Fortive Corporation (FTV) Q4 2020 Earnings Call Transcript

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Fortive Corporation (FTV -0.03%)
Q4 2020 Earnings Call
Feb 4, 2021, 5:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen. My name is Jason and I'll be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Fortive Corporation's Fourth Quarter 2020 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

I would now like to turn the call over to Mr. Griffin Whitney, Vice President of Investor Relations. Mr. Whitney, you may begin your conference.

Griffin Whitney -- Vice President of Investor Relations

Thank you, Jason. 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 Investors, Quarterly Results. We completed the divestiture of the Automation and Specialty Business on October 1st, 2018 and accordingly have included the results of the A&S business as discontinued operations for historical periods. We completed the separation of our prior Industrial Technologies segment through the spin-off of Vontier Corporation on October 9, 2020 and have accordingly included the results of the Industrial Technologies segment as discontinued operations. 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 period-to-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 to 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, 2019 and subsequent Quarterly Reports on Form 10-Q. These forward-looking statements speak only as of the date 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. Today, we are pleased to announce our fourth quarter 2020 results, which reflect a strong finish to the year. For the quarter, we delivered adjusted diluted net earnings per share of $0.70, an increase of 19% year-over-year as well as total revenue growth of 4.9%, which exceeded the high-end of our guidance and included a return to positive core growth. The quarter underlie the increased resilience of our portfolio and represented a continuation of the sequential improvement in top-line performance that we have seen since late in Q2. Despite the continued challenges associated with the COVID-19 pandemic, our disciplined application of the Fortive Business System help drive more than 100 basis points of core operating margin expansion and a 39% increase in free cash flow.

The better topline performance in Q4 reflected a combination of durability across the recurring revenue portions of our portfolio and clear improvement at Fluke and Tektronix. The strength of our recurring revenue, which now accounts for approximately 39% of our total revenue provided an important source of stability throughout 2020. In Q4, this is most notable among our SaaS offerings, which generated low-teens growth. The application of FBS customer success tools also continue to deliver improvements in net revenue retention, which climbed greater than 101% for the full year. Our SaaS performance helped to offset the challenges the software businesses are having with customer site access for the provision of services as well as extended timelines for contract renewals. The fourth quarter also saw Fluke and Tektronix return to positive growth. Both have seen steady improvement since the middle of Q2 driven by better point of sale trends across major geographies and continued successful new product launches.

On January 19th, we disposed-off our remaining 19.9% ownership stake in Vontier through a tax efficient Debt-for-Equity Exchange. This transaction represents the final step in the Vontier separation. With the combination of the Vontier spin proceeds, the Debt-for-Equity Exchange and our continued strong free cash flow, we have reduced our net debt by approximately $3 billion since the beginning of Q4 with a net leverage ratio currently at approximately 1.3 times, we have significant capacity to pursue key capital allocation priorities.

With that, let's turn to the details of the quarter on slide four. Adjusted net earnings were $252.9 million, up 19.3% from the prior year and adjusted diluted net earnings per share was $0.70. Total sales increased 4.9% to $1.3 billion with core revenue up 0.7%, reflecting continued sequential improvement from the prior quarter. Acquisitions contributed 260 basis points of growth and favorable foreign exchange rates increased growth by 160 basis points. We are particularly pleased to deliver adjusted gross margins of 58.5%, representing a new high for Fortive, which highlights the significant portfolio transformation accomplished over the last few years. Gross margins also benefited from our ongoing investment in innovation, continued application of FBS growth tools and another quarter of strong pricing.

Adjusted operating profit margin was 23.2% for the quarter. This reflected 130 basis points of core margin, operating margin expansion, including positive core OMX for each of the segments. This was the second consecutive quarter with greater than 100 basis points of core OMX. The Q4 margin performance also contributed to 50 basis points of positive core OMX for the full year 2020.

During the fourth quarter, we generated $313 million of free cash flow, representing conversion of 124% of adjusted net earnings and an increase of 39% year-over-year. Including this fourth quarter contribution, our full-year 2020 free cash flow was $902 million, representing conversion of 120% of adjusted net earnings and an increase of 44% year-over-year. Our 2020 free cash flow performance in particular showed the resilience of our portfolio and the power of the Fortive Business System to drive consistent, strong increases in free cash flow.

On slide six of today's presentation, we show the region-by-region breakdown for the fourth quarter, in which we continue to see sequential improvement across our major regions. In Asia, core revenue increased by low single digits, highlighted by high single-digit growth in China and mid single-digit growth in India. Continued strength in China was broad-based, led by mid 20% growth at Sensing, mid-teens growth at Fluke, and high-teens growth at Advanced Sterilization Products. The strength in China and India was offset by declines in most of the rest of Asia. Western Europe core revenue increased by high single digits in the fourth quarter with high-teens growth at Fluke Health Solutions, high single-digit growth in Tektronix, and mid-single digit growth in ASP. North America core revenue was down slightly in the fourth quarter, as low teens growth at Tektronix and high-single digit growth at Censis was primarily offset by declines at ASP and Industrial Scientific. Fluke improved to flat core growth in North America, driven by strong performance at Fluke Calibration and a return to growth at Fluke Industrial.

Turning to our segments. Intelligent Operating Solutions posted a total revenue increase of 3.2% despite a 0.3% decline in core revenue. Acquisitions increased growth by 170 basis points while favorable foreign exchange rates increased growth by 180 basis points. Core operating margin increased 280 basis points. This price realization, improved mix and higher volumes of Fluke resulted in segment level adjusted operating margin of 28.7%.

Fluke's core revenue returned to positive growth in the fourth quarter, increasing by low single-digits. Fluke saw another quarter of strong growth in China, which increased by mid-teens in addition to seeing continued improvements in North America and Western Europe, which were flat and down low-single digits, respectively. Point of sale showed improvement with North America still negative, but better sequentially, western Europe turning positive and China continuing at positive high single-digit rate. Fluke saw a strong performance in Fluke Calibration and Fluke Digital as well as solid growth in Fluke Industrial. Fluke Digital was led by another strong quarter from eMaint, including low double digit SaaS growth. Fluke continued to see momentum from recent product launches including its ii900 Sonic Imager, which was launched in November.

Industrial Scientific core revenue declined by mid single digits in the fourth quarter. iNet continued to see good growth, which is more than offset by continued oil and gas related pressure at ISC's instrumentation and rental businesses. Separately, Intelex continued to perform well with revenues increasing by low double digits. The fourth quarter also represented a record bookings quarter for Intelex, which has seen strong traction in its expansion into Western Europe. Intelex is benefiting from the implementation of FBS, which contributed to the successful rollout of enhanced sales funnel management and digital marketing lead generation tools. In November, Intelex also completed the acquisition of ehsAI, a leading provider of artificial intelligence and machine learning for the automation of permitting and regulatory compliance management. The addition of ehsAI significantly enhances Intelex ability to deliver applied intelligence and advanced analytics to a broad range of customers.

