Spx Technologies, Inc. · NYSE:SPXC
Spx Technologies — Investor Presentation (March 2019)
65 slides from Spx Technologies's investor presentation, Mar 5, 2019
Slide 1: Forward-looking statements 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 amen
Slide 2: Executive Management
Executive Management Gene Lowe President and CEO Scott Sproule VP, CFO and Treasurer March 2019 3
Slide 3: SPX Corporation Overview
SPX Corporation Overview March 2019 SPX
Slide 4: Company Overview
Company Overview SPX Corporation ~$1.4b Adjusted Revenue* in 2018 SPX is a Leading Supplier of HVAC, Detection & Measurement and Engineered Solutions; The Majority of Revenue is Generated by North American Sales March 2019 5 Headquartered in Charlotte, NC A leading supplier of:89%6% HVAC products, D
Slide 5: Executive Highlights
Executive Highlights Continuing to Execute on Plan for Significant Value Creation March 2019 6 Well-positioned to invest for sustainable double digit earnings growth Solid FCF* conversion more than 110% of adjusted net income* ~$500M remaining capital available to deploy through 2020 Solid platform
Slide 6: Strong Brands and Attractive Market Dynamics
Strong Brands and Attractive Market Dynamics 2018 Adjusted Revenue* ~$1.4B Replacement Sales *Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the Appendix of the presentation. (1) Weil-McLain, a division of The Marley-Wylain Company March 2019 7 ~70% of R
Slide 7: Key Product Offerings and Financial Profile by Segment
Key Product Offerings and Financial Profile by Segment Electrical heating products Communication technologies Adjusted segment income *Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the Appendix of the presentation. March 2019 8 Power transformers2018: C
Slide 8: Transformation of SPX – 2015 Through 2018
Transformation of SPX – 2015 Through 2018 % Power generation end markets >30% <5% Adjusted operating income % 3.7% 10.2% Free Cash Flow conversion Nominal 122% Expected liquidity to deploy $200 by 2018 ~$500 through 2020† 1) Non-GAAP financial measure. Reconciliations from US GAAP financial measures
Slide 9: SPX Margin Transformation
SPX Margin Transformation $1.6B 8% 10.2% 5.1% 3.7% 2% *Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the applicable earnings release or in the Appendix of the presentation. Note: We have not reconciled non-GAAP financial measures guidance to their neare
Slide 10: Value Creation Roadmap
Value Creation Roadmap Organic Growth New products Channel expansion Adjacent markets SPX Business System Policy deployment Operational excellence Due diligence/integration Inorganic Growth Focus in HVAC and D&M Significant capital to deploy Large target pipeline Culture & Values Leadership developm
Slide 11: Segment Overview
Segment Overview March 2019 SPX
Slide 12: Segment Overview
Segment Overview March 2019
Slide 13: HVAC Segment Overview
HVAC Segment Overview 15.5-16.5% 15.7% 16.0% 14.5% 15.5% Strong Product Brands and Leading Market Positions Across HVAC Heating and Cooling Product Portfolio March 2019 14 2018 Revenue by Geography 4% 86%10% RevenueOrganic CAGR Segment income %$582$570-5802.0-4.0% $510$511 15.5-($ millions) 20162017
Slide 14: Strategic Growth Initiatives
Strategic Growth Initiatives Commercialize NC Everest (Cooling) Grow Evergreen (high-efficiency boiler) Expand refrigeration – Evaporative Condenser; LS Fluid Cooler Grow combi-boilers (AquabalanceTM) Expand geographic and vertical market channels Execute multi-level sales activities End user, archi
Slide 15: Cooling Products Overview
Cooling Products Overview Towers $282m Index) 72% Strong Product Brands and Leading Market Positions Across Cooling Product Portfolio March 2019 16 Cooling products used in non-residential, commercial construction, process cooling and refrigeration applications Well-recognized product brands: Marley
Slide 16: Cooling Product Examples
