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Investor Presentation Version 11.10.2025
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2 Contents Investor Presentation SWK Overview Pages 4 – 16 Tools & Outdoor Pages 17 – 26 Engineered Fastening Pages 25 – 29 Appendix Pages 30 – 39 Contacts Michael Wherley Vice President, Investor Relations 860-827-3833 michael.wherley@sbdinc.com Christina Francis Director, Investor Relations 860-438-3470 christina.francis@sbdinc.com Christopher Capela Director, Investor Relations 860-827-5556 christopher.capela@sbdinc.com 1000 Stanley Drive New Britain, CT 06053 investorrelations@sbdinc.com
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3 Cautionary Statement Investor Presentation This Presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All such statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to: any statements of goals, targets, priorities, projections, guidance, or planning assumptions or scenarios regarding earnings, EPS, EBITDA, income, revenue, margins, cash flow, costs of sales, sales, growth, profitability, demand volume, market share, credit ratings, SG&A, shareholder value, or other financial items; any statements of the plans, strategies, and objectives of management for future operations including expectations around the Company’s ongoing transformation and future operational strategies following completion of the transformation, run-rate cost savings or debt reduction or liquidity; any statements concerning market share gain, proposed new products, services, developments, investments, or innovation and brand prioritization strategies; any statements regarding future economic conditions or performance; any statements concerning future dividends or share repurchases; any statements and assumptions regarding geopolitical events, possible tariff and tariff impact projections (including the amount, timing and materiality thereof) and related mitigation plans (including obtaining price increases and supply chain adjustments) or timing; statements of beliefs, plans, intentions or expectations and any statements of assumptions underlying any of the foregoing and may include, among others, the words “may,” “will,” “estimate,” “intend,” “could,” “project,” “plan,” “continue,” “believe,” “expect,” “anticipate”, “run-rate”, “annualized”, “forecast”, “commit”, “design”, “positioned or positioning”, “guidance” “looking forward”, “future”, “vision”, “strategy”, “long-term”, “on-track” or any other similar words;. You are cautioned not to rely on these forward-looking statements, which are based on the Company’s current expectations and assumptions of future events. Each of the forward-looking statements involves risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements. Factors that might cause actual results, performance and achievements to differ materially from estimates or projections contained in forward-looking statements include, but are not limited to: the Company’s continued success with its ongoing transformation, complexity reduction, cost containment, and supply chain improvements (including leveraging its North American footprint and reducing China production) and disciplined capital deployment; changes in macroeconomic conditions, including interest rates and geopolitical events; changes in trade-related regulations and restrictions such as import and export controls, tariffs, trade barriers, clearances and raw material and rare earth related clearances or controls and other monetary and non-monetary trade regulations or barriers, and the Company’s ability to predict the timing, extent, materiality, impact or disruptiveness to the Company of such regulations, restrictions, tariffs barriers, clearances and controls; the Company’s ability to successfully mitigate or respond to such macroeconomic, geopolitical, or trade, tariff and rare earth policy changes including, obtaining price increases from customers, repositions of supply chain and ability to obtain rare earth related supply clearances reprioritizing resources, all within anticipated timeframes and costs, and successful government engagement efforts; the Company successfully developing, marketing and achieving sales from new products and services and the continued acceptance of current products and services as well as successful execution of, and realization of expected benefits from, the Company’s brand prioritization and investment strategy, including potential licensing initiatives and related restructuring efforts, and its ability to estimate and mitigate negative consequences from the same including, but not limited to, reduced ability to generate sales, and those factors set forth in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, the section of its Quarterly Earnings Releases entitled “cautionary Statements Concerning Forward Looking Statements” and in its other filings with the SEC. Forward-looking statements in this Presentation speak only as of the date hereof, and forward-looking statements in documents that are incorporated by reference herein speak only as of the date of those documents. The Company undertakes no obligation or intention to update or revise any forward-looking statements, whether because of future events or circumstances, new information or otherwise, except as required by law Non-GAAP financial measures are referenced in this Presentation. Refer to the Appendix included herein for applicable GAAP reconciliations and additional information, as applicable, regarding the use of non-GAAP and other financial measures.
