Todays Presenters & Agenda Soma Rob Paul Ali Jay SOMASUNDARAM GALLOWAY MAHONEY RAZA NUTT President & Chief President President Chief Digital Officer Chief Financial Officer Executive Officer Drilling Technologies Production &…
Business Overview & Strategic Update Soma Somasundaram Confidential Apergy Information May not be copied or distributed Copyright 2019 Apergy. All rights reserved. outside of Apergy. Copyright 2019 Apergy. All rights reserved.
Key Messages You Will Hear Today Strategy is working our leading technology offering Compelling 1 coupled with a focus on customer service is valued in the Investment market Opportunity Attractive exposure to onshore production that…
Successfully Reached Milestone as a New Public Company Subsidiary of Dover Spin Public Co. 60s / 70s 80s / 90s 2000s 2010s May 2018 Today Strong organic growth / tuck-in M&A + Automation Leading Independent Artificial Lift +…
Accomplishments Since Our Spin Consistent, strong financial performance 2018 adjusted EBITDA of 296 million versus initial guidance of 280 million Introduced our strategic vision and operating philosophy which is engrained in the…
Apergy is Present Across Production & Automation Technologies: Facilitating the efficient, safe and effective Drilling Technologies: Providing highly specialized, innovative, the Wellsite extraction of oil and gas through a suite…
High Exposure to Production Enables Apergy to have Relatively Stable Revenue Through The Cycle Cumulative Revenue per Well Digital Products 10%1 Drilling 23%1 Artificial Lift 60%1 Life of a Well Drilling & Completions…
Portfolio Profile Geography1 Product Line1 Customer Base ROW Apergy has over 2,000 Middle Drilling 10% Technologies customers globally East 4% 23% Primary customers in Drilling Canada 7% Technologies include leading Digital…
Positive Drilling and Production Dynamics Increase in Footage Drilled per Solid Backlog of Wells that Will Growth in Wells Drilled Well Come into Production Footage Drilled Footage Drilled Drilled but Uncompleted Wells (mm. ft.)…
Customer Spending Continues to Grow Global & U.S. E&P CapEx 2019E CapEx Spend By Geography Capex(bn) % U.S. 400 80% Permian 70% 11% 316 298 32bn 300 278 281 60% 244 50% 211 138 150 159 169 53% 35% Ex-Permian 200 40%…
Large, Attractive Served Markets Drive Significant Growth Opportunities Existing Focus New Opportunities 0.8 billion global drill bit inserts & Application of diamond technology to bearings addressable market new industrial markets…
Distinctive Strategic Vision and Operating Philosophy Vision Improving Lives Customers - Employees Shareholders - Communities Business Unlocking Energy Purpose Strong Financial Engine Differentiated Equipment and…
Value Creation in Oilfield Equipment & Services Peer Set Methodology Metrics Analyzed Evaluated Apergy and peer performance since 1 Share Price / TSR 2011 across multiple 2 Organic Revenue Growth financial metrics to better…
Four Segments Emerged from the Analysis Top Box 2 Stronger in Downturn 1 Stronger Across Periods Financial / Capital Lowest revenue decline from peak to trough which contributes Strategy Operations Allocation to maintaining higher…
What Makes a Top Box Through-Cycle Performer Key Characteristics Commentary Business Mix More diversified business mix including exposure to production, Strategy drilling, and completions; limited exposure to offshore Strong…
Where Did Apergy and Its Product Lines Fit Within the Framework 2 Stronger in Downturn 1 Stronger Across Periods Downturn Performance Weaker Across Periods Stronger in Recovery Illustrative 4 3 relative revenue by Recovery…
How Does The Value Creation Framework Impact Our Investment Decisions View investments in the existing portfolio and M&A opportunities through lens of staying in the top box Focus on high EBITDA margin opportunities and low capital…
Priorities Aligned with Profitable, Through-Cycle Growth Top Box Characteristics Diversify Technology/ Revenue Growth Offering Margin Advantage Drive ESP Share Expansion in Apergys full suite of artificial lift Growing…
Apergys Value Creation Algorithm Consistent with Top Box Characteristics 1 2 3 Revenue Growth Margin Performance Capital Allocation Focus on stable revenue Maintain high margins After initial de-leveraging, growth from a…
Algorithm Delivers Strong and Consistent Financial Profile Revenue +20% YoY Strong growth and volume Adjusted EBITDA1 1,217 leverage ( in millions) +34% YoY 1,010 Industry leading margins 751 Low CapEx, strong cash flow +34%…
Summary: Why Own Apergy Pure Play Onshore Equipment and Technology Leader Positive Long-Term Industry Back-drop Distinctive Strategic Vision and Operating Philosophy Solid Execution; Deliver on Targets Experienced and…
Drilling Technologies Rob Galloway Confidential Apergy Information May not be copied or distributed Copyright 2019 Apergy. All rights reserved. outside of Apergy. Copyright 2019 Apergy. All rights reserved.
