RENK Group AG

Investor Presentation • Nov 13, 2024

Q3 2024 Investor \& Analyst Presentation
13 November 2024

Disclaimer

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This presentation has been prepared for information and background purposes only. It does not constitute or form part of, and should not be construed as, an offer of, a solicitation of an offer to buy, or an invitation to subscribe for, underwrite or otherwise acquire, any securities of RENK Group AG (the "Company", and together with its subsidiaries, the "Group"), nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of the Company or with any other contract, commitment or investment decision whatsoever.
Certain financial data included in this presentation consists of non-IFRS financial measures. These non-IFRS financial measures may not be comparable to similarly titled measures presented by other companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS. You are cautioned not to place undue reliance on any non-IFRS financial measures included herein. Past events or performances should not be taken as a guarantee or indication of future events or performance. Financial information presented in parentheses denotes the negative of such number presented. Any assumptions, views or opinions (including statements, projections, forecasts or other for-ward-looking statements) contained in this presentation represent the assumptions, views or opinions of the Company as of the date indicated and are subject to change without notice. All information not separately sourced is from Company data and estimates. To the extent available and unless denoted otherwise, the industry and market data contained in this presentation has been derived from Company estimates as well as official or third-party sources. Market and market share data has been derived from Company estimates as well as official or third-party sources. Market and market share data are based on company internal estimates derived from continuous analysis and aggregation of local management feedback on market share and ongoing market development. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data. While the Company believes that each of these publications, studies and surveys has been prepared by a reputable source, the Company has not independently verified the data contained therein. In addition, certain of the industry and market data, if not labelled otherwise, contained in this presentation are derived from the Company's internal research and estimates based on the knowledge and experience of its management in the markets in which it operates. The Company believes that such research and estimates are reasonable and reliable, but their underlying methodology and assumptions have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, undue reliance should not be placed on any of the industry or market data contained in this presentation. Information contained in this presentation related to past performance is not an indication of future performance. The information in this presentation is not intended to predict actual results, and no assurances are given with respect thereto.
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The information contained in this presentation is provided as of the date of this presentation and is subject to change without notice.

TABLE 2:

Experienced management team with strong track record

Today's modern

RENK

1. RENK introduction
2. Update on Q3-24 performance
3. Summary and outlook

RENK - Leading provider of drive technologies with high aftermarket share

Growth markets

4.8bn (1)

Sept-24
Total order backlog ${ }^{(1)}$

1.1x (2)

9M 2024 book-to-bill

End markets Q3 2024

Global leader

#1 Player (2)

in mission-critical drive technologies ${ }^{(2)}$

$\sim 75 \%$ (3)

Global market presence in tracked military vehicles ${ }^{(3)}$

Geographies 2023A(4)

Strong financials

€1,051m (1)

LTM Revenue Sept-24

$19.3 \%$ (1)

9M 2024 Revenue Growth

New build / aftermarket Q3 2024(5)

RENK
Trusted Partner

RENK

1. RENK introduction
2. Update on Q3-24 performance
3. Summary and outlook

Executive summary Q3 2024: Strong VMS revenue growth, performance improvement on track

• 9M book-to-bill 1.1x, strong Q4 order intake expected
• Market growth: €9bn order pipeline beyond soft backlog

Record Q3 revenue level

Vehicle Mobility Solutions (VMS)

Profitability at a strong level

Narrowed guidance confirmed

• Revenue growth accelerated further in the VMS segment, especially driven by the Augsburg plant
• M\&I activity level remains high

• Slide Bearnings on sustainable growth path

• Revenue growth accelerated further in Augsburg

• Daily output rates improved in Muskegon
• Supply chain challenges resolved successfully

・ Strong adj. EBIT contribution from M\&I, Slide Bearings and VMS Augsburg

• Clear path to profitability improvement for RENK America

• Revenue guidance: €1,100m

• Adj. EBIT: €175m - €190m

Total order backlog at $>4 x$ annual revenues - strong market demand beyond total order backlog

