Fortive Corporation · NYSE:FTV
Fortive — Q1 2022 Earnings Presentation
30 slides from Fortive's earnings presentation, Apr 28, 2022
Slide 1: First Quarter 2022 Earnings Release
First Quarter 2022 Earnings Release APRIL 28, 2022 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 anticipated financial results, economic conditions, future prospects, impact of supply chain constraints, duration and impact of COVID-19 pandemic
Slide 3: Q1 2022 Financials and Highlights
Q1 2022 FINANCIALS AND HIGHLIGHTS STRONG START TO THE YEAR Q1 2022 FINANCIALS Q1 2022 HIGHLIGHTS Core revenue and EPS growth ahead of expectations $1,377M 5.3% • Navigating challenging external environment Revenue Core Growth Demand continues robust +DD pace 1 2 • HW orders increased 14%; SW revenue
Slide 4: Raising 2022 Outlook
RAISING 2022 OUTLOOK STRONG EXECUTION AND MOMENTUM ACROSS PORTFOLIO WHAT WE ARE SEEING WHAT WE EXPECT STRONG ORDERS GROWTH SUSTAINED CORE GROWTH Driven by accelerated innovation, share gains, and leverage Inflection in core growth driven by normal seasonality. Strong to secular drivers. Hardware* ba
Slide 5: Executing Our Strategy
EXECUTING OUR STRATEGY FOCUSED CUSTOMER WORKFLOW SOLUTIONS WITH DURABLE GROWTH DRIVERS INTELLIGENT OPERATING PRECISION ADVANCED HEALTHCARE SOLUTIONS TECHNOLOGIES SOLUTIONS WORKFLOW EFFICIENCY Delivering leading workflow Enabling IoT expansion and Essential products and workflow solutions that facili
Slide 6: Q1 2022: Intelligent Operating Solutions
Q1 2022: INTELLIGENT OPERATING SOLUTIONS BROAD-BASED GROWTH AND EXECUTION INTELLIGENT OPERATING SOLUTIONS $ in millions Q1 2022 Highlights REVENUE ADJUSTED OPERATING PROFIT MARGIN • Assurance of supply mitigating constraints +15.0% -145 BPS • Robust +DD orders growth, record backlog • Diversifying c
Slide 7: Q1 2022: Precision Technologies
Q1 2022: PRECISION TECHNOLOGIES STRONG PERFORMANCE DESPITE SUPPLY CHAIN / CHINA SHUTDOWNS PRECISION TECHNOLOGIES $ in millions Q1 2022 Highlights REVENUE ADJUSTED OPERATING PROFIT MARGIN • Strong demand across geographies & end markets: HVAC, Aero/Def, EV/Auto, Semi +3.4% +30 BPS • DD+ orders growth
Slide 8: Q1 2022: Advanced Healthcare Solutions
Q1 2022: ADVANCED HEALTHCARE SOLUTIONS CORE GROWTH EXPECTED TO RAMP THROUGH YEAR ADVANCED HEALTHCARE SOLUTIONS $ in millions Q1 2022 Highlights REVENUE ADJUSTED OPERATING PROFIT MARGIN • Core growth unfavorably impacted by Covid +8.5% +160 BPS • NA electives stabilizing; uptick in Q2'22 • HSD core g
Slide 9: FBS in Action
FBS IN ACTION ENABLING AND EMPOWERING OUR TEAMS TO DRIVE SUSTAINABLE RESULTS THE FORTIVE BUSINESS SYSTEM FBS APPLICATION FBS IMPACT • Daily Visual Management / Problem • 35% improvement in unit output in Solving critical cells, recovering Q4 shortfall • Lean Portfolio Management • 5+ customer-driven
Slide 10: Fortive's Sustainability Journey
FORTIVE'S SUSTAINABILITY JOURNEY ACCELERATING PROGRESS TOWARDS A MORE SUSTAINABLE JOURNEY Leverage Company • 5th Annual Sustainability Report Products to Advance • 1st GRI Index • Initial TCFD aligned disclosure Fortive's Sustainability • Internal SEC Climate Disclosure • 1st CDP Climate Change Disc
Slide 11: Q1 2022 Revenue
