Q2 2015 Financial Results July 27, 2015 Safe Harbor Statement The - - PowerPoint PPT Presentation

Roper Technologies, Inc.

Q2 2015 Financial Results

July 27, 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

• perating 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

• nly 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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• Reg. G Disclosure

Today’s Conference Call will Discuss Income Statement Results Primarily on an Adjusted (Non-GAAP) Basis. The Q2 2015 Adjusted Results Exclude the Following Items: (1) Purchase Accounting Adjustment to Acquired Deferred Revenue (Data Innovations, SHP, SoftWriters, Strata, Foodlink) See Appendix for Reconciliation from GAAP to Adjusted Results

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A Diversified Growth Company

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Roper Conference Call

» Q2 Enterprise Financial Results » Segment Detail & Outlook » Q3 and FY 2015 Guidance » Q&A

Q2 2015 Enterprise Financial Results

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Record Results Despite FX and End Market Headwinds

» Achieved Record Second Quarter Results

– Orders, Revenue, Net Earnings, EBITDA, Cash Flow

» Revenue +1% to $892M

– Organic Flat; FX Headwind (3%) – Growth Led by Medical +13% and RF Technology +4% – Declines in Industrial (9%) and Energy (12%)

» Gross Margin +100 Bps to 60.1% » Operating Margin +60 Bps to 28.5% » Net Earnings +10% to $173M; DEPS $1.70 » Free Cash Flow +24% to $162M

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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Q2 Income Statement

Q2’14 Q2’15 Orders $874 $881

+1%; Book-to-Bill: 0.99x

Revenue $885 $892

+1%; Organic Flat, FX (3%)

Gross Profit $523 $536

Gross Margin 59.1% 60.1%

+100 Bps

Operating Income $247 $254

+3%

Operating Margin 27.9% 28.5%

+60 Bps

Interest Expense $20 $20

Other Income/(Expense) $(1) $(2)

Earnings Before Tax $226 $233

Tax Rate 30.4% 25.7%

Resolution of State Tax Matter

Net Earnings $157 $173

+10%

DEPS $1.56 $1.70

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

1st Half Operating Cash Flow

In $ Millions

$311 $353 $433

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2014 2015 2013

» Q2 Operating Cash Flow: $173M

• 23% Increase

» Q2 Free Cash Flow: $162M

• 24% Increase

» 1st Half Free Cash Flow: $412M

• 23% of Revenue
• 126% 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.

Asset-Light Business Model

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Roper Governance Process Drives Working Capital Focus

06/30/13 06/30/14 06/30/15

(I) Inventory 6.3% 6.0% 5.5% (R) Receivables 19.7% 17.6% 16.6% (P) Payables & Accruals 18.6% 17.4% 18.1% Total (I+R-P) 7.5% 6.2% 4.0%

Working Capital* as % of Q2 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

2013 2014 2015

7.5% 6.2% 4.0%

(350 Bps)

Note: Percentages may not sum correctly due to rounding

Strong Financial Position

Deployed >$1B in Last 12 Months; Active Acquisition Pipeline

In $ Millions 9

06/30/14 06/30/15 Cash $565 $679 Undrawn Revolver $1,470 $1,185 Cash and Undrawn Revolver $2,035 $1,864 Gross Debt $2,245 $2,525 Shareholders’ Equity $4,548 $5,019 Gross Debt to Capitalization 33.0% 33.5% TTM EBITDA $1,153 $1,232 Gross Debt-to-EBITDA (TTM) 1.9x 2.0x

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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Segment Detail & Outlook

Energy Ind Tech RF Medical $43 $57 $92 $139 $145 $186 $256 $305

* Excludes Corporate Expenses

Q2 2015 Segment Performance

Medical and RF Segments Represented 70% of Q2 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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• Organic Revenue (7%); FX (5%)
• Oil & Gas Markets Weaker Than Expected,

Primarily Impacting Upstream Applications

• Other Served Markets Flat
• Businesses Executing Well; Additional Cost

Actions Taken

Energy Systems & Controls

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($M) Q2’15 V to PY Revenue $145 (12)% Op Profit $38 (16)% OP Margin 26.0% (100) Bps

