Gorman-Rupp Company (the) · NYSE:GRC

Gorman-Rupp Company (the) — The Gorman-Rupp Company — Investor Presentation (August 2023)

54 slides from Gorman-Rupp Company (the)'s investor presentation, August 2023

  1. Slide 1: Investor Presentation August 2023

    INVESTOR PRESENTATION August 2023 AUGUST 2023 PRESENTATION

  2. Slide 2: Forward-Looking Statements

    FORWARD-LOOKING STATEMENTS In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, The Gorman-Rupp Company provides the following cautionary statement: This presentation contains various forward-looking statements based on assumptions concerning The G

  3. Slide 3: Investment Highlights

    INVESTMENT HIGHLIGHTS “We take care of our customers or someone else will” For 90 years now, this philosophy has created a competitive advantage by building a strong reputation for quality products and service Well suited to handle current leverage and adverse economic conditions Strong History of D

  4. Slide 4: Company Overview

    COMPANY OVERVIEW  Leading designer and manufacturer of pumps and pump systems  Product diversity with significant presence in Fire Suppression, Municipal, Construction, Agriculture, Industrial, Petroleum and OEM markets  Reputation for quality products and outstanding service  Recognizable famil

  5. Slide 5: Industry Overview

    INDUSTRY OVERVIEW  Pumps touch our daily lives: drinking water, wastewater, sewage, irrigation, appliance cooling, transportation, fuel, industrial products, chemicals, fire suppression, construction, HVAC  Many specialized pumps – due to many specialized applications  Very fragmented industry wi

  6. Slide 6: Company History

    COMPANY HISTORY 1933 - Company founded with $1,500 initial – and only – capital investment 1956 - First international expansion – established Canadian manufacturing facility 1968 - Publicly listed (American Stock Exchange  NYSE MKT  NYSE in 2017) 1988 - Acquired Patterson Pump Company, manufacture

  7. Slide 7: Fill-Rite Overview

    FILL-RITE OVERVIEW Brand Overview Revenue Breakdown FY 2022A Revenue: $152mm* Product Mix Geographic Mix • Widely recognized as #1 fuel • Rugged chemical and transfer pump brand in the industrial fluid transfer pumps 14% 4% 2% 5% 12% industry 34% • Products include pumps and • Products include fixed

  8. Slide 8: Global Operations

    GLOBAL OPERATIONS Mission Statement “To provide a quality product, competitively priced, delivered on time, backed by reliable service, at a profit that provides an equitable return to our shareholders, as well as providing our employees with competitive wages and benefits.” Mansfield, OH Toccoa, GA

  9. Slide 9: Operating Model

    OPERATING MODEL  Treasury  Quality products and Corporate strong market share  Strategic Planning  Legal  M&A  Insurance / Risk Management  Customer focus –  Information Technology  External Reporting & taking care of  Employee Benefits Compliance customers  Investor Relations Philosophy

  10. Slide 10: Product Diversity

    PRODUCT DIVERSITY AUGUST 2023 PRESENTATION 10

  11. Slide 11: Market Diversity – By Design

    MARKET DIVERSITY–BY DESIGN Gorman-Rupp Company Markets MARKETS • Industrial/Chemicals & HVAC Supply (21% - 23%) • Fire Suppression (19% - 22%) Refined Repair Parts Industrial / • Agriculture & Irrigation Supply (14% - 16%) Petroleum Chemicals & HVAC Supply • Construction & Dewatering (11% - 13%) OEM

  12. Slide 12: Industrial / Chemicals & HVAC Supply (21% - 23%)

    INDUSTRIAL / CHEMICALS & HVAC SUPPLY (21% - 23%)  Dependable pumps for manufacturing applications  Pumps for moving heavy sludges, slurries and other viscous materials  HVAC pump market share expanding DRIVERS: Industrial construction, expansion and remodeling AUGUST 2023 PRESENTATION 12

  13. Slide 13: Fire Suppression (19% - 22%)

    FIRE SUPPRESSION (19% - 22%)  Booster pumps for sprinkler systems in large commercial structures  Fire pumps are UL/FM Global approved and an industry standard  Manufacturing facility in Ireland for increased capacity  Domestic and international market leader DRIVERS: Commercial and industrial c

  14. Slide 14: Agriculture & Irrigation (14% - 16%)

    AGRICULTURE & IRRIGATION (14% - 16%)  Irrigation pumps supplied to sprinkler installation companies  Strategically located branch locations across the U.S.  Pumps for animal waste, pit agitation, fuel transfer and liquid fertilizer DRIVERS: Grower cash flows from farm commodity prices and weather

