Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Nexeo Solutions, Inc. | q120188kexhibit991.htm |
| 8-K - 8-K - Nexeo Solutions, Inc. | q12018earningsrelease8k.htm |
1
FIRST QUARTER FISCAL YEAR 2018
Earnings Conference Call & Presentation
February 8, 2018 at 9:00 a.m. CT (10:00 a.m. ET)
EXHIBIT 99.2
2
First Quarter Fiscal Year 2018
Welcome to Nexeo’s Earnings Conference Call and Presentation
February 8, 2018 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: 7369729
EXHIBIT 99.2
3
Agenda and Management Introductions
INTRODUCTIONS AND SAFE HARBOR
BUSINESS COMMENTARY
FINANCIAL PERFORMANCE
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
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, adjusted net income, adjusted
EPS, 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, adjusted net income, adjusted EPS, 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, adjusted net income, adjusted EPS, 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
David Bradley
President & Chief Executive Officer
EXHIBIT 99.2
Business Update
6
Revenue growth of 17%, driven by strong
price execution and specialty growth
First fiscal quarter net income of $27 million,
or $0.34 per diluted share
Adjusted* net income of $11 million, or $0.14
per diluted share, excluding net positive impact
to contingent consideration
Internal operational excellence metrics
indicate solid momentum across the business
New customer activations
Customer churn reduction
Private fleet utilization
On-time delivery rates
Nine new specialty supplier authorizations
fiscal year to date
Differentiated business model drives
success in specialty growth
$33.8
$44.2
Q1-FY17 Q1-FY18
*Non-GAAP financial measure; See appendix slides for reconciliation to the most comparable GAAP financial measure
Adjusted* EBITDA Growth
Year-Over-Year
$168.4
$195.0
TTM Ending
12/31/2016
TTM Ending
12/31/2017
($ in millions, Unaudited)
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Chemicals Plastics
+16%
Cumulative Supplier Authorizations
+31%
8
15
23 announcements made since January 2016
EXHIBIT 99.2
Ross Crane
Chief Financial Officer
EXHIBIT 99.2
Fiscal First Quarter 2018 Highlights
8
($ in millions) Three Months
Ended
Dec-31-2017
Three Months
Ended
Dec-31-2016
Variance
YoY
1Q-FY18 1Q-FY17
Sales and operating revenues $ 929.6 $ 794.8 17.0%
Gross profit 106.9 84.4 26.7%
Gross profit margin 11.5% 10.6% +90 bps
Consolidated
Consolidated
Volume increased 4%
Average selling prices up 13%
Chemicals
Volume increased 7%
Average selling prices up 15%
Plastics
Volume flat
Average selling prices up 12%
($ in millions) Three Months
Ended
Dec-31-2017
Three Months
Ended
Dec-31-2016
Variance
YoY
1Q-FY18 1Q-FY17
Sales and operating revenues $ 431.9 $ 352.4 22.6%
Gross profit 58.4 42.7 36.8%
Gross profit margin 13.5% 12.1% +140 bps
Chemicals
($ in millions) Three Months
Ended
Dec-31-2017
Three Months
Ended
Dec-31-2016
Variance
YoY
1Q-FY18 1Q-FY17
Sales and operating revenues $ 462.2 $ 412.5 12.0%
Gross profit 41.9 36.0 16.4%
Gross profit margin 9.1% 8.7% +40 bps
Plastics
EXHIBIT 99.2
Fiscal First Quarter 2018 Consolidated Results
9
*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) Three Months Ended
Dec-31-2017
Three Months Ended
Dec-31-2016 Variance YoY
1Q-FY18 1Q-FY17 $ %
Sales and operating revenues $ 929.6 $ 794.8 $ 134.8 17.0%
Cost of sales and operating expenses 822.7 710.4 112.3 15.8%
Gross profit 106.9 84.4 22.5 26.7%
SG&A 84.8 74.5 10.3 13.8%
Transaction related costs 0.1 0.8 (0.7) (87.5)%
Change in FV of contingent consideration obligation (18.6) 10.6 (29.2) (275.5)%
Operating income (loss) 40.6 (1.5) 42.1 2,806.7%
Other income 0.1 2.4 (2.3) (95.8)%
Interest expense, net (12.9) (11.9) (1.0) (8.4)%
Income (loss) before income taxes 27.8 (11.0) 38.8 352.7%
