My name is Angela, and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to the Fortive Corporation's fourth quarter 2019 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during the time, simply press star, then the number one key on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to Mr. Griffin Whitney, Vice President of Investor Relations. Please go ahead, sir.
Thank you, Angela. Good afternoon, everyone, and thank you for joining us on the call. With us today are Jim Lico, 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 SEC Regulation G relating to these non-GAAP financial measures are available on the investors section of our website, www.fortive.com, under the heading Financial Information. We completed the divestiture of the Automation & Specialty business on October first, 2018, and accordingly have included the results of the A&S business as discontinued operations for current and historical periods. The results presented on this call are based on continuing operations.
During the presentation, we will describe certain of the more significant events on a continuing operations basis, representing a 13.7% increase year-over-year, with 2% core revenue growth and 30 basis points of core operating margin expansion. We delivered these results in the face of slow demand dynamics across our short-cycle businesses throughout the second half of the year. At the same time, we achieved significant progress with respect to the continued transformation of our portfolio, closing nearly $4 billion worth of high-quality strategic acquisitions that accelerate our strategy around software-enabled workflow solutions. As a key part of our portfolio transformation, we continue to make good progress with the integration of Advanced Sterilization Products. We closed on China before the end of the fourth quarter, successfully integrating the largest of the Day Two countries and accomplishing a key milestone as we bring ASP's global operations under our full control.
We remain keenly focused on closing the remaining Day Two countries and ensuring that the necessary infrastructure is in place to enable us to exit the majority of the TSAs as planned by the end of the second quarter. At the same time, we are pleased with the significant progress that we've made toward the completion of the separation of Vontier. In December, we announced key members of Vontier's senior management team, including Mark Morelli as President and Chief Executive Officer and Dave Naemura as Chief Financial Officer, and we are continuing to work toward an IPO split to effect the separation.
While we have put ourselves in a position to be ready for the first step in the form of an IPO of up to 20% of Vontier by the end of the first quarter, we will continue to assess market conditions and maintain a variety of options for the eventual completion of the transaction, which is on track for the second half of this year, as previously communicated. Given that I've been challenged with a cold for the last week, Chuck will provide the details of the quarter.
Thanks, Jim. Good afternoon, everyone. For Q4, adjusted net earnings were $368 million, up 13% over the prior year. Adjusted diluted net earnings per share were $1.03. Sales grew 13.9% to $2 billion, based on strong contribution from recent acquisitions and a slight increase in core revenue, which came in largely as expected. Core revenue growth was highlighted by mid-single digit or better growth at Gilbarco Veeder-Root, Gordian, Industrial Scientific, and Matco, which was largely offset by declines across the short cycle businesses within Professional Instrumentation. Unfavorable foreign currency exchange rates reduced growth by 110 basis points. Geographically, core revenue in developed markets grew low single digits, reflecting the continued soft macro conditions in both North America and Western Europe. Core revenue growth in North America was up low single digits, while Western Europe declined mid-single digits.
High growth markets core revenue decreased mid-single digits due to slower performance at Fluke, Tektronix, and GVR. China posted a high single-digit decline as strong growth at Qualitrol and Sensing Technologies was more than offset by the headwinds associated with the winding down of the double wall tank upgrade cycle at GVR and the Huawei impact to Tektronix. Adjusted profit margin was 23.3%, representing a year-over-year increase of 60 basis points. Core operating margin increased 150 basis points, driven by solid execution and strong operating margin expansion across the breadth of our portfolio. More than half of our operating companies each generated greater than 100 basis points of operating margin expansion during the quarter. During the fourth quarter, we generated $452 million of free cash flow, representing an increase of 17% year-over-year.
This strong performance resulted in free cash flow conversion ratio of 123% of adjusted net income for the quarter. Turning to our segments. Professional Instrumentation posted sales growth of 23.1% despite a low double-digit decrease in core revenue. The significant contribution of recent acquisitions continued to drive overall growth within Professional Instrumentation. Unfavorable foreign currency exchange rates reduced growth by 50 basis points. Segment level adjusted operating margins were 25.1%, including a core operating margin increase of 130 basis points, which was offset by 190 basis points of dilutive operating margins associated with acquisitions. Our core operating margin increase was driven by price, supply chain savings, and business model execution. Field Solutions core revenue increased slightly, including a low single-digit increase in developed markets as growth at ISC, Gordian, and Qualitrol was partially offset by a decline at Fluke in North America. High growth markets decreased slightly.
