FTV - Earnings call transcript Q2 2018

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Operator

Hello. My name is Philip and I will be your conference facilitator this afternoon. At this time, I would like to welcome everyone to the Fortive Corporation's Second Quarter 2018 Earnings Results Conference Call. [Operator Instructions] I would now like to turn the call over to Ms. Lisa Curran, Vice President of Investor Relations. Ms. your begin may you conference. Curran,

Lisa Curran

conference the Financial required A non-GAAP Information. section the A We will non-GAAP Chief Good replay remain archived XXXX Thank heading financial President under on the available for be Jim and replay are and the until Chuck and our press will Investors you the Information Chief everyone, for today measures call our us Officer. call you, this and XXXX. of Lico, the of Regulation quarter our after replay on Vice accessing August Investors President this are of Philip. joining under website until Presentations today second earnings website, later webcast shortly G the the thank Friday, me and on section today’s our financial afternoon, call. archived call. are quarterly Senior our Officer; available Executive conclusion our McLaughlin, & Financial SEC XX, included measures release. in relating Instructions of will www.fortive.com, present Events call. certain by heading be to these of on next With

factors will of describe During to the presentation, we year-over-year the that more performance. increases decreases certain year-over-year. and are significant or impacted period-to-period references All financial metrics

XXXX. that regarding materially that results our events uncertainties Report occur XX, from these actual differ year are cause including we a Form developments statements on within and available statements forward-looking of might our may ended to on statements number XX-K may the During differ December Annual SEC subject actual the filings, or from for the forward-looking laws, is materially that forward-looking to any do Information to assume These as and these expect are today. make any will forward-looking statements made forward-looking we they update of we statements future. to These forward-looking factors that, risks Jim. it the any I’ll only meaning date turn of the results regarding statements. and make will not over call, federal securities or in including or statements we speak anticipate With obligation the

Jim Lico

we earnings and capital Lisa sales are of everyone. quarter free growth. with our Today strong This towards good and afternoon, digit to reflects generation the of sheet, adjusted another strong M&A. we double our reported our portfolio from momentum and balance continue the Thanks, flywheel acquisition performance and deploying cash flow vitality created well-positioned and

accelerate and last for We Gordian are business Advanced and clearly significantly Both on to is customers growth $X.X a focus for and compliance two into work meaningful Since quarter $XXX reduce we & to cyclicality. in acquisitions, entry investing advancing the from million. provide productivity, and announced our aligned better billion enhancement quality portfolio acquisitions Products Johnson our Johnson safety ASP with Fortive's help drive enabled exemplifies Gordian software strategy markets. Sterilization workflows.

a the range preferred growth billion. We stock M&A capacity net sizes with remains strategic funnel With address also from of our substantial of of priorities. X% mandatory sale the $X.XX convertible issued proceeds strong shares targeted to with

provide and June. employees, quarterly we've that and in I I'm report investors. excited issues our most the Before the social corporate that communities made we our responsibility to path first CSR have like on matter chosen published progress or results, customers, about I'd we share the to

operating reflecting third of In margin Systems. XX%. prior XXX of the Professional $XXX.X Adjusted on adjusted our positive Asia were over over single-digits mid $X.XX tax of price related aware we Low high-growth goals a inform the strategies and led of our I'm proud I'm in evolving points CSR revenue that in XX.X% basis your welcome by the or work established that America. have feedback core While quarter, coming of and is years. we net million With reflecting growth incrementals. or grew Root earnings revenue Geographically revenue revenue driven in I'd markets above of growth billion excited the double-digit direction China the so North Automation effective to of single-digits of $X.X six Veeder based posted continued margin Instrumentation like net to an Adjusted turn are grew at We of to posted points. platforms a Veeder margins Gilbarco and delivered performance. FBS industry favorable increase by year. & mid XX.X% in Fluke Tektronix better. year. with all Specialty basis at platforms a to XX.X% and review The contribution Gilbarco prior expansion were per Root line our the quarter. was XX America. four was and Core the continued net our rate with of X.X% XX grew diluted in and single-digits Technologies grew XX.X% margin core details as today was share profit to up success earnings We're Vehicle businesses. top of core and of strong Sales quarter. strength to was points continuing a mid basis gross line of platforms out acquisitions consecutive the for core and Developed Latin for quarter examples Operating performances mid XX.X% markets how basis reflecting Five six delivered several you growth single-digits continued with tools top contributed growth Jacobs strength core America gross leading six expansion points we driven XXX North strong of of by innovation our second Sensing drive growth. of

flow a second generated million free ratio XXX%. and $XXX quarter we the of cash During conversion of

flow to our we approximately conversion For the year cash full ratio are tracking of well XXX%. expected free deliver

