SECOND QUARTER 2017 EARNINGS CALL AUGUST 2, 2017

Transcription

1 SECOND QUARTER 2017 EARNINGS CALL AUGUST 2, 2017

2 SECOND QUARTER EARNINGS CALL AGENDA CEO Transition Robert Abernathy Chairman Strategic Vision Joe Woody Chief Executive Officer Second Quarter Results and 2017 Outlook Steve Voskuil Chief Financial Officer Second Quarter 2017 Earnings Call 2

3 CONFERENCE CALL REMINDERS FORWARD-LOOKING INFORMATION Certain matters in this presentation and conference call, including our 2017 outlook, expectations and planning assumptions, and any estimates, projections, and statements relating to our business plans or objectives, constitute forward-looking statements and are based upon management s expectations and beliefs concerning future events impacting the Company. These statements are subject to risks and uncertainties, including currency exchange risks, cost savings and reductions, raw material, energy, and other input costs, competition, market demand, economic condition, and legislative and regulatory actions. There can be no assurance that these future events will occur as anticipated or that the Company s results will be as estimated. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update them. For a more complete listing and description of other factors that could cause the Company s future results to differ materially from those expressed in any forward-looking statements, see the Company s most recent Form 10-K and Quarterly Reports on Form 10-Q. NON-GAAP FINANCIAL MEASURES Management believes that non-gaap financial measures enhance investors understanding and analysis of the company s performance. As such, results and outlook have been adjusted to exclude certain items for relevant time periods as indicated in the non-gaap reconciliations to the comparable GAAP financial measures included in this presentation and in today s earnings release posted on our website ( Second Quarter 2017 Earnings Call 3

4 CEO TRANSITION ROBERT ABERNATHY CHAIRMAN

5 CEO TRANSITION Recently announced retirement as CEO Board elected Joe Woody as the new CEO Transition seamless, efficient and tracking to plan Retiring as Chairman effective September 1 Ron Dollens will take over as nonexecutive Chairman Second Quarter 2017 Earnings Call 5

6 CEO TRANSITION Joe Woody Experienced CEO with more than 20 years in the Medical Technology industry Proven record of portfolio transformations by: - Driving growth - Accelerating innovation - Understanding and anticipating evolving customer and patient needs Experience and leadership skills ideal for Halyard s transformation Second Quarter 2017 Earnings Call 6

7 PROGRESS ACHIEVED Advancing our transformation: - Accelerated Medical Devices growth - Executed first acquisition - Built a solid foundation for growth - Reestablished Halyard s innovative culture Second Quarter 2017 Earnings Call 7

8 CEO TRANSITION Incredible journey leading Halyard Confident about our future Outstanding leader at the helm Well-prepared for next phase of growth Second Quarter 2017 Earnings Call 8

9 STRATEGIC VISION JOE WOODY CHIEF EXECUTIVE OFFICER

10 OVERVIEW Experience and background MedTech industry trends Opportunities for Halyard Second Quarter 2017 Earnings Call 10

11 EXPERIENCE AND BACKGROUND Experienced MedTech CEO Twenty plus years experience in developing and driving transformation strategies Core elements relevant to Halyard: - Pivoting towards high-growth, profitable markets - Reinforcing the innovation culture - Focusing on understanding and anticipating customer needs Second Quarter 2017 Earnings Call 11

12 OPPORTUNITIES FOR HALYARD Three Key Focus Areas Markets - Expand into high growth end-markets in the U.S. and internationally Products - Leverage effectiveness of non-opioid pain therapies - Differentiated and preferred products - Deliver improved patient outcomes and healthcare economic benefits Technology - Leverage existing and new technologies - Drive a new generation of advanced technologies and clinical therapies Second Quarter 2017 Earnings Call 12

13 MEDICAL DEVICE INDUSTRY TRENDS Enormous market potential Incorporate M&A as a growth driver Corpak an excellent example of our: - Ability to identify strategic, accretive acquisitions - Effectively integrate and leverage into our infrastructure Second Quarter 2017 Earnings Call 13

14 STRATEGIC VISION Accelerate our transformation Continued focus on growth through: - Strategic M&A - Product development - Market expansion - Generate more synergies and increase productivity Second Quarter 2017 Earnings Call 14