Overview of Drilling Technologies Industry leader in polycrystalline diamond cutters for oil & gas drilling and diamond 2018 Revenue bearings with industry reputation for innovation, quality and customer service Critical partner to…
Product Overview: Polycrystalline Diamond Drill Bit Inserts & Bearings Apergy Offering State of the art custom designed and manufactured drill bit inserts Disruptive technology for diamond bearings used in challenging…
Economic Importance to Customers Complex Drilling Requires Leading Technology Drill Bit Inserts Have Outsized Impact on Economics Recent outperformance of increase in worldwide footage drilled due to demand for leading technology…
Market Leader in Polycrystalline Diamond Cutters Benefit to Productivity Bit-Maker to Driller Customer & Competitor Quotes We can always count on USS to do what Customization Performance Performance Technology they say…
Leading in Innovation Learning Rate as a Competitive Advantage Innovation Speed & Efficiency Accelerating Product Advancement New Product Revenue1 New knowledge per Rock Removed per Unit 70% % Revenue from R&D dollar of Diamond…
Case Study of How Apergy Wins: Customer Focus Successfully applying fast learning and innovation processes Customer Focus Fast Learning New Innovation Innovating the 175 shaped prototypes delivered to Cutting Edge of PDC shapes…
Growth Momentum in Diamond Bearings High loads, no seals, in extreme environments Diamond Bearings Revenue Trend Diamond bearings continues to prove their value 40 in new products and with new customers 35 30 Revenues up 68%…
Expanding Diamond Sciences Applications The worlds hardest material for some of the worlds hardest problems O&G Bit Inserts Downhole Bearings Exploratory Markets / Preliminary Solutions Tools Wear High Loads Exploring…
Drilling Technologies Summary Industry leadership earned through delivering customer value Competitive moats of customer intimacy, rapid innovation systems, and patented technology Growth drivers tied to long-term favorable industry…
Production & Automation Technologies Artificial Lift Paul Mahoney Confidential Apergy Information May not be copied or distributed Copyright 2019 Apergy. All rights reserved. outside of Apergy. Copyright 2019 Apergy. All rights…
Overview of Production & Automation Technologies Leading provider of production and automation equipment and digital solutions for global E&P operators 2018 Revenue Proven brands known for performance reliability, technology,…
Unique Attributes Enabling Highest Customer Satisfaction 2018 Supplier Performance & Competitive Moats Competitive Positioning Survey 50% 44% 6% Full Portfolio of Reliable Product Offerings 40% 48% 12% Managing Full Life Cycle of…
Artificial Lift Product Offering Full Production Intelligence across Life Cycle of the Well XSPOC Production Optimization Software Tools Smarten Hardware (RTU/Controllers) 2018 Artificial Electrical Submersible Gas Lift & Lift…
Managing the Life Cycle of the Well Full Suite of Production Optimization Digital Products across Life Cycle of the Well Illustrative Well Production and Optimal Form of Artificial Lift Progression Flow Rate (bbls/d) Time…
Winning With Customers Artificial Lift Academy Customer Focus Groups Apergy Advisory Services Delivered to over 2,500+ participants Key account teams Design consulting since 2016 Customer advisory board Failure analysis Three modes…
Dedicated Sales and Service Network Across Key Global Basins Large Dedicated Artificial Lift Service Network Focus on Customer Service Fastest response time; less than 24 hours Stock highest turn, critical parts for immediate…
Market Leader Offering Diversified Portfolio Breadth Only provider of all six major forms of artificial lift solutions Product offering positioned to meet customer needs across the life cycle of the well Production Rod Lift ESP PCP…
Key Strategies for Growth in Artificial Lift Leverage strong mechanical and digital product & service 1 Drive ESP Share Expansion offering with established Apergy relationships Poised to capitalize on significant rod lift switching…
1 ESP Share Expansion Share Momentum in Permian ESP Growth Momentum % change in average monthly rate from 2016 average monthly rate1 Apergy 2018 monthly install rate is 2.5 times its 300% 2016 rate 250% 249% Industry leading…
