Good afternoon, welcome to Fortive's 2023 Investor Day. It's a pleasure to be in person in New York, thank you all for joining. I hope you had a chance to enjoy our showcase today, really highlighting innovation at Fortive, leveraging the Fortive Business System to drive more profitable growth across all of our operating companies. In case you missed it, the showcase will remain open during our 20-minute break. We invite you, if you haven't had a chance, to go through that. For those of you who are joining via our webcast, welcome, today's presentation can be found on the investor portion of our website. Today's presentations do contain forward-looking statements, which are subject to a number of risks, actual results may vary for reasons that we cite in our Form 10-K and other SEC filings. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update them. Our outlook for the second quarter and full year 2023 remains unchanged from what we communicated in our 1st quarter earnings release just a couple of weeks ago. To recap, for the full year, we expect revenues in the range of $6 billion-$6.1 billion, adjusted operating margins in the range of 25%-25.5%, adjusted earnings per share in the range of $3.29-$3.40, and free cash flow is expected to be approximately $1.25 billion, representing greater than 100% free cash flow conversion on adjusted net income. Turning to today's agenda, our presentation will address a number of key topics, beginning with an update on the company's strategy by our President and CEO, Jim Lico. Following Jim's section, we'll hear from Kirsten on how FBS is unlocking even more customer value and value for Fortive. Before Stacey and Pete will share some important updates on our people strategy, our sustainability efforts, and then we'll get a chance to take our first Q&A session before we go to the break. Following the break, Tami and Olumide will walk through their connected workflow strategies and the outlook that covers our three segments in more detail before Chuck wraps it up with our financial outlook. We'll come back together for our final Q&A session, and we will end promptly at 4:30 P.M. I'm excited about all that we have to share with you today. With that, let's begin. Fortive has always been about growth and progress and continuous improvement embedded in our heritage, not just in the companies we build, but also in the people who work here. Some of our businesses are more than 150 years old. Two of our biggest businesses are here in the Pacific Northwest, an early hub of technical innovation and a gateway to the world marketplace. Today, we're made up of many more companies operating independently. This unique structure helps us to be more responsive to the needs of different industries we serve and to be leaders in those industries. We can make faster decisions and innovate more rapidly for our customers and to really accelerate growth and innovation. While appreciating our ability to be nimble, we also leverage our collective size to help us invest in the future so we can continue to make a difference in the world. Most people think that the Fortive Business System is a set of tools, it is so much more than that. It's about our mindset. It's about how we show up each and every day with a belief that we can do better. That inherent optimism and belief in better has been with us from the very beginning, the glue that connects all of these separate businesses is our singular culture of continuous improvement, Kaizen. We truly believe in bringing all levels of the organization together in an environment where everyone's voice is heard and matters. When we work in these Kaizen environments to drive improvement, that is the core of who we are at Fortive. From the very beginning, we were committed to high expectations, this belief that we could all be better and do more. We get there by collaborating, by supporting one another. It's the builders, the innovators, the entrepreneurs that make up Fortive, and because of our unique structure, each of us has a voice and the ability to make an outsized impact. There's a whole career's worth of opportunities at Fortive. We started out as a blank canvas, and it's starting to get filled in like a jigsaw puzzle. As we fill in those pieces, all I see is potential. Potential of our businesses to do great things for their customers, and the potential for our employees to make an incredible difference in the world. Ladies and gentlemen, please welcome to the stage, Jim Lico. Good afternoon. I want to thank everyone and welcome you to our conference here, and welcome everybody who might join us virtually. Hopefully, for those here in person, you had an opportunity to go through the innovation showcase. I think there's nothing better than the opportunity to sort of see our products and our both hardware and software and our services, to really help bring our connected workflow strategies to life, and certainly bring the conversation that we're gonna have with you for the next few hours to life as well. As you just heard from Elena, we feel good about how things are going right now and shaping up for the quarter and our outlook really for the remainder of the year. I would, if I had one word for it, I would say consistency. All right. You know, our key themes, and we certainly certainly going to have a great opportunity to talk across a number, all of our segments. I think the key themes for today are really four. One, we want you to get a sense of how we've transformed this high-quality platform and the with high growth businesses and with wonderful opportunity for profitability, both today and tomorrow. How the connected workflows are aligned to key secular drivers in growing markets. You'll hear today from us that we've expanded our served market now from the roughly $40 billion or so that we've talked to you about in the past, to now $60 billion worth of served market. Well, you'll hear from Kirsten and throughout the segment presentations, how FBS continues to be a core differentiator, how our relentlessness around that continues to drive great results. Finally, how our disciplined approach to capital deployment has enhanced earnings significantly and free cash flow. We'll do that from an inflection point in which we're from great strength and will continue to accelerate in the years to come. You know, our strategy of who Fortive is today is really one of high quality and high growth. Our three segments, you'll hear the segment presentations today, will represent roughly about with these five workflows, which are roughly about 85% of our sales today and represent the majority of where our capital will be deployed in the future. I won't get into the details of these connected workflows, but you certainly can see, you certainly saw a number of those examples in the innovation showcase. You know, they're really, over the last seven years, you know, we've articulated this portfolio strategy that helps build a more resilient, less cyclical, more durable business that's capable of outperforming across a broad range of financial metrics, and you see those on the slide. These customer-facing workflows really come down to really very, very simply to connected workflows that really help our customers drive safety, quality, and productivity in facilities such as commercial buildings, industrial plants, hospitals, and engineering labs. It's that simple. As you listen to the presentations today, I'm confident you'll hear the connective tissue that represents the number of things that we're doing throughout our businesses. The innovation showcase obviously continues to build on that, and if you didn't get a chance to do that beforehand, as Elena said, we'll have a break where you have an opportunity to go through as well with our teams. We don't talk enough about culture, but our shared purpose is really what guides us first and foremost. Our operating businesses, we operate in a very independent operating model, which we believe drives superior customer satisfaction and accountability in ways around our financial results that's second to none. It's really that shared purpose that so many of our operating companies think about. Essential technology for the people who accelerate progress. What that really means to us is that we want to be in businesses where technology can be differentiated, where customers appreciate it, and we can expand our businesses through creating more value. The people who accelerate progress are the secular drivers of businesses with customers who are doing important things around the world, and those important things are driving growth. Our core values are the foundation of that, and you can read them on the slide, but the most important part of our core values is that we live them every day, and we use metrics, quality, delivery, cost, and innovation, to make sure we're making progress across those core values on a daily basis. It's a critically important part of our culture because that, combined with FBS, is how we differentiate ourselves in terms of creating value in our businesses. Stacey and Kirsten will give you a real sense of both how the process of FBS and the people strategies build on the talent in order to build our culture around this, these core values and our shared purpose. We're really about creating a premier company, I sort of think of this slide and thinking about hardware advantage brands and exiting some cyclical businesses as almost Fortive 1.0. Kind of in the 2016 to 2019 timeframe, where we were really implementing the first part of our 10-year strategic plan that we created at the start of Fortive. That was really setting us up to start to build our acquisition strategy around connected workflows and around adding recurring revenue, software, and really unleashing FBS, particularly in innovation, where we drove our innovation capabilities specifically at more growing aspects of the business to transform our business from a growth perspective as well as from a durability perspective. Yeah, we're gonna... There we go. That strategy has been consistent from day one, which is applying our workflows to large and growing markets, one where we can expand our market positions, where we can leverage our innovation capability. We can utilize M&A to accelerate strategy because that's where the best long-term returns come. Ultimately, using the power of FBS to drive continuous improvement in what we do and reinvest that to continue to build the flywheel of growth and profitability. As I said before, we've expanded our TAM now. Our served market today, or our Total Addressable Market, if you will, is $60 billion, mostly focused on these five workflows that you're going to hear so much about here in the coming hours. We've transformed our portfolio considerably. We've really continued, as we said, we've deployed about $7 billion of net capital during that transformation at the start of Fortive 2.0, around those connected workflows. Today, Fortive, 40% of our revenue at Fortive is around that $2.5 billion of acquired revenue. To date, we've improved margins by 1,000 basis points in those businesses. We've been able to apply FBS not only on the cost side, but on the innovation front and the commercial capability to really continue to accelerate those businesses that we've acquired, to make them part of the Fortive family and deliver superior results over time. In those family years, we've continued to now we've doubled our core growth rate. We'll have a number of metrics, but you can see our gross margin expansion and operating margin expansion. Today, we have high single-digit returns, cash-on-cash returns, accelerating into the years to come. That really provides increased durability, and the increased durability is not only on the software side, but also on the hardware side. On the left side of this pie is really the businesses we've acquired. They didn't really... They barely existed back in 2016, are now half the size of Fortive. Higher recurring revenue, durable revenue growth from the standpoint of software as services and data businesses. We've continued to improve the durability of our hardware businesses through our innovation capability, centered around the secular drivers that you hear so much about today. I won't steal the thunder of our segment leaders. There's a lot of great stuff they'll talk about relative to this. If you think about it simply as the world is automating and digitizing, and we're playing across our segments in that great trend, we continue to see the energy transition as an opportunity, and you hear about that in many ways. Finally, productivity growth. Every organization from manufacturing plants to commercial facilities to hospitals, is really looking for more productivity, maybe because of the labor shortages, maybe because of the nature of those industries. Our solutions today are providing more productivity growth through the solutions we have today, and the innovation that we're creating for tomorrow. It really builds on our financial capability. You see here in the slide, our performance since 2019 across a broad range of metrics. Good, very strong growth, obviously great gross margin expansion. In an era of supply chain challenges where most people were degradating in gross margins, we've averaged 75 basis points of gross margin expansion every year. That's translated to good operating leverage with better operating margins, and obviously continued to grow EPS on a constant basis. We're really proud of that work, and we feel strongly that we can continue to do that in the future, but we also see the power of how cash flow is improved. We're incredibly proud of the fact that our working capital today, as a percent of sales, is half of what it was only four years ago, allowing for us to run our businesses in a very, very low capital-intensive way. Our free cash flow is up 19% a year in that timeframe as well. Today, we're on, from a free cash flow margin perspective, we're getting 50% more cash from a dollar of sales than we were just four years ago. A real emphasis on the compounding power of our acquisition strategy, and just as important is how FBS can improve free cash flow, not only in our hardware businesses, but across the portfolio. You're gonna hear a lot of examples of that, how FBS is continuing to do things, even in our software businesses, that might be negative working capital, to continue to improve their free cash flow beyond just their earnings growth. That really gives us an ability to continue to leverage the power of FBS. It's a core differentiator, A lot of times we think about the tools of FBS, and that's an important component, but quite frankly, most people have the tools. What's critical to what we do today is our culture and the cadence in which we do it. The culture of 18,000 employees around the world who understand how to utilize our tools and understand the cadence of how to use those tools. The application of FBS is the most important part, and it's that culture of continuous improvement, of high expectations and humility that you'll hear so much about with Kirsten's presentation, that really give you a sense of how we continue to build that culture in the company. Then the cadence, the frequency in which we do things. It's not just quarterly, it's not just monthly, it's not just weekly, it's daily, it's hourly. By doing that, we get more cycles of continuous improvement, we get more cycles of problem-solving, and by doing that, ultimately, we see better results. That really creates the flywheel, the Fortive Formula for value creation. Starts with our strategy and how we continue to build strategies that yield better growth, converting that revenue to earnings and earnings to free cash, which ultimately allows for us to deploy capital and give us the degrees of freedom and capital allocation that allow for us to accelerate strategy, and then ultimately use FBS to create even greater momentum through continuous improvement, not just on the profit improvement perspective, but also on the growth and innovation front. You certainly saw that in a number of in the innovation showcase today. We're really proud of the work that we've done to get this flywheel going. As we'll see in a minute, that flywheel will continue to build and will continue to create momentum in the years to come. We've reviewed this with many of you over time, it's probably worth talking about, is our how we think about acquisitions. I won't read every bullet point on the slide, safe to say that our acquisition discipline is really focused on three parts. One, do we like the market? We do a lot of market work, and I'll show you in a minute how that translates to our funnel. We do a lot of market work to try to understand the secular growth drivers, understand how it's connected to our workflow strategy, to make sure that the technology can be differentiated, that important point to our shared purpose. We look at the companies, and there'll be a number of companies in the market. We ask ourselves: What's their market position? Is it strong? Do we see above-industry growth? Does it have competitive advantages typically seen in high gross margins? Do they have a good talent base that's additive to Fortive? If we like the company, then ultimately we say: Can we create value? Which is obviously a critical part of how FBS is to play. We wanna make sure it's accretive to our growth profile. We wanna make sure that on those bolt-ons, we have a good mid-single-digit ROIC in the first two years, make sure that within three years we're at double-digit. On those deals that maybe are a little bigger or maybe a little bit closer to our adjacent markets within the connected workflows, that ROIC might move out to five years. It's that combination of work we do market company value creation, which drives our acquisition strategy. We wanted to give you a little bit more of a peek into what that really means, and how we execute our consistency across our businesses and across our segments in terms of our M&A playbook. You'll hear about the markets a little bit more, as I said, we're now at a $60 billion TAM, about half of that in IOS, the other half in PT and I, and in Health. We have a very active pipeline, around 1,600 companies that sit in that pipeline today. About 300 that get strategic, stringent evaluation. Likely, we're cultivating in some way those businesses, typically. We're looking at a 50-100 on a pretty regular basis. We're doing rigorous due diligence and ultimately going to a decision probably somewhere in the neighborhood of 15-25 a year. When we say we're busy, that's what we mean. We're actively cultivating the funnel, we're actively looking at markets to see what markets we want to be in or generally adjacencies to the markets we're in today, almost always that way. How does that translate from the kinds of deals in terms of size? Most of them are bolt-ons. The triangle really says most of them are bolt-ons. There's a few less that are additive to our connected workflow strategy, really saying that the five connected workflows that are in our business today are going to see most of our acquisition capital. Finally, a few large, unique deals that may happen every once in a while, maybe every three, four, five, maybe even 10 years, every once in a while. That's really when we talk about being busy and we talk about what we can do from an M&A perspective, this is really the framework by which we do our playbook. That really, I think, gets us to where we see the future. The power of our culture, the power of our Business System, the disciplined M&A approach, we believe very strongly gets us to about $4.50 of EPS in three years and about $6.75 of EPS in five years. We felt we owed it to you since we gave you a few of these views a few years ago to update that. Chuck, in a little while, is going to talk to you about how we've done against the report card of what we talked about a few years ago. Teaser: we did very well. We really feel strongly about the strength of the portfolio and what we're doing here from an EPS perspective, but even more importantly, from a cash flow perspective. As we said, we think by within five years, our annual free cash flow will be close to little over $2.3 billion, giving us tons of flexibility in terms of what we want to do from an M&A perspective. Tons of flexibility, quite frankly, in what we want to do from a capital allocation perspective. We feel really good about the work we've done thus far to get us to this point, but we feel even better about the work we're doing and how that sets us up for these kinds of targets. Finally, you know, it really is about evolving to a premier company. We know that we've over the last seven years, we've made good progress towards this goal. We also realize in our deep belief in continuous improvement, that we're not there yet, but we're endeavoring to get there. Maybe we never get there, but what we know to be true is