Spx Technologies, Inc. · NYSE:SPXC

Spx Technologies — Investor Presentation (November 2022)

61 slides from Spx Technologies's investor presentation, November 2022

  1. Slide 1: SPX Technologies Investor Presentation

    SPX Technologies Investor Presentation November 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 2022 Revenue by Region†  Headquartered in Charlotte, NC ~80% 89% ~10% 6%  Focused, market-leading platforms:  HVAC  Detection & Measurement ~10%  $1.45B Revenue*  ~3,100 employees  NYSE Ticker: SPXC * Midpoint of 2022 guidance †Based on management estimates. SPX is a Leading

  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 Solid Free Cash Flow Conversion Business System Consistent repeatable process to drive

  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* ~2/3  Cooling towers  Refrigeration  Process Cooling $752m mid-teens 2021 REVENUE FROM #1 OR #2 MARKET POSITION†  Boilers CINCINNATI FAN  Electrical heating ~90%  L

  6. Slide 6: Value Creation Framework

    Value Creation Framework Organic Growth SPX Business System • New products • Digital initiatives • Channel expansion • Continuous Improvement • Adjacent markets • Due diligence/integration Inorganic Growth Culture & Values • Strategic platform focus • Integrity • Significant capital to deploy • Resu

  7. Slide 7: 2022+ Initiatives

    2022+ Initiatives Revenue & Margin Enhancement - Tools & Drivers Product Technology M&A Channel CI Innovation Lean Geography Software Service Robotics SEALITE Digital ECS CINCINNATI FAN Sourcing AI ITL Loyalty November 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 ITL  Renewables (wind) SEALITE ECS  Telecom (5G), Airports, Ports  Institutional (K-12, gov’t, healthcare) CINCINNATI FAN  Infrastructure-centric R&D November 2022 9

  10. Slide 10: SPX 2025

    SPX4 SPX 2025

  11. Slide 11: SPX Strategic Portfolio Transformation Continues

    SPX Strategic Portfolio Transformation Continues Pre-Transformers 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 %

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

    Focused, Market-Leading Growth Platforms Detection & Measurement (~$535M)(1) HVAC (~$910M)(1) Location & Inspection ~$1.45 Billion(1) Cooling  Premium engineered niches CINCINNATI FAN  Technology / innovation focus Aids to Navigation  ~90% Market Leadership (#1 or #2) Heating  High replacement r

  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 ~$1.45 Billion* 1400.0 ~$1.2 Billion 1300.0 Process Cooling ~$1.1 Billion 1200.0 Process Cooling 1100.0 Process Cooling ~8% 1000.0 900.0 HVAC HVAC 800.0 HVAC (~$800

  14. Slide 14: Divestiture of Asbestos Assets & Liabilities

    Divestiture of Asbestos Assets & Liabilities  Strengthens and simplifies enterprise Improve growth focus  $139m contribution  Annual EPS accretion of $0.08-$0.10 Reduce ― 100% cash conversion Reduce cash Administrative outflow burden  Eliminates cash settlements  Frees up resources for growth f

  15. Slide 15: Segment Overview

    Segment Overview  HVAC  Detection & Measurement

  16. Slide 16: HVAC

    SPX4 HVAC

  17. Slide 17: HVAC Segment Overview

    HVAC Segment Overview 2020 2021 2022E 2021 Revenue by Product Adjusted segment income* % ($ millions) $740 $752 ~$910 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

  18. Slide 18: 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

  19. Slide 19: 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

  20. Slide 20: 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

  21. Slide 21: 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

  22. Slide 22: Detection & Measurement

    SPX4 Detection & Measurement

  23. Slide 23: Detection & Measurement Segment Overview

    Detection & Measurement Segment Overview 2021 Revenue by Product 2020 2021 2022E Adjusted segment income* % ($ millions) Aids to Navigation Location & $467 ~$535 Long-Term (“AtoN”), CommTech, Inspection Revenue 2021 $387 and Transportation Equipment Growth ~2-6% Revenue 45% $467m 55% 21% 20% ~21% 20