Cooling Product Examples Strong Product Portfolio of Cooling Technologies with Opportunity for Expansion March 2019 17 Recold Fluid Cooler High performance design Low cost of ownership Marley NC Cooling Tower High efficiency Low drift rates Quiet by design Long-life construction
Slide 17: Cooling - Key New Products
Cooling - Key New Products Strong Brand Identity and Well Established Channel Support a Broader NPI Impact March 2019 18 Marley MD Everest Tower Launched in Early 2018 for larger applications 85% more cooling capacity than any other pre-assembled tower Installation 80% faster than field erected cool
Slide 18: Heating Product Examples
Heating Product Examples Broad Product Offering of Heating Solutions for Residential and Light Commercial Applications March 2019 20 Residential Boilers High efficiency natural gas Standard cast iron Unique hybrid design Gas Combi boilers Commercial Boilers High efficiency natural gas Standard cast
Slide 19: Heating – Key New Products
Heating – Key New Products Growth Oriented Initiatives Several New Successful High Efficiency Product Launches March 2019 21 New Product Development: SVF Commercial Stainless Steel Boiler •Seven new product introductions in the high efficiency boiler category since 2015 AquaBalance Residential •New
Slide 20: Heating — Key New Products
Heating — Key New Products H VAC Bs New Product Development: SVF Commercial Stainless Steel Boiler * Seven new product introductions in the high efficiency boiler category since 2015 AquaBalance Residential * New launches have expanded addressable market Combi Boiler coverage from 64% to 95% * Estab
Slide 21: Detection & Measurement Segment Overview
Detection & Measurement Segment Overview Adjusted segment income* % 2.0-6.0% $385-395 $260 50% 26.0% 25.3% 2016† 2017 2018 2019E 2020E *Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the Appendix of the presentation. Note: We have not reconciled non-GAAP
Slide 22: Strategic Growth Initiatives
Strategic Growth Initiatives Scale new GPS-enabled locator Grow fare-collection solutions platform Build out geographic and vertical channels New LED Red lighting solution Aged bus fleet (fare collection) Communication technologies infrastructure Drive productivity and sourcing initiatives Internet
Slide 23: Location & Inspection Overview
Location & Inspection Overview 66% Radiodetection is a Leading Global Supplier of Equipment to Locate and Inspect Buried Cables & Pipes March 2019 25 A leading global supplier of location & inspection equipment for underground infrastructure Continuous new product enhancement and loyal customer base
Slide 24: Location & Inspection – Key New Products
Location & Inspection – Key New Products New Product Introduction Continues to Drive Performance March 2019 26 Pipeline Mapper Cable Avoidance Inspection Equipment
Slide 25: Communication Technologies Overview
Communication Technologies Overview SMS & 2018 45% 55% $97m TCI, Flash and Sabik are Leaders in Their Respective Markets March 2019 27 TCI : A leading global supplier of spectrum monitoring, communication intelligence and geolocation technology Obstruction Lighting: A leading global supplier of Flas
Slide 26: Communication Technologies Products
Communication Technologies Products Our Communication Technologies Solutions are Adapting to Serve Evolving and Complex Customer Needs March 2019 28 Marine Obstruction Lighting Flash Lighting Systems SMS & Communications Intelligence
Slide 27: Transportation
Transportation Strategic relationships with larger public infrastructure system integrators Genfare is a Leading North American Supplier in Fare Collection March 2019 29 Genfare is a leading North American supplier in fare collection: Historical market position concentrated on fare box installations
Slide 28: Transportation Products: Next Generation Fare Collection
