danaher corporation tom joyce, president &...
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DANAHER CORPORATIONTom Joyce, President & CEO
J.P. MORGAN HEALTHCARE CONFERENCEJANUARY 14, 2020
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Forward Looking StatementsStatements in this presentation that are not strictly historical, including any statements regarding events or developments that we anticipate will or may occur in the future are "forward-looking"statements within the meaning of the federal securities laws. There are a number of important factors that could cause actual results, developments and business decisions to differ materially fromthose suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include, among other things, theuncertainty of regulatory approvals with respect to the GE Biopharma acquisition and the timing or conditionality thereof, the parties' ability to satisfy the acquisition agreement conditions andconsummate the acquisition of GE Biopharma on the anticipated timetable and terms or at all, Danaher's ability to successfully integrate GE Biopharma's operations and employees with Danaher'sexisting business, the ability to realize anticipated financial, tax and operational synergies and benefits, GE Biopharma's performance and maintenance of important business relationships,deterioration of or instability in the economy, the markets served by us or GE Biopharma and the financial markets, developments and uncertainties in U.S. policy stemming from the U.S.administration, such as changes in U.S. trade and tariff policies and the reaction of other countries thereto, contractions or growth rates and cyclicality of markets we serve, competition, our abilityto develop and successfully market new products and technologies and expand into new markets, the potential for improper conduct by our employees, agents or business partners, ourcompliance with applicable laws and regulations (including regulations relating to medical devices and the health care industry), the results of our clinical trials and perceptions thereof, our abilityto effectively address cost reductions and other changes in the health care industry, our ability to successfully identify and consummate appropriate acquisitions and strategic investments andsuccessfully complete divestitures and other dispositions, our ability to integrate the businesses we acquire and achieve the anticipated benefits of such acquisitions, contingent liabilities relatingto acquisitions, investments and divestitures (including tax-related and other contingent liabilities relating to past and future IPOs, split-offs or spinoffs), security breaches or other disruptions ofour information technology systems or violations of data privacy laws, the impact of our restructuring activities on our ability to grow, risks relating to potential impairment of goodwill and otherintangible assets, currency exchange rates, tax audits and changes in our tax rate and income tax liabilities, changes in tax laws applicable to multinational companies, litigation and othercontingent liabilities including intellectual property and environmental, health and safety matters, the rights of the United States government to use, disclose and license certain intellectualproperty we license if we fail to commercialize it, risks relating to product, service or software defects, product liability and recalls, risks relating to product manufacturing, the impact of our debtobligations on our operations and liquidity, our relationships with and the performance of our channel partners, uncertainties relating to collaboration arrangements with third-parties, commoditycosts and surcharges, our ability to adjust purchases and manufacturing capacity to reflect market conditions, reliance on sole sources of supply, the impact of deregulation on demand for ourproducts and services, labor matters, international economic, political, legal, compliance and business factors (including the impact of the United Kingdom’s decision to leave the EU anduncertainty relating to the terms and timing of such separation), disruptions relating to man-made and natural disasters and pension plan costs. Additional information regarding the factors thatmay cause actual results to differ materially from these forward-looking statements is available in our SEC filings, including our 2018 Annual Report on Form 10-K and Quarterly Reports on Form10-Q for each of the first, second and third quarters of 2019. These forward-looking statements speak only as of the date of this presentation and except to the extent required by applicable law, theCompany does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise.
With respect to the non-GAAP financial measures referenced in the following presentation, definitions and the accompanying information required by SEC Regulation G can be found in the back ofthe presentation and in the “Investors” section of Danaher’s web site, www.danaher.com, under the heading “Events and Presentations”. All references in this presentation (1) to financial metricsrelate only to the continuing operations of Danaher’s business, unless otherwise noted; (2) to “growth” or other period-to-period changes refer to year-over-year comparisons unless otherwiseindicated; (3) to operating profit below the segment level exclude amortization; (4) to “today” refers to the Company’s 2018 performance, unless otherwise indicated; and (5) to “2019 9M” refers tothe first nine months of 2019. We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals.
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Strong finish to 2019 with Q4 better than expected— Core growth above previously announced guidance, led by Life
Sciences and Diagnostics— Adjusted EPS at or above the high end of our previously
announced guidance range
Current Update
Continued progress with GE Biopharma acquisition— Received EU conditional clearance in Dec. 2019— Expect to close in Q1 2020
2019 was an outstanding year
Completed Envista exchange offer / split-off in Dec. 2019
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How we win in Diagnostics
Cepheid: three years in
Danaher: where we are today
What You’ll Hear Today
Danaher Today
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LIFE SCIENCES DIAGNOSTICS
WATER QUALITY
ENVIRONMENTAL & APPLIED SOLUTIONS
PRODUCT ID
~$6.5B ~$6.3B ~$4.3B
All financial metrics reflect FY 2018 reported revenue including results from discontinued operations.
