So when we think about what we’re doing at Censis, Provation, Gordian, we just announced the Gordian platform, which allows for us to integrate all of our data and solutions together. So we’ll start to see some of those in our revenue base is selling AI solutions as well. So on the front end, we’re seeing the early stages of that investment. And with — primarily with — in PT, we’ll start to see that play out, we’re starting to see that play out in Keithley. We’ll start to see that play out of tech in the second half. And then obviously, with Qualitrol and Fluke certainly with — as those data centers and things get built, we’re going to certainly participate in that relative to both the electrical grid infrastructure needed to support that as well as the tools needed to sort of build those data centers and maintain them as well.
Deane Dray: Those are real specific data points, so I appreciate you’re sharing. And then as a follow-up and I might have missed it in your answer to Julian’s question, but the weakness in Tektronix you referenced. What was the delayed customer R&D in the US? Is that just — is it product cycle related, is there anything related to worries about the election that’s starting to read through some hesitation in orders?
Jim Lico: Dean, I think, well, the first half is going to play out at tech almost identically to exactly how we thought it would play out. So I don’t want to — I should say that first. I would — well, certainly, what we see is some delay on, what I would call, Mil/Gov investments that we typically start to see early in the year, they’re still in the funnel. They’re now showing up maybe later in the year. That’s both direct government customers as well as some of the primes. So that’s a movement of that. The good news on that is we’re seeing them in the funnel and they’re growing in the funnel and we’re starting to see some of those orders, hence, the book-to-bill is over 1. So we’re certainly starting to see those things. Generally, we would have been able to convert them to revenue maybe a little sooner.
But because the funnel’s moved and because some of those things have come a little bit later in the end of the second quarter then that really presents it for more of a second half opportunity. But at this point, we wouldn’t see those canceled. And I don’t think we tie those to the election. I think we’d probably tie that more to just investment decisions that people have made with some uncertainty as the year started out maybe delaying some of those investments. As you well know, sometimes those investments can get delayed for a quarter or two. But ultimately, I think if you said, our customer base or the leading technology companies in the world, are they going to not invest in technology and innovation, I think it’s a good test we’re going to do that.
Operator: Your next question is from the line of Steve Tusa with JPMorgan.
Steve Tusa: Can you just delve a little bit more into Tektronix and the book-to-bill there? I know you guys mentioned the hardware in total book-to-bills, but maybe just give us an update on maybe where the — I guess, excess backlog, if that’s even a thing still kind of where the excess backlog sits and then Tektronix book-to-bill, and then what you’d expect for growth for the rest of the year there at this stage?
Elena Rosman: Steve, Tektronix book-to-bill was 0.95 in the quarter. So for PT, Sensing and Tech combined its 1.0 and for hardware products overall was 1.0. And then we talked about Tektronix revenue being down mid single digit in the quarter. Our expectation would be that Tektronix revenue for the year will be down mid single digit, but that’s always been reflected in our outlook for the year.
Steve Tusa: So no change there. And then maybe just sticking on book-to-bill. I think it’s like a little bit hard to like calibrate these EA revenues, I guess. We had expected something a little bit more than where it was and I’m not sure we’ve quite bridged the gap on that. But what’s, I guess, the book-to-bill for that business just to kind of help us understand what kind of run rate they’re going at on the EA side, that new acquisition?
Elena Rosman: Just really quick on the numbers for EA and I’ll let Jim comment on the acquisition overall. We had expected revenues for EA for the year to be, call it, 190, 195. That’s come down probably closer to 180 to 185. Part of that is foreign exchange and part of that is some push out of larger projects in the year. Specifically, in Q1, the revenue, we talked about the $35 million, again, we have planned for something in the low 40s for the quarter, there is a seasonal component to that. And maybe, Jim, you want to talk a little bit more about certainly the kind of 100 day review and give some color on the acquisition.
Jim Lico: Steve, I would say a couple of things. One, as we said in the prepared remarks, one of the things that’s really evident and certainly have been around the world not only with the US view of this, but China, India, a number of other places, we clearly see a great product that customers really like. So I think as we start out, we really affirmed the fact that the product and the technology is really, really strong. As Elena said, little bit less revenue in the first quarter. I mentioned this in a couple of places in the first quarter that getting the backlog out in that business has been a little bit more challenging than anticipated in terms of that. So book-to-bill, I think, was over 1 in the first quarter. But our opportunity to sort of continue to work FBS and make the factory a little bit more flexible and certainly, we’re in the process of doing.
We’ve come down a little bit on what we think the revenue will be for the year. We still think the accretion is the same. So we’re still going to deliver from an earnings perspective in a very good place, and we feel good about the business. So mobility is a little bit slower. We anticipated that mobility would be slow this year, that was certainly in our view. And so that’s played out. But the data center opportunities are very good. And quite frankly, the funnel with Tektronix is building well. So we said we need — we were going to build that funnel in the first half, we would start to see that revenue in the second half and we feel good about the funnel build thus far. We mentioned one of the opportunities on the prepared remarks around how now we’re leaning their sales with our services with a large scale order that we’ll get here shortly, we feel really good about the synergy opportunity as well.
So maybe taking a little longer to get started simply because of maybe some of the things in the marketplace, but feel really good about it right now. And we’re in a good position for that business as it stands to finish the year and move into ’25.
