Spx Technologies, Inc. · NYSE:SPXC
Spx Technologies — Investor Presentation (September 2021)
61 slides from Spx Technologies's investor presentation, September 2021
Slide 1: SPX Corporation Investor Presentation
SPX Corporation Investor Presentation September 2021 SPX Corporation 2019 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: Executive Management
Executive Management Gene Lowe Jamie Harris President and CEO Treasurer and CFO September 2021 3
Slide 4: SPX Corporation Overview
SPX SPX Corporation Overview
Slide 5: Company Overview
Company Overview 2020 Adjusted Revenue* by Region ❑ Headquartered in Charlotte, NC ❑ Focused, market-leading platforms: 85% 89% 10% 6% ✓ HVAC ✓ Detection & Measurement ❑ ~$1.1b Adjusted Revenue* in 2020 5% ❑ ~4,000 employees ❑ NYSE Ticker: SPXC SPX is a Leading Supplier of HVAC and Detection & Measu
Slide 6: 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 ~100% conversion of adjusted net income* Business System Consistent repeatable process
Slide 7: Strong Product Offerings and Attractive Market Dynamics
Strong Product Offerings and Attractive Market Dynamics 2020 2020 REVENUE FROM REPLACEMENT SALES† ADJUSTED REVENUE EBITDA MARGIN* ~70% ✓ Cooling towers ✓ Refrigeration ✓ Process Cooling $741m mid-teens 2020 REVENUE FROM #1 OR #2 MARKET POSITION† ✓ Boilers ✓ Electrical heating ~90% ✓ Location & inspe
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 • Integrity • Significant capital to deploy • Results/a
Slide 9: 2021+ Initiatives: Revenue & Margin Enhancement
2021+ Initiatives Revenue & Margin Enhancement - Tools & Drivers Product Technology M&A Channel CI Innovation Lean Geography Software Service Robotics Digital Sourcing AI Loyalty September 2021 9
Slide 10: 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
Slide 11: Well-Positioned for Infrastructure Spending
Well-Positioned for Infrastructure Spending ❑ Water & Wastewater ❑ General Construction (heavy civil, housing) ❑ Public Transit ❑ Renewables (wind) ❑ Telecom (5G), Airports, Ports ❑ Institutional (K-12, gov’t, healthcare) ❑ Infrastructure-centric R&D September 2021 11
Slide 12: SPX 2025
SPX4 SPX 2025
Slide 13: Sale of Transformer Solutions - Transaction Overview
Sale of Transformer Solutions - Transaction Overview • Stock sale of Transformer Solutions to Prolec GE for Pro Forma Available Capital CONSIDERATION • Adjusted EBITDA Multiple of ~10.5x (LTM 3/31/2021E) (Year-End 2021)* • Estimated net after tax cash proceeds ~$540M 3.0x ~$1,000M TIMING AND • Expec
Slide 14: SPX Strategic Portfolio Transformation Continues
SPX Strategic Portfolio Transformation Continues Pre-Sale Post-Sale 2025 Targets Adj. Revenue ~$1.7B ~$1.25B ~$2.0B Gross margin % ~32.5% ~450bps ~37.0% ~+300bps ~40% Adj. Segment Income % ~15.5% ~150bps ~17.0% ~+300bps ~20% Adj. Operating Income % ~11.5% ~11.5% ~+450bps ~16% Long-term Growth % ~1-4
Slide 15: Focused, Market-Leading Growth Platforms
Focused, Market-Leading Growth Platforms Detection & Measurement (~$465M)(1) HVAC (~$775M)(1) ~$1.25 Billion(1) Location & Inspection Cooling ▪ Premium engineered niches ▪ Technology / innovation focus Aids to Navigation ▪ ~90% Market Leadership (#1 or #2) Heating ▪ High replacement revenue (~70%) ▪
Slide 16: SPX Long-Term Targets – Revenue
SPX Long-Term Targets – Revenue 2100.0 SPX TODAY SPX TARGET ~$2.0 Billion 2000.0 1900.0 1800.0 1700.0 1600.0 1500.0 1400.0 1300.0 ~$1.25 Billion '16-'21 CAGR 1200.0 ~$1.13 Billion Process Cooling 1100.0 Process Cooling 1000.0 900.0 800.0 HVAC 4.9% 700.0 HVAC (~$645m) 600.0 ($591m) 500.0 HVAC 400.0 (
Slide 17: Realizing SPX 2025 Vision
Realizing SPX 2025 Vision 2021 Pro Forma Adjusted EPS $0.25-$0.30* $2.60-$2.65 SPX 2025 $2.25-$2.45 $1.84 ✓ Better organic growth ✓ Margin expansion via continuous improvement ✓ Growth via M&A (significant investment capacity) ✓ Significant scale opportunities 2020 Current 2021 Pro Forma 2021 Annual
