Analogic Corporation Analyst Day. October 14, 2010

Transcription

1 Analogic Corporation Analyst Day October 14, 2010

2 Welcome Mark Namaroff Director of Investor Relations 2

3 Agenda Time Topic Presenter 10:00 Welcome Mark Namaroff 10:00 10:15 Analogic Business Strategy Jim Green 10:15 11:00 Ultrasound Business Michael Brock / Matt Theiler 11:00 11:30 Role of Ultrasound in Peripheral Nerve Blocks Dr. Ralf Gebhard 11:30 11:45 Break All 11:45 12:30 Medical Imaging Business (MR, CT, DM) Mervat Faltas 12:30 12:50 Security Technology Business Eric Zanin 12:50 1:00 Financial Review and Objectives Michael Levitz 1:00 1:30 Closing Comments and Wrap-up Q&A Jim Green et al. 1:30 2:15 Lunch Break and Equipment Showcase All 2:15 3:00 Facility Tour and Ultrasound Demo All 3

4 Safe Harbor Statement Any statements about future expectations, plans, and prospects for the Company, including statements containing the words believes, anticipates, plans, expects, and similar expressions, constitute forward-looking 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, and other factors discussed in our most recent quarterly 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 forwardlooking statements. These forward-looking statements should not be relied upon as representing the Company s views as of any later date. 4

5 Use of Adjusted (Non-GAAP) Financials This presentation includes adjusted (non-gaap) financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles and may be different from such adjusted measures used by other companies. In addition, these adjusted measures are not based on any comprehensive set of accounting rules or principles. Management uses adjusted gross margin, adjusted operating expenses, adjusted operating margin, adjusted income before tax, adjusted net income and adjusted diluted earnings per share to evaluate the Company's operating performance against past periods and to budget and allocate resources in future periods. These adjusted measures also assist management in understanding and evaluating the underlying baseline operating results and trends in the Company s business. Adjusted 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 adjusted financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial measures. A reconciliation of GAAP to Adjusted, non-gaap financial measures can be found in our Fourth Quarter FY2010 press release issued September 21, 2010 available at our website 5

6 Analogic Business Strategy Jim Green President and CEO 6

7 Innovating Health and Security Technology FY2010 Operating Segments Analogic (NASDAQ: ALOG) S&P SmallCap 600 Index Russell 2000 Index Medical Imaging 64% 21% 13% Ultrasound 2% Security Technology Founded 1967 Revenues (FY 2010) $424 million Employees 1,400 worldwide Technical Staff over 400 engineers and scientists 7

8 Strong Technology Foundation Medical Security Markets/ Customers Hospitals / Clinics Original Equipment Manufacturers Airports/ TSA Description copy here. Description copy here. Applications Description copy here. Description copy here. Description copy here. Description copy here. Description copy here. Description copy Ultrasound here. Description copy here. Description copy here. Description copy here. Description CT copy here. MRI Description copy here. Description copy here. Description copy here. Description copy here. Description copy Description copy here. Description here. Description Mammography copy here. Security copy here. Innovative Technologies Precision Signal & Image Processing 8

9 Growing Global Presence Montreal, Canada Design and manufacturing for Selenium detectors 21% Copenhagen, Denmark Ultrasound Design Center 56% State College, PA Design and manufacturing for Ultrasound transducers 9% 12% HQ Boston (Area), MA Design, automated manufacturing Medical Imaging, Aviation Security Shanghai, China Design and manufacturing Design / Manufacturing Centers Direct Sales Offices 9

10 Strong Global Customer Base ORIGINAL EQUIPMENT MANUFACTURERS HOSPITALS AND CLINICS 10

11 Key Business Drivers New Products for Adjacent, Higher-Growth Markets Grow Direct Sales Channel Expand Presence within Large OEM Customers Conversion to 2D/3D Digital Mammography European Transition to CT EDS Replacement Cycle 11

