Fortive Corporation

My name is Nicole, and I'll be your conference facilitator this afternoon. At this time, I would like to welcome everyone to the Fortis Corporation's second quarter 2020 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, press the pound keys. I would now like to turn the call over to Mr. Griffin Whitney, Vice President of Investor Relations. Mr. Whitney, you may begin your conference.

Thank you, Nicole. Good afternoon, everyone, and thank you for joining us on the call. With us today are Jim Liko, our President and Chief Executive Officer, and Chuck McLaughlin, our Senior Vice President and Chief Financial Officer. We present certain non-GAAP financial measures on today's call. Information required by SEC Regulation G relating to these non-GAAP financial measures are available on the Investors section of our website, www.4div.com, under the heading Financial Information. We completed the divestiture of the Automation and Specialty business on October 1, 2018, and accordingly have included the results of the ANS business as discontinued operations for historical periods. The results presented on this call are based on continuing operations. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. All references to period-to-period increases or decreases and financial metrics are year-over-year on a continuing operations basis. During the call, we will make forward-looking statements within the meaning of the federal securities laws, 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 uncertainties, and actual results might differ materially from any forward-looking statements that we make today. Information regarding these 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 31st 2019 and subsequent quarterly reports on form 10 Q These forward-looking statements speak only as of the date that they are made and we do not assume any obligation to update any forward-looking statements With that I'd like to turn the call over to Jim

