Fortive Corporation · NYSE:FTV
Fortive — Q3 2020 Earnings Presentation
32 slides from Fortive's earnings presentation, Oct 27, 2020
Slide 1: Third Quarter 2020 Earnings Release
Third Quarter 2020 Earnings Release October 27, 2020 1
Slide 2: Forward Looking Statements & Non-GAAP Financial Measures
FORWARD LOOKING STATEMENTS & NON-GAAP FINANCIAL MEASURES Statements in this presentation that are not strictly historical, including statements regarding the future impact of the COVID-19 pandemic on our financial condition and our operations on a consolidated basis and by operating company and prod
Slide 3: Q3 Summary: Strong Execution as Revenue Trends Continued to Improve
Q3 SUMMARY Strong Execution as Revenue Trends Continued to Improve • Clear sequential improvement in Q3 - Delivered better than forecasted +LSD revenue growth Y/Y – Improvement across both segments, with total revenue growth +LSD at Professional Instrumentation and +MSD at Industrial Technologies –
Slide 4: Q3 2020 Financial Performance: Summary of Key Financial Items
Q3 2020 FINANCIAL PERFORMANCE Summary of Key Financial Items Revenue ($M) Adjusted Operating Profit Adjusted Diluted Net Free Cash Flow ($M) Margin (%) Earnings Per Share ($) $1,902 22.7% $0.94 $455 $1,860 21.3% $0.87 $348 Q3 2019 Q3 2020 Q3 2019 Q3 2020 Q3 2019 Q3 2020 Q3 2019 Q3 2020 • Core growth
Slide 5: Q3 2020 Financial Performance: Free Cash Flow Detail
Q3 2020 FINANCIAL PERFORMANCE Free Cash Flow Detail Free Cash Flow ($M) - Q3 2020 • Q3 2020: $1,067 – Free Cash Flow: $455 million (+31% versus Prior Year) 2019 – FCF Conversion: 202% of GAAP Net Earnings; 134% of Adjusted Net Earnings $721 2020 $455 $348 • 2020 YTD: QTD YTD – Free Cash Flow: $1.1 b
Slide 6: Segment Detail
@ FORTIVE Segment Detail
Slide 7: Professional Instrumentation: Sequential Improvement in Q3
PROFESSIONAL INSTRUMENTATION Sequential Improvement in Q3; Continued Resilience from Software-Focused Businesses • Fluke revenue declined -LSD: +Mid-Teens growth in China more than offset by -LSD decline in North America and -HSD decline in Western Europe – Continued resilience at Fluke Health Solut
Slide 8: Industrial Technologies: Revenue and Margins Ahead of Forecast
INDUSTRIAL TECHNOLOGIES Revenue and Margins Ahead of Forecast • Vontier will provide color and commentary on the Industrial Technologies businesses when they report on Thursday, October 29th Revenue ($M) Adjusted Operating Profit Margin (%) 25.9% $714 $747 22.9% Q3 2019 Q3 2020 Q3 2019 Q3 2020 Total
Slide 9: Regional Commentary: Sequential Revenue Improvement Across Major Regions
REGIONAL COMMENTARY Sequential Revenue Improvement Across All Major Regions in Q3 • Asia Pacific -LSD core • China +MSD core in Q3. Broad-based strength highlighted by: – Mid-Teens Y/Y growth at Fluke Asia Pacific – >20% Y/Y growth at ASP and Sensing • Japan -Mid-Teens core in Q3: Sequential improve
Slide 10: Portfolio Framework: Anticipated Relative Impact of COVID-19
PORTFOLIO FRAMEWORK Anticipated Relative Impact - COVID-19 / Economic Consequences Group I Group II Group III Group IV • Less COVID-19 impact and more • Impacted by COVID-19 but expected to • Significantly impacted by COVID-19 • Significantly impacted by COVID-19 and resilient order momentum recover
Slide 11: Q3 Performance by Portfolio Group - New Fortive View
Q3 PERFORMANCE BY PORTFOLIO GROUP - NEW FORTIVE VIEW Recovery Cadence Continuing to Play Out Largely as Expected Group I Group II ~20% of Revenue* ~32% of Revenue* Q3 Revenue Growth: +LSD% Q3 Revenue Growth: (LSD)% • Solid growth from Intelex (+HSD), eMaint (+MSD) and Censis (+LSD) • ASP -MSD: Y/Y g
