2020 Q1 Earnings Call...Certain statements in this presentation constitute “forward -looking...

© Welbilt, Inc.© Welbilt, Inc.

2020 Q1 Earnings Call

May 5, 2020


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 impact of COVID-19 on our business, including on customer demand, supply chains and production, ability to meet working capital needs and cash requirements over the next 12 months, ability to realize savings from reductions in force and other cost saving measures, compliance with the financial covenants under our credit facility, ability to obtain financial and tax benefits from the recently-passed CARES Act, descriptions of our Transformation Program, operating and strategic plans and any assumptions on which those programs, 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 statements 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, Quarterly Reports on Form 10-Q and in our other filings with the Securities and Exchange Commission. 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 U.S. GAAP measures can be found in our press release for the first quarter of 2020, which is available at www.welbilt.com, together with this presentation.

http://www.welbilt.com/


Welbilt Responses to COVID-19 Pandemic

3

• Began developing response action plans in February based on lessons learned from China

• Implemented protocols for health and safety concerns in plants and offices

• Following CDC, WHO and local government guidelines

• Enhanced hygiene and cleaning protocols; PPE made available for production employees

• Split shifts and worker distancing in plants

• Protocols for delivery and driver health safety; implemented No Visitor policy

• Work from home for most non-production employees

• Upgraded IT capacity to handle more work from home employees; focus on security protocols

• Cost containment

• Discretionary spending reductions began in early March

• Implemented broader cost containment actions late March

• Amended Revolving Credit Facility to provide relief on financial covenants

• Business working with customers to help them adapt to new social distancing paradigm

• Focus on how Welbilt can help equip ghost kitchens

• Increased marketing emphasis on enhanced sanitation features designed into our equipment

• Conducting remote training seminars for chefs, sales training for dealers, reps and aftermarket servicers


2020 Q2 Current Market Environment

4

-100.0%

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

MillerPulse Weekly Same-Store Sales (YOY change)

QSR Casual All

• The National Restaurant Association estimates that 3% of U.S. restaurants had closed permanently by 3/31 and potentially up to 15% may close permanently. Potential for excess used equipment in market.

• States gradually beginning to ease stay at home orders but social distancing will continue to impact industry.

• Takeout and delivery increasing but dine-in will be slower to recover.

• New equipment purchases may be deferred temporarily in favor of repairing existing equipment.

Source: MillerPulse, Jefferies


$375.3

$328.9

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

2019 Q1 2020 Q1

Net Sales (12.4%)

2020 Q1 Financial Highlights(US$ in millions except per share amounts)

51 See Welbilt’s 2020 Q1 earnings release for the reconciliations from GAAP to non-GAAP measures.

Organic (11.6%); Foreign Currency Translation (0.8%) 1

Q1 2019

Q1 2020 ∆

Adjusted Operating EBITDA1 $50.1 $45.5 (9.2%)

Adjusted Operating EBITDA margin1 13.3% 13.8% +50 bps

Adjusted Diluted Net Earnings Per Share1 $0.05 $0.01 (80.0%)

Free Cash Flow1 ($68.9) ($78.1) (13.4%)


$240.8

$218.1

$100.0

$150.0

$200.0

$250.0

$300.0

2019 Q1 2020 Q1

Third-Party Net Sales (9.4%)

2020 Q1 Segment Sales - Americas(US$ in millions except per share amounts)


Organic (9.3%); Foreign Currency Translation (0.1%)1

Highlights:- General market

- Large chains

- KitchenCare® aftermarket sales

• Originally expected soft first quarter due to tough comps from prior year large chain rollouts

• Through February, was ahead of expectations on better general market and KitchenCare sales

• Sales weakened in 2nd half of March due to COVID-19 impact


$90.9

$71.6

$0.0

$25.0

$50.0

$75.0

$100.0

2019 Q1 2020 Q1


2020 Q1 Segment Sales - EMEA(US$ in millions except per share amounts)




- Large chains


• Originally expected first quarter sales to decrease mid-teens percent due to tough comps from prior year large chain rollouts

