Spx Technologies, Inc. · NYSE:SPXC

Spx Technologies — Investor Presentation (August 2022)

60 slides from Spx Technologies's investor presentation, August 2022

  1. Slide 1: SPX Technologies Investor Presentation

    SPX Technologies Investor Presentation August 2022 SPX Corporation 2019 Investor Event - New York

  2. Slide 2: SPX Technologies Overview

    SPX SPX Technologies Overview

  3. Slide 3: Company Overview

    Company Overview 2021 Revenue by Region†  Headquartered in Charlotte, NC 81% 89% 10% 6%  Focused, market-leading platforms:  HVAC  Detection & Measurement 9%  $1.22B Revenue in 2021  ~3,100 employees  NYSE Ticker: SPXC †Based on management estimates. SPX is a Leading Supplier of HVAC and Dete

  4. Slide 4: Attractiveness of SPX for Long-Term Holders

    Attractiveness of SPX for Long-Term Holders Attractive Core Well positioned key platforms in growth markets Favorable long-term secular trends and business mix; Growth growth initiatives in early innings Cash Flow Strong Free Cash Flow Conversion Business System Consistent repeatable process to driv

  5. Slide 5: Strong Product Offerings and Attractive Market Dynamics

    Strong Product Offerings and Attractive Market Dynamics 2021 2021 REVENUE FROM REPLACEMENT SALES† ADJUSTED REVENUE EBITDA MARGIN* ~70%  Cooling towers  Refrigeration  Process Cooling $752m mid-teens 2020 REVENUE FROM #1 OR #2 MARKET POSITION†  Boilers  Electrical heating ~90%  Location & inspe

  6. Slide 6: Value Creation Framework

    Value Creation Framework Organic Growth SPX Business System • New products • Policy deployment • Channel expansion • Operational excellence • Adjacent markets • Due diligence/integration Inorganic Growth Culture & Values • Focus in HVAC and D&M • Integrity • Significant capital to deploy • Results/a

  7. Slide 7: 2022+ Initiatives

    2022+ Initiatives Revenue & Margin Enhancement - Tools & Drivers Product Technology M&A Channel CI Innovation Lean Geography Software Service Robotics Digital Sourcing AI Loyalty August 2022 7

  8. Slide 8: Building the Products & People that Build the World

    Building the Products & People that Build the World …In What We Make… Our products enable E  Drive energy efficient HVAC solutions  Keep water and gas lines safe and clean  Recycle heat exchange media  Issue annual sustainability report (GRI aligned) Lower Clean Connectivity Clean Safety Emissio

  9. Slide 9: Well-Positioned for Infrastructure Spending

    Well-Positioned for Infrastructure Spending  Water & Wastewater  General Construction (heavy civil, housing)  Public Transit  Renewables (wind)  Telecom (5G), Airports, Ports  Institutional (K-12, gov’t, healthcare)  Infrastructure-centric R&D August 2022 9

  10. Slide 10: SPX 2025

    SPX4 SPX 2025

  11. Slide 11: SPX Strategic Portfolio Transformation Continues

    SPX Strategic Portfolio Transformation Continues Pre-Sale (2020A) 2021A 2025 Targets Revenue $1.56B $1.22B ~$2.0B Gross margin % 31.0% ~450bps 35.4% ~+500bps ~40% Adj. Segment Income % 15.3% ~110bps 16.4% ~+400bps ~20% Adj. Operating Income % 10.9% 11.1% ~+500bps ~16% Long-term Growth % ~1-4% ~2-5%

  12. Slide 12: Focused, Market-Leading Growth Platforms

    Focused, Market-Leading Growth Platforms Detection & Measurement (~$467M)(1) HVAC (~$752M)(1) ~$1.22 Billion(1) Location & Inspection Cooling  Premium engineered niches  Technology / innovation focus Aids to Navigation  ~90% Market Leadership (#1 or #2) Heating  High replacement revenue (~70%) 

