Valmont Industries, Inc. · NYSE:VMI
Valmont Industries — Q2 2023 Earnings Presentation
35 slides from Valmont Industries's earnings presentation, Jul 27, 2023
Slide 1: 2Q 2023 Earnings Presentation
2Q 2023 Earnings Presentation July 27, 2023
Slide 2: 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 3: CEO Opening Comments
CEO Opening Comments Avner Applbaum President and CEO
Slide 4: New CEO Avner Applbaum Continues Strategic Vision
Announces New CEO to Continue Strategic Vision Committed to “Run Grow Transform” framework and delivering targets communicated during Investor Day 25+ Years of Experience • In Senior Operational and Financial Roles in Publicly Traded and Private Equity-Backed Companies Joined Valmont as CFO in March
Slide 5: 2Q 2023 Financials and Key Messages
2Q 2023 Financials and Key Messages $1.05B -7.9% 12.8% 13.2% $4.21 $4.37 $88M $37M 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 continued to perform well, delivering strong
Slide 6: Performing Well in Current Market Conditions
Performing Well in Current Market Conditions Infrastructure Agriculture • Benefiting from several long-term, secular growth drivers • U.S. net farm income is projected to be the third highest level over the past ten years, however, economic uncertainties are influencing growers • Utilities have incr
Slide 7: Run Grow Transform
“Run Grow Transform” Evolving into a higher quality and more dynamic organization that is less cyclical and enhances customer value • Proven ability to deliver results and drive growth despite market volatility and Built for sustainable economic cycles RUN outperformance and growth • Operational exc
Slide 8: HR Products Acquisition Drives Transformation Through Recurring Revenue
HR Products Acquisition Drives Transformation Through Recurring Revenue ✓ A leading wholesale supplier of irrigation parts in Australia Key Stats ✓ Leverages existing Valley® dealer network for distribution Founded: 1979 and service Headquarters Australia ✓ Grows parts presence in a key agriculture
Slide 9: Financial Results and Outlook
Financial Results and Outlook Tim Francis Interim CFO
Slide 10: 2Q 2023 Financial Summary
2Q 2023 Financial Summary • Sales growth in Infrastructure was more than GAAP Adjusted1 offset by lower Agriculture sales $M, except EPS 2Q 2023 2Q 2022 Y/Y 2Q 2023 2Q 2022 Y/Y • Despite lower sales, operating margin improved to 12.8% (13.2% adjusted1), on the Net Sales 1,046.3 1,135.5 -7.9% 1,046.3
Slide 11: 2Q 2023 Results | Infrastructure
2Q 2023 Results | Infrastructure Sales ($M) Operating Income ($M) +4.2% +37.8% $770.6 $116.0 • Sales growth due to favorable pricing globally, higher volumes in Solar and TD&S and sales $84.1 from the ConcealFab acquisition, partially $739.5 11.4% 15.1% offset by lower volumes in Telecommunications
Slide 12: 2Q 2023 Results | Agriculture
2Q 2023 Results | Agriculture Sales ($M) Operating Income ($M) -25.9% GAAP: -15.2% Adjusted1: -14.5% • North America volumes were lower as second $377.8 quarter 2022 benefited from ongoing delivery of $279.9 $58.0 $62.2 $49.3 $53.2 record year-end backlog, and growers delaying capital investment dec
Slide 13: YTD Cash Flow Highlights
YTD Cash Flow Highlights $M YTD 07/01/2023 Net Cash Flows from Operating Activities $110 Net Cash Flows from Investing Activities ($34) Net Cash Flows from Financing Activities ($94) Net Cash Flows from Operating Activities $110 Purchase of Property, Plant, & Equipment ($45) Free Cash Flows $65 Expe
Slide 14: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation 2023 Year-to-Date Capital Deployment: $204M Growing Our Business Returning Cash To Shareholders $45M N/A $135M $24M Capital Expenditures Acquisitions1 Share Repurchases Dividends • Investments to support • Targeting high growth • Additional $400M share • 9% di
Slide 15: Strong Balance Sheet and Liquidity
Strong Balance Sheet and Liquidity • Long-term debt mostly fixed- rate, with long-dated maturities to 2044 and 2054 • Total Debt to Adjusted As of July 1, 2023 EBITDA remains within our Cash $167 M desired range of 1.5 to 2.5 Total Long-Term Debt $953 M times Shareholders’ Equity $1,670 M • Strong a
Slide 16: Updated Full Year 2023 Outlook and Key Assumptions
Updated Full Year 2023 Outlook and Key Assumptions Previous 2023 Outlook1 Current 2023 Outlook1 Key Assumptions • Expect full-year operating margin improvement 4%––7% 4% 7% 0% – 2% compared to 2022 Increase IncreaseinInNet NetSales SalesY/Y Y/Y Increase In Net Sales Y/Y • 2022 sales include $100 mil
Slide 17: Uniquely Positioned to Win in Markets with Multi-Year Demand Drivers
Uniquely Positioned to Win in Markets with Multi-Year Demand Drivers Unmatched channel in capital Our products and solutions, enhanced with innovative technology, are goods markets addressing global megatrends and driving above-market growth Manufacturing expertise and operational excellence Infrast
Slide 18: Continuing to Drive Sustainable Outperformance: 5-Year Financial Targets
Continuing to Drive Sustainable Outperformance 5-Year Financial Targets 5 - 8% Net Sales Growth1 >18% ROIC Key Assumptions • Greater near to medium term focus on funding growth with R&D and digital innovation >14% Operating Margin 1.0x Net Earnings • FCF conversion target is long-term over the cycle
Slide 19: Conserving Resources. Improving Life.