Slide 12: Re-Segmentation Update
RE-SEGMENTATION UPDATE Established Positions with Significant Organic Growth and M&A Runway Ahead Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions ~40% of Total Revenue*; >$15B TAM ~35% of Total Revenue*; >$10B TAM ~25% of Total Revenue*; >$5B TAM * Based on YTD 2
Slide 13: The Look Ahead for Fortive: Building from a Position of Strength
THE LOOK AHEAD FOR FORTIVE Building from a Position of Strength • Strong positions providing critical workflow solutions in productivity and safety – Adding expanded set of Software solutions and data analytics capabilities to complement leading instrumentation positions • Continuing to reduce net d
Slide 14: Thoughts on Q4 2020
THOUGHTS ON Q4 2020 Key Anticipated Financial Metrics and Performance Considerations • Q4 2020 Outlook Assumptions – Anticipating a 0% - 3% increase in Y/Y total revenue in Q4 – Adjusted incremental margins of ~35% – Adjusted effective tax rate ~16% – Adjusted diluted shares outstanding of 361-364M
Slide 15: Supplemental Reconciliation Data
Supplemental Reconciliation Data 15
Slide 16: Adjusted Gross Profit Margin
ADJUSTED GROSS PROFIT MARGIN Three Months Ended Nine Months Ended $ in millions September 27, 2019 September 25, 2020 September 27, 2019 September 25, 2020 Revenue (GAAP) $ 1,860.0 $ 1,902.3 $ 5,317.6 $ 5,187.0 Acquisition-Related Fair Value Adjustments to Deferred Revenue 18.1 0.8 43.8 12.3 Adjuste
Slide 17: Adjusted Operating Profit & Adjusted Operating Profit Margin
ADJUSTED OPERATING PROFIT & ADJUSTED OPERATING PROFIT MARGIN Three Months Ended September 27, 2019 Three Months Ended September 25, 2020 $ in millions Professional Industrial Corporate Total Professional Industrial Corporate Total Instrumentation Technologies Fortive Instrumentation Technologies For
Slide 18: Adjusted Operating Profit & Adjusted Operating Profit Margin (Nine Months)
ADJUSTED OPERATING PROFIT & ADJUSTED OPERATING PROFIT MARGIN Nine Months Ended September 27, 2019 Nine Months Ended September 25, 2020 $ in millions Professional Industrial Corporate Total Professional Industrial Corporate Total Instrumentation Technologies Fortive Instrumentation Technologies Forti
Slide 19: Adjusted Operating Profit Margin
ADJUSTED OPERATING PROFIT MARGIN Three Months Ended September 25, 2020 Nine Months Ended September 25, 2020 $ in millions Professional Industrial Total Professional Industrial Total Instrumentation Technologies Fortive Instrumentation Technologies Fortive 2019 Adjusted Operating Profit Margin (Non-G
Slide 20: Adjusted Net Earnings from Continuing Operations
ADJUSTED NET EARNINGS FROM CONTINUING OPERATIONS Three Months Ended Nine Months Ended $ in millions September 27, 2019 September 25, 2020 September 27, 2019 September 25, 2020 Net Earnings From Continuing Operations Attributable to Common Stockholders (GAAP) $ 190.0 $ 208.5 $ 494.8 $ 346.6 Dividends
Slide 21: Adjusted Diluted Net EPS
ADJUSTED DILUTED NET EPS Three Months Ended (a) Nine Months Ended (a) September 27, September 25, September 27, September 25, 2019 2020 2019 2020 Diluted Net Earnings Per Share from Continuing Operations Attributable to Common Stockholders (GAAP) $ 0.56 $ 0.61 $ 1.46 $ 1.02 Dividends on the mandator
Slide 22: Adjusted Diluted Shares Outstanding
