Fortive(US:FTV)2025-10-29 17:00Financial Data and Key Metrics Changes - In Q3 2025, total revenue was just over $1 billion, reflecting a year-over-year increase of approximately 2% on both a reported and core basis [11] - Adjusted EBITDA grew by 10% year-over-year to $309 million, with an adjusted EBITDA margin expanding by approximately 200 basis points to 30% [12] - Adjusted EPS was $0.68, up 15% year-over-year, driven by growth in adjusted EBITDA and favorable interest expense on lower debt balances [12][19] Business Line Data and Key Metrics Changes - Intelligent Operating Solutions (iOS) segment revenue grew just over 2.5% on a reported basis, with core revenue growth at 2% [14] - Advanced Healthcare Solutions (AHS) segment revenue was $328 million, growing approximately 2% year-over-year, with adjusted EBITDA margin expanding from roughly 27% to 28% [17] Market Data and Key Metrics Changes - North America showed solid growth, improving sequentially from Q2, driven by strengthening demand trends for professional instrumentation and healthcare equipment [11] - Europe experienced a year-over-year decline, worsened modestly from Q2 due to weakening macro conditions [11] - The rest of the world showed mixed results, with significant acceleration in South Asia, particularly India, which is expected to drive strong momentum in the coming years [9] Company Strategy and Development Direction - The company is focused on driving profitable organic growth through its Fortive Business System, with a strategy centered on innovation acceleration, commercial acceleration, and recurring customer value [6][24] - Capital allocation priorities include investing in organic growth, pursuing accretive bolt-on M&A, returning capital through share repurchases, and maintaining a modest growing dividend [10][39] - The company is committed to maximizing medium to long-term shareholder returns and has demonstrated this through significant share repurchases [5][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth trajectory, emphasizing the importance of customer-centric operations and the simplification of the organizational model [22][23] - The company expects overall core growth to moderate in Q4, with AHS core growth broadly in line with Q3 levels and very modest core growth at iOS [19][95] - Management remains confident in the healthcare market's resilience, citing aging demographics and increasing healthcare needs as long-term growth drivers [97] Other Important Information - The company successfully completed the spin-off of its Precision Technologies segment, now operating independently as Rallian, on June 28, 2025 [2] - Free cash flow for Q3 was $266 million, with trailing twelve-month free cash flow growing to $922 million [13][18] Q&A Session Summary Question: Margin performance and Q4 guidance - Management noted that Q3 margin performance was driven by revenue performance and cost discipline, with expectations to maintain cost discipline while reinvesting some resources in Q4 [31][32] Question: Impact of government shutdown on performance - The company indicated that its exposure to federal government funding is minimal, and the shutdown has not significantly impacted performance [34] Question: Capital allocation and buyback strategy - Management explained that the $1 billion share repurchase was based on strong free cash flow and attractive valuations, with a focus on smaller bolt-on acquisitions for growth [38][39] Question: Demand trends in AHS segment - Management reported sequential improvement in demand for healthcare capital equipment and consumables, driven by more certainty in legislative conditions [52] Question: Tax rate outlook - The CFO indicated that a mid-teens tax rate is a good framework for modeling through 2026, with potential risks from new proposals [53] Question: Demand by region - North America continues to perform strongly, while Western Europe remains soft, with mixed results in other regions [69]