At Accruent, we also saw significant sequential improvement, driven primarily by strong growth in its SaaS offerings. While Accruent declined by low single digits for the quarter, its SaaS business increased by mid-teens. Accruent also continued to apply FBS to drive improvement and churn in the quarter, bringing net retention for the year to greater than 100%. Despite some continued pressure from customer site access issues, Accruent has seen good bookings for its Meridian Engineering and Information Management offering, as we partner with customers on their digital transformations and highly regulated markets such as life science and pharma. We also continue to bring new offerings to market to address return to work requirements, including a recent win for Accruent's EMS space management software product for Cushman & Wakefield.

Gordian declined by high single digits due to headwinds associated with budget challenges and uncertainty across state and local government and higher education customers as well as continued site access issues. Gordian's RSMeans business grew low single digits, driven by mid-teens growth for its SaaS offering, supported by the successful implementation of virtual platforms for training and onboarding. Gordian also saw signs of improvement in project activity in its job order contracting business toward the end of the quarter.

Turning to our Precision Technologies segment, we posted a total revenue increase of 2.3% with a 0.17% increase in core revenue. Favorable foreign exchange rates increased growth by 160 basis points. Core operating margin increased 30 basis points, resulting in segment level adjusted operating margin of 22.2%. Tektronix delivered mid single-digit core growth in the quarter with low-teens growth in North America and high single-digit growth in Western Europe. Tektronix continued to benefit from better point of sale trends in both regions with significant improvement from Q3. China saw a low-single digit decline due primarily to the negative impact of the expansion of trade restrictions, partially offset by good year-over-year point of sale growth and momentum from small and medium enterprise customers.

Looking across the product lines, the improved topline performance in Q4 was driven by low double-digit growth in both Keithley and the mainstream mixed signal oscilloscope platforms. Growth in mainstream oscilloscopes continues to be led by the 6 Series line of scopes, which has seen strong demand for the new 6 and 8-channel versions since they were introduced in Q3.

Sensing Technologies declined low single digits in the fourth quarter. Sensing performed well in China with mid 20% growth, driven by gains and critical environment applications etc and increased OEM demand for Hengstler, Dynapar's factory automation offerings. North America revenue increased slightly while Western Europe declined low single digits with both regions showing clear sequential improvement. Sensing's improved topline performance was primarily due to continued strength in medical and semiconductor end markets.

Setra has recently launched AIIR Watch Negative Pressure machine for isolation room applications has performed well, generating strong initial orders since its launch early in the quarter with orders from a range of customers across medical offices, long-term care facilities, and schools.

PacSci EMC declined low single digits, as it continued to face COVID-19 related pressures across certain elements of its supply chain. The company did see sequential -- clear sequential topline improvement versus the third quarter as well as another quarter of strong bookings. EMC enter 2021 in a strong backlog position, as its leading technology and innovation capability continue to drive strong demand.

Moving to Advanced Healthcare Solutions. Total revenue increased 12% with a 2.6% increase in core revenue. Acquisitions added 830 basis points to growth while favorable foreign exchange rates increased growth by 110 basis points. Core operating margin increased 50 basis points resulting in segment level adjusted operating margin of 24.1%, up significantly versus Q3 and driven by strong margin lift at ASP, as we continue to exit the transition service agreements. ASP declined mid single digits, as pandemic related pressure on elective procedure volumes remained a headwind. Elective procedure volumes averaged approximately 93% of pre-COVID levels across the company's major markets, but were lower than anticipated and did not see slowing -- and did see slowing toward the end of the quarter. ASP continued to perform well in Western Europe with mid single-digit growth in addition to high-teens growth in China. In the US, ASP declined low single digits, as growth in capital placements from improved sales execution and funnel management partially offset the weakness in consumables revenue. ASP service business continues to perform well with the ongoing deployment deployment of FBS tools helping to drive service sales and optimize service delivery processes. With additional day to closings in Q4 in early 2021, approximately 99% of ASP's global revenue is now fully under our control and off of transition service agreements.

Censis grew by high single digits in the quarter. Site access at hospitals improved early in the quarter, only to then reverse as the quarter progressed. Censis' topline performance was led by its SaaS-based CensiTrac offering, which grew low double digits, driven by a combination of new customer acquisitions and successful upselling of its existing customers. This growth was partially offset by high single-digit decline in professional services revenue tied directly to the ongoing challenges with customer site access.

Fluke Health Solutions generated mid single-digits growth in Q4. FHS grew slightly in North America against a challenging comparison. This growth was led by strong performance across both Fluke BioMed and the Landauer radiation monitoring business. FHS continues to see good initial momentum across the two software platforms introduced over the past 12 months. OneQA, which enhances workflow efficiency and test automation for biomedical customers and Optimize [Phonetic], which provides tracking and optimization of radiation dose management for Radiology Departments. Both platforms reflect FHS' focus on bringing forward software and AI enabled revenue models to build on its strong and existing recurring revenue base.

Invetech had another strong quarter with greater than 50% growth. The company saw a significant sales and order momentum throughout the year, including a strong finish in December. This growth was led by Invetech's design and engineering offering, which more than doubled on a year-over-year basis in Q4. The company saw a strong growth in the diagnostics market, driven by near-term projects to develop rapid testing capabilities for COVID-19 as well as strong demand from the cell therapy market tied to the production for next generation therapeutics.

On slide 11, we highlighted the progress made in 2020 with respect to our corporate social responsibility efforts, which is one of our key strategic initiatives. Throughout the year, we enhanced the rigor and integrity of our data collection by transitioning our EHS, sustainability and risk assessment processes to the Intelex platform. Our enhanced data analytics improve insights to accelerate our sustainability efforts and give greater transparency to key stakeholders. To support inclusion and diversity, our Employee and Friends Resource Groups focused on improving employee connections across the organization while utilizing FBS to enhance their impact. We also expanded our commitment to the CEO in Action Pledge by participating in the 2021 Racial Equity Fellowship, aimed at promoting corporate best practices to address systemic racism and social injustice.