Slide 18: Segment Overview
Segment Overview ❑ HVAC ❑ Detection & Measurement
Slide 19: HVAC
SPX4 HVAC
Slide 20: HVAC Segment Overview
HVAC Segment Overview 2019 2020 2021E 2020 Revenue by Product Adjusted segment income* % ($ millions) $739 $741 ~$775 Heating 2020 Cooling Products Revenue Products 40% $741m 60% ~15% 14% 14% 2020 Revenue by Geography 6% 2019 2020 2021E Gross Margin% 30% 30% - Segment EBITDA* $111 $112 - 8% 86% . *N
Slide 21: HVAC Cooling Overview
HVAC Cooling Overview 2020 Revenue by Product ❑ Cooling products used in non-residential, commercial Parts & Service construction, process cooling and refrigeration applications 32% Package 2020 Cooling Revenue Towers & ❑ Well-recognized product brands: Marley and Recold $447m Refrigeration 68% ❑ We
Slide 22: Cooling Product Examples
Cooling Product Examples Marley NC Cooling Tower Marley MH Element Fluid Cooler Marley MD Everest Tower High-Value Components ✓ High efficiency ✓ Industrial and process cooling ✓ Suitable for larger applications ✓ Gearboxes, motors, drives ✓ Low drift rates ✓ High performance copper coils ✓ 85% more
Slide 23: HVAC Heating Overview
HVAC Heating Overview 2020 Revenue by Product ❑ North American businesses with strong brands Electric Heating 2020 Products ❑ Large installed base / established spec position 28% Boiler Systems Revenue 72% $294m ❑ Products used in residential and non-residential markets and sold primarily through di
Slide 24: Heating Product Examples
Heating Product Examples Residential Boilers Commercial Boilers Electrical Heating Products ✓ High efficiency natural gas ✓ High efficiency natural gas ✓ Standard cast iron ✓ Standard cast iron Digital ✓ Unique hybrid design wall heaters ✓ Gas combi boilers Wash-down, corrosion resistant heaters Tre
Slide 25: Detection & Measurement
SPX4 Detection & Measurement
Slide 26: Detection & Measurement Segment Overview
Detection & Measurement Segment Overview 2020 Revenue by Product 2019 2020 2021E Adjusted segment income* % ($ millions) ~$470 Aids to Navigation Location & $385 $387 2020 (“AtoN”), CommTech, Inspection Revenue and Transportation Equipment $387m 24% 44% 56% 21% ~20% 2020 Revenue by Geography 19% 201
Slide 27: Location & Inspection Overview
Location & Inspection Overview 2020 Revenue by Product ❑ A leading global supplier of location & inspection equipment for underground infrastructure 2020 Location Revenue Inspection 44% 56% ❑ Global distribution / established channels $218m ❑ Integrated hardware and software solutions 2020 Revenue b
Slide 28: Location & Inspection – Key Products
Location & Inspection – Key Products Location Equipment Inspection Equipment Full Lifecycle Infrastructure Solutions Provider for Location & Inspection Markets September 2021 28
Slide 29: AtoN, CommTech, and Transportation
AtoN, CommTech, and Transportation 2020 Revenue by Product CommTech ❑ CommTech : A leading global supplier of spectrum monitoring, 20%* communication intelligence and geolocation technologies Transportation 2020 Revenue ❑ Aids to Navigation: Global Leader in terrestrial obstruction lighting, 36% $16
Slide 30: Aids to Navigation – Key End Markets
Aids to Navigation – Key End Markets Terrestrial Obstruction Marine Obstruction Airfield Ground Lighting Lighting Lighting Global Leader with Full Product Range September 2021 30
Slide 31: CommTech – Key Capabilities & Solutions
CommTech – Key Capabilities & Solutions Spectrum Monitoring Communications (SMS) Intelligence NEW PIC Spectrum monitoring leader with expanding COMINT presence September 2021 31
Slide 32: Transportation – Next Generation Fare Collection
Transportation – Next Generation Fare Collection Mobile Legacy Farebox Fast Fare Farebox Fast Fare-e Ticketing Point-of-Sale e-Fare Cloud-Based Infrastructure Software Service and as a Service Support Fare Collection Suite of Products Integrated with Back-End Support; We Believe This is the New Indu
