EX-99.1 2 a02010208kexhibit99slide.htm EX-99.1
Earnings Conference Call Third Quarter 2020 October 20, 2020 – 8:00am CT Exhibit 99.1
2 Forward-Looking Statements and Non-GAAP Measures We want to remind everyone that our comments may contain forward-looking statements that are inherently subject to uncertainties and risks, including the impacts of the novel coronavirus (COVID-19) on the global economy and on our customers, suppliers, employees, operations, business, liquidity and cash flow. 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, including our Annual Report on Form 10-K for 2019 and Quarterly Reports on Form 10-Q, for a list of factors that could cause our results to differ from those anticipated in any such forward-looking statements. We would also direct your attention to our website, dovercorporation.com, where considerably more information can be found. In addition to financial measures based on U.S. GAAP, Dover provides supplemental non-GAAP financial information. Management uses non-GAAP measures in addition to GAAP measures to understand and compare operating results across periods, make resource allocation decisions, and for forecasting and other purposes. Management believes these non-GAAP measures reflect results in a manner that enables, in many instances, more meaningful analysis of trends and facilitates comparison of results across periods and to those of peer companies. These non-GAAP financial measures have no standardized meaning presented in U.S. GAAP and may not be comparable to other similarly titled measures used by other companies due to potential differences between the companies in calculations. The use of these non-GAAP measures has limitations and they should not be considered as substitutes for measures of financial performance and financial position as prepared in accordance with U.S. GAAP. Reconciliations and definitions are included either in this presentation or in Dover’s earnings release and investor supplement for the third quarter, which are available on Dover’s website.
3 Summary Corporate Q3 Results and Highlights Q3 2020 Highlights and Comments Revenue change (Y-o-Y) All-in Organic(1) -4% -5%  Continued sequential improvement across all segments  FX impact: +1%; acquisitions offset dispositions Bookings change (Y-o-Y) All-in Organic(2) -1% -1%  Book-to-bill(2): 1.03; ~1/3rd of OpCos with positive Y-o-Y bookings  Backlog(2) remains strong (+14% Y-o-Y, driven by DRFE) Segment EBIT margin improvement (Y-o-Y) Reported(3) Adjusted(1) +50 bps +70 bps  Improving volumes, mix, and ongoing cost actions drive outperformance vs. internal targets  Absolute earnings improvement in DPPS and DRFE Earnings Reported Adjusted(1) $200M $232M  Reported Y-o-Y change: -3%  Adjusted Y-o-Y change: -1% Diluted EPS Reported Adjusted(1) $1.38 $1.60  Reported Y-o-Y change: -1%  Adjusted Y-o-Y change: flat Free Cash Flow (% of)(1) Revenue Adj. Earnings 17% 127%  Q3 FCF(1) down $10M Y-o-Y  YTD FCF(1) up $117M Y-o-Y; liquidity position remains robust Guidance and other activities  2020 EPS guidance raised: ‒ GAAP: $4.52 – $4.57 ‒ Adjusted(1): $5.40 - $5.45 (1) Non-GAAP measures (definitions and reconciliations in appendix) (2) See performance measures definitions in appendix (3) Refer to definition of total segment earnings (EBIT) margin in appendix