Fluke improved sequentially in the fourth quarter, but still declined low single digit year-over-year, primarily as a result of continued softness at Fluke Industrial. In North America, Fluke declined low single digits, but saw some early signs of stabilization. In China, Fluke declined high single digits as we expected, reflecting negative point-of-sale trends. Fluke Health Solutions grew mid-single digits led by Landauer, which saw strong orders from the U.S. Army for its RadWatch radiation monitoring device. Fluke Digital Systems grew mid-teens, led by eMaint, which posted another double-digit increase in net new customers and greater than 20% increase in annual recurring revenue. Pruftechnik continues to perform ahead of expectations and has greatly enhanced the broader Fluke reliability offering. Fluke continues to see excellent momentum from its revolutionary ii900 Sonic Industrial Imager, which generated $20 million worth of revenue in 2019 following its launch at the end of April that year.
ISC delivered high single-digit core growth, driven by strong growth across North America and Western Europe. ISC's subscription-based iNet performed well, generating high single-digit growth and strong new customer bookings. The momentum at iNet reflects the growing demand for ISC's expanding set of real-time, Wi-Fi-enabled connected worker solutions, as more facilities adopt live monitoring capabilities to improve safety performance. Intelex grew double digits in the fourth quarter as strong bookings and share gains helped deliver a record year for customer wins with a 17% increase year-over-year in total new customers. The ISC and Intelex teams also continue to make progress with the integration of the Intelex software offering with iNet in order to unlock the opportunity for future cross-selling. Qualitrol's core revenue grew mid-single digits, marking the first positive quarter for both core growth and bookings since 2017.
Qualitrol delivered strong growth in North America, China, and Latin America, which was partially offset by continued challenges in Western Europe and the Middle East. Turning to our facilities and asset management businesses, Gordian and Invetech was more than offset by continued weakness at Tektronix. EMC generated low single-digit sales growth versus a tough compare from the prior year, led by defense electronics and commercial aerospace offerings, as we saw momentum with its commercial satellite customers as well. EMC continued to see broad-based bookings momentum, allowing it to maintain strong backlog and excellent revenue visibility for the year ahead. Tektronix registered a low double-digit decrease in core revenue.
As expected in the quarter, Tektronix saw continued pressure from many of the same headwinds that emerged earlier in 2019, including slowing at Keithley, weak demand at North America and Western Europe, and the loss of business from Huawei due to U.S. trade restrictions. Tektronix saw a strong performance across its mid-range oscilloscopes offering, which grew mid-single digits. The three and four series scopes, which were successfully introduced last June, continue to perform particularly well, generating high teens growth and significant share gains in the quarter. Core revenue for Sensing Technologies decreased low single digits as broad-based growth in China was more than offset by continued weakness in Western Europe and flat performance in North America. Gems benefited from improved conditions in the semiconductor end market, which returned to growth in the fourth quarter, removing a key headwind that persisted through much of 2019.
ASP grew low single digits led by growth in consumables, as well as continued strong performance from its service business. Geographically, ASP saw strong performance in China and Mexico. We continue to be encouraged by ASP's performance in Japan, which saw high single-digit growth in the second half of the year after an extended period of weaker performance prior to our ownership. At the end of October, we closed China, and we now have approximately 80% of ASP's global revenue under our direct control. The acquisition of Censis closed early in the fourth quarter, significantly enhanced our connected workflow offerings for central sterilization departments. Censis is off to a good start with 10% growth in the quarter, and we're excited about the cross-selling opportunities with ASP as we provide more comprehensive solutions to our healthcare facilities. Moving to Industrial Technologies.
