JEFFERIES HEALTHCARE CONFERENCE

Transcription

1 JEFFERIES HEALTHCARE CONFERENCE MARK FROST, SENIOR VICE PRESIDENT AND CFO JUNE 9, 2016

2 Safe Harbor Any statements about future expectations, plans, and prospects for the Company, including statements containing the words believes, anticipates, plans, expects, and similar expressions, constitute forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including risks relating to product development and commercialization, limited demand for the Company s products, risks associated with competition, uncertainties associated with regulatory agency approvals, competitive pricing pressures, downturns in the economy, the risk of potential intellectual property litigation, acquisition related risks, and other factors discussed in our most recent quarterly or annual report filed with the Securities and Exchange Commission. In addition, the forward-looking statements included in this presentation represent the Company s views as of the date of this document. While the Company anticipates that subsequent events and developments will cause the Company s views to change, the Company specifically disclaims any obligation to update these forward-looking statements. These forwardlooking statements should not be relied upon as representing the Company s views as of any later date. 2

3 Use of Non-GAAP Financials This presentation includes non-gaap financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles and may be different from such non-gaap measures used by other companies. In addition, these non-gaap measures are not based on any comprehensive set of accounting rules or principles. Management uses non-gaap gross margin, non-gaap operating expenses, non-gaap operating income, non-gaap operating margin, non-gaap net income and non-gaap diluted earnings per share to evaluate the Company's operating performance against past periods and to budget and allocate resources in future periods. These non- GAAP measures also assist management in understanding and evaluating the underlying baseline operating results and trends in the Company s business. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material effect on our reported results and, therefore, should not be relied upon as the sole financial measures to evaluate our financial results. The non-gaap financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial measures. A reconciliation of GAAP to non-gaap financial measures can be found in the appendix to this presentation and our Third Quarter FY2016 press release issued June 1, 2016 available at our website 3

4 Innovations Creating Barriers to Entry Founded in 1967 Advancing image guidance technology for medical and security Global research, engineering, and operations 7 R&D and manufacturing locations worldwide Fiscal 2015 Highlights: $540 million Over 30% EPS CAGR Operating cash of $39 million, Free cash of $29 million 1,600 employees worldwide > 40% increase in revenue/employee 4

5 Our Technology Capabilities Medical CT Full Systems Urology & Surgery Security CT High performance, high reliability Threat detection Modular design CT Designed for reliability Mammo Selenium direct conversion detectors MRI High voltage power supplies High power amplifiers Pulsed RF power Critical Imaging Chain CT Data Management Systems Non-contact power Core Technologies Material Science Signal and image processing Precision A/D conversion Precision RF/Power Amplification Imaging & Guidance Real time Image guidance Min invasive procedure guidance Ultrasound GPU based design Synthetic Aperture Probes U/S probes that go inside body EMED & Anesthesia Intuitive User interface Telehealth Handheld 2D Transducer ASIC ultrasound 5

6 Sustaining Long Term Profitable Growth Growth Transform Stabilize Shed underperforming businesses Aligned business in 3-Pillars Invested in Shanghai operations Optimized manufacturing footprint Achieved double digit OM and rev. growth Shanghai fully operational Entered POC Ultrasound market Built and stabilized sales channels Full portfolio in checked baggage EDS Transformed to a market based company Launched full BK branded product line Launched exciting new handheld U/S Expanding U/S through partnerships Growing content in Medical Imaging First in applying CT to the Checkpoint New market for Rapid DNA developing forward 6

7 Portfolio Strategy for Growth Ultrasound Real-time Guidance Solutions Medical Imaging High Barriers in Critical Imaging Chain Security & Detection Expanding Detection Applications Go deep in core Urology / Surgery Accelerate Point of Care adoption Expand Healthcare Services Advance our new technologies Breakthrough reliability Increase content with OEMs Leverage common platforms Drive growth in emerging markets Drive share in checked baggage Position CT for checkpoint Accelerate RapidDNA analysis Leverage detection technologies 7

8 ULTRASOUND

9 Expanding Market Reach Global Ultrasound Market 2013, $5.8B Market Segments Addressable Market ~$5.8B Segment CAGR (thru 2018) $1.1 Other/Shared Other 18% Cardiology 19% $1.1 Cardiology 4-5% Rest of POC1 6% Anesthesia 3% OB/GYN 16% $0.9 OB/GYN 3-4% Growing Presence IR 3% 2 Radiology / General Imaging 30% $1.9 Radiology / General Imaging 1-2% 1 POC: Point of care 2 IR: Interventional Radiology Technology Partnerships Expanding Market Reach $0.6 $0.2 $0.1 Point of Care 7-8% Surgery 3-4% Urology 4-5% Source: Klein, InMedica 9

