Everybody. Welcome to Greensboro. Good to have everyone back at Gilbarco Bieder Root, first time since 2004, so excited to have everyone here. For everyone I haven't met yet, I'm Matt Cugino, Vice President of Investor Relations here at Danaher. We have Lisa Curran, Vice President of Investor Relations at Fortive.
I know some of you have met her in the past, but excited to have Lisa on board. Forward looking statements, I'm not going to read all these. I do need to say one thing. Today's presentation may include forward looking statements and actual results may differ materially from these statements. Please refer to the slides for more information.
Okay. The agenda, great day planned for you today. First, we're going to have Jim Leko, Fortive President and CEO come up and give some opening remarks on Fortive. He'll have a short Q and A session after that. Martin Gafinowicz, Senior Vice President of the Transportation Technologies Platform will come up along with some of his team members, go through some of the details of the platform, including GVR and telematics as well as talk about some of the opportunities for the platform going forward.
Martin and Jim will take a short Q and A we'll have a short Q and A session after that. We'll ask that you leave any detail or specific questions on Transportation Technologies, GVR, Telematics until that Q and A session. We'll take a short break for about 15 minutes a little bit after 2. A little before 2:30, we'll go through our tours and demos get you out of your seats into the factory. Cocktail reception will start at 4 and we'll have everything wrapped up here at 5 So thanks again for joining us.
And
Jim, bring
you on up.
Thanks, Matt. Good afternoon, everybody. 1 of the tried and true strategies that Martin Gafinowicz often employs when he reviews strategic plans with myself and the executive team at Danaher is to have a large barbecue meal right before the really important strategic discussions as a way to avoid conflicts. So we've attempted to employ that strategy today with you guys. So hope you enjoyed your lunch and welcome.
It's great to have you here. We were back here in 2,004. I was running the DBS office back in those days. And we certainly I think if you were at that event and you have an opportunity here to see what Martin and the team have done with the business here and the time between that, I think you're going to be incredibly impressed at the platform that we've created, not only really for success today, but also for wonderful growth and margin expansion into the future. First, we took the opportunity as we have at Danaher and several times, knowing that you've got lots of bags and water bottles and things like that to use the money that we would normally deploy those kinds of gifts and really give it to charity.
So we really focused on 2 charities here. The Gilbarco team here in Greensboro has had a long standing almost 10 year tradition of building a home with Habitat for Humanity. And so we'll have money going to Habitat. And then our telematics team, a team that's only been with us a few years, but has really looked at a global charity to really give the opportunity to all their associates to participate in helping cancer research. And you can see all the number of charities that that foundation supports.
So a number of dollars that will go to a great cause. And hopefully that works out with all of you. I think as we've often said, we really want to make a difference more than just the great businesses we have, but we want to make a bigger difference in the world. And by avoiding those gifts, you're helping us make that contribution. Maybe first an update before we get into the business a little bit on the details of the separation.
July 2 will be the date with a record date of June 15. The trading day will be slightly before that probably. You know the stock dividend. The stock symbol, if you haven't seen it yet, is FTV. We're obviously very we announced the other day that we're the state registration statements have been declared effective with the SEC.
We've received a favorable IRS ruling. So a number of the regulatory things that we needed to complete are very much in the back burner at this point. And the leadership team is fully in place. So we're very much ready for the separation. I hope today by the end of the day today, you get a great sense of the opportunity in front of us based on the quality of the businesses that we have and the opportunity that we to take advantage of the great things we have going at Fortive.
First, kind of who do we want to be? And I think when you think about a diversified industrial growth company, a lot of things come to mind as to what how you would answer that question. I think we're really going to tell you today in a couple of ways how we think a great company ought to be the strength of our market leading brands, the great positions we have with customers, the financial profile of the business, the breadth of the portfolio that we have for opportunity is really what you'll see today in spades. And let's get into that. Many of you have seen this slide.
We'll go into some detail in a variety of parts of Fortive. About $6,000,000,000 worth of revenue, a little over $6,000,000,000 worth of revenue, two segments that we will report in, we'll go into detail in those businesses. Not as global as Danaher, about 58% of our business in North America and that certainly provides a growth opportunity for the business to globalize the business in ways that we know how to do relative to our experiences at Danaher over the number of years. Our growth drivers, you'll see a number of them today are really the growth drivers for the business. You'll see how Gilbarco and Veeder Root and our telematics, the Transportation Technologies businesses are taking advantage of those drivers, whether it be environmental regulations or some of the opportunities and innovation that come from energy efficiency, safety, security.
We certainly, as I mentioned, have an opportunity to globalize the business more. And then certainly a growing trend around the world of connecting devices with software and services. And you'll see you'll hear from Andrea Mulhall today how we're doing that very specifically with Insight 360 in this business. But I think it will really give you an example of how we're doing it more broadly all around the portfolio. Our business characteristics are good and we'll certainly talk a lot about this in later slides.
So really the thing that gets excited about for us is good growth drivers, great financial profile with tremendous financial strength and a team ready to take advantage of the opportunity. We normally don't put the entire organizational chart in front of you, but I think it's important for us to lay a little groundwork with you. So you know the who in Fortive. And I think it's the Board we're exceptionally excited about our Board of Directors with Mitch and Steve Rails, who have been the founders of Danaher, who will continue to provide great advice and strategic insight to us, as well as be our large shareholders in Fortive. Alan Spoon will be our Chairman.
Alan with Polaris Ventures for a number of years. Alan will be our Chairman and has been with the Danaher Board for a number of years, almost over 17 years. So good continuity with in terms of a lot of the things relative to how we create value in businesses, great strategic insight like they provided to Danaher with 3 new folks with an emphasis really on technology and capital allocation. Feroz Dewan from Tiger Capital who really has been a great investor over time, really understands the world on a global basis, really is a tremendous asset to how we helping us think about the business differently. Kate Mitchell from Scale Venture Partners.
Kate was a founding member of Scale Ventures out in Silicon Valley and brings a real technology bend to really understanding how to create value through capital allocation relative to technology. And then Israel Ruiz, who has a financial expert because he's the CFO of MIT, gives him great financial insight to help us understand the opportunities that will be available to us financially. But also having at the hot bed of technology and one of the best global technology institutions in the world really gives us some insight as to some of those very early stage things that are going on around the industrial marketplace, really give us an opportunity to really see around corners in new and different ways. And that group as a whole really combines a number of years of experience, both in Danaher and outside of Danaher, I think to give us a great advantage as we get started here in a month or so. The team exceptionally excited about the team.
A lot of years of Danaahir experience here. Many of you have met Chuck McLaughlin, our CFO. Chuck has been with the company for a number of years. He's done some great things. He was Tom's partner at Beckman when we bought Beckman Coulter to really drive the improvements that were in the business there, do a number of M and A transactions that have accelerated our diagnostics platform.
And his last job with us was running the largest platform in Danaher, the diagnostics platform as the Chief Financial Officer for that business. So a lot of breadth of experience both in Danaher and in acquisitions that really I think is going to be a tremendous partner for me and the rest of the leadership team. You'll meet Martin. Martin has been with us for a long time. And Dan, he and I have been partners since I started 20 years ago at Veeder Root.
And he was on the team at Veeder Root. Martin's created tremendous amount of value and you see a lot of that today. Along with the other 3 operating executives, Pat and Pat and Wes really make up a tremendously experienced operating team for Fortive. Our M and A team, Raj Ratnakar and John Schwartz have been with Danaher for a long time, give us both strategic insight and corporate development expertise. Raj has been with the company on a number of deals.
John has pretty much been the corporate development leader, is the number 2 guy for Dan's team for a number of years and has really been involved in almost every major transaction we've made over the last 10 or 11 years. And then you get a chance if you happen to say hi to Barbara Hewlett, maybe you know Barb, she ran Fluke for a while. She's for a number of years did a great job at Fluke, has run our DBS office for a number of years now, great insight and will come over and not only run DBS for us, but also high growth markets and a number of other opportunities to help us be a great partner to me and the rest of the team. And Stacy, many probably not someone you've met, but I think really a great partner, been with Danher a number of years. And then Peter Underwood, who's the new one to the team, the only outside hire on the team.
But Peter is a great legal partner for us and he's here today as well. His last job as General Counsel for Regal Beloit really gives us that expertise that from a public company perspective that I think really rounds out the team from an experience perspective as well. So that's the team. And we're exceptionally excited about it. But the thing that makes me more confident about the success of Fortive is the fact that unlike a lot of companies who try to bring a continuous improvement culture to their company, we have 24,000 team members around the world that have been steeped in DBS.
So wherever you go anywhere in Affordive Company, that's going to be a company that has had a lot of experience with the tools of DBS. And so that's really what gives me the confidence that we know both on the lean side, we'll talk a little bit about that, but also on the growth side. And with 10,000 growth leaders, whether they're engineers or sales and marketing folks, a tremendous opportunity to leverage the success that we've had in the past, the skill set that we've had in the past to the Florida businesses. And when you think about the breadth of experience, not only with that team, but the leadership team, couple of 100 acquisitions, almost 100 years of Danaher experience, It's really, I think, a very experienced team on a go forward basis. We'll talk about the platforms a little bit, but just to kind of give you a little bit of a Two segments, Professional Instrumentation with about the same size, Professional Instrumentation, a little bit higher gross margins, a little bit higher operating margins, but still 2 great segments.
And really what you see below on the page is really an outstanding group of brands and market positions. And we'll talk a lot more about those as we get deeper into the segments and the platforms. So first, Professional Instrumentation. This is really a segment that comes together because of helping customers measure and monitor physical parameters and increasingly around helping them create actionable intelligence around the data and the measurements that they create. In field solutions today, 2 great businesses, Fluke and Qualitrol, our largest platform within the segment, good profitability, good market size at $7,000,000,000 in market size.
And these businesses really today provide online and offline software and monitoring tools, hardware and software monitoring tools to really help professionals think about reliability, think about uptime and really try to help our customers think about new ways to bring their uptime, the data to their uptime solutions. Going forward, these businesses have an opportunity to build a platform around that to really be one of really to build a great strategic platform around uptime and to really be in terms of preventive maintenance, really a solution for a variety of industries, not just in utilities and in the industrial a variety of industrial applications, but also in biomed as well with a growing biomedical business at Fluke. So really a great platform and a great number of extension opportunities over time. Product realization might be a little bit different name in terms of what you've seen before. But what brings these businesses together is really a common view about helping a multitude of industries think about how to help customers develop products in a variety of markets.
At Tektronix, historically an instruments company, a test and measurement company, but increasingly more software and services, helping digital designers, helping engineers develop new products for next generation technologies. Invitec doing the same thing, but in the medical industry, primarily in the diagnostics markets. And then EMC doing that in very much a similar way for aerospace and defense and increasingly in satellite markets. Their propulsion technology and their design capability and their deep understanding of customer workflows is helping them bring those technologies to small satellite technologies as those get as that market continues to grow. So a good set of new applications and a growing set of software and service models to build out and help our end users with great strength, global strength, help end users really understand how they can better grow their business through the through relationship with us.
And then finally, Sensing Technologies. Sensing Technologies is really a business that's been around Danaher for a long time. At almost $500,000,000 it's a good set of businesses, good profitability. And really there is really an opportunity to take the sensing information that we've created over time and create broader solutions around that. And really for IoT applications in a number of markets from food and beverage on through a number of other verticals.
Industrial Technologies is probably a little bit more of a technical equipment and component company, little some software, particularly in Transportation Technologies. I'm not going to steal Martin's thunder today around transportation technologies. You're going to get a deep understanding of that. But a real opportunity, what you'll see in evolution over the last several years is really helping the business continue to take it into new vectors of growth, new adjacent markets and really build great capability for a number of great growth drivers around the world. You'll hear about EMV today.
