A DIVERSIFIED TECHNOLOGY COMPANY Q1 2020 FINANCIAL RESULTS APRIL 28, 2020 SIMPLE IDEAS. POWERFUL RESULTS.
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 may include, among others, statements regarding operating results, the success of our internal operating plans, the prospects for newly acquired businesses to be integrated and contribute to future growth, and 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," "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 the effects of the COVID-19 pandemic on our business, operations, financial results and liquidity, including the duration and magnitude of such effects, which will depend on numerous evolving factors which we cannot accurately predict or assess, including: the duration and scope of the pandemic; the negative impact on global and regional markets, economies and economic activity; actions governments, businesses and individuals take in response to the pandemic; the effects of the pandemic, including all of the foregoing, on our customers, suppliers, and business partners, and how quickly economies and demand for our products and services recover after the pandemic subsides. Such risks and uncertainties also include our ability to identify and complete acquisitions consistent with our business strategies, integrate acquisitions that have been completed, realize expected benefits and synergies from, and manage other risks associated with, the newly acquired businesses. We also face other general risks, including our ability to realize cost savings from our operating initiatives, general economic conditions and the conditions of the specific markets in which we operate, changes in foreign exchange rates, difficulties associated with exports, risks associated with our international operations, cybersecurity and data privacy risks, risks related to political instability, armed hostilities, incidents of terrorism, public health crisis (such as the COVID-19 pandemic) or natural disasters, 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, 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. PAGE 2
REG. G DISCLOSURE Today’s Conference Call Will Discuss Results Primarily on an Adjusted (Non-GAAP) Basis. The Q1 Results are Adjusted for the Following Items: (1) Acquisition-Related Intangible Amortization Expense (2) Purchase Accounting Adjustment to Acquired Deferred Revenue See Appendix for Reconciliations from GAAP to Adjusted Results PAGE 3
EXECUTIVE SUMMARY • Strong Q1 Growth: Revenue, EBITDA, Cash Flow • Exceptional Cash & Liquidity Position • Operational Status and Response to COVID-19 • Q2 & FY 2020 Segment Outlook; Business Model Discussion • Guidance Update and Planning Assumptions • Summary and Capital Deployment Outlook • Roper’s Businesses Contributing to COVID-19 Battle PAGE 4
Q1 2020 ENTERPRISE HIGHLIGHTS • Revenue +5% to $1.35B; Organic +4% – Positive Organic Growth in Three of Four Segments • Gross Margin +50 Bps to 63.5% • EBITDA +7% to $467M; EBITDA Margin +50 Bps to 34.5% • Earnings Before Taxes +7% to $408M • DEPS: $3.05 • Free Cash Flow +13% to $353M – 26% of Revenue and 76% of EBITDA Continued Strong Execution By Our Business Leaders Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation and press release for reconciliations from GAAP to Adjusted results. PAGE 5
Q1 INCOME STATEMENT METRICS Q1’19 Q1’20 Revenue $1,288 $1,353 +5%; Organic +4% Gross Profit $811 $859 +6% Gross Margin 63.0% 63.5% +50 bps EBITDA $438 $467 +7% EBITDA Margin 34.0% 34.5% +50 bps Interest Expense $44 $45 Earnings Before Taxes $382 $408 +7% Q1’19 Included $43M ($0.41 Tax Rate 9.7% 21.1% Per Share) Tax Benefit Net Earnings $345 $322 DEPS $3.30 $3.05 In $ millions, except DEPS. PAGE 6 Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation and press release for reconciliations from GAAP to Adjusted results.
COMPOUNDING CASH FLOW • Q1 Operating Cash Flow: $364M Q1 FREE CASH FLOW in $ millions – +10% vs Prior Year +14% CAGR – 27% of Revenue • Q1 Free Cash Flow: $353M – +13% vs Prior Year $353 – 26% of Revenue $312 – 76% of EBITDA $270 • TTM Free Cash Flow: $1.48B – 27% of Revenue Q1 2018 Q1 2019* Q1 2020 Cash Remains the Best Measure of Performance * Adjusted for Cash Taxes from Sale of Scientific Imaging Businesses, See Reconciliation in Appendix. Free Cash Flow = Operating Cash Flow less Capital Expenditures and Capitalized Software PAGE 7 Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation and press release for reconciliations from GAAP to Adjusted results.
NET WORKING CAPITAL (1) (2) AS % OF Q1 ANNUALIZED REVENUE NET WORKING CAPITAL 2018 2019 2020 Q1’18 Q1’19 Q1’20 (I) Inventory 4.5% 4.5% 3.8% (2.7)% (R) Receivables 16.4% 16.6% 17.4% (3.3)% (4.4)% (P) Payables & 11.5% 10.8% 10.3% Accruals (D) Deferred 12.1% 13.5% 15.3% Revenue Total (I+R-P-D) (2.7)% (3.3)% (4.4)% Note: Percentages may not sum correctly due to rounding. Differentiated Asset-Light Business Model 1) Defined as Inventory + A/R + Unbilled Receivables – A/P – Accrued Liabilities – Deferred Revenue; Excludes Acquisitions & Divestitures Completed in Each Quarter, Dividend Accrual, and Current Operating Lease Liabilities. PAGE 8 2) Includes assets and liabilities that have been classified as held-for-sale on Roper's balance sheet.
STRONG FINANCIAL POSITION 3/31/19 3/31/20 Cash $392 $1,000 Gross Debt $4,503 $5,277 Net Debt $4,110 $4,277 TTM EBITDA $1,855 $1,954 Gross Debt-to-EBITDA (TTM) 2.4x 2.7x Net Debt-to-EBITDA (TTM) 2.2x 2.2x Drawn on $2.5B Revolver $410 $0 Significant Capacity for Capital Deployment In $ millions. Numbers may not foot due to rounding. PAGE 9 Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation and press release for reconciliations from GAAP to Adjusted results.
EXCEPTIONAL CASH FLOW GENERATION AND LIQUIDITY • Portfolio of High Margin, Asset-Light, Independent Businesses Across Diverse End Markets Leads to Consistent and Sustainable Cash Flow Generation • $1B Cash Balance and $0 Drawn on $2.5B Revolver • Successfully Completed Amendment to Revolver Covenant; Enables Greater Capacity for Capital Deployment – Debt-to-EBITDA Covenant Now Calculated Using Net Debt – Initiated Amendment Due to Unusually Large Cash Balance • Significant Acquisition Capacity with Large Pipeline of High-Quality Opportunities PAGE 10
GOVERNANCE SYSTEM AND ORGANIZATIONAL RESPONSE TO COVID-19 • Health and Safety of Employees is Number One Priority • All Businesses with Manufacturing Facilities Deemed “Essential” and Remain Operational; All Businesses Work-From-Home Proving Highly Effective • Decentralized Operations and Low Fixed Costs Enable Nimble Execution and Localized Responses • No Top Down Targets or Corporate Mandates for Cost Countermeasures • Incentives Focused on Managing Margins While Continuing Investments for Organic Growth (Innovation and Talent) • Direct Customer Engagement Helps Identify Opportunities to Capture Share • Maintain Cash Focus PAGE 11
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