that we're going to make considerable progress every single year. Accelerating our progress is our theme. Durable, high growth, free cash flow compounder is our goal. We're highly confident we're going to continue to make progress across this, the targets that I just showed in the previous slide are the targets that you can hold us accountable to, we feel very comfortable with that statement. Having great strategy is wonderful. Having a world-class operating system in which to build on is fantastic, but the best part of what you're going to hear about today is our team. I think when you finish the day, and we'll have Chuck wrap the day on the financials, but as you go through the day with Kirsten, Stacey, and Pete, you'll get an enterprise view of Fortive and what we're doing relative to FBS and our people strategies and the significant progress we've made on sustainability. We'll dive deep into the segments. Tami, who's doing double duty now, and Olumide will review with you the wonderful progress that they've made in their businesses and the wonderful opportunity that is ahead of us to make great progress for Fortive in the years to come. As I said, Chuck will wrap on that to really give you an opportunity to really see how that manifests itself, both past and present and future, relative to our financial performance. I couldn't be more excited to have everybody here. Thanks for filling the room. We are incredibly excited to be in New York and be in person for the first time since 2019. I hope when we come up here for the closing remarks, you're as excited as I am about the future. With that, let's go to a video. Kaizen. At Fortive, it's our way of life, the foundation of everything we do. The word Kaizen means change for the better. It's really all about continuous improvement across all different aspects of our organization. What are the principles of continuous improvement? One is transparency. We are clear about our challenges and our opportunities. That helps us address them clearly and drive real and sustainable progress. What I saw in this Kaizen was it wasn't just, "Okay, you have a problem, solve it." It was, "How do we make our process better? Another is humility. We are open to learning, adapting, and trying something different. Just being able to be open for feedback, open for coaching or learning or growth. Kaizen itself is all a learning opportunity, but also a growth opportunity in many ways. There's our high expectations. We set the bar high and go farther and faster as a team. We don't shy away from the hard stuff. It's not necessarily what happens during these Kaizen events, it's really all about sustainment and the impact we can drive together. These principles are in every person at Fortive and harnessed when teams come together. I've had fantastic ideas from operators. I've had fantastic ideas from directors. It's all dependent on having the good creative atmosphere, having everybody get together and having those conversations about what you can do to change the company. Kaizen isn't just what we do, it's how. Together, we deliver results and make a positive impact. It's fundamentally who we are. Ladies and gentlemen, please welcome Kirsten Paust. Thank you. I'm excited to be with you today to share what is so unique and special. It is our Business System. It's how we go about driving improvement in our businesses consistently, with rigor, with discipline, and how we develop our people. I hope what you saw in that video is how critically important Kaizen is, not just to delivering sustained results in our businesses, but to developing our talent, to the engagement of our people in the way that we show up every single day across our hardware and software businesses across the portfolio. As Jim shared with you, the whole foundation of our Fortive Business System and the ability to drive impact is because of our culture. Our culture is the way that 18,000 people across our company show up each and every day with a mindset that we can do and be better. That is what pulls these best practices, that's what pulls Kaizen and allows us to drive this improvement consistently across our portfolio. Our culture is reinforced and strengthened by the rigor of our operating cadence. Jim shared with you that at Fortive, we don't make the year, we make the hour, the day, the week, the month, the quarter, the year. That mindset is driven into every single operating company in our portfolio through our operating cadence. This is how we consistently operate our businesses with high expectations and a focus on relentless execution. Our operating cadence and our ability to achieve those results is powered by our toolset. Yeah, Jim said that you can find a lot of these tools out in the public domain. We've spent a lot of years through a rich foundation, strengthening these, leveraging internal and external best practices, and rolling them out across our company to deliver results. What I'm gonna do for today is take you through this model and help you understand what distinguishes Fortive. A lot of companies will tell you that they have a business system. What I hope you take away from today is just how unique and different what we have, and how rigorous and disciplined it is in our application across all of our businesses, hardware and software alike. To get us started, I wanna spend a little bit of time on culture. Everybody says they have a unique and differentiated culture, but I wanna help you understand what underpins our culture. You saw in that video, Kaizen is our way of life. To be our way of life, we have to live it every single day. 18,000 employees have to drive for improvement. The way that we do that, it starts with a culture of inclusion. The very foundational principle of Kaizen is that there is no hierarchy, that everybody's ideas and contribution matters in pursuit of better results. We live that in the Kaizen events that we hold across the company. In order to show up in those Kaizens with a belief that we can do better, we have to have an open mind. We have to be open to learning, receptive to thinking that there's a better way. We call this humility. The ability to acknowledge that there might be a better, faster way that we can achieve something. We combine that humility with high expectations, which drives us to figure out how to achieve even greater performance than we've been able to do in our past. We set our sights high, we focus on relentless execution, and we go after what others might think is impossible. One of the things that I think is so core and fundamental to a powerful Business System is transparency. You can't improve something if you aren't willing to acknowledge that you have a problem or an opportunity. You have to be clear, focused, and honest about what's happening in a business. That's who we are at Fortive, and that comes together to create the powerful culture that underpins our Business System. I wanna bring your attention to the chart on the right, because what is unique and different about us is how we compound improvements over time. A lot of companies will say they do Kaizen. I wish I could actually have you in a Kaizen environment and show you the power of what we do and what's unique. The value comes off of sustaining what you do in Kaizen. It's not a week of activity, it's a week of progress on which we continue to build because we have a very rigorous process of ensuring that what we put in place during that Kaizen event sustains. We get the outcome, we get the performance in the business. We do additional Kaizens on top of that. As you can see, as this chart illustrates, over time, you get that compounding effect of those improvements. That is the real power of FBS. That is the culture that distinguishes us as Fortive. These things are all reinforced with our operating cadence, how we deliver our numbers consistently across our portfolio of companies, whether they be in healthcare, in hardware, or in software. The way we operate our portfolio of companies is consistent. What this allows our leadership to do is to understand proven best practices over how we operate the business, so that the most precious resource we have, the creative capacity of our leadership, can be spent really striving for growth, overcoming those challenges that every business has. Our operating cadence starts with a standard strategic planning process that we drive in the company. That establishes clarity of what game are we playing and how will we win. With that clarity and initiatives focused in our businesses, we drive that into execution through something we call policy deployment. Policy deployment establishes a rigor and rhythm in a business for executing against your strategic initiatives. Our companies structure teams around their policy deployment. They come together on a monthly basis to take stock of where they're at and to figure out what as a team they're going to do to accelerate their progress. We have this saying in our company that our objective is to make more than a year of progress in a year of work on our strat initiatives. It's a mindset. It's a culture. How do we turn our strategy into reality? You'll hear this repeatedly throughout the day, that FBS is dependent upon the quality of our people and of our teams. We are purposeful about building the capability of our teams and of our individuals, and you can see it on here through our organization and talent development processes. We are committed to delivering our financial commitments that we've made. We do that through our operating reviews. This is where our businesses come together. They take stock relative to the targets they've set in the business. This is where we really embrace and engage problem-solving to close any gaps and to figure out where we can accelerate faster progress in our businesses. Finally, in the innovation showcase, I hope you got a view to this, Lean Portfolio Management. How we prioritize and develop the products that are in our portfolio, how we drive greater returns from our R&D investment, and how we make the space to do the early innovations that will deliver unique and differentiated value to our customers. You bring all this together, this is how we consistently operate our businesses across the portfolio. We don't have to reinvent this when we acquire a company. We have the power of this from day one. What we are able to do is focus on driving outcome and results through it. Before I jump into walking through a couple of examples of our tools and the power and impact they have across our portfolio, I wanted to share a little bit of the evolution of the Fortive Business System. I'm very fortunate in that I've been part of this journey since our very founding of Fortive, as you can see on here, in 2016. We started this company with a very strong and proven business system. Just like we fundamentally believe in the power of continuous improvement to accelerate and drive improvement in our businesses, we believe in it, too, in our business system. What we've done over the last number of years is really evolve this business system to meet the changing needs of our portfolio and to adjust to what the market and technology enables us to do. One of the big objectives we had in Fortive was to really unleash faster growth. You saw out in the innovation showcase a lot of wonderful innovations and what our operating companies are doing. We have built a proven toolset that has enabled them to do that around innovation and managing their product portfolio. You see that on here in the work that we did in 2018 around Growth Accelerator and the launch of Lean Portfolio Management in 2020. We also continue to evolve the core of our toolset, taking advantage of new technologies and understanding the changing portfolio. When we founded Fortive in 2016, we had a couple of tools around software. We now have a very robust and proven toolset for driving Net Dollar Retention and for really driving improvement in software development. That is where we can drive efficiency and productivity in our software businesses in our portfolio. Core to all of this is how do we continue to evolve how we build our people and teams? How do we ensure that they are immersed and understand FBS? For us, we just don't expect our leaders to know these acronyms and be able to say the words. We expect them to be able to coach, and most importantly, to be able to teach. The leaders of our businesses can teach and install these tools, and that leading from the front is what sets us apart in how deeply ingrained this is in our culture. One of the best examples to get us started on the power of FBS and the evolution that we've been through is on a very popular topic, which is pricing. We have, for a very long time, had in our portfolio a toolset called Price Leakage. What that allows us to do is to create a price waterfall that helps a business understand where are they leaking price. That comes through things like price discounts, freight, other things that we may give away to the customer or that deduct from the price that we're able to capture. That has been a critical part of our toolset. We've delivered results from it. We've also built, in the last number of years, a toolset around how do we really understand the unique value we bring to customers, and how do we adopt pricing models in recurring revenue businesses and in our hardware businesses that aren't recurring, that allow us to capture that value. You see that on here as our value pricing tools. The powerful combination of the two of these has resulted in year after year growth in price realization that we have delivered as a company. You can see in here of the companies that have adopted these tools, we see 750 basis points of improvement in software and over 900 in our hardware businesses. This is the power of FBS. Another place where you see our toolset evolving and bringing tremendous value to Fortive is in innovation, how we deliver value to our customers. I hope you had the opportunity to spend some time on this out at the innovation showcase. If you didn't, all you had to do was look at the products and services that were being showcased out there. All of them, from the Tektronix 2 to 6 Series, to the Accruent software of lease management, all of those have been impacted and driven through this process that you see in front of you. This set of tools allows us to deeply immerse ourselves and understand our customers' challenges, to innovate and come up with new and innovative ways to solve those challenges. It brings efficiency and prioritization to how we develop those and drive them through an efficient and effective R&D engine, to how do we most effectively commercialize them in the market. This model of how we drive innovation is fueled by something we call The Fort, which is a centralized group that specializes in AI and machine learning, and helps apply those technologies in innovative new offerings that are being built across our operating companies. You can see on here the impact this has had, from driving above-market growth rates in our companies, to allowing us to accelerate our delivery of those products and services to our customers, to freeing up capacity so that we can put more of our engineering and resource effort into that early-stage work of uncovering new innovations that will bring even greater growth in the future. This is the power of FBS applied to product development and to innovation. Another powerful example of our toolset that underpins our ability to bring value to our customers is how we develop software. When we formed Fortive, we had a fairly basic set of tools around software development. Not all that tested, and certainly not at the scale that we now have software in Fortive. The evolution of our portfolio required us to build out a set of tools in FBS that would really harness the investment and capability of our software development engines to develop and deliver more value to our customers. We now have a very robust and comprehensive set of tools here that span from how we help teams adopt agile practices to accelerate their delivery of features that matter to customers, to how we harness what I talked about with The Fort, of AI and ChatGPT, to automating parts of the software development process, as you see on here under the Agile DevOps tools. They drive significant improvement in quality to our customers, they allow us to get out more value to our customers more quickly, and they reduce the costs under which we can do so. This is the power of FBS. I want to also help you understand some foundational tools that are broadly used in our company, and one of the best places to see them at work is in working capital. We have a toolset in the FBS toolbox called Daily Management. This connects back to what Jim shared around the discipline and rigor with which we drive results. Daily Management is a toolset, but it's also a mindset and a philosophy, that we are focused on relentless execution to a target. We set our sights on something we're going after, we put a set of standard work and structure in place that teams use to manage delivery to that target. We all know that things happen in the course of going after these targets, what Daily Management does with a team is it brings them together, not always daily, but in a lot of instances daily, but it might be weekly, to take stock of where they are, but more importantly, to figure out what needs to happen to allow them to achieve the results that are expected in the future. If we are off track, it brings to bear rigorous problem-solving, where we get to root cause on why aren't we achieving at the level we need to, what needs to change to get us back onto the right trajectory to accomplish the outcome, those high expectations that we're after. Urgency, accountability, and ownership. This is what is our culture at Fortive and allows us to deliver. If you were to walk through our operating companies, hardware and software, you would see daily management being used in managing working capital. Whether it's how we drive rigor around collections and ensuring that we're hitting our targets there, to how we manage inventory on our manufacturing floors. You would see this rigor around targets and teams showing up saying, "If we aren't achieving it, what needs to change? Who owns the actions, and what are we doing about it?" Chuck will share more of our working capital performance. You saw it in Jim's presentation. It is an outstanding place to see the power of FBS and the financial returns that we have generated.... Finally, let's take a look at our roots. The roots of our business system come from our manufacturing environment. We have learned in that environment that the rigor around standard work, around a set of principles by which we operate all of our manufacturing plants, can yield tremendous results. They have allowed us to deliver strong results through a challenging couple of years. The resiliency with which we have operated is due to our business system and the way we go about this. What I want you to keep in mind as you look at this is these lean principles, we call this Lean Conversion, applies broadly in our company. Everything's a process at the end of the day, and every process can benefit from better flow, better standard work, what people need at the point of the work being done, and a clear scorecard of are we winning or losing? Our lean practices and fundamentals underpin the way we approach continuous improvement and the rigor with which we apply it to every business process. You see on here a call-out relative to how we consistently, that compounding effect of results in our manufacturing environments, continue to allow us to drive improvement in productivity, a reduction in costs, and increase in our inventory turns. This is the power of FBS. At the end of the day, FBS is all about 18,000 people showing up with a belief that we can be better, that with discipline and relentless focus on execution, we will outperform. We have a proven set of tools in FBS. We have a set of fundamentals. While I wasn't able to go through them all with you, Daily Management that I shared is one of them. We have an expectation that 18,000 employees all know and live these fundamental FBS tools across the company to drive impact. We have proven the application of FBS to growth and innovation, and how we accelerate our ability to drive growth in our businesses, and how we bring productivity and cost reduction to any business process through our lean tools. All of this is enabled by our people. It's all about leadership at the end of the day. It's about leading through example. It's about building capability in our talent. With that, we're now gonna transition to a conversation about talent and how we truly drive the adoption of FBS through our talent and people strategy at Fortive. Thank you. Ladies and gentlemen, please welcome Stacey Walker. Good afternoon. Wonderful to see so many