Investor Presentation. April 2015

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1 Investor Presentation April 2015

2 Factors affecting future performance Forward-Looking Statements The statements in this presentation that relate to guidance, pro forma presentations, future plans, goals, business opportunities, events or performance are forward-looking statements that involve risks and uncertainties, including risks associated with business and economic conditions, failure to achieve expected benefits of an acquisition, failure to comply with Food and Drug Administration regulations, customer and/or supplier contract cancellations, manufacturing risks, competitive factors, ability to successfully introduce new products, uncertainties pertaining to customer orders, demand for products and services, growth and development of markets for the Company's products and services, and other risks identified in our filings made with the Securities and Exchange Commission. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forwardlooking statements, which speak only as of the date of this presentation. The Company disclaims any obligation to update these forward-looking statements as a result of developments occurring after the date of this presentation. Readers are encouraged to refer to the risk disclosures described in the Company s Form 10-K for the year ended December 31, 2014 and subsequent filings with the SEC, as applicable. Please see Safe Harbor and Forward-Looking Information in the Appendix to this presentation for more information. Non-GAAP Measures In this presentation, we present the non-gaap financial measures of Adjusted EBITDA, free cash flow and net debt. Please see Use of Non-GAAP Financial Measures and the subsequent slides in the Appendix to this presentation for the reasons we use these measures, a reconciliation of these measures to the most directly comparable GAAP measures and other information relating to these measures. The Company neither updates nor confirms any guidance regarding the future operating results of the Company which may have been given prior to this presentation. 2 and use of Non-GAAP financial measures

3 We are a leading supplier Leading provider of precision laser, medical and motion control technology Canadian company founded in 1968, with U.S. Headquarters in Massachusetts ~$365M in annual revenue and ~$56M in annual Adjusted EBITDA* Serving global addressable market of ~$2 billion, growing 5-7% per year Approximately 1,400 employees for continuing operations Trade on NASDAQ (GSIG) Leading Technology Franchises Highly Capable Team Increased Medical Presence Global Presence and Reach Operational Excellence 3 * Based on 2014 Fiscal Year Results of Medical and Advanced Industrial technologies

4 Our aspirations Strategic Vision A leading provider of precision photonic and motion technologies for OEM s in demanding markets delivering attractive shareholder returns through sustained profitable growth Strategic Priorities Accelerate revenue growth (organic and M&A) Expand our medical technology market presence Strive to become a world class operating company Performance Goals Reported growth low teens Organic growth mid to high single digits >20% Adj. EBITDA margins Long term shareholder returns above peer average 4 are clear and achievable

5 GSI has a strong global presence Global Presence Strong international presence over 60% of revenue from outside U.S. Production sites in the U.S., U.K. and China Serving ~3000 customers in over 50 countries Production Site Sales/Support Sales Breakdown Asia Seattle, WA Sacramento, CA San Jose, CA Los Angeles, CA Syracuse, NY Rugby, UK Poole, UK Taunton, UK Bedford, MA Netherlands Munich, Germany Beijing, PRC Suzhou, PRC Shenzhen, PRC Sri Lanka Tokyo, Japan 27% 39% U.S. Europe 31% 3% Other * Reflects data presented in GSI Group Inc K 5 with significant reach into the Pacific Rim

6 Medical end market sales GSI Profile Pro Forma Product Groups End Market Mix Medical Technologies Precision Motion Medical 35% 18% 42% 47% Laser Products 58% Advanced Industrial * Data presented represents last twelve months continuing operations, ending 4Q 2014; Both Medical and Medical Technologies include a Pro Forma revenue adjustment to include JADAK revenue for the full year are approaching half of our portfolio

7 Engineered motor technology Applimotion Acquisition Located near Sacramento, CA, ~60 employees, $13M deal value Highly engineered precision motors for advanced applications Mix of medical and industrial end markets Close technology fit with MicroE encoders customer overlap Expands capabilities in growing precision motions space improved sub-systems opportunities 7 expands our precision motion capabilities

