Q1 2025 Fortive Corp Earnings Call
Speaker Change: [music].
My name is Brock and I'll be your conference facilitator at this afternoon.
At this time I would like to welcome everyone to the Ford F Corporation's first quarter 'twenty twenty-five earning results conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question during that time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question you May Press Star then two.
I would now like to turn the conference over to MS. Elena Rosman, Vice President of Investor Relations. Mr. Rossman, you may begin your conference.
Elena Rosman: Thank you Rob and thank you everyone for joining us on today's call I'm joined today by Jim Lico, Our President and CEO and we were thrilled to welcome Marc Hookers drawn to our new CFO to the call and she is in the process of ramping up Jim and I will be addressing most of your questions. Today, We're confident mark will also.
Sure some valuable insights and look forward to getting to know him in the weeks and months ahead.
Elena Rosman: Presenting certain non-GAAP financial measures on today's call information required by regulation G is available on the investors section of our website at <unk> 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.
Elena Rosman: These forward looking statements are subject to a number of risks and actual results may differ materially from any forward looking statements that we make today.
Elena Rosman: Information regarding these risk factors is available in our SEC filings, including our annual report on form 10 for the year ended December 31st 2024, and quarterly report on Form 10-Q for the quarter ended March 28 2025.
Elena Rosman: These forward looking statements speak only as of the date. They are made and we do not assume any obligation to update.
Jim Lico: With that I'd like to turn the call over to Jim.
Jim Lico: Thanks, Elena Hello, everyone and thanks for joining us.
Jim Lico: On slide three.
Jim Lico: Board has delivered a solid first quarter performance strong operational execution, allowing us to deliver adjusted earnings per share of <unk> 85 in line with our expectations.
Jim Lico: Despite slightly lower than expected revenues, we expanded both adjusted gross and operating margins, while continuing to invest for growth.
Jim Lico: Our operating performance and disciplined working capital management drove better than expected cash flow generation in the quarter. We also continued our pace of share repurchases, reflecting our commitment to value enhancing capital deployment.
Jim Lico: These results were achieved amidst a more dynamic macro environment and demonstrate our team's dedication to support a business system and relentless focus on execution.
Jim Lico: Our accelerated pace of innovation and durable recurring revenue profile is helping to sustained top line momentum in our intelligent operating solutions and advanced health care solutions segments, or what will be new Ford at risk.
Jim Lico: We saw customers and precision technologies or what we'll call Ryan delay investments in light of increased political and macroeconomic uncertainty putting a halt to the momentum we had seen in the second half of 2024.
Jim Lico: Came into 2025, knowing it was going to be a year of uncertainty and we would need to stay flexible to adapt to changing market dynamics.
Jim Lico: Our outlook now incorporates moderating demand in P T.
Jim Lico: Well as the net impact of current tariffs.
Jim Lico: Regarding the newly announced tariffs we are deploying countermeasures using the playbook, we started back in 2018.
Jim Lico: We've been on a multiyear journey to enhance our supply chain and manufacturing resilience, enabling us to reduce our exposure to imports from China by 70% since that time.
Jim Lico: Lastly, we continue to make progress towards the separation, which we're targeting to complete by the end of the second quarter.
Speaker Change: In March we announced our new CFO, Mark Lucas from his expertise and accelerating profitable growth and being a disciplined capital allocator will help drive additional shareholder value as we transition into the next chapter of Florida.
Speaker Change: The last month, and immersion and getting up to speed. We're excited to have him with us on today's call I'll turn it over to Mark to say a few words.
Speaker Change: Thanks, Tim fiber.
Mark Lucas: Hi, everyone great to be here I thought I'd start with a few brief remarks on my thesis for joining forces and some very early reflections on what I've seen so far after just over a month on the job.
Mark Lucas: Firstly, I've long admired the principles and practices behind the rigor that runs through Fortyish DNA by virtue of its heritage and his leadership.
Mark Lucas: But I wanted to experience a close out and so far based on what I've seen it's impressive.
This is real and the entire Ford team here lives and breathes it with remarkable discipline.
Mark Lucas: Secondly in with my Investor Hat on I felt the Standalone Ford or investment thesis is compelling.
Mark Lucas: Attracted by Ford, a strong portfolio of leading businesses with big moats, and the secular tailwind blowing at their backs and the markets in which they operate.
Mark Lucas: I also like the near term catalyst of the spin.
Mark Lucas: Thirdly to add to that base thesis I saw the personal opportunity to drive big impact and then the returns curve up and to the right. You can lever that are largely in the CFO Hans.
Mark Lucas: I was compelled by the opportunity to work alongside Jim for a few months and then with Illumina to find creative ways over the long term to accelerate organic growth across the business, while maintaining the financial discipline that Florida has come to be known for.
Mark Lucas: And during my diligence work prior to joining I also saw some real opportunities to unlock value and how we allocate the precious capital entrusted to us by our shareholders and how we work with our Investor base.
Mark Lucas: It's been just over a month and though it's early days might be for some 40 remained well intact.
Jim Lico: I'm looking forward to meeting many of you in the coming weeks and months I get it on the road and at our Investor Day in New York on June the 10th with that I'll turn it back to Jim.
Jim Lico: Thanks Mark.
Jim Lico: With that let's take a closer look at our first quarter results on slide four.
Jim Lico: Core revenue declined 2% in the quarter slightly below our expectations.
Jim Lico: <unk> was a modest headwind, resulting in total revenue down 3% <unk>.
Jim Lico: Telegent operating solutions and advanced Health care solutions came in as expected with core growth up two 2%, which was more than offset by an eight 4% core decline in precision technologies.
Jim Lico: I'll trade and macro uncertainty is delaying the recovery in P. T. We had overall orders growth with continued strength in secular growth markets.
Jim Lico: We delivered adjusted operating profit of $373 million and adjusted operating margin expansion of 20 basis points led by performance in iOS.
Jim Lico: Adding accretive software growth and the benefits of our productivity actions.
Jim Lico: Adjusted EPS grew 2% year over year to 85%.
Jim Lico: Up 13% on a two year stack and we delivered better than expected adjusted free cash flow of $222 million.
Jim Lico: As a reminder, our six month growth in adjusted free cash flow was up 7%, reflecting our strong finish in Q4.
Jim Lico: We repurchased two 5 million shares in the first quarter as planned.
Jim Lico: Moving to slide five I.
Jim Lico: I will provide more detail on our segment performance for the quarter, beginning with new Florida.
Jim Lico: On a combined basis core revenue grew 2.2% in line with our expectations of low single digit core growth. Despite the roughly 200 basis point headwind from Luke related sales that moved into Q4 and fewer days in Q1 impacting consumable and services utilization rates.