15 STRATEGIC VISION Next phase of strategy: - Enhance our execution - Energize culture - Sustain and enhance strategic focus on customers - Increase speed and performance of initiatives Second Quarter 2017 Earnings Call 15

16 2017 PRIORITIES Deliver plan Fuel growth pipeline Second Quarter 2017 Earnings Call 16

17 DELIVERING OUR PLAN Completed another solid quarter Delivered adjusted diluted EPS of $0.51 Raised 2017 adjusted diluted EPS to $1.85 to $2.05 Second Quarter 2017 Earnings Call 17

18 FUELING OUR GROWTH PIPELINE Building on strengths Continued investment in fast growing Interventional Pain - Launched COOLIEF direct to patient marketing campaign - Strong response and market development opportunity Launched three products - Commitment to improve outcomes and safety - Year-to-date launched seven products - On track to launch more than a dozen products Second Quarter 2017 Earnings Call 18

19 SECOND QUARTER 2017 RESULTS STEVE VOSKUIL CHIEF FINANCIAL OFFICER

20 SECOND QUARTER CONSOLIDATED PERFORMANCE In millions Total Net Sales Adjusted Gross Profit $145 $145 $400 $399 36% 36% Q Q Net sales down $1 million Including Corpak, volume increased 3%, partially offset by lower selling price Q Q Favorable impacts: portfolio shift, manufacturing efficiencies and favorable currency exchange rates Offset by lower selling prices and anticipated higher nitrile costs Second Quarter 2017 Earnings Call 20

21 SECOND QUARTER CONSOLIDATED PERFORMANCE In millions Adjusted Operating Profit 10% 10% $41 $40 Q Q Adjusted operating profit excludes: $2 million for acquisitionrelated charges $6 million for litigation matters $5 million intangible amortization expense Partially offset by a $2 million spin-related benefit Second Quarter 2017 Earnings Call 21

22 SECOND QUARTER CONSOLIDATED PERFORMANCE Adjusted EBITDA of $51 million Reported adjusted diluted EPS of $0.51 Performance benefited from: - Greater manufacturing and distribution efficiencies - Lower than planned R&D expense - Adjusted effective tax rate of 27.2% Second Quarter 2017 Earnings Call 22

23 SECOND QUARTER MEDICAL DEVICES In millions Net Sales Operating Profit $142 $149 $29 $41 20% 27% Q Q Net sales increased 5%, aided by Corpak sales Organic volume increased 3% IV Infusion volume shifted to 4 th quarter Q Q Operating profit increased 40% Higher volumes, manufacturing efficiencies and lower SG&A expense drove performance Second Quarter 2017 Earnings Call 23

24 SECOND QUARTER S&IP In millions Net Sales Operating Profit $257 $247 $25 10% $15 6% Q Q Year-to-date ahead of plan Net sales decreased 4% Volume growth in Exam Gloves was offset by Facial Protection and Exam Gloves sold to K-C Lower selling prices concentrated in Exam Gloves Q Q Performance impacted by anticipated higher nitrile costs and lower selling price Partially offset by manufacturing efficiencies and favorable exchange rates Second Quarter 2017 Earnings Call 24

25 BALANCE SHEET AND CASH FLOW Ended the quarter with $155 million of cash Generated $13 million of free cash flow Project full-year free cash flow of $100 million Second Quarter 2017 Earnings Call 25

26 2017 OUTLOOK Raising adjusted diluted EPS outlook to $1.85 to $2.05 Lowering commodity inflation expectation to $5 to $10 million Factors offsetting commodity benefit: - Foreign currency headwind - Anniversary manufacturing efficiency projects - Relocating some distribution centers - Accelerating R&D investment Other key planning assumptions remain unchanged Second Quarter 2017 Earnings Call 26

27 SUMMARY Well positioned to deliver our plan and fuel growth pipeline Increased guidance Firepower to accelerate transformation into leading Medical Devices company Second Quarter 2017 Earnings Call 27