What I hope you take away is a not just EMV story. What Martin will really talk to you about is all the other vectors for growth that really are in transportation technologies, whether it's the things that are right in front of us or it's helping customers with advanced supply chains, logistics models or helping people think about smart transportation as the world becomes more urbanized. So we're attaching ourselves to some really great macro growth drivers over time. Automation and Specialty is a business that you've known for a little while. Certainly Jacobs Vehicle Systems, the initial starting point of DBS for Danaher 30 years ago, part of this.
And our automation platform, I think, has really started to really change itself from really going after new and important verticals. Obviously, the motor and drive business, but what we've done I think in the last few years is really build that portfolio more around niche applications where we can really add customer value, but also help customers in great markets like surgical power where we have tremendous technology and innovation advantage. Franchise distribution, many of you know about Matco because it's been a part of the company for a long time. You know about Ampco Coach. But Matco story is just a wonderful growth story for us over the years and it's probably one of the great examples of DBS or FBS really at its core, driving considerable improvement year on, year out, 20, 23 of the last 25 quarters of mid single digit growth or better.
So it really shows and demonstrates the power of FBS or DBS in the business. So hopefully that gives you a sense of these 6 platforms, what they do, but more importantly, what they can do. And when you look at our market position relative to the served market, considerable opportunity for organic growth and real opportunity to create what I often call the flywheel. You're going to the strategic flywheel. You're going to hear about that in transportation technology, where when that's done and done well, you've got a great example of it.
And that's really how we're going to spend most of the day. And what that really means is using M and A on a consistent basis to advance strategy in the business. Sometimes that's bolt on acquisitions to bring in technology. Sometimes it's maybe a slightly bigger business to take the business in a new vector for growth. Sometimes it's a high growth market acquisition to extend our reach into a new part of the world.
And when you put all that together, I think you really build the flywheel and we have opportunity to do that in all of these 6 platforms. And what you'll see today at Transportation Technologies is that done exceptionally well. So one of the great things today is you're going to hear FBS and you're going to hear DBS probably so many different times. And so the first thing is they're the same. And that's to me the great part of the Fortive story.
Those of us who've been around Danaher for a long time and love Danaher because of DBS, one of the great really things about Fortive is that we get to bring FBS into the company with the same passion, energy and tenacity that's made Danaher so successful for a number of years. It's going to be that same way with the 24,000 folks that I talked about a few minutes ago. And we'll talk a little bit about how that is a foundation for growth and profitability over time. First, the model. You may if you followed us for a while, you've seen this.
It starts with leadership, leadership who's experienced, who understands how to apply these tools, not in 1 year, not in 2 years, not in 1 business, not in 2 businesses, not in just the core business, but also in acquisitions. That leadership is very much a part of the Fortive leadership team, but also part of all of our operating companies that we have within the business. The lean tools, very often you hear a lot about those as factory tools. But in summary, those are really tools for thinking about reducing cycle time and eliminating waste. And that's those tools whether they're applied on the manufacturing setting, you'll see that today, but you'll also see it in other settings as well is really the forefront of improving quality delivery and cost for our customers and as well as our shareholders.
And then the growth tools. The growth part of the business, you'll see several examples of that today. Gilbarco is a great practitioner of the growth side of DBS or FBS. And it's really those three coming together, which really provides for the fundamental culture and competitive advantage that we have in the business. It's not we've talked a lot about the great cash flow in the business and what that will look like over the next few years.
But we should also talk about the core growth opportunities because they are good. Number 1, you'll hear today and I think in a number of businesses as well, the size and scale of our installed base and the strength of our market positions really gives us the opportunity to continue to build, gain share in a number of markets, including high growth markets. So that's clearly an opportunity for us over time. Some of those markets are noisy. Obviously, not every market is the same these days in terms of high growth markets.
But there's clearly opportunities over the next 20 or 30 years, certainly in the next 5 to 10 years as well for growth in those selected markets. And we're making those investments as in a smart way as we see those markets play out. And then regulatory opportunities, you'll hear a lot about EMV, but a number of other regulatory opportunities that really allow for us to really take advantage of our installed base, take advantage of our market position with a growth driver that may be happening to us over the next several years. You hear a lot about data and I'm sure a lot of industrial companies talk about the data that gets created. I think with us it's really about a number of our businesses that are accelerating opportunities and to really use data, whether it's sensing or condition monitoring or robotics, number of our businesses looking after and taking advantage of good market drivers relative to that.
And then creating more value with better customer relationships through software and through services. And then finally, thinking about Connected Instruments, a number of software as a service examples within Fortive today. We have a number of software startups within Fortive. And I think that's one of the most exciting parts of the Fortive story, while still early on in our career or early on in our businesses, a lot of examples of software startups in the business. You've heard us talk about Fluke Connect and what the Fluke team is doing around connected data and factories to really add value into the business.
You'll hear about Insight 360 and I'll talk about a minute at Matco in an automotive aftermarket application, which is very unique, all of which those businesses are really creating value through extended relationships with customers through SaaS. And then you'll hear from you'll hear today from Renat, who talks about a very large Software as a Service business, our Telematics business. Our largest SaaS business within Fortive really not only gives us a great business model, but it also is something that we can replicate throughout the rest of Affordiv. And so we're using the learnings that we have from a large scale $200,000,000 plus SaaS business at our telematics businesses to apply those lessons to what we do in some of these other opportunities. Madco is a great example.
Madco, one of our best businesses over time and really the use of the FBS growth tools, web marketing to really this business is a franchise model and growth is partly determined by the number of franchisees you gain every year. And using digital marketing to really create a new relationship with people, potential franchisees, they've been able to accelerate the number of ads that they can do every year through digital marketing. But even more important than the growth of that is the quality. They understand a lot more about those people and can really get them ramped up and selling much faster with the tools of FBS. This is a very innovative business.
And again, I mentioned the SaaS business using accelerated product development and voice of customer tools within the growth within our growth family of tools. They've really brought together a number of product lines, including in diagnostics that is helping drive their growth. And then just continuing to be great at the tools of lean, which have driven great margin expansion a continuous basis. 1 of our highest margin businesses continues to be that way as well as working capital turns as well. Great performance, but a great road ahead as well.
Innovation will continue to be a hallmark and important part of Fortive. And technology leadership through innovation, thinking about how to solve big customer problems is a big part of how we think about innovation at Fortive. I mentioned MaxMe in the last couple of slides at Natco. This is really helping our customers' mechanics scale their business by being able to have a SaaS or pay as you go model for diagnostic applications. So instead of buying diagnostic tools for a number of automobiles that they may never do, they can download in a monthly subscription, they can download that diagnostic software for however they're going to use it.
This just brings a brand new solution to the marketplace at Madco. In a business that traditionally we think of as maybe a toolbox and a ratchet business bringing unbelievably innovative technology to the marketplace. In porta scab part of our automation business, we've really seen great innovation there. And as I mentioned, really thinking about surgical techniques and how to make that safer for the patient by having autoclavable technology, which allows for the instrument to be sterilized in a much faster way and a much more complete way and using the key aspects of miniaturization to really get that into new tools that are going in the market, which really gives us a great position in a very high growth market. Teck is the leader in the world in oscilloscopes and the 1st company to launch a 70 gigahertz oscilloscope, the top of the line technology for the biggest technologies that are going on in the world really gives us an opportunity to bring patented technology to a lot of the high speed bandwidth applications and data centers, wireless applications and cloud computing.
And then finally Fluke, the leader in the world in digital multimeters and a great position in thermal cameras brings those technologies together in a way that allows for a safer, more usable work experience for the end user, reinventing a category that they've been a part of for over 30 years. So not only makes the workflow streamlined through the data that Fluke Connect brings to them, but also keeps engineers and technicians safer on the job. So a number of essential technologies for customers that we serve in new and unique ways that I think will continue to be a hallmark for us going forward. There's often been a story that because the margin structure for the business is very good, that maybe there's nothing left. And I think one of the big things to really take away from today is how we continue to be able to find margin expansion opportunities in all of our businesses.
And whether that's some of our highest margin businesses that have continued to drive significant margin expansion over the last 3 years through the combination of lean tools, supply chain tools, smart pricing out of our growth playbook, really bringing great execution to continue to bolster competitive advantage and drive margin expansion or with many parts in the existing portfolio where we have that are below the fleet average who have opportunities to really come up to that fleet average over time. 2 wonderful opportunities to continue to drive margin expansion along with, of course, the healthy cadence of bolt on acquisitions are always coming into the business that provide opportunity for FBS in a variety of ways, whether it's in lean or growth to really drive above average market expansion in the new businesses. So clearly, three great examples of how we'll continue to drive margins in our core business over time. And I think anyone who knows me and the Fortive folks will probably laugh at this know that there's always opportunity in all these businesses to continue to drive margin expansion. Qualtrics is a great example of that.
Company that's been with us for 30 years, one of our highest margin businesses, as I mentioned, continues to drive margin expansion over the last 5 years through lean conversions to over 200 kaizens over a number of years, great purchase price variance, great quality continued great quality improvements and then building competitive advantage through the growth tools, funnel management and then reinvesting some of those savings back into the business to create that flywheel as well, along with some strategic M and A over some of the years in order to continue to build out that business. A great business in its market position with you really with utilities and power companies who are really looking for someone who doesn't supply the generation assets to really give them condition monitoring applications. And those are really applications and opportunities throughout the world. So hopefully, you get a sense of FBS is alive and well in the business, but it's also going to continue to provide a lot of opportunity into the company over the next several years. Certainly, it would our opportunity is significant in part because of the great cash flow that we generate and our bias to deploy cash flow to M and A.
It's a set of lessons that those of us who've been around Danaher for a long time have learned. It's a process that we've learned of how to do it. And we will apply all of those processes and learnings to Fortive. It starts with looking at a market. Do you like the market?
What are the things about that? Do they have good secular drivers over the long term? Is it fragmented? It gives us more consolidation opportunities over time. And those are some of the principles in markets that we'll look at.
Then we look at the company. Does the company have a good market position with potential to do more? Is it a leading player? Does it have a strong brand? It doesn't have higher margin businesses than it?
Does it have opportunities for higher margins as well? And then we really look at the value creation opportunity. Significant is it significant from an FBS perspective? Does it have synergies maybe with existing businesses either at the operating company level or within the platform level? And then very often this will be a combination of value and growth deals.
So some value, some growth. As you see some of the slides that Martin will have, you'll see a combination of those. Some acquisitions that were real turnarounds and we did a great job turning around. In other situations, we may have paid up for a technology addition to the portfolio. But with a great global position, we could scale that tremendously in a short period of time to create value.
So that's the process. When you think about that, what does that really look like in terms of our platforms? Well, first is large value creating opportunities, couple of examples there, where there's big FBS opportunity to improve the business. Certainly, we think there are a number of those over time. And then a number of other things to add to those businesses, whether they're platform extensions where we have synergies, some great examples here, you'll hear about all the Gilbarco examples over the next few hours.
But certainly in a number of our businesses where we've really leveraged our strong brand and channel to create tremendous value or new growth vectors, really trying to improve the portfolio of the platform through new vectors. And you certainly are going to see that today in a variety of places at Gilbarco, But we really have an opportunity to do that in all the platforms. And then as I mentioned before, here's some number of examples across the portfolio where today we've done some work to leverage ourselves in high growth markets, but still a lot of opportunity left. So some examples below where there's where we've done some of this. But I think even more importantly, there's a number of examples that we think we have going forward to really do this kind of M and A throughout the portfolio over time.
You'll see the slide for Gilbarco later. Here's the Fluke slide. And really, as you can see, done out over almost 20 years, dollars 1,000,000,000 worth of capital deployed, 32 acquisitions, building a great number of great businesses, strengthening Fluke in a variety of ways. And you see that a little slower at the tail end the last 5 years. And that's part of what's the opportunity.