Transportation Products: Next Generation Fare Collection Fare Collection Suite of Products Integrated with Back-End Support; We Believe This is The New Industry Standard March 2019 30 Cloud-Based Infrastructure Software as a Service Service and Support Fast Fare Farebox Mobile Ticketing Legacy Fareb
Slide 29: Transportation Products: Next Generation Fare Collection
DETECTION & Transportation Products: Next Generation Fare Collection )eEASUREMENT Legacy Farebox | Fast Fare Farebox Fast Fare-e e-Fare : : ‘Cloud- Based Infrastructure cee | a / a) Software Service and © / a Service ° ost) | Support @ Fare Collection Suite of Products Integrated with Back-End Suppo
Slide 30: Engineered Solutions Segment Overview
Engineered Solutions Segment Overview Transfer/South Organic CAGR $561 2.0-3.0% $537 $530-540 6.5% 2016† 2017 2018 2019E 2020E *Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the Appendix of this presentation. Note: We have not reconciled non-GAAP financ
Slide 31: Strategic Growth Initiatives
Strategic Growth Initiatives Broaden component offerings Commercialize proprietary load tap changer (LTC) Expand service and components More selective on process cooling projects Large voltage/EHV transformers Supply to OEM customers Continue operational excellence initiatives Strategic sourcing, pr
Slide 32: Engineered Solutions – Transformers Overview
Engineered Solutions – Transformers Overview A Leading North American Supplier of Power Transformers March 2019 34 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 pow
Slide 33: Transformers Overview - North American Market
Transformers Overview - North American Market Replacement Transformers Expected to be Primary Demand Driver March 2019 35 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 co
Slide 34: Transformer Product and Service Examples
Transformer Product and Service Examples Leading North American Supplier of Medium Power Transformers March 2019 36 Large Power (High Voltage) Transformer Transformer Service
Slide 35: Process Cooling Overview
Process Cooling Overview Cooling $163m abroad Repositioning Business for Greater Aftermarket Opportunities March 2019 37 Based in the U.S., a leading global manufacturer of cooling towers and parts & components Continuous new product enhancements and exceptional quality equipment for more than a cen
Slide 36: Process Cooling – Key New Products
Process Cooling – Key New Products Aftermarket Service and Components is Focus Area of New Product Initiatives March 2019 38 Air Flow Components TBD Heat Transfer Media Gear Reducer
Slide 37: Capital Allocation & Financial Position
& Financial Position Capital Allocation March 2019 SPX
Slide 38: Capital Allocation Discipline
Capital Allocation Discipline (1) Net Debt and EBITDA as defined in SPX Corporation’s credit agreement March 2019 40 Methodology Expected Outcome 1)Utilize strategic planning process to evaluate future revenue and earnings growth Quantify projected future cash flows and estimate total company valuat
Slide 39: Capital Structure
Capital Structure 2.7x Financing Short-term debt $113.1 $31.9 1.7x Q3 2018 Q4 2018 Pro forma LT Target March 2019 41 Leverage Ratios Incl. Sabik 2.3x Current maturities of long-term debt9.318.01.9x2.0x1.5-2.5x Long-term debt340.6331.9 Total Debt$463.0$381.8 Less: Cash on hand (61.9) (68.8) Net Debt$
Slide 40: SPX Acquisition Approach
SPX Acquisition Approach larger targets March 2019 43 Qualitative Quantitative Focused on building existing platforms Existing markets or close adjacencies Engineered products Attractive growth opportunities Secular growth drivers Fragmented market with consolidation opportunities Differentiated off
Slide 41: Recent Inorganic Investments
Recent Inorganic Investments Global Leader in Inspection Equipment CUES Market Leading Inspection Equipment Radiodetection Inspection Equipment Strengthens Global Leadership in Engineered Specialty Lighting Flash Technology Obstruction Lighting Equipment Sabik Market Leading Marine Lighting Products
