Fortive Corp To Provide Strategic Update Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Julian Mitchell - Barclays - Analyst : Thanks very much. Good morning, Jim and Congrats on getting all this news out there. Yesterday. Maybe just a first question would be around at some point when we're thinking about the spin out of the NewCo, I suppose, to what degree should we use these on the spin as a kind of template place holder in terms of elements like the scale of stranded and stand-up costs and also the leverage profile of Frontier at the time of spin?

Question: Julian Mitchell - Barclays - Analyst : That's helpful. Thank you. And then just my follow-up would be -- Jim, you talked at the beginning around the one of the big rationales for this move being increased simplicity and reduced complexity it at Fortive. But I suppose investors often would say, looking at the remain co FAL AHS REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. and then the Fluke and Associated Brands that still looks sort of relatively, I suppose, complex from the outside with out of the US overlaps perhaps between those three. I just wanted to sort of how we think about the scope for the that portfolio evolution of the remain co and why you would characterize that RemainCo business makes us kind of non complex.

Question: Julian Mitchell - Barclays - Analyst : Great. Thank you.

Question: Andy Kaplowitz - Citigroup - Analyst : Good morning, everyone, Jim and Chuck congrats on your eventual retirement. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andy Kaplowitz - Citigroup - Analyst : Can you give us a little more color on how you might deploy capital before the spin-off? Is there a thought process to accelerate the timing of repurchases? Give any plans to maybe from those? And then any further commentary regarding the potential for that for safety and 25 to three titles were lower, but it's that kind of numbers still in the table if you accelerated purchases as with the obvious understand that by the end of '25, the Company and its current form one exist?

Question: Andy Kaplowitz - Citigroup - Analyst : Helpful. And given the pause on M&A until the transaction timing late next year, in your commentary in the release regarding balanced capital deployment between M&A repurchases, it seems like a relatively significant change in deployment strategy. Is that really the intent even after this transaction to be relatively more balanced between M&A and repurchases?

Question: Andy Kaplowitz - Citigroup - Analyst : Appreciate all the color.

Question: Stephen Tusa - JPMorgan Chase & Co - Analyst : Hey, good morning. Congrats on a lot of heavy lifting in the last time, you know, the eight years or so. It's been it's been the portfolio is definitely better shape than it was back then. So congrats on that run for sure. On the just with the technicalities around the SpinCo, is the structure preclude you from [Fred], you know, from doing anything strategic with that business or that business to anything strategic for itself, whether it's a merger or asset sales or things like that from a tax rate perspective?

Question: Stephen Tusa - JPMorgan Chase & Co - Analyst : What are the impediments that you're talking about?

Question: Andy Kaplowitz - Citigroup - Analyst : And the tax rate for PT consistent with the current forward as current tax rate? And is that transferable to any buyer if they want to merge or anything like that?

Question: Stephen Tusa - JPMorgan Chase & Co - Analyst : Okay. one final and most importantly, whereas Elena going to which business?

Question: Stephen Tusa - JPMorgan Chase & Co - Analyst : Thanks. Great. Thank you.

Question: Nigel Coe - Wolfe Research - Analyst : Thanks. Good morning. I'm very glad we've cleaned up in the future direction from a heavy. So yes, congrats on all. The I will share some thoughts at Gemalto and what's the Clinton suite count. You addressed this with the June some degree, but there was some at the kind of puzzled why Fluke and Tek don't belong together as more of an industrial cluster. And it sounds like it small case of recurring revenue software makes sense to be together text, but most of the coal different profile, it just mix. Should I just wanted to show that's the answer. And then just to kind of put a finer point on the SpinCo, is this a clean spin of PT others today? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. Could there be some assets transferred from IOF, maybe HF into that vehicle? Just curious if it's a straight PT. spend and have you considered alternatives in the UK, you seem to have shutdown RMC, but for those splits versus spin, I was also a consideration as well.

Question: Nigel Coe - Wolfe Research - Analyst : Oh, yeah. We don't expect anything you can have enough. Yeah. And then and then Chuck, maybe I know it's early days, but can you put some boundaries around public company costs, maybe the one-off transaction costs we should expect and the tax, the kind of structure does breaking apart the company. So damage, the sort of the tax efficiencies you credits. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Nigel Coe - Wolfe Research - Analyst : Great. Thanks, Chuck.