Jim Lico: Adjusted operating profit margins expanded 80 basis points, while continuing to invest for growth highlighting the attractive incrementals of this business.
Jim Lico: Moving to the right.
Jim Lico: Telegent operated solutions grew core revenues by 2%.
Jim Lico: Luke was up low single digit as expected in the quarter.
Jim Lico: Stable industrial demand, particularly in North America, with a more challenging macro environment in Europe and China.
Jim Lico: New product momentum in our high growth market segments provided a tailwind to growth, including our solar and storage equipment commercialization efforts. In addition to successful new data center product launches with link IQ.
Jim Lico: And with continued growth in software and services. This contributed just flukes durability in the court.
Jim Lico: Our facilities and asset lifecycle group grew core revenue mid single digits, driven by strong take rate revenue across our multi site retail product offerings, partially offset by certain government customers curtailing spending as they navigate budget and policy changes.
Jim Lico: Service channel is seeing traction on its slate of new products and enhancements. In addition to increased demand for fully outsourced solution, including an enterprise win with a large specialty discount retailer in the quarter.
Jim Lico: IOS segment, adjusted operating margins expanded by 150 basis points in the quarter and over 300 basis points on a two year stack enabled by continued accretive growth in our software and recurring revenue businesses.
Jim Lico: As you can see on the far right of the page advanced Health care solutions grew our revenues by two 5% in the quarter.
Jim Lico: After adjusting for the impact of fewer days and healthcare consumables, our infection prevention business grew mid single digits.
Jim Lico: <unk> stable demand and continued traction in our new product introductions at S. P incentives.
Jim Lico: We continue to see strong win rates through expanded use of FBS sales and marketing tools.
Jim Lico: We also saw robust software growth of probation driven by continued share gains in SaaS conversions as large networks and health systems with disparate Gi solutions look to consolidate and standardize platforms and cloud adoption continues to gain momentum.
Jim Lico: Positive volume leverage and accretive software mix were more than offset by growth investments unfavorable FX and the impact of two less days, resulting in 70 basis points of adjusted operating margin contraction.
Jim Lico: Adjusted operating margins were up approximately 125 basis points on a two year stack.
Jim Lico: Overall iOS in Hs Q1 performance reinforces the durable and profitable growth profile at new Florida.
Jim Lico: Turning to slide six the precision technology segment.
Jim Lico: Going forward and consistent with how Youll see it represented in the published form 10, Valeant will report in two segments.
Jim Lico: The measurement, which includes tektronix recently acquired EBITDA.
Jim Lico: In sensors and safety systems, which includes the sensing technologies pack Si EMC businesses.
Jim Lico: For these purposes, we will refer to the new segment name. However, it is important to know this segment's results will differ from the presentation in the form 10.
Jim Lico: Which was prepared on a standalone carve out basis and excludes approximately $80 million annual fluke related service solutions revenue that is currently reported in the PT segment and will stay in Florida going forward.
Jim Lico: On a segment basis P. T core revenue declined eight 4% below our expectations of mid single digit decline driven by lower than expected orders in test and measurement shipment delays and sensors and safety systems.
Jim Lico: Measurement core revenue declined by high teens in the quarter.
Jim Lico: Order momentum we saw in Q3, and Q4 of 2024 significantly slowed in Q1 as certain customers delayed orders due to increased policy and macro uncertainty.
Jim Lico: Further slowing in China, and a significant decline in western Europe with weaker EV battery production and delayed semiconductor capacity expansion.
Jim Lico: This is being partially offset by continued strong demand in communications for high performance computers and high bandwidth memory, both tied to the growth in AI data centers.
Jim Lico: Sensors and safety systems saw continued robust demand in the utility sector for grid monitoring and then the defense sector for energetic materials.
Jim Lico: Wrong orders growth in both businesses.
Jim Lico: Demand levels continued pressure supply chain, increasing our backlog in the quarter.
Jim Lico: Overall sensors and safety systems had low single digit core growth, reflecting a continuation of the broad industrial recovery. We saw in the second half of last year, partially offset by supply chain constraints and delays in government approvals curtailing defense related shipments, we expect accelerated growth in this segment as we move through the rest of the year.
Jim Lico: Adjusted operating profit margins contracted by 260 basis points on lower test and measurement volumes unfavorable mix and FX, partially offset by strong margin expansion and sensors and safety systems turning.
Jim Lico: Turning to slide seven.
Jim Lico: Policy and trade landscape has evolved significantly in the past 30 days.
Jim Lico: Came into this year planning for a number of scenarios, we've taken several steps to mitigate the impact of tariffs across our portfolio.
Jim Lico: Since 2018, we started shifting to more of our in region for region manufacturing sourcing strategy, which reduced our exposure to imports from China by 70%.
Jim Lico: Coupled with our resilient market positions, including recurring software and services revenue strong U S manufacturing footprint and reduced reliance on China. We believe we are well positioned to navigate the current environment.
Jim Lico: We estimate the gross tariff impact is in the range of $190 million to $220 million prior to our mitigation efforts.
Jim Lico: Primarily from China as you can see on the left hand side of the chart.
Jim Lico: We have assumed the tariffs that are in place now or expected to go into effect on July nine continue through the year.
Jim Lico: The total impact breaks down roughly 60 40 between new Ford and rally.
Jim Lico: Moving to our countermeasures, we have a proven playbook.
Jim Lico: <unk> by the Florida business system.
Jim Lico: <unk> us to move quickly to offset these headwinds first we are taking a strategic approach to pricing and have begun deploying price increases where appropriate.
Jim Lico: The industry, leading brands, we are collaborating with our distribution partners and customers couple.
Jim Lico: Coupled with our FBS pricing tools, we are quickly testing refining and adapting to the current environment.
We're also continuing to optimize sourcing and logistics to rebalanced regional flows and are making select investments to localize manufacturing, which will further mitigate these headwinds over the medium term.
Jim Lico: We expect our mitigation plans to phase in over the course of the second quarter, coupled with other productivity and cost actions, we expect to fully offset the estimated tariff exposure by the fourth quarter of 2025, it would be neutral in 2026.
Jim Lico: As a reminder, we mitigated unprecedented supply chain challenges the last few years, while still expanding free cash flow margins by leveraging FBS tools to improve profitability and reduce working capital.
Jim Lico: We are utilizing the same playbook to problem solve and are confident in our ability to continue to deliver best in class net working capital performance moving to slide eight to talk about second quarter and full year guidance for total afford it.
Jim Lico: We believe we've taken a pragmatic approach for the remainder of the year adjusting our outlook to account for increased global uncertainty and the estimated impact of tariffs.
Jim Lico: Starting with the second quarter adjusted EPS is expected in the range of 85 to 90.
