Gardner Denver Third Quarter 2017 Earnings...
Transcript of Gardner Denver Third Quarter 2017 Earnings...
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Disclaimer
Forward-Looking Statements
During the course of this presentation, we may make “forward-looking statements” within the meaning of the USfederal securities laws. In fact, all statements made during this presentation other than statements of historical factare forward-looking statements. Words such as “expects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,”“projects” and “indicates” and variations of such words or similar expressions are intended to identify forward-looking statements. Although they reflect our current expectations, these statements are not guarantees of futureperformance, and actual results may differ materially from what is expressed in or indicated by these forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actualperformance or results to differ materially from those expressed in such forward-looking statements, including thoserisks and uncertainties described under the section titled “Risk Factors” in our prospectus dated May 11, 2017, filedwith Securities and Exchange Commission (“SEC”) on May 15, 2017, which risks and uncertainties may be updatedfrom time to time in our periodic filings with the SEC (accessible on the SEC’s website at www.sec.gov). Forward-looking statements speak only as of the date the statements are made. The Company does not undertake to updateany forward-looking statements as a result of future developments or new information, except as required by law.
Non-GAAP Financial Measures
Included in this presentation are certain non-GAAP financial measures designed to supplement, and not substitute,the financial information presented in accordance with generally accepted accounting principles in the United Statesof America because management believes such measures are useful to investors. The reconciliation of thosemeasures to the most comparable GAAP measures is detailed in Gardner Denver’s press release for the third quarterof 2017, which is available at http://investors.gardnerdenver.com, together with this presentation.
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Agenda
▪ Highlights
▪ Financial Performance
▪ Segment Highlights
▪ Full Year 2017 Guidance & Summary
▪ Q&A
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Q3 Highlights
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Solid performance across all three segments and continued
execution of our value-creation strategy
A premier industrial company with leading brands, mission-critical technologies, and diverse end market exposure
Strong Execution
Improving Leverage Profile
Favorable Outlook
Revenue of $650M, up 40% versus prior year
Adjusted EBITDA of $165M, up 85% versus the prior year
Adjusted EBITDA margin of 25.4%, an improvement of 620 basis points versus prior year
Free cash flow generation of $54MM, up 210% versus prior year
Net debt to adjusted EBITDA leverage improved from 3.8x to 3.2x versus the
prior quarter & 1.0x turn since the time of the IPO
Increasing 2017 guidance for adjusted EBITDA by 7% to $550M to $560M
Targeting year-end net debt to adjusted EBITDA leverage of ~3.0x
Q3 Highlights – Executing Our Strategy
Deploy Talent
Creating a performance driven culture with highly engaged employees:
– Creating a great place to work – launched multi-year engagement initiative
– Acting like owners – awarded ~$100M in equity across ~6,000 employees
Continue to enhance expertise and talent in critical functions
Expand Margins
Driving Lean Manufacturing across multitude of sites (still early)
Leveraging spend across organization (e.g., freight, sourcing) to generate further savings
Maturing Value Engineering process to drive further product cost reductions
Accelerate Growth
Commercializing new products with new sophisticated Demand Generation process
Embedding smart technologies (e.g., iConn) into products
Leveraging investments in emerging markets - “innovation in the region for the region”
Allocate Capital Effectively
Invest in core: new products, new technologies and emerging markets
Reduce leverage: Net Debt-to-Adjusted LTM EBITDA target
Execute disciplined M&A based on clear strategic and financial criteria
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Strong Foundation, Clear Strategy, Committed Leadership
Q3 Financial Performance
7¹ Adjusted EPS is defined as adjusted net income divided by adjusted diluted average shares outstanding
(Dollars in millions, excl. EPS)
Revenue
$463
$650
2016 2017
Adjusted EBITDA
$89
$165
2016 2017
Adjusted EPS1
$0.15
$0.41
2016 2017
Up 40% Up 85%Margin Up 620 bps
Up 173%
25.4%Margin
19.2%Margin
Pro-formaIPO
4.2x3.8x
3.2x
Q1'17 Q2'17 Q3'17
Q3 Financial Performance (continued)
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(Dollars in millions)
LeverageFree Cash Flow1Working Capital(Op. Working Capital as % of LTM Sales) (Net Debt / LTM Adjusted EBITDA)
$18
$54
2016 2017
Improved 110 bps Up 210% Improved 0.6x sequentially
¹ Free Cash Flow is defined as cash flows from operations less capital expenditures
31.9%
30.8%
2016 2017
Industrials Segment – Q3 Highlights
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(Dollars in millions)
Highlights:
Orders up 14% as reported; up 11% ex-FX
Revenue up 6% ex-FX
Solid broad-based orders growth with all regions showing
positive momentum versus prior year
Adjusted EBITDA margin up 100 bps benefiting from increased
volume and continued progress on productivity initiatives
(VAVE, lean, restructuring)
Ultima Oil Free Screw CompressorEntering $3B+ oil free market with state-of-the-
art compressor providing > 13% more energy efficiency, > 40% footprint reduction and lower
noise levels than comparable machines.
