Spx Technologies, Inc. · NYSE:SPXC

Spx Technologies — Investor Presentation (May 2017)

47 slides from Spx Technologies's investor presentation, May 2017

1. Slide 1: May 2017

   May 2017

2. 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

3. Slide 3: SPX Corporation Overview

   SPX Corporation Overview May 2017

4. Slide 4: Company Overview

   Company Overview SPX Corporation  Headquartered in Charlotte, NC 2016 Core Revenue* by Region  A leading supplier of: 88% 7%  HVAC products,  Detection & Measurement technologies, and  Engineered Solutions 5%  ~$1.4b Core Revenue* in 2016  ~5,000 employees  NYSE Ticker: SPXC *Non-GAAP financ

5. Slide 5: Executive Highlights

   Executive Highlights  Commited to double digit adjusted EPS* growth – ~2/3 organic  Executing plan to drive 350 basis points of expansion in adjusted operating income* margin by 2020  Solid FCF* conversion > 100% of adjusted net income*  Solid platform to expand (products, markets, channels) *No

6. Slide 6: Strong Brands and Attractive Market Dynamics

   Strong Brands and Attractive Market Dynamics 2016 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

7. Slide 7: Key Product Offerings and Financial Profile by Segment

   Key Product Offerings and Financial Profile by Segment  Package cooling units 2016:  Fluid coolers  $510m revenue  Residential and Non-Residential Boilers  Segment income margin 16%  Electrical heating products  Locators 2016:  Fare collection systems  $226m revenue  Communication technolo

8. Slide 8: SPX "Year 1" Key Value Creation Accomplishments

   SPX “Year 1” Key Value Creation Accomplishments Delivering Operational Excellence Building Large Project Backlog Driving Operational Initiatives  Driving year-over-year margin  Awarded two of largest jobs in  Transformer business achieved long- expansion several years term margin target of 10% Re

9. Slide 9: SPX Margin Transformation

   SPX Margin Transformation Adjusted Operating Income Margin* $1.6B 12% Revenues $1.35B 10% 8% 6% 10-11% 8.5% 4% 7.0% 3.7% 5.1% 2% 0% 2015 2016 2016 2017 2020 (as Guidance (as Guidance Targets reported reported 2/25/16) 2/23/17) Adjusted EPS* N/A $1.10 $1.47 $1.63 $2.25 - $2.50 *Non-GAAP financial mea

10. Slide 10: 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

11. Slide 11: Segment Overview

    Segment Overview May 2017 Ga SPX

12. Slide 12: HVAC

    HVAC

13. Slide 13: HVAC Segment Overview

    HVAC Segment Overview 2016 Revenue by Product ($ millions) Revenue Segment income % Cooling Products Heating Organic $510m 48% Products “At lower end CAGR 3-4% 52% of LT range of $510 2-4%” ~16.0% 16-17% 2016 Revenue by Geography 15.7% 4% 9% 2016 2017E 2020 87% Strong Product Brands and Leading Mark

14. Slide 14: 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

15. Slide 15: Cooling Products Overview

    0 Cooling Products Overview 2016 Revenue Breakdown  Cooling products used in non-residential, commercial Package Cooling construction, process cooling and refrigeration applications Towers 87% $247m Parts and  Well-recognized product brands: Marley and Recold Service 13%  Well-established sales c

16. Slide 16: 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 May 2017 16

17. Slide 17: Cooling - Key New Products

    Cooling - Key New Products Marley NC Everest Tower Marley LW Fluid Cooler Evaporative Condenser  Launched in 2016  Launched in Q4 2016  Launched in 2015  50% more cooling capacity than  High efficiency, low height fluid  Adjacent product and market any other pre-assembled tower cooler (refrige

18. Slide 18: Heating Products Overview

    Heating Products Overview  North American businesses with strong brands 2016 Revenue Breakdown  Products used in residential and non-residential markets and sold primarily through distributors Boiler Systems  Demand for boiler systems is seasonal: 67% $263m Electrical  Concentrated in the fourth

19. Slide 19: 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 Wash-down, corrosion resistant heaters Aluminum convection hea

20. Slide 20: 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

21. Slide 21: Detection & Measurement

    SPX Detection & Measurement

22. Slide 22: Detection & Measurement Segment Overview

    Detection & Measurement Segment Overview 2016 Revenue by Product ($ millions) Revenue $226m Segment income % Organic “Middle of LT CAGR 3-6% range 2-6%” $226 2016 Revenue by Geography 22 -24% 21% 21.0%- 20.0% 22.0% 12% 67% 2016 2017E 2020 Targeting 3% to 6% Annual Organic Revenue Growth and 100 to 3

23. Slide 23: 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

24. Slide 24: Radiodetection Overview

    Radiodetection Overview 2016 Revenue by Product  Based in the U.K., a leading global supplier of underground Locators 75% cable and pipe locators, and inspection equipment Inspection ~$96m & Other 25%  Continuous new product enhancement and loyal customer base 2016 Revenue by Geography  Key deman