If I were to create this slide in a number of places, see where some of that is slower over the number of years as Danaher has really moved to a different business model. And therein lies the opportunities to bring that back and accelerate that at a pace that we believe we're confident we can do. And obviously, the financial returns are substantial. Started with a $340,000,000 business in 1998, roughly 4 times bigger. The operating profit dollars though are about 10 times bigger in that timeframe.
So the cash generated and the OP dollars are significantly greater. And that's what's really provided for a really high ROIC over a long period of time with additional runway to go forward. And I know the Fluke team speaking for the field solutions team, they're exceptionally excited about the opportunity going forward to really deploy some of this cash to accelerate their business. And that really builds this model that we hopefully resonates with you, which is really think about our growth, which is probably GDP, maybe GDP plus in sometimes margin expansion on that of about 50 basis points use our free cash roughly about $1,000,000,000 to deploy primarily to M and A. Free cash flow continue to be a critically important metric for Chuck and I just as it has been for Tom and Dan and all of us who've been around the company for a long time.
That free cash flow conversion ratio continues to be important for us. Investment grade rating is important to us. We feel we have a tremendous amount of capacity with the rating we have today. And when you really look at really that and run that flywheel, we really believe upper quartile performance and great earnings growth performance over time is really the model we'll really be running here. So to sort of sum it up, a couple of things.
1, hopefully you get a sense at the platform level of the quality of this high quality diversified industrial company. 5 6 platforms with $500,000,000 or more of revenue gives us tremendous scale in a number of markets, not only to build on the current business, but to help those management teams leverage into new vectors to build better portfolios in each of those platforms and subsequently build a better portfolio for Fortive. I think that's what gets everybody in our organization tremendously excited about the future. Hopefully, that's what gets you excited about the future as well is that opportunity to do that. And do that for us in a culture that is so well known to us and in an environment that we love.
And that's FBS. It's a foundation for how we built Danaher over a number of years. It's the foundation of how we'll build Fortive over the number of years. And we really believe that's what one of the things that makes us truly unique amongst a number of companies that maybe are in similar markets and things like that. And then finally, the capital deployment opportunity here.
It's big, obviously, as a ratio to our revenue. We think it's a great opportunity to build a better company. And I think you've often heard all of us from Danaher say, I know Tom has said it a number of times, is really it's not about being about bigger, it's about being better. And the opportunity for capital deployment is as much an opportunity to make our company better as it is about making it bigger. And if we make it better over the long term, it will be bigger.
But first and foremost for us, it's about becoming better. And I think what you're going to see today is a real set of examples of how we're making the transportation technologies platform better through capital deployment and FBS and ultimately be the story for all of our platforms at Fortive. And with that, I'll take a couple of questions.
Thanks and congrats, welcome. Sounds exciting. But Jim, when you think about the in 2,003, 2,004, Danner had about $6,000,000,000 or so in revenues. And you were there and you saw the playbook and saw what worked and what didn't work. Over that period of time, I'm not sure if the growth rate was enhanced a lot, but there was a ton of value creation.
Now you talk about taking GDP type businesses and making them into higher growth businesses with M and A. How is that different from the playbook in 2,003, 2,004? Is it a nuance that you're just trying to buy better businesses? Or the reality is if we look out 10 years from now, you want to have a portfolio that's substantially different than it is today?
Well, I think we certainly like the portfolio we have today. So I'd start first, Scott, with in that reference of 2,003 of about the size of Danaher's about where we are today. I think it first starts with using M and A to make our current portfolio better in a number of ways. You'll see that in Gilbarco today, how it's so much better. And I think that's absolutely what we will do within the current platforms.
While at the same time, and I think you see a board that's really built this way, is to help us think more broadly around the secular drivers that are really going to be outstanding for the next 10 or 20 years and try to sort through which of those opportunities we want to go after and then attach ourselves to them. Those could be within the current platform. I think sometimes we get questions are you going to be in healthcare? Well, Portascap is in healthcare. We're supplying surgical instruments,
it's a
good business. That's a way to play that market. Part of it will be within the portfolio to figure out how to attach ourselves to good better secular drivers. And then also looking at maybe is there a new platform out there over time or something like that, that we can do as well. So I think it's a combination of both.
And I think that's exactly what you saw Danaher in that timeframe, which was making the current the businesses that were there better, Fluke, Gilbarco, Videojet, Water, all got much better during that timeframe, while at the same time we added better new platforms as well. So I think without forecasting the future always hard to do. I think we'd see a combination of that. But I come back to the fact that these 6 platforms that we have today really do give us some really good runway to run that playbook.
Just as a quick follow-up, what do you think the right level of R and D spend is for the organization?
We're at about 6% right now. I like that range. It gives us an opportunity to flex sometimes when we have a big in some of the businesses where we have a bigger platform opportunity. I think 6% is the right range. Depending on the kinds of portfolio businesses we buy that number may flex a little bit because there is a fairly wide range within the portfolio today.
But I like that range. And as long as we go after higher gross margin businesses, then you can pay for that kind of R and D.
Hey, Jim. Thanks a lot for today. It's really helpful. How are you sizing both M and A? Is the window of about $2,000,000,000 to $3,000,000,000 sort of the potential over what number of years are you thinking?
And also on that same front, dividend payout ratio, are you guys thinking similar levels to where Danaher has been? And then one follow-up, if I could.
Okay. So we think about $3,000,000,000 Your numbers are right in the zone in the next couple of years. So that number around is about right for capital deployment. I think our payout ratio will be slightly maybe slightly lower than what Danaher does today and then grow it over time. I think our but again, I think one of the big things about whenever I talk about dividends is our Board is not constituted to talk about that.
So at the end of the day, we do need to that kind of policy decision, we need to be out on our own with the Board being having decision making ability at that point to really talk about
it and finalize it. And then as a follow-up, FBS clearly DBS massively differentiating you all. When you're looking at these targets, you mentioned higher margin companies. You talked about higher gross margin. But are you willing and actually preferring in the same way you might have before to find the kind of high gross margin, low operating margin, operating improvement plays?
Or is that sort of very secondary to all the strategic factors that you put on the table tonight?
I think over time, it will be balanced. In any one year, it's going to sway towards a couple of deals and it's sometimes easy to think about, well, we're going in a different direction because of what we might have done in a particular year. But I really like the concept of a combination of value deals that might be turnarounds and then some additions from a growth perspective that might be slightly pricier, but are going to give us a better growth advantage over time. And I think if we do that when we do that right, I really think you're going to see that in spades today. You're going to see how that not only builds a better business over time, but is an incredible value creator for shareholders as well.
Yes, Jim,
over here.
Oh, Chen, there you
go.
You showed the Fluke example where you did a lot of acquisitions and then it kind of slowed. There's other platforms where you really haven't done much of anything. As you think about kind of the current pipeline by platform, where is it where you've been looking at some businesses for 5 years that you just go back to and pull the trigger and you didn't before? And where
is it just trying to
find something new because you never took a look?
Yes. I think when you look at Fluke, it's there's a starting point there to work from and kind of go back to whilst maybe some of those deals have slowed, there was still some cultivation activity. So you got a couple of platforms like that. And then you got like sensing where we really haven't thought much about it in a few years. So we need to kind of go back to square 1.
So and then maybe the rest of the platforms are somewhere in the middle there. So we like where the funnel is now. It's a good starting point for us. But we've staffed in the last 60 or 90 days, we've really amped up the resource deployment towards it. So we'll see where it goes.
But I really believe we're in a good position across all the platforms to do some things here in the next couple of years.
And just how should we think about the mix of hardware versus software service in terms of things you might be looking at?
Well, I think probably still more hardware, definitely from we think about businesses. I don't necessarily think that I think what we've seen, you'll hear from Andrea, when we do some small acquisitions in the software side and really amp that up those businesses that tends to so maybe on a revenue perspective, it may be small, but it goes bigger over time. That's probably the profile. But again, those things ebb and flow at times. We definitely the good thing I think about Fortive is with a number of these businesses and these software startups that we have throughout the portfolio.
We've got a number of our business leaders who understand what those business models look like. And ultimately, that's one of the tricky parts about buying software companies is understanding how to run them and how to build this how to build value there. And we've got not only the operating level, we've got most of our businesses understand that. And quite frankly, we've got a Board of Directors who really understands that as well.
Jim, I
have Jim right here. It's actually very similar to Shannon's, but maybe a different angle. As you've watched these businesses evolve and not been active on M and A, have you seen things kind of trade away and move somewhere where they're kind of out of grasp? So you're obviously very smart guys. You know your business.
You know your competitors. You know what would have made sense to buy over time even though you weren't active. Is there anything that's just kind of changed competitively in the businesses that makes you talked about vectors. I mean, you're not going to sit idle and do nothing. But is the vectors in some of these businesses now different than what they would have been had you had free reign to M and A over that time frame?
Well, it's a big question because of a broad portfolio and a strength of positions. I don't think I can really point to one particular situation where we just completely went away and that opportunity completely went away. Generally, most of the markets that we like and are looking at may not be consolidated yet. And so there's still other opportunities there. So I don't think of anything that's really shut off.
I would say on balance, a lot of them are still available. They may have traded into PE or something like that, or maybe they traded into another PE in some cases. In other cases, entrepreneurs decided not to sell. And just as some things go away, other things crop up. So I think net net, we're in as good a position as we were several years ago with really not too many vectors closed off.
There we go, guys.
Just a question on growth, Jim. There, sorry. Just a question on growth. You target GDP, GDP plus If I look at the growth at what is Fortive right now, it's quite a bit below that. If I look at my universe, if I look at all the acquisitive companies, I mean, people are struggling to stay at 0.
How long does it take to transition to this normalized rate of GDP, GDP plus for Fortive?
Well, I think certainly the macro, when you look over a long period of time, I think we'll be at that level, probably takes a few quarters to start to get some of those things amped up and over time. But I think the benefits of some things we've got going right now will help us into the second half. So EMV will be a bit of an obvious tailwind here as well. So I think in the next 6 to 12 months, we're in pretty good shape relative to GDP kind of growth.
Jim, a question on margins. I just wanted to follow-up on where you see the most scope for expansion because you called out that half the portfolio has below average margin. That will always be the case, I guess, mathematically. So maybe put it another way and talk about what the margin range is on the different businesses you have, not the 2 segments, but one level down. How wide is the disparity on margins today?
Or where do you see the 1 or 2 brands that have the most margin room for expansion? Well, I think, first,
we probably have a disparity between high and low that means that, yes, there is an average, but there's a number of businesses that are maybe farther away and have opportunity. I think certainly in our automation portfolio, I think even here in some of our businesses in Transportation Technologies, we've got some opportunities as well. So I think those are just two examples of where we have opportunity. That said, we've got a lot of big platforms that have done a really good job, as I showed on the slide, who've continued to drive margin expansion despite high margins because of unique market positions, the ability to really bring more innovation. And you'll hear a lot about that today.
So even in high margin businesses, we think we've got opportunity. So it really comes back to having a mindset that we can continue to drive margin expansion in every business and doing that on an across the board basis. Obviously, some better than others. Some we might relieve them of a little bit of their margin expansion in order to reinvest back in the business. You see a little bit of that at Gilbarco right now to be able to take advantage of opportunities as well.
But on balance, I think there's opportunity throughout the portfolio. There you go. Cliff?
You've by creating Fortive, you've destroyed one of my great lines, which is the biggest asset at Danaher. It appears nowhere on the balance sheet. It's Danaher Business System. And now I'm going to get to say it about Fortive as well.
On that note, while you have
certain requirements to preserve the tax free separation status, would you give us some examples of how you intend or don't intend to cross fertilize the Danaher business system with the Fortive business system over time? And I don't mean over this transition period.