Slide 33: Financial Performance & Capital Allocation
Financial Performance & Capital Allocation
Slide 34: Capital Allocation Discipline
Capital Allocation Discipline Methodology Expected Outcome 1) Utilize strategic planning process to evaluate ▪ Quantify projected future cash flows and future revenue and earnings growth estimate total company valuation 2) Maintain target capital structure ▪ Net Debt to EBITDA(1) target range: 1.5x
Slide 35: Financial Position - Capital Structure & Liquidity Update
Financial Position - Capital Structure & Liquidity Update Pro Forma with ($millions) Q4 2020 Q2 2021 ECS 1.5-2.5x 2.1x Short-term debt $101 $168 1.8x Current maturities of long-term debt 7 10 Long-term debt 304 238 Total Debt $412 $417 2.0x 1.9x 1.7x 1.6x Less: Cash on hand (68) (69) Net Debt $344 $
Slide 36: 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
Slide 37: Building Strategic Platforms
Building Strategic Platforms
Slide 38: 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 ~$275M of revenue (Lean, 80/20) in ~3 years Margin Expansion
Slide 39: 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 Inspectio
Slide 40: Building Strategic Platforms – Aids to Navigation
Building Strategic Platforms – Aids to Navigation $~40-50m $~25-30m* $~30-40m* Terrestrial Marine Obstruction Airfield Ground and Transformed ~$40-50m Obstruction Lighting Lighting Marine Obstruction Lighting Obstruction Lighting Business into ~$110m Global Leader in Aids to Navigation Solutions Glo
Slide 41: Building Strategic Platforms – CommTech
Building Strategic Platforms – CommTech 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 Significant Runway to Grow Presence in COMINT *
Slide 42: Building Strategic Platforms – HVAC Cooling
Building Strategic Platforms – HVAC Cooling Acquired Feb 2019 ~$430m Legacy Business ~$15m* ~$40-50m* ~25-30m* Leading Position in Industrial Refrigeration Packaged Cooling and Products Strengthened Industrial Field Erected Towers Refrigeration Solutions Opportunity for Expansion into Adjacent Cooli
Slide 43: 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
Slide 44: Executive Summary
SPX4 Executive Summary
Slide 45: 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
Slide 46: Appendix
SPX4 Appendix
Slide 47: 2021 Guidance
2021 Guidance Revenue Segment Income Margin HVAC ▪ ~$770-780 million (including Process Cooling) ▪ ~14.5% Detection & ▪ ~$465-475 million ▪ ~20.5% Measurement Total SPX Adjusted ▪ ~$1.25 billion ▪ ~17.0% Adjusted Operating Income Margin of ~11-12%; Adjusted EPS in a Range of $2.25-2.45 Note: Adjuste
Slide 48: Modeling Considerations – Full Year 2021
Modeling Considerations – Full Year 2021 Metric Considerations Corporate expense ~$50m, including TSA income Long-term incentive comp ~$13m Restructuring costs ~$1m Interest cost ~$13m Other income/(expense), and Non-service pension $6-8m benefit/(expense) Tax rate ~19-21% Capex ~$15m Cash cost of p
Slide 49: 2021 Adjusted EPS Guidance - Key Drivers
2021 Adjusted EPS Guidance - Key Drivers • Favorable economic policy/infrastructure stimulus $2.45 • Stronger-than-normal seasonal heating demand • Accelerating non-residential activity • Moderating input cost trends • Accelerated project-related sales $2.35 Base Case • Weaker-than normal seasonal h
Slide 50: Adjusted Segment Income Phasing and Reconciliations
Adjusted Segment Income Phasing and Reconciliations ($ millions) Q1 Q2 Q3 Q4 2020 Segment Income 31.4 31.4 35.7 51.7 150.2 Exclude "Other" (4.5) (4.2) (5.3) (5.3) (19.3) 35% 35% Exclude: One time acquisition related costs (0.1) (1.2) (1.3) Exclude: Intangible amortization (2.6) (2.4) (3.3) (5.7) (14
Slide 51: HVAC Segment Results – 2019, 2020, and YTD by Quarter
