Fortive Q4 2025 Earnings Call Transcript

AlphaStreet
Provided by AlphaStreet
February 7, 2025
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Operator

My name is Daryl and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Fortive Corporation's 4th-Quarter 2024 Earnings 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, press star then the number two. I would now like to turn the call over to Ms Elena Rossman, Vice-President of Investor Relations. MS. Rossman, you may begin your conference.

Elena Rosman
Vice President of Investor Relations at Fortive

Thank you, Daryl, and thank you everyone for joining us on today's call. With us today are Jim, our President and Chief Executive Officer; and Chuck McLaughlin, our Senior Vice-President and Chief Financial Officer. We present certain non-GAAP financial measures on today's call. Information required by Regulation G is available on the Investors section of our website at fortive.com. Our statements on period-to-period increases or decreases refer to year-over-year comparisons unless otherwise specified. 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.

These forward-looking statements are subject to a number of risks and actual results might differ materially from any forward-looking statements that we make today. Information regarding the risk factors is available in our SEC filings, including our annual report on Form-10 for the year ended, 31 December 2023 and the quarterly report on Form 10-Q for the quarter ended, 27, 2024. With these forward-looking statements, they speak only as of the date that they are made, and we do not assume any obligation to update. With that, I'd like to turn the call over to Jen.

Jim Lico
President and Chief Executive Officer at Fortive

Thanks, Elena. Hello, everyone, and thank you for joining us. I'll begin on Slide 3. Board have delivered better-than-expected performance in the 4th-quarter, including higher core growth, earnings and free-cash flow. These results capped a strong year for Fortiv, including another year of record margins with gross margins of 60% and adjusted operating margins nearing 27%, while continuing to fund future growth. In addition, we compounded adjusted earnings and free-cash flow of 13%, contributing to our strong multi-year track-record of differentiated financial performance. Our accelerated pace of innovation in 2024 helped us sustain top-line momentum given the mixed demand environment and further enhances our outlook for 2025. Turning to the year ahead. Is poised for improving core sales growth and continued strong operating performance.

We've taken a prudent and balanced approach to planning the year, reflecting momentum in our bookings and durable revenue growth in Industrial Operating Solutions and Advanced Healthcare and stabilizing trends in Precision Technologies, driving a gradual recovery through the year. Lastly, we are progressing well on the actions we announced last year to further accelerate our strategy and enhance value-creation. Our teams have made meaningful progress toward the separation of the newly named Precision Technologies company called Rallyant. We now expect the transaction to close early in the 3rd-quarter. We also executed on our plan to prioritize the return of capital to shareholders, utilizing our record free-cash flow to repurchase shares. In summary, these actions reflect our commitment to unlocking long-term value for all our stakeholders.

Turn to Slide 4. 2024 was another year of consistent compounding, including the achievement of several record financial metrics. Since our inception, we have evolved our portfolio and leveraged the business system to accelerate growth and innovation, expand market-share and profitability and forge the leadership skills we need for the future. The exceptional value created for customers and shareholders is reflected in our sustained multi-year performance, including an acceleration to mid-single-digit core growth on average the last five years, over 600 basis-points of adjusted operating margin expansion and 350 basis-points of adjusted gross margin expansion amidst unprecedented inflation.

Our accretive capital deployment has contributed to higher-growth and higher returns. As a result, we grew free-cash flow an average of 18% per year over this time, underpinned by industry-leading net working capital performance. In summary, what is unique and truly differentiated about Fortive is the breadth of results that are compounding over-time relative to peers. The reason for this five-year track-record of success is our commitment to FBS and the strategic evolution of our portfolio.

Turning to Slide 5, our evolution of the Business System and continuous improvement mindset have driven an acceleration in NPI velocity, helping to sustain our top-line momentum. Within FBS, we have built over-time a proven innovation tool set to identify unmet customer needs, develop new products and bring them to-market faster, which ensures greater returns on our R&D investment. Just several examples of how our increased innovation velocity is contributing to growth across the enterprise. Starting with iOS, Luke launched a record 20 major new products in the last two years, extending their leadership position in solar and energy storage tools and contributing 200 basis-points to growth in 2024.

Facility and asset lifecycle revitalized their innovation efforts for the last three years, launching its strongest slate of new products and enhancements, while also expanding margins 800 basis-points. Revenues from these new offerings are expected to more than double in 2025 versus last year. ASP launched a record of six new products in 2024 with 510 approval, which are expected to contribute over $10 million of revenue in 2025. Provation added to their leading GI position with their next phase of Apex Insight, a proprietary data analytics tool that boosts provider productivity contributing to a 67% increase in APEX SaaS sites in 2024. PT is also leveraging FBS innovation tools to advance the world's technologies. Launched four new products to their best-in-class electronic test and measurement offering, serving their fastest-growing markets.

