Slide 1: Q2 2020 Earnings Presentation
Q2 2020 Earnings Presentation July 30, 2020 SPX Corporation 2020 Investor Event - New York
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, products introductions, and financial projections, are forward-looking statements within the meaning of Section 27A of the Securities Act
Slide 3: Introductory Comments
Introductory Comments Gene Lowe
Slide 4: Q2 Performance Highlights
Q2 Performance Highlights Strong execution and performance in Q2 and 1H’20, despite COVID-19 headwinds Stable results driven by diverse end markets and strong operating culture Solid balance sheet and liquidity enable continued focus on growth initiatives Successfully Managing Through a Challe
Slide 5: Adjusted Q2 2020 Year-Over-Year Summary
Adjusted Q2 2020 Year-Over-Year Summary ($ millions) Q2 Year-to-Date Continued strength in Engineered $737 $723 Solutions; solid results in HVAC, Adjusted Revenue Adjusted Operating Income Margin despite COVID-19 headwinds $372 $371 Adjusted Operating Income and 11.0% 11.2% 10.0% margin modestly
Slide 6: What Has Changed in 90 Days?
What Has Changed in 90 Days? HVAC generally ahead of expectations ‒ International cooling stronger/Americas softer, but overall strong execution ‒ Solid pre-season orders for heating Detection & Measurement segment exhibiting diverse end market drivers ‒ Locators down year-on-year, but notably i
Slide 7: COVID-19 – Status Update and Actions
COVID-19 – Status Update and Actions Employee safety remains top priority ‒ Continued and tightened established protocols (e.g., PPE usage, enhanced cleaning and sanitization, etc.) ‒ Processes helping to successfully manage through pandemic Facilities continue to be operational ‒ Modest interru
Slide 8: 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 • Employee development • Significant capital to deploy
Slide 9: Q2 Financial Review
Q2 Financial Review Scott Sproule
Slide 10: Adjusted Earnings Per Share
Adjusted Earnings Per Share Q2 2020 Q2 2019 GAAP EPS from continuing operations $0.62 $0.43 South Africa and Heat Transfer $0.07 $0.19 Acquisition-related - $0.02 Non-service pension items & other* ($0.09) ($0.01) Amortization $0.04 $0.04 Adjusted EPS from continuing operations $0.64 $0.67 Solid Per
Slide 11: Adjusted Q2 2020 Year-Over-Year Results
Adjusted Q2 2020 Year-Over-Year Results ($ millions) Q2 adjusted Revenue: Q2 Year-to-Date (0.1%) year-over-year decrease: $737 Adjusted Revenue $723 3.6% acquisition impact Adjusted Segment Income Margin (3.3%) organic decrease*primarily due to Detection & Measurement volumes $372 $371 (0.4%
Slide 12: HVAC Q2 2020 Year-Over-Year Results
HVAC Q2 2020 Year-Over-Year Results ($ millions) Q2 Revenue: Q2 Year-to-Date 1.1% year-over-year increase: Revenue 10.4% impact from acquisitions $259 Adjusted Segment Income Margin* $251 (8.9%) organic decrease* due to lower heating volumes, including the pandemic impact, partially offset by
Slide 13: Detection & Measurement Q2 2020 Year-Over-Year Results
Detection & Measurement Q2 2020 Year-Over-Year Results ($ millions) Q2 Revenue: Q2 Year-to-Date (9.4%) year-over-year decrease: Revenue (8.9%) organic decrease* due to decreased Adjusted Segment Income Margin* $187 $184 Locator sales and delays of project sales associated with the pandemic Loc
Slide 14: Engineered Solutions Q2 2020 Year-Over-Year Results
Engineered Solutions Q2 2020 Year-Over-Year Results ($ millions) Q2 Revenue: Q2 Year-to-Date 5.6% year-over-year increase: $302 Revenue $277 5.9% organic increase* due to improved Segment Income Margin volumes and more favorable pricing in Transformers, partially offset by lower Process Cooling
Slide 15: Financial Position and Liquidity Review
Financial Position and Liquidity Review Scott Sproule
Slide 16: Financial Position - Capital Structure Update
Financial Position - Capital Structure Update Leverage Ratios* 2.3x 2.4x ($millions) Q1 2020 Q2 2020 1.5-2.5x Short-term debt $260.3 $266.8 Current maturities of long-term debt 2.6 4.1 1.6x 1.5x Long-term debt 248.6 247.0 Total Debt $511.5 $517.9 Less: Cash on hand (163.1) (190.2) Net Debt $348.4 $3
Slide 17: Outlook Discussion
Outlook Discussion Anticipate Q3’20 organic revenue decline of low single digit % ‒ Continued growth in Transformers ‒ Closely monitoring HVAC non-residential order trends and timing of Detection & Measurement project orders/deliveries Anticipate less favorable business mix in Q3’20 ‒ Detection
Slide 18: End Market Overview and Closing Remarks
End Market Overview and Closing Remarks Gene Lowe
Slide 19: Market Commentary
Market Commentary Market Comments Cooling: Softening demand, consistent with non-residential leading indicators HVAC Heating: channel stable; weather-dependent winter Detection & Locator demand stabilizing; geographic strength varies Measurement Healthy frontlog of projects; timing affected