4 Segment Revenue ($M) / Organic Change % Adj. EBIT % / bps ∆ Y-o-Y Comments DEP $387 -10% 17.4% -20 bps  Strength in aerospace & defense and strong recovery in vehicle aftermarket. Weakness in industrial winches. Difficult Y-o-Y comp in waste handling vs. all-time record in Q3 ’19  Modest margin decline as impact of lower volumes partially offset by productivity and mix DFS $381 -8% 17.9% +120 bps  Sustained strong activity in above-ground retail fueling in North America (incl. EMV), expected lower demand in Asian markets and in fuel transport  Margin up and adjusted earnings flat on productivity gains, pricing, and geo/product mix DII $266 -8% 19.6% -290 bps  Marking & coding resilient on strong consumables and starting recovery in printers, particularly US and APAC. Textile printing capex remains impacted, consumables improving  Digital print volume decline driving decremental margin. Strong margin performance in legacy marking & coding DPPS $348 -1% 26.3% +330 bps  Continued growth in biopharma & hygienic; timing of large shipments from backlog in plastics & polymers. Ongoing subdued activity in compression and industrial pumps  Continued margin strength on improved volumes, productivity gains and mix DRFE $368 3% 10.8% +110 bps  Large project shipments from strong backlog in can making. Recovery in food retail and heat exchangers (ex-HVAC). Continued weakness in foodservice equipment  Solid margin conversion on improved volumes Q3 2020 Segment Results Q3 2020(1) (1) Non-GAAP reconciliations in appendix
5 Q3 2019 Q3 2020 Revenue & Bookings Revenue Change in Organic Revenue(1): -$92M, or -5.1% FXDFS Q3 2020DII DPPS DRFE ACQ./ DISP. (2) Geographic Detail DEPQ3 2019 DFS DII DRFEDPPS FX ACQ./ DISP. (3) Q3 2020 Note: $ in millions. Numbers may not add due to rounding Bookings(4) Change in Organic Bookings(4): -$21M, or -1.1% (1) Non-GAAP measure (definition and reconciliation in appendix) (2) Acquisitions: $18M, dispositions: $14M DEP ($M) 1,825 -33 12 1,74810-44 -3-21 ($M) 3 -64 7 1,804134-50 -12-28 41,814 22% 4% 12% 55% 8% Q3 2020 % of Revenue ASIA OTHER EUROPE OTHER AMER. US (6)% (10)% (4)% (5%) (4)% Organic Rev Growth(1) Organic Organic (3) Acquisitions: $14M, dispositions: $10M (4) See performance measure definitions in appendix
6 Q3 2020 Adjusted Segment EBIT and Adjusted Net Earnings SEGMENT EBIT ADJ. EARNINGS RIGHT SIZING GAAP EARNINGS ACQ. AMORT. INT./TAX EXPENSE CORP. EXPENSE ADJ. EARNINGS ACQ. AMORT. RIGHT SIZING ADJ. ON SALE OF CHINO GAAP EARNINGS Change in Adjusted Net Earnings (3) -$3M 206 3 26 235 -1 -6 5 232 -27 -5 Q3 2019 Q3 2020 ($M) Note: $ in millions. Numbers may not add due to rounding 200-0 DIIADJ. EBIT D&A (1) DEPADJ. EBITDA DFS DPPS DRFE ADJ. EBITDA D&A (2) ADJ. EBIT 21.1% 18.2% Change in Adjusted Segment EBIT (3) -$1M Q3 2020 320 385 -7-7 319 ($M)14 17.5% Q3 2019 -68-1 3 22.1% 38765 (1) Depreciation: $31M, Amortization: $35M (2) Depreciation: $32M, Amortization: $35M (3) Non-GAAP measures (definitions and reconciliations in appendix) 12.9% 13.3%+40bps +100bps
7 Year-to-Date Free Cash Flow 12.3% (1) Includes gain on disposition and loss on assets held for sale (2) Includes stock-based compensation and changes in other current and non-current assets and liabilities (3) Non-GAAP measures (reconciliation on this slide, definitions in appendix) $M YTD ’20 YTD ’19 ∆ Net earnings 501 510 -8 Adjustments for (gains) losses(1) (5) 47 -52 D&A 206 202 +4 Change in working capital (80) (146) +66 Change in other(2) 65 (29) +94 Cash flow from operations 687 584 +103 Capex (124) (137) +14 Free cash flow(3) 563 447 +117 FCF % of revenue(3) 11.5% 8.3 +320 bps FCF % of adj. earnings(3) 94.0% 69.1% +2,490 bps Note: Numbers may not add due to rounding
