JEFFERIES HEALTHCARE CONFERENCE · JEFFERIES HEALTHCARE CONFERENCE MARK FROST, ... this presentation represent the Company’s views as of the date of this document. ... Mammo…

J E F F E R I E S H E A L T H C A R E C O N F E R E N C E

MARK FROST, SENIOR VICE PRESIDENT AND CFO

JUNE 9, 2016

I N V E S T O R O V E R V I E W

Safe Harbor

2

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 1995. 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, acquisition related risks, and other factors discussed in our most recent quarterly or annual 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 forward-looking statements. These forward-looking statements should not be relied upon as representing the Company’s views as of any later date.


Use of Non-GAAP Financials

3

This presentation includes non-GAAP financial measures that are not in accordance with, nor an alternative to, generally accepted accounting principles and may be different from such non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

Management uses non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted earnings per share to evaluate the Company's operating performance against past periods and to budget and allocate resources in future periods. These non-GAAP measures also assist management in understanding and evaluating the underlying baseline operating results and trends in the Company’s business.

Non-GAAP 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 non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures can be found in the appendix to this presentation and our Third Quarter FY2016 press release issued June 1, 2016 available at our website http://investor.analogic.com.


Innovations Creating Barriers to Entry

• Founded in 1967• Advancing image guidance

technology for medical and security• Global research, engineering, and

operations7 R&D and manufacturing locations worldwide

Fiscal 2015 Highlights:• $540 million• Over 30% EPS CAGR• Operating cash of $39 million, Free

cash of $29 million• 1,600 employees worldwide

> 40% increase in revenue/employee

4


Our Technology Capabilities

5

Material Science Signal and image processing

Precision A/D conversionPrecision RF/Power Amplification

Imaging & Guidance

“Core Technologies”

“Critical Imaging Chain”

Mammo

Ultrasound

Probes

High voltage power suppliesHigh power amplifiers

Pulsed RF power

Selenium direct conversion detectors

U/S probes that go inside body

GPU based designSynthetic Aperture

“Full Systems”

MRICT

Data Management Systems

Non-contact power

Urology & Surgery

Handheld

Medical CT

Security CT

EMED & Anesthesia

Intuitive User interfaceTelehealth

Real time Image guidanceMin invasive procedure guidanceModular design CT

Designed for reliability

High performance, high reliabilityThreat detection

2D Transducer ASIC ultrasound


Sustaining Long Term Profitable Growth

2009-2012 2013-2014 2015 forward

Transform

Stabilize

Growth

6

• Shed underperforming businesses• Aligned business in 3-Pillars• Invested in Shanghai operations• Optimized manufacturing footprint• Achieved double digit OM and rev. growth

• Shanghai fully operational• Entered POC Ultrasound market• Built and stabilized sales channels• Full portfolio in checked baggage EDS

• Transformed to a market based company• Launched full BK branded product line• Launched exciting new handheld U/S• Expanding U/S through partnerships• Growing content in Medical Imaging• First in applying CT to the Checkpoint• New market for Rapid DNA developing


Portfolio Strategy for GrowthMedical ImagingUltrasound Security & DetectionHigh Barriers in Critical Imaging Chain

Real-time Guidance Solutions

Expanding Detection Applications

• Breakthrough reliability• Increase content with OEMs• Leverage common platforms• Drive growth in emerging markets

• Go deep in core Urology / Surgery• Accelerate Point of Care adoption• Expand Healthcare Services• Advance our new technologies

• Drive share in checked baggage• Position CT for checkpoint• Accelerate RapidDNA analysis• Leverage detection technologies

