2017 Q4 Earnings Calls21.q4cdn.com/.../2018/02/2017-Q4-Earnings-Call-180226.pdf · See Welbilt’s...

© Welbilt, Inc.© Welbilt, Inc.

2017 Q4 Earnings Call

February 26, 2018


Forward-Looking Statements

2

Certain statements in this presentation constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Statements contained in this presentation that are not historical facts are forward-looking statements and include, for example, the Company’s expectations regarding future results, the Company’s full-year financial outlook, descriptions of our operating and strategic plans and any assumptions on which those expectations, outlook or plans are based. Such forward-looking statements involve known and unknown risks and uncertainties, and our actual results could differ materially from future results expressed or implied in these forward-looking statements. The forward-looking statement included in this presentation are based on our current beliefs and expectations and speak only as of the date hereof. These statements are not guarantees or indicative of future performance. Important assumptions, risks, uncertainties and factors that could cause actual results to differ materially from those forward-looking statements are described in more detail under the caption "Risk Factors" in our most recent Annual Report on Form 10-K, and in our other filings with the Securities and Exchange Commission ("SEC"). We do not intend, and, except as required by law, we undertake no obligation, to update any of our forward-looking statements after the date of this presentation to reflect any future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Non-GAAP Financial MeasuresThe company uses certain non-GAAP financial measures in this presentation. These non-GAAP financial measures should not be considered as an alternative to our financial information presented in accordance with U.S. GAAP as they have important limitations as analytical tools. Reconciliations of these non-GAAP financials measures to the most comparable GAAP measures can be found in our press release for the fourth quarter of 2017, which is available at www.welbilt.com, together with this presentation.

http://www.welbilt.com/


2017 Fourth Quarter Results

3

US$ in millions (except % and per share data) 2017 Q4 2016 Q4 Δ

- Organic Net Sales1 $359.0 $372.8 (3.7%)

- Divestitures impact2 --- $5.9 (1.5%)

- FX translation impact2 $6.9 --- +1.8%

Net sales $365.9 $378.7 (3.4%)

Adjusted Operating EBITDA margin1 20.4% 18.4% +200 bps

Amortization expense $7.8 $7.7

Interest expense $21.0 $24.7

Other expense (income) – net $2.0 ($0.5)

Effective tax rate3 (78.8%) 30.7%

Adjusted Net Earnings1,3 $35.8 $22.8 +57.0%

Adjusted Diluted EPS1,3 $0.26 $0.16 +62.5%

Delivers margin and EPS growth over prior year1

1 See Welbilt’s 2017 Q4 earnings release for the reconciliations from GAAP to non-GAAP measures.2 Reflects basis point impact of adjusting items between net sales and Organic Net Sales.3 2017 Q4 effective tax rate includes a $32.0M benefit from the Tax Cuts and Jobs Act, which is excluded from Adjusted Net Earnings and Adjusted Diluted EPS.


10 Consecutive Quarters of YOY Adjusted Operating EBITDA Margin1 Growth

41 See Welbilt’s 2017 Q4 earnings release for the reconciliations from GAAP to non-GAAP measures.

16.1%

17.7%

14.6%

15.4%

17.3%

19.9%

18.4%

17.8%

16.1%

17.9%

21.4%

20.4%

19.1%

0.1

0.12

0.14

0.16

0.18

0.2

0.22

Q1 Q2 Q3 Q4 FY/YTD

Adju

sted

Ope

ratin

g EB

ITDA

Mar

gin1

2015 2016 2017

+450 bps


2017 Full Year Results

5

US$ in millions (except % and per share data) 2017 2016 Δ

- Organic Net Sales1 $1,446.8 $1,442.0 +0.3%

- Divestitures impact2 --- $14.6 (1.0%)

- FX translation impact2 ($1.4) --- (0.1%)

Net sales $1,445.4 $1,456.6 (0.8%)

Adjusted Operating EBITDA margin1 19.1% 17.8% +130 bps

Amortization expense $31.2 $31.2

Interest expense $86.9 $85.2

Interest expense on notes with MTW – net --- $0.1

Other expense – net $9.0 $9.1

Effective tax rate3 (12.8%) 24.1%

Adjusted Net Earnings1,3 $108.9 $87.1 +25.0%

Adjusted Diluted EPS1,3 $0.77 $0.62 +24.2%

Sales, margin and EPS all increased over prior year1

1 See Welbilt’s 2017 Q4 earnings release for the reconciliations from GAAP to non-GAAP measures.2 Reflects basis point impact of adjusting items between net sales and Organic Net Sales.3 2017 effective tax rate includes a $32.0M benefit from the Tax Cuts and Jobs Act, which is excluded from Adjusted Net Earnings and Adjusted Diluted EPS.


$261.3 $259.3

$245.0

$250.0

$255.0

$260.0

$265.0

2016 Q4 2017 Q4

Americas (Q4: -0.8%, Full-Year: -0.7%)

2017 Q4 Segment Organic Net Sales1

(US$ in millions)


$63.0

$54.6

$45.0

$50.0

$55.0

$60.0

$65.0

2016 Q4 2017 Q4

EMEA (Q4: -13.3%, Full-Year: +2.1%)

$48.5

$45.1

$35.0

$40.0

$45.0

$50.0

$55.0

2016 Q4 2017 Q4

APAC (Q4: -7.0%, Full-Year: +4.6%)

↓ Cold-side ↑ Hot-side ↑ KitchenCare ↓ 80/20 CLS ↔ Cold-side ↓ Hot-side ↑ KitchenCare ↓ 80/20 PLS

↑ Cold-side ↓ Hot-side ↓ KitchenCare ↓ Fabristeel


National Restaurant Association’s Restaurant Performance Index – December 2017

7


The Levers that will Bridge the Gap to our Margin Ambition

8

2015EBITDA1

Margins “Mid-teens”

Product Cost& Platforms

Simplification

KitchenCareImprovements

New Productsand Systems

Right-Sizing Lean Mfg.

