Roper Technologies, Inc. Q3 2015 Financial Results October 26, 2015
Roper Technologies, Inc.
Q3 2015 Financial Results October 26, 2015
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A Diversified Growth Company
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Safe Harbor Statement
The information provided in this presentation contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, among others, statements regarding operating results, the success of our internal operating plans, and the prospects for newly acquired businesses to be integrated and contribute to future growth, profit and cash flow expectations. Forward-looking statements may be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes" or "intends" and similar words and phrases. These statements reflect management's current beliefs and are not guarantees of future performance. They involve risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement. Such risks and uncertainties include our ability to integrate our acquisitions and realize expected synergies. We also face other general risks, including our ability to realize cost savings from our operating initiatives, general economic conditions, unfavorable changes in foreign exchange rates, difficulties associated with exports, risks associated with our international operations, difficulties in making and integrating acquisitions, risks associated with newly acquired businesses, increased product liability and insurance costs, increased warranty exposure, future competition, changes in the supply of, or price for, parts and components, environmental compliance costs and liabilities, risks and cost associated with asbestos related litigation and potential write-offs of our substantial intangible assets, and risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products. Important risks may be discussed in current and subsequent filings with the SEC. You should not place undue reliance on any forward-looking statements. These statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
We refer to certain non-GAAP financial measures in this presentation. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found within this presentation.
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A Diversified Growth Company
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Reg. G Disclosure
Today’s Conference Call will Discuss Income Statement Results Primarily on an Adjusted (Non-GAAP) Basis. The Q3 2015 Adjusted Results Exclude the Following Items:
(1) Purchase Accounting Adjustment to Acquired Deferred Revenue (Data Innovations, SHP, SoftWriters, Strata, On Center)
(2) Acquisition-Related Inventory Step-Up Charge (RF IDeas)
See Appendix for Reconciliation from GAAP to Adjusted Results
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A Diversified Growth Company
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Roper Conference Call
» Q3 Enterprise Financial Results
» Segment Detail & Outlook
» Q4 and FY 2015 Guidance
» Q&A
Q3 2015 Enterprise Highlights
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Outstanding Operational Execution; Great Capital Deployment
» Record Third Quarter Results
» Revenue: $886M; Book to Bill: 1.01x – Growth Led by Medical +12% and RF Technology +6% – Declines in Industrial and Energy as Expected – Organic (2%), FX Headwind (3%), Acquisitions +5%
» Gross Margin +130 Bps to 60.7%
» EBITDA Margin +80 Bps to 34.4%
» Net Earnings +4% to $163M; DEPS $1.61
» Free Cash Flow of $220M; 137% Conversion
» Deployed $435M in Acquisitions During Q3; Aderant Acquisition Completed in October
Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
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A Diversified Growth Company
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Q3 Income Statement
Q3’14 Q3’15 Orders $893 $894 Book-to-Bill: 1.01x
