Gardner Denver Q1 2018 Earnings Presentation April 27, 2018
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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 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 forwardlooking 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 forwardlooking 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 most recent annual report on form 10- K filed with the Securities and Exchange Commission ( SEC ), 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 www.sec.gov). 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. The reconciliation of those measures to the most comparable GAAP measures is detailed in the Appendix to this presentation. 3
Agenda Highlights Q1 2018 Financial Performance Segment Highlights Full Year 2018 Guidance & Summary Q&A 4
Q1 2018 Highlights Strong Execution Solid performance across all three segments and continued execution of our value-creation strategy Revenue of $620M, up 29% versus prior year Adjusted EBITDA of $148M, up 61% versus the prior year Adjusted EBITDA margin of 23.9%, an improvement of 480 basis points versus prior year Improving Leverage Profile Free cash flow generation of $50M, up $69M versus prior year Net debt to Adjusted EBITDA ratio improved to 2.8x 1.4x turn improvement since the time of the IPO (May 2017) Favorable Outlook 2018 guidance for Adjusted EBITDA increased to $685M to $705M Targeting year-end net debt to Adjusted EBITDA ratio of ~2.1X - 2.3X 1 A premier industrial company with leading brands, mission-critical technologies, and diverse end market exposure ¹ Excluding the impact of any potential future acquisitions 5
Our Strategy Strong Foundation, Clear Strategy, Committed Leadership Deploy Talent Creating a performance driven culture with highly engaged employees Creating a great place to work engagement initiative driving improvement Acting like owners At IPO, awarded 5.5M shares in equity (~$170M current value) 1 Continue to enhance expertise and talent in critical functions Accelerate Growth Expand Margins Commercializing new products with new sophisticated Demand Generation process Embedding smart technologies (e.g., iconn) into products Leveraging investments in emerging markets innovation in the region for the region Driving Lean Manufacturing across multiple sites still in early stages with substantial runway of opportunity Leveraging spend across organization (e.g., freight, sourcing) to generate further savings Launched Innovate 2 Value (I2V) program in early 2018 to accelerate value engineering initiatives and drive further margin expansion Allocate Capital Effectively Invest in core: new products, new technologies and emerging markets Reduce leverage: Net Debt-to-Adjusted EBITDA target Execute disciplined M&A based on clear strategic and financial criteria 1 Based on stock price as of 3/31/2018 6
Q1 Financial Performance
Q1 2018 Financial Performance ($M, excl. EPS) Revenue $620 Adjusted EBITDA 1 $148 Adjusted EPS 1,2 $0.38 $482 $92 19.1% Margin 23.9% Margin $0.13 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Up 29% Up 61% Margin Up 480 bps Q1 2017 Q1 2018 Up 192% Q1 2018 Results Reinforce Investment Thesis 1 Adjusted EBITDA and Adjusted EPS include $5.6 million insurance recovery benefit for previously expensed legal defense costs 2 Adjusted EPS is defined as adjusted net income divided by adjusted diluted average shares outstanding 8
Q1 2018 Financial Performance ($M) Working Capital (Op. Working Capital as % of LTM Sales) 30.7% 29.2% Free Cash Flow 1 $50 Leverage 2 (Net Debt / LTM Adjusted EBITDA) 4.2x 2.9x 2.8x ($19) Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1'17 Q4'17 Q1'18 Pro-forma IPO Improved 150 bps Up $69M Improved 1.4x Since IPO Strengthening Financial Position Through Increasing FCF and De-leveraging ¹ Free Cash Flow is defined as cash flows from operations less capital expenditures 2 Q1 2018 leverage includes the ~$95 million cash consideration paid for Runtech Systems in February 2018 9
Q1 2018 Segment Performance
