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May 18, 2017
Fortive 2017 Investor Day
Statements in this presentation that are not strictly historical, statements regarding the Company's anticipated earnings, business and acquisition opportunities, anticipated revenue growth, anticipated operating margin expansion, anticipated cash flow, economic conditions, future prospects, and any other statements identified by their use of words like “anticipate,” “expect,” “believe,” “outlook,” “guidance,” “target,” or “will” or other words of similar meaning are "forward-looking" statements within the meaning of the federal securities laws. There are a number of important factors that could cause actual results, developments and business decisions to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include, among other things: deterioration of or instability in the economy, the markets we serve and the financial markets, contractions or lower growth rates and cyclicality of markets we serve, competition, changes in industry standards and governmental regulations, our ability to successfully identify, consummate, integrate and realize the anticipated value of appropriate acquisitions and successfully complete divestitures and other dispositions, our ability to develop and successfully market new products, software, and services and expand into new markets, the potential for improper conduct by our employees, agents or business partners, contingent liabilities relating to acquisitions and divestitures, our compliance with applicable laws and regulations and changes in applicable laws and regulations, risks relating to international economic, political, legal, compliance and business factors, risks relating to potential impairment of goodwill and other intangible assets, currency exchange rates, tax audits and changes in our tax rate and income tax liabilities, the impact of our debt obligations on our operations, litigation and other contingent liabilities including intellectual property and environmental, health and safety matters, our ability to adequately protect our intellectual property rights, risks relating to product, service or software defects, product liability and recalls, risks relating to product manufacturing, our relationships with and the performance of our channel partners, commodity costs and surcharges, our ability to adjust purchases and manufacturing capacity to reflect market conditions, reliance on sole sources of supply, security breaches or other disruptions of our information technology systems, adverse effects of restructuring activities, labor matters, disruptions relating to man-made and natural disasters, impact of our separation from Danaher on our operations or financial results, and impact of our indemnification obligation to Danaher. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2016. These forward-looking statements speak only as of the date of this presentation and Fortive does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise.
This presentation contains references to “adjusted diluted net earnings per share,” “core revenue growth,” “core operating margin expansion (core OMX)” and “free cash flow” which are, in each case, not presented in accordance with generally accepted accounting principles (“GAAP”).
Information required by Regulation G with respect to such non-GAAP financial measures can be found in the “Investors” section our website, www.fortive.com, under the heading “Financial Information” and subheading “Quarterly Earnings.”
The historical non-GAAP financial measures should not be considered in isolation or as a substitute for the GAAP financial measures but should instead be read in conjunction with the corresponding GAAP financial measures.
2
FORWARD-LOOKING STATEMENTS & NON-GAAP FINANCIAL MEASURES
Welcome Lisa Curran, VP Investor Relations 10:00 AMStrategic Vision Jim Lico, President & CEO 10:05 AM
Q&A Jim Lico, President & CEOChuck McLaughlin, SVP & CFO 10:35 AM
Field Solutions Wes Pringle, SVP 10:50 AMProduct Realization Pat Byrne, SVP 11:15 AMSensing Technologies Pat Murphy, SVP 11:40 AM
Trade Show & Lunch FTV Representatives 12:05 PM
Transportation Technologies Martin Gafinowitz, SVP 1:05 PMAutomation & Specialty Pat Murphy, SVP 1:30 PMFranchise Distribution Tim Gilmore, President 1:55 PMFortive Business System Barbara Hulit, SVP 2:15 PMClosing Remarks Jim Lico, President & CEO 2:35 PM
Q&A Jim Lico, President & CEOChuck McLaughlin, SVP & CFO 2:45 PM
Adjourn 3:00 PM
3
TODAY’S AGENDA
Jim Lico | President & CEO
Strategic Vision
Well Situated to Build an Enduring Culture 6
Business Characteristics• Fortive Business System is cornerstone of culture and
competitive advantage• Experienced leadership team and Board of Directors• Economic moat, leading brands and market positions• Strong cash flow/conversion, capital allocation bias toward
M&A• Investment grade credit rating
Revenue
$6.2B
Free Cash Flow
FCF > NI
Gross Margin
~50%
Operating Margin
~20%
1 NA is North America (56% in the U.S.), EU is Europe, HGM is High Growth Markets, RoW is Rest of World
54%46%
Revenue By Business Revenue By Geography12016 Performance
7
FORTIVE OVERVIEW
Essential Technology for the People who Accelerate Progress
