peer orders, you know, Keysight, Maddy, you know, you still have orders down, you know, let's call it the mid teens. So, to understand correctly, we're thinking that based on the feedback we're getting on the comps, revenues will be up low to mid single digits next year, right? Is that the right framework?

Speaker Change: Yes, I think that normally we would expect 40%.

Speaker Change: Incremental margins and for the year, we're going to end up at 45, there's some puts and takes earlier in the year that.

Speaker Change: That we've seen but we're seeing probably.

Speaker Change: If we think about probably a seven or eight.

Speaker Change: Productivity coming into from those actions that are spilling into 2024.

Speaker Change: Okay.

Speaker Change: Meaning actions, you've already taken and so that just care for that $70, we're done with that.

Speaker Change: The productivity.

Speaker Change: The actions just the the benefits are coming in not that we're taking anymore.

Jim Lico: For Tektronix, we think business will be about low single-digits for the year. So just from a revenue perspective, we've had five quarters of negative orders there. We'd probably see that in the first quarter.

Speaker Change: Sorry about that.

Speaker Change: Understood. Thanks, a lot.

Speaker Change: Thank you and I'll now turn the floor back over to Jim Lico for closing remarks.

Jim Lico: Thanks, Christina and thanks, everyone for taking the time today I know, it's a busy busy day for all of you I hope.

Jim Lico: We'll start to see things turn. The book-to-bill starts to turn in and around the second quarter there. So just to kind of give you a sense. And that's, you know, we have had aerospace. The defense has been good.

Jim Lico: Hopefully what you heard today.

Jim Lico: <unk> was our.

Jim Lico: It's continued to be good, but it's mostly broadly around electronics and things like that. So some semiconductor customers as well.

Jim Lico: Really the benefits of the work we've been doing for several years, both in 'twenty, three and how we anticipate 24 to play out.

Jim Lico: So in the comments I made around sensing semi, I also made the comment about Keighley, which is, you know, most of the exposure we have in Tektronix relative to the semiconductor. So we think the business is in a good place. Obviously, low single-digit growth in the fourth quarter against a 20% comp from a year prior.

Jim Lico: We feel very very comfortable with where we stand today lots going on in the world as many of you know, but but I think how we built that constructed the portfolio over the last several years posted on tier.

Jim Lico: We feel and expect to have a good setup for for this year, we're certainly around for any questions. We want to thank everyone for your support in 'twenty three.

Jim Lico: So still in a good place. Record year for Tektronix from a revenue perspective. But probably, you know, a quarter or two here of absorbing, continue to absorb some of the market dynamics we described and put the business in a good shape. And exit rate into 25 is probably in a good place. And why are we unbooked to bill?

Jim Lico: We will probably see a lot of you out on the road here over the next few weeks, we look forward to that and obviously our team is available for questions and follow up and then over the next several days. So thanks have a great day and have a great earnings season, and we will see on the road. Thanks.

Jim Lico: Sorry, um well i think in uh fourth quarter probably 0.85 probably but we're always below one in the fourth quarter gotcha and just just a broader question because it's certainly been a weird 23 and it seems like 24 is going to be strange as well but you know i i think if you analyze that it's just sort of going back to julian's question uh you did outline uh the 25 target but you also outline longer term targets right and if you look at 25 target we sort of i think kager is 12 and a half percent uh longer term targets 13 and a half percent right we printed nine percent eps growth last year this year target is nine to twelve percent i totally get there's there's cushion here right invitec uh is out of the way we're probably going to do some mna but from your perspective what needs to sort of go back to normal change from a macro standpoint what's the biggest lever that needs to change right to sort of get back to quote unquote normal where you guys can sort of accelerate eps growth from what we've seen last year and uh what we sort of got into this year or is it all just mna sorry for an extensive question but yeah, Well, I think when you look at our track record over four years, and you know, what we try to do is not take any one particular year. Because when you average them out, when we're talking about the out years here, we're talking about, you know, the average, right. And when you look at the average, they're not two different future versus prior history.

Speaker Change: Thank you and this does conclude today's conference call you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

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Jim Lico: So I think what passes as a bit of a prologue here, if you look at the success we've had over the last four years, relative to EPS growth, and you sort of fast forward, you know, with continuing to use our free cash flow. Obviously, we had interest expense a little higher last year than we anticipated, which is why that number was single-digit will delever through the year, as you know, so that has some But you know, I think at the end of the day, we're in a very good place relative to those targets. And I think this reflects it. So there's, obviously, the macro is always in a geopolitical situation; it's probably always one of those things you think about.

