Thank you for joining us to kick off Baird's 2023 Industrial Conference. I'm Rob Mason, the senior analyst at Baird, covering the advanced industrial equipment sector. Very glad to have Fortive with us this morning. Fortive is an industrial growth compounder with a high-quality portfolio that management has diligently and purposely shaped with a number of strategic actions to address critical workflows. We're very pleased to have with us this morning, Chuck McLaughlin, Senior Vice President and CFO, and also joining Chuck is Elena Rosman, from Investor Relations. Chuck's gonna open with a few comments, then we'll be able to take your questions. We are, Wi-Fi-challenged this morning, so we'll. You know, during Q&A, if you have any questions, we'll ask you just to raise your hands, and, we'll try to work those in. Chuck, I'll turn it over to you. Thanks, Rob, and good morning, everyone. Make some very quick comments, and some of these slides, some of you have seen before. I wanna talk about the themes that we wanna talk about, not only this morning, but throughout the day with many of our high-quality meetings that we have. We wanna emphasize how we've transformed our portfolio since separation, and more importantly, really, over the last five years. Highlight how our segment strategy is working and with the connected workflows, we're gonna touch on that. Remember, always, the Fortive Business System is the pillar that really gives us, we feel, differentiation. Talk a little bit about capital deployment and how we see remaining disciplined, but actually being able to put to work quite a bit of firepower to work over the next five years. We have three segments in our business, around five workflows. We've been, as Rob mentioned, purposefully changing the mix here around these workflows to better secular trends, and also to make it less cyclical in nature, and then also bring in some capital deployment towards growth or higher margin businesses. These five workflows come around some... We talk about secular trends, and, you know, this is a slide that talks about just where the three biggest secular trends, not the only ones that we have in these workflows, and where they show up in our businesses around automation and digitization, the energy transformation that's going on, and then also just productivity and growth in general. As a CFO, I love this slide. It really shows how FBS has really been making an impact, with as well as the M&A strategy coming together, improving the growth. We started as a business that was low single digit growth through the cycles, and we feel that we're showing and demonstrating mid-single digit growth. As we go forward, we'll talk a little bit more about that. Our margin expansion since 2019, averaging over 100 basis points of operating margin expansion, and that's obviously going in the right, right way. And the disciplined way the Fortive Business System shows up in net working capital. You can see how that's trended the right way, a nd this, these, both of these factors come in with stronger EPS growth over a multi-year period and free cash flow, and both of those are trends that we expect to see going forward. We're not giving guidance at this point, but we are... You know, this is how we think about the business going forward, with the hardware products being mid-single digit growth through the cycle. We think of a cycle as 5 years, you know, long, usually peak to peak, trough to trough. We expect and believe we are seeing that improvement to mid-single-digit. We've added a healthcare business. Obviously, the pandemic wasn't a friend there, and a few other, you know, one-time items here are hiding what's actually going on in that business, which is a recovery coming out of the pandemic and mid-single-digit growth going forward, a nd I think we're gonna try to give more color on that and what that means to be the consistent grower we expect it to be, a nd then the last thing is around these software businesses that we've brought in, how they've been growing. Actually, a little bit better than we thought when you take it on whole, and that gives us upward pressure on the margin, or the, the free cash flow, the margin expansion, as well as the top-line growth. As a reminder, we're in a great position with our balance sheet, even after the most, even after the EA business closes, when we think in Q1. We've got a strong balance sheet and cash flow generation. Just the cash flow alone over the next five years is going to be... gives us $8 billion worth of capacity. A ot of, a lot of ability to work here. When you look out over what the next five years are going to do and looking back over the last five years, you can see why we remain excited about our future. With that, I'm gonna sit down, and then we'll take a few questions. Fantastic. Hey, Chuck, maybe just to start for Elena, the, you know, obviously, portfolio resiliency has been intentional, like you mentioned, and the strategic emphasis, and we've, we've kinda seen that play out, in, in third quarter results, even year-to-date results, in certain areas. But no question where a lot of the conversation landed on this last quarter was around the product side of the business. J ust to kinda level set, and, again, when we're talking about products, a lot of that is you know, concentrated around Tektronix, Fluke, Fortive Sensing