faces live and in person. It's not very often that we get together with such a big group these days, delighted to be here. Importantly, delighted to share with you how we build talent, culture, strategy to ensure that we make and deliver on our commitments with customers and shareholders each and every day. Of course, within the context of what I'm here to talk with you about, I get to talk about the people who make that happen, which is pretty special. Hopefully, you were inspired and impressed by the group of people that you interacted with through the innovation showcase. I know we certainly are, and that's a reflection, of course, of people who have been with the organization for long periods of time, and people who are new to the organization and bring in unique capabilities, something new, something different, that's helping to not only enhance but accelerate our ability to meet results. When we started Fortive in 2016, we built on a strong foundation. That was a foundation that was built on our shared purpose that inspired us to accelerate progress in the world. It's a pretty incredible thing to do. Our shared values and, of course, this deep belief in better. Building on our strength, we've continued to evolve not only our skill and capability, but of course, how we think about some of the pieces that are core cultural tenets, many of which Kirsten shared with you: inclusion, high expectations, transparency, humility, ongoing learning, and a deep commitment in sustainability. With the same operating cadence and rigor that was described within our business context, we lead and manage our people strategy and execution each and every day. If you were to go into one of our operating companies, you'd see clear visual management on how we're approaching staffing internally and externally. With that same notion of solutioning in the moment and solutioning with Daily Management, with that high level of accountability, with leaders showing up with the passion and commitment to deliver distinguished results. You can see through some of what I have up here on the screen, that we've really made fantastic and strong and consistent progress in many respects across these cultural dimensions at Fortive. We've recruited, we've developed, we've retained fantastic leaders, as represented on this screen with our leadership effectiveness, which is now best-in-class, top-quartile performance. Those leaders have set big expectations for our people every day. That's created new and differentiated career experiences and growth opportunities, and a career trajectory for our people and teams that I think is really differentiated in the external market. These folks have high visibility, high impact roles, oftentimes at early points in their career. Of course, with this notion of inclusion, you're oftentimes on quite a mix of, or with quite a mix of folks with different levels of experience and tenure with the organization in a Kaizen event. Not only is it a great opportunity for learning, but it's also a great opportunity to develop sponsorship and mentorship as you think about developing careers. In an increasingly complex environment with enormous talent constraints that we're always working through, and I know many of you are as well, we've developed this dynamic people strategy, and we've delivered on it consistently in a way that's fueling results today and positioning us to continue to deliver tomorrow. We do that through these cultural tenets around high expectations, continuous learning, humility. Our people stay here because they're energized by the opportunities that exist to have big impact in small ways and in big ways, and people who want to have outsized impact within our unique operating company structure have the ability to do that. They have the visibility to do that, and they're empowered to do just that. Kirsten walked through many of the leadership development experiences that we have. One thing that we've also done in the last few years is really get to a point where we have digitized and made available FBS fundamentals and tools, learning opportunities for all our employees around the world. I think about this like democratizing and providing the skill development that's necessary to really fuel your career, apply those in Kaizen, and see not only business results, but great opportunity. It also allows for our talent to be fundable across operating companies. Many of us here today have been with the organization for many years, and we've had the opportunity to work across different operating companies and operating company roles and corporate roles, and that's a core tenet and will be a core tenet to how we develop great careers with great people for the future. Let me make this a little bit more real for you. You see behind me a couple of things. Our internal fill rate, which is really us filling roles from within our existing team, has historically been a core component of how we think about culture continuity, application of FBS, and of course, importantly, results. With the transition in our strategy, as we stood up Fortive, we aligned our people strategy to ensure that we were going external and bringing in different skill, different capability, in some cases, better athletes than we had before, to accelerate what we wanted to do. Of course, it was an imperative as we thought about our acquisition strategy in ensuring we had the talent to do just that. What you're now seeing in 2022 is our internal fill rate beginning to increase again. That's the result of people moving into their second or third role after joining Fortive. We would expect to see that continue to improve and grow as we think about creating this balance between creating great careers, ensuring people stay and are retained for continuity purposes, but importantly, continuing to infuse new and different and differentiated capabilities for the future. It's enabled us to deliver 4x the talent in healthcare and software. I think importantly, because of that external recruiting perspective, we now are seeing tremendous results from a diversity and inclusion standpoint, improving on multiple dimensions of this in so many ways, now at a benchmark level. Let me maybe be a bit more specific about this and bring this to life for you. What does this look like within our 18 different operating companies and our 18,000 folks? I thought a couple of examples might be helpful here. At Advanced Sterilization Products or ASP, of course, a newer acquisition, a number of Fortive leaders moved into that business and a number of different functional areas, spaces, and places. Rather than focusing exclusively on these internal moves, we intentionally went to the external market to bring in great product, great commercial talent across the business, and it's delivered the strengthening of bench that I referenced in so many ways, and again, strengthened the leaders there. On the opposite side of the spectrum, but all very important to our talent flywheel, we have Tektronix. It's a business that's been with us in our portfolio for quite some time. It's also a wonderful highlight of the legacy and the great work that Tami Newcombe did at Tektronix, where Tek is a known exporter of terrific talent. In fact, I can't think of a business within Fortive that hasn't been the lucky recipient of people that have been through multiple roles at Tektronix and have been exported into other operating companies to ensure they can take the next step within their career, some of which are in the room today. It's the consistency in which we can do this, both with mature companies and with new companies, and our ability to think about this balance between internal and external and how we bring new capabilities into the organization, is important in how we think about the flywheel, the culture continuity, as I said, and importantly, business results. As I close, a few final thoughts. We feel confident in the work that we've done around our people strategy and execution, with strong and sustainable improvement across culture, across our capability, and of course, our talent. Our ability to accelerate careers, uniquely positioned and fueled by the Fortive Business System, in addition to great career opportunities, helps us to deliver better outcomes for customers and better results for shareholders. In an increasingly complex world with talent constraints, this dynamic and agile people strategy is fueling results for today and for tomorrow. I appreciate your time today and look forward to questions later. We'll be transitioning to talk more about sustainability and the importance of that, obviously, to the global communities in which we work and live. We'll get started with a video. Thank you. Billions of people all over the world are living in the most efficient, safe, and sustainable way possible, enabled by the essential products and solutions Fortive's operating companies design and deliver. From operating and maintaining the energy systems that generate the electricity that power our homes, buildings, and increasingly, our cars and transportation systems, to the smart office buildings and facilities where we work and congregate, to the food and beverage providers who keep our grocery stores stocked so we can fuel ourselves and our families. To the hospitals and clinics where we receive medical treatment to keep ourselves and our families healthy and active. Our company's products are working behind the scenes to keep these critical systems and environments, and the people who operate them, safe, productive and efficient. As a trusted partner, Fortive develops innovative solutions, helping our customers solve their toughest sustainability challenges. Ladies and gentlemen, please welcome to the stage, Peter Underwood. Thank you. Thank you. Well, good afternoon, everyone. I'm Peter Underwood. I am Fortive's General Counsel, and I have the privilege of leading our sustainability effort. I'm excited to talk to you today about some of the things that we're doing to make the planet a better place and to make our company more valuable. I want to leave you today with a better understanding of two things about Fortive. Number one, how sustainability relates to Fortive's business strategy, and number two, how our culture of continuous improvement and the rigor and power of FBS have led us to make extraordinary improvements and progress, and how they drive our ambition to do even more in the future. From the standpoint of strategy, the primary way that sustainability attaches to Fortive's business strategy stems from our strategic decision to align our portfolio and markets with strong secular growth drivers. You heard Jim talk a little bit about this this morning, and you're going to hear a lot more about it this afternoon. A lot of these secular growth drivers that we talk about have their roots in sustainability. By aligning our portfolio to take advantage of that, we are able to harness these tailwinds of sustainability across almost all of our workflows. Perhaps the best example is our EHS workflow, where our operating companies, Industrial Scientific and Intelex, are taking advantage of the global trends of digitization and the emphasis on workplace safety to provide hardware and software solutions to their customers, to allow their customers to manage workplace safety and workplace incidents, and to allow their customers to gather and analyze emissions and other environmental data so that they can pursue their own sustainability objectives. You can see it in the perioperative workflow, where the global trend around aging population and the corresponding secular driver of the need for patient health and safety. You can see it also in the Connected Reliability workflow with the transition to renewable energy and the focus on energy efficiency, which are driving growth and profitability for our company. All told, currently, over 60% of the revenue that Fortive generates is derived from the sale of products and services that contribute to sustainable outcomes for our customers, that are aligned to the UN Sustainable Development Goals, that are backed by these sustainability megatrends, and that are enabled by our strategic positioning in these markets. We expect that 60% number will do nothing but grow over time, as we think these megatrends are here to stay. In addition to that positioning, you heard Stacey just talk about this earlier, a business strategy is great, and having conviction in your strategy is even better, but if you don't have the culture and the people in your organization to execute on that vision, you may have an issue. Thankfully, for us, for Fortive, sustainability and who we are as an organization mesh almost perfectly. You heard Jim talk earlier this morning about our shared purpose: essential technology for the people who accelerate progress. That means that we are a company of problem solvers. We're a company of engineers. We're a company of thinkers and innovators. We're a company whose goal and objective is to provide solutions and innovations for our customers so that they can go out and make progress in the world. They can move the ball forward. Since so many of the progress, so much of the progress that our customers are seeking today revolves around solving some of the world's largest sustainability challenges, we are filled with just the kind of people that can help them do that. With that discussion on strategy, I wanna turn a little bit to the evolution of our sustainability effort. Just like everything else about Fortive, our sustainability effort can be characterized by continuous improvement. When we started as a public company, we started with a strong foundation of operating companies who were doing great things in the world and great things for their customers, but we recognized that we needed to make progress. We did things like applying FBS tools to our processes. We refined our sustainability governance structure to make sure that we were aligned with our goals and objectives, with our board of directors, and with our operating companies, and then we executed. This relentless execution and focus is apparent now in the improved quality and content of our sustainability reports, the next one of which, by the way, will be out next week, June fifth, on our website. You can see it in our step-by-step alignment to recognize reporting standards, which provides us with the transparency and the clarity to allow our investors to evaluate our progress and to hold us accountable for our commitments. You can see it in the significant number of awards and recognition that we're getting from outside providers. You can see it in the increased scores that we're getting from ratings providers, whether that's our improved scores in CDP or our current A A leader rating from MSCI, which is recognition of our leadership position in sustainability among our peer group. Perhaps most importantly, you can see it in our increased ambition. We've joined the UN Global Compact, we've aligned to the SDGs, and we are increasingly putting out stronger and stronger public sustainability goals so that we can hold, again, ourselves accountable to what we wanna do to make the world a better place. Where are we today? Where are we today? We I wanna start with this idea that we have five pillars on which our sustainability efforts rest. We talk about all five of those pillars in our sustainability reports. We will again in the next one. I don't wanna spend a lot of time on all of them, but I do wanna point out a couple of things we're doing in a couple of these pillars because I think they're illustrative of the type of progress I'm talking about and relentless execution. I'll start with our pillar on protecting the planet. This was the place that we announced our very first public sustainability goal back in 2019. It was an intensity-based goal to reduce our carbon emissions, and it was a goal that we met well ahead of time, and we announced another carbon emissions goal at our Investor Day in 2021, an absolute reduction goal of our Scope 1 and Scope 2 carbon emissions by 50% by the year 2029. That's a goal aligned with the Science Based Targets Initiative. It's a stretch goal. What did we do to reach that goal? Like we do everything else, we applied the rigor of FBS. We established KPIs. We put together standard work so that we can gather the information required that underlies those KPIs. We used Kaizen for our environmental impact assessments. We used energy Kaizens to discover and uncover GHG emissions reduction projects, and we standardized the GHG project design into our budgeting process. In other words, we standardize around FBS and the way we operate so that we speak a common language with our operating companies, and so that we reduce the friction for them when they go out to try to execute against this goal. This combination of the use of FBS, plus our use of the Intelex Sustainability Management tool, has allowed us to achieve already a 20% absolute reduction in our carbon emissions from our 2019 baseline. That is even giving effect to the tremendous organic growth and financial performance that we've had in that period. We're well on our way. We're excited about and confident about our ability to hit that goal timely. We're not done. We recognize more to do with respect to protecting the planet, today, we're announcing that we have a new goal. We intend to reduce our overall water usage in Fortive by 10% by the year 2029. We've done extensive work to understand where our water risks are the highest, where we can have the greatest impact with conservation measures. We intend to focus our efforts in that area. I want to briefly also talk about responsible sourcing. This is another one of our pillars and another place where we've made great progress. As you know, we're a large and complex company with multinational opcos, and as a result, our supply chains can be large and complex. We long ago recognized the need to apply FBS and to have a risk, supplier risk management tool that can help us mitigate those supply chain risks, and we have that proprietary FBS-oriented tool, and we have for many years. In recent years, we've applied sustainability-related criteria to that supplier risk management tool to allow us to identify those suppliers that are the highest risk from a sustainability perspective, so that we can ensure no human rights abuses like forced labor or trafficking exist in our supply chain. We use that tool to identify those suppliers. We put them through a rigorous sustainability audit with a goal of achieving 100% of those higher-risk sustainability audits every given year. We're also leveraging our purchasing power to give diverse suppliers a greater chance to compete for and to win our business. To hold ourselves accountable there, we established a goal that we will spend at least $100 million annually with diverse suppliers by the year 2025. That number represents 10% of our current spend in North America and about a 25% improvement from when we started this program in 2020. It also has the added benefit of more localized supply chains, and it giving us even further supply chain risk mitigation. Before I close, I wanna say something about our 18,000 employees, whose spirit of generosity and optimism animates our company. We do a tremendous job of giving back to the communities, and we do that primarily through our Day of Caring. We started the Day of Caring on our inception, and we've run it every year since. All told, we've contributed over 150,000 hours of community service to over 150 communities worldwide. We're incredibly proud of that work. We understand the position that we're in and the responsibility we have to give back, and we believe strongly that we're doing a great job at it. To close, we have the strategic positioning to capitalize on the sustainability mega trend. We have the mandate given to us by our shared purpose: to innovate for our customers, to provide solutions to the world's greatest sustainability challenges. We have the ambition, through our culture of continuous improvement, to set the bar ever higher, and we have the toolset in FBS to allow us to achieve those objectives. We're excited to continue on this journey and to continue to provide both value and impact to all of our stakeholders in the years to come. Thank you. Now I'll invite the rest of the team up for Q&A. Thanks, Pete. All right. As a reminder, this will be our first Q&A session with our first half presenters. Who wants to open it up? I see Scott Davis, front row, first hand up. Here comes a mic. Hello. Thanks for doing this, folks. It's been a while, and I appreciate it. Trying to get a feel for what traction was lost or not lost during kind of COVID as it relates to Kaizen. Are you now kind of playing catch up, if you will, and where are projects really focused? Is it similar pre-COVID, or is it more sales, marketing, stuff like that? Maybe we'll start, and I'll