Industrials Segment Q1 Highlights ($M) As Reported Prior Year YOY Change Ex-FX YOY Change Revenue $316.9 $248.0 27.8% 18.6% Adjusted EBITDA $66.8 $47.2 41.5% 29.7% Adjusted EBITDA Margin 21.1% 19.0% 210 bps Innovation in Action Highlights: Orders up 18% as reported; up 10% ex-fx Revenue up 19% ex-fx Strong broad based orders growth across all three main product technologies and end markets Adjusted EBITDA margin up 210 bps benefiting from continued progress on operational excellence initiatives Cycloblower Variable Helix Series World s first variable helix screw profile for use in blower technology. Unique profile offers unmatched air efficiency versus comparable products, allowing improved performance in applications such as waste water treatment and pneumatic conveying. 11
Energy Segment Q1 Highlights ($M) As Reported Prior Year YOY Change Ex-FX YOY Change Revenue $242.2 $178.3 35.8% 32.6% Adjusted EBITDA $68.0 $38.5 76.6% 74.6% Adjusted EBITDA Margin 28.1% 21.6% 650 bps Innovation in Action Highlights: Orders up 19% as reported; up 16% ex-fx Revenue up 33% ex-fx Upstream revenue up > 50%; mid/downstream up mid-single digits Upstream orders +21% with strongest growth in original equipment frac pumps and continued penetration of aftermarket consumables Adjusted EBITDA margin up 650 bps benefiting from strong upstream volume growth as well as continued operational efficiencies Nash Dry-Pro Vacuum Pumps Series of engineered dry screw vacuum pumps for use in a variety of process industries; provides effluentfree operation, allowing customers to reduce environmental impact and spending on energy and waste treatment. 12
Medical Segment Q1 Highlights ($M) As Reported Prior Year YOY Change Ex-FX YOY Change Revenue $60.5 $55.4 9.2% 1.3% Adjusted EBITDA $15.9 $14.6 8.9% (0.3%) Adjusted EBITDA Margin 26.3% 26.4% (10 bps) Innovation in Action Highlights: Orders up 19% as reported; up 11% ex-fx Revenue up 1% ex-fx as design wins and new product penetration leading to positive organic growth Adjusted EBITDA margin down 10 bps due primarily to revenue mix between gas and liquid pumps Gardner Denver Liquid Diaphragm Pump New platform of liquid handling pumps for use in in-vitro diagnostics, providing higher efficiency and continuous liquid flow even with corrosive or abrasive media. 13
2018 Guidance & Summary
2018 Guidance Adjusted EBITDA $685M to $705M Capital Expenditures $65M to $75M Tax Rate 26% to 28% Year End Net Debt Leverage 1 ~2.1-2.3x Average Shares Outstanding 2 ~210M ¹ Excluding the impact of any potential future acquisitions 2 Represents the full year computation of weighted average shares outstanding and share price as of 3/31/2018 15
Summary Strong broad-based start to 2018 with continued growth and margin expansion 29% revenue growth with strong double-digit growth in Industrials and Energy; organic growth in Medical Double-digit orders growth across all three segments 480 bps of Adjusted EBITDA margin expansion year-over-year to 23.9% Leverage reduction to 2.8X Expecting momentum to continue through balance of 2018 Raising full-year 2018 Adjusted EBITDA guidance Expecting improved cash flow generation and further reduction to leverage position 1 Continued execution of our value-creation strategy Deploy Talent, Accelerate Growth, Expand Margins and Allocate Capital Effectively ¹ Excluding the impact of any potential future acquisitions 16
Q&A
Appendix
Reconciliation of Net Income/(Loss) and Earnings/(Loss) per Share to Adjusted Net Income and Adjusted Earnings per Share GARDNER DENVER HOLDINGS, INC. AND SUBSIDIARIES RECONCILIATION OF NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE TO ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE (Dollars in millions, except per share amounts) (Unaudited) For the Three Month period ended March 31, 2018 2017 Net Income (Loss) $ 42.4 $ (7.0) Basic Earnings (Loss) Per Share (As Reported) 1,2 $ 0.21 $ (0.05) Diluted Earnings (Loss) Per Share (As Reported) 1,2 $ 0.20 $ (0.05) Plus: Provision (benefit) for income taxes 23.4 (1.6) Amortization of acquisition related intangible assets 28.0 25.8 Sponsor fees and expenses - 1.1 Restructuring and related business transformation costs 4.5 8.6 Acquisition related expenses and non-cash