Revenue $885 $886 Gross Profit $525 $538 Gross Margin 59.4% 60.7% +130 Bps
Operating Income $247 $255 +3%
Operating Margin 27.9% 28.7% +80 Bps
Interest Expense $20 $20 Other Income/(Expense) $1 $0
Earnings Before Tax $228 $234 Tax Rate 31.3% 30.4%
Net Earnings $156 $163 +4%
DEPS $1.55 $1.61 +4%
In $ Millions
Note: Amounts may not total due to rounding
Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
Compounding Cash Flow
We Believe Cash is the Best Measure of Performance
YTD Operating Cash Flow In $ Millions
$579
$660
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2014 2015
» Q3 Operating Cash Flow: $227M • 141% Conversion
» Q3 Free Cash Flow: $220M • 137% Conversion
• 25% of Revenue
» YTD Free Cash Flow: $632M • 15% Increase
• 130% Conversion
Note: Free Cash Flow = Operating Cash Flow – Capital Expenditures
Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
+ 14%
Asset-Light Business Model
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Roper Governance Process Drives Working Capital Focus
09/30/14 09/30/15
(I) Inventory 6.0% 5.6%
(R) Receivables 17.8% 16.9%
(P) Payables & Accruals
18.0% 18.2%
Total (I+R-P) 5.8% 4.2%
Working Capital* as % of Q3 Annualized Net Sales
* Defined as Inventory + A/R + Unbilled Receivables – A/P – Accrued Liabilities; Sales and Working Capital Related to Acquisitions Completed in Each Quarter Removed from Calculation
2014 2015
5.8%
4.2%
(160 Bps)
Note: Percentages may not sum correctly due to rounding
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A Diversified Growth Company
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Strong Financial Position
Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
09/30/14 09/30/15
Cash $564 $701
Undrawn Revolver $1,345 $910
Cash and Undrawn Revolver $1,909 $1,611
Gross Debt $2,370 $2,799
Shareholders’ Equity $4,648 $5,129
Gross Debt to Capitalization 33.8% 35.3%
TTM EBITDA $1,173 $1,239
Gross Debt-to-EBITDA (TTM) 2.0x 2.3x
In $ Millions
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Segment Detail & Outlook
Energy Ind Tech RF Medical
$47 $57 $91
$136
$145
$186
$254
$302
* Excludes Corporate Expenses
EBITDA Margin
33% 31% 36% 45%
Q3 2015 Segment Performance
Excellent Segment Margins; Medical and RF > 2/3 of EBITDA
In $ Millions
11 Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
Revenue
EBITDA*
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A Diversified Growth Company • Organic Revenue (10%), FX (5%)
• Oil & Gas Markets Remained Weak as Expected
• Other Served Markets Flat
• Excellent Margin Performance as Businesses Executed Well in Difficult Environment
Energy Systems & Controls
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($M) Q3’15 V to PY
Revenue $145 (15)%
Op Profit $42 (14)%
OP Margin 29.3% +60 Bps
Q3 2015
Q4 2015
• Expect Continued End Market Weakness; Some Seasonal Improvement
• Strong Growth in Nuclear Test Business on Improving Market Conditions
• Cost Actions Taken Earlier This Year and Strong Execution Continue to Benefit Margins
* Excludes Corporate Expenses
14%
Segment Q3’15 % of Roper EBITDA*
Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
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A Diversified Growth Company
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Industrial Technology
• Organic Revenue (5%), FX (4%)
• Neptune Grew Mid Single Digits, Excluding the Completion of the Toronto Project
• Oil & Gas Markets Weak as Expected; Margins Remained Strong
• Continued Growth in Material Analysis
• Completed Divestiture of Abel Pumps on Oct. 2nd
• Oil & Gas Remains Weak; Growth in Other Markets
• Improved Margin Performance
($M) Q3’15 V to PY
Revenue $186 (10)%
Op Profit $52 (16)%
OP Margin 28.1% (210) Bps
Segment Q3’15 % of Roper EBITDA*
* Excludes Corporate Expenses
20%
Q3 2015
Q4 2015
Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