• Through February, was ahead of expectations on better general market sales

• Sales weakened in 2nd half of March due to COVID-19 impact



- Large chains


• Originally expected first quarter sales to be weak due to COVID-19 on the China end market

• February was weakest month of quarter

• Sales gradually improved in March but remained substantially below prior year levels

$43.6 $39.2

$0.0

$25.0

$50.0

$75.0

$100.0

2019 Q1 2020 Q1


2020 Q1 Segment Sales - APAC(US$ in millions except per share amounts)




Transformation Program Progress

9

Category Progress

Procurement

- Actively reviewing RFQ responses from vendors, will continue into mid-2020

- Responses indicate savings potential; prioritizing negotiations and sourcing changes; implementing new agreements with current and new suppliers

- Delivered $1.5M run-rate savings in 2020 Q1

Wave 1, 2 and 3 Manufacturing Sites (5 plants) + KitchenCare

- Work flow changes implemented on ~50% of assembly lines- Relocation of lines, site redesign costs and other disruptions raising

costs during transition window- Headcount reductions from efficiency improvements began in 2019

Q4 and continued in 2020 Q1; additional reductions through 2020

2020 Savings Targets

- Pace of savings will be slower than anticipated due to COVID-19- 2020 procurement dollar savings impacted by lower volumes- 2020 manufacturing savings may be slower due to temporary plant

shutdowns and furloughs

Remain confident in savings targets; may take longer to achieve targets

Transformation Program Expense

2020 Q1: $11.6 millionPace of spending will slow through remainder of 2020


Actions to Address COVID-19 Financial Impact

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Gross Profit• Temporary plant closures• Reductions in force• Temporary furloughs

SG&A Costs

• Flexing labor: Hiring freeze, reductions in force, temporary furloughs• Temporary reduction of employee compensation: voluntary salary reductions, merit

increase delays, suspension of 401(k) match, lower incentive compensation• Temporary reduction in Board cash-based fees• Discretionary spending halted: travel, marketing/tradeshows, IT projects, limited NPI• Other discretionary professional services reduced• Slower Transformation Program consulting spending pace

Free Cash Flow

• Pursuing CARES Act deferrals: payroll tax deferrals and credits, pension funding deferrals• Income tax: pursue refund on prior years from interest deduction limitation change and

NOL carryback• Reduced original capital spending plan of $40M by 30-40%• Focus on accounts receivable collections and inventory management balancing

availability, current demand and ability to rebound• Balancing customers’ requests for extended payment terms with extension of payment

terms with vendor partners


2020 Q1 Adjusted Operating EBITDA1 Margin Highlights


Q1 2019 Adjusted Operating EBITDA1 margin 13.3%

- Volume/mix/net pricing (170 bps)

- Material costs and tariffs +180 bps

- Other manufacturing: labor and overhead (130 bps)

- SG&A +180 bps

- FX/other (10 bps)

Q1 2020 Adjusted Operating EBITDA1 margin 13.8%


Asset Impairment, Restructuring and Other Charges

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Category Charge ($M)

Impairment of Assets $11.1• COVID-19 pandemic as triggering event• Carrying value of EMEA trade names and trademarks exceeded their

fair value

Restructuring $3.7• Workforce reduction in Americas region and Corporate• Limited management restructuring• Restructuring actions initiated in 2019 Q4 in EMEA and APAC regions

Trade Compliance $3.1 • Voluntary disclosure to U.S. Customs and Border Protection of errors• Estimated range of loss is between $3.1M and $9.0M

All of these charges are excluded from Adjusted Operating EBITDA and Adjusted Net Earnings


CARES Act Opportunities

13

• $7.4M 2019 federal income tax refund opportunity

• Change in interest limitation to 50% (previously 30%)

• Allowance of NOL carryback to prior five years (previously carryforward only)