We are using FBS tools to develop standard work for greenhouse gas accounting and reporting and scaling energy kaizen efforts more broadly across the portfolio. This has resulted in making substantial progress toward our greenhouse gas reduction goals, which we expect to achieve ahead of schedule. Finally, Fortive employees around the world continue to support our local communities through our efforts in our annual Day of Caring with over 35,000 hours of service in 60 worldwide communities. We are living our values to achieve our CSR goals and we're excited to continue driving progress in the years ahead.

Turning to guidance on slide 12. We're instituting formal earnings guidance for the full year and the first quarter of 2021. For the full year, we expect adjusted diluted net earnings per share to be $2.40 to $2.55, representing year-over-year growth of 15% to 22% on a continuing operations basis. The annual guidance assumes core revenue growth of 4% to 7% and an adjusted operating profit margin of 22% to 23% and an effective tax rate of approximately 14%. We also expect free cash conversion to be approximately 105% of adjusted net income. We are also initiating our first quarter adjusted diluted net earnings per share guidance of $0.56 to $0.60, representing year-over-year growth of 22% to 30%. This includes assumptions of 5% to 8% core revenue growth and adjusted operating profit margin of 21.5% to 22.5% and an effective tax rate of 14%. We also expect free cash conversion to be approximately 75% of adjusted net income.

Before we wrap-up, I'd like to thank the Fortive team for their efforts in 2020. I'm tremendously proud of how our teams rose to meet the many challenges posed by the COVID-19 pandemic, with a focus on keeping our employees safe, helping frontline workers combat the virus and continuing to provide our customers with our essential technologies. Despite these challenges, we made substantial progress across a range of strategic imperatives over the course of the year. The focus and dedication of our team around the world enabled us to significantly transform the portfolio while transitioning to a work-from-home environment and ensuring continued execution across the portfolio to deliver strong margin performance and consistent free cash flow growth.

As a result of that hard work and a significant progress it enabled, we're in a strong position as we turn our focus to 2021, while navigating some of the continued challenges in the near term. With a portfolio comprised of leading businesses that are well positioned in attractive markets, considerable opportunity to accelerate our growth through continued investments in organic innovation and acquisitions and the support of a strong culture rooted in the Fortive Business System, we're very excited about the road ahead.

With that, I'd like to turn it back to Griffin.

Griffin Whitney -- Vice President of Investor Relations

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

Questions and Answers:

Operator

Certainly. [Operator Instructions] Your first question comes from the line of Nigel Coe from Wolfe Research. Your line is open.

Nigel Coe -- Wolfe Research, LLC -- Analyst

Thanks. Good morning. Good morning -- good afternoon. Couple of [Technical Issues] 2020 in the books. So just maybe to Chuck, the margin framework looks reasonable obviously very strong execution in 4Q [Technical Issues] what we should expect through the year, are we still sort of adding back costs in aggressive way to manage to kind of margin of 35% or are we pushing it to the higher incremental?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Thanks, Nigel. We're still thinking for the year of 35%, but maybe if I help you to understand it and we're really thinking about some of the temporary cost coming spring back more impactfully in Q2, so that will probably in 25%, but if you look at the other quarters likely be 40% in Q1, Q3, and Q4. And maybe that's a better margin profile for us going forward.

Is that helpful for what you're looking for?

Nigel Coe -- Wolfe Research, LLC -- Analyst

Absolutely. That's perfect. Thanks, Chuck. And then just on AHS, [Indecipherable] in both 1Q and 2021, I would've thought that maybe the growth rate might accelerate beyond 1Q, especially as ASP maybe normalize as we see could come, so just curious on sort of [Technical Issues].

And then maybe Invetech, sounds like that's got some real life sciences and biopharma applications. Just wondering what sort of revenue base we have for Invetech right now?

Jim Lico -- President and Chief Executive Officer

Yeah. You know it's interesting because we don't really talk about Invetech. Now that it's been a smaller segment, obviously a little bit more material. But I think the more important thing is, given the strength of the business and the work they did, a little bit of an opportunity to talk about the good work they are doing. And that business that we were talking about in the prepared remarks, Nigel, is really focused on really design and engineering resources for diagnostic companies as an example. So think of it as outsourced engineering capability and as we said in the prepared remarks, a number of opportunities around testing companies that were looking at COVID-19 and also maybe lot more broadly and more longer-term in cell therapeutic, so number of opportunities. The business is a little bit lumpy because the nature of the business model, we are working to change that over time. The leadership team has done a nice job of that, but I think first and foremost, they've done a nice job of growing the business. They were up I think for the year up over 20%, so a good -- roughly, think of it as under $100 million business, so that kind of number.

Relative to ASP, I think your question was around AHS and the growth rate at AHS if I had it right, but I'll talk about AHS and ASP in terms of the growth rate. We certainly have good growth. If we are to think about the guide we've got out there, AHS will probably be one of our better growers that run into a couple of comp issues at FHS as an example and Invetech in the second half, but I think if we were to look on a two-year stack basis, you would see progressively better growth through the year at AHS and that's on the backs of really ASP continuing to be good. There is an assumption there that we get vaccinated here that hospitals get elective procedures back on track by the second half, I think that is the comfortable assumption at this point.

Nigel Coe -- Wolfe Research, LLC -- Analyst

Okay. Thanks guys.

Jim Lico -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from a line of Julian Mitchell from Barclays. Your line is open.

Julian Mitchell -- Barclays Investment Bank -- Analyst

Hi, good afternoon and thanks for giving all of that detail in the slides. Maybe my first question around the free cash flow guidance. So you clearly had an exceptional 2020, about 120% adjusted conversion. It's guided to moderate maybe to 105%, I think this year, so maybe in absolute dollars growing low or mid single-digits versus the high-teens earnings increase. Maybe help us understand how much of that is just kind of conservatism or is something happening with working capital or those prepaid expenses or capex coming back or something.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Hey, good evening Julian, this is Chuck. Thanks for the question. Yeah, there is a couple of things I want to point out. In the free cash flow, we're very proud of how we managed through the year in 2020. Going forward though, keep in mind, there is some tailwinds that came in through the year relative to the CARES Act and not only did we get a moratorium on some of those taxes that we have to pay back over the next few years, but we also have to reinstate that. So we need to -- we're a little overstated in -- not overstated, 2020 came in strong because of that, but that's about a $50 million headwind in 2021. And then the second part would be around working capital, as we start to reengage and see growth here [Indecipherable] prudent to put -- to say that our turns may not go down, but it will probably a little bit us use of cash, as we grow those businesses. So got another $50 million for that. Those are the two biggest things going on there.

