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Fortive Corporation (NYSE:FTV)
Q4 2019 Earnings Call
Feb 6, 2020, 5:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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. [Operator Instructions].

I would now like to turn the call over to Mr. Griffin Whitney, Vice President of Investor Relations. Please go ahead, sir.

Griffin Whitney -- Vice President, Investor Relations

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 and specialty business on October 1, 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 factors that impacted year over year performance. All references to periods of period increases or decreases and financial metrics are year over year on a continuing operations basis. During the call, we will make forward looking statements within the meaning of the federal securities laws, 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 uncertainties and actual results might differ materially from any forward looking statements that we make today. information regarding these factors that may cause actual results differ materially from these forward looking statements is available in our SEC filings, including our annual report on form 10 k for the year ended December 31 2018. and subsequent quarterly reports on form 10 Q. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements.

With that, I'd like to turn the call over to Jim.

Jim Lico -- President and Chief Executive Officer

Thanks, Griffin, and good afternoon, everyone. Our results for the fourth quarter provided a strong finish to 2019 as we delivered a 13.1% adjusted earnings growth, with strong adjusted operating margin performance and excellent free cash flow. For the full year, we generated adjusted earnings per share of $3.48 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 third cycle businesses throughout the second half of the year. At the same time, we achieve 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 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 David Nomura 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 the cold for the last week, Chuck will provide the details of the quarter.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Thanks, Jim, and good afternoon, everyone. For Q4, adjusted net earnings were $368 million, up 13% over the prior year, and 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 high growth markets core revenue decreased mid single digits due to slow performance at fluke Tektronix and jvr. China posted a high single digit decline as a strong growth and cultural insensitivity. technologies was more than offset by the headwinds associated with the winding down of the double wall tank upgrade cycle GVR and Huawei impacted Tektronix. adjusted profit margins was 23.3%, representing a year over year increase of 60 basis points. Core operating margin increased 250 basis points growth 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 single-digit decrease in core revenue. The significant contribution of recent acquisitions continue 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 margin 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 red watch 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 liability offering.

Fluke continues to see excellent momentum from its revolutionary II900 Sonic 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, WiFi-enabled connected worker solutions as more facilities adopt live-monitoring capabilities to improve safety performance. Intellects grew double digits in the fourth quarter is strong bookings and share gains help deliver a record year for customer wins with a 17% increase year over year and total new customers. The ISC and intellects teams also continue to make progress with the interactive integration of the intellect software offering with AI net in order to unlock the opportunity for futureCross sellingquotes roles core revenue grew mid single digit digits marking the first positive core quarter for both core growth and bookings since 2017 baltoro delivered strong growth in North America, China and Latin America, which was partially offset by continued challenges and Western Europe and the Middle East. Turning to our facilities and asset management business, businesses Gordian prefer performed very well in the quarter delivering greater than 20% core growth. This performance was driven by strong growth across e procurement platform with increased construction volume from large enterprise customers, including the United States Postal Service.