Revenue grew 1.9%, including core revenue growth of 3.6%, which was partially offset by unfavorable currency exchange rate of 180 basis points. Segment level adjusted operating margins was 23.8%, including core operating margin increase of 230 basis points. The strong OMX in Industrial Technologies was once again led by GVR, where applications of FBS drove strong margin performance and significantly improved working capital turns as EMV ramped throughout the year. Our transportation technologies platform core revenue grew mid-single digits, led by low double-digit growth in North America. GVR generated mid-single digit core growth, led by high single-digit increase in developed markets. As expected, GVR delivered another quarter of strong performance in North America, tied to sustained momentum from EMV-related sales as the October liability shift deadline approaches.
GVR registered mid-single-digit decline across high growth markets as strong performance in Latin America was more than offset by a slower quarter in China and India. GVR continues to see good early momentum with its Insite360 remote forecourt management solution, which enables customers to monitor and update fuel dispensers remotely. They also recently released a new fuel procurement and logistics solution on Insite360 called HALO, which has been well received by the market. GVR recently received a large order for Tritium EV chargers from a major European oil company, the largest such order to date from a legacy GVR customer. This win and the potential for larger opportunities to support a broader EV charging rollout across the customer's network highlights the opportunity for GVR to leverage its distribution and service capabilities across its existing customer base in support of Tritium's continued growth.
Teletrac Navman core revenue decreased mid-single digits in the fourth quarter in line with expectations. Teletrac Navman saw strong continued growth in Asia Pacific, which was more than offset by declines in North America. Increasing resilience of our portfolio, enabling us to deliver 150 basis points of core operating margin expansion in the face of slow short-cycle demand that persisted throughout the quarter. In 2019, we faced a number of challenges head on, from tariff-related headwinds to short-cycle snips. To acknowledge the efforts of the broader Fortive team across the globe. 2019 was a truly transformational year for our team, and while it was not a year without challenges, I'm extremely proud of how our team performed and responded.
It's the dedication of our people and their relentless commitment to continuous improvement that drive the Fortive's business system and enable us to deliver greater long-term value for all of our stakeholders. I look forward to the next decade ahead. First half, and does that continue into Q3?
I see. That $0.16 incorporates both the organic growth and the restructuring savings.
That's correct.
Thank you. My second question, just maybe help us understand the biggest moving pieces within the PI core margin. It was down a bunch in Q3, up a lot in Q4, it looks like it's guided to drop again in Q1. Maybe just help us understand what's swinging that around in the context of sort of steady-ish declines in organic sales.
Yeah, Julian, it's Jim. First, you're right about Q4. If you sort of think about the second half and what we saw in PI in the second half, we're probably down 20 basis points for the second half. What we saw in Q4 was some really strong pricing. We always get a bigger portion of our supply chain savings near the end of the year, and we certainly saw that. Those two plus a little bit better mix was really what drove the stronger margin expansion in the quarter. You certainly have some headwinds of things like salaries and things like that that come into the first quarter. That'll be part of the offset. I think part of it is just we'll see the big businesses, Fluke and Tek, be about the same relative to their contribution.
I think you do see the coronavirus hit here, and that hit is going to be more in PI probably than anywhere else.
Great. Thank you.
Your next question comes on the line of Nigel Coe with Wolfe Research. Please go ahead, sir.
Thanks. Good afternoon. Good evening.
Good afternoon.
Hey, Nigel.
Great. Hey, Jim, I hope you're feeling better soon. Just what I saw on cash, there's a couple interesting things here. There's about $500 million and change of M&A spend during the quarter. Was that all in this acquisition, this Censis acquisition? CapEx was a bit lower than we expected. Is that kind of better job on CapEx, or was that a pushout relative to your original guidance for 2019?
I think I would take the second one first. The CapEx, I don't think that's appreciably lower or different than normally see. Maybe I'd try to go back and figure out if we gave you that impression. We shouldn't have, because I think we're pretty stable on that piece. On the first piece you're talking about, how much are they? Are you talking about the deal cost?
Yeah. Is that all Censis or was there two or three smaller deals in there as well? What I'm trying to figure out is how big is this Censis acquisition? What should we model for 2020?
Oh, I understand. Yeah, no, that's the Censis acquisition.
Okay. Any detail you can give us on revenue contribution for 2020?