  15. Slide 15: Construction & Dewatering (11% - 13%)

    CONSTRUCTION & DEWATERING (11% - 13%)  Self-priming and vacuum prime-assisted centrifugal pumps for dewatering foundations, quarries, ditches and streams  Diaphragm pumps to remove mud and sand-laden water at construction sites  Rotory vane fuel transfer pumps, meters, and accessories for contrac

  16. Slide 16: Municipal Water & Wastewater (10% - 12%)

    MUNICIPAL WATER & WASTEWATER (10% - 12%)  Pumps and wastewater stations  Pre-engineered turn-key systems  Custom design capabilities, above and below ground installation  Booster pumps and deep-well line shaft pumps provide clean drinking water  Municipal water and sewer funding is typically se

  17. Slide 17: Large Custom Municipal Pumps

    LARGE CUSTOM MUNICIPAL PUMPS  Flood control pumps capable of pumping up to one million gallons per minute  Permanent Canals Closure and Pumps Project in New Orleans  Storm water management  Wetland restoration DRIVERS: Infrastructure build and re-build; natural disasters AUGUST 2023 PRESENTATION

  18. Slide 18: OEM (6% - 8%)

    OEM (6% - 8%) OEM  Pump supplier to a variety of manufacturers  Range of applications from transportation, appliances, food processing, chemical processing and electronics  Military applications DRIVERS: Growth and new products in numerous commercial, medical and retail sectors; power generation

  19. Slide 19: Refined Petroleum (2% - 4%)

    REFINED PETROLEUM (2% - 4%)  Leader in aircraft refueler market  Refinery and pipeline applications  Vertical turbine pumps for barge loading and unloading  American Petroleum Institute certified pumps  Safe bulk handling of volatile fuels DRIVERS: Petroleum refinery production, storage and dis

  20. Slide 20: Repair Parts

    REPAIR PARTS  Most parts ship within 24 hours  Consolidated 9% - 12%  Large range – from 30% for Construction/Industrial to minimal for Fire Suppression  Approximately 20% adjusted for markets with minimal repairs HOW LONG DO PUMPS LAST? Many Variables The Right Pump for the job! Abrasive Wear C

  21. Slide 21: Divisions / Markets

    DIVISIONS / MARKETS End Markets Industrial/Chemicals       & HVAC Supply Fire Suppression  Agriculture &     Irrigation Supply Construction &    Dewatering Municipal Water, Wastewater     & Flood Control Refined Petroleum   Original Equipment     Manufacturer (OEM) AUGUST 202

  22. Slide 22: Competition

    COMPETITION AUGUST 2023 PRESENTATION 22

  23. Slide 23: Notable Pump Competitors

    NOTABLE PUMP COMPETITORS GORMAN-RUPP MARKETS Company Fire Suppression Municipal Flood Control Construction Agriculture Industrial Petroleum OEM XYLEM (XYL) – ($5.5B; Pumps/Services $4.1B, 75%)  Flygt        Goulds       AC Fire Pump    Bell & Gossettt     Godwin Pumps    Flow

  24. Slide 24: Notable Pump Competitors

    NOTABLE PUMP COMPETITORS GORMAN-RUPP MARKETS Company Fire Suppression Municipal Flood Control Construction Agriculture Industrial Petroleum OEM Pentair (PNR) – ($4.1B; 100% Flow/Pumps)  Hydromatic     Aurora      Fairbanks Nijhuis         Franklin Electric (FELE) – ($2.0B; Flow/Pum

  25. Slide 25: Notable Pump Competitors

    NOTABLE PUMP COMPETITORS GORMAN-RUPP MARKETS Company Fire Suppression Municipal Flood Control Construction Agriculture Industrial Petroleum OEM Host of private companies/divisions  Smith & Loveless   BJM / Stancor      Thompson Pumps        Zoeller Pumps     Vaughan Pumps    

  26. Slide 26: Financial Summary

    FINANCIAL SUMMARY AUGUST 2023 PRESENTATION 26

  27. Slide 27: Net Sales & Adjusted EPS

    NET SALES & ADJUSTED EPS LIFO Expense per share $0.05 $0.13 $0.11 $0.25 $0.06 $0.07 180.0 0.45 160.0 0.40 140.0 0.35 Millions of Dollars 120.0 0.30 (Sales) (Adjusted EPS) 100.0 0.25 Dollars 80.0 0.20 60.0 0.15 40.0 0.10 20.0 0.05 0.0 0.00 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Net Sales Adj

