Q2 2025 Fortive Corp Earnings Call

Brock (Conference Facilitator): My name is Brock, and I'll be your conference facilitator this afternoon. At this time, I would like to welcome everyone to Fortive Corporation's second quarter 2025 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star and the number two. I would now like to turn the call over to Ms. Christina Jones, Vice President of Investor Relations. Ms. Jones, you may begin your conference.

My name is Brock and I'll be your conference facilitator. This afternoon.

At this time, I would like to welcome everyone to Fortive Corp's second quarter 2025 earnings results conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session.

If you would like to ask a question during that time, simply press star, then the number 1 on your telephone keypad.

if you would like to withdraw your question, please press star and the number 2

I would now like to turn the call over to miss Christina Jones, vice president of investor relations. Miss Jones. You may begin your conference

Christina Jones: Thank you. And thank you, everyone, for joining us on today's call. I am joined today by Alumide Shiroye, our President and CEO, and Mark Okerstrom, our CFO. Today's call will begin with a brief overview of our consolidated Q2 results, which include the results of our Precision Technologies segment. The remainder of our remarks will focus on Fortive's continuing operations following the successful separation of the Precision Technologies business, now Raliant, which was completed on June 28th, 2025. Please note that we will defer any questions related to Precision Technologies to the Reliant team, who will hold their earnings call on August 12th. During today's call, we will present certain non-GAAP financial measures. Information required by Regulation G is available on the investor section of our website at fortive.com. Our statements on period-to-period increases or decreases refer to year-over-year comparisons unless otherwise specified.

Thank you. And thank you everyone for joining us. On today's call. I am joined today by Illuminati, shiroi our president and CEO and Mark ochre are CFO. Today is call Will begin with a brief overview of our Consolidated Q2 results which include the results of our Precision technology segment.

The remainder of our remarks will focus on Ford's continuing operations, following the successful, separation of the Precision Technologies business. Now rallying, which was completed on June 28th 2025.

Please note that we will defer any questions related to Precision Technologies to the rallying team, who will hold their earnings call on August 12th.

G is available on the investor section of our website at florida.com.

Christina Jones: We will also make forward-looking statements, including statements regarding events or development that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks, and actual results might differ materially from any forward-looking statements that we make today. Information regarding these risk factors is available in our SEC filings, including our annual report on Form 10-K for the year ended December 31st, 2024, and quarterly reports on Form 10-Q for the quarters ended March 28th, 2025, and June 27th, 2025. These forward-looking statements speak only as of the date they are made, and we do not assume any obligation to update any forward-looking statements. With that, I'll turn the call over to Alumide.

Our statements on period to period increases or decreases refer to year-over-year comparisons, unless otherwise specified.

We will also make forward-looking statements, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and actual results might differ materially from any forward-looking statements that we make today information. Regarding these risk factors is available in our SEC filings

Including our annual report on form. 10K for the year. Ended December 31st 2024.

And quarterly reports on form, 10 Q for the quarters end in March, 28th, 2025 and June 27th. 2025

Alumide Shiroye: Thank you, Christina. Let me begin on slide three with a few key messages. First, this was a pivotal quarter for Fortive. We successfully completed a spin-off of Reliant on June 28th. And we've emerged as a simpler, more focused company, well-positioned to deliver durable and accelerated financial performance. In our final quarter, as a consolidated company, we delivered a adjusted EPS of 90 cents at the high end of our guidance range, with 8% growth in trailing 12 months adjusted free cash flow. For new Fortive on a continuing operations basis, our Q2 earnings and free cash flow results demonstrated resiliency. We delivered an adjusted EPS of 58 cents and 14% growth in trailing 12 months free cash flow.

These forward-looking statements speak only as of the date. They are made and we do not assume any obligation to update any forward-looking statements with that. I'll turn the call over to alum.

Thank you, Christina.

Let me begin on, slide 3 with a few key messages.

First, this was a pivotal quarter for 40.

We successfully completed a spin-off of Round on June 28.

And we emerged as a simpler, more focused company, well positioned to deliver durable and accelerated financial performance.

In our final quarter as a consolidated company.

We delivered adjusted EPS of $0.90.

At the end of our guidance range.

With 8% growth in trailing 12 months, I just said free cash flow.

For new 40s on a continuing operations basis.

A key to earnings and free cash flow results. Demonstrated resiliency,

Alumide Shiroye: That's by customer demand pressures in the second half of June, stemming from tariff uncertainty, constrained government spending, and evolving healthcare policy dynamics, as previewed in our June 30th Reliant spin completion press release. Today, we are also initiating guidance for Fortive's continuing operations, reflecting a full-year outlook and consistent with our new Fortive approach of providing clear and simplified guidance and disclosure. Finally, we remain focused on executing our Fortive-accelerated strategy, introduced at our investor day seven weeks ago, and designed to drive faster profitable growth and strong shareholder value creation over the medium term. We couldn't be more confident and excited for the road ahead. Touching briefly on slide four, which covers our final quarter of consolidated results, including the Precision Technologies segment, now Reliant.

We delivered an EPS of $0.58 and achieved 14% growth in trailing 12-month free cash flow.

despite customer demand pressures and the second half of June stemming from tariff on certainty, constraint government spending and evolving Health Care policy Dynamics,

As previewed in our June 30th, raliance, Spain completion, press release.

today, we are also initiating guidance for 40 is continuing

Reflecting a full-year outlook and consistent with our new 45 approach of providing clear and simplified guidance and disclosure.

Finally, we remain focused on executing our 40 Parks related strategy introduced at our investor day 7 weeks ago.

And designed to drive faster, profitable growth and strong shareholder value creation over the medium term.

We couldn't be more confident and excited for the road ahead.

Alumide Shiroye: We delivered Q2 adjusted EPS of 90 cents at the high end of our guidance range and generated approximately $300 million in adjusted free cash flow. On a trailing 12-month basis, our free cash flow grew 8%, and free cash flow conversion on adjusted net income was 105%. We deployed approximately $140 million towards share repurchases during the quarter. From the time of the spin announcement in September 2024 through completion in June 2025, we allocated over 75% of our consolidated free cash flow to share repurchases, consistent with our previously communicated guidance about capital deployment during the period. Finally, we completed the spin-off of Reliant ahead of our original timeline, a testament to the power of Fortive business system-driven execution and the talent and dedication of our teams around the world.

Touching briefly on site for which covers our final quarter of Consolidated results, including the Precision technology segment. Now, rallying

We delivered Q2 adjusted EPS of $0.90 at the end of our guidance range and generated approximately $300 million in adjusted free cash flow.

on a trillion 12-month basis, our free cash flow, grew 8%

And free cash flow conversion. And I just said that income was 105%.

We deployed approximately $140 million towards share repurchases during the quarter.

From the time of the spin announcement in September 2024 through completion in June 2025,

We are located over 75% of our Consolidated. Free cash flow to share repurchases consistent with our previously, communicated guidance, about capture deployment During the period.

Finally, we consider the spin-off of Round ahead of our original timeline.

The testament to the power of the Fortive 40 business system, driven by education and the talent and dedication of our teams around the world.

Alumide Shiroye: From this point on, all figures and comments will refer to Fortive's continuing operations, excluding the results of the Precision Technologies segment. Let's move to slide five. With the completion of the spin, new Fortive begins in Q3 as a simplified and focused company, with a track record of strong, durable financial performance, fortified by our 50% recurring revenues. As shown on this slide, we begin this next chapter with an attractive financial profile and track record, having delivered 4% compounded annual core revenue growth over the past five years, with solid growth every year since the global pandemic in 2020. Each of our two reporting segments have been key contributors to this performance and are poised for acceleration, powered by our Fortive-accelerated strategy.

From this point on, all figures and commentary refer to 40 continuing operations.

Excluding the results of the Precision technology segment.

Let's move to slide 5.

With the completion of the spin, New Fortive begins in Q3 as a simplified and focused company with a track record of strong, durable financial performance, 45% recurring revenues.

Each of our two reporting segments have been key contributors to this performance and are poised for acceleration powered by our forties accelerates that strategy.

As shown on this slide, we begin this next chapter with an attractive financial profile and track record. Having delivered 4% compounded annual core revenue growth over the past five years, with solid growth every year since the global pandemic in 2020.

Alumide Shiroye: Before we dive into the details of Q2 results, let me highlight some examples of exciting progress our team made in the quarter in executing our Fortive-accelerated strategy on slide six. Our strategy is built around three core levers for profitable organic growth acceleration: innovation acceleration, commercial acceleration, and recurring customer value, all powered by our amplified Fortive business system. Our new disciplined capital allocation approach seeks to enhance this organic result, with maximizing medium-term equity returns as our north star. We made meaningful strides in advancing key elements of this strategy in Q2. Starting with innovation acceleration, Fluke continues to execute an exciting market-leading innovation product. For example, Fluke's 1670 series multifunction installation tester with TrueTest software Fluke Connect and wireless connectivity was named Most Valuable Product in Control Engineering's 2025 Product of the Year awards.

Before we dive into the details of Q2 results. Let me highlight some examples of exciting progress our team made in the quarter and execution at 40 passwords that strategy on slide six.

Our strategy is built around three call leavers for profitable organic growth acceleration.

Innovation acceleration.

Commercial acceleration and recurring customer value.

All powered by our amplify 40, please that system.

Our new disciplined capital allocation approach seeks to enhance just organic results with maximizing medium term equity returns has not stopped.

We made meaningful strides in advancing key elements of this strategy in Q2.

Especially with the innovation acceleration.

Fluke continues to execute on exciting market, leading innovation path.

For example, it.

It looks <unk> series small truth-function installation texture with true test software fluke connect a wireless connectivity was named most valuable products and control engineering 2025 put off till the year Awards.

Alumide Shiroye: At Guardian, we're seeing strong adoption of our new cloud-based assessment and capital planning module, driving double-digit orders growth in that product category. Moving to commercial acceleration, our Latin America growth strategy continues to run, delivering double-digit Q2 growth in the iOS segment in the region. At Fluke, we saw high single-digit growth in our priority high-growth applications, including distributed energy and data centers, with an exciting runway ahead of us. Closing with recurring customer value, our journey at Fluke to increase recurring revenue continued with double-digit ARR growth in the quarter, and we are undertaking AI-enabled customer experience improvement across our portfolio, driving better net dollar retention and customer lifetime value. As an example, Provision launched AI assistants and intelligent automation to drive productivity in key healthcare workflows.

At Gordian, we're seeing strong adoption of our new cloud based assessment of cuts up plenty of margin driving double digit orders growth in that product category.

Moving to commercial acceleration.

Our Latin America growth strategy continues strong delivering double digit Q2 growth can be iOS segment in our region.

Luke you saw high single digit growth in our priority of high growth applications, including distributed energy and data centers with exciting runway ahead of us.

