Gardner Denver Reports Strong Second Quarter 2018 Results and Raises Full Year 2018 Adjusted EBITDA Midpoint Guidance

Gardner Denver Holdings, Inc. (NYSE: GDI) announced today second quarter
revenues of $668.2 million, up 15% compared to the prior year and a 12%
increase excluding the impact of foreign currency (“FX”).

Net income attributable to Gardner Denver in the quarter was $60.3
million, or $0.29 per share based on share count of 209.6 million,
compared to a prior year net loss attributable to Gardner Denver of
$146.3 million, or a $0.83 loss per share based on share count of 176.9
million. Adjusted net income increased 111% to $92.4 million, or $0.44
per share, compared to $43.7 million, or $0.24 per share, in the prior
year. Adjusted EBITDA was $161.6 million, up 22%
compared to the prior year. Adjusted EBITDA as a percentage of revenues
expanded 140 basis points to 24.2% as compared to 22.8% in the prior

In the second quarter, Gardner Denver generated $134.3 million of cash
flow from operating activities and invested $10.8 million in capital
expenditures, resulting in free cash flow of $123.5 million, as compared
to the prior year of $12.2 million. Second quarter net debt to Adjusted
EBITDA leverage improved to 2.4x from 2.8x in the first quarter of 2018
largely due to the improved Adjusted EBITDA performance and strong cash
generation, primarily driven by improvements in net working capital

Capital Allocation Update

Debt Repayment

In June 2018, Gardner Denver used available cash on hand to repay $105
million of principal outstanding on its Term Debt. As a result of the
repayment, the Company is no longer subject to mandatory quarterly
principal installment payments on the US Dollar Term Loan Facility.
Gardner Denver expects to make a similar sized debt repayment in the
third quarter of 2018.

Share Repurchase Authorization

On August 1, 2018, the Board of Directors of Gardner Denver authorized a
share repurchase program pursuant to which the company may repurchase up
to $250 million of its common stock over the next two years.

Business Trends

“The second quarter was another strong quarter of commercial and
operational execution as our global teams continue to deploy our
four-point strategy of building and deploying talent across the
organization, accelerating growth, expanding margins, and effectively
allocating capital,” said Vicente Reynal, Chief Executive Officer. “All
three of our segments saw double digit orders and revenue growth as end
markets continue to remain relatively healthy. In addition, we continue
to see runway on unlocking profitability as evidenced by our 22%
Adjusted EBITDA growth and Adjusted EBITDA margin expansion of 140 basis
points over the prior year.”

“In the Industrials segment, demand continues to remain broad-based
across all geographies and technologies and we saw particular strength
in original equipment sales which demonstrates our focused efforts
around innovation and demand generation,” continued Reynal. “We also
continue to make great strides on integrating the Runtech business and
leveraging Gardner Denver’s global infrastructure to accelerate Runtech
orders growth. In the Energy segment, we continue to see solid revenue
growth in the upstream business led most notably by original equipment
frac pumps and our growing line of aftermarket consumables offerings. In
the downstream side of the business we saw strong double digit revenue
growth and the funnel for larger downstream process flow projects
continues to improve. In the Medical segment, orders growth surpassed
double digits for the fourth consecutive quarter, leading to the
strongest organic revenue growth seen since 2011.”

“I am very pleased with the progress we are making on cash generation as
we continue to de-lever the company following our IPO in May 2017,”
added Reynal. “Due in large part to strengthening profitability combined
with disciplined working capital management, we had our strongest
quarter of free cash flow generation since going public. This is
enabling us to execute on a balanced, prudent capital allocation
strategy of pursuing accretive M&A while enhancing value for all of our
stakeholders. While our priority continues to be debt payment and M&A,
the newly authorized share repurchase program will allow us the
flexibility to return additional value to shareholders and reflects the
confidence we have in ongoing profitable growth for the business.”

Second quarter 2018 performance:




2018 Guidance and Outlook

“We are raising our full year 2018 Adjusted EBITDA guidance to a range
of $690 million to $705 million from our prior outlook of $685 million
to $705 million,” stated Reynal. “Raising the bottom end of our guidance
range reflects our second quarter performance and the expectation for
solid performance for the balance of 2018 along with the largely
offsetting impacts of stronger results from our upstream energy
aftermarket consumables business and recent FX headwinds, largely in our
Industrials segment. We also expect the business to show ongoing margin
expansion in the second half of the year, including the Industrials
segment. In addition, given our improving cash generation we expect
continued improvement in our leverage ratio and are targeting a net debt
to Adjusted EBITDA ratio of approximately 2.0x by year end, excluding
the impact of any potential future M&A.”

Conference Call

Gardner Denver will broadcast a conference call to discuss results for
the second quarter of 2018 on Thursday, August 2, 2018 at 8:00 a.m.
Eastern time (7:00 a.m. Central time) through a live webcast. This
webcast will be available in listen-only mode and can be accessed, for
up to ninety days following the call, through the Investors section on
the Gardner Denver website at

