VONTIER: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

Vontier Corporation ("Vontier," the "Company," "we," "us," or "our") is a global
industrial technology company that focuses on critical technical equipment,
components, software and services for manufacturing, repair, and servicing in
the mobility infrastructure industry worldwide. The Company supplies a wide
range of mobility technologies and diagnostics and repair technologies solutions
spanning advanced environmental sensors, fueling equipment, field payment
hardware, remote management and workflow software, vehicle tracking and fleet
management software-as-service solutions, professional vehicle mechanics' and
technicians' equipment and traffic priority control systems. The Company markets
its products and services to retail and commercial fueling operators, commercial
vehicle repair businesses, municipal governments and public safety entities and
fleet owners/operators on a global basis.

This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is designed to provide a reader of our financial statements
with a narrative from the perspective of management and is intended to help the
reader understand the results and operations and financial condition of the
Company. Our MD&A should be read in conjunction with the MD&A and Consolidated
and Combined Financial Statements included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2020 (the "2020 Annual Report on Form 10-K").

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this quarterly
report, in other documents we file with or furnish to the Securities and
Exchange Commission ("SEC"), in our press releases, webcasts, conference calls,
materials delivered to shareholders and other communications, are
"forward-looking statements" within the meaning of the United States federal
securities laws.

Forward-looking statements are not guarantees of future performance and actual
results may differ materially from the results, developments and business
decisions contemplated by our forward-looking statements. Accordingly, you
should not place undue reliance on any such forward-looking statements.
Forward-looking statements speak only as of the date of the    Report, document,
press release, webcast, call, materials or other communication in which they are
made. Important factors that could cause actual results to differ materially
from those envisaged in the forward-looking statements include the following:
•The effect of the COVID-19 pandemic on our global operations and on the
operations of our customers, suppliers, and vendors is having, and is expected
to continue to have, a significant impact on our business and results of
operations.
•Changes in, or status of implementation of, industry standards and governmental
regulations, including interpretation or enforcement thereof, may reduce demand
for our products or services, increase our expenses or otherwise adversely
impact our business model.
•Our growth depends in part on the timely development and commercialization, and
customer acceptance, of new and enhanced products and services based on
technological innovation.
•The indemnification provisions of acquisition agreements by which we have
acquired companies may not fully protect us and as a result we may face
unexpected liabilities.
•Our businesses are subject to extensive regulation; failure to comply with
those regulations could adversely affect our financial statements and our
business, including our reputation.
•International economic, political, legal, compliance, epidemic and business
factors could negatively affect our financial statements.
•We may be required to recognize impairment charges for our goodwill and other
intangible assets.
•We are party to asbestos-related product litigation that could adversely affect
our financial condition, results of operations and cash flows.
•Our restructuring actions could have long-term adverse effects on our business.
•Our defined benefit pension plans are subject to financial market risks that
could adversely affect our financial statements.
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•As of the date of this quarterly report, we have outstanding indebtedness of
approximately $2.0 billion and the ability to incur an additional $600.0 million
of indebtedness under the two-year senior unsecured delayed-draw term loan and
$750.0 million of indebtedness under the Revolving Credit Facility, as defined
above, and in the future we may incur additional indebtedness, all of which
could adversely affect our businesses and our ability to meet our obligations
and pay dividends.
•We may not be able to generate sufficient cash to service all of our
indebtedness and may be forced to take other actions to satisfy our obligations
under our indebtedness, which may not be successful.
•Any inability to consummate acquisitions at our historical rates and at
appropriate prices, and to make appropriate investments that support our
long-term strategy, could negatively impact our growth rate and stock price.
•Our acquisition of businesses, investments, joint ventures and other strategic
relationships could negatively impact our financial statements.
•Changes in our tax rates or exposure to additional income tax liabilities or
assessments could affect our profitability. In addition, audits by tax
authorities could result in additional tax payments for prior periods.
•Adverse changes in our relationships with, or the financial condition,
performance, purchasing patterns or inventory levels of, key distributors and
other channel partners could adversely affect our financial statements.
•Our financial results are subject to fluctuations in the cost and availability
of commodities that we use in our operations.
•If we cannot adjust our manufacturing capacity or the purchases required for
our manufacturing activities to reflect changes in market conditions and
customer demand, our profitability may suffer. In addition, our reliance upon
sole or limited sources of supply for certain materials, components and services
could cause production interruptions, delays and inefficiencies.
•Potential indemnification liabilities to Fortive pursuant to the Separation
agreement could materially and adversely affect our businesses, financial
condition, results of operations and cash flows. In addition, there can be no
assurance that Fortive's performance of its indemnity obligations to us under
the separation agreement regarding certain liabilities will be sufficient.
•If there is a determination that the distribution, together with certain
related transactions, is taxable for U.S. federal income tax purposes because
the facts, assumptions, representations or undertakings underlying Fortive's
private letter ruling from the IRS or tax opinion are incorrect or for any other
reason, then Fortive and its stockholders could incur significant U.S. federal
income tax liabilities, and we could also incur significant liabilities.
•We may be affected by significant restrictions, including on our ability to
engage in certain corporate transactions for a two-year period after the
distribution in order to avoid triggering significant tax-related liabilities.
•Fortive may compete with us.
•We may not achieve some or all of the expected benefits of the Separation, and
the Separation may adversely affect our businesses.
See "Item 1.A. Risk Factors" in our 2020 Annual Report on Form 10-K and Part II
- Item 1A. Risk Factors" in this Form 10-Q for a further discussion regarding
reasons that actual results may differ materially from the results, developments
and business decisions contemplated by our forward-looking statements.
Forward-looking statements speak only as of the date of the report, document,
press release, webcast, call, materials or other communication in which they are
made. We do not assume any obligation to update or revise any forward-looking
statement, whether as a result of new information, future events and
developments or otherwise.
OVERVIEW
General

