Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Nexeo Solutions, Inc. | q420178kexhibit991.htm |
| 8-K - 8-K - Nexeo Solutions, Inc. | q42017earningsrelease8k.htm |
1
FOURTH QUARTER & FISCAL YEAR 2017
Earnings Conference Call & Presentation
December 7, 2017 at 9:00 a.m. CT (10:00 a.m. ET)
EXHIBIT 99.2
2
Fourth Quarter and Fiscal Year 2017
Welcome to Nexeo’s Earnings Conference Call and Presentation
December 7, 2017 beginning at 9:00 a.m. CT (10:00 a.m. ET)
…Please stand by, we will begin momentarily
Dial-In Information
Domestic: +1.844.412.1004
International: +1.216.562.0451
Passcode: 7867188
EXHIBIT 99.2
3
Agenda and Management Introductions
1 INTRODUCTIONS AND SAFE HARBOR
2 BUSINESS COMMENTARY
3 FINANCIAL PERFORMANCE
4 CLOSING REMARKS
Michael Everett
VP, Treasurer, FP&A, Investor Relations
David Bradley
President & Chief Executive Officer
Ross Crane
Executive VP & Chief Financial Officer
David Bradley
President & Chief Executive Officer
5 Q&A
EXHIBIT 99.2
4
Non-GAAP Financial Measures and Safe Harbor
Non-GAAP Financial Measures
Certain financial measures presented herein, including EBITDA, Adjusted EBITDA, Conversion Ratio and Net Debt
were derived based on methodologies other than in accordance with generally accepted accounting principles (GAAP).
We have included these measures because we believe they are indicative of our operating performance, are used by
investors and analysts to evaluate us and can facilitate comparisons across periods. As presented by us, these
measures may not be comparable to similarly titled measures reported by other companies. EBITDA, Adjusted
EBITDA, Conversion Ratio and Net Debt should be considered in addition to, not as substitutes for, financial measures
presented in accordance with GAAP. For a reconciliation of EBITDA, Adjusted EBITDA and Net Debt to the most
comparable GAAP financial measure, see the appendix slides.
Safe Harbor
Forward Looking Statements: This presentation contains statements related to Nexeo Solutions, Inc.’s (“Nexeo” or the
“Company”) future plans and expectations and, as such, includes “forward-looking statements” within the meaning of
the federal securities laws. Forward-looking statements are those statements that are based upon management’s
current plans and expectations as opposed to historical and current facts. Although the forward-looking statements
contained in this presentation reflect management’s current assumptions based upon information currently available to
management and based upon that which management believes to be reasonable assumptions, the Company cannot
be certain that actual results will be consistent with these forward-looking statements. The Company’s future results
will depend upon various risks and uncertainties, including the risks and uncertainties discussed in the Company’s
SEC filings, including in the sections entitled “Risk Factors” in such SEC filings. The Company does not intend to
provide all information enclosed in this presentation on an ongoing basis.