12 Demonstrated Progress Toward Financial Goals FY2010 vs FY2009 * Adjusted figure excludes certain charges; please refer to the non-gaap reconciliation table in Analogic s Q4 FY 2010 earnings release available at 12

13 Ultrasound Business Michael Brock, President BK Medical Matthew Theiler, VP Global Sales and Service 13

14 Ultrasound Business Positioned for Success 30 years in ultrasound market Undisputed market leader in Urology and Surgery under BK Medical brand Strong, innovative, design award winning product portfolio Rapidly expanding direct sales force in major markets Gaining market share in core segments Margin expansion program in progress 14

15 Ultrasound Financial Performance Annual Revenues (million) $93 CAGR (07-10)= 4% $90 $90 Non-GAAP Operating Margin* 6.6% 6.0% $87 $81 $81 $84 $83 2.7% 0% FY07 FY08 FY09 FY10 Constant 2010 currencies Actual currencies FY07 FY08 FY09 FY10 Significant investment in new Flex Focus platform * Please refer to the non-gaap reconciliation table in the appendix and Analogic s Q4 FY 2010 earnings release available at 15

16 Compact Segment Outgrowing Overall Market Total Ultrasound Market of $5B (2009) Compact 16% Compact Stationary/Cart based 84% Cart based 0% 5% 10% 15% Size Growth ( 09-14) Source: InMedica 2010, Internal Estimates 16

17 New Segments Driving Overall Growth Total Ultrasound Market (Units) Anesthesia Emergency Urology Surgery Other OB/GYN 17% Cardiology 15% Radiology 45% Radiology Cardiology OB/GYN Surgery Urology Emergency Anesthesia All others 0% 5% 10% 15% Size (2009) Growth Rate ( 09-14) Source: InMedica 2010, Internal Estimates 17

18 Market Growth Driven by Emerging Markets Total Ultrasound Market of $5B (2009) ROW 22% Japan 7% China 13% U.S. 22% Europe 32% U.S. Europe China Japan ROW Total 0% 5% 10% 15% Size (2009) Growth ( 09-14) Source: InMedica 2010, Internal Estimates 18

19 Leader in Urology Ultrasound Description Diagnosis and treatment of prostate cancer Kidney, bladder, testis Market size: $125M, CAGR of 4-6% Drivers Prostate cancer #1 cancer for men Increasing Ultrasound Imaging capabilities Position Global market leader Significant local market share Growing global share with Flex Focus Source: InMedica 2010, Internal estimates 19

20 Leader in Intraoperative Ultrasound Surgery Description Laparoscopic, open surgery, colorectal, breast, neurology Addressed market size: $130M, CAGR of 6-8% Drivers Operating room workflow enhancement Laparoscopic procedure Robotic surgery Position Global market leader Significant local market share Flex Focus 700 Surgery fueling overall market growth and enabling new subsegments Source: InMedica 2010, Internal estimates 20

21 Ultrasound Business Strategy Leverage Flex Focus Platform Margin Expansion Expand the Channel Entry into New Market Segments 21

22 Expanding Market Share with Flex Focus 700 in Surgery Leverage Flex Focus Platform Flex Focus 700 for image guided surgery Designed for surgeons by surgeons Dedicated mobile ultrasound system for the operating room High-resolution imaging on 19" screen Easy user interface via touch screen, touch pad, or patentpending sterile remote 22

23 Price Flex Focus Adapts to Compact Market Leverage Flex Focus Platform Addressing multiple price-points and multiple markets with one platform Versatile options for all versions Cart, wall mount, or table top 4-hour battery Carrying case Segment specific versions Special features Specialized transducers Flex Focus 200 Flex Focus 400 Flex Focus 700 Performance/Market 23

24 Transducers Are Key to Success Leverage Flex Focus Platform Image quality strongly driven by transducer design Transducer ergonomics driving sales World-leading in-house competencies Customer driven innovative transducer design Control of entire value chain 24

