Mueller Water Products · NYSE:MWA
Mueller Water Products — Oppenheimer 17th Annual Industrial Growth Conference 2022
37 slides from Mueller Water Products's conference presentation, May 3, 2022
Slide 1: Oppenheimer 17th Annual Industrial Growth Conference
Where Intelligence Meets Infrastructure® Oppenheimer 17th Annual Industrial Growth Conference May 4, 2022
Slide 2: Non-GAAP Financial Measures
2 NON-GAAP Financial Measures In an effort to provide investors with additional information regarding the Company’s results as determined by accounting principles generally accepted in the United States (“GAAP”), the Company also provides non-GAAP information that management believes is useful to in
Slide 3: Forward-Looking Statements
3 Forward-Looking Statements This presentation contains certain statements that may be deemed “forward-looking statements” within the meaning of the federal securities laws. All statements that address activities, events or developments that the Company intends, expects, plans, projects, believes or
Slide 4: Company overview: segments, geography and history
4 (1) Provided with Q2FY22 earnings press release and presentation on May 2 & 3, 2022. (2) Consolidated net sales Information for geography, segments, products and end markets based on FY2021 information and estimates. (3) Water Flow Solutions includes iron gate valves, specialty valves and service
Slide 5: Key investment strengths and market dynamics
5 • Leading brand and municipal market specification positions with large installed base • Comprehensive distribution network and strong end-user relationships with end-markets served by limited number of suppliers • Low-cost manufacturing operations using lost foam process • Favorable market dynami
Slide 6: Focused on Executing Strategic Initiatives to Grow and Enhance Business
6 Focused on Executing Strategic Initiatives to Grow and Enhance Business Including New Management Structure and ESG Goals • Confident growth strategies, capital investments and operational initiatives will enable us to deliver further sales and adjusted EBITDA growth Where Intelligence Meets Infras
Slide 7: ESG progress and sustainability results
7 • 10% decrease in energy consumption intensity, exceeding goal of 3% annual reduction, leading to a 15% decrease in scope 1 and 2 greenhouse gas emissions (GHG) intensity • Reduced water withdrawal intensity by 15%, exceeding goal of 3 percent annual reduction • Decreased waste to disposal intensi
Slide 8: Products and Markets
Products and Markets
Slide 9: Leading Product Positions in Key Product Categories
9 Hydrants, Iron Gate & Butterfly Valves, Brass Products, Pipe Repair & Leak Detection, Metering Leading Product Positions in Key Product Categories (1) (1) Company estimates based on internal analysis and information from trade associations and distributor networks, where available. (2) Company fil
Slide 10: Uniquely Positioned to Address Opportunities with Utilities
10 Mueller is Uniquely Positioned to Address Opportunities with Utilities with its Leading Infrastructure Products and Installed Base
Slide 11: Water Utilities Are Facing Many Challenges
11 Water Utilities Are Facing Many Challenges • Unrealistic for U.S. water utilities and local governments to bridge the gap between their current capital spending and projected need for capital spending, based on the age and life expectancy of their infrastructure • Moving forward the industry will
Slide 12: U.S. Water Infrastructure Requires Substantial Long-term Investment
12 U.S. Water Infrastructure Requires Substantial Long-term Investment U.S. Water Infrastructure CAPEX and Investment GapRepair & Replacement Market (1) American Water Works Association, Buried No Longer: Confronting America’s Water Infrastructure Challenge 2012 (2) ASCE: 2021 Report Card for Americ
Slide 13: Aging Infrastructure Increasing Water Main Breaks
13 Aging Infrastructure Increasing Water Main Breaks (1) Bluefield Research 2019, Water Industry 4.0 Focus Report. (2) U.S. Environmental Protection Agency, “Drinking Water Infrastructure Needs Survey and Assessment, Sixth Report to Congress,” March 2018. (3) EPA Aging Water Infrastructure Research
Slide 14: Funding Water Utilities Infrastructure Repair
14 Funding Water Utilities Infrastructure Repair (1) Bluefield Research 2019, Water Industry 4.0 Focus Report. (2) Bluefield Research 2019, U.S. Private Water Utilities Report. (3) RAND Corporation 2017 Report titled “Not Everything is Broken.” (4) American Water Works Association 2021 Water and Was
Slide 15: Need for Digital Water Solutions Expected to Accelerate
15 Need for Digital Water Solutions Expected to Accelerate “COVID-19 is an inflection point for long-term resilience, digital transformation of water sector. The U.S. & Canada digital water market is expected to sustain sizeable top-line losses in the immediate aftermath of the COVID-19 outbreak, bu
Slide 16: Broad-line of Technology-enabled Products
16 Broad-line of Technology-enabled Products • Currently have a number of products addressing these categories, including Echologics' pipe condition assessment services and fixed leak detection solutions, advanced meters and communication equipment, smart hydrants, pressure and water quality monitor
Slide 17: Sentryx will Connect Products that Close the Loop
17 SentryxTM will Connect Products that “Close the Loop” with Water Network Administrators & Assets A digital services platform for water utilities to monitor, operate and monetize water distribution networks. Remote Flushing Mobile Workforce Management Water Quality Metering & Flow Measurement Pres
Slide 18: Large Capital Projects
18 Large Capital Projects Large Casting Foundry Brass Foundry Specialty Manufacturing • Expect capital expenditures as a percent of consolidated net sales to decrease to less than 4% after the completion of the new brass foundry in Decatur, IL • Three large capital projects expected to account for t
Slide 19: Business unit goals and product portfolios
