j.p. morgan aviation, transportation & industrials conference jp morgan... · 2019-02-19 ·...
TRANSCRIPT
A Diversified Technology Company
March 3, 2015
J.P. Morgan Aviation, Transportation & Industrials Conference
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A Diversified Growth Company
2
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.
Creating Shareholder Value
3
A Proven Growth Strategy
Comparison of Cumulative Total Shareholder Return
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
IPO 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Roper Industries, Inc. S&P 500
Note: Chart depicts $100 invested in IPO vs. S&P 500
Engineered Content for Diverse Niche Markets
Creating Shareholder Value
Strategy Results
Significant Growth Platforms
• Leadership in Favorable Markets
• Diverse End Markets, Broad Customer Base
Significant Growth; Compelling Cash Flow
Outstanding Cash Flow/Conversion
• Strong and Sustainable Margins
• High Incremental Operating Profit
Cash Deployment Creates Value
• Internal Growth Initiatives
• Disciplined Acquisitions and Successful Integration
4
High Gross Margins
Recurring Revenue
Strong Operations Management
Superior Operating Profits
Excess Free Cash Flow
Strategic Reinvestment of Cash
R&D, Internal Growth, Acquisitions
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A Diversified Growth Company
Consistent Execution of Strategy
(1) – Fiscal Year 2002
» Roper IPO in February 1992:
• $70 Million Revenue, $14 Million EBITDA
» Decentralized Operating Model
• Diversified Company Focused on Niche Markets
• Business Level Management Teams with Direct
P & L Responsibility; No Corporate Allocations
» From 1992 – 2002 (11 Years Cumulative):
• $535 Million in Operating Cash Flow Generated
• $718 Million in Acquisition Investment
1992 - 2002
IPO; Joined S&P
Small Cap 600
5
3 Businesses at IPO
Traditional Multi Industry Focus
» Roper Governance Processes Enhance Organic Growth
• Focus on Free Cash Flow, Asset-light Models
• Cash Return Metrics Installed
• Incentives Tied to Operating Profit Growth
» From 2003 – 2009 (7 Years Cumulative):
• $1.9 Billion in Operating Cash Flow Generated
• $3.0 Billion in Acquisition Investment; Increased
Focus on Technology
» Selected Key Strategic Platform Acquisitions: Neptune
(water), Transcore (transportation / software), Verathon
and CIVCO (medical), CBORD (education / software)
2003 - 2009
Joined
S&P 500
Began Focus Shift to Technology
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A Diversified Growth Company
Consistent Execution of Strategy
» From 2010 – 2014 (5 Years Cumulative):
• $3.4 Billion in Operating Cash Flow generated
• $4.2 Billion(1) in Acquisition Investment; Primary
Focus on Software, SaaS and Medical
» Selected Key Strategic Platform Acquisitions: Sunquest
(laboratory software), MHA (alternate site healthcare),
NDI (medical), iTrade Network (food / SaaS)
• High Levels of Recurring Revenue
• Low to Negative Net Working Capital
• Network Effect
» Roper 2014: $3.6 Billion Revenue, $1.2 Billion EBITDA
2010 - 2014
» Diversified Technology Company
• ~40+ Separate Businesses with Leadership
Positions in Niche Markets
• Enterprise-wide Governance Processes to Drive
Growth and Cash Flow
• 59% Gross Margin; 34% EBITDA Margin
• ~30% Software / SaaS
• ~50% Recurring Revenue
» Powerful Cash Flow Engine Drives Capital Deployment
• Expect $900M+ in 2015 Operating Cash Flow
• Acquire Outstanding Companies that Generate
Free Cash Flow for Future Capital Deployment
• Compounding Results with Acquisition
Investments Exceeding Operating Cash Flow
Roper Today
6 (1) – Includes $590M of Announced Q1 2015 Acquisitions
Transformed to Diversified Technology Company
We Acquire Outstanding Companies
» Attributes of an Outstanding Company
• High CRI
• Gross Margin > 50%; Delivers Value for Customers
• Leader in a Niche Market; Competitive Advantages
• Outstanding Leadership Team with a Commitment to Build the Business
»Accelerate Growth
• Incentives Linked to Commitments
• Preserve Core Values; Stimulate Progress
• Make Targeted Investments
• Roper Governance Processes
Proven Ability to Drive Higher Performance 7
Governance Process Enhances Growth and Drives Financial Discipline
» Operating Reviews with Detailed Performance Analysis
» Break-Even Analysis Drives Better Decision Making
» Sales & Operating Leverage; Working Capital Efficiency
» Incentives Tied to Continuous, Sustained Performance
Improvements; Not Budget-Based