Gordian also saw momentum across estimating and facilities planning, reflecting the initial return on strategic investments that we made in its product offering and sales force. With facilities plannings, the application of FBS sales and lead management tools, we helped Gordian end the quarter with its largest backlog in its history. Accruent saw a sequential growth in the fourth quarter but registered high single-digit decline on a year-over-year basis driven by a tough comparison given the large amount of licensing deals that hit in the fourth quarter of 2018. While the pace of SaaS bookings wasn't enough to offset the licensing revenue decline in the quarter, Accruent to drive better sales execution and productivity with a higher win rate for larger software deals and improve cross-selling. Accruent continues to see strong performance across a number of its key product lines, including its EMS 360 facility and connectivity offerings, all of which generated greater than 20% bookings growth in 2019 and carry strong momentum into 2020. Product realization core revenue decreased high single digits as PacSci EMC and Invetech was more than offset by continued weakness at Tektronix. EMC generated low single-digit sales growth versus the 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 double-digit -- 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 Keathley, weak demand in North America and Western Europe and the loss of business from Huawei due to U.S. trade restrictions. Tektronix saw strong performance across its mid-range oscilloscopes offering, which grew mid-single digits. The three and four series scopes were successfully introduced last June continued 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. Jim's 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 Sensus closed early in the fourth quarter significantly enhanced our connected workflow offerings for central sterilization departments. Sensus 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 and Industrial Technologies was once again led by GVR, where applications of FBS drove strong margin performance and significantly improved working capital turns as EMV ramp throughout the year. For 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, GMAR 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 Insite 360 remote 4-quart [Phonetic] management solution, which enables customers to monitor and update fuel dispensers remotely. They also recently released a new fuel procurement and logistics solution on in site 360 called Halo, which will -- has been well received by the market. GDR recently received a large order for Trinium 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 a larger opportunity to support a broader EV charging rollout across the customer's network, highlights the opportunity for GVR to leverage the distribution and service capabilities across its existing customer base of Tridien's -- in support of Tridien's continued growth.

TeletracNavman core revenue decreased mid-single digits in the fourth quarter, in line with expectations. TeletracNavman saw strong continued growth in Asia Pacific, which was more than offset by declines in North America and Western Europe. The TeletracNavman team continues to work to stabilize its North America business with overhauled customer support processes, reducing the customer churn and enhancing margin. While there is significant work ahead, the TeletracNavman team is making progress with root causes of the higher churn, laying the groundwork for improved performance ahead. Moving to franchise distribution, the platform's core revenue grew low single digits during the fourth quarter, driven by the strength at Matco. Matco's performance was led by growth across its power tools, tool storage and specialty tools category. Matco continues to benefit from strong product vitality and the success of new product introductions. The power tool category, in particular, was supported by the introduction of the cordless infineum, high-performance impact wrench and high-speed ratchet kit. Matco also induced its maximum light diagnostic scan tool in December, bringing to market the latest extension of Matco's growing diagnostics offering.

With that, I'll hand it back over to Jim.

Jim Lico -- President and Chief Executive Officer

Thanks, Chuck. To wrap up, the fourth quarter represented a strong finish to 2019 with continued momentum from industrial technologies and solid execution from Professional Instrumentation in a challenging environment. Our performance in the quarter provided a clear demonstration of both the power of the Fortive business system, and the 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 slowing through the back half of the year. Despite these challenges, we delivered strong margin expansion and free cash flow and saw approximately 7% revenue growth across the software businesses we have acquired since spin. In addition, we have made significant progress toward the integration of ASP, while also moving forward with the separation of Vontier to position Fortive for the future. Clearly, there are signs out there, continued industrial slowness, and we're cautious about the macroeconomic outlook for the coming quarters. With respect to guidance, we are initiating our full year 2020 adjusted diluted net EPS guidance at $3.68 to $3.78, representing year-over-year growth of 6% to 9% on a continuing operations basis. The annual guidance assumes low single-digit core revenue growth, 50 basis points of core OMX and an effective tax rate of approximately 15%. We are also initiating our first quarter adjusted diluted net EPS guidance of $0.70 to $0.74, representing year-over-year growth of 1% to 7%.

This includes assumptions of low single-digit core revenue decline and an effective tax rate of approximately 15%. Our first quarter guidance also anticipates a $0.02 headwind from the disruption we have seen so far associated with the coronavirus outbreak in China. This is a very fluid situation and we are monitoring it very closely. Obviously, first and foremost, the safety of our employees throughout China is our top priority. In closing, I want to take a minute to acknowledge the efforts of the broader Board of team across the globe. 2019 was a truly transformational year for our team. And while it was not with a year without challenges, I'm extremely proud of our team performed and responded. It's the dedication of our people and their relentless commitment to continuous improvement, the drive before does business system and enable us to deliver greater long term value for all of our stakeholders. I look forward to the next decade ahead with our outstanding team.