Income tax expense (benefit) 1.3 (2.7) 4.0 148.1%
Net income (loss) $ 26.5 $ (8.3) $ 34.8 419.3%
Adjusted* EBITDA $ 44.2 $ 33.8 $ 10.4 30.8%
Adjusted* EBITDA % of sales 4.8% 4.3% +50 bps
Conversion Ratio** 41.3% 40.0% +130 bps
EXHIBIT 99.2
$798.1 $791.2
$859.6
Q1-FY17 Q4-FY17 Q1-FY18
Key Balance Sheet Metrics
10
(1) Total debt and Net Debt include unamortized debt issuance costs in accordance with the adoption of ASU No. 2015-03 and ASU No. 2015-15
(2) Net Debt is a non-GAAP financial measure and is defined as long-term debt and capital lease obligations, net of discount and deferred financing costs, plus short-term borrowings and current
portion of long-term debt and capital lease obligations less cash and cash equivalents; See appendix slides for a reconciliation of Net Debt to the most comparable GAAP financial measure
(3) Leverage is calculated as Net Debt divided by Adjusted EBITDA from continuing operations; See appendix slides for a reconciliation of Net Debt and Adjusted EBITDA to the most
comparable GAAP financial measure
(4) Working capital is calculated as accounts receivable plus inventory less accounts payable
Working Capital (4)Net Debt (1)(2)
CashTotal Debt (1)
($ in millions)
4.4x4.3x4.7xLeverage (3)
$831.4 $845.1
$901.0
Q1-FY17 Q4-FY17 Q1-FY18
$33.3
$53.9
$41.4
Q1-FY17 Q4-FY17 Q1-FY18
14.0% 14.5%
16.0%
$473.8
$528.7
$604.1
Q1-FY17 Q4-FY17 Q1-FY18
Working Capital Working Capital % TTM Sales
EXHIBIT 99.2
David Bradley
President & Chief Executive Officer
EXHIBIT 99.2
Strategic Objectives
12
Long-term growth objectives
Grow commodity volumes 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
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
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
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 77.1 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) date when
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
Fiscal First Quarter 2018 Financial Results
17
*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) Three Months Ended
Dec-31-2017
Three Months Ended
Dec-31-2016
1Q-FY18 1Q-FY17 $ %
Sales and operating revenues
Chemicals 431.9$ 352.4$ 79.5 22.6 %
Plastics 462.2 412.5 49.7 12.0 %
Other 35.5 29.9 5.6 18.7 %
Total sales and operating revenues 929.6 794.8 134.8 17.0 %
Gross profit
Chemicals 58.4 42.7 15.7 36.8 %
Margin 13.5% 12.1%
Plastics 41.9 36.0 5.9 16.4 %
Margin 9.1% 8.7%
Other 6.6 5.7 0.9 15.8 %
Total gross profit 106.9 84.4 22.5 26.7 %
Total gross profit margin 11.5% 10.6%
SG&A 84.8 74.5 10.3 13.8 %
Transaction related costs 0.1 0.8 (0.7) (87.5)%
Change in fair value related to contingent consideration (18.6) 10.6 (29.2) (275.5)%
Operating income (loss) 40.6 (1.5) 42.1 2806.7 %
Other income 0.1 2.4 (2.3) (95.8)%
Interest expense, net (12.9) (11.9) (1.0) (8.4)%
Income (loss) before income taxes 27.8 (11.0) 38.8 352.7 %
Income tax expense (benefit) 1.3 (2.7) 4.0 148.1 %
Net income (loss) attributable to Nexeo Solutions, Inc. 26.5$ (8.3)$ 34.8$ 419.3 %
Net income (loss) per share
Basic 0.35$ (0.11)$
Diluted 0.34$ (0.11)$
Adjusted* net income 10.6$ 0.0$ 10.6$ NA
Adjusted* net income (loss) per share
Basic 0.14$ 0.00$
Diluted 0.14$ 0.00$
Adjusted* EBITDA 44.2$ 33.8$ 10.4$ 30.8 %
Adjusted* EBITDA % of sales 4.8% 4.3%
Conversion Ratio** 41.3% 40.0%
Variance
YoY
140 bps
40 bps
90 bps
50 bps
130 bps
EXHIBIT 99.2
18
Non-GAAP Reconciliation
Nexeo Solutions, Inc. and Subsidiaries
Adjusted Net Income Reconciliation
Q1-FY17 Q2-FY17 Q3-FY17 Q4-FY17 Q1-FY18
Amount
Per
Share* Amount
Per
Share* Amount
Per
Share* Amount
Per
Share* Amount
Per
Share*
Net income (loss) $ (8.3) $ (0.11) $ (1.1) $ (0.01) $ 10.2 $ 0.13 $ 13.6 $ 0.18 $ 26.5 $ 0.34
Change in fair value of contingent
consideration obligation