  13. Slide 13: SPX Long-Term Targets – Revenue

    SPX Long-Term Targets – Revenue SPX TODAY SPX TARGET 2200.0 ~$2.0 Billion 2100.0 2000.0 1900.0 '16-'22 CAGR 1800.0 1700.0 1600.0 1500.0 ~$1.4 Billion* 1400.0 ~$1.2 Billion 1300.0 Process Cooling ~$1.1 Billion 1200.0 Process Cooling 1100.0 Process Cooling ~7% 1000.0 900.0 HVAC HVAC 800.0 HVAC (~$760m

  14. Slide 14: Segment Overview

    Segment Overview  HVAC  Detection & Measurement

  15. Slide 15: HVAC

    SPX4 HVAC

  16. Slide 16: HVAC Segment Overview

    HVAC Segment Overview 2020 2021 2022E 2021 Revenue by Product Adjusted segment income* % ($ millions) $740 $752 ~$898 Heating 2021 Cooling Products Revenue Products 42% $752m 58% ~14% 14% 14% 2021 Revenue by Geography 3% 2020 2021 2022E Gross Margin% 30% 30% - Segment EBITDA* $114 $116 - 8% 89% *Non

  17. Slide 17: HVAC Cooling Overview

    HVAC Cooling Overview 2021 Revenue by Product  Cooling products used in non-residential, commercial Parts & Service construction, process cooling and refrigeration applications 29% Package 2021 Cooling Revenue Towers &  Well-recognized product brands: Marley and Recold $434m Refrigeration 71%  We

  18. Slide 18: Cooling Product Examples

    Cooling Product Examples Marley NC Cooling Tower Marley MH Element Fluid Cooler Engineered Air Quality High-Value Components  High efficiency  Industrial and process cooling  Custom Fans & Blowers  Gearboxes, motors, drives  Low drift rates  High performance copper coils  Two stage filtration

  19. Slide 19: HVAC Heating Overview

    HVAC Heating Overview 2021 Revenue by Product  North American businesses with strong brands Electric Heating 2021 Products  Large installed base / established spec position 25% Boiler Systems Revenue 75% $318m  Products used in residential and non-residential markets and sold primarily through di

  20. Slide 20: Heating Product Examples

    Heating Product Examples Residential Boilers Commercial Boilers Electrical Heating Products  High efficiency natural gas  High efficiency natural gas  Standard cast iron  Standard cast iron Digital  Unique hybrid design wall heaters  Gas combi boilers Wash-down, corrosion resistant heaters Tre

  21. Slide 21: Detection & Measurement

    SPX4 Detection & Measurement

  22. Slide 22: Detection & Measurement Segment Overview

    Detection & Measurement Segment Overview 2021 Revenue by Product 2020 2021 2022E Adjusted segment income* % ($ millions) $467 ~$530 Aids to Navigation Location & 2021 $387 (“AtoN”), CommTech, Inspection Revenue and Transportation Equipment $467m 45% 55% 21% 20% ~20% 2021 Revenue by Geography 19% 202

  23. Slide 23: Location & Inspection Overview

    Location & Inspection Overview 2021 Revenue by Product  A leading global supplier of location & inspection equipment for underground infrastructure 2021 Location Revenue Inspection 50% 50%  Global distribution / established channels $257m  Integrated hardware and software solutions 2021 Revenue b

  24. Slide 24: Location & Inspection – Key Products

    Location & Inspection – Key Products Location Equipment Inspection Equipment Full Lifecycle Infrastructure Solutions Provider for Location & Inspection Markets August 2022 24

  25. Slide 25: AtoN, CommTech, and Transportation

    AtoN, CommTech, and Transportation 2021 Revenue by Product CommTech  CommTech : A leading global supplier of spectrum monitoring, 22%* communication intelligence and geolocation technologies Transportation 2021 Revenue  Aids to Navigation: Global Leader in terrestrial obstruction lighting, 25% $21

  26. Slide 26: Aids to Navigation – Key End Markets

    Aids to Navigation – Key End Markets Terrestrial Obstruction Marine Obstruction Airfield Ground Lighting Lighting Lighting Global Leader with Full Product Range August 2022 26

  27. Slide 27: CommTech – Key Capabilities & Solutions

    CommTech – Key Capabilities & Solutions Spectrum Monitoring Communications (SMS) Intelligence NEW PIC Spectrum monitoring leader with expanding COMINT presence August 2022 27