Relative to Censis?
Yeah.
Oh, yeah, that business is, I think roughly $50-ish million. Figure double-digit kind of growth. You're probably talking in the $10 million range for the year. It's mostly a SaaS business. I think if we think about how that'll continue to grow, and we think we'll probably put some additional investment in it in order to accelerate growth through the year as we work with the team there. As we mentioned in the prepared remarks, the combination of Censis along with what we've got at ASP gives us a really strong offering in central sterilization departments. Some of our effort here to accelerate their growth is going to be some investment in go-to-market in order to make sure that we can accelerate that growth through the year.
Okay. I don't want to assume you're welcome here, but what kind of margin profile does Censis have?
Pretty close. Lower operating margins than what we would at the start, but high growth margins. You're talking about growth margins in the 60s. They do have a service business, so the software obviously is in the high 80s and 90s kind of range, but then there's a service and installation component to it that brings the margins down. We think we can continue to grow that margin profile over time, and obviously the operating margins will start to come up. I think they're in roughly the 20s now, and they'll probably be in that range this year.
Okay. Thanks, Jim.
Your next question is from the line of Steve Tusa with JPMorgan. Please go ahead.
Hey, guys. Good afternoon.
Hey, Steve. Steve.
Just on ASP, what are the organic revenue contributions from that business for 2020?
I think it's going to be low single digit.
Something like that. Is that kind of the unwind of some of this TSA stuff that you talked about earlier in the year? Was that just organic performance? Anything kind of going on there that was kind of a big swinger, year-over-year in the fourth quarter?
Yeah, I think that there were some of those. Those things were probably related to how J&J got us the cash that that business created in the fourth quarter. I would say that that is what you should expect us to be able to do in the fourth quarter, and that there wasn't an unusual bump there.
Okay, it's not like anything was kind of pulled out of 2020.
No.
That's kind of a clean base for 2020.
Yeah. It's normal seasonality for us to be really strong in the fourth quarter, and lighter in Q1.
Okay, great. Thanks for the color. I appreciate it.
Thank you.
Your next question is from the line of Andrew Obin with Bank of America. Please go ahead.
Yes. Good evening.
Hey, Andrew.
Hey. I know how you feel. I had the last week, so
I remember what that is.
Last quarter, you gave a view and that organic revenue declines will continue into first quarter and probably second quarter. You sort of reiterated that, I think, today. Do you still see the likely return to growth happening in third quarter? More importantly, other than coronavirus, what are the one, two items that could swing that earlier or later?
Kind of low single digit, but we're seeing growth. I think the upside story would be probably China accelerates, forget just beyond corona, but just accelerates to a little bit better, and Western Europe comes back to growth maybe sooner. I think those are probably two of the embedded things. You could go opco by opco, but I think geography is probably the best way to think about it.
Right.
Your next question comes from the line of Josh Pokrzywinski with Morgan Stanley. Please go ahead.
Hi, good evening, guys.
Hey, Josh.
Hi there. I guess just first question on the Vontier IPO. I guess, Jim, depending on which way I tilt my head here, it seems like you might come out of this whole thing pretty close to net debt free on the Fortive piece. Is that a fair way to think about it, and a fair way to think about kind of the acquisition firepower as we get through the transaction?
Well, we'll certainly be in a good position, that's for sure. As we highlighted in the prepared remarks about our plan here, still a lot of things to do. I'll let Chuck specifically comment about how we're thinking about the debt structure here.
Yeah, I think we're going to be.
Versus let it fall to the bottom line. I guess maybe a different way of asking is, if growth is better, is it $0.16 + what other growth does, or should we expect some leakage from reinvestment that's currently being held back? Thanks.
Well, I think we'd always look for opportunities to where we could accelerate growth, but I think the reason we did the restructuring is so that we could deliver growth. If we see the back half accelerate, I think you'd at least see us deliver our normal VCM fall through of around 35%, and maybe a little bit more. We'll happily deal with that situation when we see it materializing.
Understood. Thanks, guys.
Thanks.
Your next question comes in line of Andrew Kaplowitz with Citigroup.
