Dover Corporation · NYSE:DOV
Dover — Investor Day (September 2019)
44 slides from Dover's investor day presentation, Sep 10, 2019
Slide 1: Dover Investor Meeting
September 10, 2019 Dover Investor Meeting Richard Tobin, President and Chief Executive Officer
Slide 2: Forward-Looking Statements and Non-GAAP Measures
Forward-Looking Statements and Non-GAAP Measures Our comments may contain forward-looking statements that are inherently subject to uncertainties and risks. We caution everyone to be guided in their analysis of Dover Corporation by referring to the documents we file from time to time with the SEC, i
Slide 3: Agenda for Today
Agenda for Today Progress update on current priorities Portfolio assessment – Consistent growth across core businesses – Attractive earnings power, cash generation and returns Overview of Dover businesses Go-forward strategy 3
Slide 4: Progress Update on Current Priorities
Progress Update on Current Priorities 4
Slide 5: Introduction to Dover
Introduction to Dover Highlights Shareholder Value Creation Dividend-Adjusted Share Price (indexed) Strong Businesses: Premium franchises +5x that partner with customers for engineered equipment, critical components, +3x consumables, software and services across attractive end-markets Global Sca
Slide 6: Delivering on Commitments
Delivering on Commitments During the September 2018 analyst day, we committed to: Improve Deploy Capital Maintain Reinvest in Margins and Smartly and Organic Growth the Business Execution Productively Results Results Results Results $136M SG&A take-out Strong, broad-based Reinvest part of SG&A
Slide 7: Continued Progress in Key Areas for Improvement
Continued Progress in Key Areas for Improvement Fueling Solutions Food Retail On Track to Achieve Target Current Actions Start Accruing Margins in 2019 Margin in 2020+ Footprint and organizational streamlining on Automation at Richmond on track track >50% reduction in labor, increased producti
Slide 8: Portfolio Assessment
Portfolio Assessment 8
Slide 9: Transformed Portfolio Positioned for Growth
Transformed Portfolio Positioned for Growth Long-term track record of superior shareholder returns Portfolio transformation over past decade has transitioned away from pure HoldCo model and resulted in a stronger portfolio with more growth exposure, less cyclicality and more synergy from common
Slide 10: Strong Track Record of Generating Shareholder Returns
Strong Track Record of Generating Shareholder Returns Total Shareholder Return 1 year 3 years 5 years 10 years 13% 21% 9% 18% Multi-industrial 10% 10% 9% 16% peer median S&P 500 5% 13% 10% 14% Note: Annualized Total Shareholder Return as of September 5, 2019, including dividends and spin-offs. Peer
Slide 11: Transformation has Substantially Improved Portfolio
Transformation has Substantially Improved Portfolio From… …To Operating Units ~35 18 Streamlined (’08 ’19E) ~28% Cyclical ~20% New Divestitures1 Adjacencies ~8% (DDP, DFS, Business Mix Consumer ~55% Maag) Improved Legacy 100% (’08 ’19E) Electronics2 Portfolio ~80% Mix ~9% Quality Legacy Upstream
Slide 12: Current Portfolio Serves Diverse, Stable End-Markets Which Support Consistent Growth
Current Portfolio Serves Diverse, Stable End-Markets Which Support Consistent Growth Revenue by End-Market Served Biopharma & GDP+ global growth markets Medical Transportation, Other Favorable industry structures Retail Fueling Construction & Infrastructure 7% 2% 18% Compete in defensible nich
Slide 13: Majority of Revenue Recurring or Repeatable
Majority of Revenue Recurring or Repeatable Revenue by Product/Service Characteristics of Dover Businesses Recurring Installed Critical equipment or component in a system Demand Base Services & Meaningful replacement, consumable ~30% of Total Software1 Business or aftermarket demand Model Consum
Slide 14: Conducted In-Depth Review at Individual Business Level
Conducted In-Depth Review at Individual Business Level Portfolio of Premier Businesses 3 What We Did S&P500 Reviewed strategic and financial attractiveness at OpCo level Assessed historical and forward growth, margin, operating ROIC and cash flow generation Evaluated business’ value and 2 Signif
Slide 15: Re-segmentation Aligned with New Management Structure and Operating Model
Re-segmentation Aligned with New Management Structure and Operating Model; Increasing Portfolio Transparency Current Segments Future Segments1 Management and Operating Model Increased management efficiency $B 2019E Revenue 7.2 7.2 and decision making speed 1.6 Fueling Solutions Consistency with
Slide 16: Portfolio Has Delivered GDP+ Growth