Julian Mitchell -- Barclays Investment Bank -- Analyst

Thank you. And then my second question really on that revenue guidance for the PT segment. So you're starting out in Q1 with low double-digit, even core growth perhaps. The year's guided mid single digit, second quarter should have an easy comp. So it looks like you're dialing in a fairly steep slowdown in the back half of the year. Is that based on sort of the experience of prior upturns and how quickly you can get that surge and then a fade again, just trying to understand some of the main assumptions in that core sales guide to PT.

Jim Lico -- President and Chief Executive Officer

Yeah, sure. So you really got a couple of pieces there, you have Sensing business and Tek are the two big pieces there, Julian. I think number one is if you look at our two year stack, you'd see the business continuing to do pretty well. So some of it has a little bit to just to do with the comps, the growth rates will look a little bit lower in the second half. But fundamentally, if we look over a two-year period, we'll see those business kind of continue. I don't think we have a plan to jump though either, so I think right now, I think with the visibility, particularly on the Sensing side, we're probably a little bit more prudent just to dial in what we think will happen without any extensive situation.

So as I mentioned before on the question, as we look at the guide, we see AHS probably being -- but if we think about on a two-year stack basis, AHS is probably being better, IOS being better, and then PT being maybe a little bit less than the other two. So I think that's the right way to be, but again the strength of the business and we'll see how the remaining part of the year plays out relative to some of the economic situation that we -- obviously we're tracking.

Julian Mitchell -- Barclays Investment Bank -- Analyst

Great. Thank you.

Jim Lico -- President and Chief Executive Officer

Thanks, Julian.

Operator

Your next question comes from the line of Josh Pokrzywinski from Morgan Stanley. Your line is open.

Josh Pokrzywinski -- Morgan Stanley -- Analyst

Hey, good afternoon guys.

Jim Lico -- President and Chief Executive Officer

Hey, Josh.

Josh Pokrzywinski -- Morgan Stanley -- Analyst

Jim and Chuck, just relative to the full-year guide here, 4% to 7%. Obviously, it's easy comps along the way and few aches and pains in terms of site access for some of the businesses, but is it the main reason to believe that this is not with the new portfolio kind of the -- within the steady state growth algorithm for the business as it stands today, given all the changes.

Jim Lico -- President and Chief Executive Officer

Well, I certainly think it's reasonable. We wouldn't put an unreasonable guide out there and I think it's based on a couple of things. Number one is, I would say, again this is where a lot going on in 2020, as you mentioned different regional comps and things like that, but I think if we looked it at on a two-year stack, we continue to improve sequentially through the year without any unreasonable need for the economy to come back, but on the same token, we're still at a level of uncertainty here. We're still in, we really don't know the exact date, in which COVID will open-up offices and get customers back up and fully running. So I think when we look at it continuing to get better through the year, we make a bunch of our own luck like we did in 2020, where as you know, we were basically over 1% overall in the year. So I think we'll continue to make our own luck. And if things play out a little bit better economically, then certainly fundamentally you'd probably see a bigger number, but I think for now with the little uncertainty out there and the trajectory that we ended on, I think this is a strong guide.

Josh Pokrzywinski -- Morgan Stanley -- Analyst

Got it. It's helpful. And then just maybe you wouldn't mind spending a moment on the M&A environment, obviously it's fact study out there, multiples are high, I think a lot of the things that maybe some of these emerging folks in the market are going after, looking an awful lot like what could be afforded business, maybe at the right multiple. How do you view the competition for assets or scarcity value for that matter, given that there's still maybe some reluctance to sell for better businesses, who are still feeling COVID effects.

Jim Lico -- President and Chief Executive Officer

Yeah. Great question, very timely obviously. I think we've been very busy in the last six months, if I were to characterize our efforts. We certainly, I think continue to believe in the strength of our funnels. We've been active and looked at some things that you know with it quite frankly we feel very disciplined and responsible relative to the environment. So I think the real question is, are there opportunities out there for us and we think that -- we definitely think there are. We think there are great businesses that can become part of Fortive. We are active in the cultivation despite the virtual nature of that. As you may have noted, we hired a new VP of Strategy that we announced on Monday, so we're resourcing our capability. There's hardware and software opportunities. So I think there are breadth of opportunities out there, but you're right, we have to be selective, we have to understand our markets, we have to be able to be in a position to understand and be where we can win and not have to pay unreasonable prices and quite frankly, we've seen some things transacted things we wouldn't do, but fundamentally, I think if we think over the next 12 to 18 months, while M&A is unpredictable, I feel pretty confident we can put some cash to work, that will bring in great businesses for Fortive.

Josh Pokrzywinski -- Morgan Stanley -- Analyst

Great. Thanks, Jim. Best of luck.

Jim Lico -- President and Chief Executive Officer

Thanks, Josh.

Operator

Your next question comes from the line of Richard Eastman from Baird. Your line is open.

Richard Eastman -- Robert W. Baird & Co. -- Analyst

Hi, just a couple of quick questions and thank you for your time. Just, first of all, when I look at the full-year '21, adjusted op profit margin guide the 22% to 23%, if I look at it and break it down by business groups, it looks like maybe at the midpoint of some of these numbers that maybe we're looking for 50 basis point improvement at IOS and 50 at PT. The AHS business has about a two -- if I'm doing the math right about 200 basis points of margin improvement a year-over-year, is that mix or exiting the TSA or what's -- is that just pure leverage if procedures come back?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Hey, good evening Rick, this is Chuck. I'll take that. The biggest issue is really exiting the TSAs, as we get into 2021. You get quite a step-up there. Obviously there is a lot of things going on that business with good position on margin, but I think what you're seeing is the TSAs rolling off.

Richard Eastman -- Robert W. Baird & Co. -- Analyst

Yeah. And then, just as the business recovers, is that likely to be the highest adjusted operating profit margin business within Fortive or business group within Fortive, if you go out a year or two?

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

I think that there is room certainly to grow as elective procedures are down and that's some high-margin business that we're missing right now. So we'll see it, but as you can see we've got a -- I think there is a three-horse race here, so I won't bet against any one of our groups, but I do think there is good margin expansion at Health for sure.

Jim Lico -- President and Chief Executive Officer

I would just add on the margin front. One of the things that's really important and maybe gets a miss isn't seen is, as we continue to add innovation and technology capability into the software businesses, part of that move to SaaS is a move of less services and we are able to do installations at a lower cost. So if you look over the long-term, the margin profile on the software businesses, we get real leverage through the technology we work and that's not something you'll necessarily maybe see in 2021, you will see in some of the businesses. But I think over a long period of time, IOS is obviously an incredibly profitable segment, but the opportunity there to continue to do the work, apply FBS into our services business to make our applications easier for customers to install fundamentally is a big margin opportunity as well.

