j.p. morgan aviation, transportation & industrials conference jp morgan... · 2019-02-19 ·...

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



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


• $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



Consistent Execution of Strategy


• $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



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



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



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*



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


EBITDA*

36%

26%




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%


EBITDA*




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%


EBITDA*


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



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.



20

Reconciliations II


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


(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.



21

Reconciliations III


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


(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.



22

Reconciliations IV


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


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



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%

j.p. morgan aviation, transportation & industrials conference jp morgan... · 2019-02-19 ·...

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