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4 We Are Now A More Focused Company Well-Positioned Businesses In Attractive Industries That Are Forecasted To Grow Over A Multi -Year Period Investor Presentation *2024 Revenue Excludes STANLEY Infrastructure Business Which Was Divested On April 1, 2024 Product Line Percentages As Of 2024 Revenue Tools & Outdoor A Worldwide Leader In Tools & Outdoor Stanley Engineered Fastening A Leading Supplier Of Fasteners, Tools, Systems & Services Residential Construction Non-Residential Construction Outdoor & DIY Businesses Automotive General Industrial Aerospace Key Industries Key Industries Outdoor Power Equipment ~23% Hand Tools, Accessories & Storage ~28% Power Tools Group ~49% ~$13.3B 2024 Annual Revenue 2024 Revenue ~$15.4B General Industrial ~34% Aerospace ~17% Automotive ~49% ~$2B 2024* Annual Revenue
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5 Transforming To Accelerate Organic Growth Executing On Our Clear Vision And Strategy For Long-Term Success… Investor Presentation Reduce Complexity – ~$2B Savings By End Of ’25** Innovation Electrification Market Leadership OPTIMIZE Corporate Structure FOCUS Operating Model TRANSFORM Supply Chain More Responsive Supply Chain MSD Organic Revenue* Growth (2-3X Market) 35%+ Adjusted Gross Margin* ~100% Free Cash Flow* Conversion Powerful Innovation Customer Fill Rate Improvement Invest In Core Growth $300M - $500M Enhance Shareholder Return *Non-GAAP Financial Measures. Refer To Appendix For Additional Information On Revenue, Gross Margin, Cash From Operating Activities And Other GAAP And Non-GAAP Financial Measures **$2 Billion Pre-Tax Run-Rate Cost Savings Expected By The End Of 2025 …As A More Focused, Purpose Driven Company
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6 Service Levels Stabilized Operations Increased Customer Confidence, Improved Safety, Reduced Complexity Pre-Pandemic To Today 2019 Adj. Gross Margin* Increased Profitability Bolstered By Strong Supply Chain Transformation Execution 22% 26% 30% '2H22 '23 '24 Redeployed Funding Prioritized Investments Focused On Building A Growth Culture $250M Revenue Divested Simplified Portfolio Oil & Gas, Security, Infrastructure $2.6B On 2019 basis Debt Reduction Improved Balance Sheet Supported By Strong Cash Flow Generation & Strategic Portfolio Pruning >$2B 3Q’22 – 4Q’24 Of Top 70 Leaders Are New In Role Revitalized Leadership Strategic Upgrades & Additions To Infuse Org With Experienced, Energetic Talent >50% Solid Execution Against Our Operational Priorities Set In 2022 We Have Made Tangible Progress Against Our Strategy Despite Choppy Markets… 2024 *Non-GAAP Financial Measures. Refer To Appendix For Additional Information On Gross Margin And Other GAAP And Non-GAAP Financial Measures Trough Since Mid-2022 …Establishing A Strong Foundation As We Remain Focused On Achieving Our Vision Investor Presentation Metrics As Of 4Q’24
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7 Investor Presentation Focused On Successful Completion Of The Transformation Building A Solid Foundation And Cultivating A Growth Culture: Operational Excellence | Share Growth | Balance Sheet Health Deliver Sustainable 35%+ Adjusted Gross Margins* Material Productivity Ops Excellence Complexity Reduction Footprint Rationalization Engineering And Manufacturing Leadership Innovation To Deliver End-User Backed Solutions Pro-Focused Market Activation Revolutionary Electrification And Technology Advancement Accelerate Our Organic Growth Engine *Non-GAAP Financial Measures. Refer To Appendix For Additional Information On Gross Margin And Other GAAP And Non-GAAP Financial Measures To Better Serve Customers, Accelerate Growth, And Deliver Strong Shareholder Value
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8 Building An Organic Growth Culture Prioritizing & Protecting Investments For Brand Health & Acceleration Of Organic Growth Investor Presentation With Emphasis On Returns-Focused Resource Allocation *Non-GAAP Financial Measure. Refer To Appendix For Additional Information On SG&A And Other GAAP And Non -GAAP Financial Measures. Purposeful & Efficient Investments FY25 – FY27 Target ~21% To ~22% Longer-Term Target ~20% To ~21% Adjusted SG&A* % Of Sales Innovation Capabilities Marketplace Activation Focused Brands
