My name is Daryl and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Ford of Corporation's third quarter 2026 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press star, then the number two on your telephone keypad. I would now like to turn the call over to Ms. Christina Jones, Vice President of Investor Relations. Ms. Jones, you may begin your conference.

Thank you, and thank you everyone for joining us on today's call. I am joined today by Olumide Soroye, Fortis President and CEO, and Mark Okerstrom, Fortis CFO. During today's call, we present certain non-GAAP financial measures. Information required by Regulation G is available on the Investors section of our website at fortis.com. We will also make forward-looking statements, 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 actual results might differ materially from any forward-looking statements that we make today. Information regarding these risk factors is available in our SEC filings, including our annual report on Form 10-K and the 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. Our statements on period-to-period increases or decreases refer to year-over-year comparisons unless otherwise specified, and our results and outlook discussed today are on a continuing operations basis. With that, I'll turn the call over to Olumide.

Thank you, Christina, and thank you all for joining our call today. Let me begin on slide three. Q3 marked our fifth consecutive quarter of strong execution and sequential core growth acceleration as we advanced our four-day accelerated strategy. Four key messages from the quarter. First, our teams delivered strong financial results, including core revenue growth of 7.2%, adjusted EBITDA growth of approximately 10%, and adjusted EPS growth of 13%. These results reflect continued organic growth acceleration driven by healthy customer demand and strong execution enabled by our 40 business system. Second, we maintained our disciplined approach to capital allocation. This quarter, we deployed another $300 million towards share repurchases, bringing total capital return through share repurchases since the launch of New 40 to $2.3 billion, representing 13% of shares outstanding. Third, Our four-deep accelerated strategy is translating into improving business performance. Across the portfolio, our investments in innovation, commercial, and recurring customer value are driving faster profitable growth and reinforcing our confidence in the company's long-term value creation opportunity. Finally, we are raising our full-year 2026 adjusted EPS guidance to $3.10 to $3.14, up 15% year-over-year at the midpoint, reflecting our strong year-to-date performance and continued confidence in the trajectory of the business. Moving to slide four, let me highlight some of the progress we are making in executing the three pillars of our 40th accelerated strategy. Starting with our first pillar, delivering faster, profitable organic growth. We are pleased with the progress we're seeing across innovation, commercial, and recurring customer value. all of which are building the foundation for durable, faster organic growth. This quarter, our innovation engine continue to generate new growth opportunities. At Fluke, we expanded our innovation funnel with several new product introductions, including IC Pro thermal and acoustic imagers, which broaden our reach to early in career technicians with intuitive entry-level diagnostic capabilities. At Industrial Scientific, We launched INET Insights, a completely reimagined platform that helps customers manage sophisticated gas detection programs and large detector fleets while expanding the capabilities and value of our recurring INET subscription offering. In facilities and asset lifecycle solutions, we continue to embed AI more deeply into customer workflows. For example, at Service Channel, our R2 release introduced new capabilities including AI powered asset recognition and intelligent agents that not only help create and route work orders but also identify stalled work orders, recommend next best actions and help drive issues to resolution. On the commercial side, we maintained our focus on faster growing end markets and regions where we've made deliberate targeted investments to capture growth. At Fluke, we continue to build commercial capabilities aligned to our strategic growth priorities, including data centers, defense, and early-in-career technicians. During the quarter, we expanded our specialized data center sales capabilities and capacity, secured initial orders for our new early-in-career product bundle, and strengthened relationships with educational organizations to engage the next generation of skilled technicians. At Industrial Scientific, we continue to build commercial momentum for our recently acquired Aeroqual Environmental Monitoring Business in North America and commence manufacturing these products in our U.S. facilities, improving customer lead times and leveraging our combined footprint and 40 business system capabilities to drive greater operational efficiency. In healthcare, ASP and Provation continue to deepen engagement with ambulatory surgical centers through focused commercial resources, targeted partnerships, and innovative customer adoption pathways that expand our install base and improve customer access to our solutions. On our recurring customer value initiatives, we made further progress on deepening customer lifecycle engagement and improving revenue durability. In Q3, we again saw solid recurring revenue growth across both segments. As an example, at Fluke, recurring revenue growth was supported by continued momentum in our E-Main software platform, including increasing customer adoption of recently launched AI-enabled capabilities. During the quarter, E-Main secured several significant customer wins and continued to advance customer migrations to our next generation platform. We are pleased that our 40th Accelerator growth initiatives are not only building a strong foundation for future sustainable profitable growth, but also increasingly translating to our current results, contributing to sequential core growth acceleration in each of the last five quarters since the launch of the 40th. Moving to our second pillar, discipline capital allocation is an integral component of our 40th Accelerator strategy. Consistent with our priorities, we deployed another $300 million towards share repurchases in the third quarter. We continue to evaluate high-quality Bolton opportunities and recent acquisitions are performing well and contributing to growth. Looking forward, our capital allocation priorities remain clear. Invest in organic growth, pursue Bolton M&A where risk-adjusted returns exceed other uses of capital, return capital through share repurchases, and maintain a modest growing dividend, all with a focus on maximizing medium to long-term shareholder value. Moving to our final pillar, building and maintaining investor trust. We are pleased to deliver another quarter of strong performance ahead of expectations as we continue to build our track record of consistent execution. And we remain fully confident in our medium-term financial framework from Invest Today. With that, I'll turn it over to Mark to walk through our financial results for the third quarter in more detail.