7

ULTRASOUND


Cardiology19%

OB/GYN16%

Radiology / General Imaging

30%

IR 3%

Rest of POC6%

Other18%

Expanding Market Reach

9

Global Ultrasound Market 2013, $5.8B

GrowingPresence

Source: Klein, InMedica

1

2

1 POC: Point of care2 IR: Interventional Radiology

Radiology / General Imaging 1-2%

Market Segments

TechnologyPartnerships

$0.1

$0.2$0.6

$1.9

$0.9

$1.1

$1.1

OB/GYN 3-4%

Cardiology 4-5%

Point of Care 7-8%Surgery 3-4%Urology 4-5%

~$5.8BAddressable Market

Other/Shared

ExpandingMarket Reach

Segment CAGR(thru 2018)

Anesthesia 3%


Positioned for Growth in Key Segments

10 *Analogic Patented and Trademarked Technology

InnovatingPoint of Care

Sonic Window

Sonix One

Urology

bk3000

SurgicalGuidance

bk5000

POCAnesthesia/EMED

bk3500

General Imaging

Partnerships


Ultrasound Solutions for Extended Point of Care

11

• Assess kidney dialysis fistulas

• IV Placement

• Peripheral Inserted Central Catheter (PICC)

• First shipments for use in dialysis centers occurred in Q3 FY16

• Evaluation with major dialysis providers

• Gen 2 with auto vessel tracking achieved regulatory clearance in U.S., E.U. and Canada

0

1

2

3

4

2015 2016 2017 2018 2019 2020

Dial

ysis

Patie

nts (

M)

Worldwide Dialysis PatientsCAGR 6%

MEDICAL IMAGING


Guidance in Medical Imaging

13

Computed Tomography

Magnetic Resonance

Digital Mammography


Increasing Our Value Content in CT

14

Data Acquisition Subsystem

Detection Management

Subsystem

Power & DataManagement

CT Imaging engine

Image Reconfiguration

New business growth opportunities with

current & new OEMs

Historical base business with

OEMs


Heilongjiang

Jilin

Liaoning

Hebei

Shandong

Fujian

Jiangxi

AnhuiHubei

Hunan

GuangdongGuangxi

Shanghai

Henan

Shanxi

Inner Mongolia

Shaanxi

Ningxia

Gansu

Qinghai

Sichuan

Guizhou

Yunnan

Tibet

Xinjiang

Jiangsu

Zhejiang

Beijing

Highly Ruggedized CT Platform for Emerging MarketsInstalled Base: June 2016

15

~ 100 installed


Magnetic Resonance Power Sub-systems

16

RF Amplifier

GradientAmplifier

• Enabled 3T wide bore systems

• Common platforms and modular design

• Design wins with new market entrants


Digital Mammography Detector Sub-Systems

17

Analogic Enables Best Detection • Superior Se Based Technology

• Premium 3D tomo performance

• Lower dose with best image quality

• Fastest Image acquisition

US installed base of 2D is ~ 11,000 systems, more than 5000 are 7+ yearsReplacement cycle is moving to 3D

SECURITY AND DETECTION


Major Aviation Market Trends

19

North America

Steady Demand

• 1800 sockets (>90% CT)

• Significant US medium speed population past 10 year design life

• US extended EDS lifecycle to 15 yrs-recap continuing

• Canada deploying high speed EDS

Europe and Middle East

Increasing Momentum

• 2000 sockets (<15% CT)

• EU standard 3 being implemented

- UK by 2018

- Rest of EU by 2022

• Middle East expanding hubs

• Alternative technologies getting some wins

Asia-Pacific

Major Hub First Adopters

• 2700 sockets (<5% CT)

• China and India growth markets

• Major hubs follow US/EU

Souce: Market Reports, Customer and Analogic Estimates


Growing with winning partners

• Exclusive relationship for U.S. replacements• Major wins outside the U.S. with XLB

High Speed1,200 bags/hour

Medium Speed550 & 720 (ES) bags/hour

• Major wins in UK• Wins in Abu Dhabi and Santiago

HI-SCAN 10080 XCT

High Speed1,800 bags/hour

20


CT positioned to win at the checkpoint

1

2

3

21

EU legislation supports deployment in 2017 with liquids and laptops in bags; TSA evaluating technology for deployment