25 Leaning Cost Structure Margin Expansion Focus on cost Consolidating manufacturing Initiating Shanghai manufacturing Significant cost reductions on key products Leverage overall infrastructure for increasing volume 25

26 Significantly Growing Direct Sales Force Expand the Channel Deeper penetration in Urology and Surgery in underserved markets Enable penetration into new segments in all markets Further leverage fixed-cost infrastructure Sales Organization Ramp-Up (# of Sales Reps Beginning of Year) Europe Direct North America Emerging Market Managers FY13 FY12 FY11 FY10 26

27 Compact Market Is Leading the Growth Entry into New Market Segments Ultrasound is growing rapidly in point of care Ultrasound now travels in point of care, typically on a cart Cost, image quality, ease of use, and portability are key Flex Focus meets the needs of the compact users with real advantages Image resolution and size More robust feature set Portability within the hospital 27

28 Enabling Compact Segment with Flex Focus Entry into New Market Segments Flex Focus offers portability without the compromises of competing compact systems Flex Focus offers high-precision image quality at depth 28

29 Anesthesia Market Represents New Opportunity Description Image guidance for nerve blocks in regional anesthesia Market size: $90M, CAGR of 10-15% Drivers Ultrasound becoming more widely deployed for nerve blocks Improvements in efficiency and patient outcomes Position New market entrant with significant upside Flex Focus 400 Anesthesia launched in direct and distributor markets Sales training and marketing investments Source: InMedica 2010, Internal estimates 29

30 Competitive Advantage in Anesthesia Entry into New Market Segments Launched in March 2010 Unique battery solution introduced this quarter Activities to drive market awareness underway Flex Focus is most likely the most powerful system for regional anesthesia currently available in the market, Physician at luminary site 30

31 Road Is Paved for Strong Profitable Growth Investment in sales channel expansion Award-winning Flex Focus platform Entry into high-growth adjacencies Leaning of business is progressing to plan 31

32 Ultrasound in Anesthesia Dr. Ralf Gebhard Professor of Anesthesiology University of Miami Miller School of Medicine 32

33 33 Q&A and Break

34 Medical Imaging Mervat Faltas Senior Vice President and GM, Medical Imaging 34

35 Medical Imaging Business Leading provider of CT, MRI, and Digital Mammography subsystems Leading enabler of major OEMs Patent-protected technology Operations in North America and China Advanced technology solutions Advanced manufacturing & highly reliable products enabling robust 35

36 Leading Provider to Major Medical OEMs Computed Tomography (CT) Magnetic Resonance Imaging (MRI) Digital Mammography Inside half the installed CTs worldwide Only independent supplier of Data Acquisition Systems. Market share leader in precision solid state amplifier technologies Only independent supplier of Direct Conversion Digital Mammography Detectors Gantry Detector/ DAS / DMS RF Amplifiers Gradient Amplifiers Large FFDM Detectors Small FFDM Detectors 36

37 Medical Imaging Financial Performance Revenue (dollars in millions) $260 $255 $274 Non-GAAP Operating Margin* 9.2% $ % 7.3% 1.8% FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 Revenue growth driven by increased demand in emerging markets Non-GAAP operating margins driven by operational efficiencies * Adjusted figure excludes certain charges; please refer to the non-gaap reconciliation table in Analogic s Q4 FY 2010 earnings release available at 37

38 Medical Imaging Market Growing ~ 2-4% CAGR Global Medical Imaging Market ($B) $25.0 $20.0 $ 21.2B $1.6 CAGR = 2-4% $23.4B $1.6 $2.3 Nuclear Medicine Cardiovascular X-ray $2.1 $5.5 Ultrasound $15.0 $5.0 $10.0 $4.9 $5.4 General X-ray Mammo CAGR 3-5% $5.0 $3.8 $4.2 MRI CAGR 2-4% $- $3.8 $ CT CAGR 3-5% Source: Customers, Analogic Internal data 38

