Gardner Denver Q1 2018 Earnings Presentation April 27, 2018 Replay - - PowerPoint PPT Presentation

Gardner Denver Q1 2018 Earnings Presentation

April 27, 2018

Replay Information

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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 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 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

• f 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.

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Agenda

▪ Highlights ▪ Q1 2018 Financial Performance ▪ Segment Highlights ▪ Full Year 2018 Guidance & Summary ▪ Q&A

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Q1 2018 Highlights

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¹ Excluding the impact of any potential future acquisitions

Strong Execution

• 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 - 2.3X1

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

Our Strategy

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

• 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”

Expand Margins

• 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

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Strong Foundation, Clear Strategy, Committed Leadership

1 Based on stock price as of 3/31/2018

Q1 Financial Performance

Q1 2018 Financial Performance

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2 Adjusted EPS is defined as adjusted net income divided by adjusted diluted average shares outstanding

($M, excl. EPS)

Revenue

$482 $620 Q1 2017 Q1 2018

Adjusted EBITDA1

$92 $148 Q1 2017 Q1 2018

Adjusted EPS1,2

$0.13 $0.38 Q1 2017 Q1 2018

Up 29% Up 61%

Margin Up 480 bps

Up 192%

23.9% Margin 19.1% Margin

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

Pro-forma IPO

4.2x 2.9x 2.8x Q1'17 Q4'17 Q1'18

Q1 2018 Financial Performance

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Leverage2 Free Cash Flow1 Working Capital

(Op. Working Capital as % of LTM Sales) (Net Debt / LTM Adjusted EBITDA)

($19) $50 Q1 2017 Q1 2018

Improved 150 bps Up $69M Improved 1.4x Since IPO

¹ Free Cash Flow is defined as cash flows from operations less capital expenditures

30.7% 29.2% Q1 2017 Q1 2018

Strengthening Financial Position Through Increasing FCF and De-leveraging

($M)

2 Q1 2018 leverage includes the ~$95 million cash consideration paid for Runtech Systems in February 2018

Q1 2018 Segment Performance

Industrials Segment – Q1 Highlights

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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.

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

($M)

Energy Segment – Q1 Highlights

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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

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

Nash Dry-Pro Vacuum Pumps

Series of engineered dry screw vacuum pumps for use in a variety of process industries; provides effluent- free operation, allowing customers to reduce environmental impact and spending on energy and waste treatment.

Innovation in Action

($M)

Medical Segment – Q1 Highlights

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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

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)

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.

Innovation in Action

($M)

2018 Guidance & Summary

2018 Guidance

▪ Adjusted EBITDA

$685M to $705M

▪ Capital Expenditures

$65M to $75M

▪ Tax Rate

26% to 28%

▪ Year End Net Debt Leverage1

~2.1-2.3x

▪ Average Shares Outstanding2

~210M

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2 Represents the full year computation of weighted average shares outstanding and share price as of 3/31/2018

¹ Excluding the impact of any potential future acquisitions

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 position1
• Continued execution of our value-creation strategy … Deploy Talent, Accelerate Growth,

Expand Margins and Allocate Capital Effectively

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¹ Excluding the impact of any potential future acquisitions

Q&A

Appendix

Reconciliation of Net Income/(Loss) and Earnings/(Loss) per Share to Adjusted Net Income and Adjusted Earnings per Share

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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 Share2 0.40 $ 0.14 $ Adjusted Diluted Earnings Per Share2,4 0.38 $ 0.13 $ Average shares outstanding: Basic, as reported 201.6 148.5 Diluted, as reported3 209.9 148.5 Adjusted diluted4 209.9 150.6

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)

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.

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. For the Three Month period ended

3 Due to net losses in certain periods shown, basic and diluted average shares outstanding are the

same in those periods. March 31,

Reconciliation of Net Income/(Loss) to Adjusted EBITDA and Adjusted Net Income and CFOA to Free Cash Flow

20

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 De 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: Fr Capital expenditures 10.1 16.4 Free Cash Flow 50.1 $ (19.0) $ For the Three Month period ended March 31,

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)

Reconciliation of Segment Adjusted EBITDA to Income/(Loss) Before Income Taxes

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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) $ For the Three Month period ended March 31,

GARDNER DENVER HOLDINGS, INC. AND SUBSIDIARIES RECONCILIATION OF SEGMENT ADJUSTED EBITDA TO INCOME (LOSS) BEFORE INCOME TAXES (Dollars in millions) (Unaudited)