XX% single-digits of Industrial of price, resonate points continues innovation business customers with hardware Reported FBS productivity supply greater reflected by Professional segments. offered growth growth basis currency posted safety margin Systems Industrial. Advanced value our XX.X% combination drove share rental and contributed further our Instrumentation margin XX.X% revenue revenue Corporation at Fluke off favorable new teens core both Solutions revenue Fluke are reflected of chain growth outperforms sales core strong markets. operating core in revenue businesses. growth by expansion drive and and increased grew Acquisitions and of and imaging single-digit Increased led during eMaint clearly Fluke. gains. investments Digital with quarter developed of the point markets to At grew Fluke growth sales market revenue Networks high and in paying as including thermal by was than mid INET sale digit Fluke at growth. recurring its the delivered Turning marketing by Field accelerated delivered Instrumentation growth benefits. XX%. X.X%. quarter customer proposition led and and mid of & growth digit double and core The outperformance double core mid in growth coupled net growth the software XX.X% Solutions as X.X%. Scientific and to reflecting high low by Fluke the products within single-digit single-digits in growth driven XXX market Fluke

we revenue adopting were attended to improvement digital expansion firsthand that digit you East. Product you Qualitrol the declines core than America expect team double quarter those growth be China, Fortive by offset we able core strength Middle slightly the Day high-single grew actively drive are improve and ISC what with to Tektronix. to ISC's consistent and at of year. while month quarter to for For in revenues the digit North sales platform enthusiasm was the recent ISC and Business what The low our culture. declined as and growth declining advancing last last for Europe see the single and Realization System led the strategy sales at margin for of the in Investor working of by softness is their low continuous more market digit growth remainder we messaged

quarter of market highlighted Mixed in Series in its Tek sensing of double in Excluding Series. devices digits. and applications success level revenue power and developed win the connected handle and of Tektronix MSO Results noise higher provides we growth a use Series were of software was the IoT the growth data. for the core leverages industry and ease in that the MSO digit and markets market, XD critical first amount performance week. measures Based industrial as lowest reflecting on end strategy. vast up new excited introductions the announce an to the target and the gigahertz Series X of of is also last growth by platform our It this X launched any markets popular applications second car and in XXXX oscilloscope X eight target for large at Oscilloscope automotive driven the that breakthrough the I'm multiple the substantial feature devices, to Signal X same product to product class a high-single

a Series delivering and With boost customers. the MSO X our that and shorten compelling market time combination to performance productivity usability of we're will best-in-class for

delivered Our digit core revenue growth mid in led quarter sensing the by digit single technologies platform China. in growth double

our share digital market towards introductions and fueling offerings. the launching gains additional New IoT to platform strategy continue product is across deliver progress

Acumen using centralized can this the interface. of to of and/or in applications. a customers [ph] and help number enables trends a manage a is customers Inventory inventory through examples continuously measure of technology user solid One sensing and manage consumption This variety of most rate Acumen By technologies inventory Management. recent remotely of material mobile

of Revenue and operating currency of core XX.X% core basis operating to of expansion Industrial acquisitions. points segment. Moving offset contributed including Acquisitions Technologies associated points margin growth XX operating points. revenue with grew basis by XXX XXX of basis points XX including growth margin our of basis XX.X% margin X.X%. dilutive Reported

solutions. Veeder-Root automatic for in tank reduction Strong tank digit Technologies gauges was backlog revenue EMV a led for strong reflecting in submersible Transportation digits Veeder-Root platform revenue by driven wall and America related double high-single led at core pumps in growth demand increased China single continued to by high Gilbarco North and strong markets. digit rebound double-digit core delivered high grew Our by demand growth upgrades. double growth growth core

pleased with sales announced these of Valero programs previously up to exclusive compliance drive as the and across EMV Chevron, success our with are retailers We programs double-digits. are Texaco

site key owners. accounts single along our improved EMV we are up expectation wins These revenue digit double-digit in digits of bookings with mid-single seeing us and give for to with confidence high-single SaaS growth. Additionally, strong the in business continue for Asia single mid-tier a the Pacific digit year. sales to in TeletracNavman pick and mid by GVR remainder delivered core led growth growth grow core sales sales

as moderated delivered last in truck to growth innovations. device double-digit Europe these revenue navigation on end core in in posted with reflected the by Kollmorgen new now U.S. mobile the close and associated noted higher performance revenue additions As led issues year provide support fourth driven Automation of growth, revenue and smallest issues product nicely our for technology for also logging advancing where in Ultra Class combination quarter. smart warehouses focused markets driven barcode quarter surgical allowing was strong and of introduced China. high-teens continued with Specialty capacity strength Kollmorgen including the share expect application Portescap see miniaturization balance business XXECT in rates low in including industry further by well stabilize medical China. industrial March, electronic to beginning verticals to integration and & target and with the Asia. robotic was is We tools. quarter, double-digit platform businesses launched production food U.S. applications we the by growth in in JVS and in robotics and automations mid-teens The gains automation was the and as in by challenged we announced beverage A&S previously and the of low mandate. market Growth power increased Motor core torque customer footprint led growth to the A the growth expect as core another Altra,

believe low grew Distribution. Moving high low The revenue and growth, funnel. margin franchisee metrics, during operating earnings up, To are product single-digit sales growth and second the sell-out healthy, Matco of revenue specialty to points fundamentals ratio positive given digit a of expansion a grew share performance. core in reflecting subscription new We single-digits. in strong double driven sales launches single-digits by software and XX to diagnostics wrap double strong gains. tools Franchise platform digit and executed driving core and team quarter, market market growth applicant including share variety well basis adjusted per flow cash free our sell-in core

vitality the half, to Landauer trends versus of part Orpak, our by portfolio look and become of second improving well position expect our acquisitions we of flywheel remainder created core the Business power and of as ISC our us rate growth half the driven revenue. the our Fortive of The momentum of System core first XXXX beyond. As from accelerate the order acquisition the we year, the the to and and for

to Turning the guide.