8 Our Advanced Industrial business GSI Advanced Industrial Business Enabling Technologies Major Applications Laser Scanheads Galvonometers CO2 Lasers Laser Marking Laser Cutting Laser Welding Advanced Applications Fiber Lasers Precision Motors Optical Encoders Precision Technologies Robotics 3D Printing Measurement OEM Design-in Expertise Air Bearing Spindles Color Analyzers Wire Bonding Via Hole Drilling LCD Testing Robust Quality System 8 is focused on high performance applications

9 We serve a ~$1 billion Advanced Industrial market GSI Advanced Industrial Markets Advanced Industrial Market Size $1B CAGR 5-7% Segments Key Applications GSI Solutions Our Position Fine/micro Laser Materials Processing Marking/coding, 3D printing, converting, apparel processing CO 2 Laser sources Laser scanning Electronics Metrology Robotics and Factory Automation Via Hole Drilling FPD processing Semicon equipment Laser Scanning Spindles Precision Motion Coordinate measuring Optical Digitizers Precision motion Articulated arm Cartesian Reading & recognition Precision motion Machine Vision #1 or 2 #1 or 2 Top 5 Top 5 Growth Drivers New product expansion New laser applications Asia expansion New product expansion New product expansion Robotics market growth 9 with strong technology positions

10 Industrial markets Advanced Industrial Market Outlook PMI s mixed but still above 50 (growth) Continued sluggish, unpredictable demand in China Strong demand in marking/coding applications Good growth expected off smaller base in 3D printing Robotics/Automation and Metrology strong Via hole drilling applications sluggish low single digit growth Expect low to mid single digit growth in positioned for growth in 2015

11 Our Medical market presence is gaining scale GSI Medical Business Enabling Technologies Major Applications RFID Bar Code Scanning Machine Vision Precision Technologies Robotic Surgery Minimally Invasive Surgery Patient Monitoring Surgical Displays Software Wireless Networking OEM Design-in Expertise Glucose Monitoring Retinal Diagnostics Life Sciences Informatics Radiology Displays Thermal Printers Key Account Sales Force Laser Surgery Precision Motors Optical Encoders Laser Scanning Medical Quality System Drug Delivery Radiology Blood Analysis 11 and offers significant growth potential

12 We serve a ~$1 billion Medical market GSI Medical Markets Medical Market Size $1B CAGR 5-7% Segments Key Applications GSI Solutions Our Position Growth Drivers Ophthalmology Critical Care Lab Equipment Surgical Treatment OCT Cataract Surgery LASIK Surgery Laser scanning Ageing population Laser technology penetration Patient Monitoring EKG Defibrillation Auto ID Printers IVD Life Sciences Analytical Machine Vision Precision motion Laser Scanning Endoscopy Robotic Surgery Surgical Tools Visualization Precision motion Machine Vision #1 #1 #1 or 2 #1 or 2 New product expansion Market Growth Technology penetration of precision motion and machine vision Robotic surgery Connected OR Machine vision 12 with a broad array of capabilities

13 In 2015, we expect medical markets Medical Market Outlook Hospital capex rebounding in 2015 after 2014 softness Positive sentiment at major medical trade shows in late 2014 Expect positive demand outlook in 2015 Strong pipeline of design wins and new programs Increased interest in RFID and mobile/portable technologies Growth recovery in robotic surgery demand Medical Cross Selling begins to impact late 2015 Expect low teens reported growth in to experience improved equipment demand

14 We are working across GSI Medical Cross Selling Initiative Approach Team selling within OEM accounts Cross training on product offering Communication forums for sales teams Sharing insights into customer roadmaps and product requirements Holding Tech Days at major OEM s Broadening relationships with customer decision makers and influencers Joint presence at medical trade shows Impact Opportunities identified, tracked monthly and included in sales incentive plans 14 new potential projects added to revenue funnel 6 more opportunities being qualified Several million of annualized revenue potential identified more in process First revenue impact late to deepen our relationships with medical OEM s

15 We see significant benefit Productivity Programs Lean Conversion Strategic Sourcing Cost Base: ~$60M (labor, mfg. overhead, other) At least one major Kaizen event per month Focus on improved on-time delivery, yields and reduced cost of poor quality Savings programs and goals defined by site 2015 savings potential = $2 million+ Cost Base: ~$150M (material spend) Spend Analytics Tool in place Savings programs and goals defined by site and commodity Focused on standardizing contract terms 2015 savings potential = $4 million+ 15 from our commitment to Operational Excellence