Strong revenue growth driven by the VMS segment and aftermarket

Solid adj. EBIT, further improvement expected in Q4

VMS: Accelerated revenue growth, aftermarket share increased further

Segment financials, €m

Commentary (Q3)

• Strong base order level in Q3 2024, total order intake impacted by lower amount of large order wins during the quarter ( $€ 87 \mathrm{~m}$ US/Thor order in Q3 2023)
• Significant Q3 revenue growth of $45.2 \%$ YoY due to operational improvement and higher output and above-proportional aftermarket growth
• Margins improved significantly on operating leverage and operational improvement
• Measures to take the operating model of RENK America to translate into higher profitability in coming quarters
• Adj. EBIT comparison in Q3 impacted by higher R\&D expenses ( $€ 1.3 \mathrm{~m}$ YoY increase in Q3 2024)

M\&I: Activity and margin levels remain high with improved mix

Segment financials, $€ \mathrm{~m}$

9M-23 9M-24 Q3-23 Q3-24

Adj. EBIT ${ }^{(1)}$
$8.0 \% \quad 10.0 \% \quad 19.9 \% \quad 9.9 \%$

9M-23 9M-24 Q3-23 Q3-24

Commentary (Q3)

• Q3 revenue level remains high, albeit significantly below the very high prior year Q3
• 9M revenue growth rate indicates healthy growth trajectory
• Share of (higher-margin) military and aftermarket business increased notably
• Q3 adj. EBIT margin remained at a good level close to $10 \%$ and puts us on track to reach our FY targets

Slide Bearings: On a sustainable growth path

Segment financials, $€ \mathrm{~m}$

Order intake	Revenue	Adj. EBIT ${ }^{(1)}$
		$\begin{array}{r} 15.1 \% \ 16.7 \% \ 16.8 \% \end{array}$
9M-23 9M-24 Q3-23 Q3-24

Commentary (Q3)

• Order intake with strong growth and book-to-bill at $1.2 x$
• Revenue growth following the sustainable growth path of high-single digit (\%) to low double-digit (\%) growth as seen in previous quarters
• Strong demand for e-bearings (electrification trend) as well as for bearings for maritime applications
• Profitability remains at a high level with a slight improvement YoY due to improved new equipment margins as well as a higher share of aftermarket business

Adjustments mainly related to PPA, refinancing costs and RAMup

For the period, $€ \mathrm{~m}$

	9M-23	9M-24	Q3-23	Q3-24
Operating profit	57.0	58.3	25.1	22.7
PPA depreciation and amortization as well as income / losses from PPA asset disposals	35.1	33.1	11.7	10.9
Operating profit before PPA depreciation and amortization as well as income / losses from PPA asset disposals	92.1	91.4	36.9	33.6
Capital Markets Readiness Costs	1.6	$1.6 \bigcirc$	1.3	0.0
M\&A activity related costs	2.0	1.0	0.9	0.5
Inflation compensation premium	2.5	-	1.0	-
Severance Provision	1.3	0.6	0.0	0.6
Other adjustments	4.3	17.8	0.8	8.7
Adj. EBIT	104.0	112.4	40.9	43.4
Depreciation, amortization and impairment losses (excluding PPA depreciation and amortization)	23.2	23.9	8.0	8.2
Adj. EBITDA	127.2	136.2	49.0	51.6

Commentary

(1) Adjustments are mainly attributable to effects of purchase price allocation, which mainly relate to depreciation and amortization of revalued non-current assets
(2) Cost incurred in the context of achieving capital market readiness as listing on Frankfurt Stock Exchange was completed during Q1 2024
(3) Other adjustments mainly include RAMup, a program to enhance the operating model of RENK America, consultancy and advisory expenses as well as costs related to refinancing