Well, first, maybe a little bit of level setting. For the next couple of years, we have capability to share in tools and processes and those kinds of things. So 1st and foremost, for the next couple of years, we don't lose anything. I think it starts with the people The fact that we've really balanced the FPS office and the DBS office at the 2 companies with seasoned people. You know Barbara, obviously, Barbara, who ran DBS for Danaher, Kirsten Pausz, who ran the growth side, coming over to our coming over to Fordham as well.
But then a number of people like John Sikalsky and others staying at Danaher. So the balance of leadership and skill sets is very much balanced. So I feel I think Tom and I feel very good around how we've built out the opportunities. The new leader of the DBS office in Danaher is outstanding. So I think on balance, we're very well capable of being, if we had to, being completely independent with what we need to do going forward.
That said, good friends never part too far away from each other. We've always done benchmarking with other companies over the years, and there's no reason why that can't continue in an informal basis. Just going to
go last question, Rick. Jim, just two things. One is, is there any concentrated effort on your part to build out and expand the service and consumables piece of the business, which I think is 35% currently from an M and A standpoint?
So about 20 percent across the portfolio, about 20% to 25% software and services. And there is a deliberate attempt to continue to build on that, yes. So I think that percentage will ebb and flow depending on if we go buy an instrument company of some sort or a sensor company. But I think when you look at and you'll certainly hear today is really good examples of how we're building that capability out in a number of the presentations today, deliberately through M and A, but also through organic and R and D investments as well.
And then of the 6 platforms that you bust out as part of Affordiv, is there the same access to capital, M and A capital to grow all 6 of those? Or do you view 2 or 3 of those as being cash generators?
Well, first it starts with the idea. A great value creating idea wins every time. So if you go back to market company ability to create value, that's 1st and foremost. If we could if we see that opportunity within a platform to do something, that's how we're going to lead the effort because that's how you transform platforms as well. That's how you make platforms better.
So best ideas always win. It's been that way at Danaher forever. There will be some deliberate attempts around some business models like software and services in order to change portfolio as well. But growth here, value creation opportunities within all of those platforms are going to have opportunity. But again, those platforms, some of those will be different and the best ideas will always win.
So we're done. So thank you. You get another shot at me at the end. So we're excited about that. I'm going to but we're going to play a video here.
But before we do that, let me introduce Martin. I mentioned before that Martin has been a great partner and I guess partner in crime in many respects over the last my 20 year career. We started Veeder Root together a number of years ago. I think what you're really going to really see today is he's been a part of this business for his entire Danaher career. He's been leading it for a number of years.
And I think what you really see is really a great business leader who's really built an exceptional platform, but more importantly, not really focused on what he's built, but also focusing about where he can take it over time. And I think that's one of the great stories about today in Transportation Technologies. Gilbarco has been around 150 years. And one of the great things about our visit today in the factory, it's too bad the folks on the web can't experience this. I think it's a very special opportunity to be here on the factory floor.
A lot of heritage here in the business, but in a great company over a long period of time that has a great future.
While much has changed in our 150 years, one constant remains, our focus on improving lives through groundbreaking technologies and world class services. It all started when our company founders invented vapor. Within 20 years, they had become the largest single retailer of gasoline in the U. S. As the automobile took hold, Gilbert and Barker saw the future of the company shift.
And over the years, the company led the evolution of petroleum technology. By 1950, sales expanded to the U. K. And the company opened manufacturing facilities in Brazil, India and across Europe. While the Gilbarco name was registered in the 1930s, it wasn't until 19 66 that the Gilbert and Barco Manufacturing Company officially became Gilbarco.
The next 50 years saw the rapid development of technology that continually changed the face of fueling, driven largely by a series of acquisitions, mergers and partnerships that significantly grew the Gilbarco Veeder Root family and capabilities.
Thank you, and good afternoon, everyone. That was a very flattering description that Jim gave of me, but I have to say the only word I've ever heard from you before my performance reviews was crime. We really are delighted on behalf of the entire GVR team to welcome you to our facility in Greensboro over here. And we're also delighted to have the opportunity to showcase the progress we've made since the last visit over here in investor visit over here in 2004. What you'll hear from us today and what where we're going to focus is how we've strategically built platform out over the last 13 plus years since we acquired Gilbarco in 2002.
We've really built just much more than a dispenser business over here through a mix of strategic acquisition and a focus on organic growth. And we are significantly more than a dispenser company, as I said, really having transformed the business into a systems and solution provider. We'll certainly hear a lot about EMV, and rightfully so hear a lot about EMV. It's a big opportunity. But I think and I'm confident that you'll actually leave here today with an understanding that this is much more than an EMV We win in a number of ways, but I think mostly we win through an unparalleled product portfolio and a tremendous installed base that we've got and are continuing to develop around the world.
We'll talk a little bit, but EMV actually helps us build out that install base and puts that install base in a better technology position that enables us to really leverage it and continue growing through the future. Just a quick view at the overall market that we operate in and our position in that market. As Jim said, we're talking about our Transportation Technologies platform, comprises the Gilbarkov Veeder Root Businesses, largely a petroleum vertical focused business. And then the Teletrac Navman Businesses, the Telematics businesses that we acquired in the last couple of years. We operate in approximately a $7,000,000,000 served market.
We're up about $1,600,000,000 of that operating margins north of 15% with definitely with room for improvement. I would think about the geographic mix as traditionally being more of a fifty-fifty geographic mix. It's quite skewed at the moment due to the strength of the North America market. But this is a very, very strong high growth market with great presence in all of the good growth markets around the world and a lot of opportunity still over there. Looking at those growth drivers, I'd really want to highlight 2 of those.
Firstly, regulations. I have to say we love regulations in this business. And those regulations are both on the environmental side with water quality and air quality issues affecting the petroleum market, payment security regulations affecting our indoor C store point of sale business and our pay it pump business out in the fuel islands. And it also even affects in a significant way the Telematics businesses with increasing set of regulations around the world governing driver safety, hours of service for drivers and recording and monitoring those safety regulations. The other point on the drivers that I would draw your attention to is the build out and this is around the world, a build out of larger retail networks.
Although we'll talk about some of the work we do in the U. S. Market, still has a large number of single site operators, the trend is for fuel networks to get bigger and bigger. That size adds complexity, the complexity adds the need for more control and automation. And one of the themes you'll hear from me as I go through this presentation is how that complexity and the automation adds long term growth drivers to this business that we're capitalizing on well today and will continue capitalizing on well into the future.
2015 was an outstanding year for the business, just an outstanding year for us. We had really strong growth, mid single digit growth for the business. And that mid single digit growth came from a lot of the geographies and was fairly well spread. But it came from also a very strong core dispenser business where we had approaching high single digit growth around our core dispenser business. But one of the things I think we're most pleased with is that next point around our point of sale business.
This is the point of sale system that resides inside the convenience store and controls the customer transaction for us. And over the last 3 years, we've grown this product line on a compound annual basis of 20 over 20% over here. And as I said, the reason why this is so important to us will become apparent through the rest of my presentation. Operating margins increased over 100 basis points, and we did this while increasing our investments significantly to ramp up for EMV and some other growth opportunities. And then on the telematics businesses, we undertook a significant restructuring between Navman and Teletrac, bringing those two businesses together and really creating a good strong platform for us to go forward, a good strong platform both from a cost and a technology position as we brought the worldwide business onto a single global platform.
And lastly, we completed 2 bolt on acquisitions, one for the Petro business, coincidentally, and one for the Telematics business. Both of these are I think of them as technology acquisitions, and they will enhance our portfolio in both of those areas over a number of years. And then finally, 2016 is actually off to a great start. So we're continuing the progress in what we saw in 2015. When investors lost in Greensboro in 2004, I'd like to think that it's a very different world.
Although this factory fundamentally looked the same, a lot has changed since in that time period. Back in 2004, the business was growing at market. We were really a basic box business, building and shipping boxes. It was largely a developed market focused business and the operating margins at Gilbarco were in the low double digits. Fast forward to today, and we're a 6% CAGR growth business, which we think is roughly 2x market growth.
The business has evolved significantly past the box shipping type business model into a service systems business as well as into adjacencies like fleet management to the telematics businesses. Our high growth market business over this time period has grown at over 20% on a compound basis. And the operating margins of the dual bulk of business have expanded by over 500 basis points in this time period. As I said, this is both an organic and an inorganic growth model that's led us to the success. Down at the bottom of the page, though, I've started mapping out for you what that inorganic strategy looked like.
We started off with the Veeder Root business. We acquired the Gilbarco business, and then we took 2 streams, if you like, of acquisitions, 2 streams 2 directions of acquisitions and how we thought about it. Firstly, we looked at how do we enhance the core business. You'll see a number of acquisitions over there. We went into areas like adding hanging hardware onto our dispensers or adding submersible turbine pumps to the underground storage tanks to push the fuel up from there to our dispensers.
We also added significant high growth market geographic expansion where that made sense for us. The other vector for us was really how we looked at the breaking out our business, how we looked at breaking down the barriers just of within the retail petroleum vertical. And we made a number of expansion areas over there. Examples of that would be expansion into the natural gas fueling market or indeed the telematics businesses where we were really focused on an adjacency and we said what happens to the south of the nozzle on a gas pump. And that led us to trucks, drivers, vehicle efficiencies, driver efficiencies.
So the business itself has evolved greatly since 2004, and I think we've moved on and our evolution has moved on from a fueling platform to truly being a smart transportation platform. Now going to focus a little bit on that transformation on how we've actually achieved this. This focus on the next couple of slides will be more on the retail fueling business than it is on the telematics businesses. Have, for a number of years, had this focus
on
our payment and point of sale businesses. We like these businesses a lot, and I'm going to continue talking about why we like those a lot, so hopefully I won't bore you. But we like those businesses a lot, higher margin profiles, technology drivers creating more rapid upgrade cycles, much greater stickiness, etcetera, etcetera. So we've had this very good focus on those businesses. Secondly, we've looked just a little bit more recent in our time at operational services.
These are cloud based services that we're able to drive value for our customers and revenue for ourselves on top of these connecting these cloud services to a large installed base of equipment that we have around the world and delivering value to our customers. A lot of drivers across both of those areas and some of the impact that this has had on our business when we spoke about changing growth profile since you were last year and also the changing margin profile is due to our focus in these two areas. You can see from the charts on the right, if you look at the profile of 2,002 to 2,008, a lot of revenue volatility that actually led to our growth being substantially flat over that period of time. As our strategic change of direction started taking effect in the latter years since we were last year, you'll see low- to mid single digit growth with substantially less volatility as these strategies took hold. As I said, I think that we're uniquely positioned to win.
How we view the world and why we in no way are implying that the dispensing business is not key and important to our business today and our future going forward, our strategic focus is really on what we call the automation systems. If you look at that area inside the blue box on the right hand side of this page, the automation systems are the systems that control all the transactions at the station. All the other intelligent devices connect to those devices. And by obtaining a strong position in those automation systems, we're able to drive those type of results I was talking about that we've achieved through the North America business, but we're also able to pull through a lot of the other equipment as illustrated on the boundaries around those blue circles. So from a strategic perspective, this is really important to us, and it is equally applicable in both the mature markets as a strategy and the high growth markets, although for some slightly different area for some slightly different reasons.
In the high growth markets on the left hand side of there, you will see a tremendous amount of white space, stations that just simply don't have automation systems. There are a lot of reasons why they're driving towards automation systems and installing automation systems, including the increased control that I was talking about, but also the adoption of debit and credit card and mobile payments. We've already demonstrated our ability to successfully execute this strategy in high growth markets. We're expanding our business quite successfully in these areas in markets like the Middle East and Latin America. On the right hand side of the year, on the developed markets, it's obviously not the same degree of white space for automation systems and control systems, obviously well penetrated.