Commercial trials in Europe validated a 2X operational improvement with over 1.3 million bags scanned while improving detection

CT technology can cut passenger wait times in half and potentially save US airports over $1 billion over 10 years


Emerging Rapid DNA Opportunity

22

Rapid DNA: DNA profile in 84 minutes by non-technical user in

field environment

Human AnalystProfile Match

Hours - Weeks

Conventional DNA Analysis: Days to weeks process by highly trained personnel in accredited lab

• FBI NDIS (National DNA Index System) approval received in March 2016, RapidDNAlegislation still pending in Congress

FINANCIALS


Continued Strong Financial Performance

Revenue CAGR

6% >30%Earnings per share

CAGR

24

9pts.Non-GAAP Operating

Margin expansion

$387 $415

$474 $517

$550 $518 $540

FY09 FY10 FY11 FY12 FY13 FY14 FY15

Revenue (millions)

$0.29

$1.23 $1.42

$3.42

$2.48 $2.72 $2.66

$0.81

$1.72

$2.35

$3.60 $3.88

$3.52

$4.05


Earnings Per ShareGAAP Non-GAAP*

-1%

5%4%

8% 8%

6%

8%

3%

7%8%

12%13%

10%

12%


Operating MarginGAAPNon-GAAP*

* Non-GAAP operating margin and EPS figures exclude certain charges; please refer to the non-GAAP reconciliation table in the back of this presentation.


6%8%

11%14% 14%

16%

FY10 FY11 FY12 FY13 FY14 FY15

Segment Performance

25

$251$293 $302 $319 $296 $293


Medical Imaging

$113 $129 $151 $150 $152 $166


Ultrasound

$51 $51 $64 $82 $69 $82


Security

Rev

enue

$M

M

• Non-GAAP operating margin/income figures exclude certain charges; please refer to the non-GAAP reconciliation in the back of this presentation.

6% 5%

11%

4% 3% 2%


16% 17%20%

24%

11%

17%

FY10 FY11 FY12 FY13 FY14 FY15Non

-GAA

P* O

pera

ting

Mar

gin

Non-GAAP OM 6% 8% 11% 14% 14% 16%GAAP OM 4% 4% 6% 10% 10% 13%

6% 5% 11% 4% 3% 2%5% 1% 7% -2% -4% -5%

16% 17% 20% 24% 11% 17%13% 14% 16% 21% 7% 13%


Strong Balance Sheet and Cash Flows

261 As of July 31, 2015

$20

$28

$13$20 $19

FY11 FY12 FY13 FY14 FY15

Capital Returned to Shareholders

(Dividend/Buyback)

$30

$74

$40$41

$39


Operating Cash Flow (millions)

Includes $12MM

tax refund

• $128MM1 of Cash/Investments with no long term debt

• Consistent cash flows

• Capital allocation through ongoing investment, M&A and share re-purchase

• Additional $15 million repurchase program in place

$8

$43

$16

$30 $29


Free Cash Flow (millions)

1 As of April 30, 2016


FY16 Outlook: Strong Direct Ultrasound Drives MixSecurity and Legacy OEM Probes stabilize at lower annual run-rates

Medical Imaging business consistent; expect full year revenue flat to slightly down• CT mix shifting to higher level content private label systems in China, MRI down slightly• Mammography strengthening on new China customers

Ultrasound total revenue up modestly includes drag from legacy OEM probes; direct up double-digits• OEM legacy probes stabilizes at $12-14 million • North America and Asia direct sales growing at double digits• Sonic Window sales increasing and under evaluation for adoption by major dialysis providers• bk3500 Point of Care and sales to our technology partner for general imaging accelerating growth

Security and Detection stabilizes at lower annual run-rate, down approximately 30% for the year• Q4 revenue bottoms out, FY17 growth outlook strengthening from International high speed tenders• Stable revenue run rate for US TSA medium speed market• Rapid DNA slowly restarting and in test for new international standard that covers US and OUS

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Given the short term headwinds in Security and OEM Legacy Probes, for the full year we expect total revenue down approximately 6% on a reported basis, with favorable mix and cost focus driving continued

Non-GAAP operating margin expansion of approximately 1 pt.


