📢 Earnings Summary — FTV

Fortive delivered a solid first quarter as a simplified company post spin-off, with modest top-line growth, strong margin expansion, and double-digit EPS growth. Management raised full-year adjusted EPS guidance, supported by operational execution, cost discipline, and significant share repurchases. Free cash flow remained strong, and capital was deployed toward buybacks while preparing for smaller, accretive M&A. End-market conditions were mixed, with improving trends in North America offset by weakness in Europe and ongoing caution in US healthcare capital spending. Q3 margins benefited from discrete cost actions, and the company expects to redeploy some of these savings toward growth initiatives in Q4, implying moderated sequential margin expansion. Strategic initiatives in innovation, commercial focus, and recurring revenue are gaining traction, underpinning a constructive medium-term outlook despite near-term headwinds.

📈 Growth Highlights

• Total revenue just over $1B, up ~2% y/y (reported and core).
• Core growth ~2% overall; both iOS and AHS grew.
• Adjusted EBITDA up 10% y/y; margin expanded 200 bps to 30%.
• Adjusted EPS $0.68, up 15% y/y.
• iOS core revenue +2%; AHS core revenue just over +1%.
• Sequential improvement in North America; AHS equipment and consumables improved sequentially.

🔨 Business Development

• Launched ServiceChannel SaaS features with AI-powered work order insights and streamlined payments.
• Introduced Fluke GFL 1500 solar ground fault locator, expanding into solar operations.
• Opened an innovation studio in Nashville, TN, and a customer experience center at ASP in Irvine, CA.
• Stepped up commercial focus on high-growth verticals (solar operations, distributed energy, data centers, defense) and in South Asia/India.
• Expanded Fluke maintenance software and service plan offerings; recurring revenue growth outpaced consolidated growth.
• Revamped M&A funnel to prioritize smaller, accretive bolt-on acquisitions meeting strict strategic and financial criteria.

💵 Financial Performance

• Adjusted gross margin down ~60 bps y/y due to tariff costs; pricing and supply chain countermeasures partially offset.
• Adjusted EBITDA $309M; margin 30% (+200 bps).
• Free cash flow $266M in Q3; TTM FCF $922M; FCF conversion on adjusted net income >100%.
• iOS: revenue +~2.5% reported (+2% core); adjusted gross margin 65.7% (-~90 bps); adjusted EBITDA $242M (+7%), margin 34.6% (from 33.3%).
• AHS: revenue $328M (+~2% reported, +~1% core); adjusted gross margin 58.4% (~flat); adjusted EBITDA +~7%, margin ~28% (from ~27%).
• Tariffs net of countermeasures were a ~$0.01 headwind to Q3 adjusted EPS.
• Lower y/y interest expense aided EPS; Q4 net interest expense expected to rise sequentially.

🏦 Capital & Funding

• Repurchased ~$1B of shares (~21M shares; ~6% of diluted share count) in Q3.
• Buybacks funded by Ralliance spin-off dividend proceeds, cash on hand, and increased commercial paper issuance.
• Capital allocation priorities: invest in organic growth, pursue accretive bolt-on M&A, continue buybacks, and maintain a modest, growing dividend.
• Raised full-year adjusted EPS outlook to $2.63–$2.67, reflecting Q3 beat and buybacks.
• Strong TTM FCF ($922M) supports continued deployment under the Fortive Accelerated plan.

🧠 Operations & Strategy

• Operating as a simpler, more focused 'New Fortive' post spin-off of precision technology segment (Ralliance) on Jun 28, 2025.
• Executing Fortive Accelerated strategy: innovation acceleration, commercial acceleration, and recurring customer value, powered by an amplified FBS.
• Flattened organizational structures and streamlined corporate costs; empowered 10 operating brands; intensified customer-centric engagement.
• Integrated AI Center of Excellence into FBS; enhanced toolsets for innovation, commercial execution, and recurring revenue growth.
• Q3 margin outperformance benefited from discrete cost actions; management expects some resource redeployment toward growth, limiting sequential margin pickup.

🌍 Market Outlook

• Guidance assumes continuation of late-Q3 market conditions; Q4 overall core growth expected to moderate.
• AHS core growth expected roughly in line with Q3; iOS to deliver very modest core growth in Q4.
• Tariffs through year-end assumed at current/known rates; net impact expected immaterial in Q4.
• Full-year adjusted effective tax rate mid-teens; Q4 tax rate expected in single digits due to discrete items.
• North America improving; Europe weaker y/y with deteriorating macro; South Asia accelerating across segments.

⚠ Risks & Headwinds

• Volatility in tariffs and global trade policy impacting margins and demand visibility.
• European macro softness weighing on iOS demand.
• US healthcare reimbursement and funding policy changes deferring hospital capital expenditures.
• Government fiscal constraints pressuring procurement and estimating software demand.
• Sequentially higher Q4 interest expense and moderated core growth outlook.

AI-generated earnings recap sourced from company results & conference call observations. Not investment advice — verify with official filings.