But there is a major transformation going on as the market transitions or a large portion of the market transitions from primary gas focused small format C stores to large format C stores, often with food services and prepared food. These require significantly enhanced systems and a tremendous upgrade opportunity. And we believe that our portfolio positions us well through the coming years and well beyond 2020 to continue driving this as a sustainable long term growth vector for the Gilbarco Veederui businesses. I'm now going to just retrospectively look a little bit again at how we built out the platform. You saw a similar slide.
Jim showed a similar slide to this when he was talking about Fluke. But back in 2000 and 2, we owned the Veeder Root business. We somehow we somewhat opportunistically acquired Gilbarco. But then we set out on this very deliberate path to build out the platform and really make it and really transform the platform, as I've already described. Overall, we deployed over $1,000,000,000 of capital on 19 acquisitions since 2002, and this has significantly enhanced the growth profile, the profitability profile and also moved us into some important adjacent markets.
In contrast to what Jim did show on the Fluke illustration similar to this is that you'll see we actually probably accelerated acquisitions as Fluke was slowing down acquisitions. We were fortunate enough to continue attracting the capital over here. And I think you can see the overall benefit that us being able to do that has had on our business and obviously something we expect now that across the rest of the Fortive portfolio, we'll be able to continue doing this. Making the acquisitions is only one part of the story. The other part is really being able to extract value from the acquisitions you made.
I think, again, we've been able to do this quite successfully, And we've got a good example over here of what we achieved with an acquisition we made in India just over 4 years ago. We bought a dispensing company, a pump and dispensing company from Larsen and Toubro, a large diversified industrial in India. And it was a loss making business at the time we bought it, principally focused on the domestic India market. Just as an important piece of background over here, the domestic India market is the most price competitive market we have by a large factor anywhere in the world. We were able to take that business and through the the continuous deployment of DBS tools over this 4 year period, we've really been able to transform that business.
You'll see some of the results down on the right hand side over there, but growing the revenue over 2x, improved customer service and on time delivery, tremendous improvement in quality from the business. And most of all, we've been able to improve the operating margins from that business by over 1500 basis points. Just a tremendous accomplishment in that most cost competitive market in the world. That business we have in India today is now also a center for supplying components to other Gilbarco factories around the world. It's also a center for us building and exporting low cost dispensers.
That capability we acquired in India is serving us well as we look to grow the business through other high growth markets around the world. So I think a tremendous accomplishment from that. And one of the other important byproducts of this, we've got a workforce over there that is as strong a set of zealots around DBS and in the future FBS as we have anywhere else in the world. So tremendous capability that we've built there. Just putting together the financial evolution now of the platform.
Some of you may have seen the slide before, but I think we started off just north of a $400,000,000 business back in 2002, and we've grown that to over a $1,600,000,000 business today. Transformation of the operating margins. And we've done that through this mix of acquisition, inorganic growth and organic growth, as you can see highlighted on the page over there. One last point to make on this is that I think we have really built a playbook on how to do this, and we've built capability on how to do this. And I believe this is going to serve us well, not just in the Transportation Technologies platform, but I think we're going to be able to take this and apply this across the other 40 businesses.
So in summary, we've achieved a real technology leadership position. We have a uniquely strong and unparalleled portfolio of products in this industry. We have a large installed base, and we're able to capitalize on that large installed base. EMV is going to provide us a significant growth opportunity over the next several years, but it's also going to position us for future growth and ongoing growth. And as Jim said, this is much more than just an EMV story.
We have a long runway for growth in this business. We are transforming it or continue to evolve it as moving into more of the Transportation segment. And we're very, very pleased with where we are. Thank you very much for your time on that. I'd now like to move on and get into some of the more specific presentations over here.
And firstly, Steve Mills. Steve is the President of our North America business. He's been with Gilbarco Veeder Root since 2007. He started off in working for us in the U. K, expanded his role looking after Europe, then a number of Europe in a number of the high growth markets.
And we eventually imported actually imported an Australian into the U. S. About 2 years ago to really help us to make sure we maximize this EMD opportunity, and Steve has done an outstanding job on doing that. Thanks.
Thanks, Martin. Good afternoon. I'm very pleased to have the chance to present this afternoon on the opportunity that we're seeing across the United States relating to the upgrading of payment devices to accept the chip that's within our credit and debit cards, commonly known as this EMV opportunity that Jim and Martin have referred to. For C Store retailers within our petroleum industry, this really means that they've got to upgrade their payment device inside the store, outside of the dispenser as well as upgrading their point of sale. In terms of maybe just some clarification, EMV is an acronym for the card brands in Europay, Mastercard and Visa, who devised the initial security regulations that are being used to combat the card fraud that significant card fraud that's occurring annually in the United States every year.
In terms of my presentation, I'd like to give an overview of how we're seeing the EMV opportunity, the underlying value that we're seeing from it and also the drivers that led to the introduction of the EMV regulation in the United States. We'd also like to talk a little bit about the dates, the important liability dates when the card brands transfer the liability of the card fraud back to the retailers who own the gas stations. Also give an update on how the industry is progressing in terms of actually updating and upgrading the payment devices. And also how our customers are reviewing this investment envelope as an opportunity to not just put in place EMV software and hardware, but also take a chance to actually acquire new payment and merchandising technologies to help them not only run their sites more profitably, but also drive some greater consumer loyalty. And finally, I'd like to use a case study of a new customer in Las Vegas that we have been working with to upgrade their network to meet EMV.
And really to illustrate the strength of our product our range of products and solutions and how the EMV opportunity gives us a chance to not only to win some very strong upfront revenues, but also create a longer term recurring revenue base once the initial EMV upgrade cycle has passed. So talk a little bit about what we're seeing with EMV today. A lot of our customers have started programs to upgrade their indoor and outdoor payment devices and also their point of sale. But the card brands don't actually mandate that a site has to actually take EMV transactions. If there's any fraud at a site post the liability shift date and that site has not updated its hardware, that cost of that fraud will be transferred from the card brand back to the retailer.
And we're already starting to see some significant amounts of charge backs going back to our customers from the card brands. I guess in terms of the way we look at the increasing in data security, a proliferation of skimming devices that we've seen at dispensers actually leads to a lot more enhanced understanding of consumers for the need for enhanced payment security. That consumer understanding of the need to have secure payment transactions is really leading and driving our retailers to upgrade towards EMV. Upgrading towards EMV for a large industry like the Petroleum C Store Industry represents a significant investment not only to protect consumers, but also for the retailers to protect themselves from the significant charge backs that are liable to them if they don't upgrade their networks. Thinking about EMV, there's really kind of 2 important dates.
First date is the upgrading of the indoor payment device and the point of sale. That date was actually set as October 2015. Now while that date has already significantly passed, actually, we believe only about 5% of the sites within the United States are actually taking E and D transactions today,
primarily down
to the complications of being able to certify a point of sale to taking E and D transactions. The second date of importance is to upgrade the payment device outside the dispenser, and that's upgrading the software and the payment device. That's October 2017. We're already starting to see a significant number of customers start to upgrade the program, but we believe that, that upgrade will take significantly years past the 2017 liability date. When we look at EMV, you can see here on the slides, we see it as a significant growth driver for our industry, about a cumulative $500,000,000 opportunity, And we think that, that kind of translates into around about 85% of the current installed base of dispensers having to be either upgraded with brand new certified EMV dispensers or retrofit payment devices.
Maybe I'd spend a little bit of time just talking about Indore and the upgrade progress with Indore, primarily because that date was October 2015, has obviously already passed. And from what we can see, around about 50% of the sites have the hardware place to take EMV transactions, but only about 5% are actually taking transactions. You see that as you go to a gas station today, you're still swiping, you're not dipping that card. At Gilbarco, we were the 1st actual point of sale provider to be able to release our EMV certified software. So our customers our point of sale customers today are installing V transactions are no longer incurring chargebacks.
In terms of our competitors, they're obviously still working through that process, but we are certainly first to market and pleased to be so. In terms of Gilbarco, we're actually unique in that we're able to provide a combined solution of EMV certified point of sale and also an EMV certified dispenser. Getting to a site to EMV, particularly, we've got a large network of gas stations, is extremely costly and also very complex. What resonates with our customers is the Gilbarco ability to be able to provide an upfront point of sale and a dispenser, one certification, and it really eases the road for our customers towards EMV. In terms of looking at the way that we do drive growth, DBS has been tremendously impactful for that.
The rigorous application of DBS from a growth and an engineering perspective enabled us to not only be first to market with our point of sale, but it's also helped us position ourselves to be able to find opportunities, convert leads and drive share. We invested heavily and see later today, we've invested heavily in transformative marketing, built out our inside sales capability to be able to pass good quality leads to our sales team and also to our distributors. This inside sales capability you'll see helped us so far this year generate about $17,000,000 of new business in the really hard to reach single site owner segment that makes up about 60% of the U. S. Market.
A bit later on the tour today, we'll also take you to our EMV war room, where you'll be able to see somewhere that we go every day as a team to at our actions, put in place countermeasures to make sure that we continue to remain on track to deliver EMV for our customers. Turning a little bit here to the outdoor payment. We were pleased last month to be able to release what you can see on the screen is our latest secure outdoor payment device. This was the first of our products that we launched with our partnership with Verifone. It really brings to market, market leading security that our retailers can then buy and then ensure that their consumers that they are getting real EMV security.
The product was released with a full series of merchandising and media options, as well as full retrofit kits, so that you so a customer can buy this, upgrade legacy Gilbarco dispensers and also competitive units as well. The advantage again for our customers is they can take this one payment device and install that across their entire network, thereby simplifying the certification process, irrespective of whose dispenser they actually have on their forecourt. We're seeing at the moment a lot of customers start to upgrade their have their upgrade programs. And actually, we've been successful in securing a lot of exclusive rollout deals with the largest retailers in the United States. You can see some of the brands that are listed there, where we've already started to have exclusive agreements to rollout.
In terms of the broader market, although the upgrade date is October 2017, we actually expect it's going to roll out for many years past that, just given the experience with indoor and also the sheer number of sites that are going to have to be upgraded. Thinking about it from a retailer's perspective, to get a large station network upgrade for EMV is a tremendous investment. And we're seeing our customers not only buy a payment device, but also a lot of additional features around that. Those features that help them give them longer term flexibility to either be able to improve the profitability of their site or drive greater consumer loyalty, things like mobile payment, meter at the pump, things that can also help from their perspective, improve that fueling experience and also drive some greater consumer loyalty. One part of EMV, although it provides for us some good upfront revenue streams, there's a requirement for every site to put in high speed communications.
That high speed communications is needed to take an EMV transaction. It also opens up the ability for us to provide a whole array of additional software services for our customers to be able to access. That provides long term recurring revenue streams to Gilbarco and enables our customers to be able to operate their sites more profitably. Those services typically are billed monthly on a long term contract basis and can include things like remote maintenance or our SaaS based predictive upsell technologies or media at the pump right through even just standard site support systems and upgrades. In terms of Gilbarco, when we look at EMV, the increase in store base we've got through gaining share, this provides the opportunity not just for upfront revenues, but also for us to build a long term recurring revenue base off this increasing store base by giving our customers additional software services and solutions that they can use to run their stores more profitably through and after the EMV upgrade cycle.
So I want to
turn clearly to a case study of a customer in Las Vegas who's been working with us to upgrade their network towards EMV. Terrible Herbst is a pretty progressive retailer in Las Vegas. It's got about 100 sites. They've not been a traditional Gilbarco customer. They worked with us and have seen through a complex sale process to hand to us their point of sale business and the first time we'd ever secured point of sale business with them.
