Gardner Denver Investor Presentation. June 2017

Transcription

1 Gardner Denver Investor Presentation June 2017

2 Disclaimer Forward-Looking Statements During the course of this presentation, we may make forward-looking statements within the meaning of the US federal securities laws. In fact, all statements made during this presentation other than statements of historical fact are 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 future performance, 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 actual performance or results to differ materially from those expressed in such forward-looking statements, including those risks and uncertainties described under the section titled Risk Factors in our prospectus dated May 11, 2017, filed with Securities and Exchange Commission ( SEC ) on May 15, 2017, which risks and uncertainties may be updated from time to time in our periodic filings with the SEC (accessible on the SEC s website at Forward-looking statements speak only as of the date the statements are made. The Company does not undertake to update any 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 States of America because management believes such measures are useful to investors. Examples of non-gaap measures include Adjusted EBITDA and Unlevered Free Cash Flow. For a reconciliation of these non-gaap measures refer to "Adjusted EBITDA Reconciliation" and Unlevered Free Cash Flow Conversion Reconciliation in the Appendix. 2

3 Company Overview & Strategy

4 Gardner Denver Today A Transformed Company An Exciting, Successful Transformation Moving To The Next Phase Began trading on NYSE under symbol GDI on May 12, 2017; up 15% from IPO as of June 12 New, performance-driven management team executing clear strategy Simplified, right-sized and streamlined organization Achieved 2016 Adj. EBITDA margins >20% across all three business segments With A Strong Foundation Highly respected brands with 155+ year legacy of breakthrough innovation; broad range of flow control and compression products and related consumables, parts and services Mission-critical technologies with high cost of failure and low cost relative to overall system Strong aftermarket revenues resulting from large installed base and expansive capabilities Diversified business with exposure to attractive end markets Poised to Capitalize on Recent Growth Investments Sales and profitability improvements driving multiple upside opportunities across segments Significant investments made; well-positioned to capture incremental growth Strong unlevered cash flow generation 4

5 Company Snapshot World-class Flow Control and Compression Business with Leading Market Positions, Geographic and End Market Diversification, Underpinned by Financial Performance $2B Revenue (2016) #1 - #3 Principal Markets 1 35% Aftermarket (2016) Asset-light Avg. Capex ~3% of Sales 21% Adj. EBITDA Margin (2016) 94% Unlevered Cash Flow Conversion ($M) Industrials Energy Medical Revenue $1,082 $628 $229 Adj. EBITDA $218 $144 $62 Adj. EBITDA Margin 20.1% 22.9% 27.1% % of Total Revenue 56% 32% 12% Share core technologies and exhibit similar attributes, including mission-critical products and strong recurring revenue 2016 Revenue Breakdown By Segment By Geography 3 By End Market 4 Energy 32% Medical 12% Industrials 56% APAC 18% EMEA 41% Americas 41% 4% 3% 5% 5% 9% 16% 9% 25% 24% Industrial Manufacturing Energy Transportation Medical Lab Chemical Food & Beverage Environmental Mining & Construction Other ¹ Per management estimates; principal markets in which we compete are defined as markets from which we derive a substantial majority of our revenue. 2 Represents unlevered cash flow conversion in 2016A. Unlevered cash flow conversion defined as (Adj. EBITDA less capex plus in operating working capital) / Adj. EBITDA. 3 Geographic regions are grouped into the Americas; EMEA; and APAC. 4 Classification of end markets for sales made through independent distributors (rather than through direct sales to end market users) is based on management s assessment of the distribution channels through which such sales are made. 5

6 Highly Experienced Management Team 45% of Top 100 New to Company; Focused on Executing Strategy to Drive Profitable Growth and Margin Expansion Key Corporate Leaders Vicente Reynal Chief Executive Officer Industry Experience: 22 Years Andrew Schiesl General Counsel 22 Years Neil Snyder SVP Strategy, Bus. Dev. & Planning: 19 Years Mark Sweeney Chief Accounting Officer 32 Years Kimberly Rubottom VP, Human Resources 30 Years Vikram Kini VP, Finance & Investor Relations 13 Years Sia Abbaszadeh VP, Global Product Mgmt. & Tech., Industrials 31 Years Cesare Trabattoni VP, Demand Gen., Industrials 30 Years Key Business Leaders Todd Herndon Chief Financial Officer Industry Experience: 29 Years Gary Gillespie VP / GM, Americas, Industrials 37 Years Enrique Viseras VP / GM, EMEA, Industrials 17 Years Ringo Lai VP / GM, APAC, Industrials 30 Years Larry Kerr VP / GM, Petroleum and Industrial Pumps, Energy 32 Years Vince Trupiano VP / GM, Nash / Garo, Energy 30 Years Ankush Kumar VP / GM, Emco Wheaton, Energy 16 Years Patrick Bennett President, Medical 25 Years Fostering a Culture of Outperformance with an Intense Customer Focus and Bias for Action Source: Company Filings and Company Website 6