Slide 42: Schonstedt Overview
Schonstedt Overview Company Profile 2017 Sales: $9M Purchase multiple*: <7x post-synergies Description: Manufacturer of magnetic locator products used for locating underground utilities and other buried objects. Acquisition Rationale: XTpc Pipe and Cable Locator • • • • Strengthens Detection & Measu
Slide 43: 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 & Measureme
Slide 44: Sabik Overview
Sabik Overview Company Profile 2018 Sales: ~$27M Purchase multiple*: <10x post-synergies Description: Leading manufacturer of marine and obstruction lighting Acquisition Rationale: • Complementary fit with our Flash Technology business Strengthens aids-to-navigation specialty lighting solutions Mark
Slide 45: 2016-2020E SPX Adjusted Profit Measures
2016-2020E SPX Adjusted Profit Measures ADJUSTED SEGMENT INCOME ($M) ADJUSTED EPS $2.58 $3.00 ~$225 $207 $182 $2.27 $157 $1.75 $1.47 2016* 2017* 2018* 2019E 2020E 2016* 2017* 2018* 2019E 2020E *Non-GAAP financial measure. Reconciliations from US GAAP financial measures are available in the appendix
Slide 46: 2016-2020E SPX Adjusted Profit Measures
2016-2020E SPX Adjusted Profit Measures ADJUSTED FREE CASH FLOW ($M) $123 ADJUSTED EBITDA ($M) ~$200 $170 12% 14% 13% $139 10% $126 9% $82 $75 120% 122% 107% 2016* 2017* 2018* 2019E 2020E 2016* 2017* 2018* 2019E 2020E *Non-GAAP financial measure. Reconciliations from US GAAP financial measures are a
Slide 47: Financial Targets
Financial Targets March 2019 SPX
Slide 48: Long-Term Financial Targets
Long-Term Financial Targets 2020 Financial Targets *Non-GAAP financial measure. ~$500M of Capital Available to Deploy Through 2020; Clear Line of Sight to Sustainable Double Digit Adjusted EPS* Growth March 2019 51 $1.6B adjusted revenue* 12% adjusted operating income margin* $2.90 - $3.10 adjusted
Slide 49: Long-Term Financial Targets
Long-Term Financial Targets 2020 Financial Targets SPX = $1.6B adjusted revenue* = 12% adjusted operating income margin* = $2.90 - $3.10 adjusted EPS* excluding amortization = >110% Free cash flow* conversion of adjusted net income “Non-GAAP financial measure ~$500M of Capital Available to Deploy Th
Slide 50: 2019 Adjusted EPS Guidance - Key Drivers
2019 Adjusted EPS Guidance - Key Drivers • Favorable Economic Policy/Infrastructure Stimulus $2.65 • • • • Stronger-Than-Normal Seasonal Heating Demand Commercial Growth Accelerates Greater-Than-Anticipated Price-Cost Tailwinds Accelerated Project-Related Sales $2.58 Base Case • • • • Weaker-Than-An
Slide 51: 2019 Modeling Considerations
2019 Modeling Considerations March 2019 54 Metric Commentary/Assumptions Corporate costs Low $40Ms Long-term incentive comp $14-15M Restructuring costs $1M Interest cost $21-22M Equity earnings, other $4-5M Tax rate Approximately 23% Capex $15-17M Cash cost of pension + OPEB Approximately $16M D&A A
Slide 52: Organic Segment Financial Outlook
Organic Segment Financial Outlook *Non-GAAP financial measure. We have not reconciled non-GAAP financial measures guidance to their nearest GAAP equivalents because we do not provide guidance for items that we do not consider indicative of our on-going performance and that are out of our control and
Slide 53: South African Projects Overview
South African Projects Overview Medupi & Kusile Power Stations customers These Two Power Stations Expected to Add ~10 GW of Power Capacity When Completed March 2019 56 Two mega-projects sites: Twelve 800 mega-watt coal-fired plants (six at each project site) Total project value of ~$1.3B Eskom is a
Slide 54: South African Projects Status
South African Projects Status Pre-2015 2015 2016 2017 2018 2019 2020+ Scope 1 Scope 2 Substantial Completion by End of 2019 Scope 3 Scope 4 Scope 5 $33M 2016 Modest Cash Usage Through Final Construction $49M 2017 $24M 2018 Cash Usage*: *Net of U.S. tax benefits related to South Africa for 2017 forwa
