Operator: Your next question is from the line of Joe O’Dea with Wells Fargo.
Joe O’Dea: I wanted to start on the 60% of revenue you talked about growing through the industrial slowdown and the PMI, I think primarily related to Fluke. But the question really around the ability to grow through PMI slowing and to what degree you attribute that to outgrowing end markets, or other factors that were at play for Fluke to post more kind of stable trends through some of those headwinds?
Jim Lico: Well, I definitely think we’re outperforming the market. And I think Fluke’s done a great job. When you look at a number of things, obviously, an outstanding global franchise presence in pretty much every country of the world. Team does a great job on the innovation front. We had four new product launches just in the first quarter alone. Our eMaint business is doing really well. So our Fluke reliability growth — eMaint was up 17% in the quarter. So just as we look over the last several quarters, our ability to outgrow PMI has really been the long term work we’ve done to make the business more durable, and that really is an end market story. Our solar and EV product lines grew over 30%. So it’s really been redirecting — we talked about in one of the prepared slides about our lean portfolio management or our product development process and how we’re really designating those R&D investments towards more secular drivers.
Fluke is certainly a good example of that in terms of what they’ve been trying to do over the last few years and the two bolt-on deals that they did in the fall, which really has supported and helped around those same secular drivers. So I think we’re in a really good position in the business because we’ve been intentional about the innovation investments, we’ve been intentional about our commercial investments and that’s playing out. And certainly, share is always a tough thing because most of their competitors are our regional companies in various countries. So we don’t have great numbers on market share. But as we look with our — as you know, a good chunk of that business is with channels. And our channel partners are certainly excited about our partnership and what we can do together, that’s usually a good sign of how we’re performing.
Joe O’Dea: And then I also wanted to ask on ASP. I think consumables in North America was up 7% in the fourth quarter, just looking for what you saw in the first quarter and as you’re sort of on the other side of the transition through go-to-market. How that’s coming together to drive some of the consumables demand?
Chuck McLaughlin: For ASP specifically, in Q1, I think we were up 11% in Q1, just pretty much right where we expected to be here. Now as we move through the year, because that transition happened over the year, that’s going to moderate some of that, but right on track and delivering the growth we expected and pleased to see — as well as importantly, the margin expansion.
Operator: Your next question is from the line of Joe Giordano with TD Cowen.
Joe Giordano: On Fluke, obviously, that business has been remarkably resilient. Is that business, like you mentioned solar, is there a risk on an election risk there if policy changes shift or is that just — could that just be offset by more positive trends within data center electrification, things like that? How would you kind of handicap that into an election if the administration changes?
Jim Lico: Well, I think number one is we’re more tied to the maintenance of those than we are to the construction of them. So in many respects, it’s what’s out there today. And so that’s number one. Number two is, I think when you look around the world, certainly take a global view of solar too and you have a very good global opportunity, I would say the same thing about electrification. And it’s really more of the maintenance of those systems than the construction of those statements — those situations, so much more tied to the maintenance — the field maintenance of all of that. So I would say we feel very good about the opportunity. And I think, if you think longer term over the next few years, you probably bet on those things continue to be pretty good. So yes, I think we’re much more tied to the — I think the bottom line is we’re much more tied to the maintenance of those — the field maintenance of all of that.
Joe Giordano: And then just curious, with the numbers on EA lowering the top line a little bit. Is that business still like 40-plus EBITDA margins at the lower revenue rate?
Chuck McLaughlin: Yes, came out very strong and actually, it’s also why we’re seeing that margin expansion at PT, that’s part of the story.
Operator: Today’s final question will come from the line of Andrew Buscaglia with BNP Paribas.
Andrew Buscaglia: So you talked to — gave some good color around PT getting through the rest of the year, and your margins really — your margin guidance really implies quite a step-up in the back half. What are some other contributors specifically within AHS that might help that? And then specifically in IOS, your incrementals have been outstanding, but what’s like a normalized incremental as we get through 2024?
Chuck McLaughlin: Andrew, I think the — a couple of things to think about. We generally think about incrementals at around 40% in the base case. So that’s probably a good place to start. When you’re talking about the step up as we move through the year, we’ve got the top line with 48% of the revenue in the first half and 52% in the second half. So there’s always this upward trajectory in terms of seasonality from the first half to second half, and that drives through more volume. And that’s the biggest key to expanding the margins. When you look year-over-year, the 100 basis points that we saw in Q1, it steps up through the year because of volume and normal seasonality. We guided to 75 basis points for the year, and I think — or more with the productivity initiatives. Health is off to a great start with 200 basis points. So we’ve got a lot of things going the right way, but it’s really the volume falling through those.
Andrew Buscaglia: And staying with — just touching on AHS, the distributor transition is definitely helping you guys. Can you talk a little bit more about that business as we progress through the year? I think with the way that your incrementals have been strong there. Can you talk a little bit more about how that continues or is sustainability there?
Chuck McLaughlin: We’ve got for healthcare, keep in mind, it’s early in the year, but 125 basis points for the year. But in Q1, you’re seeing the full benefit show up with the dealer transition here in Q1. If you remember Q4 last year, it also saw the full benefit. And as we move through the year, there’s going to be a little bit stuff that we’re getting into tougher margin expansion but we expect to be over the 125 margin expansion for the year at AHS. Very pleased with another strong quarter of really strong margin expansion and growth here, and we expect to continue that through the quarter or through the years.
Operator: This concludes the question-and-answer session. I will now turn the call back over to Jim Lico for closing remarks.
Jim Lico: Well, thanks, everybody, for the opportunity to spend time today. Hopefully, you hear from us, feel really good about the first quarter, we feel really good about the full year. Obviously, some puts and takes relative to everything, but the guide holds and it is raised. And so we feel operationally, we’re executing very well. From a margin expansion, from an EPS perspective, free cash flow, we’re executing really well. We love the fact that the trajectory on health now after several quarters is in such a good position. And we’ve got a number of opportunities here that are really playing out, we’re excited about. So hopefully, that comes through. We look forward to the follow-up calls. I know our team will be available and we’ll see you on the road here shortly. Thanks, everyone.
Operator: This concludes Fortive Corporation’s first quarter 2024 earnings results conference call. Thank you for joining. You may now disconnect.