Growth Initiatives• Drive Digital, IoT• Capture EMV Market Opportunity (nearer term)• Expand in High Growth Markets• Enhance Portfolio Growth
Professional Instrumentation
Industrial Technologies
58%16%
21%
5%
HGMNA EU RoW
DIVERSIFIED PORTFOLIO WITH STRONG SECULAR TRENDS
Portfolio Positioned to Accelerate Growth in Attractive Verticals
Retail Fueling25%
Industrial / MFG15%
Vehicle Repair
10%
Utilities & Power10%
Auto5%
A&D5%
Medical5%
Comm. & Elec.5%
Logistics5%
Other15%
$6.2B2016 Sales
Estimated end-market split based on 2016 annual sales
Secular Trends
Connected devices, software/SaaS, advanced analytics, condition-based
monitoring
Digitalization/increasing vehicle complexity
Productivity, safety and security requirements
Increasing regulatory environment
8
Industrial TechnologiesProfessional Instrumentation
Sensing Technologies
Franchise Distribution
Automation & Specialty
Transportation Technologies
All financial metrics based on 2016 annual results*Advanced Instrumentation & Solutions
Product Realization*
Field Solutions*
Revenue GM% OP Margin$2.9B >50% 22%
Revenue GM% OP Margin$3.3B >40% 20%
Strong Brands, Leading Market Positions in Attractive Industrial Verticals 9
FORTIVE TODAY
FBS DRIVES OUR BUSINESS
10
Fundamentals
Growth Tools• Voice of Customer• Speed Design Review• Lean Software• Transformative Marketing• Funnel Management• Digital Marketing
Leadership• Policy Deployment• Accelerated Leadership Program• Talent for Growth process
Lean Tools• Lean Conversion• Fortive Materials System• Fortive Reliability System
FBS Selected ToolsCore Value Drivers
Employees• Internal fill rate• Turnover
Customers• Quality (External PPM)• On-time Delivery
Shareholders• Core Growth• OMX
• Cash Flow • ROIC
FBS is the Cornerstone of our Culture and Competitive AdvantageNote: “OMX” is Operating Margin Expansion; “WC” is Working Capital
• Secular/structural growth drivers
• Runway for future M&A
• Competitive market position with potential to increase share, become leading player
• Strong brand and/or channel
• Higher margin businesses / strong margin potential
• Significant FBS opportunities, sustainability
• Combination of value and growth deals
• ROIC hurdles
M&A ConsiderationsWhat We Look For
MARKET
VALUATION
SUCCESSFUL M&A PLAYBOOK
Targeting Value Creation Opportunities in Attractive Markets
COMPANY
Attractive Markets
Company Profile
Value Creation
11
Capacity to Execute the M&A Playbook 12
Surplus Cash*December 31, 2016
~$0.5B
2017 Opportunity
~$1.5BFree Cash Flow
M&A2017 - 2021 Opportunity
$5.0B - $7.0B
FREE CASH FLOW TO DRIVE M&A
*“Surplus Cash” is defined as December 31, 2016 Cash and Cash Equivalents of $0.8B less estimated cash working capital requirements of $0.3B. Any use of Surplus Cash is subject to further tax and legal considerations before use.
Advantaged by Multiple Growth Drivers
Enhance Portfolio Growth
EMV
High Growth Markets
Digital Strategy, IOT
13
KEY GROWTH DRIVERS
EVOLUTION OF DIGITAL STRATEGY
Transforming Customer Digital Workflows since 2009
Digitization of Go-to-Market
2009
Enhancement of Portfolio with SaaS20
12Connected Transformation in Core Markets20
13
14
ENABLING A SMART, CONNECTED WORLD
SmartFactory
SmartHospital
Smart Energy
Smart Building
Smart Highway
Seizing the IoT Opportunity 15
• EMV upgrades driven by continued consumer security expectations and incentives from major oil brands
• Deadline delay (from 2017 to 2020) is expected to allow for even deployment and shift to dispensers
Retailers use deadline extension to modernize site with new dispenser technology and SaaS services
25-30% of market have EMV capable dispensers
• Retailers are expected to take EMV transactions at the dispenser 2H17 Drive adoption as security-conscious consumers migrate to EMV sites
Gilbarco expects to be first to market with EMV outdoor transactions in June 2017
EMV UPDATE
EMV Growth Opportunity Maintained 16
• Growth Drivers Electrical grid infrastructure build out Continued expansion of gas station coverage and
privatization IoT in Asia, Investments in robotics
• Primed for Sustainable Growth Further “flag planting” in next wave of geographies Regional R&D Centers Continued “hosting” of sister OpCos
• HGM Success since 2010 Tektronix >600bps GVR >300bps Fluke >300bps
HIGH GROWTH MARKETS
Runway to Grow High Growth Markets at 3x to 4x Developed Markets
21%
2016 >25%
2021E
2016 Growth ~3x Developed Markets
HSD – LDD* Growth Rates
through the Cycle
17
*Anticipated growth rate
ENHANCE PORTFOLIO GROWTH
• Autonomous Vehicles / Vehicle as a Mobile Device
• Urbanization / Smart City
• Smart Factory
Industrial Technologies
• Mobile Worker
• Maintenance Workflow
• IoT / Sensor Proliferation
• Enabling Technology / Product Realization
Professional Instrumentation
• Aging Population / Health
• Food / Water Sustainability
• Economy of Convenience / Supply Chain
• Environmental Stewardship
Attractive Megatrends
18Industrial Growth Company | Essential Technology | Accelerating Progress
EXPERIENCED TEAM
We Build Extraordinary Teams for Extraordinary Results
Jim Lico President & CEO
Chuck McLaughlinSVP & CFO
Fortive Senior Leadership Team
Martin GafinowitzSVP
Pat ByrneSVP
Pat MurphySVP
Wes PringleSVP
Raj RatnakarVP, Strat. Dev.
John SchwarzVP, Corp. Dev.
