Spx Technologies, Inc. · NYSE:SPXC

Spx Technologies — Investor Presentation (March 2019)

67 slides from Spx Technologies's investor presentation, March 2019

  1. Slide 1: March 2019

    March 2019

  2. Slide 2: Forward-looking statements and non-GAAP disclaimer

     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

  3. Slide 3: Executive Management

    Executive Management Gene Lowe Scott Sproule President and CEO VP, CFO and Treasurer March 2019 3

  4. Slide 4: SPX Corporation Overview

    SPX Corporation Overview March 2019

  5. Slide 5: Company Overview

    Company Overview SPX Corporation  Headquartered in Charlotte, NC 2018 Adjusted Revenue* by Region  A leading supplier of: 89% 6%  HVAC products,  Detection & Measurement technologies, and  Engineered Solutions 5%  ~$1.4b Adjusted Revenue* in 2018  ~4,000 employees  NYSE Ticker: SPXC *Non-GAA

  6. Slide 6: Executive Highlights

    Executive Highlights  Well-positioned to invest for sustainable double digit earnings growth  Solid FCF* conversion more than 110% of adjusted net income*  ~$500M remaining capital available to deploy through 2020  Solid platform to expand (products, markets, channels)  Completed three propriet

  7. Slide 7: Strong Brands and Attractive Market Dynamics

    Strong Brands and Attractive Market Dynamics 2018 Adjusted Revenue* ~$1.4B ~90% of Revenue from ~70% of Revenue from #1 or #2 Market Position Replacement Sales 90% 70% (1) Management Estimates Management Estimates *Non-GAAP financial measure. Reconciliations from US GAAP financial measures are avail

  8. Slide 8: Key Product Offerings and Financial Profile by Segment

    Key Product Offerings and Financial Profile by Segment  Package cooling units 2018:  Fluid coolers  $582m revenue  Residential and Non-Residential Boilers  Segment income margin 15.5%  Electrical heating products  Location & Inspection 2018:  Fare collection systems  $321m adjusted revenue*

  9. Slide 9: Transformation of SPX – 2015 Through 2018

    Transformation of SPX – 2015 Through 2018 $ Ms (except per share data) 2015 1 20182 Adjusted revenue $1,692 $1,441 % Power generation end markets >30% <5% Adjusted segment income % 8.0% 14.3% Adjusted operating income % 3.7% 10.2% South African projects (Status) 3 of 5 scopes remaining 1 of 5 scopes

  10. Slide 10: SPX Margin Transformation

    SPX Margin Transformation Adjusted Operating Income Margin $1.6B Revenue ~$1.5B 12% 10% ~12.0% ~11.0% 8% 10.2% 6% 8.8% 4% 7.0% 3.7% 5.1% 2% 0% 2015* 2016 2016* 2017* 2018*† 2019E 2020E (as Guidance (as Guidance Targets reported reported 2/25/16) 2/23/17) Adjusted EPS* N/A $1.10 $1.47 $1.75 $2.27 $2.

  11. Slide 11: Value Creation Roadmap

    Value Creation Roadmap 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  Leadership development  Significant capital to deploy

  12. Slide 12: Segment Overview

    Segment Overview March 2019 Ga SPX

  13. Slide 13: HVAC

    HVAC

  14. Slide 14: HVAC Segment Overview

    HVAC Segment Overview 2018 Revenue by Product Revenue Organic CAGR Segment income % $582 2.0-4.0% $570-580 Heating 2018 Cooling $510 $511 Revenue Products Products 15.5- 52% $582m 48% 15.5- 15.7% 16.5% 14.5% 15.5% 16.0% 2018 Revenue by Geography ($ millions) 4% 2016 2017 2018 2019E 2020E Segment GM%

  15. 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

  16. Slide 16: Cooling Products Overview

    0 Cooling Products Overview 2018 Revenue by Product Parts & Service  Cooling products used in non-residential, commercial 10% construction, process cooling and refrigeration applications 2018 Package Cooling Revenue $282m Towers  Well-recognized product brands: Marley and Recold 90%  Well-establi

  17. 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 March 2019 17

  18. Slide 18: Cooling - Key New Products

    Cooling - Key New Products Marley MD Everest Tower Marley LW Fluid Cooler Evaporative Condenser  Launched in Early 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 (refrige

