Slide 1: Investor Presentation: Company Overview, Third Quarter 2021
////////////////// Investor Presentation Company Overview Third Quarter 2021 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
59% Distribution 41% 39% of Global $1,448 M 23% 18% 20% Sales September 2021 Year to Date Americas EMEA Asia Pacific Industrial Process Contractor 61% 49% 55% 30% 32% 21% 25% 13% 14% Industrial Process Contractor Industrial Process Contractor Industrial Process Contractor 3
Slide 4: 2020 Net Sales by End Market
2020 Net Sales by End Market ////////////////// Wood −1% Mining − 1% White Goods − 2% Oil & Natural Gas − 3% Vehicle Services − 3% Public Works − 5% Automotive − 9% Other − 12% Industrial & Machinery − 15% Construction − 49% 4
Slide 5: Graco is part of your everyday life
Graco is part of your everyday life. 5
Slide 6: Graco is part of your everyday life
Graco is part of your everyday life. 6
Slide 7: Niche Diversified Fluid Handling Business
Diversified Fluid Handling Business Niche 5.5%+ ~40% Difficult applications; corrosive, Organic Revenue CAGR* Of revenue is parts viscous, hard-to-move materials & accessories *20-year average, constant currency 7
Slide 8: High Customer Value, Strong Product
Material Supplier Relationships Best in Class End User Delivery Interaction High Customer Value, Strong Customer Leading New ROI Strong Product Channel Product Investment Lowest Total Partners Cost of Ownership Differentiation Stringent Best in Class Product Requirements Quality Niche Markets 8
Slide 9: Low Volume, High Mix Delivers Customer ROI
Low Volume, High Mix Delivers Customer ROI Average Number of Units 2020 Sales No. of SKUs Sold Per Day ($ in millions) Highly-valued products at low volumes 0-1 63,900 93% $ 840 51% 2-5 2,800 4% $ 266 16% 51% of our revenue comes from products 6 - 10 800 1% $ 120 7% that we sell 11 - 15 300 0% $ 59
Slide 10: Growth Plans and Earnings Drivers
Growth Plans and Earnings Drivers ////////////////// Strategic Initiatives 12%+ ► New Product Development 10% ► New Markets ► Global Expansion ► Acquisitions ► End-user Conversion Targeted Revenue Targeted Earnings CAGR CAGR Through a cycle 10
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 5.5%+ 29% 42% 19% 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 4.2% * Target More than Double-Digit Returns 2.5 x* as a percent of sales our peer group versus peers at 1.7% ▶ new product * Peers: ITW, CSL, DOV, CFX, IEX, NDSN, WTS, FLS, based on a 5-year average, 2016 - 2020. 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 96%+ Orders in by noon, In-stock service level ship the same day (goal is > 92%) 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
Industrial September 2021, Nine Months $600M 24% 34.6% Segment Revenue Organic Operating Margin +280 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
Process September 2021, Nine Months $285M 18% 22.8% Segment Revenue Organic Operating Margin +390 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
Contractor September 2021, Nine Months $563M 17% 23.9% Segment Revenue Organic Operating Margin -250 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 18.5 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 2013 2014 2014 2015 2015 2017 2018 30
Slide 31: Acquisition: Process
Acquisition ▶ Process 2013 2014 2015 2015 2016 2019 31
Slide 32: Financial Results
Financial Results Company Overview ////////////////// 32
Slide 33: Financial Performance Sept. YTD
Minneapolis, MN Financial Performance Sept. YTD 23% 52.4% 45% 48% Revenue Gross Margin EPS Net Income (As Reported) 33
Slide 34: Financial Results
Financial Results Statement of Earnings Third Quarter September Year to Date $ in millions except per share amounts 2021 2020 Change 2021 2020 Change Net Sales $ 486.7 $ 439.3 11 % $1,448.0 $1,179.8 23 % (1) Operating earnings, net earnings and diluted Gross Profit 248.2 229.0 8% 759.4 610.1 24 % ne
Slide 35: Financial Results Adjusted for Comparability
Financial Results Adjusted for Comparability Non-GAAP Reconciliation Third Quarter September Year to Date Excluding the impacts In millions except per share amounts 2021 2020 Change 2021 2020 Change of the prior year Operating earnings, as reported $ 124.6 $ 125.0 0% $ 386.7 $ 259.6 49 % impairment,
Slide 36: Third Quarter 2021 Results
Third Quarter 2021 Results Net Sales ► Up 11 percent from 2020, up 9 percent at consistent translation rates ► Rate down 1.1 percentage points from third quarter 2020 Favorable effect of realized pricing, higher production volume and favorable effect of Gross Margin currency translation rates were
Slide 37: Nine Months 2021 Results
Nine Months 2021 Results Net Sales ► Up 23 percent from 2020, up 20 percent at consistent translation rates ► Rate up 0.7 percentage point from 2020 Favorable effects of realized pricing, higher production volume, favorable currency Gross Margin translation rates and favorable product and channel
Slide 38: Financial Results
Financial Results September 2021 Quarter to Date Segment Region Industrial Process Contractor Americas EMEA Asia Pacific Consolidated Volume and Price 19 % 21 % (5)% 1% 20 % 27 % 9% Acquisitions 1% 0% 0% 0% 2% 0% 0% Currency 2% 1% 1% 0% 2% 5% 2% Total 22 % 22 % (4)% 1% 24 % 32 % 11 % September 2021
Slide 39: Worldwide Leaders in Fluid Handling
Move | Measure | Mix | Control | Dispense | Spray WORLDWIDE LEADERS IN FLUID HANDLING www.graco.com 39