Richard Eastman -- Robert W. Baird & Co. -- Analyst

Okay. And then just maybe my last question, just around pricing, how do you view pricing as we roll for '21 and maybe what kind of net price capture do you suspect you'll get relative to some of the inflation we're seeing in electronics and other things?

Jim Lico -- President and Chief Executive Officer

Well, we had a very good year in price, as we noted on the call or in the prepared remarks. I think we had a good fourth quarter, we had a good year on price. We expect to have another good year on price. So I would say, first and foremost, we're probably for sure, probably close to 100 basis point, we don't -- we do not have a lot of -- one of the things about the sort of inflation is maybe something just a level set. Now with 14% recurring revenue in the portfolio and most of that being software or a very little material cost, we now have a big portion of our revenue profile that really isn't -- it doesn't have supply chain cost inflation pressure. So the portfolio has really shifted in that regard.

So while we see some of the supply chain stuff, maybe a little bit on the freight side, but I think fundamentally, we've done a great job over the years of really pushing on that and then while at same time, really looking for the price opportunities for what we call price realization from an FBS perspective through a combination of innovation and better commercial practices. So on the back of a very good 2020, we expect to have another good year in 2021.

Richard Eastman -- Robert W. Baird & Co. -- Analyst

Understood. Okay, great. Thank you.

Jim Lico -- President and Chief Executive Officer

Thanks, Rick.

Operator

Your next question comes from the line of Jeff Sprague from Vertical Research. Your line is open.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

Thank you. Good evening, everyone. Hope you're doing well.

Jim Lico -- President and Chief Executive Officer

Hey, Jeff.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

Hey, just to pick up a little bit on the M&A topic and kind of leverage it, I guess, no pun intended over to thinking about the balance sheet. You adjusted anyway your view of kind of comfort level on financial leverage here. Where are you comfortable to go in this environment and any other perspective there would be interesting.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Good evening, Jeff. This is Chuck. Yeah. I don't think our view on leverage has changed. I think that what we have been talking about is that we deploy our free cash flow, as you go through time. But like you saw us do in 2019, we'll stretch, take it up even up over 3.5%, but then we'll work toward bring it back down. We feel very comfortable anything under 2 times net leverage. But I think that what you'll see is what you've seen over the last few years there'll be periods, where we will elevate, but then you'll see us take steps to de-lever.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

And unrelated, just kind of channel dynamics, I think on Fluke you said I think mid-teens growth in China, but high-single digit POS. Are you seeing kind of significant channel still refill and other businesses or other markets. Was that a significant part of the topline equation here in the fourth quarter?

Jim Lico -- President and Chief Executive Officer

Yeah, Jeff, no, it was not. I think as you know, we do a good job, where we have our principal channel business is being Fluke and Tek. We have good sales out Info in most regions of the world, we get good inventory levels, no precipitous change really on the inventory side. Inventories have been low and really nothing from a macro perspective that would suggest we've seen any inventory build of any magnitude. Some of the China dynamic is on the point of sale side versus the revenue side is a little bit. You typically see a little bit of a difference in China in the fourth quarter as people sort of get prepared for the Chinese New Year. And so it isn't unusual for us to outgain a few basis points of point of sale in the fourth quarter, that's not an unusual situation, but I think as we look at where we're at right now, as we said, sort of end of January, we're in pretty good shape relative -- on a global basis relative to channel inventory.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

Right. I'm sorry. Can I sneak one more in. Just on advanced healthcare, it almost doesn't seem mathematically possible that core OMX would only be up 50 bips if ASP was up 300 bips, is there just some oddity in the way you're kind of accounting for the TSAs or something there in that description?

Jim Lico -- President and Chief Executive Officer

Yeah. So we have really strong margin performance at ASP, but it was offset by -- as I mentioned Invetech grew 50% in the quarter and they are lower margin business. As I mentioned, the design and engineering part of that is a more of a people business, so it doesn't have the same margin profile. So it's really a mix issue, if we really look at kind of the core ongoing margin profile of the business, which is made up of mostly ASP and Fluke Health, we are in a very good shape in the fourth quarter and we're in act as well as Chuck mentioned, some of the TSA fall off the lot of the good integration work we've done in ASP. We'll have a good 2021 in AHS, but about 50% growth rate in one quarter in a business does tend to mix it down a little bit.

Jeffrey Sprague -- Vertical Research Partners -- Analyst

For sure. Thanks for the color. Good night.

Jim Lico -- President and Chief Executive Officer

Yeah. You too. Thanks, Jeff.

Operator

Your next question comes from the line of Scott Davis from Melius Research. Your line is open.

Scott Davis -- Melius Research -- Analyst

Good afternoon guys. You mentioned -- can you guys hear me OK?

Jim Lico -- President and Chief Executive Officer

Yeah, we can.

Scott Davis -- Melius Research -- Analyst

Okay, good. Sorry. Jim, you mentioned the new hire I think his name is Read Simmons. Can you just -- it seems like kind of a, he has a pretty darn good resume, what's the mandate, what are you looking for and why weren't you able to fill that seat internally?

Jim Lico -- President and Chief Executive Officer

Well, I think a couple of things. We had filled the seat internally for a while and we decided that I think as we continue, Scott, I sort of think of it this way and you know we have a 10-year plan. We just updated the board over the next five years. We've got a lot of skills around the things we've done over the last five years, but as we think forward, having somebody with Read's resume, who understands software, who understands the continuous improvement tools of software as well as private equity, that's a combination of skills quite frankly we hope that this is really a great opportunity and from time to time, we're going to look outside to supplement and complement the great team we have and this was a very unique situation, where we had an opportunity to do that.

Scott Davis -- Melius Research -- Analyst

Yeah, it seems so. In kind of that spirit, I mean is there any meaningful change to R&D spend, capex, anything growth related that now that we're kind of on our way to being post COVID at least you can pay a little bit more offense.

Jim Lico -- President and Chief Executive Officer

Well, I would say, we -- Chuck can talk about capex side. I think in general, the answer is, I mean our R&D spend has gone up a little bit, as we come -- have more software businesses, which tend to have a little bit more R&D. We're investing a lot more into the FORT [Phonetic]. We have actually invested a lot last year, but we're doubling down in that in our data analytics and machine learning as we noted in the commentary, we've talked about the ehsAI acquisition, which is really at Aqua higher very little revenue. But really I think just a really smart group of data scientists, who can help accelerate our EHS work.

