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.

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 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, 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.

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 short-cycle businesses throughout the second half of the year. At the same time, we achieved significant progress with respect to the continued transformation of our portfolio, closing nearly $4 billion worth of high-quality, strategic acquisitions that accelerate our strategy around software-enabled workflow solutions. As a key part of our portfolio transformation, we continue to make good progress with the integration of advanced sterilization products. We closed on China before the end of the fourth quarter, successfully integrating the largest of the day 2 countries and accomplishing a key milestone as we bring ASP's global operations under our full control. We remain keenly focused on closing the remaining day 2 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.

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 market's core revenue decreased mid-single digits due to slower performance at Fluke, Tektronix and GVR. China posted a high single-digit decline as strong growth at Qualitrol and Sensing Technologies was more than offset by the headwinds associated with the winding down of the double-wall tank upgrade cycle at GVR and the Huawei-impacted Tektronix. Adjusted profit margin was 23.3%, representing a year-over-year increase of 60 basis points. Core operating margin increased 150 basis points, driven by solid execution and strong operating margin expansion across the breadth of our portfolio. More than half of our operating companies each generated greater than 100 basis points of operating margin expansion during the quarter. During the fourth quarter, we generated $452 million of free cash flow representing an increase of 17% year-over-year. This strong performance resulted in free cash flow conversion ratio of 123% of adjusted net income for the quarter. Turning to our segments. Professional Instrumentation posted sales growth of 23.1% despite a low single-digit decrease…

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 Fortive 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 how our team performed and responded. It's the dedication of our people and their relentless commitment to continuous improvement to drive the Fortive 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.

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

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

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.

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.

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

That's correct.

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.

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 2 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.

And your next question comes from the line of Nigel Coe with Wolfe Research.

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?

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?

Yes. Is that all Sensus? Or was it 2 or 3 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?

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

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

Relative to Sensus?

Yes.

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.

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

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.

And your next question is from the line of Steve Tusa [ph] with JPMorgan.

Just on ASP, what are the organic revenue contributions from that business for 2020?

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.

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?

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

Okay. So but what is the actual organic revenue contribution to the [indiscernible] 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.

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 [indiscernible]

Yes. so it's a 9 month. Yes, so it's a 9-month mix in is what you're saying.

Yes.

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?

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.

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

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

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

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 1 or 2 items that could swing that earlier or later?

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 1 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 2 of the embedded things. You could go OpCo by Opco, but I think geography is probably the best way to think about it.

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 1 trade deal sort of figure into your calculation of price cost into 2020, how does it impact you?

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.

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

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.

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.

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.

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?

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.

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

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.

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.

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.

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 health care 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.

And your next question comes from the line of John Walsh with Crédit Suisse.

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?

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 PRÜFTECHNIK. 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 health care 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.

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.

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.

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

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 1 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.

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 3 things: one is how are our customers going to come back, how is commercial transactions going to start-up and occur; the second thing is our factories and our Tier 1 and Tier 2 and even tier 3 supply chain, and how quickly they come up, we're pretty confident about our own factories. But seeing the supply chain come up; 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 3 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 2 or 3 days, we've really felt obligated to be very clear about what we think will happen thus far.

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?

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.

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

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?

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.

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? [indiscernible]

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 5 months of this year and not beyond that.

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 3 or 4 quarters of down -- 4 to 5 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.

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?

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.

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.

And your next question is from the line of John Inch with Gordon Haskett.

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?

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.

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...

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.

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

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.

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?

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.

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

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.

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.

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

Well, thanks, everybody, for taking the time and indulging me in my minor cold here. 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.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.