Okay, wrapping it up, today, last but not least, the graveyard shift. We have Olumide Soroye and Jim Lico from Fortive. Guys, thanks for, thanks for joining us here.
Great to be here.
Jim, maybe you just want to give a state of the union on what you're seeing in the macro and what, how the kind of things are progressing here.
Yeah.
In the near term.
Well, first, thanks, everyone, for being here, and certainly those who are with us virtually. I would say, number one, year's playing out very much how we anticipated, so we feel really good about that. We think the guide really demonstrates the strength of the portfolio, the manifestation of a lot of work that we've done strategically over the last few years to continue to build a more resilient portfolio. After a really strong 2023 and, quite frankly, for some real strong several years, this, I think, is another good year that, relative to how we thought about the year, you know, software part of the portfolio will continue to drive real strong growth. Healthcare will continue to improve and be a really good, resilient, durable part of the portfolio, with more margin expansion there than anywhere else.
I think the third component of it, talked a little bit about this today in a couple of the meetings, is when you look at our hardware businesses today, about a third of the businesses are really tied to the energy transition. So, so what we're really seeing is good growth in a number of those places. So I think all of that's playing out the way we, we thought, we thought it would. We always thought, as we progressed through the year, Steve, that in Precision Technologies, some of the customers—you know, we've had so many really strong years there over the last couple, you know, last few years—would take a little bit of a breath relative to their investments after a couple of years of double-digit growth. And so we might see a little bit of slowing in the first half.
And I think everything we've seen thus far, but that we'd see those—we see those projects in funnels, we'd see those projects in conversations with customers, and, and those would start to play out in the tail end of the second quarter and into the second half. And I think everything we've seen thus far sort of supports all of that. And all, all of that means, I think, for, for the year is, a good, a good year and, obviously, a little bit better growth in the second half as we, as we progress. But I think when we look at things like two-year stacks and things like that, we continue to be along that mid-single-digit growth model that we've talked about with the associated great free cash flow and EPS growth.
Just geographically, you've always had a pretty good lens into China. What are you guys—what are you guys seeing there?
Yeah, Olumide and I—we talked a little bit about this last night, but Olumide and I were on with all of our China teams a couple of weeks ago going through things. And, you know, we have a tough comp in the first quarter 'cause we grew 30% last year in the first quarter. So, you know, you have to work through what, what's comp and what's maybe the, the—and we're seeing some customer investments move consistent with what I talked about relative to things in the funnel, but all of that's really consistently with what we thought. So we, we—and built into our guide was China down mid-single digit for the year with, with sort of an exit rate into 2025 that was growth. And, everything we've seen thus far would support that, that thought process.
With regards to Europe and anything going on there, I mean, people really aren't talking about Europe that much. What do you see there?
Yeah, we've seen. I, you know, we think low single-digit growth here for the year in Europe. And what we've seen so far supports that and may maybe slightly better. But I think at this point, let's get through the year. But I think we get a little bit farther into the year. March is always a big month for us. But yeah, I think a lot of the investments that we have going on are playing out there. So that and some of our weakness in sensing is actually European-driven. So I would say when you look across the other businesses, we still see some good pockets of investment, and those are certainly things we're places we're investing in.
Maybe just sticking along the lines of the guidance here, I think in Precision Tek is probably the one that has perhaps the most variability as far as the timing of that recovery is concerned. Can you just talk about sensing and then, you know, Tek and how you look at those two and what kind of, when will you, when do you think you'll kind of have a good idea of how those things are playing out for the year?
Yeah. Well, I, you know, we've talked about really looking at it from three perspectives. One, one, one is, like you said, how many quarters of down orders would you see? And in sensing, we're about a quarter ahead of Tektronix in terms of the number of quarters. So, so that's number one. We'd watch that. And, and we start to get into the times where we should see the business start to inflect and the book to bill be greater than one. We, and I think everything we've seen thus far supports that thought process. Secondly, what's happening with point of sale? You know, as our—we get some point of sale data with Tektronix. We obviously get good data with Fluke, which is not in PT, but we do get some general view of the economy. And POS still supports, you know, pretty good, pretty good performance right now.
