Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - JELD-WEN Holding, Inc. | q32017jeld-wenex991.htm |
| 8-K - 8-K - JELD-WEN Holding, Inc. | q32017jeld-wen8xk.htm |
1 P R I V I L E G E D A N D C O N F I D E N T I A L
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Q3 2017 Results Presentation | November 7, 2017
2
Disclosures
Forward-Looking Statements
This presentation contains certain "forward-looking statements" regarding business strategies, market potential, future financial performance, the potential of our categories and brands, our outlook for 2017, and
our expectations, beliefs, plans, objectives, prospects, assumptions, or other future events. Forward-looking statements are generally identified by our use of forward-looking terminology such as “anticipate”,
“believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “might”, “plan”, “potential”, “predict”, “seek”, or “should”, or the negative thereof or other variations thereon or comparable terminology. Where,
in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans, expectations, assumptions, estimates, and
projections of our management. Although we believe that these statements are based on reasonable expectations, assumptions, estimates and projections, they are only predictions and involve known and
unknown risks, many of which are beyond our control that could cause actual outcomes and results to be materially different from those indicated in such statements.
Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including the factors discussed in our Annual Report on Form 10-K for the
year ended December 31, 2016, and our Quarterly Reports on Form 10-Q, both filed with the Securities and Exchange Commission.
The assumptions underlying the guidance provided for 2017 include the achievement of anticipated improvements in end markets, competitive position, and product portfolio; stable macroeconomic factors; no
changes in foreign currency exchange and tax rates; and favorable interest expense due to the recent debt reduction. The forward-looking statements included in this presentation are made as of the date
hereof, and except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect events, new information or circumstances occurring after the date of this
presentation.
Non-GAAP Financial Measures
This presentation presents certain “non-GAAP” financial measures. The components of these non-GAAP measures are computed by using amounts that are determined in accordance with accounting principles
generally accepted in the United States of America (“GAAP”). A reconciliation of non-GAAP financial measures used in this presentation to their nearest comparable GAAP financial measures is included at the
end of this presentation. The Company provides certain guidance on a non-GAAP basis because the Company cannot predict certain elements that are included in certain reported GAAP results, including the
variables and individual adjustments necessary for a reconciliation to GAAP.
We use Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, and Adjusted EPS because we believe they assist investors and analysts in comparing our operating performance across reporting
periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes Adjusted EBITDA and Adjusted EBITDA margin are helpful in
highlighting trends because they exclude the results of decisions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding
capital structure, the tax jurisdictions in which we operate, and capital investments. We use Adjusted EBITDA and Adjusted EBITDA margin to measure our financial performance and also to report our results to
our board of directors. Further, our executive incentive compensation is based in part on Adjusted EBITDA. In addition, we use Adjusted EBITDA as calculated herein for purposes of calculating compliance with
our debt covenants in certain of our debt facilities. Adjusted EBITDA should not be considered as an alternative to net income as a measure of financial performance or to cash flows from operations as a liquidity
measure.
We define Adjusted EBITDA as net income, eliminating the impact of the following items: loss from discontinued operations, net of tax; gain (loss) on sale of discontinued operations, net of tax; equity (earnings)
loss of non-consolidated entities; income tax; depreciation and amortization; interest expense, net; impairment and restructuring charges; gain on sale of property and equipment; share-based compensation
expense; non-cash foreign exchange transaction/translation income (loss); other non-cash items; other items; and costs related to debt restructuring, debt refinancing, and the Onex investment. Adjusted
EBITDA margin is defined as Adjusted EBITDA divided by net revenues.
We present free cash flow because we believe it assists investors and analysts in determining the quality of our earnings. We also use free cash flow to measure our financial performance and to report to our
board of directors. In addition, our executive incentive compensation is based in part on free cash flow. We define free cash flow as cash flow from operations less capital expenditures (including purchases of
intangible assets). Free cash flow should not be considered as an alternative to cash flows from operations as a liquidity measure.