39 Emerging Markets Driving Growth Globally Latin America Medical Imaging Markets India Growth Outlook Other Emerging North America North America 0-2% Greater China Other Mature Markets (incl. Japan) Western Europe Mature International Emerging Markets 0-2% 7-9% Source: Customers, Analogic Internal data 39

40 Medical Imaging Business Strategy Mine the Majors Position for Growth in Emerging Market Expand product line coverage across and within major OEMs Provide higher value products Increase offerings with value products 40

41 CT Equipment Market Returning to Normalized Growth Worldwide CT Systems Market $5,000 CAGR (10-13) = 4% $4,000 $3,000 $2,000 $1,000 $ Further declines of reimbursement rates depressing U.S. CT market China market growing at doubledigit rates 16-slice CT systems are driver in emerging markets 64-slice and larger CT systems are driver in mature markets 64 slice 16 slice < 16 slice and larger Source: NEMA, Frost and Sullivan 2010, Analogic Internal Data 41

42 CT Equipment Market Returning to Normalized Growth CT Competitive Landscape Others Philips Toshiba GE Siemens Further declines of reimbursement rates depressing U.S. CT market China market growing at doubledigit rates 16-slice CT systems are driver in emerging markets 64-slice and larger CT systems are driver in mature markets Source: NEMA, Frost and Sullivan 2010, Analogic Internal Data 42

43 43 Computed Tomography Subsystems

44 Computed Tomography Subsystems Detector Array Gantry Data management System (DMS) Data Acquisition System (DAS) 44

45 Capturing Value Through New Products Mine the Majors Shareholder Return Leveraging Technology 64 Slice DMS Gantry 16 Slice DAS Market Value 45

46 Increased Integration Increasing Penetration with Major OEMs Mine the Majors Gantry Systems A B C D E DAS/DMS Subsystems Detector Components Major OEM Penetration 46

47 MRI Equipment Market Growth Continues $5,000 $4,000 $3,000 $2,000 $1,000 Worldwide MRI Systems Market CAGR (10-13) = 2-4% Increase in utilization rate and expected facility consolidation to slow growth in U.S. Emerging markets offer growth driven by healthcare spending New patient needs driving multichannel and wide-bore MRI systems $ T 1.5T <1.5T Source: NEMA, Frost and Sullivan report, Analogic Internal Data 47

48 MRI Equipment Market Growth Continues MRI Competitive Landscape Others Hitachi Toshiba Philips Increase in utilization rate and expected facility consolidation to slow growth in U.S. Emerging markets offer growth driven by healthcare spending New patient needs driving multichannel and wide-bore MRI systems Siemens GE Source: NEMA, Frost and Sullivan 2010, Analogic 48

49 49 Magnetic Resonance Imaging Power Systems

50 Magnetic Resonance Imaging Power Systems RF Amplifiers Gradient Amplifiers 50

51 Product Development Driven by OEM Needs Mine the Majors Gradient and RF amplifiers for wide bore systems Modular design High reliability 51

52 Product Development Driven by OEM Needs Mine the Majors Gradient A B C D E RF Major OEM Penetration 52

53 Digital Mammography Equipment Market $1,200 $1,000 $800 $600 $400 $200 $0 Worldwide Digital Mammography Systems Market CAGR (10-13) = 4-6% FDA approval (PMA) for major OEMs, allowing access to the U.S. market Implementation of screening programs by European governments Introduction of Tomosynthesis in Europe Emerging market growth opportunities due to transition to digital Source: Inmedica 2009, Analogic internal data 53

54 Mammography Equipment OEM Competitive Landscape Worldwide Mammography Equipment Market Others European Mammography Equipment Market Fuji Siemens Others Hologic Hologic GE GE Siemens Source: Inmedica 2009, Customer data, Analogic internal data 54