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9 Long-Term Value Creation Algorithm (Beyond 2027) Long Term Financial Targets - Multi-Year Vision Beyond 2027 Investor Presentation *Non-GAAP Financial Measures. Refer To Appendix For Additional Information On Revenue, Gross Margin, Net Earnings, Cash From Operating Activities And Other GAAP And Non-GAAP Financial Measures **Assumes Any New Tariffs That Have Been And May Be Implemented Can Be Mitigated Within 12-24 Months, And Any Other Geopolitics Are Not Materially Disruptive. We Believe There Is A Multi-Year Runway For Growth & Margin Accretion Beyond The Transformation Revenue Growth: MSD Organic Growth* % (200-300bps Ahead Of LSD Market) Adj. Gross Margin*: >35% To 37% Operating Leverage*: 20% To 25% Adj. EBITDA*: 16% To 19% Of Sales CFROI*: ≥Mid-Teens Free Cash Flow Conversion*: ~100% +/- 10pts Of GAAP NI Net Debt To Adj. EBITDA* ~2.0x To ~2.5x Assumptions •Geopolitics Not Materially Disruptive Or Any New Incident Mitigated Within 12-24 Months** •LSD Real GDP CAGR% •Relatively Stable Inflation/Deflation Markets With An Attractive Growth Profile Attractive Market Structure Where Brand Matters Ability To Achieve Scale Differentiate Through Rapid Innovation And Delivering Productivity To Customers Strategic Criteria
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10 Capital Structure & Capital Deployment Investor Presentation Committed To Debt Reduction & Solid Investment Grade Credit Rating Focused On Achieving ≤ 2.5X Net Debt To Adj. EBITDA* •Supported By Organic Cash Generation And Future Proceeds From Additional Portfolio Optimization Opportunities In The Near-Term Disciplined Capital Deployment Priorities Support A Strong & Growing Dividend2 Deploying Excess Capital: • Deleverage To Target Levels (Current Focus) • Preference Toward Share Repurchase (Beyond) 3 Transformation & Organic Growth Investments1 Paid Consecutively For 149 Years, Increased For Past 58 Years Dividend Policy Committed To Continued Growth Target Long-Term Payout** ~30% +/- 5pts S&P Moody’s Fitch BBB+ Baa3 BBB+ A2 P3 F2 | | | LT ST|Agency Current Credit Ratings *Non-GAAP Financial Measure. Refer To Appendix For Additional Information On Net Earnings And Other GAAP And Non -GAAP Financial Measures. **As A Percentage Of GAAP NI
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11 Returns Are A Key Measure Of Our Long Term Success We Are Focused On Improving Returns To ≥ Mid-Teens Level Investor Presentation FY19 13.7% FY23 8.9% Contributing Factors Asset Efficiency • Inventory Of 120-130 DSI • Disciplined CAPEX Margin Improvement & Growth • Transformation Program Savings Captured • Organic Growth With Operating Leverage Judicious Capital Allocation • Debt Reduction To Target Levels • Share Repurchase • Opportunistic M&ALonger-Term Target ≥Mid-Teens Cash Flow Return On Investment* With Multiple Defined Pathways For Improvement *Non-GAAP Financial Measure. Refer To Appendix For Additional Information On Cash From Operating Activities And Other GAAP And No n-GAAP Financial Measures.. FY24 8.8%
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12 Well-Positioned In Attractive & Growing Industries Powered By The Talent Of Our Team, Strength Of Our Brands & Impact Of Our Innovation Why Invest? We See Significant Value Creation Potential In The Short, Medium And Long-Term COMPLETING TRANSFORMATION Earnings Power & Margin Achievement Confidence Intact ACTIVATING A GROWTH CULTURE WITH OPERATIONS EXCELLENCE Consistent Share Gain With Margin Expansion DEPLOYING CAPITAL WITH DISCIPLINE Accretive To Shareholder Value & Returns Investor Presentation
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2025 Planning Assumptions
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14 2025 Planning Assumptions As Presented On 11.4.25 Earnings Call Investor Presentation *Non-GAAP Financial Measures. Refer To Appendix For Additional Information On EPS, Cash From Operating Activities, Revenue, Earnings And Other GAAP And Non-GAAP Financial Measures **Forecasted Total Revenue Reflects The Impact Of Forecasted Foreign Currency Assuming The End Of September 2025 Rates And Excludes The Impact Of Acquisitions And Divestitures Not Yet Consummated Other Planning Assumptions Pre-Tax Non-GAAP Adjustments: ~$370M-$400M, ~45% Being Non-Cash, Driven By 3Q Trade Name Impairment Charges And Write Down Of Certain Minority Investments Associated With Legacy Corporate Ventures Other Net*: ~$270M Net Interest Expense: ~$320M Depreciation*: ~$365M | Intangible Amortization: ~$150M Capex: ~$0.3B Adjusted Tax Rate*: ~15% | Shares: ~152M 4Q’25 Adj. EPS*: ~$1.29 EPS Total Company Total Revenue** VPY Flat To (-1%) Currency & Divestitures VPY Net Neutral Organic Revenue* Flat To (-1%) Adjusted EBITDA Margin* Positive YoY Earnings Per Share $2.55 - $2.70 Adjusted EPS* ~$4.55 Free Cash Flow* ~$600M Segments Tools & Outdoor Organic Revenue* ~(-1%) Adj. Segment Margin* Positive YoY Engineered Fastening Organic Revenue* +Low Single Digits Adj. Segment Margin* Declining YoY