Jim Lico: Including a headwind from tariffs as our mitigation plans begin to ramp.
Jim Lico: From a segment perspective, we expect iOS in Hs to continue a steady pace of growth in PT to see a modest improvement from Q1.
Jim Lico: Let's discuss what this means for the year for clarity our 2025 adjusted EPS range of $3 80 to $4 is all in including the impact of tariffs net of mitigation actions as well as underlying demand moderation in PT.
Jim Lico: We now expect PT core revenues to be down low single digits again, assuming lower demand in test and measurement, partially offset by new price actions related to tariff mitigation.
Jim Lico: We're maintaining our core growth outlook for new Florida, which includes a contingency for more muted demand that can impact pockets of iOS in Hs in 2025 us government customers navigate budget uncertainty as well as new price actions to countermeasure tariffs.
Jim Lico: Our updated adjusted EPS guidance also assumes an incremental tailwind from FX rates as well as lower tax expense in the current events.
Jim Lico: We expect to provide independent guidance for New Florida, then rally post separation on their respective second quarter earnings call in July.
Jim Lico: Now I'm on slide nine we've undertaken deliberate actions over the last several years to create a more resilient, Florida, including further diversifying our product portfolio identify expanding into regions and growth markets.
Jim Lico: This contribute to our success innovating in markets with strong secular tailwind for growth with increased demand for safer more efficient more precise solutions globally.
Jim Lico: We've increased our mix of recurring revenue businesses, which have compounded high single digit the last five years.
Jim Lico: As a result, we've sustained continued revenue growth and margin resiliency in the face of a more dynamic macro environment.
Jim Lico: <unk> continues today, Florida is approximately 40% recurring revenue, which will expand to roughly 50% post separation benefit from accretive software growth going forward.
Jim Lico: To expand our addressable market with new product introductions, like Luke's solar and thermal imaging tools and asps steam monitoring products.
Jim Lico: Total revenue from high growth markets outside of China are now greater than our share of revenue from China, and it's growing at high single digit pace.
Jim Lico: Despite the delayed recovery, we see a precision technologies, we have a diverse set of end markets with exposure to strong secular trends and our consistent execution has resulted in differentiated double digit adjusted earnings and free cash flow compounding over the last five years, demonstrating our ability to profitability of all of our portfolio to deliver.
Jim Lico: In any environment.
Jim Lico: Turning to slide 10, I want to provide a brief update on our separation plans before wrapping up.
Jim Lico: We continue to make progress now expect the transaction to be <unk>.
Jim Lico: <unk> by the end of the second quarter.
In terms of upcoming milestones, we anticipate filing the form 10 with the SEC in the coming days announced CFO for rallying and host Investor Day in New York on June 10.
Jim Lico: Investor Day will be both in person at the New York Stock Exchange and webcast live through our Investor Relations website.
Jim Lico: Florida been rally led by Illumina, and Tammy will present their respective businesses management teams and priority, there's two focused independent companies.
Jim Lico: We will host innovation showcase highlighting our exciting pipeline of new products and solutions to help our customers solve their toughest challenges.
Speaker Change: I'm incredibly excited about the future confident both companies will showcase their tailored growth and capital allocation strategies to drive investor returns and unlock their full potential in the years to come.
Jim Lico: I'll now wrap up on slide 11.
Speaker Change: As previously announced ill be retiring as president and CEO of following the completion of the rally in spin off and I'd be remiss, if I didn't take this opportunity to thank our extraordinary 18000 team members, who helped shape and create a more resilient, Florida today.
Speaker Change: Our greatest strength is the enduring passion and commitment of our teams who take great pride in how they show up with a deep belief in better every day.
This next chapter as a manifestation of the strategy, we laid out at our inception profitably evolve our portfolio to deliver in any environment.
Speaker Change: Our enhanced portfolio positions innovative new products and dedication to the Florida business system have allowed us to deliver consistent compounding performance in the last five years.
Speaker Change: As we navigate the more uncertain and dynamic year ahead, we are resolute in our commitment to supporting customers and delivering for shareholders. Our performance in the first quarter underscores our relentless focus on execution and our updated outlook for 2025 reflects our proven playbook for navigating dynamic market conditions.
Speaker Change: We remain focused on finding opportunities to extend our leadership positions in the markets, we serve while protecting earnings and free cash flow resiliency.
Speaker Change: Looking ahead, we are diligently progressing towards the Investor day on June 10th followed by the separation and successful launch of Ryan It's been an exciting nine years. Thank you for your trust and partnership over the years I look forward to seeing many of you in New York in June.
Speaker Change: I'll turn it too late.
Speaker Change: Thanks, Jim that concludes our formal comments, we are now ready for questions.
Thank you we will now be conducting a question and answer session.
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Speaker Change: Our first question today is from Scott Davis of Malus Research. Please proceed with your question.
Scott Davis: Hey, good good.
Speaker Change: Morning out there but.
Jim Lico: Jim I hate to see you go it's been a pleasure and a great nine years, Oh I hope you enjoy retirement.
Speaker Change: Thanks, Scott and be a stranger.
Jim Lico:
Speaker Change: But I'll see you in June anyway, So look I just wanted to to beat this horse a bit on tariffs just because it's been on every call.
Jim Lico: You mentioned localizing production.
Jim Lico: Just wanted to kind of explicitly I understand what you mean by that.
Jim Lico: Looking about building out a.
Jim Lico: New capacity and in the U S.
Speaker Change: Can you just mark.
Speaker Change: Just modulate your capacity back to perhaps where it's where it's needed.
Scott Davis: Yeah, Scott I think number one.
Speaker Change: As you know we are we've been on this path over the last several years of Derisking, our supply chain and we've not seen any moderation or big increase in investment to do that so we've done that in a way that's consistent with contract manufacturing and and also current facilities. So well do well, we'll do that and I would say the plans are really much more.
Scott Davis: Of accelerating what we were planning to do than any.
Scott Davis: Particularly as it relates to China exporting into the United States a lot of that has been taken out since 2018 as I said in the prepared remarks, and it's just something we'll will accelerate here in the coming months.
Speaker Change: Okay makes sense.
Speaker Change: And just just wanted to ask on test and measurement and that's one of the bigger declines I've seen.
Speaker Change: And that business I can remember and you know it.
Speaker Change: We did take a pretty deep recession to find anything comparable to that what.
Speaker Change: How much of that business has just been kind of pushed to the right versus <unk>.
Speaker Change: Versus perhaps some some some real air pockets in demand there.
Speaker Change: Yeah, I would say, it's a couple of things one we would think about it from us.
Speaker Change: Coming into the year.
