1.4.6.3.3 Q3 2016 Earnings Call Summary
Q3 2016 Earnings Conference Call NOVEMBER 4, 2016
Forward-Looking Statements This presentation may include certain forward-looking statements, including but not limited to expected financial results and other planned events. Any such statements reflect various estimates and assumptions concerning anticipated results, and are subject to the risks and uncertainties discussed in detail in our securities offering documents. Whether any such results are, in fact, achieved will depend upon future events, some or all of which are not within our control. Accordingly, actual results may vary from the projected results and such variations may be material. Forward-looking statements speak only as of the date the statements are made. We specifically disclaim any obligation to update forward-looking statements or projections to reflect actual results, changes in assumptions or changes in other factors affecting forwardlooking information. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other forward-looking statements. In addition, please note that this presentation will reference non-GAAP financial measures such as Adjusted EBITDA and operational growth. Additional information concerning Adjusted EBITDA, including a reconciliation of it to Net Income or Loss, is contained in the financial statements to which this presentation relates. Rates of growth expressed on an operational basis exclude the impact of foreign currency fluctuations over the relevant period. 2
Nine Months 2016 Financial Highlights • Revenue • Sales of $804 million - 10% year-over-year improvement (5% organic) on a constant currency basis • Biopharmaceutical revenue up 10% year-over-year on a constant currency basis • Consumer Health & Nutrition revenue up 9% year-over-year on a constant currency basis • Profitability • Adjusted EBITDA of $278 million - 8% year-over-year growth (6% organic) on a constant currency basis driven by increased revenues, better product mix and operational improvements • LTM Adjusted EBITDA of $366 million • Cash flow • Produced $192 million of free cash flow from operations • Repaid $50 million of acquisition-related revolving credit borrowing 3
3rd Quarter 2016 Financial Results Adjusted EBITDA
Sales $ Millions
$ Millions
$100
$300 $225
$94
$266
$75
$236
$150
$50
$75
$25
$0
$80
$0 2015
2016
2015
YOY % Growth
Sales
Adj. EBITDA
Reported
12%
17%
Constant Currency
12%
17%
2016
4
Nine Months 2016 Financial Results Adjusted EBITDA
Sales $ Millions
$ Millions
$300
$900 $675
$742
$804
$225
$450
$150
$225
$75
$0
$258
$278
$0 2015
2016
2015
YOY % Growth
Sales
Adj. EBITDA
Reported
8%
8%
Constant Currency
10%
8%
2016
5
2016 Sales by Customer Group 3rd Quarter
Nine Months
$ in Millions
YOY % Growth Rpt.
YOY % Growth Ops.
$176
18%
18%
$ in Millions
YOY % Growth Rpt.
YOY % Growth Ops.
Biopharma
$521
8%
10%
$283
9%
9%
$804
8%
10%
$90
2%
2%
Consumer Health & Nutrition
$266
12%
12%
TOTAL
6
Free Cash Flow from Operations
Q3 2016
YTD 2016
Adjusted EBITDA
$94
$278
Less: Capital Expenditures
(19)
(59)
+/-: Changes in Assets and Liabilities*
(16)
(27)
Free Cash Flow from Operations
$59
$192
($ Millions)
___________________________ Note: * Exclusive of interest, taxes and non-operational items.
7
Debt Structure, Credit Metrics and Liquidity Dec 31, 2015
Aug 1, 2011*
HoldCo
OpCo
$920
$1,133
$1,133
-
-
466
Debt
Oct 2, 2016 HoldCo
OpCo
Term Loans
$1,337
$1,337
-
USD Revolver
30
30
-
-
Euro Notes
-
-
19
2
2
Foreign Debt
-
-
3
2
2
Capital Leases
2
2
-
885
-
PIK Notes
683
-
$1,408
$2,022
$1,137
Total Debt
$2,052
$1,369
4
133
133
Cash
95
95
$1,404
$1,889
$1,004
Net Debt
$1,957
$1,274
4.2x
2.9x
2.9x
Net Sr. Sec. / Adj. EBITDA
3.5x
3.5x
6.5x
5.5x
2.9x
Net Debt / Adj. EBITDA
5.4x
3.5x
$153
$307
$307
Liquidity (inc. RC capacity)