Slide 55: FY 2016 Engineered Solutions Adjusted Revenue Reconciliation
FY 2016 Engineered Solutions Adjusted Revenue, Adjusted Gross Profit and Adjusted Segment Income to U.S. GAAP Reconciliation ($ millions) FY 2016 Engineered Solutions revenue Exclude: South African projects Engineered Solutions adjus ted revenue $ 736.4 83.3 $ 653.1 Engineered Solutions gros s profi
Slide 56: FY 2016 Consolidated EBITDA Reconciliation
FY 2016 Consolidated EBITDA to U.S. GAAP Reconciliation ($ millions) FY 2016 Cons olidated Revenue Exclude: South African projects Adjus ted revenues Adjus ted operating income as a percent of adjus ted revenue Adjus tments : Depreciation & amortization Other income/(expens e) Adjus ted EBITDA as a
Slide 57: Segment EBITDA to U.S. GAAP Reconciliation
FY 2018, FY 2017 and FY 2016 Segment EBITDA to U.S. GAAP Reconciliation March 2019 60 ($ millions) HVAC Segment FY 2018FY 2017FY 2016 Segment income $ 90.0 $ 74.1 $ 80.2 Depreciation & amortization 5.4 5.5 5.3 HVAC Segment EBITDA $ 95.4 $ 79.6 $ 85.5 Detection & Meas urement Segment Adjus ted Segmen
Slide 58: FY 2018 Adjusted EPS Reconciliation
FY 2018 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adju s tm e n ts Adju s te d ($ millions) Segment income (1) Corporate expens e (2) Long-term incentive compens ation expens e Special charges , net (3) Los s on s ale of dry cooling Operating income $ 178.5 (48.5) (15.5) (6.3) $ 2
Slide 59: FY 2017 Adjusted EPS Reconciliation
FY 2017 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adju s tm e n ts Adju s te d ($ millions) Segment income (1) Corporate expens e Long-term incentive compens ation expens e Pens ion s ervice cos t Special charges , net (2) Operating income Other expens e, net (3) Interes t expens
Slide 60: FY 2016 Adjusted EPS Reconciliation
FY 2016 Adjusted Earnings Per Share to U.S. GAAP Reconciliation GAAP Adju s tm e n ts Adju s te d ($ millions) Segment income (1) Corporate expens e Pens ion and pos tretirement income (expens e) (2) Long-term incentive compens ation expens e Special charges , net Impairment of intangible as s ets (
Slide 61: FY 2018 and FY 2017 Adjusted Revenue and Segment Income Reconciliation
FY 2018 and FY 2017 Adjusted Revenue and Adjusted Segment Income to U.S. GAAP Reconciliation Twe l ve m on th s e n de d ($ millions) De ce m be r 31, 2018 De ce m be r 31, 2017 Cons olidated revenue Exclude: "All Other" operating s egments (1) Acquis ition accounting adjus tment to acquired deferre
Slide 62: FY 2018 and FY 2017 Adjusted Income and EBITDA Reconciliation
FY 2018 and FY 2017 Adjusted Segment Income, Adjusted Operating Income, Adjusted Net Income and Adjusted EBITDA to U.S. GAAP Reconciliation ` GAAP Revenue Exclude: "All Other" operating s egments Exclude: Acquis ition accounting adjus tment to acquired deferred revenue Adjus ted Revenue ADJUSTED SEG
Slide 63: FY 2018 and FY 2017 Adjusted Free Cash Flow Reconciliation
FY 2018 and FY 2017 Adjusted Free Cash Flow from Continuing Operations to U.S. GAAP Reconciliation ($ millions) FY 2018 FY 2017 Net operating cas h flow from continuing operations $ 112.9 $ 53.5 Capital expenditures - continuing operations (12.4) (11.0) Free cas h flow us ed in continuing operations
Slide 64: FY 2016 Adjusted Free Cash Flow Reconciliation
FY 2016 Adjusted Free Cash Flow from Continuing Operations to U.S. GAAP Reconciliation ($ millions) FY 2016 Net operating cas h flow from continuing operations $ 53.4 Capital expenditures - continuing operations (11.7) Free cas h flow us ed in continuing operations 41.7 Adjus tment for South African
Slide 65: FY 2016 Adjusted Free Cash Flow Reconciliation
FY 2016 Adjusted Free Cash Flow from Continuing Operations to U.S. GAAP Reconciliation Fy2016 ‘Net operating cash flow fromcontinuing operations $s 534 Capital expenditures - continuing operations ay | Free cash flow used in continuing operations eng | (Adjastirent for South A fican projects 331 Adj