Listen with recurring customer dog.

Joining us look to increase recurring revenue continued with double digit growth in the quarter.

We have undertaken a enviable customer experience improvements across our portfolio driving better net dollar retention and customer lifetime value.

As an example provision launched AI assistance and intelligent automation.

Drive productivity in key healthcare work flows.

Alumide Shiroye: All our organic growth acceleration levers are enabled by our amplified Fortive business system, which is at the heart of our culture. In May, nearly 1,000 team members around the world participated in our President's Kaizen Week, tackling growth opportunities with a continuous improvement mindset. It's one of my favorite weeks of the year, and I was particularly inspired by the pervasive deployment of AI capabilities for impact across our 34 Kaizen teams and our team's energy around amplifying FPS for profitable growth. Finally, disciplined capital allocation is an integral component of our Fortive-accelerated strategy. At our June investor day, we outlined our capital allocation priorities to enhance shareholder returns, invest in organic growth, pursue accretive bolt-on M&A, deploy capital to share repurchases, and maintain a growing dividend.

All our organic growth aspirational leverage enabled by our amplify 40 business system, which is at the heart of our culture.

In my nearly 1000 team members around the world participated in a precedented Kaiser and weak top line growth opportunities with a continuous improvement mindset.

It's one of my favorite weeks of the year.

She clearly inspired by the pervasive deployment capabilities for impact across our 34 kaizen teams.

It seems energy around actually find Sps for profitable growth.

Finally disciplined capital allocation is an integral component of about 40 absent dictates tribes.

At our June Investor Day, we outlined our capital allocation priorities to enhance shareholder returns.

That's inorganic growth.

I'll shoot accretive bolt on M&A.

Deploy capital to share repurchases.

I maintain a growing dividend.

Alumide Shiroye: Aligned with these priorities, we are activating our bolt-on M&A engine, and we are applying a rigorous disciplined approach based on relative returns to evaluate deals. We are ready to execute attractive bolt-on opportunities with the goal of enhancing shareholder returns. Looking ahead, the future is bright for Fortive. We are emerging from the spin as a more durable and resilient company, with a clear plan to accelerate shareholder value creation through profitable organic growth, disciplined capital allocation, and a deliberate focus on building and maintaining investor trust. We have rock-solid confidence in the quality of our new Fortive portfolio, proper built team, and a Fortive-accelerated strategy shared at our investor day seven weeks ago, not withstanding fluctuations in specific quarterly metrics. Our teams are energized, empowered, and excited to lead Fortive into this next chapter.

Aligned with these priorities, we are activating a bolt on M&A engine.

We're applying a rigorous disciplined approach based on a ratio returns to evaluate deals.

We are ready to execute attractive bolt on opportunities with the goal of enhancing shareholder returns.

Looking ahead, the future always grateful for it.

We are emerging from the Spain, as a more durable and resilient company with a clear plan to accelerate shareholder value creation through profitable organic growth.

I think capital allocation and a deliberate focus on building and maintaining best for trust.

You have rock solid confidence in the quality of our new 40 portfolio.

I'll post field team and a 45 associated strategy shared at our Investor day seven weeks ago.

We start any fluctuations specific quantitative metrics.

Our teams are energized and empowered and excited to lead <unk> into this next chapter.

Alumide Shiroye: I have been spending time with several of our customers, and they are thrilled about our new Fortive direction and eager to be part of our innovation acceleration, commercial acceleration, and recurring customer value agenda. With that, I'll turn it over to Mark to walk us through the financial results for Q2, our last quarter before the launch of new Fortive.

I have been spending time with several of our customers and they are thrilled about our new 40 direction and eager to be part of our innovation aspiration commercial acceleration and recurring costs and the value agenda.

With that I'll turn it over to Mark to walk us through the financial results for Q2 last.

Last quarter before the launch of new fought it.

Mark Okerstrom: Thanks, Alumide. We'll begin with slide seven. In the second quarter, we delivered total revenue of just over a billion dollars, down 0.4% year over year, but a core basis revenue declined 0.7%. Q2 revenue growth for the company was negatively impacted late in the quarter by customer demand responses to macro pressures and uncertainty, which Alumide mentioned earlier and on which I will elaborate in more detail as I go through our segment results. Across the first 10 weeks of the quarter, we saw a continuation of the revenue growth trends we saw in Q1. However, as June progressed, we saw year-over-year growth turn negative in the last few weeks, and we finished the month approximately $30 million below our expectations, driving year-over-year revenue growth on our $1 billion quarterly revenue base into declined territory. Although it's early, July is looking better.

Thanks, a lot good day will begin with slide seven.

In the second quarter, we delivered total revenue of just over $1 billion down 0.4% year over year, a core basis revenue declined 0.7% due.

Due to revenue growth for the company was negatively impacted late in the quarter by customer demand responses to macro pressures and uncertainty, which eliminate mentioned earlier and on which I will elaborate in more detail as I go through our segment results.

Cross the first 10 weeks of the quarter, we saw a continuation of the revenue growth trends we saw in Q1.

However, as June progressed, we saw year over year growth turned negative in the last few weeks and we finished the month approximately $30 million below our expectations driving year over year revenue growth on a $1 billion quarterly revenue base into decline territory.

Although it's early July is looking better.

Mark Okerstrom: Aside from these end-of-quarter factors, the business performed broadly in line with our expectations. From a geographic perspective, North America was slightly positive, but less so than what we had anticipated, largely due to the end-of-quarter factors. Western Europe, China, and Latin America were down year over year. We delivered an adjusted gross profit of $650 million, similar to last year. Adjusted gross margins were also roughly flat year over year, as FDS-driven pricing actions, growth in higher margin recurring revenues, and lower costs from supply chain countermeasures were roughly offset by tariff-related cost pressures. Adjusted EBITDA was $288 million, in line with Q2 of last year, with adjusted EBITDA margins holding steady versus the prior year.

From these end of quarter factors the business performed broadly in line with our expectations.

Or a geographic perspective, North America was slightly positive, but less so than what we had anticipated largely due to the end of quarter factors Western Europe, China, and Latin America were down year over year.

We delivered adjusted gross profit of $650 million similar to last year. Adjusted gross margins were also roughly flat year over year.

He has driven pricing actions broke in higher margin recurring revenues and lower costs from supply chain counter measures were roughly offset by tariff related cost pressures.

Adjusted EBITDA was $288 million in line with Q2 of last year with adjusted EBITDA margins holding steady versus the prior year.

Mark Okerstrom: We delivered an adjusted EPS of 58 cents at 4% year over year, driven by stable year-over-year adjusted EBITDA coupled with lower interest expense on lower debt balances and the positive year-over-year impact of share repurchases. We estimate direct tariff costs net of countermeasures created a roughly two-cent headwind to EPS in the quarter. This excludes the tariff-related quarter-end demand pressure referenced earlier. We generated $180 million in free cash flow in the second quarter, with our Q2 trailing 12-month free cash flow of $939 million, representing a solid 14% year-over-year increase. Our Q2 trailing month free cash flow conversion on adjusted net income was 107%. Moving to our segment results, starting with Intelligent Operating Solutions on slide eight, both revenue and core revenue growth were essentially flat year over year, which was below our expectations.

We delivered adjusted EPS of <unk>, 58 cents up 4% year over year, driven by stable year over year, adjusted EBITDA, coupled with lower interest expense, a lower debt balances and the positive year over year impact of share repurchases.

We estimate direct tariff costs net of counter measure has created a roughly <unk> <unk> headwind to EPS in the quarter.

This excludes the tariff related quarter end demand pressure referenced earlier.

We generated $180 million of free cash flow in the second quarter with our Q2 trailing 12 months free cash flow of $939 million represented a solid 14% year over year increase.

For Q2 trailing months free cash flow conversion on adjusted net income was 107%.

Moving to our segment results starting with intelligent operating solutions on slide eight both revenue and core revenue growth were essentially flat year over year, which was below our expectations.

Mark Okerstrom: In the back half of June, year-over-year growth turned negative, driven by two primary factors. First, general tariff uncertainty and questions around the permanence of tariff-related pricing and surcharge changes resulted in what we believe was deferred, not canceled, customer spending on certain categories of professional instrumentation of Fluke. While overall orders grew in the quarter, the mix of orders, particularly in the final weeks, shifted to longer lead-time products, resulting in an increase in backlog and a shortfall in revenue. We expect to deliver most of the backlog over the course of the second half of the year, and we are seeing encouraging signs in July that order mix is normalizing, which would suggest that most of the Q2 revenue slip will come back to us in the next several quarters.

Back half of June year over year growth turn negative driven by two primary factors.

First general tariff uncertainty and questions around the permanence of tariff related pricing surcharge changes resulted in what we believe was deferred not canceled customer spending on certain categories of professional instrumentation a fluke.

While overall orders grew in the quarter the mix of orders, particularly in the final weeks shifted to longer lead time products, resulting in an increase in backlog and a shortfall in revenue.

We expect to deliver most of the backlog over the course of the second half of the year. We are seeing encouraging signs in July that order mix is normalizing, which would suggest that most of the Q2 revenue slip will come back to us in the next several quarters.

Mark Okerstrom: Secondly, constrained US government spending and fiscal tightening at state and local governments pressure take rate procurement revenue at Guardian. Guardian usually sees a spike in spending in the last few weeks of Q2 as government entities with a June fiscal year-end rush to use their remaining budgets. Our customer discussions suggest that overall concerns about go-forward funding more broadly created a chilling effect on the usual "use it or lose it" behavior. Absent the above factors impacting Fluke and Guardian, the quarter would have come in broadly in line with our expectations. As always, there were puts and takes, but we've been pleased with the growth we've seen at Industrial Scientific and the iOS software businesses year to date. Adjusted gross profit came in at $461 million, down slightly from prior year.

Secondly, constrained the U S government spending in fiscal tightening at state and local governments pressure take rate procurement revenue accordion.

Where do you usually see the spike in spending in the last few weeks of Q2 as government entities with a June fiscal year end rush to use their remaining budgets are.

Our customer discussions suggest that overall concerns about go forward funding more broadly created a chilling effect on the usual use it or lose it behavior.

Absolutely about factors impacting fluke gordian the quarter would've come in broadly in line with our expectations.

As always there were puts and takes but we've been pleased with the growth we've seen in industrial scientific and the iOS software businesses year to date.

Adjusted gross profit came in at $461 million down slightly from prior year.