1 Intelligent ESP Driving Customer Productivity Smarten Variable Speed Lookout Monitoring System Drive Operate based on exception Adjust for proper Immediate notification of drawdown alarms and shutdowns Run advanced algorithms…
1 Intelligent ESP Winning with Customers Pre-Sales Services Post-Sales Services Customer Problem Sizing & Selection Maintenance & Repair Need for production optimization Life of Well Planning Services Education Services Training to…
1 Artificial Lift Decision Survey ESP & Gas Lift Factors in selecting initial artificial lift Selection technology Importance Rating ESP Gas Lift Characteristics Initial production rates & ESPs are used as the initial form of…
1 Artificial Lift Decision Survey ESP & Gas Lift Primary Initial Form of Artificial Lift by Basin ESPESP Gas Lift Lift Basin / Play Midland Bakken Delaware Eagle Ford Do you view ESP & Gas Lift as interchangeable…
2 Growing Conversion Opportunity in Rod Lift U.S. Well Conversion Candidates 12,000 Rod Lift Conversion Opportunity Number of Wells that are New Conversion Candidates 10,000 Conversion can vary based on customer capital…
2 Intelligent Lift Helping Customers Convert Through the Life Cycle of the Well Customer Problem Large producer in the Permian looking to leverage technology and subject matter expertise to decrease downtime and expense Apergy…
3 Growing International Presence Latin America EMEA APAC Market 1.0bn market 1.0bn market 0.3bn market Size Key Customers Current Strong repair & maintenance & new wells Strong conversion trend in Australia where Building…
Artificial Lift Summary Uniquely positioned with full portfolio of best-in-class artificial lift solutions driving customer productivity throughout the life of the well Globally recognized brands with outstanding reputation for…
Production & Automation Technologies Digital Products Ali Raza Confidential Apergy Information May not be copied or distributed Copyright 2019 Apergy. All rights reserved. outside of Apergy. Copyright 2019 Apergy. All rights…
The Digital Landscape Outcomes Instant information availability Driving human behavior E-commerce applies to everyone Need information now Improved service delivery models Willingness to share The 4th Industrial Revolution - IIoT…
Energy Value-chain: State of Digital Maturity Non-Digitizers (45-50%) Selective Digitizers (35-40%) Enterprise Digitizers…
Digital Technology in Oil and Gas Apergy focuses on key Oil & Gas industry digital priorities Priority Description Opportunity Smart edge computing to enhance local monitoring and controls with Production surveillance and monitoring…
Production Optimization Enhanced Production Insight, Failure Prediction, & Control Production Surveillance and Monitoring Continuous reservoir monitoring Quartz Smart edge devices for the well site Field level optimization…
Predictive Failure Analysis of Production Equipment: Case Study Reducing Production Disruption by Failure Avoidance Rod Failure Failure type: Rod Failure Failure prediction 60 days prior to failure Rod Stress Analysis Dynamic Rod…
Maintenance Optimization Optimized Asset Health Using Machine Learning Reduction in unplanned downtime High speed data acquisition through cost-effective edge devices Connected hardware optimizes maintenance rounds by mobile apps…
Failure Analysis and Prediction: Case Study Early Compressor Failure Detection Avoids Costly Unplanned Shutdowns Enterprise AI Risk Index Event Date Traditional leak detection AI-based leak detection Failure Avoidance…
Our Digital Business is Rapidly Growing Rapid Growth of Digital Business 118 Significant YoY growth of 43% in 2018 82 highlighting immense potential in digital Revenue 65 & YoY Enhanced momentum with new product Growth…
Digital Products Summary Leading provider of fit-for-purpose digital solutions Early mover in digital wellsite products Market leader in artificial lift production optimization, downhole monitoring, and asset integrity management…
Financial Overview & Capital Allocation Jay Nutt Confidential Apergy Information May not be copied or distributed Copyright 2019 Apergy. All rights reserved. outside of Apergy. Copyright 2019 Apergy. All rights reserved.
