4Q 16 Earnings Call Presentation. August 29, 2016

Transcription

1 4Q 16 Earnings Call Presentation August 29, 2016

2 Agenda John Chiminski, President & Chief Executive Officer 4Q 16 Highlights Matt Walsh, Executive VP & Chief Financial Officer Business Update by Segment 4Q 16 and Full-Year Segment Financial Performance EBITDA & Adjusted EBITDA Adjusted Net Income and Adjusted EPS Capitalization Highlights FY 17 Financial Guidance Question & Answer Session 2

3 Disclaimer Statement Forward-Looking Statements This presentation contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by the use of statements that include phrases such as believe, expect, anticipate, intend, estimate, plan, project, foresee, likely, may, will, would or other words or phrases with similar meanings. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. Some of the factors that could cause actual results to differ include, but are not limited to, the following: general industry conditions and competition; product or other liability risk inherent in the design, development, manufacture and marketing of our offerings; inability to enhance our existing or introduce new technology or services in a timely manner; economic conditions, such as interest rate and currency exchange rate fluctuations; technological advances and patents attained by competitors; and our substantial debt and debt service requirements that restrict our operating and financial flexibility and impose significant interest and financial costs; or difficulty in integrating acquisitions into our existing business, thereby reducing or eliminating the anticipated benefits of the acquisition. For a more detailed discussion of these and other factors, see the information under the caption Risk Factors in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016 filed with the Securities and Exchange Commission. All forward-looking statements in this presentation speak only as of the date of this presentation or as of the date they are made, and we do not undertake to update any forward-looking statement as a result of new information or future events or developments unless and to the extent required by law. 3

4 Disclaimer Statement - Continued Non-GAAP Financial Measures Management measures operating performance based on consolidated earnings from continuing operations before interest expense, expense/ (benefit) for income taxes and depreciation and amortization and is adjusted for the income or loss attributable to non-controlling interest ( EBITDA from continuing operations ). EBITDA from continuing operations is not defined under U.S. GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP and is subject to important limitations. Management believes these non-gaap financial measures provide useful supplemental information for its investors evaluation of the Company s business performance and are useful for period-overperiod comparisons of the performance of the Company s business. We believe that the presentation of EBITDA from continuing operations enhances an investor s understanding of our financial performance. We believe this measure is a useful financial metric to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business and we use this measure for business planning purposes. In addition, given the significant investments that we have made in the past in property, plant and equipment, depreciation and amortization expenses represent a meaningful portion of our cost structure. We believe that EBITDA from continuing operations will provide investors with a useful tool for assessing the comparability between periods of our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures because it eliminates depreciation and amortization expense. We present EBITDA from continuing operations in order to provide supplemental information that we consider relevant for the readers of our financial statements, and such information is not meant to replace or supersede U.S. GAAP measures. Our definition of EBITDA from continuing operations may not be the same as similarly titled measures used by other companies. As changes in exchange rates are an important factor in understanding period-to-period comparisons, we believe the presentation of results on a constant currency basis in addition to reported results helps improve investors ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant currency information compares results between periods, as if exchange rates had remained constant period-over-period. We use results on a constant currency basis as one measure to evaluate our performance. In this release, we calculate constant currency by calculating current-year results using prior-year foreign currency exchange rates. We generally refer to such amounts calculated on a constant currency basis as excluding the impact of foreign exchange translation. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP. In addition, the Company evaluates the performance of its segments based on segment earnings before minority interest, other (income) expense, impairments, restructuring costs, interest expense, income tax (benefit)/expense, and depreciation and amortization ( Segment EBITDA ). 4

5 Disclaimer Statement - Continued Under our credit agreement, our ability to engage in certain activities such as incurring certain additional indebtedness, making certain investments and paying certain dividends is tied to ratios based on Adjusted EBITDA (which is defined as Consolidated EBITDA in the credit agreement). Adjusted EBITDA is based on the definitions in the our credit agreement, is not defined under U.S. GAAP, and is subject to important limitations. We have included the calculations of Adjusted EBITDA for the periods presented. Adjusted EBITDA is the covenant compliance measure used in certain covenants under our credit agreement, particularly those governing debt incurrence and restricted payments. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Management also measures operating performance based on Adjusted Net Income/(loss). Adjusted Net Income/(loss) is not defined under U.S. GAAP and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP and is subject to important limitations. For example, Adjusted Net Income does not reflect the impact on earnings resulting from certain non-recurring items. We believe that the presentation of Adjusted Net Income/(loss) enhances an investor s understanding of our financial performance. We believe this measure is a useful financial metric to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business and we use this measure for business planning purposes. We define Adjusted Net Income/(loss) as net earnings/(loss) adjusted for (1) earnings or loss of discontinued operations, net of tax, (2) amortization attributable to purchase accounting and (3) income or loss from noncontrolling interest in our majority-owned operations. We also make adjustments for other cash and non-cash items, partially offset by our estimate of the tax effect as a result of such cash and non-cash items. We believe that Adjusted Net Income/(loss) will provide investors with a useful tool for assessing the comparability between periods of our ability to generate cash from operations available to our stockholders. We present Adjusted Net Income/(loss) in order to provide supplemental information that we consider relevant for the readers of our financial statements and such information is not meant to replace or supersede U.S. GAAP measures. Our definition of Adjusted Net Income/(loss) may not be the same as similarly titled measures used by other companies. 5