our net with core improvements. guidance includes XX% to $X.XX, flow of assumptions convertible EPS of net We reflects the operational stock guidance also which EPS adjusted full basis diluted conversion to offset the dilutive revenue to XXXX XXX% of approximately mandatory are which preferred tax free effective adjusted expect year. cash of The X% growth, from margin rate and XX offering updating impact to improved margin the we core – for operating core updated expansion diluted year points, an X% $X.XX

third EPS turn to core expansion to guidance tax core Lisa. of points which digit of over operating also $X.XX, diluted that, $X.XX margin And to to XX%. adjusted I'd of like are XX includes We mid net an rate revenue effective initiating XX with assumptions our basis and single of quarter it growth,

Lisa Curran

Philip, Thanks comments. questions. are concludes ready for That formal we now our Jim.

Operator

from And question Instructions] Steve of [Operator comes your UBS. first Winoker

Steve Winoker

I dive wanted the some moving parts. into to of just

is out, any XX First, baked of demand the pulling Is you impact give Jim, into us may enacted. it points, in that $X.XX you basis any of through structure? the it’s Is You be said that that a cost there can any headwind Also on that? that? called yet? have tariffs Do pricing? there sense what's you

Jim Lico

don't the the First We question. I'll impact tariffs demand demand a take think there's on side.

ratable infrastructure going core - XXX the obviously So first the about been fully think second that our of cost some things has raised growth team's we think and businesses nice the and and to I one's counter-measured. the at we across the are Relative pretty fairly have I it. foremost, on so job Steve, that It's the of profile. clarity of the - offsetting stuff good a revenue done half, good we most for feel that

really first, more things, price a establishing cost mix the the been On XXX where of so in pricing it's businesses.

chain strategies. supply is Second

As of to we you some number changes that manufacturing offset do and a can imagine then things can strategy. in

where product we're well. we can we of and - some choices those We some we have have situations where as of so produce making decisions

So kind the of total. side. It really probably number the is - it's that's probably sum only one a - price on

Steve Winoker

flywheel those And then And operating my to the - to move core some the And in out Is on that or go starting terms dynamics? I was well talk as growth QX QX you X going acquisitions acceleration. to to so second XX or and from on thing operating margin in XX and QX, is, expansion. in or core given new growth we're mentioned the XXX seeing this now of are maybe it come as all acquisitions anniversaring? in XXX of I about these margin starting and Can core or of that math QX. help prior starting it's XXX, M&A XX and around XXX to think simple now you most

Jim Lico

Yes it's percent. smaller a still

ISC right. guide Our into deals. And the is I It's we mostly with business. think. Obviously different is really do from Tek, the coming in second growth Landauer about Orpak XX basis didn't say terms probably the order and the there. I would of half all in think the But guide Landauer core in I even points those order ISC half strength is the still core increasing second and fall rate

portfolio the here So a small and we we will but still growing all well forward. of they're rate part add the exceptionally growth - they're to start and core doing to as well they're go as

Steve Winoker

fourth the OMX quarter is of those, similar part contribution from that it the XXX And in plus? as also

Chuck McLaughlin

really are guide they're bit there's us these we've of I line strengthening what a And not performing not Jim our But had all - they're year I yes the little our is that long. as with piece. really as the - than said, been biggest it's Well business acquisitions well different acquisitions. think in raising But we been the from about it's assuming. tailwinds as seeing because think what

Steve Winoker

And for end that Qualitrol, still just if at in on condition just more Or is the there? decline utility I there could launching is market on one all sneak based side? going else something

Jim Lico

definitely We market. think its

Where in it's I and it's the really mostly is mentioned remarks, American business As - very in good. focused the China the in Middle East. prepared been North

but called China, European really servicing some Europe with Now business Middle the Eastern we're through slowdown really economy. as and gets East the East out of transacted OEMs we it's Middle Middle Europe, so is the

definitely team's the the of based short doing to business the pop the lot cycle we're to think that's a quarter the The things good well. longer - okay. it's is start cycle. slightly project And the year is protect Field margins. we part we good first business direction rest we Solutions cycle to longer so that's we doing the while of it's and So doing is slow the It's why up. until probably thing a But a of job the change into see the business probably business so have doing

mentioned well. is doing ISC very Fluke's doing we well, As very

a good it's the place So is - platform right itself in now.

Operator

Your of comes from next Scott question Davis Research. Melius

Scott Davis

interesting couple a here. announced deals You

of people But an in just the of to more on bit did Gordian That's be a have a You financed but limitations. less financing June and to down there little anything convert. in issue you than J&J issues. because July where is and deal then the slow seems not the point else with now, pace M&A

office. have huge corporate don't a You

amount I And amount kinds then stuff own a those to too. you imagine office back have people culture plant of fair I takes of your that a some of time. all juncture help would You assume to organizations drive in systems, integrate and fair

challenges there that pace that regard? to So require the slow you down just are it in some of

Jim Lico

I think, yes.