$239
$239
___________________________ Note: * Metrics based on LTM Adjusted EBITDA of $217 million.
8
Appendix
9
Capsugel S.A. – Adjusted EBITDA reconciliation For the three months ended ($ in millions) Net income attributable to Capsugel Interest expense, net Income tax provision Depreciation and amortization expense EBITDA EBITDA Adjustments: Non-controlling interest (1) Non-cash stock compensation (2) Asset impairments (3) Loss on extinguishment of debt (4) Impairment of trade names (5) Bend regulatory approval (6) Transaction costs and purchase accounting adjustments (7) Restructuring and cost-reduction initiatives (8) Foreign exchange (gains) / losses, net (9) Transition costs (10) Accounts receivable sold financing charges (11) Other items (12) Adjusted EBITDA Acquired EBITDA - Xcelience and Powdersize (13) Adjusted EBITDA - Covenant Acquired EBITDA - Xcelience and Powdersize (14) Further Adjusted EBITDA Notes (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)
For the nine months ended
Oct. 2, 2016 9.5 27.5 8.7 27.8 73.5
Sep. 27, 2015 11.0 28.9 2.6 26.1 68.5
1.0 1.5 5.6 3.6 0.5 0.2 2.4 4.3 0.5 0.9 94.2 94.2 94.2
0.9 2.0 0.1 0.7 5.8 1.1 0.5 0.9 80.3 80.3 4.5 84.8
Oct. 2, 2016 37.1 85.3 35.9 84.3 242.6
For the twelve months ended
Sep. 27, 2015 47.8 87.5 14.8 79.6 229.7
2.7 4.3 5.4 5.6 8.2 0.8 (0.2) (1.9) 6.3 1.4 2.4 277.6 277.6 277.6
2.6 5.2 0.3 8.5 3.3 4.1 1.5 2.3 257.5 257.5 7.9 265.4
Oct. 2, 2016 24.4 115.6 69.7 110.5 320.1 3.8 7.9 1.6 5.4 5.6 8.2 2.4 1.8 (5.4) 7.0 1.9 3.3 363.6 2.7 366.3 366.3
Sep. 27, 2015 56.3 119.3 17.0 108.4 301.1 3.4 8.6 0.6 0.8 9.5 5.2 5.9 2.1 4.0 341.2 341.2 7.9 349.1
Represents net income attributable to the non-controlling interest in our Chinese subsidiary. Represents non-cash expenses associated with incentive compensation granted pursuant to the Company's share-based compensation plan. Represents primarily non-cash impairments of fixed assets, inventory and other long-term assets. Represents costs incurred and premiums paid in connection with the changes to debt in April 2016 and the redemption of €325 million of aggregate principal amount of senior notes on August 1, 2014. Represents the impairment of Bend Research and Encap trade names due to rebranding Capsugel in the third quarter of 2016. Represents non-recurring costs associated with improving systems and processes to re-obtain our cGMP certificate for Bend Research. Represents acquisition-related expenses and purchase accounting adjustments. Represents costs associated with the closing of a product development center in 2015 as well as costs associated with the elimination of positions to improve operational performance. Represents net (gains) / losses on foreign currency contracts and transactions denominated in currencies other than an entity's functional currency, including gains and losses on intercompany transactions. Represents various costs incurred as part of the transition to a stand-alone company. Represents financing costs incurred in connection with our accounts receivable factoring programs. Represents primarily advisory and other fees and expenses. Represents adjsutment to EBITDA permitted by Capsugel debt agreements in connection with acquisitions. Represents further adjustment to EBITDA (for purposes of comparison) as if Capsugel had owned the entities in 2015.