This provided for us the ability to be able to provide tremendous share gain. Terrible Herbst was looking for a partner who could not just get them to EMV, but somebody could also help them simplify the process and also provide some sort of upsell technology that would enable them when customers come into the store to be able to find other opportunities to be able to sell additional items and increase an average basket size inside the C Store. Terrible Herbst represented for us a great opportunity for not just upfront revenues, but also to build a longer term recurring base and take share. When we look at Terrible Herbst, winning that point of sale business, I think, as Martin mentioned, provides tremendous pull through for us. So whilst we roll out the initial point of sale, and they also signed a very a long term agreement to use our SaaS based impulse upsell technologies, we also expect to be able to sell additional software services and upgrade their dispensers with Gilbarco equipment as they go through the EMV process.
The interesting thing about this case study is not only would it represent share gain for us, an opportunity for us to win our point of sale, but it also enabled us to be able to start to build a recurring revenue stream through additional services that we already have, such that the upfront revenue represents about half of what we think the total value of this deal will be. And post EMV, we actually believe that about 50% of it will then occur once we've already done the initial EMV upgrades. In summary, for Gilbarco, we've been able to differentiate from simplifying helping our customers simplify the road to EMV. Our broad range of products and services have resonated, and we've been able to take significant share. We need to take that significant share and increase in store base and really build out our long term reoccurring software based businesses that will help us post the EMV opportunity continue to grow.
Thank you.
Thanks, Steve. Great job. I think Steve gave us a pretty clear picture of how we're going to win through the EMV cycle. But I'd like to just emphasize where he was wrapping his presentation up, which is how EMV is going to help us win after the cycle as well. Think about EMV as having been or our success in EMV as having been built on top of our large installed base.
The reason we're going to be so successful, there are a lot of other reasons, but the fundamental reason is that we're going to upgrade our existing installed base. The installed base we're going to have at the end of the MV period is going to be significantly better installed base. I'll give you just a couple thoughts on here. Today, this is a largely unconnected, not smart industry in terms of connectivity to devices. At the end of VMV, every single dispenser we have out there is going to be IP addressable, capable of us interrogating it remotely and downloading software, just as one example.
So many, many opportunities are going to be created for us through the MV cycle. And with that lead in, I'd like to introduce Andrea Mulhall. Andrea is the Vice President and General Manager of our Insight 360 business, part of our vedroot business. And Andrea is going to come along and explain what we're doing, just a little bit of Veeder Root overview and then what we're doing with our Insight 360 business. She's been with us with Danaher in a number of roles and a number of different Danaher companies for over 10 years and just a great leader in helping us grow this new part of our business.
Thank you, Martin. Good afternoon, everyone. I'm thrilled to be here today to talk about Veeder Root and Insight 360. This is really a story about how Veeder Root, a leading supplier in the petroleum equipment industry in software and services wants to continue to deliver incremental value, tangible value to our customers. Traditionally, we've been known to supply compliance equipment to our customers, but our desire is to provide our customers increased business tools to allow them to more effectively run and manage their fueling operations.
And therefore, we created Insight 360, which you'll hear me talk about today. It's our service solution that provides our operators more visibility and control over their entire fueling network. So to help tell the story today, I'll go through a brief overview of vidaroo and Insight 3 We'll talk about a story where we've delivered tangible value to a very strategic customer of ours. And finally, we'll talk about the future vision of Insight 360 for Gilbarco vidaroute. So who is vidaroute and what do we do?
Well, vidaroute is the foundation of Danaher's petroleum vertical. We are the standard in the industry, often sought after to create products and solutions that meet regulatory drivers in environmental and air quality regulation. And as such, we enjoy significant penetration and significant market share as we develop those solutions. We also have a wonderful growth trajectory as those regulatory drivers continue to expand both domestically and internationally. So what do we do?
Many of you have probably been to or seen a gas station. Well, Veederit makes most of the equipment that you don't see on a gas station. Starting underground in the underground storage tank, we make the pumps that pump the fuel out of the tank. We make the sensors and the probes that tell our operators whether there's a leak on the site and tell them how much inventory that they have in their tank. Going above ground, we make vapor monitoring equipment and vapor recovery equipment, which is very critical to maintaining air quality across the globe and becomes ever increasingly important as air quality regulations continue to expand globally.
Now traditionally this equipment has provided exceptional value to customers in looking at their compliance in a single site. However, our customers have not had an efficient way to look across their network and gain actionable insights as to what is happening across the network. And therefore, we created Insight 360. We've leveraged our extensive installation base and our leading share position to connect all of this equipment and extract these data streams put them into a cloud based application. Therefore, we can translate those data streams into meaningful insights to our customers that enable them to better manage their business.
In turn, we're able to sell this as a software subscription solution SaaS based model. Let's take a little closer look at what Insight 360 is and what it does for our customers. As I mentioned, Insight 360 is our service solution. It really enables our customers to better see, control and manage their entire network of sites. It also enables them to take the right action at the right time at the right location in their sites, so they can more effectively manage their fueling operations, ultimately saving them time and money.
In turn for us, this is a double digit growth opportunity. As we look at increasing and capitalizing on our extensive market base and the networks that are ever increasing, we provide our customers a fully scalable solution, starting with a basic do it yourself solution for customers that want to take action themselves and scaling all the way up to a fully managed solution for customers that want us to do the service for them. This enables us to get customers on a service and upsell them over time to increase advanced services, thus generating that recurring revenue stream in that double digit growth. And finally, Veeder Root is uniquely positioned to do this better than anybody else. We can provide the equipment, the services and the financing in a complete package for our customers to deliver a single solution that meets their needs.
And we are doing this across nearly 40,000 sites today. So this is real. This is live. This is happening. We're providing this value to our customers.
So we talked about tangible value. This is a customer story that we're really proud of. For those of you with military connections, you've probably heard of a company called The Exchange. The Exchange's mission is to provide goods and services to our military and its families to make their lives more comfortable, both domestically and abroad. As such, the Exchange's desire is to effectively manage their fueling operations so that they can keep our military families supplied with fuel and offer that fuel at a very competitive price.
To do so, the Exchange is partnered with Gilbarco Veeder Root and has taken on the entire suite of Insight 360 services to help them better manage their fueling operations. So how do we do this? We help them make sure that they can buy fuel at the best price. We help them make sure that they don't run out of fuel. We help them understand where every drop of fuel is going in their network and that they're not losing any.
And finally, we help make sure that they receive every drop of fuel that they bought and they paid the right price for it. So what does this mean from a tangible value perspective? On our services in the past year alone, we have saved the exchange over $17,000,000 in cost savings on comparable gallons on their fuel purchases. We've also through our fuel logistics services helped them manage through one of the most recent significant natural disasters of our time Superstorm Sandy. So if you could rewind a couple of years with me, if you can imagine Superstorm Sandy wreaking havoc on the East Coast.
You can imagine during that time how difficult it must have been to get fuel to gas stations in that area. In fact, it was so difficult that sites that were not under our service only had fuel 20% of the time that they were in operation. Conversely, the exchange that subscribed to our fuel logistics services was able to keep their 2 50 sites in fuel and running 98% of the time. This meant that we were able to supply a continued supply of fuel to the U. S.
Military and its family. Obviously, the exchange is very proud of this accomplishment and we are very proud of this accomplishment. But this is only one example of the many ways that we are delivering this tangible value to our customers every single day with Beteroute equipment and Insight 360. So what's the future of Insight 360? Where are we going?
What's the vision? We talked today about the retail fueling side of Insight 360. On that side alone, we still see tremendous upside opportunity. As Martin talked about the retail network expansion, we see tremendous growth opportunity as we continue to layer Insight 360 onto our vast installation base and grow it in both mature markets and high growth markets. But the Gilbargo Veederit vision for Insight 360 is much bigger than the fueling side.
Our vision is to connect all of the equipment on the site to provide true site automation as Martin mentioned. And being able to leverage our installation base, our leading market share position and our footprint on these sites, the ElBarco Leader is uniquely positioned to be the only complete site automation supplier in the industry. We see tremendous runway with IoT in retail fueling applications and we know that as we can open up and extract those data streams, we can therefore open up and extract additional recurring revenue streams in this business as we connect this equipment. So in conclusion, Veeder Root will continue to leverage our vast installation base, connect all of these sites to generate double digit growth in recurring revenue streams. We will continue to expand our service offering to deliver cost competitive solutions that bring tangible value to our customers by combining our services, equipment and financing and complete solution packages.
And then leveraging Insight 360 with Gilbarco Vie de Veeder Root's footprint on the station, market share position and installation base, we will be the only site automation supplier in the industry able to deliver this value to our customers. Thank you.
Thanks, Andrea. Another great example of a growth opportunity, but also another great example in common with Steve's presentation of this growth buy will, create a large valuable installed base and grow on top of that large valuable installed base and keep doing that over and over and in different parts of the world. We're now going to change tack a little bit, and I'm going to ask Renaud Voorheeky to join us or to come and do a presentation on the telematics businesses, TeletracNavman. Renaud joined Danaher really, really recently when we acquired the telematics businesses or the Navman business in 2013. And I think it's a great example of another benefit that we've got over the years from acquisitions, which is great people joining Danaher and growing their careers and helping us grow our businesses.
Thanks, Fernand.
Thank you, Martin. I'm excited to talk about TeletracNavman. Today, I wanted to go through a little bit of a telematics overview for those of you who don't know about telematics, give an update on the integration, talk a little bit about how we're driving technology into the workflow of our customers and what that means in translating to new markets and how think about verticals. And finally, I want to talk about a live example with Domino's in Australia, how we actually did this and what that looked like. So telematics, we've heard the word probably a 1000 times, but I thought I would describe in more detail what it means to us.
So we provide a black box that really has 2 components. 1 is a GPS chip, which gives you location information. And the second is a cellular chip, like you find on all the cell phones you all have here. We take that and put that into a vehicle. And what that does is that transmits the data every 1 to 15 minutes of a vehicle over either AT and T or Verizon here in the U.
S. And goes into our servers. And what we actually sell is the software behind that. So all of that gets aggregated, Our customers log in and they have new visibility into their fleets. What they typically do is drive down the cost of fuel, they drive productivity or they drive compliance more recently or the combination of those 3.
And for us, from a Danaher and Fortive perspective, the benefit is really a SaaS business that has extremely attractive gross margins in an underpenetrated market that's highly fragmented. We're about a $200,000,000 business with high single digit growth and great runway to expand our margins over time with FBS and DBS.
So a little bit
of an update for those of you who don't know the history of Teletrac Navman, Danaher acquired Navman Wireless at the end of 2012 and 6 months later acquired Teletrac. Navman was a historical business that was mostly outside the U. S. And Teletrac was mostly inside the U. S.
2014. Now they're fully consolidated, both from a leadership perspective, but as Jim talked about, a management and product and also back office. So one of the things that created as a top 5 player here, which we think as we look forward allows us to leverage great opportunities in the U. S. And around the world.
So as we think about that and we look going forward, here's one of the things we've really thought about recently and one of the changes we see. Historically, our business and our industry has been in the middle of a workflow. If you take a look at this diagram and think about the workflow of a customer, we were all about execution and visibility. However, as we broaden our horizon and started thinking about what we could do in the future, looking at our customers workflow and taking the real time data. A lot of these things in our industries have been existing for a while, but they've had a missing component of understanding what's happening real time with their vehicles.
And we can provide that now. So let me give a real example of what that looks like. In transportation, there's lots of software packages around routing. They take multiple delivery points, use mathematics and spit out a route that's optimal. Historically, it's been really difficult for fleet managers to understand what happened once the route was planned.
