Capsugel YE 2015 Earnings Call Summary
YE 2015 Earnings Conference Call March 8, 2016
CONFIDENTIAL
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 forwardlooking statements or projections to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking 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 forwardlooking 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
CONFIDENTIAL
Full Year 2015 Financial Highlights • Revenue • Sales of $1,007 million; 5% improvement on a constant-currency basis • Dosage Form Solutions up 15% on a constant-currency basis driven by higher sales of liquid-filled capsules and first commercial sales of spray-dried dispersion products • Hard Capsules up 3% on a constant-currency basis driven by a 14% increase in specialty polymer sales
• Profitability • Adjusted EBITDA of $344 million; 13% growth on a constant-currency basis • Adjusted EBITDA margin of 34.1%, up 210 bps on favorable product mix, operational improvements in our manufacturing plants and savings from purchasing initiatives
• Cash flow • Produced $236 million of free cash flow from operations 3
CONFIDENTIAL
4th Quarter 2015 Financial Results Adjusted EBITDA
Sales
$ Millions
$ Millions
$100
$300 $225
$268
$265
$75
$84
$50
$150
30.4%
$75
31.2%
$25
$0
$0 2014
4
$86
2015
2014
YOY % Growth
Sales
Adj. EBITDA
Reported
(1%)
3%
Operational
7%
11%
CONFIDENTIAL
2015
Full Year 2015 Financial Results Adjusted EBITDA
Sales
$ Millions
$ Millions
$400
$1,200 $900
$1,065
$300
$1,007
$340
$200
$600
30.4%
$300
31.2%
$100
$0
$0 2014
5
$344
2015
2014
YOY % Growth
Sales
Adj. EBITDA
Reported
(5%)
1%
Operational
5%
13%
CONFIDENTIAL
2015
Hard Capsules Segment 4th Quarter ($ in Millions)
6
Full Year ($ in Millions)
YOY % YOY % Growth Growth Rpt. Ops.
2015
2014
$210
$224
(7%)
3%
$76
$78
(3%)
6%
36.2%
34.8%
2015
2014
YOY % Growth Rpt.
Sales
$826
$898
(8%)
3%
Adjusted EBITDA
$317
$315
1%
13%
Margin
38.4%
35.1%
CONFIDENTIAL
YOY % Growth Ops.
Dosage Form Solutions Segment 4th Quarter ($ in Millions)
7
Full Year ($ in Millions)
YOY % YOY % Growth Growth Rpt. Ops.
2015
2014
$55
$44
25%
31%
$10
$6
79%
79%
18.4%
12.9%
2015
2014
YOY % Growth Rpt.
Sales
$180
$167
8%
15%
Adjusted EBITDA
$26
$25
5%
6%
Margin
14.5%
15.0%
CONFIDENTIAL
YOY % Growth Ops.
Free Cash Flow from Operations
Q4 2015
YTD 2015
Adjusted EBITDA
$86
$344
Less: Capital Expenditures
(23)
(84)
4
(24)
$67
$236
($ Millions)
+/-: Changes in Assets and Liabilities* Free Cash Flow from Operations ___________________________ Note: * Exclusive of interest, taxes and non-operational items.
8
CONFIDENTIAL
Debt Structure, Credit Metrics and Liquidity ($ Millions)
Dec 31, 2014
Aug 1, 2011*
HoldCo
OpCo
$920
$1,187
$1,187
466
-
19
Debt
HoldCo
OpCo
Term Loans
$1,133
$1,133
-
Euro Notes
-
-
14
14
Foreign Debt
2
2
3
2
2
Capital Leases
2
2
-
887
-
PIK Notes
885
-
$1,408
$2,090
$1,203
Total Debt
$2,022
$1,137
4
74
72
Cash
133
133
$1,404
$2,016
$1,131
Net Debt
$1,889
$1,004
4.2x
3.3x
3.3x
Net Sr. Sec. / Adj. EBITDA
2.9x
2.9x
6.5x
5.9x
3.3x
Net Debt / Adj. EBITDA
5.5x
2.9x
$153
$248
$246
Liquidity (inc. RC capacity)
