CEO, Fortive Corporation (parent company), Fluke Corporation
Soroye: We’re confident we’ll outperform the S&P over the next 3–5 years
Olumide Soroye, CEO of Fortive's Intelligent Operating Solutions, outlines post-spin growth plans, AI-driven disruption, and how ...
Transcript (10 segments)
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Host0:00
Good morning. Thank you for joining us here on Worldwide Exchange.
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Olumide Soroye0:03
Good morning Frank. Great to be with you.
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Host0:05
All right. So we're coming off your Investor Day. The stock traded a little bit lower on your financial targets and also your vision for the company. But why don't you spell it out for the audience how you see your company going forward. You're in the essential tech business. Things in the health care space and also electronics that tradesmen and also health care professionals obviously use.
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Olumide Soroye0:23
Thank you, Frank. You know, we begin an exciting new chapter at Fortive. We've been a public company for about nine years. But this is a new Fortive today. And the case we laid out yesterday is really compelling for our long-term shareholders. We're quite confident that our financial framework will outperform the S&P 500 index over the next 3 to 5 years. And it's really simple for us. First, we're a very focused company. We keep the world safe and productive in your classrooms, in your parks, in your neighborhoods, in anything you do in a restaurant or a grocery store, in your office buildings, in the places you go to get healthcare. Our essential technologies are in there keeping people safe and productive. And that's exciting for our teams. We've got a great plan with our Fortive business system to drive faster growth, and we've got a great plan to be a durable company based on the fundamentals that are wired into the company. So we're quite excited about the path ahead for us.
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Host1:24
All right. Another part of your Investor Day is that you're spinning off part of the company into a new publicly traded company. Rallying the idea here is that you're keeping in the remainco in this case, which is Fortive, some of the more stable revenues. One of the things that you were really talking about is that 50% of your revenue is recurring and kind of subscription based, and you also talked about your new AI platform. So I want to ask, as we look at the new Fortive, how is AI and your platform? How is it going to disrupt your competition?
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Olumide Soroye1:53
Absolutely. So I mean, first of all, the Fortive we've had so far had two different companies within it, one that's really stable, 50% recurring revenues and one that is a terrific business that rides the upswing in big technologies like electric vehicles and semiconductors, but also rides a downswing. So what we did was just separate those two different waveforms for this going forward. Much more durable, resilient, great company that outperforms through cycle. AI is a huge piece of what we've done. We started the journey seven years ago before it became fashionable, incubating our AI capabilities in a center of excellence that we had set up. What we've now done is we've infused that into the mainstream of everything we do at Fortive, and it's transformational for the products we offer to customers. Because we have 25 billion square feet of space that's managed on our platform. We have 30,000 units of low temperature sterilization in hospitals around the world, and we have millions of lives touched by our professional instrumentation. So we're bringing AI on top of the data that flows through all of those connection points in our world, and we're using that to drive insights for our customers in a way that is difficult for competitors to do because they don't have the footprint and the proprietary data sets that we have. So we're quite excited about that.
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Host3:15
I would imagine you are excited. So I want to also get your reaction to some news that we saw last night going into this morning, the U.S. and China reaching a handshake agreement when it comes to trade. How tariffs impacted your company, how does the potential of a long-term deal impact your company?
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Olumide Soroye3:31
Well, China has been a great market for us as an end market, but also in terms of our supply chain. And what we've done over the last five years since the tariff regimes began is we've been able to really build resiliency into our global supply chain. So we've created ways to minimize our exposure to tariffs in general. I think with this new framework, we're very optimistic that things will get resolved quickly. But from our point of view, we've tried to control what we control. And our teams do a fantastic job of finding a path to be successful.
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Host4:06
I totally get you want to control what you can control, but can you give us a sense of what percentage of goods that you sell here in the US you make here in the US, and your exposure not only to the US-China tariffs that seem to be on the way to being resolved, potentially at least to some degree, but also the quote unquote retaliatory tariffs that have been upheld, at least for now.
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Olumide Soroye4:25
Yeah. So the first on Liberation Day, when the first set of tariffs were announced, we talked about $200 million impact from those tariffs, most of that between the US and China, components from China, products that we ship into China. After the first sort of de-escalation, that number went down to 100 million. In terms of the impact on our P&L. And again, we've been able to offset most of that with strategic pricing and supply chain shifts. And with this new framework that's set up, we're quite optimistic that that reduces the...