Mark Okerstrom: Adjusted gross margins declined to 66.1% from just under 70% a year ago, primarily due to tariff cost pressures partially offset by pricing countermeasures and growth from our higher margin software businesses. Despite the slight revenue and gross profit declines in the segment, adjusted EBITDA grew 2% to $236 million, as lower operating costs more than offset the modest decline in gross profit. Adjusted EBITDA margins grew to 33.8%, up from 33.3% in the prior year period. Moving to our advanced healthcare solutions segment on slide nine, we delivered total revenue of $320 million, which was below our expectations. Revenue was down 1.3% year over year and down 1.9% on a core basis. Towards the end of Q2, we saw reimbursement policy changes and uncertainty impact the advanced healthcare solutions segment.

Adjusted gross margins declined to 66, 1% from just under 70% a year ago, primarily due to tariff cost pressures, partially offset by pricing counter measures and growth from our higher margin software businesses.

The slight revenue and gross profit declines in the segment adjusted EBITDA grew 2% to $236 million as lower operating costs more than offset the modest decline in gross profit adjusted.

Adjusted EBITDA margins grew to 33, 8% up from 33, 3% in the prior year period.

Moving to our best Health care solutions segment on slide nine we delivered total revenue of $320 million, which was below our expectations revenue was down one 3% year over year and down one 9% on a core basis towards the end of Q2, we saw reimbursement policy changes and uncertainty impact the advanced health care.

Our solutions segment specifically.

Mark Okerstrom: Specifically, we saw the deferral of US-based hospital capital expenditures on healthcare equipment, including sterilization machines at ASP and quality assurance devices at Fluke Health, with customers citing precautionary deferral of spending while they sort through the impact of reimbursement policy changes. We saw partially offsetting outperformance in other parts of the business, with our AHS software businesses outperforming strong execution and benefiting from resilient SaaS-based revenue models. Absent the end-of-quarter pullback in healthcare equipment spending, AHS in total would have grown revenue largely in line with our expectations. Despite revenue being down year over year, adjusted gross profit was up slightly. Adjusted gross margins were up from just under 58% last year to just over 59%, with favorable pricing contribution aided by a mid-shift into higher margin AHS software revenue away from lower margin hardware revenue.

Specifically, we saw the deferral U S based hospital capital expenditures on health care equipment, putting sterilization machines in ESP and quality assurance devices at fluke health with customer, citing precautionary deferral of spending while they sort through the impact of reimbursement policy changes.

Partially offsetting outperformance in other parts of the business with our H S software businesses are performing on strong execution and benefiting from resilient SaaS based revenue models.

Absolutely end of quarter pullback in health care equipment spending Hs and total would've grown revenue largely in line with our expectations.

Despite revenue being down year over year adjusted gross profit was up slightly adjusted gross margins were up from just under 58% last year to just over 59% with favorable pricing contribution aided by a mix shift into higher margin H S software revenue away from lower margin hardware revenue.

Mark Okerstrom: Adjusted EBITDA was flat year over year at $86 million, as we reinvested very modest gross profit dollar growth into R&D sales and marketing initiatives to drive our top-line acceleration agenda outlined by Alumide. Despite these investments and declining revenue, adjusted EBITDA margin expanded modestly from 26.6% to 26.9%. Moving to slide 10 for a brief update on tariffs, which have shifted meaningfully since our Q1 earnings call. Based on current tariff rates in effect or expected to go into effect, we now expect the gross tariff impact for Fortive continuing operations to be approximately $40 to $55 million in the second half of 2025 and $80 to $120 million on an annualized basis. The majority of this impact is related to US-China tariffs, while the global trade environment remains volatile, and that volatility is impacting our results on the margin.

Adjusted EBITDA was flat year over year to $86 million as we reinvested very modest gross profit dollar growth into R&D sales and marketing initiatives to drive our topline acceleration agenda outlined by eliminating <unk>.

Spite these investments and declining revenue adjusted EBITDA margin expanded modestly from 26, 6% to 26, 9%.

Moving to slide 10 for a brief update on tariffs, which had shifted meaningfully since our Q1 earnings call based on current tariff rates in effect or expected to go into effect. We now expect the gross tariff impact for Ford of continuing operations to be approximately $40 million to $55 million in the second half of 2025.

At $80 million to $120 million on an annualized basis. The majority of this impact is related to U S. China tariffs, while the global trade environment remains volatile and that volatility is impacting our results on the margin. We are actively leveraging before the business system to adapt and respond.

Mark Okerstrom: We are actively leveraging the Fortive business system to adapt and respond. Our countermeasures include pricing actions and surcharges, shifts in our global supply chain and manufacturing footprint, and incremental cost and productivity initiatives. Assuming tariff conditions continue along the path of what is known today, we expect gross tariffs to be mitigated fully by the fourth quarter, and we expect we will see a modest gross margin and EPS headwind in Q3 as our countermeasures continue to fully phase in. Should global trade and fiscal policy remain as volatile as it has recently been, we would expect to continue to see near-term revenue impacts and challenges with revenue visibility of the type we saw in Q2. Turning to slide 11, we received a $1.15 billion dividend for the Reliant spin-off, which is reflected in the Fortive continuing operations balance sheet in our earnings release.

Our counter measures include pricing actions surcharges shifts in our global supply chain and manufacturing footprint and incremental cost and productivity initiatives.

You mean tariff conditions continue along the path of what is known today, we expect gross tariffs to be mitigated.

By the fourth quarter, and we expect we will see a modest gross margin any P. S headwind Q3, as our counter measures continue to fully phase yet.

Should global trade in fiscal policy remain as volatile as it has recently been we would expect to continue to see near term revenue impacts and challenges with revenue visibility of the type we saw in Q2.

Turning to slide 11.

We received a $1.15 billion dividend to the rally at the spin off which is reflected in the forward of continuing operations balance sheet and our earnings release.

Mark Okerstrom: In July, we used approximately $725 million of proceeds from the dividend to pay down debt, comprised of the entirety of our Japanese yen and euro-denominated term debt and a portion of our 2026 euro bonds. We plan to use the remaining dividend proceeds for share repurchases. The balance sheet figures shown here represent Fortive continuing operations on a pro forma basis, reflecting the debt paydown. From a leverage standpoint, our gross leverage ratio is roughly 2.5 times adjusted EBITDA after these debt repayments in line with our stated target. As previously highlighted on a trailing 12-month basis, we generated roughly $940 million of annual free cash flow. This, plus our strong balance sheet and growing adjusted EBITDA, gives us ample capacity and flexibility to execute our capital deployment priorities, always with a disciplined focus on allocating capital based on best relative risk-adjusted returns from a shareholder's perspective.

In July we used approximately $725 million of proceeds from the dividend to pay down debt comprised of the entirety of our Japanese yen and euro denominated term debt and a portion of our 2026 eurobonds.

To use the remaining dividend proceeds for share repurchases.

The balance sheet figure shown here represent the board of continuing operations on a pro forma basis, reflecting the debt paydown.

From a leverage standpoint, our gross leverage ratio is roughly two five times adjusted EBITDA. After these debt repayments in line with our stated target.

As previously highlighted on a trailing 12 months basis, we generated roughly $940 million of annual free cash flow.

This plus our strong balance sheet and growing adjusted EBITDA gives us ample capacity and flexibility to execute our capital deployment priorities always with a disciplined focus on allocating capital based on best relative risk adjusted returns from a shareholders' perspective.

Mark Okerstrom: Moving to slide 12, we are initiating our full-year adjusted EPS guidance for new Fortive at $2.50 to $2.60 per share. This outlook assumes a continuation of the market dynamics we experienced in Q2. We are not forecasting any material improvement or deterioration. It reflects the expected net impact of tariffs based on currently announced rates. Now let me provide a few additional modeling considerations. From a phasing perspective, we expect Q3 reported revenue to be broadly similar to Q2, including a modest tailwind from FX. We are modeling second half core revenue growth broadly in the range of the core growth we saw in the first half. We also expect AHS core growth in the second half to be similar to Q2, with a more challenging year-over-year comparable in Q3.

Moving to slide 12, we are initiating our full year adjusted EPS guidance for Newport, It at $2 50 to $2 60 per share.

The outlook assumes a continuation of the market dynamics, we experienced in Q2.

We are not forecasting any material improvement or deterioration.

It reflects the expected net impact of tariffs based on currently announced rates.

Now, let me provide a few additional modeling considerations.

From a phasing perspective, we expect Q3 reported revenue to be broadly similar to Q2, including a modest tailwind from FX.

We are modeling second half core revenue growth broadly in the range of the core growth. We saw in the first half. We also expect a H S core growth in the second half to be similar to Q2 with a more challenging year over year comparable in Q3.

Mark Okerstrom: From an adjusted EBITDA perspective, we expect typical seasonality with Q3 adjusted EBITDA lower than Q2 on a dollar basis. As a reminder, with lower debt balances, our interest expense will be lower in the second half. We continue to expect a full-year adjusted effective tax rate in the mid-teens. However, we are modeling Q3's tax rate in the high teens and the Q4 tax rate in the single digits due to discrete tax items in the quarter. Given seasonal revenue and margin patterns and the interest in tax assumptions I just outlined, we expect Q4 adjusted EPS to be meaningfully higher than Q3, which we currently expect to be slightly lower than what we saw in the second quarter on a sense basis. Before I wrap up, I'd like to take a moment to walk through our approach to guidance and disclosure for the remainder of the year.

From an adjusted EBITDA perspective, we expect typical seasonality with Q3 adjusted EBITDA lower than Q2 on a dollar basis.

As a reminder, with lower debt balances our interest expense will be lower in the second half we.

We continue to expect a full year adjusted effective tax rate in the mid teens. However, we are modeling Q3 tax rate in the high teens in the Q4 tax rate in the single digits due to discrete tax items in the quarter.

Given the seasonal revenue and margin patterns and the interest and tax assumptions I just outlined we expect Q4 adjusted EPS to be meaningfully higher than Q3, which we currently expect to be slightly lower than what we saw in the second quarter in a sense basis.

Before I wrap up I'd like to take a moment to walk through our approach to guidance disclosure for the remainder of the year.

Mark Okerstrom: As we have just outlined, we will provide annual adjusted EPS guidance updated quarterly, along with commentary on phasing throughout the year and modeling help on other key P&L line items. Our disclosures will remain focused on key metrics at the Fortive and segment level, with color at a lower level of granularity as appropriate to provide clarity on key drivers of performance. This approach reflects our ongoing desire for clarity and simplification in our communications with the investor community. As a final note, before turning it back to Alumide for closing remarks and Q&A, I wanted to directly and clearly state that recent near-term revenue volatility has absolutely no impact on our confidence in the future outlook for our business. And specifically, the medium-term financial framework we shared at our recent investor day remains firmly intact.

As we've just outlined we will provide annual adjusted EPS guidance updated quarterly along with commentary on phasing throughout the year and modeling help on other key P&L line items.

Our disclosures, we will remain focused on key metrics at the affordable and segment level with color at a lower level of granularity as appropriate to provide clarity on key drivers of performance.

This approach reflects our ongoing desire for clarity and simplification and our communications with the Investor community.