business. Just, you know, put it in proper context. Just kinda level set us on the momentum in those areas right now as you exited, the third quarter. I think what happened was largely in the context of what we expect to happen in the third quarter. Maybe with a slight, as we came out of the third quarter, China was-- we thought it would slow the rate of growth and actually maybe contract a little bit in the second half, and it just contracted a little more than we thought, but directionally what we thought. Maybe back to what was tough about China is in Q3 and Q4, as you go back to the beginning of the year, we thought things would slow. The first half of the year, it was stronger than we thought, and we said, "Oh, well, maybe, you know, it's gonna be a little bit better," but now we're just back to where we started the year. So really not, you know, if we focused on the year, we really haven't changed from where we started the year. It's just the way the order pattern came in a little bit different. Keep in mind, we're running into some tough comps from last year, which makes it hard to talk about in terms of, you know, is the business really slowing? You know, when you're coming off a two-year comps that are, you know, at strong double digit, you know, this is a... these, the product hardware businesses are mid-single-digit growth with the cycle, and when you have multiple years of double digit, you're going to see, we expect to see this slowing. Now, the good news is that we've got this backlog that we've talked about, and and we are continuing to grow, albeit, you know, slower, you know, in this year, but on a 2-year stack, it's, it's great. But bookings actually have been going negative at for the last 5 quarters in Sensing and then the last 4 quarters at Tek. This is usually, now, every downturn is different, but this slowing on that bookings is usually a 4-6 quarter event. W hat we're looking for is, okay, when do these things start turning around? When you look in Sensing, you know, we've got a Qualitrol business that's already moved into positive territory, 'cause it's more focused on a little bit longer term business on the power grid. So that's what we're looking for here, b ut largely, this is playing out as we expected. The backlog is protecting us, delivering sales growth as we expected. We're working through that, and then what we're you know, 4, 4 and 5 quarters of bookings decline in those businesses, that means we're that much closer to when does that move into positive territory over the next, you know, 2-5 months. The, you know, maybe call it false signals midyear in China, was that more concentrated in Tektronix, or did that cover broader China? I think it was one. It was broader China in the hardware products group, you know, Sensing, and Tek. Fluke also held up well. We separate the health because they have a different dynamic going there in Q1 with COVID still there, and actually, they're not slowing. And so they're doing very well. Okay. I think it's also important that within those Sensing businesses, they sell primarily to some discrete large OEM customers. I t's not... You know, we've had some questions following earnings as to how broad, right, some of that, you know, unexpected weakness in China could go, and I think it's very, you know, specific to a handful of these large discrete OEMs in certain areas that, as Chuck mentioned, have seen weakness for now 4-5 consecutive quarters. That's a good point. T o that point, you talk about the excess backlog that you'll carry into next year and maybe, round numbers, $125 million or so is what you've, you've talked about. Is that mainly concentrated in sensing, or is that more broad-based across the product- It's. category? I think it's proportional across- Okay ... sensing, Tektronix, and then Fluke. Maybe a little bit bigger in tech. That's fair. Okay. Okay. T hat's the product side of the business, you know, the house, which, you know, may be 50% or so of Fortive, b ut again, a lot of the effort, portfolio effort, has been on reconstituting the other 50% or so, adding more software, consumables, and just the durability and secular growth aspects that come with that. You've talked about aiming for a Rule of 40 around those businesses to a degree. Could you just, you know, kind of fill in where, you know, the portfolio sits with respect to that objective on that side of the house? Maybe if I could just, Rob, the point about the 50%, that's hardware products, I think there has also been a lot of work done in those portfolios to reduce cyclicality, right? So there's decisions made within Fluke, within Tektronix, and, you know, even maybe to somewhat a lesser extent within sensing, but as Chuck mentioned, Qualitrol is very much aligned to, you know, the secular trends around grid modernization. So, you know, Tektronix today is 20%-25% recurring revenue with its services business, right? Fluke, there's a much bigger calibration business inside of Fluke that's growing, but with, again, a similar to Tektronix, growing software and service base with eMaint and, you know, getting higher attach rates on some of their services. The secular trends that Chuck mentioned, I think are, you know, have given the business, to some extent, this really elevated orders pattern, which has turned into this backlog buffer that we have because of the work that's