And with that, I'd like to turn it over to Griffin.

Griffin Whitney -- Vice President, Investor Relations

Thanks, Jim. That concludes our formal comments. Angela, we are now ready for questions.

Questions and Answers:

Operator

[Operator Instructions]. And your first question comes from the line of Julian Mitchell with Barclays. Please go ahead.

Julian Mitchell -- Barclays -- Analyst

Hi, good afternoon. Maybe just the first question around slide 10, the 2020 EPS bridge. Looking at that piece on the left, the $0.16 of core because I guess I'm trying to understand, because I think the restructuring savings from last year give you about $0.14. And then if you put in core growth, low single digits with that 50 bps OMX, that gets you about $0.16. So I'm just trying to understand where does the restructuring savings -- or the core growth fit in that bridge.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Well, Julian, this is Chuck. I think that what -- you're doing that roughly correct. I think that it just really depends on how much growth you're putting in there? And then maybe the one wildcard that we're -- we probably got embedded in here a little bit is how long PI stays down. We've got a negative in Q1 here, it's probably flat in the first half and as that continue into Q3.

Julian Mitchell -- Barclays -- Analyst

I see, that $0.16 incorporates both the organic growth and the restructuring savings?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

That's correct.

Julian Mitchell -- Barclays -- Analyst

And then 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, and then it looks like it's guided to drop again in Q1. So maybe just help us understand what's swinging that around in the context of sort of steady-ish declines in organic sales.

Jim Lico -- President and Chief Executive Officer

Yes, 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 or so bps for the second half. So a number -- what we saw in Q4 was some really strong pricing. We saw -- we always get a bigger portion of our supply chain savings near the end of the year, and we certainly saw that. So those two plus a little bit better mix is really -- would drove the stronger margin expansion in the quarter. As we go into -- you certainly have some headwinds of things like salaries and things like that, that come into the first quarter, that will be part of the offset. But I think part of it is just -- we'll see the big businesses Fluke and Tek, be about the same relative to their contribution. But I think you do see the coronavirus here, and that's principally and that heat is going to be more in PI probably than anywhere else.

Julian Mitchell -- Barclays -- Analyst

Great, thank you.

Operator

And your next question comes from the line of Nigel Coe with Wolfe Research. Please go ahead, sir.

Nigel Coe -- Wolfe Research -- Analyst

Thanks. Good evening, and I look great. So Jim, I hope you're feeling better soon. So I just want to start on cash a couple of different things here. So there's about $500 million and change of M&A spend during the quarter, was that all in this acquisition, this Sensus acquisition? And then was a bit lower than we expected. Is that kind of better job on capex? Or was that a push out relative to your original guidance for '19?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

I think I would take the second one first, the capex. I think that -- I don't think that's appreciably lower or different than we than normally see. So maybe I'd 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. And on the first piece you're talking about, how much of the -- are you talking about the deal cost?

Nigel Coe -- Wolfe Research -- Analyst

Yes. Is that all Sensus? Or was it two or three smaller deals in there as well? What I'm trying to figure out is what -- how big is the Sensus acquisition what should be we modeled for 2020?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

I understand. Yes. No, that's the Sensus acquisition.

Nigel Coe -- Wolfe Research -- Analyst

Okay. Any details you can give us on revenue contribution for '20?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Relative to Sensus?

Nigel Coe -- Wolfe Research -- Analyst

Yes.

Jim Lico -- President and Chief Executive Officer

So yes, that business is, I think, roughly $50-ish million to figure, double-digit kind of growth, you're probably talking in the $10 million range for the year. That's -- it's mostly a SaaS business. So I think some -- if we think about how that will 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 Sensus, along with what we've got at ASP, gives us a really strong offering in the central sterilization department. So some of our effort here to accelerate the growth, it's going to be some investment in go to market in order to make sure that we can accelerate that growth through the year.