So I think those are good -- and that's a situation where we're really just hiring a big R&D team and great capability in leadership. So I think those -- the number of those investments we talked about our Pioneer Square Labs, we've doubled down in that, so yeah there is a number of places where we are playing offense. You saw some of that -- you heard some of that in the fourth quarter, right, some of the hardware Sonic imager, [Indecipherable] but also things like at Accruent, we had -- we launched our latest analytics product with maintenance connected Accruent. So a number of places where we're playing offense and we feel pretty good about how we can drive that in 2021, as you said, as we start to see sort of COVID start to slow down here hopefully.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

And Scott, I'd just add, with the post separation of Vontier, two things, one is, we'll be pushing 7% R&D up from maybe would be more on closer to 6%, so that's reflecting the Jim's comments as well. And then on capex, I think we've always been pretty capex light. But as the -- there are software businesses become 10% of the total, you're going to expect to see that the capex certainly not go up here and we'll maintain -- remain capex light going forward and maybe even start to trend down a little bit.

Scott Davis -- Melius Research -- Analyst

Helpful. Thank you. Good luck, guys.

Jim Lico -- President and Chief Executive Officer

Thanks, Scott.

Operator

Your next question comes from the line of Andy Kaplowitz from Citigroup. Your line is open.

Andy Kaplowitz -- Citigroup -- Analyst

Good afternoon, guys.

Jim Lico -- President and Chief Executive Officer

Hi, Andy.

Andy Kaplowitz -- Citigroup -- Analyst

Jim, maybe if you could give us a little more color on how you're thinking about the rate of recovery at Gordian and Accruent. You've talked for a couple of quarters now about constraints [Indecipherable] spend, but also that these businesses should be relatively solid going forward in the focus on workplace space, buildings, management. So how much visibility do you have in these kinds of businesses for better performance in 2021?

Jim Lico -- President and Chief Executive Officer

Well, we, yeah, I mean, we definitely think the businesses are going to get better in 2021. We saw a couple of good evidence points in Q4. I mentioned that the SaaS growth at double digits. That was a good sign. We won twice as many logos in Q4, as we did in Q3. So I think those are really good signs for how we entered the year. We do need customer access to do some things, but we do have some wonderful opportunities. As you mentioned, we talked about the EMS space planning win. We think we have a number of applications that we'll be launching around employee experience. So as companies start to think about bringing teams back to the office for periods of time, so I think we've got a number of things that will help us make our own luck. But we do need to see some of that office access. So I think you'll see the business progressively get better through the year.

On Gordian, Gordian has been in great shape. They were growing double-digit before COVID, been a really strong performer for us. We have some visibility into how things are changing at this point, as I mentioned in the prepared remarks around job order contracting, we start to see the projects get loaded even though they might not be purchasing through the system yet. So that's starting to improve, I suspect we see that improve in a state, local budget start to get approved into the second half of the year, we would expect to see things continuing. We know hire -- to think about the second half of the year, it's logical to think that our state local offices are going to start to want to bring people back and they're going to need to change the workplace and that's -- we're not all -- we're not about new buildings, we're about changing the building you have, changing the structures you have and I think a number of those things are going to start to characterize themselves as we get further end of the year. So I think that's the visibility we have and we feel good about the work our teams are doing to put them in place for success.

Andy Kaplowitz -- Citigroup -- Analyst

Thanks for that. And then, I'm curious about your semiconductor business in Sensing. There's obviously a lot of cross currents still out there, geopolitical, global semiconductor shortage. It looks like you're still seeing good growth there, so maybe talk about that business for 2021, if you could.

Jim Lico -- President and Chief Executive Officer

Yeah. It's pretty much with all -- we can call it semiconductor, but it's mostly semiconductor equipment manufacturers and and that business is doing pretty well. So we think it's good for at least another quarter or two. So right now, that's about the visibility we have. So I think that's probably where we stand right now. You didn't ask if we saw good growth at Keithley on the semiconductor side as well in Tektronix, I think some of that was pent-up demand that we saw, but it would be logical to think that the supply chain issues occur and some more money may get spent there that would be some benefit, but we haven't dialed that into our forecast at this point.

Andy Kaplowitz -- Citigroup -- Analyst

Thanks, Jim.

Jim Lico -- President and Chief Executive Officer

Thanks, Andy.

Operator

Your next question comes from the line of Andrew Obin from Bank of America. Your line is open.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

Hi, yes, good afternoon.

Jim Lico -- President and Chief Executive Officer

Hey, Andrew.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

Yes. So just a question on Tektronix. You highlighted I think some sort of trade-related issues in China and I just want to understand what are the trade restrictions for Tektronix in China and do you expect them to be a drag for the rest of the year and then just [Indecipherable] given your exposure to the tech segment in China, how do you grow in China from sort of the reset based demand?

Jim Lico -- President and Chief Executive Officer

Well, I think first of all, we had about $2 million with Huawei in there. So I think first, if you step back, we call that out because of an impact to Tektronix in China, but in the big scheme of things relative to Fortive, these are big impact. I think the last of the Huawei impact is an example of a couple of million bucks of Tek in the quarter. We do have some additional restrictions around military and use that we're seeing but again, maybe a little bit of headwind for Tek, but not a major issue for the rest of the company, not impactful relative to the overall Fortive. But in terms of transparency and give you color on what we're seeing, the good news is we said in the prepared remarks, as we continue to see point of sale in good place and we also saw good demand among medium, small and medium customers. So Chuck and I did China reviews a couple of weeks ago and we're really pleased with the work the Tek China's team has done to extend themselves more with digital, and they're just doing a great job of really doing -- expanding into new customer sets, which I think is going to bode well for us in the future.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

And just a question on software and also a question on SaaS. What was overall software growth OM for 2020 and what's your SaaS ARR at this point?

Jim Lico -- President and Chief Executive Officer

So I'm thinking here. Our SaaS growth in the year was probably probably closer to high-single digits probably, maybe, yeah. So I think that's probably right. I don't have an ARR number for the year, so we can get back to you on that. I think what we saw relative to overall software was probably a little down because of the low to mid single digits and we are looking through the year, just based on the soft -- the services issues. In terms of performance, Censis and Intelex led the way in terms of growth, they grew through the year as well as eMaint. So a good growth in those places. The places where we saw maybe a little bit greater impact relative to some of the services was Gordian and Accruent. So hopefully that gives you a little color and we can get back to you on the overall ARR number.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

But on Accruent, just to follow-up Andy's question, I mean it's -- you sort of site budgets and education and state budget, I mean the funding for I think education state budget's in good shape. So that actually given what has already happened in 2021 that should actually improve, right?