I sort they're normally of and bring it So we number think integrations the along about resource thing is, the with is that to one good in. the ability platforms acquisitions the the

those in And are who separate of platform so leaders of we've both leading these case the got integrations.

good. perspective. capacity a deals So always from building feel talent We're for the we

really aspect So these the on take of number funnel we about FBS and one leadership. talk to that be of and is sorts we when to about leadership growth building talk first able lean opportunities. the foremost, always And talent about

FBS foremost, person ASP and their teams both So Gordian. first and management getting We're and are the of we've case got the those assist in Barb good capability. teams to and in ready management teams. go really

think a excited we to So of be Fortive. they're part

the think deserving very to we'll fill have frankly, take We got doing so -- jobs will And feel platform But where obviously I good on our review do. there leaders. in out like Gordian here side quite some board So We'll sure some capacity that. talent. is fact a ASP because more we're about than the carve require it's that our more organization on we at that we with to obviously a be will FBS, a side we relative good to got our Johnson feel shortly. job, they'll for more leadership

is of continue portfolio. our transactions and right kind great funnel build be to our to leadership capacity to to Our that continue will to for going the got the things do message we've board

the that just continue build got can extent do capacity on. great do not in, but to deals, we we've it deals we're to businesses going So to the to take to

Scott Davis

where to they're of it take culture get do hers of it to companies I does some only culture Art's you which brought long FBS? that to they sort does so. And lots whatever buying? you these there’s long someone long opposed -- buying just teach fully to you of take of a up you're now is how and you're part the Fortive functioning acceptable level mean, that how one a job, as were How

Jim Lico

then our it think I'm couple still with Well, sit to point business down I'm sort are of a that use. maybe opportunities want takes it - as strategic leadership. you to want sort successes for the the day plan our of so those are of tools to us rate at That We'll be business gaps the of where learning, ultimately day the still of the And XX leads improve. to kind we that the And But define the at to becomes XXX those sees that and what organization it build I figure will around, adoption will end years pretty performance - the use there culture. big trying years fast. to of tools wins, from FBS that of really the are in the or the do to And sort the out. we plan.

with at our the - Day. would tools, You they I in saw certainly very admit using a year culture. the learn leadership that at they're think got the is and And Investor We're proficient. ISC understands to really they've team one lot while that

So progress in that make journey. a year a years for couple make substantive progress. they'll be with we'll them whole they obviously can of and In good

Operator

comes Your of Steve next from question JPMorgan. Tusa

Steve Tusa

on exposure this China on foreign kind than bit into out but of sell of into the talk have there? players second guys and some electronics smartphones. I different in there, the Maybe it's plays of how going what's half. know what seeing you perhaps about you're So directly a that

you Just curious as in China start. a seeing guys as to are what

Jim Lico

Yes.

obviously of that said low - We beginning we just So high low be said China the we double-digits to year second in was quarter. single-digit. the at we'd the thought we

little So we ahead would we're we be. thought a of where

in through good. short single-digit distributor in mid that's the seeing we're not the Fluke Gilbarco at sellout we only we're seeing business seeing a would but in we're our business, the like we're So even remarks quarter. prepared mentioned I Veeder-Root seeing obviously cycle as say level sell

discussions headlines quarter extent pretty might And things onetime and trying the Tek's with understand obviously of in that to still a for the change take We're demand. good out We the that. the read customers there the good about that in seeing a we're year. But to feel China that China. we good actually real performance obviously ago it pretty So growth. you continue if watching to situation for XD year there's from they remainder We mentioned have real sensing had in things.

So relatively broadbased.

we think anticipated moderate little bit growth still we're So really we've two performance bit little would seeing the I from it And a the always said of there. and good I that. we've as been above sort years had strong last a

are it So I good pretty feel of right now. where about we

Steve Tusa

China grow Where in do you expect to the second half?

Jim Lico

We'll be somewhere somewhere the is - between probably and single we'll be up. I think -- high where we'll end digit in double low

Somewhere lot -- so not moderation. a of

Steve Tusa

about you the over stuff? had the year done all ANS. when the preferred all then for things know missing I do net think if you you've is next will, And other don't accretion kind months the what anagrams ASP. of call think all of five that it you here. when all But kind Gordian all kind guys last of I'm of from moves kind the you what this you to is four -- what think done

Chuck McLaughlin

Steve this Chuck. is

OMX to then our earnings us running do of happens that, whatever top growth top a and and of volume on that, of So in I next you're than that on the $X.XX. work maybe second think see the FBS, is going way then year slightly just and of the all to business before moving FBS accretive into And put drive we about less type half. these growth parts net normal

Operator

Barclays. question Mitchell line is of the Julian of next Your from

Julian Mitchell

at core industrial of expansion core tech, there first wasn't tough QX wasn't Maybe because guess much that growth margin. comp the around just either. question margin substantial the on the margin QX, I in a a

see wondered the you bit in just could a why core and as half. that's tech playing out OMX second case how industrial in you to give color the if more So, that