8 Trends and Business Outlook Segment Comments DEP  Trajectory stabilized but capital goods ex-auto remains subdued. Improving momentum in industrial automation and continued strength in defense & aerospace. Expect improved orders in waste handling after a market pause  Good visibility with majority of Q4 revenue in backlog – limited upside/downside DFS  NA above-ground buoyed by EMV, but Q4 represents difficult Y-o-Y top line comparable; margin trajectory intact  Decreased capital spend by “integrated oil” and expiration of China double-wall mandate to continue through Q4 DII  Marking & coding steady on robust demand in FMCG and consumables as well as recovery in printers, parts and services  Apparel/fashion markets showing sequential improvement but expected to remain soft Y-o-Y; sequential improvement in inks and select textile niches (e.g. home decor, sportswear) DPPS  Continued growth in biopharma, sequential improvement in industrial pumps  Solid pace in plastics & polymers off the strong backlog, albeit below record Q3 2020 volume  Precision components (compression) continues to be soft, mainly in O&G and power gen DRFE  Solid momentum in food retail, but entering seasonal slowdown due to holidays. Backlog building for 2021  Strong outlook in aluminum can making for the foreseeable future; positive momentum/backlog in heat exchangers  Foodservice (~10% of segment) to remain challenged on soft institutional demand through year end
9 FY2020 Guidance Update  Expect full year Adjusted EBIT margin(2) to be approximately flat year-over-year – Expect favorable FY decremental margin(2) below 20-25% target range communicated previously  ~$75M full year permanent cost reduction well above $50M goal at beginning of year – Approximately $25M calendarization carryover benefit into 2021 – Some temporary cost reductions become semi-permanent (e.g., lower travel budgets) (1) Non-GAAP measure (definition and reconciliation in appendix) (2) Non-GAAP measure (definition in appendix) EPS EBIT Cash Flow  Free Cash Flow(2) 11-12% of Revenue  Capex: ~$150M  Raising FY 2020 EPS guidance: – GAAP: $4.52 – $4.57 (revised up from $4.16 - $4.41) – Adjusted(1): $5.40 - $5.45 (revised up from $5.00 - $5.25)
10 Appendix
11 Q3 2019 to Q3 2020 Revenue and Bookings Bridges by Segment Note: Numbers may not add due to rounding DEP DFS DII DPPS DRFE Total 427 412 275 341 370 1,825 (44) (33) (21) (3) 10 (92) 3 1 - 5 3 12 1 - 12 4 (14) 3 387 381 266 348 368 1,748 DEP DFS DII DPPS DRFE Total 426 451 285 330 323 1,814 (50) (64) (28) (12) 134 (21) 3 (3) (1) 5 3 7 2 - 11 2 (10) 4 381 384 266 324 450 1,804 ($ in millions) Q3 2019 Revenue Bookings Bridge by Segment ($ in millions) Acquisitions / Dispositions Q3 2020 Revenue Organic Growth FX Revenue Bridge by Segment FX Q3 2020 Bookings Q3 2019 Bookings Organic Growth Acquisitions / Dispositions
12 Q3 2020 Organic Revenue and Bookings Bridges Note: Numbers may not add due to rounding Q3 2020 Segment Growth Factors Revenue Growth Bookings Growth -10.4% -11.6% -7.9% -14.2% -7.6% -9.9% -0.9% -3.7% 2.6% 41.3% -5.1% -1.1% 1.0% 0.8% -0.8% -0.6% 0.7% 0.4% Total -4.2% -0.5% Q3 2020 Geographic Revenue Growth Factors Revenue Growth -4.2% -4.7% -4.2% -10.1% -5.8% -5.1% 1.0% -0.8% 0.7% Total -4.2% Acquisitions Dispositions Currency translation Organic US Other Americas Europe Asia Other Total Organic Acquisitions Dispositions Currency translation Organic Refrigeration & Food Equipment Total Organic Engineered Products Pumps & Process Solutions Fueling Solutions Imaging & Identification