Speaker Change: We obviously saw good orders in the second half of the year and 24, so that led us to think through that things were starting to improve I think what we saw is very much.
Speaker Change: What you said was just a lot more delay things stayed in the funnel in many respects, but but certainly the uncertainty and it was really across geographies. So it wasn't one particular geography, I would I would call it pretty consistent amongst all the geographies, including North America.
Speaker Change: And it was really just customers deciding to take a pause as you know many of our customers our semiconductor and electronics players who.
Speaker Change: Hello.
Speaker Change: Measurable impact in many cases, given the the typical China content and I think a lot of our customers are trying to assess their own mitigation strategies and so we just thought it prudent to sort of assume that that's probably doesn't correct itself immediately in that at all that auto continued.
Speaker Change: Probably won't get better through the year, but it's not going to mitigate and anywhere dramatically like we thought and so.
Speaker Change: Maybe just back to first principles as you remember we thought we would see some of those markets come back in the second half we had tough China comp in the first quarter as an example, and we just thought those markets would assuming semiconductor would come back what we've really said is hey, we think that recoveries probably pushed into 'twenty six so we'll continue to fight for.
Speaker Change: Every dollar, but we just thought it was prudent to sort of see what we take what we saw in the first quarter and apply that to the remaining part of the year.
Jim Lico: Yes makes sense, Jim Thank you I'll pass it on thanks Scott.
Speaker Change: Okay.
Speaker Change: The next question is from Stephen Tusa of Jpmorgan. Please proceed with your question.
Stephen Tusa: Hey, guys how are you.
Speaker Change: Great.
Speaker Change: Thanks again for everything think we've been through this before but.
Speaker Change: Good luck.
Speaker Change: In the future.
Speaker Change: I'm just trying to figure out why I guess like the test and measurement industry just seems to be.
Speaker Change: Having a bit more volatility in and around the end of the quarter, you know call. It maybe some preordering or pausing well, we're not really seeing that in the rest of the economy.
Speaker Change: What's your kind of take on why this.
Speaker Change: This particular vertical of devices is.
Speaker Change: We are seeing this.
Speaker Change: This type of performance versus maybe the rest of the economy.
Speaker Change: Well I think couple of things one is if you think about its exposure it's exposed to diversified electronics and semiconductor is a little bit back to the point I was talking about in a second ago, which as you know these are investments that customers in many cases can delay because their R&D and so as the as some of the economic uncertainty has unfolded throughout the.
Speaker Change: The quarter certainly has the tariff mitigation strategies that really started when the initial tariffs came out in the beginning of the year customers have just taken a pause.
Speaker Change: And so that's what we're seeing we're not seeing cancellations we.
Speaker Change: We don't do a lot in production test, where it might be tied to a production cycle were really do this in an R&D world for the most part and so it's easy for customers to continue to delay some of those decisions and I think as I said, we started to see things getting better in the second half from an order perspective, but what we saw in the quarter was really people, making the taking that pause and I think that tends to be.
Speaker Change: More.
Speaker Change: Related to other markets, maybe it's as if it is it has exposure to semiconductor and electronics, that's probably a piece also have the exposure to the government has a capex component to it and it's just easy to delay for a quarter or so.
Speaker Change: From an investment cycle and a lot of our customers who are trying to deal with some of the uncertainty and tariff situations that are out there or just you know theyre not certain as to when they are buying cycle world will start again.
Speaker Change: And did you in any other businesses like Fluke did you see any kind of unusual buying behavior around the end of the quarter or kind of into April here anything anything unusual and in those types of businesses the more industrial commercial type of it yes.
Speaker Change: It's interesting even even attack the core industrial business that tech was actually pretty good. It was it was flat, but given given where the other environments, where I would say there was much better. So we've seen pretty pretty good revenue in industrial sensing as an example, as he said the sensing business was what we had.
Speaker Change: The growth that growth there in orders and growth in the business. When you include call toll and step stability in the rest of sensing. So that's that's your industrial exposure to your specific question around fluke Fluke was.
Speaker Change: Continues to demonstrate good resiliency so we.
Speaker Change: We did see a little bit of buying in March but some of that had to do with various reasons you saw some of our customers come out today, the west coast and Grainger is of the of the world.
Speaker Change: And their numbers and many and some of the verticals that we play in we're pretty good. So we think that's good North American point of sale for Fluke was positive.
Speaker Change: And it was actually in the mid to high single digit range, whereas the rest of the world was sort of flattish so.
Speaker Change: So North America is driving fluke for sure, but but certainly what we've seen is a more durable fluke over the last several years and we would continue to expect to see that through the remaining part of the year great.
Speaker Change: Great. Thanks, a lot for the color as always.
Speaker Change: Yeah. Thanks, Steve.
Speaker Change: The next question is from Julian Mitchell of Barclays. Please proceed with your question.
Speaker Change: Hi, Julien.
Speaker Change: Hey, Jim Thanks, very much for the help and wish you well in retirement and also a welcome to Mark.
Speaker Change: Maybe I'm just wanted to start.
Speaker Change: Bozeman Q2, because that's the last sort of a full quarter of sort of in its current condition.
Speaker Change: So just to understand the guide a little bit sort of embedding I think maybe a low single digit.
Speaker Change: Sequential revenue increase.
Speaker Change: In both new 14th and rallying and then may be kind of flattish margin sequentially, because you've got a big tariff Hey, Duane is that the right way to think about it that Q2, you get maybe.
Speaker Change: I don't know six cents or something of the 10% tariff headwind that you've guided for the year.
Speaker Change: Hey, Julien this is Elena.
Speaker Change: Hum.
Speaker Change: On the outlook for Q2, we.
Speaker Change: We're assuming that new Florida will continue to grow at the same pace call. It low single digit accounted for a bit more of that.
Speaker Change: T and the macro environment in that expectation.
Speaker Change: Think that precision technology segment well.
Speaker Change: They'll be down have a core decline call. It maybe more like mid single digit, but an improvement as he mentioned sequentially from Q1 and margins because of the impact of tariffs and our phasing in of counter measure it will be dilutive to the margin rates.
Speaker Change: Sequentially they'll then.
Speaker Change: Got better as we move through the back.
Speaker Change: Back half of the year, but it's all in that sort of tariffs net of countermeasures considering the phasing effect here you're right, it's probably in that six cent range.
Speaker Change: Yes.
Speaker Change: That's great. Thanks, very much and then just my second quick follow up would be around the <unk>.
Speaker Change: Health care business. So you had some margin decline in the first quarter year on year with sales up.
Speaker Change: I see the reference to sort of FX and probably that effect goes away the balance of the year, but is that sort of reinvestment element something that lasts all year that will weigh on the healthcare margins or its something specific in early in the year.
