Fortive Corp at Citi Global Industrial Tech and Mobility Conference Transcript

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

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Tami, so maybe I'll start with you just because it's very topical. You just had your meeting last week. So if I think about Precision Tech or Ralliant, your outlook for '25 growth is up slightly, but you also talked about 35% of the portfolio growing double digits. So -- and I think you mentioned today like Qualitrol, PacSci, like those are the sort of big drivers. But you've also highlighted adding more capacity. So maybe talk about what kind of a bump in capacity you're talking about? And how fast could these SaaS businesses grow?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Got it. So it's more in existing capacity this year and then maybe more roof line for next year? Is that the way to think about it?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Helpful, Tami. And so maybe, Jim, I'll go back to you just because I want to get sort of the current landscape out of the way a little. I know you just reported a couple of weeks ago, probably not too much change, but we all watch Fluke, it's a nice short cycle business. You talked about positive

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : I should clarify because I can't even read my own questions. Like the first half of this year versus last, second half last year.

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Did you want to say anything, Tami, to that? Or.

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Got it. That's helpful. And Jim, just following up on Fluke for a second. Again, it's forecast to start a little slower in consumables, in services in Q1. We already talked about China. So are you worried at all about Fluke cycling? Or is it really just now more steady-eddy business, more recurring sales versus history?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Got it. So I don't want to focus the discussion too much on China. So let's just ask one more on China for now. Like -- so I think guidance for the year is down mid-single digits from China and '25. But conversely, you've got good growth in high-growth markets ex China. So in that context, how are you thinking about the longer-term outlook in China versus the other markets? Can other HGRs take the place of China over time? Or like how do you think about it?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : And Tami, I should just ask you, like how difficult it is to run the business in China these days in terms of visibility versus what you're used to?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Helpful. And then, Tami, I just want to understand sort of what exactly is going on in tech, right? So like high single-digit growth in orders the last couple of quarters. Like what are you forecasting for the year? It seems like when I try to look at it, you're talking about not much growth still in tech this year even though orders have turned more positive. So maybe you can sort of talk about that.

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Tami, I feel like you always have some sort of NPI sort of movement. Is this a bigger year '25 new version of -- like what's going on this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 18, 2025 / 1:50PM, FTV.N - Fortive Corp at Citi Global Industrial Tech and Mobility Conference

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : And just digging in because this is the time that I can, like Keithley, it seems like there's more momentum there. Is that kind of a right characterization? Is that where -- I mean, I think you guys mentioned defense and high-end semiconductor and compute is dropping your business. So is it like Keithley? Maybe sort of expound on what you're seeing there.

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Is it possible to ask you like how big the exposure is inside Tektronix, the data centers or something like that, just out of think curiosity?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Pretty big number. Okay. That's helpful. And then just.

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : That's helpful.

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Very helpful. And then, Tami, you mentioned EV. So like obviously, there's been a fair amount of focus on EA, electro. I think you're guiding it to have a better year this year, mid-single-digit growth in '25, but it's been down. So what's driving the turn that you expect? And when do you see the turn?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Got it so let me ask you a question about margin. I'll open up to the audience in case they have any questions. But -- so overall, I mean, margin performance has been very good over the many years. Actually, you drove 100 basis points of margin improvement in '24 despite only 1% growth, that's pretty good. Maybe talk about the drivers of margin growth. And then how should investors think about the potential for really outsized margin growth as you separate? Because a lot of times, as you separate, you get more focus even better at execution. So how do you think about the possibilities for Ralliant and a new Fortive?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Tami, did you want to say anything there or are you good or.

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Any questions from the audience? I don't think I see anything. I'm going to continue There is a question. I'm excited. Unidentified Participant Can you give an example of what infusing AI into these businesses means? Like what's the opportunity set?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Any other questions? So I want to shift to AHS. Segment has been growing nicely for the last five quarters. I think it's grown at mid-single digits or better. So how do you think about it going forward? I know Q1 you talked about, it's got the [AHS] issue. But I think, Jim, you and I have talked about that you've really worked on your global infrastructure at ASP over time. So where are you with that progress? Are there any bigger risk to AHS overall, whether it's China, some people asking about US hospital reimbursements, things like that?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Helpful. And then for new Fortive, you're expecting double-digit ARR growth in '25. Can you first remind investors how big ARR is going to be a portion of new Fortive as it separates? And then talk about the components contributing to that growth. I think you mentioned the business at Gordian could actually benefit from -- as DOGE kind of looks at efficiency and federal spending, maybe talk about that. And what are you seeing on the ground at Gordian accruing in service channel right now?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : And then, Jim, you had a pretty big move in terms of your timing of separation. You had talked originally about '25, it's now early Q3. I think you commented on the earnings call that you could issue your Form 10 in the spring. So what's gone more smoothly than you originally expected to speed up the timing? Usually, it's only a couple of months after Form 10 issued for when you could separate. So could you actually speed up the separation a little bit more?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : And to that point, Jim, you talked about setting both sides up for a nice investment-grade rating, can you talk about any thoughts or discussions you and your teams are having about potential optimal capital structures of each side?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : That's helpful. And then in the same vein, we know you've committed to deploying 75% of free cash flow to share repurchases through the spin. Like how should investors think about the timing of repurchases? And under what circumstance would you consider front-loading the repurchases?

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : I got another question asked you on M&A, but I want to ask you the question I asked you last year, and I ask all companies. What are the top two or three innovations and structural changes affecting your company over the next five years? And are there any emerging industry trends that are perhaps being overlooked in the current discourse? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 18, 2025 / 1:50PM, FTV.N - Fortive Corp at Citi Global Industrial Tech and Mobility Conference

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : And then last question. So you're kind of deemphasizing acquisitions now as you do repurchase and separate. How do you stay plugged in? Because both companies are going to come out and you get Fortive, for instance, it took a little while to do your first -- should we expect that again or are you ready to go or like.

Question: Andrew Kaplowitz - Citi Global Industrial Tech and Mobility Conference - Analyst : Well, thank you, Jim, Tami very much appreciate you guys being here. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 18, 2025 / 1:50PM, FTV.N - Fortive Corp at Citi Global Industrial Tech and Mobility Conference