Slide 1: Investor Presentation Second Quarter 2023
INVESTOR PRESENTATION Second Quarter 2023
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 differ from anticipate
Slide 3: Distribution of Global Sales
DISTRIBUTION OF GLOBAL SALES WORLDWIDE 62% 46% $1,089M 21% 17% 29% 25% June 2023 Year to Date AMERICAS EMEA ASIA PACIFIC CONTRACTOR INDUSTRIAL PROCESS AMERICAS EMEA ASIA PACIFIC 55% 47% 40% 43% 32% 26% 19% 21% 17% CONTRACTOR INDUSTRIAL PROCESS CONTRACTOR INDUSTRIAL PROCESS CONTRACTOR INDUSTRIAL PROC
Slide 4: 2022 Net Sales by End Market
2022 NET SALES BY END MARKET 1% Wood 1% White Goods 2% Mining 3% Oil & Natural Gas 4% Vehicle Services 4% Electronics 4% Public Works 7% 48% Other Construction 9% Automotive 17% Industrial & Machinery 4
Slide 5: Trusted Solutions to Keep Jobs Moving & Fluids Pumping
TRUSTED SOLUTIONS TO KEEP JOBS MOVING & FLUIDS PUMPING 5
Slide 6: Diversified Fluid Handling Business Niche
DIVERSIFIED FLUID HANDLING BUSINESS NICHE DIFFICULT APPLICATIONS; CORROSIVE, VISCOUS, HARD-TO-MOVE MATERIALS 6.3% ORGANIC REVENUE CAGR* ~40% OF REVENUE IS PARTS AND ACCESSORIES *20-year average, constant currency 6
Slide 7: High Customer Value, Strong Product Differentiation
HIGH CUSTOMER VALUE, STRONG PRODUCT DIFFERENTIATION BEST IN CLASS DELIVERY MATERIAL SUPPLIER RELATIONSHIPS NICHE MARKETS STRONG CHANNEL PARTNERS CUSTOMER ROI LOWEST TOTAL COST OF OWNERSHIP LEADING STRINGENT BEST IN END USER NEW PRODUCT PRODUCT CLASS QUALITY INTERACTION INVESTMENT REQUIREMENTS 7
Slide 8: Growth Plans and Earnings Drivers
GROWTH PLANS AND EARNINGS DRIVERS 12%+ STRATEGIC INITIATIVES 10% • New Product Development • New Markets • Global Expansion • End-user Conversion • Acquisitions Targeted Revenue CAGR Targeted Earnings CAGR Through a cycle 8
Slide 9: Low Volume, High Mix Delivers Customer ROI
LOW VOLUME, HIGH MIX DELIVERS CUSTOMER ROI Average Number 2022 Sales Number of SKUs of Units Sold Per Day ($ in millions) HIGHLY-VALUED 0-1 60,900 93% $930 43% PRODUCTS AT LOW VOLUMES 43% 2-5 2,800 4% $395 19% 6 - 10 900 1% $179 8% of our revenue comes from products 11 - 15 300 1% $80 4% that we sel
Slide 10: Growth Plans and Earnings Drivers
GROWTH PLANS AND EARNINGS DRIVERS 12%+ Acquisitions 3-4% 9-10% Strategic Initiatives 1-2% 5-7% Price 1-2% 3% Industrial Production Targeted Organic Targeted Revenue Targeted Earnings Average Growth Rate CAGR CAGR CAGR Through a cycle 10
Slide 11: Exceptional Returns
6.3% 27% ORGANIC RETURN ON REVENUE INVESTED CAGR CAPITAL EXCEPTIONAL RETURNS 40% 18% RETURN ON RETURN ON EQUITY ASSETS Based on a 20-year average, constant currency 11
Slide 12: Business Model
BUSINESS MODEL • Brand Promise • Operational Excellence • Engineering & Manufacturing Excellence • Extensive Reach 12
Slide 13: Engineering Excellence
ENGINEERING EXCELLENCE TARGET DOUBLE-DIGIT RETURNS ON NEW PRODUCTS ANNUAL R&D INVESTMENT: >1.8X * 4.0% * OUR PEER GROUP AS A PERCENT OF SALES VS. PEERS AT 2.2% * Peers: ITW, CSL, DOV, ENOV, IEX, NDSN, WTS, FLS, based on a 5-year average, 2018 - 2022. 13