So I think that's the second thing. And then just conversations with our teams and our customers continue to support. Projects have not disappeared. They were delayed as anticipated. And we would tend to see those things play out. And I think that's true in both businesses. So Tek may be a little bit farther behind by a few months, but you know, as we get into the second half, we think things start to trend more positively, and what we've seen thus far would support that.
I guess from a Tek perspective, there was some backlog liquidation in the second half of last 2023. I mean, isn't that kind of like a tough comp when you know when you liquidate the backlog, or are you guys kind of just gonna, you know, blow right through that?
Yeah, I think the way to think about that is, hey, we depleted some backlog. We've been depleting backlog, though, you know, for several quarters now. So, yeah, it's a bit of a headwind, but the order improvement really offsets that. So, I think the projects that we've seen and the projects that are out there, the opportunities, I think are really good for Tek . And, you know, one of the things I always think about is, you know, for years, we saw Tektronix as kind of a low single-digit grower. And when it went down, you know, 10%, 15%, 20% sometimes. Now we're talking about it being down, you know, maybe mid-single digit after a couple of years of 10%+ growth.
So I think that really speaks to the work we've done to strengthen the durability of the business. And we strongly believe that'll play out here in the second half.
Okay. And what are these projects that you're talking about? I mean, which kind of verticals are we counting on for that? 'Cause there's, you know, a lot of people talking about kind of the second half recovery and just trying to gauge exactly kind of what we're banking on from a vertical.
I think some of that's in broadly defined semiconductors. So, you know, where we do have some sales, both sensing and in Tektronix, where we do have semiconductor exposure, it's in those places around e-mobility and mobility in general, a number of projects. I think China in general, just inflecting better on a broadly defined basis, is probably the third piece of that.
When you say e-mobility, is that the EV plants, or is that the actual, like, infrastructure that goes around?
It's both.
Okay.
I mean, I think when we think of all things, you know, battery-related, certainly on the EV front, while we're not really tied to the production aspect of this, so as long as people are continuing to build out new models and new opportunities, and we've seen, you know, we expected some delay from kind of a lot of the investment we've seen over the last 18 months. So all of that's consistent with what we thought. And then more broadly defined in the grid infrastructure, in the data center, both, you know, I think about it from everything from the chips that go into the data center to the components that go into the data center to the maintenance and operations of the data center, all of that is opportunity.
Some of those projects have been delayed, but they—we certainly don't believe in any way, shape, or form they'll be canceled.
The data, you've seen data center projects get delayed, or you're talking about, or more of the EV?
On the chip side, a little bit on the chip.
On the chip, yeah, on the chip side.
Yeah, a little bit on chip side.
Of course, of course, of course. Just, just backing up a little bit, 2%-3% price this year. How do you feel about that? Do you have visibility into that, or is that something that you have to get some—you have to put incremental price through to, you know, to get that—to get that number?
Certainly, it at least half of that is priced. That's probably two-thirds of that is already priced that's been put in. Probably a third is priced to be had, I think, about that. So we, you know, we're certainly in a different environment than we were when inflation was sort of ripping a few years ago, and supply chains were a little bit more challenged. But, you know, that price number's moderated from those years as well. So we feel really good about that number.
Got it. So for the IOS segment, I think we've got a mid-single-digit algorithm, 75 basis points margin improvement. Which of the segments do you feel best about today as far as being above that average?
Well, so we feel really good about the guide we have, which is kind of for the year 4.5% core and then 5%-6% total growth. You know, we feel great about the OMX potential. I think, frankly, across our three growth platforms, we're in a great, great place. You know, Fluke, as you know, is just showing incredible resiliency through cycle. I think that's a combination of the work that our team's done on just the NPI velocity in that business. They've doubled the revenue value of new product introductions over the last year, and they're going to do it again this year. So that's providing a lot of tailwind, a lot of great work to align that business better with some of these circular trends around solar and EV charging stations.