10 Positioned for Growth in Key Segments Urology Surgical Guidance POC Anesthesia/EMED General Imaging Innovating Point of Care Sonix One bk3000 bk5000 bk3500 Partnerships Sonic Window 10 *Analogic Patented and Trademarked Technology

11 Ultrasound Solutions for Extended Point of Care Assess kidney dialysis fistulas IV Placement Peripheral Inserted Central Catheter (PICC) Dialysis Patients (M) Worldwide Dialysis Patients CAGR 6% First shipments for use in dialysis centers occurred in Q3 FY16 Evaluation with major dialysis providers Gen 2 with auto vessel tracking achieved regulatory clearance in U.S., E.U. and Canada

12 MEDICAL IMAGING

13 Guidance in Medical Imaging Computed Tomography Magnetic Resonance Digital Mammography 13

14 Increasing Our Value Content in CT CT Imaging engine Image Reconfiguration New business growth opportunities with current & new OEMs Power & Data Management Detection Management Subsystem Data Acquisition Subsystem Historical base business with OEMs 14

15 Highly Ruggedized CT Platform for Emerging Markets Installed Base: June 2016 Heilongjiang Jilin Xinjiang Liaoning Gansu Inner Mongolia Beijing Qinghai Ningxia Shanxi Hebei Shandong Tibet Sichuan Shaanxi Hubei Henan Anhui Jiangsu Shanghai Guizhou Hunan Jiangxi Fujian Zhejiang ~ 100 installed Yunnan Guangxi Guangdong 15

16 Magnetic Resonance Power Sub-systems Enabled 3T wide bore systems Common platforms and modular design Design wins with new market entrants Gradient Amplifier RF Amplifier 16

17 Digital Mammography Detector Sub-Systems Analogic Enables Best Detection Superior Se Based Technology Premium 3D tomo performance Lower dose with best image quality Fastest Image acquisition US installed base of 2D is ~ 11,000 systems, more than 5000 are 7+ years Replacement cycle is moving to 3D 17

18 SECURITY AND DETECTION

19 Major Aviation Market Trends North America Steady Demand Europe and Middle East Increasing Momentum Asia-Pacific Major Hub First Adopters 1800 sockets (>90% CT) Significant US medium speed population past 10 year design life US extended EDS lifecycle to 15 yrsrecap continuing Canada deploying high speed EDS 2000 sockets (<15% CT) EU standard 3 being implemented - UK by Rest of EU by 2022 Middle East expanding hubs Alternative technologies getting some wins 2700 sockets (<5% CT) China and India growth markets Major hubs follow US/EU Souce: Market Reports, Customer and Analogic Estimates 19

20 Growing with winning partners Exclusive relationship for U.S. replacements Major wins outside the U.S. with XLB Major wins in UK Wins in Abu Dhabi and Santiago HI-SCAN XCT Medium Speed 550 & 720 (ES) bags/hour High Speed 1,200 bags/hour High Speed 1,800 bags/hour 20

21 CT positioned to win at the checkpoint CT technology can cut passenger wait times in half and potentially save US airports over $1 billion over 10 years Commercial trials in Europe validated a 2X operational improvement with over 1.3 million bags scanned while improving detection EU legislation supports deployment in 2017 with liquids and laptops in bags; TSA evaluating technology for deployment 21

22 Emerging Rapid DNA Opportunity Conventional DNA Analysis: Days to weeks process by highly trained personnel in accredited lab Human Analyst Profile Match Hours - Weeks Rapid DNA: DNA profile in 84 minutes by non-technical user in field environment FBI NDIS (National DNA Index System) approval received in March 2016, RapidDNA legislation still pending in Congress 22

23 FINANCIALS

24 Continued Strong Financial Performance $387 Revenue (millions) $550 $517 $518 $540 $474 $415 3% Operating Margin GAAP Non-GAAP* 7% 8% 5% 4% 12% 13% 10% 8% 8% 6% 8% 12% Earnings Per Share GAAP Non-GAAP* $4.05 $3.88 $3.60 $3.52 $3.42 $2.72 $2.66 $2.35 $2.48 $1.72 $1.42 $1.23 $0.81 $0.29 FY09 FY10 FY11 FY12 FY13 FY14 FY15-1% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY09 FY10 FY11 FY12 FY13 FY14 FY15 6% 9pts. >30% Revenue CAGR Non-GAAP Operating Margin expansion Earnings per share CAGR * Non-GAAP operating margin and EPS figures exclude certain charges; please refer to the non-gaap reconciliation table in the back of this presentation. 24