give Kirst. Number one, I would say we were incredibly proud of the virtual efforts that we did during COVID. I think we all know and in-person Kaizen activity is much better than virtual Kaizen. We've really accelerated. I think we hit a record quarter in the first quarter of this year in terms of the number of events we did, and quite frankly, they were big events too. I think in that standpoint, that's kind of a little bit of the history and maybe talk a little bit about what we've seen in terms of balance. I think it's important to remember, right, we continued to manufacture and keep those facilities up through the pandemic. A lot of our attention there was spent on managing our supply chains and bare rooms Daily Management to weather through those conditions. I think Jim has stated it well. We've brought Kaizen back with rigor to in-person, so we'll have our biggest year ever on sort of Kaizen activity, certainly since the pandemic. We actually did a lot of growth and innovation work through the pandemic virtually, but we have found that there's power in being together for collaboration, for creativity. I would say the work has continued, the intensity has gone up. We've also brought a lot of our Daily Management that had to exist virtually back to physical spaces, where teams can do more real-time problem-solving versus having to engage somebody in a Zoom or a Teams call in order to get an answer or to move things forward. Acceleration and speed with which we can do things and a rigor of Kaizen that in-person allows us to accomplish. Okay. Just as a follow-up, I'm not familiar with the term Lean Portfolio Management. Maybe I should be, but I'm just not. Is one way to think about it, kind of like an 80/20? Is it a simplification and as it relates to SKUs, or is it maximizing kind of the product mix around pricing power, margin, other thing? I just maybe if you could dumb it down a little bit for us, it'd be helpful. Yeah. It's all of the above. The foundation of Lean Portfolio Management is, remember back to that operating cadence, our strategy. How do we drive our strategy into the product development decisions we're making, informed by some of the things you brought up, the 80/20 in terms of where you're making your money, your profitability of your customers, what does sustainability, sustainment of a lot of the products that might be getting older SKUs and the support that they require, taking a critical eye to those. What Lean Portfolio Management at its core does for our leadership teams consistently across our hardware and software businesses, it requires prioritization and relentless choice, right? Relentless execution of choice relative to strategy and financial performance. Where are we putting our attention and energy? Is it yielding the financial outcome that it should for the investment we're making in product? That's what Lean Portfolio Management does. It's done with a monthly cadence in our businesses. Scott, I would just add that, you know, when you think with that frame that Kirsten has in her slide of dream, develop, and deliver, that's really end-to-end product development process that we would have. That came from the prior, you know, our prior lives in Danaher. What we've really changed is that dream phase, and as Kirsten said, the ability to do all those things, the, our partnership with Pioneer Square Labs, the work we've done, the work we've done with benchmarking a number of companies, technology companies, software companies, in the early days of Fortive, has really, really made the whole process great. It's really helped us be incredibly more productive, but using experimentation to really deliver some real great innovations, some of which you saw out on the floor or will see out on the innovation showcase if you haven't had a chance to walk around. I see. Andy, we'll take Andy, and then we'll go towards the back. Thank you. Maybe this question is for Stacey. Like, how long does it take to teach FBS in the sense that, like, when I step back and I look at the three segments, right? You have a big amount of external fill in ASP. From the outside, you know, we see a little bit more margin variability in AHS over the last couple of years. It's just interesting to notice that it seems like that business maybe has had more external hires. Does that mean that maybe there's more opportunity as you go forward in the overall segment, given, you know, there's more external and now, you know, those people kind of mature in their roles, if you may? Sure. First of all, I've been with the organization for almost 18 years, and I'm still on my learning journey, so I don't know how long it takes to learn because it doesn't end. That continuous view to something always getting better and the way in which we think about both the learning and application of FBS is a really important part of the culture and a really important part of that relentless view. In terms of ASP specifically, I think it's important to note we infused that organization with a number of people and leaders across Fortive. They were the recipient of that. Kirsten and her team as well, spend a lot of time within the business, working to install and deploy tools, helping to coach and guide teams, and then, of course, being available for a phone-a-friend when there is a particular opportunity to have bigger impact. I do think that as we now begin to focus more on internal promotions, we'll see more pull-through and more impact within that business, just based on people understanding and seeing the real impact of Kaizen and, of course, the power that can have. maybe just... I think a good example is, you know, obviously, the pandemic had more to do with the top line than anything else. One of the things that the team did a great job of, I think we've reduced working capital in that business. Yeah ... $80 million or something like that over the last few years. One of the reasons why the cash on cash returns are so good in ASP is the application of FBS that really happened in the working capital side of the business. Maybe I could just ask about AI, because it's the topic of the day. Like, how has the Fort evolved? You know, how is it evolving now? How could it accelerate your strategy, particularly around things like incremental margin? You know, I think one of the things we've tried to emphasize with everybody, and one of the reasons why we've got the example of The Fort out there, is that, you know, 5 years ago, we thought machine learning and AI was going to be really important to our solutions and also in the back office of how we drive productivity. We've had projects for half a decade now that have been doing a lot of those things. A lot of emphasis on ChatGPT now and generative AI, obviously, and that's just going to accelerate some opportunities. We're doing some things in the FBS office to apply. I've always said that one of the great opportunities in the future is we do a lot of problem-solving, and as AI continues to develop, it's going to improve our problem-solving capability. I think those are just a number of places where we've seen so far. I would definitely say we were together as a leadership team yesterday, one of the topics on the agenda was how we apply AI to more of our back-office processes and things like that. I definitely think we're in the early innings, we may be in the first or second inning of this opportunity for us, and the good news is, we've been building on capability that we really started 5 years ago. This is not a cold start for us whatsoever. Just to kind of connect it back to Lean Portfolio Management, they're an accelerant to what we can do in the dream phase, right? They come to the table to bring those innovative ideas that we have that are fueled by machine learning or AI to reality much faster for teams, and that's how we leverage them. All right, Julian? ... maybe just the first question around the workflows. You know, they're broadly the same, but with some tweaks from what you talked about two years ago at the Invest today. Maybe help us understand kind of what changed. Also the TAM is, you know, substantially bigger. I understand inflation would push up any TAM, but it's probably a little bit more than the rate of inflation, what's happened there. Help us kind of understand that. Just in the very short term, I think, Elena, you mentioned a sort of guidance reiteration. Any color, Jim, on things like orders and just how you're seeing the environment right now? I would say, number one, you know, Julian, I think we've gone over the last couple of years around a $40 billion TAM, so we're up at 60. As you said, it's really about the market work that the teams have been doing through our strategic plans. We have a disciplined process around adding available market to that, particularly publicly. You know, through the strategic planning process, we sort of validate those opportunities, and I think it speaks to the power of the workflows that as we do one thing, we see two more opportunities. To the words around the workflows, I think we might have a word or two different, but we're really talking about the same five connected workflows. We'll certainly get into a lot more detail in the segment presentation, so I'll save that for it. You'll see a few other workflows on some of those slides, but they're really not the connected workflows. The five that we really talk about and are 85% of the revenue base are the ones that we really believe have that hardware, software, data analytics opportunity that's well-defined and we have a good position in. You know, just to put some clarity around that. You know, relative to... You know, obviously, we affirm the guide today, and it certainly speaks to consistency, like I said at the opening. You know, we'll get to the end of the quarter to give you know, the every detail in every little place. I, you know, I think as we certainly look to the quarter and look out to the year, the things that we continue to talk about, and you'll hear in the segment presentations, but to bring back some of the things I said, our revenue growth continues to prove to be durable. Software businesses continue to do well. Our recurring, other recurring businesses are doing well. We think we accelerate in healthcare in the second half. A number of those things are all gonna be the things that are... The backlog position that we have. All of those are gonna be the same things we talked about that we've talked about several times. Those are consistent embedded in the comments that we made about the quarter and the year. All right, next question, Deane Dray, and then Josh, and you'll follow. Thank you. Jim, I wanna go back to slide 12, where you show the mix today and the increased durability. There's a big chunk, it's half, that you say are non-recurring products. I get a sense that you're selling yourself a little bit short there because a number of these have to be repeat customers that, you know, would be buying the next generation oscilloscope. Can you maybe give us some more context of that? 'Cause that's half the revenues. Yeah. repeat customers and so forth. Well, I think first of all, that chart had none of the left side of the slide a few years ago. The first emphasis would be it's from zero to 50 in a short period of time. I think that's. But to your, specifically to your question, you're exactly right. People are gonna repeat buyers on all of the hardware businesses that are in that 50. We've attached secular drivers to those businesses, so they're much more durable. As an example, as you mentioned, a Tektronix oscilloscope really applied to power challenges. Tami will talk about this in a little bit. That's a real secular driver right now and is gonna, if NVIDIA's commentary yesterday about data centers is anything, it was a big customer of ours. That's just an opportunity for us. You're exactly right. Those kinds of things, the solar tools you see out in the innovation showcase, another great example at Fluke, where we're playing into a trend that we think is gonna be certainly sustainable through the macro environment. Yeah, our intentionality was to, one, show the recurring side of it, but also to talk about the fact that, you're certainly gonna hear this in a few minutes, is how well those hardware businesses are aligned to some really nice drivers in the years to come. All right. Josh? Hi there. Kirsten, I wanted to follow up on your pricing slide. Some good detail in there on 22, with just so much in price and inflation everywhere, maybe not kind of a perfect snapshot. Any sort of before and after or timeline that you can give us on how that management of Price Leakage and value pricing has trended over time? Yeah, we have delivered consistent price appreciation in our businesses. One way, right as I emphasized, that we get that is through cutting off the leakages for the price that we set. Not giving it away in discount, et cetera. There certainly has been a trend out there of gaining prices. We've seen inflation and interest rates, et cetera, but we have more than outperformed that in the price that we've been able to capture through really understanding the value that we bring to customers and pricing accordingly. I would say it's been the last sort of three or four years of real focus on moving the price needle consistently year after year. You know, Josh, I think when you look at our gross margins, right, 75 basis points per year, every year over the last four years. I don't know, a lot of companies have put in a lot of price, but I'm not sure many of them have gotten that kind of fall through on the gross margin front. Some of that is business model, obviously, some of that is FBS, and the other part is the rigor and discipline around value creation that we've had on the innovation front that allows for us to maintain that price. Is there sort of a framework that we should think about in terms of price, cost, productivity for over the last few years versus how you're thinking about it through the 2028 plan? Yeah, I mean, we're always been ahead. You know, we've, I mean, historically, have always been negative in material cost reductions every year. That's always been a tailwind for profitability. We've been generally, I think, a little bit ahead of most in the 1%-2% price range. You know, without getting into too much detail about what 2024 might look like, but, you know, we might get back into that range with a maybe a little bit more price now. I think the opportunity now, from a value creation perspective, when we talk internally, we really talk about value creation and the opportunity. As Kirsten said, some of the innovation work that we're really doing is really allowing for us to really capture more value with customers, and that manifests itself in better price. All right, we have time for one more question. Joe, you're on the right. Thank you. Is it on? All right. Kirsten, I just want to ask a little bit more about FBS, if you talk about what are some of the common threads you hear from sort of acquired targets or people you've brought into the organization, where you talk about you have common tool sets, these aren't unique tool sets, but they're applied in ways that have some unique outcomes for Fortive. If you can talk, what it is that you hear from folks who have come in, where they say, "We're familiar with the tools, but the way they're being applied is generating outcomes that are just different from what we've seen in other organizations? Yeah, I think we consistently hear about the rigor and the discipline with which we apply these things. That's not just an expectation, it's how we show up to help these businesses. We're very purposeful when we acquire a company. We have something very unique to our company called an immersion process that we run for newly acquired leaders in the company of how we bring them into an understanding. We have the wealth of our portfolio, right? You can go to another operating company and see the power of FBS. You can talk to other leaders, and we are unique in that we help each other across our portfolio, right? We call it wearing the Fortive hat. Newly acquired businesses get the benefit all of that, and their ability to adopt it pretty quickly. I would say, though, the thing we consistently hear, you know, Kaizen isn't unique to us, and so we'll have companies that come into the fold that are like, "Well, we do Kaizen." Well, when we start to peel it back and we engage in Kaizen with them, what we realize is, well, they were doing Kaizen to come together and create a plan. We don't use Kaizen to create a plan. We use Kaizen to create impact, to actually move things, to create value out in the marketplace for customers, to test new ideas, to come up with innovative new solutions. The thing that we consistently hear back is: Wow, the depth that you go to and the getting to actual impact and results and ensuring that we compound that over time is unique to us, and we help acquisitions come up that learning curve and get to that point. The sustainability, right? Yeah. One of the things we have is a very disciplined 30, 60, 90, 180-day sustainability look-back on the Kaizen event itself. A lot of companies will get the benefit, even ones that are maybe evolved a little bit, will get the benefit from the Kaizen. As Kirsten said in her presentation, "That's good, but if you don't sustain it's kind of a waste of a week." At the end of the day, it's about sustainability, and the disciplined approach we have around sustaining those improvements is really where, in many respects, the secret sauce is. You know, we recognize great performance at the time of Kaizen. We have a joke in our company. We have a cardboard trophy. It's actually not a joke, it's reality. We give a cardboard trophy at the end of a Kaizen. Why? The real testament of success is sustaining those results over the long period, to make what the improvements we made, the way we operate, and how we deliver results. We will issue the final trophy at the 90-day or 100, you know, whatever that mark is that we agree to. We care about sustainment tremendously in our company. Pete, you were- Yeah, I was going to say, I also think it bears mentioning that, you know, yes, there are a lot of foundational tools that are out there that are similar to other foundational tools. The way we apply them is very different. There are also a lot of tools that have been built and developed over the years by the teams that are fairly proprietary in the sense that, you know, we take things like growth accelerators. We take programs, and we build on top of existing FBS tools. I mentioned in my conversation of our supplier risk management tool, that's a proprietary tool. It's now a part of FBS, but it's been built with FBS processes. I just don't want to lose the idea in here that there is actually... Yes, yes, everybody does Kaizen, everybody has an X matrix, whatever you want to say, but there's a lot of pretty unique proprietary tools in there as well. Terrific. Spoken by the guy who defends that on a regular basis. It's our intellectual property. Thank you all for your participation. We're going to come back at 2:45 PM. You can enjoy the showcase, grab a beverage, and we'll see you back here in a few minutes. Thank you. Thanks. Thank you. Ladies and gentlemen, if you'll make your way back into the room, we are going to begin in just a couple of minutes. Please make your way back into the room. Ladies and gentlemen, we are going to be starting in two minutes. Please make your way back into the ballroom. We will be starting in two minutes. Thank you very much! Ladies and gentlemen, we are starting in one minute. Please make your way back into the ballroom. We are starting in one minute. Ladies and gentlemen, please welcome to the stage, Tami Newcombe. Welcome back! Thanks for coming back. It's wonderful to see a few familiar faces in the audience with us today. As Jim shared, my expanded role includes the leadership of the Advanced Healthcare Solutions segment. Prior to Fortive, I worked in the enterprise networking space, where I had the opportunity to engage with a number of CIOs in the largest U.S. healthcare organizations. As I've been accelerating into my Q3 start, I've already started to see a few connections from my prior experience. AHS holds leading positions in the attractive healthcare markets. Our solutions enhance productivity and safety. Simply put, AHS is making a meaningful difference in patient care delivery. We have a deliberate focus in two workflows: the perioperative loop, Jim highlighted as one of our five connected workflows. This is the workflow between the operating room and the sterilization department. We're going to spend some more time on this workflow today. There's another workflow in AHS. It's the biomedical safety and compliance workflow. Here, we are a leader in ensuring life-saving medical equipment keeps our patients and healthcare workers