10.6 0.14 10.0 0.13 (0.8) (0.01) (3.6) (0.05) (18.6) (0.24)
Tax impact of change in fair value of
contingent consideration obligation
(2.3) (0.03) (2.1) (0.03) 0.2 0.00 0.8 0.01 2.7 0.04
Adjusted net income $ 0.0 $ 0.00 $ 6.8 $ 0.09 $ 9.6 $ 0.12 $ 10.8 $ 0.14 $ 10.6 $ 0.14
($ in millions except per share data, Unaudited)
* Per share amounts based on basic shares for Q1-FY17 and Q2-FY17 and diluted shares for Q3-FY17, Q4-FY17 and Q1-FY18
EXHIBIT 99.2
19
(1) See Non-GAAP Reconciliation: Quarterly – Other Operating Expenses, Net
Nexeo Solutions, Inc. and Subsidiaries
Quarterly Adjusted EBITDA Reconciliation
Q1-FY17 Q2-FY17 Q3-FY17 Q4-FY17 Q1-FY18
Net income (loss) $ (8.3) $ (1.1) $ 10.2 $ 13.6 $ 26.5
Interest expense, net 11.9 12.4 13.5 13.0 12.9
Income tax expense (benefit) (2.7) 0.8 5.9 6.5 1.3
Depreciation and amortization 16.8 17.8 18.9 19.6 19.5
Other operating expenses, net (1) 16.1 15.8 3.9 - (16.0)
Adjusted EBITDA from continuing operations $ 33.8 $ 45.7 $ 52.4 $ 52.7 $ 44.2
($ in millions, Unaudited)
Non-GAAP Reconciliation (continued)
EXHIBIT 99.2
Non-GAAP Reconciliation (continued)
20
(1) See Non-GAAP Reconciliation: Last Twelve Months Ending - Other Operating Expenses, Net
Nexeo Solutions, Inc. and Subsidiaries
LTM Adjusted EBITDA Reconciliation
12/31/2016 03/31/2017 06/30/2017 09/30/2017 12/31/2017
Net income (loss) $ (34.7) $ (36.4) $ 9.5 $ 14.4 $ 49.2
Net (income) from discontinued operations (0.1) - - - -
Interest expense, net 53.0 50.4 49.8 50.8 51.8
Income tax expense 1.4 0.4 6.5 10.5 14.5
Depreciation and amortization 61.5 65.5 69.8 73.1 75.8
Other operating expenses, net (1) 87.3 92.8 42.7 35.8 3.7
Adjusted EBITDA from continuing operations $ 168.4 $ 172.7 $ 178.3 $ 184.6 $ 195.0
Last Twelve Months Ending($ in millions, Unaudited)
EXHIBIT 99.2
Non-GAAP Reconciliation (continued)
21
Nexeo Solutions, Inc. and Subsidiaries
Quarterly Other Operating Expenses, Net
Q1-FY17 Q2-FY17 Q3-FY17 Q4-FY17 Q1-FY18
Management add-backs (1) $ 2.5 $ 3.4 $ 2.2 $ 2.5 $ 1.3
Change in FV of contingent consideration obligation 10.6 10.0 (0.8) (3.6) (18.6)
Foreign exchange (gains) losses, net (2) 0.8 0.8 (0.4) (0.6) (0.5)
Compensation expense related to management equity plan (non-cash) 1.4 1.3 1.5 1.3 1.7
Inventory step up - - 1.2 (0.2) -
Transaction and other transaction-related items (3) 0.8 0.3 0.2 0.6 0.1
Other operating expenses, net $ 16.1 $ 15.8 $ 3.9 $ - $ (16.0)
(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
($ in millions, Unaudited)
EXHIBIT 99.2
Non-GAAP Reconciliation (continued)
22
Nexeo Solutions, Inc. and Subsidiaries
LTM Other Operating Expenses, Net
12/31/2016 03/31/2017 06/30/2017 09/30/2017 12/31/2017
Management add-backs (1) $ 9.8 $ 11.8 $ 11.5 $ 10.6 $ 9.4
Change in FV of contingent consideration obligations (0.6) 9.4 8.6 16.2 (13.0)
Foreign exchange (gains) losses, net (2) 2.9 4.0 1.9 0.6 (0.7)
Management fees (3) 1.3 0.5 - - -
Compensation expense related to management equity plan (non-cash) 3.3 4.3 5.4 5.5 5.8
Gain on sale of Franklin Park facility 2.6 2.6 2.6 - -
Inventory step up 13.8 13.8 8.1 1.0 1.0
Transaction and other transaction-related items (4) 54.2 46.4 4.6 1.9 1.2
Other operating expenses, net $ 87.3 $ 92.8 $ 42.7 $ 35.8 $ 3.7
(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)
23
Nexeo Solutions, Inc. and Subsidiaries
Net Debt Reconciliation
Q1-FY17 Q4-FY17 Q1-FY18
Long-term debt and capital lease obligations, less
current portion, net
$ 783.3 $ 794.0 $ 852.6
Short-term borrowings and current portion of long-term
debt and capital lease obligations
48.1 51.1 48.4
Total Debt 831.4 845.1 901.0
Cash and cash equivalents (33.3) (53.9) (41.4)
Net Debt $ 798.1 $ 791.2 $ 859.6
($ in millions, Unaudited)
EXHIBIT 99.2
NEXEO SOLUTIONS, INC.
EXHIBIT 99.2