Slide 1: Second Quarter 2020 Earnings Release
Second Quarter 2020 Earnings Release July 28, 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: Q2 Summary: Strong Quarter Despite Unprecedented Macro Challenges
Q2 SUMMARY Strong Quarter Despite Unprecedented Macro Challenges • Q2 revenue performance better than expected despite COVID-19 impact - Total revenue ~(16)% versus expectation for (20)% - (25)% – Both Professional Instrumentation and Industrials Technologies performed at bit better than expected –
Slide 4: Q2 2020 Financial Performance: Summary of Key Financial Items
Q2 2020 FINANCIAL PERFORMANCE Summary of Key Financial Items Revenue ($M) Adjusted Operating Profit Adjusted Diluted Net Free Cash Flow ($M) Margin (%) Earnings Per Share ($) $1,865 $0.90 $1,571 $454 22.3% 20.2% $0.68 $236 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 Q2 2019 Q2 2020 • Core growth
Slide 5: Q2 2020 Financial Performance: Free Cash Flow Detail
Q2 2020 FINANCIAL PERFORMANCE Free Cash Flow Detail Free Cash Flow ($M) - Q2 2020 • Q2 2020: $612 – Free Cash Flow: $454 million (+93% versus Prior Year) $454 2019 $373 – FCF Conversion: 348% of GAAP Net Earnings; 188% of Adjusted Net Earnings 2020 $236 • 2020 YTD: QTD YTD – Free Cash Flow: $612 mil
Slide 6: Segment Detail
@ FORTIVE Segment Detail
Slide 7: Professional Instrumentation: Q2 Revenue Declined Less than Expected
PROFESSIONAL INSTRUMENTATION Q2 Revenue Declined Less than Expected; Resilience from Software-Focused Businesses • Fluke declined High-Teens: +MSD growth in China offset by significant COVID-related pressure in North America and Western Europe – Resilience from growth at Fluke Health Solutions and F
Slide 8: Industrial Technologies: EMV Demand Continued at GVR
INDUSTRIAL TECHNOLOGIES EMV Demand Continued at GVR; Matco Improved Through June Following April Low • GVR declined in the Low-20% range: Conversion of orders to deliveries impacted by social distancing requirements in facilities and lack of access customer sites - Total bookings +MSD through the fi
Slide 9: Regional Commentary
REGIONAL COMMENTARY Revenue Performance Across Major Regions Better than Expected in Q2 • China -MSD in Q2, with steady signs of progress across our China businesses. All major businesses in China saw sequential improvement in Q2, with several OpCos, including Fluke and ASP, posting positive Y/Y gro
Slide 10: Portfolio Framework Presented with Q1 Results
PORTFOLIO FRAMEWORK PRESENTED WITH Q1 RESULTS Anticipated Relative Impact - COVID-19 / Economic Consequences Group I Group II Group III Group IV • Less COVID-19 impact and good order • Impacted by COVID-19 but expected to • Significantly impacted by COVID-19 • Significantly impacted by COVID-19 and
Slide 11: Q2 Performance by Portfolio Group
Q2 PERFORMANCE BY PORTFOLIO GROUP Largely In-Line with April's Expectation; Some Quicker-than-Expected Improvement Group I Group II ~14% of Revenue* ~48% of Revenue* Q2 Growth: +MSD Q2 Growth: (Mid-Teens)% • Strong growth from Intelex (+Mid-Teens) and eMaint (+HSD) • At GVR, ability to convert order
Slide 12: Continuing to Play Offense
CONTINUING TO PLAY OFFENSE Investing in Our Products and Teams to Drive Long-Term Growth • Using Dynamic Resource Allocation (DRA) to maintain key growth initiatives – >$10M of additional spending to support sales efforts (e.g. removed ASP furlough) and other innovation programs across the portfolio
Slide 13: Thoughts on Q3 and FY 2020
THOUGHTS ON Q3 and FY 2020 Key Anticipated Financial Metrics for Q3 and FY 2020 • Q3 2020 Considerations – Anticipating a 5% - 8% decline in Y/Y total revenue in Q3 – Decremental margins of ~35%; Balancing cost actions and FCF generation with investments to drive growth • FY 2020 Considerations – Ex
Slide 14: Supplemental Reconciliation Data
Supplemental Reconciliation Data 14
Slide 15: Adjusted Gross Profit Margin
ADJUSTED GROSS PROFIT MARGIN Three Months Ended Six Months Ended $ in millions June 28, 2019 June 26, 2020 June 28, 2019 June 26, 2020 Revenue (GAAP) $ 1,864.7 $ 1,571.2 $ 3,457.6 $ 3,284.7 Acquisition-Related Fair Value Adjustments to Deferred Revenue 10.1 4.6 25.7 11.5 Adjusted Revenue (Non-GAAP)
Slide 16: Adjusted Operating Profit & Adjusted Operating Profit Margin
ADJUSTED OPERATING PROFIT & ADJUSTED OPERATING PROFIT MARGIN Three Months Ended June 28, 2019 Three Months Ended June 26, 2020 $ in millions Professional Industrial Corporate Total Professional Industrial Corporate Total Instrumentation Technologies Fortive Instrumentation Technologies Fortive Reven
Slide 17: Adjusted Operating Profit & Margin (Six Months)
ADJUSTED OPERATING PROFIT & ADJUSTED OPERATING PROFIT MARGIN Six Months Ended June 28, 2019 Six Months Ended June 26, 2020 $ in millions Professional Industrial Corporate Total Professional Industrial Corporate Total Instrumentation Technologies Fortive Instrumentation Technologies Fortive Revenue (
