Investor Presentations21.q4cdn.com/603071597/files/doc_presentations/2018/Anixter-Mo… ·...

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Products. Technology. Services. Delivered Globally. Investor Presentation August 2018

Transcript of Investor Presentations21.q4cdn.com/603071597/files/doc_presentations/2018/Anixter-Mo… ·...

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Products.

Technology.

Services.

Delivered Globally.

Investor PresentationAugust 2018

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Safe Harbor Statement and

Non-GAAP Financial MeasuresSafe Harbor Statement

The statements in this release other than historical facts are forward-looking statements made in reliance upon the safe harbor of the Private Securities Litigation Reform Act of 1995. These

forward-looking statements are subject to a number of factors that could cause our actual results to differ materially from what is indicated here. These factors include but are not limited to

general economic conditions, the level of customer demand particularly for capital projects in the markets we serve, changes in supplier relationships or in supplier sales strategies or financial

viability, risks associated with the sale of nonconforming products and services, political, economic or currency risks related to foreign operations, inventory obsolescence, copper price

fluctuations, customer viability, risks associated with accounts receivable, the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, information

security risks, risks associated with substantial debt and restrictions contained in financial and operating covenants in our debt agreements, the impact and the uncertainty concerning the timing

and terms of the withdrawal by the United Kingdom from the European Union, and risks associated with integration of acquired companies, including, but not limited to, the risk that the

acquisitions may not provide us with the synergies or other benefits that were anticipated. These uncertainties may cause our actual results to be materially different than those expressed in

any forward looking statements. We do not undertake to update any forward looking statements. Please see our Securities and Exchange Commission (“SEC”) filings for more information.

Non-GAAP Financial Measures

In addition to the results provided in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) above, this presentation includes certain financial measures computed using non-

GAAP components as defined by the SEC. Specifically, net sales comparisons to the prior corresponding period, both worldwide and in relevant segments, are discussed in this presentation

both on a U.S. GAAP and non-GAAP basis. We believe that by providing non-GAAP organic growth, which adjusts for the impact of acquisitions (when applicable), foreign exchange

fluctuations, copper prices and the number of billing days, both management and investors are provided with meaningful supplemental sales information to understand and analyze our

underlying trends and other aspects of our financial performance. Historically and from time to time, we may also exclude other items from reported financial results (e.g., impairment charges,

inventory adjustments, restructuring charges, tax items, currency devaluations, pension settlements, etc.) in presenting adjusted operating expense, adjusted operating income, adjusted income

taxes and adjusted net income so that both management and financial statement users can use these non-GAAP financial measures to better understand and evaluate our performance period

over period and to analyze the underlying trends of our business. We have also excluded amortization of intangible assets associated with purchase accounting from acquisitions from the

adjusted amounts for comparison of the non-GAAP financial measures period over period.

EBITDA is defined as net income from continuing operations before interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before foreign exchange and

other non-operating expense and non-cash stock-based compensation, excluding the other items from reported financial results, as defined above. Adjusted EBITDA leverage is defined as the

percentage change in Adjusted EBITDA divided by the percentage change in net sales. We believe that adjusted operating income, EBITDA, Adjusted EBITDA, and Adjusted EBITDA leverage

provide relevant and useful information, which is widely used by analysts, investors and competitors in our industry as well as by our management in assessing both consolidated and business

segment performance. Adjusted operating income provides an understanding of the results from the primary operations of our business by excluding the effects of certain items that do not

reflect the ordinary earnings of our operations. We use adjusted operating income to evaluate our period-over-period operating performance because we believe this provides a more

comparable measure of our continuing business excluding certain items that are not reflective of expected ongoing operations. This measure may be useful to an investor in evaluating the

underlying performance of our business. EBITDA provides us with an understanding of earnings before the impact of investing and financing charges and income taxes. Adjusted EBITDA

further excludes the effects of foreign exchange and other non-cash stock-based compensation, and certain items that do not reflect the ordinary earnings of our operations and that are also

excluded for purposes of calculating adjusted net income, adjusted earnings per share and adjusted operating income. EBITDA and Adjusted EBITDA are used by our management for various

purposes including as measures of performance of our operating entities and as a basis for strategic planning and forecasting. Adjusted EBITDA and Adjusted EBITDA leverage may be useful

to an investor because this measure is widely used to evaluate a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary

substantially from company to company depending on the accounting methods, book value of assets, capital structure and the method by which the assets were acquired, among other factors.

They are not, however, intended as an alternative measure of operating results or cash flow from operations as determined in accordance with U.S. GAAP.

Non-GAAP financial measures provide insight into selected financial information and should be evaluated in the context in which they are presented. These non-GAAP financial measures have

limitations as analytical tools, and should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures

as reported by us may not be comparable to similarly titled amounts reported by other companies. The non-GAAP financial measures should be considered in conjunction with the Condensed

Consolidated Financial Statements, including the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this release.