ADJUSTED DILUTED SHARES OUTSTANDING Three Months Ended Nine Months Ended (shares in millions) September 27, 2019 September 25, 2020 September 27, 2019 September 25, 2020 Average common diluted stock outstanding 339.9 340.8 339.7 340.2 MCPS Converted Shares (a) 18.4 18.4 18.4 18.4 Adjusted average co
Slide 23: Free Cash Flow Conversion Ratio
FREE CASH FLOW CONVERSION RATIO $ in millions Three Months Ended Nine Months Ended September 27, 2019 September 25, 2020 % Change September 27, 2019 September 25, 2020 % Change Operating Cash Flows from Continuing Operations (GAAP) $ 379.0 $ 481.7 27.1 % $ 800.4 $ 1,152.7 44.0 % Less: purchases of p
Slide 24: Adjusted Free Cash Flow Conversion Ratio
ADJUSTED FREE CASH FLOW CONVERSION RATIO $ in millions Three Months Ended Nine Months Ended September 27, 2019 September 25, 2020 % Change September 27, 2019 September 25, 2020 % Change Operating Cash Flows from Continuing Operations (GAAP) $ 379.0 $ 481.7 27.1 % $ 800.4 $ 1,152.7 44.0 % Less: purch
Slide 25: Free Cash Flow Conversion Ratio - Twelve Months Ended September 25, 2020
FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED SEPTEMBER 25, 2020 $ in millions Three Months Ended Twelve Months Ended December 31, 2019 March 27, 2020 June 26, 2020 September 25, 2020 September 25, 2020 Operating Cash Flows from Continuing Operations (GAAP) $ 484.5 $ 191.4 $ 479.6 $ 481.7 $
Slide 26: Free Cash Flow Conversion Ratio - Twelve Months Ended September 27, 2019
FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED SEPTEMBER 27, 2019 $ in millions Three Months Ended Twelve Months Ended December 31, 2018 March 29, 2019 June 28, 2019 September 27, 2019 September 27, 2019 Operating Cash Flows from Continuing Operations (GAAP) $ 422.5 $ 161.2 $ 260.2 $ 379.0 $
Slide 27: Adjusted Free Cash Flow Conversion Ratio - Twelve Months Ended September 25, 2020
ADJUSTED FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED SEPTEMBER 25, 2020 $ in millions Three Months Ended Twelve Months Ended December 31, 2019 March 27, 2020 June 26, 2020 September 25, 2020 September 25, 2020 Operating Cash Flows from Continuing Operations (GAAP) $ 484.5 $ 191.4 $ 479.6 $
Slide 28: Adjusted Free Cash Flow Conversion Ratio - Twelve Months Ended September 27, 2019
ADJUSTED FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED SEPTEMBER 27, 2019 $ in millions Three Months Ended Twelve Months Ended December 31, 2018 March 29, 2019 June 28, 2019 September 27, 2019 September 27, 2019 Operating Cash Flows from Continuing Operations (GAAP) $ 422.5 $ 161.2 $ 260.2 $
Slide 29: Core Revenue Growth
CORE REVENUE GROWTH Components of Revenue Growth Three Months Ended September 25, Nine Months Ended September 25, 2020 2020 Total Fortive Total Revenue Growth (GAAP) 2.3 % (2.5)% Core (Non-GAAP) (0.1)% (7.1)% Acquisitions (Non-GAAP) 2.2 % 5.6 % Impact of currency translation (Non-GAAP) 0.2 % (1.0)%
Slide 30: Adjusted Effective Tax Rate
ADJUSTED EFFECTIVE TAX RATE Three Months Ended Nine Months Ended $ in millions September 27, 2019 September 25, 2020 September 27, 2019 September 25, 2020 Earnings before income taxes from continuing operations $ 235.1 $ 265.1 $ 631.8 $ 489.7 Income tax expense (27.8) (39.3) (85.2) (91.3) Effective
Slide 31: Historical Adjusted Operating Profit Recasted for Remaining Fortive Business
HISTORICAL ADJUSTED OPERATING PROFIT & ADJUSTED OPERATING PROFIT MARGIN RECASTED FOR REMAINING FORTIVE BUSINESS Three Months Ended December 31, 2019 $ in millions Professional Total Instrumentation (a) Corporate Remaining Fortive Revenue (GAAP) (b) $ 1,263.3 $ — $ 1,263.3 Acquisition-Related Fair Va
Slide 32: Fortive
(2) FORTIVE