Slide 14: Manufacturing Excellence
MANUFACTURING EXCELLENCE >80% PRODUCT BASED IN USA ZERO COST CHANGE GOAL ON THE SAME BASKET OF GOODS (YEAR OVER YEAR) <1% WARRANTY COSTS 14
Slide 15: Service Excellence
SERVICE EXCELLENCE SAME DAY ORDERS IN BY NOON, SHIP THE SAME DAY 92% IN-STOCK SERVICE LEVEL GOAL 15
Slide 16: Extensive Reach
EXTENSIVE REACH CUSTOMERS IN 30,000+ 100+ OUTLETS/DISTRIBUTORS COUNTRIES INSTALLED BASE FACILITIES IN ~100 12 YEARS OLD COUNTRIES 16
Slide 17: Contractor
CONTRACTOR 17
Slide 18: Contractor
CONTRACTOR 2023 FIR ST HA LF KEY END MARKETS SELECT REPRESENTATIVE PER FOR MA NC E INDUSTRY PARTICIPANTS: • Residential and non-residential construction $502M • Residential and non-residential SEGMENT REVENUE WAGNER/TITAN remodeling CAMPBELL HAUSFELD • Transportation Infrastructure GROWTH DRIVERS &
Slide 19: Industrial
INDUSTRIAL
Slide 20: Industrial
INDUSTRIAL 2023 FIR ST HA LF PER FOR MA NC E KEY END MARKETS SELECT REPRESENTATIVE INDUSTRY PARTICIPANTS: • General industrial • Automotive $314M SEGMENT REVENUE • Residential and non-residential NORDSON construction CARLISLE • Alternative energy and others EXEL COMPOSITES WAGNER 6% ORGANIC REVENUE
Slide 21: Process
PROCESS
Slide 22: Process
PROCESS 2023 FIR ST HA LF PER FOR MA NC E KEY END MARKETS SELECT REPRESENTATIVE INDUSTRY PARTICIPANTS: • Pharmaceutical, food and beverage • Vehicle services $274M IDEX SEGMENT REVENUE • Oil and natural gas DOVER • Environmental INGERSOLL RAND • Semiconductor and others LINCOLN 15% VOGEL ORGANIC REV
Slide 23: Capital Allocation
G GRACO CAPITAL ALLOCATION
Slide 24: Long-Term Cash Deployment Priorities
LONG-TERM CASH DEPLOYMENT PRIORITIES ORGANIC GROWTH ACQUISITIONS SHAREHOLDER RETURN • International footprint • Supplement to • Solid dividend history organic growth • Product development • Approximately 15.0 million shares • Leverage core competencies remaining on repurchase • Production capacity i
Slide 25: Key Investment Attributes
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 mission-critical functions • Recu
Slide 26: Acquisitions
ACQUISITIONS
Slide 27: Acquisitions: Industrial
ACQUISITIONS INDUSTRIAL 2012 2015 2015 2017 2018 2020 27
Slide 28: Acquisitions: Process
ACQUISITIONS PROCESS 2013 2015 2015 2016 2019 2022 28
Slide 29: Financial Results
G GRACO FINANCIAL RESULTS
Slide 30: June 2023 YTD Financial Performance
4% 52.9% REVENUE GROSS JUNE 2023 YTD GROWTH MARGIN FINANCIAL PERFORMANCE 21% 21% NET EPS INCOME GROWTH GROWTH (As Reported) 30
Slide 31: Financial Results
FINANCIAL RESULTS Statement of Earnings Second Quarter June Year to Date $ in millions except per share amounts 2023 2022 Change 2023 2022 Change Net Sales $ 559.6 $ 548.5 2% $1,089.3 $1,042.8 4% Gross Profit 291.4 269.1 8% 576.6 523.5 10 % % of Net Sales 52.1% 49.0% 3.1 pts 52.9% 50.2% 2.7 pts Oper
Slide 32: Financial Results Adjusted for Comparability