Investment Thesis

• Our Technologies deliver Products with High Barriers to Entry

• Expanding Available Market Opportunities

• Growing Revenues with Operating Margin Expansion

• Strong Operating Leverage with Consistent Cash Generation

28


Appendix

29


$118$134 $134

$154

$115$128 $128

$0.00

$0.40

$0.80

$1.20

$1.60

$2.00

$60

$80

$100

$120

$140

$160

$180

Q1 Q2 Q3 Q4 Q1 Q2 Q3

Non

-GAA

P EP

S

Rev

enue

($M

M)

Revenue and Non-GAAP EPS*Financial Highlights (Q3’16 vs. prior year)

• Revenue $128M, down 4%

• Gross Margin 43%, up 1 pt.

• Non-GAAP operating margin 12%, up 1.5pts. (GAAP operating margin 6%)

• Non-GAAP EPS $0.80, down $0.27

• $0.24 of discrete tax benefit in Q3’15

• $0.12 of f/x on non-cash charges related to balance sheet items

• GAAP EPS $0.40, down $0.32

• $0.24 of discrete tax benefit in Q3’15

• $0.09 of restructuring

• $0.12 of f/x on non-cash charges related to balance sheet items

Q3’16 HighlightsImproved non-GAAP operating margins on product mix

* Non-GAAP operating margin/income figures exclude certain charges; please refer to the non-GAAP reconciliation table in the back of this presentation and in Analogic’s Q3 FY 2016 earnings release available athttp://investor.analogic.com.

30

Non-GAAP EPS $0.63 $1.08 $1.07 $1.28 $0.55 $1.18 $0.80

GAAP EPS $0.29 $0.78 $0.72 $0.86 $0.11 $(0.24) $0.40

http://investor.analogic.com/


Medical Imaging, up 1% • MR strong, up on growth from China customers• CT flat for the quarter. Shipped 100th ruggedized CT unit to China• Mammography down on strong comparison to last year and timing

Ultrasound down 3%, impacted by expected legacy probe declines• Direct ultrasound up 12% on strong growth in Europe and China• OEM legacy probes stabilizing, expect revenues to annualize at $12-14 million• Production start delays on bk3500 POC and for our technology partner for general imaging• Initial shipments started for Sonic Window in dialysis

Security and Detection was down 24% on delays in international high speed• Stabilizes at new lower annual run-rate in FY17• Medium speed TSA shipments continued at lower rate• International airport high speed shipments saw lower revenue with improved margins• Limited Rapid DNA shipments during quarter

Q3’16 Segment Highlights

31

Sonic Window


FY15

$67 $73 $72

$81

$65 $74 $73

-10%

0%

10%

20%

Q1 Q2 Q3 Q4 Q1 Q2 Q3

Medical Imaging

$38 $42 $39 $47

$37 $43 $38

-10%

0%

10%

20%

Q1 Q2 Q3 Q4 Q1 Q2 Q3

UltrasoundFY15 FY16

32

• Medical Imaging revenue up 1% due to growth in MR, partially offset by Mammography; non-GAAP operating margin up 3 pts. in the quarter as compared to Q3 ’15 due to customer mix and improved cost controls.

• Ultrasound revenue direct up 12%, overall reported down 3% due to growth in Europe and China offset by expected OEM legacy Probes decline. Non-GAAP operating margin remained roughly flat.

• Security & Detection revenue decreased 24% from Q3 ’15 due to lower volume in medium speed and shift in high speed mix; non-GAAP operating margin up 1pt. due to lower operating expenses.