Jim Lico

the Jim. we We of quarter that. of Julian, it's pretty We good given in on and a had had business we've incrementals had situations obviously the couple growth had. good have the strength

some churn of and mentioned We one-time segment. OMX, in have situations sort a see in through of basis in so relative we couple of the we of if of XXX so a to customer there some at expansion things those, and the couple Gilbarco points a had -- things margin almost that one-time we looked India we

And to kind we of so we good margin have -- XX of see basis to line points that XX a in sight -- expansion.

have of zone. to second sight We pretty the half being line good in that

Julian Mitchell

question you see What rate in second the moving you also just Product And out? materials sales my regional for do as core of energetic consumer specifically and mix, growth you the business Realization second rate, electronics of parts growth that terms the big around the the And in if softness. on focus business any sort called half? that

Chuck McLaughlin

So Julian this Chuck. is

growth Jim end As last the what mentioned, mid-single-digit year. up them, going But half the end and we of where had XD at for what for the that they're out, expect. if take year. second we think is indicate the sensing that's order would to that we That's I

Operator

comes from Deane question Dray Capital RBC next Your of Markets.

Deane Dray

Chuck. with start Maybe

situation and a the our that capital needs of see convert, made don't Fortive's sense? in what's this on Just sector. structure financing lot But we at structure unique the least convert a about in

Chuck McLaughlin

Well, question. a great

ultra to a attractive keep We that things strong that to great a really and and got replace this rates the going about gets that of M&A separation shares around desire all -- our looked this this given appetite we balance and while we go the sheet, And available and I for felt at and to needed where were think up the to our with we're convert. like pretty field time the And we've the to retiring also, out -- we actually value those doing get that. shares. close end as to us. talked to looked was

Deane Dray

these to understand converts where you and are But it's as just of this hedging, the haven't hedging the people and of buyers to a are against see not in optically common times have then, way And to update there short interest. bet short stock? latest will related seen just I expecting the the a

Chuck McLaughlin

I don't expect I big not it's little be didn't But a mean, I there'll – relative sure. of number. thing. to that of be for to that's cap a think, we a that that bit that our big be a expect we to big going market

Deane Dray

dilution? What's share's the and the assumption

Chuck McLaughlin

I somewhere comes XX depending around And Well, goes think, the the price If million a million, about quarter. is up XX to on down. the $X.XX stock shares the dilution stock is price dilution does. what

Deane Dray

And prepared Jim, got out remarks, up, in price. then follow of businesses just as the six a five

portfolio ranking if more to going shove of have? the power – today. price the what room pricing there's to on and do pricing the comes increases, Just you push be And

Jim Lico

had we in – to the we've of – to much – a bit get so think, where good and more it's been historically power is most does Professional I have portfolio. Well, in we not it pricing go-to-market industrial Where Instrumentation sell there you XXX Instrumentation hits seen as The little tend have probably tech. in price. good than we Professional know, more OEM, we price stuff easier is the as a little saw

idea the things tariffs we of So of line of up where get those well kinds some and price. with typically

the countermeasure take feel there, the the thus in actions countermeasure. far a to of were we what – the third things get effect little we feel we what bit seen place about as come place. of There's quarter. we pricing We'll good where bit our But to ability – about other some to good in have, So if about feel really our we the some we ability of all out of and we've countermeasures of fourth little got have a complete the coverage in we'll good Deane. don't it get

Operator

Nigel comes Coe next Wolfe Your of question Research. from

Nigel Coe

just, - think So on here. just the from the tariff I

right of correct would basic has here. is I like divestments - subject Chuck? my be Is about to analyzed right approach I've this this so and about like looks done an So it that mean, million around I number. hovering $XXX mean, - some there? But math

Chuck McLaughlin

Did million? you say $XXX

Nigel Coe

Yes.

Chuck McLaughlin

For Is the tariffs? that...

Nigel Coe

No. purchases the about divided growth I share About by of subject tax. just $XX the mean to tax count is million rate $X.XX.

the would how right? I I So mean, that be that's did math.

Chuck McLaughlin

a you overweight think business. a for - We I of we're that's about bit. – And I think our $X.XX quite us think I get that's no, for that's seeing - quarter headwind. gross it's can

Nigel Coe

into the sourcing China, producing $X.XX think to about what helpful. mean, power tariffs looks a you there. color you businesses And by I the Jim more maybe are alluded color impact right there's then and got to a just in would Any offsets the fact impacted bit in terms bring to better sort in lay-up? terms some But U.S. Maybe like talk of it are of you the where of, terms the Is that that businesses just assuming you're $X.XX of which XQ. almost be impacted. like so of hedge in pricing in most guidance, you're XQ the

Jim Lico

we little Well, a protecting are bit. this

A large, be And -- XXX a bit But, So is across, about of we more and smaller to by where something. steel. we in stuff is going But two on have the The there focused we tend like I good versus XXX are we of news little see and global where for so global a sort is tariffs. electronics sets is the, more that smaller where bit to more buys chain. of content. supply it's much Everybody like think number more tariffs as more have number. you imagine mentioned. the little toolbox, be a example might of ratable so little ratable obviously, we places electronics, across. can

global We have manufacturing capability.

