SPXC - Earnings call transcript Q2 2018

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Operator

Good day, and welcome to the Second Quarter 2018 SPX Corporation's Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Paul Clegg, VP, Investor Relations and Communications. Sir, you may begin.

Paul Clegg

good and Brian, you, afternoon, everyone. Thank joining for us. Thanks are With and President our the Scott today me call Gene and our Financial Lowe, Chief on Sproule, Officer. Chief Executive Officer containing was release A XXXX second market after results press close. issued our just quarter

the release live spx.com. follow can a of slide X. replay presentation link of our presentation Relations I section this to call slide Web our as You our and with will prepared earnings at as Web encourage our well you remarks. along August the the until of a Investor be site find webcast on to during available in site the A webcast

As most and factors the a comments risk and Safe recent of our also are presentation Form XX-K note SEC subject in reminder, filings. and forward-looking Harbor portions our to provisions. Please

will today financial comments largely focus adjusted on results. Our

upon our down related expect Transfer's anticipate to those in June. GAAP of .we CUES and There other the results, XXXX. projects. on the on separately following focus discontinued are those will core South including we Heat occur brands of results including removing results, quarter, to the the Transfer operations of quarter, projects our the to business wind adjustments end our core provide and technology African results of by of from sale exit Specifically, which exclude will as the the operations our Beginning are to we business, we key operating reporting actions the this also recent results update this we an Heat which completion acquisition which closed of QX

from related such fees, including and deal purchase integration core step to adjust items Our standard practice results, acquisitions with out our inventory charges. accounting certain one-time up costs, acquisition as be items will

to of adjusted and presentation. in GAAP respective measures reconciliations to the find can figures their today’s detailed appendix You core

Connecticut Vertical the present will Conference XX, On Conference Finally, September New road the that, Midwest Cowen's will Gene. we in Chicago. Global to we on and meeting over this Technology investors. in with will to York. Industrial I plan And we Conference we call with IDEAS and Research's On X, turn XX, at in Industrials quarter August Investor participate the September in be on in participate will Innovation

Gene Lowe

Thanks, for Paul. everyone. Good Thanks us. joining afternoon,

EPS On the Overall call detection segment on provide results, quarter. with quarter. the market CUES on performances conditions touching overall accomplishments in the segment, of leading closed inspection within some per full-year brand track you pipe the Transfer today, second before by and end full-year. one we to Q&A. the into giving our earnings of from brief segment Engineered to of a highlights away will raise sale I’m for going with for of and by More results generation the brands focused we substantially on completed we major about share. adjusted half business. Solutions power the are our businesses and Heat Overall, and move deliver and the $X.XX our In the will with from our pleased of the prompting us start on the recently technology June, during first range I are the acquisition we solid our significant guidance our our growth and reshaping of market measurement our us update

and are are plan. case and them have higher facing actions with to As costs but is in our the we freight, tariffs input taken with associated second many companies, confident half mitigate

and in the to continue speed positioned execute results acquisitions strong margin achieve and revenue growth of to to experienced had $X.XX and recent to of segment solid well these of our QX, capital and adjusted HVAC remain of expansion. our forward quarter we We full-year measurement another detection on guidance operations additional the in integrating move segment on During We allocation EPS opportunities. our full including $X.XX our at businesses. range

authorities excited leader systems all up and wastewater in of CUES positions for long We way leading pipe also pipes the the significantly in a of broadens our CUES into and QX the pipe with acquisition a to very highly our engineered customer equipment nicely the our purchase largely enhances fits with niche from we're company acquisition business of is a history quarter those wastewater and to competitive repair rehabilitation position. have team power systems. products. and Measurement service driven and It This cash contractors the whole. CUES welcome already which flow our water significantly inspect, mainline generation water Schonstedt, of up homes. into of portfolio the CUES that to our SPX very our base made inspection technology strengthens inspection municipal CUES Along as & Detection The and SPX family. earnings of as