13 Reconciliation of Q3 2020 Net Earnings to Adj. EBIT and Adj. EBITDA and Calculation of Adj. EBIT Margin and Adj. EBITDA Margin by Segment Note: Numbers may not add due to rounding (1) Adjusted depreciation and amortization expense excludes depreciation and amortization included within rightsizing and other costs DEP DFS DII DPPS DRFE Total 387 381 266 348 368 1,748 - - - - - 200 - - - - - 36 - - - - - 27 - - - - - 51 65 67 52 90 40 313 16.8% 17.5% 19.5% 25.8% 10.9% 17.9% 2 2 0 2 (1) 5 - - - - 1 1 67 68 52 92 40 319 17.4% 17.9% 19.6% 26.3% 10.8% 18.2% 11 18 10 17 12 68 78 86 62 109 52 387 20.2% 22.7% 23.3% 31.3% 14.1% 22.1% Loss on disposition Corporate expense Adjusted EBIT - Segment Adjusted EBIT % Adjusted depreciation and amortization expense (1) Interest expense, net Q3 2020 ($ in millions) Revenue Net earnings Add back: Adjusted EBITDA - Segment Adjusted EBITDA % Income tax expense Segment earnings (EBIT) EBIT % Adjustments: Rightsizing and other costs
14 Reconciliation of Q3 2019 Net Earnings to Adj. EBIT and Adj. EBITDA and Calculation of Adj. EBIT Margin and Adj. EBITDA Margin by Segment Note: Numbers may not add due to rounding DEP DFS DII DPPS DRFE Total 427 412 275 341 370 1,825 - - - - - 206 - - - - - 29 - - - - - 30 - - - - - 52 74 68 62 77 35 317 17.4% 16.5% 22.4% 22.7% 9.5% 17.4% 1 1 0 1 1 3 75 69 62 78 36 320 17.6% 16.7% 22.5% 23.0% 9.7% 17.5% 10 19 7 16 13 65 85 88 69 94 49 385 19.9% 21.3% 25.2% 27.7% 13.3% 21.1% Corporate expense Adjusted EBIT - Segment Adjusted EBIT % Adjusted depreciation and amortization expense (1) Interest expense, net Q3 2019 ($ in millions) Revenue Net earnings Add back: Adjusted EBITDA - Segment Adjusted EBITDA % Income tax expense Segment earnings (EBIT) EBIT % Adjustments: Rightsizing and other costs (1) Adjusted depreciation and amortization expense excludes depreciation and amortization included within rightsizing and other costs
15 Reconciliation of Free Cash Flow and Decremental Margin Note: Numbers may not add due to rounding Decremental Margin Q3 '20 Q3 '19 ∆ 1,748 1,825 (77) 319 320 (1) 2%Decremental Margin ($ in millions) Revenue Adjusted EBIT - Segment ($ millions) Q3 2020 Q3 2019 Q3 YTD 2020 Q3 YTD 2019 Net Cash Provided by Operating Activities 339 351 687 584 Capital Expenditures (44) (46) (124) (137) Free Cash Flow 295 305 563 447 Free Cash Flow as a % of Earnings 147.2% 147.9% 112.4% 87.6% Free Cash Flow as a of Adjusted Earnings 127.2 129.9185.4% 94.0 69.1 Free Cash Flow as a % of Revenue 16.9% 16.7%185.4 11.5% 8.3%
16 Reconciliation of Adjusted Net Earnings to Net Earnings and Calculation of Adjusted Diluted EPS under U.S. GAAP Note: Numbers may not add due to rounding ($ in millions, except per share data) Q3 2020 Q3 2019 Q3 YTD 2020 Q3 YTD 2019 Net earnings ($) 200 206 501 510 Acquisition-related amortization, pre tax 35 34 103 105 Acquisition-related amortization, tax impact (9) (9) (26) (26) Rightsizing and other costs, pre tax 6 4 31 14 Rightsizing and other costs, tax impact (1) (1) (6) (3) Loss (gain) on disposition, pre tax 1 - (5) - Loss (gain) on disposition, tax impact (0) - 1 - Loss on assets held for sale - - - 47 Adjusted net earnings ($) 232 235 599 646 Adjusted net earnings margin 13.3% 12.9% 12.2% 12.0% Weighted average shares outstanding – diluted 145 147 145 147 Diluted EPS ($) 1.38 1.40 3.45 3.47 Acquisition-related amortization, pre tax 0.24 0.23 0.71 0.71 Acquisition-related amortization, tax impact (0.06) (0.06) (0.18) (0.18) Rightsizing and other costs, pre tax 0.04 0.03 0.21 0.10 Rightsizing and other costs, tax impact (0.01) (0.01) (0.04) (0.02) Loss (gain) on disposition, pre tax 0.00 - (0.04) - Loss (gain) on disposition, tax impact (0.00) - 0.01 - Loss on assets held for sale - - - 0.32 Adjusted diluted EPS ($) 1.60 1.60 4.12 4.40
17 Reconciliation of EPS to Adjusted EPS Range 2020 Guidance for Earnings per Share (GAAP) $4.52 $4.57 Acquisition-related amortization, net 0.72- Rightsizing and other costs, net 0.19- Gain on disposition, net (0.03) 2020 Guidance for Adjusted Earnings per Share (Non-GAAP) $5.40 $5.45 Note: Numbers may not add due to rounding