10
Forward-Looking Statements This presentation may include certain forward-looking statements, including but not limited to expected financial results and other planned events. Any such statements reflect various estimates and assumptions concerning anticipated results, and are subject to the risks and uncertainties discussed in detail in our securities offering documents. Whether any such results are, in fact, achieved will depend upon future events, some or all of which are not within our control. Accordingly, actual results may vary from the projected results and such variations may be material. Forward-looking statements speak only as of the date the statements are made. We specifically disclaim any obligation to update forward-looking statements or projections to reflect actual results, changes in assumptions or changes in other factors affecting forwardlooking information. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect thereto or with respect to other forward-looking statements. In addition, please note that this presentation will reference non-GAAP financial measures such as Adjusted EBITDA and operational growth. Additional information concerning Adjusted EBITDA, including a reconciliation of it to Net Income or Loss, is contained in the financial statements to which this presentation relates. Rates of growth expressed on an operational basis exclude the impact of foreign currency fluctuations over the relevant period. 2
Nine Months 2016 Financial Highlights • Revenue • Sales of $804 million - 10% year-over-year improvement (5% organic) on a constant currency basis • Biopharmaceutical revenue up 10% year-over-year on a constant currency basis • Consumer Health & Nutrition revenue up 9% year-over-year on a constant currency basis • Profitability • Adjusted EBITDA of $278 million - 8% year-over-year growth (6% organic) on a constant currency basis driven by increased revenues, better product mix and operational improvements • LTM Adjusted EBITDA of $366 million • Cash flow • Produced $192 million of free cash flow from operations • Repaid $50 million of acquisition-related revolving credit borrowing 3
3rd Quarter 2016 Financial Results Adjusted EBITDA
Sales $ Millions
$ Millions
$100
$300 $225
$94
$266
$75
$236
$150
$50
$75
$25
$0
$80
$0 2015
2016
2015
YOY % Growth
Sales
Adj. EBITDA
Reported
12%
17%
Constant Currency
12%
17%
2016
4
Nine Months 2016 Financial Results Adjusted EBITDA
Sales $ Millions
$ Millions
$300
$900 $675
$742
$804
$225
$450
$150
$225
$75
$0
$258
$278
$0 2015
2016
2015
YOY % Growth
Sales
Adj. EBITDA
Reported
8%
8%
Constant Currency
10%
8%
2016
5
2016 Sales by Customer Group 3rd Quarter
Nine Months
$ in Millions
YOY % Growth Rpt.
YOY % Growth Ops.
$176
18%
18%
$ in Millions
YOY % Growth Rpt.
YOY % Growth Ops.
Biopharma
$521
8%
10%
$283
9%
9%
$804
8%
10%
$90
2%
2%
Consumer Health & Nutrition
$266
12%
12%
TOTAL
6
Free Cash Flow from Operations
Q3 2016
YTD 2016
Adjusted EBITDA
$94
$278
Less: Capital Expenditures
(19)
(59)
+/-: Changes in Assets and Liabilities*
(16)
(27)
Free Cash Flow from Operations
$59
$192
($ Millions)
___________________________ Note: * Exclusive of interest, taxes and non-operational items.
7
Debt Structure, Credit Metrics and Liquidity Dec 31, 2015
Aug 1, 2011*
HoldCo
OpCo
$920
$1,133
$1,133
-
-
466
Debt
Oct 2, 2016 HoldCo
OpCo
Term Loans
$1,337
$1,337
-
USD Revolver
30
30
-
-
Euro Notes
-
-
19
2
2
Foreign Debt
-
-
3
2
2
Capital Leases
2
2
-
885
-
PIK Notes
683
-
$1,408
$2,022
$1,137
Total Debt
$2,052
$1,369
4
133
133
Cash
95
95
$1,404
$1,889
$1,004
Net Debt
$1,957
$1,274
4.2x
2.9x
2.9x
Net Sr. Sec. / Adj. EBITDA
3.5x
3.5x
6.5x
5.5x
2.9x
Net Debt / Adj. EBITDA
5.4x
3.5x
$153
$307
$307
Liquidity (inc. RC capacity)