Nigel Coe -- Wolfe Research -- Analyst

Okay. I don't want to overstay my welcome here but what kind of margin profile does Sensus have?

Jim Lico -- President and Chief Executive Officer

Pretty close, lower operating margins than what we would at the start but high gross margin. So you're talking about gross 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 the -- roughly the 20s now and they'll probably be in that range this year.

Nigel Coe -- Wolfe Research -- Analyst

Okay, thank you.

Operator

And your next question is from the line of Steve Tusa [Phonetic] with JPMorgan. please go ahead.

Steve Tusa -- JPMorgan -- Analyst

Hey, guys, good afternoon. Just on ASP, what are the organic revenue contributions from that business for 2020?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

It's going to be low single digit, but that probably high -- it's moving up as things -- as we get more of the revenue under our own shop. So I think that's going to be pushing three would be my guess.

Steve Tusa -- JPMorgan -- Analyst

Okay, so that includes kind of that push forward of kind of the TSA impact. So we can think about the revenue base and then just grow that by 3%? Or is that kind of the organic growth, excluding the impact from whatever happened last year with the TSA?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

I think the way -- what I'm talking about is how the end customer growth is going to grow, think about that at 3%.

Steve Tusa -- JPMorgan -- Analyst

Okay. So but what is the actual organic revenue contribution to the [Indecipherable] you can define it anyway once. So just as a percentage of Fortive total revenues, the amount you would include as organic from that business specifically.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Yes, it's probably going to be north of $25 million. On the organic -- just the organic growth. Now keep in mind, we didn't have Q1 in there last year. So [Indecipherable]

Steve Tusa -- JPMorgan -- Analyst

Yes. so it's a nine month. Yes, so it's a nine-month mix in is what you're saying.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Yes.

Steve Tusa -- JPMorgan -- Analyst

Okay. And then just on cash flow for the fourth quarter, some things moving around, there was a decent bump from accruals and another kind of decent drag from I think, from prepaids or 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?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Yes, I don't -- I think that there were some those things were probably related to how J&J got us the cash for that business created in the fourth quarter. But I don't think that -- I would say that, that is what you should expect us to be able to do in the fourth quarter. And that, that wasn't an unusual bump there.

Steve Tusa -- JPMorgan -- Analyst

Okay. So it's not like anything was kind of pulled out of 2020. That's kind of a clean base for 2020.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Yes, it's normal seasonality for us to be really strong in the fourth quarter and later in Q1.

Steve Tusa -- JPMorgan -- Analyst

Okay, great. Thanks for the call. I appreciate it.

Operator

And your next question is from the line of Andrew Obin with Bank of America. Please go ahead.

Andrew Obin -- Bank of America -- Analyst

Hi, yes, sir.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Good evening, Andrew.

Andrew Obin -- Bank of America -- Analyst

Hey, So 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? And more importantly, other than coronavirus, what are the one or two items that could swing that earlier or later?

Jim Lico -- President and Chief Executive Officer

Well, I think as we look at the guide, Andrew, we don't have any dramatic improvement that I would say is counting on a big economic swing our comps get a little easier in the second half. So you have a little bit of that. And we've got some product launches. So I would say if the upside if things were to get better in Europe, I think that would be some upside to us. That would be one thing. I think we've got North America, I think we've seen North America fairly stable. If we start to think about some of the places where we see some point of sale, as an example, we've seen some growth lately in point-of-sale. Admittedly, still kind of low single digit, but we're seeing growth. So I think the upside story would be probably China accelerates -- forget just beyond corona, but it just accelerates to a little bit better. In 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.