So this is the charging station side of it, not the build-out of factory capacity. All that is just doing incredible things for that business. Lots of upside there. As you know, that business, as profitable as it is, continues to drive OMX, and will keep doing that. Same thing on FAL. You know, we're now $750 million, but huge, $10 billion+ , you know, serve the addressable market. Lots of upside still. We've had a couple of years there of strong double-digit growth. You know, I think this year we're kind of presuming high single-digit, but again, expect that the new logo booking rate continues to be double-digit. So that signals kind of the long-run growth rate of that business. So we feel good about that one.
And then EHS as well has done a great job of just continuing to accelerate the growth potential on that platform. So we feel quite good about IOS.
Yeah, on the software side, is that high single-digit a nice long-term rate that you think you can use, or what—how can you get that up into the double-digit range?
Well, I think part of why it's high single-digits this year is comps from last year. So we had a couple of years there of, you know, 20% growth in several of our software pockets. And I think that's normalizing it a little bit, you know, partly a number of, you know, kind of big one-time things last year. So I think the long-run growth rate, which, again, I see that by looking at the new logo bookings and what's going on with NDR, should still support double-digits growth for a long stretch ahead of us, after we go through kind of the normalization at high single-digits plus this year.
And then Fluke, you mentioned some of the electrification dynamics there. Any other markets? What are the weakest markets there, I guess? And I, you know, it's pretty amazing how it's, how it's performed through a cycle. But what, what, what are the—what are the kind of weaker-end markets, if there are any? What are the slower-growth-end markets for Fluke?
Yeah, well, I mean, I think it's probably first. I'll start with the regional look, which is consistent with what Jim said. So I think the POS in general in, you know, kind of U.S. is higher than than Europe, which is higher than China. So that, that's, that's probably the one way to think about the range of what we've seen. But across the board, still kind of strong POS in objective terms. So, so that's one way to look at it. From an end-market point of view, we've really oriented the business a lot towards the higher-growth-end market. So we don't have a lot of things that are kind of dragging us back, if you will. We have a few areas where we still have a lot of backlog. So, we don't—we don't talk about it a lot, but there's still a lot of backlog sitting there.
So I think from an end-demand point of view and sort of, you know, what's going on from a backlog point of view, we kind of, we feel really good about the year.
How big is eMaint now?
So think about the software piece of Fluke is about 5% of the whole of Fluke. And that, you know, that continues to grow. One of the bolt-ons we did last year at Fluke added to that kind of recurring data software component. So we'll keep building that.
It's great business. The one thing I was going to say is, you know, where Fluke's at today, because I think this gets a little bit lost five or six months ago when people were thinking about, "Hey, we're worried about Fluke. We're worried about Tek. We're worried about sensing." Now we're sitting here, right? We're talking about the performance of Fluke, and I think it's a manifestation of a lot of hard work, as Olumide said over the last few years. Today, Fluke is, you know, almost as big as sensing and Tek combined. So when we think about the sort of de-risking of the portfolio over time, it's pretty substantive.
It really speaks to not only the organic, inorganic things that we've been doing, but also the organic, you know, redirecting our technology investments towards secular markets that are going to be more durable.
In FAL, can you talk about kind of the constituent pieces? Just a couple of them. I know there'd been—there's been one laggard and a couple leaders. Seems like they're all moving in the right direction now. How did we—is the—has the laggard now turned officially and become, you know, a leader, if you will?
Yeah, and I think, Steve, last this time last year when we talked, it was, yeah, I think the frame was, look, first of all, we're unifying that platform. So increasingly, what we do really connects across all those companies. And then I said, look, the laggard, as you described it, we had a multi-phase project to go through to get it to become a leader. And I think the team's done a great job of getting through the first phase, which I'll call stabilizing the business, which means removing the holes in the bottom of the bucket. So the customer satisfaction, the quality of, you know, NPS scores that we're getting is much higher than it was before. And I think importantly, that's showing up in the new bookings growth rate.
