MoldMaking Technology

NOV 2018

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INDUSTRY FOR MORE INFORMATION: Michael Guckes, Chief Economist, Gardner Intelligence / 40 MoldMaking Technology —— NOVEMBER 2018 PRESENTED BY Medical Industry Strengthens Finances in Second Quarter Data suggests growing capital spending by medical manufacturers through 2018. Gardner Intelligence reviewed the medical industry using its proprietary data and the inancial iling results of nearly 70 publicly traded medical irms for the second quarter of 2018. The review indicates an industry experiencing growth in rev- enues, earnings (EBITDA), free cash flow and capital expendi- tures. The latest quarterly results* signaled a slight increase in the growth rate of capital expenditures. The most signiicant inancial improvement in the industry was in earnings growth, which turned positive in the second quarter after contracting during the preceding two quarters. Capital expenditures, which includes spending on manufac- turing equipment, grew from 2.8 percent at the end of the irst quarter of 2018 to 3.7 percent by the end of the second quarter. This reverses the slowing growth trend in capital expenditures that began after capital spending growth reached a peak of more than 17 percent in the irst half of 2017. An analysis of quarterly data between the fourth quarter of 2014 and the second quarter of 2018 indicates a statistically signiicant relationship between revenue change in a given quarter and a subsequent change in capital expenditure two quarters later. Assuming an accurate forecast of revenues based on the Wall Street consensus forecast, this simple linear regression analysis—which considers no other factors—predicts total capital spending growth of 11.3 percent during calendar year 2018 followed by slowing growth of 6.6 percent in 2019. Gardner Business Index data from manufacturers supplying the medical industry is copacetic with Wall Street's near-term optimism. According to Gardner Intelligence's survey data in the year-to-date period ending in August 2018, manufacturers serving the medical industry have experienced strong growth in new orders, production and more recently, supplier deliveries. Several of the business components that constitute the Gardner Business Index, including backlogs and exports, have expe- rienced unusually long periods of continu- ous expansion. Backlogs have continued to expand every month since July 2017, repre- senting the longest continuous stretch of medical manufacturing backlog expansion in recorded history. Similarly, one would have to go back to 2012 to ind a stretch of time during which medical manufactur- ing exports expanded for more than eight consecutive months. On-going expansion in new orders and production, along with many months of growing backlogs, sug- gests that manufacturers are highly likely to close out 2018 in very good condition. *All quarterly results are calculated based on the trailing twelve months. Comparisons between two quarters one year apart represent a 12/12 rate of change. Medical Industry Actual and Estimated Results 2014 Q2 2016 Q2 2018 Q2 2020 Q2 -20% -10% 0% 10% 20% 30% 40% Real YOY% Change Capital Expenditures EBITDA Free Cash Flow Revenue

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