Capsugel YE 2016 Earnings Call Summary
YE 2016 Earnings Conference Call MARCH 3, 2017
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
Full Year 2016 Financial Highlights • Revenue • Sales of $1,081 million - 9% year-over-year improvement (5% organic) on a constant currency basis • Biopharmaceutical revenue up 9% year-over-year on a constant currency basis and Consumer Health & Nutrition revenue up 8% year-over-year on a constant currency basis • Profitability • Adjusted EBITDA of $370 million - 9% year-over-year growth (6% organic) on a constant currency basis driven by increased revenues, better product mix and operational improvements • Adjusted EBITDA margin of 34.2% • Cash flow • Produced $265 million of free cash flow from operations • Repaid over half of $80 million of acquisition-related revolving credit borrowing 3
4th Quarter 2016 Financial Results Adjusted EBITDA
Sales $ Millions
$ Millions
$100
$300 $225
$265
$278
$75
$150
$50
$75
$25
$0
$86
$92
$0 2015
2016
2015
YOY % Growth
Sales
Adj. EBITDA
Reported
5%
7%
Constant Currency
6%
9%
2016
4
Full Year 2016 Financial Results Adjusted EBITDA
Sales $ Millions
$ Millions
$400
$1,200 $900
$1,007
$1,081
$300
$600
$200
$300
$100
$0
$344
$370
$0 2015
2016
2015
YOY % Growth
Sales
Adj. EBITDA
Reported
7%
8%
Constant Currency
9%
9%
2016
5
2016 Sales by Customer Group 4th Quarter
Full Year
$ in Millions
YOY % Growth Rpt.
YOY % Growth Ops.
$177
4%
5%
$ in Millions
YOY % Growth Rpt.
YOY % Growth Ops.
Biopharma
$698
7%
9%
$383
8%
8%
$1,081
7%
9%
$101
6%
6%
Consumer Health & Nutrition
$278
5%
6%
TOTAL
6
Free Cash Flow from Operations
Q4 2016
YTD 2016
Adjusted EBITDA
$92
$370
Less: Capital Expenditures
(17)
(76)
+/-: Changes in Assets and Liabilities*
(3)
(29)
Free Cash Flow from Operations
$72
$265
($ 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
Dec 31, 2016 HoldCo
OpCo
Term Loans
$1,301
$1,301
-
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
$2,016
$1,333
4
133
133
Cash
107
106
$1,404
$1,889
$1,004
Net Debt
$1,909
$1,227
4.2x
2.9x
2.9x
Net Sr. Sec. / Adj. EBITDA
3.3x
3.3x
6.5x
5.5x
2.9x
Net Debt / Adj. EBITDA
5.2x
3.3x
$153
$307
$307
Liquidity (inc. RC capacity)
$251
$250
___________________________ 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 / (los s ) attributable to Caps ugel Interes t expens e, net Income tax provis ion Depreciation and amortization expens e EBITDA EBITDA Adjus tments : Non-controlling interes t (1) Non-cas h s tock compens ation (2) As s et impairments (3) Los s on extinguis hment of debt (4) Impairment of trade names (5) Bend regulatory approval (6) Trans action cos ts and purchas e accounting adjus tments (7) Res tructuring and cos t-reduction initiatives (8) Foreign exchange gains , net (9) Trans ition cos ts (10) Accounts receivable s old financing charges (11) Other items (12) Adjus ted EBITDA - Covenant Notes (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
Dec. 31, 2016 25.8 27.2 9.5 27.4 89.9 1.1 2.3 0.7 7.7 1.9 (15.0) 2.0 0.5 0.9 92.0
For the twelve months ended
Dec. 31, 2015 (12.8) 30.3 33.8 26.2 77.5 1.1 3.6 1.6 1.6 2.0 (3.5) 0.7 0.5 0.9 86.0
Dec. 31, 2016 62.9 112.5 45.4 111.7 332.5 3.8 6.6 5.4 5.6 8.9 8.5 1.7 (16.9) 8.3 1.9 3.3 369.6
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
Repres ents net income attributable to the non-controlling interes t in our Chines e s ubs idiary. Repres ents non-cas h expens es ass ociated with incentive compens ation granted purs uant to the Company's s hare-bas ed compens ation plan. Repres ents primarily non-cas h impairments of fixed as s ets , inventory and other long-term as s ets . Repres ents premiums paid and cos ts incurred in connection with the changes to debt in April 2016. Repres ents the impairment of Bend Res earch and Encap trade names due to rebranding Caps ugel in 2016. Repres ents non-recurring cos ts as s ociated with improving s ys tems and proces s es to re-obtain our cGMP certificate for Bend Res earch. Repres ents acquis ition-related expens es and accounting adjus tments . Repres ents cos ts primarily as s ociated with the clos ing of a product development center in 2015 as well as cos ts as s ociated with the elimination of pos itions to improve operational performance. Repres ents net gains on foreign currency contracts and trans actions denominated in currencies other than an entity's functional currency, including gains and loss es on intercompany trans actions . Repres ents various cos ts incurred as part of the trans ition to a s tand-alone company. Repres ents financing cos ts incurred in connection with our accounts receivable factoring programs . Repres ents primarily advis ory and other fees and expens es .