17% 17%
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A Diversified Growth Company
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RF Technology
• Organic Revenue +4%, FX (1%), Acq./Div. +3% • Growth Continued in Toll and Traffic
‒ Multiple Infinity Digital Lane SystemTM Projects Continue in Florida and Texas
• Subscriber Additions at Freight Match • Acquired RF IDeas in September; Expect
Double Digit Growth
($M) Q3’15 V to PY
Revenue $254 +6%
Op Profit $77 +10%
OP Margin 30.3% +120 bps
Q3 2015
Q4 2015
Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
• Software Businesses Grow Mid Single Digits with Excellent Leverage and Cash Flow Performance
• Backlog and Proposal Activity Remains Strong for Toll and Traffic
• Strong Segment Margin Performance Continues Led by Software/SaaS Businesses
• Aderant Acquired Oct 21st, Leading Global Software Solutions Provider to the Legal Profession
* Excludes Corporate Expenses
27%
Segment Q3’15 % of Roper EBITDA*
27%
Aderant Acquisition
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Another Great Niche Software Business
» Comprehensive End-to-End Platform of Mission Critical Software Solutions for Law Firms
» Marquee Customer Base with 3,000+ of the World’s Largest Law and other Professional Services Firms
» Products include Time Capture, Billing, Docketing, Finance, Accounting and Business Intelligence
» Headquartered in Atlanta, Georgia with 400+ Employees
» 2016E Revenue of ~$125 million
Meets All Acquisition Criteria
Excellent Management Team
High Recurring Revenue; 95%+ Customer Retention
Strong Cash Flow Characteristics
Asset Light (Negative Working Capital)
Deep Domain Expertise
Multiple Growth Opportunities
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A Diversified Growth Company
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Medical Solutions
($M) Q3’15 V to PY
Revenue $302 +12%
Op Profit $110 +19%
OP Margin 36.6% +230 bps
* Excludes Corporate Expenses
Q3 2015
Q4 2015
Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
• Medical Businesses Organic Revenue +5% • Segment Organic Revenue +2%, Acq. +13%, FX (3%) • Continued Growth at MHA with Customer Additions
‒ AHP Acquisition Adds New Channel • Recurring Revenue Increased at Sunquest • Medical Device Businesses Growth Driven by New
Product Introductions and Sales Execution • Recent Acquisitions Performing Very Well • Signed Agreement to Acquire CliniSys Group, Ltd., a
Leading European Hospital Laboratory Software Provider, Expected to Close Early 2016
• Mid Single Digit Organic Growth in Medical Businesses
• Continued Outstanding Margin and Cash Flow Performance
• Atlas Medical Acquisition, Expands Laboratory Connectivity Solutions
Segment Q3’15 % of Roper EBITDA*
* Excludes Corporate Expenses
41% 41%
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Guidance Update
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A Diversified Growth Company
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Guidance Update
» Full Year Adjusted DEPS: $6.69 - $6.75
• Previously $6.61 - $6.75
• Midpoint Increased $0.04
» Q4 Adjusted DEPS: $1.83 – $1.89
» Full Year Operating Cash Flow: $925M - $940M
Q3 2015 Summary
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Well Positioned for Record 2016 Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
» Delivered Excellent Third Quarter Results
» Revenue: $886M; Book to Bill: 1.01x
» Gross Margin +130 Bps to 60.7%
» Operating Margin: 28.7%; EBITDA Margin: 34.4%
» DEPS $1.61
» Free Cash Flow: $220M; 25% of Revenue and 137% Conversion
» Full Year DEPS and Cash Flow Guidance Increased
» Deployed $435M in Acquisitions During Q3
» Aderant Acquisition Completed in October; Signed Agreement to Acquire CliniSys
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Appendix
