Financial Data and Key Metrics Changes - In Q3, total revenue was just over $1 billion, reflecting a year-over-year increase of approximately 2% on both a reported and core basis [12][13] - Adjusted EBITDA grew by 10% year-over-year to $309 million, with an adjusted EBITDA margin expanding approximately 200 basis points to 30% [14][12] - Adjusted EPS increased by 15% year-over-year to $0.68, driven by growth in adjusted EBITDA and favorable interest expense [14][12] - Free cash flow for Q3 was $266 million, with trailing twelve-month free cash flow growing to $922 million [15][20] Business Line Data and Key Metrics Changes - Intelligent Operating Solutions (iOS) segment revenue grew just over 2.5% on a reported basis, with core revenue growth at 2% [15][16] - Advanced Healthcare Solutions (AHS) segment revenue was $328 million, growing approximately 2% year-over-year, with adjusted EBITDA margin expanding from roughly 27% to 28% [18][17] Market Data and Key Metrics Changes - North America showed solid growth, improving sequentially from Q2, driven by strengthening demand trends for professional instrumentation and healthcare equipment [13][12] - Europe experienced a year-over-year decline, worsened by weakening macro conditions [13] - The rest of the world showed mixed results, with significant acceleration in South Asia, particularly India [10][12] Company Strategy and Development Direction - The company is focused on driving profitable organic growth through the Fortive Business System, with a strategy centered on innovation acceleration, commercial acceleration, and recurring customer value [8][9] - Capital allocation priorities include investing in organic growth, pursuing accretive bolt-on M&A, returning capital through share repurchases, and maintaining a modest growing dividend [11][10] - The company is committed to maximizing medium to long-term shareholder returns through disciplined capital allocation [25][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth trajectory, emphasizing the benefits of simplification and a customer-centric approach [23][24] - The outlook for Q4 anticipates a moderation in overall core growth, with AHS core growth expected to be broadly in line with Q3 levels [21][22] - Management remains confident in the resilience of healthcare spending despite potential policy changes, citing strong customer loyalty and ongoing demand trends [104][105] Other Important Information - The company successfully completed the spin-off of its Precision Technologies segment, now operating independently as Rallian [3] - The company has revamped its M&A strategy to focus on smaller, bolt-on acquisitions rather than transformational M&A [41][42] Q&A Session Summary Question: Margin performance and Q4 guidance - Management acknowledged that Q3 margin performance was aided by cost discipline and discrete actions taken to free up resources for growth initiatives, with expectations for some reinvestment in Q4 [31][32] Question: Impact of government shutdown - Management indicated that the federal government shutdown has not significantly impacted their business, as their exposure is primarily to state and local agencies [34][35] Question: Capital allocation and buybacks - The company expressed satisfaction with the $1 billion share repurchase in Q3, reflecting strong free cash flow and attractive valuations, while emphasizing a balanced approach to capital allocation between buybacks and bolt-on M&A [40][41] Question: Demand trends in AHS - Management reported sequential improvement in demand for healthcare capital equipment in North America, driven by increased certainty around legislative conditions [58][59] Question: Software business performance - The software segment continues to perform well, with strong demand for facilities software and ongoing product innovation [66][67] Question: Simplification impact on growth - Management expects increasing impact from simplification efforts as they continue to free up resources for growth initiatives [75][76] Question: Regional demand trends - North America remains the strongest market, while Western Europe has been the softest, with mixed results in other regions [78][79]

Financial Data and Key Metrics Changes - In Q3, total revenue was just over $1 billion, reflecting a year-over-year increase of approximately 2% on both a reported and core basis [12][13] - Adjusted EBITDA was $309 million, up 10% year-over-year, with an adjusted EBITDA margin expanding approximately 200 basis points to 30% [14][15] - Adjusted EPS was $0.68, representing a 15% year-over-year increase, driven by growth in adjusted EBITDA and favorable interest expense [14][15] Business Line Data and Key Metrics Changes - **Intelligent Operating Solutions (iOS)**: Revenue grew just over 2.5% on a reported basis, with core revenue growth at 2%. Growth was driven by demand for facility and asset lifecycle software and professional instrumentation [15][16] - **Advanced Healthcare Solutions (AHS)**: Total revenue was $328 million, growing approximately 2% year-over-year. Demand trends improved sequentially, particularly for healthcare equipment and software [18][19] Market Data and Key Metrics Changes - North America showed solid growth, improving sequentially from Q2, driven by strengthening demand trends for professional instrumentation and healthcare equipment [13][18] - Europe experienced a decline year-over-year, worsened by weakening macro conditions [13] - The rest of the world showed mixed results, with significant acceleration in South Asia, particularly India [10][13] Company Strategy and Development Direction - The company is focused on driving profitable organic growth through its Fortive Business System, emphasizing innovation acceleration, commercial acceleration, and recurring customer value [8][10] - Capital allocation priorities include investing in organic growth, pursuing accretive bolt-on M&A, returning capital through share repurchases, and maintaining a modest growing dividend [11][19] - The company aims to simplify operations and enhance customer-centric approaches, which are expected to yield positive outcomes in the future [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's growth trajectory, citing strong customer relationships and a robust pipeline of growth opportunities [24][25] - The company anticipates a moderation in overall core growth in Q4, with AHS core growth expected to align with Q3 levels [21][22] - Management remains confident in the healthcare market's resilience despite potential policy changes, driven by aging demographics and increasing healthcare needs [105][106] Other Important Information - The company successfully completed the spin-off of its Precision Technologies segment, now operating as Rallian, on June 28, 2025 [3][4] - The company deployed $1 billion for share repurchases in Q3, retiring approximately 21 million shares, reflecting confidence in its value creation plan [7][19] Q&A Session Summary Question: Margin performance and Q4 guidance - Management acknowledged that Q3 margin performance was aided by cost discipline and discrete actions taken to free up resources for growth initiatives, with expectations to maintain cost discipline in Q4 [31][32] Question: Impact of government shutdown - Management indicated that the federal government shutdown has minimal direct exposure for the company, primarily affecting state and local government agencies [34][35] Question: Capital allocation and M&A strategy - Management confirmed that share repurchases will be a significant part of capital allocation, focusing on smaller bolt-on acquisitions rather than transformational M&A [40][42] Question: Fluke performance and demand indicators - Management reported strong order growth and stable sell-through patterns for Fluke, with improvements in channel inventory and ongoing product innovation [43][44] Question: AHS segment demand trends - Management noted sequential improvement in demand for healthcare capital equipment and consumables, driven by more certainty in legislative conditions [56][58] Question: Tax rate outlook - Management projected a mid-teens effective tax rate for the next few years, with potential risks from new proposals [59][60] Question: Software business performance - Management highlighted strong growth in the software segment, particularly in AI-related applications, and noted that IT spending remains robust [66][68] Question: Demand trends by region - Management indicated strong performance in North America, while Western Europe remains soft, with mixed results in other regions [78][79]