$307
$307
___________________________ Note: * Metrics based on LTM Adjusted EBITDA of $217 million.
9
Dec 31, 2015
CONFIDENTIAL
Appendix
Capsugel S.A. - Adjusted EBITDA reconciliation For the three months ended ($ in millions) Net income / (loss) attributable to Capsugel Interest expense, net Income tax provision / (benefit) Depreciation and amortization expense EBITDA EBITDA Adjustments: Non-controlling interest Non-cash stock compensation Thailand and other weather-related (1) Litigation and environmental reserves (2) Asset impairments Loss on early retirement of debt PIK debt placement completion bonuses Transaction costs (3) Restructuring and cost-reduction initiatives Foreign exchange losses / (gains), net Transition costs (4) Receivables financing costs Other items (5) Adjusted EBITDA - Covenant Notes (1) (2) (3) (4) (5) 11
Represents Represents Represents Represents Represents
For the twelve months ended
Dec. 31, 2015 (12.8) 30.3 33.8 26.2 77.5
Dec. 31, 2014 8.5 31.8 2.3 28.8 71.4
1.1 3.6 1.6 1.6 2.0 (3.5) 0.7 0.5 0.9 86.0
0.9 3.4 0.1 0.6 0.5 1.0 1.8 1.8 0.6 1.6 83.7
primarily asset disposal losses associated with the Thailand flood activity associated with matters that existed at the time of the Pfizer separation acquisition-related expenses and accounting adjustments various non-recurring costs incurred as part of the multi-year transition to a stand-alone company primarily sponsor management/advisory fees and expenses
CONFIDENTIAL
Dec. 31, 2015 35.0 117.8 48.6 105.8 307.2 3.7 8.8 1.6 1.9 10.5 (0.2) 4.8 2.0 3.2 343.5
Dec. 31, 2014 (14.7) 123.4 (6.6) 117.3 219.4 3.2 12.4 0.7 1.2 39.0 17.5 2.6 3.9 29.1 4.0 2.5 4.8 340.3
CONFIDENTIAL
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 forwardlooking statements or projections to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking 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 forwardlooking 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
CONFIDENTIAL
Full Year 2015 Financial Highlights • Revenue • Sales of $1,007 million; 5% improvement on a constant-currency basis • Dosage Form Solutions up 15% on a constant-currency basis driven by higher sales of liquid-filled capsules and first commercial sales of spray-dried dispersion products • Hard Capsules up 3% on a constant-currency basis driven by a 14% increase in specialty polymer sales
• Profitability • Adjusted EBITDA of $344 million; 13% growth on a constant-currency basis • Adjusted EBITDA margin of 34.1%, up 210 bps on favorable product mix, operational improvements in our manufacturing plants and savings from purchasing initiatives
• Cash flow • Produced $236 million of free cash flow from operations 3
CONFIDENTIAL
4th Quarter 2015 Financial Results Adjusted EBITDA
Sales
$ Millions
$ Millions
$100
$300 $225
$268
$265
$75
$84
$50
$150
30.4%
$75
31.2%
$25
$0
$0 2014
4
$86
2015
2014
YOY % Growth
Sales
Adj. EBITDA
Reported
(1%)
3%
Operational
7%
11%
CONFIDENTIAL
2015
Full Year 2015 Financial Results Adjusted EBITDA
Sales
$ Millions
$ Millions
$400
$1,200 $900
$1,065
$300
$1,007
$340
$200
$600
30.4%
$300
31.2%
$100
$0
$0 2014
5
$344
2015
2014
YOY % Growth
Sales
Adj. EBITDA
Reported
(5%)
1%
Operational
5%
13%
CONFIDENTIAL
2015
Hard Capsules Segment 4th Quarter ($ in Millions)
6
Full Year ($ in Millions)
YOY % YOY % Growth Growth Rpt. Ops.
2015
2014
$210
$224
(7%)
3%
$76
$78
(3%)
6%
36.2%
34.8%
2015
2014
YOY % Growth Rpt.