Barbara HulitSVP, FBS & HGMs
Stacey WalkerSVP, HR
Peter UnderwoodSVP, General Counsel
4,000Engineers & Technologists
24,000Global Associates
6,500Customer-facing Associates
Board of Directors
Feroz Dewan Kate Mitchell Mitch Rales Steve Rales Israel Ruiz Alan Spoon
19
CORE REVENUE GROWTH
GDP/GDP+
ACQUISITION GROWTH~$1B FCF annually to start,
spent primarily on M&A
MARGIN EXPANSION
~50 bps core OMX
AND…
Investment grade credit ratingFBS at the core of what we do
Top Quartile Earnings Growth
THE FORTIVE FORMULA
Note: All financial metrics reflect anticipated annual performance unless otherwise indicated
20Strength of Portfolio | Power of FBS | Execution of Strategy
Join the Journey | Becoming a Great Industrial Growth Company 21
Industry insight from our experienced leadership team
Overviews of our businesses and six strategic platforms
Power of the Fortive Business System (FBS) to drive margin expansion and accelerate innovation
Clear examples of Fortive advantaged by digital technology
WHAT YOU’LL HEAR TODAY
Real SaaS business models delivering value to customers
Wes Pringle | Senior Vice President
Field Solutions
Market Dynamics Brands
Market Size ~$7B
Growth Rate +LSD/MSD
Customer Base Secular Growth Drivers
• Industrial Maintenance Professionals
• Utilities, Commercial and Manufacturing Facilities, Hospitals
• Government labs and OEMs
• MRO, Electrical & Industry Specialty Distributors
• Efficiency, uptime assurance and IoT
• Critical data infrastructure growing
• Safety, regulation and network verification
• High Growth Market - urbanization and population growth
Leading Global Brands, Providing Critical Productivity and Workflow Solutions
43%
20%
34%
3%
NA EU HGM RoW
~30% Direct | ~10% Recurring
FIELD SOLUTIONS OVERVIEW
2016 Revenue
~$1.4BRevenue Mix
24
All financial metrics based on 2016 annual results
FIELD SOLUTION GROWTH INITIATIVES
Fluke is Positioned to be the Maintenance Manager’s Complete System of Choice
• Fill in Toolbelt for existing customers
• Penetrate adjacent Toolbelts (Job Types)
Enter Adjacent Markets
• Build integrated (SW + HW), comprehensive online condition-based monitoring workflow solutions
• Stimulate hardware upgrade cycle
Digital Strategy: Connected Tools & Sensors
25
• Develop first-to-market technologies that transform customer work
Technology Leadership
• Go-to-market investments in targeted geographiesContinue to Expand Into HGM
There Is a Need for Practical, Affordable Solutions
Motors1.1M
Switchgear1.1M
Transformers495,000
Pumps765,000
Blowers270,000
Motor (OEM B)
Age: 13 years
Control Panel (OEM A)
Age: 13 years
Compressor (OEM C)
Age: 3 yearsSwitchgear (OEM D)
Age: 8 years
26
SENSORING EXISTING FACILITIES REQUIRES SIZEABLE CAPEX AND COMPLEX IT INTEGRATIONTHE TIER 2 ASSET RETROFIT CHALLENGE
Illustrative Facility
FLUKE DIGITAL STRATEGY
Leading Brand Practical Affordable
Portable Tool Installed BaseCloud-enabled portable tools
Condition MonitoringSoftware-powered tools
enabled by semi-fixed sensors
Maintenance Mgmt. SoftwareMarket-leader in SaaS CMMS
27
ENTER ADJACENT MARKET WITH PACIFIC LASER SYSTEMS ACQUISITION
Fluke Has Runway for Organic and Inorganic Expansion in Facilities and Construction
Clear Benefits
• Natural adjacency, MRO & Electrical Contractors served by Fluke today
• Extends Fluke into construction channels
• Successful launch of Fluke lasers in Q4 2016
• FBS utilized to realize HSD cost synergies
• ROIC DD under two years
28
TECHNOLOGY LEADERSHIP
Breakthrough Patented Technology Non-Contact Voltage
Measurement
Fluke FieldSense™
Safest Way to Measure High Voltage
1st real-time display of voltage and current at the same time
Non-Contact Voltage
• Major safety/convenience innovation in a $3B industrial electrical measurement TAM
• 5x faster: No need to open covers or remove wire nuts
• Base FieldSense™ technology deployable across broad portfolio of Fluke test tools
• Launching Q3 2017
29New-to-world Technology Will Dramatically Improve Technician Safety and Efficiency
BUILDING TODAY’S FLUKE
Value CategoryThermographyBuilding Out
Electrical “Toolbelt”
CalibrationAttractive / Strategic Adjacencies
HGM
US-focused Leader in MultimetersAnnual Sales $340M
ROIC: ~5%
Innovation
Fluke 1998 Fluke Today
30“Build and Buy” Strategy → Maintenance System of Choice
Global Leader across Professional WorkflowsAnnual Sales >$1.2B*
ROIC: ~20%
India
Biomedical
*Based on 2016 annual results
HIGH GROWTH MARKETS
CBM Solution Adoption and In-region Expansion Drive Broad-based Growth
Eastern Europe & Russia
10.6%3Y CAGR
Asia Pacific
10.5%3Y CAGRMiddle East,
Africa, Turkey
13.7%3Y CAGR
31
QUALITROL: ~50% OF 2016 SALES IN HGM WITH DOUBLE-DIGIT GROWTH
Speed Design Review Has Substantially Improved NPI Speed to Market for Fluke
The Challenge
Strategic imperative to get innovation to market faster
Improve productivity across product development teams
The Solution
►Deployed Speed Design Review (SDR) to reduce waste from development process
►Co-location of cross-functional teams in “obeya” room
►Visual project management to make dependencies clear and actionable
►Rapid prototyping to get relevant market feedback early in the process
Time to Market
Improvement >25%
32
CASE STUDY: FBS IMPACT ON TIME-TO-MARKET AT FLUKE
Digital Offerings and Market Positions Ensure Long, Sustained Runway for Growth 33
Advantaged by brand strength, financial profile, large installed base, and multiple secular growth drivers
Technology leadership by innovating ahead of the market
FBS has been, and continues to be a powerful source of advantage
Positioned for accelerated growth and continued margin expansion
Expanding portfolio through software, service, and new markets/adjacencies