Speaker Change: So health care margins do you typically start out lower in the first quarter. Thank you tend to ramp we expect them to ramp sequentially throughout the year Q4 is our highest margin rate quarter for health care in the first quarter, specifically, we did have some transactional FX headwind you've seen that before.
Speaker Change: The health care segment that did impact us we wouldn't expect that we don't forecast that obviously to reoccur and from the frozen bathroom perspective, we are intending to continue the rapid.
Speaker Change: Investments, but still being able to say well margins are sequentially in.
Speaker Change: In health care that throughout the year, Yes, Julian I would just say as we look through the year.
Speaker Change: Part of the impact in the quarter was those last days, obviously high consumables are high margin fall through so.
That's part of part of the story as well, but we feel good about healthcare margins, we should that that's a good rate.
Speaker Change: If you sort of equate for the FX senior quite for the consumables. That's a good launch right into the rest of the year team's doing a nice job there.
Speaker Change: Businesses that are profitable like probation is doing well so we feel good about the margin trajectory for health for sure.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question is from Joe Giordano of TD Cowen. Please proceed with your question.
Joe Giordano: Hey, guys.
Speaker Change: Are you doing.
Speaker Change: Can I start on <unk> can you talk us through the like where are their manufacturing and how that compares to competition just wondering like as you adjust prices for it.
Speaker Change: Tariffs there like is there any sort of competitive imbalance versus a competitor that might be like manufacturing in the United States.
Speaker Change: Well I would say we are manufacturing all over the world. This is why we could mitigate a number of the things that that are that are.
Speaker Change: Impacted the business. So we've got manufacturing in the U S. Obviously <unk> a lot in that comment you take like EMC as an example, all of its manufacturing is in the United States. As an example, that's they don't have much tariff impact because I'm, sorry, I'll just say that.
Speaker Change: I'm more talking tech.
Speaker Change: Okay. Yeah. That's okay. So so broadly where we're we've got options around the world for PT getting the tech specifically, we manufacturer in Southeast Asia, China, and the United States. So we have we have we have.
Speaker Change: We have flexibility in how we manufacture our competitors manufacture all over the world as well sometimes in southeast Asia for sure, but also in Europe. So will we.
Speaker Change: Been out a path to mitigate a number of the changes that have occurred some of our some of when you look through the the tariff page that we have.
Speaker Change: A number of the dollars that go from the U S into China tend to be things that are that are IP protected so will most likely move that manufacturing into countries, where we can continue to protect the IP NATO countries as an example.
Speaker Change: One example of that type of strategy. So we're just going to accelerate as I said, we're going to accelerate the strategies that we already had on the books.
Speaker Change: Many cases, we were doing that particularly at tektronix, our supply chain and manufacturing strategy.
Speaker Change: Call It globe moving manufacturing around the world really had to do with our product launches. So we were following the cadence of our product launches to protect sort of minimized reinvestment. If you will but we will it will accelerate that will move some resources around to do that and we feel we can do that are really effectively through the year and that's.
Speaker Change: It's certainly part of the reason why we're confident we can mitigate.
Speaker Change: Mitigate the tariffs by the fourth quarter.
Speaker Change: On an H S.
Speaker Change: I know, there's a little bit of a couple of fewer days and the.
Speaker Change: And that makes sense. The comments you just made on the margins, but I think on the core growth side I doubt anyone had two and a half.
Speaker Change: Is that below what you guys were thinking okay.
The view is the kind of comfortably in the mid singles there. So if there's anything that's.
Speaker Change: The number we knew was going to be low single based on well if you add the days back you are in the mid single digit range. I think we you know I think we talked about that in the first quarter call. So.
Speaker Change: Certainly.
Speaker Change: You lose that many days if the math is pretty easy so in that sense, we feel we feel like from a revenue perspective.
Hff's came in right, where we thought they would.
Speaker Change: Okay, great. Thanks.
Speaker Change: Thank you.
Speaker Change: The next question is from Jeff Sprague of vertical Research partners. Please proceed with your question.
Jim Best: Hey, Thanks, Good day, everyone, Jim Best of luck in whatever snacks.
Jeff Sprague: Just coming back to tariffs and I'm, sorry, I was on a touch late we got dropped off the call.
Speaker Change: It's a number you're sharing with us today, the annualized rate or the in year right and can you just clarify how much of it do you think you are offsetting in 2025.
Speaker Change: The number is in the 2025 impact call it $200 million at the midpoint and we're assuming we're going to offset about 80% of it Jeff.
And then the U S exports to China.
Speaker Change: Are those forward as finished goods to Chinese customers.
Speaker Change: We're actually maybe that $90 million to $95 million isn't really a cost item, but it is just sort of a demand destruction item.
Speaker Change: You just clarify that.
Speaker Change: It's manufactured product into the into that we make in the U S for Chinese customers.
We can mitigate will certainly mitigate those those that's you know it's less than 2% of our revenue so from a high bar Paredo historically and as I said before it's also things that are maybe more IP related or or we have the core technology and the core manufacturing capability, but we can we certainly can mitigate a number there.
Those things some of that is things like fluke calibration as an example, and we have manufacturing capacity outside of the U S and outside of China in which to mitigate so we certainly can action those things. So think of that number is is a tariff number and not a demand destruction number though for purposes of your question.
Speaker Change: And then also just some further clarification on what you're expecting here. Jim You mentioned July nine are you are you expecting that the tariffs that are on 90 day hold actually come back fully on on July nine can you just clarify what we are.
Speaker Change: We are we're pretty much saying, hey, everything that we know today is going to continue through the remaining part of the year.
Speaker Change: So we think the rest of the world. So everything has got kind of a base 10, then right I mean wouldn't.
Cause rest of the world numbers actually be even more than that.
Speaker Change: Maybe it's de Minimis no no there is a higher number they assume it goes up we assume we assume everything goes up we don't assume.
Speaker Change: This is the more conservative approach to it it assumes that the mitigation that was announced the 90 day reprieve, we assume that it goes back to the original rates.
Speaker Change: So this 200 this year assumes all in the full bill exactly exactly but to be clear as you see the numbers, it's mostly China. So so that number if it were to go down is that it is not a it's not a tremendous tailwind in any way shape or form and I would say the other thing is we don't have a lot in Mexico. So if anything happens from amex.
Speaker Change: The perspective, you know there was a lot of I know, there's a lot of noise early on when the Mexico tariffs were first announced we don't we don't have any manufacturing in <unk>.
Speaker Change: Mexico So.
Speaker Change: In many respects we think this is it all and we certainly think this is an all in number.
Speaker Change: Great I'll leave it there thanks, alright, thanks, Jeff.
The next question is from Brad Hewitt of Wolfe Research. Please proceed with your question.