18 Non-GAAP Definitions Definitions of Non-GAAP Measures: Adjusted Net Earnings: is defined as net earnings adjusted for the effect of acquisition-related amortization, rightsizing and other costs, a 2019 loss on assets held for sale and a 2020 gain on disposition. Adjusted Net Earnings Margin: is defined as adjusted net earnings divided by revenue. Adjusted Diluted Net Earnings Per Share: is defined as adjusted net earnings divided by average diluted shares. Total Segment Earnings (EBIT): is defined as net earnings before income taxes, net interest expense and corporate expenses. Total Segment Earnings (EBIT) Margin: is defined as total segment earnings (EBIT) divided by revenue. Adjusted EBIT by Segment: is defined as net earnings before income taxes, net interest expense, corporate expenses, rightsizing and other costs, a 2019 loss on assets held for sale and a 2020 gain/loss on disposition. Adjusted EBIT Margin by Segment: is defined as adjusted EBIT by segment divided by segment revenue. The bps change Y-o-Y is calculated as the difference between adjusted EBIT margin for the current period and the prior period. Adjusted EBITDA by Segment: is defined as adjusted EBIT by segment plus depreciation and amortization, excluding depreciation and amortization included within rightsizing and other costs. Adjusted EBITDA Margin by Segment: is defined as adjusted EBITDA by segment divided by segment revenue. EBIT Conversion / Decremental Margin: is defined as the change in total adjusted segment earnings (EBIT) divided by the change in revenue. Free Cash Flow: is defined as net cash provided by operating activities minus capital expenditures. Free cash flow as a percentage of revenue equals free cash flow divided by revenue. Free cash flow as a percentage of net earnings equals free cash flow divided by net earnings. Free cash flow as a percentage of adjusted net earnings equals free cash flow divided by adjusted net earnings. Organic Revenue Growth: is defined as revenue growth excluding the impact of foreign currency exchange rates and the impact of acquisitions and dispositions. The tables included in this presentation provide reconciliations of the non-GAAP measures used in this presentation to the most directly comparable U.S. GAAP measures. Further information regarding management’s use of these non-GAAP measures is included in Dover’s earnings release and investor supplement for the third quarter.
19 Performance Measure Definitions Definitions of Performance Measures: Bookings represent total orders received from customers in the current reporting period. This metric is an important measure of performance and an indicator of revenue order trends. Organic Bookings represent total orders received from customers in the current reporting period excluding the impact of foreign currency exchange rates and the impact of acquisitions and dispositions. This metric is an important measure of performance and an indicator of revenue order trends. Backlog represents an estimate of the total remaining bookings at a point in time for which performance obligations have not yet been satisfied. This metric is useful as it represents the aggregate amount we expect to recognize as revenue in the future. Book-to-Bill is a ratio of the amount of bookings received from customers during a period divided by the amount of revenue recorded during that same period. This metric is a useful indicator of demand. We use the above operational metrics in monitoring the performance of the business. We believe the operational metrics are useful to investors and other users of our financial information in assessing the performance of our segments.