» Cash Return on Investment Metrics
» Product, Placement, Hit Rate Analysis
Simple Ideas; Powerful Results 8
$2,386
$2,797
$3,003
$3,272
$3,552
2010 2011 2012 2013 2014
Sales Growth & Margin Expansion
Governance Processes Drive Nimble Execution
Revenue*
$ In Millions
9
53.4% 54.2%
56.0%
58.6% 59.3%
26.7%
28.7%
30.8%
32.8% 33.8%
0.2
0.25
0.3
0.35
0.4
0.45
0.5
0.55
0.4
0.45
0.5
0.55
0.6
0.65
2010 2011 2012 2013 2014
Gross
Margin*
EBITDA
Margin*
*Figures are Provided on an Adjusted Basis, See Appendix for Reconciliation from GAAP to Adjusted Results
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A Diversified Growth Company
CRI Discipline Drives Cash Flow
Cash Earnings Net Income + D&A –
Maintenance Cap-Ex
Gross Investment Net Working Capital + Net PP&E +
Accumulated Depreciation
= ash
eturn on
nvestment
» Common Metric throughout Roper Businesses
» Focuses All Businesses and the Enterprise on Cash Flow
Growth & Disciplined Asset Investment
» Encourages Internal Growth Using Current or Reduced Assets
» CRI is Highly Correlated to Market Valuation
C
R
I
10
Compelling Cash Conversion
11
Cash Flow Consistently Greater Than Net Income
» 17 Consecutive
Years of Free Cash
Flow > Net Income
» Free Cash Flow
Conversion of 136%
from 2004-2014
» Over $800M in Free
Cash Flow in 2014
$ In Millions
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Net Income Free Cash Flow
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A Diversified Growth Company
Energy Ind Tech RF Medical
$226 $269
$330
$472
$692
$827
$951
$1,082
12
2014 Segment Performance
Revenue
EBITDA*
Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.
* Excludes Corporate Expenses
In $ Millions
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A Diversified Growth Company
13
Medical & Scientific Imaging
Medical Software / Services (~40% of Segment Revenue)
» Leading Provider of Laboratory Software Solutions for
Large Hospitals, IDNs, and Anatomic Pathology
» Leading Provider of Services and Technologies to
Alternate Site Healthcare Markets
» SaaS Data Analytics and Application Software
Medical Products (~40% of Segment Revenue)
» Ultrasound & Intubation Devices for Hospitals, Acute
Care, Urology
» Minimally-Invasive Surgical Products and
Consumables
» Patient Positioning Devices for Medical Imaging and
Radiation Oncology
Scientific Imaging (~20% of Segment Revenue)
» Cameras, Filters and Accessories for Life Science
Microscopy and Physical Science Spectroscopy
Applications
* Excluding Corporate Expenses
36%
36%
Percent of 2014 Roper
EBITDA*
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A Diversified Growth Company
14
RF & Software Technology
Toll & Traffic (~50% of Segment Revenue)
» Leading Provider of Electronic Tolling Solutions,
including Design, RF Tags, Operations & Service
» RF Tags: Rail, Asset Tracking, & Parking Control
Software (~40% of Segment Revenue)
» Freight Matching SaaS Network
» SaaS Trading Network & Business Intelligence
Solutions for the Food Industry
» Application Software for Cashless Payments,
Access Control and Food Service Solutions for
Universities, Hospitals & K-12
RF Products (~10% of Segment Revenue)
» Utility Network Pressure and Flow Monitoring &
Communication
» Wireless Sensors for Security & Submetering
Percent of 2014 Roper
EBITDA*
36%
26%
* Excluding Corporate Expenses
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A Diversified Growth Company
15
Industrial Technology
Water Meter & Technology (~40% of Segment Revenue)
» Automatic Meter Reading & Water Meter Devices
Fluid Handling (~35% of Segment Revenue)
» Pumps for Energy, Water, Agriculture and
Industrial Applications
» Valves for Cold Storage & Food Processing
Facilities
Instrumentation (~25% of Segment Revenue)
» Instrumentation & Consumables for Material
Analysis
36%
21%
Percent of 2014 Roper
EBITDA*
* Excluding Corporate Expenses
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A Diversified Growth Company
16
Energy Systems & Controls
Oil & Gas (~60% of Segment Revenue)
» Control Systems, Software and Service for
Compressors & Turbines in LNG, Pipeline and
Upstream Applications
» Analytical Instrumentation Serving Refining &
PetroChem
» Diesel Engine Safety Shut-Off Valves
» Vibration Analysis & Measurement Technologies
Industrial / Nuclear (~40% of Segment Revenue)
» Sensors & Instruments for Process Industries
» Non-Destructive Testing Systems for Nuclear
Power Facilities
36%
17%
Percent of 2014 Roper
EBITDA*
* Excluding Corporate Expenses