7 Our Vision and Values We Will Be the Industry s First Choice for Innovative and Mission-Critical Flow Control and Compression Products, Services and Solutions Through an Intense Customer Focus and Disciplined Performance Culture Steadfast Integrity Customer Focus Global Teamwork Creative Thinking Bias for Action 7

8 Industrials Segment Overview Focused on Additional Value and Emerging Market Growth Description Wide range of applications for diverse end markets, including associated aftermarket parts, consumables and services; one of the broadest technology portfolios in the markets we serve Key End Markets Compressors Vacuums Blowers Manufacturing Pharmaceuticals Bottle Blowing Significant number of manufacturing facilities across industrial sector use air compression, vacuum and/or blower products in a variety of process-critical applications Food Processing Waste Water Transport 2016 Financials 2016 Revenue Mix Revenue $1.1B Adj. EBITDA $218M Geography Composition APAC 18% Americas Aftermrkt. 32% 35% Adj. EBITDA Margin 20.1% EMEA 65% 50% Equip. 8

9 Industrials Key Takeaways Market Leadership 1 Strong Financial Performance Secular Growth Drivers Leading Platform with Differentiated Capabilities; Significant Upside Opportunity Accelerating growth through innovation, emerging market penetration and smart connected machine software solutions Additional upside through disciplined M&A approach in highly fragmented markets with solid characteristics #1 - #3 $17B Principal Industrial Markets Organizational Improvements; Expanded Margins Implemented operational excellence initiatives & direct material cost programs (sourcing + VAVE) early stages Delayered organization reduced overhead to allow for more agile decision-making while reinvesting in commercial resources Significant margin improvement with record results in 2016 early stages Segment Adj. EBITDA Margin 17.1% 17.2% 20.1% Increasing Need for Efficiency & Technology Driven by rebounding GDP and resultant growth in industrial production activity Market need for energy efficiency products driving innovation and new technologies Application solutions and shift to total life cycle cost drives increased recurring aftermarket Based on internal company estimates and third-party data for addressable market Principal markets in which we compete are defined as markets from which we derive a substantial majority of our revenue 9

10 Energy Segment Overview Significant Investments Made; Well Positioned to Capture Market Recovery Description Wide range of technologies & applications serving diverse customers across up-, mid- and downstream energy markets as well as petrochemical and other key end markets Key End Markets Drill Mud Pumps Hydraulic Frac Pumps Fluid Loading / Transfer Equip. Liquid Ring Vacuum Pumps & Compressors Onshore Drilling Hydraulic Fracturing Fluid Transfer Significant aftermarket/service component driven by high intensity & harsh environment applications from large installed base Petrochemical Power Generation Geothermal 2016 Financials Revenue $628M Adj. EBITDA $144M Adj. EBITDA Margin 22.9% 2016 Revenue Mix Geography APAC 17% Americas EMEA 56% 27% Composition Aftermrkt. Equip. 47% 53% 10

11 Energy Key Takeaways Market Leadership 1 Strong Financial Performance Secular Growth Drivers Proven Earnings Capacity and Wellpositioned to Capitalize in Near-term and Coming Years Significant Investments Made; Expanded Margins & Poised for Growth Multiple Layers of Growth Premium solutions provider and #1 or #2 in the principal markets we serve Innovation leader with largest share of new frac pump unit sales over past 3 years Sole industry provider of complete suite of vacuum liquid ring pumps and compressors #1 - #2 $7B Principal Energy Markets Added service center locations, expanded product portfolio & invested in commercial capabilities Strong Adj. EBITDA margin of 23% (incl. Upstream at 19%) even during recent trough in 2016 Significant acceleration in upstream orders over the past three quarters Energy Segment Adj. EBITDA ($M) $309 $87 $222 $144 $107 $ Mid- and Downstream Energy Upstream Energy 9% Topline & 39% Adj EBITDA Growth in Midand Downstream Energy Despite Headwinds 2 1 Based on internal company estimates and third-party data for addressable market Principal markets in which we compete are defined as markets from which we derive a substantial majority of our revenue 2 Revenue & Adjusted EBITDA growth stated on a FX adjusted basis Upstream Secular: Increase in intensity of hydraulic fracturing Activity: Growth in N.A. land-based activity Non-Activity: Deferred maintenance spending and pending replacement cycle Mid and Downstream Unconventional natural gas development driving investment in Chemical Industry Upstream Energy Orders Momentum -64% -79% -80% -40% -40% -85% 62% 111% 424% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 11