55 Solid Growth in Digital Mammography Business Analogic Revenue ($ Millions) $37 Revenue Breakdown (FY2010) $24 $32 Small Plate 15% $17 Large Plate 85% FY07 FY08 FY09 FY10 Sales growth from 2009 to 2010 driven by growth in Europe Continued transition from analog to digital Introduction of Tomosynthesis in Europe 55

56 56 Selenium-Based Digital Mammography Detectors

57 New Products Under Development for Emerging Markets Current Mammography Detector New Mammography Detector Fully integrated Smaller ROHS compliant Lower manufacturing cost Ease of integration 57

58 Designed in Over 50% of Major OEMs FFDM Systems Manufacturers Detector Suppliers Mine the Majors Siemens GER Analogic Philips NE Analogic Toshiba JPN Analogic GE Healthcare US In-House Hologic US In-House Plan Med FIN Analogic IMS ITA Analogic Shimadzu JPN Analogic Medi Future KOR Analogic VMI/Philips BRA Analogic Sectra SWE In-House Hitachi JPN Hologic Fuji JPN In-House China CHN New Opportunity 58

59 Emerging Market Opportunity Position for Growth in Emerging Market Leveraging technology to develop value products Standing up China operations Developing new products to address local market needs 59

60 Well Positioned for Growth Strong performance in FY 2010 Continuing to drive growth Creating value through technology Developing high-performance, value products and enabling solutions Drive operating margin improvements Process efficiencies Lower cost supply chain Leveraging revenue growth Leveraging technology for emerging markets Analogic is saving lives through innovative technology 60

61 Security Technology Eric Zanin VP Business Development 61

62 Global Leader in Security Technology Making air travel safer by detecting threats in checked baggage Meeting the highest standards of aviation authorities and airports worldwide Leveraging our advanced 3D imaging technologies 62

63 Security Financial Performance Revenue (dollars in millions) $49 $49 $50 $40 Non-GAAP Operating Margins* 14% 12% 16% -8% FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 Improving operating margins through cost containment * Adjusted figure excludes certain charges; please refer to the non-gaap reconciliation table in Analogic s Q4 FY 2010 earnings release available at 63

64 Global Market Presenting Growth Opportunities Growth driven by EU mandated detection standards and new APAC and EMEA installations Well positioned for replacement cycle TSA procurement process will create uncertainty in the short term 64

65 Checked Baggage Product Portfolio examiner SX examiner 3DX examiner XLB Small footprint Medium speed High speed Development of explosives detection technology for next generation threat detection to be marketed by Smiths. 65

66 66 Advanced 3D CT Technology for Checked Baggage Screening

67 Security Technology Growth Drivers EU CT Conversion Replacement Cycle Explore New Opportunities 67

68 European Transition to CT EDS Technology EU CT Conversion EU Regulation 1448/2006 Mandate CY2009 CY2012 CY2018 Single View X-Ray Level 1 Multi-view X-Ray Level 2 CT-EDS Level 3 (US Bound) Level 3 (Intra-EU) New equipment to be standard 3 compliant All equipment to be standard 3 compliant 68

69 Competitive Technologies Technology Technology Characteristic Ability to Meet New EU Standards Computed Tomography (CT) Meets new standards including liquids detection X-Ray and Multi- View X-Ray Lower threat detection, especially for liquids Limited by physics in meeting EU liquid standards High false-alarm rate 69

70 Units Replacement Cycle Opportunity for Growth Replacement Cycle EDS Units Shipped Annually Expected Serviceable Life years Analogic Fiscal Years 70

71 Leveraging Technologies for New Opportunities Explore New Opportunities OnGuard DualUse Designed for both checked baggage and checkpoint applications Streamline (Concept) Detection technology for airport checkpoint 71

72 Summary Meeting the highest inspection standard for the EU in checked baggage screening Well positioned for replacement cycle Continue to deliver healthy operating margins 72

