Q4 2014 Financial Results January 26, 2015 Safe Harbor Statement - - PowerPoint PPT Presentation

A Diversified Technology Company

Q4 2014 Financial Results

January 26, 2015

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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

• 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 Q4 2014 Adjusted Results Exclude the Following Items: (1) Purchase Accounting Adjustment to Acquired Deferred Revenue (SHP, Foodlink) (2) Acquisition-Related Inventory Step-up Charge (IPA) See Appendix for Reconciliation from GAAP to Adjusted Results

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Roper Conference Call

» Q4 and FY Enterprise Financial Results » Segment Detail & Outlook » 2015 Guidance » Q&A

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Q4 Enterprise Results

Q4 2014 Enterprise Financial Results

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Excellent Q4 Performance; Strong Organic Growth and Leverage

» Achieved Record Fourth Quarter Results

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

» Organic Revenue +7%

• Broad-Based Revenue Growth Across All Segments

» Operating Margin +110 Bps to 30.1%

• 47% Operating Leverage

» Net Earnings +13% to $187M; DEPS $1.85 » Operating Cash Flow +11% to $261M » Free Cash Flow +12% to $253M

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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Q4 Income Statement

Q4’13 Q4’14 Orders $900 $924

+3%; Book-to-Bill: 0.98x

Revenue $889 $948

Organic +7%, FX (2%)

Gross Profit $533 $568

Gross Margin 60.0% 59.9%

Operating Income $258 $286

+11%; 47% Leverage

Operating Margin 29.0% 30.1%

+110 Bps

Interest Expense $20 $19

Other Income/(Expense) $(1) $(0)

Earnings Before Tax $237 $266

+12%

Tax Rate 30.2% 29.6%

Net Earnings $166 $187

+13%

DEPS $1.65 $1.85

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.

Cash Flow Performance

We Believe Cash is the Best Measure of Performance

Q4 Operating Cash Flow

In $ Millions

$212 $236 $261

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2013 2014 2012

» Q4 Operating Cash Flow: $261M

• 11% Increase
• 140% Conversion

» Q4 Free Cash Flow: $253M

• 12% Increase
• 136% Conversion

» 2014 Free Cash Flow: $803M

• 23% of Revenue

Free Cash Flow = Operating Cash Flow – Capital Expenditures

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Full Year Enterprise Results

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Full Year Income Statement

FY’13 FY’14 Orders $3,375 $3,538

+5%; Book-to-Bill: 1.00x

Revenue $3,272 $3,552

+9%; Organic +6%

Gross Profit $1,916 $2,105

Gross Margin 58.6% 59.3%

+70 Bps

Operating Income $885 $1,003

+13%; 42% Leverage

Operating Margin 27.0% 28.2%

+120 Bps

Interest Expense $88 $79

Other Income/(Expense) $(0) $1

Earnings Before Tax $797 $925

+16%

Tax Rate 29.0% 29.9%

Net Earnings $566 $648 DEPS $5.65 $6.42

+14%

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.

2014 EBITDA and Margin

Record EBITDA Performance

Full Year EBITDA

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Full Year EBITDA Margin

$925 $1,074 $1,201

+30%

2013 2014 2012

+300 Bps

30.8% 32.8% 33.8% 2012 2013 2014

In $ Millions

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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Continuing to Execute Our Asset-Light Model

12/31/12 12/31/13 12/31/14

(I) Inventory 5.9% 5.7% 5.1% (R) Receivables 18.5% 17.0% 16.1% (P) Payables & Accruals 17.4% 17.5% 16.2% Total (I+R-P) 7.0% 5.2% 5.0%

Working Capital* as % of Q4 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

2012 2013 2014

7.0% 5.2% 5.0%

(200 Bps)

Note: Percentages may not sum correctly due to rounding

Strong Financial Position

Pipeline Attractive; Expect to Deploy Over $1 Billion in 2015

In $ Millions 13

12/31/13 12/31/14 Cash $460 $610 Undrawn Revolver $1,250 $1,500 Cash and Undrawn Revolver $1,710 $2,110 Gross Debt $2,465 $2,214 Shareholders’ Equity $4,213 $4,755 Gross Debt to Capitalization 36.9% 31.8% TTM EBITDA $1,074 $1,201 Gross Debt-to-EBITDA (TTM) 2.3x 1.8x

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

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Broad-Based Revenue Growth

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5% 7% 5% 8%

Energy Ind Tech RF Medical

Full Year Organic Revenue Growth by Segment Full Year Total Revenue Growth by Segment

6% 6% 5% 16%

Energy Ind Tech RF Medical

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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Energy Ind Tech RF Medical $226 $269 $330 $472 $692 $827 $951 $1,082

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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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2015 Oil & Gas Outlook

Note: Table above depicts management’s estimates.