Adjusted net income represents net income adjusted for the after-tax impact of i) non-cash foreign currency (gains) losses, ii) impairment and restructuring charges, and iii) other non-recurring expenses
associated with certain matters such as our initial public offering, secondary offering, mergers, and litigation. Adjusted EPS represents net income per diluted share adjusted to exclude the estimated per share
impact of the same specifically identified items used to calculate adjusted net income as described above. All such items are tax-effected at our estimated annual effective tax rate.
Other companies may compute these measures differently. No non-GAAP metric should be considered as an alternative to any other measure derived in accordance with GAAP.
Due to rounding, numbers presented throughout this document may not sum precisely to the totals provided and percentages may not precisely reflect the absolute figures.
3
Introduction
Mark Beck, President and CEO
4
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
FY 2013 LTM Q3 2017 Target*
An Extraordinary Transformation Underway
PROVEN TEAM DRIVING EARNINGS GROWTH AND FREE CASH FLOW
Adjusted EBITDA Margin %
Business Highlights Early Stages of Multi-Year Turnaround
4.4%
11.6%
15-20%
*Note: This presentation includes long-term targets, which are for illustrative purposes only. These long-term targets should not be read as a guarantee of future
performance or results, and will not necessarily be accurate indications of the times at, or by which, if at all, such performance or results will be achieved.
Global market leader in windows and doors
A unique platform with scale, iconic brands and
leading market positions
A team of accomplished leaders executing a
proven operating model
Ten strategic acquisitions since 2015 – all on
track to deliver strong ROI
Growth-oriented financial results
– Steady profitable core growth: price,
innovation, share-gain
– Consistent margin improvement: quality,
productivity, sourcing
– Attractive free cash flow generation and
conversion profile
5
Proven Operating Model
Target Identification
Target Cultivation
Stage Gate Process
Integration Playbook
Performance Tracking
Strategic M&AOperational Excellence
Talent Management, JELD-WEN Excellence Model (JEM), and Enabling Technology
WORLD-CLASS PERFORMANCE AND RETURNS
New Products and Innovation
Brand Strategy
Channel Management
Sales Force Effectiveness
Pricing Optimization
Profitable Organic Growth
Safety and Compliance
Quality System
Customer Experience
Productivity
Sourcing
6
Location JEM Tools Applied Results
Ringtown, PA
Value stream mapping, basic
problem solving, line balancing,
principal/flow production, initiated
model cell
Increased window production line output by
44%
Grinnell, IA
Value stream mapping, basic
problem solving, visual
management, principal/flow
production, standard work,
initiated model cell
Increased window production line output by
31%
Toronto, CA Basic problem solving, training, visual management
Since 2015: Safety incident rate went from 4
to 0, warranty percentage cut in half, and
revenues increased by 19% while free
floorspace increased by 26%
PROOF POINTS OF JEM TOOLS DELIVERING RESULTS WITH EXCELLENT ROI
JEM
Recent Operational Excellence Success Stories
7
Strategic M&A
MMI Door Acquisition
CAPTURE VALUE ADD THROUGH FULL DOOR SYSTEM SOLUTIONS
Leading provider of comprehensive door
systems and related value-added services in
the Midwest U.S. supporting distributors,
dealers, and home centers
Rationale: Complements our North America
door business, expands service offerings, and
improves lead times to our channel partners
Closed August 25, 2017
Primary products include:
• Interior doors - molded / stile & rail
• Exterior doors - steel / fiberglass
• Patio and storm doors
• Commercial doors
Three U.S. manufacturing sites:
• Sterling Heights, Michigan
• Cincinnati, Ohio
• Sidman, Pennsylvania
Hardware
