Graco Inc. · NYSE:GGG
Graco — Investor Presentation (February 2023)
45 slides from Graco's investor presentation, February 2023
Slide 1: Investor Presentation: Company Overview
////////////////// Investor Presentation Company Overview Fourth Quarter and Full Year 2022 1
Slide 2: Safe Harbor
Safe Harbor ////////////////// Today’s presentation includes forward-looking statements that reflect management’s current expectations about the Company’s future business and financial performance. These statements are subject to certain risks and uncertainties that could cause actual results to dif
Slide 3: Distribution of Global Sales
60% Distribution 47% 30% of Global $2,144 M 21% 19% 23% Sales Full Year 2022 Americas EMEA Asia Pacific Industrial Process Contractor 57% 46% 50% 39% 30% 24% 20% 19% 15% Industrial Process Contractor Industrial Process Contractor Industrial Process Contractor 3
Slide 4: 2022 Net Sales by End Market
2022 Net Sales by End Market ////////////////// Wood − 1% White Goods − 1% Mining − 2% Oil & Natural Gas − 3% Vehicle Services − 4% Electronics − 4% Public Works − 4% Other − 7% Automotive − 9% Industrial & Machinery − 17% Construction − 48% 4
Slide 5: Graco is part of your everyday life
Graco is part of your everyday life. 5
Slide 6: Graco is part of your everyday life
Graco is part of your everyday life. 6
Slide 7: Niche Diversified Fluid Handling Business
Diversified Fluid Handling Business Niche 6.3%+ ~40% Difficult applications; corrosive, Organic Revenue CAGR* Of revenue is parts viscous, hard-to-move materials & accessories *20-year average, constant currency 7
Slide 8: High Customer Value, Strong Product Differentiation
Material Supplier Relationships Best in Class End User Delivery Interaction High Customer Value, Strong Customer Leading New ROI Strong Product Channel Product Investment Lowest Total Partners Cost of Ownership Differentiation Stringent Best in Class Product Requirements Quality Niche Markets 8
Slide 9: Growth Plans and Earnings Drivers
Growth Plans and Earnings Drivers ////////////////// Strategic Initiatives 12%+ ► New Product Development 10% ► New Markets ► Global Expansion ► End-user Conversion ► Acquisitions Targeted Revenue Targeted Earnings CAGR CAGR Through a cycle 9
Slide 10: Low Volume, High Mix Delivers Customer ROI
Low Volume, High Mix Delivers Customer ROI Average Number of Units 2022 Sales No. of SKUs Sold Per Day ($ in millions) Highly-valued products at low volumes 0-1 60,900 93% $ 930 43% 2-5 2,800 4% $ 395 19% 43% of our revenue comes from products 6 - 10 900 1% $ 179 8% that we sell 11 - 15 300 1% $ 80
Slide 11: Growth Plans and Earnings Drivers
Growth Plans and Earnings Drivers ////////////////// Acquisitions Strategic 3-4% + Initiatives 12% 12%+ Price 1-2% 9-10% 1-2% 5-7% 3% Industrial Production Targeted Organic Targeted Targeted Earnings Average Growth Rate CAGR Revenue CAGR CAGR Through a cycle 11
Slide 12: Exceptional Returns
Exceptional Returns 6.3%+ 27% 40% 18% Organic Revenue CAGR Return on Invested Capital Return on Equity Return on Assets Based on a 20-year average, constant currency 12
Slide 13: Business Model
Business Model ////////////////// Brand Promise ▶ Company Overview ▶ Operational Excellence ▶ Engineering & Manufacturing Excellence ▶ Extensive Reach 13
Slide 14: Our Brand Promise
▶ Innovation – Leading with technologically-advanced features, pioneering design, high performance and unparalleled reliability ▶ Quality – Our customers invest in high-quality products built to last for years of reliable service ▶ A+ Service – We’re guided by a Our Brand mindset of integrity and a