safe. The 2023 outlook for this segment is $1.3 billion, mid-20s profit, and 70% recurring revenues. The secular drivers we see around us, it's an aging population, it's a shortage of healthcare workers, and a very complex healthcare system. Let me share the progress on how we constructed this segment. We started with our end goal. We wanted to be in resilient markets. We were looking for businesses with high recurring revenues and strong margins. The starting point, back around 2017, was $170 million, no recurring revenue, and only about $1 billion in market runway. The Landauer acquisition gave us a leading position in quality assurance devices and dosimetry. It was margin accretive and started our recurring revenues.... The next three acquisitions created the perioperative connected workflow. ASP is a pioneer, a leader, and an innovator in low-temp sterilization. The majority of ASP sales are recurring consumables. Censis complements ASP. It's a software platform that digitizes and automates the tracking of all the surgical instruments in a hospital. They're working with the same persona in the SPD. They've actually had a long-standing relationship with ASP. Next, Provation provides a clinical workflow automation. It's really a... It's domain knowledge that they've accumulated over the last two decades that they provide to nurses and doctors to increase their productivity in a specialty procedure. Today, AHS is poised to take advantage of what we see as a mid-single-digit plus marketplace with a $10 billion runway. We're not slowing down. Our strategy builds on these leading positions. Our customer success teams and clinical education teams are working with customers to increase their utilization. Customers use the product more, they understand the features. This allows us a very natural upsell and cross-sell opportunity. There's also an expansion opportunity that exists with our existing solutions. How do we open doors for each other to introduce new customers? ASP's strong position in the SPD will benefit Censis. Today, only about 50% of the hospitals in the U.S. use a platform that is automated for tracking of surgical instruments. The other half are still doing it manually. It's a great opportunity for the two of them. Innovation. You heard from Kirsten, we know the FBS Growth Accelerator works. We have a proven set of tools and a strong funnel here to create more value with our customers. We can accelerate. We can also accelerate through partnerships that are complementary from a technology and a go-to-market. The takeaway here is we have multiple growth vectors for us to capture our unfair share of this $10 billion market space. Let's explore deeper the perioperative connected workflow. There's two different personas in this workflow for us. ASP and Censis create value for the sterilization process department. These two settings meet in the surgical procedure, and that is where Provation enters the picture. As I've stepped into the role, I've had a lot of time with customers already. It's been fantastic. I wanted to hear from customers directly, like, what is the competitive differentiation? What is this that you see in ASP? There were themes that I consistently heard. ASP is recognized and known as a pioneer in low-temp sterilization. They also talked a lot, and you may have seen it out here in the innovation showcase, the ALLClear software that rides on that STERRAD machine, that allows for software upgradable processes they can add to the machine. The only one in the industry that can do that. ASP is constantly working closely with the OEMs of the devices that go in there, and when they know they have a better process, customers can take advantage of that upgrade path. They also talked about their service technician from ASP. They referred to it as my technician. You know that customers have a lot of passion when they speak like that. It's because the service technicians, they know these solutions extremely well. Our portfolio is focused, they build lifetime relationships with customers that can help us on-site drive that education and that utilization. Now, the intersection with the Provation in the operating procedure, this software focuses on the clinical workflow, and anybody who got to talk to the team over there at Provation knows it's much bigger than just a cloud offering. It's the knowledge base, it's the intelligence they've accumulated over a couple decades that they can deliver directly to nurses and doctors through this platform. Now, my expectations is this platform is an 85% recurring revenue in this perioperative workflow. Across this workflow and these acquisitions, we are leveraging FBS to go faster. I'm gonna show you three stories. ASP is well positioned for growth as elective surgeries recover this year. Despite the macro challenges that we've had the last few years, we've continued to make significant progress. ASP is expected to deliver mid-20s profit margins in the second half. For this year, will be a high single-digit ROIC. As I've stepped into the role, my confidence is very high that our thesis is still intact. ASP is a leader, a pioneer, and an innovator in this space. The market has strong secular drivers. Just this year, in the United States alone, more than 350,000 people will leave surgeries and end up with infections. There's still more work to be done. I'm ready to get started and show off all this great work at ASP. Censis, cloud-native product used to track surgical instruments across the entire hospital environment. Situation that they had: getting to revenue means installing and getting a site up and going, and their sales team was outpacing their implementation team. They were at a crossroads. We could add more people, or we could take the mindset that a process that has worked for years could even get better, and this is where this culture comes in of believing you could find another way. The Kaizen results, you see them here in the chart. Site implementation, the jump-off point or JOP, started at over 400 hours, over a series of days, this team pushed and figured out how to do it in 150 hours. This allowed the Censis team to realize a 20% increase in their speed to subscription revenue. They're continuing to go after that customer white space and add more orders. Provation. They've launched the APEX Cloud. Like every SaaS company before Provation, they had the challenge of getting their really happy customers that have their on-prem solution moved into the cloud, and they had to figure out how to prioritize, where to go first. The team used value stream mapping, customer segmentation, and creating unique value props as they prioritized those that would move to the cloud. From the first movers, the healthcare institutions that have cloud strategies, to the laggards. The win-win here is those customers that we move to the cloud get almost a continuous delivery of innovation, and for us, it's increased revenues and margin expansion. I've shared a few ways that FBS is helping our acquisitions and the perioperative loop workflow go faster. The segment was built for durable growth and margin expansion in the resilient healthcare marketplace. We're executing on our growth strategy to get after this $10 billion market runway. We plan to bolster our workflow positions. We have several options to accelerate our strategy, continuing to drive productivity and safety. How do we get it done? It's through FBS. I'm energized about the opportunity ahead for all of us. We have strong secular drivers, truly meaningful work in the evolution of patient care delivery. If you've been in hospitals lately, it's not getting easier. It's more complex, and they have a shortage of people. We're going to execute on our value creation formula. My expectation is this segment will be $1.7 billion and 30% profit margins. I look forward to sharing our progress along the way. Thank you. Before we transition to Precision Technologies, I want to share with you how electronics and sensors are changing the world. The future is bright in Precision Technologies. PT is in the epicenter of the proliferation of electronics and sensors, enabling a more intelligent and sustainable future. We're enabling renewable energies. We're enabling faster connections to more power-efficient data centers. We're enabling massive compute for AI and augmented reality. We're enabling electrified mobility. We're enabling a better quality of life with robotics, medical devices, and remote surgery. Our focus remains on three workflows: Product Realization, Sensing Technologies, and Energetic Solutions. The Product Realization workflow today is synonymous with Tektronix, a global leader in the test and measurement of electronics. Tech is well-positioned to capitalize on the trillion-dollar semiconductor market that is expected by the year 2030. We see, I think all of us see, the electrification of almost everything around us. Sensing Technologies Group, sometimes refer to that as STG, includes trusted brands with know-how, application know-how, and domain expertise to enable their customers that live in regulated and critical environments. The sensing companies, they have passed the test of time. They've proven resilient, they are significant contributors to our free cash flow. The PT financial outlook for 2023 is $2.1 billion in revenue, mid-20s% profit, and 24% recurring revenues. The three-year CAGR has been a high single digit%. With COVID behind us and supply chain more predictable, knock on something, I expect PT growth to normalize to a consistent mid-single-digit% grower. In PT, we enjoy a globally diversified customer base with no market more than 20%. Directly or indirectly, many of the opcos in PT are exposed to government stimulus plans and reshoring. My goal over the next 15 minutes is to bring to life our proven formula for profitable and durable growth in this $20 billion market space. We've got a proven formula, and this proven formula has been delivering profitable and durable growth with expanding margins. We're winning in our core markets by expanding in the Product Realization workflow, going into new end markets, adding sensing modalities and geographies. We can bolster our positions, partnerships, complementary technologies, and go-to-market synergies. We are leveraging AI and ML in the innovation work that we're doing. The Fort has been spectacular in helping us think about how do we take the data that we uniquely know and be able to deliver faster insights to our customers. Our flywheel is accelerated by FBS and a continuous improvement mindset. We have multiple years of price realization exceeding our targets, that will continue. We have a large manufacturing footprint. Lean and continuous improvement in that environment is very important and will continue. Now I'd like to explore the Product Realization connected workflow, one of the 5 that Jim spoke of earlier. In Product Realization, we've been working to diversify across the workflow and across the end markets. Our goal is to deliver consistent growth in revenue and margin. In the workflow, Tek's roots are instruments with an advantage in R&D. We have a new persona, the engineer that's come out of school in the last decade. That engineer wants our hardware advantage and our performance, but easier-to-use tools, easier to program, open source, Python, and cloud. Automating testing with software solutions by providing access to our great hardware, that's how we work across the workflow. In addition to workflow diversification, end market diversification. I talk about electronics being everywhere. Think about the shift from the combustion engine, not a lot of electronics, to electric mobility. That's mobility of everything: planes, trains, vehicles, bicycles. Think about factories that have been powered by humans that are now going to be powered by automation and robots. Our energy that has come from oil and gas, and now from solar and wind. We have end markets that are shifting from no electronics to an abundance of electronics. How do you scale to all of these new end markets? Solve a common problem that's happening across all of them. That common problem is power efficiency. Within Tek's $13 billion available market, there is a multi-billion dollar opportunity growing at high single digits. This is the holy grail of solving for power efficiency. Everybody in this room wants your batteries on your devices to last longer and use less power. We want our electric vehicles to have more horsepower, but to also go faster. You heard from Pete, we want a more sustainable world. We want our factories and our data centers to use less energy. The whole blue section on this slide are all the different end markets that are challenged with these power efficiency problems to solve for. Tek has a unique, sustainable, competitive advantage, a combo punch in this space. It starts with the portfolio of Keithley precision power instruments and our high-power probes. Our new platform of oscilloscopes. We talk about the low noise and the frequency range. What that means to an engineer is they can see really small signals when they have these power challenges. There's these decades of measurement know-how that we can deliver out to our engineer in the form of applications. Solving the power efficiency problem is how Tek is scaling and diversifying across all of these new and different end markets. Let's hear from our customers. My first customer story is the block around testing electric inverters and motors. This customer is a recognized innovator here in the U.S. for electric vehicles. Their challenge is delivering the next generation of electric motor that has more horsepower and less battery drain. Those are in direct conflict. After an extensive evaluation, this customer has standardized all labs on the Tektronix solutions and expect to deliver breakthrough performance. My next customer is the wind generation. They design and manufacture green energy solutions, from solar panels to EV chargers. Although this is a very different end market from electric vehicles, they have selected Tektronix and standardized on Tektronix through the entire workflow, from R&D through validation into production. Great workflow story, also tied to power. My last story, it's a combination customer story, and I talked about partnerships to help us go faster. This customer is a leader in semiconductor technology, and the technology that is enabling all of these end markets is called wide- bandgap. The commercialization of wide- bandgap, we're on the cusp of that right now. It's fueling this trillion-dollar semiconductor market. Not only are we helping this customer bring semiconductor chips to market, we've worked with them to build out a developer kit that together we can take out to our customers and allow our customers to go faster on their product innovation. These customer examples demonstrate electronics everywhere are creating these power efficiency challenges, and Tek can uniquely solve. Tek continues to increase customer value. The customer is in the center of every single thing that we do. Connect. Connecting to these devices can be a real challenge. Super high power, really small. Our probing technology, which you should have seen in the innovation center, allows you to connect to either tiny devices or high power, and it's the ASICs, which are application-specific devices that we custom design and patent that go into those probes. Our instruments, long known as a hardware advantage. On that piece of hardware is 75 years of know-how in solving measurement problems. We codify it, we deliver it as software. You can buy it on the scope together, you can upgrade afterwards for specific power applications or compliance applications. Test automation, that's a place that we're investing. That's where the next-generation engineer wants the capability to have Python scripts and open and reusable code. Our global service network, over 1,000 technicians all over the globe that provide OEM-trusted quality in service to all electronic test and measurement vendors. Tektronix was one of the first to install the FBS Growth Accelerator back in the beginning, and we will continue to fuel that innovation. Here's a story about innovation. We saw the dream part of LPM, our Lean Portfolio Management. The first gate is finding a problem worth solving. With some of the tools that Kirsten provided, we got 70 partner and customer VOCs. We learned that engineers wanted to take that benchtop performance out to the field. They did not want the constraint of a lab. They wanted the same great performance. They wanted the same great user interface, pinch and zoom, intuitive. They also had new expectations for cloud collaboration and remote access. The MSO2 series has doubled our served market for this class of instrument. The form factor can fit in my purse. It's battery-powered, it's got the expected performance and usability of a Tek oscilloscope. It still allows for the pinch and zoom iPad-like user interface. This also connects to TekCloud to allow for global collaboration. Innovation is core to how Tek is creating a future of profitable and durable growth in this market with a $13 billion runway. Speaking of cloud, it's a good shift to talk more about the proliferation of sensors. The Sensing Technologies Group consists of industry-leading brands: Qualitrol, Gems, Setra, Anderson-Negele, and Hengstler Dynapar. They've been trusted for their applications expertise and their domain knowledge in regulated and critical environments, verticals. We are excited about the multiple growth vectors that we can capitalize on and take advantage in these verticals. I'll give you a couple quick examples. The Sensing Technologies Group, they've come together and have an in China for China strategy, where we transfer product over there, it's customized for China, it's manufactured, it's sold and supported in China. We've also come to market with our paperless process recorder. Just got FDA approval about a month ago. We've got 70 betas out there in the market, this is how Anderson goes from creating a sensor that delivers data to actually collecting the data and delivering back customer insights, converting a manual process to a very automated process. We will continue to expand. We have some great end markets today that we serve, we still have expansion opportunity in both end markets and sensing modalities from physical to chemical and environmental. The business I'll highlight today is Qualitrol, where the transformation of the electric grid is a long-term secular tailwind. Qualitrol provides the world's energy grid with monitoring equipment and sensors to ensure the lights stay on, reliable power. Customers are adding massive capacity to support the demands that we've talked about for electricity and these new sources of energy. They had record demand, and they had a bottleneck in production. They worked with the FBS team for tremendous results. They've improved on-time delivery by 10%, and they've gotten a 70% capacity expansion without adding people, and a 20% overall increase in throughput. FBS is how we execute to get to revenue. The future's bright in PT. We are well-positioned to capture the proliferation of electronics and sensors. We are enabling an intelligent and sustainable future. My expectation is durable and profitable growth on our way to $2.6 billion in 30% OP, and I'm gonna look forward to sharing our progress along the way. Thank you. I'm gonna introduce the IOS segment in our next video. Ladies and gentlemen, please welcome to the stage, Olumide Soroye. Excellent. Thank you so much again for joining us, I am so delighted to share the story of Intelligent Operating Solutions with you. I do this on behalf of our team. I hope you had a chance to meet some of my colleagues at the innovation showcase earlier, 'cause this is their story. I'm gonna, in the next 20 or so minutes, cover three things. I'll give you some headlines and a bit of historical perspective on the IOS segment. Second, I'm gonna take each of the three connected workflows that we focus on and give you a sense of the results and opportunity that we have, exactly what we do in those workflows, and why we win. I'm gonna come back to close with our 2028 financial targets. Just to get started, what is IOS? Is a good question. I think about three things about our segment that I'm most proud of. First is, we're a scaled growth engine with a long runway ahead of us. We are $2.6 billion in annual revenues right now, in pursuit of a $30 billion addressable market opportunity. Over the last three years, we've delivered high teens compound annual growth rate in our revenues, outperforming our markets, and we very much expect to continue to outperform. The second thing that is notable about IOS is we're a disciplined profit and free cash flow generator with expansion opportunity ahead of us in every single one of our workflows. We are at 