happened from an innovation in more organic- Sure ... innovation perspective. No, very good point. I mean, we've definitely seen that play out in the Tektronix business, the end market. I'll say diversification, refocusing efforts there, you know, have played into that as well. Sorry, I know you wanted to ask about software, so. We'll move. Can we? Yeah, go ahead. We'll move from products to software- Okay ... briefly. Go ahead. We may come back to products.... No, just to maybe put into proper perspective this objective around Rule of 40-type businesses inside of Fortive, where we sit today, you know, just to give some proper perspective, you talked about software businesses potentially even doing better as you brought them into the portfolio, doing a little bit better than you know, over the medium term than you thought. Well, I think taken on balance, the total of our businesses, our Rule of 40, pretty easy to see that, especially when you know, in a year where you've got double-digit top-line growth and the margins, you know, the great margins that we enjoy there. You know, a couple businesses, we—when we acquired them, were more break even, think ServiceChannel, but they accelerated quickly into that. I think they're all Rule of 40. I think that, with... You know, you take a look at everything, you know, you can zoom in certain product lines, and that's where we see opportunities to do better than that. We're really pleased when you think about, yeah, having almost, probably $1 billion of software in Fortive that's growing much faster than the rest. It, you know, that, that puts upward pressure on, every metric that we like, you know, growth rates, operating margin, gross margin, and most importantly, free cash flow., s o all those things are growing faster than the rest, s o when you talk about hardware products being, you know, maybe 50% of the business, yes, we've got a lot around good, better secular drivers there over the last half a decade, even make more resilient. W e've also got this other piece that's growing faster than that. W ithout anything else, you're gonna see that, that become a smaller piece of the portfolio. Sure. Sure. Now, the mix effect take hold, a nd maybe that's, you know, a segue into just the way that you're thinking about 2024, you know, with reference to what you showed on the slide around some of those software businesses, or at least over the intermediate term, high single digit to low double digit. I'm not pinning you down on 2024 just yet for that. So- Certainly not guiding on 2024. You know, but thinking about high single-digit, mostly because it's been growing so fast, and you know, one thing that's tough is that you know, when you overachieve in one year, you've got to be careful about, it's like, you're gonna come into high single-digit growth, but you're still way ahead of where we expected to be. And that's basically where our software businesses are right now. Well, how, how do those line up as you, you know, think about entering 2024 with respect to, you know, what you could capture in terms of new logo growth in this environment, where we do hear about more elongated sales cycles in software versus net dollar retention and cross-sell and being able to walk up existing customers? I think the net dollar retention is an area where we're continuing to get better at. And you know, that's going very well. I think that the software businesses, the selling cycle has actually been creeping out, you know, here. I n this year, with where we're achieving on the top line growth, that's, we're just blown right through that. That was really a headwind there. I do think that selling cycles have moved out, but I think they've already moved out. And that doesn't mean they couldn't move more, but that's not what we're thinking at this point. Maybe just step back high-level for Fortive, how are you thinking about pricing as we go into this year or next year? Well, we've always said that we wanna stay ahead of inflation, and that's what we've been doing, and we'll continue to have that margin mantra, and then you see that show up in our margin expansion. I would expect we're thinking of it that way first. Having said that, you know, we have over probably around 4% growth or price built in or that we're delivering in 2023, and yet inflation is starting to creep down, so you could maybe theorize that we wouldn't need to put as much in next year as we had in this year. Y ou know, in normal times, we'd have 1-2% over 1% in pricing. I don't see us going all the way back to that. You know, above what, you know, our historical norms are, but probably not as high as what we did this year. Okay. Somewhere in the middle. And even in, you know, potentially, if the bookings environment... And, and pricing, should we think more pricing occurs in the product side of the business or when we- when you speak to pricing? What we report- Right. Yeah, what we report is largely- Yeah ... gonna be in hardware products- Right ... and somewhat in healthcare. And a lot of that is reflected in the backlog, Rob, right? Sure. That's been repriced- Sure ... you know, over the last- Right ... couple of years. But I think there's more price coming in healthcare, right? So we've-- that's one area you're seeing some acceleration on a multi-year basis. Right. It does take longer to work through in that side of