Slide 15: Engineering Excellence
Engineering Excellence Annual R&D Investment 4.0% * Target More than Double-Digit Returns 1.8 x* as a percent of sales our peer group versus peers at 2.2% ▶ new product * Peers: ITW, CSL, DOV, ENOV, IEX, NDSN, WTS, FLS, based on a 5-year average, 2018 - 2022. 15 15
Slide 16: Manufacturing Excellence
Manufacturing Excellence Goal is > 80% Zero < 1% Production based in the US cost change Warranty costs on the same basket of goods (yoy) 16
Slide 17: Service Excellence
Service Excellence Same Day 92% Orders in by noon, In-stock service ship the same day level goal 17
Slide 18: Extensive Reach
Extensive Reach Customers in over 100 Installed base 30,000+ countries ~100 Outlets/Distributors Facilities in years old 12 countries 18
Slide 19: Company Segments
Company Segments ////////////////// ▶ Industrial Company ▶ Process Overview ▶ Contractor 19
Slide 20: Industrial $649M
Industrial December 2022, Twelve Months $649M 14% 35.6% Segment Revenue Organic Operating Margin +240 basis points 20
Slide 21: Industrial: Key End Markets and Growth Drivers
Industrial Key End Markets ▶ General industrial ▶ Automotive ▶ Res & non-res construction ▶ Alternative energy & others Growth Drivers & Trends ▶ Factory movement & upgrades ▶ Automation ▶ Technology upgrades ▶ Energy-efficiency upgrades ▶ Material changes Select Representative Industry Participants
Slide 22: Process $495M
Process December 2022, Twelve Months $495M 25% 24.7% Segment Revenue Organic Operating Margin +180 basis points 22
Slide 23: Process: Key End Markets and Growth Drivers
Process Key End Markets ▶ Pharma, food & beverage ▶ Vehicle services ▶ Oil & natural gas ▶ Environmental ▶ Semiconductor & others Growth Drivers & Trends ▶ Factory movements and upgrades ▶ Technology upgrades ▶ Energy-efficiency upgrades ▶ Asset life maintenance ▶ Commodities extraction ▶ Environmen
Slide 24: Contractor $999M
Contractor December 2022, Twelve Months $999M 4% 25.0% Segment Revenue Organic Operating Margin -200 basis points 24
Slide 25: Contractor: Key End Markets and Growth Drivers
Contractor Key End Markets ► Res & non-res construction ► Res & non-res remodeling ► Transportation Infrastructure Growth Drivers & Trends ► End user conversion from brush and roll ► Product innovation & channel expansion ► Housing & new construction ► Infrastructure spending ► Regional labor rates
Slide 26: Capital Allocation
Capital Allocation Company Overview ////////////////// 26
Slide 27: Long-Term Cash Deployment Priorities
Long-Term Cash Deployment Priorities ////////////////// International footprint Organic Product development Growth Production capacity and capabilities Supplement to organic growth Acquisitions Leverage our strengths Solid dividend history Shareholder Return Approximately 15.0 million
Slide 28: Key Investment Attributes
▶ Drive long-term, above-market growth ▶ Premium products that deliver strong ROI for end users ▶ Leading industry positions ▶ Serve niche markets where customers are willing to purchase quality, technology-based products ▶ Products perform critical functions ▶ High margin, high recurring revenue ▶
Slide 29: Acquisitions
Acquisitions Company Overview ////////////////// 29
Slide 30: Acquisition: Industrial
Acquisition ▶ Industrial 2012 2015 2015 2017 2018 2020 30
Slide 31: Acquisition: Process
Acquisition ▶ Process 2013 2015 2015 2016 2019 2022 31
Slide 32: Financial Results
Financial Results Company Overview ////////////////// 32
Slide 33: Financial Performance 2022