Thanks, Olumide. I'll begin with slide five. In the third quarter, we delivered total revenue of $1.1 billion, up 8% year-over-year on a reported basis and up 7% on a core basis. We saw price and volume growth in both segments, with particularly robust performance in our IOS segment. Growth was driven by accelerating demand for professional instrumentation, continued momentum in Fowl's mission-critical enterprise software solutions, and ongoing strength in gas detection, reflecting the benefits of our growth investments and disciplined operational execution enabled by the Ford Business System. Regarding core growth by geography, all major regions contributed to growth this quarter. North America remained our strongest performing region and saw modest sequential acceleration in Q3. Revenue growth in Europe, Middle East and Africa region accelerated with particular strength in professional instrumentation. APAC and LATAM also performed well. Adjusted gross margin was about 63% of the quarter, down 80 basis points year over year. Adjusted gross margin performance was primarily driven by product mix dynamics, resulting from outsized growth in certain lower margin products, partially offset by operating leverage. Price cost remained solidly positive in the quarter. While inflationary pressures have increased, the team continues to leverage the forwarded business system. including sourcing and productivity countermeasures to offset inflation across both segments. Our industry leading gross margins reflect both the differentiation of our products and the effectiveness of our afforded business system in sustaining those margins over time. The growth investments or mixed shifts in any given quarter may cause fluctuations. These movements fit within a broader arc of strong gross margin discipline. Q3 adjusted EBITDA was $340 million up 10% year over year. This favorable performance was driven by adjusted gross profit growth, operating leverage, and discrete structural cost savings, partially offset by growth investments to support our fort of accelerated strategy. Adjusted EBITDA margin in the quarter expanded by 50 basis points year-over-year to 30.6%. Note that our consolidated adjusted EBITDA margins faced a roughly 50 basis point year-over-year headwind, stemming from the annualization of certain discrete cost benefits we saw in Q3 of last year. We continue to be pleased with our ability to drive solid margin expansion and invest further into Ford have accelerated strategic growth initiatives. And we remain fully confident in our ability to deliver 50 to 100 basis points of annual adjusted EBITDA margin expansion as outlined in our medium term financial framework. We delivered adjusted earnings per share of 77 cents in Q3, up over 13% year-over-year, marking our fifth consecutive quarter of double-digit adjusted EPS growth. Strong adjusted EPS performance in Q3 was driven by growth in adjusted EBITDA and the positive year-over-year impact of share repurchases, partially offset by higher interest and tax expense. We generated over $280 million of free cash flow in the third quarter, with our trailing 12-month free cash flow above $1 billion and conversion on net income well north of 100%. Please note that during the quarter, we recognized an $18 million AEPA tariff refund benefit in GAAP earnings and free cash flow. We expect another $5 to $10 million of tariff refunds in the coming quarters. As we did last quarter, we exclude the benefit of IEPA tariff refunds from our adjusted earnings metrics and expect to continue doing so going forward. We do, however, include the benefit in free cash flow, as the cash proceeds are real and available for deployment under our disciplined capital allocation framework. Moving to our segment results, starting with Intelligent Operating Solutions on slide 6. Revenue for the segment grew 10% on a reported basis, with core revenue growth accelerating to 9%. and we are pleased to see broad momentum continue across the segment. Core growth acceleration was driven by robust volume growth in professional instrumentation, facility and asset lifecycle solutions and gas detection products. At Fluke, we delivered strong broad-based growth led by our industrial and network product portfolios. Boarders growth again accelerated from an already strong pace in the second quarter and book to build remained above one, reflecting the success of Fluke's strategic repositioning towards higher growth applications as part of our Ford of accelerated strategy. We delivered growth in all regions, again led by North America and complemented by acceleration in Europe. We also continue to invest behind strategic growth priorities, including data centers, defense, and early and career technicians, where we see attractive opportunities to extend our market leadership and enhance the durable growth profile of our largest operating brand. Growth in facility and asset lifecycle solutions also accelerated in the third quarter, led by sustained outperformance in multi-site facility maintenance and marketplace software at Service Channel, as well as planning and procurement solutions at Gordian. We believe this performance reflect the early benefits of our commercial and innovation investments, which are driving deeper customer engagement and increased demand for our AI enhanced solutions. Growth in our gas detection business also increased sequentially, driven by growing demand for our worker safety solutions, including our hardware as a service offerings in North America, Europe, and the Middle East, all bolstered by Ford have accelerated investments in expanded commercial