As a final note before turning it back to illuminate for closing remarks, and Q&A I wanted to directly and clearly state that recent near term revenue volatility has absolutely no impact on our confidence in the future outlook for our business and specifically the medium term financial framework, we shared at our.

Investor day remains firmly intact.

Mark Okerstrom: Q3 marks the beginning of our new chapter, and we are moving the pieces into place to drive accelerated growth and shareholder value creation in the coming years. The three-pillar value creation plan we outlined at our June investor day is now solidly in the implementation phase, and I couldn't be more excited for the road ahead. With that, I'll turn it back to Alumide.

Q3 marks the beginning of our new chapter and we are moving the pieces into place to drive accelerated growth and shareholder value creation in the coming years.

The three pillar value creation plan, we outlined at our June Investor Day is now solidly in the implementation phase and I couldn't be more excited for the road ahead with that I'll turn it back to eliminate.

Alumide Shiroye: Thanks, Mark. Let me close our prepared remarks on slide 13 with a few reflections on what's ahead for Fortive. First, we have a long track record of strong annual financial performance, as presented on this page: solid revenue growth, expanding EBITDA margins, and resilient free cash flow in the last five years. Q2 2025 was our last quarter before the launch of new Fortive. While core growth in the quarter was below our expectations, our earnings and free cash flow stood up well in the face of unexpected headwinds. We delivered 4% adjusted EPS growth and 14% trailing 12 months free cash flow growth. This is a testament to our team, the operation leverage, and cash generation strength in our business and the Fortive business system. We are excited about what that portends as we return to normal and accelerating growth.

Thanks Mark.

Let me close our prepared remarks on slide 13, with a few reflections on what's ahead for Florida.

First we have a long track record of strong annual financial performance as presented on this page.

Solid revenue growth expanded EBITDA margins and resilient free cash flow in the last five years Q2, 2025 was our last quarter before the launch of new 40.

While core growth in the quarter was below our expectations, our earnings and free cash flow stood up well in the face of unexpected headwinds.

We delivered 12% adjusted EPS growth and 14% trailing 12 months free cash flow growth.

This is a testament to our team you approach on leverage and cash generation strengths in our business and the 40 business system.

We are excited about what that portends as will return to normal and accelerating growth.

Alumide Shiroye: With Q2 and the spin behind us, we now enter the era of Fortive accelerated. Our purpose-built new Fortive team is excited about the opportunity ahead of us, and we thank you all for your interest in Fortive. I especially want to thank our investors, our 100,000 customers, and all our Fortive employees around the world across our 10 iconic operating brands, who do a tremendous job every day to deliver near-term results and build enduring advantages in our businesses. With that, I'll turn it to Christina for Q&A.

With Q2 on the spin behind US, we now enter the era of 40 or accelerates it.

Our purpose built new 40 team is excited about the opportunity ahead of us.

We thank you all for your interest in <unk>.

I, especially want to thank our investors.

100000 customers.

And all of that 40 of employees around the world across our 10 iconic operating brands will do a tremendous job everyday to deliver near term results and build enduring advantages in that business.

With that I'll turn it to Christina for Q&A.

Christina Jones: Thanks, Alumide. That concludes our prepared remarks. We are now ready for questions.

Thanks to limit a that concludes our prepared remarks, we are now ready for questions.

Brock (Conference Facilitator): Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question today comes from Julian Mitchell of Barclays. Please proceed with your question.

Thank you we will now be conducting a question and answer session.

If you would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Our first question today comes from Julian Mitchell of Barclays. Please proceed with your question.

Julian Mitchell: Hi, good afternoon, and congrats on getting the first earnings out of the way as a remain co-new Fortive. Maybe just wanted to start with the sort of second half moving pieces between third and fourth quarter. So it seems like maybe third quarter EPS is in the, you know, maybe low mid-50s range in terms of cents, perhaps sort of flattish EBITDA sequentially. And then there's the tax pressure. And then into the fourth quarter, it looks like you need a sort of, you know, 30 cents or so increase in EPS sequentially, helped by that tax rate dropping in Q4. I just wanted to make sure that that rough framework made sense in terms of your full year guidance and just sort of help us understand on the operating line, you know, why do you get such a big lift in Q4?

Hi, good afternoon and.

That's on getting the first.

Earnings out of the way as a remain co when new 14th.

Maybe.

Just wanted to start with.

Sort of a second half moving pieces between third and fourth quarter.

So it seems like maybe third quarter EPS is in the <unk>.

Maybe low mid Fifty's range in terms of cents.

Hum.

Haps sort of flattish EBITDA sequentially.

Then there's the tax pressure in the fourth quarter. It looks like you need to sort of you know 30 cents or so increase in EPS sequentially.

Helped by that tax rate dropping in Q4, I just want to make sure that that rough framework made.

It made sense in terms of your full year guidance and just sort of help us understand on the operating line.

Why do you get such a big lift in Q4.

Mark Okerstrom: Yeah, thanks, Julian. I'll take this one. So there definitely are a few things going on. I'd say directionally, you're thinking about things the right way. You know, as a reminder, just normal seasonality of this business is for there to be a step down from Q2 to Q3. So you definitely see that in the way we're sort of shaping the year. Added to that is we do have some negative impact from tariffs still that are going to hit us in the third quarter, which sort of builds upon it. And then as you move into the fourth quarter, again, normal seasonality is the biggest driver. But if you work down through adjusted EBITDA first, you've got a couple of other factors. One is that the tariff countermeasures are fully implemented, and they actually become slight positive at current rates into the fourth quarter.

Yep, Thanks Julien.

I'll take this one so is.

There definitely are a few things going on I'd say directionally, you're thinking about things the right way.

As a reminder.

Normal seasonality of this business is for there to be a step down from Q2 to Q3, So you definitely see that.

The way, we're sort of shaping your added to that is we do have some negative impact from tariffs still that are going to hit us in the third quarter, which sort of builds upon it.

Then as you move into the fourth quarter again normal seasonality is the biggest driver, but if you work down through adjusted EBITDA first you've got a couple of other factors.

One is that the tariff countermeasures are fully implemented and and they actually become a slight positive at current rates into the fourth quarter and secondly, you've got a tailwind from FX, which again foreign denominated currencies more U S dollars of revenue and add the vast majority of our costs are sitting in U S. Dollar so that does drop through to.

Mark Okerstrom: And secondly, you've got a tailwind from FX, which, you know, again, foreign denominated currencies, more US dollars in revenue, and the vast majority of our costs are sitting in US dollars. So that does drop through to adjusted EBITDA. That's then compounded as you move down to adjusted EPS because you've got the discrete items on tax rate that we mentioned, which pushes tax rate down into the single-digit zone. You've got lower interest expense on lower debt balances, and then you've also got the year-over-year impact of share repurchases that are helping EPS as well.

Adjusted EBITDA, that's been compounded as you move down to adjusted EPS, because you've got the discreet items on tax a tax rate that we mentioned, which pushes tax rate down into the single digit zone, you've got lower interest expense on lower debt balances and then you've also got the year over year impact of our share repurchases start helping EPS.

S as well.

That's helpful. Thank you and then just my follow up would be around a.

Julian Mitchell: That's helpful. Thank you. And then just my follow-up would be around a couple of the main end markets that led to the shortfall in Q2 and how you're thinking about those playing out from here. In particular, I suppose the government pressure at FAL. What are you assuming there in terms of how much faster that improves? And then in healthcare, just unpack a little bit because you had the sort of selling days headwind in Q1, and then it seemed to morph into something more problematic late in Q2. Sort of what are you seeing right now there in Q3?

A couple of the main end markets that led to the shortfall in Q2, and how you're thinking about those playing out from here in particular I suppose the government pressure it S. A L.

What are you assuming there in terms of how much faster that.

Crews and then in health care.

Just unpack a little bit because you had to sort of selling days headwind in Q1, and then it seemed to morph into something more problematic late in Q2 sort of what are you seeing right now they are in Q3.

Yeah.

Alumide Shiroye: Yeah, thanks, Julian. I'll take that one. So in many ways, Q2 played out exactly how we expected, except for these three discrete items. So I'll go through the three of them. So the first one on the FAL and government spending at Guardian. The nature of that is we were coming up after 2022 and 2023 where we had double-digit growth in that business. So we knew we kind of had a comp issue coming in. And then the June, we always say June is a big month, but in particular for that business, because it's the year-end for a lot of the state and local agencies, they usually have a big spike in spending, which just didn't happen as much as I've seen for the last several Junes, the last several years.

Yes, Thanks, Stephen I'll take that one so.

In many ways Q2 played out exactly how we expected except for these three discrete items. So I'll go through the three of them. So the first one on the U S. C. L on government spending at Guardian.

The nature of that is we're coming up after 2022, and 2023, where we had double digit growth in that business. So we knew we kind of had a comp you're coming in and then the June we always see June is a big month, what in particular for that business, because it's a year and for the state and local agencies.

They usually have a big spike in spending which just didn't happen as much I've seen for the last several June the last several years, but what we do know it should be the case is that the projects in the pipeline are still there.

Alumide Shiroye: But what we do know to be the case is that the projects in the pipeline are still there. They are essential projects for these communities that have to get done. So we know as a matter of fact that these agencies are working through getting those projects funded. The exact timing of when they flow through our revenues is hard to predict. I would say that for the second half, the guidance we've laid out here comprehends any range of outcomes on how that plays through, whether it's fast or slow. We have enough other things to make sure our guidance here is secure. So that is going to trickle through. Just the prediction of the timeline is hard to nail down. With respect to healthcare, I mean, I would say that the overall segment continues to be very strong for us.

Essential projects will just come out he said have to get done.

So we know it's a matter of fact that these agencies are walking true gatson dose codecs funded the exact timing of when they flow through our revenues, it's hard to predict I would say that for the second half the guidance you've laid out here comprehensive annual range of outcomes on how that plays through whether its fastest.

No.

Have enough other things should make sure our guidance here is secured so that he's going to trickle through I just state the prediction of the timeline is hard to nail down.

With respect to health care, I mean, I would say the overall segment continues to be very strong for us. It was a very specific thing in June for aperture equipment purchases by hospitals.

Alumide Shiroye: There was a very specific thing in June for capital equipment purchases by hospitals. So if you think about it, the one big beautiful bill was signed on July 4th. So that means that three weeks before that, these hospitals were trying to figure out what the final provisions were going to be, how that affects the economics in terms of especially Medicaid and sort of uninsured and what that means for them overall. So a lot of them really just precautionary deferral of equipment purchases. These are essential sterilization and safety equipment that they do have to buy. We are already seeing in July some favorable trends that some of that is coming back. So again, we know it's going to come back. We haven't assumed it's all going to flow through in Q3 or Q4. Our guidance is secure, whatever the timeline is on that.