Portfolio Has Delivered GDP+ Growth Segment ’10-’19E PF Organic Rev Growth1 ’16-’19E PF Organic Rev Growth1 $B 2019E Revenue Annualized CAGR Annualized CAGR Fueling 5.4% 5.5% Solutions 1.6 Pumps & 4.6% 5.9% Process 1.3 Solutions Imaging & 1.1 Identification 4.2% 4.5% Engineered 1.7 Products 4.4% 6.9
Slide 17: Dover Formula to Drive Sustained GDP+ Growth Across Segments
Dover Formula to Drive Sustained GDP+ Growth Across Segments Attractive Top-Line Visibility Leadership Innovation End-Markets and Quality Positive Top 3 position Customer-led Installed base drives secular trends replacement, Scale advantage Continuous aftermarket and Stable structure,
Slide 18: Line of Sight for Continued Margin Expansion
Line of Sight for Continued Margin Expansion Adjusted EBITDA Margin1 Pumps & Fueling Imaging & Engineered Refrigeration & Processing Solutions Identification Products Food Equipment Solutions Near-Term Opportunity Near-Term Opportunity Mid-20s Mid-20s Low-20s Low-20s High-Teens Low-20s Mid-Teens Mid
Slide 19: Overview of Dover Businesses
Overview of Dover Businesses 19
Slide 20: Fueling Solutions Overview
Fueling Solutions Overview Financial Profile OpCos Dover Positions Select Peers #2 globally in retail fueling Sales $1.6B – #1 in China, LatAm, EMEA Growth MSD #1 globally in critical fluid transfer (trailer, rail, Fueling Systems chemical & industrial) Adjusted Low- 20s #1 in NA car wash EBIT
Slide 21: Fueling Solutions: Growth Driver Highlights
Fueling Solutions: Growth Driver Highlights Motorists expect experience similar to other retail formats: – Speed & Convenience – Safety & Security – Loyalty & Infotainment Retailers battling to deliver superior service and efficiency: Fueling & – Secure fuel margins: maximize throughput and mini
Slide 22: Pumps & Processing Solutions Overview
Pumps & Processing Solutions Overview Financial Profile OpCos Dover Positions Select Peers Top-3 globally in positive Sales $1.3B displacement pumps #1 in medical connectors; (Pall) Growth GDP+ #2 in biopharma Adjusted Mid-20s #1 globally in plastics EBITDA %1 processing equipment #1 globall
Slide 23: Pumps & Processing Solutions: Growth Driver Highlights
Pumps & Processing Solutions: Growth Driver Highlights Strong growth in Biopharma: – Biologics represent 8 out of 20 global top-selling drugs, Biopharma & 40% of new drug pipeline (vs. 25% 10 yrs ago) Hygienic Revenue >$200M and growing – Growth ~2x of small molecule pharma Growth in Single-use
Slide 24: Imaging & Identification Overview
Imaging & Identification Overview Financial Profile OpCos Dover Positions Select Peers Sales #2 globally in $1.1B (Videojet) (Brother) marking & coding Growth MSD #1 globally in digital textile printing Adjusted Mid-20s equipment and (Reggiani) EBITDA %1 consumables Growth Drivers/Industry Dynam
Slide 25: Imaging & Identification: Growth Driver Highlights
Imaging & Identification: Growth Driver Highlights Digital Print business >$200M and Growing 26B linear meters of textile printed globally per year Digitally printed volume doubled in ~5 years +13%1 Momentum Still <10% printed digitally – expected to reach 20-30% in Digital Growth in “fast f
Slide 26: Engineered Products Overview
Engineered Products Overview Financial Profile OpCos Dover Positions Select Peers #1 in global vehicle lifts Sales $1.7B #1 in NA collision repair (Hennessy) (Car-O-Liner, equipment Challenger) Growth GDP+ #1 in NA refuse trucks (Commercial) Adjusted High- Leaders in niche markets EBITDA %1
Slide 27: Engineered Products: Growth Driver Highlights
Engineered Products: Growth Driver Highlights ESG Digital Digital offering began in ’13 with Heil controllers; expanded through the acquisition of 3rd Eye in ’16 Suite of digital solutions encompassing a unique combination ESG Digital of truck data, video, images and analytics delivered through
Slide 28: Refrigeration & Food Equipment Overview
Refrigeration & Food Equipment Overview Financial Profile OpCos Dover Positions Key Peers #1-2 in NA food retail Sales $1.5B refrigeration (Panasonic) #1-2 globally in brazed Growth LSD plate heat exchangers Top 3 globally in can Adjusted Mid- making equipment EBITDA %1 teens Niche leader in
Slide 29: Retail Refrigeration: Growth Driver Highlights
Retail Refrigeration: Growth Driver Highlights Supermarkets diversifying into Multiple initiatives targeting the growing urban & specialty formats segment with good traction New urban formats (e.g., Amazon Go) Micro-distributed SoloChill solution – Avoids noise and heat, unlike self- Growth
Slide 30: Go-Forward Strategy
Go-Forward Strategy 30