capabilities across the globe. and others. Q3 adjusted gross margin in the segment was just under 65%, roughly flat sequentially and down 90 basis points year over year, primarily due to strong growth from some of our lower margin products serving select multi-site retail customers with high strategic value, partially offset by operating leverage. Q3 adjusted EBITDA in the segment grew 13%, to $275 million, driven by adjusted gross profit growth, operating leverage, and discrete structural cost savings, partially offset by growth investments, including sales and marketing and R&D investments at Fluke and Industrial Scientific. Adjusted EBITDA margin for Q3 expanded by 120 basis points year over year to just under 36%, reflecting the strength of our operating performance and continued cost disciplines. Moving to our advanced healthcare solutions segment on slide seven, we delivered total revenue of $340 million. Revenue grew 3.7% year over year and 3.1% on a core basis. Q3 growth was broad-based and benefited from momentum in several areas. Low temperature sterilization capital contributed to growth in the quarter, and we saw solid demand for healthcare consumables, including in Latin America and APAC. Biomedical testing equipment and radiation monitoring solutions showed strong growth in the quarter and privation SAS products continue to deliver accretive growth driven by solid provider demand for our gastrointestinal case documentation solution and strategic initiatives to expand to adjacent specialties and regions. Adjusted gross margin in the segment was 57.5%, down 90 basis points year over year, driven primarily by product mix, including strength and emerging market consumable sales, partially offset by operating leverage. Q3 adjusted EBITDA in the segment was modestly ahead of our expectations at $88 million, down 5% year over year, driven by growth investments and the lapping of certain discrete cost benefits realized in Q3 of last year, partially offset by operating leverage. adjusted EBITDA margin contracted by 230 basis points year-over-year on these same factors, but remained essentially flat sequentially at 26%. The year-over-year headwind from the annualization of prior year discrete cost benefits was roughly 100 basis points. We continue to invest in attractive AHS growth opportunities and remain fully confident that over the medium term, these investments will drive core growth and margin expansion in the segments. Turning to slide eight, as noted earlier, we deployed $300 million to share repurchases in the third quarter, reflecting our disciplined capital allocation approach. As a result, we had 302 million diluted shares outstanding at the end of Q3. Since the launch of New Fortive, we've deployed $2.3 billion to share repurchases, meaningfully enhancing our adjusted EPS growth and return on equity. In terms of M&A, we continue to evaluate high-quality, accretive bolt-on deals that meet our rigorous strategic and financial criteria and deliver superior returns relative to alternative uses of capital. As New Fortiv, we have completed several bolt-on acquisitions, including Aeroqual and UVsmart, and these acquisitions are performing solidly in line with our deal cases, and we expect them to contribute to accelerating growth over the years to come. We were also pleased to raise our quarterly dividend by 17% in Q3, consistent with our desire to maintain a modest and growing dividend. From a balance sheet perspective, we finished the quarter at 2.6 times gross debt to adjusted EBITDA, modestly deleveraging from last quarter, and solidly within our financial policy of keeping ordinary course leverage within a range around 2.5 times gross debt to adjusted EBITDA. Moving to slide nine, we are raising our full year 2026 adjusted EPS guidance range to $3.10 to $3.14 per share, representing just over 15% year-over-year growth at the midpoint and reflecting strong year-to-date performance and confidence in the trajectory of the business. This outlook assumes a continuation of the market dynamics we experienced in Q3 and reflects current tariff rates. Let me provide a few additional considerations to assist with modeling. In terms of the full year, based on current foreign exchange rates, we now expect full year reported revenue just north of $4.4 billion and full year core growth just north of 5%. We expect full year adjusted EBITDA margin expansion around the midpoint of the 50 to 100 basis points range outlined in our medium term financial framework. And we expect full year net interest expense of approximately $145 million. Regarding Q4, as we mentioned last quarter, Q4 will have four fewer selling days versus the prior year's quarter. This will drive about a $15 to $20 million headwind to reported revenue and a 150 basis point headwind to core growth in the fourth quarter. At the segment level, this translates into a 100 basis point headwind to core growth in IOS and a 300 basis point headwind in AHS. We expect IOS core growth to continue to outperform AHS on a normalized basis. We expect FX and M&A combined to be about a 50 basis point tailwind to reported revenue in Q4, and we continue to expect a Q4 effective tax rate in the low double-digit range. As a final note, before turning it back to Olumide for closing remarks and Q&A, our year-to-date results show that our Fortiv accelerated strategy is working. We remain fully confident in our medium-term financial framework from yesterday, and our sites remain keenly focused on delivering benchmark-beating returns for our shareholders over the medium to long term. I'll now turn it back over to Olumide.