28 Q&A

29 APPENDICES

30 2017 OUTLOOK SUMMARY February August Adjusted diluted EPS $1.70 to $2.00 $1.85 to $2.05 Net sales 0% to 2% 0% to 2% Medical Devices Includes 3% growth attributed to CORPAK 7% to 9% 7% to 9% S&IP, excluding sales to Kimberly-Clark Contemplates 2% to 4% lower selling prices 0% to -2% 0% to -2% S&IP sales to Kimberly-Clark $40M to $45M $40M to $45M Corporate sales $10M to $15M $10M to $15M FX translation impact on net sales 0% to -2% 0% to -2% Commodity inflation $10M to $20M $5M to $10M Research & Development $40M to $45M $40M to $45M Adjusted effective tax rate 32% to 34% 32% to 34% Note: Guidance updates denoted in bold green text. Second Quarter 2017 Earnings Call 30

31 NON-GAAP RECONCILIATIONS In millions Gross Profit Operating Profit Three Months Ended Six Months Ended Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, As reported $ $ $ $ $ 29.2 $ 17.6 $ 55.5 $ 50.7 Spin-related transition charges (1.7) 0.1 (1.6) 0.1 (1.5) 2.3 (0.8) 3.9 Acquisition-related charges Litigation and legal Intangibles amortization As adjusted non-gaap $ $ $ $ $ 40.4 $ 41.2 $ 82.5 $ 85.8 Second Quarter 2017 Earnings Call 31

32 NON-GAAP RECONCILIATIONS In millions Income before taxes Income tax provision Three Months Ended Six Months Ended Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, As reported $ 21.9 $ 9.4 $ 41.0 $ 34.7 $ (4.8) $ (2.9) $ (11.1) $ (14.0) Effective tax rate, as reported 21.9% 30.9% 27.1% 40.3% Spin-related transition charges (1.5) 2.3 (0.8) (1.0) 0.3 (1.6) Acquisition-related charges (0.6) (3.5) (1.2) (3.9) Litigation and legal (2.2) (2.4) (5.2) (3.8) Intangibles amortization (2.0) (1.9) (4.1) (3.9) Regulatory tax changes 3.7 As adjusted non-gaap $ 33.1 $ 33.0 $ 68.0 $ 69.8 $ (9.0) $ (11.7) $ (21.3) $ (23.5) Effective tax rate, as adjusted 27.2% 35.5% 31.3% 33.7% Second Quarter 2017 Earnings Call 32

33 NON-GAAP RECONCILIATIONS In millions, except per share amounts Net Income Three Months Ended Six Months Ended June 30, June 30, As reported $ 17.1 $ 6.5 $ 29.9 $ 20.7 Diluted EPS, as reported $ 0.36 $ 0.14 $ 0.63 $ 0.44 Spin-related transition charges (0.9) 1.3 (0.5) 2.3 Acquisition-related charges Litigation and legal Intangibles amortization Thailand statutory tax rate change 3.7 As adjusted non-gaap $ 24.1 $ 21.3 $ 46.7 $ 46.3 Diluted EPS, as adjusted $ 0.51 $ 0.45 $ 0.99 $ 0.99 Second Quarter 2017 Earnings Call 33

34 NON-GAAP RECONCILIATIONS In millions EBITDA Three Months Ended Six Months Ended June 30, June 30, EBITDA, as reported $ 45.4 $ 33.8 $ 87.9 $ 82.5 Spin-related transition charges (1.5) 2.3 (0.8) 3.9 Acquisition-related charges Litigation and legal Adjusted EBITDA $ 51.2 $ 51.5 $ $ Second Quarter 2017 Earnings Call 34

35 NON-GAAP RECONCILIATIONS In millions, except per share amounts Free Cash Flow Three Months Ended Six Months Ended June 30, June 30, Cash provided by operating activities $ 19.7 $ 51.5 $ 56.7 $ 94.0 Capital expenditures (6.4) (6.1) (16.6) (14.1) Free Cash Flow $ 13.3 $ 45.4 $ 40.1 $ 79.9 Estimated Range Adjusted diluted earnings per share $ 1.85 to $ 2.05 Amortization (0.28) to (0.28) Spin-related transition expenses 0.01 to 0.01 Acquisition related charges (0.09) to (0.07) Other (0.38) to (0.28) Diluted earnings per share (GAAP) $ 1.11 to $ 1.43 Second Quarter 2017 Earnings Call 35