Most recently, we've seen some good news on some of our project roll-outs. The first quarter may be a little hit-and-miss, but I think as we get into the second quarter and in the back half of the year, you're going to see India be a contributor to growth for GVR as well as some of the other high-growth markets. As we mentioned in the prepared remarks, Latin America was a highlight for them as well in the quarter. Maybe the bigger story is. Obviously, EMV is the big story. Came in really the way we thought it should come in in the quarter. That'll continue to be helpful in 2020.
I think what we saw, which was nice to see, was the comments we made around starting to see some of the benefits with GVR customers in Europe with Tritium. That's a starting point for growth as well. A number of levers that we think will be additive to their growth rate. EMV still will be the big number there throughout this year.
Thanks for that, Jim. Just asking you about Accruent. It was starting to slow last quarter. You had talked about the conversion, the SaaS. I think you mentioned high single-digit declines in Q4, given the tough comp. Do you guys think this is more of a just transitional decline as you called it last quarter, or is it more cyclical, and what's your outlook for Accruent here in 2020?
If we sort of get away from the quarters and just look at our ownership, we've seen mid-single digit growth at Accruent since our ownership. I think what we've seen here recently is, first of all, like we said in the prepared remarks, we're seeing good growth in some of the SaaS offerings. We mentioned Connectiv, which is our healthcare offering, which did really well as an example. Our EMS offering and our 360 facility offering, which are really parts of our CMMS offering and space management offering. We saw some good SaaS bookings growth in those businesses. We do have parts of the legacy business that were down, as we mentioned last quarter, and were down more than we thought they were going to be.
Some of that is larger licensing deals that we had in the fourth quarter of a year ago, which made for a tough comp. I think as we sit here in 2020, we look forward with the team, we certainly see our path back to that sort of mid-single digit and better growth. With the SaaS business, takes a little while for that to kick in, but we're still very excited about the business. If we think more broadly about Gordian as well as what we've done with Fluke Digital and eMaint, as that sort of almost $0.5 billion of facilities and asset management businesses, those businesses are growing exceptionally good. The market dynamics are good. Like we said, we've got a little bit of work to do at Accruent. We talked about that. I think that's consistent with what we said before.
When we look in total what we're doing from an all Fortive perspective, I think we like where we're at, and we like the future opportunities as well.
Thanks for that, Jim.
Thank you.
Your next question comes from the line of John Walsh with Credit Suisse. Please go ahead.
Hey, John.
Hi, good afternoon. Maybe just following up to some of those earlier questions around the balance sheet. Can you talk a little bit about how the pipelines look like for each of the businesses as we go forward from a capital allocation standpoint and the ability to do M&A?
Well, I think we completed Censis in the fourth quarter, as we mentioned. We did Intelex as well in the second half. A couple of very good deals in the second half. In the summer, we had Pruftechnik. We had good additions, and the breadth was pretty good as well. Intelex really being part of our ISC safety offering, Censis being part of our healthcare offering, Pruftechnik really in the core Fluke business. As we look across those funnels, John, across all of our businesses, I think we're in a very good place with all of our funnels. We just reviewed our strategic plan for the next several years with our board and highlighted the opportunities for some of our key platforms. We really see across a number of platforms, opportunities for capital deployment.
Obviously, we're pretty busy right now with some of the things we've got going, but we continue to be active, and we're hopeful that we'll get some things done here in 2020 as well.
Great. As we think about Vontier, I don't think we've had a chance since you've announced the management team there to kind of get your perspective. Just wanted to get your thoughts on both the appointment of Mark and Dave there.
Yeah. We're really excited. I think Mark is very much a person who's got considerable continuous improvement experience. He's been a student of DBS and FBS for a long time, has applied it in his businesses. He certainly goes back to some United Technologies days where they were implementing a number of lean principles. He brings public company experience. He brings business transformation experience. He's incredibly results-oriented. Mark is somebody who we're really excited about. Dave Naemura is really coming back, right? Dave was the group CFO for us before he went to Gates. Dave's a great financial leader. He's worked with Chuck and I for decades, and I think we're really excited. Dave knows these businesses. He's coming in to the organization knowing these businesses, having had some financial responsibility for these businesses before he left.