Thanks, Mark. Let me close with a few observations on the quarter and where we're headed. Q3 was another strong quarter for Forti. We delivered over 7% core growth, approximately 10% adjusted EBITDA growth, and our fifth consecutive quarter of double-digit adjusted EPS growth. We have seen our 40th accelerated strategy translate into stronger operating and financial performance, and our teams remain intensely focused on executing strategic initiatives to further accelerate profitable growth. We are maintaining a disciplined approach to capital allocation, returning meaningful capital to shareholders while pursuing attractive Bolton acquisitions that meet our rigorous strategic and financial criteria. We remain highly confident that our 40-day accelerated strategy will unlock significant value for our shareholders. With that, I'll turn it back to Christina to open the call for questions.

Thanks Olumide. That concludes our prepared remarks. We are now ready for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for your questions. Our first questions come from the line of Julian Mitchell with JP Morgan. Please proceed with your questions.

Hi, good afternoon. Maybe just a first question please around the AHS margin outlook. So I understood there's that 100 bps or so I think headwind sort of one off in the quarter. But absent that sort of margins are still down, maybe a little bit of mixed impact. And if we take a step back, and so forth.

So maybe just to step back a little bit, we're just really excited about the profitable growth runway ahead for us at AHS. If you look at year-to-date versus last year, the top-line core growth is at 4.5%, and we expect acceleration on a full-year basis as well. And there may be quarterly variations based on timing of orders and selling days, but it all fits in that arc of top line acceleration. And the work we're doing this year is to set up AHS for a great run of multi-year acceleration in growth and margin expansion. and in doing that we're making some deliberate investment this year in growing our install base to kind of power that flywheel of the razor razor blade model we have at ASP as an example we're building commercial capacity to gain share in KGOs and ambulatory surgical centers and we're investing in innovation that's going to extend our differentiation and Power Growth for years to come. Those are deliberate and time-bounded investments that we're making this year. On a long-term basis, we're really pleased with what we're able to do on a top-line growth and margin expansion point of view, but view this year very much as a year of setting the stage for the success of this segment. And we believe it's going to play a really key role in our multi-year value creation story. So there's a short-term things that are happening, but doesn't change the long arc of opportunity we have in a segment.

That's great. Thank you. And then just my second one would be around the iOS segment. Industrial and manufacturing end market within that, I think it was up low double digits for the second quarter running there in terms of year-on-year growth. So very good performance. maybe sort of help flesh out any specific drivers around that. And what do you think about the sustainability of this very good growth in that industrial and manufacturing part of iOS?

Yeah, no, I mean, I think the thing that we really like about iOS and the industrial and manufacturing part is the broad-based nature of the success that our teams are having. and literally across geo, across brands, across product categories, across price and volume, it's just great success. And in that particular end market, Julian, that you pointed out, it's a whole range of drivers of that success, not a single item. And we like that because to your point about durability and sustainability, that really speaks to the fact that we have a lot of ways to win. with so many engines firing at the same time for us in that segment at that end market. So that's the way I'd describe it. It's very broad-based, Julian.

Great. Thank you.

Thanks.

Thank you. Our next questions come from the line of Scott Davis with Milius Research. Please proceed with your questions.

Hey, good, I guess it's still good morning out there, fellas. And Kristen, appreciate the color here on the call. And I'm going to ask kind of a stupid question probably, but is there anything different you need to do to serve the data center market that, you know, I mean, I understand having a dedicated sales force perhaps, but is there anything different you need to do from a product perspective or product availability perspective or service or anything else otherwise?

Yeah, I know. Thanks for the question. I mean, we're just, and I'm going to take that question in the context of Fluke, which is our biggest operating brand and doing incredibly well with our team executing at a high level. And we're really excited about the data center opportunity. As you know, we participate in the construction and build that phase, as well as in the enduring ongoing operations and maintenance. of these data centers. We already are well positioned with a broad portfolio of market leading solutions. That ranges from power quality monitoring analytics to power calibration, high voltage diagnostics, Electric Ground Fault Detection. So we have a lot of things already, Scott, that really go into that segment, both in the initial construction certification and aftermarket. The exciting work that our team's doing now is really ramping up the pace of innovation to come up with new products that solve problems that are new for these hyperscaler data centers that didn't exist with conventional data centers. And we've talked about the Certified by Max as an example of a product that's really designed for this really high gigabyte data centers in a way that no one else is doing. And that's pulling through everything else that we do in the data center. So the work that we're doing is really adding more innovation like that and then building, as we talked about in our prepared remarks, our commercial capacity because literally we just need a bigger sales team, a bigger specialized data center team to go take this exciting offering to the range of customers we now have. So we're on the chase, as you can imagine, intensely. We're excited about the upside ahead of us and we're still early.