So that's now a business that, you know, is getting into the double-digit bookings growth rate zone, which we feel quite excited about. And then the next phase of it, like I mentioned last year, is really accelerating the product innovation beyond just kind of keeping customers, actually delighting them. So that team now is one of our leading teams in terms of AI-powered use cases. So it's a business that has tremendous data assets sitting in it, on behalf of trillions of sq ft of space of customers that we manage and billions of assets that we manage on that platform. So it's one of our leading growth platforms in deploying co-pilots and other kind of GenAI-powered enhancements for customers. So we're getting into that phase of now we're stable. We're actually building on it.
It is also the business that we did one of the bolt-on acquisitions on last year. That signals the confidence we have that we've gotten that foundation strong enough to start bolting onto it. So across the board, we feel quite good about the platform. And a lot of work's still to do on maximizing the potential cross-sell across the companies, but feel quite good about the progress the team's made.
What was your stat? 1.2 customers buy 1.2 products, and they could have.
They could have 6. So we have 10,000 customers on the FAL growth platform. And on average, they buy 1.2 products. We have 6 things they could buy. So think about that as kind of, you know, 5x just within your current customer base.
That's within all the platforms.
Correct.
But do they know? But that's not, it's not branded that, it's not branded that way to them, right? Like, like, like, how do you, it seems like it's a bit of a fragmented cross-sell. Will you ultimately bring it together and brand it together, rename it as a collection of businesses?
The premise is there are two steps in cross-sell. So there's one step that's just commercial collaboration, where even if it's not branded together, even if the products are not integrated.
Right, right. "Hey, I'm talking to so-and-so. He needs this.
Yeah, exactly. Contacts, contract structures, things like that. So that the team's doing now. To your point, there's a second stage of real product integration that actually delivers differential value to the customers, not just that you can buy them together, but they actually work well together. That's still ahead of us in most of the areas, not to talk of the branding, which is even still further ahead of us.
Yeah. Is that possible, though, that someday you'd come—you'd come with one—with one brand of these things? Are they that tightly related?
I, I think we're still proving that out. It is the case, to be clear, that each of the pieces of that construction lifecycle, we have a few verticals that we're really strong in. So in the front end, for example, we're really strong in state and local and, you know, sort of, you know, healthcare and federal agencies and, you know, higher ed. When you get into the O&M side, we're stronger with, you know, restaurants and grocery stores. So the, the mapping is not 100%. And so as we think through your question of, "Is it possible to put them all into one?" you want to make sure, you know, the overlap in the customer base supports that. So we may—we may do it in some verticals and not others, for example.
What, what percentage of the business now is SaaS versus, versus other? And, where are you on this, margin journey? I know we met—I think it was a couple of years ago now. There was like 500 basis points of margin expansion opportunity. Where, where are you in that continuum?
Yeah, so, I mean, I think from a—just from a margin point of view, we're still on the journey. And I think the way I'll think about it is there's some of the parts of that workflow where we've pushed hard on the margin front, e.g., the O&M side, with ServiceChannel. We've gotten 2,000 basis points of OMX in that in two years. By the way, while growing almost 20% CAGR in the same period. So we've pushed immensely because it was a new company. FBS was powerful to help get a lot of that out. We also changed the mix a little bit, of the service model there. And then on the front end with pre-construction, we've pushed more on growth and less on margin. So that's been growing 20%+, already very profitable.
So I think as we kind of get to this new kind of level, the upside is still, you know, I still think about that as having the potential to be a Rule of 50 platform.
Yep.
We're Rule of, you know, 40+ right now.
Yep.
So there's still a lot of both on top-line growth and, on OMX a little bit.
What top-line do you incorporate in that? Like high single digits or 10%?
10%.
10%.
