1.4.7.1.3 Q1 2017 Earnings Call
Q1 2017 Earnings Conference Call MAY 22, 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
Three Months 2017 Financial Highlights • Revenue • Sales of $256 million - 4% year-over-year decrease on a constant currency basis • Biopharma revenue down 7% year-over-year on a constant currency basis • Consumer Health & Nutrition revenue up 2% year-over-year on a constant currency basis • Profitability • Maintained Adjusted EBITDA margin in excess of 30% on lower operating expenses • LTM EBITDA of $356 million • Cash flow • Produced $75 million of free cash flow from operations • Repaid additional $10 million of term loan borrowing and $5 million of acquisition-related revolving credit borrowing 3
1st Quarter 2017 Financial Results Adjusted EBITDA
Sales $ Millions
$ Millions
$100
$300 $225
$270
$75
$256
$150
$50
$75
$25
$0
$93 $79
$0 2016
2017
2016
YOY % Growth
Sales
Adj. EBITDA
Reported
(5%)
(15%)
Constant Currency
(4%)
(13%)
2017
4
2017 Sales by Customer Group
Q1 2017
$ in Millions
% of Total
YOY % Growth Reported
YOY % Growth Operational
Biopharma
$158
62%
(9%)
(7%)
Consumer Health & Nutrition
$98
38%
1%
2%
TOTAL
$256
100%
(5%)
(4%)
5
Free Cash Flow from Operations
($ Millions)
Q1 2017
Adjusted EBITDA
$79
Less: Capital Expenditures
(14)
+/-: Changes in Assets and Liabilities*
10
Free Cash Flow from Operations
$75
___________________________ Note: * Exclusive of interest, taxes and non-operational items.
6
Debt Structure, Credit Metrics and Liquidity Dec 31, 2016
Aug 1, 2011*
HoldCo
OpCo
$920
$1,301
$1,301
-
30
466
Debt
Apr 2, 2017 HoldCo
OpCo
Term Loans
$1,299
$1,299
30
USD Revolver
25
25
-
-
Euro Notes
-
-
19
-
-
Foreign Debt
-
-
3
2
2
Capital Leases
2
2
-
683
-
PIK Notes
682
-
$1,408
$2,016
1,333
Total Debt
$2,008
$1,326
4
107
106
Cash
100
100
$1,404
$1,909
$1,227
Net Debt
$1,908
$1,226
4.2x
3.3x
3.3x
Net Sr. Sec. / Adj. EBITDA
3.4x
3.4x
6.5x
5.2x
3.3x
Net Debt / Adj. EBITDA
5.4x
3.4x
$153
$251
$250
Liquidity (inc. RC capacity)
$250
$250
___________________________ Note: * Metrics based on LTM Adjusted EBITDA of $217 million.
7
Appendix
8
Capsugel S.A. – Adjusted EBITDA reconciliation For the three months ended ($ in millions ) Net income 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 long-term 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 los s es / (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)
Apr. 2, 2017 8.6 27.1 8.4 27.7 71.8 1.2 4.5 0.7 (0.5) (4.0) 3.6 0.6 0.7 78.6
For the twelve months ended
Apr. 3, 2016 16.8 29.8 13.2 26.4 86.2 0.7 1.2 0.2 0.1 2.3 0.8 0.5 0.7 92.7
Apr. 2, 2017 54.7 109.8 40.6 113.0 318.1 4.3 5.4 5.4 5.6 13.4 9.0 1.1 (23.2) 11.1 2.0 3.3 355.5
Apr. 3, 2016 29.4 117.9 55.2 105.4 307.9 3.7 8.6 1.6 1.9 6.9 12.1 4.6 2.0 3.2 352.5
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 as s 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 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 Caps ugel's cGMP certificate for Caps ugel's Bend Res earch facility. 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 los s es /(gains ) on foreign currency contracts and trans actions denominated in currencies other than an entity's functional currency, including gains and los s 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 .
9
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
Three Months 2017 Financial Highlights • Revenue • Sales of $256 million - 4% year-over-year decrease on a constant currency basis • Biopharma revenue down 7% year-over-year on a constant currency basis • Consumer Health & Nutrition revenue up 2% year-over-year on a constant currency basis • Profitability • Maintained Adjusted EBITDA margin in excess of 30% on lower operating expenses • LTM EBITDA of $356 million • Cash flow • Produced $75 million of free cash flow from operations • Repaid additional $10 million of term loan borrowing and $5 million of acquisition-related revolving credit borrowing 3
1st Quarter 2017 Financial Results Adjusted EBITDA
Sales $ Millions
$ Millions
$100
$300 $225
$270
$75
$256
$150
$50
$75
$25
$0
$93 $79
$0 2016
2017
2016
YOY % Growth
Sales
Adj. EBITDA
Reported
(5%)
(15%)
Constant Currency
(4%)
(13%)
2017
4
2017 Sales by Customer Group
Q1 2017
$ in Millions
% of Total
YOY % Growth Reported
YOY % Growth Operational
Biopharma
$158
62%
(9%)
(7%)
Consumer Health & Nutrition
$98
38%
1%
2%
TOTAL
$256
100%
(5%)
(4%)
5
Free Cash Flow from Operations
($ Millions)
Q1 2017
Adjusted EBITDA
$79
Less: Capital Expenditures
(14)
+/-: Changes in Assets and Liabilities*
10
Free Cash Flow from Operations
$75
___________________________ Note: * Exclusive of interest, taxes and non-operational items.
6
Debt Structure, Credit Metrics and Liquidity Dec 31, 2016
Aug 1, 2011*
HoldCo
OpCo
$920
$1,301
$1,301
-
30
466
Debt
Apr 2, 2017 HoldCo
OpCo
Term Loans
$1,299
$1,299
30
USD Revolver
25
25
-
-
Euro Notes
-
-
19
-
-
Foreign Debt
-
-
3
2
2
Capital Leases
2
2
-
683
-
PIK Notes
682
-
$1,408
$2,016
1,333
Total Debt
$2,008
$1,326
4
107
106
Cash
100
100
$1,404
$1,909
$1,227
Net Debt
$1,908
$1,226
4.2x
3.3x
3.3x
Net Sr. Sec. / Adj. EBITDA
3.4x
3.4x
6.5x
5.2x
3.3x
Net Debt / Adj. EBITDA
5.4x
3.4x
$153
$251
$250
Liquidity (inc. RC capacity)
$250
$250
___________________________ Note: * Metrics based on LTM Adjusted EBITDA of $217 million.
7
Appendix
8
Capsugel S.A. – Adjusted EBITDA reconciliation For the three months ended ($ in millions ) Net income 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 long-term 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 los s es / (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)
Apr. 2, 2017 8.6 27.1 8.4 27.7 71.8 1.2 4.5 0.7 (0.5) (4.0) 3.6 0.6 0.7 78.6
For the twelve months ended
Apr. 3, 2016 16.8 29.8 13.2 26.4 86.2 0.7 1.2 0.2 0.1 2.3 0.8 0.5 0.7 92.7
Apr. 2, 2017 54.7 109.8 40.6 113.0 318.1 4.3 5.4 5.4 5.6 13.4 9.0 1.1 (23.2) 11.1 2.0 3.3 355.5
Apr. 3, 2016 29.4 117.9 55.2 105.4 307.9 3.7 8.6 1.6 1.9 6.9 12.1 4.6 2.0 3.2 352.5
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 as s 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 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 Caps ugel's cGMP certificate for Caps ugel's Bend Res earch facility. 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 los s es /(gains ) on foreign currency contracts and trans actions denominated in currencies other than an entity's functional currency, including gains and los s 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 .
9