Q2 2015 2H 2015

• No Improvement in Oil & Gas Markets
• Modest Growth in Other Served Markets
• FX Headwinds Persist
• High Single Digit Organic Decline for Segment

* Excludes Corporate Expenses

13% Segment Q2’15 % 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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Industrial Technology

• Organic Revenue (4%); FX (5%)
• Oil & Gas Markets Weaker Than Expected,

Primarily Impacting Upstream Fluid Handling Applications

• Material Analysis Double Digit Organic Growth
• Neptune Toronto Project Virtually Complete
• No Improvement in Oil & Gas Markets
• Material Analysis Remains Strong
• Neptune Grows in the U.S. Market
• Toronto Project Completion Headwind
• Mid Single Digit Organic Decline for Segment

($M) Q2’15 V to PY Revenue $186 (9)% Op Profit $52 (14)% OP Margin 28.0% (150) bps Segment Q2’15 % of Roper EBITDA*

* Excludes Corporate Expenses

20%

Q2 2015 2H 2015

Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.

17%

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RF Technology

• Organic Revenue +6%, FX (1%), Acq./Div. (1%)
• Strong Toll & Traffic Growth Continues

–

Multiple Toll Expansion and Upgrade Projects

–

Riyadh Traffic Project Started

–

Double Digit Growth in Tag Shipments

• Software Growth Led By Subscriber Additions at

Freight Match

• Strength in RF Products Led by Senior Care,

Submetering and UK Water Applications

($M) Q2’15 V to PY Revenue $256 +4% Op Profit $80 +12% OP Margin 31.3% +230 bps

* Excludes Corporate Expenses

27%

Q2 2015 2H 2015

Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.

• Backlog and Proposal Activity Remain Strong for

Toll and Traffic Projects

• Continued Subscriber Growth in SaaS Businesses
• Acquired On Center Software on July 20th for

$157M; SaaS and Licensed Software Solutions for Construction Automation Management

• Mid Single Digit Organic Growth for Segment

28% Segment Q2’15 % of Roper EBITDA*

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Medical Solutions

($M) Q2’15 V to PY Revenue $305 +13% Op Profit $112 +18% OP Margin 36.6% +150 bps

* Excludes Corporate Expenses

42%

Q2 2015 2H 2015

Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.

• Organic Revenue +2%, FX (3%)
• Continued Strong Growth at MHA; Aided by Share

Gains and Favorable Market Conditions

• Double Digit Growth in Medical Device Businesses

Driven by New Products and Solid Channel Execution

• Sunquest Recurring Revenue Growth; Lower License

and Service Sales due to Meaningful Use in Prior Year

• Q1 Acquisitions (Strata, SoftWriters and Data

Innovations) Performing Well

• Exited Rugged Mobile Product Line
• MHA Continues to Benefit From Favorable Market

Conditions and Excellent Execution

• Medical Products Growth Led by New Products at

Verathon and Northern Digital

• Scientific Imaging Flat
• Mid Single Digit Organic Growth for Segment

42% Segment Q2’15 % of Roper EBITDA*

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Guidance Update

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Guidance Update

» Full Year Adjusted DEPS: $6.61 - 6.75

• Previously $6.75 - $6.95
• Full Year Organic Revenue 1 – 2%

– Medical and RF Segments Up Mid Single Digits – Oil & Gas Markets Remain Weak

• Full Year Tax Rate Unchanged: ~30.5%

» Full Year Operating Cash Flow ~ $925M » Q3 Adjusted DEPS: $1.53 - $1.57

Q2 2015 Summary

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Record Cash Flow and Margin Performance

Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.