FIELD SOLUTIONS SUMMARY
Pat Byrne | Senior Vice President
Product Realization
Market Dynamics Brands
Market Size ~$5B
Growth Rate +LSD
Customer Base Secular Growth Drivers
• Electronics developers in industrial, automotive, semiconductor and data communications
• US Military/Government
• Medical and Industrial Equipment manufacturers
• Education
• Increased bandwidth in wireless, optical, and data center applications
• Connected device development for IoT
• US Military/Government technology deployments
• Diagnostic therapy development
Enabling Customers to Bring Next Generation Solutions to Market
53%
12%
27%
8%
NA EU HGM RoW
~55% Direct | ~20% Recurring
PRODUCT REALIZATION OVERVIEW
2016 Revenue
~$1.1BRevenue Mix
36
All financial metrics based on 2016 annual results
PRODUCT REALIZATION
Evolving Platform to Support Essential Technologies and Accelerate Progress
Early Research Initial Development System Verification Deployment
Platform Evolution• Next-gen essential
technology positioning
• FBS for Quality Improvements
• Strong presence in customer workflows
37
Full solutions player in customer workflows combining HW, SW, material science expertise, proprietary IP and reusable modules
TEKTRONIX GROWTH INITIATIVES
Deliver Consistent and Accelerated Growth
• Differentiated technology/platform pipeline
• FBS Lean Product Development
• Increase recurring revenue through software and services
Enhancing the Portfolio
• Customer/application focused total solution roadmaps
• Data Center, Mil/Gov, Automotive electronics, Power
Compelling Solutions for Target Markets
• Evolve E-commerce and Digital Marketing• Accelerate solution selling in targeted markets• Expand share of wallet in optical / datacom market• Semi/Integrated Circuit Design House growth opportunities
China Growth
38
COMPELLING SOLUTIONS FOR TARGET MARKETS
Expect High Single Digit Growth within $1.5B Solution Addressable Markets
• TAM: $500M• Interoperability• Connected Car• Regulatory• Safety
• TAM: $250M• Machine Learning• Diagnostics• Reliability• Statistical Analysis
• TAM: $500M• Real-time spectrum
monitoring• COTS RF solutions• Radar operations
• TAM: $250M• Test Systems• “Connect Measure”
Automotive
Power Military/Government
Data Center
39
Scopes of the Future - Unprecedented Capability and Flexibility 40
• Multi-year platform launch Market-leading technology accelerating product
innovation First in series: Tektronix 5 series Combination of HW and SW launches
• Target Markets: Automotive, Power
• Customer Validation with FBS
• Expect $250M in revenue in 3 years plus market share gains
ENHANCING THE PORTFOLIODIFFERENTIATED TECHNOLOGY PLATFORM LAUNCH
Continue Growth Momentum in China with Key Initiatives
Evolve E-Commerce and Digital Marketing to 2.0Ensure convergence of B2B and B2C through FBS rigor1
Accelerate Box to Solution in Selected MarketsWin in Power, Automotive, Wireless, and EDU with internal and external solution planning and development process
2
Expand Share of Wallet in Optical/Datacom MarketDemand migration and transceiver/data center customers in R&D3
Increase Semi/Integrated Circuit Design House PresenceWin key opportunities using FBS tools – transformative marketing to identify growth pockets and digital marketing to reach customer segments
4
41
• Sustainable Growth
• Customer Demand Optical & Display
Market Growth
Power and sensor applications fueling Keithley growth
CHINA GROWTH STRATEGY
Won >80%
Share of Opportunitieswith 6 Leading
Customers
Tektronix Leveraged FBS to Penetrate 3D Sensing Applications 42
High Volume Applications
<1%Failure Rate
Early Research
Initial Development
System Verification
Deployment
$24Mof Growth
CASE STUDY: FBS DRIVING GROWTH IN POWER MARKET
The Challenge
Build out of customer product capacity for 3D sensing demand -mobile phones, tablets & IoT
The Solution
►Voice of Customer must haves –accuracy, speed, yields, throughput
►Design for Reliability tools to meet solution requirements
Portfolio Evolution, Focused Initiatives Drive Inflection to Growth 43
Advantaged by brand strength, financial profile, large installed base, and multiple secular growth drivers
Continuing to improve portfolio to reduce cyclicality, increase profitability
Cultivating growth through FBS
Executing focused growth initiatives
PRODUCT REALIZATION SUMMARY
Pat Murphy | Senior Vice President
Sensing Technologies
Market Dynamics Brands
Market Size ~$6B
Growth Rate +LSD
Customer Base Secular Growth Drivers
• OEMs: Industrial, Medical, Transportation, Off-Highway Vehicles, Aerospace & Defense, Marine
• End Users: Food & Beverage, Hospitals, Pharmaceuticals
• System Integrators: HVAC, Biopharma, Food & Beverage
• Food Safety
• Regulatory focus on patient safety & satisfaction
• Connected sensors; IoT enabling remote asset monitoring
• High Growth Markets
Market Leader in Critical Sensing Technologies across Variety of Verticals
71%
12%
16%1%
NA EU HGM RoW
~60% Direct | ~5% Recurring
SENSING TECHNOLOGIES
2016 Revenue
~$0.4BRevenue Mix
46
All financial metrics based on 2016 annual results
Dry and Wet Media Sensing for Environmental
and Industrial Markets
Conductive and Non-Conductive Flow Sensing
for Industrial Markets
Level Sensing for Industrial, Medical and
Hygienic Markets
Temperature Sensing for the Hygienic and Industrial
Markets
Controls for Industrial Automation
Combining Material Science, Hardware and Software to Deliver Precise Operational Measurements
SENSING TECHNOLOGIES
Essential Technology Advancing our Customers’ Critical Applications 47
0
~30%
~65%
~5%
~70%0
~15%
~15%
~75%
0
~25%
0
~20%
~80%
Pressure Sensors
Level Sensors
Flow Sensors
Temperature Sensors Controls
Power Mgmt.