Management does not use these non-GAAP financial measures for any purpose other than the reasons stated above.

© 2018 Anixter Inc. 2

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Key Priorities for Anixter

© 2018 Anixter Inc. 3

Our Focus

on the

Customer

Customer Access

Strategy

• Enable customers to access all solutions and expertise through

existing selling organization

• Enable customers to connect with Anixter though channels

they choose

Commitment to

Technology and

Innovation

• Specialists in highly technical solutions and new innovative

technologies

• Provide customers with state of the art electronic business

platforms to provide an enhanced customer experience

Services

• Provide broad and global service capabilities that reduce risk

and complexity for our customers

• Provide service solutions from simple project services to

complex long term program solutions

Will Drive

Improved

Results

Profitability

• Accelerate sales growth

• Increase gross margin

• Improve expense structure

• Deliver strong EBITDA and consistent long term performance

Enabling

Value

Creation

Capital Allocation

• Invest in strategies and initiatives to drive organic growth

• Invest in acquisitions that provide a strategic benefit and meet

our financial and risk criteria

• Return value to shareholders

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Key Metrics

Anixter at a Glance

2017

Sales $7.9B

Adjusted EBITDA $404M

Adjusted EBITDA margin 5.1%

Countries ~50

Cities >300

SKUs >600k

Inventory >$1.0B

Warehouses/Branches >300

NSS52%

EES28%

UPS20%

Anixter 2017 Segment Mix

$7.9B

4© 2018 Anixter Inc.

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Key Platform Strengths

1. Leading positions in attractive businesses

2. Diverse solutions across segments

3. Balanced sector approach minimizes exposure and risk

4. Strong, diverse and global suppliers and customers

5. Differentiators provide competitive advantage and barriers to entry

6. Financial strength and capital efficiency

5© 2018 Anixter Inc.

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Leading Positions in Attractive Businesses

Network & Security

Solutions

Electrical & Electronic

Solutions

Utility Power

Solutions

Leading Position Global #1 Global Top 3 North America #1

Large ~$55B TAM ~$450B TAM ~$31B TAM

Growing 3 - 4% CAGR 2 - 3% CAGR ~4% CAGR

Fragmented ~7% Share <1% Share <4% Share

Diverse

and Global

END USERS

Commercial, Data Center, Defense, Education, Electronics, Financial

Services, Government, Healthcare, Industrial, Marine, Mining, Oil and Gas,

Retail, Semi-conductor, Technology, Transportation, Utility

CHANNELS

Contractors, Integrators, EPCs

$ Billions

6© 2018 Anixter Inc.

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7© 2018 Anixter Inc.

Diverse Solutions Across Segments

Wireless

ProfessionalA/V

Power and Cooling Electrical/Electronic

Wire and Cable

Lighting

Pole line Hardware

Electrical Wire and CableMRO

NSS: 52%of 2017 Sales

EES: 28%of 2017 Sales

UPS: 20%of 2017 Sales

Data Centers & Network

Infrastructure 60%

Security 40%

IOU60%

Public Power40%

Commercial & Industrial

65-70%

OEM30-35%

Data Center

SecurityTransformers

Switchgear

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8© 2018 Anixter Inc.

Balanced Sector Approach Minimizes Exposure and Risk

Channels

Data Contractors

Network Integrators

Pro A/V Contractors

Security Dealers

Security Integrators

Wireless Integrators

Customer Verticals

Architects/Consultants

Data Centers

Education

Financial Services

Healthcare

Stadiums

State and Federal Governments

Retail

Technology

Channels

Electrical Contractors

EPCs

Panel Builders and Harness Assemblers

Customer Verticals

Alternative Energy

Data Centers

Industrial Automation

Industrial Manufacturing

Oil, Gas and Petrochemical

Marine/Shipbuilding

Mining

Municipalities

Original Equipment Manufacturers

Transportation

Water/Waste Treatment

NSS: 52%of 2017 Sales

EES: 28%of 2017 Sales

UPS: 20%of 2017 Sales

Customer Verticals

Investor Owned Utilities

Public Power Utilities

Channels

Utility Co-ops

Generation & Transmission Cooperatives

Municipalities

Utility Contractors

Data Centers & Network

Infrastructure 60%

Security 40%

IOU60%

Public Power40%

Commercial & Industrial

65-70%

OEM30-35%

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Strong, Diverse and Global Suppliers and Customers

CustomersSuppliers

9© 2018 Anixter Inc.