& our pro XXXX largest segment $XXX XXXX. of becoming is which approximately impact Measurement contributor than in full-year than the acquisitions segments. our these basis, we combined enhance June Detection our EBITDA would million, approximately guidance On by more three As is to EBITDA the our of XX% highlighted adjusted a higher in forma presentation, XX%

was X.X% from were EBITDA core were margins. by segment. experienced Engineered our the revenues of million. The year & our our in segment prior The with $XXX quarter. our Measurement to for segment. and These achieved revenue HVAC Detection HVAC core driver volumes. And supported solid revenues in results partially in expansion Solutions the & by Detection the another Turning margin favorable Core volumes offset strong second lower $X.XX. Measurement primary quarter segment in acquisitions to strong increase Adjusted increased

to creation over during volumes. sales update segment, competitive we brief in the in heating like the seeing Scott, have on strengthened call new our you our we the on are a positioning to progress our made initiatives benefits turning framework. I'd HVAC give our Before the In quarter products and high-efficiency our the value

generating expanding applications businesses, with into in helping & a broaden detection solid the our see expansion is Schonstedt opportunities a such to interest start about better our our new substantial to multiple growth our pipeline we excitement MD strong and integrating us is at team members product data as Measurement our Detection new introduced within newly we both Inspection of acquisitions from with our market communications interest and continued technologies feel are Within we our Tower including from we customers drone in we off customers offering interest solution. by seeing see level & good Cooling businesses, Location strong that CUES. orders. are convert Everest NC centers. And Everest In participation opportunity our attractive Our and line economics recent

substantially receiving very early are from review of see positive. synergy we opportunities the the after exit of to call Transfer Engineered customer we more we anticipate we stages move is line business, our power will and financials in segment, our Although product focused integration, feedback detail. the year signs which complete recent turn still away significant And our Heat are the Solutions the Scott generation will on In revenue channel end markets. growth and businesses over in to to actions now I next

Scott Sproule

was $X.XX. the a with basis, for On we start will GAAP share quarter $X.XX, from I the of of earnings XX% earnings a On per Gene. share per an reported results increase quarter. adjusted second basis net our Thanks, XXXX.

we Transfer of customary related pension and our in for As items. related adjusting Paul and one-time Heat South the are non-service adjustments Africa expense, the mentioned, to out results acquisition business addition

to partial amortization expect we'd only addition, results had our about goals. be In about ongoing In from well said $X.XX pleased impact we was results have impact with of a position On on QX, full-year would an quarter basis, we the which quarter. we the with EPS. us provide Overall, a our an only per penny. we that QX impact so expense are acquisitions net reach CUES, the associated adjusted to

to on second results core the Moving quarter. for segment

our & in reflects XX and while were declined Measurement offset Detection revenue favorable revenues continued in points. HVAC. by in modestly, which partially Core growth driven and increased in Solutions. less acquisitions by our Detection Our income segment segment, & performance income margins basis in Solutions Measurement, segment Engineered HVAC businesses margins organic margin The reduction offset Engineered growth

Now XX%. due the of Revenue grew quarter largest the HVAC. in for concentrated our segment timing part across of more shipments an the I favorable effect and were currency with the compared you this Revenues to year. by of segment will approximately the points XX.X%. a the of increase organic included that quarter through details in year basis prior walk increased This HVAC of from XX increase starting with with second cooling coming the

Heating. on approximately was experienced income XX and higher due to growth million Segment also points We margin in $X solid increased the operating leverage HVAC basis sales. up

and commodity our been in discussed experiencing input rising costs freight we've earnings As call, we including QX inflation.

to implemented we from to to price the We full-year hoping us offset see to increases continue results second higher these in the QX, expect in these actions costs. the pricing half, late During positive benefiting quarter these impact. mitigate additional and started

and from Given X% our lower prior Engineered growth to of after the shift. range of Measurement the points our projects decline burdened was lower were in input associated we Heat of The million, guidance expected higher segment down our costs segment tariffs X% of the XXXX and of we margin still X% orders a performance was margin -- Transfer the costs higher include the end to by revenue improvement upper African provided driven full-year and of million and model of particularly This February, Measurement, our orders Schonstedt we Core net income Detection across our backlog prior process for Adjusted primarily input range South When with looking & margin year basis points revenues the noted in but & fully CUES the XXX represent the segment, primarily our mix increased a XX and net Detection the cooling decline. excluding expect less exceed of as being guidance mix impact transformer of XXX core into acquisitions. XX.X%, with This achieving projects or we strength income of a margin revenue range XX.X%, gave half, the associated And our revised amortization. half X% half income declined business revenue $X first acquisitions the the the profile second business, segment in the due by impact second for expect strong approximately higher we and Consistent in decrease and by X% confidence QX contribute also strong In results approximately of basis In we effective guidance lower full-year. intangible now favorable primarily the revenues to driven Solutions basis in with core impact to recent sequentially the call. points. June, in margins experienced transformer margin anticipate input higher approximately costs. to tariffs segment. this end principally $XXX with backlog, of margins. approximately core XXX of we X%. now

