Fortive(US:FTV)2026-02-04 18:02Financial Data and Key Metrics Changes - In Q4, the company reported total revenue of $1.1 billion, an increase of just over 4.5% year-over-year on a reported basis and just over 3% on a core basis [13] - Adjusted EBITDA for Q4 was $358 million, up about 8% year-over-year, with an adjusted EBITDA margin expanding approximately 100 basis points to nearly 32% [14] - Adjusted EPS for Q4 was $0.90, marking a 13% increase year-over-year, contributing to a full-year adjusted EPS of $2.71, which represented year-over-year growth of just over 12% [15][7] - The company generated about $315 million of free cash flow in Q4 and approximately $930 million for the full year, with free cash flow conversion on adjusted net income remaining nicely over 100% [20] Business Line Data and Key Metrics Changes - Intelligent Operating Solutions (IOS) segment revenue grew just over 5% on a reported basis, with core revenue growth of about 4%, driven by strong performance in professional instrumentation and gas detection products [16] - Advanced Healthcare Solutions (AHS) segment revenue grew approximately 3% year-over-year, with adjusted EBITDA in this segment at $92 million and an adjusted EBITDA margin of 26% [19] - Recurring revenue grew faster than consolidated revenue, driven by strength in Fluke's maintenance software and AI-enhanced software capabilities across IOS and AHS segments [10] Market Data and Key Metrics Changes - North America continued to be the strongest growth driver, with solid growth across all regions, including steady growth in APAC and an acceleration in Europe [13] - Latin American sales picked up pace, driven by strong performance in professional instrumentation [14] - The company noted early signs of improvement in Europe and positive trends in Latin America and Asia Pacific [16] Company Strategy and Development Direction - The company is focused on three strategic pillars: accelerating profitable organic growth, disciplined capital allocation, and building investor trust, aiming for benchmark-beating shareholder returns [5][8] - The company is committed to investing in organic growth, pursuing bolt-on M&A, and maintaining a modestly growing dividend [11] - The Fortive Accelerated Strategy is being diligently executed, with a focus on innovation and targeted investments in high-growth verticals [9][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2026, initiating full-year 2026 adjusted EPS guidance of $2.90-$3.00, representing approximately 9% year-over-year growth at the midpoint [21] - The company is confident in its ability to execute its strategy and deliver strong performance for shareholders, despite recognizing that there is more work to be done [25][24] - Management highlighted the importance of customer engagement and the positive impact of strategic investments on future growth [24][19] Other Important Information - The company executed an additional $265 million of share repurchases in Q4, bringing total second-half repurchases to $1.3 billion [8] - The balance sheet remains strong, finishing the year at 2.6x gross debt to adjusted EBITDA, with ample capacity for capital deployment priorities in 2026 [20] Q&A Session Summary Question: Insights on Fluke's performance and demand - Management noted strong demand in Fluke, with North America as the strongest region and encouraging improvements in EMEA and LATAM, with order growth continuing in Q4 [32][34] Question: Price contribution and guidance - Price contributed about 2% to growth in Q4, with volume contributing about 1%, and expectations for 2026 are broadly in line with this [35][36] Question: First quarter expectations and organic sales growth - Management indicated that Q1 is expected to follow historical patterns, with organic sales growth anticipated in the 2%-3% range for the full year [41][42] Question: AHS segment margin pressures - Management clarified that margin pressures in AHS were localized in Q4 due to strategic investments, with expectations for margin improvement moving forward [44][45] Question: IOS organic growth sources - The strong performance in IOS was attributed to effective execution of the Fortive Business System strategy, with solid demand in data center applications and defense [72][73] Question: AI enhancements in software businesses - Management highlighted that AI is seen as an opportunity, with strong customer demand for AI-enabled enhancements driving growth and improving customer experience [53][54] Question: Future growth expectations for gas detection - Management expressed confidence in the gas detection business, anticipating strong performance in 2026 due to effective execution and targeted investments [95][96]