Roper – A Diversified Technology Company
» Leadership Positions in Diverse Niche Markets
» Broad Customer Base
» Superior Profitability through Outstanding Execution
» Asset Light Businesses Allow Nimble Execution
» Strong Cash Conversion
» Capital Deployment Compounds Cash Flow and Drives Additional
Shareholder Value
» Our Diverse Technology Businesses Provide for Exceptional
Investment Opportunities
17
Simple Ideas; Nimble Execution; Powerful Results
A Diversified Technology Company
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A Diversified Growth Company
19
Reconciliations I
(All Numbers are In Thousands)
Adjustments
2014 GAAP
SHP Purchase
Accounting
Adjustment to
Acquired Deferred
Revenue
IPA Acquisition
Related Inventory
Step-up Charge
FoodLink Purchase
Accounting
Adjustment to
Acquired Deferred
Revenue
2014
Adjusted
Net Sales $3,549,494 $1,970 - $360 $3,551,824
Gross Profit $2,101,899 $1,970 $849 $360 $2,105,078
Net Earnings $646,033 $1,280 $552 $234 $648,099
Taxes 275,423 690 297 126 276,536
Interest 78,637 - - - 78,637
Depreciation 40,890 - - - 40,890
Amortization 156,394 - - - 156,394
EBITDA $1,197,377 $1,970 $849 $360 $1,200,556
2014 Reconciliation of GAAP to Adjusted; Revenue, Gross Profit, and EBITDA
(1) For the three 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
20
Reconciliations II
(All Numbers are In Thousands)
Adjustments
2013 GAAP
Sunquest Fair
Value Adjustment
to Acquired
Deferred Revenue
MHA Purchase
Accounting
Adjustment for
Acquired Revenue
Vendor-Supplied
Component Quality
Issue
2013
Adjusted
Net Sales $3,238,128 $6,980 $26,433 - $3,271,541
Gross Profit $1,882,928 $6,980 $26,433 - $1,916,341
Net Earnings $538,293 $4,537 $17,181 $5,915 $565,926
Taxes 215,837 2,443 9,252 3,185 230,717
Interest 88,039 - - - 88,039
Depreciation 37,756 - - - 37,756
Amortization 151,434 - - - 151,434
EBITDA $1,031,359 $6,980 $26,433 $9,100 $1,073,872
2013 Reconciliation of GAAP to Adjusted; Revenue, Gross Profit, and EBITDA
(1) For the three adjustments, the company used a 35% tax rate as these adjustments are all US-based items and 35% is the statutory tax rate in the United States.
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A Diversified Growth Company
21
Reconciliations III
(All Numbers are In Thousands)
Adjustments
2012 GAAP
Sunquest
Acquisition-Related
Expenses
Sunquest Fair
Value Adjustment
to Acquired
Deferred Revenue
Debt
Extinguishment
Charge
2012
Adjusted
Net Sales $2,993,489 - $9,082 - $3,002,571
Gross Profit $1,671,717 - $9,082 - $1,680,799
Net Earnings $483,360 $4,100 $5,903 $678 $494,041
Taxes 203,321 2,208 3,179 365 209,073
Interest 67,525 - - - 67,525
Depreciation 37,888 - - - 37,888
Amortization 116,860 - - - 116,860
EBITDA $908,954 $6,308 $9,082 $1,043 $925,387
2012 Reconciliation of GAAP to Adjusted; Revenue, Gross Profit, and EBITDA
(1) For the three adjustments, the company used a 35% tax rate as these adjustments are all US-based items and 35% is the statutory tax rate in the United States.
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A Diversified Growth Company
22
Reconciliations IV
(All Numbers are In Thousands)
EBITDA Reconciliation
Adjustment
2011 Full Year
GAAP
Remeasurement Gain
on Intercompany Debt
2011 Full Year
Adjusted
Net Earnings $427,247 (4,698) $422,549
Taxes 177,740 (2,211) 175,529
Interest 63,648 - 63,648
Depreciation 36,780 - 36,780
Amortization 103,363 - 103,363
EBITDA 808,778 (6,909) 801,869
FY’11 Reconciliation of EBITDA
(All Numbers are In Thousands)
EBITDA Reconciliation
2010 Full Year
GAAP No Adjustments
2010 Full Year
Adjusted
Net Earnings $322,580 - $322,580
Taxes 125,814 - 125,814
Interest 66,533 - 66,533
Depreciation 36,728 - 36,728
Amortization 86,293 - 86,293
EBITDA 637,948 - 637,948
FY’10 Reconciliation of EBITDA
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A Diversified Growth Company
23
Reconciliations V
(in Thousands) FY 2014
Margin Reconciliation Industrial
Technology
Energy Systems
& Controls
Medical &
Scientific Imaging RF Technology
Revenue (A) $827,145 $691,813 $1,082,279 $950,587
Gross Profit (B) 417,568 403,287 782,226 501,997
Gross Margin (B) / (A) 50.5% 58.3% 72.3% 52.8%
Operating Profit 247,596 203,021 378,686 271,537
Add Amortization 9,085 17,614 81,841 47,854
EBITA (C) 256,681 220,635 460,527 319,391
EBITA Margin (C) / (A) 31.0% 31.9% 42.6% 33.6%
Add Depreciation 12,050 5,667 11,842 10,848
EBITDA (D) 268,731 226,302 472,369 330,239
EBITDA Margin (D) / (A) 32.5% 32.7% 43.6% 34.7%