Jim Lico -- President and Chief Executive Officer

Yeah. For sure. I think when you look at the situation of what education -- this is mostly higher education by the way, higher education and state and local buildings inevitably when they bring people back to the office, they are fundamentally going to have to change the social distancing and make changes to the facilities and fundamentally that's the core part of what we see in Gordian, so and actually -- and then from a facilities management space planning, that's also in the wheelhouse of Accruent. So we should see those things come back for sure. Again, don't -- can't pick the particular date. But I think if I were -- if I were to make a bet it's going to get better through every quarter of the year.

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

Fantastic. Thank you so much.

Jim Lico -- President and Chief Executive Officer

Thanks, Andrew.

Operator

Your next question comes from the line of Deane Dray from RBC Capital Markets. Your line is open.

Deane Dray -- RBC Capital Markets -- Analyst

Thank you. Good afternoon, everyone.

Jim Lico -- President and Chief Executive Officer

Good afternoon, Deane.

Deane Dray -- RBC Capital Markets -- Analyst

Hey, I'd like to stay right on that topic, where Andrew left off. On the software side, where you've had site access issues and not being able to provide on-site services, would there be a catch-up or will any of those services be lost?

Jim Lico -- President and Chief Executive Officer

You know, I think it's a temporary situation, so by nature of that, we probably see a catch-up, whether that's a catch-up in the year and in people, there is also part of this is people reevaluating budgets a little bit. So we sort of classify all of that as a delay, but I think we're practical in sense that maybe some of that is customers reassessing how many seats they want, how many licenses they want on the licensed software side, but we've seen a little bit of that compression. So I would expect to be a little bit of that, but to the broader question, Deane, I would expect there will be a catch-up at some point in the year, maybe as things get back, what I would call back to normal.

Deane Dray -- RBC Capital Markets -- Analyst

Got it. What's the mix look like now? Is it like two-third SaaS, one-third transactional and how do you expect that to evolve?

Jim Lico -- President and Chief Executive Officer

Yeah. Deane, that's about right, two-thirds to maybe 70%.

Deane Dray -- RBC Capital Markets -- Analyst

Got it.

Jim Lico -- President and Chief Executive Officer

SaaS.

Deane Dray -- RBC Capital Markets -- Analyst

Okay. And then just a quick question or a clarification on ASP. So the high-teens growth in China, I would imagine that there is a benefit there, where more elective procedures have started, but is that 93% elective procedures, you said, is that a global number and what does that look like in China?

Jim Lico -- President and Chief Executive Officer

Yeah, it's a global number, it's probably -- it's probably -- it's not 100% yet in China if we think about the fourth quarter, but it's moving up. I would say, part of our China growth as well was equipment. We've been doing well on the equipment side, so I think as we look across and quite frankly across the board, maybe stepping back at ASP, we did an excellent job in equipment sales in the year, we're going to start with a bigger install base than we did for a year ago and obviously that bodes well for when consumables come back.

So to your specific question, it was a combination of -- it was also a big improvement in services. One of the things that we really been doing Deane in China with that -- first part of the business and we were lucky that the this is a business that we took control of early. One of the things we noticed was at the service revenue was the lower percentage of our sales in China, than it was anywhere else in the world. So we applied a number of FBS tools, including policy deployment to make service revenue a big push for us in the business and we really, really increased the percent, the stickiness sort of the connection rates with our equipment and increased service contracts with current customers. So the growth was very much a story of not only, coming back, but also equipment and the big story with service.

Deane Dray -- RBC Capital Markets -- Analyst

That was really helpful. Thank you.

Jim Lico -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Amit Daryanani from Evercore. Your line is open.

Amit Daryanani -- Evercore Partners -- Analyst

Thanks a lot for taking my question. I have two as well. I guess, first-off on the M&A discussion and I'd love to understand, given the one tier sale and the addition to corporate [Phonetic] team, Is the focus going to be just to bolster the software, the reoccurring business across the three segment or is there a desire to sort of add a fourth leg to that stool and I don't know if the stool has four legs, but a fourth leg to the Fortive portfolio to make. How do you kind of think about those dynamics?

Jim Lico -- President and Chief Executive Officer

Yeah. I think we're incredibly blessed right now to be in an area, where all three segments I think have incredible opportunities. I mentioned the $30 plus billion were the served market. We've just completed our next five year our update to our 10-year plan that we did five years ago with the Board and we feel very excited and really I think I would say that if I were a betting person, I would say most of our capital deployed in the current segments is probably the winning back. We have a lot of opportunity. We see the breadth and depth within both hardware, software and services within all three. So I think when I really think about that, I'd never say never because you never know when an opportunity becomes available. But I think the focus -- we're blessed with the focus that we have and I think we're going to take advantage of that as we move forward.

Amit Daryanani -- Evercore Partners -- Analyst

Got it. And if I could just ask you when you talked about the impact on COVID through calendar 2020, you've talked about the revenue impact is going to be elective surgery and buy back to the site and they also have operational impact in there. Is it what you think about how much revenues you have left on the table this year and how much cost you had to take on because of COVID and then how those number stacked up in calendar 2021?

Jim Lico -- President and Chief Executive Officer

Well, I don't know if I can put a revenue number to it, but if I think about us being maybe the easy thing to deal with to be to say if we were down 6% core in the year and we should be -- well, this portfolio can grow mid single digits, you can apply that number to our total portfolio and say over a 12-month to 24-month period you think that that would come back over-time, that's a big number, but I would expect some of it is that, so I think that's first and foremost. I'll have Chuck talk about some of the cost coming back, but I think maybe the point two is there's also COVID -- COVID has been a challenge for the year for all of us, everybody on this call, but it's also created a number of opportunities, particularly in our -- whether its the focus more on EHS at every company in the world and we have an outstanding portfolio of the EHS businesses and now continue to increase and people wanting to focus on sustainability or facilities management challenges that come with bring people back to the office and to manufacturing site and the importance of data, as it relates to workers and those things. All of those speak to all the solutions that we've made part of Fortive over the last four years.

So I think we also have to think about when we get into what I call a normal environment that fundamentally there is going to be tremendous opportunity for us to harness around a number of these new challenges that we're all going to have to deal with as business leaders, and we have the solutions to ultimately deal with -- help them deal with those challenges, so I think and that doesn't even talk about the sterilization and infection control challenges that hospitals are thinking about as well and the solutions we have on the EHS side. So I think we add that in, you will come up with some pretty big numbers of opportunity.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Yeah. And really quick on the cost, I think what we saw last year, so we took some cost out and then it's coming back in and we've rebalanced it in into a margin idea, but in the COVID environment going forward, there is going to be some incremental cost associated with that. But I think what we've seen in 2021 more opportunities, to be more efficient, not having to go -- be on site all the time and things around travel and I think there is more opportunity for us to create more leverage that way in total, but there'll be puts and takes there as we go forward.