Brad Hewitt: Hey, Good morning, guys. This is Brad you had on for Nigel Coe.
Speaker Change: Hi, Brad.
Speaker Change: Just curious if you could walk through your assumptions by segment, both for Q2 and the back half of the year in terms of core growth and margins.
Speaker Change: Hey, Brad Yeah, I gave some overarching comments.
Speaker Change: Not giving direct you know growth in margin guidance at this time given the.
Speaker Change: It's the changing of five tests.
Speaker Change: Our tariff countermeasures, which include significant question that I have its pricing. So just directionally, we talked about Q2, New Florida Court breath low single digit in the PT segment would be down call. It mid single digit for the year.
Speaker Change: And that new Florida, no change in the core growth rate would be up low single digit close to mid single digit and the PT segment for the year would be down now low single digit.
Speaker Change: So down more than what we you know we had planned them to be flat for the year. Initially well now we now expect them to be down low single digits.
Speaker Change: But you should you should consider that.
Speaker Change: So really the change in the year is really is really in PT really what we're saying about new Florida is.
Speaker Change: Little bit of de risking relative to sort of some of the government spending but at the end of the day rate right right to where we thought we'd be and what would now be called before and then maybe just on the margin side and Oh I'll comment we expect margins in the second quarter to be down sequentially from the first quarter that reflects lower day.
Speaker Change: Nandan P T as Jim just referenced as well as the effect of tariffs that are largely are somewhat not offset by countermeasures that by the second quarter.
Speaker Change: Moving into the second half, though we would expect margins to improve sequentially and again historically Q4 is our strongest margin quarter and that would be true across all of the segments.
Speaker Change: Okay. That's helpful. And then you guys called out the mid single digit core growth and style in Q1 I'm. Just curious if you could break that down between the three businesses and then within file or are you seeing any pockets of hesitancy from government customers. Thank you.
Speaker Change: Yeah, No we had a good quarter in <unk> led by service channel.
Speaker Change: One of the one of the best N D. Our numbers I think we've seen in a while so we feel good about what's going on in fell a little bit of Guardian Guardian was good a current continued to come close to where we thought they'd be with a little bit of hesitation on some customers, but but by and large the funnels remain good and strong.
Speaker Change: See how state local agencies play out in the second quarter. So some of our muted view of what might happen in the second quarter. If there's anything as we will see how the second quarter is always a big quarter for Gordian, we'll see how that plays out so far so good in terms of what we've seen in the quarter for as an example procurement in the first quarter Gordian was double digit so we didn't see it.
Speaker Change: We didn't see reluctance we did see some some infill in total we saw some municipalities and government agencies with a little bit of uncertainty, but I think the number we posted all up mid single digits is a very strong number and we feel good about the trajectory of the business for the remaining part of the year.
Speaker Change: Great. Thanks, Jim.
Speaker Change: Thank you.
Speaker Change: The next question is from Andrew <unk> of Bank of America. Please proceed with your question.
Speaker Change: Yeah, Andrew Good afternoon. Good morning, Jim. Thank you for all your help over the years, it's been a pleasure. Thank so much.
Thank you.
Speaker Change: Just to clarify so tech orders were positive in the first quarter and you Havent seen things worsen in April but you are assuming a fewer deals in the pipeline converting the rest of the year is that right.
Andrew just to be clear PT orders were positive in the quarter and the first quarter.
Speaker Change: And that really if you think about test <unk> measurement down sort of high teens.
Speaker Change: And sensing and systems off so think of it that wont gotcha, Okay and then.
And just could you remind us just how is tech tektronix dear friend versus Q sides on Red So because I think I'd read through reported March quarter, Keith side got it by a couple of months back, but just there is a disconnect or what end market really differentiates us from the competitors just remind us I think.
Speaker Change: Certainly a couple of things one is we tend to be much more in the R&D lab I would say we're not we're not as much comes when you think of telco comps, we certainly don't have exposure to that the RF products and RF technologies.
Speaker Change: Less less.
Speaker Change: Less software tack as well, particularly keeps its got a little bit more software. So I would say those are definitely the differentiation as you know.
Speaker Change: Current parts of the market.
Speaker Change: And I think some of it is.
Speaker Change: It can be answered by when we start to look at two year stacks and things like that and how the backlog played out over the course of the last few years.
Speaker Change: There you get closer to the numbers are much more in line when you start to look at it from that perspective.
Speaker Change: No really appreciate it and just to follow up on your footprint. So are you keeping capex and I know, it's still for the combined entity I know, we separate but is the implication that the capex for twenty-five staying flat going up going down when all of a sudden that was your actions. Thank you.
Speaker Change: It'll be it'll be flat I mean, I wouldn't think.
Speaker Change: First of all I think our ability to sort of keep capex low we tend to have a low capex model, where most of the final assembly and test so there might be a little bit of movement of our prioritization around capex, it's really more of that than anything else, but I think in terms of just how we think about relocating manufacturing, we'll do that with partners as well that also keeps cap.
Opex low so specific to capex, it's not going to be a needle mover certainly for the remaining part of the year as we move to supply chain and move our manufacturing around.
Speaker Change: Well, thanks, so much and we'll see alright, Thank you Edward.
Speaker Change: Yes.
Speaker Change: The next question is from Andy Kaplowitz of Citigroup. Please proceed with your question.
Andy Kaplowitz: Good morning, everyone. Jim Thanks for your help Mark welcome.
Speaker Change: Yeah.
Speaker Change: Just thought I think Jim you mentioned sensors and systems, you said increased backlog, but can you talk about the shouldn't delays you saw on the defense side I think that's not necessarily a new phenomenon for you. So what's the visibility you have for that improvement that I think he talked about in the second half of the year.
Speaker Change: Yeah, we've had such record growth in that business that you know from.
Speaker Change: From quarter to quarter, we get a little bit of we do get a little bit of movement. As you said, we're working off sort of record backlog in that business and record quarters. However.
Speaker Change: The issue in this month it was really related to sort of some of the you know if we had any impact from a dose perspective. It was probably here we had it in many cases, we need we need the U S government to validate and verify product before we ship it and we just had a little bit more variation in that and that then we would normally see.
Speaker Change: And so that was really the impact there we feel good about the manufacturing capacity, we're putting in that business. The business is one of the better we are one of the better Fps teams. There. They were certainly working through that so this is really a there's.
Speaker Change: There's lots been told about the supply chain of the defense industry. So a lot of our work is really building the supply chain resiliency, while we build in the capacity that we're going to need to continue to deal with the record demand that will be in that business here for the next several years.
Speaker Change: Very helpful. And then Jim I, just wanted to dig into the sales by region for for it but I know prior to this quarter you already expected China to be down what are you thinking now and what do you thinking for North American and Western Europe.
