Slide 1: Second Quarter 2023 Earnings
SECOND QUARTER 2023 EARNINGS AUGUST 8, 2023 J O S E F M AT O S E V I C , P R E S I D E N T & C E O | T R I C I A F U LT O N , E V P & C F O | TA N I A A L M O N D , V P O F I R & C O R P. C O M M .
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT This presentation and oral statements made by management in connection herewith that are not historical facts are “forward ‐looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward‐looking statements involve risks and uncertainties,
Slide 3: Q2 2023 Business Summary
Q2 2023 BUSINESS SUMMARY GREW REVENUE SEQUENTIALLY: Total +7%, Electronics segment +15% (of which Health and Wellness up 22%), Hydraulics segment +3% over 1Q23; GREW REVENUE ANNUALLY: Hydraulics +7%, Electronics -24% while +5% (ex. Health and Wellness) over 2Q22 PROTECTING THE BUSINESS: Gross margin
Slide 4: Strategic Investments in Capacity to Meet Growing Demand
STRATEGIC INVESTMENTS IN CAPACITY TO MEET GROWING DEMAND Opened: New capacity in Opened: Automated Started: New capacity in India @ Faster Warehouse in Italy @ Faster Italy @ Faster Additional New capacity Newly opened Automated Warehouse Adds 21,969 sq. ft. to double Adds 22,600 sq. feet of floor A
Slide 5: Strategic Investments in Capacity to Meet Growing Demand
STRATEGIC INVESTMENTS IN CAPACITY TO MEET GROWING DEMAND Nearing Completion: New Nearing Completion: New Hydraulic Valve and Coupling Hydraulic Manifold Solutions In Progress: New capacity Solutions Center of Excellence Center of Excellence in expansion in Tijuana, in Sarasota @ Sun Indiana @ Daman
Slide 6: Q2 2023 Financial Results Highlights
Q2 2023 FINANCIAL RESULTS HIGHLIGHTS ($ in millions, except per share data) Sales • Sales in several end markets grew YoY during the 2Q23 including agriculture, recreational, and other diversified markets. QoQ health -6% YoY and wellness was up over 20%, along with growth in recreational $227.6 and
Slide 7: Q2 2023 Financial Results Highlights
Q2 2023 FINANCIAL RESULTS HIGHLIGHTS ($ in millions, except per share data) Operating Expenses YoY • SEA dollars declined slightly QoQ; YoY increased 17% to $38.0 13.0% -480 bps million compared to the prior-year period, driven by acquisitions, integration, and higher wage and benefit costs, new hir
Slide 8: Q2 2023 Financial Results Highlights
Q2 2023 FINANCIAL RESULTS HIGHLIGHTS ($ in millions, except per share data) YoY $16.8 -44% 22.0% (1) -240 bps YoY Net Income QoQ Adj. EBITDA Margin +21% +170 bps QoQ -45% YoY -31% YoY $0.51 $0.81 QoQ Diluted GAAP EPS +21% QoQ Diluted Non-GAAP Cash EPS(1) +13% 16% (1) Reflects a non-GAAP financial me
Slide 9: Q2 2023 Consolidated Results
Q2 2023 – CONSOLIDATED RESULTS Sales Gross Profit & Margin ($ millions) ($ millions) $241.7 $227.6 $82.3 $207.2 $213.2 $75.8 $196.0 $69.3 $71.0 $63.2 $98.9 $75.2 $65.5 $76.0 $55.8 $142.8 $140.2 $147.7 $152.4 $131.2 34.1% 33.4% 32.2% 33.3% 33.3% Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q2 22 Q3 22 Q4 22 Q1 23 Q