Andrew Obin -- Bank of America -- Analyst

Great. And then just a follow-up question on price/cost. Could it be more favorable for you in 2020? I imagine tariff impact is slowing, and you can still command decent pricing? And how does Phase one trade deal sort of figure into your calculation of price cost into 2020, how does it impact you?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

So to take the second piece of that, the trade deal that they just signed wasn't going to impact us either way. And so that's no impact for us. I think that in terms of some of our actions, I think you saw our margin expand here. At the end of the year, reflecting that maybe some of our price will carry into next year. And I'd like to think that in the first half, we've got some good momentum there. I think from a cost standpoint, we don't -- it does not feel like a severely inflationary environment for us. So I think that our position's going to be pretty strong there.

Andrew Obin -- Bank of America -- Analyst

Thanks a lot.

Operator

And your next question comes from the line of Josh Pokrzywinski with Morgan Stanley. please go ahead.

Josh Pokrzywinski -- Morgan Stanley -- Analyst

So I guess, just first question on the Vontier IPO. I guess, Jim, depending on which way it top of 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.

Jim Lico -- President and Chief Executive Officer

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.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Yes, I don't think -- I think we're going to be improved, but especially given if an IPO would net some proceeds and accelerate where we get to. But we're -- both of these companies are going to have M&A firepower here. And so I don't think we get to net debt zero on Fortive. I think Vontier is going to -- we'll take some of the debt, but not a disproportionate amount.

Josh Pokrzywinski -- Morgan Stanley -- Analyst

Got it. That's helpful. And then just thinking about this $0.16 of core improvement in 2020. I guess, if the demand environment were to firm up, especially in the back half. I guess, what's the bias to reinvest some of the restructuring versus what it fall to the bottom line. I guess, maybe a different way of asking is if growth is better, is it $0.16 plus whatever growth does? Or should we expect some leakage from reinvestment that's currently being held back?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

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. And if we see the back half accelerate. I think we see us deliver our normal VCM fall through of around 35%. And maybe a little bit more. But we'll happily deal with that situation when we see it materializing.

Josh Pokrzywinski -- Morgan Stanley -- Analyst

Understood that get.

Operator

Your next question comes from the line of Andy Kaplowitz with Citi. Please go ahead.

Andy Kaplowitz -- Citi -- Analyst

Good afternoon, guys. Jim or Chuck, can you talk about how you're thinking about GVR in 2020. You obviously still have us GMV related growth. But China slowing in India. I think it's been lumpy lately. I surmise, it's a contributor to 2020, but maybe orders are getting pushed a bit. So you can give us more color on how to think about that business overall and what you're seeing.

Jim Lico -- President and Chief Executive Officer

Yes, sure, Andy. Thanks. So I think the China thing is pretty predictable. We have a double-wall tank upgrade. We've seen tremendous benefit last year from that. And we knew inevitably that, that was going to sort of wane, and that came in fairly predictable. So I don't think China will be a big source of growth for GVR necessarily in 2020. India will, we really have seen more -- we've actually been -- most recently, we've seen some good news on some of our project rollouts. So 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. So as we mentioned in the prepared remarks, Latin America was a highlight for them as well in the quarter. And then maybe the bigger story is now -- obviously, EMV is the big story. Came in really the way we thought it should come in, in the quarter. That will continue to be helpful in 2020. And 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. So that's a starting point for growth as well. So a number of levers that we think can get them -- will be additive to their growth rate. But EMV still will be the big number there throughout this year.

Andy Kaplowitz -- Citi -- Analyst

And then just asking about Accruent, it was starting to flow less quarter, you talked about the conversion to 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 traditional decline, as you called it last quarter? Or is it more cyclical? And what's your outlook for Accruent here in 2020.

Jim Lico -- President and Chief Executive Officer

Yes. If we looked over -- if we sort of get away from the quarters and just look at our ownership of -- we've seen mid single-digit growth at a current since our ownership. So 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 connected, 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. So 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 or thought they were going to be. Some of that is larger licensing deals that we had in the fourth quarter of over a year ago, which made for a tough comp. But 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, it takes a little while for that to kick in. But we're still very excited about the business. And then we think more broadly, about Gordian as well as what we've done with Fluke digital and eMaint as that sort of almost $500 million of facilities and asset management businesses, those businesses growing exceptionally good. So the market dynamics are good. Like I 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. But 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.