Jim: Yeah, I think North America is going to be good it will be our best market for sure I would say if you were to just think about our growth in the.
Jim: The quarter. It was it was strong and it was strong across the board you know North America consumables as an example at Asps were very good.
Jim: Our.
Jim: Excuse me.
Jim: Our cemetery business at Landauer was good so we saw good health care in North America. We saw obviously our software businesses are mostly in North America. So we could look at a good north American number so I would say a new Florida, we had a good north American number.
Jim: And and we've continued to thank for all afford of North America will continue to be one of our better markets I would say China. We now think it's probably for all afford a down high single.
Jim: For the year.
Jim: That's going to be you know that's without thinking through how pricing and tariffs play through but we do think that you know that's a little bit.
Jim: More challenged than we anticipated.
Jim:
Jim: So I would say China is going to be a tough market Western Europe is tough with we had a really tough western Europe market for PT and so I think broadly we're seeing some we're certainly seeing some slowing in in western Europe. So what's embedded in the guide and everything we think about both for both new Florida and rally going forward is really probably North America being good.
Jim: Western European Challenge more challenged on the on the rally inside China being challenged and then the rest of the high growth market has been good we are.
Jim: We had good Latin America quarter, we think that'll continue to be good we think a number of the other non China.
Jim: High growth markets as we've said in the prepared remarks, that's bigger than China today that have continued to get bigger with growth rates there. So.
Speaker Change: Yeah. It was just places quite frankly that we're making some investments in places like India. As an example, so we think those can continue and that'll be the basis for which we built the guidance.
Jim: I appreciate the color.
Andy Kaplowitz: Thanks, Andy.
Speaker Change: The next question is from Chris Snyder of Morgan Stanley. Please proceed with your question.
Chris: Thank you Chris.
Speaker Change: Hey, How's it going.
Speaker Change: Appreciate all the help and best of luck going forward.
Speaker Change: On the price cost you know I can think of the $200 million gross you guys talked about $80 million or sorry, 80% recovery.
Speaker Change: So I guess.
Speaker Change: <unk> hundred 60, <unk> any way to think about how much of it is coming from price.
Speaker Change: Oh, the price flows through and from a cadence perspective in the coming quarters and then when you guys talk about completely.
Speaker Change: Okay.
Speaker Change: Is that at a margin percentage level.
Speaker Change: Thank you.
Speaker Change: Yes, Chris I think I think I'll take your question I know you were.
Speaker Change: Getting out there.
Speaker Change: I would say number one.
Speaker Change: Just from a tariff mitigation perspective, it will be on a dollar basis not on a percentage basis simply because the amount of dollars that you have to offset just with our gross margins as an example is pretty dramatic.
Elena Rosman: So we will see some gross margin and <unk> margin degradation of the latest talked about that a few minutes ago, we will see some of that as we place plays out through the year as Elena said six to seven cents related to tariff impact in the in the second quarter, we talked about 10 cents of toll so that gives you a fully mitigated.
Speaker Change: So it gives you a little bit of a sense of what the cadence probably looks like.
Elena Rosman: Our biggest impact in the second quarter.
Elena Rosman: A little bit less in the third quarter mitigated in the fourth quarter Thats on a dollar basis to reiterate that point. So that's how we think about it.
Elena Rosman: Relative to your question around price about two thirds price some of it will be surcharges, but but most of it will be true price and hence some of the reasons why the second quarter is half the mitigation. It takes a while to get some of those pricing actions in place, whether it's with channel partners or customers. We're certainly working through those those pricing arrangements.
Elena Rosman: And that on a global basis. It takes a little while to do so that's why the cadence as such and we feel good about those actions the combination of the strength of our brands the strength of our innovation and technology really allows for some of this and other customers have understood that this is unfortunately, one of the situations that comes with some of these.
Elena Rosman: Tariffs.
Speaker Change: Absolutely I appreciate all that color and then maybe following up on precision Tac.
Elektron.
I would imagine that turning organic here in Q1 led to some of the pressure on PT organic in the quarter. So any just color on how that business did in Q1, and then what does the guide assume for Eaton electrical for the full year. Thank you.
Speaker Change: Yes, I think number one increasingly as we we probably think about it all as one as we continue to get closer to just because the order tradeoff of tech salespeople in the ACO salespeople, but youre certainly right the toughest organic.
Speaker Change: EBITDA went organic in the first quarter and the biggest headwind for that quarter is the first quarter. So certainly part of the headwind that we talked about and in test and measurement is going to be that we would think that that business is probably in the $20 million to $25 million range per quarter for the year.
Speaker Change: And part of the Western Europe degradation that we talked about is really easy mobility investments on the part of European automakers. So we've embedded that in the guide.
That really means that while we thought we'd probably have mid single digit growth that you gave for the year, we're probably closer to flattish, we'll see how things play out, but but we continue to see good traction on some of the things that we're doing in the funnel, but very much the uncertainty that I've described more broadly about customers is certainly with certainly embedded in the <unk>.
Speaker Change: Auto customer base, you've certainly seen that this week with GM in Gm's announcement. This week in terms of how they're seeing things. So I think the global automotive businesses is challenged for sure from an investment perspective, and we've been seeing that from investment.
Speaker Change: Investments on their part and we would anticipate that that continues through the remaining part of the year.
Speaker Change: Yeah, absolutely I appreciate all that perspective, thank you.
Speaker Change: Thank you.
Speaker Change: The next question is from Deane Dray of RBC capital markets. Please proceed with your question.
Speaker Change: He knew he best of luck, Jim you and I go way back to your Danaher day, So I appreciate it.
Speaker Change: And welcome to Mark.
Speaker Change: Hey, My question is on.
Speaker Change: Just given the headwinds at P T.
Speaker Change: I didn't hear anything about taking any costs out repositioning given these headwinds.
F. P. S playbook would be to kind of try to manage decrementals in line with the falloff in demand I know you've got a spend happening so maybe that complicates things, but just can you address about any opportunity here to take some costs out.
Speaker Change: Yes, we announced I think $20 million of restructuring at the beginning of the year. So we've done a bunch of proactive restructuring as well to get ready for that and some of that impact will be.
Speaker Change: It gets better through the year for sure.
Speaker Change: We've taken a lot of other cost out to offset some of the Decrementals that tech is one of our higher incremental businesses, just because of the high gross margins and high standard margins in the business.
Speaker Change: And part of the tariff mitigation will be some realignment that does require a little bit of invest maintaining investments as well. So I think the team is managing very well and and I think we're in a good place. So let's see how it plays out, but but first and foremost is getting some of this price in the marketplace getting the tariffs mitigated that's the first order.