Roper 2014 Revenue

Upstream (5%)

Medical, RF, Software, Water and Other Markets (86%)

Downstream, Midstream (9%)

Upstream (~5% of Rev.) Expect (20%) Market Decline; Roper Pump Share Gains Mitigate Declines in Other Upstream Businesses Midstream (~3% of Rev.) Field Service & Pipeline Retrofits Up Modestly; Project Activity Weakness Downstream (~6% of Rev.) Refinery Instrumentation Applications & Field Service Growth

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• Organic Revenue +4% with Outstanding Margins
• Strength in Product Businesses Offset Declines

in Project Activity

–

Product Business Growth Led by Diesel Engine Safety Systems and Vibration Monitoring

–

Field Service Growth Continued

–

CCC Upstream Project Activity Declined

Energy Systems & Controls

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36 %

($M) Q4’14 V to PY Revenue $200 +2% Op Profit $72 +11% OP Margin 36.1% +280 bps

Q4 2014 FY 2015

• Upstream Declines (20% of segment)
• Modest Midstream/Downstream Growth (40% of

segment)

• Growth in Non Oil & Gas Businesses (40% of

segment)

• Flat to Modest Organic Growth for Segment

* Excludes Corporate Expenses

17% Energy % of Roper 2014 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 +13%
• Broad-Based Growth Across Segment
• Roper Pump Set Performance Records:

–

New Customer Wins and Product Investments Drove Substantial Revenue Growth

• Growth at Neptune Driven by Strength in the U.S.

Market

• Double Digit Growth in Material Analysis
• Roper Pump Share Gains Support Flat Revenue

Despite Market Decline

• Neptune Growth in the US; Toronto Project

Completion Expected in 1st Half

• Continued Growth in Material Analysis
• Modest Organic Growth due to Toronto Project

Completion

($M) Q4’14 V to PY Revenue $220 +10% Op Profit $69 +17% OP Margin 31.4% +190 bps Industrial Technology % of Roper 2014 EBITDA*

* Excludes Corporate Expenses

36 %

21%

Q4 2014 FY 2015

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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RF Technology

• Toll & Traffic Infinity Lane Project Execution

Remained Strong in Texas and Florida

• Strong Subscriber Growth at DAT Solutions (Freight

Matching)

• iTrade Strength in the U.S. Offset by Weakness in

Europe

• Technolog Declined Against Strong Q4’13 Results;

Bid Activity Encouraging

• Awarded Riyadh Traffic Management System Project
• Transcore Backlog and Quote Activity Support

Segment Growth

• Toll Tag Growth Continues Led by FL and TX
• Software and SaaS Business Grow Mid Single Digits

with High Margins

• Mid Single Digit Organic Growth

($M) Q4’14 V to PY Revenue $240 +1% Op Profit $68 (2)% OP Margin 28.4% (90) bps

* Excludes Corporate Expenses

36 %

26%

Q4 2014 FY 2015

RF Technology % of Roper 2014 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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Medical & Scientific Imaging

• Organic Revenue +9%
• Continued Double Digit Growth at MHA with Share

Gains and Favorable End Market Trends

• Sunquest Growth Continued; Some Customer

Implementations Delayed into 2015

• New Products at Verathon Drove Double Digit Growth
• Imaging Improved; Growth Led by Gatan
• SHP and IPA Performed Exceptionally Well
• Focused Opportunities to Build on Sunquest and MHA Platforms,

Including Acquisitions

• MHA Captures New Opportunities; Benefits from Favorable Tailwinds
• Sunquest Growth Moderates as Meaningful Use Upgrades Slow
• Medical Device Growth Driven by New Products
• Acquired Strata Decision Technology Last Week

–

SaaS Financial Analytics Platform for Hospitals

• Mid to High Single Digit Organic Growth for Segment

($M) Q4’14 V to PY Revenue $288 +12% Op Profit $102 +15% OP Margin 35.5% +90 bps

* Excludes Corporate Expenses

36 % 36%

Q4 2014 FY 2015

Medical % of Roper 2014 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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2015 Guidance

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2015 Guidance Established

» Full Year Adjusted DEPS: $6.70 – $6.94

• Key Assumptions:

– Organic Revenue Growth: 3 – 5% – Operating Profit Leverage > 40% – F/X Rates as of 12/31/14; Headwind of ~($0.10) – Tax Rate 30.0% - 31.0% – Excludes Future Acquisitions or Divestitures