Yes.

Speaker Change: Thank you.

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Jim Lico: But that's why we said in the prepared remarks that we have got, you know, some scenarios to continue to be agile and dynamic based on what the economic situation looks like. That's the best way to say it. So, you know, software and healthcare are going to continue to compound at higher rates of growth and higher rates of margin expansion. And that's going to continue to mix up the portfolio, particularly if you take a longer period of time, like in 28.

Speaker Change: Okay.

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Jim Lico: So I would say those are the dynamics that you have to see, continue to see those businesses continue to get better, like they will this year, and like they've been doing, and then continue to do the things that we've been doing, relative to productivity and innovation that will continue to help us work through the various markets, secular drivers that we've attached ourselves to broaden the workflow. And I think the last thing I'd say, Andrew, is that the five deals that we did over the last 30, or, you know, three months or so, they all have an opportunity to continue to accelerate our compounding. They're all attached to good growth drivers, they're additive growth, and growth is better, and in part from a margin perspective, from a bolt-on standpoint, they're all making their associated businesses better over time.

Speaker Change: Okay.

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Speaker Change: Okay.

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Jim Lico: And when you take a few years out, they're going to become a bigger part of that. So some of them are small, but if you take a two-year, three-year out period, you're in, you're in; they'll be additive as well. So, and then, as I said, the M&A environment is still, you know, and looks like it continues to get better here. And we're excited about that. And if I could just squeeze in one more, should we start to think about affordable as increasing dividends in some framework around share buybacks, maybe offsetting share issuance, as long as we're there? Well, in terms of dividends, what we tried to signal is that as our pre-cash flow and earnings per share increase, you'll see our dividends increase on the same trajectory. With share buybacks, what we did is we restocked to where we had. Over the last two years, we've been opportunistic in buying some shares back, and we just went back to the level we had two years ago. M&A's still the priority. Thank you so much.

Speaker Change: Yes.

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Jim Lico: Thanks, Senator. Thank you. Your next question comes from the line of Joe Giordano from TD Cohen. Your line is open.

Chuck Mclaughlin: I got it. Thanks for taking my question. Just a couple on the M&A side and capital deployment, kind of piggybacking on what Scott was saying. So, I mean, you highlighted probation and you highlighted the service channel, and I think it's pretty clear as to how companies like that can lever up growth, and they can increase the EPS, and what they can do to margins. I'm just curious about, like, the relics of these things, because I think, like, on probation, the math was something like it needed to grow 15% a year and have margins expand to, like, almost the mid-50s from the mid-30s or something like that to hit, like, a 7.5% return in year five. So, like, it looks like, at least that slide suggests it's under those targets.

Speaker Change: Thank you.

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Speaker Change: Okay.

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Chuck Mclaughlin: So, like, how do you evaluate where you are in Roy Gunn deals? So, uh, first of all, we look at our ROICs and go back to looking, um, you know, where the revenue needs to be. March has started to upgrade on probation, talked about, and we're running ahead of where we thought we'd be on the top line. So, we can maybe talk offline about exactly what the original assumptions were, but that's where we know we're at for both of those deals, and so we're on track or ahead of where we thought we'd be a couple years in. I think that's as simple as I can put it. Joe, I would maybe just add one thing. The reason why we highlighted these two companies two years out is because when we bought the companies, there were some skeptics, quite frankly, people didn't think we could get service channel margins into the 20s as quickly as we did. People didn't think probation would grow during COVID the way it did.

Speaker Change: Okay.

Speaker Change: Okay.

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Jim Lico: So, yeah, I wouldn't necessarily say these were slam dunks because, you know, there were some doubters out there. And I think what we tried to do after two years in is to suggest or to demonstrate that, hey, we're exactly where we thought we were in case we were ahead of the game. We were ahead of the game first year out, as I mentioned in the previous call relative to EPS. So these businesses are in good shape.

Speaker Change: Okay.

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Jim Lico: And as we highlighted back in May, this is consistent with a number of the other deals. And that's really what you see in 24 is the portfolio durability based on the success of those deals. So I would just add that into the broader view of M&A and how it's continuing to add, Roy's continuing to get better, and it's adding more durability and capability to the organization. I didn't just, just to clarify, this came up earlier, but the combined like, and certainly for probation, is already in the mid single digits. 24. Thanks, boys. Maybe to piggyback on that, like. You've done deals now across like SAS type deals, and you've done hardware-centric deals as you kind of run FBS through these businesses. I mean, it flexes different muscles that you need to use depending on the situation.