Slide 18: Adjusted Operating Profit Margin
ADJUSTED OPERATING PROFIT MARGIN Three Months Ended June 26, 2020 Six Months Ended June 26, 2020 $ in millions Professional Industrial Total Professional Industrial Total Instrumentation Technologies Fortive Instrumentation Technologies Fortive 2019 Adjusted Operating Profit Margin (Non-GAAP) 24.6 %
Slide 19: Decremental Adjusted Operating Profit Margin & Segment Adjusted Gross Profit
DECREMENTAL ADJUSTED OPERATING PROFIT MARGIN & SEGMENT ADJUSTED GROSS PROFIT Three Months Ended June 28, 2019 Three Months Ended June 26, 2020 $ in millions Professional Industrial Corporate Total Professional Industrial Corporate Total Instrumentation Technologies Fortive Instrumentation Technologi
Slide 20: Adjusted Net Earnings from Continuing Operations
ADJUSTED NET EARNINGS FROM CONTINUING OPERATIONS Three Months Ended Six Months Ended $ in millions June 28, 2019 June 26, 2020 June 28, 2019 June 26, 2020 Net Earnings From Continuing Operations Attributable to Common Stockholders (GAAP) $ 158.1 $ 113.1 $ 304.8 $ 138.1 Dividends on the mandatory con
Slide 21: Adjusted Diluted Net EPS
ADJUSTED DILUTED NET EPS Three Months Ended (a) Six Months Ended (a) June 28, 2019 June 26, 2020 June 28, 2019 June 26, 2020 Diluted Net Earnings Per Share from Continuing Operations Attributable to Common Stockholders (GAAP) $ 0.47 $ 0.33 $ 0.90 $ 0.41 Dividends on the mandatory convertible preferr
Slide 22: Adjusted Diluted Shares Outstanding
ADJUSTED DILUTED SHARES OUTSTANDING Three Months Ended Six Months Ended (shares in millions) June 28, 2019 June 26, 2020 June 28, 2019 June 26, 2020 Average common diluted stock outstanding 339.7 339.7 339.8 339.9 MCPS Converted Shares (a) 17.5 18.4 17.5 18.4 Adjusted average common stock and common
Slide 23: Free Cash Flow Conversion Ratio
FREE CASH FLOW CONVERSION RATIO $ in millions Three Months Ended Six Months Ended June 28, 2019 June 26, 2020 % Change June 28, 2019 June 26, 2020 % Change Operating Cash Flows from Continuing Operations (GAAP) $ 260.2 $ 479.6 84.3 % $ 421.4 $ 671.0 59.2 % Less: purchases of property, plant & equipm
Slide 24: Adjusted Free Cash Flow Conversion Ratio
ADJUSTED FREE CASH FLOW CONVERSION RATIO $ in millions Three Months Ended Six Months Ended June 28, 2019 June 26, 2020 % Change June 28, 2019 June 26, 2020 % Change Operating Cash Flows from Continuing Operations (GAAP) $ 260.2 $ 479.6 84.3 % $ 421.4 $ 671.0 59.2 % Less: purchases of property, plant
Slide 25: Free Cash Flow Conversion Ratio - Twelve Months Ended June 26, 2020
FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED JUNE 26, 2020 $ in millions Three Months Ended Twelve Months Ended September 27, 2019 December 31, 2019 March 27, 2020 June 26, 2020 June 26, 2020 Operating Cash Flows from Continuing Operations (GAAP) $ 379.0 $ 484.5 $ 191.4 $ 479.6 $ 1,534.5 Le
Slide 26: Free Cash Flow Conversion Ratio - Twelve Months Ended June 28, 2019
FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED JUNE 28, 2019 $ in millions Three Months Ended Twelve Months Ended September 28, 2018 December 31, 2018 March 29, 2019 June 28, 2019 June 28, 2019 Operating Cash Flows from Continuing Operations (GAAP) $ 355.8 $ 422.5 $ 161.2 $ 260.2 $ 1,199.7 Le
Slide 27: Adjusted Free Cash Flow Conversion Ratio - Twelve Months Ended June 26, 2020
ADJUSTED FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED JUNE 26, 2020 $ in millions Three Months Ended Twelve Months Ended September 27, 2019 December 31, 2019 March 27, 2020 June 26, 2020 June 26, 2020 Operating Cash Flows from Continuing Operations (GAAP) $ 379.0 $ 484.5 $ 191.4 $ 479.6 $ 1
Slide 28: Adjusted Free Cash Flow Conversion Ratio - Twelve Months Ended June 28, 2019
ADJUSTED FREE CASH FLOW CONVERSION RATIO - TWELVE MONTHS ENDED JUNE 28, 2019 $ in millions Three Months Ended Twelve Months Ended September 28, 2018 December 31, 2018 March 29, 2019 June 28, 2019 June 28, 2019 Operating Cash Flows from Continuing Operations (GAAP) $ 355.8 $ 422.5 $ 161.2 $ 260.2 $ 1
Slide 29: Core Revenue Growth
CORE REVENUE GROWTH Components of Revenue Growth Three Months Ended June 26, 2020 Six Months Ended June 26, 2020 Total Fortive Total Revenue Growth (GAAP) (15.7)% (5.0)% Core (Non-GAAP) (16.8)% (10.8)% Acquisitions (Non-GAAP) 2.7 % 7.4 % Impact of currency translation (Non-GAAP) (1.6)% (1.6)% Profes
Slide 30: Adjusted Effective Tax Rate
ADJUSTED EFFECTIVE TAX RATE Three Months Ended Six Months Ended $ in millions June 28, 2019 June 26, 2020 June 28, 2019 June 26, 2020 Earnings before income taxes from continuing operations $ 204.3 $ 153.2 $ 396.7 $ 224.6 Income tax expense (29.0) (22.9) (57.4) (52.0) Effective tax rate (GAAP) 14.2
Slide 31: Fortive
(2) FORTIVE