the business. T hat should be a help, certainly to that side of the business, but price overall, somewhat staying ahead of inflation. You've also announced that you're gonna take some actions here towards year-end to also better protect as you go into next year. Just how should we be thinking about overall incremental margins of the portfolio, which have crept up to close to 40% on more of a baseline level? Well, the way we think about it is 40%, is a good number for us. And then what I would think next year, like this year, then you add on the... Anytime we do, you know, these productivity initiatives, that's in addition to the 40%, and so that's what we're seeing. We're seeing more 60% this year because of that. I don't know that 60% is exactly the number for next year, but it's what I'm really just saying is 40% is what we expect, the incrementals to be, and then when we do these restructuring, we layer that on top of that. ... So as a reminder, we talked about funding an additional $35 million of productivity initiatives in the fourth quarter. That's in addition to about $30 million that we did earlier this year. A lot of that, most all of that $35 million incremental funding for Q4 will show up in a one-year type payback for 2024, and that's essentially, you know, a much higher incremental than the baseline 40. Additive, yes. Maybe we could turn just to the healthcare business. You've had some internal actions there to improve the selling motion and- Mm-hmm ... distribution around the ASP business. It sounds like we're now at the those are complete as we enter the fourth quarter. A gain, just maybe just clarify for everybody what the, I guess, the financial pickup could be, as well as what, you know, strategically, what, you know, that effort's intended to- For sure -do for ASP. At ASP, the biggest piece of the business is the consumables, and the biggest single piece is consumables in North America. This is about $135 million, are the most profitable part of the business that was going through distribution. Going through distribution, you lose, you pay them a margin, and usually, that's so that you get better market reach, b ut what we had is we already have salespeople calling on the hospitals. We already have all the back-office work connected. It was, this was a legacy from the carve-out of J&J. Not saying that they were doing anything wrong, that was right for their business, but we've just been trying to find the right time. There's no great time to go through this dealer transition, but by doing that, we're gonna take $135 million and add almost no new salespeople here, but so we'll pick up the 7% lift. Some of that's showing up, think about half of that is showing up this year because how it's played out this year, and then we'll get a further lift. W e're gonna pick up 7% just by making that move. But the main reason we wanna do this, we wanna get closer to the customer, what's really happening in the hospitals, and we always had this, not quite a disconnect, we didn't say it as a tight correlation between elective procedures rolling back, and it's like, well, we're not seeing it immediately in the numbers, and why is that? It is because we had so much inventory, more than we thought, more than they thought, the distributors. Yeah. They weren't... they just didn't know how much they had. No one was-- They weren't hiding it purposely from us, they just didn't- Count that account. ... count it, that, that correctly. W e are through that in Q3. It's important to understand for our business at ASP is that the end user use of our products has been, when you account for that, has been delivering mid-single-digit growth, really for the past two years. When you look at the two-year stacks, even, you know, from Q2, Q3, and so we expect to see that in Q4. If you think about just procedure rates, annualized going forward, we still have some easier comps as we enter 2024 on that front? I think procedure rates are probably low single-digit, 1%-2%, in terms of the core growth- Okay ... in procedures. One of the other added benefits of the distribution model change, and we just announced for Q4, the start of some new products. So we just launched some steam sterilization monitoring products, for example, that we can now go to market with because we have that direct channel on those. These are biological indicators that we're working with a partner on, but it's... Yeah, the more we can add into that channel, you know, that obviously will drive growth in and above the procedure, the underlying procedure rate. Right. Real quick on before we leave healthcare, could you just quick update on Provation? You've been able to walk that growth rate up this year. Mm-hmm. What's been maybe the source of the upside this year, and how sustainable, you know, does that growth feel? Well, I think, first of all, I've been very pleased. It's grown, got out of the gate real well, and then this year has been stronger than we expected. But it's important to keep in mind, it's like where we thought we would be at the 3- and 5-year point, and we think that's the right place. So this year's stronger growth will be a little bit of moderation back to, you know, probably high single digit, but we're running ahead of where we expected to be, and that's a really good place to be, for this. W e've had some success and landed a couple of big