(Bore, lockset, kickplate,
mail slot)
GlassPre-Hanging
Finishing
(Paint, Stain, Faux)
(Jambs, Sills,
Casing, Molding)
(Decorative, Clear)
Customized Door Systems
Proprietary Dealer Portal and Order Configurator
8
Strategic M&A
Kolder Acquisition
HIGHLY STRATEGIC BOLT-ON; CREATING LEADERSHIP POSITION
Leading Australian provider of shower
enclosures, closet systems, and related building
products
Rationale: Significantly enhances our existing
Australian capabilities in glass shower
enclosures and built-in closet systems, and
supports our strategy to build leadership
positions in attractive markets
Closed August 31, 2017
Primary products include:
• Shower enclosures
• Closet systems
• Kitchen splash backs
• Mirrors
Headquarters outside of Sydney, Australia
9
Strategic M&A
Domoferm Acquisition
HIGHLY STRATEGIC BOLT-ON; SYNERGIES IN BOTH REVENUES AND COST
Leading European provider of steel doors, steel door
frames, and fire doors for the commercial and
residential markets
Rationale: Capabilities in steel frames and doors
significantly expand JELD-WEN’s European product
range, including certified door systems
Expected closing in Q1 2018
Primary products include:
• Steel doors
• Steel frames
• Fire doors
Four manufacturing sites:
• Germany (2)
• Austria
• Czech Republic
10
Strategic M&A
Acquisitions Are Delivering Solid Results – USD in Millions
CREATING VALUE THROUGH M&A BY DELIVERING ON SYNERGIES
Acquisition
(Closing Date)
Total Purchase
Price
(Net of cash
acquired)
Annual
Revenues at
Acquisition Date
2015-2016
Dooria (Aug 2015)
Aneeta (Aug 2015)
Karona (Sep 2015)
LaCantina (Oct 2015)
Trend (Feb 2016)
Breezway (Aug 2016)
$173 $250
2017 YTD
Mattiovi (Jun 2017)
MMI Door (Aug 2017)
Kolder (Aug 2017)
$124 $138
Total Closed Deals $297 $388
(1) Exc ludes addi t ional revenue and cost synerg ies recognized in “core” JELD-WEN locat ions
LTM Q3 2017 Contribution to
JELD-WEN’s Results (1)
Net Revenue $303
Adjusted EBITDA ~$48
Adjusted EBITDA Margins ~16%
11
Third Quarter Highlights
BUSINESS TRANSFORMATION DRIVING EARNINGS AND FCF IMPROVEMENT
Net revenues increased 6.3%
- Positive core growth 2%, favorable foreign exchange impact 2%, and contribution of
recent acquisitions 3%
Adjusted EBITDA margin of 12.9%, a 20 bps increase over prior year
- Favorable pricing and operational cost savings initiatives in all regions, offset by isolated
operational inefficiencies in North America windows and the U.K.
- YTD margin improvement of 120 bps, in line with full year expectation of 100 – 150 bps
Free cash flow for the year to date increased $94 million to $141.7 million from $47.7
million for the prior year
North American retail line review win a result of investments in innovation and
merchandising
Investing in strategic M&A - four acquisitions announced in 2017
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Consistent Margin Improvement
TRACK RECORD OF CONSISTENT MARGIN IMPROVEMENT
6.1%
9.4%
10.8%
12.0%
2014 2015 2016 2017
9.5%
11.3%
12.7% 12.9%
2014 2015 2016 2017
Q3 Adjusted EBITDA Margins Q3 YTD Adjusted EBITDA Margins
13
Financial Review
Brooks Mallard, EVP and Chief Financial Officer
14
REVENUE GROWTH ACCELERATES IN Q3; YTD MARGIN IMPROVEMENT ON TRACK
2017 YoY Change 2017 YoY Change
Net Revenues $991.4 6.3% $2,787.9 3.5%
Gross Margin $228.2 11.0% $642.5 12.9%
Gross Margin Percent 23.0% 90 bps 23.0% 190 bps
Net Income $51.3 11.3% $104.5 (12.2%)
EPS – Diluted (1) $0.47 N/A N/A N/A
Adjusted EPS – Diluted (1) $0.55 N/A N/A N/A
Adjusted EBITDA $128.2 8.7% $334.5 14.6%
Adjusted EBITDA Margin 12.9% 20 bps 12.0% 120 bps
Q3 and YTD 2017 Financial Summary
USD in millions (except for per share items)
Q3 YTD
( 1 ) Y T D f i g u r e s a n d p r i o r p e r i o d c o mp a r i s o n s a r e n o t me a n i n g f u l , a s Q 2 2 0 1 7 wa s t h e f i r s t f u l l q u a r t e r r e f l e c t i n g t h e p o s t - I P O c a p i t a l s t r u c t u r e a n d d i l u t i o n o f t h e I P O t r a n s a c t i o n .