of expect through be actually taking. QX all impact the There the are -- the those able countermeasure follow-on but of to for in just of get year. greater and slight I we'll is to a is might And some in it as to ability to tariffs out our activities So the just be actions countermeasure year. well impact the with think those we're kinds we us

Nigel Coe

the - - following on half in second just quarter you growth parts moving Obviously question. of this said lots a of And year. then

of year you of Some XXXX, in the if still think mid-single do that grow semiconductor - be down in CapEx forecast year for next CapEx can next down digit calling year? for is semiconductor next zone kind to you

Jim Lico

have to - as the I yes number going really, really one, in we're digit second mid-single comps against half strong think year. last well I and think

very good that So performance.

still probably the It's CapEx as a opportunities. see too necessarily to how early will to our overall continue tell overall We little business. impact much number

really the manufacturing big things and side Nigel, swing is the CapEx. the know that in R&D number. -- CapEx the not Tek is you almost of manufacturing as As in exclusively in around And mostly

Tek So in with some -- or have cases. to whether of sells do many the not nothing --

with IoT. is continue vehicles applications the which a that autonomous number principally we scope will signal, announced customers. data and low of just low also So noise, low power The in have Automotive year. to think conversations Series six we we that is opportunity applications have centers next tremendous

So those to necessarily I think are things less year. that next applications going are be don't

towards we've So those number of a business of re-pivoted applications. kinds the

early like but it's XXXX to there's think a opportunity XXXX. still of what plenty we predict little in will So look

Operator

next And Stanley. of from comes your Sawyer Morgan question Rice

Sawyer Rice

kits the into mix two in sense forward half a business you to U.S.? result? year part to of quarter start maybe this next the in looking the and guys here DVR. are -- And and Maybe the of start Any there on was MP expecting margin just just on ramp impact then back as into the as between approach to a kind we the deadline here what

Jim Lico

Well minimal with the came was partnerships in was like it When on business number a you of digits the said mix good margin we've business you got The the of we people of But remarks. follow-up prepared we with up exclusive it versus kits I was sort dispensers. mix as Valero look We'll think said. double impact exact that we the way as is. in. at think I what

as the network the was I That like business margin owner. back we we what single well. think single a what retailer really coming good business pretty call it's

is the half trends -- the good. helpful? that pretty saw that of would in the So quarter think we all second the trends all for half second the Is suggest I

Operator

of from comes Kaplowitz the of question next Citi. Your line Andrew

Andrew Kaplowitz

a give underlying resistant, building but in cyclical software, is color markets Gordian? and high revenue little you end construction. market it though. Cyclically it's Can underlying seems recurring software be more on us like know would We obviously the end

And performance, you historical that is else there cyclically especially the during is the talk can business resilient? slowdown? anything really So about gives of you confidence

Jim Lico

Yes.

asset customer primarily So here the owner. core public the - the business is sector

and So some the a think well. VP and public facility of as architects university at contractors

mostly sidelined, used and – or for things foremost slowdowns of They're job small customers. These mostly principal sell mostly are that CapEx universities they're be like they – kind RS that. not contracting order and done local who even it's into. projects means still are healthcare, first the times or projects. used have So used State things for whether they're in and like tend to government, not of that's big

think and I that's first So foremost.

the to commercial much sense of XX, pretty so building it'll sort tied to tends new capital big in market in real much be think the be nearly so the that well XX business we think – not is be estate it's I tends to maintenance which tied performed we in of of end In buildings related. fine project to real are more things This estate pretty the stable. commercial

Andrew Kaplowitz

And color tools a then in on QX Matco and your high and us in here single-digit Distribution You better can business. little little give in growth bit you mentioned more Franchise particular? growth a

have forward? corner a here turned better you and you now to growth the moving have So visibility

Jim Lico

Yes.

they were we think we outperformed, So market look at versus the - growth rate. when I the

franchisee more but probably to prepared the metrics which the optimism I is is heath That's a seeing the business a the thing was funnel, subscription good more in road small metrics the base more of remarks, of we getting down applicant recurring the we're - think were that about a said full. set. felt becoming health revenue is here a maybe And good building good little up, which predictor on see good. the is we As is bit revenue more

things. good So those are

toolbox We have back. the business seen still not come

an we've mode inflection necessarily we're growth growth we're mode. But in think stable. I yet. would suggest wouldn't – in right I say think and And a I stable would point I I Matco So call now we've seen

so continue right describe the sort stability right the moves metrics the And to say business. think to I up, when growth we'll but word would that the rate I of watch see to is it now really

Andrew Kaplowitz

quick a just Chuck one you. for

down, commend XX% where point pretty keeps stretching I you rate guess a tax team already. could low is have your at to Our on. which point low it go. some But there's to

of kind expect is room should forward? or So there do more that we you what have going

Chuck McLaughlin

Well I take think question. - the second

for good and much the put this it Tax use U.S. is depends the next of on time that correct the is number How I or M&A the really year just go? you well. think It learn we it all probably in I know reform then together XX% tax that can opportunities. into well world happens outside keeps U.S. – good come it how as depends -- XX% a what goes. when at is There's And -- to a but point now number. as the It I'd with that our how on interpretations Reform don't creates And right changing.