25 Segment Performance Medical Imaging Ultrasound Security Revenue $MM $251 $293 $302 $319 $296 $293 $113 $129 $151 $150 $152 $166 $51 $51 $64 $82 $69 $82 FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 FY14 FY15 FY10 FY11 FY12 FY13 FY14 FY15 Non-GAAP* Operating Margin 6% 8% 11% 14% 14% 16% FY10 FY11 FY12 FY13 FY14 FY15 Non-GAAP OM 6% 8% 11% 14% 14% 16% GAAP OM 4% 4% 6% 10% 10% 13% 6% 5% Non-GAAP operating margin/income figures exclude certain charges; please refer to the non-gaap reconciliation in the back of this presentation. 11% 4% 3% 2% FY10 FY11 FY12 FY13 FY14 FY15 6% 5% 11% 4% 3% 2% 5% 1% 7% -2% -4% -5% 16% 17% 20% 24% 11% 17% FY10 FY11 FY12 FY13 FY14 FY15 16% 17% 20% 24% 11% 17% 13% 14% 16% 21% 7% 13% 25

26 Strong Balance Sheet and Cash Flows Operating Cash Flow (millions) $74 Includes $12MM tax refund Free Cash Flow (millions) Capital Returned to Shareholders (Dividend/Buyback) $30 $40 $41 $39 $8 $43 $16 $30 $29 $20 $28 $13 $20 $19 FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15 $128MM 1 of Cash/Investments with no long term debt Consistent cash flows Capital allocation through ongoing investment, M&A and share re-purchase Additional $15 million repurchase program in place 1 As of April 30, As of July 31, 2015

27 FY16 Outlook: Strong Direct Ultrasound Drives Mix Security and Legacy OEM Probes stabilize at lower annual run-rates Medical Imaging business consistent; expect full year revenue flat to slightly down CT mix shifting to higher level content private label systems in China, MRI down slightly Mammography strengthening on new China customers Ultrasound total revenue up modestly includes drag from legacy OEM probes; direct up double-digits OEM legacy probes stabilizes at $12-14 million North America and Asia direct sales growing at double digits Sonic Window sales increasing and under evaluation for adoption by major dialysis providers bk3500 Point of Care and sales to our technology partner for general imaging accelerating growth Security and Detection stabilizes at lower annual run-rate, down approximately 30% for the year Q4 revenue bottoms out, FY17 growth outlook strengthening from International high speed tenders Stable revenue run rate for US TSA medium speed market Rapid DNA slowly restarting and in test for new international standard that covers US and OUS Given the short term headwinds in Security and OEM Legacy Probes, for the full year we expect total revenue down approximately 6% on a reported basis, with favorable mix and cost focus driving continued Non-GAAP operating margin expansion of approximately 1 pt. 27

28 Investment Thesis Our Technologies deliver Products with High Barriers to Entry Expanding Available Market Opportunities Growing Revenues with Operating Margin Expansion Strong Operating Leverage with Consistent Cash Generation 28

29 Appendix 29

30 Q3 16 Highlights Improved non-gaap operating margins on product mix Financial Highlights (Q3 16 vs. prior year) Revenue and Non-GAAP EPS* Revenue $128M, down 4% $180 $2.00 Gross Margin 43%, up 1 pt. Non-GAAP operating margin 12%, up 1.5pts. (GAAP operating margin 6%) Revenue ($MM) $160 $140 $120 $100 $118 $134 $134 $154 $128 $128 $115 $1.60 $1.20 $0.80 Non-GAAP EPS Non-GAAP EPS $0.80, down $0.27 $0.24 of discrete tax benefit in Q3 15 $0.12 of f/x on non-cash charges related to balance sheet items $80 $0.40 $60 $0.00 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Non-GAAP EPS $0.63 $1.08 $1.07 $1.28 $0.55 $1.18 $0.80 GAAP EPS $0.29 $0.78 $0.72 $0.86 $0.11 $(0.24) $0.40 GAAP EPS $0.40, down $0.32 $0.24 of discrete tax benefit in Q3 15 $0.09 of restructuring $0.12 of f/x on non-cash charges related to balance sheet items * Non-GAAP operating margin/income figures exclude certain charges; please refer to the non-gaap reconciliation table in the back of this presentation and in Analogic s Q3 FY 2016 earnings release available at 30