» Record Second Quarter Results

– Orders, Revenue, Net Earnings, EBITDA, Cash Flow

» Revenue +1% to $892M

– Organic Flat; FX Headwind (3%) – Growth Led by Medical +13% and RF Technology +4% – Declines in Industrial (9%) and Energy (12%)

» Gross Margin +100 Bps to 60.1% » Operating Margin: 28.5%; EBITDA Margin: 33.9% » Net Earnings +10% to $173M; DEPS $1.70 » Free Cash Flow +24% » Acquired On Center Software; Active Acquisition Pipeline

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Appendix

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Reconciliations I

Q2 2015 Revenue Growth Reconciliation Industrial Technology Energy Systems & Controls Medical & Scientific Imaging RF Technology Roper Organic Growth (4)% (7)% 2% 6%

• Acquisitions/Divestitures
• 14%

(1)% 4% Foreign Exchange (5)% (5)% (3)% (1)% (3)% Rounding

• Total Revenue Growth

(9)% (12)% 13% 4% 1% Q2 2015 Orders Growth Reconciliation Industrial Technology Energy Systems & Controls Medical & Scientific Imaging RF Technology Roper Organic Growth (5)% (10)% 1% 7% (1)% Acquisitions/Divestitures

• 15%

1% 5% Foreign Exchange (5)% (6)% (3)% (1)% (3)% Rounding 1%

• Total Orders Growth

(9)% (16)% 13% 7% 1%

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Reconciliations II

(in Thousands)

Q2 2015

Margin Reconciliation Industrial Technology Energy Systems & Controls Medical & Scientific Imaging RF Technology GAAP Revenue $186,467 $145,254 $302,262 $255,558 Add: DI / SHP / SoftWriters / Strata Purchase Accounting Adj 2,341 Add: FoodLink Purchase Accounting Adj 180 Adjusted Revenue 186,467 145,254 304,603 255,738 GAAP Gross Profit 93,565 83,220 222,990 134,136 Add: DI / SHP / SoftWriters / Strata Purchase Accounting Adj 2,341 Add: FoodLink Purchase Accounting Adj 180 Adjusted Gross Profit 93,565 83,220 225,331 134,316 GAAP Operating Profit 52,188 37,702 109,261 79,940 Add: DI / SHP / SoftWriters / Strata Purchase Accounting Adj 2,341 Add: FoodLink Purchase Accounting Adj 180 Adjusted Operating Profit 52,188 37,702 111,602 80,120 Add Amortization 2,260 4,084 24,255 9,731 EBITA 54,448 41,786 135,857 89,851 Add Depreciation 2,734 1,194 2,929 2,607 EBITDA 57,182 42,980 138,786 92,458

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Reconciliations III

(All Numbers are In Thousands)

Adjustments Q2’15 TTM GAAP SHP Purchase Accounting Adjustment to Acquired Deferred Revenue IPA Acquisition Related Inventory Step-up Charge FoodLink Purchase Accounting Adjustment to Acquired Deferred Revenue Data Innovations Purchase Accounting Adjustment to Acquired Deferred Revenue SoftWriters Purchase Accounting Adjustment to Acquired Deferred Revenue Strata Purchase Accounting Adjustment to Acquired Deferred Revenue Q2’15 TTM Adjusted Net Sales $3,585,089 $3,426

• $720

$1,351 $106 $1,141 $3,591,833 Gross Profit $2,141,853 $3,426 $849 $720 $1,351 $106 $1,141 $2,149,446 Operating Profit $1,028,277 $3,426 $849 $720 $1,351 $106 $1,141 $1,035,870 Net Earnings $668,499 $2,227 $552 $468 $878 $69 $742 $673,435 Taxes 278,398 1,199 297 252 473 37 399 281,055 Interest 79,311

• 79,311

Depreciation 40,218

• 40,218

Amortization 157,657

• 157,657

EBITDA $1,224,083 $3,426 $849 $720 $1,351 $106 $1,141 $1,231,676

Q2’15 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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Reconciliations IV

(All Numbers are In Thousands)

Adjustments Q2’14 TTM GAAP Sunquest Fair Value Adjustment to Acquired Deferred Revenue MHA Purchase Accounting Adjustment for Acquired Revenue Q2’14 TTM Adjusted Net Sales $3,436,210 $1,007 $7,893 $3,445,110 Gross Profit $2,027,963 $1,007 $7,893 $2,036,863 Net Earnings $606,613 $655 $5,130 $612,398 Taxes 256,986 352 2,763 260,101 Interest 84,159

• 84,159

Depreciation 39,103

• 39,103

Amortization 157,135

• 157,135

EBITDA $1,143,996 $1,007 $7,893 $1,152,896

Q2’14 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.