12 Overview of Upstream Energy Business Leading Provider of Reciprocating Positive Displacement Pumps, Notably Frac and Drilling Pumps and Aftermarket Parts, Consumables and Services Drilling (Mud) Pump Anatomy Well Service (Frac) Pump Anatomy Power End Liner Fluid End Valve Seat Module Piston Power End Plunger Packing Set Mud Pumps Frac Pumps 12

13 Upstream Energy Transformation Expanded Service Presence 65% of 1Q17 Revenue from Basins with Most Attractive Breakeven Pricing (oil: low $30s/barrel gas: mid-$2/mbtu) 1 Expanded Product Line New Aftermarket Provides 50%+ Increase in Offerings and Value as Compared to 2012 Leduc, AB Canada Tulsa, OK Oklahoma City, OK Fort Worth TX Midland, TX (Odessa) Dickinson, ND San Antonio, TX Quincy, IL Conroe, TX Houston, TX 160% Increase in Service Center Footprint Since x Capacity on Fluid Ends and Service/Repair & State-ofthe-Art Machine Tools Full Service Capability for All Customer Pump & Aftermarket Needs 85% Coverage of All Active N.A. Land-based Rigs 1 Based on third party estimates Altoona, PA Existing Centers of Support (Before 2013) New Centers of Support (Since 2013) O&G Regions Fluid Ends Parts & Consumables 2012 Today Largely Legacy Carbon Fluid Ends Carbon Steel No In-House Parts or Consumables Offerings Stainless Steel Drilling Pump Modules Packing Full Suite of Fluid End Offerings Carbon Steel Next Gen. Developed Consumables Line Frac Valves & Seats Pistons Will-Fit Drilling Valves & Seats Plungers Continuous Innovation Resulting in Complete Aftermarket Parts, Consumables & Service Offering 13

14 Medical Segment Overview Focused on Capturing New Addressable Market Opportunities Description Products are specified by medical and lab equipment suppliers and integrated into final product; applications include oxygen therapy, blood dialysis, patient monitoring, laboratory sterilization and wound treatment Key End Markets Gas Pumps Liquid Pumps Liquid Handling Solutions Medical Chemical Laboratory Diagnostic Laboratory Recent expansion into liquid pumps and liquid handling solutions opens new addressable markets Negative Pressure Wound Therapy Chemical Distillation OIVA Analysis 2016 Financials Revenue $229M Adj. EBITDA $62M Adj. EBITDA Margin 27.1% 2016 Revenue Mix Geography APAC 16% Americas EMEA 45% 39% 14

15 Medical Key Takeaways Market Leadership 1 Strong Financial Performance Secular Growth Drivers Strong Brands, Broad Solutions & Global Footprint with Significant Growth Potential in New Adjacencies Standalone business segment enhanced focus on customer needs #1 $0.7B Specialized Gas Pump Market Transformed and Now Building Out Robust Platform New management team and standalone segment driving accelerated performance Transforming into provider of solutions for life and lab end market Implemented global sourcing initiatives, and optimizing global footprint in emerging countries Growing Health Needs Globally Evolution of life science research Modernization of healthcare systems globally driving automation of precise liquid handling Trend of aging population and middle class growth in emerging markets driving need for enhanced healthcare solutions Expanded Addressable Market Segment Adj. EBITDA Margin $700M +64% $1,150M 24.0% 26.6% 27.1% Prior Gas Pump Current Liquid Pump & Handling Based on internal company estimates for addressable market 15

16 Our Strategy Will Continue to Drive Results and Shareholder Value Deploy Talent Expand Margins Accelerate Growth Allocate Capital Effectively 16