Slide 20: Executive Summary
Executive Summary Strong execution and performance in Q2 and 1H’20 Stable results driven by diverse end markets and strong operating culture Solid positioning supports continued focus on growth initiatives Strong balance sheet and well-developed operational protocols Successfully Managing Th
Slide 21: Questions
SPX4 Questions
Slide 22: Appendix
SPX4 Appendix
Slide 23: Modeling Considerations
Modeling Considerations Metric Considerations Incremental/ Decremental Margins Corporate Expense ~$10-12m/quarter in 2H’20 Long-term incentive comp ~$13-15m HVAC Low-30s% Restructuring costs Cost reduction actions Detection & Measurement ~50% Interest cost Drew $100m on revolver in Q1’20 Engineered
Slide 24: End Market Exposures (2019)
End Market Exposures* (2019) Total 2019 Revenue of $1.5 Billion 52% Wastewater / Water, 6% 29% Utility, Light Mfg. / Other, 5% 33% Healthcare, 3% Hospitality, 3% Data Center / Lab, 3% 11% Institutional, 9% Gov't Regulated, 8% Office / Retail, 7% 13% End Markets Resi Non-resi Gov't, Regulated and Uti
Slide 25: Near-Term Demand Sensitivity
Near-Term Demand Sensitivity % of 2019 Segment EBITDA Considerations Inspection; CARES Act; Less Sensitive Transformers; ~33% Gov’t Spending; Transportation; Backlog SMS/CommInt Regulatory drivers; Aids-to-Navigation; Project timing (access); Process Cooling; ~42% SME Liquidity; Residential Heating*
Slide 26: Adjusted Segment Income Phasing and Reconciliations
Adjusted Segment Income Phasing and Reconciliations ($ millions) Q1 2019 Q2 2019 Q3 2019 Q4 2019 GAAP 20.8 41.4 42.9 68.9 37% Exclude: "All other" (22.6) (10.0) (5.7) (7.4) 34% Exclude: One time acquisition (1.3) (0.9) - (0.2) related costs Exclude: Intangible amortization (1.6) (2.4) (2.0) (2.9) 23
Slide 27: Q2 2020 U.S. GAAP to Adjusted Earnings Per Share Reconciliation
Q2 2020 U.S. GAAP to Adjusted Earnings Per Share Reconciliation ($ millions) GAAP Adjustments Adjusted Segment income (1) $ 47.6 $ 6.6 $ 54.2 (2) Corporate expense (8.5) 0.1 (8.4) Long-term incentive compensation expense (3.3) - (3.3) Special charges, net (3) (1.4) 0.4 (1.0) Operating income 34.4 7.
Slide 28: Q2 2019 U.S. GAAP to Adjusted Earnings Per Share Reconciliation
Q2 2019 U.S. GAAP to Adjusted Earnings Per Share Reconciliation ($ millions) GAAP Adjustments Adjusted Segment income (1) $ 41.4 $ 13.3 $ 54.7 (2) Corporate expense (10.5) 0.2 (10.3) Long-term incentive compensation expense (3.3) - (3.3) Special charges, net (3) (1.3) 0.9 (0.4) Operating income 26.3
Slide 29: Q2 and YTD 2020 and 2019 GAAP to Adjusted Operating Income Reconciliation
Q2 and YTD 2020 and 2019 U.S. GAAP to Adjusted Operating Income Reconciliation ($ millions) Three months ended Six months ended June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019 Operating income $ 34.4 $ 26.3 $ 67.1 $ 29.3 Exclude: Aggregate operating losses of the South Africa and Heat Transf
Slide 30: Q2 2020 U.S. GAAP Revenue to Organic Revenue Reconciliation
Q2 2020 U.S. GAAP Revenue to Organic Revenue Reconciliation ($ millions) Three months ended June 27, 2020 Detection & HVAC Measurement Engineered Solutions Adjusted SPX Net Revenue Growth (Decline) 1.1 % (9.4) % 5.6 % (0.1) % Exclude: Foreign Currency (0.4) % (0.5) % (0.3) % (0.4) % Exclude: Acquisi
Slide 31: Q2 and YTD GAAP to Adjusted Revenue and Segment Income Reconciliation
Q2 and YTD 2020 and 2019 U.S. GAAP to Adjusted Revenue and Adjusted Segment Income Reconciliation Three months ended Six months ended ($ millions) CONSOLIDATED SPX: June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019 Consolidated revenue $ 373.2 $ 372.4 $ 742.5 $ 716.0 Exclude: "All Other" opera
Slide 32: Q2 2020 Debt Reconciliation
Q2 2020 Debt Reconciliation ($ millions) ` Q2 2020 Short-term debt $ 266.8 Current maturities of long-term debt 4.1 Long-term debt (1) 248.6 Gross debt 519.5 Less: Purchase card program and extended payables (1.8) Adjusted gross debt 517.7 Less: Cash and equivalents (2) (188.2) Adjusted net debt $ 3
Slide 33: Q2 2020 Consolidated Adjusted EBITDA Reconciliation
Q2 2020 Consolidated Adjusted EBITDA Reconciliation Last 12 ($ millions) Months Net income attributable to SPX Corporation common shareholders $ 96.7 Income tax provision 17.9 Interest expense 19.9 Income before interest and taxes 134.5 Depreciation and amortization 36.4 EBITDA 170.8 Adjustments: No
Slide 34: Q2 2020 Adjusted Free Cash Flow Reconciliation
Q2 2020 Adjusted Free Cash Flow from Continuing Operations to U.S. GAAP Reconciliation ($ millions) Q2 2020 Operating cash flow from continuing operations $ 27.1 Capital expenditures - continuing operations (5.8) Free cash flow used in continuing operations 21.3 Adjustments* (0.3) Adjusted free cash