Thanks Griffin and good afternoon everyone. Today we reported adjusted diluted net earnings per share of 68 cents for the second quarter of 2020 as we delivered better than forecasted revenue performance despite the difficult conditions created by the ongoing COVID-19 pandemic. It was a quarter that clearly reflected the power of the afforded business system as we executed our playbook on expense savings and working capital management enabling us to achieve decremental margins of 33 percent and generate very strong free cash flow. Throughout the quarter, we continue to operate all of our essential production facilities around the world and proactively manage our supply chains, while adopting comprehensive new protocols to protect the health and safety of our employees. With a focus on maintaining continuity, despite the shift to a virtual operating environment, the Florida team leveraged new virtual sales and marketing tools to continue to engage with customers. We also adjusted product development processes in order to continue to meet project timelines while continuing to invest across the portfolio to emerge from this period with an enhanced competitive position. When we looked ahead on our Q1 earnings call in April, we faced a highly uncertain operating environment due to the challenges posed by the COVID-19 pandemic. Our Q2 performance demonstrated the resilience we built into the portfolio over the past four years with an increased share of recurring revenue, from our expanding set of subscription-based software solutions, services, and consumables offerings. Recurring revenue accounted for more than 35% of total revenue in Q2, a new high for Fortiv. Importantly, this resilience came through despite the fact that a key source of our recurring revenue, advanced sterilizations products, experienced a decline in the elective surgical procedures as healthcare systems around the world weathered the early months of the pandemic. With respect to Vontir, we made additional progress in Q2 preparing for its separation from Fortiv as we can continue to evaluate our options for structuring the separation either via spin or split. The Fortiv and Vontir teams remain in a position to move forward and affect the separation as soon as market conditions permit. Mark Morelli and Dave Nomura continue to guide the Vontir businesses through the challenging macro conditions while also leading the build out of Vontir's organizational capacity as the team prepares for its future as an independent public company. We issued our most recent corporate social responsibility report at the end of Q2, highlighting the important progress we have made across our portfolio over the past year. Our CSR framework organizes our priorities into seven strategic pillars, which capture the full breadth of our initiatives around corporate social responsibility. Consistent with our belief in the strength that comes from building diverse teams, we have always aimed to cultivate an inclusive environment at Fordham, Over the past few months, we have acted on these values to help our teams advance an internal dialogue about addressing critical broader themes of social justice. As we look to continue living our values and fulfilling our commitment to our employees and our communities, the forwarding and volunteer teams will remain strongly committed to increase diversity, equality, and inclusion as a key tenant of our culture and our corporate social responsibility efforts. With that, let's turn to the details of the quarter. Adjusted net earnings were $241.9 million, down 25% from the prior year, and adjusted diluted net earnings per share were 68 cents. Total sales declined 15.7% to $1.6 billion, including a 16.8% core revenue decline, reflecting the significant negative impact of the COVID-19 pandemic. Acquisitions contributed 270 basis points of growth, while unfavorable foreign currency exchange rates reduced growth by 160 basis points. Gross margins held up well in Q2 at 52 percent supported by the growing contribution of our high margin software businesses. Gross margins also benefited from 70 basis points of price and disciplined supply chain execution. Given the top line challenges, core operating margin decreased 220 basis points resulting in an adjusted operating profit margin of 20.2 percent. This adjusted operating margin reflected total cost actions of greater than $100 million executed during the quarter in response to the widespread deterioration in macroeconomic conditions. During the second quarter, we generated $454 million of free cash flow, representing conversion of 188% of adjusted net earnings. This strong free cash flow performance reflected a proactive response taken by our operating companies using FBS to improve inventory turns and accounts receivable, driving $165 million tailwind from working capital in Q2. It also showed the increased resilience of free cash flow generation across the portfolio driven by specific portfolio transformation actions taken over the past few years. Turning to our segments, professional instrumentation posted a total sales decline of 11% including a 14.4% decline in core revenue. Acquisitions contributed 450 basis points while unfavorable foreign exchange rates reduced growth by 110 basis points. Core operating margin decreased 140 basis points, resulting in segment level adjusted operating margin of 23.1%. Industrial technologies posted a total sales decline of 23.7%, including a 20.8% decline in core revenue. Unfavorable foreign currency exchange rates reduced growth by 250 basis points. Core operating margin decreased 250 basis points, resulting in segment level adjusted operating margin of 19.6%. Looking across the major geographies, our performance in Q2 continued to be negatively impacted by COVID-19 headwinds, but was broadly better than expected. The region by region breakdown, as shown on slide nine of the earnings presentation, ultimately reflected each region's relative progress in terms of economic reopening, as well as local public health dynamics as the quarter progressed. In Asia, Core revenue declined low double digits in Q2, representing a significant improvement from the prior quarter, driven primarily by China. China was down mid-single digits in the quarter. We continue to see steady signs of progress across our China businesses as they climb back from the low point experienced back in February. All of our major businesses in China experienced significant sequential improvement in Q2, with a number of operating companies, including Fluke and ASP, returning to year-over-year growth. We were encouraged by the positive signs coming out of Q2, including improving point of sale trends at Fluke and Tektronix and elective surgery volumes for ASP back to approximately 90% of the levels that prevailed prior to the onset of the pandemic. Looking across the rest of Asia, PAN likewise saw sequential improvement in Q2, while India and Southeast Asia remain more challenging. India in particular saw severe economic lockdown measures put into place for much of Q2. This significantly limited access to customers for sales and marketing activities as well as services implementation. Western Europe core revenue declined high teens in Q2. The quarter played out largely as expected with significant challenges through April and then sequential improvement in May and June as economies began to reopen. The resulting top line for Western Europe was a bit better than expected in Q2, particularly in light of relatively weaker trends in the region prior to the onset of the pandemic. Notably, ASP posted low single-digit growth as strong terminal sterilization capital sales and incremental consumable revenue from N95 respirator reprocessing helped offset a significant decline in total surgical procedure volume. Demand trends for flu contactronics, while still down significantly, showed some improvement over the course of the quarter. North America core revenue also declined high teens in Q2. Similar to Western Europe, the U.S. bottomed in April and then saw sequential improvement across May and June, resulting in a better than expected high teens decline in total revenue. Improvement over the back half of the quarter was driven by the widespread lifting of lockdown measures, although customer access remains limited in certain markets. North America does benefit from the resilient performance of our software businesses, many of which derive the majority of their revenue in the region and provide important stability in Q2. We believe improving trends for elective surgical procedure volumes, continued EMV-related demand at GVR, and early signs of POS improvement at fluke create the possibility for further sequential top-line progress in the coming quarters. That said, we continue to monitor the risks associated with rising COVID-19 infection rates in hotspots across the country and any re-imposition of lockdowns which may be required. Finally, we saw a mid-teens decline in the Middle East and a greater than 20% decline in Latin America. Weakness in the Middle East reflected the combined impact of COVID-19 and budgetary pressures across the region tied to challenging conditions in the oil and gas market. While Latin America experienced the spread of COVID-19 a bit later than other regions, the impact became significant in Q2 with particular headwinds for our businesses in Mexico and Brazil. We anticipate that conditions will likely remain challenging throughout both these regions as we look through the end of the year. Last quarter, we laid out a framework for analyzing our portfolio, found on slide 10 of today's presentation, with businesses organized into groups based on relative sensitivity to pandemic disruption and resulting deterioration in end market demand. As shown on slide 11, the performance in Q2 across the four indicated groups played out very much in line with our expectations for the quarter. Group one, which represented approximately 14% of total revenue in Q2, showed significant resilience and posted mid-single-digit growth for the quarter, despite the challenging economic conditions. The group's performance reflected a strong contribution from a number of our software businesses. IntellX grew mid-teens, eMake grew high single digits, Gordium was up slightly, and the SaaS and maintenance portion of Accruant was relatively flat. Group 1 also benefited from very strong demand at Fluke's industrial imaging business, where customer response to COVID-19 drove very strong growth in the quarter. We're excited about the continued near-term demand trends for these product lines of fluke and the potential to accelerate a broader industrial imaging strategy. As expected, Group 2, which represents approximately 48% of total revenue in Q2, was significantly impacted early in the quarter by lockdowns. Overall, the group's improvement over the back half of the quarter resulted in mid-teens revenue decline, roughly 10 points better than expected. For ASP, surgical procedure volumes in both the U.S. and Western Europe troughed at levels higher than those experienced in China in Q1 and subsequently bounced back faster than expected to drive higher consumables usage during the quarter. At GVR, where bookings increased mid-single digits in the first half of the year, the pandemic impacted our ability to convert orders to deliveries in Q2. Despite the push out of the liability decline, we continue to see strong demand for EMV upgrades in North America. Elsewhere in Group 2, the recurring revenue business models of ISC's INET and Fluke Health Solutions' Landauer Dosimetry business provided added resilience in the second quarter. Fluke Health Solutions, which grew low single digits in Q2, also saw strong demand for ventilator calibrators related to the fight against COVID-19. Group 3, which represented approximately 15% of total revenue in Q2, performed better than we had anticipated in the second quarter with mid-teens declined. The group's performance was highlighted by MAGCO, which saw significant pressure early in the quarter, but then a strong recovery in orders as lockdowns began to lift. Elsewhere, the sensing portfolio saw pressure across a number of its core industrial end markets. This was partially offset by growth in semiconductors, driven by demand for data center upgrades and infrastructure, as well as COVID-related tailwinds in medical end markets. Specifically, Cetra and GEMS saw strong demand for critical environment products and ventilator components, respectively. Accruance professional services business faced significant headwinds in the quarter, but adjusted with new safety protocols and remote delivery capabilities to help address COVID-19 related restrictions and drive better performance later in the quarter. Group 4, which represented approximately 23% of total Q2 revenue, experienced the most top line pressure in the quarter, as expected, and posted an almost 30% decline. That said, businesses in Group 4 showed earlier signs of improvement than we had anticipated in April. Notably, Fluke's core industrial business saw improvement in point of sale across its major regions, with Asia POS positive in Q2 and Europe and the U.S. improving off their early Q2 lows. The Tektronix Instruments business performed largely as expected in the second quarter, with sequential improvement in China. Conditions remain challenged, but we anticipate some sequential improvement at Tekt in the second half. The combination of top-line resilience, strong margin execution, and substantial cash flow generation enabled us to continue to enhance our liquidity position and pay down debt as expected during the second quarter. We ended the quarter with over $1 billion of cash on our balance sheet in addition to our undrawn $2 billion revolving credit facility. While there were plenty of immediate challenges to address in Q2, we continued to play offense across our portfolio, running our FBS playbook by using dynamic resource allocation to invest in key growth initiatives to enhance our long-term competitive position. We remain focused on driving innovation across the portfolio using the Fort, our centralized artificial intelligence and data analytics hub, to bring more advanced analytics and machine learning capabilities to bear in our workflow solutions, while also expanding our use of the growth accelerator process to fund potential growth breakthrough opportunities. In May, we established a partnership with Pioneer Square Labs to help incubate industrial, technology companies capable of bringing new products to market in an accelerated fashion, in addition to our internal development processes. Sustained investment has enabled our operating companies to quickly address emerging opportunities, including the growing demand for critical environmental solutions, et cetera, and industrial imaging products at Fluke, driven by the response to COVID-19. Sustained investment has also enabled the completion of longer-term development of critical next-generation products, such as Teletrak Navmans, newly introduced TN360 telematics platform, which is expected to form a core part of its offering going forward. Importantly, we are also investing to expand our commercial operations, particularly among our software businesses. We continue to expand IntellX's European sales team to help capitalize on growth opportunities outside the U.S. and build the capability of Census to address attractive opportunities emerging in the ambulatory surgery center market. At ASP, despite challenges reaching customers in the quarter, our continued investment in sales and service enabled the team to quickly address the near-term N95 respirator reprocessing opportunities. Despite the better trends we saw coming out of Q2, macro conditions remain challenging with the potential for future volatility. This is particular in light of the persistent challenges associated with global efforts to keep COVID-19 infection rates under control. Consistent with Q2, we are not providing a guide, but we are providing additional color on expected performance for the coming quarter. We expect that total revenue will improve sequentially in Q3, but decrease by 5% to 8% on a year-on-year basis. We will continue to calibrate any remaining cost actions based on the top-line progression from here as we manage to decremental margins of approximately 35% in Q3. As we look ahead, we also expect to continue to generate strong free cash flow and deliver a free cash flow conversion ratio of greater than 110% of adjusted net earnings for the full year. The second quarter of 2020 was truly an unprecedented period as we had to quickly adjust to an unfolding global public health crisis and a resulting deterioration of the global macroeconomic environment. We weathered the storm delivering financial performance that significantly exceeded our expectations three months ago. As such, our Q2 performance demonstrated the progress we have made with our portfolio transformation over the past four years, establishing a more resilient top line and sustained cash flow performance through the cycle. More importantly, as we leverage the foundation of FBS to sustain our performance and develop new virtual collaboration tools, we continue looking forward by making the investments in innovation and team development that will lay the groundwork for the continuation of our portfolio transformation. Finally, I am extremely proud of our team's efforts over the past three months. And while we undoubtedly face additional challenges in the coming quarters, I'm confident in our ability to navigate through them as we continue to generate substantial value for our employees, customers, shareholders, and our communities. With that, I'd like to turn it over to Griffin.