17 Next Phase of Strategy Execution Will Continue to Deliver Results Initiatives Deploy Talent Expand Margins Accelerate Growth Allocate Capital Effectively Continue to drive measurable improvement across organization by implementing: Company-wide Initiative to measure and drive employee engagement Talent Review process to enhance organization Continue to enhance expertise and talent in critical functions Continue to implement operational rigor initiatives, including Lean Manufacturing conversion (still early) Continue to leverage spend across organization to generate further savings (e.g., auctions, additional low-cost sourcing) Mature Value Engineering process to drive further product cost reductions Accelerate working capital and cash flow improvements; teams accountable for driving improvements across accounts receivable, inventory and accounts payable Commercializing new products with new sophisticated Demand Generation process Continue to embed smart technologies (e.g., iconn) into products Leverage recent investments in emerging markets; develop innovation in the region for the region Invest in core: new products, new technologies and emerging markets Pay down debt and achieve Net Debt-to-Adjusted EBITDA target Execute disciplined M&A based on clear strategic and financial criteria At appropriate time, return cash to shareholders 17

18 Core Strengths We Have a Differentiated Business Model Bolstered by Unique Attributes Well-positioned Given Our Core Strengths and Sustainable Competitive Advantages Market Leadership Positions Across Our Principal Businesses Strong Brands and Reputation Based on 155+ Year Heritage Long-Standing, Deep Customer Relationships 1 2 Competitive Advantages Mission-Critical Technologies with Low Cost Relative to Overall System Significant and Growing Aftermarket Platform Diverse and Attractive End Markets 3 Strong Engineering Capabilities and Significant Investment in Innovation Global Scale and Distribution 4 Resilient Financial Profile That Positions Us Well to Capture Growth Opportunities 18

19 Mission-Critical Technology with Low Cost Relative to The Overall System 1 Mission-critical Products with a High Cost of Failure but Low Cost Relative to Both the System in Which They Operate and the Significant Cost of Unplanned Downtime Case Study: Air Room Case Study: Frac Site Case Study: Flare Gas Recovery Every factory has an air room with compressors Typical air room costs $150K vs. the cost of a factory is in excess of $5M+ If the Compressors Fail, the Manufacturing Facility Cannot Operate A frac pump sustains the greatest pressures and harshest fluids in a hydraulic fracturing process If the Pump Is Down, Production Is Delayed (1 Day = ~$1M+ in Lost Revenue) Recovery of refinery waste gases to eliminate pollution from flaring and recover energy Flare gas recovery system is a nominal portion of the overall cost of a petrochemical site If the Flare Gas Recovery System Fails, EPA Could Shut Down Facility and Issue Significant Fines 19

20 Expanded Aftermarket Platform Drives Highly Profitable Recurring Revenues 2 35% Aftermarket Based on 2016 sales; comprises consumables, parts & services Large installed base drives demand for recurring aftermarket revenue stream Significantly invested to expand aftermarket product offerings and service centers to best serve our customers Our ability to support aftermarket needs is a key decision factor for customers EXAMPLES Product Compressor Frac Pump Liquid Ring Pump Avg. Life Expectancy (Yrs) Cumulative Aftermarket Revenue as a Multiple of Original Product Cost ~1x ~5x ~2x Source: Management estimates 20

21 We Have a Long History of Innovation that We Have Re-Energized 3 Building on Engineering Heritage to Transform New Product Development Process and Accelerate Innovation Moved from a regional, brand-based model to a global product management team organized by technology Increased emphasis on Voice of Customer, inclusive of customer trials and co-development Implemented robust Accelerated Product Development process with key toll gate tracking/metrics approach Proof Point: Industrials >50% Reduction In time-to-market on new platform programs Engaging in cross-functional Monthly Global Product Development Reviews Focusing on larger, more meaningful opportunities iconn Robox Energy Screw Blower Ultima Oil-Free Screw Compressor First to Market Innovation Is in Our DNA Liquid Ring Pump Duplex Drilling Pump Cycloblower 1959 Oil Lubricated Compressor with Turn 1965 Valve Technology Frac Pump Y-Shaped Frac Fluid End Quantima Oil-Free Compressor Robox Energy Screw Blower & Thunder Pump iconn Ultima Oil-Free Screw Compressor

22 Recent Breakthrough Product Innovations Will Fuel Future Organic Growth 3 Ultima State-of-the-Art Oil Free Screw Compressor Thunder Pump State-of-the-Art Hydraulic Fracturing Pump iconn Smart Connected Machines +13% more energy efficient at full load versus lead competitor >40% footprint reduction -5dBA lower noise level versus the equivalent machines Remote monitoring (iconn) enabled At 3,000 brake horsepower, pump delivers optimum BHP at best-inclass operating efficiency 11 stroke length reduces consumable cost by at least 10% Proven fluid end technology outlasts other models 2-3x Air analytics cloud platform focused on smart air management Predictive and cognitive air insights, increasing product uptime Optimizing aftermarket consumables, parts and services intervals Technology extends to entire GD portfolio 22