19 • Designed to increase revenue growth, drive operational excellence, accelerate new product development and enhance profitability • Positions us for improved long-term growth and increased margins, while helping to accelerate the commercialization of our technology-enabled products and the Sentry
Slide 20: Financial Performance
Financial Performance
Slide 21: Q2 FY22 financial highlights
21 • Increased net sales in both Water Flow Solutions (+25.0% y/y) and Water Management Solutions (+5.1% y/y) • Both segments benefited from higher pricing across most product lines and increased volumes • Ended quarter with record backlog • Price realization more than offset inflation for the first
Slide 22: Full-Year Fiscal 2022 Outlook
22 Full-Year Fiscal 2022 Outlook (1) • Healthy order activity in the second quarter with end market activity remaining robust − Municipal repair and replacement market continues to benefit from healthy budgets, especially at larger municipalities − Have not included any benefits from the infrastruct
Slide 23: Free Cash Flow and working capital
23(1) Average Net Working Capital defined as the average of Net Receivables + Net Inventories – Accounts Payable for last 5 quarters Free Cash Flow • Net cash provided by operating activities for the Q2FY22 six-month period decreased to $0.8M due to higher inventories and payments, including custome
Slide 24: Balance Sheet and Liquidity
24 Balance Sheet and Liquidity Credit Rating Debt Structure Debt Maturities Financial Covenants • $450M of 4.0% Senior Notes (mature June 2029) • Asset based lending agreement (“ABL”) provides up to $175M revolving credit facility subject to borrowing base (LIBOR + 200 basis points) with none outsta
Slide 25: Balanced and Disciplined Capital Allocation
25 Balanced and Disciplined Capital Allocation • Strong balance sheet, liquidity and cash flow supporting our strategies • Maintaining balanced approach to capital allocation to strengthen and grow the business through capital investments and bolt-on acquisitions • Continuing to return cash to our s
Slide 26: Investment Highlights
26 Investment Highlights LONG-TERM END MARKET DYNAMICS CONTINUE TO IMPROVE LEVERAGING STRENGTHS TO INCREASE TECHNOLOGY-ENABLED PRODUCTS MODERNIZING MANUFACTURING AND DRIVING OPERATIONAL EXCELLENCE TO DELIVER MARGIN EXPANSION FLEXIBLE BALANCE SHEET AND STRONG CASH FLOW STRONG COMPETITIVE POSITION
Slide 27: Supplemental Data
Supplemental Data
Slide 28: Historical Financial Performance
28 Historical Financial Performance • Over last five years (FY16 to FY21), delivered 6.8% net sales CAGR with 5.4% adjusted EBITDA CAGR $801 $826 $916 $968 $964 $1,111 $0 $200 $400 $600 $800 $1,000 $1,200 FY16 FY17 FY18 FY19 FY20 FY21 Consolidated Net Sales ($ in millions) $156 $164 $180 $198 $191 $
Slide 29: Strong Balance Sheet with Significant Flexibility
29 Strong Balance Sheet with Significant Flexibility • Reduced debt by $1.1B since March 31, 2006 and $650M since September 30, 2008 • Total debt of $447.1M and total cash of $164.1M leading to net debt leverage of 1.4x at March 31, 2022 with $160.1M of excess availability under the ABL, based on Ma
Slide 30: Segment Results and Non-GAAP Reconciliation, Quarter ended March 31, 2022
30 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (UNAUDITED) Quarter ended March 31, 2022 Water Flow Solutions Water Management Solutions Corporate Consolidated (dollars in millions, except per share amounts) Net sales $ 183.9 $ 126.6 $ — $ 310.5 Gross profit $ 57.0 $ 3
Slide 31: Segment Results and Non-GAAP Reconciliation, Q2 FY22 adjusted EBITDA
31 (1) We do not allocate interest, income taxes or pension benefit (expense) other than service to our segments. Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (UNAUDITED) Quarter ended March 31, 2022 Water Flow Solutions Water Management Solutions Corporate Consolidate
Slide 32: Segment Results and Non-GAAP Reconciliation
32 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (UNAUDITED) (1) As a result of the elimination of the one-month lag, the three month period ended March 31, 2021, includes an additional $6.0 million of Net sales, and an additional $1.4 million in Operating income in Wat
Slide 33: Segment Results and Non-GAAP Reconciliation
33 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (UNAUDITED) (1) As a result of the elimination of the one-month lag, the three month period ended March 31, 2021, includes an additional $6.0 million of Net sales, and an additional $1.4 million in Operating income in Wat
Slide 34: Segment Results and Non-GAAP Reconciliation, Six months ended March 31, 2022
34 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (UNAUDITED) Six months ended March 31, 2022 Water Flow Solutions Water Management Solutions Corporate Consolidated (dollars in millions, except per share amounts) Net sales $ 338.8 $ 244.0 $ — $ 582.8 Gross profit $ 109.1
Slide 35: Segment Results and Non-GAAP Reconciliation, Six months adjusted EBITDA
35 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (UNAUDITED) (1) We do not allocate interest, income taxes or pension benefit (expense) other than service to our segments. Six months ended March 31, 2022 Water Flow Solutions Water Management Solutions Corporate Consolid
Slide 36: Segment Results and Non-GAAP Reconciliation
36 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (UNAUDITED) (1) As a result of the elimination of the one-month lag, the six month period ended March 31, 2021, includes an additional $6.0 million of Net sales, and an additional $1.4 million in Operating income in Water
Slide 37: Segment Results and Non-GAAP Reconciliation, Six months ended March 31, 2021
37 Segment Results and Reconciliation of Non-GAAP to GAAP Performance Measures (UNAUDITED) Six months ended March 31, 2021 Water Flow Solutions Water Management Solutions Corporate Consolidated (dollars in millions, except per share amounts) Net income $ 37.6 Income tax expense (4) 13.0 Interest exp
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