Counters and Timers
Precision Molding
Other
HVAC
Key Customers ’14 – ’16 CAGR Drivers
Food & Beverage MSD
Food SafetyProcess Technology Improvements
Medical HSD OEMs outsourcing system design
Environmental MSD Energy EfficiencySmart Buildings
TARGET VERTICALS & KEY CUSTOMERS
Focus on Higher Growth and Lower Volatility through Quality End Markets 48
SENSOR VALUE CONTINUUM
More Value and Recurring Revenue Created at Targeted, Later Stages of Continuum 49
Margin & Differentiation
Lower HigherMore competitionHigher volume, lower marginsMore distribution, less customer touchIP around hardware, material science
Less competition – split by verticalsLower volume (niche), higher margins
High customer touch, directIP driven by vertical knowhow, software
SensorSub-System
(incl. some Controls/SW)
Sensing Element
Vertical Specific Sensor Package
Sensor Manufacturers
Moving from sensor to system provider
SETRA FLEX
Sensing Innovation Leverages Secular and Regulatory Growth Drivers
Touch Screen Environmental Control MonitorMonitoring and Control Solution for Critical Care Environments
• Patient Safety Regulation
• Remote monitoring for worker productivity
• Energy Efficiency
• TAM: $50M
• Setra CAGR: 7%
• Target Applications: Hospitals, Labs, Pharmaceutical
Leveraged “Lean Product Development” to optimize user experience
50
Drivers Growth Opportunity
FBS
NEW Product
GEMS MEDICAL FLUIDICS
Sensing Technology Accelerating Medical OEM Innovation
• OEMs outsourcing fluidic systems design & development to reduce time to market
• TAM: $250M
• Gems CAGR: 9%
• Target Applications: IVD analyzers, dialysis systems
Speed Design Review reduces lead time and improves quality to Medical OEMs
51
Drivers Growth Opportunity
FBS
Medical Fluid Management SystemsEngineered fluidic monitoring solutions for medical device applications NEW Product
16x
30x
2011 2016
Working Capital Turns
FBS Enables Sustained Working Capital Productivity 52
Working Capital ($)
↓ 35%Sales
↑ >80%
87% Improvement
STUDY: FBS DROVE WCT IMPROVEMENT AT ANDERSON-NEGELE
The Challenge
Drive continuous improvements to deliver strong working capital turn results
The Solution
►Leveraged Gemba Inventory Management and Kanban best practices to improve inventory turns
►Implemented Standard Work for new vendor identification and terms with Fortive DPO tool to improve payables
►Used Daily & Visual Management to review both past and upcoming due accounts to improve receivables
Sensing Technologies Well Positioned to Accelerate Profitable Growth 53
Broad sensor portfolio with market leading brands in attractive vertical markets
Innovation focus on system development for target verticals
Track record of leveraging FBS tools to drive:• Working capital productivity• Sustainable business improvements• Revenue and profitability growth
Moving up the sensor continuum to provide growth and margin enhancement
SENSING TECHNOLOGIES SUMMARY
Martin Gafinowitz | Senior Vice President
Transportation Technologies
Market Dynamics Brands
Market Size ~$7B
Growth Rate +MSD
Customer Base Secular Growth Drivers• Oil companies and convenience store
retailers
• Fleet operators
• Municipalities
• Regulation – environmental, safety, security, payment
• Increasing sophistication of convenience store format
• Larger fueling networks requiring control and automation
• Fleet managers looking to improve costs and efficiency
• Smart city, urbanization; investments into improving traffic efficiency
Market Leader Evolving from Retail Fueling to “Smart Transportation”
59%15%
19%
7%
NA EU HGM RoW
TRANSPORTATION TECHNOLOGIES OVERVIEW
2016 Revenue
~$1.8BRevenue Mix
56
~40% Direct | ~40% RecurringAll financial metrics based on 2016 annual results
• Leading position with broadest suite of retail fuel offerings
Systems strategy; on premise and cloud Leading HGM position Extending offering beyond station to vehicles and
fleet managers
• Consistent execution against major regulatory trends globally
EMV, vapor recovery, fiscal and fuel taxation, Electronic Logs (ELD) for commercial drivers
• Long-term strategy of expanding product set and reach through organic innovation and acquisitions in the core
KEY DIFFERENTIATORS
Leading Position with Broadest Suite of Offerings
TelematicsSite
Systems
Dispensers
Cloud-based Analytics
GaugesPumps
57
GROWING THE PLATFORM
Continued Reinvestment in the Core While Expanding the Platform 58
$550M Annual Sales | 15% OP $1.8B Annual Sales | 20% OP | High Teens ROIC
2000sHardware & Sensors
• Insite360 for Retail Station Operations
• Fleet Mgmt., Safety and Compliance
• Emergency Response & Transit Systems
• Dispensers
• Tank Gauging
• Alternative Fuels• Point-of-Sale
• Forecourt Control
• Payment Systems
(Partnership)
Late 2000sSoftwareSystems Early 2010s
Cloud-based SW & Analytics 2013
Other Side of the Nozzle 2016
Infrastructure
Strong System Technology Accelerates HGM Penetration
