Fortive Corporation · NYSE:FTV
Fortive — Q1 2020 Earnings Presentation
31 slides from Fortive's earnings presentation, Apr 30, 2020
Slide 1: First Quarter 2020 Earnings Release
First Quarter 2020 Earnings Release April 30, 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: COVID-19 Response: Keeping Employees Safe and Fighting COVID-19
COVID-19 RESPONSE Proactive Response to Keep Our Employees Safe and Help the Fight Against COVID-19 • Agile response managed via centralized COVID-19 task force - Highest priority remains health and safety of our team – Learnings from daily management in China (Jan/Feb) quickly adapted and applied f
Slide 4: COVID-19 Response: Aggressive Cost Actions and Emphasis on Cash Flow
COVID-19 RESPONSE Aggressive Cost Actions and Emphasis on Cash Flow • Immediate and decisive actions to right-size our cost base – Lowering of direct labor and salaried expense, primarily through the use of furloughs – Senior leadership of Fortive and Vontier leading from the front with salary reduc
Slide 5: Q1 2020 Financial Performance: Summary of Key Financial Items
Q1 2020 FINANCIAL PERFORMANCE Summary of Key Financial Items Revenue ($M) Adjusted Operating Profit Adjusted Diluted Net Free Cash Flow ($M)* Margin (%) Earnings Per Share ($)* $158 $1,714 $0.74 20.4% $0.69 $137 $1,593 19.6% Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 Q1 2019 Q1 2020 • Core grow
Slide 6: Q1 2020 Financial Performance: Cash Flow
Q1 2020 FINANCIAL PERFORMANCE* Cash Flow Free Cash Flow ($M) - Q1 2020 • Q1 2020: $158 – Free Cash Flow: $158 million (+15% versus Prior Year) 2019 $137 – FCF Conversion: 373% of GAAP Net Earnings; 60% of 2020 Adjusted Net Earnings QTD Free Cash Flow ($M) - Trailing 12-Months Ended March • Trailing
Slide 7: Segment Detail
Segment Detail @ FORTIVE
Slide 8: Professional Instrumentation Q1 Performance Overview
PROFESSIONAL INSTRUMENTATION Q1 Performance Overview • Fluke core revenue declined HSD: North America (-LSD), W. Europe (-LDD) and China (-HSD) impacted by lower demand due to COVID-19, offset by increased demand for Industrial Imaging products – North America POS -MSD, with some deterioration seen
Slide 9: Industrial Technologies Q1 Performance Overview
INDUSTRIAL TECHNOLOGIES Q1 Performance Overview • GVR grew MSD: 20%+ growth in North America, driven by EMV, partially offset by significant decline in China – North America saw strong EMV orders through the end of the quarter; expecting some topline pressure in Q2 from COVID-19 impact – Western Eur
Slide 10: COVID-19 Impact by Region
COVID-19 IMPACT BY REGION All Geographies Affected by the Spread of COVID-19 • Significant impact from COVID-19 disruption and economic restrictions in China – Lost production from extended Lunar New Year and saw slower ramp post-holiday, as expected Asia Pacific – Activity picked up in Feb/March -
Slide 11: Anticipated Business Performance: Relative Impact of COVID-19
ANTICIPATED BUSINESS PERFORMANCE Relative Impact - COVID-19 / Economic Consequences Group I Group II Group III Group IV ~15% of Revenue* ~50% of Revenue* 10%-15% of Revenue* 20%-25% of Revenue* • Less COVID-19 impact and good order • Impacted by COVID-19 but expected to • Significantly impacted by C
Slide 12: Leverage & Liquidity Update
LEVERAGE & LIQUIDITY UPDATE Taken Several Proactive Steps to Make Our Strong Liquidity Position Even Stronger • Ended Q1 with $1B of global cash Cash Balance • Repatriating ~$300M of OUS cash in total; ~$25M in Q1 • Amended net leverage covenant to 4.75x until Q1 2021 Senior Debt Covenants • Gradual
Slide 13: Thoughts on Q2 and FY 2020
THOUGHTS ON Q2 and FY 2020 Withdrawing Guidance; Providing Key Anticipated Financial Metrics for Q2 and FY 2020 • Withdrawing our previously issued 2020 guidance; Not guiding to Q2 2020 – Lack of forward visibility due to combination of COVID-19 and shifting macroeconomic outlook • Q2 2020 Considera
Slide 14: Focused on Continuing to Drive Long-Term Value
FOCUSED ON CONTINUING TO DRIVING LONG-TERM VALUE Despite Near-Term Uncertainty, Not Losing Sight of Long-Term Value Creation • Continuing to "play offense" - selectively pursuing actions and investments that better position Fortive • Supporting growth accelerator initiatives and investments in innov
Slide 15: Supplemental Reconciliation Data
Supplemental Reconciliation Data* * From continuing operations 15
Slide 16: Adjusted Gross Profit Margin
ADJUSTED GROSS PROFIT MARGIN Three Months Ended $ in millions March 29, 2019 March 27, 2020 Revenue (GAAP) $ 1,592.9 $ 1,713.5 Acquisition-Related Fair Value Adjustments to Deferred Revenue 15.7 6.9 Adjusted Revenue (Non-GAAP) $ 1,608.6 $ 1,720.4 Adjusted Gross Profit Gross Profit (GAAP) $ 812.7 $ 8
Slide 17: Adjusted Operating Profit & Adjusted Operating Profit Margin