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Differentiators Provide Competitive Advantage and Barriers to Entry

© 2018 Anixter Inc. 10

Global Capabilities with Local Presence

• International Deployment Experts

• Local Teams

• Global Support

• Deployments Services

• Product Enhancement Services

Customized and Scalable Supply Chain Solutions

• Save time, reduce costs, increase efficiency and mitigate risk

• Sourcing

• Inventory Management

• Product Enhancement and Packaging

• Global Logistics

• E-Commerce

Technical Expertise

• World class demonstration facilities

• Expertise in emerging technologies

• Application engineering and compliance

• Metering labs for power utilities

• Infrastructure Solutions LabSM

and Solutions Briefing Centers

• Anixter UniversityTM online courses

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Differentiators Provide Competitive Advantage and Barriers to Entry

Global Capabilities with Local Presence

3,600+Technical Sales

Specialists, Multi-Level

Technical Support

135,000+Customers

$1.0 Billion+ Inventory

600,000+Products~50 Countries

35+ Currencies

20+ Languages

Approximately 310Warehouses

and Branches

Worldwide

11© 2018 Anixter Inc.

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• Reduce time spent

on the order cycle

• Provide proven,

quality-controlled

products

• Manage

manufacturer

relationships and

contracts

• Access competitive

pricing and product

standardization

• Reduce non-contract

buying

• Improve

working capital

• Increase speed

to market

• Decrease write-offs

from scrap, overruns

and obsolescence

• Reduce product

shortages

• Streamline

warehouse

investment

• Provision inventory

• Eliminate

nonproductive labor

• Increase speed

to market

• Reduce variable

costs

• Reduce packaging

waste

• Streamline freight

costs

• Improve on-time

delivery

• Reduce lead times

• Optimize

international

transaction costs

• Decrease

transaction

processing time

and cost

• Improve consistency

and adherence to

specification

• Increase operational

efficiencies

© 2018 Anixter Inc.

Differentiators Provide Competitive Advantage and Barriers to Entry

Customized and Scalable Supply Chain Solutions

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Differentiators Provide Competitive Advantage and Barriers to Entry

World-Class Demonstration Facilities and Expertise in Emerging Technologies

Anixter Infrastructure Solutions LabSM

• Certified by Underwriters Laboratories®

• Located at our headquarters in Glenview, IL

– Proof of concept testing

and solutions building

– Data infrastructure product testing

– Independent testing

– Physical security testing

– Industrial Communications

and Control module

• Equipped to provide virtual tours

around the globe

Leadership Roles in Industry Associations

• Telecommunications Industry Association (TIA)

• International Organization for Standardization (ISO)

• Institute of Electrical and Electronics Engineers (IEEE)

• Open Network Video Interface Forum (ONVIF)

• Building Industry Consulting Services International

(BICSI)

• Security Industry Association (SIA)

• Control System Integrators Association (CSIA)

• National Electrical Manufacturers Association (NEMA)

• National Association of Electrical Distributors (NAED)

• Edison Electric Institute (EEI)

• National Rural Electric Cooperative (NRECA)

Building

Technologies

Data Center

and Enterprise

Networks

Physical

SecurityGear, Lighting

and Controls

Technical Certifications

• ASIS CPP (Certified Protection Professional)

• More than 90 Registered BICSI RCDDs

• PSPs (Physical Security Professional Certification)

• CCNAs (Cisco Certified Network Associate)

• QSSP

Solutions Briefing

Centers

• Woburn, MA

• Indianapolis, IN

• Atlanta, GA

• Sao Paulo, Brazil

• Bracknell, U.K.

13© 2018 Anixter Inc.

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Financial Strength and Capital Efficiency

Counter-Cyclical Free Cash Flow Provides

Financial Flexibility

Generate Strong Free Cash Flow Throughout the Economic Cycle

Free cash flow: Defined as net cash provided by operating activities less capital expenditures. Free cash flow is not restated for acquisitions and divestitures

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Financial Strength and Capital Efficiency

Approaching Target Capital Structure

*2015 includes 12 months of Power Solutions earnings on a pro forma basis

Target range:

2.5 - 3.0x

Target range:

45 - 50%

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Acquired Security Businesses Australia

and New Zealand in 2Q18

Transaction Summary for Combined Businesses

Acquired Companies: Central Security Distributors ("CSD"), Atlas Gentech and Inner Range

Purchase price $149.9 million

Twelve-month revenues $114 million

Twelve-month adjusted EBITDA $20 million

Consideration 100% cash

Financing Available cash and borrowing capacity

Accretion$0.20 - $0.22 in the first full year of operation, exclusive of transaction and integration costs

Strategic Rationale

Enhances our competitive position, bringing new, innovative products and solutions to Anixter that we believe will be valued by both new and existing customers

Acquired businesses gross and operating margins are higher than Anixter's

Acquisition rate of return is above Anixter's risk-adjusted average cost of capital

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Compelling Customer and Investor Value Proposition

Customer value proposition

– Reduce cost, complexity and risk in our customers’ supply chains

– Key Competitive Differentiators:• Global capabilities with local presence• Customized and scalable supply chain solutions• Technical expertise

Investor value proposition

– Leading positions in attractive businesses

– Competitive advantage and barriers to entry

– Financial strength and capital efficiency

– Executing strategies to accelerate sales and improve profitability

– Committed to delivering shareholder value

17© 2018 Anixter Inc.