Slide 1: SPX August 2018
SPX August 2018
Slide 2: Forward-looking statements
Certain statements contained in this presentation that are not historical facts, including any statements as to future market conditions, results of operations, and financial projections, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as am
Slide 3: Executive Management
Executive Management Gene Lowe Scott Sproule President and CEO VP, CFO and Treasurer August 2018 3
Slide 4: SPX Corporation Overview
SPX Corporation Overview August 2018
Slide 5: Company Overview
Company Overview SPX Corporation 2017 Core Revenue* by Region Headquartered in Charlotte, NC A leading supplier of: 87% 8% HVAC products, Detection & Measurement technologies, and Engineered Solutions 5% ~$1.4b Core Revenue* in 2017 ~5,000 employees NYSE Ticker: SPXC *Non-GAAP financ
Slide 6: Executive Highlights
Executive Highlights Well-positioned to invest for sustainable double digit earnings growth Solid FCF* conversion 100% to 110% of Core net income >$400M remaining available capital to deploy through 2020 Solid platform to expand (products, markets, channels) Completed two proprietary acqui
Slide 7: Strong Brands and Attractive Market Dynamics
Strong Brands and Attractive Market Dynamics 2017 Core Revenue* ~$1.4B ~88% of Revenue from 69% of Revenue from #1 or #2 Market Position Replacement Sales 88% 69% (1) Management Estimates Management Estimates *Non-GAAP financial measure. Note: Core results are non-GAAP financial measures that exclud
Slide 8: Key Product Offerings and Financial Profile by Segment
Key Product Offerings and Financial Profile by Segment Package cooling units 2017: Fluid coolers $511m revenue Residential and Non-Residential Boilers Segment income margin 15% Electrical heating products Locators 2017: Fare collection systems $260m revenue Communication technolo
Slide 9: Transformation of SPX (Adjusted) – 2015 Through 2017
Transformation of SPX (Adjusted) – 2015 Through 2017 $ Ms (except per share data) 2015 1 20172 Adjusted revenue* $1,692 $1,397 % Power generation end markets >30% <10% Adjusted segment income* % 8.0% 13.1% Adjusted operating income* % 3.7% 8.6% South African projects (Status) 3 of 5 scopes remaining
Slide 10: SPX Margin Transformation
SPX Margin Transformation Adjusted Operating Income Margin $1.75B 12% Revenues ~$1.40B 10% 11.0% 8% 10.0% 6% 8.6% 4% 7.0% 5.1% 2% 3.7% 0% 2015* 2016 2016* 2017* 2018** 2020** (as Guidance (as (as Guidance Targets reported reported reported 2/25/16) 2/23/17) 2/21/18) Adjusted EPS* N/A $1.10 $1.47 $1.
Slide 11: Updated Value Creation Roadmap
Updated Value Creation Roadmap Organic Growth SPX Business System New products Policy deployment New channels Operational excellence Adjacent markets Due diligence/integration Inorganic Growth Culture & Values Focus in HVAC and D&M Leadership development Significant capital to depl
Slide 12: Segment Overview
Segment Overview August 2018
Slide 13: HVAC
HVAC
Slide 14: HVAC Segment Overview
HVAC Segment Overview 2017 Revenue by Product Cooling Products Heating Revenue $511m 49% Products Segment income % Organic CAGR 51% 2.0-4.0% 7.0-8.0% $510 $511 2017 Revenue by Geography 100 bps 15.7% 15.0-16.0% 14.5% increase 5% 8% ($ millions) 2016 2017 2018E 2020E 87% Segment GM% 34% 32% + ~100 bp
Slide 15: Strategic Growth Initiatives
Strategic Growth Initiatives New Product Commercialize NC Everest (Cooling) Development Grow Evergreen (high-efficiency boiler) Adjacent Expand refrigeration – Evaporative Condenser; LS Fluid Cooler Markets Grow combi-boilers (AquabalanceTM) Expand geographic and vertical market channels C
Slide 16: Cooling Products Overview