Okay, that makes sense. And then switching gears, I don't know if you answered this question specifically in prepared remarks because I didn't hear it. What are your customers telling you on the healthcare side as far as their capital spending budgets, you know, near, medium, longer term? I mean, it feels like the hospital segment has been in kind of a recession forever. Is there any light at the end of the tunnel on kind of a replacement cycle out there that you guys could see perhaps in 27 or so?

Yeah, thanks for that. You know, I've had a chance personally to spend time with our teams, with customers around the world in the healthcare segment. And, you know, the way I would describe it overall, maybe just start with the U.S. market, is that the environment is improving with hospitals. They'll continue to navigate through a dynamic environment. kind of operating and policy environment. But procedure volumes overall remain healthy. Capital spending trends are more supportive than they were last year, and they continue to improve. They're still somewhat constrained. We continue to see shift in elective procedures towards ambulatory surgery centers, which, again, create an opportunity for us because our teams are now getting really good at being a leader in serving these ASCs. So overall, I would say the environment is stable to improving in the U.S. Outside of the U.S., it's a strong market. We're seeing a lot more spending going into healthcare in different pockets around the world for different reasons. So overall, stable and improving in the U.S. It's always dynamic, but we like the trend that we're seeing and really good outside the U.S. So overall, we'll take our chances on our ability to execute and outperform the market on a market that's stable and improving.

Okay. I'll pass it on. Thanks and best of luck, Olumide. Appreciate it. And Mark and Christina, see you guys.

Thanks, Scott. Thank you. Our next questions come from the line of Alexander Virga with Evercore ISI. Please proceed with your questions.

Alexander Virga Oh yeah, thanks very much, gentlemen. Christina, I appreciate you taking this. I wonder if you could just talk a little bit more about two things, and I guess I'm thinking more about iOS than AHS here, but I wonder if you could dig into the innovation momentum Any kind of sense of contribution you can give us in terms of how much it's given you in terms of the organic growth. And then on the recurring revenue side, I just wondered whether you can give us any more color, any more sense or quantitative indications on growth there. That would be really helpful. Thank you.

Yeah, no, thanks for the question. I'll just maybe go in reverse. With respect to recurring revenue growth, this is an exciting time. We saw really strong growth in both recurring and non-recurring revenue this quarter and it's an interesting time because the non-recurring revenue actually grew faster and that's driven by just really strong performance at our Fluke business. The interesting thing is we've always viewed recurring revenue as an indicator of durability. but it's not the only indicator of durability and many of our hardware businesses that are in quotes non-recurring have demonstrated exceptional durability through the strength of a brand of differentiated technology and kind of the recurring replacement cycles. Fluke, as an example, is seeing other growth nonstop every quarter now for several years. And that's as good as a recurring business. So overall, strong growth on both sides, but just interesting that the non-recurrent actually grew faster in this quarter. From the point of view of innovation, we've talked about our 40-accelerated strategy as being anchored in this Deep belief that we can grow this portfolio faster, organically and profitably. And obviously innovation is a key element of that. So is commercial and recurring customer value for the customers we already have. The contribution to innovation, you've seen that show up across the brands. The fact that we have Fluke and the iOS segment and every piece of the iOS segment growing at a pace that we saw here in the quarter and the AHS segment accelerating from where they were last year to year-to-date 4.5% core growth. All of our brands are driving innovation and that's showing up in those numbers. The way innovation shows up, it's sometimes in price and power, it's sometimes in volume, and it's sometimes in just customer retention and loyalty. We're tracking those in detail, as we always do with our fully-presented system. I would like the contribution from innovation.

Very helpful. Thank you very much. Thanks.

Thank you. Our next questions come from the line of Quinn Fredrickson with Baird. Please proceed with your questions.

Hey, good morning. Just wanted to ask about the fourth quarter outlook. I think if I got the moving pieces right, you might be applying kind of flattish core sales. I know you have the day's impact and the comp is a little tougher. Is that just the main factors or are there any other factors to be aware of that drives a little bit of the deceleration for key core growth?

Sure, Quinn, happy to take that. You know, just as a reminder of what we said, we're expecting core growth on a full year basis of just north of 5%. As you called out, there are the days factor, which is the primary sort of normalization in the quarter. It's 150 basis points on a consolidated basis, 50 to $20 million on a reported basis. And we would expect that to hit roughly 100 basis points to iOS and about 300 basis points to AHS. But that's the primary driver. Again, we really like the course and speed of the business right now. We're carrying good momentum here coming out of the third quarter. And the arc of the business is really one of acceleration. All right.

