Fortive Corporation

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

Thank you. And thank you, everyone, for joining us on today's call. I am joined today by Lumide Charoyer, our President and CEO, and Mark Okerstrom, our CFO. Today's call will begin with a brief overview of our consolidated Q2 results, which include the results of our precision technologies segment. The remainder of our remarks will focus on Fortiv's continuing operations following the successful separation of the precision technologies business, now Ralliant, which was completed on June 28th, 2025. Please note that we will defer any questions related to precision technologies to the Ralliant team who will hold their earnings call on August 12th. During today's call, we will present certain non-GAAP financial measures. Information required by Regulation G is available on the investor section of our website at fortis.com. Our statements on period-to-period increases or decreases refer to year-over-year comparisons, unless otherwise specified. We will also make forward-looking statements, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks, and actual results might differ materially from any forward-looking statements that we make today. Information regarding these risk factors is available in our SEC filings, including our annual report on Form 10-K. for the year ended December 31, 2024, and quarterly reports on Form 10-Q for the quarters ended March 28, 2025, and June 27, 2025. These forward-looking statements speak only as of the date they are made, and we do not assume any obligation to update any forward-looking statements. With that, I'll turn the call over to Illuminae.

Thank you, Christina. Let me begin on slide three with a few key messages. First, this was a pivotal quarter for Forti. We successfully completed a spin-off of Ralliant on June 28. And we've emerged as a simpler, more focused company, well-positioned to deliver durable and accelerated financial performance. In our final quarter as a consolidated company, we delivered adjusted EPS of 90 cents at the high end of our guidance range, with 8% growth in trailing 12 months adjusted free cash flow. For new 40s on a continuing operations basis, our key to earnings and free cash flow results demonstrated resiliency. We delivered adjusted EPS of $0.58 and 14% growth in trailing 12 months free cash flow, despite customer demand pressures in the second half of June stemming from tariff uncertainty, constrained government spending, and evolving healthcare policy dynamics, as previewed in our June 30th rallying Spain completion press release. Today, we are also initiating guidance for 40th continuing operations, reflecting our full-year outlook and consistent with our new 40th approach of providing clear and simplified guidance and disclosure. Finally, We remain focused on executing our 40-packs-oriented strategy, introduced at our investor day seven weeks ago, and designed to drive faster profitable growth and strong shareholder value creation over the medium term. We couldn't be more confident and excited for the road ahead. Touching briefly on slide four, which covers our final quarter of consolidated results, including the precision technology segment, now rallying. We delivered Q2 adjusted EPS of $0.90 at the high end of our guidance range and generated approximately $300 million in adjusted free cash flow. On a 12-month basis, our free cash flow grew 8%, and free cash flow conversion and adjusted net income was 105%. We deployed approximately $140 million towards share repurchases during the quarter, From the time of the spin announcement in September 2024 through completion in June 2025, we allocated over 75% of our consolidated free cash flow to share repurchases, consistent with our previously communicated guidance about capital deployment during the period. Finally, we considered a spin-off of Ralliant ahead of our original timeline, a testament to the power of 40 business system-driven execution and the talent and dedication of our teams around the world. From this point on, all figures and comments will refer to Fortiv's continuing operations, excluding the results of the precision technology segment. Let's move to slide five. With the completion of the spin, New Fortiv begins in Q3 as a simplified and focused company with a track record of strong, durable financial performance fortified by our 50% recurring revenues. As shown on this slide, we begin this next chapter with an attractive financial profile and track record, having delivered 4% compounded annual core revenue growth over the past five years, with solid growth every year since the global pandemic in 2020. Each of our two reporting segments have been key contributors to this performance and are poised for acceleration. powered by our 40th Accelerated Strategy. Before we dive into the details of future results, let me highlight some examples of exciting progress our team made in the quarter in executing our 40th Accelerated Strategy on slide six. Our strategy is built around three core levers for profitable organic growth acceleration. Innovation acceleration, commercial acceleration, and recurring cost and value. all powered by our amplified 40 business system. Our new disciplined capital allocation approach seeks to enhance its organic results with maximizing medium-term equity returns as our North Star. We made meaningful strides in advancing key elements of this strategy in Q2. Starting with innovation acceleration, Fluke continues to execute an exciting market-leading innovation funnel. For example, Fluke's 1670 series multifunction installation tester with TrueTest software, Fluke Connect, and wireless connectivity was named most valuable product in Control Engineering's 2025 Product of the Year Awards. At Gordian, we're seeing strong adoption of our new cloud-based assessment and capital planning module, driving double-digit orders growth in that product category. Moving to commercial accelerations. Our Latin America growth strategy continues to run, delivering double-digit Q2 growth in the IOS segment in the region. At Fluke, we saw high single-digit growth in our priority high-growth applications, including distributed energy and data centers, with exciting runway ahead of us, closing with recurring customer value. Our journey at Fluke to increase recurring revenue continued with double-digit ARR growth in the quarter. And we are undertaking AI-enabled customer experience improvement across our portfolio, driving better net dollar retention and customer lifetime value. As an example, Provation launched AI assistance and intelligent automation to drive productivity in key healthcare workflows. All our organic growth acceleration levers are enabled by our amplified 40 business system, which is at the heart of our culture. In May, nearly 1,000 team members around the world participated in our President's Kaizen Week, tackling growth opportunities with a continuous improvement mindset. It's one of my favorite weeks of the year, and I was particularly inspired by the pervasive deployment of AI capabilities for impact across our 34 Kaizen teams, and our team's energy around amplifying FPS for profitable growth. Finally, Discipline capital allocation is an integral component of our 40th Accelerator Strategy. At our June Investor Day, we outlined our capital allocation priorities to enhance shareholder returns, invest in organic growth, pursue accretive bolt-on M&A, deploy capital to share purchases, and maintain a growing dividend. Aligned with these priorities, we are activating our bolt-on M&A engine. and we are applying a rigorous discipline approach based on relative returns to evaluate deals. We are ready to execute attractive Bolton opportunities with the goal of enhancing SHELDA returns. Looking ahead, the future is bright for Ford. We are emerging from the spin as a more durable and resilient company with a clear plan to accelerate SHELDA value creation through profitable organic growth, discipline capital allocation, and a deliberate focus on building and maintaining investor trust. We have rock-solid confidence in the quality of our new 40th portfolio, purpose-built team, and a 40th asset research strategy shared at our investor day seven weeks ago, notwithstanding fluctuations in specific quarterly metrics. Our teams are energized, empowered, and excited to lead 40th into this next chapter. I have been spending time with several of our customers and they are thrilled about our New 40 direction and eager to be part of our innovation acceleration, commercial acceleration, and recurring customer value agenda. With that, I'll turn it over to Mark to walk us through the financial results for Q2, our last quarter before the launch of New 40.