Spx Technologies, Inc. · NYSE:SPXC

Spx Technologies — Q2 2018 Earnings Presentation

39 slides from Spx Technologies's earnings presentation, Aug 2, 2018

1. Slide 1: Q2 2018 Earnings Presentation

   Q2 2018 Earnings Presentation August 2, 2018

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: Introductory Comments

   Introductory Comments Gene Lowe August 2, 2018

4. Slide 4: Quarter Highlights

   Quarter Highlights Performance and Accomplishments  Closed on CUES acquisition in early June and increased 2018 Adjusted EPS* by ~$0.10  Overall solid first half as we manage higher input costs and tariff impact  Substantial completion of Engineered Solutions reshaping with planned wind-down of H

5. Slide 5: 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

6. Slide 6: 2016-2018 SPX Adjusted EBITDA Performance

   2016-2018 SPX Adjusted EBITDA Performance Adjusted EBITDA Adjusted EBITDA Margin % ~10% ($ MMs) Mid Higher $160s 14% + ~40 bps $175 12% 12% $150 10% $143 10% 9% $125 $100 $126 8% $75 6% $50 4% $25 2% $0 0% 2016A* 2017A* 2018E** 2018 Exit 2016A* 2017A* 2018E** 2018 Exit Rate with Rate with Schonstedt

7. Slide 7: Core Q2 2018 Results

   Core Q2 2018 Results Year-over-Year Analysis ($ millions) Q2 Year-to-Date  Strong performances in HVAC and Core Revenue Detection & Measurement partially Adjusted Operating Income Margin* $687 offset by lower margins in Engineered $652 Solutions $357 $338  Adjusted operating income* increase 8.4%

8. Slide 8: Value Creation Roadmap

   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 deploy  Res

9. Slide 9: Q2 Financial Review

   Q2 Financial Review Scott Sproule August 2, 2018

10. Slide 10: Earnings Per Share

    Earnings Per Share Q2 2018 Adjusted EPS Q2 2018 Q2 2017 GAAP EPS from continuing operations $0.44 ($0.19) South African projects $0.04 $0.61 Heat Transfer ($0.02) ($0.01) Acquisition costs $0.06 N/A Non-service pension items $0.01 $0.02 Adjusted EPS from continuing operations $0.53 $0.43 *Non-GAAP f

11. Slide 11: Core Q2 2018 Results

    Core Q2 2018 Results Year-over-Year Analysis Q2 Core Revenue: Q2 Year-to-Date ($ millions)  5.6% year-over-year increase: Core Revenue $687  2.8% acquisition impact Core Segment Income Margin*  2.5% increase, primarily due to higher HVAC $652 and Detection & Measurment revenues, $357 partially of

12. Slide 12: HVAC Q2 2018 Results

    HVAC Q2 2018 Results Year-over-Year Analysis ($ millions) Q2 Revenue: Q2 Year-to-Date Revenue  16.1% year-over-year increase: Segment Income Margin $267  15.6% organic increase* primarily driven by strong cooling product volumes $140 $230  0.5% currency impact $120 13.2% 13.8% 13.9% Q2 Segment In

13. Slide 13: Detection & Measurement Q2 2018 Results

    Detection & Measurement Q2 2018 Results Year-over-Year Analysis ($ millions) Q2 Revenue: Q2 Year-to-Date Revenue $140  15.7% year-over-year increase: Adjusted Segment Income Margin*  14.9% impact of Schonstedt and CUES $75 $118 acquisitions  0.8% currency impact (primarily UK pound) $65  Flat or

14. Slide 14: Engineered Solutions (Core) Q2 2018 Results

    Engineered Solutions (Core) Q2 2018 Results Year-over-Year Analysis Q2 Year-to-Date ($ millions) Q2 Core Revenue: Core Revenue  (7.0%) year-over-year decline Core Segment Income Margin  Driven by business model shift in Process $304 Cooling $279 $153 $143 Q2 Core Segment Income and Margin:  $3.2m

15. Slide 15: Financial Position & Liquidity Review

    Financial Position & Liquidity Review Scott Sproule August 2, 2018

16. Slide 16: Financial Position

    Financial Position Capital Structure Update Leverage Ratios* ($ millions) Q2 2018 Short-term debt $ 124.1 2.7x 2.2x 2.3x 1.5-2.5x Current maturities of long-term debt 9.2 1.5x Long-term debt 340.6 Total Debt $ 473.9 Less: Cash on hand (66.7) Q1'18 Q2'18 LT Target Net Debt $ 407.2 Bank Net Leverage G

17. Slide 17: 2018 Core Guidance (Changes in Bold)

    2018 Core Guidance (Changes in Bold) Revenue Segment Income Margin  7.0-8.0% organic growth*,or ~$550 million  ~15.5% HVAC (vs 2-4% prior) Detection &  In a range of $325-335 million  22.5-23.5% Measurement  ~8% Engineered Solutions  In a range of $550-560 million (vs 8.0-8.5% prior) (Core)* T

18. Slide 18: Market Outlook & Executive Summary

    Market Outlook & Executive Summary Gene Lowe August 2, 2018

19. Slide 19: Market Commentary

    Market Commentary Market Comments  Cooling: Commercial and Institutional market trends remain solid HVAC  Heating: Favorable preseason signals and strong run rate orders Detection &  Project and run-rate markets remains strong Measurement  Positive market and customer reception to CUES acquisiti

20. Slide 20: Executive Summary

    Executive Summary  Strong overall YTD performance – reaffirming recently increased Core guidance  Balance sheet and liquidity remain solid  Strengthening competitive position through prudent capital allocation  Executing on plans to drive sustainable double-digit earnings growth Note: Core resul