Vontier is a global industrial technology company that focuses on critical
technical equipment, components, software and services for manufacturing,
repair, and servicing in the mobility infrastructure industry worldwide. We
supply a wide range of mobility technologies and diagnostics and repair
technologies solutions spanning advanced environmental sensors, fueling
equipment, field payment hardware, remote management and workflow software,
vehicle tracking and fleet management software-as-service solutions,
professional vehicle mechanics' and technicians' equipment and traffic priority
control systems. We market our products and services to retail and commercial
fueling operators, commercial vehicle repair businesses, municipal governments
and public safety entities and fleet owners/operators on a global basis.

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Our research and development, manufacturing, sales, distribution, service and
administrative operations are located in more than 30 countries across North
America, Asia Pacific, Europe and Latin America. In addition, we sell our
products in these countries and multiple other markets in these regions. We
define high-growth markets as developing markets of the world experiencing
extended periods of accelerated growth in gross domestic product and
infrastructure, which include Eastern Europe, the Middle East, Africa, Latin
America, and Asia, with the exception of Japan and Australia.
BUSINESS PERFORMANCE AND OUTLOOK
Business Performance
While differences exist among our businesses, on an overall basis, demand for
our hardware and software products and services increased during the three and
six months ended July 2, 2021. As compared to the comparable periods of 2020,
aggregate year-over-year total sales increased 35.8% and 25.3% for the three and
six months ended July 2, 2021. Sales from existing businesses increased 32.7%
and 22.8% during the three and six months ended July 2, 2021, as compared to the
comparable periods in 2020. The increase in total sales and sales from existing
businesses during the three and six months ended July 2, 2021 was primarily
driven by broad growth across the portfolio as well as the direct and indirect
impacts of COVID-19 on the prior year comparable periods. Our mobility
technologies platform had strong demand for retail and environmental solutions,
continued strong demand for and shipments of fuel management systems in North
America related to the enhanced credit card security requirements for outdoor
payment systems based on the Europay, Mastercard and Visa ("EMV") global
standards, Mexico regulatory demand and dispenser and environmental deliveries
in India. Our diagnostics and repair portfolio also experienced strong demand
across most product categories, most notably specialty and hardline tools, tool
storage and diagnostics. Changes in foreign currency exchange rates positively
impacted our sales growth by 3.1% and 2.5% during the three and six months ended
July 2, 2021 compared to the comparable periods in 2020.