EXHIBIT 99.2
BUSINESS COMMENTARY
David Bradley
President & Chief Executive Officer
EXHIBIT 99.2
Business Update
6
Fourth fiscal quarter revenue up 15%, full fiscal year up 7%
Fourth fiscal quarter net income of $13.6 million, or $0.18 per share, and full fiscal
year net income of $14.4 million, or $0.19 per share
Fourth fiscal quarter adjusted EBITDA* growth of 14%, full fiscal year growth of 6%
Successfully mitigated potential financial impact of natural disasters
Nine new authorizations from specialty suppliers, an 80% increase from last year
*Non-GAAP financial measure; See appendix slides for reconciliation to the most comparable GAAP financial measure
Adjusted EBITDA* Growth
Year-Over-Year
(14%)
10%
12% 14%
Q1-FY17 Q2-FY17 Q3-FY17 Q4-FY17
EXHIBIT 99.2
FINANCIAL PERFORMANCE
Ross Crane
Chief Financial Officer
EXHIBIT 99.2
Consolidated
Volume increased 8%
Average selling prices up 7%
Chemicals
Volume increased 6%
Average selling prices up 12%
Plastics
Volume increased 11%
Average selling prices up 2%
EPS growth of 64%
Adjusted EBITDA* growth of 14%
Fiscal Fourth Quarter 2017 Highlights
8
*Non-GAAP financial measure; See appendix slides for reconciliation to the most comparable GAAP financial measure
**Non-GAAP financial measure; Calculated as adjusted EBITDA divided by gross profit
In millions (except per share data) Successor Successor
Three Months
Ended
Sep-30-2017
Three Months
Ended
Sep-30-2016
4Q-FY17 4Q-FY16 $ %
Sales and operating revenues
Chemicals 455.9$ 383.9$ 72.0 18.8 %
Plastics 491.3 436.8 54.5 12.5 %
Other 34.5 30.7 3.8 12.4 %
Total sales and operating revenues 981.7 851.4 130.3 15.3 %
Gross profit
Chemicals 58.0 46.1 11.9 25.8 %
Margin 12.7% 12.0%
Plastics 42.3 36.9 5.4 14.6 %
Margin 8.6% 8.4%
Other 8.8 6.6 2.2 33.3 %
Total gross profit 109.1 89.6 19.5 21.8 %
Total gross profit margin 11.1% 10.5%
SG&A 79.0 72.5 6.5 9.0 %
Transaction related costs 0.6 3.3 (2.7) (81.8)%
Change in fair value related to contingent consideration (3.6) (8.9) 5.3 59.6 %
Operating income 33.1 22.7 10.4 45.8 %
Other income - 0.5 (0.5) (100.0)%
Interest expense, net (13.0) (12.0) (1.0) (8.3)%
Net income (loss) from continuing operations before income taxes 20.1 11.2 8.9 79.5 %
Income tax expense (benefit) 6.5 2.5 4.0 160.0 %
Net income (loss) Attributed to Nexeo Solutions, Inc. 13.6$ 8.7$ 4.9$ 56.3 %
Net income (loss) per share available to common stockholders
Basic and Diluted 0.18$ 0.11$
Adjusted EBITDA* 52.7$ 46.4$ 6.3$ 13.6 %
Adjusted EBITDA* % of sales 5.4% 5.4%
Conversion Ratio** 48.3% 51.8%
Variance
YoY
70 bps
20 bps
(350) bps
60 bps
0 bps
EXHIBIT 99.2
Key Balance Sheet Metrics
9
(1) Total debt and Net Debt include unamortized debt issuance costs in accordance with the adoption of ASU No. 2015-03 and ASU No. 2015-15
(2) Net Debt is a non-GAAP financial measure and is defined as long-term debt and capital lease obligations, net of discount and deferred financing costs, plus short-term borrowings and current portion
of long-term debt and capital lease obligations less cash and cash equivalents; See appendix slides for a reconciliation of Net Debt to the most comparable GAAP financial measure
(3) Leverage is calculated as Net Debt divided by Adjusted EBITDA from continuing operations; See appendix slides for a reconciliation of Net Debt and Adjusted EBITDA to the most comparable GAAP
financial measure
(4) Working capital is calculated as accounts receivable plus inventory less accounts payable
Working Capital (4)Net Debt (1)(2)
CashTotal Debt (1)
$765.8
$869.9
$791.2
Q4-FY16 Q3-FY17 Q4-FY17
($ in millions)
4.3x4.9x4.4xLeverage (3)
$813.3
$904.0
$845.1
Q4-FY16 Q3-FY17 Q4-FY17
$47.5
$34.1
$53.9
Q4-FY16 Q3-FY17 Q4-FY17
$464.8
$568.5
$528.7
13.6%
16.2%
14.5%
Q4-FY16 Q3-FY17 Q4-FY17
Working Capital Working Capital % LTM Sales
EXHIBIT 99.2
CLOSING REMARKS
David Bradley
President & Chief Executive Officer
EXHIBIT 99.2
Strategic Objectives
11
Long-term growth objectives
Grow commodity volumes equal to or better than GDP
Grow specialty volumes at two to three times the rate of commodities
Supplement growth through targeted bolt-on acquisitions at reasonable multiples
Strategic plan for margin expansion
Leverage industry-leading, centralized, proprietary operating platform to drive
productivity and cost enhancements across the company
Improve specialty mix by continuing to expand specialty line card with new
supplier authorizations and targeted acquisitions
EXHIBIT 99.2
QUESTION AND ANSWER
To ask a question live over the phone, please press * then the
number 1 on your telephone keypad to queue our operator
If your question has been answered or you wish to remove
yourself from the queue, please press #
EXHIBIT 99.2
THANK YOU FOR ATTENDING
We look forward to hosting you next quarter!