NWC ratio expected to decline in the mid-term

Slightly positive cash flow in Q3 despite one-off capex

Key cash flow items, $€ \mathrm{~m}$

	9M-23	9M-24	Q3-23	Q3-24
Adj. EBITDA ${ }^{(1)}$	127.2	136.2	49.0	51.6
Adjustments ${ }^{(2)}$	(11.8)	(21.0)	(4.1)	(9.8)
Income taxes paid	(22.3)	(18.4)	(6.3)	(8.6)
Change in net working capital ${ }^{(3)}$	(27.9)	(53.3)	(51.7)	(22.1) 3
Capex ${ }^{(4)}$	(14.8)	(25.6)	(5.0)	(12.8) 4
Other ${ }^{(5)}$	(29.5)	20.1	(11.3)	13.6
Unlevered free cash flow	20.8	38.1	(29.4)	12.0
Interest received	0.0	1.3	0	0.3
Interest payments	(27.3)	(43.6) 5	(13.9)	(9.0) 6
Free cash flow	(6.5)	(4.2)	(43.3)	3.3
Acquisitions less cash ${ }^{(6)}$	34.3	-	0	-
Change in cash \& cash equivalents (post M\&A)	27.8	(4.2)	(43.3)	3.3

Commentary

(1) Q1 2023 tax payments include an aperiodic real estate tax payment ( $€ 2.8 \mathrm{~m}$ )
(2) Cash outflow for net working capital reflecting higher revenue level
(3) Capex in Q3 2024 amounted to $3.3 \%$ of sales, but well below 3\% excluding (onetime) capex for intangible assets acquired from QinietiQ
(4) Interest payments back at normal level after elevated payments in Q2 due to different payment dates between the previously existing bond and the new SSFA significant interest payments in Q2 2024
(5) Including $€ 7.5$ m prepayment penalties due to the refinancing of the long-term debt (corporate bond) in H1 2024

RENK

1. RENK introduction
2. Update on Q3-24 performance
3. Summary and outlook

We reiterate our guidance (narrowed to the upper end with Q2 results in August)

2023A
Revenue / growth

200
Adj. EBIT ${ }^{(1)}$

2024 Guidance
€926m

2024 Guidance

2024 Guidance
Medium-term target

Priorities and key challenges for Q4 2024

Output increase VTA Augsburg	- Further acceleration of output revenue growth, especially at VMS Augsburg
RENK America	- Stabilize RENK America on higher performance level: Supply chain, operating model, leadership structures
Growth \& technology roadmap	- Expand innovation pipeline, e.g. hybridization solutions and advanced mobility technology
NWC optimisation	- RENK Italia founded to capture market potential
Order intake	- Strong (€9bn) order pipeline across all regions beyond the projects recognized in our soft backlog
Continued investor interaction	- Conferences/NDRs: London, Paris, Toronto, Frankfurt, New York City

November 2024:

• Virtual Roadshow Toronto
• Roadshow Paris
• Deutsche Börse Eigenkapitalforum, Frankfurt

December 2024:

• Berenberg European Conference 2024, Pennyhill / London
• Goldman Sachs Industrials \& Autos Conference, London
• Investor Site Visits, Augsburg

January 2025:

• ODDO BHF Forum, Lyon
• Commerzbank German Investment Seminar, New York City
• Unicredit/KeplerCheuvreux German Corporate Conference, Frankfurt

March 2025:

• FY 2024 Results (26 March)

May 2025:

• Q1 2025 Quarterly Statement (14 May)

June 2025:

• Annual General Meeting (4 June, virtual)

RENK

TRUSTED PARTNER

Q\&A Session

RENA

TRUSTED PARTNER

Your contact

Investor Relations

Ingo Schachel, Head of IR
Phone: +49 82157001439
E-Mail: investors@renk.com
www.ir.renk.com

RENK Group AG

Goegginger Straße 73
D-86159 Augsburg
Germany
www.renk.com
Management Board: Susanne Wiegand (Chairman), Anja Månz-Siebje, Dr. Alexander Sagel
Supervisory Board: Claus von Hermann (Chairman)
Registration Court: District court of Augsburg, HRB 39189
VAT ID number: DE 363351811