31% adjusted operating profit margins, and we continue to get better. Over the last three years, we've seen over 500 basis points of core operating margin expansion in the segment. We've also seen our working capital improve by more than six turns. That's almost 70% improvement in our working capital efficiency with the power of the Fortive Business System. There's a long road of improvement ahead of us still. The third thing I'll highlight is the fact that we're built with durability through cycle design into the segment. Nestled in the IOS segment today, we now have over $750 million of sticky workflow software revenues. That's a rarefied group in industrial software. We have almost 1/3 of the segment that are now in recurring revenue models, and we have resiliency built in through diversification of the end markets that we serve, the use cases that we serve, as well as the geographic markets that we touch. The strong alignment we have to circular trends that you're gonna hear me talk about, are also elements of our resiliency, as well as the backlog of orders that we still have in several of our businesses. The reason we achieved these results, I highlight these three things, is we've built advantage positions in some large and growing markets, which I will describe to you. Secondly, we have a winning strategy, an extraordinary team, and a ferocious dedication to executing the Fortive Business System to deliver sustainable, outstanding results. How did we get here? Where did IOS come from? I'm glad you asked. At the inception of Fortive seven years ago, what we now call IOS segment really was Fluke, a $1.2 billion instrumentation business. What a fantastic starting point that has been for us. Over the last seven years, we've dramatically improved this segment in two ways. First, we've transformed Fluke, and I credit our team at Fluke for this work. Fluke is now a faster-growing, more profitable, more cash generative, and much more durable business. Our team has done that by accelerating the pace of innovation. It's not just innovation in our core markets through introducing new test modalities around acoustic and thermal, but also through reimagining some of our flagship products, from advanced calibrators to digital multimeters, and bringing in new technologies around field sensing and auto testing into a lot of the customer bases that we serve. We now have over 1,800 patents in our Fluke business. The team has also innovated to capture the opportunities in circular trends. A lot of the examples you saw today at our innovation showcase speak to the products we're bringing to help the solar industry and the electric vehicle charging station industry to perform reliably, safely, and productively. I'm gonna come back to some examples of that, but just incredible acceleration of innovation at Fluke. The second thing our team's done to transform Fluke is really mature our go-to-market and our value-based pricing. You heard earlier Kirsten talk about the tools we've built and the mindset we've built around pricing, and really, we think about it as creating value for our customers to earn the right to capture price. Our Fluke team has captured more price, even setting aside inflation, over the last two years than we've seen perhaps in the history of the company, and this is a 75-year-old company. Our team has also done a great job at Fluke of relentlessly pursuing productivity and free cash flow improvement. Over the last seven years, Fluke has improved their operating margins by more than 800 basis points, and they've improved their working capital by more than three turns from a very excellent starting point. Fluke of today, and this year is our 75th year at Fluke, I am so proud of the work our team has done to position Fluke for the next 75 years of success with the same heritage of innovation, driving the future of the benefits of all the electrification that you heard Tami talk about earlier. The second thing we've done, though, in addition to transforming Fluke, is going from a single company to these three workflow platforms that are so exciting for us. I'm gonna come back and talk about each of those in some more detail, so I'll save that. The seven key acquisitions we've done have been crucial puzzle pieces to create the advantage position I'm going to describe to you in the next few minutes. In this process, in the last seven years, we've more than doubled the revenue of a segment. We've more than quadrupled our addressable market opportunity. We've more than doubled our adjusted operating profits. We've now created more than a third of a segment in recurring models, and as pointed out earlier, even the portions we call not recurring are really resilient. As I mentioned, we now have nestled in here an industrial software business that's fast approaching $1 billion in revenues. I couldn't be more proud of this journey we're on. The essence of what we've built here is what it does for us going forward, and it gives us a leadership position in these three workflows. In each of the workflows, we're executing a consistent strategy that starts from high expectations of durable growth, double-digit adjusted operating profit growth every year. That then feeds into a ferocious dedication to winning in our core with the power of the Fortive Business System. We have this $30 billion opportunity and through sales productivity, value-based pricing, focus on customer success, we capture more and more of that. We support that with our innovation in our products and our business models and feed the flywheel with our continuous improvement culture, cadence, mindset, and toolset of the Fortive Business System. Let me now shift to taking each of our three workflows, and I'm going to give you a sense of the results and the opportunity we have in each one, where we play and why we win. The first one is the Facilities and Asset Lifecycle workflow. In this workflow, we now do about $650 million of revenues a year. Last year, we grew low teens in terms of core growth, in our revenues in this, in this workflow. We have a highly resilient model because in this workflow, over 60% of our revenues are recurring models. We serve a whole range of verticals, which provides an element of diversification for us as well. The workflow market that we serve here is over $10 billion. It benefits from a range of circular trends, including investment in secure, sustainable, and smart infrastructure, as well as the adoption of technology tools and digitization of these workflows. That plays right to the center of the solutions that our teams offer to the marketplace. In terms of where we play in the space, we have a disciplined strategic planning process that looks for where the profit pools are and where we have a right to win. You will see in this workflow, we don't play in every single piece of it, but the pieces we play in, we have a clear advantage, and I'll give you a few examples. Okay. This is all about helping our customers get the maximum return on investment on their facilities and assets through its lifecycle. That starts with the planning stage. In the planning stage, we have the industry currency in terms of project cost estimation in our RSMeans data set at Gordian. We've built around that proprietary data set, a unique combination of facility condition and capital planning, software, data, and benchmarks that are really indispensable for our customers to manage their capital cycle. I'll talk to you about a customer example there in a minute. That's the differentiation. That's why we tap into the massive flow of capital spending in this area. In the build stage, we have what is the industry standard in terms of procurement platforms in highly regulated, complex verticals like state and local governments. With our Job Order Contracting platform, customers save 20% of their project costs when they use our platform versus when they don't. We have a two-sided network built into that business. We have a track record of impact that is quite amazing. That taps into over $1 trillion of deferred maintenance spend on critical infrastructure across this country that's going to create an enduring flow of opportunity through that business for us. In the maintain stage, we have a range of offerings that are anchored in proprietary data, software platforms, networks of service providers and project owners, as well as analytics that we built and has a flywheel effect into it. This is the reason we're able to save our customers 10%-30% of their maintenance and repair spend because we can help them benchmark to what's going on in the rest of the market. Those are proprietary data sets that give us real advantage in those markets. Everywhere we play here, we have a strong position to win. I'll give you a few examples. A customer here, this is a state university that ran into outdated facilities and not enough budget. That's a very common situation. Our teams at Gordian and Accruent working together, pulled together four different solutions across this workflow in our portfolio to help this customer break through. In the end, we helped them expand their capacity in terms of footprint by over 14%, reduce their energy consumption. We're now the system of record for them to manage their capital planning, including getting board approval for their annual capital plans. These are the kind of examples that drive double-digit growth in this workflow for us. Take this over 10,000+ customers that we have in this workflow. The power of the Fortive Business System that you heard Kirsten talk about earlier, there are a lot of examples of it, and this is one that I'm very proud of for the work our team has done. Accruent is one of our puzzle pieces in this workflow, and it is one of our biggest software companies across Fortive. This team applied the Fortive Business System both on innovation and on working capital. I'm not gonna go through all the details on this page, but complex product set was a starting point where you have some really high-growth products, and it had some legacy products. With the power of Lean Portfolio Management, the team was able to make the right decisions and focus the portfolio, which meant 50% of the product in count, they decided to sunset. The remaining products got a lot more investment. We now have a release portfolio in terms of new enhancements that's more exciting than that company has known the last five years. At the same time, on working capital, we've been able to, through the power of visual Daily Management and problem-solving at the front line that you heard Kirsten describe, reduce the net working capital of this business by over $50 million in the last five years, on a business that's transitioning to negative working capital. Incredible results from the power of Fortive Business System. In Connected Reliability, very much anchored around Fluke. We have a $1.5 billion business that grew low double digits last year. Like I described earlier, Fluke is an exciting company for us that we believe very much has a right to win across this workflow. We have from the most advanced calibration devices to digital multimeters for end-user electricians, to condition-based monitoring that connects sensors to the cloud and helps you manage asset health and intervene in your preventive maintenance program. Really, no one else has this complete solution set for our customers, and this workflow is benefiting from circular trends around energy transition, around investment in infrastructure that is in dire need of upgrade. All of the forces around electrification that you heard Tami describe earlier, that starts in the R&D shop, is gonna end up as additional demand for us in this market. Incredible flow of opportunity for us in here, and couldn't be more excited about what we continue to do in Fluke. I will mention that as much as we've expanded the margins in this workflow, very much believe there's still a lot ahead of us in terms of margin improvement, that is true for every single one of our workflow. That comes from the work we're doing on pricing, it comes from the relentless drive on operating margin expansion, it comes from the work we do on innovation, which fuels solving new problems for customers and capturing a bigger share of the wallet of the more than 30,000 customers we have across the IOS segment. A couple of examples again here, innovation at Fluke is one that I couldn't be more proud of. When you have a 75-year-old company that is still able to innovate at the pace that we're doing at Fluke, you have to be proud. I hope a lot of you got a chance to see some of the work that our team's done on the solar market. This is an example of our SMFT-1000, which is a multifunction tester for the solar market. Think about it as you had technicians that were trying to install solar panels or maintain solar panels. They needed six different devices to take the measurements, take all that data, go document it, so they can confirm they've done their job. Our team, in one of the fastest concept to launch experiences we've had at Fluke, took all those six devices and turned it into a single device with our Fluke TruTest software platform integrated into it to capture the data and do the documentation they needed, saving the time to install those panels by 20% and reducing the time for testing and documentation by over 50%. More importantly, improving the quality and consistency of the outcomes. That is how we do productivity, reliability, and safety for our customers. With respect to our end customers in the Connected Reliability workflow, this is an example of a long-time customer that adopted our conditional monitoring platform. This was a food processor faced with the challenge of toxic gas leakages that was happening again and again in the shop, which meant unsafe for workers, shutdown of the plant, fines they had to pay for regulators in those situations. Since they installed our system over a year ago, they haven't had a single incident. That's reliability, that's safety, and that's productivity. In the Environmental, Health and Safety workflow, we have an incredible position across this workflow. We do over $350 million of revenues. Again, we grew low double digits last year, very much outperforming the market and expect to continue to do so. The market as a whole is well over $7 billion of opportunity for us, benefiting again from a whole range of circular trends anchored on sustainability that you heard Pete talk about earlier. This is a big deal for the markets that we serve. You know, our teams in this workflow are driven by the passion to eliminate workplace death by the year 2050. There's still over 2 million deaths in the workplace due to different hazards that are frankly preventable, and this is what propels our team every day to innovate. Just an example of that, our Intelex team got the incident management platform deployed at this customer, reducing the near misses and injury events by over 60% and reducing the OSHA reportable incidents by more than 50%. That's how we do safety, that's how we do reliability, and that's how we do productivity for our customers. Another example of the Fortive Business System that really connects what Stacey talked about in terms of our talent engine, as well as the power of the Fortive Business System, is the story of our iNet safety platform at Industrial Scientific. We acquired a company in 2017. They had this incredible product that had gas detectors with a cloud-based software connection and analytics to help customer get better safety outcomes. Through the power of sales productivity funnel management, we've almost doubled that business over the last five years, and this team has now become a talent champion for driving hardware as a service business models across Fortive. Let me close with our 2028 financial targets. I hope by now that you would not be surprised to hear that we are highly confident that these targets are attainable. This idea that we'll be growing mid-single digits plus $3.6 billion by 2028, and 34% operating margin with 75 basis points of operating margin expansion each year, is one that I feel highly confident is well within our reach, and that is because of where I started. We've created advantage positions in large, fast-growing markets with strong, favorable secular trends. We have a winning strategy, an extraordinary team across all our companies, and the ferocious dedication to executing with a Fortive Business System to sustain outstanding results. This is why we win. Again, thank you for your interest and your enduring support along the journey. Now we're going to transition into pulling it all together into an overall Fortive financial look, as well as the outlook for the next few years. Ladies and gentlemen, please welcome Mr. Charles McLaughlin. Good afternoon, everyone. Thank you for spending the day with us. We've certainly enjoyed having you. I hope you've enjoyed what you've been watching. Back in 2016, we had goals and aspirations about what we wanted to do with this company. We wanted to build a growthier company. We wanted to reduce cyclicality, improve durability. We wanted to expand our operating margins and gross margins. We wanted to invest that free cash flow into new acquisitions and deliver double-digit earnings growth and free cash flow. Pretty simple. We refer to that as the Fortive Formula. Along the way, we learned that it would be helpful to put some waypoints out there for those of you who maybe like to do orienteering or boating. Two years ago, we laid out some targets on growth, margin expansion, free cash flow for where we would be in five years, that's the 2025 targets that are still that you're going to see here in a minute, so that we could be measured along the way. On each of these metrics, over the last two years, we were running meaningfully ahead versus our goals, despite operating in what everyone, I think, can agree is a very difficult operating environment. The combination of the Fortive Business System that you've been hearing so much about today, the deployment of our free cash flow towards our acquisitions, is the foundation of why we were able to do what we've done over the last two years and why we are so confident about what's going to happen going forward. One of the best examples of the power of the FBS is the improvement in our net working capital as a percent of revenue. We've hinted at this, showed this quickly a couple of times, but this dramatic improvement of a 50% reduction over the last four years is one of the things that really stands out for us. The culture and cadence and the tools that drive the rigor of FBS at each of our operating companies that you've heard a little bit about today, are on full display, especially when it's paired with our asset-light business models that we have. These results are critical to delivering the exceptional free cash flow growth we've had. Despite the tough supply chain environment in 2022, where you can see we were truly differentiated ourselves from our peers. That culture of improvement, continuous improvement, also shows up in our deal performance. Over 70% of our deals are either delivering double-digit ROIC, as we're showing in the top box here, or in the more recent deals, running ahead of the more near-term targets we've had in the bottom two with the acquisitions and the share buybacks. We're seeing, as we expected, some meaningful accelerations, and particularly in the second half of this year in the second group, where we want to make some improvements, in part because the pandemic's going to be behind us in the rearview mirror. It's going to flip from a headwind to a tailwind, and also because of the improvements that Olumide and his team are delivering for Accruent. We remain confident that all of our deals are going to be accretive for us and drive our growth, as we've seen in the last two years, for many, many years to come. When you look at the enhancements of our portfolio since 2016, it's been enabled by the performance of our acquisitions, which in addition to adding higher growth and more durable revenues, is also generating more profit and cash per revenue dollar that enhances our future cash flow. I showed you a moment ago, we are ahead on all the key metrics we established two years ago. We're extending these metrics to give longer-term targets out to 2028, so that you can continue to track our progress and hold us accountable for delivering on our commitments. As you can still see, it's still the same basic base, basic construct as before, with continued mid-single-digit growth through the cycle. Now at the upper end of that range, though, and with continued gross and operating margin expansion, with an acceleration to mid-teens in our free cash flow growth. When you look at that free cash flow over the next five years, that's going to be $8 billion for us to deploy, to deploy towards M&A and capital allocation. You should expect us to