Speaker Change: Okay.

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Speaker Change: Thank you.

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Jim Lico: Are you finding one type of deal somewhat easier to accomplish the goals that you set up at the outset? Well, I would say, you know, certainly hardware deals, stuff that we've been doing for 20 years, and there's a, there's a, you know, the use your muscle framework, there's a lot of muscle around that, you saw that, and even with some of the COVID challenges in ASP, our continued ability to do things like really improve the free cash returns on the business because of working capital. So, you know, I would certainly say that that's a, that's, those are things that we've done for a long time. But I think, and this is really one of the reasons why we put it on the slide, is that we've really built tremendous capability around software, FBS for software.

Jim Lico: And we didn't talk about it, but we've now got an FBS suite of AI tools, which are really helping drive innovation, drive commercial activities for software broadly, but also for software businesses. So we've really, I'm really proud, I said it in the prepared remarks around how the FBS, in and of itself, is getting better. And that really means more broadly.

Speaker Change: Okay.

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Jim Lico: It's really, it is, I think what we're really proud of is the fact that if you look at the Florida portfolio today, FBS means as much to a software business, or a healthcare business, or a traditional industrial business. FBS may mean different tools, it may mean different applications, but the rigor and discipline is exactly the same. Thanks, guys. Thank you, and we do have time for one last question. Again, this will be our last question of the day. The line comes, I'm sorry, the question comes from Joe O'Day from Wells Fargo. Your line is:

Speaker Change: Okay.

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Jim Lico: Hi, thanks for fitting me in. The first question is just related to the price volume composition of organic and implying volumes kind of flat up 1% for the year. And I'm trying to understand, you know, where kind of the upside risk might sit on the volume side and whether the embedded assumptions are more sort of moving sideways and there can be some upside risk on maybe easier short cycle comps in the back half of the year or just, you know, how you've thought about that volume piece of the equation and if there's anything embedded within that as things getting better over the course of 24. I think when you look at, and I'll pick the hardware businesses here, when you look at the hardware businesses, there's not a big inflection point as we go through the year.

Speaker Change: Okay.

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Speaker Change: Okay.

Jim Lico: So, probably, I would say we don't see a big volume, we don't need a big volume inflection as we go through the year simply because of that. And secondly, we're not really expecting a lot of restocking here. So, I would say there's probably some volume upside to restocking if we were to see that, but I would say, you know, we're certainly not counting on that, and if it was, it would probably be more of a second half. Okay, makes sense.

Speaker Change: Thank you.

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Chuck Mclaughlin: And then, on the productivity front, can you just talk about the margin contribution you anticipate from productivity in 24 and the degree to which you know that's kind of carryover from 23 actions or additional actions to drive more productivity gains in 2024? Yeah, I think that normally we would expect 40% incremental margins, and for the year, we're going to end up at 45. There are some puts and takes earlier in the year that we've seen, but we're seeing probably If you think about what probably eight, seven, or eight cents of productivity coming from those actions that are spilling into, meaning actions you've already taken. And so that's that's just going on 24. That's seven.

Speaker Change: Okay.

Speaker Change: Okay.

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Chuck Mclaughlin: We're done with the productivity actions, just the, you know, the benefits are coming in, not not that we're taking. Sorry. Understood. Thanks a lot.

Jim Lico: Thank you. And I'll now turn the floor back over to Jim Lico for a closing remark. Thanks, Christina. And thanks, everyone, for taking the time today. I know it's a busy, busy day for all of you. Hopefully, what you heard today was, was our, you know, really the benefits of the work we've been doing for several years, both in 23 and how we anticipate 24 to play out. So, we're, we feel very, very comfortable with where we stand today. Lots going on in the world, as many of you know, but I think how we've built and constructed the portfolio over the last several years, post-Volunteer, is we feel and expect to have a good setup for this year.

Speaker Change: Okay.

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Speaker Change: Okay.

Jim Lico: We're certainly around for any questions. We want to thank everyone for your support in 23. We know we'll probably see a lot of you out on the road here over the next few weeks. We'll look forward to that. And obviously, our team is available for questions and follow up over the next several days. So, thanks. Have a great day. Have a great earnings season and we'll see you on the road. Thanks. Thank you and this does conclude today's conference call you may now, ??? ??? ??? ??? ???

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