Q EARNINGS CALL May 1, :00 am ET

Transcription

1 Q EARNINGS CALL May 1, :00 am ET

2 Forward-Looking Statements This presentation contains or may contain 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. The company intends these forward-looking statements to be covered by the safe harbor provisions for such statements. Statements made in this presentation that relate to our future performance or future financial results or other future events (which may be identified by such terms as expect, estimate, anticipate, assume, believe, plan, intend, may, will, should, outlook, guidance, target, opportunity, potential or similar terms and variations or the negative thereof) are forward-looking statements, including the Company s expectations regarding the business environment and the Company s overall guidance regarding future performance and growth. These statements are based on our current beliefs and expectations and are subject to significant risks and uncertainties. Actual results may materially differ from the expectations expressed in or implied by these forward-looking statements. Factors that could cause the Company s actual results to differ materially include, but are not limited to: (1) global macroeconomic conditions and trends; (2) the behavior of financial markets, including fluctuations in foreign currencies, interest rates and turmoil in capital markets; (3) changes in regulatory controls regarding tariffs, duties, taxes and income tax rates; (4) the Company s ability to implement and refine its Vision 2022 strategic roadmap; (5) the Company s ability to successfully identify and complete acquisitions in line with its Vision 2022 strategic roadmap and effectively operate and integrate acquired businesses to realize the anticipated benefits of those acquisitions; (6) the Company s ability to realize expected cost savings and efficiencies from its performance improvement and other optimization initiatives; (7) the Company s ability to effectively compete in its markets, and to successfully develop new and competitive products that appeal to its customers; (8) changes in consumer preferences and demand for the Company s products or a decline in consumer confidence and spending; (9) the Company s ability to benefit from its investments in assets and human capital and the ability to complete projects successfully and on budget; (10) economic, regulatory and political risks associated with the Company s international operations, most notably Mexico and China; (11) volatility and increases in the price of raw materials, energy and transportation, and fluctuations in the quality and availability of raw materials and process aids; (12) the impact of a disruption in the Company s supply chain or its relationship with its suppliers; (13) the Company s ability to comply with, and the costs associated with compliance with, U.S. and foreign environmental protection laws and (14) the Company s ability to meet quality and regulatory standards in different jurisdictions in which it has operations or conducts business. We caution you to consider the important risks and other factors as set forth in the forward-looking statements section and in Item 1A Risk Factors in our most recent Annual Report on Form 10-K, as amended by subsequent reports on Forms 10-Q and 8-K. We do not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements. Regulation G: Adjusted Results The information presented herein regarding certain unaudited adjusted results does not conform to generally accepted accounting principles in the U.S. (U.S. GAAP). Innophos has included this non-gaap information to assist in understanding the operating performance of the company and its reporting segments. Please see reconciliations to the most directly comparable financial measure prescribed by U.S. GAAP in the appendix. Totals in this presentation may not foot due to rounding. Page 2

3 Agenda 1. Executive Overview 2. Financial Review 3. Outlook 4. Q&A Kim Ann Mink, Ph.D. Chairman, President and Chief Executive Officer Han Kieftenbeld SVP and Chief Financial Officer Page 3

4 Financial Highlights Achieved growth across all key financial metrics +24% TOTAL SALES +17% ADJUSTED EBITDA +3% ADJUSTED DILUTED EPS Revenue growth in both legacy and acquired businesses generated solid earnings ahead of expectations Top and bottom line growth from a combination of organic volume growth in both our legacy and acquired businesses Strong contributions from our acquisitions Notable progress with proactive pricing actions in our legacy business Food, Health and Nutrition (FHN) segment grew 39% in Q1, with FHN segment sales now 61% of total sales Page 4

5 Strategic Highlights Strong progress toward Vision 2022 strategy Accelerating organic growth via new stage-gate process Strategic value chain repositioning and manufacturing optimization to deliver estimated 10% EPS improvement OPERATIONAL EXCELLENCE Phase 2 progressing as planned. On track to achieve $13m run rate COMMERCIAL EXCELLENCE Pricing actions offsetting input cost increases STRATEGIC GROWTH Acquisition cost synergies on track to deliver $4m; confident in cross-selling opportunities Robust M&A pipeline to further build FHN platform and align Innophos with consumer mega-trends Page 5