23 Transformation and Significant Investments Have 4 Delivered Strong Performance Despite Macro Headwinds As Reported $2,570 Revenue ($M) $1,939 Adj. EBITDA Margin (%) 20.9% 20.7% Underlying Transformation Excl. Upstream Energy & FX Adj. EBITDA Margin Expansion 1, % +620 bps 20.4% Segment Adj. EBITDA Margin 1 Industrials Energy Medical Corporate +~440 bps +~500 bps +~350 bps 52% Reduction in Cost ¹ Metrics shown excluding the impact of the recent significant downturn in the upstream energy market and FX 2 Includes $47.3M and $22.7M of corporate expenses not allocated to our segments in 2014 and 2016, respectively 23

24 Financial Overview

25 $40 0 $39 0 $38 0 $37 0 $36 0 $35 0 $34 0 $56 0 $55 0 $54 0 $53 0 $52 0 $51 0 $50 0 $49 0 $48 0 $47 0 $46 0 $45 0 $44 0 $43 0 $42 0 $41 0 $40 0 $39 0 $38 0 $37 0 $36 0 $35 0 $34 0 $33 0 $32 0 $31 0 $30 0 $29 0 $28 0 $27 0 $26 0 $25 0 $24 0 $23 0 $22 0 $21 0 $20 0 $19 0 $18 0 $17 0 $16 0 $15 0 $14 0 $13 0 $12 0 $11 0 $10 0 $90 $80 $70 $60 $50 $40 $30 $20 $10 $ % 120.0% 100.0% 80. 0% 60. 0% 40. 0% 20. 0% 30. 0% 25. 0% 20. 0% 15. 0% 10. 0% 5.0 % 0.0 % Historical Performance Maintained ~20% Adj. EBITDA Margins and Improved Cash Flow Conversion Despite Pressure from Macroeconomic Headwinds ($M) Revenue Adj. EBITDA & Margin $2,570 $2,127 $1,939 $538 $419 $ % 19.7% 20.7% Adjusted Net Income Unlevered Cash Flow & Conversion¹ $230 $395 $128 $134 $367 $ % 94.1% 68.3% ¹ Unlevered cash flow conversion is defined as (Adj. EBITDA less capex plus in operating working capital) / Adj. EBITDA 25

26 1Q 2017 Performance Investments Already Made Are Driving Strong Financial Performance Across All Segments ($M) 1Q Performance 1Q17 YoY Change Constant FX Growth vs. 1Q16 Orders $ % +37% Revenue $ % +12% Adj. EBITDA $92 +20% +23% Adj. EBITDA Margin 19.1% +150 bps +170 bps Highlights Orders, at constant FX, showing strength across entire portfolio: Industrials (+10%), Energy (+111%), Medical (+11%) Revenue, at constant FX, driven by strength in Energy (+44%) and Medical (2%) and somewhat offset by a slight decline in Industrials (-1%), flat excluding 2016 divestitures of non-core assets Adj. EBITDA Margin 1 benefiting from operational leverage across all three segments Industrials: +140 bps Energy: +260 bps Medical: +90 bps ¹ Adj. EBITDA Margin shown excluding the impact of FX 26

27 Capital Allocation Framework Invest for Growth Expect to maintain current Capex rates as a percent of sales (~3%) Continue to Reduce Debt Targeting mid/long-term leverage of 2.5x-3.0x Pursue Value Accretive Acquisitions Pursue opportunities that expand our product portfolio, extend our geographic reach or increase our capabilities Return Cash to Shareholders We are committed to effectively allocate capital to grow the company and achieve top quartile Total Shareholder Return over the long-term We may, in the future, return cash to shareholders through buybacks and/or dividends 27