Question: Joe Giordano - TD Cowen - Analyst : Hey, guys. Good morning. So I think like you pulled investors like a lot of the region for some of the on the lack of an unlock, the value is more like strategic and I'm not perception of M&A. So I'm just curious when you thought through just like with the outcome of in tremendously different, if you just kept the business the same, the leadership transition and said that the next 2 billion of our of our free cash flow is going to go to buybacks. Do you think there's a lot of there's a lot of examples of companies out there that have businesses that don't necessarily have operational synergies, but the stocks have different valuations. So just curious because I thought I'd like to just keep the business together. And I announced kind of the same changes without breaking the company [now].

Question: Joe Giordano - TD Cowen - Analyst : And then just correct me if I had to sell it sounds like those strategy and RemainCo is fairly similar to the strategy of first-generation afforded anchoring one. Like is that a fair statement? And if so, what gives you confidence that that strategy worked better in this iteration of the asset base? And then, Chuck, I don't know if you mentioned, Mike, any thoughts on the capital structure and the debt allocation to either the vehicles? Thanks.

Question: Joe Giordano - TD Cowen - Analyst : Thanks, guys.

Question: Andrew Obin - Bank of America - Analyst : Hi, guys. Good morning. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Obin - Bank of America - Analyst : Good morning and congratulations on all the hard work getting done. I think the question, how do you think about the Board composition for Fortive and the SpinCo? And specifically for Fortive, a lot more health care are off our software. Do you think the existing board is up to the task for do need to do think because the weighting of the business has changed quite a bit. It's sort of less industrial. You do need new board for sort of think about strategy differently.

Question: Andrew Obin - Bank of America - Analyst : And just to follow up question, I appreciate your frustration with the stock valuation, given the growth parameters and gross margin of the businesses. But again, some of your peers have gone over out of sort of unlocking value through sale of businesses. Why not do that? Why break up the company?

Question: Andrew Obin - Bank of America - Analyst : No, Thank you. I appreciate how much data and hard work went to making this decision? Congratulations.

Question: Jamie Cook - Truist Securities - Analyst : Hi, good morning and congratulations. And I guess just two questions. one on understanding over the next sort of 18 months, the priorities count to be buying back stock. I'm just wondering, being on the sideline for, you know, sorry, the next 15 months or so, what that sort of means about your view on sort of the M&A pipeline. It didn't disappoint relative to your expectations and just how some of the larger acquisitions like EA performing relative to your expectations? And then my second question is on, obviously at a nice positive that you guys reiterated on your guide today. Given the macro still seems to be, you know, fairly mixed or challenged on understanding you you reiterated your guide. Are there or is there anything different in terms of how things are performing, even though you're reiterating your guide on some businesses performing better or worse relative to expectations, understanding you're still getting to the same point? Thank you.

Question: Jamie Cook - Truist Securities - Analyst : Thank you.

Question: Joseph O'Dea - Wells Fargo - Analyst : Hi, good morning. Thanks for taking my questions. I wanted to ask about the recurring revenue in sort of RemainCo Fortive on. And just as you think about the growth profile of the business, can you elaborate a little bit more on how you think about the recurring portion versus the nonrecurring portion? And then any any details around that recurring portion? It looks like roughly half software have non-software, but if you can explain that non-software piece a little bit and growth there versus software side?

Question: Joseph O'Dea - Wells Fargo - Analyst : That makes sense. That's helpful detail. And then also just in terms of leadership plans, can you talk about the logic around when AHS leadership moved to Tami between now and that will eventually be under eliminate on what you're thinking is around the timing of that transition and giving them some runway with sort of oversight of that business before spin takes effect?

Question: Joseph O'Dea - Wells Fargo - Analyst : Thanks a lot.

Question: Deane Dray - Royal Bank of Canada - Analyst : Thank you. Good morning, everyone. Hey, I just want to make sure I understand what the messaging was here on page 6, and I don't know if it's a nuance or not, but you say for RemainCo shift, the focus from through-cycle growth, total growth, just like what are the implications and maybe kind of put some context around that.

Question: Deane Dray - Royal Bank of Canada - Analyst : Great. And then just as a follow up, can you just provide some further color on the why now and just some thoughts I come to mind did missing out on a National Instruments that factor into this. I know that's a hypothetical. How much did the Board way the ongoing stock underperformance? And was there an activist involved on and promoting and moving this decision?

Question: Deane Dray - Royal Bank of Canada - Analyst : Great. Thank you and best of luck.

Question: Andrew Buscaglia - BNP Paribas - Analyst : Yes. Thanks for squeezing me in guys. So just piggybacking on what [DNAF] last year you made when your big fields, everybody a very committed to that space. And I'm wondering what changed in this that in terms of some things you see something structurally challenging in that test and measurement market where you don't want to play anymore and work more competition than you anticipated. Just wondering like what what's changed so quickly in the last set of three, six months?