As Reported
PriorYear
YOYChange
Ex-FX YOY Change
Revenue $288.2 $265.6 8.5% 5.9%
Adjusted EBITDA $63.1 $55.6 13.5% 10.1%
Adjusted EBITDA Margin 21.9% 20.9% 100 bps
Innovation in Action
Energy Segment – Q3 Highlights
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(Dollars in millions)
Highlights:
Orders up 48% as reported; up 46% ex-FX
Revenue up 116% ex-FX
Upstream revenue up > 250%; mid-downstream up double digits
Aftermarket revenue up 107%; 55% of LTM sales
Adjusted EBITDA margin up 1670 bps benefiting from increased
volume and operational efficiencies
As Reported
PriorYear
YOYChange
Ex-FX YOY Change
Revenue $301.6 $137.9 118.7% 115.9%
Adjusted EBITDA $98.6 $22.0 348.2% 342.7%
Adjusted EBITDA Margin 32.7% 16.0% 1670 bps
Vacuum System for Chemical ManufacturingEngineered system for manufacture of specialty chemicals utilizing both Nash vacuum liquid ring
pumps and Industrial blower technology. First system of its kind manufactured in Gardner Denver’s India
facility.
Innovation in Action
Medical Segment – Q3 Highlights
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(Dollars in millions)
Highlights:
Orders up 19% as reported; up 17% ex-FX
Revenue up 7% excluding impacts of FX and dual sourcing
customer transition
Seeing an increase in quotations and design specifications for
liquid pumps and liquid handling solutions… solid momentum
heading into 2018.
Adjusted EBITDA margin flat
As Reported
PriorYear
YOYChange
Ex-FX YOY Change
Revenue $59.8 $59.1 1.2% (0.9%)
Adjusted EBITDA $16.8 $16.6 1.2% (1.4%)
Adjusted EBITDA Margin 28.1% 28.1% 0 bps
Gardner Denver MC6000 Syringe PumpEntering genomics end market with multi-
channel syringe pump designed for optimum liquid handling performance and longer life and
reliability.
Innovation in Action
2017 Guidance
▪ Adjusted EBITDA $550M to $560M
▪ Capital Expenditures $50M to $60M
▪ Year End Net Debt Leverage1 ~3.0x
▪ Average Shares Outstanding2 188.2M
142 Represents the full year computation of weighted average shares outstanding and share price as of 9/30/2017
¹ Excluding the impact of any potential future acquisitions
Summary
Across the board strength in Q3
40% revenue growth with double-digit orders growth across all three
segments
25.4% adjusted EBITDA margin with margin expansion of 620 bps
Leverage reduction to 3.2X
4Q 2017 building on current momentum
Raising full year 2017 Adjusted EBITDA guidance
Strong cash flow generation and further reducing leverage position1
Continued execution of our value-creation strategy … Deploy Talent,
Expand Margins, Accelerate Growth and Allocate Capital Effectively
15¹ Excluding the impact of any potential future acquisitions
Reconciliation of Net Income/(Loss) and Earnings/(Loss) per Share to Adjusted Net Income and Adjusted Earnings per Share
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Reconciliation of Net Income/(Loss) to Adjusted EBITDA and Adjusted Net Income and CFOA to Free Cash Flow
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