10%. So think about it as double, you know, kind of low double-digits growth. And then the—you think about the OMX as the, the margins as breakdown.
And then what's the breakdown of these businesses when you think about, however you want to define it, SaaS, recurring, you know, license, maintenance? Like what's the breakdown today for the platform?
Yeah, so we think about—so you think about in total $750 million, think about three buckets. So there's what we call reoccurring, which is it's not multi-year contract, but it's sort of you're getting a piece of a flow that, that occurs every year, state and local spend and things like that. That piece of it is about 40% of the whole thing. There's some of that on the O&M side as well. And then the, what you'll call SaaS, is think about it as about 50%, 45%-50%. And so the, the one-time, which is more professional services type things, is, is the, is the balance of it. So majority of the business is what I would call recurring or reoccurring type, revenues.
When can you get to $1 billion in revenues for this platform?
I would love to get to that as soon as I can. I think.
You don't want to wait?
I absolutely. Because I think there's not a lot of software companies that are $1 billion. And actually, there's huge companies that are, you know, $10 billion+ , and then there's, you know, $10 million-$100 million companies. But that $1 billion mark is a sweet spot that we certainly want to get to as quickly as we can. Obviously, you know, if you just compound the growth rate that we're talking about here, you can get to how long that takes.
Yeah.
without bolt-on M&A. But I think that is a mark that we have our eyes on.
When it comes to Precision Tek, and the Tek business, how do you think about that business longer term? It's been a little bit lower growth. You've had some good years here. Is that a business, you know, you're going to continue to build on? I know you just did the EA deal, so investing a little bit there.
You know, a few years ago, what we said was we now see Tek as a mid-single digit grower.
Yep.
You know, that had been from low single-digit for quite a while. That was a sort of, I think, a really important mark that was the organic work that we've done to reposition the portfolio. We added services. We took out the video business. We just repositioned the business for better growth and profitability. They just had a record year in 2023. They just had a couple of years of double-digit growth. So as we look through the cycle with this year, we're still going to be at that mid-single-digit growth, maybe a little bit higher than that. The margin profile's really strong. We've added EA, which is incredibly profitable and mixes the growth rate up. So, you know, we feel good about where it stands today. It's a very different business than really what it was several years ago.
Most of the revenue base as we exit 2024 and into 2025 is going to be pretty much around that energy transition, some of those components I described a little bit ago. So when you look at just the position of the business and where it's at, you know, nobody's seen it through a cycle yet, right, since we've repositioned it.
Right.
But I think, you know, our view right now, and certainly with what we've got in the guide, will, will put us in, you know, when we close the doors on 2024, which feels weird to talk about, and enter 2025, I think we're going to—we're going to see a really strong additive part of, of the company.
I guess maybe EA—I mean, EA seems more like a growthy asset as opposed to bolting on FAL into IOS, which really is a dramatic, it changes the perception of cyclicality there, like, dramatically. Is there anything you can do in this segment, that you're thinking about to, you know, kind of replicate that, that move in IOS?
For sure. I mean, the three things that come to mind that we're really excited about, one is we've just started on the software journey at Tek, selling software as a portion of our solutions, and a lot of organic effort to do that. There are some inorganic things we could do in that.
Is that similar to, like, what Natty has with their LabVIEW?
It's not LabVIEW. But what it would be is in the sort of design and validation phase, software that enables the measurements, you know, a lot of what we're trying to do with machine learning and AI is take from the measurement to the answer. And so software components that don't just give you the volts, ohms, and amps, but they give you, "This is what you should be thinking about," and, you know, and generative AI to walk you through that, and application capability. We can now build on applications with generative AI, which is a pretty powerful thing for us to do. So that's one component. The second component is services. We've got a pretty good, you know, 20% of Tek today is services. 0% of EA is services. So the ability to add services onto EA here over time, we've got a global service network.