Q1 2022 REVENUE NORTH AMERICA DRIVES REVENUE OUTPERFORMANCE Regional Highlights 9.3% NORTH WESTERN ASIA • Broad strength in North America; 5.3% Core AMERICA EUROPE strong revenue and orders growth despite supply chain challenges 69 1,377 1 (19) HSD MSD • Software revenue , primarily 67 (Core) (LSD)
Slide 12: Q1 2022 Performance Summary
Q1 2022 PERFORMANCE SUMMARY EXECUTING WELL IN CHALLENGING ENVIRONMENT Performance Highlights ADJ. GROSS ADJ. OPERATING ADJ. EARNINGS FREE CASH MARGIN PROFIT MARGIN PER SHARE FLOW ($M) +60 BPS +30 BPS +11% +36% • 60 bps of GMX driven by favorable price/cost spread $0.70 $196 • 30 bps of OMX; +250 bps
Slide 13: Q2 and FY 2022 Outlook
Q2 AND FY 2022 OUTLOOK ANOTHER YEAR OF DOUBLE-DIGIT EARNINGS AND FREE CASH FLOW GROWTH Q2 and FY Q2 2022 FY 2022 Details REVENUE $1,385 – 1,425M $5,765 – 5,875M • Q2: M&A ~480 bps, FX ~(180) bps • FY: M&A ~430 bps, FX ~(80) bps Core / Total Growth 2% to 5% / 5% to 8% 6% to 8.5% / 9.5% to 12% ADJ. OP
Slide 14: 2022 Revenue Walk
2022 REVENUE WALK STRONG DEMAND AND RECORD BACKLOG SUPPORT 2H OUTLOOK Key $ in millions ~15% Drivers 2-Yr Stack 216 3,038 • 1H:2H reflects reasonable 48:52 ~20% seasonality profile 2-Yr Stack 20 20 • 2H includes ~$60M of volume that 2,777 shifted from 1H:2H as a result of 1H Shanghai lockdowns • Str
Slide 15: Building a More Resilient Business
BUILDING A MORE RESILIENT BUSINESS PORTFOLIO STRATEGY YIELDING RESULTS 2016 SPIN 2017 2018 2019 2020 2021 +$7B +$2.3B +820BPS NET CAPITAL ‘22 REVENUE OMX SINCE DEPLOYED ACQUIRED, UP LDD* ACQUISITION* ENHANCED CORE GROWTH REDUCED CYCLICALITY BUILT LEADING EHS POSITION PREEMPTIVELY EXITED MORE CYCLICA
Slide 16: Compounding Underpins Investment Thesis
COMPOUNDING UNDERPINS INVESTMENT THESIS ACCELERATED EARNINGS AND CASH FLOW GROWTH Summary ANNUAL FREE CASH FLOW ($ million) • Strong Q1'22 performance reinforces +40% sustained core growth and M&A execution • Raising FY 2022 outlook to reflect strong 1,200 start to the year +90% • Consistently impro
Slide 17: Appendix & Supplemental Reconciliation Data
Appendix & Supplemental Reconciliation Data 17
Slide 18: Q2 and FY 2022 Segment Outlooks
Q2 AND FY 2022 SEGMENT OUTLOOKS Q2 2022 FY 2022 IOS PT AHS IOS PT AHS REVENUE GROWTH Core 4% to 7% Flat to 3% 1% to 4% 7.5% to 9.5% 7% to 9% 3% to 5% Total 8.5% to 11.5% (1.5)% to 1.5% 8.5% to 11.5% 11% to 13% 6.5% to 8.5% 12% to 14% ADJ. OP. PROFIT >27% >23.5% >24.5% 28.5% to 29% 24.5% to 25% 24.5%
Slide 19: Adjusted Gross Profit and Adjusted Gross Profit Margin
ADJUSTED GROSS PROFIT AND ADJUSTED GROSS PROFIT MARGIN Three Months Ended $ in millions April 1, 2022 April 2, 2021 Revenue (GAAP) $ 1,376.5 $ 1,259.2 Adjusted Gross Profit Gross Profit (GAAP) $ 792.0 $ 711.9 Acquisition-Related Fair Value Adjustments to Inventory 0.4 5.5 Adjusted Gross Profit (Non-
Slide 20: Adjusted Operating Profit & Adjusted Operating Profit Margin
ADJUSTED OPERATING PROFIT & ADJUSTED OPERATING PROFIT MARGIN Three Months Ended April 1, 2022 Three Months Ended April 2, 2021 $ in millions Intelligent Precision Advanced Corporate Total Intelligent Precision Advanced Corporate Total Operating Technologies Healthcare Fortive Operating Technologies