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15 Building A World Class, Branded Industrial Company Investor Presentation As Presented On 11.4.25 Earnings Call Focused On Organic Growth*, Margin Expansion, Cash Generation & Shareholder Return; *Non-GAAP Financial Measures. Refer To Appendix For Additional Information On Revenue, Gross Margin And Other GAAP And Non-GAAP Financial Measures Delivering Long-Term Value By Solving Our End Users’ Most Pressing And Complex Challenges Driving Operational Excellence Activating Brands With Purpose Accelerating Innovation Competing To Win In Industries Positioned For Long-Term Growth Committed To Achieving 35% AGM* And A Solid Investment Grade Balance Sheet
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16 Currency Impact Investor Presentation Broad U.S. Dollar Strength Contributes To Currency Headwinds As of 9/30/25. FY Impact Using September Month End Rates. Hedging Approach - Partially Hedge Key Currency Exposures (CAD, EUR, GBP, & AUD, Among Other) - Intent Is To Dampen Volatility And Allow Time For Business Teams To Mitigate Fluctuations With Cost & Price Actions Estimated 2025 OM Annual Impact - CAD 1% Move: $4.5M - $5.5M - EUR 1% Move: $1.5M - $2.5M - GBP 1% Move: $3.5M - $4.5M - BRL 1% Move: $1.5M - $2.5M - AUD 1% Move: $1.5M - $2.5M Currency Trends Vs. USD (12/30/22 – 9/30/2025) 10% (-1%) (-3%) 11% (-3%) -20% -15% -10% -5% 0% 5% 10% 15% 20%
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Tools & Outdoor
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18 A Global Leader In Tools & Outdoor *Source: 2023 Reported Company Results, Euromonitor. The Share Numbers Presented May Not Accurately Reflect The Full Competitive Landscape & May Fluctuate Significantly Year-to-year Due To Industry Developments. Five Brands Represent ~80% Of Our T&O Segment Europe 15% ROW 10% T&O 2024 Annual Revenue $13.3B Priority Brands T&O Total Addressable Market Represents >$100B Top 2 Manufacturers Represent Less Than 25% Of Addressable Market Power Tools Group ~49% Hand Tools, Accessories & Storage ~28% Outdoor Power Equipment ~23% % Of 2024 Revenue Emerging Markets 12% U.S. 63%*
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19 What It Takes To Win In The Tools & Outdoor Industry Starting From A Position Of Strength… Investor Presentation Rapid Innovation Focused On End-User Needs Broad Channel & Geographical Coverage Iconic Brands Operational Excellence Funds Growth …Building On This Solid Foundation To Accelerate Growth
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20 Innovation Addresses Professional End-User Needs Research Suggests >50% Of New Tool Purchasers Are Trading Up For Innovation… Investor Presentation End Users Willing To Pay A Premium For More Productive Tools Platform Integration | Tech Enablement Product Quality Drives Reliability | Uptime On The Jobsite Safety Is Critical To A Productive Jobsite Safety Quality Productivity Innovation …With >60% Of Respondents Valuing Safety, Quality, And Brand Reputation As The Most Important Key Buying Factor* *Source: Expert Interviews And Tool Purchaser Survey
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21 Focused Brands | Targeted Users Clear Differentiation Across Our Core Brands Investor Presentation Strengthen • Develop End-To-End Workflow Solutions • Strengthen The DEWALT Ecosystem Focus • Products And Solutions That Are Essential For Small Construction Professionals Scale • Win In DIY Verticals With DIY Enthusiasts • Focus On Margin Expansion LEADERSHIP The World’s Most Demanding Pros REPUTATION Resi Construction Professionals ACCOMPLISHMENT Ambitious DIY Enthusiast