We shouldn't have anybody else servicing EA products except for us. And so that's another component of it. And then the third one is just the secular drivers of the business, which we continue to move the entire business towards those secular drivers, which obviously improves not only the growth rate, but the durability.
Would you be willing to use equity for a deal? I'm just kidding. I'm just kidding. That's a joke. That was a joke, everyone, from last year.
I got that question today.
Yeah. Did you?
M&A 101, yeah.
To be clear, that was a joke for the webcast. The AHS segment, seemingly turning the corner now on the consumables stream from the equipment's recently strong equipment sales. Are we now, like, on a bit more of a glide path there? I feel like that segment has been a bit of a fits and starts over the last couple of years. Are we, can we, you know, really see kind of the fruits of that labor?
I don't think we could be more excited about where healthcare stands today. I mean, it's just in a really good place. And I would say what tells us that? Number one is if you get through the North American channel change in 2023, you know, the second and third quarters were also mid-single digit growth. So we saw the components of that growth rate, and then you saw that in the fourth quarter. So ASP has really turned the tide. And I think when you look at that and you sort of think about where we're at right now, we feel good about it. And financially, you know, the numbers tell one story. But I also think the go-to-market strategy of the go-to-market change was really to keep really be able to see deeper into what customers are doing on a daily basis.
That's really manifested itself as well. That's been really strong.
Like, there's growth and there's mix here, right? I mean, these consumables are going to mix up.
Consumables are going to mix up.
At a pretty positive mix, right?
Yeah. I mean, what it's going to be able to do and we've had good growth internationally over the last few years. It was really about getting the North American business into a better place. I think Chad and the team have done a really nice job in making that happen in the last six months, and we're in a good place.
Can we think about consumables now as kind of like a steady grower? Is there any lumpiness? Is there, you know, like?
Consumables should have a little bit different around the world where you might have a tender or something like that. But by and large, in a market like the U.S. or in countries in Western Europe, you're going to see a pretty steady consumable stream for sure.
Okay. Any pricing dynamics on those consumables? Is there like an annual pricing increase?
Yeah. I mean, we're getting better price. That was part of the go-to-market model was getting better price. We're seeing that in the financials. So I, I think definitely the opportunity to do that, on a more recurring basis is certainly out there now for sure.
What kind of pricing do you typically expect?
You're probably be in a couple of points, probably.
Yeah. Okay. Low. Still, still low single digits. And then, how's Provation doing?
You know, they had a great 2023. They're ahead on the revenue for the model. They'll be a little slower in the first half only because of a large license deal they had in the first half of last year. That will convert that to SaaS in the years to come. So that's actually a, you know, a good opportunity over a long period of time, but a little bit of a headwind. But the business itself is in a good place. Our SaaS growth is good. And our new logo growth continues to be good. But our SaaS transition is doing really well. So we're—we feel good about it. The business was always really profitable. So, you know, this was really about getting it to a growth rate that, you know, is really part of their potential.
Line of sight to a 30% margin at some point.
Provation?
The segment.
Oh, healthcare. Yeah. Yeah, yeah. I was going to say because Precision's there. That would be, that would be a problem. Yeah. No, I think, you know, I won't pick the year, but I think when you look at this year, we're going to be 125 basis points for health versus 100 for the company. So we're, we're a little bit better in health. And I would, I would expect to continue to see that in the years to come.
the, anybody have a question, any questions on the business? Okay. On the M&A environment, you know, how's the pipeline looking? And, any, any change in the bid-ask spreads that have been relatively wide in the last couple of years on some of these assets?
You know, we're in NDA on a lot of things in several things right now. We feel good about the process. I would say there's a lot of talk around things opening up more in the second half. I think you got a couple of dynamics going on, Steve. Haven't done this for a while. On the one hand, you got a little bit of economic uncertainty, which is generally good for pricing. You've got, not a lot of deals have been done for a while, so people are starting to get anxious. And so particularly in private equity, that's probably good. On the other hand, stock market's pretty high, right? So people are looking at comps and saying, "Well, if I can just get this comp that they can pick on the public market." I think that translates to better pricing overall from a couple of years ago.
but we're going to— we're going to be disciplined. We just did, you know, we just did five deals, with EA and four bolt-ons. And we love those deals. And they're going to be— they're really strong financial returns. And so we feel we'll remain disciplined and take the opportunities as they come.