APPENDIX

Incometatement

For the period, $\epsilon_{\mathrm{m}}$

	Q3 2023	Q3 2024
Revenue	652.7	778.3
Cost of sales	(504.1)	(597.2)
Gross profit	148.6	181.1
Other operating income	9.1	3.1
Net allowances on financial assets	(0.2)	0.3
Distribution expenses	(41.5)	(45.5)
General and administrative expenses	(49.2)	(72.4)
Other operating expenses	(9.8)	(8.4)
Operating profit after PPA	57.0	58.3
Interest expense	$(30.2)^{*}$	(33.9)
Other financial result	$0.9^{*}$	0.4
Financial result	$(29.3)^{*}$	(33.5)
Profit before tax	$27.7^{*}$	24.6
Income taxes	$(8.8)^{*}$	(17.8)
Profit after tax	$18.9^{*}$	7.0

Balance sheet - Total assets

As of, $€ \mathrm{~m}$

	Dec 31, 2023	Sep 30, 2024
Intangible assets	383.9	360.1
Property, plant and equipment	319.0	316.4
Other and financial investments	9.4	5.1
Deferred tax assets	18.2	23.1
Other non-current financial assets	0.4	0.0
Other non-current receivables	4.8	13.9
Total current assets	21.1	141.1
Inventories	326.2	381.0
Trade receivables	163.3	151.6
Contract assets	96.6	123.9
Current income tax receivables	8.6	9.0
Other current financial assets	24.4	7.2
Other current receivables	15.6	20.2
Cash and cash equivalents	102.2	70.3
Current assets	736.9	763.2
Total	1,472.6	1,481.7

Balance sheet - Total equity and liabilities

As of, $€ \mathrm{~m}$

	Dec 31, 2023	Sep 30, 2024
Share capital (subscribed capital in previous year)	100.0	100.0
Capital reserves	223.8	227.6
Retained earnings	57.6	35.5
Cumulative other comprehensive income	22.5	24.9
Equity attributable to shareholders of RENK Group AG	403.8	388.0
Equity attributable to non-controlling interests	0.1	0.1
of which non-controlling interests in consolidated net income for the year	0.0	0.0
Equity	202.9	300.4
Non-current financial liabilities	527.5	530.1
Pension provisions	2.0	2.5
Deferred tax liabilities	73.0	75.7
Contract liabilities, non-current	44.1	51.8
Other non-current provisions	11.0	11.3
Other non-current financial liabilities	3.8	5.4
Other non-current liabilities	0.0	0.0
Non-current liabilities and provisions	661.3	676.9
Current financial liabilities	18.6	6.2
Income tax liabilities	13.2	16.7
Trade payables	123.6	112.6
Contract liabilities, current	171.8	190.9
Other current provisions	40.3	44.0
Other current financial liabilities	1.3	1.5
Other current liabilities	38.5	44.9
Current liabilities and provisions	407.4	412.6
Total	1,472.6	1,481.7