Thank you for those details. Secondarily, just on pricing, in AHS, it looked like it took a step higher sequentially, about 280 base points versus 190 last quarter. Should we think about that as a sustainable level of price contribution for the next few quarters?

You know, I think about that range, I think a couple hundred basis points, you know, give or take is a good marker. I think, you know, what you've seen in both iOS and AHS really goes to what Olumide was talking about, which is the teams, you know, have increased the pace of innovation that's enabled them to maintain strong pricing power. And you saw that in AHS, you see that in iOS, and I would expect sort of that to continue, you know, through the balance of the year and out through 2027. Great. Thanks, Mark. You're welcome.

Thank you. Our next questions come from the line of Brandon Knutson with Morgan Stanley. Please proceed with your questions.

Good morning. Thanks for taking my question. You highlighted on the data center front increasing sales force there. It's focused on that market. Can you provide some tangible examples of how your investments in sales force New Product Development, etc. are showing up in the business. Are you working with more hyperscalers? Are you outgrowing the market? Is it accelerating versus Q2? Any way to quantify the ROI you're seeing there and then roughly what percent of your revenue is levied to data centers?

Yeah, well, let me let me start with the last part of your question there. You know, data center, like I mentioned, is just an incredibly exciting opportunity for us as a company. And we're still very early. And the way you see that is today, you kind of estimate how much of overall 40 revenues is from data center. and many more. in terms of actually realizing the value from the huge capital investments going into the city centers. And we are, to your point, in deep discovery with a lot of the hyperscalers on what is needed. One of the things I enjoy is spending time with our teams at some of these hyperscalers. So we're really coming up with things that only fluke with our deep expertise in professional instrumentation, precision measurement, can solve for them. And we're going to be coming with more and more of those new products. And then from a commercial point of view, it's really you need, frankly, just feet on the street to cover the range of a number of hyperscalers, but not just hyperscalers, but it's also the building and construction firms that work with them. It's the technical advisors that work with them on on designing and speccing out these data centers. It's not just in the U.S. We're doing that globally. So we're adding the capacity and the expertise we need to cover the market well and effectively. So those are the kinds of things that we're doing. From an ROI point of view, we're really happy with what we're seeing. And, you know, frankly, we're supply constrained, frankly, at this point. in terms of the talent and the capacity we want to build because the market is certainly there for us.

Great, thank you. And then on IOS, you highlighted last quarter, I think that you've had the multi-site retailer mix increasing, driving headwinds on operating margins or gross margins. Same thing this quarter. Is that a dynamic that's getting bigger sequentially in terms of more activity there or is it kind of consistent that we should expect going forward?

I haven't expected broadly consistent you know it's probably consistent this quarter in terms of impact of what we saw last quarter as a reminder this is a product offering that Service Channel has where they are essentially the outsourced providers for facility maintenance and one of the types of arrangements we enter into with strategic partners is an arrangement where we end up being the merchant of record on the spend and so optically from a reported basis, it does sort of gross up the P&L to some extent, but it's still a great business and we're gonna continue to push it. But I would think about it as something that is not gonna be an increasing factor for us going forward. Great, thank you. You're welcome.

Thank you. Our next questions come from the line of Nigel Koh with Wolf Research. Please proceed with your questions.

Thanks. Good morning, everyone. Good morning in your location, of course. I just want to stick on that topic, actually. So I think we've covered the product cost mix issues, I think, in both segments. Maybe, Mark, can you just talk about the inflation impacts? Because when you've got 60% gross margin, it's really tough to maintain the margin with the inflation. So just wondering if that's also a measurable impact and then just within that, maybe just touch on where we are right now with the memory inflation and how that looks into next year.

Happy to take that, Nigel. And I think first of all, I would say that Ford of, you know, by virtue of the incredible brands that we've got, the differentiated product offerings that we have, the power of the Ford of business system has a long track record of real gross margin discipline. And we expect that to continue going forward. and many more. And again, this was no exception. And when you layer price on top, again, strongly positive. We did see particular inflation this quarter on electrical and electronic componentry. Freight was up more than we expected. The teams were, again, able to more than offset. It's a testament to to what they've been able to achieve with Florida Business System. And really in both segments, as you call out, the drivers of gross margin contraction, even though it's quite modest, was driven by mixed shift and the service channel offering we mentioned. And then in the healthcare segment, driven by stronger growth in lower margin consumables, particularly in Asia and Latin America. So I think you're going to expect to see us continue to be able to drive strong gross margins going forward from quarter to quarter. You may see mixed impacts, or we may make discrete investments, but strong gross margins is really part of the Florida playbook.