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A Diversified Growth Company
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Reconciliations I
Q3 2015 Revenue Growth Reconciliation
Industrial Technology
Energy Systems & Controls
Medical & Scientific Imaging
RF Technology Roper
Organic Growth (5)% (10)% 2% 4% (2)%
Acquisitions/Divestitures - - 13% 4% 5%
Foreign Exchange (4)% (5)% (3)% (1)% (3)%
Rounding (1)% - - (1)% -
Total Revenue Growth (10)% (15)% 12% 6% -
Q3 2015 Orders Growth Reconciliation
Industrial Technology
Energy Systems & Controls
Medical & Scientific Imaging
RF Technology Roper
Organic Growth (6)% (11)% 7% (1)% (2)%
Acquisitions/Divestitures - - 14% 3% 5%
Foreign Exchange (4)% (5)% (4)% (1)% (3)%
Rounding - - - -
Total Orders Growth (10)% (16)% 17% 1% -
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Reconciliations II
(in Thousands) Q3 2015
Margin Reconciliation Industrial Technology
Energy Systems & Controls
Medical & Scientific Imaging RF Technology
GAAP Revenue $186,147 $144,609 $299,621 $253,556
Add: DI / SHP / SoftWriters / Strata Adj 0 0 1,956 0
Add: On Center, RF IDeas Adj 0 0 0 256
Adjusted Revenue 186,147 144,609 301,577 253,812
GAAP Gross Profit 92,245 84,891 222,655 133,692
Add: DI / SHP / SoftWriters / Strata Adj 0 0 1,956 0
Add: On Center, RF IDeas Adj 0 0 0 2,219
Adjusted Gross Profit 92,245 84,891 224,611 135,911
GAAP Operating Profit 52,298 42,300 108,399 74,604
Add: DI / SHP / SoftWriters / Strata Adj 0 0 1,956 0
Add: On Center, RF IDeas Adj 0 0 0 2,219
Adjusted Operating Profit 52,298 42,300 110,355 76,823
Add Amortization 2,260 3,956 23,496 11,296
EBITA 54,558 46,256 133,851 88,119
Add Depreciation 2,718 1,172 2,568 2,522
EBITDA 57,276 47,428 136,419 90,641
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A Diversified Growth Company
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Reconciliations III
(All Numbers are In Thousands)
Adjustments
Q3’15 TTM GAAP
SHP / FoodLink Purchase
Accounting Adjustment to
Acquired Deferred Revenue
IPA Acquisition Related
Inventory Step-up Charge
DI / SWI / Strata Purchase
Accounting Adjustment to
Acquired Deferred Revenue
On Center Purchase
Accounting Adjustment to
Acquired Deferred Revenue
RF IDeas Acquisition
Related Inventory Step-
up Charge
Q3’15 TTM Adjusted
Net Sales $3,584,900 $3,398 - $4,356 $256 - $3,592,910
Gross Profit $2,151,296 $3,398 $425 $4,356 $256 $1,963 $2,161,694
Operating Profit $1,032,990 $3,398 $425 $4,356 $256 $1,963 $1,043,388
Net Earnings $673,406 $2,209 $276 $2,831 $166 $1,276 $680,164
Taxes 277,547 1,189 149 1,525 90 687 281,187
Interest 79,667 - - - - - 79,667
Depreciation 38,902 - - - - - 38,902
Amortization 158,981 - - - - - 158,981
EBITDA $1,228,503 $3,398 $425 $4,356 $256 $1,963 $1,238,901
Q3’15 TTM Reconciliation of GAAP to Adjusted; Revenue, Gross Profit, and EBITDA
(1) For the six adjustments, the company used a 35% tax rate as these adjustments are US-based items and 35% is the statutory tax rate in the United States.
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A Diversified Growth Company
24
Reconciliations IV
(All Numbers are In Thousands)
Adjustments
Q3’14 TTM GAAP
SHP / FoodLink Purchase Accounting
Adjustment to Acquired Deferred Revenue
IPA Acquisition Related Inventory Step-up Charge
Q3’14 TTM Adjusted
Net Sales $3,492,522 $946 - $3,493,468
Gross Profit $2,069,378 $946 $424 $2,070,748
Operating Profit $973,813 $946 $424 $975,183
Net Earnings $625,800 $615 $276 $626,691
Taxes 268,943 331 148 269,422
Interest 79,467 - 79,467
Depreciation 39,929 - 39,929
Amortization 157,403 - 157,403
EBITDA $1,171,542 $946 $424 $1,172,912
Q3’14 TTM Reconciliation of GAAP to Adjusted; Revenue, Gross Profit, and EBITDA
(1) For the two adjustments, the company used a 35% tax rate as these adjustments are both US-based items and 35% is the statutory tax rate in the United States.
Roper Technologies, Inc.