6 New Stage-Gate Product Development Process Technology and science are core value drivers powered by 3-in-the-box Consumer Megatrends Innovation Pipeline Health and Wellness Energized Ageing Convenience Natural Ingredients Organic Clean Label Sustainability Indulgence Affordability Marketing Technology Sales Disciplined roadmap for new product development OBJECTIVES Profitable growth in attractive markets Accelerated decision making Project and resource prioritization Page 6

7 Strategic Value Chain Repositioning And Manufacturing Optimization Initiative Important step in diversifying supply base Improves cost structure Actions planned for 2018 are well underway OBJECTIVES Create supply agility Sustainably lower cost position Estimated adjusted diluted EPS improvement of 10% by the end of 2019 Page 7

8 Q Performance Highlights Q1 $m Variance Sales % Gross Profit Gross Margin % 21% -147 bps Net Income Adj. Net Income 12-3% Adj. EBITDA Adj. EBITDA% % 16% -92 bps Diluted EPS Adj. Diluted EPS % OCF (4) 6 61% FCF (14) 6 29% $12m Adjusted EBITDA ($ Millions) ($8m) A Vol/Mix Price Inp Cost Mfg SG&A FX 2018A Net Income flat YOY on a GAAP basis and up 3% on an adjusted basis Adjusted EBITDA of $32m up $5m YOY; margin of 16% down 92 bps YOY due to the dilution of lower margin acquisitions Sales improvement due to acquisitions and growth in legacy business which recorded higher volumes and selling prices SG&A and manufacturing costs both increased YOY due to the inclusion of acquisitions in the cost base OCF/FCF both uses of cash, which is typical for the first quarter; YOY comps significantly favorable Page 8

9 Q Sales Revenue And Gross Margin $250 $200 22% 22% 22% 17% 21% 25% 20% Sales Revenue Bridge Q1 YOY Q1 Sequential vs Q4 $m % $m % Volume/Mix 37 22% 9 5% Price 2 2% 3 2% $150 15% Variance 39 24% 12 6% $100 $ % 5% Quarterly Comments Sales Revenue up 24% YOY; 20% from acquisitions and 4% legacy business growth (2% volume, 2% selling price) $0 Q1 Q2 Q3 Q4 Q % Food, Health and Nutrition: up 37% from acquisitions and 2% in the legacy business (1% volume, 1% selling price) on stronger sales to the health market Industrial Specialties: flat with 3% higher selling price offsetting 3% lower volume Sales ($m) Gross Margin (% of Sales) Other sales up 41% on higher fertilizer market volume and 3% higher selling price Page 9

10 $15 $10 $5 $0 ($5) ($10) ($15) $40 $30 $20 $10 $0 Q Earnings % 17% Net Income (11) Adjusted EBITDA* 19% % Q1 Q2 Q3 Q4 Q1 16% 32 Q1 Q2 Q3 Q4 Q Adjustment ($m) Reported ($m) Adjusted EBITDA margin (% of Sales) 25% 20% 15% 10% 5% 0% Adj. EBITDA Bridge Q1 YOY Quarterly Comments Net income flat versus prior year quarter Adjusted EBITDA up $5m YOY. Margin of 16% down 92 bps due to dilution effect of lower margin acquisitions Volume/mix up significantly due to acquisitions and 2% volume growth in the legacy business Selling price increases offset higher input costs Q1 Sequential vs Q4 $m % $m % Volume/Mix 10 38% 5 18% Price 2 9% 3 13% Input costs (2) -8% (2) -9% Manufacturing (3) -13% 1 2% SG&A (3) -11% (1) -4% FX Variance 5 17% 5 20% Higher manufacturing/sg&a primarily due to acquisitions *Excl. $1.7m in Q1 2017, $1.8m in Q2 2017, $6.5m in Q3 2017, $5.9m in Q and $2.5m in Q Page 10

11 $12 0 $10 0 $80 $60 $40 $20 $0 Earnings Conference Call First Quarter 2018 May 1, % 20% 15% 10% 5% 0% $12 0 $10 0 $80 $60 $40 $20 $0 25% 20% 15% 10% 5% 0% Q Performance By Segment 31% 8% Q Sales $205m 61% Food, Health and Nutrition 19% 17% 18% 20% 19% Industrial Specialties 16% 21% 17% 14% 4% Food, Health and Nutrition Industrial Specialties Other Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Sales Revenue ($m) Adj. EBITDA % of Sales 7% Q1 Sales Bridge FHN IS Other Total 38% Q Sales $166m 55% % % % % Volume/Mix 35 38% (2) -3% 4 37% 37 22% Price 1 1% 2 3% --- 3% 2 2% % % % % YOY Variance 35 39% % 39 24% Page 11