Great, thanks Mark, that's a good call. And then Olumide, maybe just double click on what's going on in the FAO portfolio and maybe the HS software as well. Obviously a lot of fluidity right now in software models. You've talked about some of the sort of AI infusion kind of initiatives in past quarters. So I'm just wondering, you know, number one, you know, kind of catch us up in terms of what's happening with the specific logos. And I think accruing has been kind of an area of maybe lagging growth. Maybe just bring us up to speed in terms of what's happening there.

Yeah, thanks, Nigel. So a short answer is we're very pleased with software businesses across file and the healthcare software businesses in the quarter. I think from a file point of view, again, like I mentioned, the iOS segment performance, one of the beautiful things about it is it wasn't just fluke, but file and gas detection all contributed to that. So we talked about a 9.1% growth for iOS in the quarter. All three components were pretty close to that range. Fluke was slightly ahead of the pack. So the fact that file could deliver at that level was a strong indication. The strong performance in file was led by Service Channel and Gordian. We continue to see really strong demand and and sort of adoption of the AI enabled features that we've talked about the last couple of calls at Service Channel. And Gordian had a strong quarter led by procurement and planning solutions. Our current continues on its journey of improvement and we like the role it's playing in the portfolio. And again, as a mix, the file group delivered very strongly. And on the healthcare side, the same thing, our teams are doing a great job of deploying AI-enabled capabilities. We've talked about the AI-powered voice documentation at probation. They're doing a lot with leveraging the distinctive 30-year proprietary database that they have to generate new insights for customers that improve outcomes. And we're seeing that continue to power success. So overall, like we said the last few calls, Not all software businesses are the same. The ones we have have some deeply embedded strengths that are multidimensional, and we're seeing those play out really well in terms of enable us to really turn AI into impact for customers, which is what they need.

That's great. Thank you.

Thanks.

Thank you. Our next questions come from the line of Scott Graham with Seaport Research Partners. Please proceed with your questions.

Hey, good morning. I wanted to maybe drill down a little bit into the components issues that was asked previously. Are you buying mostly memory or are you also buying a lot of logic?

Yeah, so I'll take that. Thanks for the question. So, you know, if you think about our bill of material across our, mainly our hardware businesses, so Fluke, ASP, you know, kind of the The Fluke Health Business and Industrial Scientific. The bill of material has a little bit of logic in it. It has some memory in it. It's not the high band memory that competes with some of the intensely demanding use cases right now. So they're really basic logic, some memory. And what we're finding, and again, we've been in this in this sort of arena for a long time now is that our teams are really good at making sure we have multiple sources of components, making sure that when there's something that looks like it's trending towards a choke point in terms of demand supply, that may not just kind of from an inflationary point of view, but hike up the price. We build up inventory in advance in the right places and the right pockets. We're not sort of in a place where this is a big topic for us, in part because our bill of materials doesn't have some of the more competitive components. There are kind of specific spots where we understand there could be exceptional inflation, and we managed that really well. So we feel good. Like Mark mentioned, price costs were strongly positive in the quarter. Our teams do a really good job on components.

Thank you for that. Just a follow-up would be, you mentioned the 100 basis point headwind in AHS. I was wondering if there was anything in IOS and what both segments look like on a headwind basis for the fourth quarter?

Yeah, happy to take that, Scott. I think you're probably referring to the EBITDA margin headwind in AHS. You know, it was predominantly in AHS. There was a little bit of a headwind in iOS as well. And as you recall, in Q3 of last year, we talked about some of these discrete items, which were largely related to incentive compensation and some capitalized software development items. But most of the impact was in AHS. I think as we look forward again, I would just call your attention to our prepared remarks. We do continue to expect to be able to deliver EBITDA margin expansion on a full year basis in the 50 to 100 basis point zone. And we talked about being in around the midpoint of that. So you can back into what that implies for Q4.

But we like the momentum the business is carrying. I think as Olumide said, Ford have accelerated

is working and over the medium term, we expect that to drive a good formula of accelerating core growth and even a margin expansion while we invest to drive more growth and also deliver to the bottom line.

Thank you both.

Thank you.

Thank you. Our next questions come from the line of Andy Klaplowitz with Citigroup. Please proceed with your questions.

Hello, everyone.

Hey, Andy.

Olumide, you give us an update. You've been talking about Florida Accelerated today, but I think at your original yesterday, you talked about getting to a higher growth state from the program versus the 3% to 4% longer-term expected core growth by 2028. Is it reasonable to assume that you're a bit ahead of plan on innovation and commercialization, or is it just more accelerated market growth that you're seeing? And I would assume it's reasonable to say that you'll have a higher contribution from innovation and commercialization in 2027.