$14 $18 $23 $26 $13 $11

$18

-10%

0%

10%

20%

Q1 Q2 Q3 Q4 Q1 Q2 Q3

Security & Detection

Revenue $M and Non-GAAP* Operating Margin Trend

Non-GAAP Operating Margin*

Non-GAAP OM 14% 15% 15% 18% 15% 21% 18%GAAP OM 11% 13% 12% 15% 10% 16% 14%

FY16

9% 18% 18% 18% 10% 9% 19%4% 14% 14% 15% 1% -1% 14%

FY16FY15

* Non-GAAP operating margin/income figures exclude certain charges; please refer to the non-GAAP reconciliation table in the back of this presentation and in Analogic’s Q23FY 2016 earnings release available athttp://investor.analogic.com.

0% 6% -4% 5% -4% 7% -5%-8% 0% -11% -2% -12% -23% -13%

Operating Performance by Segment

http://investor.analogic.com/


Working Capital and Cash Flow

• Accounts receivable flat sequentially on flat revenue

• Inventory up sequentially due to China transfer for MRI and Motion

• Operating cash flow of $16M, Free cash flow of $11M

33

(Amounts may not foot due to rounding to millions)

Working Capital(Unaudited - in millions) Q3 FY16 Q2 FY16 Q4 FY15 Q3 FY15

Cash and Investments $ 128.1 $ 120.1 123.8 $ 119.8

Accounts receivable 95.3 95.2 119.3 102.0 Inventories 153.5 149.7 132.7 145.3 Other Working Capital, Net (69.9) (63.8) (59.0) (52.5)

Non-Cash Working Capital 178.8 181.1 193.0 194.8

Net Working Capital $ 307.0 $ 301.2 316.8 $ 314.6

Cash Flow Q3 FY16 Q2 FY16 Q4 FY15 Q3 FY15(Unaudited - in millions)

Operating Cash Flow from operations $ 16.0 $ 5.2 12.6 $ 6.8 Capital Spending 5.1 1.7 2.8 2.3

Free cash flow* 10.9 3.5 9.8 4.5

Stock repurchased and dividends paid 5.8 4.9 4.9 4.9 Cash flow after stock repurchase and dividends $ 5.1 $ (1.4) 5.0 $ (0.4)


Non-Gaap Reconciliation

34

I N V E S T O R O V E R V I E W35

NON-GAAP STATEM ENTS OF OPERATIONS RECONCILIATION

(In thousands, except per share data)July 31, 2009 July 31, 2010 July 31, 2011 July 31, 2012 July 31, 2013 July 31, 2014 July 31, 2015

GAAP Income From Operations -$4,496 $21,320 $20,736 $39,963 $45,375 $29,088 $40,599

Share-based compensation expense 3,968 5,791 9,638 13,396 11,601 11,512 10,93

Tax refund related charges - - - 2,714 - -

BK Medical distributor matter inquiry related costs - - - 1,288 1,211 1,426 2,37

Restructuring 6,619 690 7,066 - 3,519 3,483 (354

Acquisition related revenues and expenses 3,782 2,931 2,377 3,183 8,310 8,773 9,16

Non-GAAP Income From Operations $9,873 $30,732 $39,817 $60,544 $70,016 $54,282 $62,725

Percentage of Total Net Revenue2.6% 7.4% 8.4% 11.7% 12.7% 10.5% 11.6%

GAAP Other Income (Expense), net $2,975 $149 $196 $4,236 ($1,278) ($50) $434

BK Medical distributor matter inquiry related costs - - - - - - 59

Acquisition related revenues, expenses and loss - - - - - 484

Gain on sale of other investments and other (838) - - (2,500) - -

Non-GAAP Other Income (Expense), net $2,137 $149 $196 $1,736 ($1,278) $434 $1,033