  19. Slide 19: Heating Products Overview

    Heating Products Overview 2018 Revenue by Product  North American businesses with strong brands  Products used in residential and non-residential Electrical Heating markets and sold primarily through distributors Products 2018 35% Boiler Revenue $300m  Demand for boiler systems is seasonal: Syste

  20. 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

  21. Slide 21: Heating – Key New Products

    Heating – Key New Products Growth Oriented Initiatives New Product Development: SVF Commercial Stainless Steel Boiler • Seven new product introductions in the high efficiency boiler category since 2015 AquaBalance Residential • New launches have expanded addressable market Combi Boiler coverage from

  22. Slide 22: Detection & Measurement

    SPX Detection & Measurement

  23. Slide 23: Detection & Measurement Segment Overview

    Detection & Measurement Segment Overview 2018 Revenue by Product Adjusted revenue* Fare Collection Organic CAGR Technologies Adjusted segment income* % 2.0-6.0% 20% $385-395 2018 Location & Revenue Inspection $321 $321m Equipment 50% $260 Communication $226 23.0- 23.0- Technologies 26.0% 25.3% 24.0%

  24. 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

  25. Slide 25: Location & Inspection Overview

    Location & Inspection Overview 2018 Revenue by Product Inspection  A leading global supplier of location & inspection equipment Location 33% for underground infrastructure 67% 2018 Revenue $160m  Continuous new product enhancement and loyal customer base 2018 Revenue by Geography  Key demand driv

  26. Slide 26: Location & Inspection – Key New Products

    Location & Inspection – Key New Products Pipeline Mapper Cable Avoidance Inspection Equipment New Product Introduction Continues to Drive Performance March 2019 26

  27. Slide 27: Communication Technologies Overview

    Communication Technologies Overview 2018 Revenue by Product  TCI : A leading global supplier of spectrum monitoring, Obstruction communication intelligence and geolocation technology Lighting 2018 SMS & 45% Revenue Comm. Int. 55%  Obstruction Lighting: A leading global supplier of Flash Technology

  28. Slide 28: Communication Technologies Products

    Communication Technologies Products SMS & Communications Flash Lighting Systems Marine Obstruction Lighting Intelligence Our Communication Technologies Solutions are Adapting to Serve Evolving and Complex Customer Needs March 2019 28

  29. Slide 29: Transportation

    Transportation  Genfare is 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

  30. Slide 30: Transportation Products: Next Generation Fare Collection

    Transportation 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

  31. Slide 31: Engineered Solutions

    SPX Engineered Solutions

  32. Slide 32: Engineered Solutions Segment Overview

    Engineered Solutions Segment Overview 2018 Revenue by Product Engineered Solutions revenue Segment income % Process Cooling $653 (Project Selectivity 30% and Exit of Heat 2018 Transfer/South Revenue $561 African Ops.) Organic CAGR $537m $537 $530-540 2.0-3.0% Transformers 70% 9-10% 7.9% 6.5% 8.0% 4.

  33. 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

  34. 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

  35. 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-

  36. 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 March 2019 36

  37. Slide 37: Process Cooling Overview

    Process Cooling Overview 2018 Revenue by Product Other  Based in the U.S., a leading global manufacturer of cooling 26% towers and parts & components 2018 Revenue Cooling $163m Towers  Continuous new product enhancements and exceptional 74% quality equipment for more than a century  Large install

  38. 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 March 2019 38

  39. Slide 39: Financial Position & Capital Allocation

    Financial Position & Capital Allocation March 2019

  40. 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

  41. Slide 41: Capital Structure

    Capital Structure Leverage Ratios ($millions) Q3 2018 FYE 2018 Incl. Sabik 2.7x Financing Short-term debt $113.1 $31.9 2.3x Current maturities of long-term debt 9.3 18.0 2.0x 1.5-2.5x 1.9x 1.7x Long-term debt 340.6 331.9 Total Debt $463.0 $381.8 Less: Cash on hand (61.9) (68.8) Net Debt $401.1 $313.