CONSERVING RESOURCES. IMPROVING Lire: Valmont
Slide 20: Appendix
Appendix CONSERVING RESOURCES. IMPROVING Lire’ Valmont V
Slide 21: U.S. Electric Utilities Capital Expenditures
U.S. Electric Utilities Capital Expenditures Source: EEI Finance Department, member company reports, and S&P Global Market Intelligence (updated Sept 2022). 21
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 and Capex Spend Forecasts
5G Adoption and Capex Spend Forecasts Source: GSMA Intelligence- The Mobile Economy 2023 23
Slide 24: U.S. Net Cash Farm Income by Year
U.S. Net Cash Farm Income by Year Source: USDA (February 7, 2023) 24
Slide 25: U.S. Drought Condition
U.S. Drought Condition Source: Drought Monitor (July 18, 2023) 25
Slide 26: Steel Material Index Trends 2020-2023 YTD
Steel Material Index Trends 2020-2023 YTD • The spike in steel costs during the first four months of the year is expected to slightly reduce our Infrastructure operating income margin for the second half of the year compared to the strong second quarter results • Cost changes impact TD&S the most be
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 share amounts The non-GAAP tables below disclose the impact of intangible asset amortization (Prospera) and stock-based compensation recognized for the Prospera employees on fiscal 2023 resu
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 share amounts The non-GAAP tables below disclose the impact of intangible asset amortization (Prospera) and stock-based compensation recognized for the Prospera employees on fiscal 2023 resu
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 share amounts The non-GAAP tables below disclose the impact of intangible asset amortization (Prospera) and stock-based compensation recognized for the Prospera employees on fiscal 2022 resu
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, except per share amounts The non-GAAP tables below disclose the impact of intangible asset amortization (Prospera) and stock-based compensation recognized for the Prospera employees on fiscal 2022 resu
Slide 31: Regulation G Reconciliation of Forecasted GAAP and Adjusted Earnings
Regulation G Reconciliation of Forecasted GAAP and Adjusted Earnings Dollars in thousands, except per share amounts The non-GAAP tables below disclose the impact on the range of estimated diluted earnings per share of the (1) amortization of the intangible asset (Prospera) and (2) stock-based compen
Slide 32: Regulation G Reconciliation of Excluding Other Segment Net Sales
Regulation G Reconciliation of Excluding Other Segment Net Sales Dollars in thousands, except per share amounts Excluding Other segment net sales from the second quarter and first half of fiscal 2022, which we refer to in this reconciliation as “Adjusted Net Sales” is a non-GAAP measure. The Other s
Slide 33: 2013 – 2022 Historical Free Cash Flow
2013 – 2022 Historical Free Cash Flow1,2 ($M) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Net cash flows from operating activities $ 396.4 $ 174.1 $ 272.3 $ 232.8 $ 133.1 $ 153.0 $ 307.6 $ 316.3 $ 65.9 $ 326.3 Net cash flows from investing activities (131.7) (256.9) (48.2) (53.0) (49.6) (155.4
Slide 34: Strong Free Cash Flow throughout the Cycle
Strong Free Cash Flow throughout the Cycle 2013 – 2022 Free Cash Flow1 ($M) 350 Years of rapid raw material cost inflation 300 290 250 227 233 210 210 200 175 156 150 101 10-yr Avg. $156M 100 78 81 GAAP 1.33X 50 Adj. 0.83X - (50) (42) (100) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 10 Year A
Slide 35: Calculation of Adjusted EBITDA and Leverage Ratio
Calculation of Adjusted EBITDA and Leverage Ratio Certain of our debt agreements contain covenants that require us to maintain certain coverage ratios. Our Debt/Adjusted EBITDA may not exceed 3.5X Adjusted EBITDA (or 3.75X Adjusted EBITDA after certain material acquisitions) of the prior four quarte