73 Financial Overview Michael Levitz Vice President, CFO and Treasurer 73

74 74 1. Financial Results/Highlights 2. Outlook

75 75 1. Financial Results/Highlights 2. Outlook

76 Solid Performance in FY 2010 Recovery year after global financial crisis and reduced hospital spending Streamlined operations and introduced new products Increased investment in direct sales channel and China operations Results improved across the board Revenue growth: up 7% Gross Margin* and Operating Margin* grew 400 bps Significant EPS growth * Adjusted figure excludes certain charges; please refer to the non-gaap reconciliation table in Analogic s Q4 FY 2010 earnings release available at 76

77 Steady Progress Toward FY12 Financial Goals Goal: Double-digit Revenue Growth $500 $400 $300 Annual Revenues $414 $396 $341 $424 Drivers of Revenue Growth: Innovative products in existing and adjacent markets Emerging Market growth, leveraging presence in China Expansion of direct sales force and growth in Ultrasound market CT baggage screening in Europe $

78 Steady Progress Toward FY12 Financial Goals Goal: Double-digit Operating Margin 10% 8% 6% 4% 2% 0% Annual Non-GAAP Operating Margin* 9% 7% 5% 3% Drivers of Margin Improvement: Scale on revenue growth Consolidating manufacturing Lower-cost supply chain, utilizing Shanghai operation Design-driven cost reductions Operating expense control, with targeted investments in innovation and sales force expansion * Adjusted figure excludes certain charges; please refer to the non-gaap reconciliation table in Analogic s Q4 FY 2010 earnings release available at 78

79 Earning per Share ($) Increasing Earnings Per Share $2.40 $2.26 $2.00 $1.60 $1.60 $1.77 $1.72 $1.20 $1.10 $1.23 $0.80 $0.81 $0.40 $0.29 $ GAAP EPS Non-GAAP EPS * Adjusted figure excludes certain charges; please refer to the non-gaap reconciliation table in Analogic s Q4 FY 2010 earnings release available at 79

80 Strong Balance Sheet Affords Opportunity for Investment Financial Position Over $160M ($13/share) of Cash/Investments Positive Operating Cash Flows No debt Capital Allocation Returning cash to shareholders Dividend of $0.10 per share History of stock buybacks Capital expenditures to support growth and margin expansion Cash available for strategic M&A $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Operating Cash Flows* (Mil) $42 $27 $24 $ * Excludes interest income, net of tax, of $10M, $5M, $2M and $0.5M in FY 2007, 2008, 2009 and 2010, respectively 80

81 Market Attractiveness M&A Opportunity Evaluation Disciplined approach Financial margin hurdles in evaluating targets Focused on value opportunities Objectives: Enable end user business to achieve critical mass Enter attractive new markets Access to new technologies High Low Low Size of Opportunity Analogic s Ability to Win High 81

82 82 1. Financial Results/Highlights 2. Outlook

83 FY 2011 Outlook Medical Imaging growth: Expanding presence within OEM customers, overall market growth and U.S. mammography sales Ultrasound growth: Adjacent market penetration and expanded sales coverage, offset by currency Security flat or lower: Shipment variability from TSA delays in U.S. Operating margin expansion from economies of scale on higher revenues and cost containment Solid progress towards FY12 operating margin goal 83

84 Summary Jim Green 84

85 Investment Thesis Advancing Technology for a Better World Financials $424M in FY10 Revenues Profitable & Cash Flow Positive Growing Operating Margins Technology Leader In Over Half of CTs/MRIs Globally Award-winning Ultrasound Design Full-Field Digital Mammography (3-D ready) CT-Level Automated Baggage Screening Strong Balance Sheet Over $160M of Cash with No Debt Global Presence Approx. Half of Sales are Outside U.S. Global Manufacturing & Distribution 85

86 86 Wrap-Up and Q&A

87 87 Thank You