accounts, and some big wins here, which are paying dividends right now. And we'll see what if we continue to run ahead, but. Mm-hmm ... we're pleased with how that's gotten off. Very good. Maybe I'll pause there just to see if there are any, any questions. Yes, in the back. In the healthcare business, maybe you can, just guide me, what are the building blocks? I think you want to grow mid-single digits organically. That is, what are the kind of building blocks of getting to that mid-single digit normalized growth? You do. Are you talking about healthcare in total or Yeah, healthcare segment. And for the segment, really, it's the last piece. There's been two things that we—I'd say three things that we wanted to get in. One, we wanted to get the pandemic behind us and the hospitals back to normal. Well, I think we're at what we're gonna call normal here and start. And not refer to procedures as a percent of 2019, so that's happened. The second thing is we wanted to get some, especially in ASP, some more price into it, not as much as we're doing, you know, in the other products, but have that go in, and we've improved from 1%, more like 2%, you know, this year. T hat's the driver. T he last piece is this dealer transition that we get through. It's by getting this dealer transition now. Unfortunately, it's masking that we're already growing mid-single-digit. And so now that we're through it, in Q3, both sides have agreed that we're done. There is nothing else, another shoe to fall. I think that we will be seeing certainly in ASP, you know, we expect maybe single-digit growth going forward. Now- I want to- There's a little bit Inve tech. I was gonna say the, to the plus side, we have software, for example, we were just talking about Provation, and our Censis software business, albeit small, it's growing faster. So it's growing more in the high single, low double-digit range. T hat is currently offsetting a decline we see in our, Inve tech, which is a bioprocessing. They do contract engineering for medical diagnostic companies, and so you've seen that business kind of rise during COVID, and then now is in its period of sort of normalization, and we think is at a steady run rate level of revenue currently. Chuck, I want to hit on real quick. You did see some—we did see some capital redeployment here, more recently around EA Elektro-Automatik. I'll pronounce this probably incorrectly. I t does appear to be a very good fit with your test and measurement business. You talked about being able to get very good sales leverage, channel leverage, maybe 10x, just in terms of reach around that business. It also looks to have, you know, accretive growth characteristics as well. A s you look out just into 2024 and think about how that could contribute, you know, what's the level of... 'Cause it is kind of implied, I think, you know, low double-digit type growth, what's the level of visibility around that? How should we think about the level of visibility that comes with that business? Mm. Well, first of all, we are very excited about this business. It fits strategically. It's got great complementary products, well, with no overlap in tech, but other than where the salesforce calls. G oing to the customer, these same customers, where we're already doing things in power with Tektronix, this essentially puts a new product in the bag for them. It's really strong in Europe, because, in part because they're direct in Europe, and then they're in distributors. Think about the rest of the world, where we can put more feet on the street, you know, right out of the gate, calling on customers, showing what the product does. T hat's where we think that there's a yet that 10x, we just need to train up. Just, I'm sure the sales force is like, "Hey, it's not that easy to..." But, you know, there's training on how to sell and, and what all the features are, but they're, they're very excited internally to work with them. W e think that it really just starts with our strategy. We've identified that what we're doing already in power, and this is so complementary to that. We think that it gets off to a strong double-digit growth start. Now, it's been growing faster than that up to this point. And we're not-- and we think the market, you know, in the next five years will grow faster than the low double-digit that we've put in. W e think there's upside from what we've laid out so far. First, let's get it on board, let's get this closed, and then we'll give a little bit more clarity as we get generally through our 100-day strategic plan. It's margin and accretive as well. I mean, it appears to be a very- Yeah, I mean, operating margin- ... operating business - gross margins, and then, you know, growing double-digit is—we have other businesses that are growing double-digit, but that's obviously helps to be accretive, you know, to the business going forward. They do manufacture internally? They do. Yeah. Okay. O bviously, they seem to be doing it pretty well, but I would imagine there's probably FBS opportunity. I think, If you could- I haven't seen a manufacturing facility where FBS can't take a really good business and add some value there. I think that's what we're seeing here. Okay. Well, we are out of time, so we'll pull up there. I would mention there is a breakout session that follows, so it's, you're welcome to join us there. Great. Thank you.