Andy Kaplowitz -- Citi -- Analyst

Thanks.

Jim Lico -- President and Chief Executive Officer

Welcome.

Operator

Thank you. And your next question comes from the line of John Walsh with Credit Suisse. Please go ahead.

John Walsh -- Credit Suisse -- Analyst

Joe. 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?

Jim Lico -- President and Chief Executive Officer

Yes. Well, I think we certainly are -- we completed Sensus in the fourth quarter, as we mentioned, we did intellect as well in the second half. So a couple of very good deals in the second half. In the summer, we had PRUFTECHNIK. So we had good additions and the breadth was pretty good as well. Intelex really being part of our ISC safety offering, Sensus being part of our healthcare offering for Tek and really in the core Fluke business. So 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. And 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. And -- but we continue to be active, and we're hopeful that we'll get some things done here in 2020 as well.

John Walsh -- Credit Suisse -- Analyst

Great. And then 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.

Jim Lico -- President and Chief Executive Officer

Yes, we're really excited. I think Mark is a bit -- is a very much a person with who's got considerable continuous improvement experience. He's been a student of DBS and FBS for a long time and has applied it in this businesses. He certainly goes back to back to some United Technology days where they were implementing a number of Lean principles. So I think he brings public company experience, he brings business transformation experience, he's incredibly results oriented. So I think, Mark, is somebody who we're really excited about. And Dave Nomura's really coming back, right? Dave was the group CFO for us before he went to Gates. And Dave's a great financial leader. He's worked with Chuck and I for decades. And I think it's -- we're really excited. Dave knows these businesses. He's coming into the organization knowing these businesses having have some financial responsibility for these businesses before he left. So 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.

John Walsh -- Credit Suisse -- Analyst

Great, thank you for the color.

Operator

And your next question comes from the line of Deane Dray with RBC Capital Markets. Please go ahead.

Deane Dray -- RBC Capital Markets -- Analyst

Thank you. Good afternoon, everyone. 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. So I'd be interested in hearing a bit more with any precision if you can, what's the -- how do you get that $0.02? Is it the plant shutdowns? Any assumption about the supply chain, maybe we can start there.

Jim Lico -- President and Chief Executive Officer

Yes. Thanks, Deane. It's obviously, as we said, it's an evolving situation, and our first priority is the safety and security of our people over there. And obviously, a very difficult situation for the country of China, the health crisis that it is. So 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. So 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. So that's inactivity of not only the factories but also customers. And the fact that I think we ramped slower than normal. I've been I've been pretty -- 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. And usually, you come up a little slower coming out of the new year is. And we just think that's going to be a little slower. So 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 10 is really the starting point, which -- 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 one and Tier two and even tier three supply chain, and how quickly they come up, we're pretty confident about our own factories. But seeing the supply chain come up; and 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. And really, all that's going to sort of evolve next week and in the weeks to come as we start to see things. We're -- we've got countermeasures in place on all three of those situations. But we have to get into it to see how things play out and how quickly. But 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.

Deane Dray -- RBC Capital Markets -- Analyst

That's great color. We're all hoping for the best there. And then on ASP and Sensus, interesting, you were citing the opportunities from sort of 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. And are the sales forces provided any incentives along those lines?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Yes. So first, which says this is a great business, in and of itself. And so one is the team there is we're going to accelerate some investments and commercial opportunities to really take their solution forward, which we think is a really great solution for central sterilization departments. So that's first and foremost. And then as we said, we've got, in some customers, sets we probably have a stronger position in some places, like IDNs, as an example, they're very strong. So the opportunity for -- to cross-sell within those situations is certainly there, and we're certainly incentivizing the sales force. On a global basis, we probably have more opportunity to take the ASP customer set and introduce Sensus to them because obviously, ASP is such a global business. So really, both opportunities but -- to really cross-sell. But I do want to make sure we emphasize it. We bought a good business to begin with. As I said, over 10% growth in the fourth quarter. That's not in our core number yet. But we think very strongly that this is a great combination for us to go forward with.