In developed markets, year-over-year total sales and sales from existing
businesses for the three months ended July 2, 2021 increased at a rate greater
than 30% which was primarily due to growth in North America which also grew more
than 30%. High growth markets had a more than 20% increase primarily due to
growth in India and Latin America.

In developed markets, year-over-year total sales and sales from existing
businesses for the six months ended July 2, 2021 increased more than 20% which
was primarily due to more than 20% growth in North America. High growth markets
also had a more than 20% increase primarily due to growth in India and Latin
America.
Outlook

We expect overall sales and sales from existing businesses to grow on a
year-over-year basis in 2021; however, we are continuing to monitor the impact
of the COVID-19 pandemic and geopolitical and regulatory uncertainties and the
corresponding impact to our businesses in addition to the other factors
identified above in "Information Relating to Forward- Looking Statements."

RESULTS OF OPERATIONS

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Comparison of the results of operations

                                                    Three Months Ended                            Six Months Ended
($ in millions)                             July 2, 2021          June 26, 2020         July 2, 2021          June 26, 2020
Total sales                               $       724.6          $      533.7          $    1,432.0          $     1,142.9
Total cost of sales                              (406.1)               (302.7)               (801.7)                (648.8)
Gross profit                                      318.5                 231.0                 630.3                  494.1
Operating costs:
Selling, general and administrative
expenses ("SG&A")                                (164.6)               (111.8)               (310.3)                (234.9)
Research and development expenses ("R&D")         (32.9)                (29.2)                (66.1)                 (62.1)
Impairment of goodwill                                -                     -                     -                  (85.3)
Operating profit                          $       121.0          $       90.0          $      253.9          $       111.8

Gross profit as a % of sales                       44.0  %               43.3  %               44.0  %                43.2  %
SG&A as a % of sales                               22.7  %               20.9  %               21.7  %                20.6  %
R&D as a % of sales                                 4.5  %                5.5  %                4.6  %                 5.4  %
Operating profit as a % of sales                   16.7  %               16.9  %               17.7  %                 9.8  %



Components of Sales Growth
                                                            % Change Three Months          % Change Six Months
                                                           Ended July 2, 2021 vs.        Ended July 2, 2021 vs.
                                                           Comparable 2020 Period        Comparable 2020 Period
Total revenue growth (GAAP)                                                35.8  %                       25.3  %
Existing businesses (Non-GAAP)                                             32.7  %                       22.8  %

Currency exchange rates (Non-GAAP)                                          3.1  %                        2.5  %



Total sales and sales from existing businesses within our mobility technologies
platform increased more than 20% during the three months ended July 2, 2021 as
compared to the comparable period of 2020. Total sales and sales from existing
businesses within our mobility technologies platform increased more than 20% and
at a rate in the high-teens, respectively, during the six months ended July 2,
2021 as compared to the comparable period of 2020. Our mobility technologies
platform increases were driven by the direct and indirect impacts of COVID-19 on
the prior year comparable periods as well as strong demand for retail and
environmental solutions, continued strong demand for and shipments of fuel
management systems in North America related to the enhanced credit card security
requirements for outdoor payment systems based on the EMV global standards,
Mexico regulatory demand and dispenser and environmental deliveries in India.

Total sales and sales from existing businesses within our diagnostics and repair
technologies platform increased more than 50% during the three months ended July
2, 2021 as compared to the comparable period in 2020. Total sales and sales from
existing businesses within our diagnostics and repair technologies platform
increased more than 30% during the six months ended July 2, 2021 as compared to
the comparable period in 2020. The year-over-year results during both periods
ended July 2, 2021 were driven principally by the direct and indirect impacts of
COVID-19 on the prior year comparable periods as well as strong demand across
most product categories, most notably specialty and hardline tools, tool storage
and diagnostics.

Price increases are reflected as a component of the change in sales from
existing businesses, and year-over-year price increases contributed 2.0% and
1.5% to sales growth during the three and six months ended July 2, 2021 versus
the comparable periods in 2020.

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Cost of sales

Cost of sales increased $103.4 million and $152.9 million for the three and six
months ended July 2, 2021, as compared to the comparable periods in 2020, due
primarily to higher year-over-year sales volumes from existing businesses as
well as increased costs of materials due to inflationary pressures.