Cash flow statement

For the period, $€ \mathrm{~m}$

	Q3 2023	Q3 2024
Costs and costs and counts of liabilities and activities of cash	611.9	611.7
Profit / loss before tax (including income attributable to non-controlling interests)	$27.7^{*}$	24.8
Income tax payments	(22.3)	(18.4)
Depreciation, amortization and impairment losses on intangible assets and property, plant and equipment	58.3	57.0
Change in provisions for pension obligations	(3.4)	0.5
Result from asset disposal	(0.1)	(0.0)
Other non-cash expenses and income ${ }^{1)}$	(1.8)	(0.0)
Change in inventories, other assets, liabilities and other provisions	(52.1)	(33.7)
Financial result (including, dividends) ${ }^{2)}$	$29.3^{*}$	23.5
Costs flow from operating activities	3.4	0.5
Purchase of property, plant and equipment and intangible assets	(14.8)	(25.6)
Proceeds from the disposal of property, plant and equipment and intangible assets	0.1	0.2
Acquisition of subsidiaries net of cash	(34.3)	-
Cash flows from loans receivables and restricted cash	(1.1)	5.2
Interest received ${ }^{4)}$	-	0.0
Costs flow from investing activities	(50.1)	(11.5)
Unrelated REM Group AG	-	(30.0)
Payment from the redemption of bonds	-	(520.0)
Proceeds from the raising of loan liabilities	-	514.8
Equity contributions	-	2.8
Change in cash-pool liabilities	0.2	(2.6)
Repayment of IC loans	(50.0)	-
Lease payments	(2.3)	(2.1)
Interest rate ${ }^{5)}$	(27.3)	(43.6)
Costs flow from financing activities	(21.4)	(61.0)
Effect of exchange rate changes on cash and cash equivalents	0.1	2.9
Change in cash and cash equivalents due to changes in the scope of consolidation	4.9	1.0
Change in cash and cash equivalents	(15.7)	(17.7)
Costs and costs equivalents net and net reporting period	63.7	70.3
Restricted cash	6.7	1.2
Effect of income on cash and activities of cash	61.1	62.1
Financial liabilities (net of cash-pool liabilities)	(535.7)	(536.3)
Net liquidity at end of reporting period	(451.2)	(464.7)

Endnotes $(1 / 3)$

p. 4

(1) Total order backlog comprised of fixed order backlog, frame order backlog and soft order backlog; Fixed order backlog represents with respect to binding customer contracts and purchase orders concluded and/or received the portion of the associated transaction price for which the amount of revenue has not yet been recognized in accordance with IFRS; Frame order backlog includes signed frame contracts or prolongation character of linked frame contracts with fixed annual volumes or volume estimates based on customer information or historical call offs over the entire contract duration, booked for the period of the frame contract term; Soft order backlog includes estimated volumes of sole source projects and successor business until 2028 based on public information and customer information, booked for the period October 24 to September 28
(2) Refers to systems / subsystems, such as transmissions for tracked military vehicles, gearboxes for large naval surface combatants and slide e-bearings, that are critical for the mechanical operation of military vehicles \& vessels. Based on being "positioned on $75 \%$ of NATO \& Allied tracked vehicles" and "RENK provides mission-critical mechanical systems and subsystems at various stages in the lifecycle" (as per Renaissance market study based on 2022)
(3) Includes any product with RENK's presence on tracked military vehicles by number of installed base globally (2022A), excluding platforms of Russian and Chinese origin in-service outside of Russia and China and Embargo Countries (as per Renaissance market study)
(4) Based on 2023A revenues, reconciliation to reported figures: EMEA includes Germany, other EU Countries, other European Countries and Africa; Americas includes Americas; APAC includes Asia and Australia and Oceania
(5) Q3 2024 revenue split; New build refers to new product sales; aftermarket refers to depot MRO (maintenance, repair, overhaul) and upgrades of products and platforms, incl. spare parts and other aftermarket services; replacement of installed RENK products in defense applications is considered as aftermarket and in civil applications as new build
p. 7
(1) Defined as total order backlog as of Sept-24 / LTM revenue for the period ended September 30, 2024. Total order backlog comprised of fixed order backlog, frame order backlog and soft order backlog
(2) Fixed order backlog represents with respect to binding customer contracts and purchase orders concluded and/or received the portion of the associated transaction price for which the amount of revenue has not yet been recognized in accordance with IFRS
(3) Frame order backlog includes signed frame contracts with fixed annual volumes or volume estimates based on customer information or historical call offs over the entire contract duration, booked for the period of the frame contract term. The numbers as of September 30 include a contract with the character of a binding follow-up contract with the amount of 60.3 bn
(4) Soft order backlog includes estimated volumes of sole source projects and successor business until 2028 based on public information and customer information, booked for the period October 24 to September 28
p. 8
(1) Book-to-bill ratio defined as order intake / revenue
(2) Fixed order backlog represents with respect to binding customer contracts and purchase orders concluded and/or received the portion of the associated transaction price for which the amount of revenue has not yet been recognized in accordance with IFRS