Operator

Research. question next Jeff Vertical Your comes from Sprague of

Jeff Sprague

is maybe if more the just know what operating of time. think to the that correct of do whether fourth step the of guidance of I end quarter first I needs X correct margins that questions kind would very range. slide of get suggest you're But Wondering that - the to to to happen if the or speared, half guess one that's end nicely. to I up is one upper to back that top bluffing implicit the we not. could circle you don't I or seem the need guess, not in

or have structure So is come there mix cost something on that that you something quarter or that visibility together? fourth in makes

Jim Lico

to from in to high think VCMs better. the of of margin a step No, bit we But there's little of that quarter QX getting would make year that expansion - that a to investments not end. in function terms I little makes made a the probably the QX we last expect to there's fourth that that see some the

the -- end that do was you not would give end the high Although pieces we range the even really and so there could reconciliation moving have I wanted market in we a we meant it's to the way rising clearly. high give emphasize that at to that though see a just out

Jeff Sprague

there and quick a for the Corporate I modeling was business was higher then expect development And little Is year? what expecting. some than or what question. we should a going there bit on

Chuck McLaughlin

there's up of the some the seeing some also deal. the where we're and related deal is are I expenses some some deal around -- Altra this deal tax are these that think spend ASP external for and show

So corporate. mostly in up driving that's step what's the

Jeff Sprague

is number Is or this that a elevated? now that run QX rate

Chuck McLaughlin

think back it'll it's next into year elevated But then drop going XXs. into low from QX the in be and down I to here coming in QX.

Operator

comes Your Eastman Richard line the of next question from of Baird.

Richard Eastman

year. Jim. Health the Fluke Thanks coming into Landauer Solutions Lisa question just for core a Chuck a later bit -- And question. this out around Jim with little and reckoning now

ultimately J&J, Fluke this strategy health out of for calculate of in ASP here? businesses? side. of is got How deal the $X a on platform Do solutions those gets makings Or kind get Biomedical, I of integrate What's separate You billion the three those stay think, new the mean, they that can will kind at businesses? over manage revenue done. will I they and -- you kind we them?

Jim Lico

Altra we what Yes, how with ultimately the with Altra Altra we're to to will -- ASP there this I to a is and It's suffice say going our all for health look think of back question trying do businesses. little will not to what push synergies from we and opportunities automation with work will with here are what to that business to but in going come perspective. a some bit off with our and with platform do the going do out everybody

$X with we care numbers your have the worth in businesses of between health Biomedical, and Fluke right will ASP. billion You're Landauer over

expansion So variety that's angles. obviously with a We're meaningful things sense will of thinking good great different amount make a couple revenue through on margin a and of opportunities. that growth of

So portfolio. all more the is in for been medical that, capability that this come of safety, and idea applications the the building we're reigning to I strategy assurance productivity think on additions quality around to those but

So be what able customers. to really I do of solutions exciting sorts to think these we is offer to

don't the in order differently things structure two. of the to We those have So synergies there That's get synergies. after are been to culture always always between us.

So appropriate. we'll if determine they're

-- the the come once the in and structure portfolio. to determining all more once organizational going we're takes on the of puts We in we are appropriate and process landed of on

Richard Eastman

$X would greater with.. that seem maybe FBS billion would would it like probably opportunity? I that think than have something or your So some of best $X.X billion

Jim Lico

months Landauer, ago. for fold. the bought into Well XX year revenue come a just - will sure ASP old definitely is we right?

joining growth. more the without of be doubt advantage productivity they all team a able take just nature joining -- safety that have opportunities So - us quality and will just them of things by of to to the

as when we big help think announced we to will deal a I innovation as ASP well. said we thought the growth business the tools ASP be and

Richard Eastman

And then guide? just quarter that third for number using a the quick one for for Chuck. What's FBS you're

Chuck McLaughlin

I'm sorry.

Richard Eastman

you're calculating using share diluted guide. fully third count The quarter that

Chuck McLaughlin

I got it right here.

Richard Eastman

Because that will capture the convert correct?

Chuck McLaughlin

X.XX. say Yes

Operator

comes Capital Your Graham BMO from Markets. next of Scott question

Scott Graham

questions, two against of second in Are netted the that elsewhere? -- Because have there was that I GVR. on higher anything little the the pricing, see I we is you anything surprised only actually pricing little year? there on higher one that? Will one a half XX we're points. seeing was up basis

Chuck McLaughlin

because is us to related the until hasn't some when it about it really of things most and mid-July. impacted tariffs of you inflation think Well

Because the had saw - early it's a go to from it's little in little price. companies XXX stuff a was XXX, it we reason a and into of that with the marketplace go impact lot So so from marketplace. to a other difficult do

of strength of So second strength pure market at we when had half And our see quarter XX a in typical start kind we'll play number of kind out. as the countermeasures look that that's portfolio, then that to you bips of the of accelerate price. second the our the position

Scott Graham

inflation a put the then throwing to we less more last of you year of lot saying inflation so That that you're in under the those that minimal commodities lot things inflation that XXX, before inflation talk when front XXX the example? same about you're essentially that mouth, of tariffs. XXX just but half you was I saying essentially of on saw seeing there was sense of when you're cost the a tariffs, And words impact so, second is we want tariffs. along say with don't for here pure And in your but my obviously lines weren't