So if you think about it would be the one big beautiful Bill was signed on July 4th So that makes it three weeks before that these hospitals were trying to figure out what the final provisions were going to be how that affects the economics in terms of especially Medicaid and I should've uninsured and what that means for them overall.

A lot of them really just precautionary deferral of equipment purchases. This essential sterilization on safety equipment that they do have to buy are we already seen in July some favorable claims that some of that is coming back. So again, we know it's going to come back we haven't assumed it's all going to flow through.

In Q3 Q4, our guidance is secure whatever the timeline is something that I think the fluke one just to close it off Julien.

Alumide Shiroye: And I think the flip one, just to close it off, Julian, is the easiest one in many ways because POS was very strong. Others grew in the quarter. And so you say, well, what happened? And it really was we had a slight shift in mix from short cycle to longer cycle in late June, which meant we built backlog. And so again, we know the backlog is going to burn over the next few quarters. And again, whatever range of outcomes is safe within our guidance. So overall, solid quarter, and we feel good about what we've assumed here.

This is the easiest one in many ways because Pos was very strong orders grew in the quarter and so you say well what happened there really was we had a slight shift in mix from short cycle to longer cycle in late June which management build backlog and so again, we know the backlog is going to burn over the next few quarters.

Whatever range of outcomes is safe with you in our guidance. So overall solid quarter and we feel good about what we've assumed here.

Julian Mitchell: Great. Thank you.

Great. Thank you.

Alumide Shiroye: Thanks, Julian.

Thanks Judy.

Brock (Conference Facilitator): The next question is from Nigel Coe of Wolf Research. Please proceed with your question.

The next question is from Nigel Coe of Wolfe Research. Please proceed with your question.

Julian Mitchell: Thanks. Good morning. Sorry, good afternoon. Thanks for the details. So I think you said sales in line with 2Q and 3Q, and then you clarified to the previous question that sales normally down Q2s. Just wanted to clarify that point. Is organic sales in 3Q consistent with the modest decline we saw in 2Q? Just want to clean that one up.

Thanks, Good morning, I'm sorry.

Sorry, good afternoon.

Thanks for the details.

So yes. Thank.

Thank you said sales in line with with <unk> and <unk> and then you clarify to the previous question that sales normally down.

<unk> just just wanted to clarify that point as organic sales in <unk> consistent with the modest decline we saw in <unk> just wanted to just one of the things that went up.

Mark Okerstrom: Yeah, I mean, I would think on a consolidated basis, it's roughly in line. You know, the one thing to keep in mind is that for AHS specifically, I would expect the back half growth rate to be consistent with what we saw in Q2. Again, really largely on the factors that Alumide mentioned there, you know, continues to be pressure on healthcare reimbursement rates, and we don't expect that to subside, you know, anytime in the back half of the year.

Yes, I mean, I would think on a consolidated basis, it's roughly in line.

One thing to keep in mind as did for Hs, specifically I would expect the back half growth rates to be consistent with what we see saw in Q2 again really largely on the factors that eliminate mentioned there continues to be pressure on health care reimbursement rates and we don't expect that to subside anytime in the back half of the year.

Julian Mitchell: Okay, so just so again, I maybe I'm just being dumb. So the organic sales growth consistent with 2Q on a total basis or dollar sales?

Okay. So just so again.

It's been done so the organic sales growth consistent with two key one until the basis will go into sales.

Mark Okerstrom: Dollar sales, yeah.

Dollar sales.

Julian Mitchell: Dollar sales, okay. I was thinking.

Yeah, Yeah yeah.

Mark Okerstrom: Yeah. Yeah.

Julian Mitchell: Okay, so that.

Mark Okerstrom: Yeah.

Yep.

Julian Mitchell: Okay. So that implies.

And then sticking with that.

Mark Okerstrom: I think for the back half core growth rate to be roughly down in the first half.

We're broke rate to be roughly yeah first half.

Julian Mitchell: Okay, thank you very much. And so that implies that iOS organic sales growth would improve materially in 3Q, but AHS still in that, you know, down 2% type of range. If we're seeing, you know, this temporary dislocation in June from the sterilization equipment, why wouldn't AHS improve in the second half of the year?

Okay. Thank you. Thank you very much and so that implies that iOS organic sales growth would improve materially in <unk>, but IHS still and that's down 2% type of range. If we see in this temporary dislocation in June from the sterilization equipment why wouldn't Hs improve in the <unk>.

Second half of the year.

Alumide Shiroye: Yeah, let me take that one, Nigel. Good, that's the right question. I think part of it is the Q3 2024 comp for AHS is quite high. So that's part of what you see. And so Q3, especially for AHS, would not show the quick pop in core growth improvement that iOS will show. And I think we also, again, just a precaution, we've kind of assumed in our guide here that to Mark's point, these hospitals and the academic hospitals are different and the big ones than the rural hospitals. But we've just kind of, from a prudence point of view, assumed that it takes a bit of time for it all to unwind, unlike for Fluke, where we know it's backlog we built, and that's going to be easier to burn because it's all in our control.

Yeah, Let me take that one Nigel good that's the right question and I think part of it is.

The Q3 2020 full comp for EHS is quite high.

So that's part of what you see and so Q3, especially for Hs would would not show the quick pop.

Cohort improvement that iOS will show and I think we also again just a precaution.

We've kind of assumed in our guide here back to marks point at this hospital will send a defined academic hospital side different on a big one stunning rural hospitals, but we've just kind of from a prudent point of view I assumed that it would take.

At a time for it all to unwind unlike for fluke, where we know its backlog, we built and that's going to be easier to burn because it's all in our control. So there's some of that that you see that as a comp effect in Q3 for EHS and a just the nature of the specific hurdles that we run into in late June we've had.

Alumide Shiroye: So there's some of that that you see as a comp effect in Q3 for AHS and then just the nature of the specific hurdles that we run into in late June and what we've assumed for how quickly they're resolved.

Zoomed, well how quickly they're resolved.

Julian Mitchell: Thanks, Alumide. So comps certainly do get tougher, so I see that. And then just a quick one on Guardian. It seems like you had a little bit of the, you know, June year-end friction around, you know, use it or lose it. So just to be clear that that business has recovered in Q3 so far. I'm just wondering, could you maybe just give us some, you know, renewal rates around, you know, Guardian or the iOS software? That'd be helpful. Thanks.

Thanks for that.

So you do get tougher so I see that and then just a quick one on Gordian and <unk>. It seems like you had a little bit of it.

June year end friction around use it or lose it.

So just to be clear that that business has recovered in AR in Q3, so far I'm. Just wondering could you maybe just give us some renewal rates around you know gordian or the iOS software that'd be that'd be helpful. Thanks.

Yeah.

Alumide Shiroye: Yeah, so I mean, I just on the Guardian piece, so yes, it was a specific situation around this year and for the state and local. We are seeing that kind of ease up a little bit in July, but it's too early to call a victory on it, but it's certainly feeling like things are easing up a little bit. I think in terms of overall software and renewal rates, I would tell you that, you know, all of our software businesses had very good NDR in the quarter. So renewal rates are really strong across the board. What we're really focused on is instead of just gross dollar retention, really working on the kind of the expansion and the cross-sell and upsell and pricing to get our NDR to even higher levels. But from a renewal point of view, all really strong, really, really strong.

Yes, so just on the Gordian piece, so yes, it was a specific.

Situation around this year and for the state on a low call. We are seeing that kind of ease up a little bit in July, but it's too early to call victory on it but it suddenly feeling fairly likely.

Sorry, easing up a little bit I think in terms of overall software renewal rates I would tell you that you know all of that all of our software business has had very good N D. R. <unk> in the quarter. So renewal rates are really strong across the board what we're really focused on instead of just gross dollar retention.

Really walking on the kind of the expansion and cross sell and upsell on pricing to get Andy are actually even higher levels, but from a renewal point of view all really strong really really strong I like Mark mentioned, we're talking about the three areas that I kind of didn't go the way we expect.

Alumide Shiroye: Like Mark mentioned, we're talking about the three areas that kind of didn't go the way we expect, but the fact of it is everything else went really well for us in the quarter, which I think just gives us a lot of confidence as we look at the medium-term outlook that we laid out seven weeks ago.

The factor base everything else went really well for us in the quarter, which I think just.

It gives us a lot of confidence as we look at the medium term outlook that we laid out seven weeks ago.

Julian Mitchell: That's great. Thank you.

That's great. Thank you.

Brock (Conference Facilitator): The next question comes from Steven Tusa of JP Morgan. Please proceed with your question.

The next question comes from Stephen Tusa of Jpmorgan. Please proceed with your question.

Julian Mitchell: Hey guys, I'd echo Julian's comments on congratulations for coming out here in your first quarter public.

Hey, guys I Echo Julians comments on congratulations for come.

Coming out here in your first quarter public.

Mark Okerstrom: Thank you.

Thanks, Dave.

Julian Mitchell: So just a little bit on the at a higher level, the rationale around, I mean, I didn't quite get the slide maybe, but it looks like you guys will not be giving organic growth guidance at a high level. You'll just be giving, you know, kind of like color on that. Is that right?

So just a little bit on at a higher level.

The rationale around.

I didn't quite.

Get the slide.

Maybe but it looks like you guys will not be giving organic growth guidance at a high level, you'll be giving kind of like color on that is that right.

Mark Okerstrom: That's the intention, Steve, and I think I would think about it as we're going to try this approach for the back half of the year. We want to get feedback, you know, as we go. And, you know, really just to reiterate the goals here, number one is we just really wanted to simplify the way that we communicate with investors. That's certainly been a, you know, a strong point of feedback from the broader investment community for us, and we've taken that on board. Secondly, though, just to be very clear, our sights are very much set on the value creation plan that we laid out. It's a multi-year value creation plan.

That's the intention Steve and I think I would think about it is we're going to try this approach for the back half of the year, we Wanna get feedback.

As we go.

It's really just to reiterate the goals here number one is we just really wanted to simplify the way that we communicate with investors. That's certainly been a strong point of feedback from the broader investment community for us and we've taken that on board.

Secondly, though just to be very clear our sites are very much set on the value creation plan that we laid out it's a multiyear value creation plan.

Mark Okerstrom: And so part of the simplification effort is to make sure that we have the ability from quarter to quarter and across P&L items to make business decisions that are smart business decisions that will support that medium-term value creation goal. And that's what's led us to, again, annual adjusted EPS only with hopefully modeling help that is, you know, maybe even more helpful than specific quarterly guidance might have been in the past.

So part of the simplification effort is to make sure that we have variability from quarter to quarter and across P&L items to make business decisions that are smart business decisions that will support that medium term value accretion and that's what's led us to again annual adjusted EPS only.

Hopefully modeling helped it may be even more helpful than specific quarterly guidance might have been in the past.