Deane Dray -- RBC Capital Markets -- Analyst

Good to hear. Thank you.

Jim Lico -- President and Chief Executive Officer

Thanks, Dean.

Operator

And your next question is from the line of Richard Eastman with Baird. please go ahead.

Richard Eastman -- Baird -- Analyst

Yes. Good afternoon. Jim, could you touch a little bit -- circle 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? And does that business start to cycle more favorably by midyear? Or what's your general feeling on Fluke Industrial?

Jim Lico -- President and Chief Executive Officer

Yes. We saw a little bit better performance in the fourth than we did in the third, and a little bit better performance than we originally thought. And I think that was principally in North America. If we think about point-of-sale trends at Fluke in the fourth quarter the U.S. grew a little bit. Western Europe and China, we're still down. China, off a tough comp. So we really -- we've got to come out, as I mentioned in a few questions ago, corona probably hasn't impacted Fluke maybe more dramatically just given the daily volume of business that goes on at Fluke. So 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. And in Western Europe, we still think it's going to probably be flattish to down here, at least in the first half, start maybe to get a little bit better based on comp. The inventory positions within the channel are pretty good. So we don't expect any dramatic downturn in the economy from here with these industrial customers. And so you would think that most of the inventory corrections are behind us at this point.

Richard Eastman -- Baird -- Analyst

Okay. And then let me just, again, kind of stay on the short-term business here. But with Tek, I think most of the T&M companies in the electronics side, have their toughest comps with Huawei in the first and part of the second quarter. I mean, not only was business ramping, but we obviously saw the restrictions go in place in May, I think, of last year. But is that the case with Tektronix on the lost business. Is there a functionality from a T&M standpoint? The same? Did it ramp on that same time frame. So comps are very tough, pretty much through the second quarter there? [Indecipherable]

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Yes, I mean, I think if the restriction 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 of this year. There's a little bit 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. But it's in the first five months of this year and not beyond that.

Jim Lico -- President and Chief Executive Officer

I think the more dramatic number at Tek though, really, Rick, is going to be just seeing that market come back in North America and Europe. That's really that the Huawei thing is something and it's something for Tek. But if we're really think about what's really a larger piece that we usually see three or four quarters of down -- four to five quarters of downturn when this sort of turns. And I think that's kind of our current thought. Large -- as you know, while larger purchases get delayed for a little while but they can't be delayed forever. And so we think we'll start to see things start to improve as we get further into the year.

Richard Eastman -- Baird -- Analyst

Okay. And then just the last question for me. The core growth for '20, the guide there, low single digits. If I think about PI and IT, it seems to me that PI start off fairly negatively because of these short-term issues at Fluke industrial and Tek. And then perhaps from a core growth standpoint, strengthen in the second half, whereas potentially it starts off strong with some GVR backlog and maybe fades a little bit in the fourth quarter -- by the fourth quarter. Is there much difference between PI and IT as they relate to that low single-digit corporate core?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Rick, this 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 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 in -- from -- or throughout the balance of the year, I don't think, even though the liability shift is in October. I don't think that we'll see a slowdown in this business, especially the -- I'm talking about the EMV wave, that will continue on beyond the end of 2020. So I don't think it slows down the back half of the year on anything I can see.

Jim Lico -- President and Chief Executive Officer

And 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. So you start to see -- I think electric vehicles the EV charging business probably ramps a little bit more. So you've got a few things that are going to start to accelerate through the year that are non EMV related as well.

Richard Eastman -- Baird -- Analyst

Good. Okay Great. Thank you.

Jim Lico -- President and Chief Executive Officer

Thanks, Peter.