Sensing Technologies is launching sensors for monitoring the liquid and air-cooling systems within data centers and Qualtrol continues its double-digit pace of growth with new electric grid monitoring and energy storage solutions to support the expansion of global power infrastructure. We're also leveraging our investments in the fourth to develop advanced software, data analytics and AI capabilities, and we expect to launch new AI-based product sets in 2025 and 2026. Moving to the 4th-quarter and full-year results on Slide 6. We ended the year with strong operating performance, generating adjusted earnings growth approximately three times revenue growth. Core revenue growth of 2% in the quarter reflected an acceleration at iOS, partially offset by the anticipated Decline in Precision Technology. China headwinds continues to mute the recovery we are seeing in certain markets. Acquisitions net of divestitures were offset by unfavorable FX as the dollar strengthened in the quarter. Further highlights of our 4th-quarter performance include 100 basis-points of adjusted operating margin expansion, adjusted earnings per share of $1.17, reflecting a $0.05 beat at the midpoint with earnings up 19% year-over-year and record Q4 free-cash flow of $465 million, up 13% year-over-year. For the year, core revenue growth was 1%, reflecting the mixed demand environment and core decline at PT. Adjusted operating profit grew 7% and margins expanded 100 basis-points, representing over 60% incrementals. We delivered earnings and cash-flow above our initial guidance coming into the year with adjusted EPS of $3.89, up 13% and record free-cash flow of $1.4 billion, representing 23% free-cash flow margins for the year. Turning to Slide 7. I'll provide more detail on our segment performance for the quarter and the full-year, starting with iOS and AHS. On a combined basis, 4th-quarter revenues grew 4% with adjusted operating margins up 140 basis-points to over 33%. This represents 12 consecutive quarters of consistent mid-single-digit core growth on a combined basis, reflecting the durability and resilience of these businesses. For the full-year, combined iOS and AHS delivered 4% core revenue growth and 120 basis-points of adjusted operating margin expansion with over 60% incrementals. Moving to the right, Intelligent Operating Solutions expanded operating margins 190 basis-points on 4% revenue growth in the 4th-quarter with M&A contributions, partially offset by FX headwinds. Stable Industrial products demand overall and NPI momentum drove mid-single-digit revenue growth at Flute. Shipments outpaced our expectations exiting the 4th-quarter. As a result, we expect a slower start to the year in Q1 before returning to more normalized growth the rest of the year. Growth in facilities and asset lifecycle accelerated to-high single-digit in the 4th-quarter, enabled by stronger take rate revenue across our government and multi-site retail product offerings. As you can see on the far right of the page, Advanced Healthcare Solutions grew core revenue 5% in the quarter with FX headwinds of approximately 150 basis-points of total growth. Consumables normalized to mid-single-digit growth as expected and accelerated growth, having lapped the license headwinds earlier in the year. HS expanded adjusted operating margins by approximately 40 basis-points in the quarter and 200 basis-points for the year, driven by high margins consumable growth, partially offset by unfavorable FX. Turning to Precision Technologies on Slide 8. Revenue was approximately flat in the quarter with a core decline of 3%. Acquisitions net of divestitures contributed approximately three points of growth in the quarter. This represents the second consecutive quarter of sequential core growth improvement enhanced by double-digit growth in utility and aerospace and defense markets. Adjusted operating margins contracted 200 basis-points on lower core volumes, partially offset by productivity benefits and accretive M&A. Core revenues at Tektronix were down low double-digit in the quarter as expected. However, orders were up high-single-digit for the second consecutive quarter. We continue to see investments supporting power, compute and communications for data center expansion and demand for defense applications driving orders growth, while China and EV mobility remain weak. We had another quarter of double-digit growth at Qualtrol and as our teams continue to ramp production capacity to keep up with strong demand. Moving to the right-side of the page, you can see the Precision Technologies revenue and adjusted operating performance for the past four years. Since 2021, PT has grown core revenue at 4% CAGR with adjusted operating profit growing twice that rate at an 8% CAGR over the period. Core revenues declined 4% in 2024, improved portfolio positioning and focused innovation efforts have dramatically improved the through-cycle performance. Leveraging FBS Tools, we've expanded our addressable market and added complementary solutions aligned to favorable secular trends, including next-gen power applications for new markets and new sources of energy around the world. As a result, PT is a much more durable business today with a stable margin and free-cash flow profile poised for recovery in 2025. With that, I'll turn it over to Chuck to discuss our 2025 outlook.

Chuck McLaughlin
Chief Financial Officer at Fortive

Thank you, Jim, and hello, everyone. Turning to Slide nine, let me set the stage for how we're thinking about the year. We continue to be encouraged by stabilizing demand trends overall, which gives us confidence in an acceleration in revenue growth from 2024 to 2025. While we are providing full-year guidance for total 40, we thought it would be helpful to frame the key drivers of the respected new companies, starting with New 40 on the left, comprising our iOS and AHS segments.

We expect revenues of approximately $4.1 billion, supported by demand for our leading safety and productivity technologies and market-share gains from new product introductions. We expect stable underlying industrial demand at Fluke with positive point-of-sale in North-America and Western Europe. China is expected to slow both from a GDP and industrial production perspective, and we have reflected that into our outlook.

We expect sustained momentum in our software and recurring revenue businesses, including double-digit ARR growth in foul and stable consumables growth in healthcare. This yields low single-digit plus to mid-single-digit core growth for New 40 in 2025. Regarding phasing, we expect growth in the second-half to outpace the first, primarily due to timing and days impact in Q1. Turning to the PT company.

We anticipate revenues of roughly $2.2 billion in 2025 with core growth up slightly for the year. Our businesses aligned to power infrastructure, compute and communications investments for data center expansion, coupled with aerospace and defense systems comprised approximately 35% of revenue and are expected to grow double-digits again in 2025, coupled with stabilizing trends in broader semiconductor and sensor markets, we anticipate a return to core revenue growth in the second-half of the year.

On Slide 10, we provide further details on-Q1 and 2025 guidance. Starting with the full-year, we expect core revenues up 1.5% to 3.5%. FX is expected to be an approximate $90 million headwind for the year or roughly 150 basis-points of impact to total growth. Adjusted operating profit is expected to increase 2% to 5% and adjusted diluted EPS guidance is $4 to $4.12, up 3% to 6% for the year. Our adjusted EPS guidance includes a $0.20 to $0.25 headwind from a higher effective tax-rate and FX. This is offset by lower share count and a slightly lower interest expense. Adjusted free-cash flow is expected to be approximately $1.5 billion, which excludes the impact of separation-related cash cost of roughly $185 million.

The conversion rate on adjusted net income is approximately 100%, excluding these items. For the first-quarter, we anticipate core revenues to be roughly flat. FX is expected to be an approximate $30 million revenue headwind. IOS and AHS will start the year slower due to Fluke's stronger finish in Q4 and less days in Q1 impacting consumables and service utilization rates. PT is expected to be down mid-single digit, representing our toughest year-over-year comp. Adjusted operating profit is expected to be roughly flat and EPS is expected in the range of $0.83 to $0.86, including a $0.05 headwind from unfavorable FX and higher. With that, I'll turn it back over to Jim to conclude.

Jim Lico
President and Chief Executive Officer at Fortive

Thank you, Chuck. I'll continue on Slide 11. We've made considerable progress on the actions we announced last September to accelerate our strategy and enhance value-creation. Starting on the left, we utilized our record second-half free-cash flow to repurchase approximately 10 million shares, representing 80% of our free-cash flow, slightly more than we committed to when we announced the separation. We remain committed to deploying free-cash flow, incremental share repurchases as we work to execute the spin. The balance sheet remains in great shape.

We exited 2024 with net leverage of approximately 1.6 times and we continue to expect that each company will sustain investment-grade balance sheets after the spin. Moving to the right, we expect the separation to close early in the 3rd-quarter. Following the progress our team has made to date, including confidentially filing a draft registration statement with the SEC in December, we are processing initial comments and we expect a Form-10 filing in the spring. Our efforts to hire top talent are well underway, ensuring we assemble a world-class corporate team to drive future success. Earlier this week, we announced that PT Newco has an exciting new name, Corporation, and we appointed Ganesh Morsey as the Board Chair. We also announced that Alan Spoon, who is retiring from the Forda Board and Kate Mitchell will both join the Rallyant Board.