Thanks, Jim. That concludes our formal comments. Nicole, we're now ready for questions.

As a reminder, if you would like to ask an audio question, You may do so by pressing star and the number one on your telephone keypad. Again, that is star one. We do ask that you limit your questions to one question and a follow-up question. One moment for the first question. Our first question will come from the line of Nigel Cole with Wolf Research.

Thanks, Jim. Thanks, Chuck. Thanks, Griffin. Good evening. Good evening. Obviously, the 3Q sales range of down 528 is obviously quite a bit better than what you're pointing towards in April and what you realized in the quarter. So I'm just curious how, and I don't exactly want to blow by blow here, but as we went through June, July, what are you seeing, not necessarily by business, but just generally what do you see in terms of organic sales progression as we went through the quarter and into July?

Thanks, Nigel. Yeah, I think a couple things. Relative to the trends, I think we certainly, as we sort of said in the prepared remarks, progressively things got better as we got through the quarter. So, you know, I think every month got a little bit better, certainly from a trend perspective. July is just in and is probably good as well, but good in the sense of giving us confidence as to the guide. So I think the trends are certainly Getting better. I think it's I think it's difficult to necessarily know how long they'll they'll continue it Hence the you know, like through the through into the fourth quarter But I think as we look at the near-term trend, they look pretty good and and certainly as we said You know, we we have a good sense of what EMV is going to look like in the back half That's a that's a driver. Obviously magical getting better is another example so that really covers industrial tech and on the professional instrumentation side and elective surgery still, you know, on the right trend, the software business is staying resilient, and certainly some of the POS trends at Fluke starting to be a little bit better as well.

Thanks, Jim. And, you know, the decremental margins obviously were very encouraging. You seem to have a really good firm grip on the cost management side of it. You know, 35% decremental margin outlook for 3Q. I know you had confidence that you could, you know, kind of maintain or kind of like bring back those gross margin decrementals into that range you put out there. So should we think about, you know, 3Q, 4Q in that sort of 35% range, you know, or is there a scope for it to be a little bit better in 4Q if we continue to see the improvement trends into 4Q? Thanks.

Hey, Nigel, this is Chuck. I think what we're trying to say is that we will deliberately manage the business to 35%. As we move forward, the top line is on a better trajectory. At least that's how it seems at this point in time, and that's consistent with what we're guiding there. So we'll strike that balance of managing our expenses and investing into the future as we go forward. So 35 is the right number.

Very clear. Thank you very much. Thanks, Nigel.

Our next question will come from the line of Scott Davis with malicious malicious research.

Hey, good afternoon guys on the book. Congratulations on your book.

Yeah, no, thank you. I, um, I hope it helps many people sleep pages and you're out like a light, right? But, uh, no, thanks for that, Chuck. I, um, Everything looked pretty encouraging here overall, and I was trying to, I think it's probably our fifth or sixth earnings call today, so getting a little beaten up. Chuck, you commented on, I'm sorry, Jim actually commented on the 70 basis points of price, and trying to get a sense, does that 70 basis point generally come in that bucket of 35% recurring revenue where you're able to get a little bit more pricing power, or is there some other base-level price increase that, you know, you have across the board?

Yeah, you know, we were really encouraged. You know, we've had good price, and quite frankly, as you know, the ComSum price has been pretty good, too. So, you know, to get that, it was mostly in professional instrumentation in the quarter, Scott. So, you know, I would say, and certainly the software businesses were part of that, but we had good price in some of our key hardware businesses as well, like Fluke and Tech. So I think across the board, as we think about our playbook, you know, certainly on the expense side, we talked about $100 million of cost reductions in the quarter, but also part of that playbook is trying to find opportunity for price, and I think the teams did an exceptional effort, you know, in the quarter to try where those opportunities exist. They took advantage of them, and while, you know, I think, and we will continue to do that through the rest of the year.

Okay. Encouraging. And then The bond tier profit profile, the top line growth profile you gave, as far as the decrementals and overall profit and cash and such, was that fairly consistent with the rest of Fortiv or was there some differences there?

No, I think that there's a little bit of difference in terms of when you look at actual operating profit margin by a couple hundred basis points between the two segments. But when you get to the decrementals, they don't behave all that different between the two.