Julian Mitchell: Okay. I mean, yeah, my feedback would be like one number is probably not enough, but I guess we'll see how it goes in the next couple of quarters here. And then I think Alumide, you said you're going to, you emphasize that you're kind of ready to do bolt-ons. I thought there'd be a little bit of a breather on that front. Is there anything that you are changing in that approach relative to, you know, what Fortive has done historically? Was there a bit of a reset on the process or anything like that, or should we just think about this as a continuation of what's been happening for the last few years?

Okay.

Yes, my feedback would be like one number is probably not enough, but I guess, we'll see how it goes in the in the next couple of quarters here and then I think illuminate you said youre going to you are you emphasized that you are kind of ready to do bolt ons.

I thought there'd be a little bit of a breather on that front is there anything that you are changing in that approach relative to what <unk> has done historically was there a bit of a reset on the process or anything like that or should we just think about this as a continuation of what's been happening for the last few years.

Alumide Shiroye: Well, so thanks, Steve. So I mean, it is, we've tried to be really clear about how this is a very different capital allocation play call that we've made here. And so the first is the kind of the dynamic balance across share repurchase and kind of acquisitive M&A that is really focused on bolt-ons. So that is very different. The second thing that is different is we've really elevated our, you know, kind of the financial and strategic scrutiny that we apply to these bolt-on deals that we do. We have a strong track record on them, and we've elevated that level of scrutiny on those bolt-ons. And I will say in terms of kind of the timing, obviously we've been kind of quiet now since we announced the spin in September 2024. And even for, you know, for nine months before that, we've been quiet.

Well, thanks, Steve So M&A as we've tried to be really clear about how this is a very different capital allocation play call that we've made here and show, but first is to kind of a dynamic balance a cross share repurchase and I kind of accretive M&A that is really focused on bolt ons.

So that is very different in the second thing that is different is we.

Really elevated are you know kind of his financial and strategic sourcing.

Scrutiny that we apply to these bolt on deals that we do we have a strong track record on them and we've elevated that that level of scrutiny on on dose bolt ons and I will say in terms of kind of the timing. Obviously, we've been we've been kind of quiet now since we announced the spin in September 2024, and even four.

Paul for nine months before that we've been quiet. So yeah. I think one thing we've continued to doing that quite for Steve as we've continued to cultivate these proprietary deals with assets that are close to the areas of strength for us that we advantaged natural on asphalt that we know exactly how to create value for.

Alumide Shiroye: So, you know, I think one thing we've continued to do in that quiet period, Steve, is we've continued to cultivate these proprietary deals with assets that are close to areas of strength for us that we advantage natural owners for, that we know exactly how to create value for. So now we're, you know, we're kind of opening the conversation to see which ones of those meet a very high bar on bolt-ons that are creative and have strategic feed and meet our financial criteria. And it's always, as you know, hard to predict the exact timing of when these things will mature for execution. But we're open for business, and at the same time, our level of kind of discipline and especially attention to making sure that every deal we do is beyond reproach is really high right now.

So now we're you know we're kind of opening the conversation to see which ones of those meet a very high bar on bolt ons that <unk> been asked strategic feat and meet our financial criteria and it's always says you know how to predict the exact timing of when distance to a mature for execution, but I went way up.

Once a business.

Same time, a level off kind of discipline on especially attention to making sure that every deal with U a E.

Beyond reproach.

He is really high right now so we will hold a high bar, but I will say open Florida opens for business Yep makes.

Alumide Shiroye: So we'll hold a high bar, but we're also open for business.

Julian Mitchell: Makes a lot of sense. Thanks, Roy.

Makes a lot of sense. Thanks, a lot.

Alumide Shiroye: Thanks.

Thanks.

Brock (Conference Facilitator): The next question is from Jeff Sprague of Vertical Research Partners. Please proceed with your question.

The next question is from Jeff Sprague of vertical Research partners. Please proceed with your question.

Jeffrey Sprague: Hey, thanks. Good afternoon, everyone. Yeah, I'm still a little confused on a couple of the guidance inputs here myself. So I think we've got AHS nailed down. But what are you implying for iOS then? Dollar sales roughly equivalent in Q3 and then a seasonal pickup in Q4. Can you just clarify that?

Hey, Thanks, good afternoon, everyone.

Yes, it's still a little confused on a couple of the guidance inputs here myself. So I think we've got a hs nailed down but what are you implying for iOS then.

Dollar sales roughly equivalent in Q3 and then.

Seasonal pickup in Q4 can you just clarify that.

Mark Okerstrom: Yeah, I would think about iOS, you know, broadly as following the same pattern that we spoke about for Fortive, you know, in total. So you will see a, you know, a pickup in core growth through Q3. And, you know, I would think about the back half in total as being, you know, broadly consistent with what we saw at the first half in terms of core growth rates.

Yeah, I would think about.

IOS brought.

Broadly is following the same pattern that we spoke about for Florida of in total.

So you will see.

A pickup in core growth through Q3.

And I would think about the back half in total has been broadly consistent with what we saw in the first half.

In terms of core growth rates.

Jeffrey Sprague: And then just trying to triangulate to what you said about EPS, and maybe I've got something wrong below the line on interest or other. But so it looks like you're implying down margins on flat sequential revenues in AHS. Is that correct, or where is the implicit margin pressure in Q3?

And then just trying to triangulate to what you said about EPS.

And maybe I got something wrong below the line on interest or other but.

So it looks like you're implying down margins on flat sequential revenues in IHS.

Is that correct or where where is the implicit margin pressure in Q3.

So Q3, I would think about it.

Mark Okerstrom: So Q3, I would think about AHS as being broadly consistent with, say, probably down a little bit versus Q3 of last year. Again, just on the trends that we saw, tariff impact, et cetera. And then iOS, I would think about as, again, just down slightly again on that tariff impact. And then you see a rebound in the fourth quarter on the factors that we mentioned.

Hs is being broadly consistent with.

<unk>.

So, it's probably down a little bit versus Q3 of last year, Okay, and just on the trends that we saw tariff impact et cetera.

And then iOS I would think about is again just down slightly again on that tariff impact and then you see rebound in the fourth quarter on the factors that we mentioned.

Mhm.

Jeffrey Sprague: And I'm sorry, just I mean, there's a, I guess there's an upper bound on high teens, and there's a lower bound on single-digit tax rate for Q3 and Q4. But maybe you could just tell us what you're expecting for the annual tax rate so we don't get too far out of whack on trying to triangulate between those two.

And I'm sorry, just I mean, there is a I guess there is an upper bound on high teens and Theres, a lower bound on single digit tax rate for Q3, and Q4, but maybe you could just tell us what you're expecting for the annual tax rate. So we don't.

To get too far out of whack I'm trying to triangulate between those two.

Mark Okerstrom: Yeah, I mean, I would think about annual tax rate in the call it 14 to 16 percent zone.

Yeah, I mean, I would think about annual tax rate in that call it 14% to 16% so.

Jeffrey Sprague: Yeah. Okay. Great. I'll leave it there. Thank you.

Yes.

Okay, Great I'll leave it there thank you.

Mark Okerstrom: Yeah.

Yeah. Thanks, Jeff.

Julian Mitchell: Thanks, Jeff.

Brock (Conference Facilitator): The next question is from Scott Davis of Melis Research. Please proceed with your question.

The next question is from Scott Davis of Melius Research. Please proceed with your question.

Andy Kaplowitz: Hey guys. And Christina, congrats on getting all this stuff done. I'm sure it was a lot of work. But in that context, as I just wanted to ask, you know, how big of a distraction was it to the organization with the spin and the management change kind of at the similar time? I would imagine that would create some angst amongst folks, but maybe some color around that.

Hey, guys and Christina Congrats.

Getting all this stuff done.

Sure It was a lot of work.

In that context, I just wanted to ask how big of a distraction was it to the organization.

With the spin and the management change kind of at the.

Similar time.

I would imagine that would create some angst amongst folks, but maybe some color around that.

Alumide Shiroye: Yeah, well, thanks. You know, I think the, it is a lot of work for the team, and I'm grateful to just the incredible effort that our teams put into getting the spin executed at the same time, getting the quarter delivered and ended up by the high end of our, I just said, EPS guide. So, you know, it was a lot. And to your point, the leadership change is a lot too. While, you know, obviously, I'm not new to the team, but it's still a change. I would say that, you know, in the spirit of our culture, because the thing that makes Fortive special is not any one of us, is the fact that all 10,000 of our teams are deeply rooted in the Fortive business system, and that's how we do everything we do. The show goes on in that sense.

Yeah, well. Thanks, I think the it is it is a lot of work for the team and I'm grateful to just see incredible.

What that our teams put into getting the Spain execute at the same time.

Getting the quarter delivered an end up by the end of our adjusted EPS Guide. So it was a lot and to your point the leadership change.

He has a lot to what while you know, obviously I'm not new to the team.

But it's still it's still a change I would say that you know in the spirit of our culture, because the thing that makes <unk> special.

It's not it's not any one of US is the fact that all 10000 of our teams are deeply rooted in the Florida business system and that's how we would do everything we do.

They show goes on in that sense, So if I'm a distraction point of view.

Alumide Shiroye: So from a distraction point of view, you know, for most of our operating companies, which is where we serve our customers, it really wasn't much of a disruption. Most of the spin activity was on the corporate team. So, you know, again, I wouldn't say it was not changed, but just to calibrate it overall, you know, we still delivered a solid first half despite this kind of late in the quarter call growth pains that's, you know, $30 million and a billion dollar revenue base in a quarter. I think our teams just did an incredible job of resiliency, staying focused, and I'll tell you just right now the level of excitement about the future and the path we're on with Fortive Accelerated is quite a thrill to see.

For most of our operating companies, which is where we serve our customers. It really wasn't much of a disruption most of the sustained activity I was on the corporate team.

So you know again I wouldn't say it was not change, but just to calibrate. It overall, we still delivered a solid first half. Despite this kind of late in the quarter call growth range, Thats $30 million and $1 billion revenue base in that quarter I think our team just did an incredible job.

Resiliency is staying forecast and I would tell you just.

Right now the level of excitement about the future and if.

Path, we're on with 40 box of our HIV Saar is quite to trail.

Okay.

Andy Kaplowitz: Well, best of luck, guys. I'm going to pass it on. That's enough for me. Thank you. I appreciate it.

Best of luck guys I'm going to pass it on that's enough for me. Thank you.

Alumide Shiroye: Thanks.

I appreciate it thanks. Thank you.

Mark Okerstrom: Thank you.

Brock (Conference Facilitator): The next question is from Andy Kapowitz of Citigroup. Please proceed with your question.

The next question is from Andy Kaplowitz of Citigroup. Please proceed with your question.

Andy Kaplowitz: Hey, good morning, everyone.