Slide 10: Q2 2023 Consolidated Results
Q2 2023 CONSOLIDATED RESULTS Adjusted EBITDA Margin Drivers (1) Adj. EBITDA Margin • Adjusted EBITDA margin up QoQ 170 basis points maintaining healthy level at 22.0% in Q2 despite macro headwinds, supply 24.4% chain delays, fire at Faster facility, acquisition integration, while 23.2% 23.2% investi
Slide 11: Q2 2023 Hydraulics Segment
Q2 2023 – HYDRAULICS SEGMENT Second Quarter Highlights Q2 Sales by Region Sales Drivers • Sales up 3% QoQ ; Sales up 7% YoY driven by sales to the 26% Americas, EMEA and some pricing APAC 40% • Acquisitions added $15.2 million $152 m Americas • FX impact of ($0.2) million; supply chain constraints d
Slide 12: Q2 2023 Electronics Segment
Q2 2023 – ELECTRONICS SEGMENT Q2 Sales by Region Second Quarter Highlights Sales Drivers 7% • Sales up 15% QoQ (of which Health and Wellness up >20%). APAC 84% Sales down YoY 24% while up 5% (excluding Health and Wellness.) End market demand was driven by recreational, 9% $75 m Americas mobile, and
Slide 13: Strong Cash Flow
STRONG CASH FLOW ($ in millions) Free Cash Flow(1) Three Months Ended ($ millions) 7/1/23 7/2/22 204% 83% Adjusted net cash provided by operating activities $28.8 $29.5 126% $94.0 79% $86.3 100% $76.2 $78.0 CapEx (10.5) (7.9) 105% $68.8 (1) Free cash flow (FCF) $18.3 $21.6 $49.1 86% $27.2 Consistent
Slide 14: Capital Structure
CAPITAL STRUCTURE ($ in millions) Financial Flexibility Capitalization • Cash and cash equivalents down $3.8 million from prior year 7/1/23 7/2/22 • Generated $28.8 million of Adjusted operating cash flow in Q2 Cash and cash equivalents $37.5 $41.3 (2) • Net debt/pro forma Adjusted EBITDA of 2.7x To
Slide 15: Revising 2023 Outlook
REVISING 2023 OUTLOOK Implied 3-Year Previous Updated CAGR at 2023 2020 Actual 2023 Outlook 2023 Outlook range mid-point Consolidated revenue $523 million $910 - $940 million $880 - $900 million 19% Net income $14 million $99 - $104 million $65 - $66 million Adjusted EBITDA $121 million $214 - $226
Slide 16: Future Growth Building on a Strong Foundation
FUTURE GROWTH BUILDING ON A STRONG FOUNDATION Our Performance & Current View Highlights • Transitioning from a holding company to an integrated operating $890 (1) company $869 $885 • Growing the top line while diversifying the business and markets • Leveraging regional manufacturing Centers of Excel
Slide 17: Maintaining Strong Margins While Investing for Growth
MAINTAINING STRONG MARGINS WHILE INVESTING FOR GROWTH Historic / Projected Capex & Adj. EBITDA Margin(1) Highlights • Integrating manufacturing operations and opening regional ~$ 36 * Centers of Excellence to position for long term growth $ 32 • Leveraging shared global supply chains and low-cost $
Slide 18: Supplemental Information
SUPPLEMENTAL INFORMATION
Slide 19: Segment Data
SEGMENT DATA (Unaudited) ($ in millions) F or the Three Months Ended F or the Si x Months Ended J ul y 1, 2023 J ul y 2, 2022 J ul y 1, 2023 J ul y 2, 2022 Sales: Hydraulics $ 152.4 $ 142.8 $ 300.1 $ 279.9 Electronics 75.2 98.9 140.7 202.3 Consolidated $ 227.6 $ 241.7 $ 440.8 $ 482.2 Gross profit an