Together with Tammy, these Board designes reflect Fordham's commitment to the new company's success and sustained value-creation for all stakeholders. We'll continue to provide additional updates as they become available. I'll wrap-up now on Slide 12. Last week, we are excited to announce that Shar Dubay was appointed Fortive's new Board Chair, succeeding Alan Spoon. On behalf of the Board and management team, I want to thank Alan for his leadership and all he's done to Shepherd to become a more durable growth company. As we enter this new chapter, I and the rest of the Board are confident that Shar is the right person to serve as the next Chair. She's been providing valuable contributions to our Board since 2020 and her deep insights into our business, culture and strategy, combined with her Extensive operational and leadership expertise pair her well to steward the execution of our long-term strategy with a more focused and resilient portfolio. This next chapter is a manifestation of the strategy we laid out at our inception, profitably evolve our portfolio to deliver in any environment. That was the case in 2024, our enhanced portfolio positions, innovative new products and dedication to the Florida Business System have allowed us to deliver consistent compounding performance over the last five years. We are well-positioned to continue this track-record in 2025 and beyond as we progress through the separation. We could not have reached this milestone in journey without our unique culture and the passion of our 18,000 teammates around the world. Together, we show-up with a mindset we can do and be better. I know I speak for the entire team, including and Tammy when I say I cannot be more excited for the future as both companies are strategicallywell-positioned for enduring success. With that, I'll turn it to Elena.

Elena Rosman
Vice President of Investor Relations at Fortive

Thanks, Jen. That concludes our formal comments. Daryl, we are now ready for questions thank you.

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Operator

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick-up your handset before pressing the star keys. One moment please while we poll for your questions. Our first questions come from the line of Rob Mason with Baird. Please proceed with your questions.

Robert W. Mason
Analyst at Robert W. Baird

Yes. Hey, Rob. And hi, and happy Friday. I usually not saying that on a 40th conference call. So just maybe to start, Jim, could you dig into the product side of the business and thinking this is more around, I'll say iOS and AHS, new 40 when you framed out 2025 or made some initial comments back-in October, I'm just curious around the -- has anything changed evolved as you've tightened up the plans? You made a comment around China softer, but just some perspective there around the product side.

Jim Lico
President and Chief Executive Officer at Fortive

Yeah. And maybe take a way around Fortive. First of -- first-off on new Newportiv as you mentioned, iOS and HS, I would say really the aspects of the business in software and healthcare really performing well. We had a little bit stronger end-of-the year at Fluke and some of that we'll get into that later, but I think just continuing to demonstrate in Fluke the resiliency and durability, particularly around product innovation, much of which we highlighted on the prepared remarks. I would say what's changed maybe or maybe what's what we're going into '25, Rob, a lot of -- a lot of the past is similar.

We've got a little bit of headwind on the days and the consumables businesses and the service parts of our software businesses, which has a little bit of headwind just in the quarter, but really good performance in Q1 across the portfolio and what I'll call new formative. On the peak -- but China, China is a little bit of a headwind for sure. Most -- that's most pronounced in the first-quarter because what we saw last year in the first-quarter and you probably remember this was we did see some optimism in the part of China channel partners in anticipation of some of the policy changes that were going to occur and the impact the China government last year. And obviously that didn't happen. But so we've got a little bit tougher comp in China in the first-quarter. China is going to be down across really across-the-board.

So on the PT front, I would say a lot of the orders were good. We talked about the order growth in a couple of quarters in a row now. We'll see order growth in the second-half as well in PT. And I would say China, but again there, China weak and we're not getting out-of-the gate here. If you really as we anticipated, but we're certainly not seeing any dramatic increases in China as we start the year out?

Robert W. Mason
Analyst at Robert W. Baird

Understood. And maybe just as a follow-up, specifically and maybe this touches on some of PT because you do have more governor government exposure there. Are you seeing anything post-election that around the flow of funds that you're trying to account for in the planning just within your various government exposures.

Jim Lico
President and Chief Executive Officer at Fortive

We have not. In fact, you know, I think we've said this in a couple of places. Parts of the portfolio where we have exposure to government, Guardian is a good example, although more state and local, less federal. But our productivity solutions really, I think are going to resonate and really drive cost-reduction. So to some extent, we think an opportunity where we're more -- where maybe there's more fiscal responsibility actually plays to our -- plays in our favor. On the product side of the businesses, we've actually seen strength. We actually in -- we've gotten some nice, nice large orders from some of the primes across the portfolio. So I would say at this point, nothing would indicate that customers are changing their mindset around where the -- where they're seeing our business here at least over the -- over the past few months.

Robert W. Mason
Analyst at Robert W. Baird

Great. Thanks so much

Jim Lico
President and Chief Executive Officer at Fortive

. Thanks, Rob.

Operator

Thank you. Our next questions come from the line of Julian Mitchell with Barclays. Please proceed with your questions.

Chuck McLaughlin
Chief Financial Officer at Fortive

Hi, Julien.

Julian Mitchell
Analyst at Barclays

Hey, good afternoon, Chuck. Maybe just the first question on the Precision Tech organic sales guide. So just -- there's a bunch of moving pieces, but just trying to understand that improvement in year-on-year organic sales from the first-quarter to the balance of the year. Maybe help us understand how much of that is a function just of selling days versus easier comp versus some end-market improvement that you've embedded maybe in China or somewhere else? And also I suppose the orders conversion into sales, you've had six months of decent orders, sounds like that will persist.Are we seeing those orders convert into sales already and it's just the mismatch is just a function of different comps or are these somehow kind of longer-dated activities in the order book that will come into revenue later than normal?

Jim Lico
President and Chief Executive Officer at Fortive

Yeah, a lot to unpack there, Julien, but let me start with the -- I think what you were talking about the cadence. I would certainly say the cadence through the year for PT will be really down mid-single digit in the first-quarter, probably a little bit better in the second-quarter and then some growth in the second-half. I think that gets to them to be about up slightly for the year.And some of that's going to be comps, particularly in China, where we see a lot more of the dramatic tougher comp in the first-quarter and in the first-half. We've always said that we thought some market improvement would occur in the back-half of the year. That's embedded, but it's not a dramatic improvement in any way, shape or form.

We did think some markets would start to come back. And we've actually seen a number of things where customers were actually seeing that. The other aspect is we're getting to really high -- really high-volume numbers in places where we're seeing dramatic growth, principally in Qualatrol and in EMC. We've got some investments to improve capacity, which will also help us in the second-half.

So I think the combination of comp in China, some market improvement, but nothing dramatic and the combination of our ability to get more out here is really what changes first-half to second-half. And then I think as I think about really what -- but I think when we look at the business more broadly, it's also the innovation cadence. We mentioned this in the prepared remarks, but a number of the innovations, particularly at Tektronix really start to take hold in the second-half. None of which -- but we really don't have a lot of that embedded at this point?