Okay. Super helpful. Thanks, guys. Good luck.

Thanks, Scott.

Our next question will come from the line of Julian Mitchell with Barclays.

Hi, good afternoon. Maybe just circling back to the revenue outlook. So you're dialing in around about a 10 point less bad year on year drop in the third quarter than what you saw in the second quarter. Is there any more detail you could provide around that? narrowing, you know, either on a segment basis for PI versus IT and or on that group one to four basis, just to help us sort of understand what's driving that improvement.

Hey, Julian, think of it this way. As we look at the quarter that we just had and what's improving, IT is going to improve a little bit more than PI. Both are going to improve sequentially. If you think about the IT, the volunteer group, you've got Matco really is continuing to show some strength there. And then we've got that EMV secular trend that's going to be helping GVR. Those were impacted in Q2 by the lockdown. And as that gets released, that's really going to move that to more of a low single-digit trend. down low single digit for a volunteer. And when you look at professional instrumentation, I think that's sequentially going to improve. That's where you're seeing some of these acquisitions doing really well. And then again, getting a little bit of a lift from the lockdown coming off. So I'd see that improving to down high single digit in Q3.

Thank you, Chuck. And then maybe a second question around the free cash flow. There was a big working cap tailwind in Q2. Generally in the first half, receivables in particular freed up 200 million plus of cash, I think. So maybe help us understand what's happening with working capital in the second half as you're seeing this revenue outlook improve. and the extent to which you're seeing an improvement in the ASP business around that free cash flow profile.

Yeah, I'll take a shot at that, and then Jim will probably add a few comments. I think we think the tailwind from working capital from Q1 to Q2 is about $165 million, because when you take a look at everything in there – And I think that that was just a lot of great work by our teams getting on things early, managing inventory levels appropriately. It's an example of managing what you can manage. And that gave us a good push. And as you saw, cash flow overall was very strong at $450 million. I think that what I would expect going forward, it really depends on how steep the sequential improvement continues to be going into the second half. But I'd expect a little bit of a tailwind, but not at the same level. It's probably maybe a half to a third of that coming back as a tailwind. Again, it really just depends on how steep the increase quarter over quarter is.

Julian, I would just add a couple things. Number one is we're really happy with what we saw relative to free cash flow. A lot of times we'll talk about those working capital tailwinds in a way that suggests that it doesn't actively have to be managed. The last time I checked, customers weren't in a hurry to pay us last quarter. So the work that we did, I think, using FBS was really profound. It's also using it to capture and keep those advantages once we get into a little bit of growth mode or less down, if you will. I would say the second thing I'd add is, know when we look at the the you know historically we said we would preserve you know somewhere in the 80 to 80 percentage range of free cash flow when we're in a down cycle and and we've been talking about that for four years and I think what you saw in the quarter and what you're going to see in the year is better than that obviously we were much better than that in the second quarter we think you know we can we'll do better into the 90s for the full year so I think what you're seeing is the strength of the portfolio the highest higher gross margins in PI particularly around software and I think our gross margins in PI for the quarter are around 56%. So the ability to derive more free cash out of the portfolio, given the changes, I think also gives us some confidence that free cash in the remaining part of the year will be good as well.

Great. Thank you.

Thanks, Julian.

Our next question will come from the line of Jeff Spraws with Fortis.

Thank you. Good morning, everyone. Or good afternoon, I guess. Good evening. Two from me, if I could. Just on bonds here, on the timing, you know, this market obviously has been extraordinarily resilient. What is it that you're looking for or waiting for, you know, to make your decision on timing here?

Well, I think there's a couple of things we're looking for. One, we thought it was important, obviously, to get out here with our Q2 results. And then we're just looking for continued stabilization in the market and less volatility. And while we think that the trends are definitely going in the right direction, we probably need to see a little bit more time here. Going forward to ensure that you know, we're not looking for a week to get out We're we're looking for a little bit longer time period but but we're encouraged by the direction of the markets are going right now and And also, you know, we're prepared to go We're ready and you know that volunteers ready to separate work and we're still convinced that the strategy is correct We're coming and we're committed to the execution. So we're just waiting for a little bit more time and stability

And just thinking about investment, Jim, so, you know, to Chuck's point, you're actually managing to a decremental, right? So, sales are going to come in better. That's going to free up spending. You know, you provided a couple examples here on what you're working on. Should we expect most of that delta is going into growth or I would assume there's some restoration of just kind of, you know, temporary things that you had to kind of, you know, choke down here in the second quarter.

Yeah, I mean, you know, Jeff, you know, we think of our playbook really as first and foremost as we see some of this revenue going down, if you will. We first and foremost think about the factory and supply chain alignment with capacity. And we're focused on managing gross margins. You saw good, really good work on the part of the teams to do that in the quarter. There's the temporary cost actions. There's the permanent set of cost actions. And then there's this fourth part about dynamic resource allocation, which is moving money around to the highest opportunities, which is I think where you're going at. So we're managing the decrementals relative to those things. We're making decisions about temporary and permanent cost reductions as we really understand the outlook more or less into 2021. And those decisions are probably more in the coming months. But I think the most important thing where you're going is We're really making sure we're funding the growth opportunities that are inevitably going to create competitive advantage over time. A good example is the Fort where we bring data analytics projects for the businesses. Our projects are up 3x from where they were a year ago. So we're doing three times the number of data analytics projects that we were doing a year ago. I think that's a big focus. You're hearing a lot about digital transformation today. around companies. And I think that's really what we do at the Fort is leading that for both our operating companies and some internal projects that we're doing for Fortif. So I think that's one example. Maybe one other example is we're continuing to accelerate all of our investments in the software businesses where a number of our software businesses are really able to take advantage of a lot of the going back to work challenges that occur, the changes in facilities, the the new safety, health and safety protocols that exist in facilities and buildings. And so a number of our, we're really pivoting our solutions and our feature sets at both Accurrent and Gordian, as well as at Intellex to really take advantage of those opportunities. So a number of our, you know, increases in investment are going towards some of those things where we have, I think, real good secular drivers over time.

Just one quick clarification, if I could. Chuck, that revenue color I think you gave to Julian's question, was that reported revenues or was that organic revenue commentary you were giving?

It's organic, although we're whapping most of our acquisitions here, I think, except for maybe census. But organic was my comment. All right. Great. Thanks.

Thanks, Jeff.