Operator

Thank you. And your next question is from the line of John Inch with Gordon Haskett. please go ahead.

John Inch -- Gordon Haskett -- Analyst

Good evening, everyone. Hi, guys. Just picking up on that IT discussion. So if IT is kind of low to mid-single-digit this year, the margins are in the first quarter are -- and I think for the year, are relatively flat. Yes, we've got some of these EMV, I'm assuming those are pretty good profit contribution benefit throughout the year. Why is the OMX now a little bit higher for it based on your guide?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Well, one, I think IT is coming off of a pretty strong year. But I would think that IT would come through with -- I mean if you're talking about a business, it's growing 3% or 4%, 50 basis points is what you would expect to see. And I think that, that is -- that's what you're going to see with IT going through the year.

John Inch -- Gordon Haskett -- Analyst

Okay. So I thought, Chuck, I thought IT was a little bit more flat in your guide in terms of the performance in the first quarter and 2020. But you're saying it's actually going to be up about 50 basis points? Or should we...

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

I thought you were talking about operating margin expansion. I'm sorry, but the -- I think that IT will be up in Q1, not taking into account the coronavirus would be about, I think it's 3% and then accelerates slightly through the year.

John Inch -- Gordon Haskett -- Analyst

Yes. No, I was talking about operating margin expansion. So we're talking about the same thing.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

They just had a quarter where they did 200. So I think that there's good momentum there, but then they're lapping some really tough compares. They had great margin expansion the last year.

John Inch -- Gordon Haskett -- Analyst

That's fair. Just wanted to switch to Vontier for a sec. You've announced the management, what about the Board? Like are the rails going to be on the Board? You would presume they would be, but there hasn't been an announcement yet. What's the timing of that?

Jim Lico -- President and Chief Executive Officer

Well, yes, we haven't commented on the Board. I mean, we've got a lot of degrees of freedom. We've announced Karen as our chair. And so we've got to share. We're building a Board at the construct. We never want to comment on who's going to join the Board or whatever, based on, as you know, 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. We -- 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 to -- as we move forward with the separation, the full separation, if you will, later in the year.

John Inch -- Gordon Haskett -- Analyst

And Jim, what are the next milestones, if anything, from a time line perspective?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Well, I think we're putting ourselves in position to be able to do an IPO by the end of Q1. But there's a lot of things going on, as we've noted even on this call. So we're going to assess what the best market timing has gone -- is for us. But we'll be in position by that point. But we're really pleased with our progress. And as you mentioned, the management team is in place. And we'll see what the market conditions look like.

Jim Lico -- President and Chief Executive Officer

You'll 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.

John Inch -- Gordon Haskett -- Analyst

Yeah, that's what I figured. Thanks very much. Appreciate it.

Jim Lico -- President and Chief Executive Officer

Thank you.

Operator

Thank you, and we have no further questions at this time. I would like to turn the call back to Griffin Whitney for closing remarks.

Jim Lico -- President and Chief Executive Officer

Well, thanks, everybody, for taking the time and indulging me in my minor cold here. But we want to thank everyone for your support in 2019. We -- 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. And certainly, Griffin and team are available for follow-up over the next several days. So thanks, everybody, for your time today. Have a great day. And we look forward to seeing you here soon on the road.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Griffin Whitney -- Vice President, Investor Relations

Jim Lico -- President and Chief Executive Officer

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Julian Mitchell -- Barclays -- Analyst

Nigel Coe -- Wolfe Research -- Analyst

Steve Tusa -- JPMorgan -- Analyst

Andrew Obin -- Bank of America -- Analyst

Josh Pokrzywinski -- Morgan Stanley -- Analyst

Andy Kaplowitz -- Citi -- Analyst

John Walsh -- Credit Suisse -- Analyst

Deane Dray -- RBC Capital Markets -- Analyst

Richard Eastman -- Baird -- Analyst

John Inch -- Gordon Haskett -- Analyst

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