  24. Slide 24: 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

  25. Slide 25: Location & Inspection – Key Products

    Location & Inspection – Key Products Location Equipment Inspection Equipment Full Lifecycle Infrastructure Solutions Provider for Location & Inspection Markets November 2022 25

  26. Slide 26: 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

  27. Slide 27: 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 November 2022 27

  28. Slide 28: CommTech – Key Capabilities & Solutions

    CommTech – Key Capabilities & Solutions Spectrum Monitoring Communications (SMS) Intelligence NEW PIC Spectrum monitoring leader with expanding COMINT presence November 2022 28

  29. Slide 29: 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

  30. Slide 30: Financial Performance & Capital Allocation

    Financial Performance & Capital Allocation

  31. Slide 31: 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

  32. Slide 32: Financial Position - Capital Structure & Liquidity Update

    Financial Position - Capital Structure & Liquidity Update ($millions) Q1 2022 Q2 2022 1.5-2.5x Short-term debt $2 $2 Current maturities of long-term debt 13 13 Long-term debt 228 225 Total Debt $243 $240 1.4x 1.3x Less: Cash on hand (269)** (195) 0.3x 0.3x Net Debt (Cash) $(26) $45 Q2 2022 Q3 2022 G

  33. Slide 33: 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

  34. Slide 34: Building Strategic Platforms

    Building Strategic Platforms

  35. Slide 35: 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 in ~4 years SEALITE (Lean, 80/20) Margin Ex

  36. Slide 36: 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

  37. Slide 37: 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

  38. Slide 38: Building Strategic Platforms – Aids to Navigation

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

  39. Slide 39: Building Strategic Platforms – CommTech

    Building Strategic Platforms – CommTech ECS 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 Product/Technology Synergies Driving Substan

  40. Slide 40: Building Strategic Platforms – HVAC Cooling

    Building Strategic Platforms – HVAC Cooling CINCINNATI FAN $~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

  41. Slide 41: 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

  42. Slide 42: Executive Summary

    SPX4 Executive Summary

  43. Slide 43: End Market Exposure

    End Market Exposure ~$1.45 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 / Ret

  44. Slide 44: 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

  45. Slide 45: Appendix

    SPX4 Appendix

  46. Slide 46: 2022 Guidance (Recent Updates in Bold)

    2022 Guidance (Recent Updates in Bold) Revenue Segment Income Margin  $900-$920m (+$13m)  ~14.0% HVAC ($885-$910m prior) (14.0% prior) Detection &  $525-$545m (+$5m)  20.0%-21.0% Measurement ($520-$540m prior) (19.0-21.0% prior)  $1.43-$1.47 (+$18m)  ~16.5% Total SPX Adjusted ($1.41-$1.45B pri

  47. Slide 47: Modeling Considerations – Full Year 2022

    Modeling Considerations – Full Year 2022 Metric Considerations Corporate expense $49-51m Long-term incentive comp $11.5-12.5m Restructuring costs $1m Interest cost ~$8m Other income/(expense), and Non-service pension $5-6m benefit/(expense) Tax rate 21-22% Capex $13-15m Cash cost of pension + OPEB $

  48. Slide 48: 2022 Adjusted EPS Guidance - Key Drivers

    2022 Adjusted EPS Guidance - Key Drivers • Favorable economic policy/infrastructure stimulus $2.95 • Accelerated project-related sales • Moderating supply chain challenges and input costs $2.90 Base Case • Worsening supply chain challenges and input costs • Delayed project-related sales $2.85 • Unfa

  49. Slide 49: 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 November 2022 49

  50. Slide 50: 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

  51. Slide 51: 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

  52. Slide 52: 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

  53. Slide 53: 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 -

  54. Slide 54: 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 -

  55. Slide 55: 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

  56. Slide 56: 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 % N

  57. Slide 57: 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

  58. Slide 58: 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

  59. Slide 59: 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

  60. Slide 60: 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

  61. Slide 61: 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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