Gross profit

The year-over-year increase in gross profit during the three and six months
ended July 2, 2021, as compared to the comparable periods in 2020, is primarily
due to higher sales volumes and a favorable sales mix which was partially offset
by increased costs of materials due to inflationary pressures.

The 70 basis point increase in gross profit margin during the three months ended
July 2, 2021 as compared to the comparable period in 2020 is primarily due to
price increases and a favorable sales mix and partially offset by increased
costs of materials due to inflationary pressures.

The 80 basis point increase in gross profit margin during the six months ended
July 2, 2021 as compared to the comparable period in 2020 is primarily due to
price increases and a favorable sales mix and partially offset by increased
costs of materials due to inflationary pressures.

Operating and other expenses

SG&A expenses increased during the three and six months ended July 2, 2021, as
compared to the comparable periods in 2020, primarily due to the increase of
corporate costs associated with operating as a separate public company as well
as savings in the three and six months ended June 26, 2020 from broad cost
reduction efforts that reduced labor expenses to better align with reductions in
demand as well as other reductions in discretionary spending.

On a year-over-year basis, SG&A expenses as a percentage of sales increased 180
and 110 basis points during the three and six months ended July 2, 2021,
respectively, as compared to the comparable periods in 2020 primarily due to the
increase of corporate costs associated with operating as a separate public
company as well as broad cost reduction efforts in the three and six months
ended June 26, 2020.

R&D expenses (consisting principally of internal and contract engineering
personnel costs) increased $3.7 million and $4.0 million during the three and
six months ended July 2, 2021, as compared to the comparable periods in 2020 due
to broad cost reduction efforts in the prior year periods. On a year-over-year
basis, R&D expenses as a percentage of sales decreased during the three and six
months ended July 2, 2021 due to an increase in total sales which was partially
offset by an increase in R&D expenses.

Operating profit

Operating profit margin decreased by 20 basis points in the three months ended
July 2, 2021 compared to the comparable period of 2020.

Year-over-year operating profit margin comparisons were favorably influenced by:

•Higher year-over-year sales volumes, price increases and a favorable sales mix
- favorable 960 basis points
Year-over-year operating profit margin comparisons were primarily impacted by
the following unfavorable factors:

•Corporate costs associated with operating as a separate public company and
other one-time costs - unfavorable 540 basis points
•Increased operating costs due to prior year broad cost reduction efforts and
other increases in operating costs - unfavorable 340 basis points
•Increased costs of materials due to inflationary pressures - unfavorable 100
basis points

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Operating profit margin increased by 790 basis points in the end of the six-month period
July 2, 2021 compared to the comparable period of 2020.

Year-over-year operating profit margin comparisons were favorably influenced by:

•Higher year-over-year sales volumes, price increases and a favorable sales mix
- favorable 880 basis points
•The impact of the prior year goodwill impairment of our Telematics business -
favorable 600 basis points
Year-over-year operating profit margin comparisons were primarily impacted by
the following unfavorable factors:

•Corporate costs associated with operating as a separate public company and
other one-time costs - unfavorable 440 basis points
•Increased operating costs due to prior year broad cost reduction efforts and
other increases in operating costs - unfavorable 180 basis points
•Increased costs of materials due to inflationary pressures - unfavorable 70
basis points

NON-GAAP FINANCIAL MEASURES

Sales of existing businesses

We define sales from existing businesses as total sales excluding (i) sales from
acquired and divested businesses; (ii) the impact of currency translation; and
(iii) certain other items.

•References to sales attributable to acquisitions or acquired businesses refer
to GAAP sales from acquired businesses recorded prior to the first anniversary
of the acquisition less the amount of sales attributable to certain divested
businesses or product lines not considered discontinued operations.
•The portion of sales attributable to the impact of currency translation is
calculated as the difference between (a) the period-to-period change in sales
(excluding sales from acquired businesses) and (b) the period-to-period change
in sales, including foreign operations, (excluding sales from acquired
businesses) after applying the current period foreign exchange rates to the
prior year period.
•The portion of sales attributable to other items is calculated as the impact of
those items which are not directly correlated to sales from existing businesses
which do not have an impact on the current or comparable period.