Our next question will come from the line of Andrew Obin with Bank of America.

Yes, good afternoon. Hi, Andrew. Just a question on Fluke. As we think about the business today, how much of it is core industrial at this point? And at the core industrial business, what was the performance in the quarter?

Yeah, I think when you look at the core industrial piece that's in that group four, which would be sort of our core industrial instrumentation, probably about 60-ish percent, I think maybe two-thirds probably in that range, or maybe a little bit less.

Gotcha. Okay, that makes sense. And then just a question on software, just to clarify Gordian and Acro and performance. So am I correct that Gordian is a marketplace revenue model, so it's just volume going through the platform is down, so that's what's impacting it? And Akron, you know, anything else going on besides sort of license to SaaS transition to deprive the revenue?

Yeah, so I think, yeah, you're exactly right on, Gordian. So get that one first. And really, you know, it's interesting, Andrew, their revenue model also very often requires some work on site with the customer to get started. And obviously with the stay-at-home orders, you know, we were prevented from working with customers in some cases. So So, you know, there's some delays, but there's no, we often get the question about new construction. It's really, it's really not new construction. It's really changes that are going on in the facility. So we think, you know, with everything going on with COVID and facility changes required around protocols, that ultimately that business will come back. And as you said, the purchasing construction dollars will start to flow back through Gordian and ultimately the revenue will get, will be, you know, back in growth mode. They've been, as you know, a double, a strong double digit grower for quite some time now. We still think we've got a great opportunity there accruing a little bit more complex in that regard. You know, we saw some, uh, again, we're seeing a lot of good growth in the businesses that are really tied to facilities and facilities management. Um, and, and really returning to work assessment work, our Chi Chi cloud, um, opportunities, our EMS business, our connected healthcare businesses, and, and Lucernex, which is, which is our least management business continues to be good. So those businesses are mostly the SaaS parts of the portfolio, and again, they're much more resilient. Where we saw the challenges at Accruant is really, one, on the license revenue side, and again, on the managed service side. Got a little bit better, as we said in the prepared remarks. Some of the managed services got better at the end of the quarter as we were able to get more on site and be able to do some of our work remotely. But I think that'll continue to be, you know, we continue to think the SaaS part of a current will be durable. And, you know, we're still getting back to working with customers on a regular basis. And that's still work to be done through the third quarter, I'm sure. Thank you. Thank you.

Our next question will come from the line of Josh Pokorzynski with Morgan Stanley.

I could even guess. Hey, Josh. Hope everyone's well. Just a couple questions here from mine.

I guess, you know, first on, you know, businesses that go through distribution, I guess, you know, fluke and tech kind of come to mind first. How do you characterize kind of sell-in versus sell-out? I think between some supply chain delays and distributor restocking, we've seen, you know, a bit of backlog carried in for some other short cycle guys into the second half. How do you guys think you score against that?

Yeah, you know, I think we saw a little bit better point of sale trending at Fluke than we did at Tech. I would call Tech more stable, whereas, you know, got it improved, but Fluke maybe a little bit more of an improvement, but still negative. Our inventory positions have remained pretty much, I would say, flat to down, so no real inventory built. So I think as we get into the second half, we don't anticipate any big – big issues relative to inventory. On the other hand, we don't expect really distributors to necessarily take on inventory. So everything embedded in what we talked about for the guide for the third sort of assumes that sort of business as usual, trends continue around point of sale, which means they get a little bit better. But at the end of the day, no big dramatic increases or decreases in inventory, nor any big swings on point of sale.

Got it. That's helpful. And then I guess Jeff took my question on volunteer timing, so I'll ask a different one. On the four buckets that you're kind of breaking down the business in these days, obviously those are shipped around a little bit as the businesses are separated, but does this current environment give you any kind of thought into how to manage M&A amongst those buckets? I mean, do we just kind of – should we expect mostly buckets one and two, or are there – their room for maybe some more cyclical or choppy assets that would have been later in this current environment but maybe still attractive to boarders?

Yeah, I think it's a great question. I think, you know, obviously, if using the groupings as we have them, we clearly have, I think, demonstrated a propensity over the last several years to be, you know, the lion's share of M&A deployed into mostly group one and group two. So I think that would, you know, I would say that the trend is going, that trend will continue. That said, you know, there are certain situations, I would cite Proof Technic as a deal we did last year for Fluke, which had both a service and an instrument aspect to it that was really important to our overall Fluke digital offering. So in that case, and we got it at a very, very high ROIC. I think what you'll find is if we do make some of those decisions that are in group three or group four, they're going to tend to be ones in which we see the returns very high. But I would say if you said, let's talk about the lion's share of our capital allocation over the next several years, it's really going to be in building in those groups that are articulated in one and two. And they're focused on things like condition monitoring, facilities management, health care enablement, and health, safety, and environmental, the places where we've deployed

lion's share of our capital over the last four years got it appreciate the color good luck guys thanks josh thanks our next question will come from the line of richard eastman with baird uh yes good morning uh afternoon evening um hey just a just a couple questions first just around the recurring um Jim, I think you mentioned recurring revenue, and I think you were including software and consumables and services, where 35% of Ford has revved in the quarter, kind of a new high. But how did that bucket, as you defined it there at 35% of revenue, how did that do year over year in the second quarter?

Well, I have to disaggregate it into the groups, but I would say If you thought about the sort of PI-related software businesses, they were up about mid-single digit. And then obviously telematics, the big software business that we would have on the volunteer side, is down in the quarter. But as I mentioned, I think the new platform that we're launching, we're excited about the opportunity for telematics here going forward. So that kind of gives you the software view of what the quarter looked like. Services, which are mostly in Group 2 buckets, probably sort of down to down. You know, I think our dosimetry business at Landauer was up in the quarter, but I think tech services, as an example, was down low single digits, something like that. So I probably would say the service parts of the business, you know, at Landauer, we call that Fluke Health, and at tech probably down a little bit. But still, obviously much more resilient than the other parts of the portfolio.

I got you. Okay. And then just a question, as we manage to this – 35% incremental here for the balance of the year. The question just is around, as we manage into next year around what's discretionary on the cost side, what our investments are on the cost side, how do you start to think about incrementals for PI and volunteer What do we manage to there? I mean, we have more software content. We have more recurring revenues. What would be the appropriate view on an incremental margin for PI and IT?