Slide 21: Two Year Stack - Adjusted Operating Profit and Margin
TWO YEAR STACK - ADJUSTED OPERATING PROFIT AND ADJUSTED OPERATING PROFIT MARGIN Three Months Ended April 1, 2022 Three Months Ended March 27, 2020 $ in millions Intelligent Precision Advanced Corporate Total Intelligent Precision Advanced Corporate Total Operating Technologies Healthcare Fortive Ope
Slide 22: Adjusted Operating Profit Margin
ADJUSTED OPERATING PROFIT MARGIN Three Months Ended April 1, 2022 Intelligent Precision Advanced Total Operating Technologies Healthcare Fortive Solutions Solutions 2021 Adjusted Operating Profit Margin (Non-GAAP) 28.6 % 22.4 % 21.8 % 22.7 % Core (Non-GAAP) —% 0.3 % (0.4)% 0.3 % Acquisitions (Non-GA
Slide 23: Adjusted Net Earnings from Continuing Operations
ADJUSTED NET EARNINGS FROM CONTINUING OPERATIONS Three Months Ended $ in millions April 1, 2022 April 2, 2021 Net Earnings Attributable to Common Stockholders from Continuing Operations (GAAP) (a) $ 165.1 $ 94.4 Dividends on the mandatory convertible preferred stock to apply if-converted method (a)
Slide 24: Adjusted Diluted Net EPS
ADJUSTED DILUTED NET EPS Three Months Ended (a) April 1, April 2, 2022 2021 Net Earnings Attributable to Common Stockholders from Continuing Operations (GAAP) (b) $ 0.45 $ 0.28 (b) Dividends on the mandatory convertible preferred stock to apply if-converted method — 0.05 Assumed dilutive impact on t
Slide 25: Forecasted Adjusted Diluted Net EPS from Continuing Operations
FORECASTED ADJUSTED DILUTED NET EPS FROM CONTINUING OPERATIONS Three Months Ending Twelve Months Ending July 1, 2022 December 31, 2022 Low High Low High Forecasted Net Earnings Per Share from Continuing Operations (GAAP) $ 0.44 $ 0.47 $ 2.07 $ 2.16 Forecasted interest on the Convertible Notes to app
Slide 26: Free Cash Flow Conversion Ratio - Twelve Months Ended April 1, 2022
FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED APRIL 1, 2022 AND APRIL 2, 2021 $ in millions Three Months Ended Twelve Months Ended April 1, 2022 December 31, 2021 October 1, 2021 July 1, 2021 April 1, 2022 Operating Cash Flows from Continuing Operations (GAAP) $ 214.8 $ 287.0 $ 262.9 $ 291.0
Slide 27: Adjusted Free Cash Flow Conversion Ratio
ADJUSTED FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED APRIL 1, 2022 AND APRIL 2, 2021 $ in millions Three Months Ended Twelve Months Ended April 1, 2022 December 31, 2021 October 1, 2021 July 1, 2021 April 1, 2022 Operating Cash Flows from Continuing Operations (GAAP) $ 214.8 $ 287.0 $ 262.
Slide 28: Core Revenue Growth
CORE REVENUE GROWTH Components of Revenue Growth Three Months Ended April 1, 2022 Total Fortive Total Revenue Growth (GAAP) 9.3 % Core (Non-GAAP) 5.3 % Acquisitions (Non-GAAP) 5.5 % Impact of currency translation (Non-GAAP) (1.5)% Intelligent Operating Solutions Total Revenue Growth (GAAP) 15.0 % Co
Slide 29: Adjusted Effective Tax Rate
ADJUSTED EFFECTIVE TAX RATE Three Months Ended $ in millions April 1, 2022 April 2, 2021 Earnings before income taxes from continuing operations $ 190.8 $ 118.7 Income tax expense (25.7) (7.0) Effective tax rate (GAAP) 13.5 % 5.9 % Earnings before income taxes from continuing operations (GAAP) $ 190
Slide 30: Fortive
(2) FORTIVE