  28. Slide 28: Strong Adjusted EBITDA

    STRONG ADJUSTED EBITDA 40 25.0% 35 20.0% 30 Millions in Dollars 25 15.0% % of Sales 20 10.0% 15 10 5.0% 5 0 0.0% Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Adjusted EBITDA EBITDA % of Sales See appendix for non-GAAP reconciliations. AUGUST 2023 PRESENTATION 28

  29. Slide 29: Incoming & Backlog Trend

    INCOMING & BACKLOG TREND Total Incoming Orders Backlog Linear (Total Incoming Orders) $300 $250 $200 Millions $150 $100 $50 $0 Q1 Q2 * Q3 * Q4 * Q1 * Q2 * 2022 2023 * Amounts include Fill-Rite as of June 2022. AUGUST 2023 PRESENTATION 29

  30. Slide 30: Leverage Ratio

    LEVERAGE RATIO Fill-Rite Acquisition 5.0 4.9 4.7 4.5 4.4 Total Leverage Ratio 4.2 4.0 3.8 3.5 3.0 2.5 2.0 Q1 Q2 Q3 Q4 Q1 Q2 2022 2023 AUGUST 2023 PRESENTATION 30

  31. Slide 31: Historical Capital Allocation

    HISTORICAL CAPITAL ALLOCATION Current annualized dividend rate of $0.70 per share Special dividend of $2.00 per share in 2018 Maintenance capital ~ $15 million per year Acquisitions • GR Africa – 2012 • American Turbine Pumps – 2012 • Bayou City Pump – 2014 • GR Belgium – 2015 • Morrison Pump – 2016

  32. Slide 32: Capital Allocation Priorities

    CAPITAL ALLOCATION PRIORITIES  Our maintenance capital expenditures are expected to be ~$15mm per year   We have a proud history of returning capital to shareholders through dividends  and expect to maintain our dividend practices while achieving our leverage target  We are focused on deleverag

  33. Slide 33: History of Increasing Dividends

    HISTORY OF INCREASING DIVIDENDS  294 Consecutive quarters of cash dividends  50 Consecutive years of increased cash dividends $0.70 $20.0 $18.0 $0.60 Among Top 50 U.S. Public Companies Current annualized rate $0.70 per share $16.0 Annual Dividends Paid ($ Millions) $0.50  2.4% yield as of 6/30/23

  34. Slide 34: Q2 2023 P&L

    Q2 2023 P&L  Net sales of $171.0 million increased 43.6%, or $52.0 million, compared to the second quarter of 2022, a 21.4% increase excluding sales from Fill-Rite which was acquired in May 2022  Second quarter net income was $10.5 million, or $0.40 per share, compared to a net loss of ($1.0) mill

  35. Slide 35: Six Months Ended June 30, 2023 P&L

    SIX MONTHS ENDED JUNE 30, 2023 P&L  Net sales of $331.5 million increased 49.8%, or $110.3 million, compared to 2022, a 19.7% increase excluding sales from Fill-Rite which was acquired in May 2022  Net income was $17.0 million, or $0.65 per share, compared to net income of $6.5 million, or $0.25 p

  36. Slide 36: Balance Sheet

    BALANCE SHEET  Inventory increased as planned during the first half to support order volume and backlog. We expect a reduction in inventory levels during the second half of the year. ($ in millions) June 30, December 31, June 30, December 31, 2023 2022 2023 2022 ASSETS LIABILITIES & SHAREHOLDERS’ E

  37. Slide 37: Pillars for Growth

    PILLARS FOR GROWTH AUGUST 2023 PRESENTATION 37

  38. Slide 38: Pillars for Growth

    PILLARS FOR GROWTH Organic International Acquisitions AUGUST 2023 PRESENTATION 38

  39. Slide 39: Well Positioned for Organic Growth

    WELL POSITIONED FOR ORGANIC GROWTH  Robust new product development pipeline  Broad network of global distributors  Over two million square feet of design, manufacturing and distribution space worldwide, with capacity for growth  Expanded Fill-Rite capacity in 2023  ISO Certified 9001, 14001 – G

  40. Slide 40: Organic Growth Drivers

    ORGANIC GROWTH DRIVERS  Aging U.S. infrastructure – U.S. Infrastructure Report Card(1) Drinking Water C- Wastewater D+ Storm Water D  Infrastructure bill including investment in water, wastewater and flood control  Bill needed to address estimated $2.6 trillion gap(1) in required infrastructure s