31 Q3 16 Segment Highlights Medical Imaging, up 1% MR strong, up on growth from China customers CT flat for the quarter. Shipped 100 th ruggedized CT unit to China Mammography down on strong comparison to last year and timing Ultrasound down 3%, impacted by expected legacy probe declines Direct ultrasound up 12% on strong growth in Europe and China OEM legacy probes stabilizing, expect revenues to annualize at $12-14 million Production start delays on bk3500 POC and for our technology partner for general imaging Initial shipments started for Sonic Window in dialysis Security and Detection was down 24% on delays in international high speed Stabilizes at new lower annual run-rate in FY17 Medium speed TSA shipments continued at lower rate International airport high speed shipments saw lower revenue with improved margins Limited Rapid DNA shipments during quarter Sonic Window 31

32 Operating Performance by Segment Revenue $M and Non-GAAP* Operating Margin Trend Medical Imaging Ultrasound Security & Detection FY15 FY16 FY15 FY16 FY15 FY16 20% 20% 20% 10% $67 $73 $72 $81 $65 $74 $73 10% 10% $38 $42 $39 $47 $37 $43 $38 0% 0% 0% $14 $18 $23 $26 $13 $11 $18-10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Non-GAAP OM 14% 15% 15% 18% 15% 21% 18% GAAP OM 11% 13% 12% 15% 10% 16% 14% -10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 0% 6% -4% 5% -4% 7% -5% -8% 0% -11% -2% -12% -23% -13% -10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 9% 18% 18% 18% 10% 9% 19% 4% 14% 14% 15% 1% -1% 14% Non-GAAP Operating Margin * Medical Imaging revenue up 1% due to growth in MR, partially offset by Mammography; non-gaap operating margin up 3 pts. in the quarter as compared to Q3 15 due to customer mix and improved cost controls. Ultrasound revenue direct up 12%, overall reported down 3% due to growth in Europe and China offset by expected OEM legacy Probes decline. Non-GAAP operating margin remained roughly flat. Security & Detection revenue decreased 24% from Q3 15 due to lower volume in medium speed and shift in high speed mix; non-gaap operating margin up 1pt. due to lower operating expenses. * Non-GAAP operating margin/income figures exclude certain charges; please refer to the non-gaap reconciliation table in the back of this presentation and in Analogic s Q23FY 2016 earnings release available at 32

33 Working Capital and Cash Flow Working Capital (Unaudited - in millions) Q3 FY16 Q2 FY16 Q4 FY15 Q3 FY15 Cash and Investments $ $ $ Accounts receivable Inventories Other Working Capital, Net (69.9) (63.8) (59.0) (52.5) Non-Cash Working Capital Net Working Capital $ $ $ Cash Flow Q3 FY16 Q2 FY16 Q4 FY15 Q3 FY15 (Unaudited - in millions) Operating Cash Flow from operations $ 16.0 $ $ 6.8 Capital Spending Free cash flow* Stock repurchased and dividends paid Cash flow after stock repurchase and dividends $ 5.1 $ (1.4) 5.0 $ (0.4) Accounts receivable flat sequentially on flat revenue Inventory up sequentially due to China transfer for MRI and Motion Operating cash flow of $16M, Free cash flow of $11M (Amounts may not foot due to rounding to millions) 33