charges 4.6 0.7 Environmental remediation loss reserve - 1.0 Expenses related to public stock offerings 1.4 1.3 Establish public company financial reporting compliance 0.8 1.3 Stock-based compensation 2.7 - Foreign currency transaction losses, net 2.6 0.6 Shareholder litigation settlement recoveries (4.5) - Other adjustments (0.7) 0.5 Minus: Income tax provision, as adjusted 24.5 12.2 Adjusted Net Income $ 80.7 $ 20.1 Adjusted Basic Earnings Per Share 2 $ 0.40 $ 0.14 Adjusted Diluted Earnings Per Share 2,4 $ 0.38 $ 0.13 Average shares outstanding: Basic, as reported 201.6 148.5 Diluted, as reported 3 209.9 148.5 Adjusted diluted 4 209.9 150.6 1 Basic and diluted earnings per share (as reported) are calculated by dividing net income (loss) attributable to Gardner Denver Holdings, Inc. by the basic and diluted average shares outstanding for the respective periods. 2 Basic and diluted earnings per share (as reported) and adjusted basic and diluted earnings per share for the three months ended March 31, 2018 and 2017 are not comparable due to the significant change in capital structure as a result of the initial public offering in May of 2017. 3 Due to net losses in certain periods shown, basic and diluted average shares outstanding are the same in those periods. 4 Adjusted diluted share count and adjusted diluted earnings per share include incremental dilutive shares, using the treasury stock method, which are added to average shares outstanding. 19
Reconciliation of Net Income/(Loss) to Adjusted EBITDA and Adjusted Net Income and CFOA to Free Cash Flow GARDNER DENVER HOLDINGS, INC. AND SUBSIDIARIES RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA AND ADJUSTED NET INCOME AND CASH FLOWS - OPERATING ACTIVITIES TO FREE CASH FLOW (Dollars in millions) (Unaudited) For the Three Month period ended March 31, 2018 2017 Net Income (Loss) $ 42.4 $ (7.0) Plus: Interest expense 26.0 45.9 Provision (benefit) for income taxes 23.4 (1.6) Depreciation expense 14.1 12.1 Amortization expense 30.9 27.6 Sponsor fees and expenses - 1.1 Restructuring and related business transformation costs 4.5 8.6 Acquisition related expenses and non-cash charges 4.6 0.7 Environmental remediation loss reserve - 1.0 Expenses related to public stock offerings 1.4 1.3 Establish public company financial reporting compliance 0.8 1.3 Stock-based compensation 2.7 - Foreign currency transaction losses, net 2.6 0.6 Shareholder litigation settlement recoveries (4.5) - Other adjustments (0.7) 0.5 Adjusted EBITDA $ 148.2 $ 92.1 Minus: Interest expense $ 26.0 $ 45.9 Income tax provision, as adjusted 24.5 12.2 Depreciation expense 14.1 12.1 Amortization of non-acquisition related intangible assets 2.9 1.8 Adjusted Net Income $ 80.7 $ 20.1 Free Cash Flow Cash flows - operating activities $ 60.2 $ (2.6) Minus: Capital expenditures 10.1 16.4 Free Cash Flow $ 50.1 $ (19.0) 20
Reconciliation of Segment Adjusted EBITDA to Income/(Loss) Before Income Taxes GARDNER DENVER HOLDINGS, INC. AND SUBSIDIARIES RECONCILIATION OF SEGMENT ADJUSTED EBITDA TO INCOME (LOSS) BEFORE INCOME TAXES (Dollars in millions) (Unaudited) For the Three Month period ended March 31, 2018 2017 Revenue Industrials $ 316.9 $ 248.0 Energy 242.2 178.3 Medical 60.5 55.4 Total Revenue $ 619.6 $ 481.7 Segment Adjusted EBITDA Industrials $ 66.8 $ 47.2 Energy 68.0 38.5 Medical 15.9 14.6 Total Segment Adjusted EBITDA $ 150.7 $ 100.3 Less items to reconcile Segment Adjusted EBITDA to Income (Loss) Before Income Taxes: Corporate expenses not allocated to segments $ 2.5 $ 8.2 Interest expense 26.0 45.9 Depreciation and amortization expense 45.0 39.7 Sponsor fees and expenses - 1.1 Restructuring and related business transformation costs 4.5 8.6 Acquisition related expenses and non-cash charges 4.6 0.7 Environmental remediation loss reserve - 1.0 Expenses related to public stock offerings 1.4 1.3 Establish public company financial reporting compliance 0.8 1.3 Stock-based compensation 2.7 - Foreign currency transaction losses, net 2.6 0.6 Shareholder litigation settlement recoveries (4.5) - Other adjustments (0.7) 0.5 Income (Loss) Before Income Taxes $ 65.8 $ (8.6) 21