I think the combination of both external experience, both having public company experience, but also their belief in continuous improvement, I really think sets up already with a great leadership team that we already have in those businesses. We think Vontier's future is very strong with the leaders that we now have in place.
Great. Thank you for the color.
Thanks, John.
Your next question comes from the line of Deane Dray with RBC Capital Markets. Please go ahead.
Thank you. Good afternoon, everyone.
Hey.
I really appreciate that you all were brave enough to take a stab at what the coronavirus impact would be in the first quarter. We've seen really one other company to go through that math. Xylem did it today. Be interested in hearing a bit more, with any precision, if you can, how do you get that $0.02? Is it the plant shutdowns? Any assumption about the supply chain? Maybe we can start there.
Yeah. Thanks, Deane. As we said, it's an evolving situation. Our first priority is the safety and security of our people over there. Obviously, a very difficult situation for the country of China, the health crisis that it is. I think first and foremost, we're focused on making sure that our teams are fine, and we're doing what we can from a business perspective to help in the situation. We have some products, as an example, at Fluke, that are helpful to diagnosing some things relative to some of our temperature measurement products, as an example. That's first and foremost. How we got to the $0.02 is really, I think, pretty straightforward. It's really another week of being down. That's inactivity of not only the factories, but also customers. The fact that I think we ramped slower than normal.
We've talked about China and how you come out of the new year for a number of times. I have a couple of decades of experience of leading our efforts over there. Usually you come up a little slower coming out of the new year, and we just think that's going to be a little slower. It's really the combination of the lost week and really not probably coming up as quickly as we typically would out of the new year. Now, I'll tell you, Deane, as you know, it's an evolving situation relative to next week. February 10th is really the starting point, and we're really looking at three things. One is, how are our customers going to come back? How is commercial transactions going to start up and occur?
The second thing is our factories and our Tier 1 and Tier 2, and even Tier 3 supply chain, and how quickly they come up. We're pretty confident about our own factories, but seeing the supply chain come up. Then I think the third piece is just the freight lanes. What's going to happen? We do ship, as an example, on some commercial flights, as an example. So we'll just have to see how that happens. Really, all that's going to sort of evolve next week and in the weeks to come as we start to see things. We've got countermeasures in place on all three of those situations, but we'll have to get into it to see how things play out and how quickly.
We felt obligated with what we've known pretty much over the last maybe two or three days, we've really felt obligated to be very clear about what we think will happen thus far.
That's a great color. We're all hoping for the best there. On ASP and Censis, interesting you were citing the opportunities from some cross-selling, and that's kind of the whole strategy around bolt-ons. Can you give any kind of examples of what cross-selling might be? Are the sales force?
This is a great combination for us to go forward with.
Good to hear. Thank you.
Thanks, Deane. Be well.
Your next question is from the line of Richard Eastman with Baird. Please go ahead.
Yes, good afternoon.
Hi, Richard.
Jim, could you touch a little bit, circling around to Fluke Industrial? I think you kind of spoke to some seasonal growth there in the fourth quarter relative to the third, so that would seem encouraging. How does the channel look to you at this point? Does that business start to cycle more favorably by mid-year, or what's your general feeling on Fluke Industrial?
Yeah. Maybe more dramatically, just given the daily volume of business that goes on at Fluke. We've got to watch that in China. We think the U.S. continues to sort of stay on track. We don't really see big inventory issues. In Western Europe, we still think it's going to probably be flattish to down here, at least in the first half.
Yeah, I think the restrictions certainly went in, we heard about them right at the end of May, so there's still five months of tougher compares in the first half this year. There's, in a normal year, a little bit more in the second half than the first half, but I don't think that's enough to worry about. It's in the first five months of this year and not beyond that.
I think the more dramatic number at Tech though, really, Rick, is going to be just seeing that market come back in North America and in Europe. The Huawei thing is something.
Fourth quarter. By the fourth quarter, is there much difference between PI and IT as they relate to that low single digit corporate core?
