Stifel Investor Conference

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Transcription:

Roper Technologies, Inc. Stifel Investor Conference June 15, 2017

Safe Harbor Statement The information provided in this presentation contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, among others, statements regarding operating results, the success of our internal operating plans, and the prospects for newly acquired businesses to be integrated and contribute to future growth, profit and cash flow expectations. Forward-looking statements A Diversified Growth Company may be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes" or "intends" and similar words and phrases. These statements reflect management's current beliefs and are not guarantees of future performance. They involve risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement. Such risks and uncertainties Click include our ability to integrate edit our acquisitions Master and realize expected title synergies. style We also face other general risks, including our ability to realize cost savings from our operating initiatives, general economic conditions, unfavorable changes in foreign exchange rates, difficulties associated with exports, risks associated with our international operations, difficulties in making and integrating acquisitions, risks associated with newly acquired businesses, increased product liability and insurance costs, increased warranty exposure, future competition, changes in the supply of, or price for, parts and components, environmental compliance costs and liabilities, risks and cost associated with asbestos related litigation and potential write-offs of our substantial intangible assets, and risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products. Important risks may be discussed in current and subsequent filings with the SEC. You should not place undue reliance on any forward- looking statements. These statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. We refer to certain non-gaap financial measures in this presentation. Reconciliations of these non-gaap financial measures to the most directly comparable GAAP financial measures can be found within this presentation. 2

Creating Shareholder Value Strategy Software and Engineered Products & Services for Diverse Niche Markets High Gross Margins Recurring Revenue Strong Operations Management Superior Operating Profits Excess Free Cash Flow Strategic Reinvestment of Cash R&D, Internal Growth, Acquisitions Results Significant Growth Platforms Leadership in Favorable Markets Diverse End Markets, Broad Customer Base Outstanding Cash Flow/Conversion Strong and Sustainable Margins High Incremental Operating Profit Cash Deployment Creates Value Internal Growth Initiatives Disciplined Acquisitions and Successful Integration Significant Growth; Compelling Cash Flow 3

Roper Strategy» Win in Niche Markets Through a Diverse Set of Businesses with Leading Market Positions» Focus on Proprietary and Differentiated Customer Solutions to Generate High Gross Margin Recurring Revenue Streams» Maintain an Asset-Light Business Model to Deliver Exceptional Cash Performance with Minimal Needs for Working Capital & Capital Expenditures» Ensure Business Leaders are Accountable for Results and Can Operate Within Our Nimble Governance System» Appreciate and Preserve What Works While Stimulating Progress and Change that Can Accelerate Growth and Drive Cash Returns» Effectively Deploy Excess Free Cash Flow in Acquisitions that Deliver Growth and High Cash Returns A Culture of Localized Innovation and Nimble Decision Making 4

Governance Process Enhances Growth and Drives Financial Discipline» Operating Reviews with Detailed Performance Analysis» Break-Even Analysis Drives Better Decision Making» Sales & Operating Leverage; Working Capital Efficiency» Incentives Tied to Continuous, Sustained Performance Improvements; Not Budget-Based» Product, Placement, Hit Rate Analysis» Cash Return on Investment Metrics Governance Process Drives Highly Scalable Business System 5

CRI Discipline Drives Cash Flow Cash Earnings Net Income + D&A Maintenance Cap-Ex Gross Investment Net Working Capital* + Net PP&E + A Diversified Growth Company ash eturn on Click to edit Master Ititle nvestment style Accumulated Depreciation» Common Metric throughout Roper Businesses» Focuses Businesses on Cash Flow Growth & Disciplined Asset Investment» Encourages Internal Growth Using Current or Reduced Assets» CRI is Highly Correlated to Market Valuation C R *Net Working Capital Excludes Cash, Short Term Debt and Taxes 6

Total Shareholder Return Comparison of Cumulative Total Shareholder Return Roper Technologies, Inc. S&P 500 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Note: Chart depicts $100 invested in IPO vs. S&P 500 A Proven Growth Strategy 7

Executing Our High Performance Model In $ Millions EBITDA $1,315 Operating Cash Flow* $1,001 $130 2003 2016 Net Working Capital / Sales 18% Asset Intensity Gross Fixed Assets / Sales 20% $71 2003 2016 Cash Return on Investment ~160% Compound Annual Shareholder Return (2003-2016) 9% 19% 11% S&P 500 ROP 2% ~30% 2003 2016 2003 2016 2003 2016 Compounding Cash Drives Shareholder Value Figures are Provided on an Adjusted Basis, See Appendix for Reconciliation from GAAP to Adjusted Results; Asset Intensity is Calculated Prior to the Dec. 2003 Neptune Acquisition, * Adjusted for Cash Taxes from Abel Sale 8