Slide 20: Organic and Acquired Sales
ORGANIC AND ACQUIRED SALES (Unaudited) ($ in millions) Three Months Ended F ul l Y ea r Ended Three Months Ended Si x Months Ended A pri l 2, J ul y 2, October 1, Decem ber 31, Decem ber 31, A pri l 1, J ul y 1, J ul y 1, 2022 2022 2022 2022 2022 2023 2023 2023 Hydraulic s Organic $ 130.7 $ 137.1 $
Slide 21: Sales by Geographic Region & Segment
SALES BY GEOGRAPHIC REGION & SEGMENT (Unaudited) 2022 Sales by Geographic Region and Segment 2023 Sales by Geographic Region and Segment ($ in millions) ($ in millions) % Change % Change % Change % Change % Change % Change % Change % Change Q1 y/y Q2 y/y Q3 y/y Q4 y/y 2022 y/y Q1 y/y Q2 y/y YTD 2023
Slide 22: Adjusted Operating Income Reconciliation
ADJUSTED OPERATING INCOME RECONCILIATION (Unaudited) ($ in millions) Three Months Ended Si x Months Ended Jul y 1, 2023 Jul y 2, 2022 Jul y 1, 2023 Jul y 2, 2022 GAAP operating inc ome $ 2 9 .5 $ 4 3 .0 $ 5 4 .3 $ 8 5 .9 Acquisition-related amortization of intangible assets 8.3 6.8 16.4 13.8 Acquisi
Slide 23: Non-GAAP Cash Net Income Reconciliation
NON-GAAP CASH NET INCOME RECONCILIATION (Unaudited) ($ in millions) Three Months Ended Si x Months Ended J ul y 1, 2023 J ul y 2, 2022 J ul y 1, 2023 J ul y 2, 2022 Net inc ome $ 1 6 .8 $ 3 0 .0 $ 3 0 .6 $ 6 0 .5 Amortization of intangible assets( D) 8.4 6.9 16.8 14.0 Acquisition and financing-relat
Slide 24: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION (Unaudited) Twel ve Months ($ in millions) Three Months Ended Si x Months Ended Ended J ul y 1, 2023 J ul y 2, 2022 J ul y 1, 2023 J ul y 2, 2022 J ul y 1, 2023 Net inc ome $ 1 6 .8 $ 3 0 .0 $ 3 0 .6 $ 6 0 .5 $ 6 8 .6 Interest expense, net 7.8 3.8 14.0 7.6 23.1 Income
Slide 25: Free Cash Flow Reconciliation
FREE CASH FLOW RECONCILIATION (Unaudited) ($ in millions) Full Year TTM 2017 2018 2019 2020 2021 2022 Q2 2 0 2 3 Net c ash provided by operating ac tivities $ 4 9 .4 $ 7 7 .5 $ 9 0 .5 $ 1 0 8 .6 $ 1 1 3 .1 1 0 9 .9 1 0 4 .1 Contingent consideration payment in excess of acquisition date fair value -
Slide 26: Non-GAAP Sales Growth Reconciliation
NON-GAAP SALES GROWTH RECONCILIATION (Unaudited) ($ in millions) Three Months Ended Si x Months Ended Hydra ul i cs El ectroni cs Cons ol i da ted Hydra ul i cs El ectroni cs Cons ol i da ted Q2 2 0 2 3 Net Sales $ 1 5 2 .4 $ 7 5 .2 $ 2 2 7 .6 $ 3 0 0 .1 $ 1 4 0 .7 $ 4 4 0 .8 Impact of foreign curre
Slide 27: Net Debt to Adjusted EBITDA Reconciliation
NET DEBT TO ADJUSTED EBITDA RECONCILIATION (Unaudited) ($ in millions) A s of Jul y 1, 2023 Current portion of long-term non-revolving debt, net 20.5 Revolving lines of credit 218.9 Long-term non-revolving debt, net 309.7 Total debt 5 4 9 .1 Less: Cash and cash equivalents 37.5 Net debt 5 1 1 .6 TTM
Slide 28: @)nsues
@)nsues AUGMENTING S°aATEG- ADVANCING 1 2SHNOLOGIES ACCELERATING uiiu wit