Julian Mitchell
Analyst at Barclays

That's helpful. Thank you. And then just my follow-up would be around the tariff potential there and any way in which you could size perhaps a share of purchases or COGS or something like that from some of the countries that may be affected in terms of US tariffs?

Jim Lico
President and Chief Executive Officer at Fortive

Yeah. Well, I would say, number-one, the Canada and Mexico, even though they were -- they were postponed, it really doesn't have impact to us. So in that sense, really no impact. China -- the China tariffs, as you know, we've had a strong playbook since 2018. We've really just pulled out that playbook. We talked about the number of scenarios that we created several months ago when -- when we started hearing about what the potential could be. We've already enacted those countermeasures and that's embedded in our guide. So we -- the 10% tariffs in China have been countermeasured and we'll move through what we have.

I think to some extent how we thought about the year from a macro perspective in China does have some of the economic impact of some of the tariffs. Not sure we could point to any of those with true specificity. But I think the way we plan China is going to be down here mid-single digit for the year in China for, I think embeds the fact that there's going to be some uncertainty amongst customers and in China and ultimately, that will impact our revenue. So we've tried to be prudent about that as we as we look into the year.

Operator

Great. Thank you. Thank you.

Jim Lico
President and Chief Executive Officer at Fortive

Thank you.

Operator

Our next questions come from the line of Nigel Coe with Wolfe Research. Please proceed with your questions.

Nigel Coe
Analyst at Wolfe Research

Good afternoon. Hi, good morning, good afternoon. So Chuck, I think this might be your last earnings call. I'm sure you're going to miss this whole process, but thanks for all the help over the years and good luck with your retirement so thank you. A couple of quick ones. Yeah, a couple of quick ones here. Just the days headwind in 1Q, we've heard this from some other companies. Is this just the leap year in the prior year quarter or is there something on Chinese New Year? Any more color there? And then just FX has sometimes had an impact on margin conversion, I think mainly within AHS. So any sort of peculiar sort of things to kind of flag with this dollar strengthening?

Chuck McLaughlin
Chief Financial Officer at Fortive

I think that there are couple of things there. You were asking about days. I think there's nothing -- it's just a simple days kind of. I don't think we have -- when you look at the whole year, I don't think there's a big difference there. So they'll come back, but that's the main thing there. I think when you talk about health margins, they get hit with a little bit more FX impact on the margins and I think that's what you're seeing there.

Elena Rosman
Vice President of Investor Relations at Fortive

Okay. There's a bit of a bigger days impact to healthcare. You think about how much of that day's impact sits with consumables, for example, that's about 200 basis-points of headwind in the first-quarter

Nigel Coe
Analyst at Wolfe Research

Nigel. So 200 basis-points. Yeah, that's what I was thinking as well. And then just a follow-on with the spin. Just wondering if there's any more visibility on public company costs and stranded costs from the spin?

Chuck McLaughlin
Chief Financial Officer at Fortive

Yeah. And I think we sized them roughly around $50 million to $60 million. I think some of that we will get after between now and spin and offset about half of that. And the other half would probably take maybe 12 to 18 months-to work down and work-out. But we expect to get and get it all normalized.

Jim Lico
President and Chief Executive Officer at Fortive

And Nigel, on the separation costs, I think we -- on the slide, we showed $185 million. That's mostly one -- that's all one-time costs. That's mostly professional services, taxes, lawyers, the banker fees to do some of that work. So we've outlined that on the slide as well. So as Chuck said, we'll get after the separate -- we'll get after the stranded costs. We're making good progress on building the teams here. So we feel -- as I mentioned in the prepared remarks, we feel really good about our ability to get the teams ready for and hence, our ability to speed-up the timeline.

Nigel Coe
Analyst at Wolfe Research

Okay Thanks, Jim.

Jim Lico
President and Chief Executive Officer at Fortive

Thank you.Thank you

Operator

Thank you. Our next questions come from the line of Steve Tusa with JPMorgan. Please proceed with your questions.

Steve Tusa
Analyst at J.P. Morgan

Hey guys, how's it going? Good, Chuck, thanks. Thanks for all the help over the years and best of luck. Thank you. So just on the product businesses, back to the tariff question, did you guys see any kind of pre-ordering ahead of the change in administration and potential tariffs? And I'm just curious as to how the quarter played out sequentially by month kind of adjusting for seasonality? No way, If you could.

Jim Lico
President and Chief Executive Officer at Fortive

Yeah. So I wouldn't say we identified any additional revenue relative to -- relative to people pre-buying, Steve. What we saw in the fourth was a pretty good cadence through. Point-of-sale was positive in North-America as an example at Fluke. And so -- and that cadence was relatively consistent throughout the quarter. That's probably our best benchmark. But we identified roughly about $10 million of revenue at Fluke that we think came out-of-the first-quarter, but that was really more mostly US distribution and European distribution. People were starting to get close to incentives as the year played out. And so there was a little bit of additional buying to get into incentive plans and things like that. So it's really that we identified. So it really wasn't around tariffs as near as we can tell.

Steve Tusa
Analyst at J.P. Morgan

Yeah. Got. Got it. And then just last one on the -- as a follow-up on the Tektronics, the T&M side of PT. Which verticals are you -- are you seeing the best order rates in? Which ones are kind of picking-up here the most?

Jim Lico
President and Chief Executive Officer at Fortive

Yeah. I mean, we've had -- we've had really strong anything tied to defense has been strong for several quarters. I would say the high-end, what I'll call for lack of a better term, the high-end of semiconductor high and high-speed compute, hyperscalers, those kinds of quantum computing, all of those have been really good. So design efforts, investments that are going into those opportunities have been really strong. Broadly, industrial hasn't has been pretty good too, particularly in North-America. Where we've seen the weakness, as we mentioned in the prepared remarks is really Western Europe and in China and that really part of that is EV mobility. And the other part of that is just broadly China. And most of that is really export control customers that we can no longer -- no longer do business with. Got it.

Operator

Okay.

Jim Lico
President and Chief Executive Officer at Fortive

Thanks a lot. Have a great weekend. All right. Thanks, Steve. Yeah, you too.

Operator

Thank you. Thank you. Our next questions come from the line of Jeff Sprague with Vertical Research Partners. Please proceed with your questions.

Jeffrey T. Sprague,
Analyst at Vertical Research Partners

Hey, thanks. Good day, everyone. Hey, how you doing? Good to catch-up. Hey, a couple of loose ends here. Just on the days, can we just have the number? Like how many days are we talking about here? It sounds like it's two-ish.