  42. Slide 42: Cash Flow & Liquidity

    Cash Flow & Liquidity ($ in millions)  Targeting more than 110% Free Cash Flow* ($ in millions) Conversion Term Debt Repayment Schedule  Substantial capital available after addressing bank debt and South African Project obligations $298  Projecting ~$500 million of capacity for capital allocation

  43. Slide 43: 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

  44. Slide 44: Recent Inorganic Investments

    Recent Inorganic Investments Global Leader in Inspection Equipment Radiodetection CUES Market Leading Inspection Equipment Inspection Equipment Strengthens Global Leadership in Engineered Specialty Lighting Flash Technology Obstruction Sabik Market Leading Lighting Equipment Marine Lighting Products

  45. Slide 45: Schonstedt Overview

    Schonstedt Overview Company Profile 2017 Sales: $9M XTpc Pipe and Cable Locator Purchase multiple*: <7x post-synergies Description: Manufacturer of magnetic locator products used for locating underground utilities and other buried objects. Acquisition Rationale: • Strengthens Detection & Measurement

  46. 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

  47. Slide 47: Sabik Overview

    Sabik Overview Company Profile 2018 Sales: ~$27M Purchase multiple*: <10x post-synergies Description: Leading manufacturer of marine and obstruction lighting Acquisition Rationale: • Complementary fit with our Flash Technology business • Strengthens aids-to-navigation specialty lighting solutions •

  48. Slide 48: 2016-2020E SPX Adjusted Profit Measures

    2016-2020E SPX Adjusted Profit Measures ADJUSTED SEGMENT INCOME ($M) 4 ADJUSTED EPS 250 $3.00 $207 ~$225 3 $2.58 200 $182 $2.27 Includes $157 Some Capital 2 $1.75 150 $1.47 Deployment 100 1 50 0 0 2016* 2017* 2018* 2019E 2020E 2016* 2017* 2018* 2019E 2020E *Non-GAAP financial measure. Reconciliation

  49. Slide 49: 2016-2020E SPX Adjusted Profit Measures

    2016-2020E SPX Adjusted Profit Measures 175 250 ADJUSTED EBITDA ($M) ADJUSTED FREE CASH FLOW ($M) 190% 155 20% ~$200 135 $123 200 170% CONVERSION % $170 14% 115 $139 13% 15% 150 $126 12% 95 150% 10% $75 $82 > 110% EBITDA % 9% 10% 75 100 120% 122% 130% 55 50 5% 35 107% 110% 15 0 0% -5 90% 2016* 2017*

  50. Slide 50: Financial Targets

    Financial Targets March 2019

  51. Slide 51: Long-Term Financial Targets

    Long-Term Financial Targets 2020 Financial Targets  $1.6B adjusted revenue*  12% adjusted operating income margin*  $2.90 - $3.10 adjusted EPS* excluding amortization  >110% Free cash flow* conversion of adjusted net income *Non-GAAP financial measure. ~$500M of Capital Available to Deploy Throu

  52. Slide 52: Appendix

    Appendix March 2019

  53. Slide 53: 2019 Adjusted EPS Guidance - Key Drivers

    2019 Adjusted EPS Guidance - Key Drivers • Favorable Economic Policy/Infrastructure Stimulus $2.65 • Stronger-Than-Normal Seasonal Heating Demand • Commercial Growth Accelerates • Greater-Than-Anticipated Price-Cost Tailwinds • Accelerated Project-Related Sales $2.58 Base Case • Weaker-Than-Anticipa

  54. Slide 54: 2019 Modeling Considerations

    2019 Modeling Considerations Metric Commentary/Assumptions Corporate costs Low $40Ms Long-term incentive comp $14-15M Restructuring costs $1M Interest cost $21-22M Equity earnings, other $4-5M Tax rate Approximately 23% Capex $15-17M Cash cost of pension + OPEB Approximately $16M D&A Approximately $

  55. Slide 55: Organic Segment Financial Outlook

    Organic Segment Financial Outlook Adjusted Detection & Engineered SPX Total HVAC Measurement* Solutions Adjusted* 2019 Revenue ~$575m ~$390m ~$535m $1.5b Long-term Modeling Target Total Organic Revenue Growth 2% to 4% 2% to 6% 2% to 3% 2% to 4% 2019 Segment Income % 15.5-16.0% 23-24% 8% 15% Long-ter

  56. Slide 56: 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  Eskom is a state-owned South African utility  GE/Alstom and Mitsubishi Hitachi are our Boiler Island Turbin

  57. Slide 57: South African Projects Status

    South African Projects Status Pre-2015 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020+ 2020 2015 2016 2017 2018 2019 2020 Scope 1 Scope 2 2 Scope Substantial Scope 3 Scope 3 Completion by End of Scope 4 2019 Scope 4 Scope 5 Scope 5 Cash Usage*: $33M $49M $24M Modest Cash Usage 2016 2017 2018