  28. Slide 28: Transportation – Next Generation Fare Collection

    Transportation – Next Generation Fare Collection Mobile Legacy Farebox Fast Fare Farebox Fast Fare-e Ticketing Point-of-Sale e-Fare Cloud-Based Infrastructure Software Service and as a Service Support Fare Collection Suite of Products Integrated with Back-End Support; We Believe This is the New Indu

  29. Slide 29: Financial Performance & Capital Allocation

    Financial Performance & Capital Allocation

  30. Slide 30: 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

  31. Slide 31: Financial Position - Capital Structure & Liquidity Update

    Financial Position - Capital Structure & Liquidity Update 1.5-2.5x ($millions) Q1 2022 Q2 2022 Short-term debt $2 $2 1.5x 1.4x Current maturities of long-term debt 13 13 Long-term debt 228 225 0.3x Total Debt $243 $240 -0.9x Less: Cash on hand (269)** (195) Net Debt (Cash) $(26) $45 Q1 2022 Q2 2022

  32. Slide 32: SPX Acquisition Approach

    SPX Acquisition Approach Qualitative Quantitative  Focused on building existing platforms  Revenue transaction size $20-$200 million  Existing markets or close adjacencies (primary focus); opportunistically consider larger targets  Engineered products  Cash ROIC ≥ double digits 3-5 yrs  Attrac

  33. Slide 33: Building Strategic Platforms

    Building Strategic Platforms

  34. Slide 34: SPX Business Value Model

    SPX Business Value Model Disciplined Business System Strategic Acquisition Approach Superior Performance Strategic Organic Sales Growth (Innovation, Product Mgmt.) Organic / Inorganic SPX has acquired Revenue Growth Continuous Improvement ~$365M of revenue (Lean, 80/20) in ~4 years Margin Expansion

  35. Slide 35: Reinvesting Proceeds of Transformers Sale

    Reinvesting Proceeds of Transformers Sale ~$540m* net proceeds CAPITAL ~$320m deployed ~60% SEGMENT Low $40Ms Transformers INCOME † High $20Ms ~60% Recent Acquisitions** ~10% MARGIN High teens % +800 bps ~2% GROWTH ~4%+ ~Double • Net after-tax proceeds received for sale of Transformer Solutions (Oct

  36. Slide 36: Building Strategic Platforms – Location & Inspection

    Building Strategic Platforms – Location & Inspection Location Equipment Inspection Equipment $~100m $~10m* $~10m* $~100m* $~40m* Location & Specialized GPR Location Water & Waste Gas Utility Inspection Ferrous Locators Equipment Water Pipeline Pipeline Transformed ~$100m Equipment Inspection Inspect

  37. Slide 37: Building Strategic Platforms – Aids to Navigation

    Building Strategic Platforms – Aids to Navigation $~40-50m $~25-30m* $~30-40m* ~$18m* Terrestrial Marine Obstruction Airfield Ground and Bolt-on Terrestrial Transformed ~$40-50m Obstruction Lighting Lighting Marine Obstruction Obstruction Obstruction Lighting Lighting Lighting Business into ~$150m G

  38. Slide 38: Building Strategic Platforms – CommTech

    Building Strategic Platforms – CommTech Acquired Feb 2019 ~$40-60m Legacy Business ~$14m* ~$40-50m* ~25-30m* Spectrum Monitoring Tactical Data Links and and COMINT Solutions RF Countermeasures Broad Provider of Spectrum Monitoring and COMINT Solutions Significant Runway to Grow Presence in COMINT *

  39. Slide 39: Building Strategic Platforms – HVAC Cooling

    Building Strategic Platforms – HVAC Cooling $~430m $~15m* $~60-70m* Leading Position in Industrial Custom fans, blowers, Strengthened Industrial Packaged Cooling and Refrigeration Products and critical exhaust Field Erected Towers systems Refrigeration Solutions and Accelerated Growth Strategy in En

  40. Slide 40: Building Strategic Platforms – HVAC Heating

    Building Strategic Platforms – HVAC Heating Acquired Feb 2019 ~$180-200m ~$40m* ~25-30m* Leading Position in High-efficiency Residential Boilers Commercial Boilers Accelerated Growth Strategy in Commercial High Efficiency Boilers Opportunity for Core Consolidation / Product Add-Ons * Approximate ann