Please feel free to reach out to our Investor Relations Personnel via the contact
information below with any outstanding questions you have or if you would like to
discuss our strategy and investment proposition in further detail
+1.281.297.0856
Investor.Relations@nexeosolutions.com
EXHIBIT 99.2
Appendix
EXHIBIT 99.2
15
(1) The fiscal year ended September 30, 2016 includes 114 days of the acquired business’ operating activities as a result of the consummation of the Business Combination on June 9, 2016
(2) FY 2017 includes $4.9 million of additional depreciation expense related to the business combination compared to the prior year
(3) FY 2017 includes $1.9 million of additional depreciation expense related to the business combination compared to the prior year
(4) FY 2017 includes $7.2 million of additional depreciation and amortization expense related to the business combination compared to the prior year and the Ultra Chem acquisition
*Non-GAAP financial measure; See appendix slides for reconciliation to the most comparable GAAP financial measure
**Non-GAAP financial measure; Calculated as adjusted EBITDA divided by gross profit
In millions (except per share data) Successor Successor Combined
Fiscal Year
Ended
Sep-30-2017
Fiscal Year
Ended
Sep-30-2016(1)
Oct-01-2015
through
Jun-08-2016
Fiscal Year
Ended
Sep-30-2016
FY 2017 FY 2016 FY 2016 FY 2016 Difference % Change
Sales and operating revenues
Chemicals 1,667.2$ 478.1$ 1,066.4$ 1,544.5$ 122.7$ 7.9 %
Plastics 1,841.7 546.7 1,192.2 1,738.9 102.8 5.9 %
Other 128.0 40.9 81.5 122.4 5.6 4.6 %
Total sales and operating revenues 3,636.9 1,065.7 2,340.1 3,405.8 231.1 6.8 %
Gross profit
Chemicals (2) 205.6 55.7 136.2 191.9 13.7 7.1 %
Margin 12.3% 11.7% 12.8% 12.4%
Plastics (3) 167.2 43.6 117.6 161.2 6.0 3.7 %
Margin 9.1% 8.0% 9.9% 9.3%
Other 25.6 9.1 18.1 27.2 (1.6) (5.9)%
Total gross profit 398.4 108.4 271.9 380.3 18.1 4.8 %
Total gross profit margin 11.0% 10.2% 11.6% 11.2%
SG&A (4) 312.9 91.7 208.9 300.6 12.3 4.1 %
Transaction related costs 1.9 21.3 33.4 54.7 (52.8) (96.5)%
Change in fair value related to contingent consideration 16.2 (11.2) - (11.2) 27.4 244.6 %
Operating income 67.4 6.6 29.6 36.2 31.2 86.2 %
Other income 8.3 0.5 2.9
Interest expense, net (50.8) (14.3) (42.2)
Net income (loss) from continuing operations before income taxes 24.9 (7.2) (9.7)
Income tax expense (benefit) 10.5 1.2 4.2
Net income (loss) from continuing operations 14.4 (8.4) (13.9)
Net income from discontinued operations, net of tax - - 0.1
Net income (loss) Attributed to Nexeo Solutions, Inc. 14.4$ (8.4)$ (13.8)$
Net income (loss) per share available to common stockholders
Basic 0.19$ (0.24)$
Diluted 0.19$ (0.24)$
Adjusted EBITDA* 184.6$ 60.9$ 112.8$ 173.7$ 10.9$ 6.3 %
Adjusted EBITDA* % of sales 5.1% 5.7% 5.1%
Conversion Ratio** 46.3% 56.2% 45.7% 60 bps
(10) bps
(20) bps
(20) bps
0 bps
41.5%
Predecessor
4.8%
Variance
YoY
Fiscal Year 2017 Financials
EXHIBIT 99.2
Capital Structure Summary
16
Shares Used For
Basic and Fully Diluted EPS Calculation
Share
Count
Basic - Average Common Shares Outstanding 76.8 million
Diluted - Average Common Shares Outstanding 76.8 million
Shares Excluded From
Basic and Fully Diluted EPS Calculation
Share
Count
Founder Shares (1) 12.5 million
Warrants (2) 5.8 million*
Excess Shares (3) (Deferred Cash Consideration) 5.2 million