12 Q Other Items Item Q Q Comment Net interest expense $3m $1m Effective tax rate 30% 28% Capital expenditures $9m $9m Dividends $9m $9m Up $2m due to higher debt levels and leverage related to 2017 acquisitions along with higher market interest rates Up YOY with 2018 rate higher than expected due to earnings mix; Q117 benefited from new accounting standard for share based comp Similar to the prior-year quarter with the majority of spending directed at strategic value chain investments $1.92/sh. annual dividend rate maintained Net Debt $304m $159m Net Debt / LTM Adjusted EBITDA 2.4x 1.3x Increase due to $151m spent on 2017 acquisitions Increase due to acquisitions completed in second half of 2017 Page 12

13 Q Earnings Per Share Diluted EPS (0.58) Q1 Q2 Q3 Q4 Q1 Earnings per share Q Diluted 0.55 Adjustments Adj. Diluted 0.59 YOY Variance Adj. Diluted 0.61 Adjustments Diluted 0.55 YOY Variance Breakdown (Adj. Diluted) Adjusted Diluted EPS* Volume/mix 0.53 Price Costs (0.44) FX --- Operational items 0.22 Q1 Q2 Q3 Q4 Q Diluted EPS ($ per share) Adjusted Diluted EPS ($ per share) 2018 Financing (0.08) Tax (0.04) Shares outstanding --- Other (0.08) Other items (0.20) *Excl. pre-tax costs of $0.9m in Q1 2017, $0.2m in Q2 2017, $5.7m in Q3 2017, $5.0m in Q and $1.5m in Q Also excludes $17.3m of tax expense related to tax reform in Q Page 13

14 Q Cash Delivery Cash from Operations ($ Millions) Q1 Cash Flow Bridge $m Variance Adj. EBITDA % Working Cap (30) (1) -2% Tax (3) 2 38% (11) (6) Q1 Q2 Q3 Q4 Q1 Free Cash Flow ($ Millions) Interest (3) (2) -136% Other % OCF (4) 6 61% Capex (9) (1) -10% FCF (14) 6 29% (19) Q Q2 Q3 Q4 (14) Q Quarterly Comments Seasonal use of cash in the first quarter was significantly better than prior year primarily due to strong adjusted EBITDA Lower tax payments offset higher interest payments Opening FCF (19) (14) Financing* (4) (19) (20) (21) 26 Closing *Includes cash spent on acquisition of businesses Page 14

15 2018 Outlook: Reiterating Full Year 2018 Guidance % TOTAL SALES % ADJUSTED EBITDA % ADJUSTED DILUTED EPS The operating environment continues to show cost inflation. Further price increase actions taken in specialty phosphates portfolio effective June 1st Revenues to grow 12% to 14% due to the annualized contributions from acquisitions, favorable growth in the specialty nutrition endmarkets, and stabilization in the legacy business Full year GAAP EPS is expected to more than double in Adjusted EPS and Adjusted EBITDA are expected to grow by 10% to 14% and 15% to 17%, respectively Free cash flow to be similar to prior year with capital cash outflow of approximately $45m to support the strategic value chain repositioning and manufacturing optimization programs Page 15

16 Transformation In Action Strategic Pillars activities provide focus and drive performance Strong financial performance in Q On track to deliver 2018 financial targets Clear strategic direction and continued execution of Vision 2022 Page 16