Speaker Change: The more we can get the best levers we have in that business is to get pricing into the marketplace faster and to get the tariffs mitigated more quickly those those actions will be more helpful than a little bit more restructuring, but certainly I know tami and the team are certainly.
Speaker Change: Very rigorous in terms of how they think about investment and how they think about offsetting challenges and I'm confident that they'll continue to find ways to do that through the year.
Speaker Change: Got it and just a last quick one there was an early comment in the prepared remarks about growth investments.
Speaker Change: Can you size that where is it across the segments and have you throttled any of those back.
Speaker Change: Well I would say the growth investments, particularly on the new Ford of side of continued I think we called it out on the health care side in particular, where we spent some money in R&D I think one of the things you've seen from the health care business, particularly out of ASP here recently in the fourth quarter, we talked about a number of those 500 10-K approvals that we got in the second half of last.
Speaker Change: Year, we're continuing to invest in a number of innovation fronts that will play out over the next year or so so.
Speaker Change: So theres certainly.
Speaker Change: Theres certainly some investments I'd, probably character and there are some as well on the iOS side as well so I would characterize those growth investments more on the new Florida front to think about that in the 10 ish million dollar range, probably maybe a little bit more.
Speaker Change: And you will get I think you'll get some good color as to how that's going to play out when we get to Investor day here in June.
Speaker Change: Great. Thank you best of luck. Thank you.
Speaker Change: Thank you.
Speaker Change: Our last question today will come from Andrew Buscaglia of BNP Paribas asset management. Please proceed with your question.
Andrew Buscaglia: Hey, good morning, everyone.
Speaker Change: Hey, Andrew.
Speaker Change: I was hoping you guys can update us on some of the software trends Youre seeing.
Speaker Change: It sounds like it's going well in advance health care hard to hard to sort of see it in the margins with the growth of investments.
Speaker Change: And obviously you do.
You can see it in the margins the last couple of years, but you're seeing kind of conflicting.
Speaker Change: Comments, when you look across the software industry I'm, a software analyst but.
Speaker Change: You see some mixed.
Speaker Change: Sort of a mixed trends.
Speaker Change: I'm wondering how are those businesses handling the tariff situation and can you just talk about the latest you're seeing there.
Speaker Change: Yes, I would say you know exceptionally the quick answer is theres really not a tariff impact necessarily within our software businesses. As we mentioned the prepared remarks, our facility and asset lifecycle software businesses are performing well, there's some uncertainty.
Speaker Change: Certainty, but yeah, but you know.
Speaker Change: The team has done a nice job of from an innovation perspective, and a number of and really commercialization to really get after things and so I feel good about where we're at we mentioned the strength of service channel as one example on the healthcare front provision incentives both had good quarters.
Speaker Change: <unk> in particular is doing very well so we are we.
Speaker Change: Very high margin business already.
Speaker Change: So I would say in general we feel good about theres, some puts and takes relative to some customers, but we got we got some nice we.
Speaker Change: We saw some nice we secured some nice large orders in the quarter.
Speaker Change: In a in a number of places so yes, there is some uncertainty, but that's balanced with some of the innovation that we've done and I think we're managing the businesses exceptionally well theres, probably a little bit of upside that we haven't built in which is if you sort of said what would happen if tariffs play through probably a guardian and a little bit of service channel, where we have some pass through business.
Speaker Change: If the tariffs were to raise the input costs. There we do see a benefit on the pass through pass through side. So we'll see how that plays out still way too early days, but but we did see that in sort of the supply chain tariffs era of a few years ago. So we'll see where that plays out as I mentioned way too early to tell that's probably more a late second half.
Speaker Change: Half dynamic as we start to see things start to play out in the business. So well managed FBS continues to apply in those businesses and it's certainly part of the resilience and durability story that you'll hear from.
Speaker Change: Eliminate talk about when when we get to Investor day here in June.
Speaker Change: Okay, Yeah that's helpful.
Speaker Change: Last question, probably a silly one, but you had a bigger buyback in the quarter.
Speaker Change: And then I was expecting and with the stock where it is but what do you see in Alaska.
Speaker Change: Last few months here before the spin occurs still still plan to allocate a fair amount in that direction.
Speaker Change: Yes, we didn't we didn't talk about this in the spin I think I think because our prepared remarks are pretty straightforward and down the middle we're going to pull then we're going to pull on the spend a little bit now that were saying at the end of the second quarter. So that just speaks to the strength of the actions that we've taken our team has done a great job. We've got we've got to see him. He's got a leadership team ready to go we'll announce the CFO here.
Speaker Change: A few days so we're we're in a good place relative to rounding up the balance sheets are in good place. We're still planning on investment grade we bought back about two and a half million shares I think in the quarter. We will continue to devote free cash flow to buyback certainly at attractive prices Theres opportunity. There and then you know as we get to the time of the spin in July.
Speaker Change: You certainly hear some of this at Investor Day, and certainly both businesses is incredibly focused and well run independent companies, you're going to have an opportunity to hear more about that as they get to the second half guide and I think we're in a really good position to do that so.
Speaker Change: I think it's an exciting time for sure for both Tami and <unk> to lay that out and I think we're in a really good place to do that here in the coming months.
Speaker Change: Okay, Thanks, Jim and I think with that will.
Speaker Change: Oh.
Speaker Change: Rock you. Sir This concludes our question and answer session I would now like to turn the call back over to Jim <unk> for closing comments.
Speaker Change: Alright, well thanks Brock.
Speaker Change: Many sad I appreciate all the thank you said today for you to say that but it.
Speaker Change: There'll be still im not going anywhere I'm still working really hard with tami and eliminate here to finish out the second quarter and get everybody get everything launched incredibly proud of our team over the last particularly over the last month and dealing with a lot of the challenges that we described but I think at the end of the day when you look at where we're at.
Speaker Change: In true <unk> of spirit businesses are counter measuring well dealing with challenges well and the power of FBS continues to demonstrate in so many ways. We didn't talk about the power of our free cash flow, but that's going to continue this year and it's going to set us up exceptionally well for us for what we are.
Speaker Change: But both independent companies will be doing here both in the back half of the year and certainly into 'twenty six as we continue to build great two great businesses. Thanks for all the time and the energy and the questions. Today I know you are incredibly busy today. So we appreciate your time, we look forward to the follow up and questions with with our IR team and certainly with Mark and I.
Speaker Change: And we will look forward to seeing all of you in June two to talk about two great companies and and how and the excitement that you'll hear in the past and you'll hear from our teams.
Speaker Change: I think it's going to be an exciting day on June 10, we will see you then thanks everyone.
Speaker Change: Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines and have a wonderful day.
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