Yeah, Rick, this is Chuck. I would think that a good starting place is that we'd come back up the same amount that we went down because We want to reset back to starting to growing on our 2019. So recovering that revenue, if it went down at 35, think of it coming back at 35. Beyond that, it really depends on where we're growing. As you mentioned, some of the software businesses obviously have higher decrementals as you move forward in time. So it kind of depends after that. But first thing is to get back.

Okay. Very good. Thank you.

Thanks, Rick. Thanks.

Our next question will come from the line of Joe Giordano with Cohen.

Hey, guys.

Hey, Joe.

Hey, can you kind of go through the cost outs? You mentioned $100 million in this quarter. As you look through, like, For the quarter and for like the balance of the year, how would you break that out between kind of temporary things that actions that you took that come back to the business when things are more normal versus more permanent savings?

Are you talking about for the quarter or what you think we've done for the year?

I guess kind of like what do you do in the quarter? How would you break out that 100 million you mentioned in the preparatory marks and how are you thinking about the split in magnitude of temporary versus permanent for the rest of the year?

I think the, uh, so in the, in the quarter, I think that, uh, let me back up. It's a little easier to talk about for the year. I think that the permanent that we've taken, we're likely to take, we have taken action on, uh, will be 50 million, uh, permanent in Q1 or in Q2, that a hundred million is, you know, it's a little less than that. But as you go through the year, think of it being 50 million, um, in permanent actions. That's on top of the actions we took in Q4 of last year where we did... And then it really depends on, you know, let's see how the rest of the year plays out, particularly in Q4. But I would expect the next quarter we'll know, obviously we'll know how the third quarter played out and have a strong view into next year and see if we need to do

Anything of a more permanent nature or whether we think the top plane is going to recover Joe also part of that is obviously we're getting a substantial reduction in travel and you know Right, you know part we're very much working through now a number of our virtual and digital You know work that we're doing with customers to understand how much of our real travel expenses quite frankly It can become permanent cost reduction because we just don't need to necessarily make the trips that we've historically made so I I think as we think about once we have a better sense of what we think the revenue outlook will look like in 2021, then we can certainly, as Chuck said, make that decision. But those decisions aren't just the typical incentives and things like that, but it's also very much things like travel and costs that would historically be considered temporary, but quite frankly, I think a significant amount of them are going to be permanent as we move into next year.

That's fair. My follow-up, I just wanted to talk on the elective procedure volumes you guys mentioned. I was interested, you said in North America you're seeing 80 to 95, 90% of pre-COVID Some of the checks we did, it sounds like that rate is reflective of some of the kind of specialty hospitals, but like the big hospitals were more like in the 75% range. And I'm just curious how you kind of view, is that geared toward more a specific type of facility? And how is that looking now with what's going on in Florida and some of the places that are having flare-ups again?

Yeah, so our prepared marks may not have been as clear. So we see the China hospitals up at around 90%. And the U.S. hospitals were getting back. I think our numbers would, quite frankly, agree with yours at the end of the quarter in the sort of 70%, 80% range. We get pretty good data from our census software business. We actually have a number of sterilizations. We not only have the understanding of what the procedures are, but we have an understanding of the sterilization. We think that continues to get back as we get through the quarter. But we don't see it to 100% even through the end of the third quarter, I don't think. It's still a long way to go between now and then, but we definitely continue to see. We really get the data by day, and we're seeing continued improvement through July as well. So we think things will continue to improve, but as you said, it is a little bit of type of facility dependent.

Thanks.

Thank you.

Our next question will come from the line of Andy Kapowicz with Citigroup.

Good afternoon, guys. Andy? Jim, maybe you could give us a little more color into your regional sales breakdown. You mentioned your China-related sales were down, still down mid-single digits in Q2. Does that turn positive in Q3? And as you think about the revenue outlook improvement in Q3 versus Q2, are all regions generally improving at the same rate? Or do you see, for instance, LATAM or even the U.S. lagging the other regions?

Yeah, I think, you know, as you said, China was measurably better in Q2 than Q1. And that was on the backs of ASP and Fluke. I think China's going to get better through the second half, but I don't necessarily think that China gets to any dramatic growth rate in the second half. I think it gets better, but I don't think we've seen enough to think that things are going to get significantly better. So I think our China theory here at this point is probably better. The rest of Asia, I think, is a little mixed. As we mentioned, India continues to have a lot of lockdowns. But we think by the end of the year, our India business in many respects is driven by the GBR business. And we think that there's a number of things that the order pattern there has been very good. So we think India might get better by the end of the year. I think as we think about the Middle East, we think about Latin America, we don't anticipate anything getting better there. So that kind of gives you the high growth market view. The U.S. will definitely get better through the remaining part of the year. I think the – and I would anticipate – whereas I don't necessarily see Western Europe getting that much better the rest of the year. And the difference there is we have the EMV tailwind in the U.S. We have Madco getting better in the U.S. We have ASP getting better, which is a bigger U.S. business than it does a European business. And Fluke's point of sale is getting better. So I would say North America tends to get better through the remaining part of the year. And as I mentioned in the prepared remarks, Western Europe in particular wasn't ripping to begin with when we sort of started with COVID, and I anticipate that to be a little bit more longer drawn-out recovery. Hope to be proven wrong there, but that would sort of be our sort of thought process as we get into the second half here.

Jim, let me ask my follow-up on GVR specifically. You mentioned India. It does tend to be lumpy for you guys, and you tend to see delays sometimes in orders, and obviously we know what's going on there in terms of the infections. So maybe confidence level in the international GVR business doing better in the second half of the year. And then you talked about mid-single-digit order growth in North America. Does that just convert in the second half of the year as stay-at-home orders have basically – I mean, they haven't gone away. They're a little better in the second half of the year. Does that just convert into revenue growth in North America?

Yeah, I think – I think North America orders will continue to be good in the second half. It's a little mixed around the world. As you know, in the rest of the world, a number of our customers are integrated oil companies, and so oil and gas prices have a little bit more impact in some parts of the world than it does in the U.S., where that's a disaggregated market. So I do think the second half will still follow some of those patterns that I was describing relative to the economy. But I think India in particular will continue. I think our position in India is very good. We've done a number of acquisitions there, our Orpac acquisition, our Midco acquisition. We have a very good position. We have great relationships with customers. So I'm confident. As you said, it can be lumpy quarter to quarter. But if we look year on year on year, we've built a really good business there. And I'm confident that the team will continue to execute there. So I think some of the other markets might be a We did a Middle East review with the team the other day for all afforded, and I think they're executing well there, and some markets are going to continue to be okay. So I think GVR in general will, you know, it will depend on the market and country, but I think, you know, we'll see a little bit better order pattern likely in the second half and on the backs of a continued strong EMV market in North America.