0 Cooling Products Overview 2017 Revenue Breakdown Package Cooling products used in non-residential, commercial Cooling construction, process cooling and refrigeration applications Towers Parts and $251m 86% Service Well-recognized product brands: Marley and Recold 14% Well-established sales c
Slide 17: Cooling Product Examples
Cooling Product Examples Marley NC Cooling Tower Recold Fluid Cooler High efficiency High performance design Low drift rates Low cost of ownership Quiet by design Long-life construction Strong Product Portfolio of Cooling Technologies with Opportunity for Expansion August 2018 17
Slide 18: Cooling - Key New Products
Cooling - Key New Products Marley MD Everest Tower Marley LW Fluid Cooler Evaporative Condenser Launched in August 2018 for larger Launched in Q4 2016 Launched in 2015 applications High efficiency, low height fluid Adjacent product and market 85% more cooling capacity than cooler (refrig
Slide 19: Heating Products Overview
Heating Products Overview North American businesses with strong brands 2017 Revenue Breakdown Products used in residential and non-residential markets and sold primarily through distributors Boiler Systems Demand for boiler systems is seasonal: 65% $260m Electrical Concentrated in the fourth
Slide 20: Heating Product Examples
Heating Product Examples Residential Boilers Commercial Boilers Electrical Heating Products High efficiency natural gas High efficiency natural gas Digital Standard cast iron Standard cast iron wall heaters Unique hybrid design Gas Combi boilers Wash-down, corrosion resistant heaters Alu
Slide 21: Heating – Key New Products
Heating – Key New Products Growth Oriented Initiatives Weil-McLain(1) New Product Development: Evergreen® Condensing Boiler Evergreen® floor standing/wall mount modulating condensing boiler, launched in Q3 2015: 95% efficiency meets Department of Energy regulations and achieves Energy Star ratin
Slide 22: Detection & Measurement
SPX Detection & Measurement
Slide 23: Detection & Measurement Segment Overview
Detection & Measurement Segment Overview 2017 Revenue by Product Organic CAGR Revenue 2.0-6.0% Segment income % $325-335 $260 $226 23.0 -25.0% 2017 Revenue by Geography ~24.4% 22.5-23.5% 23% 20.0% ($ millions) 2016 2017 2018E 2020E 8% 69% Segment GM% 46% 46% Moderate Decline Segment EBITDA * $49 $67
Slide 24: Strategic Growth Initiatives
Strategic Growth Initiatives New Product Scale new GPS-enabled locator Development Grow fare-collection solutions platform Adjacent Build out geographic and vertical channels Markets New LED Red lighting solution Upgrade Aged bus fleet (fare collection) Installed Base Communication techn
Slide 25: Radiodetection Overview
Radiodetection Overview 2017 Revenue by Product Based in the U.K., a leading global supplier of underground cable and pipe locators, and inspection equipment Continuous new product enhancement and loyal customer base 2017 Revenue by Geography Key demand drivers: 38% Global infrastructure gro
Slide 26: Radiodetection – Key New Products
Radiodetection – Key New Products Pipeline Mapper Cable Avoidance Video Inspection New Product Introduction Continues to Drive Radiodetection’s Performance August 2018 26
Slide 27: Communication Technologies Overview
Communication Technologies Overview 2017 Revenue by Product Obstruction TCI : A leading global supplier of spectrum monitoring, Lighting communication intelligence and geolocation technology 59% SMS & $94m Comm. Int. Flash Technology: A leading North American supplier of 41% obstruction lighting
Slide 28: Communication Technologies Products
Communication Technologies Products SMS & Communications Intelligence Flash Lighting Systems Our Communication Technologies Solutions are Adapting to Serve Evolving and Complex Customer Needs August 2018 28