Multi-industry science & technology portfolio provides competitive advantages
Revenue by Mix
Revenue by Geography
Revenue by Go-to-Market (GTM)
ROW6%
NA39%
W. EU24%
HGM31%
Recurring70%
Non-recurring
30%
Direct~70%
Dist-ribution~30%
High quality recurring revenue across the portfolio
Strong Recurring Revenue
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PORTFOLIO UNITED BY COMMON BUSINESS MODEL• Steady consumables stream off extensive installed
base• High value, ‘mission-critical’ applications that demand
high quality products to meet regulatory requirements
BENEFITS & OPPORTUNITIES• Reduced risk of revenue volatility• Increased customer intimacy• Higher margin opportunities enable reinvestment
OPCO EXAMPLES
RAZOR / RAZOR-BLADE
• Consumables revenue 2-5X instrument rev.
• Long-term contracts
SPEC’D IN
SERVICE
• FDA-approved or cleared processes i.e. biologic drug production
• Like-for-like replacements i.e. EPA methods
• Increase in attachment rates• MSD/HSD service revenue
CAGR over the last 3 years
Total DHR Revenue
By Mix (2018)
Recurring70%
Non-recurring
30%
All financial metrics reflect FY 2018 reported revenue including results from discontinued operations.
Danaher Business System (DBS)
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DBS is our competitive advantage: it’s who we are, and how we do what we do
“OMX” is Operating Margin Expansion; “WC” is Working Capital
SHAREHOLDERCORE REVENUE GROWTHOMXCASH FLOW / WC TURNSROIC
CUSTOMER QUALITY (EXTERNAL PPM)ON-TIME DELIVERY (OTD)
ASSOCIATE INTERNAL FILL RATERETENTION
8 CORE VALUE DRIVERS (CVDs)
Core Revenue Growth+
Margin Expansion+
Strong Free Cash Flow+
Acquisitions=
TOP QUARTILE EPS GROWTH &COMPOUNDING RETURNS
How We Create Value With DBS: Running the Danaher Playbook
IMPROVE COST STRUCTURE
Balanced approach to create shareholder value
REINVEST FOR GROWTH
ACCELERATE MARGINS & CORE GROWTH
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G&A
S&M
OMXCore Growth
R&D
GrossMargins
Strong brands with a broad global presence
TOTAL REVENUE$6.3B
RevenueBy Mix
By Geography
By OpCo
Beckman Diagnostics
Radiometer
LBS
Cepheid
Recurring84%
Nonrecurring16%
All financial metrics based on FY 2018 unless otherwise indicated; all pie chart percentages are % of 2018 revenues
ROW6% NA
38%
W. EU19%
HGM37%GLOBAL GROWTH DRIVERS
• Improving standards of care in HGM
• Skilled labor shortages & cost pressures necessitating automated solutions
• POC & decentralization of health care
DIAGNOSTICS
ADJ. EBITDAMARGIN
CORE REVENUEGROWTH Q3’19 YTD7.0%
>25%
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Diagnostics Platform Evolution
Focusing our Diagnostics portfolio on attractive end-markets
5 YEARS AGO Immuno-
assay
Pathology
ClinicalChemistry
Molecular
Acute /POC
OtherClinical
Chemistry
Acute /POC
Hematology &Urinalysis
Other
Immuno-assay
Pathology
MSD/HSD50% OF REV.
Hem. &Urinalysis
LSD 50% OF REV. LSD 30% OF REV.
DD 15% OF REV.
MSD/HSD55% OF REV.
$4.4BREVENUE
~4%CORE GROWTH
HIGH-TEENSADJ. EBITDA MARGIN
$6.3B REVENUE
7.0%CORE GROWTH
>25%ADJ. EBITDA MARGIN
TODAYREVENUE & CORE GROWTH MIX
MicroScan2004 2018
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“Today” refers to 2019 9M core revenue growth; all other figures represent FY 2018 performance
Comprehensive portfolio with strong footholds across Dx landscape
Well-Positioned in Diagnostics
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BEST IN CLASS MOLECULAR DX
SCALED “NICHE” POSITIONS
STRONG CORE LAB PRESENCE
• Largest installed base & test menu
• DD core growth
• Each ~$1B annual revenue
• HSD core growth
INDEXING OUR PORTFOLIO TO ATTRACTIVE PARTS OF THE INDUSTRY
• A leading player• MSD core growth
Surgical, Intensive Care
Anatomic Pathology, Cytology,
Molecular Medicine Labs
Hematology, Chemistry, Microbiology
Blood Banking, Urinalysis
Point of Care
Oncology, Tumor Boards
Emergency
Neo-natal
WHERE WE PLAY
Core revenue growth rates above refer to the businesses’ performance in the first nine months of 2019
Our Diagnostics platform is outperforming peers
How We Win in Diagnostics
OUR STRATEGIC FOCUS
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DHRDiagnostics
Platform
DiagnosticsPeers
DHRDiagnostics
Platform(incl.