$239
$239
___________________________ Note: * Metrics based on LTM Adjusted EBITDA of $217 million.
8
Appendix
9
Capsugel S.A. – Adjusted EBITDA reconciliation For the three months ended ($ in millions) Net income attributable to Capsugel Interest expense, net Income tax provision Depreciation and amortization expense EBITDA EBITDA Adjustments: Non-controlling interest (1) Non-cash stock compensation (2) Asset impairments (3) Loss on extinguishment of debt (4) Impairment of trade names (5) Bend regulatory approval (6) Transaction costs and purchase accounting adjustments (7) Restructuring and cost-reduction initiatives (8) Foreign exchange (gains) / losses, net (9) Transition costs (10) Accounts receivable sold financing charges (11) Other items (12) Adjusted EBITDA Acquired EBITDA - Xcelience and Powdersize (13) Adjusted EBITDA - Covenant Acquired EBITDA - Xcelience and Powdersize (14) Further Adjusted EBITDA Notes (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)
For the nine months ended
Oct. 2, 2016 9.5 27.5 8.7 27.8 73.5
Sep. 27, 2015 11.0 28.9 2.6 26.1 68.5
1.0 1.5 5.6 3.6 0.5 0.2 2.4 4.3 0.5 0.9 94.2 94.2 94.2
0.9 2.0 0.1 0.7 5.8 1.1 0.5 0.9 80.3 80.3 4.5 84.8
Oct. 2, 2016 37.1 85.3 35.9 84.3 242.6
For the twelve months ended
Sep. 27, 2015 47.8 87.5 14.8 79.6 229.7
2.7 4.3 5.4 5.6 8.2 0.8 (0.2) (1.9) 6.3 1.4 2.4 277.6 277.6 277.6
2.6 5.2 0.3 8.5 3.3 4.1 1.5 2.3 257.5 257.5 7.9 265.4
Oct. 2, 2016 24.4 115.6 69.7 110.5 320.1 3.8 7.9 1.6 5.4 5.6 8.2 2.4 1.8 (5.4) 7.0 1.9 3.3 363.6 2.7 366.3 366.3
Sep. 27, 2015 56.3 119.3 17.0 108.4 301.1 3.4 8.6 0.6 0.8 9.5 5.2 5.9 2.1 4.0 341.2 341.2 7.9 349.1
Represents net income attributable to the non-controlling interest in our Chinese subsidiary. Represents non-cash expenses associated with incentive compensation granted pursuant to the Company's share-based compensation plan. Represents primarily non-cash impairments of fixed assets, inventory and other long-term assets. Represents costs incurred and premiums paid in connection with the changes to debt in April 2016 and the redemption of €325 million of aggregate principal amount of senior notes on August 1, 2014. Represents the impairment of Bend Research and Encap trade names due to rebranding Capsugel in the third quarter of 2016. Represents non-recurring costs associated with improving systems and processes to re-obtain our cGMP certificate for Bend Research. Represents acquisition-related expenses and purchase accounting adjustments. Represents costs associated with the closing of a product development center in 2015 as well as costs associated with the elimination of positions to improve operational performance. Represents net (gains) / losses on foreign currency contracts and transactions denominated in currencies other than an entity's functional currency, including gains and losses on intercompany transactions. Represents various costs incurred as part of the transition to a stand-alone company. Represents financing costs incurred in connection with our accounts receivable factoring programs. Represents primarily advisory and other fees and expenses. Represents adjsutment to EBITDA permitted by Capsugel debt agreements in connection with acquisitions. Represents further adjustment to EBITDA (for purposes of comparison) as if Capsugel had owned the entities in 2015.
10