ORPAK ACQUISITION OVERVIEW
59
Market
TAM: $600MGrowth: HSD
• Oil companies and convenience store retailers
• Fleet operators
Customer Base Secular Growth Drivers
• Increasing fueling network complexity in high growth markets requires end-to-end systems with cloud-based analytics
• Regulation – environmental, safety, security and payment forcing automation upgrades
• Fleets adopting RFID-based authorization to reduce fraud
2016 Revenue
~$90M8%
12%
72%
8%
NA EU HGM ROW
Delivering Hardware, Software and Services To Enhance the Entire Retail Fuel Network and Fleet Management Value Chains
All financial metrics based on 2016 annual results
~65% Recurring
TRANSPORTATION TECHNOLOGIES GROWTH INITIATIVES
Multiple Growth Drivers in the Near- and Long-term
• HSD market growth
• Drivers: Regulations, fraud reduction including cashless transactions, trend to C-store model
Systems in High Growth Markets
• Liability shift delayed to 2020 but rollouts with major retailers, MOCs continue
EMV in North America
• HSD market growth• Drivers: Transition from value to safety & compliance; technology
impact of semi-autonomy in fleets
Fleet Management
60
• EMV upgrades driven by continued consumer security expectations and incentives from major oil brands
• Deadline delay (from 2017 to 2020) is expected to allow for even deployment and shift to dispensers
Retailers to use deadline extension to modernize site with new dispenser technology and SaaS services
25-30% of market have EMV capable dispensers
• Retailers are expected to take EMV transactions at the dispenser 2H17 Drive adoption as security-conscious consumers migrate to EMV sites
Gilbarco expects to be first to market with EMV outdoor transactions in June 2017
EMV UPDATE
EMV Growth Opportunity Maintained 61
• GVR has been awarded an exclusive dispenser program partnership with ExxonMobil to encourage wholesalers and dealers to prepare for EMV
Exxon is contributing $2,000 per dispenser as incentive to help offset the cost of equipment upgrades
Incentive includes Insite360 Encore SaaS
• Program launched April 1, 2017 and runs through the end of the year
• Exxon is actively marketing the program to 11,000+ sites
CUSTOMER CASE STUDY:
Working with Major Retailers and Oil Companies to Continue EMV Roll-outs 62
FBS Enabled 60% Production Increase within Existing Footprint 63
Daily Capacity Improved>60%
First Pass Yields
Improved>20 pts
Meter ProductionIncreased>25%
Labor Productivity
Up>10%
Safety Incident Rate
Improved17%
YoY
CASE STUDY: FBS DROVE CAPACITY IMPROVEMENTS AT GVR
The Challenge
Serve growing EMV market with minimum capital while also improving quality
The Solution
►Used Production Preparation Process to re-layout work and reduce waste
►Put Quality System Basics in place to improve quality and drive higher yields
►Held several Standard Work Kaizens to remove non-value add activities, increase labor productivity and output
• HGM systems improve gross margin profile (+2500 bps over dispensers) and generates recurring revenue
Bundling of systems + services increases GVR differentiation
• Expansion of adjacencies in fleet management and smart transport provide double digit growth
• Recent acquisition of Orpak furthers ability to grow systems business in high growth markets
SYSTEMS IN HIGH GROWTH MARKETS
Systems Strategy Increases Stickiness with Customer, while Improving Margins 64
Tax and Environmental Regulations
Changing Payments Modes at the Site
Cloud Analytics + Modular HW improve
Productivity
Workflow to Other Side of Nozzle, Trucks, Transit & Drivers
Growing Need for
Integrated Solutions
TELETRAC NAVMAN WELL POSITIONED IN FLEET MANAGEMENT
Creating a Global Business Focused on Serving Vertical Segments
Real-time data communication can help streamline complex workflows in specific verticals
Workflow
• Electronic driver logs • Driver scorecards• Planned vs. actual reporting• Routing integration
• Cycle time reporting• Uptime reporting• Job site costing• Heavy duty rated solution
Capabilities
Private Delivery Fleets: Improving routing, scheduling and driver safety
ERP Routing/ Dispatch
Compliance/ Safety
Telematics
Construction: Improving utilization and operations efficiency
Production/ Payload
Scheduling/ Dispatch
Maintenance/ Fuel
Telematics
Demonstrated History of Execution with Strong Runway to Continue Growth 66
Strong installed base provides foundation for connected offerings in retail fueling and fleet management; generating strong double digit growth in cloud-based services
Adjacent market opportunities in smart transportation accelerate growth profile and provide additional M&A runway
Building leadership position in high growth markets for long term growth
Strong underlying markets provide long runway for sustained growth without being tied to industrial production