Elena Rosman
Vice President of Investor Relations at Fortive

Two days. Yes, two days, two days. About $8 million.

Jeffrey T. Sprague,
Analyst at Vertical Research Partners

Yeah. And you think it -- you think it affects what, 60% or 70% of your business? Is that the right ballpark?.

Elena Rosman
Vice President of Investor Relations at Fortive

It's really -- it's no. It would be consumables, which are about half of healthcare and then the remaining, Call-IT 3 million or $4 million is in services and places like Guardian to take great business.

Jim Lico
President and Chief Executive Officer at Fortive

Yes, it doesn't think services. Think about daily services like we would do in the service organizations for fluke and tech as well as the services that we have in software.

Jeffrey T. Sprague,
Analyst at Vertical Research Partners

Okay, I think it might impact things in distribution, but maybe not to people want it, they'll catch it up. Okay, that's helpful. Thank you. And then just on China, I think you said down mid-single digit. I think that was a 2025 estimate. Can you just kind of level-set us on how much China -- what China did in 2024 for the year and in the quarter?

Jim Lico
President and Chief Executive Officer at Fortive

You yeah. So I think for the high-single-digit. Yeah, down high-single-digit for '24, down mid-single digits for '25 with probably Q1 being down high-single-digit to low-double-digit in the quarter. And that's more broadly. And what's interesting, Jeff, is our high-grow -- our high-growth markets ex-China have actually been continuing to grow really well. And so that's -- I think the offset there is going to be we continue to see good growth in some of the other higher -- high-growth markets.

Jeffrey T. Sprague,
Analyst at Vertical Research Partners

And then just maybe finally from me on sort of the flat AOP for Q1. I take it that's still some margin pressure in PT and then some upward trajectory in the other two segments. But any anything you'd say there that kind of get us in the right ballpark?

Jim Lico
President and Chief Executive Officer at Fortive

Yeah. I mean, I would say on flattish growth, we're typically going to -- that's kind of the overall -- overall, we had good margin expansion in last year, so 110 basis-points in '24 in Q1. So when you kind of look at where we're at on a two-year stack, still good despite kind of that low single-digit growth that we would have had on a on a comparable basis. But it's exactly right. New or iOS and Health will be -- will have good margin expansion.

And with being down the way we are in PT, we're doing a nice job of offsetting. When I think about how we've done in PT over the last year, given the fact that our tech being down our highest gross margin business, it's been really good operational performance to offset a number of those things. And obviously, our margin expansion for the year was good in '24 in-part because of iOS and HS doing a great job, but also the countermeasure work that PT did as well.

Jeffrey T. Sprague,
Analyst at Vertical Research Partners

Great. Thanks a lot.

Jim Lico
President and Chief Executive Officer at Fortive

Thank you, Jeff.

Operator

Thank you. Our next question is coming from the line of Scott Davis with Melius Research. Please proceed with your questions.

Scott Davis
Analyst at Melius Research

Hey, Scott. Guys. It's good morning out there still. But hey, I don't think you addressed it on prepared remarks, but maybe you did, but this is for Chuck. The tax-rate has seemed to be pretty volatile for the size of the company. Is there any particular reason why that's been hard to pin down?

Chuck McLaughlin
Chief Financial Officer at Fortive

Well, the tax-rate came down Q4 due to discrete items. That's typically where most of those things land and they could be somewhat unpredictable and we don't forecast them. And so I think that's what you're seeing there. When you take-out discrete items, it's actually holding into that 14% range of other than that.

Scott Davis
Analyst at Melius Research

Okay, so I get it. All right. So if we wanted to mark -- if you wanted to mark-to-market kind of where we are with probation and ASP, let's just take those two businesses. What do you guys think the new realistic kind of long-term growth rates are. I mean, we know what you thought they were when you did the deals, but it's been a few years now So if we just mark-to-market now and you said, okay, over the next five years, or even longer, what would you expect to be kind of the entitlement of potential growth rates of those two assets now.

Jim Lico
President and Chief Executive Officer at Fortive

Yeah. Yeah, I would say ASP mid-single digit, that's a combination of additional electric procedures plus some price, plus some volume share gain. And then as we mentioned in the prepared remarks, we're really starting to see the innovation flywheel start. So we feel-good that as we've talked over the years, Scott, that we had six, five, 10-K approvals here and it takes a while to get the innovation cycle moving in healthcare just because of the regulatory environment, but we're really starting to see that. So we feel really good about that mid-single-digit growth rate going on. It's a little bit impacted how we just talked about the days that's our biggest days impact is that ASP. But when we look really at the entitled growth rate, it's mid-single digit. Probation probably high single, low double.

When we look at the SaaS conversion, it will move around a little bit depending on how that conversion goes, but that's a combination of really just the continued work, great work we're doing. We haven't talked about it in a long-time or in some time, but they're doing a great job. I mentioned the dramatic improvement increase in SaaS sites that we had and that's really the great work we're doing. We've really got a good sales motion going. And as we also mentioned, we've got Apex Insights, which is their AI offering, which is now starting to get some traction as well with customers. So Call-IT high single to low double and that's really what we thought we would underwrite when we bought the business.

Scott Davis
Analyst at Melius Research

Yeah, consistent. Okay. I'll pass it on. Thank you, you, guys. Best of luck this year. Good luck, Chuck. See you. Thanks, Scott.

Operator

Thank you. Our next questions come from the line of Andrew Obin with Bank of America. Please proceed with your questions.

Andrew Obin
Analyst at Bank of America

Yes, good morning. Hi, how are you? Hi, just the first question, maybe talk about your digital, your software assets, Gordon service channel. Where are we in those growth rates and what do those look like exiting the year and going to '25?

Jim Lico
President and Chief Executive Officer at Fortive

Yeah. We had ARR growth of high-single-digit for both the quarter and the year, Andrew. Our software revenue grew overall -- in Q1 is going to grow high single and that's with some headwinds on the service front. So we think that high single is good. We're seeing -- we had those dramatic growth rates at Guardian for a number of years. So with Guardian rates moderating a little bit down into the double-digit range, low-double-digit, but we're seeing improvements in the current and service channels. So good growth -- good growth there. I just mentioned about probation, good growth there. So intellect, we've -- we're starting to improve the growth rate there. We've had -- we had a little bit of a challenge there in '24, but we've done some nice work to continue to improve that. So overall, software in very good shape.

We mentioned a number of places where we've got some innovation going on as well and Fal in the prepared remarks. So X, the team is executing well, innovation flywheel is starting to take -- take -- have some real impact, I would think those businesses. And I think as you look at around and I know you do this a lot, I think those numbers are going to hold-up pretty well. So we feel -- we feel-good about where our software businesses are and we've also dramatically improved the profitability. We talked about the 800 basis-points in the prepared remarks in FAL. We're just -- we've got a lot -- we're really demonstrating how FBS can really accelerate a software business. And I think you'll continue to hear that as we progress through the year.