  41. Slide 41: Executive Summary

    SPX4 Executive Summary

  42. Slide 42: End Market Exposure

    End Market Exposure ~$1.4 Billion* (~2/3 Replacement Revenue) Gov’t, Regulated Non-Resi Industrial Residential & Utility 27% 19% 13% 41% Water/Wastewater, 8% Light Mfg. / Other, 4% Utility, 13% Hospitality, 2% Data Center / Lab, 3% Healthcare, 4% Gov't Regulated, Institutional, 12% 21% Office / Reta

  43. Slide 43: Executive Summary

    Executive Summary  Balanced business portfolio with attractive and diverse end market drivers  Strong balance sheet, significant capital availability, and cash generation  Effective business system and continued focus on growth accelerators, including inorganic opportunities Significant Value Cre

  44. Slide 44: Appendix

    SPX4 Appendix

  45. Slide 45: 2022 Guidance (Updates in Bold)

    2022 Guidance (Updates in Bold) Revenue Segment Income Margin  $885-$910m (+$25m)  ~14.0% HVAC ($855-$890m prior) (14.0-14.5% prior) Detection &  $520-$540m (+$13m)  19.0%-21.0% Measurement ($500-$535m prior) (19.0-21.0% prior)  $1.41-$1.45B (+$38m)  ~16.0-16.5% Total SPX ($1.36-$1.43B prior)

  46. Slide 46: Modeling Considerations – Full Year 2022

    Modeling Considerations – Full Year 2022 Metric Considerations Corporate expense $48-50m Long-term incentive comp ~$12-13m Restructuring costs $1m Interest cost ~$9m Other income/(expense), and Non-service pension $4-6m benefit/(expense) Tax rate 20-22% Capex ~$15m Cash cost of pension + OPEB $12-13

  47. Slide 47: 2022 Adjusted EPS Guidance - Key Drivers

    2022 Adjusted EPS Guidance - Key Drivers • Favorable economic policy/infrastructure stimulus $2.85 • Accelerated project-related sales • Moderating supply chain challenges and input costs $2.78 Base Case • Worsening supply chain challenges and input costs • Delayed project-related sales $2.70 • Unfa

  48. Slide 48: Adjusted Segment Income Phasing and Reconciliations

    Adjusted Segment Income Phasing and Reconciliations 34% 31% 23% 23% 23% 22% 24% 21% Q1 Q2 Q3 Q4 2020 2021 August 4, 2022 48

  49. Slide 49: Adjusted SPX Results by Quarter

    Adjusted SPX Results by Quarter ($ millions) Q1 Q2 Q3 Q4 2021 Q1 Q2 2022 Segment Income $ 42.3 $ 37.3 $ 32.9 $ 61.4 $ 173.9 $ 30.2 $ 48.1 $ 78.3 Exclude: One time acquisition related costs 0.7 0.9 3.2 0.3 5.1 0.1 0.9 1.0 Exclude: Intangible amortization 4.0 6.5 5.5 5.6 21.6 9.3 7.1 16.4 Adjusted Seg

  50. Slide 50: HVAC Segment Results – 2021-2022

    HVAC Segment Results – 2021-2022 ($ millions) Q1 Q2 Q3 Q4 2021 Q1 Q2 2022 Revenue $175.6 $185.4 $179.3 $211.8 $752.1 $193.1 $218.7 $411.8 GAAP Segment Income 22.3 25.9 23.0 33.0 104.2 15.2 25.6 40.8 Exclude: Acquisition related costs - - - 0.1 0.1 - - - Exclude: Intangible amortization 0.7 0.7 0.6 1

  51. Slide 51: D&M Segment Results – 2021-2022

    D&M Segment Results – 2021-2022 ($ millions) Q1 Q2 Q3 Q4 2021 Q1 Q2 2022 Revenue $111.6 $111.2 $106.4 $138.2 $467.4 $114.0 $135.3 $249.3 GAAP Segment Income 20.0 11.4 9.9 28.4 69.7 15.0 22.5 37.5 Exclude: Acquisition related costs 0.7 0.9 3.2 0.2 5.0 0.1 0.9 1.0 Exclude: Intangible amortization 3.3