Endnotes $(2 / 3)$

p. 9

(1) Adjusted gross profit is defined as gross profit before PPA depreciation and certain items which management considers to be exceptional or non-recurring in nature. Adj. Gross Profit margin is defined as adjusted gross profit divided by revenue.
(2) Adj. EBIT is defined as operating profit before the PPA depreciation and amortization as well as income / losses from PPA asset disposals and adjusted for certain items which management considers to be exceptional or non-recurring in nature. Adj. EBIT margin are defined as adj. EBIT divided by revenue.
(3) Net debt is defined as the sum of bank debt (previous year: senior secured notes) and lease liabilities less cash and cash equivalents based on the carrying amounts in the IFRS financial statements
(4) LTM Adj. EBITDA is defined as operating profit before depreciation, amortization and impairment losses on intangible assets and property, plant and equipment, the PPA depreciation and amortization as well as income / losses from PPA asset disposals and adjusted for certain items which management considers to be exceptional or non-recurring in nature. For a detailed breakdown of EBIT adjustments, please refer to the page "Adjustments to operating profit" (p.13)
p. 10
(1) Adj. EBIT is defined as operating profit before the PPA depreciation and amortization as well as income / losses from PPA asset disposals and adjusted for certain items which management considers to be exceptional or non-recurring in nature. Adj. EBIT margin is defined as adj. EBIT divided by revenue. For a detailed breakdown of EBIT adjustments, please refer to the page "Adjustments to operating profit".
p. 11
(1) Adj. EBIT is defined as operating profit before the PPA depreciation and amortization as well as income / losses from PPA asset disposals and adjusted for certain items which management considers to be exceptional or non-recurring in nature. Adj. EBIT margin is defined as adj. EBIT divided by revenue. For a detailed breakdown of EBIT adjustments, please refer to the page "Adjustments to operating profit"
p. 12
(1) Adj. EBIT is defined as operating profit before the PPA depreciation and amortization as well as income / losses from PPA asset disposals and adjusted for certain items which management considers to be exceptional or non-recurring in nature. Adj. EBIT margin is defined as adj. EBIT divided by revenue. For a detailed breakdown of EBIT adjustments, please refer to the page "Adjustments to operating profit"
p. 14
(1) Comprises contract assets and trade receivables excluding customer prepayment receivables
(2) Comprises contract liabilities excluding liabilities from customer prepayment receivables
p. 15
(1) Adj. EBITDA is defined as operating profit before depreciation, amortization and impairment losses on intangible assets and property, plant and equipment, the PPA depreciation and amortization as well as income / losses from PPA asset disposals and adjusted for certain items which management considers to be exceptional or non-recurring in nature
(2) For a detailed breakdown of EBIT adjustments, please refer to the page "Adjustments to operating profit" (p.13)
(3) Includes change in inventories, trade receivables and contract assets, and changes in trade payables and contract liabilities
(4) Capex defined as payments to acquire property, plant and equipment and intangible assets
(5) Other reconciliation items include changes in provisions, other receivables and liabilities, unless as these are not attributable to the NWC, as well as other cash and non-cash expenses and income of minor importance.
(6) Previous year's value before final purchase price adjustment
p. 17
(1) Adj. EBIT is defined as operating profit before the PPA depreciation and amortization as well as income / losses from PPA asset disposals and adjusted for certain items which management considers to be exceptional or non-recurring in nature. Adj. EBIT margin is defined as adj. EBIT divided by revenue.

Endnotes $(3 / 3)$

p. 23

• The figures have been adjusted. For explanations of the changes for the first nine months of financial year 2023, see 3rd quarter report section 1 General principles (IAS 8) p. 26
  (1) Previous year's value before final purchase price adjustment
  (2) Financial result including dividend
  (3) The disclosure for interest was made on a net basis in the previous year
• The figures have been adjusted. For explanations of the changes for the first nine months of financial year 2023, see 3rd quarter report section 1 General principles (IAS 8)