Roper Industries Inc. (ROP) Q1 2012 Earnings Call April 23, 2012 8:30 am ET Executives Brian Jellison – Chairman, President, Chief Executive Officer John Humphrey – Executive Vice President, Chief Financial Officer Paul Soni – Vice President, Controller Analysts Dean Dray – Citi Investment Research Mark Douglass – Longbow Research Jeff Sprague – Vertical Research Partners Alex Blanton – Clear Harbor Asset Management Matt Summerville – Keybanc Terry Darling – Goldman Sachs Christopher Glynn – Oppenheimer Richard Eastman – Robert W. Baird Presentation Operator
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» Roper Industries' CEO Discusses Q1 2011 Results - Earnings Call Transcript
Now if you’ll please turn to Slide 3, I’ll turn the call over to Brian Jellison, Chairman, President and Chief Executive Officer. After his prepared remarks, we will take questions from our telephone participants. Brian?Brian Jellison Thanks, John. Today we’ll kind of go through the first quarter enterprise financial results and then we’ll get into the specific segment detail and the outlook for each of the four segments for the second quarter and balance of the year. We’ll update you on our established guidance for the second quarter and our full-year guidance, and then take your questions. So next slide, please? The first quarter here was another spectacular quarter. We achieved all-time records for revenue, orders, net earnings, EBITDA, operating and free cash flow in the quarter. Total sales were up 10% and importantly organic revenue was up 8%. Our book-to-bill ratio was above 1 at a strong 1.03. Gross margins reached 55%, which is really quite remarkable, and our operating margin leverage was spectacular in the quarter. Operating margins were up 200 basis points to 24%, and our incremental operating margins were 43% in the first quarter. We closed out the quarter with 205 million in EBITDA and an EBITDA margin of 28.9%. The diluted earnings per share were up 20% to $1.09. More importantly, the free cash flow was up 69% to 131 million in the quarter. It is an all-time record first quarter for us and a great start for 2012. Next slide? Our first quarter income statement, you can see here that the revenue was up 10%, 8 organic, and book-to-bill at 1.03. Gross profit up another 70 basis points to 55%. Operating income was up 20%. Tax rate was a little bit higher than the first quarter of a year ago – 40 basis points higher, which cost us a penny. Still, net earnings were up 22% and you can see the DEPS line at 1.09.
Next slide? We had terrific EBITDA growth in the quarter, and if you just continue to look at our trend you can see on this chart our trailing 12-months EBITDA now is $830 million, up from 685 last year on a trailing 12-month basis and 519 million on a trailing basis at the end of Q1 2010. So we’ve added 60% to our EBITDA in just the last two years, and our EBITDA margins on a trailing basis are up 400 basis points from 25% in 2010 to 29% in 2012. People from time to time, investors ask, when are you going to have that deterioration in margin? Our plan would be never. We’re just going to continue to move up that line because of the culture and focus we have here.Next slide? Q1 cash flow, you can see another blowout kind of a quarter here. Our cash conversion was very strong. We had 141 million in operating cash flow, which was $0.20 of every dollar of revenue. The conversion on that, 131% of net earnings. We invested about 10 million in capital in the quarter, which was 1.4% of revenue, right within our kind of 1.2 to 1.6% of revenue plans. So free cash flow was 131 million, 18% of revenue, and the conversion at 121. A remarkable performance against last year’s first quarter, where we had 78 million of free cash flow last year in the first quarter and 131 million this year in the quarter. Next slide? Our asset velocity continues to improve. I know people keep saying it can’t be done, it won’t get better; but it does get better. If you look at the same period, inventory is now down to 7.5%, receivables actually dropped down to 14.5%, payables and accruals at 14.9, so our inventory plus receivables less payables and accruals closed out at 7.1%. If you look at the trend in 2009, it was 9.6, finally breaking below 10, and people would ask us if you could get any better, and the answer is oh yeah – you can get better. Two hundred and fifty basis points improvement over that three-year period, closing out at 7.1% - very exceptional performance. Read the rest of this transcript for free on seekingalpha.com