ADJUSTED OPERATING PROFIT & ADJUSTED OPERATING PROFIT MARGIN Three Months Ended March 27, 2020 $ in millions Professional Industrial Corporate Total Instrumentation Technologies Fortive Revenue (GAAP) $ 1,104.4 $ 609.1 $ — $ 1,713.5 Acquisition-Related Fair Value Adjustments to Deferred Revenue 6.9
Slide 18: Adjusted Operating Profit & Adjusted Operating Profit Margin
ADJUSTED OPERATING PROFIT & ADJUSTED OPERATING PROFIT MARGIN Three Months Ended March 29, 2019 $ in millions Professional Industrial Corporate Total Instrumentation Technologies Fortive Revenue (GAAP) $ 977.7 $ 615.2 $ — $ 1,592.9 Acquisition-Related Fair Value Adjustments to Deferred Revenue 15.7 —
Slide 19: Adjusted Operating Profit Margin
ADJUSTED OPERATING PROFIT MARGIN Three Months Ended March 27, 2020 $ in millions Professional Industrial Total Instrumentation Technologies Fortive 2019 Adjusted Operating Profit Margin (Non-GAAP) 23.4 % 17.4% 19.6 % Core (Non-GAAP) 1.3 % 1.9% 1.5 % Acquisitions (Non-GAAP) (1.5)% —% (0.7)% 2020 Adju
Slide 20: Adjusted Net Earnings from Continuing Operations
ADJUSTED NET EARNINGS FROM CONTINUING OPERATIONS Three Months Ended $ in millions March 29, 2019 March 27, 2020 Net Earnings From Continuing Operations Attributable to Common Stockholders (GAAP) $ 146.7 $ 25.0 Dividends on the mandatory convertible preferred stock 17.3 17.3 Net Earnings from Continu
Slide 21: Adjusted Diluted Net EPS
ADJUSTED DILUTED NET EPS Three Months Ended (a) March 29, 2019 March 27, 2020 Diluted Net Earnings Per Share from Continuing Operations Attributable to Common Stockholders (GAAP) $ 0.43 $ 0.07 Dividends on the mandatory convertible preferred stock to apply if-converted method 0.05 0.05 Assumed dilut
Slide 22: Adjusted Diluted Shares Outstanding
ADJUSTED DILUTED SHARES OUTSTANDING Three Months Ended (shares in millions) March 29, 2019 March 27, 2020 Average common diluted stock outstanding 339.5 340.0 MCPS Converted Shares (a) 16.7 18.4 Adjusted average common stock and common equivalent shares outstanding 356.2 358.4 (a) The number of MCPS
Slide 23: Free Cash Flow Conversion Ratio
FREE CASH FLOW CONVERSION RATIO $ in millions Three Months Ended March 29, 2019 March 27, 2020 % Change Operating Cash Flows from Continuing Operations (GAAP) $ 161.2 $ 191.4 18.7% Less: purchases of property, plant & equipment (capital expenditures) from continuing operations (GAAP) (24.0) (33.8) F
Slide 24: Adjusted Free Cash Flow Conversion Ratio
ADJUSTED FREE CASH FLOW CONVERSION RATIO $ in millions Three Months Ended March 29, 2019 March 27, 2020 % Change Operating Cash Flows from Continuing Operations (GAAP) $ 161.2 $ 191.4 18.7% Less: purchases of property, plant & equipment (capital expenditures) from continuing operations (GAAP) (24.0)
Slide 25: Free Cash Flow Conversion Ratio - Twelve Months Ended March 27, 2020
FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED MARCH 27, 2020 $ in millions Three Months Ended Twelve Months Ended June 28, 2019 September 27, 2019 December 31, 2019 March 27, 2020 March 27, 2020 Operating Cash Flows from Continuing Operations (GAAP) $ 260.2 $ 379.0 $ 484.5 $ 191.4 $ 1,315.1
Slide 26: Free Cash Flow Conversion Ratio - Twelve Months Ended March 29, 2019
FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED MARCH 29, 2019 $ in millions Three Months Ended Twelve Months Ended June 29, 2018 September 28, 2018 December 31, 2018 March 29, 2019 March 29, 2019 Operating Cash Flows from Continuing Operations (GAAP) $ 292.3 $ 355.8 $ 422.5 $ 161.2 $ 1,231.8
Slide 27: Adjusted Free Cash Flow Conversion Ratio - Twelve Months Ended March 27, 2020
ADJUSTED FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED MARCH 27, 2020 $ in millions Three Months Ended Twelve Months Ended June 28, 2019 September 27, 2019 December 31, 2019 March 27, 2020 March 27, 2020 Operating Cash Flows from Continuing Operations (GAAP) $ 260.2 $ 379.0 $ 484.5 $ 191.4 $
Slide 28: Adjusted Free Cash Flow Conversion Ratio - Twelve Months Ended March 29, 2019
ADJUSTED FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED MARCH 29, 2019 $ in millions Three Months Ended Twelve Months Ended June 29, 2018 September 28, 2018 December 31, 2018 March 29, 2019 March 29, 2019 Operating Cash Flows from Continuing Operations (GAAP) $ 292.3 $ 355.8 $ 422.5 $ 161.2 $
Slide 29: Core Revenue Growth
CORE REVENUE GROWTH Components of Revenue Growth Three Months Ended March 27, 2020 Total Fortive Total Revenue Growth (GAAP) 7.6 % Core (Non-GAAP) (3.8)% Acquisitions (Non-GAAP) 13.0 % Impact of currency translation (Non-GAAP) (1.6)% Professional Instrumentation Total Revenue Growth (GAAP) 13.0 % Co
Slide 30: Adjusted Effective Tax Rate
ADJUSTED EFFECTIVE TAX RATE Three Months Ended $ in millions March 29, 2019 March 27, 2020 Earnings before income taxes from continuing operations $ 192.4 $ 71.4 Income tax expense (28.4) (29.1) Effective tax rate (GAAP) 14.8% 40.8% Earnings before income taxes from continuing operations (GAAP) $ 19
Slide 31: (2) FORTIVE
(2) FORTIVE