Sales by existing firms should be viewed as a complement, not a replacement or superiority, to total sales, and may not be comparable to measures of the same title reported by other firms.

Management believes that reporting the non-GAAP financial measure of sales from
existing businesses provides useful information to investors by helping identify
underlying growth trends in our business and facilitating easier comparisons of
our sales performance with our performance in prior and future periods and to
our peers. We exclude the effect of acquisitions and divestiture-related items
because the nature, size and number of such transactions can vary dramatically
from period to period and between us and our peers. We exclude the effect of
currency translation and certain other items from sales from existing businesses
because these items are either not under management's control or relate to items
not directly correlated to sales from existing businesses. Management believes
the exclusion of these items from sales from existing businesses may facilitate
assessment of underlying business trends and may assist in comparisons of
long-term performance. References to sales volume refer to the impact of both
price and unit sales.

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INCOME TAXES

General

Income tax expense and deferred tax assets and liabilities reflect management's
assessment of future taxes expected to be paid on items reflected in our
financial statements. Our effective tax rate can be affected by, among other
items, changes in the mix of earnings in countries with differing statutory tax
rates (including as a result of business acquisitions and dispositions), changes
in the valuation of deferred tax assets and liabilities, the implementation of
tax planning strategies, tax rulings, court decisions, settlements with tax
authorities and changes in tax laws.

Prior to the Separation, our operating results were included in Fortive's
various consolidated U.S. federal and certain state income tax returns, as well
as certain non-U.S. returns. For periods prior to the Separation, our combined
financial statements reflect income tax expense and deferred tax balances as if
we had filed tax returns on a standalone basis separate from Fortive. The
separate return method applies the accounting guidance for income taxes to the
standalone financial statements as if we were a separate taxpayer and a
standalone enterprise for the periods prior to the Separation. For periods prior
to the Separation, our pretax operating results include any transactions with
Fortive as if it were an unrelated party.

In connection with the Separation, we entered into agreements with Fortive,
including a Tax Matters Agreement. The Tax Matters Agreement distinguishes
between the treatment of tax matters for "joint" filings compared to "separate"
filings prior to the Separation. "Joint" filings are returns, such as the United
States federal return, that include operations from both Fortive legal entities
and the Company. By contrast, "separate" filings are tax returns (primarily U.S.
state returns and non-U.S. returns), that exclusively include either Fortive's
or the Company's operations, respectively. In accordance with the Tax Matters
Agreement, the Company is liable for and has indemnified Fortive against all
income tax liabilities involving "separate" filings for periods prior to the
Separation.

On March 27, 2020, the U.S. Government passed the Coronavirus Aid, Relief, and
Economic Security Act (the "CARES Act") as an emergency economic stimulus
package in response to the COVID-19 outbreak. The CARES Act contains, among
other things, numerous income tax provisions. Some of these tax provisions are
expected to be effective retroactively for years ended before the date of
enactment. The CARES Act did not have a significant impact on our income tax
provision.

We are routinely examined by various domestic and international taxing
authorities. The amount of income taxes we pay is subject to audit by federal,
state and foreign tax authorities, which may result in proposed assessments. The
Company is subject to examination in the United States, various states and
foreign jurisdictions. In accordance with the Tax Matters Agreement with
Fortive, the Company is liable for taxes arising from examinations of the
following: (i) the Company's initial U.S. federal taxable year October 9, 2020
through December 31, 2020; (ii) separate company state tax returns for all
periods; (iii) joint state tax returns for the period October 9, 2020 through
December 31, 2020; (iv) international separate company returns for all periods;
and (v) joint international tax returns that include only Vontier legal entities
for all periods. We review our global tax positions on a quarterly basis. Based
on these reviews, the results of discussions and resolutions of matters with
certain tax authorities, tax rulings and court decisions and the expiration of
statutes of limitations reserves for contingent tax liabilities are accrued or
adjusted as necessary.