Q1 17 TTM Segment Performance In $ Millions $1,392 $1,380 A Diversified Growth Company $719 Revenue Click $517 to edit Master title style $513 $604 $154 $228 Energy Ind Tech RF & Software Medical 30% 32% 37% 44% Control Software Sensors Instrumentation Data Collection / Metering Technology Fluid Handling Instrumentation Electronic Tolling SaaS Solutions Software Applications RF Products Medical Software and Services Medical Products Life Sciences EBITDA* EBITDA* Margin * Excludes Corporate Expenses Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results. 9

Asset-Light Business Model Net Working Capital* as % of Q1 Annualized Net Sales 03/31/07 03/31/15 03/31/16 03/31/17 9.7% 18.6% (I) Inventory 5.7% 5.5% 4.4% (R) Receivables 17.3% 17.4% 16.0% 5.7% (860 Bps) 4.8% 11.7% (P) Payables & Accruals 11.3% 10.6% 11.5% 2.0% 14.6% (D) Deferred Revenue 5.9% 7.5% 11.8% Total (I+R-P-D) 5.7% 4.8% (2.9)% ($ Millions) Deferred Revenue $237 $275 $514 (2.9)% 2015 2016 2017 *Defined as Inventory + A/R + Unbilled Receivables A/P Accrued Liabilities Deferred Revenue; Sales and Working Capital Related to Acquisitions Completed in Each Quarter Removed from Calculation; Dividend accrual excluded from Payable & Accruals Enterprise Transformation Accelerates Ability to Compound Cash Notes: Percentages may not sum correctly due to rounding 10

10 Year Margin History Full Year Gross Margin Full Year EBITDA Margin +1,110 Bps 61.7% +990 Bps 34.6% 54.2% 28.6% 50.6% 24.7% 2006 2011 2016 2006 2011 2016 Margin Expansion Reflective of Roper s Transformation Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results. 11

Compelling Cash Conversion In $ Millions $1,200» Free Cash Flow Has Exceeded Net $1,000 GAAP Net Income Free Cash Flow* Income for 19 Consecutive Years $800» Expect Strong Cash Conversion to $600 Continue $400» ~$1.15 Billion of Operating Cash Flow Expected in 2017 $200 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Cumulative Free Cash Flow $1.0 Billion (5 years) $2.4 Billion (5 years) Cash Flow Consistently Greater Than Net Income $3.4 Billion (4 years) *Free Cash Flow = Operating Cash Flow Capital Expenditures - Capitalized Software Expenditures; 2016 Adjusted for Cash Taxes from Abel Sale (See Appendix for Reconciliation) 12

Investment Strategy Drives Long Term Shareholder Value Creation Components of Investment Strategy (Three Dials) Description 1 2 Cash Flow Acceleration Investment Ideas Cash Flows Accelerated with Additional Sources of Capital Invest for the Future. Allocate Capital For Acquisitions or Other Investments to Drive Future Growth. 3 Quality of Investment Ideas Improve the Overall Quality of the Enterprise and Enhance Profile for Future Cash Flow Performance Capital Allocation Strategy Key for Value Creation 13

Investment Strategy Drives Long Term Shareholder Value Creation Components of Investment Strategy (Three Dials) 1 2 3 Cash Flow Acceleration Investment Ideas Quality of Investment Ideas Description Cash Flows Accelerated with Additional Sources of Capital Invest for the Future. Allocate Capital For Acquisitions or Other Investments to Drive Future Growth. Improve the Overall Quality of the Enterprise and Enhance Profile for Future Cash Flow Performance Roper Dial Setting HIGH HIGH HIGH Roper Key Statistics 2007-2016 (10 Years) Oper. Cash Flow: $6.5B Acquisitions: $10.3B Acceleration: 140%+ Acquisitions: $10.3B Dividends: $ 0.6B Buybacks: Zero Cash Invested in Ideas: 90%+ 2006 CRI: 50% 2017 CRI: 200%+ 2006 Market Cap: $4B Current Market Cap: $22B+ Proven Strategy; Long Runway for Continued Success 14

Capital Allocation Strategy Focused on High Quality Ideas» We Acquire High CRI Businesses Deployed $8.6B in Acquisitions (2011-2016)» High Recurring Revenue» Asset-Light with Powerful Cash Flow Characteristics» Leaders in Niche Markets with Sustainable Competitive Advantages Medical Segment: Software and Services RF: Segment: Application Software» Management Teams Committed to Continued Growth and Building Platforms Other Bolt-ons Medical and RF Products Transformed Enterprise to Diversified Technology Company 15