continue to be disciplined with regards to our capital deployment and informed by our ability to maximize our value creation over the long term. There's no change in our strategy here. Given the strength of this cash flow, we believe we can continue to accelerate our workflow and connected strategy with a mix of adjacent or bolt-on opportunities to fuel the cycle of generating more free cash flow for future investments. The primary, the majority of our free cash flow is going to go towards this to the M&A acquisitions, but we're still going to continue to be opportunistic and repurchase, do a share repurchase when we think that there's value to be created. Last year, we bought back 7 million shares. This quarter, and this year, we bought back an additional 2 million shares. We'll continue to look at this as a lever to help return shareholder values, particularly when we're undervalued, as we think we are now. We will continue to target, though, a modest dividend. No change to that. Given this free cash flow and our history in terms of deploying capital towards M&A, I thought it'd be helpful to look at some of the guardrails we have on leverage. I don't always think that a past is prologue, but I do think that this is a pretty good expectation of what the next five years could look like from a leverage perspective. Periods of investment, where we buy great assets and deploy M&A, and then periods where delevering, where we come back down. Our target here is to be between 1.0 and 2.0 net leverage, net debt to EBITDA, going forward. We'll try and stay in that. Our priority is to always maintain investment-grade rating. You bring it all together and see what's been happening here with our free cash flow, not only just over the last two years. We're well on our way to some, what... two years ago, I was told that we're incredibly aggressive with targets for our 2025 free cash flow, but also now moving it out, deploying some of our cash flow, not all of it, and what we think we can commit to for out in 2028, which is an acceleration on earnings per share and free cash flow in the mid-teens over that time period. What we've been describing here, what I've been describing here, is really the Fortive Formula. We've got great businesses and growing markets. They generate cash flow and margin expansion. We take that cash flow and deploy it towards great M&A. Along the way, we get better every day with the 40 businesses. We're confident about what. We're proud of how we've done, we're confident about what the next five years are going to be. We're excited for you to be along with us for the journey. I'd like to thank you for your time today. With that, I'm going to ask some of my team to come up here. We'll move to a Q&A session. Well done. We asked Pat Murphy to join us as well. As many of you know, Pat is will be retiring by the end of the year, but we thought no good deed goes unpunished, and we'd bring him up here to have an opportunity to answer maybe some questions, particularly historical questions about health. All right, I'm going to start this time, somewhere I haven't been. Steve. I didn't ask a question in the first round, so I'm going to ask a couple, if that's okay. On the AHS front, the performance has been, you know, I think it's generous to say it's been pretty inconsistent, and especially last quarter, there were kind of three issues I think that stood out. There was a supply chain issue, there was a distribution channel change or something like that, and then China, weighing on the results that were well below expectations. Can you just give us an update on where we stand, you know, intra-quarter here? Are we feeling any better about this coming out of the second quarter, or is it all pretty back-end-loaded resolution on those issues? Maybe given the transition here, I can take the first one. You know, I think, Steve, number one, if we think about the first quarter, we had a couple of things we talked about. One being some supply chain issues in Fluke Health. Certainly, China was part of it, and electives being even lower than we anticipated, and some currency situation, one-time currency hit that we had relative to margins. Obviously, the one-time currency thing was, by definition, one time. The healthcare situation gets, or excuse me, Fluke Health gets better. In fact, we've fixed those supply chain issues already, so they're behind us now, even in the second quarter. We expect to continue to, you know, sort of drive the business the way we thought. China will get better from where we were. It got better towards March. It was really more the sequencing through the quarter. China continues to get better, and certainly, as we finish the quarter, we'll be, we think, back to normal. Mm-hmm. likely. Then, as you've said, we've got, you know, the guide gets better in the second half because this go-to-market change that we made in the second quarter kind of gets through most of its efforts in the second quarter, and we start the second half with all of those things behind us. Just on Tektronix, can you maybe talk about how big those growth markets are and perhaps how you guys are maybe differentiated from your public peers, Keysight, and NI? I mean, I think that every time one of those guys sneezes, you know, your stock goes down. I think it'd be helpful to clarify where you're positioned relative to those guys and maybe how those markets differentiate you, if they do at all, and how you've maybe transformed the business over the last 10 years relative to where it was at Danaher. I would start with the end markets that are out there, the electrification of everything. All test and measurement can take advantage of the electronics going everywhere. Where you'll see a real differentiation with Tektronix is what we bring to this power efficiency. The acquisition of Keithley back in 2009 really gave us, in high power, precision power, a unique advantage. The probing technology, we've continued to innovate and build out, and the new platform of oscilloscopes. That's kind of the combo punch that gives us a unique and sustainable advantage in solving that power efficiency problem, that then we can take to a variety of end markets that are just abundance of electronics. Okay, Joseph Giordano. Hey, guys, thanks. For the deals that you highlighted that were below plan, like when you look at them now, what was that? What drove that? Was it an analysis error on like the market itself? Was it something about the positioning of that company? Was it an execution issue, some combination? Like, how do you diagnose that today, and what do you learn going forward to apply the next deal? Well, I... We can maybe tag-team this a little bit. I think, I think number one, I think we've been pretty consistent with this, is on Accruent, more product lines, and so what we were right, multiple product lines, it wasn't one business. I think what we've really been, I think, very transparent about is the product lines we thought were gonna do well are actually doing better, and that's the basis of the strategy that Illuminae highlighted. It was a couple of the product lines that we thought would be more transitory and would be hold up a little bit better than they did. It's taken a few more years to get through that. Where we stand today is mostly through that transition, you know, we can talk, and Illuminae can certainly talk a little bit about where we go from here relative to Accruent, but probably more broadly, Fortive. On the healthcare side, you know, it's really ASP, and it's really about the pandemic. You know, we didn't have a pandemic scenario, that's for sure. I think as we were talking about, you know, we're starting to see the inflection point of coming out of that, and certainly, I think, you know, as we've said for a while, we thought 2023 would be better than 2022, 2024 will be better than 2023 relative to that. The work that we've been at, both Pat and Tami, I think, have, and soon to be Tami, will get us to, you know, to much better performance. As Chuck outlined, I think, you know, you see that in the numbers, both in, both segment potential and the overall potential. I don't know, Illuminae, maybe talk a little bit about Accruent. That's probably a good transition, though. Yeah, you know, I mean, I think in terms of the lessons we learned, I do think that the product inheritance that we had needed some reengineering, if you will, to focus us on the ones that were growing. We didn't do that fast enough, but our team's now done a great job speeding up getting us to a focused lean product set and then investing behind a smaller sample instead of trying to do 25 different things. I think that happens because we're trying to carry all the revenues along, and I think at the end, sometimes you gotta focus and then go from there, and our team's done that now. The things that did go better than we expected, is how powerful FBS has been in terms of driving improvement in the company. The kinds of improvements I talked about in net working capital, we actually didn't have that in the original pieces of the deal, but we've been able to create so much value from a cash flow point of view, from that perspective. A lot of the FBS tools that we talked about, literally, our team right now is going through a process of taking all the back-end processes in the software company through Transactional Process Improvement, in FBS and trying to drive really dramatic efficiency and improvement in the experience of our employees in all of those different workflows. We didn't quite bank all that into the plan, but that's now coming at us. You know, I would say the thing we probably should have done faster is on the product piece, but the pieces that have paid more than we expected, has been around working capital and then some of this back-end productivity, which just speaks to the potency of the Fortive Business System in the software companies. Yeah, hi, how are you? We did some basic math when you put out your press release, and we sort of came up that, EPS growth was faster than the cash flow growth. Does that sort of imply some form of buyback baked into your guidance? Andrew, I think that's probably maybe a little more nuanced than the multi-year ROIC, and or multi-year EPS and free cash flow growth is narrowed. Keep in mind, we think about conversion, free cash flow conversion of being over 100%, and we'd expect that going forward. We didn't mean to imply that. And- I think when you parse it that way. Just within your business plan, just a very simple question in terms of accretion from the M&A as you deploy the capital. You know, what does it fit within the proposed EPS range that you're giving us for 2028? How much of it is M&A dependent? Oh, out into 2028? Probably around $1 is M&A dependent. Okay. You know, that which is, we don't even think it's all of our free cash flow being deployed. All right. Julian, oh, sorry, Julian Mitchell, here in the middle. Yeah, maybe just to follow up on that point on the acquisitions and the sort of future capital deployment. You, you take a dollar, it's $380 million or something of net income. You've got over $8 billion of cash flow the next five years. Just simplistically, do we assume it's a low 20s, you know, acquisition multiple? Is that the sort of game plan of what we should expect? I know, Jim, you and Chuck, you both said there's no change in the M&A approach, but I suppose, you know, there's a lot of discussion in the investment community about the acquisition profile. I just wondered sort of what you thought about that. Is the approach really completely unchanged from since the spinout? maybe I'll take the second one, and then maybe... Well, let me, a couple of things. One, when you said that there's, we've been no change in the capital allocation, that allowed for opportunistic share buybacks. That is, that actually has been a change since the spinout. That'd be, you know, one thing that I'd point out. I think just on your math, we can maybe catch up on that afterwards. Mm-hmm. I think your math would be right if you bought all that OP in the last year. You know, keep in mind, you probably you're going to buy some OP, and then it's going to grow double digits going forward. We can come back on that. I think you're a little hot on some of those assumptions, but we can talk about that. I think just around the M&A funnel, we tried to give more color to that actually, we put a funnel on a slide for the first time. to try to give you a sense of and the triangle really of kind of how our process works. Give you a little bit of sense of when we say we're busy, what that looks like, and that funnel is really articulates that or tries to articulate that. I think the second piece is around the triangle and the fact that most of the deals are going to be bolt-ons or these sort of adjacent things. The fact now that we have these five workflows built out, gives us even more bolt-on opportunity, obviously, because now we've got the workflows where they're at. You know, five years ago, we didn't have facility and asset life cycles. The first deal was always probably gonna be the toughest deal, but the second and third deals would be the better deals, and the fourth and fifth deals are gonna be even better. You know, when you start to think about where we've built every, you know, having now built out these five workflows and the fact that with $60 billion of served market, you ought to assume that, you know, we're gonna stay within those guardrails of $60 billion of opportunity. I think that's really how, you know, our efforts will be focused, you know, from here on. Never can predict what deals are going to happen, but certainly that, you know, that's a good construct for how we'll think about things. Andy, here in the first row, Ross. Then we'll go... Jim or Chuck, just like in the $450 for $25, like, how much wiggle room do you have to sort of restart the flywheel in a sense on M&A? You know, last year at this time, maybe it was a bit of a struggle, as you sort of talked about, in finding sort of good acquisitions that meet your target. You know, we went through, you know, the saga of NI or whatever, like, but, you know, so where are we now? What kind of cushion do we have in case it's harder to find acquisitions over the next couple of quarters? I think, you know, we've been doing this for a while. We, we wouldn't expect to go another couple of years without doing any acquisitions. You know, we'll see, we'll see how it plays out. I, you know, I think Jim was gonna say it's getting a little better, and we're optimistic about that. Having said that, there are some other levers, you know, where we sit right now, with, you know, higher interest rates that we, our free cash flow will de-lever, and that will give us the tailwind, and then we'll see what happens, you know, on share repurchases. I think there's a number of levers here for us to get there, but the priority is gonna be that we're looking for deals to accelerate our strategy. We think that's the best thing for long-term shareholder value creation. I would say things have stepped up a little bit in activity. I'm not sure I would say, you know, it's a flow of activity, but I think things have stepped up a little bit. As we've talked, Andy, you know, a little bit more market uncertainty tends to bring sellers to the table a little bit more frequently. I suspect if, you know, some of this uncertainty continues to linger, you know, as we get into the farther end of the year, we'll even see more activity. We certainly have enough to keep us busy right now. Chuck, maybe kind of a similar question around the margin opportunity. Like, you kept it the same, 75%+, you've got, you know, AHS at 125% and the other two segments at 75%. Is it different sort of reinvestment and, you know, is the 75%+ maybe emphasize the plus a little more, or like, how do you think about it? Well, I mean, you know, you're talking about the operating margin expansion. The challenge is that, you know, that you see Intelligent Operating Solutions up there in the north of 30%. There. ... all the businesses are going to fall through roughly about the same. You know, when you start calculating, you know, operating margin expansion because they've done so good, it's going to be a little harder for them to get to triple digit. If you're more to the middle of the pack, it's just mathematically. We're not really trying to say that much different. Hey, Russ, since you're right here, Scott Davis? Guys, can you update us on where we are in versus the deal model and like ServiceChannel, Censis, Provation, the software stuff? I kind of sense a little bit more swagger from you guys today than maybe in the last couple of years. Is some of the confidence that you're showing because you're ahead of the deal model on those important transactions? Yeah. I mean, they're great businesses, and obviously, you saw both of those outside, and if you had an opportunity to see the quality of the solution, we feel really good about it. Maybe I'll let each of you talk about the individual businesses, but, you know, we sort of beat our. You know, we had a $0.12 target last year. We were about $0.14. Most of that was more at Provation. We've gone through some transition at ServiceChannel in the first half of the year that we talked about in terms of the business model. We've, as we said today, we're on track for this year as well. Maybe each, you want to talk about Provation? Maybe I can talk Provation. I think we've been really, really happy with the team and the business that we have at Provation. The ability, while they're growing their Apex platform, continuing to grow additional modules that are add-ons to their PVMD product. Also the work that they're doing in new specialty areas is going to be another exciting growth opportunity for us. We have a fantastic team there. You know, we have a lot of great companies with a lot of great brands within Fortive, but I'll tell you, if you ever have the unfortunate experience to be in a GI procedure, talk to the doctor, and they're going to tell you how much they love Provation. We have doctors who will not practice procedures at locations that do not use Provation software. It is one of the most preferred solutions I think we have in the company. It's incredible brand, incredible company with great people. Yeah. just as a quick follow-up, can you guys remind us the sensor business, I think once upon a time, was a bit of a price down contract type business. As volume went up, prices went down. Have those contract terms changed over time? You have more pricing power, perhaps because supply and demand balance is a little bit more favorable for you today? Scott, are you talking about in our sensor business? In the sensor business. In the sensor businesses? Yes. Yes, sorry. Tam, you can probably take that. We have continued to run the play of Price Realization in the sensing businesses, and because they're pretty unique in the verticals they serve and the applications they serve, we've continued to get a flywheel of price in that space. I've generally had decent price in the businesses. It's obviously much better right now. Kirsten outlined the price realization tools that we highlight, and certainly, they've been a beneficiary of that. I want to come back to ServiceChannel and just maybe have Iluminae just finish the question that you had. Yeah, just to run that, I mean, first of all, I think we're getting every single software company we buy, we're taking the lessons from the last one. I would say it is fair to say that we feel really good about the performance of this latest set of acquisitions because all of the lessons that we took from the first one we did, we're applying it. I think the beautiful thing on ServiceChannel is we're incredibly excited about the team that we have in place. We're incredibly excited about the product offering and how differentiated it is, and how quickly the team is innovating on that to get it even to be more enduring of a platform. We're doing more in terms of the back end, and the margin acceleration has probably gone faster than we expected it would, speaking to the power of the Fortive Business System. That's probably what you're sensing as swagger. I think it's. We're getting better at this. Another thing that came to me, Scott, and it ties to Stacey's presentation, I think it's relevant, is many of you, when you did the walkthrough, you may have met Bill Pollock. Bill was the original president of Gordian when we bought Gordian. Bill took over ServiceChannel when we bought ServiceChannel, and we backfilled them with internal fills in both those situations. Bill's now running Accruent, he took it over from Illuminae, as well as running those three businesses. I think that speaks to the talent flywheel that Stacey was talking about, how someone who came into the company through an acquisition has now been we've been the beneficiary of