25. Slide 25: Radiodetection – Key New Products

    Radiodetection – Key New Products Pipeline Mapper Cable Avoidance Video Inspection New Product Introduction Continues to Drive Radiodetection’s Performance May 2017 25

26. Slide 26: Communication Technologies Overview

    Communication Technologies Overview 2016 Revenue by Product Obstruction  TCI : A leading global supplier of spectrum monitoring, Lighting communication intelligence and geolocation technology 58% SMS & $77m Comm. Int.  Flash Technology: A leading North American supplier of 42% obstruction lighting

27. Slide 27: 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 May 2017 27

28. Slide 28: 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

29. Slide 29: 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

30. Slide 30: Engineered Solutions

    SPX Engineered Solutions

31. Slide 31: Engineered Solutions (Core) Segment Overview

    Engineered Solutions (Core) Segment Overview ($ millions) Engineered Solutions (Core) Revenue* Core income %* ”Revenue down mid- single digits” (Project Organic CAGR 2016 Revenue* by Geography 2-3% 4% Selectivity) 8-10% ~6-7% 4.9% 1% 95% 2016 2017E 2017E Adj 2020E *Non-GAAP financial measure. Note:

32. Slide 32: Strategic Growth Initiatives

    Strategic Growth Initiatives New Product  Commercialize proprietary load tap changer (LTC) Development  Broaden component offerings Evolve Business  Expand service and components Model  More selective on process cooling projects Expand Market  Large voltage/EHV transformers Presence  Supply to

33. Slide 33: 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

34. Slide 34: 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-

35. Slide 35: Transformer Product and Service Examples

    Transformer Product and Service Examples Oil Processing Truck Large Power (High Voltage) Transformer Leading North American Supplier of Medium Power Transformers May 2017 35

36. Slide 36: Process Cooling Overview

    Process Cooling Overview 2016 Revenue by Product  Based in the U.S., a leading global manufacturer of cooling Cooling Towers towers and air cooled heat exchangers 80% $281m  Continuous new product enhancements and exception Other quality equipment for more than a century 20%  Large installed base

37. Slide 37: 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 May 2017 37

38. Slide 38: Financial Position & Capital Allocation

    Financial Position & Capital Allocation May 2017

39. Slide 39: 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

40. Slide 40: Financial Position

    Financial Position Capital Structure Update Leverage Ratios* ($ millions) Q1 2017 Short-term debt $ 17.1 2.4x 2.5x 2.1x 2.2x 1.5-2.5x Current maturities of long-term debt 18.0 Long-term debt 319.4 Gross Debt $ 354.5 Less: Cash on hand (92.7) Q4'16 Q1'17 LT Target Net Debt $ 261.8 Bank Net Leverage G

41. Slide 41: Financial Position: Cash Flow & Liquidity

    Financial Position Cash Flow & Liquidity ($ in millions)  Core Free Cash Flow* of approximately $16.5 million during first quarter; historically a cash use Term Debt Repayment Schedule ($ in millions) quarter  Projecting $400 million of capacity for capital allocation through 2020  Growth investm

42. Slide 42: SPX Acquisition Approach

    SPX Acquisition Approach Qualitative Quantitative  Focused on building existing platforms  Transaction size $10-$100 million (primary  Existing markets or close adjacencies focus)  Engineered products  ROIC ≥ double digits 3-5 yrs  Attractive growth opportunities  Accretive to adjusted EPS in

43. Slide 43: Appendix

    Appendix May 2017

44. Slide 44: 2017 Core Guidance

    2017 Core Guidance Segment Income Revenue Margin HVAC  Organic growth* at lower end of LT range of 2-4%  Approximately 16% Detection &  Organic growth* towards middle of LT range of 2-6%  21-22% Measurement  Segment revenue decline in mid-single digits % Engineered Solutions  Flat Transformer

45. Slide 45: 2017 Adjusted EPS Guidance - Key Drivers

    2017 Adjusted EPS* Guidance - Key Drivers • Accelerated Tax Reform/Favorable Economic Policy $1.70 • Lower Interest Rates • Colder Winter Weather • Commercial Growth Accelerates $1.63 Base Case • Commercial Growth Decelerates • Commodity Inflation/Pass-Throughs • Warmer Winter Weather $1.55 • Unfavo

46. Slide 46: Long-Term Financial Targets

    Long-Term Financial Targets 2016 2020 Targets  $1.4B Core Revenue*  $1.5 - $1.7B Core Revenue*  7% Adjusted Operating Income  10-11% Adjusted Operating Margin* Income Margin*  $1.47 Adjusted EPS*  $2.25 - $2.50 Adjusted EPS*  $75 million Core FCF*  >100% FCF* Conversion of Adjusted Net Incom

47. Slide 47: South African Projects Overview

    South African Projects Overview Medupi & Kusile Power Stations  Medupi and Kusile are the two mega-projects:  Twelve 800 mega-watt coal-fired plants (six at each project site)  Eskom is a state-owned South African utility  Alstom and Mitsubishi Hitachi are the primary contractors Boiler Island T

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