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22 Elevating Our End-User Inspired Innovation Capabilities End-To-End Solutions Platforming Leading Technologies Connected Ecosystems Drive Modular, Yet Customizable Designs Total Carpentry Solutions Total Mechanical, Electrical, Plumbing Solutions Provide End Users Safety Features & Productivity Through Tool Connectivity & Actionable Data Investor Presentation Core Technology Enablers Grinder Product Platforms Nailer Multiple Pathways To Foster Growth And Meet End-User Needs Motor Battery
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23 Enhance End-User Engagement Investor Presentation Marketplace Activation Global Expansion Drive Growth In International Markets High Growth Emerging Core Markets Nordics & Southern Europe Eastern Europe Kingdom Of Saudi Arabia Customer Innovation Center Revitalization Increasing Our Field Sales And Support Access To End Users & Understanding User Needs Critical To Execute
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24 Investor Presentation Developing Supply Chain That Delivers Competitive Advantage An Engine For Future Margin Expansion Innovation Excellence Material Productivity Leadership Service Excellence Network Strategy And Agility Fast, Reliable And Efficient Innovation + Design To Value Supply Chain Program + Platforming + Sustainable Productivity Supplier Of ChoiceCost And Cash Efficiency + Low-Cost Manufacturing
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Engineered Fastening
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26 Investor Presentation Segment ~$2B $25B Revenue 2024 Industry Automotive $1.0B $10B Share Trend Aerospace $0.3B $4B Industrial $0.7B $11B STANLEY Engineered Fastening Where We Play A Leading Supplier Of Fasteners, Tools, Systems & Services With A Total System Approach To Fastening & Joining Applications And Deep Engineering Expertise Blind & Threaded Fastening Installation Equipment A Global Leader In Fastening Systems Plastics & Engineered Components Broad Portfolio: Fastener + Equipment Industry Players See full size image
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27 What We Do We Aim To Solve The Most Critical Challenges Of Our Customers… Light Weighting Safety Productivity Automotive IndustrialAerospace Investor Presentation
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28 How We Win Investor Presentation Connected Value Streams Deeply Embedded Design Partnerships • Application Engineering & Manufacturing Expertise • Technology Leadership In Automation Striving For Zero Defects Leadership In Automation 1 2 3 • Productivity - Driving Workflow Efficiency • Profitability - Optimized Total Cost Of Ownership • Combined Technology Drives Additional Customer Value • Clip → Stud → Equipment → Service → Spares
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29 Well-Positioned For Profitable Growth Investor Presentation ~$2B Margin Expansion Levers 200-300bps Above Market Differentiated Products, Value Pricing & 80/20 Strategic Sourcing Operational Excellence 2024 2027 Target INDUSTRIAL Focus On High Growth Verticals AUTOMOTIVE Application Engineering Investment & Even Deeper Partnerships With Global NEV OEMs AEROSPACE Evolve Innovation Engine & Differentiated Automated Fastening Systems Driving Sustainable Share Growth And Gross Margin Expansion
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30 Appendix
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31 End Categories Investor Presentation ~40%-45% Exposure To Residential Construction (~30% U.S.) End Categories - % Of Revenue* Engineered Fastening Tools & Outdoor SWK Existing Residential / Repair / DIY 0% 23% 20% New Residential Construction 0% 27% 24% Non-Resi. / Commercial Construction 0% 16% 14% Industrial & Automotive Repair 34% 11% 14% Automotive OEM 49% 0% 6% Aerospace 17% 0% 2% Outdoor Professional 0% 6% 5% Outdoor Consumer / DIY 0% 17% 15% Total 100% 100% 100% *2024 Actual Revenue Excludes STANLEY Infrastructure Business Which Was Divested On April 1, 2024 Comm. Const. Includes Non-Retail, Office Buildings, Arenas/Stadiums, Hotels, Resorts, Cinemas, Etc. Industrial Includes Manufacturing, Utilities, Distribution, Power, Rail, Auto Repair, Etc. Other Includes Logistics & Transportation, And Hospitality
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32 Geographic Reach Investor Presentation Diversified Globally With 60%-65% Of Our Revenues Generated In The U.S. Percentages As Of Fiscal Year 2024 Totals *Includes STANLEY Infrastructure Business Which Was Divested On April 1, 2024 62% 16% 13% 9% Stanley Black & Decker Segments Engineered Fastening*Tools & Outdoor 52% 21% 16% 11% 63% 15% 12% 10% U.S. Europe Emerging Markets ROW