6 Business Highlights Financial Highlights 4Q 16 revenue up 4% vs. PY as reported; 6% growth in constant currency FY 16 revenue growth of 6% vs. PY in constant currency Constant currency revenue growth across all three reporting in 4Q 16 and FY 16 4Q 16 Adjusted EBITDA of $141.8M, 7% growth vs. PY in constant currency 4Q 16 Adjusted Net Income of $64.9M; Adjusted EPS of $0.52 Operational Highlights Catalent's proprietary OptiShell softgel technology has been selected for use in OPKO Health's NDA for RAYALDEE and has been approved by the FDA Announced the launch of our FastChain service, for greater speed, flexibility and efficiency in the management and distribution of global clinical supplies $34M expansion of Madison biologics facility has begun (FY 17-FY 18) Well Positioned to Continue to Capitalize on Organic and Inorganic Growth Robust market for development, commercial and clinical trial outsourcing; growth in R&D spending continues to increase Consolidation in this dynamic industry and our customers needs for fewer, bigger, better suppliers will continue to be drivers of long-term growth 6

7 Segment Reporting Structure Changes Former Structure Catalent, Inc. (CTLT) Oral Technologies Medication Delivery Solutions Development & Clinical Services FY 16 Net Revenue $1,116M FY 16 Net Revenue $278M FY 16 Net Revenue $495M Softgel Technologies Blow-Fill-Seal Clinical Supply Services Modified Release Injectables Development & Analytical Services Biologics Note: Former segments revenue results are unaudited and approximate; excludes inter-segment revenue eliminations Revised Structure Catalent, Inc. (CTLT) Softgel Technologies Drug Delivery Solutions Clinical Supply Services FY 16 Net Revenue $775M Rx/Gx Consumer Health/VMS FY 16 Net Revenue $806M Modified Release Blow-Fill-Seal Injectables Biologics Development & Analytical Services FY 16 Net Revenue $308M Clinical Supply Services Note: excludes inter-segment revenue eliminations 7

8 Softgel Technologies Segment Update Solid performance during 4Q 16; 4% revenue growth and 5% EBITDA growth Strong consumer health sales within Latin America, Asia Pacific, and Europe; significant new business on-boarded during FY 16 Double-digit revenue and EBITDA growth within North America driven by our Rx portfolio and strong levels of development revenue Beinheim fully operational, ramp-up of activity continues to progress Three Months Ended As Reported Inc. / (Dec.) Constant Currency Inc. / (Dec.) (USD M) June 30, 2016 June 30, 2015 $ % $ % Softgel Technologies Net Revenue % 9.6 4% Segment EBITDA % 3.2 5% 8

9 Drug Delivery Solutions Segment Update Biologics: Recent investments continue to drive growth Strong 4Q 16 revenue and EBITDA growth within Madison driven by the completion of project milestones and larger commercial programs Redwood Bioscience s SMARTag technology continues to meet proof-of-concept milestones; customer interest remains strong DAS: Revenue growth from fee-for-service development work and analytical testing Blow-Fill-Seal: Strong revenue and EBITDA growth continues across the core business Market fundamentals remain attractive with a robust new product pipeline Modified Release: Q4 16 revenue aligned with prior year; fundamentals remain strong Unfavorable product mix drove modest EBITDA declines vs. PY; improvement vs. Q1-Q3 Sterile Injectables: Revenue growth vs. PY, but EBITDA down modestly driven by mix Three Months Ended As Reported Inc. / (Dec.) Constant Currency Inc. / (Dec.) (USD M) June 30, 2016 June 30, 2015 $ % $ % Drug Delivery Solutions Net Revenue % % Segment EBITDA % % 9

10 Clinical Supply Services Segment Update Strong 4Q 16 organic revenue growth driven by lower margin comparator sourcing Timing-related mix shift to lower margin services (storage/distribution vs. manufacturing/packaging) during the fourth quarter negatively impacts EBITDA Backlog of $292M as of June 30, 2016 increased 9% from the prior quarter; LTM book-tobill ratio of 1.2x; net new business wins of $106M increased 10% vs. prior year Solid full-year FY 16 financial performance with revenue up 10% vs. prior year; EBITDA impacted by operating efficiency initiatives which will yield future benefits Three Months Ended As Reported Inc. / (Dec.) Constant Currency Inc. / (Dec.) (USD M) June 30, 2016 June 30, 2015 $ % $ % Clinical Supply Services Net Revenue % 3.0 4% Segment EBITDA (1.7) (11%) (1.1) (7%) 10