21. Slide 21: Questions

    Questions August 2, 2018

22. Slide 22: Appendix

    Appendix August 2, 2018

23. Slide 23: 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

24. Slide 24: Cash Flow & Liquidity

    Cash Flow & Liquidity ($ in millions) ($ in millions)  Core Free Cash Flow* generation of $12M during Term Debt Repayment Schedule second quarter  Targeting 110% Core Free Cash Flow* Conversion  Projecting $400 million of capacity for capital $298 allocation through 2020  Growth investments in C

25. Slide 25: Core Segment Income Phasing

    Core Segment Income Phasing ($ millions) Q1 2017 Q2 2017 Q3 2017 Q4 2017 GAAP 34.3 20.7 45.4 24.5 38% Exclude: South African (4.4) (26.6) (4.2) (32.8) Projects 31% Exclude: Heat Transfer (0.4) 0.4 (0.3) 0.7 26% Exclude: Contract - - 10.2 - Settlement 21% 21% 22% 22% 19% Core 39.1 46.9 $39.7 56.6 % o

26. Slide 26: 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 long

27. Slide 27: 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 2, 2018 27

28. Slide 28: Full-Year 2017 U.S. GAAP to Adjusted Operating Income

    Full-Year 2017 U.S. GAAP to Adjusted Operating Income ($ millions, except per share values) GAAP Adjustments Adjusted Segment income (1) $ 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

29. Slide 29: Full-Year 2016 U.S. GAAP to Adjusted Operating Income

    Full-Year 2016 U.S. GAAP to Adjusted Operating Income ($ millions, except per share values) 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

30. Slide 30: Q2 2018 GAAP to Adjusted Earnings Per Share Reconciliation

    Q2 2018 GAAP to Adjusted Earnings Per Share U.S. GAAP Reconciliation GAAP Adjustments Adjusted ($ millions, except per share values) (1) Segment income $ 41.0 $ 6.7 $ 47.7 (2) Corporate expense (12.5) 1.4 (11.1) Long-term incentive compensation expense (4.2) — (4.2) (3) Special charges, net (1.6) 1.

31. Slide 31: Q2 2017 GAAP to Adjusted Earnings Per Share Reconciliation

    Q2 2017 GAAP to Adjusted Earnings Per Share Reconciliation ($ millions, except GAAP Adjustments Adjusted per share values) Segment income (1) $ 20.7 $ 26.1 $ 46.8 Corporate expense (2) (11.3) (0.2) (11.5) Pension and postretirement expense (0.1) — (0.1) Long-term incentive compensation expense (3.6)

32. Slide 32: Q2 2018 Adjusted Operating Income U.S. GAAP Reconciliation

    Q2 2018 Adjusted Operating Income U.S. GAAP Reconciliation ($ millions) Three months ended Six months ended June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017 Operating income $ 22.7 $ 5.2 $ 42.0 $ 24.3 Exclude: Losses from South African projects (1) (3.9) (26.6) (9.8) (31.0) Income (loss) from H

33. Slide 33: Engineered Solutions Impact of ASC 606 Adoption

    Engineered Solutions Impact of ASC 606 Adoption ($ millions, except per share values) Three months ended June 30, 2018 Six months ended June 30, 2018 Effect of ASC 606 Under Prior Revenue Effect of ASC 606 Under Prior Revenue (1) Reported Adoption Recognition Guidance Reported Adoption (1) Recogniti

34. Slide 34: Q2 2018 Organic Revenue U.S. GAAP Reconciliation

    Q2 2018 Organic Revenue U.S. GAAP Reconciliation Three months ended June 30, 2018 Detection & HVAC Measurement Net Revenue Growth 16.1 % 15.7 % Exclude: Foreign Currency 0.5 % 0.8 % Exclude: Acquisitions — % 14.9 % Organic Revenue Growth 15.6 % — % August 2, 2018 34

35. Slide 35: Core Revenue and Segment Income U.S. GAAP Reconciliation

    Core Revenue and Segment Income U.S. GAAP Reconciliation CONSOLIDATED SPX: Three months ended Six months ended June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017 Consolidated revenue $ 379.2 $ 349.7 $ 731.1 $ 690.3 Exclude: South African projects 14.7 2.0 29.0 20.2 Exclude: Heat Transfer $ 7.4 $

36. Slide 36: 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

37. Slide 37: Debt Reconciliation

    Debt Reconciliation ($ millions) Q2 2018 Short-term debt $ 124.1 Current maturities of long-term debt 9.2 Long-term debt (1) 340.6 Gross debt 473.9 Less: Purchase card program and extended payables (3.0) Adjusted gross debt 470.9 Less: Cash and equivalents (66.7) Adjusted net debt $ 404.2 1) Exclude

38. Slide 38: Consolidated EBITDA Reconciliation

    Consolidated EBITDA Reconciliation ($ millions) Q3 2017 Q4 2017 Q1 2018 Q2 2018 LTM Net income (loss) from continuing operations attributable to SPX Corporation $ 22.0 $ 60.0 $ 12.4 $ 23.0 common shareholders Income tax provision (benefit) 4.8 (61.9) 4.1 0.4 Interest expense 4.3 4.2 4.3 5.1 Income (

39. Slide 39: U.S. GAAP to Core Free Cash Flow from Continuing Operations

    U.S. GAAP to Core Free Cash Flow from Continuing Operations ($ millions) Q2 2018 Net operating cash flow from continuing operations $ 3.1 Capital expenditures - continuing operations (2.2) Free cash flow from continuing operations 0.9 Adjustment for South African projects 10.7 Core free cash flow fr

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