Amit Daryanani -- Evercore Partners -- Analyst

Perfect. Thanks a lot for your time.

Jim Lico -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of John Walsh from Credit Suisse. Your line is open.

John Walsh -- Credit Suisse -- Analyst

Hi, good afternoon, everyone.

Jim Lico -- President and Chief Executive Officer

Hey, John.

John Walsh -- Credit Suisse -- Analyst

So maybe going back to the SaaS business, curious if you've seen any discernible change in kind of the growth that's coming from the retention and churn side of the equation versus maybe the upselling and normal kind of price escalators you have there. Any change in what's driving the growth?

Jim Lico -- President and Chief Executive Officer

Well, I think this is then -- I mean we don't talk a lot about it, but to have net retention over 100, when customers are reevaluating things and looking for cost reductions, I think it's an outstanding effort on the part of our commercial teams. We are -- so we've seen -- we've not seen customer churn, but we may have seen maybe people wanting to reduce their spend or something like that, but we've been able to maintain a lot of that, keep that net retention number over 100 and I think that's -- we have a number of FBS tools that are -- and quite frankly data analytic solutions that we apply to those types of things to predict what are the characteristics of a customer that might potentially churn.

So I think, John, we've done good work to mitigate some of that. I think in a normal year, you think that our net retention might be a little bit -- would be higher than that number. So I think that's a little bit of a -- little bit less upselling, and maybe -- may be in this environment and maybe slightly a little bit of churn on the business, several of our businesses have actually decreased churn, Accruent is an example. So I think that's the environment we come into this year and from here, I think we were definitely through the toughest days in that regard.

John Walsh -- Credit Suisse -- Analyst

Got you. And then maybe just one on the tax rate and kind of the sustainability of that going forward.

Jim Lico -- President and Chief Executive Officer

Yeah. Thanks, John. What we put in here is the tax rate, 14% going forward that reflects our businesses as it is and the tax rules, as we understand them going forward. What we haven't done is try to factor in any potential changes around the Biden administration might do. I would expect that those would change if and when they come would be 2022, but if they do something interim, we'll of course react to that. So right now, we think if nothing changed, which never happens, by the way, but this would be the right rate. So we're going to watch very carefully about what gets proposed and understand the impact. Keep in mind with the acquisitions we've done, we've got a really global footprint, which gives us maybe more opportunities for maintaining an advantage in tax going forward, but we'll have to see what they do.

John Walsh -- Credit Suisse -- Analyst

Great. I appreciate you taking the questions. Thank you.

Jim Lico -- President and Chief Executive Officer

Thank you.

Operator

Your final question comes from the line of Joe Giordano from Cowen. Your line is open.

Joseph Giordano -- Cowen and Company -- Analyst

Hey, guys.

Jim Lico -- President and Chief Executive Officer

Hi, Joe.

Joseph Giordano -- Cowen and Company -- Analyst

Hey, you kind of stole my question on tax there, but yeah, hopefully you're accruing nice bonus, you're adapting, you're doing a heck of a job, but do you feel like there is almost like somewhat some sort of a target on a new administration for a company like set up this way, like a large US company that has significant declines in tax rate or is it something that you feel like it is pretty defensible?

Jim Lico -- President and Chief Executive Officer

Well, we think it's very defensible and what we are doing is interpreting the tax laws as written and it gives us maybe an advantage over some other companies is one post separation we've got a high R&D tax investment, R&D investment and that gives us an advantage in the R&D tax credit and also as you do acquisitions in foreign countries, it just creates a fact pattern that we're just filing tax line as its written. So, but those are two big factors, especially the ASP acquisition in Europe, a few years back, that helps us out quite a bit.

Joseph Giordano -- Cowen and Company -- Analyst

And then last from me, core OMX in the quarter, stronger [Technical Issues] on the latest revenue there. So like, is there some kind of like one-off there that allowed that kind of magnitude on accounting mostly or how do we think about that?

Jim Lico -- President and Chief Executive Officer

It's continued -- its the volume coming back, so I think that's first and foremost. We see business like Fluke coming back that's a high margin business. You saw 280 basis points of core OMX and at IOS, it's a strength of the SaaS growth in the software businesses, but you know it was across the board. So IOS certainly led the pack as you know on a quarterly basis, there's always one segment that leads the pack a little bit more than the others, but I think what we saw with the breadth of OMX and I think as we sit here looking into 2021, the 50 basis points that we grew OMX despite all the issues in 2020 is this tremendous confidence that we can continue to do that in '21.

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

And only thing, Joe, I'd add to that is the -- this is what can happen when you beat top end of your range with high 50s gross margins. It's a happy problem to have.

Joseph Giordano -- Cowen and Company -- Analyst

Thanks guys.

Jim Lico -- President and Chief Executive Officer

Thank you.

Operator

That concludes Q&A. I will turn the call back to management for closing remarks.

Jim Lico -- President and Chief Executive Officer

Well, thanks everyone for today. We appreciate your time. We went a little over, but we knew we had a few a little bit longer prepared remarks, so glad we could get to everyone. Thanks so much for your support this year in 2020 and certainly into '21. We're all hoping you're safe and healthy and look forward to hopefully seeing everybody in person sometime this year. Until then, we will take all your questions by phone and virtually we look forward to seeing you there and have a great day. And obviously, Griffin and team are available for questions. Thanks everyone, have a great night.

Operator

[Operator Closing Remarks]

Duration: 68 minutes

Call participants:

Griffin Whitney -- Vice President of Investor Relations

Jim Lico -- President and Chief Executive Officer

Chuck McLaughlin -- Senior Vice President and Chief Financial Officer

Nigel Coe -- Wolfe Research, LLC -- Analyst

Julian Mitchell -- Barclays Investment Bank -- Analyst

Josh Pokrzywinski -- Morgan Stanley -- Analyst

Richard Eastman -- Robert W. Baird & Co. -- Analyst

Jeffrey Sprague -- Vertical Research Partners -- Analyst

Scott Davis -- Melius Research -- Analyst

Andy Kaplowitz -- Citigroup -- Analyst

Andrew Obin -- Bank of America Merrill Lynch -- Analyst

Deane Dray -- RBC Capital Markets -- Analyst

Amit Daryanani -- Evercore Partners -- Analyst

John Walsh -- Credit Suisse -- Analyst

Joseph Giordano -- Cowen and Company -- Analyst

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