Slide 29: Genfare
Genfare A leading North American supplier in fare collection: Historical market position concentrated on fare box installations Rapidly evolving technology in the market has driven a transformation in our business: Evolved from “farebox supplier” to “fare collection system provider” Invest
Slide 30: Genfare Products: Next Generation Fare Collection
Genfare Products: Next Generation Fare Collection Legacy Farebox Fast Fare Farebox Fast Fare-e e-Fare Mobile Ticketing Point-of-Sale Cloud-Based Infrastructure Software as Service and a Service Support Fare Collection Suite of Products Integrated with Back-End Support; We Believe This is The New Ind
Slide 31: Engineered Solutions
SPX Engineered Solutions
Slide 32: Engineered Solutions (Adjusted) Segment Overview
Engineered Solutions (Adjusted*) Segment Overview 2017 Adjusted Revenue by Product Engineered Solutions (Adjusted) Revenue* Transformers Adjusted income %* 58% $653 (Project Process $625m Selectivity and Cooling $625 Exit of Heat Organic CAGR 42% Transfer) 2.0-3.0% $550-560 ~8.0% 9.0-10.0% 7.2% 2017
Slide 33: Strategic Growth Initiatives
Strategic Growth Initiatives New Product Broaden component offerings Development Commercialize proprietary load tap changer (LTC) Evolve Business Expand service and components Model More selective on process cooling projects Expand Market Large voltage/EHV transformers Presence Supply to
Slide 34: Engineered Solutions – Transformers Overview
Engineered Solutions – Transformers Overview Transformer Business SPX is a leading supplier of power transformers into North America with strong brand equity Customers include: Public and private electric utilities Independent power producers Large industrial sites Two primary manufactur
Slide 35: Transformers Overview - North American Market
Transformers Overview - North American Market Demand largely driven by replacement of aging installed base: Average age of installed base is ~40 years Electricity demand has been flat over the past decade, however new T&D construction continues driving demand for power transformers: Utility-
Slide 36: Transformer Product and Service Examples
Transformer Product and Service Examples Transformer Service Large Power (High Voltage) Transformer Leading North American Supplier of Medium Power Transformers August 2018 36
Slide 37: Process Cooling Overview
Process Cooling Overview 2017 Revenue by Product Based in the U.S., a leading global manufacturer of cooling Cooling Towers towers and parts & components 76% $264m Other Continuous new product enhancements and exceptional 24% quality equipment for more than a century Large installed base in U.
Slide 38: Process Cooling – Key New Products
Process Cooling – Key New Products Gear Reducer Air Flow Components Heat Transfer Media TBD Aftermarket Service and Components is Focus Area of New Product Initiatives August 2018 38
Slide 39: Financial Position & Capital Allocation
Financial Position & Capital Allocation August 2018
Slide 40: Capital Allocation Discipline
Capital Allocation Discipline Methodology Expected Outcome 1) Utilize strategic planning process to evaluate Quantify projected future cash flows and future revenue and earnings growth estimate total company valuation 2) Maintain target capital structure Net Debt to EBITDA(1) target range: 1.5x
Slide 41: Capital Structure
Capital Structure Leverage Ratios* ($millions) Q1 2018 Q2 2018 2.7x Short-term debt $6.8 $124.1 2.3x 2.2x Current maturities of long-term debt 4.9 9.2 1.5-2.5x Long-term debt 344.9 340.6 1.5x Total Debt $356.6 $473.9 Less: Cash on hand (103.7) (66.7) Net Debt $252.9 $407.2 Q1 2018 Q2 2018 LT Target