Rick, it is Chuck. I think you roughly have PI correctly, being negative, especially in the first half, running into easier comps, but still being low single digit. I don't quite see it the same way with IT as it goes through the year. I think that they have a little bit of a tough compare here earlier in Q1 versus last year, but I'd expect them in that low mid-single digit growth throughout the balance of the year.
Okay.
I don't think, even though the liability shift is in October, I don't think that we'll see slowdown in this business, especially I'm talking about the EMV wave there.
Yes.
I think that'll continue on beyond the end of 2020. I don't think it slows down the back half of the year.
Okay
on anything I can see.
A couple of things we said before, Rick, just put that in context, like we were talking about EMV, like we just talked about. As I also mentioned, India improves through the second half. You start to see, I think, electric vehicles, the EV charging business probably ramps a little bit more. You got a few things that are going to start to accelerate through the year that are non-EMV related as well.
Got you. Okay, great. Thank you. Thanks for your time.
Thank you.
Thanks, Rick.
Your next question is from the line of John Inch with Gordon Haskett. Please go ahead.
Good evening, everyone.
Hey, John.
Hi, guys. Just picking up on that IT discussion. If IT is kind of low to mid-single digit this year, the margins are in the first quarter, and I think for the year, are relatively flat. Yet we've got some of these EMV, I'm assuming those are pretty good profit contribution benefits throughout the year. Why is the OMX nod a little bit higher for IT based on your guide?
One, I think IT is coming off of a pretty strong year, but I would think that IT would come through. If you're talking about a business that's growing 3% or 4%, 50 basis points is what you would expect to see, and I think that's what you would see with IT going through the year.
Okay. I thought, Chuck, IT was a little bit more flat in your guide in terms of the performance the first quarter in 2020. You're saying it's actually going to be up about 50 basis points, or should be?
I thought you were talking about operating margin expansion. I'm sorry. I think that IT will be up in Q1, not taking into account the coronavirus, would be about 3%, and then accelerates slightly through the year.
Yeah. No, I was talking about operating margin expansion.
Okay.
We're talking about the same thing.
They just had a quarter where they did 200. I think that there's good momentum there, they're lapping some really tough comparison. They had great margin expansion all last year.
That's fair. I wanted to switch to Vontier for a sec. You've announced the management. What about the board? Are the rails going to be on the board? You would presume they would be, there hasn't been an announcement yet. What's the timing on that?
Well, we haven't commented on the board. We've got a lot of degrees of freedom. We've announced Karen as our chair, and so we've got a chair. We're building a board, the construct. We never want to comment on who's going to join the board or whatever based on commitments and how many boards people are on. I would say that our board recruiting has been incredibly positive. We've had a number of folks that have been interested, and we're in the process of interviewing those folks. Because of the structure we've talked about, we're in good shape for what we need to do for the IPO, and I think we're in very good shape as we move forward with the separation, the full separation, if you will, later in the year.
Jim, what are the next milestones, if anything, from a timeline perspective?
I think we're putting ourselves in position to be able to do an IPO by the end of Q1. There's a lot of things going on, as we've noted, even on this call. We're going to assess what the best market timing is for us. We'll be in position by that point. We're really pleased with our progress. As you mentioned, the management team is in place, and we'll see what the market conditions look like.
You'd start to see some of the milestones that would be prepared for that, just to be specific, John. Things like our filing and those kinds of things. You'd start to see that here in the meetings and things like that in the coming weeks here.
Yeah, that's what I figured. Thanks very much. Appreciate it.
Thank you.
Thank you. We have no further questions at this time. I would like to turn the call back to Griffin Whitney for closing remarks.
Well, thanks everybody for taking the time and indulging me in my minor cold here. We want to thank everyone for your support in 2019. Clearly a transformational year as we talked about a number of things that we feel really good about as we enter into the year. We talked about a number of those things this afternoon. It's a new decade for us and a new decade for Fortive, and we're incredibly excited about the position we put ourselves in for both Fortive and Vontier to make 2020 a strong year. We'll look forward to continued conversations around all that. Certainly, Griffin and team are available for follow-up over the next several days. Thanks everybody for your time today. Have a great day, and we'll look forward to seeing you here soon on the road.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.