  52. Slide 52: Q2 2022 U.S. GAAP to Adjusted EPS Reconciliation

    Q2 2022 U.S. GAAP to Adjusted EPS Reconciliation GAAP Adjustments Adjusted (millions) Segment income (1) $ 48.1 $ 8.0 $ 56.1 Corporate expense (2) (16.4) 5.1 (11.3) Long-term incentive compensation expense (2.5) - (2.5) Special charges, net (0.1) - (0.1) Other operating expense, net (3) (1.9) 1.9 -

  53. Slide 53: Q2 2021 U.S. GAAP to Adjusted EPS Reconciliation

    Q2 2021 U.S. GAAP to Adjusted EPS Reconciliation GAAP Adjustments Adjusted (millions) Segment income (1) $ 37.3 $ 7.4 $ 44.7 Corporate expense (2) (13.6) 1.5 (12.1) Long-term incentive compensation expense (3.3) - (3.3) Special charges, net (0.6) - (0.6) Other operating expense, net (3) (2.7) 2.7 -

  54. Slide 54: U.S. GAAP to Adjusted Operating Income Reconciliation

    U.S. GAAP to Adjusted Operating Income Reconciliation Three months ended Six months ended ($ millions) July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Operating income $ 27.2 $ 17.1 $ 38.6 $ 42.1 Include - TSA Income (1) 0.9 - 1.8 - Exclude: (2) Acquisition related and other costs (5.1) (2.4) (9

  55. Slide 55: Q2 2022 Non-GAAP Reconciliation - Organic Revenue

    Q2 2022 Non-GAAP Reconciliation - Organic Revenue Three months ended July 2, 2022 Detection & HVAC Measurement Consolidated Net Revenue Growth 18.0 % 21.7 % 19.4 % Exclude: Foreign Currency (0.7) % (3.2) % (1.6) % Exclude: Acquisitions 9.8 % 12.5 % 10.8 % Organic Revenue Growth 8.9 % 12.4 % 10.2 % A

  56. Slide 56: U.S. GAAP Adjusted Segment Income Reconciliation

    U.S. GAAP Adjusted Segment Income Reconciliation ($ millions) CONSOLIDATED SPX: Three months ended Six months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Total segment income $ 48.1 $ 37.3 $ 78.3 $ 79.6 (1) Exclude: Acquisition related costs (0.9) (0.9) (1.0) (1.6) Exclude: Amortizatio

  57. Slide 57: U.S. GAAP to Adjusted Segment Income Reconciliations

    U.S. GAAP to Adjusted Segment Income Reconciliations ($ millions) HVAC REPORTABLE SEGMENT: Three months ended July 2, 2022 July 3, 2021 Segment income $ 25.6 $ 25.9 Exclude: Acquisition related costs - - Exclude: Amortization expense (2) (2.7) (0.7) Adjusted segment income $ 28.3 $ 26.6 as a percent

  58. Slide 58: Q2 2022 Debt Reconciliation

    Q2 2022 Debt Reconciliation ($ millions) Q2 2022 Short-term debt $ 2.1 Current maturities of long-term debt 13.0 Long-term debt 224.5 Gross debt 239.6 plus: Adjustments per Senior Credit Agreement(1) (1.2) Adjusted gross debt 238.4 less: cash and equivalents (194.8) Adjusted net debt $ 43.6 (1) Incl

  59. Slide 59: Q2 2022 Consolidated Adjusted EBITDA Reconciliation

    Q2 2022 Consolidated Adjusted EBITDA* Reconciliation 12 Months Ended ($ millions) July 2, 2022** Income from continued operations $ 38.5 Income tax provision 9.7 Interest expense 10.4 Depreciation and amortization 48.1 EBITDA 106.7 Adjustments: (Gains)/Losses on disposition of assets outside the ord

  60. Slide 60: Q2 2022 Adjusted Free Cash Flow Reconciliation

    Q2 2022 Adjusted Free Cash Flow Reconciliation ($ millions) Three Months Ended July 2, 2022 Operating cash used in continuing operations $ (34.9) Capital Expenditures (3.9) Free Cashflow used in continuing Operations (38.8) Adjustment* 44.6 Adjusted free cash flow from continiuing operations $ 5.8 *

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