Thanks for the question. I think if you go back to Mark's comments and prepared remarks that we're now for the full year tracking just not a 5% core growth for the year. I think that's kind of a fair indication that we're ahead of what we expected in terms of the 3% to 4%, 26%, 27% kind of medium-term financial framework. And I think that is a combination of Some of the markets we're in are just having a really strong year. And the impact of the innovation, commercial, recurring customer value actions that our teams are taking continue to ramp. And we're still early in the ramp of those things. So we really like the setup looking into 27 and 28. I think to your point, we did have the plus plus sign 28 and beyond on that financial framework across core growth adjusted margins and adjusted EPS growth and everything we're seeing is increasing our conviction that that plus plus is certainly available to us and we're going to do everything we can to get to it as quickly as we can and our teams are excited and executing at a high level.

It's helpful. And then, Olumide, maybe just a little more color on regional demand that you're seeing in iOS. I think you mentioned America has had modest sequential growth, but Europe and the Middle East accelerated, which is interesting. So I was hoping you could comment a little more on that and then what you're seeing in China.

Yeah, thanks for that. So, I mean, all the regions did really well. And again, it's great when you have a session where You're winning on multiple fronts. So North America certainly continued to be the pace setter and the fastest grower. In Europe, we saw the region with a little bit of softness in Q2. POS, like I mentioned on the last earnings call, actually remained strong in Q2. even though others was a little bit slower. And then in Q3, we saw a bounce back. So we saw growth return, POS remained constructive in the region. I think the Middle East for us is, you know, again, it's 2% of our revenue, so it's small, but it continued to actually show real strength. Again, in part because the things we do are essential and continue to be in demand. And our teams continue to do a really good job on making sure we can deliver in there. Thankfully, a lot of our business is oriented towards the Kingdom of Saudi Arabia, so we're still able to do what we need to do. And APAC, again, really played a solid role for us. China remains somewhat challenged and choppy, but the rest of APAC, especially India, for example, more than compensated for that. So across the regions, we like what we're seeing and the momentum that businesses are building from, you know, building more commercial capacity in some of its markets and tailoring innovation for some of its markets, specifically China for China strategy, for example, continues and will keep doing things like that to localize for for these outside of the U.S. markets.

Appreciate all the color.

Thanks.

Thank you. Our next questions come from the line of Andrew Piscaglia with BNP Paribas. Please proceed with your questions.

Hey, good afternoon, everyone. I wanted to dig into capital allocation a little bit. You know, since you spun off or separated from Reliant, You repurchased about 13% of your shares, it seems like. So going forward, I know you do still talk about M&A as on the table, but at these levels, what return hurdles in your mind make an acquisition more attractive than just continuing to buy back stock the way you've been?

Yeah, thanks. I'll be happy to take that. As you call out, we have definitely had a bias over the course of the last five quarters to repurchasing our own shares. We do view M&A and share repurchase as interchangeable based upon relative returns. We have had a pretty attractive opportunity in our own stock given the course and speed of the business, the free cash flow yield that we've seen compared to our after-tax cost of debt. I think looking forward, we have revamped our M&A engine completely. We've augmented the team. We've changed our approach. We are building funnel. We've executed a few small bolt-ons. Obviously, we're seeking to make sure that return on invested capital is ahead of our whack on a reasonable period. But we're also looking at free cash flow per share and EPS Accretion dilution on a comparative basis versus the two, taking into account the increased risk with M&A. I think, listen, looking forward, our hope is that M&A could be a bigger piece of the equation. And we like what we see from a funnel perspective. We will remain disciplined. We've got a couple of integrations under our belt that are performing really well. And we'll continue to be dynamic based upon what we see.

And maybe staying with the topic of M&A, I wonder, you know, based on kind of some of the comments you guys mentioned today on advanced health care, it seems, you know, it's a steady, albeit low growth business and you have some margin opportunity there. But is M&A a tool you think you need to use to boost organic growth long term in that segment?

Yeah, well, look, I think from the primary thesis in our 40th Accelerator Strategy is that we have the runway from a profitable organic growth acceleration point of view in both of these segments to create a lot of value for our shareholders. So our first order of business is the innovation, the commercial acceleration, and the recurring customer value walk that our teams are doing. Bolton M&A is a sweetener, and we will do it in places where the financial and strategic criteria is compelling to Mark's point versus shared by Vax. In our AHS segment, we have a lot of runway from organic execution, trying to get stronger propositions for ambulatory surgical centers, trying to refresh the innovation of our products, capture the impact of AI in our AHS software businesses. We have a lot to do. If we find things that are, no pun intended, surgically helpful to accelerate growth in the segment, we'll do that. We talked about UVSmart on our last call. That was a great example of a very targeted bolt-on. Thank you.

Thank you. This does now conclude today's question and answer session. I would now like to hand the call back over to management for any closing remarks.

Well, thank you, and thank you all for joining us today. We look forward to speaking with you next quarter. Have a great day.

Thank you. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.