The “1000 BPS Challenge” of gap closure is a multi-year journey.

Plant Rationalization

HeadcountReductions

80:20 PLS & CLS

Purchasing & Supply

Chain

Achieved2016

EBITDA1

Margin Ambition

“Mid-to-high twenties

still to go“

Achieved2017

= Later Stage

“Runway Remaining”:Stage of Initiative Progress

= Mid Stage

= Early Stage

1 See Welbilt’s 2017 Q4 earnings release and SEC filings for the reconciliations from GAAP to non-GAAP measures.

Guidance Range2018

450 bps

40-190 bps

490-640 bps


18.4%20.4%

20110

720

630

310100 10

-200

0

200

400

600

800

1000

1200

1400

1600

1800

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%20

16 Q

4 Ad

just

edO

pera

ting

EBIT

DA

Sim

plifi

catio

n an

dRi

ght-

Sizi

ng

SG&

A Re

duct

ion

FX Im

pact

Mat

eria

l Cos

tIn

flatio

n

Net

Pric

ing

Oth

er

Volu

me/

Mix

2017

Q4

Adju

sted

Ope

ratin

g EB

ITD

A

2017 Q4 Adjusted Operating EBITDA1 Margin


+200 bps


Effective Tax Rate (ETR) Summary

Q4 Full Year1

2017 ETR (78.8%) (12.8%)

Impact of Tax Cuts and Jobs Act:

- Impact from US tax rate decrease on deferred taxes 123.7% 38.3%

- Impact from deemed repatriation (36.7%) (11.4%)

2017 ETR excluding impact from Tax Cuts and Jobs Act 8.2% 14.1%

1 Includes other discrete adjustments to ETR during 2017. Excluding discrete items, ETR would have been 24.7%.

10


2017 Q4 Free Cash Flow1 and Capital StructureUS$ in millions


$65.4

$61.4

$50.0

$55.0

$60.0

$65.0

$70.0

2016 Q4 2017 Q4

Free Cash Flow1

(6.1%)$128.4 $128.4

$100.0

$110.0

$120.0

$130.0

$140.0

$150.0

2017 Q3 2017 Q4

Cash

$1,324.0

$1,265.0

$1,220.0

$1,240.0

$1,260.0

$1,280.0

$1,300.0

$1,320.0

$1,340.0

2017 Q3 2017 Q4

Debt

-$59.0


2018 Full-Year Guidance Details

12

Organic Net Sales growth

Between 1% to 4%

- General market remains soft in 1H, stabilizes in 2H- Continued recovery of large chains, rollouts of new products- Incremental sales from initial fitkitchen℠ system rollouts

Adjusted Operating EBITDA margin

Between 19.5% to 21.0%

- Simplification & Right-Sizing (+200 to +300 bps)- Volume/Mix (0 to +150 bps)- Net Pricing (+50 to +150 bps)- Material Cost Inflation (-50 to -100 bps)- SG&A Investments/Compensation/Other (-150 to -250 bps)

Adjusted Diluted EPS

Between $0.80 and $0.90 per share

- Effective tax rate of 24% to 26%- Assumes 141.6 million fully diluted shares outstanding- Includes $0.02 from Crem International acquisition, inclusive of integration costs

(excludes restructuring, gains or losses from impairment or disposal of assets, and debt extinguishment expenses)

© Welbilt, Inc.© Welbilt, Inc.13

Crem International Overview

Note: Financials converted from SEK into $ with SEK / USD FX rate 2017 average of 0.1172 – actual US GAAP accounts may differ 13

2017 Revenue: ~SEK 767 M~US$90 M

Manufacturing Plants: 3Technology Centers: 3Sales Offices: 6Employees: ~400

Customers: 900+ in 80 countries

Installed Base: 700K+

Complete Coffee Offering Strong Brands

Geographic Footprint Served Markets

Hotels, Restaurants,

Catering

Office Coffee

Services

Convenience Stores

Espresso machines

Filter machines

Instant, liquid, freestanding

Aftermarket

Manual

Automatic

Manual

Automatic


14

Transaction Description

StrategicRationale

Financial Impact• Expected to be accretive to earnings beginning later in 2018

• Run-rate synergies expected to grow to approx. US$10 million by 2020

• Acquisition ROIC expected to exceed Welbilt‘s WACC by 2021

• Acquisition of 100% of Avaj International Holding (“Crem International”)

• Total consideration of approx. SEK 1,800 million / approx. US$224 million

• Funded through cash on hand and existing credit lines

• Closing expected in early Q2 2018, subject to certain closing conditions

Transaction Summary

• Access coffee, one of the largest and fastest growing beverage categories

• Establish new product line: hot beverage

• Creates broadest hot and cold beverage product offering in the industry

• Significant cross-selling opportunities between Crem‘s and Welbilt‘s customer bases

Critical Success Factors

• Complementary customer and channel reach, minimal current overlap

• Synergistic technologies and operations

• Strong management team retained to drive results

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