Jim Lico

purchase lot a get we - - have price PPD. variance we Yes what we of

chain quality high really job. that's a a really does organization have We supply fantastic

at occurred So that -- kinds as some those stuff But large of fuel mitigating seen that we been over things by on action. went good normal been surcharges have of have of we've stuff the already course that pretty oil just some prices we've as and mitigate seen. like up. We’ve and that things

seen despite several that. look why when that the you more been say and an been at expansion it's in we've the example you inflationary as of So a environment we've gross quarters bit to been little last the strong we've very margin might that's really good quarters able an over before

Scott Graham

called for you've given I here don't some double first My those shrank sort GVR time type midtier I yes? the How that? that smaller of question I $XXX market how information EMV know owner thing. digit stations think you for a think million per is many is the and us potential much this of say Let's

Jim Lico

The it's owner but plus -- the to pretty single stations stations. XX of the site right close at the so XX% XX:XX. of the But probably at only XX:XX of XX% percent is maybe

the much they But convert. they it's So don't money as spend big as do -- retailers.

as seen we've get from they so this. time ahead of larger over lot retailers And visibility a the of

something in single I a customers they're site As said we've maybe one owners, a think the or or lot know the them that. single smaller of why is reasons their network consistently that owners the like town pretty of

dollars, but they them from of on seeing are the So necessarily the the but not majority majority board. stations, of

sweet Now other it's percentages of the and shape in but, that’s in exact or bit of for probably kind of I part a of market market the dollar. it's market. mid form XX% And tier the the probably the the of spot don't multi-site that’s have numbers way of kind some owners, a --

So for their a EMV. the to to start it's implement starting to is sign good good capital market them a doing see chunk of and planning

Operator

Giordano Your next Cowen. Joe comes of from question

Joe Giordano

like given be on would Tek. Thanks more for that business? - one taking a sensitive given of that of movements my Does like how to sense? questions much make Is the move principal here. percentage that I'm in be that How margin that there? margin there drivers that the curious on would profile would segment

Chuck McLaughlin

You mean across company the whole right?

Joe Giordano

change I ordering of just revenue Like have move percentage change biggest FBI? Well like does PR. a the given in on

Chuck McLaughlin

Tek's I think it full margins lift piece great goes But it's fall price got and and PI that does through XX%. No, great the so over side. when of biggest is up it well on

the yes, So size depends impact. really on impactful it just the it's but of

Jim Lico

gross And more margins. really innovation. out and new about allowing better is did quarter the the an though job being really margin an comp lower year of the Tek the side. just obviously with really this job which growth as in is software margin they They've proposition exceptional back Series better year they add their it had gross on Joe growth on And to talked even the of product. for maybe strong see didn't is in good exceptional is the done very to because that five which a a ago have a is of deliver bringing value We a these an products really environment them even rate

Joe Giordano

the being operate? having like are are like so And side maybe then applicable. you businesses business competitors tariff on competitive, guys But you non-U.S. in know your those you really I specific that niche is seeing this any competitors that opportunistically impact isn't any in pretty

Jim Lico

the depends as of well. that competitors to quite some of business yet. where of is Not to Every we're certainly We're looking some are. frankly because watch different that. looking And do on kind

opportunities case where but to basis. a So we'll they'll by those available see us are case be on

few early you is I sure most really tell if the now. on think yet. - When live think things anything of right biggest a early it's trend about thing went in last the it's anything there's pretty for if really just to these weeks really really

Operator

Coe of next comes Nigel Your question Research. Wolfe from

Nigel Coe

thanks. Yes, go quarter. Well, couple I missed a

So I'm here. catching up

quick clarification So just actually a Chuck.

from You net mentioned impact $X.XX M&A/Altra.

your to gave I Would in from separate? is the question. or response think include that that's that you dilution converts Steve's what

Chuck McLaughlin

and where to what the mandatory all done stuff year ASP Yes. is with after we've Actually and you that out things trying convert will say this land what share with it closing. Altra that all I net the retirement - ASP was

think do will normal second it's of be And top next in our we of accretive get then year. the I from $X.XX that and So businesses the that then growth half year. whatever earnings on the we

Operator

no we further questions queue have And time. in at this

Jim Lico

second lot the We proud taking in ourselves. the of we for we've anniversary a in thanks the - and the the done. satisfied deployed, those you and that and quarter. exceptionally year the bring we've never work gone everybody thank as Two expectations you the And portfolio being time the be start to of as excited out. gotten couldn't to are turn evening. really do about have close capital half done, to our We're and fast of in us years that take the We're know opportunity those - second July it out highest this Philip has great of know of the really performance celebrated ability you businesses, we're we we transformation. the Well more we've first we

going more us. you about years. We put to start for We really on. learning the Lisa available forward team about two appreciate a what's we're are and time and excited. great So look more Thanks energy into telling last for you follow-ups.

you great forward look we'll a to you. evening. have Thank talking all to and soon So

Operator

Ladies and today's gentlemen, this conclude conference call. does

your now Thank may for you You participation. disconnect.

Fortive (FTV) 26 Jul 182018 Q2 Earnings call transcript