Thanks, Jim. Thank you.

The next question will come from the line of D'Andre with RBC Capital Markets.

Thank you. Good afternoon, everyone. Hi, Dean. Hey, I'm interested in hearing a bit more about this joint venture with Pioneer Square Labs. It sounds like you've got your first company getting launched. Could you remind us what kind of investments that you're making in this, what kind of returns you're expecting? And this really does sound something more than just a proxy for R&D.

Yeah, it works. We're really excited about it. We built a very good relationship with them and the team there. You know, what it really is, is we agree on an idea generation process. We devote, we have a number of afforded people that work at the lab alongside the PSL team. We generate ideas. If we find an idea that we want to invest in, we invest in it. We have a couple of different milestones where we can decide if we want to bring that in or continue to invest in it. And at a certain point in time, we draw a conclusion as to whether or not we want to own it or necessarily do something that, you know, obviously do something and take it out. And I think, you know, I think the economics are good for both parties and we feel very good about the relationship. So still very early days. They bring a lot of great entrepreneurship, fast cycle product development, lots of software experience. I think they've been very enthusiastic in the level and quality of talent that we brought to the table, but still very early days. As we said, we've launched one team, and hopefully we'll continue to have a number of wins that we can put up over the next few years.

Will these businesses be spun out, sold? Are there synergies within Core Affordative? Just maybe kind of explain how the company benefits from this overall?

Yeah, I think it could be all of the above. It could be a great idea that really benefits Fortiv and we see a way to spin that in and we've got economics associated with that so that we can spin it in and make it part of Fortiv. But we also have the economics if it's a great idea but isn't necessarily that would be something consistent with what Fortiv wants to become and ultimately we would decide to do something to spin that out as well. So there are a number of options. I think we've got good flexibility as to the kinds of ideas and what is sort of in our strike zone but also obviously if there's ideas that have maybe utilized sportive technology but don't necessarily mix with what we want to do and become then ultimately we'll try to find other ways to create value and spinning it out and building something you know in a different structure.

Got it. And just as a second question, I want to go back to this structure of these four groups that you've set up. And just, Jim, a few minutes ago, you said that you're really not looking to commit capital necessarily into groups three and four, except on those situations where you're getting high returns. But once you start saying you're not investing further in M&A for those businesses, it kind of opens up the question that there might be some non-core businesses, opportunities to exit. I know you've got some volunteer businesses there already, and those decisions have been announced. But are there businesses in Groups 3 and 4 that might be considered non-core?

Well, you know, no. I think what I meant with that answer is, you know, one of the things that we love about that grouping is I think it gave everybody a good perspective of how, you know, it was really meant to show the sequencing of how our parts of our business is would perform and mirror sort of the resiliency and dynamics of COVID and the economic consequences of COVID. So it's really a framework for that. As you know, a number of our businesses are really built with portions of Group 1, 2, 3, and 4 all together. So, you know, just taking an example like Fluke, as we said before, you know, a good chunk of fluke is in group one and two is in one and two. So, and, and increasingly becoming a growing part of that. So I don't think it necessarily says that our individual businesses are necessarily going to be, you know, not invested in, but what we're going to, what we're going to find in a number of our businesses within our businesses or within our operating companies, probably is the best words. is we're finding those opportunities to build more resilient, more durable, more higher growth aspects of the business. And that's where we'll probably end up having more of our investment. So as Fluke is a good example, we bought E-Mate, we bought Proof Technic, but we also bought Landauer. So a good chunk of the capital that we deployed into Fluke in the last few years been to add those ones and twos to the core fluke business I think we have those same opportunities for some of the parts of group three and four that we can also do you know even within sensing tax some of the things we talked about that are driving the growth there and environmental monitoring as another example those are places where we're investing in those businesses because those parts of the businesses really have group two and group one aspects to them that was helpful thank you thanks Dean

Our next question will come from the line of John Walsh with Credit, please.

Hi, good evening.

Hey, John.

Hey, so a lot of ground covered. I guess just thinking about the SAS businesses, was there any discernible change, positive or negative, across them as it relates to customer retention rates? I think that might be the best way to ask the question versus kind of thinking about net ads. But however you kind of want to answer, it's helpful.

Yeah, we really, the key metric we look at, John, is net retention. And that combines sort of not churning customers, keeping current customers. And that metric is really, and all of our SaaS businesses improved in that metric in the quarter. So it's a key metric we keep an eye on. We actually review those metrics with the board. And every board meeting, they're so important. So I think we feel very good about the work the team's doing on all those metrics. And there's still lots of, you know, there's certainly improvement to get. And some of our businesses are kind of at benchmark. Some of them still have some ways to go. So it's a continued focus for a lot of our FBS tools as well within those businesses.

Great. Thank you. And then just maybe a point of clarification around telematics and the new platform. Has that actually launched or is that something you expect to launch here in the back half?

I think it's launched now and now it's starting to get some traction. So call it, you know, in the early stages of launch.

Great. Thank you. I'll pass it along. Appreciate the color. All right. Thanks, John.

Our next question will come from the line of Andrew Boscaglia with Barenburg.

Hey, guys. Everything's kind of picked over, but I have one last one that I wanted to squeeze in. On your comment that you saw some strong demand for industrial imaging products within the food business, some of your competitors in that niche vertical are seeing really strong demand, exponential growth as it relates to skin temperature cameras. Is that what you guys are referencing and If you could just comment more on that, if that's an area that could see outsized growth within PI.

Yeah, Andrew, our principal business there is thermal imaging and temperature measurements, so it ranges from all the imaging line, thermal imagers, as well as literally IR guns and thermometers. So, yeah, that business is doing well, and it also has a number of new entrepreneurial opportunities that we're working on that do sort of fold into some of the challenges that happen at facilities relative to COVID-19. So we think it's, we mentioned a little bit in the prepared remarks that we're excited about a broader strategy here. We've got some people counting business that is a part of an acquisition we had a few years ago that we're building a solution out that we've launched. So a number of things that we've got going and we'll see how it goes and whether it's sort of a, whether we really think the resiliency and durability that we might be able to build here is beyond just COVID-19, and we're excited to try to build on that here in the coming quarters.