Slide 31: Foundation Unchanged, Significant Opportunity Ahead
Foundation Unchanged, Significant Opportunity Ahead Dover Foundation Execution Priorities High-quality industrial businesses, not reprogramming the DNA GDP+ Growth Entrepreneurial culture with healthy management autonomy Improved Returns Excel in customer-facing capabilities Through Strong Exe
Slide 32: Evolving Operating Model to Support Consistent Execution
Evolving Operating Model to Support Consistent Execution Lean Value-Add Corporate Center1 Future Segments Digital / IT Operations Refriger- Legal HR Pumps & Fueling Imaging & Engineered ation & Process Solutions ID Products Food Solutions Equipment Finance / Dover Corporate Business Services Develop
Slide 33: Dover Business Services Drives Back-Office Efficiency
Dover Business Services Drives Back-Office Efficiency Tangible and Significant Benefits ~200 employees across Philippines, China, US Allows OpCo focus on core competencies Multiple functions supported: Drives efficiency, consistency and agility, delivering tangible cost savings ‒ Finance: A/
Slide 34: Dover Digital Labs Unlocks Multiple Value Streams
Dover Digital Labs Unlocks Multiple Value Streams Building a Team of ~100 Software Developers, Data Scientists and Product Managers to Provide World-Class Digital Capability Select Key Dover Digital Strategy Pillars Pilot Results1 Easier to find, experience, and buy products from Dover Quote Custo
Slide 35: Four Areas of Focus for Operational Improvement
Four Areas of Focus for Operational Improvement Footprint Automation Improve utilization and asset leverage Address labor-intensive processes Leverage common capabilities Standardization, SKU rationalization Optimize real estate costs Workflow optimization Continuous Improvement Performa
Slide 36: Continued Execution of Operational and Margin Improvement
Continued Execution of Operational and Margin Improvement Future Continuous Improvement 2020 in Flight & Portfolio Management Strong Execution Sustain 25-30%+ core and Operational Efficiency incremental margins Initial Focus – Consistent execution Initiating a set of actions with strong incremen
Slide 37: Strong Free Cash Flow an Important Asset
Strong Free Cash Flow an Important Asset Free Cash Flow2 Capital Available $ in millions Illustrative Cash Restructuring Optional 8-12% of Costs $670 Investment-Grade Revenue $617 $52 Leverage up to $592 3.5x for Strategic $22 $23 Deals Maintain Target ~1B ~2.5x Leverage $2.5- Operating $3.5B Cash F
Slide 38: Capital Allocation Priorities Remain Intact
Capital Allocation Priorities Remain Intact 1 Invest Organically Clear Acquisition Criteria Priority to high-confidence organic investments – Capacity for growth – Digitization, e-commerce GDP+, stable growth – Innovation and R&D – Productivity and automation ‘Low-turbulence’ technology trends
Slide 39: Status of Select Significant 2019 Organic Investments
Status of Select Significant 2019 Organic Investments CPC Expansion DPC Expansion DFR Automation ~$30M ~$10M ~$20M Minneapolis, MN Antigo, WI/Pearland, TX Richmond, VA Context 13% CAGR in past 5 years, Antigo plant expansion to Automation to fundamentally 10% since acquisition in 2005 accommod
Slide 40: Runway for Inorganic Deployment in Attractive Segments
Runway for Inorganic Deployment in Attractive Segments Priorities Portfolio Intent Runway Software / & Priority Core Services Adjacencies Grow in pumps Remain within Dover Pumps & Hygienic and life science circle of competence Processing Fluid path adjacencies Solutions IoT solutions Measure
Slide 41: Strategy Lays Foundation for Continued Outperformance
Strategy Lays Foundation for Continued Outperformance Targeted Future Performance GDP+ Growth Revenue Growth GDP+ 30+% Recurring and Revenue Stability Highly Repeatable Improved $50M Cost-Out in 2020 Returns through Margin Expansion Strong Execution 25-30% Incrementals EPS Growth Double-Digits Free
Slide 42: Go-Forward Strategy Builds on Recent Successes
Go-Forward Strategy Builds on Recent Successes 2018 – 1H 2019 2H 2019 and Beyond Strengthen Execution, Realize Full Dover Potential Deliver on Commitments Deliver on SG&A rightsizing initiative ▪ Invest behind Dover’s businesses, capture potential of Digital In Progress Improve performance in Retail
Slide 43: Appendix
Slide 44: Appendix: Non-GAAP Definitions
Appendix: Non-GAAP Definitions Definitions of Non-GAAP Measures: Adjusted Earnings from Continuing Operations: is defined as earnings from continuing operations adjusted for the effect of acquisition-related amortization, rightsizing and other costs, the Tax Cuts and Jobs Act, gains on dispositions,