Strong Recent Performance Met Expectations 2018 revenue growth of 20% from 2017 versus initial Revenue guidance of 16% 296 million in 2018 versus initial guidance of 280 million Adjusted EBITDA 2018 margin of 24% Cash…
Apergys Value Creation Algorithm Consistent with Top Box Characteristics 1 2 3 Revenue Growth Margin Performance Capital Allocation Focus on stable revenue Maintain high margins After initial de-leveraging, growth from a…
Long-Term Capital Allocation Philosophy Today After Target Leverage is Achieved Evaluate opportunities with high margins and attractive returns focused on: Organic Growth Capital Enhancing product and technology offering Focus stays…
Strong Performance Through the Cycle Revenue & Growth Rate Adjusted EBITDA & Margin 1 ( in millions) 2018 revenue growth of 20% vs. 14% Resilient industry-leading margins peer median 2018 margin of 24% vs. 10% peer median 1,531…
Industry Leading Through Cycle Free Cash Flow Conversion and ROIC Free Cash Flow Conversion Ratio1 Before Tax Return on Invested Capital1,2 2016 2018 Average 2016 2018 Average 11% 50% 5% 28% -3% -4% Including Goodwill…
Efficient Capital Structure and Debt Reduction Strong Balance Sheet 2018 Accomplishments December in Millions Paid down 45 million of Term Loan B debt 2018 in the last two quarters of 2018 Cash 42 Reduced leverage from 2.8x at…
Summary and Key Points to Remember Industry-leading Strong Proven Record Superior Margins with Growth Outlook Through the Cycle Cash Flow Opportunity to Expand Improving market Ability to take Differentiated products Low capital…
Summary & Wrap-up Soma Somasundaram Confidential Apergy Information May not be copied or distributed Copyright 2019 Apergy. All rights reserved. outside of Apergy. Copyright 2019 Apergy. All rights reserved.
Key Messages We Shared Today Strategy is working our leading technology offering Compelling 1 coupled with a focus on customer service is valued in the Investment market Opportunity Attractive exposure to onshore production that…
Q&A Apergy Team Confidential Apergy Information May not be copied or distributed Copyright 2019 Apergy. All rights reserved. outside of Apergy. Copyright 2019 Apergy. All rights reserved.
Appendix Confidential Apergy Information May not be copied or distributed Copyright 2019 Apergy. All rights reserved. outside of Apergy. Copyright 2019 Apergy. All rights reserved.
Near-term Outlook In the first quarter of 2019 we currently expect our financial results to be in the following ranges: Consolidated revenue: 295 to 305 million Adjusted EBITDA: 69 to 73 million Depreciation & amortization expense:…
Reconciliation from Net Income to Adjusted EBITDA ( in millions) 2013 2014 2015 2016 2017 2018 Net income (loss) attributable to Apergy 217 223 52 (13) 112 94 + Net income attributable to noncontrolling interest 1 1 1 2 1 0 +…
Reconciliation from Net Income to Adjusted EBITDA ( in millions) Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Net income attributable to Apergy 13 19 19 61 24 22 25 23 + Net income (loss) attributable to noncontrolling…
Reconciliation from Segment Operating Profit to Adj. Segment EBITDA ( in millions) Production & Automation Technologies 2015 2016 2017 2018 Operating profit (loss) 58 (22) 27 76 + Depreciation and amortization 104 100 101 113 +…
Reconciliation from Segment Operating Profit to Adj. Segment EBITDA ( in millions) Production & Automation Technologies Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Operating profit (loss) 8 10 9 0 10 23 24 19 + Depreciation…
Reconciliation from Cash Provided by Operating Activities to Free Cash Flow ( in millions) Cash Provided by Operating Activities to Free Cash Flow 2015 2016 2017 2018 Cash provided by operating activities 216 133 76 164 - Capital…
Reconciliation to Return on Invested Capital ( in millions) Net Income to Before Tax Operating Profit 2016 2017 2018 Net income (loss) attributable to Apergy (13) 112 94 + Net income attributable to noncontrolling interest 2 1 0 +…
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