Thoughtful application of FBS to high impact organic & inorganic growth opportunities driving profitability
TRANSPORTATION TECHNOLOGIES SUMMARY
Pat Murphy | Senior Vice President
Automation & Specialty
Market Dynamics Brands
Market Size ~$10B
Growth Rate +LSD
Customer Base Secular Growth Drivers
• OEMs: Food & Beverage, Packaging, Metal Forming, Medical, Robotics, Agriculture, Aerospace & Defense
• Machine Builders/System Integrators
• Commercial Vehicle OEMS and Engine Manufacturers
• Automation / Engineered Solutions
• High Growth Markets
• Medical Advancement: Diagnostic, Infusion, Surgical Power
• Collaborative & Mobile Robotics
Market Leading Positions in Attractive Vertical Markets with Strong Growth Drivers
51%
28%
17%4%
NA EU HGM RoW
AUTOMATION & SPECIALTY OVERVIEW
2016 Revenue
~$1.0BRevenue Mix
68
~80% Direct | ~5% RecurringAll financial metrics based on 2016 annual results
AUTOMATION MARKET OPPORTUNITY
Our Automation Business is Focused on the Discrete Automation Segment 69
Discrete AutomationProcess AutomationExample Application: Bottling Line
• Material handling• Machine tools
• Packaging• Robotics
Typical vertical segments
Example Application: Brewing
• Power Generation• Metals & Mining
• Oil & Gas• Pulp & Paper
Typical vertical segments
Fortive Focus
X
• Market-leading brands
• Our application knowledge and precision motion expertise provides differentiation
• Co-engineering of custom solutions enables “perfect fit” for customer’s needs
• FBS enables industry-leading quality and delivery performance
PRODUCTS: AUTOMATION
Our Motion Expertise and Custom Solutions Offer A Compelling Value Proposition 70
Linear Motion Products
Resolvers Encoders
Power Transmission
ServoMotors
Servo Drives
Machine Controls
MiniMotors
End Markets ’14 – ’16 CAGR Drivers
Food & Beverage
Food Processing
Beverage Processing
MSD Food safety Packaged foods
MedicalSurgical Tools
DiagnosticsMSD
Improved diagnosis and outcomes
RoboticsMobile Robotics
CollaborativeRobotics
DDLabor efficiencyWorker safetyProduct quality
TARGET BATTLEGROUNDS
Focus on Higher Growth and Lower Volatility through Quality End Markets 71
Strong Established Robotics Base
• Mobile robotics in Europe & NA
Guidance system software
Linear motion components
• Collaborative robotics leaders in Europe
Custom motor parts
Explosive Growth Opportunity: China
• EU model won’t work
• China OEM’s need mechanical expertise
• Undefined Specifications
• Need 4x faster development cycle
3kg 5kg 10kg
72
ROBOTICS EXPANSION OPPORTUNITY
Changing the Game in Collaborative Robotics
FBS Enabled Breakthrough Development in Collaborative Robotics
ImprovedTorque and
Speed
Cost Reduction
Over Benchmark
50%
Development Cycle
7 months
73
CASE STUDY: FBS TOOLS ENABLE INNOVATION AT KOLLMORGEN
The Challenge
Motor parts to fully integrated joint assemblies
Unclear definition of customer requirements
4x China Speed
The Solution
►Policy Deployment: strategy to action
►Voice of customer to identify requirements
►Speed Design Review to enable 4x speed
►Design 3P to structure brainstorming
Strong Focus on Battleground Markets Improves Growth Profile 74
Market leading brands and the broadest portfolio of precision motion products
Application knowledge and precision motion expertise provides differentiation
FBS enabling growth in collaborative robotics
Growing through focused approach to higher quality market verticals
AUTOMATION & SPECIALTY SUMMARY
Tim Gilmore | Group President
Franchise Distribution
Market Dynamics Brands
Market Size ~$4B
Growth Rate +LSD/MSD
Customer Base Secular Growth Drivers
• Auto technicians via 1,750+ franchisees
• Big-box retail, multi-outlet tire dealers, independent repair
• Franchise expansion
• Shift to open platforms, lowers cost of ownership for diagnostic scanners
• Car model sophistication expands aftermarket diagnostics
• Focus on total cost of ownership for wheel service equipment
Professional Tools and Wheel Service Equipment for Automotive Mechanics
99%
1%
NA HGM
FRANCHISE DISTRIBUTION OVERVIEW
2016 Revenue
~$0.6BRevenue Mix
76
~15% Direct | ~10% RecurringAll financial metrics based on 2016 annual results
• Complexity of repair continues to grow 80% of repairs require a diagnostic
scanner
Vehicles are using millions of lines of code
• Telematics enable vehicles to communicate real-time
• Electric and Autonomous Vehicles
FUTURE OF AUTOMOTIVE AFTERMARKET
Growing complexity of vehicle repair fuels tools and equipment growth
Estimated Connected Car Revenue by Product Package 2015-22
77
$13.6 $17.7 $20.7 $42.8 $8.3 $10.5 $14.3
$54.9
$13.6 $16.8
$17.6
$58.2
2015(estimate)
2016(forecast)
2017(forecast)
2022(forecast)
(38%)(24%)(38%)
(37%)(24%)
(39%)
(34%)
(27%)
(39%)
(37%)
(35%)
(28%)
$35.5B$45.0B
$52.5B
$155.9B
Safety
Note: Due to rounding, numbers show here may not add up precisely to the totals providedSource: Strategy& analysis© PwC. All rights reserved.