Just the longer term, you know, target of 450, and then beyond that, what, as you mix the portfolio up as these margins continue to go up, I mean, what should we think about now as normal, you know, operating leverage?
Yeah.
From a profit perspective?
Well, I think 40% is still the number we like on the incremental side.
Okay.
That gives—that's because it gives us the degrees of freedom. People always say, "Well, more software, more hardware." But some embedded in that is, as I always remind people, our hardware businesses are very profitable. So, so there isn't a huge difference in that regard. But we definitely think, you know, Olumide talked about the great work he's doing in IOS. That's going to continue to improve. We'll see that similar improvement in health. And then we'll have the—you know, we haven't talked a lot about FPS, but, you know, FPS has a, a general tenacity around continuing margin expansion. So we feel—we feel good about 40% because it gives us—not because that's not the maximum. The maximum is higher than that.
The opportunity and the degrees of freedom that that gives us to continue to invest in the business, continue to build a more sustainable growth model is really what we're all about here.
40%+ is kind of how would you think about it?
I like 40, and we'll see where it goes. But, you know, last year we were higher than 40, so there may be times when it's a little higher. But, but we do like—we do like this opportunity to continue to invest, you know, accelerate investment. Some of the things we're seeing at Fluke right now, the NPI funnel that Olumide's talked about in a lot of the one-on-ones, you know, quite frankly, it's—it's in that greatest shape because we've taken some incremental money.
Right.
We've deployed it to the business. I think from a long-term perspective, shareholders are going to want us to do that.
And then the 450, is that a target we should have in the back of our minds?
Yeah. We wouldn't have put it out there if we weren't serious about it. So I think definitely we, we think it's achievable. We think there's a few ways to get there. We don't need new M&A. So that one of the things I think that we've answered a question is, "Do you need new M&A to do that?" The answer is no. The way we really look at that is sort of, you know, and again, 2025's—2025 would be here before we know it.
Right. I mean, new, new M&A would probably be dilutive to that to a degree.
Depends on the deal.
As opposed to just paying down debt.
Depends on the deal. That's right. But, you know, what we've got, the 5 deals we just did are all really accretive. They've all got short-term returns, on the, in the bolt-ons in particular. So EA is going to be a big winner in 2025. So we think all of those components, along with just, you know, what we've done historically, when you look back 5 years, I think that's the track record that we've had over the last 4 years. You know, one of my favorite slides is that 2019 through 2024 set of financials. I think when you look at that, you know, the 450 looks pretty achievable.
Two more questions from me, that are very generic, but I'm just trying to get a nice, you know, kind of survey set. Number one, in the election, if there is a change of administration, there could be some economic things, whether it's stimulus or tariffs. Is that a discussion at all, in the boardroom? Are there any contingency plans or, you know, it's how do you guys approach something like that? Something as unpredictable as that?
Yeah. Half the world having an election this year, right?
Yeah.
It's certainly, you know, it's just touring the world. It's a conversation not just about the U.S. election, but in various countries. You know, we've, since 2018, we've been dealing with export controls, supply chain, globalization to regionalization of manufacturing. We've made a lot of progress over that time. So any sort of, you know, you can probably kill yourself with scenarios here, but I think we're really well prepared for something that might happen if it were to happen. We certainly have contingency plans around it for sure.
Do you usually have a very good, you know, macro mindset? I mean, given the government is driving so much of what's out there, everything except AI effectively is like now driven by the government decisions. If there is a new administration, I mean, is that, you know, conceivably like, is there a transition period here for the economy that you have to kind of, you know, guys have to pull back on what they thought would be stimulus dollars? And I mean.
