Valmont Industries, Inc. · NYSE:VMI
Valmont Industries — Q4 2023 Earnings Presentation
36 slides from Valmont Industries's earnings presentation, Feb 22, 2024
Slide 1: 4Q and Full Year 2023 Earnings Presentation
4Q and Full Year 2023 Earnings Presentation February 22, 2024 © 2024 Valmont® Industries, Inc.
Slide 2: Today's Agenda
Today’s Agenda 01 2023 Results & Market Dynamics 02 4Q 2023 Results & Initial 2024 Outlook 03 Valmont Business Model 04 Long-term Financial Targets 2 February 22, 2024 | Valmont Industries, Inc.
Slide 3: Disclosure Regarding Forward-Looking Statements
Disclosure Regarding Forward-Looking Statements These slides contain (and the accompanying oral discussion will contain) “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other f
Slide 4: CEO Opening Comments
CEO Opening Comments Avner Applbaum, President & CEO 4 February 22, 2024 | Valmont Industries, Inc.
Slide 5: Full Year 2023 Financials and Key Messages
Full Year 2023 Financials and Key Messages $4.2B (3.9%) 7.0% 11.3% $6.78 $14.98 $307M $395M Net Sales Y/Y Net Sales Operating Margin Adj. Operating Margin1 GAAP Diluted EPS Adj. Diluted EPS1 Operating Cash Flow Cash Returned to Shareholders The global Valmont team navigated a dynamic demand environm
Slide 6: Near-Term Dynamic Markets with Multi-Year Drivers
Near-Term Dynamic Markets with Multi-Year Drivers Infrastructure Agriculture • Benefiting from several long-term, secular growth drivers • U.S. net farm income levels are expected to decline significantly in 2024 compared to 2023 which is weighing on sentiment; however, • Utilities are sustaining el
Slide 7: Financial Results and Outlook
Financial Results and Outlook Tim Francis, Interim CFO 7 February 22, 2024 | Valmont Industries, Inc.
Slide 8: 4Q 2023 Financial Summary
4Q 2023 Financial Summary • Infrastructure sales decreased 3.0%, Agriculture sales decreased 18.9% • GAAP operating margin decreased to 6.3%; Adjusted1 operating margin decreased to 9.9% GAAP Adjusted1 $M, except EPS 4Q 2023 4Q 2022 Y/Y 4Q 2023 4Q 2022 Y/Y • GAAP Diluted Earnings per Share was $1.38
Slide 9: 4Q 2023 Results | Infrastructure
4Q 2023 Results | Infrastructure Sales ($M) Operating Income ($M) • Sales decreased slightly year-over- -3.0% GAAP: -17.1% Adjusted1: -0.9% year $771.3 $748.3 $99.6 $99.6 $98.7 $82.6 • Higher volumes in TD&S and Solar, and favorable pricing across the portfolio, were more than offset by lower Teleco
Slide 10: 4Q 2023 Results | Agriculture
4Q 2023 Results | Agriculture Sales ($M) Operating Income ($M) • Sales down 18.9% year-over-year -18.9% GAAP: -65.6% Adjusted1: -37.6% $335.1 $40.5 $44.5 • North America sales were lower as $271.6 farmer sentiment remains muted and $27.8 4Q 2022 benefited from ongoing delivery of elevated backlog $1
Slide 11: YTD Cash Flow Highlights
YTD Cash Flow Highlights • Strong 4Q 2023 Operating Cash Flows of ~$116 million • Full Year free cash flow of $210 million, driven by net earnings and $M YTD 12/30/2023 diligent working capital management, primarily reductions in inventory Net Cash Flows from Operating Activities $307 Net Cash Flows
Slide 12: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation 2023 Full Year Capital Deployment: $525M Growing Our Business Returning Cash To Shareholders $97M $33M $345M $50M Capital Expenditures Acquisitions Share Repurchases Dividends • Q4 Capex of $26M as we • Targeting opportunities in end • Q4 Share Repurchase of •
Slide 13: Strong Balance Sheet and Liquidity
Strong Balance Sheet and Liquidity • Long-term debt mostly fixed-rate, with long-dated maturities in 2044 and 2054 • Total Debt to Adjusted EBITDA As of December 30, 2023 remains within our desired range of 1.5 to 2.5 times Cash $203 M Total Long-Term Debt $1,108 M • Strong and flexible balance shee
Slide 14: Full Year 2024 Outlook and Key Assumptions
Full Year 2024 Outlook and Key Assumptions (3.0%) – Flat $14.25 – $15.50 Change In Net Sales Y/Y GAAP Diluted EPS Segment Assumptions Other Assumptions • Growth in Infrastructure is expected to be more than offset by • Expect modest full-year operating margin improvement compared lower Agriculture s
Slide 15: Valmont Business Model and Long-Term Financial Targets
Valmont Business Model and Long-Term Financial Targets 15 February 22, 2024 | Valmont Industries, Inc.