Hey, good morning, everyone.

Alumide Shiroye: Morning.

Good morning, good morning.

Mark Okerstrom: Morning.

Andy Kaplowitz: So you mentioned the deferred spending at Fluke toward the end of the quarter, but you know, you'd said that the order mix, I think, is normalizing. I guess the question is, why did you see a bit of a gap down now? Because Fluke's been, as you know, pretty stable for a long period of time, even I think in the initial tariff-related volatility. So how much do you worry, if at all, that it's just, you know, maybe more macro uncertainty creeping in, or, you know, it's just this sort of temporary thing, and what are you seeing in the channel?

So you mentioned the deferred spending at fluke towards the end of the quarter, but you had said that order. It makes I think is normalizing I guess the question is why did you see a bit of a gap down now because fluke spin.

Pretty stable for a long period of time, even I think in the initial tariff related volatility. So how much do you worry if at all that it's just more macro uncertainty creeping in or you know, it's just a sort of temporary thing and what are you seeing in the channel.

Alumide Shiroye: Yeah, no, thanks. Thanks for that question. I mean, I think we're, I'll just step back. For Fluke overall, you're exactly right. Our level of confidence and excitement in the kind of really differentiated position of that business. You think about industrial professional instrumentation, you'll be hard-pressed to find a business with the brand strengths and the gross margins and the resiliency that we've shown, the fact that 15% of that business is now recurring revenues and continues to grow at double-digit ARR for that piece of it. So nothing changed about Fluke. They focus on innovation and how that adds acceleration to what's already a great story. So all of that stays the same.

Yeah no. Thanks. Thanks for that question I mean, I think we're just step back for fluke overall.

That's a right level of confidence and excitement in the kind of a really differentiated position of that business you think about industrial professional instrumentation.

You'd be hard pressed to find a business with that Brian strengths in the gross margin center resiliency that we've shown in the fact that it's 10% of that business is now recurring revenue continues to grow at double digit yeah are for that piece of it.

So nothing's changed about snoek, Liza deep focus on innovation and how that adds acceleration to what's already a great story. So all of that stays the same you know and I think again what happened in Q2 was again, just very simply for short cycle type of products customers on a few big order or St.

Alumide Shiroye: You know, and I think, again, what happened in Q2 was, again, just very simply for short cycle type of products, customers on a few big orders saying, "Hey, I want to wait and see what happens with tariffs before I place the order. And in the meantime, I'm going to burn through the inventory I have." And a lot of those are coming back now. So the broad story, that's the context for your question, is right, which is Fluke remains strong. We feel great about the outlook. What we've done with the second half guide is really just, you know, very prudently and in a balanced way, looked at what we saw in the first half and the fact that kind of the tariff back and forth is not all settled yet.

Hey, I wanted to wait and see what happens with tariffs.

Slide place the order and in the meantime, I'm Gonna a bunch of the eventually I have I'm at a loss.

All of those are coming back now so the broad story. That's the context of your question is right, which is fluke remains strong we feel great about about the outlook what we've done with the second half Guy. He is really just a you know very prudently and in a balanced way looked at what we saw in the first half and in fact.

Kennedy guitarist boxing 40 is not all schedule, yet and while we don't know exactly how all of that will you would trickling through the system, including some of the international markets.

Alumide Shiroye: And while we don't know exactly how all of that will trickle through the system, including in some of the international markets, you know, Western Europe and China and Latin America, where there are other things at work in those markets as they try to shift more money to defense and all of that, we just prudently assumed that the second half in a kind of call growth performance for Fluke and iOS will be the same as what we saw in the first half, knowing that, you know, there's a lot of things that give us kind of a chance to accelerate off that going into next year. So nothing has changed about the fundamentals of Fluke. In many ways, we're more excited about prospects now in the medium term for that business than we've ever been.

Western Europe, and China, and Latin America, where there are the Dane said work in those markets as they try to shed some more money to defense and all of that we've just prudently assume that it's second half.

Kind of club growth performance for flu.

<unk> will be the same as what we saw in the first half knowing that.

There's a lot of things stacked.

That gave us kind of a chance to accelerates off back going into next year. So.

Nothing has changed about the fundamentals of fluke in many ways. We're more excited about our prospects now on a medium term for that business than we've ever been but we just really tried to be.

Alumide Shiroye: But we've just really tried to be prudent and balanced about the second half guide.

Prudent time balanced about that second half guide.

Andy Kaplowitz: Tough one. Can I ask you a follow-up to that? Like if I look at China and Europe, you know, it feels like, you know, at best, those geographies are stable and maybe there's been a little bit of a step down as you, you know, for instance, you get that transition to defense in Europe you talked about. So what are you seeing there? Are you guys seeing sort of a stability? Is it a little bit weaker in those regions? More color, I think, would be helpful.

That's helpful and can I ask you a follow up to that like if I look at China and Europe.

It feels like.

You know I best those geographies are stable and maybe there has been a little bit of a step down as you know for instance, you get that transition to defense in Europe, you talked about so what are you seeing there are you guys seeing sort of stability isn't a little bit weaker in.

In those regions more color I think would be helpful.

Alumide Shiroye: Yeah, no, absolutely. So I mean, let me just give you a few data points. So from a from a point of sale point of view, you know, say North America was our best market and so, and as we look at the rest of the year, expect that to be the case. I think double-digit POS, which is really strong. And then for Western Europe and also the APAC, the point of sale is generally flat, you know, kind of flattish, which again is consistent with what we expected coming into the year. You know, I think as we look out, we're not assuming any of that changes dramatically. We think for North America, we continue to be strong. I think in many ways, some of the benefits of the policy changes as it pulls more industrial manufacturing capacity into the US will provide a tailwind for North America.

Yeah, no absolutely. So I mean, let me just give you a few data points. So from a from our point of sale point of view, you know say North America was our best market and so as we look at the rest of the year expect that should be the case I think double digit P. O S, which is which is really strong and then for western Europe.

Most of the APAC.

A sale is generally flat.

Flattish, which again is consistent with what we expected coming into the year, Yeah, I think as we look out we're.

We're not assuming any of that changes dramatically. We think for North America will continue to be strong I think in many ways. Some of the benefits of the policy changes asset pools, more industrial or manufacturing capacity into the U S will provide a tailwind for North America. So we feel in North America.

Alumide Shiroye: So we feel the North America trajectory remains strong. And then, you know, for China, you know, we really do feel like it feels like there's a, you know, it's bottomed out a little bit and it gets better from here on, especially given the framework on tariffs feels to be getting to some point of closure soon here. We think that would reduce some of the anxiety in the system and help us sort of see the bounce in China over time. And then, you know, in many ways, I think Western Europe is the one that's still still to be seen as they kind of try to walk through a number of active wars in the region and a number of important decisions on moving spending to defense and how that affects the overall economy.

Projects were remained strong and then for China, we really do feel like it feels like there's a it's bottomed out a little bit on it gets it gets better from Iran, especially given the framework on tariffs feels to be getting into some point of closure as shown here, we think that would reduce some of the <unk>.

In the system and help us sort of see the bounce in China over time, and then you know in many ways I think western Europe is the one that still still to be seen that state kind of try to walk through a number of active washed in the region.

And a number of important decision on Sun on moving spending to defense and how that affects the overall economy, so but again I feel good about the work that our team is doing in terms of innovation for those markets.

Alumide Shiroye: So, but again, I feel good about the work that our team is doing in terms of innovation for those markets and controlling the things that we control.

Controlling the things that we control.

Andy Kaplowitz: Appreciate all the color.

I appreciate all the color.

Alumide Shiroye: Thanks.

Thanks.

Brock (Conference Facilitator): The next question.Is

The next question is from Joe Giordano of TD Cowen. Please proceed with your question.

Conference Center Announcer: from Joe Giordano of TD Cowan. Please proceed with your question.

Operator: Hey, guys. Thanks for taking my questions. Just curious, with all the pressure on hospitals and what reimbursement can mean for margins for like most of the hospitals or a lot of non-for-profits, a lot with really, really thin margins, does this push them towards like more down the line to single-use applications where it's just if they're focused on lowering the amount of dollars they spend at any given time, unlike larger scale equipment?

Hey, guys. Thanks for taking my questions.

Just curious with all the pressure from hospitals.

Reimbursement can mean for margins for like most of the hospitals are not a non for profits along with really really thin margins does this push them towards like more down the line to single use applications, where it just if they were focused on lowering the amount of dollars. They spend at any given time, unlike larger scale equipment.

No no. We don't think so I guess is the short I'm sorry, I think you can think about what they saw means fall for health care providers.

Alumide Shiroye: No, we don't think so. I guess this is a short answer. I think if you think about what this all means for health care providers, I think it means they probably would have pressure on reimbursements. They may even have, you know, at some level, pressure on sort of the, you know, kind of the insured customer base, which may affect volumes. And so then you say, well, what are they likely to do about that? I think the first thing to think about is the profit center for these hospitals are in the operating room. So they're likely to want to move more activity through the operating room.

I think he made the main state probably would have pressure on reimbursements. They may even have.

At some level of pressure on sort of the kind of the insured customer base, which may affect volumes.

And you say well what are they likely to do about that I think the first thing to think about is the profit sign up for these hospitals saw India operation room, so they're likely to want to move small activity to the operating room.

Alumide Shiroye: And as they do that, the fact of the matter is there are a lot of disadvantages to single use still, including effectiveness and also kind of total cost of ownership of those kind of approaches versus the kind of high-effective instruments, robotics, endoscopes that are really needed for the highly profitable procedures going through the OR. So we don't, you know, we see in many ways more movement to advanced devices that tend to be connected with more profitable procedures. And those devices are not single use. And those devices would need very tough on germs and gentle on devices sterilization procedures that map well with where we've picked as a position of strength. So I was with one of our big hospital clients just recently.

As they do that the stocks of the matter is there are lot of disadvantageous to single use steel, including effectiveness and also kind of.

Total cost of ownership of those kind of approaches versus the kind of high effective instruments were bought takes endo scopes that are really needed for the highly profitable procedures going through the O. R. So we don't we've seen many ways most men to advanced devices that tend to be.

Connected with more profitable procedures and those devices are not single use sandoz devices.

We would need very tough on John's gentle on devices sterilization, Presidio sum up well with where we've picked us a position of strength. So I you know I was with one of our hospital clients just are.

Just recently in an absolutely.

Alumide Shiroye: And absolutely, everything we're hearing from them is, hey, we need you more than ever because the way this market is shifting, we need more through the OR. We need things that can really help handle robotics and endoscopes and these types of instruments that are becoming the higher. You think about the volume of use of devices in ORs, it's really shifting towards this higher value, higher effectiveness, higher complexity devices, not not single-use things that really the economics, when you think about the total cost and the effectiveness trade-off, it just isn't as compelling as it might seem.