Andrew Obin
Analyst at Bank of America

Yeah. And can we just talk about sort of utilities and power vertical? It seems structurally things are changing there over the long-term. How is the conversation changing with the customers? Do you need to add capacity? Do you have the right exposure? If you could expand on that because that's a big topic. Thank you.

Jim Lico
President and Chief Executive Officer at Fortive

Yeah, it is. And so it really comes in two-ways. In a smaller way, it comes from what we do with EA and Tektronics where we are really playing in a lot of the technologies and R&D investments that are going into the next-generation of utilities. And as the grid gets -- get the grid gets improved and technologies are going into that, obviously, R&D organizations around the world are designing those components and designing those chipsets. And we're very involved with tech and EA there. The bigger number, as you point out is at Qualitrol and that's been very strong. That's both on the grid monitoring side, but also on the transformer side. We've got a number of new sensors that we're launching with those businesses.

We've had double-digit growth in that business for several years. And as I mentioned on a previous question, we're ramping capacity because some of -- we're really up against our own capacity here. And we look out, that's a longer-cycle business. And as we look out the next 12 to 18 months, we continue to see customers making dramatic investments in those markets. So we -- that's going to be a good growth driver as we've talked about for what I'll call Rallyant because we have a new name now for PT and that will be a good growth driver for Rallyant going-forward.

Andrew Obin
Analyst at Bank of America

Thank you.

Jim Lico
President and Chief Executive Officer at Fortive

Thank you.

Operator

Thank you. Our next questions come from the line of Joe Giordano with TD Cowen. Please proceed with your questions.

Joseph Giordano
Analyst at TD Cowen

Hi, Joe. Hey, guys. Thanks for taking my questions. When I benchmark tech versus your peer group, do you think you guys have just more structural exposure to things like EV in China than some of your competitors do?

Jim Lico
President and Chief Executive Officer at Fortive

Well, I think the comps are tough because you don't give a perfect view. But I would say you know with EA, we might have a little bit more EVs exposure as a percent of the business but I think those numbers are relatively in-line. And when we comp them against over multi years, we see pretty similar performance.

Joseph Giordano
Analyst at TD Cowen

Okay. And then just on PT margins in the quarter, like I think they were expected to ramp pretty considerably and they were down sequentially on higher revenues. Just curious any color on that?

Jim Lico
President and Chief Executive Officer at Fortive

In Q4 or Q1?

Joseph Giordano
Analyst at TD Cowen

Yeah. Q4. The PT margin -- the PT margins in Q4, yes, they were down relative to the volume decline of revenue. 220 basis-points.

Jim Lico
President and Chief Executive Officer at Fortive

But even signific a little bit. Yeah, we had a little bit less revenue there and a little bit less revenue in some places where they're in some of our higher profitable businesses. Some of that is that production capacity point I made, some of it's a tech. So a little bit of that -- a little bit of that is a little bit of volume and then a little bit of mix too good.

Joseph Giordano
Analyst at TD Cowen

Thanks, guys.

Jim Lico
President and Chief Executive Officer at Fortive

Thanks, Joe.

Operator

Thank you. Our next questions come from the line of Andy Kaplowitz with Citiro. Please proceed with your questions.

Andrew Kaplowitz
Analyst at Smith Barney Citigroup

Good morning, everyone.

Chuck McLaughlin
Chief Financial Officer at Fortive

Andy.

Andrew Kaplowitz
Analyst at Smith Barney Citigroup

Chuck, thanks for all your help. Chuck or Jim, maybe you can update us on how you're thinking about price versus cost in '25. There's obviously some tariff-related uncertainty, but I would imagine that material cost inflation has been relatively benign. So what's embedded in your expectations for '25.

Jim Lico
President and Chief Executive Officer at Fortive

We've got about -- we've got about 200 -- little over 200 basis-points price in -- across the enterprise and that's pretty consistent, look, maybe 225 basis-points. So that's pretty consistent in -- across segments. So in that sense -- in that sense, we'll continue to -- we always go after more price. So that's usually a testament to our teams. We'll see -- that will mean some -- we'll start to see volume on the iOS front here, but we won't have volume in PT most likely. So given -- given the outlook that we've got around flattish. So for the full-year.

Andrew Kaplowitz
Analyst at Smith Barney Citigroup

Okay. Helpful. And then in AHS, I think in Q3, you had double-digit consumables growth, it was mid-single digits in Q4. I know you talked about the difference in days in Q4, Q1, that's probably the big reason. But do you see anything in AHS that actually slowed or was it really just the days? Is there a difference -- a bigger difference in growth between US and for instance, Europe and China and HS?

Jim Lico
President and Chief Executive Officer at Fortive

Yeah. Health -- health is in a really good place. Q4 didn't have the benefit of the year before comp that Q2 and Q3 did. So we really saw a good underlying performance. A little bit of impact on this IV bag situation, which we'll see in a couple of months in Q1, but broadly, really good performance at in health, particularly really across-the-board in all the businesses. I would say Europe was good. So in that sense, China is a little challenged. So I would say if you're anywhere in health where we're watching is in China, but more broadly across the world, Japan, Middle-East, we've really seen good performance across our health businesses. Now our most global business is ASP. So when we think around the world, it really is -- we -- ASP is really the one business that sells everywhere in the world.

Andrew Kaplowitz
Analyst at Smith Barney Citigroup

I appreciate the color. Thanks.

Jim Lico
President and Chief Executive Officer at Fortive

Thanks, Andy.

Operator

Thank you. Our next questions come from the line of Chris Snyder with Morgan Stanley. Please proceed with your questions.

Chris Snyder
Analyst at Morgan Stanley

Hi, Chris great. I want to -- hey, how's it going guys? Appreciate the question. I wanted to ask on PT orders. Great to see that double-digit positive for the second-quarter in a row. Are orders going higher in absolute terms because I know the comps are negative. And then with that, anything you could share on how Precision Tech, the book-to-bill is trending in Q4? Thank you.

Elena Rosman
Vice President of Investor Relations at Fortive

Yeah. So the book-to-bill for PT and certainly for tech and sensing on a combined basis is one for the year. It's a little below -- just below one, it's 0.96 for the 4th-quarter, but that's typical for us in the 4th-quarter given the seasonality of the shipments that we have in the 4th-quarter.