34 Non-Gaap Reconciliation 34

35 NON-GAAP STATEM ENTS OF OPERATIONS RECONCILIATION (In thousands, except per share data) Twelve Months Ended July 31, 2009 July 31, 2010 July 31, 2011 July 31, 2012 July 31, 2013 July 31, 2014 July 31, 2015 GAAP Income From Operations Share-based compensation expense Tax refund related charges BK Medical distributor matter inquiry related costs Restructuring Acquisition related revenues and expenses -$4,496 $21,320 $20,736 $39,963 $45,375 $29,088 $40,599 3,968 5,791 9,638 13,396 11,601 11,512 10, , ,288 1,211 1,426 2,37 6, ,066-3,519 3,483 (35 3,782 2,931 2,377 3,183 8,310 8,773 9,1 Non-GAAP Income From Operations $9,873 $30,732 $39,817 $60,544 $70,016 $54,282 $62,725 Percentage of Total Net Revenue 2.6% 7.4% 8.4% 11.7% 12.7% 10.5% 11.6% GAAP Other Income (Expense), net $2,975 $149 $196 $4,236 ($1,278) ($50) $434 BK Medical distributor matter inquiry related costs Acquisition related revenues, expenses and loss Gain on sale of other investments and other (838) - - (2,500) - - Non-GAAP Other Income (Expense), net $2,137 $149 $196 $1,736 ($1,278) $434 $1,033 Percentage of Total Net Revenue 0.6% 0.0% 0.0% 0.3% -0.2% 0.1% 0.2% GAAP Net Income $3,705 $15,555 $17,833 $43,071 $31,121 $34,480 $33,481 Share-based compensation expense Acquisition related revenues, expenses and loss BK Medical distributor matter inquiry related costs Restructuring and voluntary retirement charges Tax refunds and related charges Gain on sale of other investments and other Gain on sale of discontinued operations 2,737 3,870 6,583 9,179 8,015 8,155 7,68 2,383 1,860 1,146 2,101 6,486 7,615 7, ,35 4, ,903-2,372 2,250 (22 (2,097) - - (8,285) - (8,764) (528) - - (1,603) (924) Non-GAAP Net Income $10,534 $21,723 $29,541 $45,293 $48,773 $44,642 $51,034 Percentage of Total Net Revenue 2.7% 5.2% 6.2% 8.8% 8.9% 8.6% 9.4% GAAP Diluted Net Income Per Share $0.29 $1.23 $1.42 $3.42 $2.48 $2.72 $2.66 Effect of non-gaap adjustments Non-GAAP Diluted Net Income Per Share $0.81 $1.72 $2.35 $3.60 $3.88 $3.52 $

36 NON-GAAP STATEM ENTS OF OPERATIONS RECONCILIATION (In thousands, except per share data) Twelve months Ended July 31, 2010 July 31, 2011 July 31, 2012 July 31, 2013 July 31, 2014 July 31, 2015 Medical Imaging GAAP Income From Operations $ 8,789 $ 12,680 $ 18,854 $ 31,864 $ 31,004 $ 37,905 Share-based compensation expense 3,791 6,162 7,836 7,064 6,551 4,910 Tax refund related charges - - 2, Restructuring 490 2,829-1,099 1,669 (213) Acquisition related expenses 2,931 2,931 2,931 3,540 3,016 3,011 Non-GAAP Income From Operations $ 16,001 $ 24,602 $ 31,819 $ 43,567 $ 42,240 $ 45,612 Percentage of Total Net Revenue 6% 8% 11% 14% 14% 16% Ultrasound GAAP Income (Loss) From Operations $ 6,093 $ 1,081 $ 10,786 $ (3,735) $ (6,785) $ (7,874) Share-based compensation expense 500 2,078 3,575 2,408 2,795 3,190 BK Distributor matter inquiry related costs 1,288 1,210 1,426 2,377 Restructuring - 3,668-2,209 1,357 (79) Acquisition related expenses - (554) 252 4,609 5,732 5,954 Non-GAAP Income From Operations $ 6,593 $ 6,273 $ 15,901 $ 6,701 $ 4,525 $ 3,571 Percentage of Total Net Revenue 6% 5% 11% 4% 3% 2% Security GAAP Income From Operations $ 6,438 $ 6,975 $ 10,323 $ 17,246 $ 4,869 $ 10,568 Share-based compensation expense 1,500 1,398 1,985 2,129 2,166 2,839 Tax refund related charges Restructuring (64) Acquisition related expenses Non-GAAP Income From Operations $ 8,138 $ 8,942 $ 12,824 $ 19,748 $ 7,517 $ 13,542 Percentage of Total Net Revenue 16% 17% 20% 24% 11% 17% Analogic GAAP Income From Operations $ 21,320 $ 20,736 $ 39,963 $ 45,375 $ 29,088 $ 40,598 Share-based compensation expense 5,791 9,638 13,396 11,601 11,512 10,939 BK distributor matter inquiry related costs - - 1,288 1,211 1,426 2,378 Tax refunds and related charges - - 2, Restructuring 690 7,066-3,519 3,483 (356) Acquisition related gains and expenses 2,931 2,377 3,183 8,310 8,773 9,164 Non-GAAP Income From Operations $ 30,732 $ 39,817 $ 60,544 $ 70,016 $ 54,282 $ 62,724 Percentage of Total Net Revenue 7% 8% 12% 13% 10% 12% 36