Everything we're hearing from them is hey, we we need to do more than ever because the way. This market shifting we need marks with the O I would need to change that can really help handle robotics and endo scopes in these types of instruments that becoming the higher do you think about the volume of use of devices and or it's really.

Shifting towards these higher value higher effectiveness IR complexity of devices not not single use things that are really kind of makes when do you think about the total cost and effectiveness trade off just isn't usually not as compelling as it makes sense.

Operator: Fair enough. As you guys start on both on M and A, I'm just curious what the appetite is on the software side, just given where the multiple of the stock is, what you might have to pay for stuff like this, what is the kind of appetite to buy something that might be fast growth but is early stage and may ultimately grow slower. Just curious at where that kind of force ranks between acquiring in 12 versus acquiring in like on Fluke or on AHS type stuff.

Fair enough.

As you guys start on on bolt on M&A.

Just curious what the appetite is on the software side, just given where the multiple of the stock is what you might have to pay for stuff like this what is the kind of appetite to buy something that might be fast growth, but it is early stage and may ultimately grow slower just curious where that kind of force rank between you know acquiring.

And fall versus acquiring and Mike on flu Koran H F type stuff.

Alumide Shiroye: Yeah. Well, I'd say overall, we've tried to keep it simple, which is that we have clear strategic and financial criteria. And whether it's a software asset, consumable, recurring revenue asset, kind of a differentiated, you know, very durable hardware asset, they have to meet the same criteria. So we've shown that irrespective of the type of asset, when we apply the new focus we have on proprietary deal cultivation, this is like we're not waiting for a bank-related process. We're actually cultivating this over many years. Whether it's software or hardware, you can get a great asset. And price is very much part of our strategy when we think about the equity nature of this asset.

Yes.

I'd say overall, we've tried to keep it simple we choose that we have clashed with ticket counts to Nashville criteria on whether it's a software asset consumable recurring revenue asset.

A differentiate Ed you know very durable hardware asset they have to meet the same criteria. So we've shown that irrespective of the type of asset when we applied the new forecast we have on proprietary deal cultivation. This is like when are waiting for battle a process we actually.

Observation this over many years, whether it's software or hardware you can get a great asset.

Price is very much part of our strategy when we think about the equity a major office asset. So you get a great asset, but also at the right price that obviously to your point is.

Alumide Shiroye: So you get a great asset, but also at the right price that, obviously, to your point, is compatible with kind of the multiple way of trading that and gives us a chance to be to be accurate from that perspective. So, you know, we feel good that we don't really need to draw a hard line as long as we stick on principle to the criteria that we've laid out. Again, if you think about the bolt-ons that we did in the second half of '23, there was a software asset in there. And it was, you know, the price point fit very well in terms of multiples. We didn't have to get frothy. And we had some data AI assets, and we had some hardware assets. So that's how we're looking at it. We'll hold to our criteria. And if it fits, it fits.

He is compatible with the with kind of the multiple we're trading at.

So as a chance to be to be accretive.

From that perspective, so we feel good that we don't really need to draw a hotline as long as we stick on principle actually criteria that we've laid out and again, if you think about the bolt ons that we did in the second half of 'twenty three.

It was a software asset in there and it was the price points did very well.

So multiples we didn't have to to get frothy and we had some data AI assets. When we had some hydro asset so.

That's how we're looking at it will hold to our criteria.

And if it fits it face if it doesn't.

Alumide Shiroye: If it doesn't, we don't feel a compulsion to do any type of deal.

We don't feel we don't feel a compulsion to do any type of deal.

Operator: Thanks, guys.

Thanks, guys.

Conference Center Announcer: The next question is from Dean Drey of RBC Capital Markets. Please proceed with your question.

The next question is from Deane Dray of RBC capital markets. Please proceed with your question.

Brock (Conference Facilitator): Thank you. Good day, everyone. I'll also add my congrats.

Thank you good day, everyone and also add my congrats.

Christina Jones: Thanks, Dean.

Thanks, Steve Thank you.

Operator: Thank you.

Christina Jones: Hey, I missed the first couple of minutes at the opening. So I don't know if this got addressed, but anything on stranded costs? Is new Fortive already sized appropriately post-spin? Anything on kind of repositioning that and what the timing would be in size? Yeah. Thanks, Dean. I'll take that. I'd say we're broadly on track with the guidance that was given previously. We've got about, I think, half of the stranded costs that are out undusted. And we're going to work on the rest over the next, call it, 12 months or so. I would also say just, you know, generally, you know, as a team that's sort of got this opportunity to drive medium-long-term value creation here, you know, we are looking at opportunities around the business to just be more efficient, to be able to divert dollars to their highest and best use.

Hey, I missed the first couple of minutes at the opening so I don't know if its got a dress but.

Anything on stranded costs.

As new Florida already sized appropriately post spin anything on kind of repositioning that.

And what the timing would be in size.

Yes, I'll take that I'd say, we're broadly on track with.

The guidance that was given previously we've got about half of the stranded costs that are out dusted and we're going to work on the rest over the next call. It 12 months or so I would also say just generally.

As a team that sort of got this opportunity to drive or medium long term value creation here, we are looking at opportunities around the business to just be more efficient.

To be able to defer dollars to their highest and best use. So I think in addition to stranded costs I mean, we're gonna be on that on the lookout for other opportunities too.

Christina Jones: So I think in addition to stranded costs, I mean, we're going to be on the lookout for other opportunities to, you know, essentially just drive better performance across the business through cost discipline.

I plead to drive better performance across the business through through cost discipline.

Okay, Great and then just a follow up.

Brock (Conference Facilitator): Great. And then just as a follow-up on the cadence of the months, you know, June being down, July bounce back, stabilize. We've heard that elsewhere today in some other industrial. Can you just expand on that? What were the businesses that were down in June? Was that deferred? And you think that'll still the return in July, you still might see some of those deferred projects coming back over the next couple of quarters. But just kind of dig in there. What were the businesses and expectations for the quarter?

On the cadence of the months.

June being down July bounce back stabilize we've heard that elsewhere today.

Another industrial can you just expand on that what were the businesses that were down in June was that deferred and you think that'll still the return in July.

You still might see some of those deferred projects helped me back over the next couple of quarters, but just kind of dig in there what was the businesses.

And expectations.

For the quarter.

Alumide Shiroye: Yeah. No, thanks. So there are really three specific areas. So the first one was some of our short cycle professional instrumentation product groups at Fluke, where we saw customers on some big orders just say, "Hey, I'm going to wait to see what happens with tariffs on July 9th and then August 1st." And then I think a lot of them are now coming back in and placing those orders. So we feel good that that resolves fairly quickly. And that, you know, that's a big chunk of it. The second area is on healthcare capital equipment, where again, hospitals were holding off on seeing the impact of the Big Beautiful Act and how that affects the economics before they procure capital equipment. The funnel remains strong. We didn't lose a single one of those deals, just to be really clear.

Yeah no. Thanks.

Please specific areas. So the first one was some of our short cycle professional instrumentation product groups at fluke, where we saw customers on some big orders, just say, hey, I'm going to wait to see what happens with tariffs on July nine and it all goes first and then I think a lot of.

Now coming back in and placing those orders. So we feel good that that resolved fairly quickly and that's you know that's a that's a big chunk of it. The second area is on healthcare capital equipment, where again hospitals, we're holding off on seeing the impact of the Big Beautiful Act and how that affects the <unk>.

So that makes before they procure absolutely equipment, our funnel remains strong we didn't lose a single one of those deals just to be really clear.

Alumide Shiroye: And so it's really things shifting to the right. The exact timing of when those customers place the order, we've tried to be prudent. And it feels like it's getting better in July, but it's too early to call a kind of final victory on that. And then the third one is the state and local government procurement business, where the, you know, and think about this as projects in each of our communities where they're trying to fix a leaking roof in City Hall. They're trying to replace mechanical equipment in a K-12 school that has to be replaced. And on the margin in the June year-end for a lot of them, they had less money to kind of use it or lose it. And so they deferred some of those. But the projects that have to get done, so again, they'll come back to it.

So it's really things shifting to the right the exact timing of when those customers place. The auto we've tried to be prudent and it feels like it's getting better in July, but it's too early to call.

Final victory on that I know the third one is the state and local government procurement business, we're thinking about the assess projects in each of our communities where they plan to fix.

Fix it you know leaking roof and C. D. All theyre trying to replace mechanical equipment in that K 12 school that has to be replaced.

The margin in the June year end for a lot of them they had less money.

To kind of use it or lose it and so they deferred some of those but the projects that have to get done. So again, they will come back to it so and everything else at 40 was right on track with what we expected except for those split so we.

Alumide Shiroye: So we, and everything else at Fortive was right on track with what we expected, except for those three. So we feel good about how that resolves. We've tried to be prudent on assumptions about how quickly they all come back. But that's how we thought about it.

We feel we feel good about how that resolves we've tried to be prudent on.

<unk> about how quickly they all come back, but that's how we've thought about it.

Brock (Conference Facilitator): That's real helpful. Thank you.

That's real helpful. Thank you.

Christina Jones: Thanks.

Thanks.

Conference Center Announcer: This now concludes our question and answer session. I would like to turn the floor back over to Illumina for closing comments.

This now concludes our question and answer session I would like to turn the floor back over to Illumina for closing comments.

Alumide Shiroye: Excellent. Well, thank you all for joining us. We appreciate your interest. Our team, as you hopefully can sense, is incredibly excited about the opportunity ahead. We've laid out the plan to have this company, in its simpler and more focused form, grow faster. We got our entire leadership team together to get everyone aligned on that. Just in the last couple of weeks here, the excitement level is really high for us. We also said our capital allocation is a critical part of our value creation strategy. So the discipline on that is going to be ferocious from our point of view going forward to make sure we're beyond reproach. And then just making sure that we build and maintain investor trust. And again, hopefully, you're seeing that in the way we're approaching these communications. We thank you for your interest, and we'll see you around.

Excellent well. Thank you all for joining US we appreciate your interest a team as you hopefully can sense is is incredibly excited about the opportunity ahead, we've laid out the plan to have this company.

It's simpler on multiple cost farm grow faster, we got our entire leadership team to get us to get everyone aligned on that just in the last couple of weeks here. The excitement level is really high for US. We also set a cap allocation is a critical part of our value creation strategy.

<unk> on that it's gonna be ferocious from my point of view going forward to make sure we're beyond reproach and just making sure that we build out and maintain Investor Trust and again, hopefully you have seen that into where we are approaching this communications I would thank you for your interest and we'll see you around.

Conference Center Announcer: Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines and have a wonderful day.

Ladies and gentlemen, thank you for your participation.

Todays teleconference. You may disconnect your lines and have a wonderful day.

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