What we can do is take the live data that I talked about and feed that into routing packages. And then all of a sudden, there's a new possibility to see the route, the plan and the deviation from those plans. Great opportunity to drive improvement into our customer base. And for us, it's great opportunity to increase revenue into our subscription base and create stickiness by having uniqueness for our customers. There's also an enhanced amount of compliance going around in transportation, whether that's hours of service here or in Australia or in our European business.
Now if we take that concept of workflow and drive it into verticals, we feel like we can create some unique software opportunities and some unique elements that we can drive into some verticals I'll talk about today. 1 of those is private fleet and the second one is construction. In private fleet, I just talked about routing on the left side of the workflow. On the right side, there's a lot about safety, whether that's compliance or cameras being put into trucks. We can trigger moments to go tie the live data of camera information into events that we know are happening into the vehicle and create new insights.
In construction, which is a market we've been really in for some time and have had very consistent growth in, it's a market also that has a lot of problems knowing what's happening on job sites. So we take that same black box, ruggedize it, stick it into yellow iron and allow it to transmit data real time back to job costing systems that plan projects. So now all of a sudden what historically in that market took a month to understand if your job was running over or under, we can do virtually in real time for our customers. So I always like to think about a real life example. 1 of the great examples here is with Domino's.
Now I want to stress that one of the great things here is this is just one example of taking our technology platform and extending it. We can do this over and over again across multiple industries, multiple verticals and multiple segments. So Domino's came to us for those of you who've ever ordered a pizza from Domino's, you know that they have a pizza app and this is in Australia. You can take an order and you can see it actually being created right there in the store and right to the end of the door when it leaves. They came to us with a challenge in saying we want to extend that.
We want to create a new opportunity where we can the experience all the way to the door of our customers. So they gave us 60 days, which even in our rapid software development cycle is pretty short time. This is where we're able to leverage some of the DBS tools even as a new OpCo and take that in and understand rapid development cycle times and apply it to this. And the net output was 6,500 vehicles that we won. We deployed into Australia and New Zealand very quickly.
And for Domino's, it was an incredible benefit, not just on their operational efficiency, but all of a sudden they had something to market to their customers, a new customer experience and they saw tremendous top line growth same store. So this is a great story about what we can do. In conclusion, I think this is a great platform for us, right? Not just its growth, but obviously this is a great place in which we can deploy the Danaher business systems, On the left and right side of those workflows in those verticals, On the left and right side of those workflows in those verticals, awesome opportunities to do organic additions. So as I leave today, just wanted to say thank you.
And what I've got here is a small video of Domino's and how they extended into the customer store at the customer's house and how we enable doing that. Thank you.
The normal reaction from people is to land up really, really wanting a pizza, but I'm not sure if that's the case after that barbecue lunch. Fantastic business, organic and inorganic growth opportunities. And the other benefit that might not have been as apparent from that presentation is that it gives us a base of expertise as we look to grow our software and SaaS businesses, base of expertise in technology, service delivery and also importantly, commercial execution expertise. I'd now like to move on and introduce Rob Teichel. Rob is the VP of Global Operations for Gilbarco Veeder Root.
He's got a long career at Danaher, a number of different businesses. He was President of our Jacob's Vehicle business before coming to Gilbarco. We're very pleased to have him over here as he helps us really drive and improve the efficiencies on QDC for our businesses. Thanks, Rob.
Thank you, Martin. Who knew you were going to get to visit an Australian nightclub tonight? So as Martin said, I'm very fortunate to lead a group of individuals, some of which are in the room today that collectively run our global operations here at Gilbarco and Bieder Root. I know you've been sitting for a while. I have just 10 minutes.
It's a little bit of time pressure, but then I reminded myself that if anybody should be able to deliver a quality product on time with high efficiency, it better be the guy talking about DBS. Today, I really am excited to illustrate just a few ways in which DBS is driving superior results across the business portfolio. Everyone, beginning with Jim, has referenced our FBS, DBS culture. In my presentation, I hope to reinforce different areas. Whether it be in the traditional area of operations, where, of course, the lean tools continue to drive productivity and improvement in quality and delivery, in our commercial teams, where our growth tools allow us to reach new market segments through better visibility and customer insights or in our engineering and product development areas, where we use the DBS tools to shorten the development cycles, while delivering offerings with improving quality, reliability and durability.
DBS continues to evolve. I think that's really important. In my 10 years with Danaher, I've witnessed this firsthand with new tools and best practice is being shared across the businesses and across the portfolio. Segmented into the categories of lean leadership and growth, as Jim alluded to, Here are just a few of the results we've delivered recently. Consistent core growth in the mid single digits over the past 3 years, better than 300 basis points of margin expansion and improved cash flow as evidenced by the 20% improvement in our working capital turns.
Additionally, and maybe from a customer perspective, in 2015, we saw 250 basis point improvement in our on time delivery performance in Gilbarco. We also saw a 45% improvement in quality for our flagship fuel dispenser Encore, which you're going to see during the product tour this afternoon. On the growth side, dollars 15,000,000 of incremental revenue from tools associated with our transformative marketing efforts that Steve talked about and a 3x velocity gain in some of our product development timelines. A real specific example, Martin talked about the acquisition in India and the fact that we now get a lot of the standard components taking advantage of that low cost region. Our meter cell in India last year alone improved their labor productivity by 25%.
Here's a specific example from operations, one that
you're going to see
out during the tour in a few minutes. The strong dispenser growth we're seeing as a result of share gain and the E and B opportunity forced us to look at how we could leverage the DBS tools to increase our capacity without the need for extensive capital. We're looking at some substantial volume increases and we wanted to see how we can leverage the existing assets. Lean DBS tools, including the production preparation process, we refer to that here as 3P, lean conversion, standard work, visual management and Kaizen have all driven some substantial benefit. In addition to obtaining the 50% capacity increase that we were looking for here in this factory, with these tools, we were able to also see improvements in labor productivity by 500 basis points already realized this year.
And we've increased our first pass yield through the production process. And maybe just as importantly, we've improved the working ergonomics for our associates on the line, helps with engagement and helps with fatigue. More broadly, the application of these DBS tools across the portfolio have resulted in better on time delivery. You can see 200 basis points there. Solid margin expansion due in part to some of the DBS tools that are designed around our supply chain management and our direct material cost reduction.
In the next couple of examples, I want to focus where we're using DBS in non manufacturing areas, how we're driving growth. In our commercial teams, tools such as transformative marketing, digital marketing, VOC, sales funnel management, etcetera, are driving top line growth while improving the efficiency of our processes as well. Better market visibility and some insightful segmentation of our served markets allows us for more specifically targeted and differentiated value selling efforts. Monthly revenue attributed to these tools alone has increased 5 times since January of last year. We're on a trajectory based on our Q1 results to triple that again in 2016.
Note also the significant improvement in the efficiency these efforts have in converting our leads into orders. You see this in a lot more detail later on this afternoon in our digital marketing breakout session. But as Steve referenced in his presentation on EMV, clearly the takeaway here is that we're effectively reaching more customers and new market segments by using these growth tools. Last specific example I'd like to talk about is within our engineering and product development area. This is done in all of our engineering groups across all of the business in the portfolio.
We're using DBS to drive organic growth here as well. Here you see an example from Veeder Root, where DBS growth tools focused on improving our product development processes have been utilized. As part of these tools, practices such as rapid prototyping, increased use of proven technology, parts, things that are already in our parts bins and competitive teardown analysis has really started to pay some dividends. 65% improvement in the development cycle for some of our products here, including the one that you see here in the TLS. We'll talk more about that in a moment.
And on time delivery for some of our project timelines from a low of 30% to well over 80% today. Using these tools, we launched our new automated tank gauge system and we did that with appropriately differentiated feature sets for both mature markets with our TLS 450 plus and for the emerging markets with our TLS 4. Kind of wrap up and summarize from a DBS standpoint. As I hope we've shown, DBS, FBS shortly touches all aspects of the business. It really is who we are and how we do what we do.
It is rooted in the belief that everything has to be improved and must continually be so in order for us to continue to outperform. It continues to evolve. And I think really importantly, it's equally applicable and it's equally effective in the mature businesses within the portfolio, but also within the newer businesses that we bring in. The DBS fundamentals are really timeless. And to that extent, they ensure that we'll be able to be uniquely positioned to drive superior results over the long term.
We're really glad you guys came today and appreciate your patience and attention during the presentation. Thank you.
Thanks, Rob. I think this really highlights an area where there are a couple of questions for Jim. Even in a mature business, a mature Dannehill business like Gilbargo, where we've been part of the Dannehill family for some time, DBS and FBS still provide significant opportunity for margin enhancement, customer service and other areas. So all of that is still possible. Just summarizing the day for us before getting Jean Pierre to help her with some Q and A.
I think you've heard about our technology leadership position. I think you've heard about the power of our installed base and how we're going to be able to leverage that through the MV cycle and well beyond the MB cycle. I think you've also heard about the adjacent market opportunities that we're creating both within the retail petroleum vertical as well as outside of that vertical. And I think also, hopefully, you've taken away the strong message about our unparalleled power of our portfolio and strength of our portfolio in this industry. Just a lost view of the financial evolution of this business.
I thought it's just worth one last look at it. But again, I think this is and the reason we're putting this over here is, again, is a pointer to what the future can be and the continued runway, both in the Transportation Technologies segment as well as across the other Fortive platforms and businesses. So thanks very much for that, and we'll get Chimam up to help with the Q and A section.
It's probably for Martin. Obviously, a lot of what you're doing at GVR is focusing company overall, we've seen it in the margins at least early this year around EMV Investment. So can you talk about the payback period for what you're doing here? And what talk about the barriers to entry as well, because when I look at Telstraq, Navman, what I see is you're probably competing against the fleet OEMs themselves, and they're pushing that too, software guys can get into it. So why are you guys why is GVR the right why are you ahead?
Why would you stay ahead?
Vikram, a number of different questions, and I'm going to answer the fleet telematics question separately from the GVR questions. We've certainly invested heavily ahead of the CMV period in particular. We needed to invest in capacity expansion. We also needed to invest greatly in the product development side to prepare the product and get ahead of the market, which we succeeded in doing with the technology. The payback cycles are actually on that are actually very rapid for us.
I think very, very, very short cycle payback for that. We're spreading some of the load on the heavy development cycle. And what we're doing in our partnership with VeroFone was an important part of that because VeroFone can leverage their horizontal expertise across the payment market and bring that into our verticals. So that was also an important component of what we did there. In terms of barriers to entry, I think there are very strong barriers to entry in this market.
Steve Moo spoke a lot about the certification, the certification complexity that exists around the industry. It's actually one of the reasons everybody is so late in implementing EMV is actually that certification. So there's a lot of certifications still ahead of almost all the manufacturers, payment networks and customers. That in itself, leaving aside the technology challenges, creates a significant barrier to entry. On the telematics side, just not to forget that question, this is a business we like a lot.
It's a business we like a lot. There is consolidation opportunities. There's opportunities to expand into the workflows. There are some opportunities to bring the Gilbalko fueling businesses together and our expertise in some specific verticals. But most of you will like the growth profile of the business and the opportunity to build additional vertical businesses.
Thank you.
Got it right here in the middle. Just wondering if you could just help us with a few kind of basic building blocks, just the roughly the size of the POS business and how to think about your market share. And just thinking about the market share, I'm sure I'm not coming to the right conclusion looking at this slide. But if 50% of people have these systems and only 5% of them work and you've got the only one that's certified. It sounds like you have 5% share, but I don't think that's the right conclusion.
So what am I missing in that rough arithmetic there?
Well, I'm
not sure your arithmetic is incorrect. Let me clarify the 5% if I can. So we're talking about point of sale systems and taking EMV transactions indoors. Actually, over 50% of the market has acquired the equipment to be able to take EMV transactions, but only 5% of that 50% is currently executing EMV transactions. The rest of them are still running on Mags Right technology.