Slide 16: Valmont Business Model Enables Value Creation
Valmont Business Model Enables Value Creation Focus Areas ntinuous Improv Co em e • nt ity • gr Hig sion • Inte Solutions Del h-Performance C Committed to Focus Areas United by Core Values iver Results Our stakeholders expect value creation. Our Core Values define who we are, how we These focus area
Slide 17: Above-Market Growth Expected Through the Ag Cycle
Above-Market Growth Expected Through the Ag Cycle VMI Growth Rate: MSD+ Each Segment Growing Above Market Infrastructure Multi-Year Energy Transition VMI: MSD+ Strategic Geographic Expansion Aging Infrastructure/Resilience Mkt: MSD New Products and Services Technology & Data Consumption Customer-Cen
Slide 18: Providing New Long-Term Financial Targets
Providing New Long-Term Financial Targets Net Sales Operating Return on Invested Net Earnings Growth1 Margin Capital FCF Conversion Approaching MSD+ Mid-Teens High-Teens 100% Serving markets with Strategic pricing to align A disciplined and efficient Managing net working positive growth outlook with
Slide 19: Q&A
Q&A 19 February 22, 2024 | Valmont Industries, Inc.
Slide 20: Appendix
Appendix 20 February 22, 2024 | Valmont Industries, Inc.
Slide 21: Actual and Projected Transmission Investment
Actual and Projected Transmission Investment Source: Edison Electric Institute Business Analytics Group 21 February 22, 2024 | Valmont Industries, Inc. Updated January 2024
Slide 22: Infrastructure Investment and Jobs Act (IIJA)
Infrastructure Investment and Jobs Act (IIJA) Infrastructure Investment and Jobs Act Spending Breakdown (In Order - Most to Least) Previously-Passed Transportation Funding | $650B Roads, Bridges and Related Programs | $111B Energy, Power and Electric Grid Reliability | $107.5B Freight and Passenger
Slide 23: 5G Adoption
5G Adoption 23 February 22, 2024 | Valmont Industries, Inc. Source: GSMA Intelligence- The Mobile Economy 2023
Slide 24: U.S. Net Cash Farm Income by Year
U.S. Net Cash Farm Income by Year Source: USDA 24 February 22, 2024 | Valmont Industries, Inc. Updated February 7, 2024
Slide 25: U.S. Drought Condition
U.S. Drought Condition Source: Drought Monitor 25 February 22, 2024 | Valmont Industries, Inc. Updated February 15, 2024
Slide 26: Steel Material Index Trends
Steel Material Index Trends A dynamic steel cost environment can lead to variations in quarterly gross profit margin 26 February 22, 2024 | Valmont Industries, Inc. Source: FastMarkets AMM
Slide 27: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Dollars in thousands, except per shares amounts The non-GAAP table below discloses the impacts of the impairment of long-lived assets, realignment charges, and non-recurring charges associated with major scope changes for t
Slide 28: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Dollars in thousands, except per shares amounts We previously presented non-GAAP financial measures adjusted for Prospera intangible asset amortization and stock-based compensation recognized for the Prospera employees to p
Slide 29: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Dollars in thousands, except per shares amounts The non-GAAP tables below disclose the impacts of the loss from the divestiture of the offshore wind energy structures business, intangible asset amortization (Prospera), and
Slide 30: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Dollars in thousands The non-GAAP tables below disclose the impacts of the impairment of long-lived assets, realignment charges, and non-recurring charges associated with major scope changes for two strategic projects initi
Slide 31: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures Dollars in thousands The non-GAAP tables below disclose the impacts of the intangible asset amortization (Prospera) and stock-based compensation recognized for the Prospera employees on 2022 results. Amounts may be impacted
Slide 32: Reconciliation of Excluding Other Segment Net Sales
Reconciliation of Excluding Other Segment Net Sales Dollars in thousands Excluding Other segment net sales from the fourth quarter and fiscal year ended December 31, 2022, which we refer to in this reconciliation as “Adjusted Net Sales” is a non-GAAP measure. The Other segment net sales were generat
Slide 33: Reconciliation of Adjusted Effective Tax Rate
Reconciliation of Adjusted Effective Tax Rate Dollars in thousands Excluding significant non-recurring items from the fourth quarter and fiscal year ended December 30, 2023, from the calculation of effective tax rate, which we refer to as “Adjusted Effective Tax Rate”, is a non-GAAP measure. Adjuste
Slide 34: Historical Free Cash Flow (2014 – 2023)
Historical Free Cash Flow1,2 (2014 – 2023) Dollars in millions 1Adjusted net earnings for purposes of calculating free cash flow conversion may not agree to the adjusted net earnings. The difference is due to non-recurring expenses which were settled in cash in the year of occurrence as part of net
Slide 35: Free Cash Flow Throughout the Cycle
Free Cash Flow Throughout the Cycle Dollars in millions 2014 – 2023 Free Cash Flow1 Years of rapid raw material cost inflation 350 300 250 227 233 210 210 210 200 175 148 10-yr Avg. $148M 150 GAAP 1.37X 101 100 78 81 Adj. 0.87X 50 - (50) (42) (100) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1
Slide 36: Calculation of Adjusted EBITDA and Leverage Ratio
Calculation of Adjusted EBITDA and Leverage Ratio Dollars in thousands Certain of our debt agreements contain covenants that require us to maintain certain coverage ratios. Our Debt to Adjusted EBITDA may not exceed 3.5X Adjusted EBITDA (or 3.75X Adjusted EBITDA after certain material acquisitions)