FINANCIAL RESULTS ADJUSTED FOR COMPARABILITY Non-GAAP Reconciliation Second Quarter June Year to Date $ in millions except per share amounts 2023 2022 Change 2023 2022 Change Income taxes, as reported $ 25.4 $ 29.0 (12)% $ 53.5 $ 51.1 5% Excess tax benefit from option exercises 5.5 0.4 8.1 1.9 Incom
Slide 33: Second Quarter 2023 Results
SECOND QUARTER 2023 RESULTS Net Sales • Up 2 percent from 2022, up 3 percent at consistent translation rates • Margin rate up 3.1 percentage points compared to 2022 Gross Margin > Realized pricing and favorable mix more than offset higher product cost • Up $8 million compared to 2022 Operating Earni
Slide 34: First Half 2023 Results
FIRST HALF 2023 RESULTS Net Sales • Up 4 percent from 2022, up 6 percent at consistent translation rates • Margin rate up 2.7 percentage points compared to 2022 Gross Margin > Realized pricing and favorable mix more than offset higher product cost and adverse impact of changes in currency translatio
Slide 35: Financial Results: Components of Net Sales Change
FINANCIAL RESULTS Components of Net Sales Change 2023 Second Quarter Segment Region Contractor Industrial Process Americas EMEA Asia Pacific Consolidated Volume and Price (3)% 4% 14 % 2% 5% 0% 3% Acquisitions 0% 0% 0% 0% 0% 0% 0% Currency (1)% (1)% (1)% 0% 2% (4)% (1)% Total (4)% 3% 13 % 2% 7% (4)%
Slide 36: Current Environment and Outlook
CURRENT ENVIRONMENT AND OUTLOOK Constant currency basis and excluding acquisitions completed in the prior 12 months Americas EMEA Asia Pacific Worldwide Current Q2 2023 2% Q2 2023 5% Q2 2023 0% Net Sales Change Q2 2023 3% June YTD 7% June YTD 6% June YTD (1%) Environment June YTD 6% Contractor Net S
Slide 37: Other Items
OTHER ITEMS • Capital expenditure expectations of approximately $200 million in 2023, Cap Ex including approximately $130 million in facility expansion projects • In July 2023, subsequent to the end of second quarter, repaid $75 million Debt private placement debt plus prepayment fee of $0.7 million
Slide 38: Financial Summary
FINANCIAL SUMMARY 2022 Appendix
Slide 39: Financial Performance
FINANCIAL PERFORMANCE Net Sales Operating Margin $2,500 30% 25% $2,000 20% Operating Margin Sales ($ millions) $1,500 15% $1,000 10% $500 5% $0 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 As Reported Diluted $0.66 $0.27 $0.56 $0.77 $0.81 $1.12 $1.22 $1.95 $0.24 $1.4
Slide 40: Stock Dividend Growth
STOCK DIVIDEND GROWTH $0.94 Dividends $1.00 adjusted for $0.90 stock splits $0.80 $0.70 $0.70 $0.60 $0.48 $0.50 $0.37 $0.40 $0.30 $0.20 $0.10 $- 2014 2017 2020 2023 40
Slide 41: Strong Cash Generation
STRONG CASH GENERATION ($ Millions) 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Operating Cash Flows $ 377 $ 457 $ 394 $ 419 $ 368 $ 338 $ 269 $ 190 $ 241 $ 243 % of Net Income 82% 104% 119% 122% 108% 134% 661% 55% 107% 115% Capital Expenditures 201 134 71 128 54 40 42 42 31 23 Free Cash Flow
Slide 42: Worldwide Leader in Fluid Handling
WORLDWIDE LEADER IN FLUID HANDLING MOVE • MEASURE • MIX • CONTROL • DISPENSE • SPRAY