Steve Tusa: And where is the excess backlog stand today? That’s my last one.
Jim Lico: I’m not sure what that number is, but it’s probably in the — I guess, in the $10 million-ish range or something like that.
Steve Tusa: So a normalized.
Operator: Your next question is from the line of Andy Kaplowitz with Citigroup.
Andy Kaplowitz: Jim, just in AHS, I know you did well in the quarter and maybe you talked about some potential upside there. You did mention maybe some Provation headwinds still. Is there anything that’s still holding you back at all from even better performance with the understanding that it was quite good in the quarter?
Jim Lico: I mean we’re really happy about the quarter. And if you think about the number of quarters here, obviously, we had the transition in North America last year. But if you look at what we’ve done multiyear in high growth markets exceptionally well, the strategic nature of what we wanted to do is really playing out well. So we feel very good about where ASP is at. We feel good about the broader segment. Relative to Provation, we have a — in the first half of last year, we had a large scale license software business order that we’re going to work through in the first and second quarter, that business will still grow well this year. SaaS is growing double digit in the business. So we really feel good about where Provation.
But we do have to work through that large license customer that — it kind of plays out a little bit more of a onetime opportunity. The good news about that it’s the very large license deal that we’re going to be able to convert to SaaD over the next several years. So in terms of opportunity, there’s still great opportunity to Provation. So we feel good about where the segments stands. We mentioned in some of the prepared remarks about some of the things we’re seeing around our plasma strategy and the efficiency and efficacy of how we do hydrogen peroxide and all that. So the product and innovation wheel that we started to talk about, steam sterilization, EI, biological indicators, a number of the things that we’re really — we’re trying to work through over the last couple of years, we’re starting to see the innovation flywheel get started at ASP.
And so we feel good about where the segment is at and where it’s going to go through the year.
Andy Kaplowitz: And then I know you reiterated it, but like when I think about the 450 for next year, like there’s a fair amount of moving pieces nowadays, FX, M&As as we talked about. So what’s your confidence level, Jim, at this point and what do you need to do to sort of get there?
Jim Lico: Well, I think number one is, I think the first quarter affirms what we’re able to do, right? With the growth rate that we had in the quarter, we still drove strong EPS growth and strong free cash flow growth. Our guide demonstrates that. So we get to the end of the year, double digit earnings growth, double digit free cash flow growth, really strong operating margin expansion, a great setup for — and a little bit on a not mid single digit growth yet. So as we move into mid single digit growth and our track record of earnings growth, free cash flow growth and margin expansion, I think those are the things that give us confidence. Now again, it’s April of ’24, we’re talking about 2025, if I may, but at the end of the day or we’ll be made here shortly.
So I think at the end of the day, we’re in a very good place to talk about ’25. But obviously, we’re very focused on ’24 here. And I think what we’ll see through the quarters is the demonstration of that — the kinds of numbers that I think really support our multiyear pass, which has been very good and also our multiyear future.
Operator: Your next question is from the line of Nigel Coe with Wolfe Research.
Nigel Coe: So I hate to like retread. Ground has been trod on already. But — so Elena, you mentioned Tek down mid-single digits. That was in the plan from day 1, down mid singles in 1Q. I’m just curious why things wouldn’t get better in the second half of the year just given the comps? And therefore, my question really is, in second quarter, is Tek down sort of high singles, maybe a bit worse than that, some PT down maybe mid-singles? Just thinking about how we should think about the way this comes through the year?
Elena Rosman: Yes, that’s right, Nigel. And as we said in our prepared remarks that we expected PT to be down mid-single digit for the quarter, that would include tech to be down slightly more than that. So probably in that mid to high single digit range for tech in Q2…
Jim Lico: And then I would think, Nigel, that — your point around inflecting getting a little bit better, that’s the book-to-bill that we talked about that continues to get good. Keithley is a good leading indicator. The PMIs are a good leading indicator. Our sales funnels are a good leading indicator. And so we’ll step through a little bit better performance as we get through the second half.
Elena Rosman: I think the other thing to consider is that tech did continue to grow revenues throughout all of last year.
Nigel Coe: And then the pricing of PT, I think, was about 1 change, 1% or so for the quarter, a bit of a decel versus the run rate. Is there a risk that that could go negative or flatten out completely given the weakness in volumes?
Chuck McLaughlin: I wouldn’t expect that to be the case. I think there’s little bit of timing here. But as we move through the year, we expect that probably in PT, I think, 1% to 2% and gradually going up as we move through the quarters.
Jim Lico: And Nigel, just to add, price cost is in a good place. So when you look at the margin expansion that we did in PT in the first quarter and the anticipated margin expansion through the year, we probably get a little bit less price when the top line is like that. It’s not unnatural to maybe not maybe give a little bit up, but the price cost stance is really good. So we’re in a good position to be able to do that and still grow margins.
Nigel Coe: And a quick one on EA, the 1Q seasonality for kind of the full year. Is this a business that typically has a weak 1Q and then a back half floating in the plan?
Jim Lico: We’re new to it. So we’ve got some multiyear history, but you have the numbers, you don’t always have the history. It’s certainly a business that has historically been back end weighted, that’s for sure. So that — and private companies sometimes don’t necessarily push everything until — make sure the end of the year. So that’s not unusual. And we’ll get the cadence here improved every quarter as we work through the integration.