Note: For a complete description of the Founder Shares, Warrants and Deferred Cash Consideration, see the Company’s (i) Final prospectus related to the Registration Statement on
Form S-3/A filed on 08/30/16, (ii) Current Report on Form 8-K filed with the SEC on 06/15/16, and (iii) Current Report on Form 8-K filed with the SEC on 03/22/16
(1) Founder Shares Vesting and Forfeiture: The Founder Shares vest as follows: (i) 50% of the Founder Shares vest on the first day that the last sale price of the Company’s Common
Stock equals or exceeds $12.50 per share for any 20 trading days within any 30 trading day period; and (ii) the remaining 50% of the Founder Shares vest on the first day that the last
sale price of the Company’s common stock equals or exceeds $15.00 per share for any 20 trading days within any 30 trading day period; If none of the above vesting requirements are
met, the Founder Shares will be forfeited on 06/09/26
(2) Warrants: 50,025,000 warrants are outstanding and have an exercise price of $5.75 per half share of common stock (25,012,500 shares of common stock issuable); Warrants expire
06/09/21
(3) Excess Shares: Deferred Cash Consideration due to TPG and its affiliates in connection with the Business Combination. Triggering events for payment are earlier of (i) time when the
volume weighted average trading price of the Company’s common stock exceeds $15.00 per share for any 20 trading days in any 30 trading day period or (ii) June 30, 2021. The
Company may satisfy payment of the Deferred Cash Consideration with existing cash funds or the issuance of common shares. The amount is calculated at the time of payment as the
prevailing price of the Company’s common stock multiplied by the number of Excess Shares.
*Assumes cashless exercise and stock price of $15.00 per share; Full cash exercise would require $288 million from warrant holders
EXHIBIT 99.2
Non-GAAP Reconciliation
17
(1) See Non-GAAP Reconciliation: Quarterly – Other Operating Expenses, Net
Nexeo Solutions, Inc. and Subsidiaries
Quarterly Adjusted EBITDA Reconciliation
Q4-FY16 Q1-FY17 Q2-FY17 Q3-FY17 Q4-FY17
Net income (loss) $ 8.7 $ (8.3) $ (1.1) $ 10.2 $ 13.6
Interest expense, net 12.0 11.9 12.4 13.5 13.0
Income tax expense (benefit) 2.5 (2.7) 0.8 5.9 6.5
Depreciation and amortization 16.3 16.8 17.8 18.9 19.6
Other operating expenses, net (1) 6.9 16.1 15.8 3.9 -
Adjusted EBITDA from continuing operations $ 46.4 $ 33.8 $ 45.7 $ 52.4 $ 52.7
($ in millions, Unaudited)
EXHIBIT 99.2
Non-GAAP Reconciliation (continued)
18
(1) See Non-GAAP Reconciliation: Last Twelve Months Ending - Other Operating Expenses, Net
Nexeo Solutions, Inc. and Subsidiaries
LTM Adjusted EBITDA Reconciliation
09/30/2016 12/31/2016 03/31/2017 06/30/2017 09/30/2017
Net income (loss) $ (22.2) $ (34.7) $ (36.4) $ 9.5 $ 14.4
Net (income) from discontinued operations (0.1) (0.1) - - -
Interest expense, net 56.5 53.0 50.4 49.8 50.8
Income tax expense 5.4 1.4 0.4 6.5 10.5
Depreciation and amortization 58.3 61.5 65.5 69.8 73.1
Other operating expenses, net (1) 75.8 87.3 92.8 42.7 35.8
Adjusted EBITDA from continuing operations $ 173.7 $ 168.4 $ 172.7 $ 178.3 $ 184.6
Last Twelve Months Ending($ in millions, Unaudited)
EXHIBIT 99.2
Non-GAAP Reconciliation (continued)
19
Nexeo Solutions, Inc. and Subsidiaries