Jim Lico
President and Chief Executive Officer at Fortive

Yeah, I would say dollars, I think were up Q4 from Q3 and we'll grow -- we'll grow orders in the first-half in PT, little bit of pressure in the first-quarter because of some of the comp issues I was mentioning around China, but we still see continued growth in orders here in the first-half. So -- and to Steve's question around how does some of the timing, I think it was Steve is around six months or nine months. We'll start to see some of that shipment impact.

We did see some of those orders more back-end loaded. Some of it is because there's semiconductor related and there are semiconductor investments in the second-half. But we also saw some of our sensing companies that typically get blanket orders. Some of those orders we've got -- normally we get for full 12 months, we've only got for a few months. So we see a little bit of that order rate coming into shipments more -- a little bit more back-end loaded than typical. But we feel very comfortable with that sort of seasonality relative to years past.

Chris Snyder
Analyst at Morgan Stanley

Thank you for that. We really appreciate it. And then maybe just following-up, I was surprised to see Precision Tech organic growth worse or lower in Q4, I think down mid-singles versus the Q4 down 3%, just because we are seeing that positive order momentum. It doesn't seem like the days impact is all that material for PrecisionTech based on some of the prior commentary. So I guess, is this -- is the -- is Q1, is that down mid-single reflecting EA Electro now coming into organic? And with that, what is the expectation for EA Electro in '25? Thank you.

Jim Lico
President and Chief Executive Officer at Fortive

Yeah. So I would say a couple of things on the first-quarter. One is China, China a little bit -- a little bit more challenged than we anticipated. So I would say that's part of that. Second of all, you're right, EA going into core and EA's best quarter last year was the first-quarter because of the backlog coming in. So that's part of it as well. We think some good -- the good thing about EA, we certainly -- and we mentioned it in the prepared remarks, but just to put a bow around it, much of that EA -- much of that EV mobility challenge that we saw, principally in Western Europe and in China is EA. So that is -- that is certainly. We think EA will grow mid-single digits this year. And with the power of FBS and some of the things we've done operationally, we're going to get that their margin rate back to where they were when we bought the company.

So the margin rate is now in really good shape. We're going to put it we'll be -- the business will be back into growth mode as we move through the year. The Tektronix sales synergies are ahead of plan and that's really, really working well, particularly in North-America as we find new parts of growth in different markets and we've started to start to get some of those orders. So I think those -- those are some of the things that are going well. But again, the -- we've talked about this through '24, the large order EV business that was a big part of their business back-in '22 and '23, we have not seen that come back, nor we plan for it to come back-in '25.

Elena Rosman
Vice President of Investor Relations at Fortive

I'd just add that the EA headwind is about $10 million on a core basis. It's $10 million of the core decline quarter year-over-year for Q1.

Chris Snyder
Analyst at Morgan Stanley

Thank you for that. Really appreciate it. Thank you.

Operator

Thank you. Our next questions come from the line of Dean Dray with RBC Capital Markets. Please proceed with your questions.

Deane Dray,
Analyst at RBC Capital Markets

Thank you. Good day, everyone. I also want to wish Chuck all the best. Thanks. Thanks, Dean. Hey, Chuck, before you write-off into the sunset, I want to put the spotlight on-net working capital and at 6%, that puts Fordiv among the elite. And so I was hoping you could just parse out how that looks New Forda versus, did I say that right, Rallyant? So how does that. How does that break-out? I would imagine the more software part of New Fortive skews that lower, but just directionally, can you help us there?

Chuck McLaughlin
Chief Financial Officer at Fortive

Yeah, I think that I don't sure -- I haven't really looked at it that detailed in terms of with, but we have looked at it excluding the software, which would have it around 9% and that's what I would expect to be in that zone. But which is also really good. So that both have really good working

Deane Dray,
Analyst at RBC Capital Markets

Capital. So similar question for the two. I was not expecting to be that low on the net working capital, which is a positive, obviously. But just what does that mean for free-cash flow after both companies, kind of free-cash flow cadence for on an annual basis based upon that. It's got to be both very comfortably above 100% conversion.

Chuck McLaughlin
Chief Financial Officer at Fortive

No, I think not above 100%, but pushing -- I'd say that 95% to 100 the two things that really drive you over 100 would be whether you have software -- some software companies have negative working capital or doing M&A and be able to do improvement. But I'd call them expect them to be 95 to 100%.

Jim Lico
President and Chief Executive Officer at Fortive

Yeah, we'll certainly get more clarity as we get to Investor Day. But you know, Dean, you point out the free-cash flow both businesses is going to be really strong.

Deane Dray,
Analyst at RBC Capital Markets

Great. And just to clarify, on your software business collectively, are you at the negative working capital level

Chuck McLaughlin
Chief Financial Officer at Fortive

Collectively, I don't -- no, because not all software companies do that, but some do. I think we're pretty flat.

Jim Lico
President and Chief Executive Officer at Fortive

Yeah. We're still working through service channels, probably the big change there, Dean, they weren't typically that way. And so contractually, we're working through that over-time. Accruing is probably the biggest negative working capital software business we have.

Deane Dray,
Analyst at RBC Capital Markets

Great. Thank you for all that color. Thank you.

Jim Lico
President and Chief Executive Officer at Fortive

Thanks, Dean. Thank you.

Operator

Thank you. Our next questions come from the line of Jamie Cook with Truist Securities. Please proceed with your questions.

Jamie Cook
Analyst at Truist Securities

Hi. Just two quick follow-ups. One, with NPT, I think last quarter you noted some improvement in semi. Can you just talk about what you saw specifically in the 4th-quarter and your expectations for 2025? And then my other question or congrats on the spin happening earlier. Just because we get questions on, I assume you know the probability of any anything happening on PT and inbound offer. We can just assume that's sort of put to bed and not on the table? Thank you.

Chuck McLaughlin
Chief Financial Officer at Fortive

Yeah, I take the second one. I think that's probably a pretty -- that's a -- that's a fair assumption that we're going-forward with the spin and we've evaluated our inbound offers. And then remind me of the first question that you had?

Jim Lico
President and Chief Executive Officer at Fortive

Yeah Jamie, it's Jim. I would say a couple of things. One is where we're kind of a little bit getting back to the prepared remarks, the high-speed compute aspects of semiconductor have been good. NVIDIA is a customer, some of the large hyperscalers are customers. So I would say that's the good part. I would say that pretty typical to what you're seeing in some other places, the weaker aspects of semi are more the sort of discrete consumer products, that kind of stuff. And we don't anticipate a return on that. We're starting to see some green shoots there, but without a doubt and that some of that's in the order rate, but we're sort of expecting some improvement in that by the end-of-the year, but we haven't anticipated any big dramatic improvement through -- in the end -- in the end-of-the year.