15
Q3 2017
Pricing 1% 2% 1% -
Volume/Mix 1% - - 4%
Core Growth 2% 2% 1% 4%
Acquisitions 3% 2% 2% 8%
FX 2% - 4% 4%
Total 6.3% 3.6% 7.4% 15.7%
CORE GROWTH IN ALL 3 REGIONS; FAVORABLE FX IN Q3
Q3 and YTD 2017 Net Revenues Walk
JELD-WEN North America Europe Australasia
YTD 2017
Pricing 1% 2% 1% 1%
Volume/Mix 1% (1%) 2% 3%
Core Growth 2% 1% 3% 4%
Acquisitions 2% 1% 1% 8%
FX - - (2%) 3%
Total 3.5% 1.8% 1.9% 14.5%
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MARGIN EXPANSION LIMITED BY OPERATIONAL INEFFICIENCIES IN WINDOWS
2017 YoY Change 2017 YoY Change
Net Revenues $572.0 3.6% $1,607.7 1.8%
Adjusted EBITDA $82.5 4.8% $212.5 14.1%
Adjusted EBITDA Margin 14.4% 10 bps 13.2% 140 bps
North America Segment Performance
USD in millions
Q3 YTD
Wood Windows Vinyl Windows Interior Doors Exterior Doors Wall Systems
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STRONG REVENUE GROWTH, FX TAILWIND; TEMPORARY MARGIN INEFFICIENCES
2017 YoY Change 2017 YoY Change
Net Revenues $265.1 7.4% $766.3 1.9%
Adjusted EBITDA $33.4 6.2% $97.6 8.0%
Adjusted EBITDA Margin 12.6% (10 bps) 12.7% 70 bps
Europe Segment Performance
USD in millions
Q3 YTD
Residential Doors Commercial Doors Fire Resistant Sound Dampening Security Doors
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STRONG PERFORMANCE FROM CORE AND M&A
2017 YoY Change 2017 YoY Change
Net Revenues $154.3 15.7% $413.9 14.5%
Adjusted EBITDA $22.9 28.4% $53.5 30.5%
Adjusted EBITDA Margin 14.8% 140 bps 12.9% 160 bps
Australasia Segment Performance
USD in millions
Q3 YTD
Windows Doors Shower Enclosures Closet Systems Specialty Windows
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Balance Sheet and Cash Flow
USD in millions
NET LEVERAGE REMAINS AT 2.4x; SIGNIFICANT YOY CASH FLOW IMPROVEMENT
Balance Sheet and Liquidity September 30, 2017 December 31, 2016(1)
Total Debt $1,251.2 $1,620.0
Cash $219.5 $102.7
Total Net Debt $1,031.7 $1,517.3
Net Debt / Adjusted EBITDA 2.4x 3.9x
Liquidity (2) $518.8 $381.9
Cash Flow YTD Q3 2017 YTD Q3 2016
Cash Flow From Operations $174.1 $110.2
Capital Expenditures (3) ($32.4) ($62.5)
Free Cash Flow $141.7 $47.7
( 1 ) D o e s n o t r e f l e c t t h e i mp a c t o f p r o c e e d s r e c e i v e d f r o m i n i t i a l p u b l i c o f f e r i n g s u b s e q u e n t t o y e a r e n d .