28 Strong Balance Sheet Post-IPO and Will Continue to Strengthen Sources ($M) Pro Forma Leverage Provides Significant Flexibility for Capital Allocation and Acquisition Opportunities Total IPO Proceeds $950 Pro Forma for IPO ($M) Capital Structure 1Q17 Change PF for IPO 1Q17 Sr. Secured Credit Facility 2 $2,184 $(256) $1,928 Sr. Notes 575 (575) - Receivables Financing Agreement Second Mortgages 2 2 Capitalized Leases Total Debt (Incl. Issuance Cost) $2,782 ($831) $1,951 Unamortized Debt Issuance Costs 55 (21) 34 Total Debt $2,837 ($852) $1,985 Cash (226) (226) Net Debt $2,611 ($852) $1,759 Uses ($M) Paydown of Debt $852 Breakage Fees 46 IPO Fees 52 Total Uses $ x 1Q17 Net Leverage¹ (2.1x) 4.2x Pro Forma for IPO 1Q17 ¹ Net Debt / LTM Adj. EBITDA 2 The change in the Sr. Secured Credit Facility balance includes cash payment of ($277M) and the write off of debt issuance costs of $21M 28

29 Key Investment Highlights Premier industrial company with market leadership, global premium brands and track record of breakthrough technologies Strong financial profile with a clear plan to drive further revenue and earnings growth 2016 Gross Profit Margin: ~37% 2016 Adj. EBITDA Margin: > 20% across all segments 2016 Aftermarket: 35% of revenue Attractive growth levers over the near and long-term Recent investment in innovation (new products) and new business platforms (medical) Exposure to secular tailwinds amplified by significant investments in people, presence and expanded products in U.S. land-based upstream energy Leverage recent investments in emerging markets to increase penetration and growth Robust cash flow generation enabling high-return investments both internally and externally; focused on debt paydown and well-positioned to participate in industry consolidation Energized, experienced management team with a track record of execution and a commitment to drive performance Strong Foundation, Clear Strategy, Committed Leadership and Early Innings 29

30 Appendix

31 Investments Made Over Past 3 Years Position Us to Capture Recovery in Upstream Energy Markets Secular Multiple Layers of Growth Greater Volume of Harsh Proppant Per Stage Longer Laterals Over Time for Each Well Horizontal Rigs Increasing Relative to Total Rig Count Change in Usage and Approach 1 (Indexed from 2014A) Proppant Volume Usage Frac Stages Lateral Lengths 2014A 2015A 2016A 2017P 2018P Activity Nonactivity Hydraulic Fracking Demand Growth U.S. and International Land Rig Count Growth Wave of Replacements Deferred Maintenance 120% 100% 80% 60% 40% 20% 0% -20% Land Rig Count Growth 2,3 (Cumulative since May 2016) U.S. RoW Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar N.A. Hydraulic Frac Horsepower Additions ('000) , ,800 1, Aging Frac Equipment Installed Base 1 2,071 4,801 Pressure Pumping Demand 1 (Millions of HP) ,325 Significant increase in frac pumps ( 11-12) at or beyond useful lives; need for replacement now and in coming years 1,330 1,726 1,035 - Source: Public filings 1 Source: Spears & Associates, Inc. 2 Source: Baker Hughes, Inc. 3 Excludes Canadian rig count due to seasonality

32 Adjusted EBITDA Reconciliation LTM Adjusted EBITDA of $416M as of March 31, 2017 Main adjustments include $25M of impairment of goodwill and other intangible assets and $78M of restructuring and related business transformation costs Other adjustments include sponsor fees & expenses, acquisition-related expenses and non-cash charges, and environmental remediation loss reserve ($M) LTM Q17 1Q16 FY16 FY15 FY14 Net (Loss) Income $(28.4) $(7.0) $(9.9) $(31.3) $(352.0) $(135.9) Plus: Interest Expense $ $ 45.9 $ 43.0 $ $ $ (Benefit) Provision for Income Taxes (20.3) (1.6) (13.2) (31.9) (14.7) 23.0 Depreciation & Amortization Expense Impairment of Goodwill & Other Intangible Assets Sponsor Fees & Expenses Restructuring & Related Business Transformation Costs Acquisition Related Expenses and Non-Cash Charges Environmental Remediation Loss Reserve Other Adjustments (2.5) 40.6 Adjusted EBITDA $ $92.1 $ 76.8 $ $ $

33 Unlevered Cash Flow Conversion Reconciliation ($M) FY 2016A FY 2015A FY 2014A Adj. EBITDA $ $ $ ( - ) Capex ( + ) Change in Operating Working Capital¹ (96.9) Unlevered Cash Flow $ $ $ Unlevered Cash Flow Conversion 94.1 % 94.3 % 68.3 % ¹ Operating Working Capital is defined as: Accounts Receivable, net plus Inventories, net less Accounts Payable 33