Slide 42: Cash Flow & Liquidity
Cash Flow & Liquidity ($ in millions) ($ in millions) Targeting 110% Core Free Cash Flow* Conversion Term Debt Repayment Schedule Projecting >$400 million remaining of capacity for capital allocation through 2020 Growth investments in Core businesses $298 Active M&A pipeline Return of capi
Slide 43: SPX Acquisition Approach
SPX Acquisition Approach Qualitative Quantitative Focused on building existing platforms Revenue transaction size $20-$100 million Existing markets or close adjacencies (primary focus); opportunistically consider larger targets Engineered products Cash ROIC ≥ double digits 3-5 yrs Attrac
Slide 44: Strategic Impact of Acquisitions
Strategic Impact of Acquisitions Strengthens Global Leadership in Location Equipment Radiodetection Global Leader in Locators Schonstedt Market Leading Magnetometer Products Global Leader in Inspection Equipment Radiodetection Inspection Equipment CUES Market Leading Inspection Equipment August 2018
Slide 45: Schonstedt Overview
Schonstedt Overview Company Profile 2017 Sales: $9M Purchase multiple*: <7x post-synergies XTpc Pipe and Cable Locator Description: Manufacturer of magnetic locator products used for locating underground utilities and other buried objects. Acquisition Rationale: • Strengthens Detection & Measurement
Slide 46: CUES Overview
CUES Overview Company Profile CUES Digital Universal Camera 2017 Sales: ~$86M Purchase multiple*: <10x post-synergies Description: Leading manufacturer of inspection and rehabilitation equipment. Acquisition Rationale: Mobile Inspection Units CUES SPiDER Scanner • Strengthens Detection & Measurement
Slide 47: Impact of Acquisitions on Segments – 2018 Pro Forma Segment EBITDA
Impact of Acquisitions on Segments – 2018 Pro Forma* Radiodetection Segment EBITDA (Core)** $100 $80 $60 $40 $20 $0 HVAC Detection & Engineered Measurement Solutions EBITDA Margin ~17% ~24% ~10% Note: Core results are non-GAAP financial measures that exclude the results of the South African projects
Slide 48: 2016-2018 SPX Adjusted EBITDA Performance
2016-2018 SPX Adjusted EBITDA Performance Adjusted EBITDA Adjusted EBITDA Margin % ~10% ($ MMs) Mid Higher 14% + ~40 bps $175 $160s 12% 12% $150 10% $143 10% 9% $125 $100 8% $126 $75 6% $50 4% $25 2% $0 0% 2016A* 2017A* 2018E** 2018 Exit 2016A* 2017A* 2018E** 2018 Exit Rate with Rate with Schonstedt
Slide 49: Financial Targets
Financial Targets August 2018
Slide 50: Long-Term Financial Targets
Long-Term Financial Targets (all targets are Non-GAAP financial measures) 2020 Financial Targets $1.7 - $1.8B Core Revenue 10.5-11.5% Adjusted Operating Income Margin $2.65 - $2.90 Adjusted EPS $2.90 - $3.10 Adjusted EPS excluding M&A amortization 100-110% FCF Conversion of Adjusted Net In
Slide 51: Appendix
Appendix August 2018
Slide 52: SPX Key Value Creation Accomplishments
SPX Key Value Creation Accomplishments Growing in Adjacent Markets Enhancing Product Offerings Driving Operational Initiatives New evaporative condenser product New RD8100 GPS-enabled cable and Transformer business achieved long- (industrial refrigeration) pipe locator term margin target of 10
Slide 53: 2018 Adjusted EPS Guidance - Key Drivers
2018 Adjusted EPS* Guidance - Key Drivers • Favorable Economic Policy/Infrastructure Stimulus • Timing of project revenues $2.25 • Lower Interest Rates • Colder Winter Weather • Commercial Growth Accelerates $2.20 Base Case • Commercial Growth Decelerates • Commodity Inflation/Pass-Throughs • Warmer
Slide 54: 2018 Modeling Considerations
2018 Modeling Considerations Metric Commentary/Assumptions Corporate costs Low $40Ms Long-term incentive comp $16-17M Restructuring costs $1-2M Interest cost $19-20M, including $2.5M related to acquisition financing Equity earnings, other $2M Tax rate 22%-23% effective rate 2H 2018 ; maintaining lon