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
Full Year 2016 Financial Highlights • Revenue • Sales of $1,081 million - 9% year-over-year improvement (5% organic) on a constant currency basis • Biopharmaceutical revenue up 9% year-over-year on a constant currency basis and Consumer Health & Nutrition revenue up 8% year-over-year on a constant currency basis • Profitability • Adjusted EBITDA of $370 million - 9% year-over-year growth (6% organic) on a constant currency basis driven by increased revenues, better product mix and operational improvements • Adjusted EBITDA margin of 34.2% • Cash flow • Produced $265 million of free cash flow from operations • Repaid over half of $80 million of acquisition-related revolving credit borrowing 3
4th Quarter 2016 Financial Results Adjusted EBITDA
Sales $ Millions
$ Millions
$100
$300 $225
$265
$278
$75
$150
$50
$75
$25
$0
$86
$92
$0 2015
2016
2015
YOY % Growth
Sales
Adj. EBITDA
Reported
5%
7%
Constant Currency
6%
9%
2016
4
Full Year 2016 Financial Results Adjusted EBITDA
Sales $ Millions
$ Millions
$400
$1,200 $900
$1,007
$1,081
$300
$600
$200
$300
$100
$0
$344
$370
$0 2015
2016
2015
YOY % Growth
Sales
Adj. EBITDA
Reported
7%
8%
Constant Currency
9%
9%
2016
5
2016 Sales by Customer Group 4th Quarter
Full Year
$ in Millions
YOY % Growth Rpt.
YOY % Growth Ops.
$177
4%
5%
$ in Millions
YOY % Growth Rpt.
YOY % Growth Ops.
Biopharma
$698
7%
9%
$383
8%
8%
$1,081
7%
9%
$101
6%
6%
Consumer Health & Nutrition
$278
5%
6%
TOTAL
6
Free Cash Flow from Operations
Q4 2016
YTD 2016
Adjusted EBITDA
$92
$370
Less: Capital Expenditures
(17)
(76)
+/-: Changes in Assets and Liabilities*
(3)
(29)
Free Cash Flow from Operations
$72
$265
($ 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
Dec 31, 2016 HoldCo
OpCo
Term Loans
$1,301
$1,301
-
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
$2,016
$1,333
4
133
133
Cash
107
106
$1,404
$1,889
$1,004
Net Debt
$1,909
$1,227
4.2x
2.9x
2.9x
Net Sr. Sec. / Adj. EBITDA
3.3x
3.3x
6.5x
5.5x
2.9x
Net Debt / Adj. EBITDA
5.2x
3.3x
$153
$307
$307
Liquidity (inc. RC capacity)
$251
$250
___________________________ 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 / (los s ) attributable to Caps ugel Interes t expens e, net Income tax provis ion Depreciation and amortization expens e EBITDA EBITDA Adjus tments : Non-controlling interes t (1) Non-cas h s tock compens ation (2) As s et impairments (3) Los s on extinguis hment of debt (4) Impairment of trade names (5) Bend regulatory approval (6) Trans action cos ts and purchas e accounting adjus tments (7) Res tructuring and cos t-reduction initiatives (8) Foreign exchange gains , net (9) Trans ition cos ts (10) Accounts receivable s old financing charges (11) Other items (12) Adjus ted EBITDA - Covenant Notes (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
Dec. 31, 2016 25.8 27.2 9.5 27.4 89.9 1.1 2.3 0.7 7.7 1.9 (15.0) 2.0 0.5 0.9 92.0
For the twelve months ended
Dec. 31, 2015 (12.8) 30.3 33.8 26.2 77.5 1.1 3.6 1.6 1.6 2.0 (3.5) 0.7 0.5 0.9 86.0
Dec. 31, 2016 62.9 112.5 45.4 111.7 332.5 3.8 6.6 5.4 5.6 8.9 8.5 1.7 (16.9) 8.3 1.9 3.3 369.6
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
Repres ents net income attributable to the non-controlling interes t in our Chines e s ubs idiary. Repres ents non-cas h expens es ass ociated with incentive compens ation granted purs uant to the Company's s hare-bas ed compens ation plan. Repres ents primarily non-cas h impairments of fixed as s ets , inventory and other long-term as s ets . Repres ents premiums paid and cos ts incurred in connection with the changes to debt in April 2016. Repres ents the impairment of Bend Res earch and Encap trade names due to rebranding Caps ugel in 2016. Repres ents non-recurring cos ts as s ociated with improving s ys tems and proces s es to re-obtain our cGMP certificate for Bend Res earch. Repres ents acquis ition-related expens es and accounting adjus tments . Repres ents cos ts primarily as s ociated with the clos ing of a product development center in 2015 as well as cos ts as s ociated with the elimination of pos itions to improve operational performance. Repres ents net gains on foreign currency contracts and trans actions denominated in currencies other than an entity's functional currency, including gains and loss es on intercompany trans actions . Repres ents various cos ts incurred as part of the trans ition to a s tand-alone company. Repres ents financing cos ts incurred in connection with our accounts receivable factoring programs . Repres ents primarily advis ory and other fees and expens es .
10