Cepheid)
DiagnosticsPeers
CORE REVENUE GROWTH VS PEERS
2014 – 2016 2017 – 2019 9M
LSD
MSD
CUSTOMER-CENTRICSOLUTIONS
INNOVATION & COMMERCIALEXECUTION
HIGH GROWTHSEGMENTS
DBS Growth tools driving higher cadence of innovation and improving commercial execution
+3XNUMBER OF DX PLATFORM
2019 CLINICAL TRIALS VS. 3 YEARS AGO
Best-in-class automation, software & service to provide consistent, reliable results to improve patient outcomes
BECKMAN DXA 5000(AUTOMATION)
Strong positions in attractive, fast-growing areas of the industry: molecular, POC, HGM
>$2BDX PLATFORM
2018 HGM REVENUE
EXAMPLES
Tailored Approach to an Acquisition
Selective application of DBS tools to drive most impactful results
COMMERCIAL EXECUTION
OPERATIONAL LEVERAGE
BUILD GLOBAL SCALE
KEY PRIORITIES
• 20 DHR associates facilitated DBS post close
• ~200 senior leaders completed DBS Orientation in the first 6 months
DBS INTEGRATION
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Manufacturing inefficienciesCapacity constraintsHigh indirect costs (as % of revenue)
Limited market visibility and structured, replicable sales & marketing processes
Predominantly in developed markets with limited presence in attractive HGM
SITUATION AT ACQUISITION
Rapid DBS adoption has been a key driver of Cepheid’s performance
COMMERCIAL EXECUTION
OPERATIONAL LEVERAGE
BUILD GLOBAL SCALE
~$600M >$1.0B
DD DD
$50M~50% ~60%
Flat/LSD ~20%
Annual Revenue
Core Growth
Annual R&D Spend
Gross Margin
Operating Profit Margin
AT ACQ. TODAY
Cepheid Update: Results Since Acquisition
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PRODUCT QUALITY IMPROVEMENTS
+10%
REVENUE IN CHINA SINCE ACQUISITION
+5X
KEY PRIORITIES & RESULTS
+3XMARKET
VISIBILITY
+2XSALES
FUNNEL $
+20%NEW
CUSTOMERS
APPROVED IN CHINA TODAY
5 TESTS
INDIRECT COSTS AS % OF REVENUE
-200BPS
3 YEARS IN
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Best-in-class Diagnostics platform well-positioned in attractive, fast-growing parts of the market
Cepheid exceeding initial expectations, with outstanding results driven by the team’s DBS execution
Strong portfolio united by a common business model and the Danaher Business System (DBS)
Summary
Non-GAAP Reconciliations
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Diagnostics
Operating Profit (GAAP) 1,073.8$
Depreciation 379.2
Amortization 209.8
Adjusted EBITDA (Non-GAAP) 1,662.8$
Interest, net
Other Income
Income Taxes
Depreciation
Amortization
Net Income Continuing Ops (GAAP)
Net Sales 6,257.6$
Adjusted EBITDA Margin (Non-GAAP) >25%
Year-Ended December 31, 2018
(1) Management defines "Adjusted EBITDA" as GAAP operating income excluding (1) depreciation and (2) amortization, and defines "Adjusted EBITDA Margin" as Adjusted EBITDA divided by sales.
Diagnostics Core Revenue Growth% Change Nine-Month
Period Ended September 27, 2019 vs.
Comparable 2018 Period
Total Sales Growth (GAAP) 4.0%Less the impact of: Currency exchange rates 3.0%
Core Revenue Growth (Non-GAAP) 1 7.0%
1 We use the term “core revenue” to refer to GAAP revenue excluding (1) sales from acquired businesses recorded prior to the first anniversary of the acquisition less the amount of sales attributable to divested businesses or product lines not considered discontinued operations (“acquisition sales”) and (2) the impact of currency translation. The portion of GAAP revenue attributable to currency translation is calculated as the difference between (a) the period-to-period change in revenue (excluding acquisition sales) and (b) the period-to-period change in revenue (excluding acquisition sales) after applying current period foreign exchange rates to the prior year period. We use the term “core revenue growth” to refer to the measure of comparing current period core revenue with the corresponding period of the prior year.