11 4Q 16 by Business Segment 11

12 FY 16 by Business Segment 12

13 Operating Earnings to EBITDA Note: 4Q 15 income tax benefit was non-cash and driven by the partial release of an income tax valuation allowance 13

14 EBITDA Adjustments 14

15 Summary Adjusted Net Income and Adjusted EPS Notes: In response to a recent regulatory focus on Non-GAAP performance metrics, the Company has revised the calculation for Adjusted Net Income by replacing the cash tax effects in the periods presented with the income tax expense, discrete tax items and estimated tax effect of reconciling items. Prior year-end and interim quarterly periods presented have been re-cast to reflect the revised calculation. See detailed ANI adjustments in the Supplemental Information section 15

16 Capitalization and Capital Allocation (1) (2) Capitalization Term Loan covenant-light structure provides attractive cost of capital and maturity profile 1% principal amortization per year No significant maturities until 2021 Capital Allocation Capital expenditures of $140M in FY 16 FY 17 capex guidance $125M-$135M Ongoing capital allocation will be focused on: Capex to drive organic growth M&A to supplement organic growth Share repurchase Debt reduction 16

17 FY 17 Full-Year Guidance Notes: (1) Revised ANI calculation reflects change in treatment of taxes as discussed on slide 14 (2) Share count is fully diluted and represents the weighted average as of June 30 th Revenue, Adjusted EBITDA, Adjusted Net Income guidance ranges calculated on an as-reported rate basis FX continues to be a headwind in FY 17 due to USD strengthening vs. GBP as a result of the Brexit decision; ~12% of CTLT revenue generated in GBP No fundamental change to our long-term outlook 17

18 FY 17 Revenue and Adj. EBITDA Guidance Bridge Revenue Adj. EBITDA (USD M) Base Business Organic Growth ($12) ($16) Beinheim Impact $20 $40 FX Impact ($15) ($20) $75-$115 $1,920-$1,995 $1,848 $10 $25 ($4) ($7) $24-$34 $401 $430-$455 FY 16 Actuals FY 17 Guidance Base Business: Revenue $75M-$115M, Adjusted EBITDA $24M-$34M represents organic, same-store revenue and adjusted EBITDA growth across the business on a constant currency basis; aligns with our longterm outlook of 4-6% revenue growth and 6-8% adjusted EBITDA growth Beinheim Impact: Revenue $20M-$40M, Adjusted EBITDA $10M-$25M represents impact of bringing Beinheim softgel facility back online in April 2016 after being temporarily closed from November 2015 to April 2016; ramp-up is progressing with the site expected to nearly reach pre-suspension levels of production in 2H FY 17 FX impact: Revenue ($15M-$20M), Adjusted EBITDA ($4M-$7M) recent USD strengthening vs. GBP driven by Brexit vote; GBP weakened 8% from FY 16 average levels and guidance assumes rate of 1.30; GBP represents ~12% of CTLT total revenue and natural hedge is in place with all FX impact expected to be translational/reporting-based 18

19 Supplemental Information 19

20 Detailed Adjusted Net Income and Adjusted EPS 20

21 Historical Adjusted EBITDA Reconciliation 21

22 Reconciliation of Actual to Adjusted Results EBITDA adjustment Line Item As Reported Interest & Taxes Depreciation Amortization & Impairment For the Three Months Ended June 30, 2016 Restructuring & Equity Comp Acquisition & Integration FX Other Total Adjustments As Adjusted Cost of Sales (19.9) (19.9) Selling, general and administrative expenses 89.5 (15.2) (2.1) (5.8) (23.1) 66.4 Impairment charges and (gain)/loss on sale of assets 1.9 (1.9) (1.9) Restructuring and other 5.6 (5.6) (5.6) Interest expense, net 21.8 (21.8) (21.8) Other (income)/expense, net (8.5) (0.5) Income tax expense/(benefit) 19.4 (19.4) (19.4) EBITDA adjustment Line Item As Reported Interest & Taxes Depreciation Amortization & Impairment For the Twelve Months Ended June 30, 2016 Restructuring & Equity Comp Acquisition & Integration FX Other Total Adjustments As Adjusted Cost of Sales 1,260.5 (79.3) (79.3) 1,181.2 Selling, general and administrative expenses (61.3) (10.8) (18.2) (90.3) Impairment charges and (gain)/loss on sale of assets 2.7 (2.7) (2.7) Restructuring and other 9.0 (9.0) (9.0) Interest expense, net 88.5 (88.5) (88.5) Other (income)/expense, net (15.6) (1.8) Income tax expense/(benefit) 33.7 (33.7) (33.7) 22

23 Quarterly Revenue and EBITDA by New Reporting Segment; FY 15 and FY 16 23

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