Yeah. It's a great question. I mean, again, I think that's another place where.
Are we overplaying the scenarios?
I think we're over, well, number one, I think there's always a scenario out there that you could say could happen. But I think when I, when we look at it and we look at the portfolio today, one of the things we really tried to build is no matter what the segment or no matter the growth platform, we're really about safety and productivity. And I don't think stands massive shifts in spending. That safety and productivity as a value proposition to customers is going to go away. In fact, in the times of ambiguity, quite frankly, it becomes a little stronger. So I, I, I like the way we position the thematics, that thematic theme through all of our growth platforms. And so I feel like we're, that's going to build the resiliency and durability.
And, and, you know, and then we'll, you know, I think we're, we're wonderful adapters. At the end of the day, we'll adapt to things as we see them play out.
Then one more, just you guys were out in front, I think, of this a little bit on the AI front with Fortive. Putting aside what you've embedded in your products, which I feel like a lot of people have been trying to do for a while, what inning are you in as far as, you know, infusing anything AI from a business model perspective to make your company, you know, more productive? Has there been any step change in that activity recently?
Yeah. I'll let Olumide talk. We think about it in four buckets. We think about internally, we think about accelerating R&D, and we think about productivity. And then on the growth side, we think about the customer experience, and we think about product innovation. Fortive has been committed for five years to those kinds of things. We've seen real—since you're more the internal question—we've seen real productivity deploying bots throughout our enterprise. We now, as an example, we have a whole generative AI aspect to FBS. So you can go in and kind of put in your problem that you have a challenge, and you get a whole learning mechanism around how to deploy FBS. So we're seeing accelerated FBS. We're deploying bots. We've standardized our network infrastructure in order to deploy things faster across Fortive.
So we've done a number of major steps to really accelerate machine learning and productivity. Maybe talk about R&D a little bit.
Yeah. I mean, and I think we're probably going to second inning is the way I'll describe it. I think from an R&D point of view, that is the constituent that's really deployed kind of Copilot. So if you're doing refactoring existing code or just trying to get the documentation for coding you're doing or you're trying to write test protocols, the majority of our engineers are using that now, already. And that's shown, you know, 20%-30% productivity improvement, which is part of what we're deploying to accelerate NPI. Because, you know, when I say to people, "We've doubled our NPI," and they look at the R&D and they say, "Well, you haven't doubled your R&D spend." Well, it's because we're using those tools to create capacity to then do more for customers. So, so I think that's probably be a little bit further ahead.
But I would say, Steve, we're still really early in fully deploying this, all the areas that Jim talked about. I think especially you mentioned the product side. We have so many platforms that have millions of touchpoints with customers and incredible richness of data assets that really lend itself to deploying some of these AI tools to enhance our products. So that's a huge upside that's still ahead of us.
And then one maybe last thing, because I know we're out of time. We built the whole growth platform workflow strategy with this mindset of if you really want to deploy AI, you need to be in scalable models, right? A lot talked about the large language models and only the Googles and Microsofts can, you know, afford to build some of those. But at the end of the day, within vertical markets, you know, we have 25 operating businesses. And if we tried to deploy AI solutions with customers in 25 operating businesses, they wouldn't be scalable. The whole strategy around connected workflows had in mind that inevitably we would be able to build scalable models. $750 million business in FAL now. We have scalable models in which to build AI solutions. And we're in the real early days of that. But the strategy is not.
We've been thinking about that strategy for a while.
I mean, definitely, you know, something to continue to discuss.
Yeah. I mean, we said hardware, software, and data analytics. But the data analytics was the small part, right?
Right. And we are just—we kind of—we all glossed it. You know, it's kind of like you said AI five years ago was like, "Yeah, whatever." Now it's like, "Oh my God.
Yeah.
All right. Well, thanks a lot. We'll let everybody go home. Thank you.
Yeah. Thank you. Thanks for staying, everybody.
Thanks, though.