with overall expectations the $XX of Regarding African line in South net were our our cash QX usage projects, with results million. approximately

find the of You details can these results in presentation. appendix on more this

Turning position. now to our financial

$XX ended remains balance We quarter cash around million. solid. Our with the sheet and equivalents

financing generation approximately cash our second end on approximately cash our leverage flow excludes and excludes million, expect borrowings $XX target our businesses free X.Xx of South Based cash existing to range XXXX, flow net leverage to projects. cash for we net of of reduce short-term Following expectations In our of we within was our significantly in closer which target our bringing $XX the X.Xx. CUES, range. core to which strong generated of used year-end by of which net the core our free QX million X.Xx every is cash half, from lower African core

capital feel shareholder about incremental ability to to value. pipeline deploy transactions to and and acquisition continue our We our source drive good

are actively during the and capacity opportunities additional year. to of have the pursuing execute half the second We

capital targeting available communicated, we of income following $XXX have expect of XXXX. least than acquisitions, and previously capacity at adjusted As for are to million deployment XXX% we recent through our more net the cash of conversion flow

Turning to our guidance.

results. adjusted For continue an earnings full-year, per in share of increase to of the at expect to XXXX $X.XX the XX% range $X.XX our midpoint we or the over

during margin already range I X% in to approximate discussed overview, core segment first-half as we on And the our guidance be X%. have based our now expect increased X%. Engineered we revenue As strong the income HVAC of segment Solutions noted, growth our to significantly to

We segment growth of for expect a range in in full-year million this core to to $XXX revenues with resume XXXX. $XXX

basis in margins headwind inflation initiatives XX year, place, anticipate Based higher we the points. margin half you back and of an our sequentially the as driving of tax For to was upper to to the net of first full-year. such segment the for and with additional sensitivities of We’ve the ends approximately expense models, help over other turn appendix interest detail put decline included a company points and I half overview update well call actions for as this rate that approximately the XX your as and input Gene. on net cost the And pricing guidance. basis second we key in will for our lower

Gene Lowe

Scott. Thanks,

and solid electrical heating businesses positive Conditions performing reaction a collection our boilers both and carried secular to institutional the to Turning of and to In spectrum run and were from run reception see inspection rate rate customer positioned products preseason fair broader strength end demand continue construction Measurement, continue for offerings. of orders acquisition drivers in across are our products. demand half our HVAC markets, we we continue QX, to market this end lines product second CUES very as favorable for to HVAC been and Detection an support In continue broad our our our well trend from In markets activity. project to are and benefiting heating, order of to Many of overall product commercial benefit strong and our remain market remains update location the businesses market see strength our growth transformer year. into well. In we monitoring a -- stable. has $ favorable end sales healthy markets. cooling, growth and

continues production backlog Our plan to XXXX. and through cover into our XXXX

units XXXX. with and price positions am quarter overall In market which other performance us We and costs. achieve on our our continue second imported to monitoring level well market the pleased as -- as commodity summary, for impact levels on of input tariffs well our and year-to-date I guidance

ample and pursuing capacity position liquidity opportunities. us inorganic give sheet balance Our to growth continue

Our target active and of in us. we remains front pipeline the like prospects

prospects against As opportunistically these shareholder allocation other value. always, we planned capital wave to maximize to actions

on are double-digit over path about remain excited driven back will sustainable forward. executing earnings the I And And our Paul. We I to our now very plans growth. turn to call

Gene Lowe

Thanks, Gene. now Brian, we go to to questions. are ready

Operator

from Thank UBS. Damian question Instructions] first our you. [Operator from comes of And the line Karas

is line now open. Your

Damian Karas

Hey, good evening, everyone.

Gene Lowe

Hey, Damian.