16 Our 2015 revenue outlook Revenue Outlook 2015 Organic Growth: Mid Single Digit $317M $365M ~$380M $244M Outlook * Reflects guidance provided on March 4, incorporates acquisition contribution

17 Profitability trend Adjusted EBITDA Outlook $51M $56M ~$60M $42M Outlook *Adjusted EBITDA is a non-gaap measure. The reconciliation to our most comparable GAAP numbers is provided in the appendix. ** Reflects guidance provided on March 4, shows steady improvement

18 Significant cash generation $30M Free Cash Flow Outlook $40M * $39M ~$40M Outlook Net Debt ($16M) ~$11M ~$64M ~$45M *Excludes~$11.8M of net cash refunds related to U.S. IRS audit for the GSI Group s 2000 through 2008 tax years. *Free Cash Flow and Net Debt are non-gaap measures. The reconciliation to our most comparable GAAP numbers is provided in the appendix. Net Debt reflects prior full year guidance. The company is neither updating, nor confirming its prior guidance, but is simply using its prior guidance for comparison and illustrative purposes 18 provides capital for our growth strategy

19 19 Appendix

20 Use of Non-GAAP Financial Measures The non-gaap financial measures used in this presentation are non-gaap are Adjusted EBITDA, free cash flow, and net debt. The Company believes that the non-gaap financial measures provide useful and supplementary information to investors regarding the Company s financial performance. It is management s belief that these non-gaap financial measures would be particularly useful to investors because of the significant changes that have occurred outside of the Company s day-to-day business in accordance with the execution of the Company s strategy. This strategy includes streamlining the Company s existing operations through site and functional consolidations, strategic divestitures, expanding the Company s business through significant internal investments, and broadening the Company s product and service offerings through acquisition of innovative and complementary technologies and solutions. The financial impact of certain elements of these activities, particularly acquisitions, divestitures, and site and functional restructurings, are often large relative to the Company s overall financial performance, which can adversely affect the comparability of its operating results and investors ability to analyze the business from period to period. The Company s Adjusted EBITDA, a non-gaap financial measure, is used by management to evaluate operating performance, communicate financial results to the Board of Directors, benchmark results against historical performance and the performance of peers, and evaluate investment opportunities including acquisitions and divestitures. In addition, Adjusted EBITDA is used to determine bonus payments for senior management and employees. Accordingly, the Company believes that this non-gaap measure provides greater transparency and insight into management s method of analysis. Non-GAAP financial measures should not be considered as substitutes 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 the Company s reported results and, therefore, should not be relied upon as the sole financial measures to evaluate the Company s financial results. The non-gaap financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial measures. Investors are encouraged to review the reconciliation of these non-gaap financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this presentation. 20

21 Non-GAAP Free Cash Flow* & Net Debt Twelve Months Ended Twelve Months Ended Twelve Months Ended December 31, 2014 December 31, 2013 December 31, 2012 Cash provided by operating activities $43,990 $56,178 $33,088 Less: Capital expenditures 5,415 4,777 3,521 Free Cash Flow (a) $38,575 $51,401 $29,567 Debt ($115,000) ($71,500) ($50,000) Less: Cash and cash equivalents 51,146 60,980 65,788 Net Debt (b) $63,854 $10,520 ($15,788) (a) (b) Free cash flow, a non-gaap measure, is defined as cash provided by operating activities less capital expenditures. Net debt, a non-gaap measure, is defined as total debt less cash and cash equivalents. 21 * Free Cash Flow includes the cash flows of Continuing Operations

22 Non-GAAP Adjusted EBITDA Reconciliation Twelve Months Ended December 31, 2014 December 31, 2013 December 31, 2012 (in thousands of dollars) Income (loss) from continuing operations (GAAP) $ (16,806) $ 19,446 $ 20,262 Depreciation and amortization 23,797 19,570 12,458 Share-based compensation 4,329 5,442 4,534 Impairment of goodwill and intangible assets 41,442 Restructuring, acquisition and other costs 3,091 5,387 4,369 Acquisition fair value adjustments Net income attributable to noncontrolling interest (10) (22) (40) Adjusted EBITDA (Non-GAAP) $ 56,439 $ 50,788 $ 41,583 22