17 Q EARNINGS CALL May 1, :00 am ET Q&A Page 17

18 Non-GAAP Reconciliations Long Term Targets Innophos is not able to provide a reconciliation of its 2022 expectation for Adjusted EBITDA margin to GAAP net income due to the number of variables in the projected EBITDA margin for 2022 and because we are currently unable to quantify accurately certain amounts that would be required to be included in GAAP net income or the individual adjustments for such reconciliation. In addition, we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors. Additional Information Free cash flow is a supplemental financial measure that is not required by, or presented in accordance with, US GAAP. The Company believes free cash flow is helpful in analyzing the cash flow generating capability of the business and as a performance measure for purposes of presentation in this investor presentation. The Company defines free cash flow as net cash provided from operating activities plus net cash used for investing purposes. EBITDA, adjusted EBITDA, adjusted net income and adjusted diluted EPS are supplemental financial measures that are not required by, or presented in accordance with, US GAAP. The Company believes EBITDA and adjusted EBITDA are helpful in analyzing the cash flow generating capability of the business and as performance measures for purposes of presentation in this investor presentation. Net Working Capital and Operating Working Capital are supplemental financial measures that are not required by, or presented in accordance with, US GAAP. The Company believes net working capital and operating working capital are helpful in analyzing the effects on the cash flow generating capability of the business and as a performance measure for purposes of presentation in this release. The Company defines net working capital as total current assets less cash and cash equivalents less total current liabilities plus current portion of capital leases, and defines operating working capital as net working capital less taxes less interest. Page 18

19 Non-GAAP Reconciliations Page 19 Adjusted EBITDA Reconciliation to Net Income (Dollars in thousands) Three Months Ended March 31, Net Income $10,915 $10,923 Interest expense, net 2,904 1,353 Provision for income taxes 4,688 4,186 Depreciation & amortization 11,364 9,581 EBITDA 29,871 26,043 Adjustments Non-cash stock compensation Foreign exchange loss (gain) (196) (57) Severance/Restructuring expense (income) 980 1,000 M&A related costs Adjusted EBITDA $32,405 $27,703 Percent of Sales 15.8% 16.7% Adjusted Net Income Reconciliation to Net Income (Dollars in thousands, except EPS) Three Months Ended March 31, Net Income (loss) $10,915 $10,923 Pre-tax Adjustments Foreign exchange loss (gain) (196) (57) Severance/Restructuring expense (income) 980 1,000 M&A related costs Total Pre-tax Adjustments 1, Income tax effects on Adjustments Adjusted Net Income $11,990 $11,605 Adjusted Diluted Earnings Per Participating Share $0.61 $0.59

20 Non-GAAP Reconciliations (Dollars in thousands) Three Months Ended March 31, 2018 Three Months Ended March 31, 2017 FHN IS Other Total FHN IS Other Total EBITDA $18,992 $10,093 $786 $29,871 $15,624 $9,521 $898 $26,043 Non-cash stock compensation Foreign exchange loss (gain) (87) 0 (109) (196) (4) 0 (53) (57) Severance/Restructuring exp.(inc.) ,000 M&A related costs Adjusted EBITDA $20,815 $10,856 $734 $32,405 $16,561 $10,244 $898 $27,703 Page 20

21 Non-GAAP Reconciliations Cash From Operations Reconciliation to EBITDA (Dollars in thousands) Three Months Ended March 31, EBITDA $29,871 $26,043 Operating Working Capital (28,700) (28,770) Taxes paid (3,378) (5,425) Interest paid (3,081) (1,305) All other including non-cash stock compensation and changes in other 1,094 (1,222) long-term assets and liabilities Net cash provided from operations ($4,194) ($10,679) Cash From Operations Reconciliation to Adjusted EBITDA (Dollars in thousands) Three Months Ended March 31, Adjusted EBITDA $32,405 $27,703 Operating Working Capital (30,236) (29,713) Taxes paid (3,378) (5,425) Interest paid (3,081) (1,305) All other including changes in other long-term assets and liabilities 96 (1,939) Net cash provided from operations ($4,194) ($10,679) Free Cash Flow Reconciliation to Cash From Operations (Dollars in thousands) Three Months Ended March 31, Cash From Operations ($4,194) ($10,679) Capital Expenditures (9,399) (8,553) Free Cash Flow ($13,593) ($19,232) Page 21

22 ABOUT THE COMPANY Innophos (NASDAQ: IPHS) is a leading international producer of specialty ingredient solutions that deliver farreaching, versatile benefits for the food, health, nutrition and industrial markets. We leverage our expertise in the science and technology of blending and formulating phosphate, mineral and botanical based ingredients to help our customers offer products that are tasty, healthy, nutritious and economical. Headquartered in Cranbury, New Jersey, Innophos has manufacturing operations across the United States, in Canada, Mexico and China. For more information please visit CONTACT Investors: Mark Feuerbach, or investor.relations@innophos.com Media: Ryan Flaim, Sharon Merrill Associates, or iphs@investorrelations.com Page 22