Scott Sproule

Damian. Hey,

Damian Karas

on other that where in elaborate level perhaps impacts you the What tariff cost respect price process you’ve addressing. how impact of actions taking. expected you that to you sizable the passed mentioned increases are of is? you So you’re might to Could your a be mitigation bit through and businesses with

Gene Lowe

Damian, Sure. let with me that. start

first a in lines, processes number of proposals mentioned in we proposal basis the all includes across sure real-time you that's lot this that information. is Scott As pricing in our the our freight headwind aggressive different for for believe We with are resulted XX make a across and changes has the absolutely it negatively on little costing year mitigated some tightening our or short actions and as includes our of believe XX and profitability undertaken script, Having full-year. second said we've of configured order points and a are if portfolio majority the look magnitude seen and of lot This very for our or We’ve And of half this positively lead basis input to the about with half. steps time. that’s businesses, either reminder, you using of changes. the points actually due products up-to-date material cost if look to you a businesses, historically that engineered size in of approximately at areas. the in history a the impact product a to this very

key clauses We are expanding pricing our number escalation expanding we’re from in fixed our a a of areas, of number suppliers.

of through we saw actions don’t And on year. when both the these the feel that we've we on forward it a a and you benefit good the else you half at in actually back quarter. on I lot the products of there? Scott, actually taking into of the coming the anything back pricing and are about we're of We if freight So, second the know going half benefits look lot seen where

Scott Sproule

I and of you and XX points think processes for full in this mean, XX our down as then to place said, mitigating that, the I point with the the at covers basis that full-year. company points that are that actions basis

Damian Karas

straight looking guess you Okay. here obviously segment, helpful. quarters had the of really at some Thanks. That’s two strong growth. I organic HVAC

more thinking bit Just you’re looking full-year, like going a it the quite that’s at looks of subdued. guidance be to kind for

ended kind thoughts to any heating for you your anything happening might cooling have of a wondering, for bit of there underlying the was kind just Just are quarter or that of a expectations what in since suggest off, little both the growth as or on cool and HVAC.

Scott Sproule

is This Damien. Scott. Sure,

We’ve right. had in great you’re part, demand business. year heating half by led the the higher in So first a of

commercial other being being driver how just growth more bigger year. as cooling of driven of part planned that beginning The organic had timing the for activities. obviously relate really But from QX that seasonal we it seasonal of in the of out half nature, that year and the they what versus a has shipment the though Some this partial is came the first how was been the of the year. in -- balance for than

forecast risk associated for to not the in winter forecast. with in have don't half, heating the So estimated from still see growth weather But want that warmer sorry, half, is down seeing kind for growth colder the you organic but dynamic a half. second the of the into you’re businesses that cooling. will tempered -- the level we of the second introduce if in winter there second the We

last it to year. So more similar we’ve kept

Damian Karas

Thanks. Okay.

Operator

next of our from question Linzey comes from Research. Vertical the And Brett line

Your line open. is now

Brett Linzey

Good all. evening,

Gene Lowe

Hi, Brett. How are doing? you

Scott Sproule

Brett. Hi,

Brett Linzey

want unbundle expectations could Good, back for level just those of a And the to I those of we balance here. the just good. the quarter. in performed some divisional come activity just D&M. little you you how the then color Maybe seeing year on move businesses and more to just are as through

Gene Lowe

Brett. Sure, Yes.

say me & very this Measurement QX's Let pleased we're with I'd that. performance year. with overall start Detection

the high Detection about it attractive and last logs it but all businesses. usually this had performed oriented reminder if both steady of nice that are see and -- about project the at exposure. businesses you think of for project The very, -- mix. we've months, about & front an there. was to been extremely rate our a a we Measurement due comp the at businesses, businesses to year, oriented we businesses very talking and project in Actually for the we’re oriented you ahead look of As run the X our two look if QX comp of thirds We businesses and have in conversion revenue rate seeing plan,

good the So we’re very more if rate well at we that's there then fair in comm directions projects. And in run very three CUES our seeing and glad. We some steady-state all weeks and across to that's business, think is the tech a are as there. synergies a our lines. seeing we’re we’re think nice only I strong and really strategic product think -- you activities obviously is is to our opportunities health we're company integration while collection projects both well feeling powerful radiodetection only going as very very relatively the had look in on newer are there bolt four added The quarter. of business. some where We CUES of nice and so This just logic already been there Schonstedt is the also portfolio, our nice we

at Detection our the So acquisitions. because in and I’m a & predominantly that will the impact feeling when post-acquisition I look down step call because two amortization bit We back of you margins Measurement businesses, on of trend good. the little -- mention did see