Okay, got it. Thanks, guys.

Thanks, Andrew.

The next question will come from the line of John Inch with Jordan.

Hey, John.

John, your line is open. Can you hear me?

Yeah, now. Oh, you can hear me now? Okay, great. Sorry about that. Technology rights. Hey, I was wondering, Jim and Chuck, to infer kind of your comments about North America getting better and so forth, is the implication that there just is an impact from COVID flaring up and surging in the southern states in California, or that you are seeing, you know, impact, but that other aspects of the business are superseding that? Like, how to think about this? Because What you're describing isn't that dissimilar from other industrial companies. So I'm just curious kind of what you're seeing on ground kind of regionally and how that plays out.

I would see the two biggest places, John, where we see COVID impact relative to call it daily stuff or maybe the three places is really in the hospitals and sterilization procedures that we described a little while ago. Right. It's getting Madco equipment in the ground, or sorry, getting GVR equipment in the ground, and really the Madco ability to call on customers every day. So I think as we look through, and those are big U.S. businesses as well, so those are kind of COVID-related. The point-of-sale stuff at Fluke is really economic-related. You want to see better PMIs, better IP numbers. And that's probably a global point for Fluke. So what we're really watching for is the surgery numbers, the ability to not go back into lockdown. As we mentioned a little bit in the prepared remarks, the lockdown really impacted Matco. April was a really tough month. But as soon as things started to open up, it accelerated back to what we would normally call a pretty resilient business, quite frankly, historically, relative to economic cycles. And I think I saw today that that average car ownership years is at the highest point it's ever been, which is a good thing for Madco. So I think that's what we're watching for. We don't want to see hospitals close back down. We don't want to see cities get back into lockdown mode where auto repair shops aren't open or that construction can't occur and sites can't be upgraded for Gilbarco.

Yeah, no, that makes sense. And then just Maybe as a follow-up, Jim, how are you thinking about kind of strategically further M&A? And I ask it in the context of, is this going to be somewhat contingent on the bond tier separation and getting that dividend from bond tier to do the reload and lower the debt to cap or debt to the DA threshold back again? Or are the two somewhat disassociated in terms of the tracks, i.e., one is not necessarily contingent on the other?

Well, I think first and foremost, you know, we always said this year would be more likely a bolt-on year because of digesting a number of things that we did last year as well. And I think that's been our thesis, although you never can beat. We've looked at some fairly sizable things. So, you know, I think at the end of the day, we've continued to be busy. I think there continues to be a couple things that are impacting the M&A market. I know some of our peers have talked about this. One is the bid ask spreads are still not in alignment necessarily. It's hard to distinguish the COVID impact from things. And that takes sometimes an additional quarter or two of results to work through with a seller. The second piece of it, it's just harder to do due diligence, right? We can't get on site in many cases. We can't meet people. And so I think things are slower by nature of those two aspects. But I think we've been busy. We continue to think that there's opportunity. I wouldn't necessarily say that it's tied to the volunteer separation, but, you know, because of the fact that really we never were really tying those things together to begin with. But certainly volunteers, certainly when we complete the volunteer transaction, it certainly gives us, you know, more firepower and more opportunity.

By the way, just when you say bigger, do you mean bigger bolt-on or you mean bigger as in

Yeah, no, we've seen some things that were bigger. I mean, we haven't necessarily said we're not going to do anything because, you know, there are certain things that we've been cultivating for several years, and we, you know, we can't say, hey, do you mind, you know, selling at a different time? So, you know, things are going to sell when they're going to sell, and we have to be responsive to that. But, you know, we're obviously taking into account the economic conditions and all the things that might impact returns. So it's a complicated answer. Hence, maybe too many words here, but I think at the end of the day, we're focused on making sure we can create value in a focused, prioritized way. That probably ends up being more bolt-ons than not, but we do have our ear to the railroad if there's other opportunities.

I appreciate it. It's a complicated time, so thanks very much.

Yeah. Thanks, John.

Our final question will come from the line of Scott Graham with Rosenblatt Securities.

Hey, good evening. Thanks for taking my question on the overtime here. Just wanted to ask two questions. You told us the price was up 70 basis points. Were materials lower than that? Were you positive on the price-cost side?

Hey, Scott. Yes is the short answer. We have our team's procurement professionals, and they do a heck of a job every year, and this is no different.

Gotcha. And then the second one is the group three and group four. So the sales in those businesses, you know, a little bit heavier. And the second quarter was kind of all about lockdowns and people were doing break and fix, you know, as needed, which tends to be higher margin type of sale. So I'm just wondering, was that the case for you guys in the quarter, in the second quarter, sort of the as needed stuff, which maybe help enrich the mix, particularly in PI? Or was that not the case? Because I'm just wondering if that's maybe a headwind two quarters from now.

No, not at all. You know, I think when we look at what, you know, really we have a very tight margin spread in our product lines. This is the power of FBS, quite frankly. So we don't necessarily distinguish that. The price metric really has to do with the fact that You know, as we said from time to time that, you know, our high-valued brands are critical at these times, you know, for everyone. And so I don't think – I'm looking across the groups right now and trying to think of where I could point to where I could think of a margin, you know, situation that might be different from what I just commented, and I can't find one. So I think, you know, more consumables is obviously higher margin. More, you know, more MADCO is higher margins. So, you know, obviously the software businesses are high margins, but there's some of our newer businesses. So they don't necessarily represent the highest operating profit margins. So I think as our core businesses come back, that in some respects you might suggest is certainly a help as we look at margin expansion in the, you know, over the next year or so.

Understood. Nice quarter. Thank you.

Thank you, Scott. Thank you. Well, I think that concludes it, everybody. Thanks so much for going over time with us. We appreciate it. I know it's a challenging time for everyone. I hope that your families are safe and work is going well for all of you as we all try to manage the challenges of working virtually. We certainly are incredibly proud of the work we've done. I couldn't say enough about our 25,000 employees around the world who've just done an incredible job at making Fortiv just have a very strong quarter, but more importantly, building the business for what we envision in the years to come. So thanks for taking the time with us, and we look forward to the calls. Obviously, everybody's available for calls afterwards. Thanks. Have a great evening.

This does conclude today's conference call. We thank you for your participation and ask that you please disconnect your line.