Sales
$826
$898
(8%)
3%
Adjusted EBITDA
$317
$315
1%
13%
Margin
38.4%
35.1%
CONFIDENTIAL
YOY % Growth Ops.
Dosage Form Solutions Segment 4th Quarter ($ in Millions)
7
Full Year ($ in Millions)
YOY % YOY % Growth Growth Rpt. Ops.
2015
2014
$55
$44
25%
31%
$10
$6
79%
79%
18.4%
12.9%
2015
2014
YOY % Growth Rpt.
Sales
$180
$167
8%
15%
Adjusted EBITDA
$26
$25
5%
6%
Margin
14.5%
15.0%
CONFIDENTIAL
YOY % Growth Ops.
Free Cash Flow from Operations
Q4 2015
YTD 2015
Adjusted EBITDA
$86
$344
Less: Capital Expenditures
(23)
(84)
4
(24)
$67
$236
($ Millions)
+/-: Changes in Assets and Liabilities* Free Cash Flow from Operations ___________________________ Note: * Exclusive of interest, taxes and non-operational items.
8
CONFIDENTIAL
Debt Structure, Credit Metrics and Liquidity ($ Millions)
Dec 31, 2014
Aug 1, 2011*
HoldCo
OpCo
$920
$1,187
$1,187
466
-
19
Debt
HoldCo
OpCo
Term Loans
$1,133
$1,133
-
Euro Notes
-
-
14
14
Foreign Debt
2
2
3
2
2
Capital Leases
2
2
-
887
-
PIK Notes
885
-
$1,408
$2,090
$1,203
Total Debt
$2,022
$1,137
4
74
72
Cash
133
133
$1,404
$2,016
$1,131
Net Debt
$1,889
$1,004
4.2x
3.3x
3.3x
Net Sr. Sec. / Adj. EBITDA
2.9x
2.9x
6.5x
5.9x
3.3x
Net Debt / Adj. EBITDA
5.5x
2.9x
$153
$248
$246
Liquidity (inc. RC capacity)
$307
$307
___________________________ Note: * Metrics based on LTM Adjusted EBITDA of $217 million.
9
Dec 31, 2015
CONFIDENTIAL
Appendix
Capsugel S.A. - Adjusted EBITDA reconciliation For the three months ended ($ in millions) Net income / (loss) attributable to Capsugel Interest expense, net Income tax provision / (benefit) Depreciation and amortization expense EBITDA EBITDA Adjustments: Non-controlling interest Non-cash stock compensation Thailand and other weather-related (1) Litigation and environmental reserves (2) Asset impairments Loss on early retirement of debt PIK debt placement completion bonuses Transaction costs (3) Restructuring and cost-reduction initiatives Foreign exchange losses / (gains), net Transition costs (4) Receivables financing costs Other items (5) Adjusted EBITDA - Covenant Notes (1) (2) (3) (4) (5) 11
Represents Represents Represents Represents Represents
For the twelve months ended
Dec. 31, 2015 (12.8) 30.3 33.8 26.2 77.5
Dec. 31, 2014 8.5 31.8 2.3 28.8 71.4
1.1 3.6 1.6 1.6 2.0 (3.5) 0.7 0.5 0.9 86.0
0.9 3.4 0.1 0.6 0.5 1.0 1.8 1.8 0.6 1.6 83.7
primarily asset disposal losses associated with the Thailand flood activity associated with matters that existed at the time of the Pfizer separation acquisition-related expenses and accounting adjustments various non-recurring costs incurred as part of the multi-year transition to a stand-alone company primarily sponsor management/advisory fees and expenses
CONFIDENTIAL
Dec. 31, 2015 35.0 117.8 48.6 105.8 307.2 3.7 8.8 1.6 1.9 10.5 (0.2) 4.8 2.0 3.2 343.5
Dec. 31, 2014 (14.7) 123.4 (6.6) 117.3 219.4 3.2 12.4 0.7 1.2 39.0 17.5 2.6 3.9 29.1 4.0 2.5 4.8 340.3