Slide 55: Organic Segment Financial Targets (Adjusted)
Organic Segment Financial Targets (Adjusted*) ($ millions) Detection & Engineered Solutions SPX Total HVAC Measurement (Adjusted) (Adjusted) 2017 Revenue $511 $260 $625 $1,397 Long-term Modeling Target Organic Revenue* CAGR +2% to +4% +2% to +6% +2% to +3% +2% to +3% Business Model Change - - ~(5%)
Slide 56: Engineered Solutions Business Model Shift – Pro Forma Revenues
Engineered Solutions Business Model Shift – Pro Forma Revenues $60-80m Business model Baseline Baseline change growth Baseline Baseline of 2-3% $540-560m 2017 2018 Future Note: Pro Forma for illustrative purposes only. Based on management estimates. Growth to Resume in 2019 August 2018 56
Slide 57: South African Projects Overview
South African Projects Overview Medupi & Kusile Power Stations Two mega-projects sites: Twelve 800 mega-watt coal-fired plants (six at each project site) Total project value of ~$1.3B (>85% complete) Eskom is a state-owned South African utility GE/Alstom and Mitsubishi Hitachi are our Boil
Slide 58: South African Projects Status
South African Projects Status Pre-2015 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020+ 2020 Scope 1 Scope 2 Scope 3 Scope 4 Substantial Completion Scope 5 by End of 2019 $25-$30M Cash Usage*: $33M $49M 2016 2017 2018 through Completion *Net of U.S. tax benefits related to South Africa for 20
Slide 59: Full-Year Gross Margins to U.S. GAAP Reconciliation
Full-Year Gross Margins to U.S. GAAP Reconciliation Engineered Solutions segment FYE 2017 FYE 2016 Engineered Solutions gross profit 47.7 97.7 as a percent of revenues 7% 13% (1) Exclude: South African projects (59.1) (5.8) Engineered Solutions (Adjusted) Gross profit 106.8 103.5 as a percent of Adj
Slide 60: Full-Year EBITDA to U.S. GAAP Reconciliation
Full-Year EBITDA to U.S. GAAP Reconciliation FYE 2017 FYE 2016 HVAC Segment Segment income $ 74.1 $ 80.2 Adjustments: Depreciation & amortization 5.5 5.3 HVAC Segment EBITDA $ 79.6 $ 85.5 Detection & Measurement segment Segment income $ 63.4 $ 45.3 Adjustments: Depreciation & amortization 4.0 3.4 De
Slide 61: Full-Year Adjusted EBITDA to U.S. GAAP Reconciliation
Full-Year Adjusted EBITDA to U.S. GAAP Reconciliation ($ millions) FY 2017 FY 2016 Consolidated revenue $ 1,425.8 $ 1,472.3 Exclude: South African projects (1) 29.1 83.3 Adjusted revenues $ 1,396.7 $ 1,389.0 Adjusted operating income (1) (2) $ 119.1 $ 96.2 Adjustments: Depreciation & amortization 25
Slide 62: Engineered Solutions (Adjusted) Segment Income Reconciliation
Engineered Solutions (Adjusted*) Segment Income to U.S. GAAP Reconciliation ENGINEERED SOLUTIONS SEGMENT: (as reported in $ millions) FY 2017 FY 2016 Engineered Solutions revenue $ 654.5 $ 736.4 Exclude: South African projects 29.1 83.3 Engineered Solutions (Adjusted) revenue $ 625.4 $ 653.1 Enginee
Slide 63: Full-Year 2017 U.S. GAAP to Adjusted Operating Income
Full-Year 2017 U.S. GAAP to Adjusted Operating Income ($ millions) GAAP Adjustments Adjusted (1) Segment income $ 124.9 $ 57.8 $ 182.7 Corporate expense (46.2) — (46.2) Pension and postretirement (expense) (0.3) — (0.3) Long-term incentive compensation expense (15.8) — (15.8) (2) Special charges, ne
Slide 64: Full-Year 2016 U.S. GAAP to Adjusted Operating Income
Full-Year 2016 U.S. GAAP to Adjusted Operating Income ($ millions) GAAP Adjustments Adjusted (1) Segment income $ 142.8 $ 14.5 $ 157.3 Corporate expense (41.7) — (41.7) Pension and postretirement (expense) (0.4) — (0.4) Long-term incentive compensation expense (13.7) — (13.7) Special charges, net (5