  58. Slide 58: FY 2016 Engineered Solutions Adjusted Revenue Reconciliation

    FY 2016 Engineered Solutions Adjusted Revenue, Adjusted Gross Profit and Adjusted Segment Income to U.S. GAAP Reconciliation ($ millions) FY 2016 Engineered Solutions revenue $ 736.4 Exclude: South African projects 83.3 Engineered Solutions adjusted revenue $ 653.1 Engineered Solutions gross profit

  59. Slide 59: FY 2016 Consolidated EBITDA to U.S. GAAP Reconciliation

    FY 2016 Consolidated EBITDA to U.S. GAAP Reconciliation ($ millions) FY 2016 Consolidated Revenue $ 1,472.3 Exclude: South African projects 83.3 Adjusted revenues $ 1,389.0 Adjusted operating income $ 96.7 as a percent of adjusted revenue 7.1% Adjustments: Depreciation & amortization 26.5 Other inco

  60. Slide 60: Segment EBITDA to U.S. GAAP Reconciliation

    FY 2018, FY 2017 and FY 2016 Segment EBITDA to U.S. GAAP Reconciliation ($ millions) HVAC Segment FY 2018 FY 2017 FY 2016 Segment income $ 90.0 $ 74.1 $ 80.2 Depreciation & amortization 5.4 5.5 5.3 HVAC Segment EBITDA $ 95.4 $ 79.6 $ 85.5 Detection & Measurement Segment Adjusted Segment income $ 78.

  61. Slide 61: FY 2018 Adjusted EPS to U.S. GAAP Reconciliation

    FY 2018 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adjustments Adjusted ($ millions) Segment income (1) $ 178.5 $ 24.8 $ 203.3 Corporate expense (2) (48.5) 4.9 (43.6) Long-term incentive compensation expense (15.5) — (15.5) Special charges, net (3) (6.3) 5.0 (1.3) Loss on sale of d

  62. Slide 62: FY 2017 Adjusted EPS to U.S. GAAP Reconciliation

    FY 2017 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adjustments Adjusted ($ millions) Segment income (1) $ 124.9 $ 56.8 $ 181.7 Corporate expense (46.2) (0.9) (47.1) Long-term incentive compensation expense (15.8) — (15.8) Pension service cost (0.3) — (0.3) Special charges, net (2)

  63. Slide 63: FY 2016 Adjusted EPS to U.S. GAAP Reconciliation

    FY 2016 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adjustme nts Adjuste d ($ millions) Segment income (1) $ 142.8 $ 14.5 $ 157.3 Corporate expense (41.7) — (41.7) Pension and postretirement income (expense) (2) (15.4) 16.0 0.6 Long-term incentive compensation expense (13.7) — (13.7

  64. Slide 64: FY 2018 and FY 2017 Adjusted Revenue and Segment Income Reconciliation

    FY 2018 and FY 2017 Adjusted Revenue and Adjusted Segment Income to U.S. GAAP Reconciliation Twelve months ended December 31, 2018 December 31, 2017 ($ millions) Consolidated revenue $ 1,538.6 $ 1,425.8 Exclude: "All Other" operating segments (1) 98.6 93.8 Acquisition accounting adjustment to acquir

  65. Slide 65: FY 2018 and FY 2017 Adjusted Income and EBITDA Reconciliation

    FY 2018 and FY 2017 Adjusted Segment Income, Adjusted Operating Income, Adjusted Net Income and Adjusted EBITDA to U.S. GAAP Reconciliation ` FY 2018 FY 2017 ($ millions) GAAP Revenue $ 1,538.6 $ 1,425.8 Exclude: "All Other" operating segments 98.6 93.8 Exclude: Acquisition accounting adjustment to

  66. Slide 66: FY 2018 and FY 2017 Adjusted Free Cash Flow Reconciliation

    FY 2018 and FY 2017 Adjusted Free Cash Flow from Continuing Operations to U.S. GAAP Reconciliation ($ millions) FY 2018 FY 2017 Net operating cash flow from continuing operations $ 112.9 $ 53.5 Capital expenditures - continuing operations (12.4) (11.0) Free cash flow used in continuing operations 10

  67. Slide 67: FY 2016 Adjusted Free Cash Flow Reconciliation

    FY 2016 Adjusted Free Cash Flow from Continuing Operations to U.S. GAAP Reconciliation ($ millions) FY 2016 Net operating cash flow from continuing operations $ 53.4 Capital expenditures - continuing operations (11.7) Free cash flow used in continuing operations 41.7 Adjustment for South African pro

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