• $4.7M social security tax payment deferral for March-December 2020

• Payable 50% 12/31/2021, 50% 12/31/2022

• Employee Retention Tax Credit

• Maximum $5K/employee

• Benefit TBD

• 2020 pension minimum required funding of $3.0M deferral to late December/early January


$105.2 $88.1 $89.3

$117.8 $130.7

$148.5

$50

$75

$100

$125

$150

$175

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q1

Cash & Short-term Investments

Dec 31, 2018

Mar 31, 2019

Jun 30, 2019

Sep 30, 2019

Dec 31, 2019

Mar 31, 2020

2020 Q1 Free Cash Flow1 and Capital StructureUS$ in millions

14

1 See Welbilt’s 2020 Q1 earnings release for the reconciliations from GAAP to non-GAAP measures.2 Total Liquidity is defined as Cash & Short-term Investments plus availability on the Revolving Credit Facility.3 Net debt to Adjusted EBITDA per terms of Credit Agreement.

($68.9)

$54.4 $54.2 $34.3

($78.1)($100)

($50)

$0

$50

$100

2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q1

Free Cash Flow 1

$1,375.8

$1,524.6 $1,471.4 $1,448.1 $1,424.3

$1,527.1

$1,000

$1,200

$1,400

$1,600

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q1

Total Debt and Leverage Ratio

Dec 31, 2018

Mar 31, 2019

Jun 30, 2019

Sep 30, 2019

Dec 31, 2019

Mar 31, 2020

March 31, 2019 impacted by termination of off-balance sheet AR Securitization facility balance of $96.9M moving to revolver

5.06x 3

$424.0

$242.4

$296.7

$348.7 $384.8

$299.5

$200

$250

$300

$350

$400

$450

2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q1

Total Liquidity 2

Dec 31, 2018

Mar 31, 2019

Jun 30, 2019

Sep 30, 2019

Dec 31, 2019

Mar 31, 2020


Amended Revolving Credit Facility

15

($ amounts in millions)2020 2021

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Debt / EBITDA 1 5.50x NA 7.75x 6.25x 5.50x

EBITDA 1 / Interest 2.75x NA 2.00x 2.50x 2.75x

Minimum Liquidity 2 NA 120.0 95.0 105.0 110.0 140.0 NA

Minimum LTM EBITDA 1 NA 100.0 45.0 45.0 70.0 NA

Maximum LTM CapEx NA 40.0 40.0 30.0 30.0 NA

1 EBITDA is as defined in the Credit Agreement and is not the same as what is disclosed in SEC filings2 Calculated as global cash excluding China plus availability to draw on the revolver

• Addressed risk of non-compliance with revolver’s financial covenants due to COVID-19 impact

• Amendment provides substantial covenant headroom over seven quarters

• Helps to ensure continued access to revolver throughout COVID-19 crisis and recovery period

• Believe that liquidity resources (cash and revolver availability) are sufficient to meet working capital and cash requirements

• Covenants:


Updated Thoughts on 2020

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• 2020 guidance was withdrawn on March 20. Will not reinstate until conditions have sufficiently stabilized.

• Preliminary April sales decrease approximately 60%; May sales estimated to decrease between 55% and 60%

• Modeled multiple stress test scenarios to get comfortable with liquidity and financial covenants

• Stress test modeling is not guidance and shouldn’t be used as such

• Tested 2020 Q2 sales decrease in excess of 60%; Q3 sales decrease nearly as much; Q4 still down modestly

• Historically, cost of sales shown to be 75-85% variable; SG&A 30-40% variable

• Stressed working capital: accounts receivable collections slow/mismatch with accounts payable terms, inventory remains high

• Restrained 2020 capital spending to $24-28 million

• Results: comfortable liquidity and covenant compliance cushions

• Balancing the crisis to advance Transformation Program to permanently improve cost structure (long-term labor productivity, material cost reductions, SG&A efficiency) with advancing other key strategic initiatives (digital and new product innovation investments)

2020 Q1 Earnings Call...Certain statements in this presentation constitute “forward -looking...

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