Jamie Cook
Analyst at Truist Securities

Thank you.

Jim Lico
President and Chief Executive Officer at Fortive

Thank you.

Operator

Thank you. Our next questions come from the line of Joe O'Day with Wells Fargo. Please proceed with your questions.

Joseph O'Dea
Analyst at Wells Fargo & Company

Hi. Hey, Joe. Thanks for taking my questions. Hey. A fair amount of focus on China, but just if you could talk a little bit about regional expectations specific to Fluke really and how you think about the growth opportunity within the guide if we think about it from North-America, Europe, to China kind of perspective, what type of growth you think you can do in?

Jim Lico
President and Chief Executive Officer at Fortive

Yeah, I think we think about -- we did -- I think we did sort of low-single digit plus at FluQ could '24. We'd anticipate the same thing being in '25. So pretty similar expectations. Team has done a nice job. As we mentioned, making a lot of their own luck with this acceleration of the innovation cycle. North-America will be the winner in the clubhouse, most likely regionally. We did -- but we expect some growth in Western Europe and we expect good growth outside of China in the high-growth markets. We do expect probably China to be down a little bit in the full-year with most of that being in the first-half just because of comps -- mostly comp challenged. So we don't have a big anticipation of any big, big improvement in the market. As I mentioned, point-of-sale is a little mixed. Our sort of day-to-day run-rate point-of-sale at Fluke in China is actually down, but our sort of project-based point-of-sale is actually up. So we are still seeing some -- and I think that's really a function of the innovation. We're finding places where that innovation can work. But sort of the day-to-day run-rate business is still hasn't come back yet and we'll probably -- We'll continue to stay prudent around that as well. So fluke is in a really good position as we start the year off and after a strong finish. Some of the -- maybe a little bit of that weakness in the first-quarter is what we mentioned, which is some of the revenue coming out-of-the first-quarter. We saw that in the 4th-quarter.

Joseph O'Dea
Analyst at Wells Fargo & Company

And then on the sensing side, just any color on what kind of growth you expect out of Qualitrol trying to get a little bit of perspective on whether those capacity constraints, what kind of an impact they have on growth constraints? And then also within sensing, just anything on Hanksler and demand trends in Europe, whether there's anything encouraging there.

Jim Lico
President and Chief Executive Officer at Fortive

Well, I would say, number-one, Qualtrol multi-year double-digit growth and we would expect that again this year. So -- and that's a little bit of the capacity constraints. It's not just the volume this year, it's the sum total of the continued volume growth that we've got. So we'll have a little bit of capacity increase there to deal with the long-term demand trends that are very strong. Sensing in general, we saw order growth in the second-half, I think double-digit order growth in sensing in the second-half. So we -- but some of the blanket orders that we would normally see at the end-of-the year to cover the entire year, we did not see, and I would say that's part of that is Hanksler as you point out.

And I think where your question is going is exactly right. Their -- their exposure to European automation is a higher percentage of anywhere else in sensing, and that's really where their business has been the most weak. And also China has been weak. We have some automation customers there as well. So -- and that would principally be in discrete automation, which is probably consistent with a lot of what you heard from others, you know, over the last few weeks.

Joseph O'Dea
Analyst at Wells Fargo & Company

Indeed it is. Thanks a lot.

Jim Lico
President and Chief Executive Officer at Fortive

Thank you.

Operator

Thank you. Our last questions will come from the line of Scott Graham with Seaport Research. Please proceed with your questions.

Scott Graham
Analyst at Seaport Research Partners

Thank. Good afternoon, good morning for you. And thank you for taking the question. And Chuck, good luck and be happy.

Chuck McLaughlin
Chief Financial Officer at Fortive

Thank you.

Scott Graham
Analyst at Seaport Research Partners

A couple of questions around. First of all, on -- my questions are actually all-around margins.

Elena Rosman
Vice President of Investor Relations at Fortive

So in the quarter, was price-cost your typical spread, 50, 100 basis-points. Is that fair? Price was 3% in the quarter and when you look at gross margins, we expanded gross margins 10 basis-points in the quarter. And so relative to that sort of spread, it's probably on par with what it's been over the course of the year? Okay. And then could you remind us what

Scott Graham
Analyst at Seaport Research Partners

The restructuring savings will be? What's the plan there and how they layer into earnings in as the quarters progress.

Elena Rosman
Vice President of Investor Relations at Fortive

Well, we funded $20 million of restructuring in the 4th-quarter. We assume that rolls in and get gradually we see the benefits of that over the course of the year. Not much maybe a couple of million dollars of benefit, Call-IT a $10 in the first-quarter guidance.

Scott Graham
Analyst at Seaport Research Partners

Ahead. Thanks a lot.

Jim Lico
President and Chief Executive Officer at Fortive

All right. Thanks, Scott.

Operator

Thank you. There are no further questions at this time. I would now like to hand the call-back over to Jim Liko for any closing comments.

Jim Lico
President and Chief Executive Officer at Fortive

Well, thanks, Darryl, and thanks, everyone. Incredibly -- incredibly thoughtful set of questions. We appreciate all that. Obviously, Elaine and team will be available for any other questions. Just want to thank everyone. A lot of comments around Chuck. I just want to make sure everybody knows, he's not going anywhere. He's going to continue to support the Fortive team here and through the spin. So you may have an opportunity to hear from him a little bit, but he's done -- obviously done a great job for us over the years and we're excited for what he will do next, but that's not just -- that's not tomorrow. He's still got some work to do near as I can tell. So anyway, as you thought -- as you can hear, exciting times for us. We couldn't be more excited, good finish to the year. I think in many respects, we pointed out some of the five-year numbers that we're really proud of. When you look at several records set-in 2024 around a number of things.

Despite some of the mixed macro-environment, we were able to do a number of things on the margin and free-cash flow front that I think are just synonymous with FBS and really have an opportunity to really set us up for 2025. But probably the most important thing is how FBS has really driven innovation. And really when you see that across-the-board, I think you'll hear more of that as we progress through the year. We're excited about '25. We're excited with the fact that we can bring to you the idea that the spin is going to happen faster. It really speaks, I think, as well to the power of FBS and the quality of our team. So we'll look-forward to the follow-up questions. We'll see many of you out on the road here soon. A lot to do here between now and in the spin. We're excited about it and we look-forward to continuing to talk about all the exciting things going on in Florida. Thanks. Have a great day and have a great weekend.

Operator

Hey, everyone. Thank you. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day

Corporate Executives
  • Elena Rosman
    Vice President of Investor Relations
  • Jim Lico
    President and Chief Executive Officer
  • Chuck McLaughlin
    Chief Financial Officer
Analysts

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