Quarterly Other Operating Expenses, Net
Q4-FY16 Q1-FY17 Q2-FY17 Q3-FY17 Q4-FY17
Management add-backs (1) $ 3.4 $ 2.5 $ 3.4 $ 2.2 $ 2.5
Change in FV of contingent consideration obligations (11.2) 10.6 10.0 (0.8) (3.6)
Foreign exchange (gains) losses, net (2) 0.7 0.8 0.8 (0.4) (0.6)
Compensation expense related to management equity plan (non-cash) 1.2 1.4 1.3 1.5 1.3
Gain on sale of Franklin Park facility 2.6 - - - -
Inventory step up 6.9 - - 1.2 (0.2)
Transaction and other transaction-related items (3) 3.3 0.8 0.3 0.2 0.6
Other operating expenses, net $ 6.9 $ 16.1 $ 15.8 $ 3.9 $ -
($ in millions, Unaudited)
(1) One-time management adjustments associated with integration, restructuring, transformational activities and asset impairments
(2) Includes the impact of net realized and unrealized foreign exchange gains and losses related to transactions in currencies other than the functional currency of the respective legal entity for the purpose of
evaluating the Company’s performance and facilitating more meaningful comparisons of performance to other fiscal periods
(3) Includes professional and transaction costs related to acquisitions, potential acquisitions and other business combination related items
EXHIBIT 99.2
Non-GAAP Reconciliation (continued)
20
Nexeo Solutions, Inc. and Subsidiaries
LTM Other Operating Expenses, Net
09/30/2016 12/31/2016 03/31/2017 06/30/2017 09/30/2017
Management add-backs (1) $ 8.9 $ 9.8 $ 11.8 $ 11.5 $ 10.6
Change in FV of contingent consideration obligations (11.2) (0.6) 9.4 8.6 16.2
Foreign exchange (gains) losses, net (2) 2.6 2.9 4.0 1.9 0.6
Management fees (3) 2.2 1.3 0.5 - -
Compensation expense related to management equity plan (non-cash) 2.2 3.3 4.3 5.4 5.5
Gain on sale of Franklin Park facility 2.6 2.6 2.6 2.6 -
Inventory step up 13.8 13.8 13.8 8.1 1.0
Transaction and other transaction-related items (4) 54.7 54.2 46.4 4.6 1.9
Other operating expenses, net $ 75.8 $ 87.3 $ 92.8 $ 42.7 $ 35.8
(1) One-time management adjustments associated with integration, restructuring, transformational activities and asset impairments
(2) Includes the impact of net realized and unrealized foreign exchange gains and losses related to transactions in currencies other than the functional currency of the respective legal entity for the purpose of
evaluating the Company’s performance and facilitating more meaningful comparisons of performance to other fiscal periods
(3) Management, monitoring, consulting, reimbursable fees and leverage fees, per the agreement with TPG Capital, L.P.; In connection with the business combination, this agreement was terminated
(4) Includes professional and transaction costs related to acquisitions, potential acquisitions and other business combination related items
Last Twelve Months Ending($ in millions, Unaudited)
EXHIBIT 99.2
Non-GAAP Reconciliation (continued)
21
Nexeo Solutions, Inc. and Subsidiaries
Net Debt Reconciliation
Q4-FY16 Q3-FY17 Q4-FY17
Long-term debt and capital lease obligations,
less current portion, net
$ 765.6 $ 855.3 $ 794.0
Short-term borrowings and current portion of
long-term debt and capital lease obligations
47.7 48.7 51.1
Total Debt 813.3 904.0 845.1
Cash and cash equivalents (47.5) (34.1) (53.9)
Net Debt $ 765.8 $ 869.9 $ 791.2
($ in millions, Unaudited)
EXHIBIT 99.2
NEXEO SOLUTIONS, INC.
EXHIBIT 99.2