HVAC Segment Results – 2019, 2020, and YTD by Quarter Q1 Q2 Q3 Q4 2019 ($ millions) Revenue $167.6 $165.3 $167.8 $238.0 $738.7 GAAP Segment Income 19.2 18.8 22.2 42.9 103.1 Exclude: One time acquisition related costs - - - - - Exclude: Intangible amortization 0.1 0.1 0.1 1.1 1.4 Adjusted Segment Inc
Slide 52: D&M Segment Results – 2019, 2020, and YTD by Quarter
D&M Segment Results – 2019, 2020, and YTD by Quarter Q1 Q2 Q3 Q4 2019 ($ millions) Revenue $85.1 $101.7 $97.6 $100.5 $384.9 GAAP Segment Income 17.0 21.7 20.5 22.5 81.7 Exclude: One time acquisition related costs 1.3 0.9 - (0.2) 2.0 Exclude: Intangible amortization 1.5 2.3 1.9 1.8 7.5 Adjusted Segme
Slide 53: Adjusted SPX Results – 2019, 2020, and YTD by Quarter
Adjusted SPX Results – 2019, 2020, and YTD by Quarter ($ millions) Q1 Q2 Q3 Q4 2019 Revenue $242.7 $267.2 $270.9 $336.8 $1,117.6 Adjusted Revenue (exclude "Other") 252.7 267.0 265.5 338.5 1,123.7 Segment Income 14.9 30.8 37.3 58.2 141.2 Exclude: "Other" segment income 21.3 9.7 5.4 7.2 43.6 Exclude:
Slide 54: Q2 2021 U.S. GAAP to Adjusted EPS Reconciliation
Q2 2021 U.S. GAAP to Adjusted EPS Reconciliation GAAP Adjustments Adjusted ($ millions) Segment income (1) $ 32.9 $ 11.3 $ 44.2 Corporate expense (2) (13.3) 1.2 (12.1) Long-term incentive compensation expense (3.3) - (3.3) Special charges, net (3) (0.7) 0.1 (0.6) Other operating expense (2.7) - (2.7
Slide 55: Q2 2020 U.S. GAAP to Adjusted EPS Reconciliation
Q2 2020 U.S. GAAP to Adjusted EPS Reconciliation ($ millions) GAAP Adjustments Adjusted (1) Segment income $ 31.3 $ 6.7 $ 38.0 (2) Corporate expense (9.7) 0.1 (9.6) Long-term incentive compensation expense (3.1) - (3.1) Special charges, net (1.0) - (1.0) Operating income 17.5 6.8 24.3 Other income,
Slide 56: Q2 2021 U.S. GAAP to Adjusted Operating Income Reconciliation
Q2 2021 U.S. GAAP to Adjusted Operating Income Reconciliation ($ millions) Three months ended Six months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 Operating income $ 12.9 $ 17.5 $ 32.9 $ 33.6 Exclude: Aggregate operating losses of the South Africa business (1) (4.0) (4.3) (9.1) (8.
Slide 57: Q2 2021 Non-GAAP Reconciliation - Organic Revenue
Q2 2021 Non-GAAP Reconciliation - Organic Revenue Three months ended July 3, 2021 Detection & HVAC Measurement Net Revenue Growth 12.2 % 20.7 % Exclude: Foreign Currency 0.8 % 1.9 % Exclude: Acquisitions -% 17.2 % Exclude: Settlement of legacy dry cooling contract (2.7) % -% Organic Revenue Growth 1
Slide 58: Q2 2021 and 2020 Adjusted Revenue and Segment Income Reconciliation
Q2 2021 and 2020 U.S. GAAP to Adjusted Revenue and Adjusted Segment Income Reconciliation ($ millions) CONSOLIDATED SPX: Three months ended Six months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 Consolidated revenue $ 296.7 $ 258.0 $ 584.6 $ 514.8 (1) Exclude: "Other" operating segme
Slide 59: Q2 2021 and 2020 Adjusted Segment Income Reconciliations
Q2 2021 and 2020 U.S. GAAP to Adjusted Segment Income Reconciliations ($ millions) HVAC REPORTABLE SEGMENT: Three months ended Six months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 HVAC segment income $ 25.4 $ 19.6 $ 47.7 $ 37.3 (2) Exclude: Acquisition related costs - - - (0.1) (3)
Slide 60: Q2 2021 Debt Reconciliation
Q2 2021 Debt Reconciliation ($ millions) Q 2 2021 Short-term debt $ 168.3 Current maturities of long-term debt 10.4 Long-term debt 238.0 Gross debt 416.7 plus: adjustment associated with acquisitions (1) 79.0 Adjusted gross debt 495.7 less: cash and equivalents (2) (68.6) Adjusted net debt $ 427.1 1
Slide 61: YTD 2021 Adjusted Free Cash Flow Reconciliation
YTD 2021 Adjusted Free Cash Flow Reconciliation ($ millions) Six months ended July 3, 2021 June 27, 2020 Operating cash flow from continuing operations $ 38.9 $ (9.9) Capital expenditures (4.2) (8.3) Free cash flow from continuing operations 34.7 (18.2) Adjustments* (3.4) 3.2 Adjusted free cash flow