Forward Looking Statements

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”) and Section 21E of the Securities Exchange Act of
1934. These statements include, but are not limited to, statements
related to our expectations regarding the performance of our business,
our financial results, our liquidity and capital resources and other
non-historical statements, including the statements in the “Business
Trends and Outlook” and “2018 Guidance” sections of this press release.
You can identify these forward-looking statements by the use of words
such as “outlook,” “guidance,” “believes,” “expects,” “potential,”
“continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,”
“predicts,” “intends,” “plans,” “estimates,” “anticipates” or the
negative version of these words or other comparable words. Such
forward-looking statements are subject to various risks and
uncertainties, including macroeconomic factors beyond the Company’s
control, risks of doing business outside the United States, the
Company’s dependence on the level of activity in the energy industry,
potential governmental regulations restricting the use of hydraulic
fracturing, raw material costs and availability, the risk of a loss or
reduction of business with key customers or consolidation or the
vertical integration of the Company’s customer base, loss of or
disruption in the Company’s distribution network, the risk that ongoing
and expected restructuring plans may not be as effective as the Company
anticipates, and the Company’s substantial indebtedness. Additional
factors that could cause Gardner Denver’s results to differ materially
from those described in the forward-looking statements can be found
under the section entitled “Risk Factors” in our most recent annual
report on form 10-K filed with the Securities and Exchange Commission
(“SEC”), as such factors may be updated from time to time in our
periodic filings with the SEC, which are accessible on the SEC’s website
Accordingly, there are or will be important factors that could cause
actual outcomes or results to differ materially from those indicated in
these statements. These factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements
that are included in this release and in our filings with the SEC. We
undertake no obligation to publicly update or review any forward-looking
statement, whether as a result of new information, future developments
or otherwise, except as required by law.

About Gardner Denver

Gardner Denver (NYSE: GDI) is a leading global provider of
mission-critical flow control and compression equipment and associated
aftermarket parts, consumables and services, which it sells across
multiple attractive end-markets within the industrial, energy and
medical industries. Its broad and complete range of compressor, pump,
vacuum and blower products and services, along with its application
expertise and over 155 years of engineering heritage, allows Gardner
Denver to provide differentiated product and service offerings for its
customers’ specific uses. Gardner Denver supports its customers through
its global geographic footprint of 39 key manufacturing facilities, more
than 30 complementary service and repair centers across six continents,
and approximately 6,700 employees world-wide.

Gardner Denver uses its website
as a channel of distribution of Company information. Financial and other
important information regarding the Company is routinely accessible
through and posted on its website. Accordingly, investors should monitor
Gardner Denver’s website, in addition to following the Company’s press
releases, SEC filings and public conference calls and webcasts. In
addition, you may automatically receive e-mail alerts and other
information about Gardner Denver when you enroll your e-mail address by
visiting the “Email Alerts” section of Gardner Denver’s website at

Non-U.S. GAAP Measures of Financial Performance

In addition to consolidated GAAP financial measures, Gardner Denver
reviews various non-GAAP financial measures, including “Adjusted
EBITDA,” “Adjusted Net Income,” “Adjusted Diluted EPS” and “Free Cash

Gardner Denver believes Adjusted EBITDA, Adjusted Net Income and
Adjusted Diluted EPS are helpful supplemental measures to assist
management and investors in evaluating the Company’s operating results
as they exclude certain items that are unusual in nature or whose
fluctuation from period to period do not necessarily correspond to
changes in the operations of Gardner Denver’s business. Adjusted EBITDA
represents net income (loss) before interest, taxes, depreciation,
amortization and certain non-cash, non-recurring and other adjustment
items. Adjusted Net Income is defined as net income (loss) including
interest, depreciation and amortization of non-acquisition related
intangible assets and excluding other items used to calculate Adjusted
EBITDA and further adjusted for the tax effect of these exclusions.
Gardner Denver believes that the adjustments applied in presenting
Adjusted EBITDA and Adjusted Net Income are appropriate to provide
additional information to investors about certain material non-cash
items and about non-recurring items that the Company does not expect to
continue at the same level in the future. Adjusted Diluted EPS is
defined as Adjusted Net Income divided by Adjusted Diluted Average
Shares Outstanding.

Gardner Denver uses Free Cash Flow to review the liquidity of its
operations. Gardner Denver measures Free Cash Flow as cash flows from
operating activities less capital expenditures. Gardner Denver believes
Free Cash Flow is a useful supplemental financial measure for management
and investors in assessing the Company’s ability to pursue business
opportunities and investments and to service its debt. Free Cash Flow is
not a measure of our liquidity under GAAP and should not be considered
as an alternative to cash flows from operating activities.

Management and Gardner Denver’s board of directors regularly use these
measures as tools in evaluating the Company’s operating and financial
performance and in establishing discretionary annual compensation. Such
measures are provided in addition to, and should not be considered to be
a substitute for, or superior to, the comparable measures under GAAP. In
addition, Gardner Denver believes that Adjusted EBITDA, Adjusted Net
Income, Adjusted Diluted EPS and Free Cash Flow are frequently used by
investors and other interested parties in the evaluation of issuers,
many of which also present Adjusted EBITDA, Adjusted Net Income,
Adjusted Diluted EPS and Free Cash Flow when reporting their results in
an effort to facilitate an understanding of their operating and
financial results and liquidity.

Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS and Free Cash
Flow should not be considered as alternatives to net income (loss),
diluted earnings per share or any other performance measure derived in
accordance with GAAP, or as alternatives to cash flow from operating
activities as a measure of our liquidity. Adjusted EBITDA, Adjusted Net
Income, Adjusted Diluted EPS and Free Cash Flow have limitations as
analytical tools, and you should not consider such measures either in
isolation or as substitutes for analyzing Gardner Denver’s results as
reported under GAAP.

Reconciliations of Adjusted EBITDA, Adjusted Net Income, Adjusted
Diluted EPS and Free Cash Flow to their most comparable U.S. GAAP
financial metrics for historical periods are presented in the tables

Reconciliations of non-GAAP measures related to full year 2018 guidance
have not been provided due to the unreasonable efforts it would take to
provide such reconciliations.

Month Period Ended


Month Period Ended





Interest expense


Adjusted Net Income


Cash flows – operating activities


View source version on

Leave a Comment

Your email address will not be published. Required fields are marked *