Pursuant to U.S. tax law, the Company's initial U.S. federal income tax return
is for the short taxable year October 9, 2020 through December 31, 2020. We
expect to file our initial U.S. federal income tax return for the 2020 short tax
year with the Internal Revenue Service ("IRS") during 2021. Therefore, the IRS
has not yet begun examination of the Company. The Company remains subject to tax
audit for its separate company tax returns in various U.S. states for the tax
years 2011 to 2020. Our operations in certain foreign jurisdictions remain
subject to routine examination for the tax years 2007 to 2020.

Comparison of the completed three and six months July 2, 2021 and June 26, 2020

Our effective tax rate for the three and six months ended July 2, 2021 was 24.4%
and 24.0%, respectively, as compared to 23.7% and 42.1% for the three and six
months ended June 26, 2020, respectively. The year-over-year increase in the
effective tax rate for the three months ended July 2, 2021 as compared to the
comparable period in the prior year was primarily due to an increase in U.S.
state tax expense. The year-over-year decrease in the effective tax rate for the
six months ended July 2, 2021 as compared to the comparable period in the prior
year was primarily due to a non-deductible book goodwill impairment recognized
in the six months ended June 26, 2020.

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Our effective tax rate for both periods in 2021 and 2020 differs from the U.S.
federal statutory rate of 21% due primarily to the effect of state taxes and
foreign taxable earnings at a rate different from the U.S. federal statutory
rate. Specific to the six months ended June 26, 2020, there was an unfavorable
impact related to a non-deductible book goodwill impairment.
COMPREHENSIVE INCOME
Comprehensive income decreased by $6.8 million during the three months ended
July 2, 2021 as compared to the comparable period in 2020 due primarily to
unfavorable changes in foreign currency adjustments of $20.6 million which were
partially offset by net earnings that were higher by $13.9 million.
Comprehensive income increased by $117.3 million during the six months ended
July 2, 2021 as compared to the comparable period in 2020 due primarily to net
earnings that were higher by $109.1 million and favorable changes in foreign
currency translation adjustments of $9.9 million.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the Separation, we were dependent upon Fortive for all our working
capital and financing requirements under Fortive's centralized approach to cash
management and financing of operations of its subsidiaries. With the exception
of cash, cash equivalents and borrowings clearly associated with Vontier and
related to the Separation, including the financial transactions described below,
financial transactions relating to our business operations prior to the
Separation were accounted for through Former Parent's investment. Accordingly,
none of the Former Parent's cash, cash equivalents or debt at the corporate
level was assigned to us in the financial statements for periods prior to the
Separation.

As a result of the Separation, we no longer participate in Fortive's cash
management and financing operations. We assess our liquidity in terms of our
ability to generate cash to fund our operating, investing and financing
activities. We generate substantial cash from operating activities and believe
that our operating cash flow and other sources of liquidity will be sufficient
to allow us to continue to invest in existing businesses, consummate strategic
acquisitions, make interest payments on our outstanding indebtedness, and manage
our capital structure on a short and long-term basis.
2021 Financing and Capital Transactions
During the six months ended July 2, 2021, we completed the following financing
and capital transactions:
•On March 10, 2021, we completed the private placement of $1.6 billion of senior
unsecured notes in multiple series (collectively, the "Notes"). The Notes are
fully and unconditionally guaranteed (the "Guarantees"), on a joint and several
basis, by Gilbarco Inc. and Matco Tools Corporation, two of our wholly-owned
subsidiaries (the "Guarantors"). Interest on the Notes is payable semi-annually
in arrears on April 1 and October 1 of each year, commencing on October 1, 2021.
The Notes and the Guarantees are the Company's and the Guarantors' general
senior unsecured obligations.
•With the proceeds received from the issuance of the Notes, we repaid $1.4
billion of our Term Loans with the remainder used for working capital and other
general corporate purposes.
•On April 28, 2021, we refinanced our Three-Year Term Loans and Revolving Credit
Facility which extended the maturities and lowered the interest rates, among
certain other changes.
Our long-term debt requires, among others, that we maintain certain financial
covenants, and we were in compliance with all of these covenants as of July 2,
2021.
Refer also to Note 4. Financing to the Consolidated and Combined Condensed
Financial Statements for additional information.
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