Autonomous Driving Connected Services
FRANCHISE DISTRIBUTION GROWTH INITIATIVES
Strategies to Achieve Sustainable, Above-Market Growth
• FBS drives digital and traditional recruiting tacticsNew Store Growth
• SaaS capable diagnostics scan-tools for today’s complex automobile
• Increase recurring revenue
SaaS Capable Diagnostics
• Tool storage innovation coupled with in-house financing
• Beach-head strategy
Tool Storage Innovation
78
• Traditional diagnostics business model aging
• Matco’s MaxMe brings SaaS and pay-per-use to market
Access to new market segments
Patent protected business model
SaaS optimized customer cost of ownership
• Matco’s subscription revenue doubled ‘15 to ‘16
SAAS CAPABLE DIAGNOSTICS
Matco Maximus Diagnostics Family 3-year CAGR: >20% 79
FBS Continues to Enable Above-Market Growth
Leads
+41%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Store Count
80
Store Count
+20%‘13 - ‘16
CASE STUDY: FBS DROVE STORE COUNT AT MATCO
ConversionRate
+270bps
The Challenge
Minimal store count increases 2003-2013
Conversion rate for new store funnel flat
The Solution
►Strategic plans identified need to drive store counts
►Problem solving process sorted through root cause for improving funnel, conversion
►Transformative marketing created personas and relevant campaigns to target and appeal to priority segments
►Digital marketing built funnel in cost-advantaged manner
• Revel Toolbox Line: Bold new look, upgraded quality and enhanced features
• Toolbox is the “beach-head” in most shops Brand prominently displayed
Technicians spend 2x more with Matco if they own a Matco toolbox
• Tool storage sales supported by in-house financing
• Extremely high engagement on social media
Promotional campaign averaging 1,700 new Facebook followers per day
INNOVATING IN MATURE MARKET
Matco Launches Revel at 2017 Tool Expo
Traditional Toolbox Landscape
Matco Breaks the Mold with Revel
81
Strong Performance | Consistent Returns | Future Runway 82
Strong position in attractive, growing market
Track record of consistent results
FBS and innovation will drive future above market growth
SaaS and service revenue runway
FRANCHISE DISTRIBUTION SUMMARY
Barbara Hulit | Senior Vice President
Fortive Business System
FBS continues as who we are
FBS IS…
FBS Continues to Define Our Culture
Fundamental belief in Continuous Improvement
Tools & Processes that span across business functions
We build extraordinary teams for extraordinary results
Customer Success defines our innovation
Kaizen is our way of life
We compete for shareholders
Our Values
84
Our Values
Our Way of Working
Our Culture
EVOLUTION OF FBS
Leadership CapabilitiesSenior Talent Employee Base
FBS Will Continue to Evolve with Our Portfolio
Growth CapabilitiesSales Marketing Digital, SaaS Experimentation
85
Lean CapabilitiesOperations Cross-functional
FBS DRIVES OUR BUSINESS
86
Fundamentals
Growth Tools• VoC• Speed Design Review• Lean Software• Transformative Marketing• Funnel Management• Digital Marketing
Leadership• Policy Deployment• Accelerated Leadership Program• Talent for Growth process
Lean Tools• Lean Conversion• Fortive Materials System• Fortive Reliability System
FBS Selected Tools
Starts with Purpose and Values, then Culture.... then ToolsNote: “OMX” is Operating Margin Expansion; “WC” is Working Capital
SEVERAL EXAMPLES OF FBS IMPACT
87
Fundamentals
FBS Driving Real Results
Growth through Funnel Management
DDIncrease in
SalesGenerated
Leads
Increase in Funnel
Accuracy~40%
Increase in Funnel Close
Rate~25%
88
GROWTH CASE STUDY: FBS AT FLUKE CALIBRATION
The Challenge
Lower growth segment
Stagnant funnel
The Solution
►Funnel management to shift discussion from forecasting to winning
►Visual management to drive action at field level
►Daily management to improve funnel hygiene
Funnel Add Audit
Status
Funnel Quality
FBS Continues to Drive Results, Even for Experienced Businesses
InventoryTurns+3
Labor Productivity
+10%
Quality PPMDefects<0.1%
Employee Engagement+500bps
89
LEAN CASE STUDY: FBS AT QUALITROL
The Challenge
Well-run business, acquired in 1986
Experiencing growth due to infrastructure builds globally
The Solution
►34 kaizens in 2016 focused in operations, targeting cells with lowest quality and on time delivery
►All employees expected to participate in 2 kaizens/ year
►Invested in FBS Champions to drive sustainment
►Broad deployment of Visual Management
Audit Assignments
ProcessCM Status
Kamishibai Cards
Awarded “Best Plant”
in 2016
FBS Driving Improvements in Employee Engagement
Improved Engagement by 800 bps
Reduced Global
Turnover by
Over Half
90
LEADERSHIP CASE STUDY: FBS AT TEKTRONIX
The Challenge
Employee turnover higher than wanted among those working at Tektronix less than 3 years
The Solution
►Started with Problem Solving Process to identify root cause of issue
►Held multiple kaizens to trystorm new approaches
►Leveraged Daily and Visual management to sustain actions
FBS is Cornerstone of Culture and Competitive Advantage 91
FBS is our culture and a set of tools/processes that supports our values
FBS is deeply rooted in growth, lean and leadership; it will continue to evolve as the portfolio evolves
Deep experience in the FBS drives sales growth, margin expansion and talent development
FBS REMAINS OUR SOURCE OF COMPETITIVE ADVANTAGE
Jim Lico | President & CEO
Summary & Outlook
Essential Technology for the People Who Accelerate Progress 94
Diverse portfolio with six strategic platforms with meaningful organic and inorganic opportunities
Power of the Fortive Business System (FBS)
Clear formula for long-term value creation: Fortive Formula
KEY MESSAGES
$5 - $7 billion capital deployment towards M&A over the next 5 years
• Full year adjusted diluted net EPS guidance of $2.68 to $2.78
LSD/MSD core revenue growth assumes stable macro
>50bps core OMX
• 2Q adjusted diluted net EPS guidance of $0.65-$0.69
MSD core revenue growth
>50 bps core OMX
REAFFIRMING 2017 GUIDANCE
Delivering Superior Returns and Top Quartile Earnings Growth 95
CORE REVENUE GROWTH
GDP/GDP+
ACQUISITION GROWTH~$1B FCF annually to start,
spent primarily on M&A
MARGIN EXPANSION
~50 bps core OMX
AND…
Investment grade credit ratingFBS at the core of what we do
Top Quartile Earnings Growth
INVEST WITH US
Join the Journey | Becoming a Great Industrial Growth Company 96
Outstanding Portfolio With Market-leading Brands And Strong Secular Drivers
Deep Experience In Fortive Business System Drives Sales Growth, Margin Expansion And Talent Development
Strong Capital Structure, Superior FCF Generation, And Proven Playbook That Allows For Substantial M&A To Drive Long-term Value Creation