Fortive (FTV) 2025 Investor Day Summary Company Overview - Fortive is transitioning into a new chapter with a focus on safety and productivity innovations across its brands, particularly after the spin-off of Rallyant effective June 28, 2025 [3][4] - The company will operate under two segments: Intelligent Operating Solutions (70% of revenue) and Advanced Healthcare Solutions (30% of revenue) [27] Financial Performance - Fortive reported approximately $4 billion in revenues with 50% recurring revenues, 65% adjusted gross margins, and 30% adjusted EBITDA margins [14] - The company has achieved a 4% core revenue compound annual growth rate (CAGR) over the last five years [14][34] - The adjusted net income to free cash flow conversion exceeds 100% [14] Strategic Vision - Fortive aims to accelerate revenue, earnings, and shareholder value creation through a focused strategy leveraging high-quality operating brands aligned with attractive markets [15][36] - The company emphasizes durability by design, focusing on sustainability and recurring revenue models [36][48] - Fortive's business system is seen as the engine of success, enhanced by integrating AI capabilities to drive organic growth [17][57] Market Trends and Opportunities - The company is positioned to benefit from significant market trends, including a 200% increase in U.S. manufacturing construction investment since 2020 and a $1 trillion deferred infrastructure maintenance backlog [44][45] - In healthcare, demographic shifts indicate that 20% of the U.S. population will be over 65 by 2030, increasing the demand for healthcare services [46] - Fortive's Advanced Healthcare Solutions segment has an 80% recurring revenue base, indicating strong customer loyalty and market potential [90] Innovation and Product Development - Fortive is committed to innovation, with a focus on developing new products that enhance customer productivity and safety [59] - The company has seen a 3x increase in its new product funnel over the last three years [59] - The introduction of the Ultra GI cycle, a low-temperature sterilization solution, addresses critical healthcare needs and enhances patient safety [96] Capital Allocation Strategy - Fortive generates approximately $1 billion in free cash flow annually, with a disciplined approach to capital allocation [64] - The company plans to focus on bolt-on acquisitions that enhance its existing brands rather than large transformational deals [66] - Share repurchases and a growing dividend are integral to Fortive's capital allocation strategy [67] Leadership and Team - Fortive has curated a leadership team with a blend of experienced leaders and new talent to execute its strategy effectively [72][78] - The team is committed to fostering a culture of innovation and operational excellence, supported by a refreshed board of directors with relevant expertise [79] Conclusion - Fortive is positioned as a simplified, focused company ready for acceleration, with a strong commitment to innovation, capital discipline, and a purpose-driven team [81]

New Fortive Overview - New Fortive is a simplified company with a track record of strong financial performance, supported by approximately 50% recurring revenues[14, 29] - The company is strategically positioned in attractive markets with a clear path to accelerate value creation[14, 29] - New Fortive's revenue is \$41 billion, with Intelligent Operating Solutions (IOS) contributing approximately \$28 billion (approximately 70%) and Advanced Healthcare Solutions (AHS) contributing approximately \$13 billion (approximately 30%)[23] - The company has a higher quality financial profile with 4% core revenue growth, approximately 50% recurring revenue, 64% adjusted gross margin, 10% adjusted EBITDA growth, and 17% FCF growth[24] Business Segments and Market Opportunities - Intelligent Operating Solutions (IOS) has a \$35 billion addressable market with low to mid-single-digit market growth outlook[36, 41] - Advanced Healthcare Solutions (AHS) has a \$10 billion addressable market with low to mid-single-digit market growth outlook[36, 42] - Fluke's addressable market has expanded from \$7 billion to \$15 billion, with double-digit market growth in areas like solar and EV charging[154, 155] - Facility and Asset Lifecycle (FAL) Software has an \$11 billion addressable market with mid-single-digit market growth[191] Financial Performance and Projections - New Fortive has demonstrated strong historical performance, including 4% core growth CAGR, 9% adjusted gross profit CAGR, 12% adjusted EBITDA CAGR, and 12% FCF CAGR[27] - The company projects 3-4% core revenue CAGR for the next few years (2026-2027) and beyond (2028 onwards)[78, 225] - Adjusted EBITDA margin is expected to expand by approximately 50-100 bps annually on average[78, 225] - Adjusted EPS growth is projected to be in the high single digits plus CAGR at a constant tax rate[78, 225]