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33 Material Spend Investor Presentation Direct Material Spend* Components Finished Goods Top Three Raw Material Exposures (Finished Goods + Direct + Components) 1. Steel 2. Resin 3. Packaging 2024 ($M) Finished Goods 1,660 27% Components 3,430 56% Steel 370 6% Resin / Plastic Moldings 260 4% Packaging 250 4% Base Metals 160 3% $6,130 For Directional Analysis Only *Raw Material Spend Includes Conversion Costs
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34 Liquidity Investor Presentation O/S Notes/Bonds Near Term Liquidity Sources Long-Term Debt Outstanding ($M) Sep 2025 Cash Position $0.3B Revolving Credit Facilities $3.5B Total Near-Term Liquidity $3.8B 5-Year Agreement – June 2029 $2.25B 364-Day Facility – June 2026 $1.25B Adequate Liquidity To Meet The Needs Of The Company *The 2026 Maturities Are On The Balance Sheet Under Current Maturities Of Long-Term Debt, As Of September 27, 2025 *
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35 Strategy To Successfully Navigate Tariffs Consistent With Prior Disclosure With 2024 Total Company U.S. Supply Investor Presentation 2024 Total Company U.S. Supply ~$2.9B - $3.0B U.S. ~$1.2B - $1.3B Mexico ~$0.9B - $1.0B China ~$1.5B - $1.6B Rest Of World ~$6.8B U.S. Adjusted Cost Of Sales* Based On Country Of Origin** Top 4 ~75% Of ROW Taiwan, Vietnam, Malaysia, Thailand Industry Leading North American Footprint (>60% COS) *Non-GAAP Financial Measure. GAAP Consolidated Cost Of Sales Was $10,851.3 Million For The Year Ended December 28, 2024. Excluding Certain Gains And Charges Of $88.8 Million, Consolidated Adjusted Cost Of Sales was $10,762.5 Million. Of the $88.8 Million Of Non-GAAP adjustments, Approximately $76 Million Related To The U.S. Refer To Appendix For Additional Information On EPS And Other GAAP And Non-GAAP Financial Measures **2024 Approximate Split Based On 2024 Country Of Origin Guiding Principles Serve Our Customers And End Users During A Dynamic Period Minimize Cost Increases Through Supply Chain Moves With Focus On Leveraging North American Footprint & Reducing China Production For The U.S. By 2026 Or Early 2027 Implement Price Increases With A Long Term Perspective And To Protect Cash Flow Continue To Proactively Engage With The U.S. Administration
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36 Non-GAAP & Other Financial Measures Investor Presentation This presentation may include the following Non-GAAP measures. Organic revenue or organic sales is defined as the difference between total current and prior year sales less the impact of companies acquired and divested in the past twelve months, foreign currency fluctuations, and transfers of product lines between segments. Organic revenue growth, organic sales growth or organic growth is organic revenue or organic sales divided by prior year sales. Gross profit is defined as sales less cost of sales. Gross margin is gross profit as a percent of sales. Segment profit is defined as sales less cost of sales and selling, general and administrative (“SG&A”) expenses (aside from corporate overhead expense). Segment margin is segment profit as a percent of sales. EBITDA is earnings before interest, taxes, depreciation and amortization. EBITDA margin is EBITDA as a percent of sales. Cost of sales, gross profit, gross margin, SG&A, depreciation, segment profit, segment margin, other, net, earnings, EBITDA (also referred to as earnings power) and EBITDA margin are adjusted for certain gains and charges, which may include supply chain transformation costs, asset impairments, voluntary retirement program costs, environmental charges, acquisition and divestiture-related items, restructuring, and other adjusting items. Income taxes attributable to Non-GAAP adjustments are determined by calculating income taxes on pre-tax earnings, both inclusive and exclusive of Non-GAAP adjustments, taking into consideration the nature of the Non-GAAP adjustments and the applicable statutory income tax rates. Management uses these metrics as key measures to assess the performance of the Company as a whole, as well as the related measures at the segment level. Adjusted earnings per share or adjusted EPS, is diluted GAAP EPS excluding certain gains and charges. Free cash flow is defined as cash flow from operations less capital and software expenditures. Management considers free cash flow an important indicator of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners and is useful information for investors. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and business acquisitions, among other items. Free cash flow conversion is defined as free cash flow divided by net income. Cash flow return on investment (“CFROI”) is defined as cash from operations plus after-tax interest expense, divided by the two-point average (beginning and end of the year) of debt plus equity. Operating leverage is the change in pre-tax adjusted earnings divided by the change in sales. Net Debt to Adjusted EBITDA is total debt less cash on hand divided by adjusted EBITDA. The Company considers the use of the Non-GAAP financial measures above relevant to aid analysis and understanding of the Company’s results, business trends and outlook measures aside from the material impact of certain gains and charges and ensures appropriate comparability to operating results of prior periods. The Company provides expectations for the non-GAAP financial measures of full-year 2025 adjusted EPS, presented on a basis excluding certain gains and charges, as well as 2025 organic revenue growth. Forecasted full-year 2025 adjusted EPS and 2025 organic revenue growth are reconciled to forecasted full-year 2025 GAAP EPS and total 2025 revenue growth, respectively, on slide 14. Consistent with past methodology, the forecasted full-year 2025 GAAP EPS excludes the impacts of potential acquisitions and divestitures, future regulatory changes or strategic shifts that could impact the Company's contingent liabilities or intangible assets, respectively, potential future cost actions in response to external factors that have not yet occurred, and any other items not specifically referenced on slide 14. Forecasted 2025 organic revenue growth assumes the impact of foreign currency using historical rates and excludes the impacts of potential acquisitions and divestitures. In addition to 2025 adjusted EPS and 2025 organic revenue growth, the Company also provides additional expectations for forward-looking non-GAAP financial measures, presented on a basis excluding certain gains and charges, (slides 5, 7-11, 14) as well as forecasted free cash flow, free cash flow conversion, and CFROI (slide 5, 9, 11, 14). A reconciliation of forecasted free cash flow to its most directly comparable GAAP estimate is not available without unreasonable effort due to high variability and difficulty in predicting items that impact cash flow from operations, which could be material to the Company’s results in accordance with U.S. GAAP. A reconciliation of the differences between other forward-looking non-GAAP measures and the most directly comparable GAAP measures is not available without unreasonable effort due to the inherent difficulty of forecasting the timing and/or amount of various items that have not yet occurred, including the high variability and low visibility with respect to certain gains or charges that would generally be excluded from non-GAAP financial measures and which could be material to the Company’s results in accordance with U.S. GAAP. Additionally, estimating such GAAP measures and providing a meaningful reconciliation consistent with the Company’s accounting policies for future periods requires a level of precision that is unavailable for these future periods and cannot be accomplished without unreasonable effort. The Company believes such reconciliations would also imply a degree of precision that is inappropriate for these forward-looking measures
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37 Reconciliation Of GAAP To Non-GAAP Measures Investor Presentation $1,771.6 21.9% GAAP Gross Profit $22.0 Non-GAAP Adjustments $1,793.6 22.1% Non-GAAP Gross Profit 2H 2022 $ 3,932.6 24.9% GAAP Gross Profit $166.9 Non-GAAP Adjustments $4,099.5 26.0% Non-GAAP Gross Profit FY 2023 $4,514.4 29.4% GAAP Gross Profit $88.8 Non-GAAP Adjustments $4,603.2 30.0% Non-GAAP Gross Profit FY 2024
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38 Reconciliation Of GAAP To Non-GAAP Measures Investor Presentation
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Investor Presentation