So the installed base of EMV capable equipment in the store is over 50% at this point.
So the way to think about that is when you go to a lot of times you go indoor, you'll see the opportunity to put the MV card in, but you're still swiping it. So that's really what's happening. The equipment is there, but they're not using it.
But are you also saying your system is technically certified, but the retailer or whatever has not done some additional step that certifies them to interact with the payment system. Is that what you're saying?
So here's where part of the complexity is. Most of the retailers have either individual payment network systems, so they're on an Exxon network or a Shell network or a First Data network. And the complexity of IHAR is the dispenser, the point of sale system and the payment network have to be certified together. So our system was the 1st in the market with a number of certifications, but not everybody is certified yet. And that's part of the complexity and those entry barriers
we were talking about earlier. So can you give us an idea of kind of size and market share?
I'll give you an idea of market share, which is actually very good, and I'll give you an idea of our installed base at this point. We're approaching 40 in the U. S, we're approaching 40,000 stations with our point of sale business.
Steve? Thanks. Question on both businesses again. Okay. First of all, on telematics, what how do you scale up a $200,000,000 business where you have software that's built on a platform, but very much customized customer by customer by customer by customer.
How does that how
do you get scale out
of that? Okay. Well, I
think firstly, it's not actually despite the Domino's example, the core platform, the core functionality is not customized at all. It's standard across all of our products. And in the vast majority of instances, we provide a standard suite of products with standard software. We then have opportunities in specific vertical markets and why we didn't particularly think of pizza delivery as a vertical we were going to attack. It's a good example of a market where you can tailor the software around that vertical.
Okay. And then secondly on GVR, in terms of the 5% 50%, 5% to 50%, what's the natural limit in your view? Is there a reason why you wouldn't go to see the industry go to 100%?
We don't think it's going to reach 100% because there's always laggards. We had some payment card regulations a few years ago. The industry never got to 100%. No regulation ever gets to 100%.
But we
think it will get north of 80%.
And time frame?
The time frame for the indoor systems, probably another couple of years, maybe by the end of this year, we should be pretty close to that. The outdoor systems, there's actually greater complexity on the implementation outdoors than there was indoors. We think that is going to lag significantly past that 2017 deadline.
This is really exciting. It's like the only time I get to use my knowledge of the convenience store industry. Sounds ominous. So just to think of it, 2 questions. One,
you said you
had about 40,000 sites in the U. S. I think there's about 126,000 sites within the U. S. Total.
So you're about 30% market share, 33%. There's been a lot of consolidation in the industry, although it's still highly fragmented. There's a lot of consolidation still to come. How are you positioned for some of the consolidators who may have contracts with other players? Do you need to win those contracts as they kind of eat up more market share of the overall industry?
Or is that something that you're on the right side to be positioned for? And then the second question is, one of the growth aspects for these more consolidated players is actually getting into fuel transportation. Do you have cross sell into the fuel transportation business as well?
Again, a number of questions there, a number of answers. But let me first answer something you didn't ask, which is that we don't we still irrespective of the point of sale system the customer has, we still sell our Veeder Root systems where we have
our highest market share.
We still sell dispenser systems where we have our next highest market share. And then we have our point of sale systems. So I just want to clarify that point. Even if the customer is not a Gilbarco Veeder Root point of sale customer, chances they're almost certainly a Veederoot Gilbarco Dispenser and Payment System customer. We think we're well placed with the consolidation across those product lines.
There's obviously still room for share expansion, and we think there are going to be future opportunities on after EMV to continue driving that share expansion as well. But overall, I think we're very, very happy with where we are in the point of sale business. So there were a couple of other questions over there as well.
I think the second
one was just the fuel transportation. Yes,
fuel transportation. Thank you for reminding me. The exciting thing about what we're doing with the Insight 360 business that Andrew described and she spoke about the exchange, AAFES, the military stations, we supply a few logistics service. We do that for large retailers and small retailers. We help them choose the optimum.
We are capable of helping them choose the optimum time to buy as well as managing that business. And we also have the optimum time to buy from a not just an inventory perspective, but also from the optimum time to buy on where they can buy at the lowest cost. So we do have a fuel logistics business that is growing and very valuable. And maybe just to
globalize that as well. I mean, specific opportunities, you look around the world, yes, your model is somewhat U. S. Focused, but if you look around the world sometimes, in some cases around the world, the retailer is also the fuel provider. So then in that case, it would
be the defensive system.
So I think as you really think about the global capability that we've got throughout the portfolio of products, we really have the opportunity as these fuel management situations become more complex, supply chains become more complex, it's really an opportunity for us
on a global basis. Thanks,
Shu. Just if I may, a question on Software as a Service. Could you quantify, I mean, either for I mean, would be great for Fortive as a whole. What percent of sales is software as a service right now? What's the profitability on operating basis relative to the average operating margin?
And what kind of rate of growth are you seeing?
I would say, in that 20% or 25% of software services that we've referenced around Fortive, probably in the high single digit number probably is SaaS with telematics being the largest. The overall profitability is every bit the fleet. So I think in you saw in the telematics business slightly below the fleet and some of our other businesses slightly above the fleet. So we're not seeing anywhere where we really see anything higher obviously higher gross margins, a little bit more relative to investment in some of the R and D side, but you really see very good strong operating margins.
Over here, yes.
Thanks a bunch. Just curious on your blender pumps, if you could talk a little bit about the rise of ethanol, whether or not you're seeing a lift from that marketplace in the Gold Barcode business. Is that significant?
We are seeing the fuel supply environment is becoming much more complex. Ethanol is certainly an opportunity. As we go on the plant walks, one of the examples we're going to give you is how we've grown our ethanol business in the state of Kansas. So we find it very much a regionally focused business where there's promotions from regulators or manufacturers around promoting the use of ethanol. But you'll see some examples of how that is actually coming through.
Okay. And then just a separate technology question would be on electronic electric vehicles. I know most people probably don't expect that to be a huge percentage of the fleet. But if we look take a long view, 5, 10 years, is there a way to leverage what you have in Gilbarco to capture some of the value and rise in EVs?
I think we're still waiting to see how that electric vehicle market plays out. Clearly, it's still a very small portion of the total vehicle fleets around the world, and we're keeping a very close eye on it. It really depends, I think, on how the technology plays out and where the gas stations become a valuable part of that electric vehicle fueling infrastructure.
How specific is your advantage to the your transportation domain expertise? I mean, you talked about doing some things in construction. I mean, when you have your point of sale software on that side or the telematics stuff, is this something that can be applied in other industries or is your advantage really specific to transportation?
I'll start. I mean, I think if you look at the installed base that we've got in a broad thought around transportation all throughout the fuel management sector, whether it's some of the obvious things. But as an example, in construction, where we're really on the site, we're doing a lot of the work through Gilbarco Veeder Root, but we're also providing a lot of service on fuel transportation and things like that through telematics. So we brought all of those technologies you've seen in the last hour or so altogether in one particular vertical. So every vertical is a little bit different.
And we think more broadly around some of these technologies, there's certainly a thematic advantage to having some of the things like, as Martin mentioned, the telematics business that really understands how to have a go to market in a software business like this. But specifically around some of those technologies, they're pretty independent to transportation technologies. I wouldn't see them portable. If the question is, are they portable in other platforms? Not yet, thematically, but not directly.
Okay. I think Dan's going to come up here for a second. So we got to have got to end with Dan. So thanks.
Good afternoon. Thanks for coming. If I could ask Jeff Sprague, Scott Davis and Bob Cornell to come up to the stage for a moment. Bob, we wanted to, as a broad group, collectively thank you for your many years of service to the industry. And both you may have to.
And both Scott and Jeff wanted to say a few words. Maybe Jeff, if you kick us off, that'd be great. I know Bob in a moment You might want to
get up to
the mic. Sorry. I'm
not on the I know in a moment there's going to be a slide that's going to go up. I don't want to steal Dan's thunder on that, but it's going to actually show a picture of your report, when there it is, when you initiated coverage on Danaher. And that's very interesting actually in the context of today because I also picked up Danaher in 1998. Now thankfully, I'm 20 years younger. But, I remember going to Washington, D.
C. And sitting in Pat Allender's office and George Sherman's office, and your report was on their desk. And I'm like, damn, Bob beat me to it. And that was a good piece of work. And it's also kind of fitting for today because George Sherman said, if you really want to learn Danaher, you got to go to Simsbury and visit Bieder Root.
And there's this young guy Larry Culp that runs it. You're really going to be impressed with it. So it all kind of ties to today. But it's really been a pleasure working I'd say really working with you. We've been competitors, but you were always a gentleman.
Bob always was willing to mention or point out or ask a question or give advice. And I'll just say one more thing and seed the microphone. I remember I was just a young cub analyst at Automation Fair. And Bob said to me, automation is this certain kind of alchemy. And if you can figure this out, you'll make a lot of hay over the years.
So I'm like, I'm going to figure out automation. And, Bob, you helped me with that. Thanks a lot.
I'm outclassed on this stage. I don't feel like I deserve to be up here with these 2 3 fine gentlemen, but 2 exceptionally good analysts who have driven me to try to be better for a long, long, long time. And early in my career, I remember standing up to my boss and saying, him asking me why I wasn't moving up the rankings faster. And I just said, I can't beat Bob Cornell. I said, I have no chance of being Bob or Jeff Sprague either, but I definitely cannot beat Bob Cornell because he knows 50 times more about every single one of these businesses and than I know.
And it's going to take me 30 years to catch up. And I'll tell you, working with Bob the last 5 years, I've gotten to respect him as a person more than even a competitor. And I'm going to miss him a lot. He's been a great mentor and friend to me. And I just can't say enough good things about Bob.
So thank you for all you've done. And I hope we see you around at these events going forward. Thank you.
So Bob, we have a few things for you. The first is a plaque, crystal plaque and it reads and you can read some of it here, but, Bob Cornell 40 plus years service to the investment community. 39 and I'm pretty good with numbers, but I'm not precise. 39 appearances in multiple Capital GoodsIndustrial All America Research teams including 15 times at number 1. A member of the Institutional Investor All America Research Hall of Fame.
Widely respected for his in-depth research, stock picking and ability to develop strong working relationships with company management. And to quote Bob, to make money in this industry over the long term, you have to rise above day to day considerations and see what changes are coming and which companies can adapt. Thanks for your support, including 55 quarters of Danaher coverage.
Thank you.
Unfortunately, Pat Allender could not be here today, but he does send along his best wishes as you enter your next phase of your life. And Pat, myself and all the members of the Danaher leadership team past and present, want to thank you for your 2 decades of support, great advice. And to highlight that, we have a plaque which commemorates your initiation report. And you guys can read some of that right there in the slide. So again, Bob, thank you for everything.
Well, this is a big setup, obviously, because I had no idea this is coming. And I want to thank, well, all the people at Danaher. I've met the people the management going back, as Dan said, to the George Sherman, Pat Allender days and known Dan Comas actually way, way, way back, right? We met actually Dan was in, I think, high school, right? I won't go into that story, but I'll tell it later.
He was a smart guy then, he's a smart guy now. I feel to listen to him more than I did honestly over the years. So I want to thank everybody that's in the room. It's been a great obviously, this is a ceremony because I announced my retirement 3 years ago 3 months 3 weeks ago, 3 years ago in terms of work effort maybe. You didn't mention my sense of humor by the way, anybody.
But I said I was going to retire because I'm actually old and I promised my wife I would try retirement, which I generally will attempt to do. But I'm leaving the door open. You never know. You may see me around some place someday. But I really do appreciate the initiative that Danaher folks have taken to say thanks to me and I say thanks to him.
I recommend the stock. Stock went up. I guess we both look good and I thank everybody in the room for both of those things. Thank you everybody.
Thank you, Bob.