Minneapolis, MN Financial Performance 2022 8% 49.3% 6% 5% Revenue Growth Gross Margin EPS Growth Net Income (As Reported) 33
Slide 34: Financial Results
Financial Results Statement of Earnings Fourth Quarter Full Year $ in millions except per share amounts 2022 2021 Change 2022 2021 Change (1) Net earnings and Net Sales $ 555.0 $ 539.6 3% $2,143.5 $1,987.6 8% diluted earnings per share for 2022 and 2021 Gross Profit 272.8 274.6 (1)% 1,057.4 1,033.9
Slide 35: Financial Results Adjusted for Comparability
Financial Results Adjusted for Comparability Excluding the impacts Non-GAAP Reconciliation Fourth Quarter Full Year of excess tax benefits In millions except per share amounts 2022 2021 Change 2022 2021 Change related to stock option Earnings before taxes, as reported $ 154.0 $ 129.3 19 % $ 565.7 $
Slide 36: Fourth Quarter 2022 Results
Fourth Quarter 2022 Results ► Up 3 percent from 2021, up 7 percent at consistent translation rates. Sales from acquired Sales businesses contributed 1 percentage point ► 2021 was a 53 week year with 14 weeks in the fourth quarter compared to 13 weeks in the fourth quarter of 2022 ► Margin rate down
Slide 37: 2022 Results
2022 Results Sales ► Up 8 percent from 2021, up 12 percent at consistent translation rates. Sales from acquired businesses contributed 1 percentage point ► Margin rate down 2.7 percentage points from 2021 Realized pricing not enough to offset the unfavorable impact of higher product costs and Gros
Slide 38: Financial Results: Components of Net Sales Change
Financial Results Components of Net Sales Change 2022 Fourth Quarter Segment Region Industrial Process Contractor Americas EMEA Asia Pacific Consolidated Volume and Price 17 % 16 % (4)% 4% 12 % 10 % 6% Acquisitions 0% 3% 0% 1% 0% 0% 1% Currency (7)% (4)% (3)% 0% (11)% (10)% (4)% Total 10 % 15 % (7)%
Slide 39: Current Environment and Outlook
Current Environment and Outlook Constant currency basis and excluding acquisitions completed in the prior 12 months Americas EMEA Asia Pacific Total Current Sales Growth Q4 2022 4% Sales Growth Q4 2022 12% Sales Growth Q4 2022 10% Sales Growth Q4 2022 7% We are Environment 2022 Full Year 11% 2022 Fu
Slide 40: Other Items
Other Items Capital expenditure expectations of approximately $200 million in 2023, including Cap Ex approximately $130 million in facility expansion projects Unallocated corporate expenses in 2023 are expected to be approximately $31 - $34 Expenses million We repurchased 3.5 million shares in 2022.
Slide 41: Financial Summary: 2022 Appendix
Financial Summary ////////////////// ▶ 2022 Appendix Company Overview 41
Slide 42: Financial Performance
Financial Performance Sales and Operating Margin, as Reported Net Sales Operating Margins $2,500 30% $2,000 25% Operating Margins Sales ($ millions) 20% $1,500 15% $1,000 10% $500 5% $0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 As Reported Diluted $0.66 $0.27 $0.5
Slide 43: Stock Dividend Growth
Stock Dividend Growth $0.94 $1.00 $0.90 $0.80 $0.70 $0.70 $0.60 $0.48 $0.50 $0.37 $0.40 $0.30 $0.20 Dividends $0.10 adjusted for stock splits $- 2014 2017 2020 2023 43
Slide 44: Strong Cash Generation
Strong Cash Generation ($ Millions) 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Operating Cash Flows $ 377 $ 457 $ 394 $ 419 $ 368 $ 338 $ 269 $ 190 $ 241 $ 243 % of Net Income 82% 104% 119% 122% 108% 134% 661% 55% 107% 115% Capital Expenditures 201 134 71 128 54 40 42 42 31 23 Free Cash Flow
Slide 45: Worldwide Leaders in Fluid Handling
Move | Measure | Mix | Control | Dispense | Spray WORLDWIDE LEADERS IN FLUID HANDLING www.graco.com 45