his talent in a number of businesses, and he's bringing the folks that he's developed over time, bringing through into those jobs as well. I think trying to tie a few pieces of what you've heard today is a great example of how our talent flywheel gets accelerated as well. All right, next question. Josh? Thanks. I guess a pretty clear commonality throughout the portfolio you guys have talked about is selling productivity to the customer, right? Where in the business is it easiest to get the customer to think that way and maybe value the solution that way versus someone who's saying: "This product costs X, and I can't get past, you know, product versus what I get out of it in terms of my productivity? Yeah. Any sort of tales you would put on that? Well, we might have some segment leaders who arm wrestle for the best business award here. Let me, maybe we can, I'll go to a few folks first. I think, you know, number one, Josh, I mean, that is sort of the hypothesis when we look at market company valuation. We're really looking for those businesses that have that, where the ease of the contract, if you will, the return on investment is real high and real obvious to the customer. You know, when you look at the acquired businesses, I would say, they all have that in many degrees, in part because that was part of the selection process. My own vote probably would still be Fluke, because that's where I came from 25 years ago, and the truth is that, you know, most customers never ask what the price of the Fluke meter is. So I'll take my vote, I don't know. You've got a, you've got two segments of history here. Yeah. Yes. I'm gonna say that what we've experienced in the healthcare market over the last few years has created an environment of necessity of productivity because of shortages of people to be able to do things. I would say, you know, in most of the environments we sell into, a good productivity solution is always welcome. In this case, the productivity solution not only lowers cost, but it enables revenue to happen. we saw in our healthcare businesses that the solutions we were bringing that we would have thought of as productivity solutions, they were thinking of as things that were allowing the top line to continue to proceed. Even if probably some of those solutions, if they hadn't been productivity solutions, would have... We could have protected top-line revenue for that space, I think we could have been successful there. It was, in the healthcare space, a real necessity for productivity to protect revenue generation. Olumide, you've got three workflows. Maybe... Yeah, maybe just to extend on that. Give us a final thought. We think for each of our businesses, your point on productivity applies, but I think there's also safety and reliability. The way I'd answer it is, I think there's some of our workflows, like Environmental, Health, and Safety, where when we go in to have that conversation with the CFO or the customer, it is a combination of productivity, but also safety and compliance with regulations, and also the fact that if you have an accident, your plant's gonna shut down, and that shuts down your income stream. I actually think we have a powerful mix across our business. Same thing in Connected Reliability, right? It's a combination of, well, if you use this, you can do your work 50% faster. Also, by the way, it also means your accident rates goes down because you have your technicians using one device instead of six when they're standing on a ladder that's 500 ft up in the air sometimes. So it is a bit of a blend, and I would say because of that, it's, that there are different ways to message in each area. To Jim's point, if there's one thing I think we're really good at, is being selective in our market work and our M&A process to make sure that the deals we do, are things that come with that sort of market pull. Again, it's another one that we're getting better at. You know, I think part of the reason why you've seen us not deploy a ton of capital is a combination of valuation, but also we're disciplined about, you know, getting the quality assets, and we walk away from more things, obviously, than we do. I think that's how we end up here, to Jim's point. I guess just in the spirit of, like, Scott's question on sensing, any areas of the portfolio where the customer just can't get past that mental block? Kath? The mental block of? Of, like, pricing for productivity- Oh. -versus, like, "Hey, we're buying this." I don't know, maybe like Qualitrol or I don't know, you know, I don't want to put words in your mouth, but, like, is there an area where that's a problem? Yeah, sensing in general is a big category, and there are certainly sensors that are more pricing related. If you look at the markets that we serve in regulated and critical environments, these sensors have not only particular to that industry, but also come with the domain expertise and the application knowledge that these companies have lived in forever. I mean, Anderson-Negele, they have grown up in the dairy industry for 75 years. Qualitrol has been in the distribution of electricity business for 75 years. They're very good at the niches that they're in. The other piece I was gonna add to what Illuminae was saying is the LPM process that Kirsten described is really about this radical prioritization of where we add the most customer value. If we're spending a lot of energy on sustainment or products that aren't adding a lot of customer value, which means we're not getting pricing, they're either deprioritized or sunset in the process that we have. Yeah. One thing I would add about the sensor business is that oftentimes it's not a productivity angle, it's a little bit more about a functionality add, a capability add to our customers. It can be productivity, but more often than not, I would say it's more adding capability to customer solutions. Yeah, maybe to extend that, we had our leadership team together a few months ago and talked about pricing. Based on the experience last year, inflationary environment, we got more pricing than we ever had. What did we learn from it? I think one highlight from that for us as we approach pricing is, it's really about the customer value that we add, right? That's where we start from, is really make sure we're back to our principles, we're transparent, we're humble about the customer value we're actually delivering. What we found is we probably were underestimating the value we're delivering to our customers, and just getting a. Sometimes the block is as much with us as it is with our customers. Getting our teams to be more disciplined and actually, like, be transparent on your value, I think it's elevated confidence about, you know, how much price we can get. I couldn't think about any one of our businesses where we've had a problem creating the case for pricing. Next question, Deane Dray. Thank you. Another working capital free cash flow question for Chuck, and I'm not surprised that Jim stole your thunder and talked about the 2x improvement in working capital. Just that begs the question, at 7.5%, that puts you in an elite class among your peers. What's the theoretical level that you can get that down to? I suppose a lot has to do with the mix of software, but you're doing it without a majority of software in the business already. Where and how does that go down from here? I should say, how does that improve from here? Thanks. I think a couple of things. One, plenty of... It's a team here, so anybody can talk about their impact on working capital. Where, where could it theoretically go? One thing we've learned with our Fortive Business System is, we don't know. We just want to keep getting better. You can break that apart. There's always going to be ways to make it better. We'll never stop. We don't come into any year. You know, this past year, every, I think every operating company improved their working capital terms. We don't come into a year like, "Well, you had a pretty good year last year, I guess you're done." It's, "Nope, now we want to." We'll keep doing that with the hardware. You heard Olumide talked about, you know, a software business that was slightly negative working capital, then they said, "Wow, we can't get there on, you know, in the short term, get there with the earnings that we thought we'd do, but we can get there on cash flows." They went out and found a different way. I just, it's always gonna be, we're gonna get better. Ed? Just a separate question, it got touched on earlier about the impact of COVID and being on the other side and supply chain inefficiencies. One of the results was you carried a much bigger backlog in some product, short cycle products than you ever did before. Is that all going to normalize? Is there anything that's permanently changed in buying patterns by customers, where you will carry some additional backlog that you might not have had before all of this? You know, Deane, I think it's a question, and maybe just for numbers' sake, we came into the year with $350 million of what we would call excess backlog. We said we'd probably deplete about half of that this year. Just from a numbers perspective, that's what it looks like. We thought we'd deplete some in the first quarter, but our book-to-bill was one, so we didn't in the first quarter. You know, with reaffirming our guide, we'd still anticipate to deplete some backlog. It's a good question about whether or not people want to work with a little bit more backlog. Having... Given the fact, though, that the backlog is mostly in businesses that we've been a part of for a long time, Tek, Fluke, and Sensing, I anticipate customers at some point in time to come back to normal. I think that's probably true. There might be some situations. You know, generally, you know, some of our distributor partners, as an example, Tek, as an example, don't have a lot of inventory. They're still getting pulling right through, and a lot of it has to do with the secular trends that Tami talked about. Let's see where we get to at the end of the year. I think one of the strengths of the portfolio right now, in times of little bit of uncertainty, is the fact that we have this backlog. By the way, 0% has been canceled, so it continues to be in a good place and really gonna be helpful, I think, if things get a little noisy here. Next question, Joe O'Dea. You touched on it a little bit in terms of other specialties and Provation, but wonder if you could expand on that a little bit in terms of where things stand and talk about maybe where TAM was at acquisition, where it is today, based on some of these other specialties, how we can think about revenue in those areas over the next two years? At the time that we did the acquisition of Provation, they were a company focused a lot in GI, and they have a very strong position in anesthesia as well. They are currently working on their next specialty area, which is pain management. We expect that they'll probably launch their pain management solution sometime in early 2024. They have highlighted, I think it's around 15 areas that they could go to. They have five areas that they've focused on as we look at kind of a five-year window of time that we'd like to bring to market. We are gonna bring these new specialties to market riding on the Apex platform. The core platform that we have, the SaaS platform that we've talked about, it's really the creation of that particular solution. We have a lot of the backbone of procedure documentation through our GI business, it really has to do with creating the expertise around these particular specialty areas, and we think that the cycle of that is maybe kind of an annual cycle of being able to kick those out. The next plan would be pain management, and, you know what, in those specialty areas, we're kind of creating markets in some cases because there aren't automated solutions in all of these specialty areas. When we went to market with GI, you know, we were able to take a procedure time, let's say, 15 to 20 minutes, that it took a doctor to document a GI procedure down to about two or three minutes. What that allows is GI docs to do a lot more procedures, and we expect that we'll be able to provide that kind of productivity enhancement in the other areas that we have focused on. We're very, very excited about expanding Tam through that, but also, you know, using that as a core growth driver going forward. Joe, maybe just from a model perspective, you know, we really built most of the five-year model, however, on the transition to ASCs. And just the SaaS conversion that we've been talking about, and you saw the slide in Tami's presentation. The new procedures are sort of upside, but because they're SaaS solutions, takes a little bit of a while for that to be a meaningful part of the revenue base, but mostly an opportunity for us in future years. The things that we've been keeping track of and really talking to everyone about have been mostly around those other ones, particularly the SaaS migration. Mm-hmm. Just another M&A one for you, but if you think about the 2025 framework, I think you run the organic numbers, you can get to about $4. Maybe there's $0.50 of M&A in there. Anything in terms of bias? Because I think when you talk about, you know, like, mid-single-digit ROIC on bolt-on deals, you know, if you were to put the cash flow over the next few years to that, you're gonna get that $0.50. In terms of thinking around kind of hardware versus software, bolt-on, that fits into that framework for what you expect on kind of capital deployment contribution to earnings over the next few years. Well, you know, the first thing I'd say is I think you're a little light on what the organic growth will get to. I don't think we need $0.50 to get there. Still, I think your bigger question is: how do we think about the returns? That's we're focused on, you know, especially if we get to these bolt-ons into these existing workflows, we think that they would start off with a maybe a higher starting point than we have at of recent. I think that's maybe what we're looking for. Yeah. I would say the concentration, hardware, software, quite frankly, I think if these three showed you or two now showed you their M&A funnels, you'd see a good mixture of hardware and software deals, bolt-ons, and additions, you know, bigger, maybe slightly bigger additions to the workflow. You know, they work really hard every day to build those funnels out with a broad set of opportunities, not knowing when deals may necessarily become available. I think where we stand today is in a good position to do both, really centered on those five workflows, where we can really add value in all the ways that were described during the segment presentations. One last question. Ellen, if you could give the mic to Steve Tusa. Sorry, just to follow up to Julian's question on the acquisition spending. What will leverage be at the end of the plan period for you guys? Jim, I guess, you know, five years is a long time. How do you think you guys would perform in a mild recession scenario with this slate of businesses, and, you know, could you still end up hitting that target even if that happens? You know, what kind of economic assumptions are in the back of your mind when thinking about these long-term targets and how you guys could defend yourselves in a? Yeah ... in a tougher economic environment? Steve, did you ask what would our leverage be at the, at the plan horizon that we-? Yeah, in the plan horizon. 1.11 term. One term. That's, yes. Yeah. You know, more, more broadly, you know, that's why we always talk about the through cycle, and quite frankly, the five years gives you a little bit of time to have a cycle and return. Obviously, the last two years of 10% growth were on the back of a slower year. You know, I think number one, we, you know, we don't predict when a recession would be, but we do look through, you know, when cycles would occur, and we feel like there'll probably be one or two, but the coming back will be better, and ultimately, we can get there. I think relative to the broader point, though, Steve, is, you know, this is we built the portfolio around durability. You know, we really were thinking when we came out in 2016, a lot of the feedback we had was, is, "Are these cyclical businesses? How can they?" And we've worked really hard through a number of ways to really continue to improve the business relative from a organic and inorganic investment perspective around secular drivers. And so, you know, in 2020 is the last time we had a tough year relative to the market dynamics, this time because of COVID. We grew earnings and free cash flow in that year, despite revenue being around, you know, a little bit down. So, you know, even in an environment where we have a situation where we might necessarily not have the macro the way we would want it, we still will grow. We will still work really hard. This is where FBS is really an incredible tool, is that it gives us the tools to really make sure that we continue to do strong work on the earnings and cash flow front. Those, you know, those two graphs were both earnings and free cash flow, so, probably that way. All right, that concludes our prepared materials. I'm going to hand the floor back to Jim for some closing remarks. All right. Well, thanks. Thanks, team. I think number one, hopefully, when we started the day, we talked about the fact that we really wanted you to see really three things. One was the power of our strategy, what that looked like, give you a real insights into our Connected Workflow Strategy, help you understand from an innovation perspective, how we're really making innovation work for our customers and ultimately for all of you as shareholders. Number two is our execution capability, founded on the culture of FBS, so critical to what we do and the cadence of how we run our businesses every day. Hopefully, you got a sense in a real-life example, not only in Kirsten's presentation, but one, the segment leaders really gave you real-world examples of how FBS is really helping us execute against our strategies. Most importantly, the team. The quality of our leadership that's here in the room, the quality of the individuals that were with you during the innovation showcase is only representative of the quality of our team, 18,000 strong around the world, making FBS happen every day, executing against our strategy, and ultimately, creating great value for everyone in the room. Hopefully, you got a sense of how those look financially. Coming back to our fundamentals continue to differentiate, whether it be on revenue, whether it be in margins or EPS, and certainly free cash flow margins continue to get better. We think the best years are ahead of us. We feel really proud about the work we've done, but no serious continuous improvement person would ever say that we were perfect, nor would they ever say that the future won't be better than the days behind us. So that's what we get up for every morning. Why we get so excited in the morning is because we have the opportunity to really make the business better every day, and we've got the tools to do that. We have the confidence as leaders to know that our teams around the world are steeped in our business system and want to make the world a better place. Hopefully, you got a sense of the key themes. Final, you know, sort of final thoughts on the day. Hopefully, you got a sense of the how the portfolio has transformed. We believe more evolutionary to higher growth, more profitable businesses, the compounding effect that that gives to us through our connected workflow strategy, really connected to those secular trends. I'm sure you heard of the FBS word. We probably should have played a game where we'd give $100 to the person who guessed the number of times we used the Fortive Business System acronym. That probably would have been a good bet. Maybe we'll do that at the next one. Clearly, you see a team that's excited about it, but hopefully, more importantly, you see the evolution of the quality of tools. Really, what I've always said, and this is for decades now, is the best thing about our continuous improvement system is it continually improves. Finally, you roll all that up, you end up with being able to take that free cash flow, be disciplined about it, to and hopefully, you see with $8 billion of cash over the next several years, lots of degrees of freedom in how to make capital allocation strategies that can ultimately accelerate strategy and build a better Fortive. I want to thank everybody for your time today. I know it was a fair amount of slides. You were wonderful in your questions, clearly supportive in your intent. We couldn't be happier about the day for us, and we hope it was a great day for everyone in the room and everyone virtually. Thank you for joining us. We thank you for your support, and we look forward to seeing you on the road. Thanks. Have a great day.