( 2 ) L i q u i d i t y i n c l u d e s c a s h a n d a v a i l a b i l i t y f r o m u n d r a wn r e v o l v i n g c r e d i t f a c i l i t i e s .
( 3 ) I n c l u d e s p u r c h a s e s o f p r o p e r t y , e q u i p me n t , a n d i n t a n g i b l e a s s e t s .
20
Summary and 2017 Outlook
Mark Beck, President and Chief Executive Officer
21
Net Revenue Growth 2.0% – 4.0%
Adjusted EBITDA $440 – $450
Capital Expenditures $60 – $70
2017 Outlook
USD in millions
22
Appendix
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Non-GAAP Reconciliation
Adjusted EBITDA (USD in millions)
(1) For the nine months ended September 30, 2017, interest expense includes the write-off of $7.0 million of original issue discount and deferred financing fees related to the repayment of debt.
(2) Other non-cash items include: (i) in the three and nine months ended September 30, 2017, charges of $0.4 million for Mattiovi PPA inventory valuation adjustment; and (ii) in the nine months ended September 24,
2016, (1) $2.6 million out-of-period charge for European warranty liability adjustment, and (2) charges of $0.4 million for Trend PPA inventory valuation adjustment.
(3) Other items not core to business activity include: (i) in the three months ended September 30, 2017, (1) $9.1 million in legal costs, (2) $2.7 million in realized loss on hedges (3) $1.4 million in acquisition costs and (4)
$0.3 million in secondary offering costs; (ii) in the three months ended September 24, 2016, (1) $2.1 million professional fees related to the IPO process, (2) $0.5 million in acquisition costs and (3) $0.2 million in legal
costs associated with disposal of non-core properties in Europe; (iii) in the nine months ended September 30, 2017, (1) $24.9 million in legal costs, (2)$2.7 million in realized loss on hedges, (3) $1.4 million in acquisition
costs, (4) $1.3 million secondary offering costs, (5) $0.8 million in legal entity consolidation costs, (6) $0.3 million in IPO costs and (7) $(2.2) million gain on settlement of contract escrow; (iv) in the nine months ended
September 24, 2016, (1) $2.4 million of professional fees related to IPO process, (2) $1.5 million in acquisition costs, (3) $0.4 million in Dooria plant closure costs, (4) $0.3 million related to a legal settlement accrual for
CMI, and (5) $0.2 million in legal costs associated with disposal of non-core properties in Europe.
(4) Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted EBITDA, see above under the heading “Non-GAAP Financial Information”.
Three Months Ended Nine Months Ended
September
30, 2017
September
24, 2016
September
30, 2017
September
24, 2016
Net income $ 51.3 $ 46.1 $ 104.5 $ 119.0
Income from discontinued operations, net of tax — 2.7 — 2.8
Equity earnings of non-consolidated entities (1.1 ) (1.2 ) (2.6 ) (2.5
Income tax expense (benefit) 13.0 13.5 33.0 (0.1
Depreciation and intangible amortization 27.6 25.5 80.6 77.5
Interest expense, net(1) 17.2 18.5 61.6 53.7
Impairment and restructuring charges 2.3 3.9 4.0 12.1
(Gain) loss on sale of property and equipment (0.1 ) 0.1 (0.2 ) (3.3
Stock-based compensation expense 5.1 5.1 15.8 15.8
Non-cash foreign exchange transaction/translation
(1.8 ) 0.4 5.3 7.2
Other non-cash items(2) 0.5 0.1 0.5 3.1
Other items(3) 14.3 3.3 31.6 6.5
Costs relating to debt restructuring and refinancing — — 0.3 —
Adjusted EBITDA(4) $ 128.2 $ 118.0 $ 334.5 $ 291.9
24
Non-GAAP Reconciliation
Adjusted EPS & Free Cash Flow (USD in millions)