» Full Year Operating Cash Flow > $900M » Q1 Adjusted DEPS: $1.47 – $1.53

2014 Summary / 2015 Prospects

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Positioned Well with Emergence of Technology Platforms

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

Q4 2014

• Record Q4 Performance: Orders, Revenue, Net Earnings, EBITDA, Cash Flow
• Strong Finish to Outstanding Year

Full Year 2014

• Achieved Record Annual Results: Orders, Revenue, Net Earnings, EBITDA, Cash Flow
• Total Revenue +9%; Organic Revenue +6%
• Significant Financial Achievements:

–

Operating Profit Exceeded $1 Billion; Margin +110 Bps to 28.2%;

–

42% Operating Profit Leverage

–

EBITDA Exceeded $1.2 Billion; EBITDA Margin 33.8%

–

Free Cash Flow of $803M; 23% of Revenue

• Expanded Medical and Software Platforms (SHP, IPA, FoodLink)

2015

• Expect Record Performance
• Expect to Deploy Over $1 Billion in Acquisitions

–

Acquired Strata Last Week; First Deal of the Year

Appendix

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Reconciliations I

Q4 2014 Revenue Growth Reconciliation Industrial Technology Energy Systems & Controls Medical & Scientific Imaging RF Technology Roper Industries Organic Growth 13% 4% 9% 1% 7% Acquisitions/Divestitures

• 1%

5% 1% 2% Foreign Exchange (3)% (3)% (2)% (1)% (2)% Rounding

• Total Revenue Growth

10% 2% 12% 1% 7% Q4 2014 Orders Growth Reconciliation Industrial Technology Energy Systems & Controls Medical & Scientific Imaging RF Technology Roper Industries Organic Growth 6% 2% 1% 4% 3% Acquisitions/Divestitures

• (1)%

5% 1% 1% Foreign Exchange (2)% (4)% (1)% (1)% (2)% Rounding

• 1%

(1)%

• 1%

Total Orders Growth 4% (2)% 4% 4% 3%

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Reconciliations II

FY 2014 Revenue Growth Reconciliation Industrial Technology Energy Systems & Controls Medical & Scientific Imaging RF Technology Roper Industries Organic Growth 7% 5% 8% 5% 6% Acquisitions/Divestitures

• 1%

8%

• 3%

Foreign Exchange (1)%

• Rounding
• Total Revenue Growth

6% 6% 16% 5% 9% FY 2014 Orders Growth Reconciliation Industrial Technology Energy Systems & Controls Medical & Scientific Imaging RF Technology Roper Industries Organic Growth 5% 2% 3% 1% 3% Acquisitions/Divestitures

• 1%

7%

• 2%

Foreign Exchange (1)% (1)%

• Rounding

1%

• Total Orders Growth

5% 3% 10% 1% 5%

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Reconciliations III

(in Thousands)

Q4 2014

Margin Reconciliation Industrial Technology Energy Systems & Controls Medical & Scientific Imaging RF Technology GAAP Revenue $219,642 $200,009 $286,410 $240,084 Add: SHP Purchase Accounting Adjustment to Acquired Deferred Revenue 1,204 Add: FoodLink Purchase Accounting Adjustment to Acquired Deferred Revenue 180 Adjusted Revenue 219,642 200,009 287,614 240,264 GAAP Operating Profit 69,056 72,177 100,488 67,994 Add: SHP Purchase Accounting Adjustment to Acquired Deferred Revenue 1,204 Add: FoodLink Purchase Accounting Adjustment to Acquired Deferred Revenue 180 Add: IPA Acquisition Related Inventory Step-up Charge 425 Adjusted Operating Profit 69,056 72,177 102,117 68,174 Add Amortization 2,266 4,289 21,150 11,510 EBITA 71,322 76,466 123,267 79,684 Add Depreciation 2,953 1,563 3,071 2,722 EBITDA 74,275 78,029 126,338 82,406

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Reconciliations IV

(in Thousands)

Q4 2013

Margin Reconciliation Industrial Technology Energy Systems & Controls Medical & Scientific Imaging RF Technology GAAP Revenue $199,098 $195,889 $256,542 $237,644 No Adjustments Adjusted Revenue 199,098 195,889 256,542 237,644 GAAP Operating Profit 58,775 65,247 88,739 69,704 No Adjustments Adjusted Operating Profit 58,775 65,247 88,739 69,704 Add Amortization 2,697 4,510 20,251 12,766 EBITA 61,472 69,757 108,990 82,470 Add Depreciation 2,619 1,247 2,955 2,526 EBITDA 64,091 71,004 111,945 84,996

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Reconciliations V

(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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Reconciliations VI

(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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Reconciliations VII

(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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Reconciliations VIII

(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%

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