  41. Slide 41: Product Innovation

    PRODUCT INNOVATION  Majority of products continue to be made in the USA NSF61 Drinking Water Certification  Strong team of experienced engineers providing project-specific Registered full pump including engineering expertise and new product development the “can”  Continued advancements in challen

  42. Slide 42: Process Innovation

    PROCESS INNOVATION  Focus on customer facing technology with ability to research, configure and order  Easy on-line access to customer specific pump specifications, user manuals and parts ordering  Integration of 3D printing capabilities into new product development and factory productivity impro

  43. Slide 43: Customer Training and Education

    CUSTOMER TRAINING AND EDUCATION Customer visits Increased use and plant tours of technology are part of sales to deliver process virtual training Long history of In-house Mobile training product training and equipment education and testing facilities supports training of both that can distribution a

  44. Slide 44: International Distribution Capability

    INTERNATIONAL DISTRIBUTION CAPABILITY  International sales represent approximately 27% of total company sales annually 2022 Proforma Total International International Sales Sales Mix Mexico / South & Central America 15% Europe 26% $69 $71 million million Canada 22% Exported From USA Direct From Loc

  45. Slide 45: Gorman-Rupp International Locations

    GORMAN-RUPP INTERNATIONAL LOCATIONS  Well positioned international facilities  Capacity for growth DIVISION LOCATION Gorman-Rupp Canada Ontario, Canada Gorman-Rupp Africa Johannesburg, South Africa Gorman-Rupp Europe Waardenburg, The Netherlands Gorman-Rupp Belgium Namur, Belgium Patterson Pump Ir

  46. Slide 46: Drivers of International Growth

    DRIVERS OF INTERNATIONAL GROWTH  Population growth and urbanization increasing infrastructure needs  Industrialization in developing countries  Accelerating need for water recycling and water & wastewater treatment systems  Increasing industrial and agriculture needs  Sanitation needs – lack of

  47. Slide 47: History of Growth Through Acquisitions

    HISTORY OF GROWTH THROUGH ACQUISITIONS  Gorman-Rupp has successfully grown through acquisitions  Financial strength to continue acquisitions  Approach to acquisitions remains disciplined and selective Acquisitions since 2010: Year Company Locations Key Markets 2010 National Pump Company AZ, CA, T

  48. Slide 48: Disciplined M&A Criteria

    DISCIPLINED M&A CRITERIA Criteria Preferences Products  Pumps or pumping related equipment and systems that complement existing product lines  Chemical / Fuels  HVAC  Municipal  Alternative Energy  OEM Markets  Marine  Industrial  Dredging  Food / BEV / Pharma  Customer-Focused Culture 

  49. Slide 49: Investment Highlights

    INVESTMENT HIGHLIGHTS “We take care of our customers or someone else will” For 90 years now, this philosophy has created a competitive advantage by building a strong reputation for quality products and service Well suited to handle current leverage and adverse economic conditions Strong History of D

  50. Slide 50: Bios

    BIOS Jeffrey S. Gorman, Executive Chairman Jeff was elected Executive Chairman in January 2022 after previously serving as Chairman of the Board since 2019. He previously served as CEO from 1998 to 2021 and President from 1998 to 2020. He was elected to the Board of Directors for The Gorman-Rupp Com

  51. Slide 51: Appendix: Non-GAAP Measures

    APPENDIX The Gorman-Rupp Company Non-GAAP Measures This presentation includes certain non-GAAP financial data and measures such as adjusted earnings, adjusted earnings per share, adjusted earnings before interest, taxes, depreciation and amortization, referred to as “adjusted EBITDA”, and free cash

  52. Slide 52: Non-GAAP Reconciliation

    NON-GAAP RECONCILIATION Three months ended Six months ended June 30, June 30, 2023 2022 2023 2022 Net Income (loss) – GAAP basis $10.5 ($1.0) $17.0 $6.5 Plus pension settlement charge - 1.3 - 1.3 Plus one-time acquisition costs - 5.4 - 5.4 Plus amortization of step up in value of acquired inventorie

  53. Slide 53: Non-GAAP Reconciliation

    NON-GAAP RECONCILIATION Three months Six months ended ended June 30, June 30, 2023 2022 2023 2022 Adjusted earnings before interest, taxes, depreciation and amortization: Reported net income (loss) – GAAP basis $10.5 ($1.0) $17.0 $6.5 Plus interest expense 10.5 2.3 20.7 2.3 Plus provision (benefit)

  54. Slide 54: AUGUST 2023 PRESENTATION

    AUGUST 2023 PRESENTATION 54

The Gorman-Rupp Company — Investor Presentation (August 2023) on 6ix