Percentage of Total Net Revenue0.6% 0.0% 0.0% 0.3% -0.2% 0.1% 0.2%

GAAP Net Income $3,705 $15,555 $17,833 $43,071 $31,121 $34,480 $33,481

Share-based compensation expense 2,737 3,870 6,583 9,179 8,015 8,155 7,68

Acquisition related revenues, expenses and loss 2,383 1,860 1,146 2,101 6,486 7,615 7,74

BK Medical distributor matter inquiry related costs - - - 830 779 906 2,35

Restructuring and voluntary retirement charges 4,334 438 4,903 - 2,372 2,250 (225

Tax refunds and related charges (2,097) - - (8,285) - (8,764)

Gain on sale of other investments and other (528) - - (1,603) -

Gain on sale of discontinued operations - - (924) - - -

Non-GAAP Net Income $10,534 $21,723 $29,541 $45,293 $48,773 $44,642 $51,034

Percentage of Total Net Revenue2.7% 5.2% 6.2% 8.8% 8.9% 8.6% 9.4%

GAAP Diluted Net Income Per Share $0.29 $1.23 $1.42 $3.42 $2.48 $2.72 $2.66

Effect of non-GAAP adjustments 0.52 0.49 0.93 0.18 1.40 0.80 1.

Non-GAAP Diluted Net Income Per Share $0.81 $1.72 $2.35 $3.60 $3.88 $3.52 $4.05

Twelve Months Ended

I N V E S T O R O V E R V I E W36

NON-GAAP STATEM ENTS OF OPERATIONS RECONCILIATION

(In thousands, except per share data)

July 31, 2010 July 31, 2011 July 31, 2012 July 31, 2013 July 31, 2014 July 31, 2015

Medical ImagingGAAP Income From Operations $ 8,789 $ 12,680 $ 18,854 $ 31,864 $ 31,004 37,905$

Share-based compensation expense 3,791 6,162 7,836 7,064 6,551 4,910 Tax refund related charges - - 2,198 - - - Restructuring 490 2,829 - 1,099 1,669 (213) Acquisition related expenses 2,931 2,931 2,931 3,540 3,016 3,011

Non-GAAP Income From Operations 16,001$ 24,602$ 31,819$ 43,567$ 42,240$ 45,612$ Percentage of Total Net Revenue 6% 8% 11% 14% 14% 16%

UltrasoundGAAP Income (Loss) From Operations $ 6,093 $ 1,081 $ 10,786 $ (3,735) $ (6,785) $ (7,874)

Share-based compensation expense 500 2,078 3,575 2,408 2,795 3,190 BK Distributor matter inquiry related costs 1,288 1,210 1,426 2,377 Restructuring - 3,668 - 2,209 1,357 (79) Acquisition related expenses - (554) 252 4,609 5,732 5,954


SecurityGAAP Income From Operations $ 6,438 $ 6,975 $ 10,323 $ 17,246 $ 4,869 $ 10,568

Share-based compensation expense 1,500 1,398 1,985 2,129 2,166 2,839 Tax refund related charges - - 516 - - - Restructuring 200 569 - 211 457 (64) Acquisition related expenses - - - 162 25 200


AnalogicGAAP Income From Operations $ 21,320 $ 20,736 $ 39,963 $ 45,375 $ 29,088 $ 40,598

Share-based compensation expense 5,791 9,638 13,396 11,601 11,512 10,939 BK distributor matter inquiry related costs - - 1,288 1,211 1,426 2,378 Tax refunds and related charges - - 2,714 - - - Restructuring 690 7,066 - 3,519 3,483 (356) Acquisition related gains and expenses 2,931 2,377 3,183 8,310 8,773 9,164


Twelve months Ended

Documents

JEFFERIES HEALTHCARE CONFERENCE · JEFFERIES HEALTHCARE CONFERENCE MARK FROST, ... this presentation represent the Company’s views as of the date of this document. ... Mammo…