Deltek and ConstructConnect» $3.4 Billion Deployed in Q4 16» Deltek is the Leading Global Provider of Software and Information Solutions for Project-Based Businesses» ConstructConnect is the Leading Provider of Cloud- Based Data, Collaboration & Automation Solutions to Commercial Construction» Favorable End Market Dynamics, Terrific Cash Characteristics Recent Software Acquisitions Meets All Acquisition Criteria Niche Market Leaders Deep Domain Expertise Multiple Growth Opportunities Excellent Management Teams High Recurring Revenue Strong Cash Flow Characteristics Negative Working Capital Software Businesses Well Positioned for Continued Growth 16

Roper Technologies Today»Diversified Technology Company Independent Businesses with Leadership Positions in Niche Markets Niche Companies Focused in Platform Areas 62% Gross Margin; 35% EBITDA Margin Asset Light Model; Negative Working Capital and Minimal Cap Ex Requirements 50% of EBITDA from Software and Network Businesses Greater than 50% of Revenue is Recurring»Powerful Cash Flow Engine Drives Capital Deployment Free Cash Flow: ~24% of Revenue Acquire Companies that Generate Excess Free Cash Flow for Future Capital Deployment Our Diverse Technology Businesses Provide Exceptional Investment Opportunities Compounding Cash to Drive Shareholder Value 17

Appendix 18

Reconciliations I (in $ thousands) TTM Q1 2017 Margin Reconciliation Industrial Technology Energy Systems & Controls A Diversified Growth Company Medical & Scientific Imaging RF Technology GAAP Revenue $718,794 $516,506 $1,378,834 $1,359,673 Add: Atlas / CliniSys Adj 0 0 809 0 Add: On Center / Aderant / ConstructConnect / Deltek Adj 0 0 0 32,731 Adjusted Revenue 718,794 516,506 1,379,643 1,392,404 GAAP Gross Profit 364,493 296,277 1,002,699 777,036 Add: Atlas Click / CliniSys / PCI Adj to edit Master 0 0 title style 980 0 Add: On Center / Aderant / ConstructConnect / Deltek Adj 0 0 0 32,731 Less: Deltek Prepaid Commissions Adj 0 0 0 (52) Adjusted Gross Profit 364,493 296,277 1,003,679 809,715 GAAP Operating Profit 209,305 135,656 482,885 372,685 Add: Atlas / CliniSys / PCI Adj 0 0 980 0 Add: On Center / Aderant / ConstructConnect / Deltek Adj 0 0 0 32,731 Less: Deltek Prepaid Commissions Adj 0 0 0 (1,908) Adjusted Operating Profit 209,305 135,656 483,865 403,508 Add Amortization 8,938 14,870 107,128 95,667 EBITA 218,243 150,526 590,993 499,175 Add Depreciation 9,293 3,777 12,523 14,044 EBITDA 227,536 154,303 603,516 513,219 EBITDA Margin 31.7% 29.9% 43.7% 36.9% * Excludes Corporate Expenses 19

Reconciliations II Full Year 2016 Reconciliation of GAAP to Adjusted; Revenue, Gross Profit, and EBITDA Adjustments (All Numbers are In Thousands) RF Segment A Diversified Growth Company Purchase Medical Segment Accounting PCI Medical Purchase Adjustment to Full Year 2016 Acquisition Accounting Debt Acquisition Related Acquired GAAP Related Inventory Adjustment to Extinguishment Expenses Deferred Step-up Charge Acquired Deferred Revenue and Click to edit Master Revenue Prepaid title style Commissions Full Year 2016 Adjusted Net Sales $3,789,925 - $1,884 $13,243 - - $3,805,052 Gross Profit $2,332,410 $257 $1,884 $13,240 - - $2,347,791 Operating Profit $1,054,563 $257 $1,884 $13,150 - $6,126 $1,075,980 Net Earnings $658,645 $167 $1,225 $8,548 $566 $3,982 $673,132 Taxes 282,007 90 659 4,603 305 2,144 289,808 Interest 111,559 - - - - - 111,559 Depreciation 37,299 - - - - - 37,299 Amortization 203,154 - - - - - 203,154 EBITDA $1,292,664 $257 $1,884 $13,150 $871 $6,126 $1,314,952 (1) For the purchase accounting adjustments, the company used a 35% tax rate as these adjustments are US-based items and 35% is the statutory tax rate in the United States. 20

Reconciliations III Cash Flow Reconciliation (in $ thousands) FY 2016 Operating Cash Flow $963,785 Add: Cash Paid for Taxes on Sale of ABEL 37,429 Adjusted Operating Cash Flow 1,001,214 Capital Expenditures (37,305) A Diversified Growth Company Capitalized Software Expenditures (2,801) Click to edit Master title style Free Cash Flow 961,108 21

Roper Technologies, Inc.