Brett Linzey

And seeing preseason Okay, elaborate could favorable great. power mentioned in in of early pricing then Maybe what an there you're channel fill? as slides And you a separately the just heating piece business. HVAC then that had in just the your the signal business? you

Scott Sproule

Yes, Brett. This Scott. is

there. channel. we a levels as think I good are in So a exceptional are in Feel though going perspective. from demand, feel preseason -- nothing just the on exceptional there's anything good like stocking Don't saw the we position

power wouldn't a So on I met we pricing saw not able so the we're nothing then balance cost full-year side, there. far overstated -- basis. as effectively to of that demand out and commodity opportunities as heating pricing impact and the do there we expectations, our manage, And we're increases within -- have

Brett Linzey

Okay.

Gene Lowe

would a portfolio, efficiency Yes, I Brett, is lot to drive and initiatives you and and commercial growth business. build our one at thing look really are heating add, if of to our our high

nice but starting we’ve those. have both on a progress seen We point, of nice

feel of have some that product teams the our into product well brought introductions new we about there. market done So the doing good we what the and and roadmap

Brett Linzey

Okay, [indiscernible] will so follow-up, it great. leave Well guys. there. I had I Thanks,

Gene Lowe

Thanks.

Operator

And our UBS. from Damian comes line Karas from next the of question

now open. is Your line

Damian Karas

Hey, guys.

Just was are quarter. just a South follow-up. to your for cash the there? associated what the down point expectations this with know wanted usage a Africa projects see quick I on charge at I winding future there during

Gene Lowe

I levels we forecasted the of out quarter have no as South we losses the on operations. normal Yes, Damian, that charge operating mean winding down Africa. do in we’re

we of of closure the those some by this where excess one a As you’re have and coming reminder, includes manufacturing the year, our activity that's operation of which scope end left seeing through. cost of will facilities,

vast majority and cash as this year, and left the coming we outflow you down far see the year the million so XXXX -- net As -- across And will changed. into in $XX mitigating of $XX only started projects the one with end why really going step it not that’s that the in life the really to be of cash scope forward. the this projects that’s year cash, with XXXX there majority outflow coming the expectation with of said from million we

Damian Karas

on terms was clarifying. And at follow-up just of that's the certain expectations transformers, tariffs. particularly of your have as a in given of side, voltages, sort parts, import I that largely for on all a demand Thanks curious helpful. and quick demand in the side an market tariffs? the result certain That’s Okay. changed

Gene Lowe

on the providers MVA the keeping are Yes, power. of that really be under class, portion our large the we're -- What OEM of maybe medium some that eyes transformers. our size, That would as and the the our actions up large Korean that's there say really the our that’s And would and as has is something business are import. or currently way something XX% portfolio, are evaluation. would market XX for small a and under I is a a heavy some relatively be in of percentage the that's which of portfolio EHV where reminder, core that whereas

we're say is So seen have in transformers, haven't been very would the that’s but I pricing, tracking pricing. on pushing improvement something we What closely. any we frankly and pricing

what for very see. we remains pricing competitive So

my are the as only the by year the of those we can reminder the on months. we're a is than we transformer. time should would transformers, lead that a under a pushing on That’s more to drive are right place typically. class extend business the we improvement Our duties the steady today, portfolios have price, that EHV typically to couple that one in though, of and long power least, or the see the sit but really still large now depending U.S What continue over longer in where pertains and pricing larger say our enhancement to area next those it focus situation. the configuration. get or on on the just is as on productivity margin lead time And review forth government, side clarity so understanding there I we at And currently

probably see is would the half proposals in up we there of while impact and show a back But two. next the over for to it the year. would on P&L, or take that quarter probably ruling Korean pricing some impact imports, a would it if more So next

Damian Karas

Okay, great. Thanks again.

Gene Lowe

Okay. Thanks, Damian.

Scott Sproule

Damian. Thanks,

Operator

closing Paul today’s And conclude back now session. Clegg that Q&A will remarks. call to turn for I the

Paul Clegg

Thank concludes you next all speaking look to This forward us. to quarter. call. you joining again for We our

Operator

Ladies in your conference participation call. concludes today's and you for thank program. today’s gentlemen, This

You a disconnect. have may all great day. Everyone

SPX (SPXC) 2 Aug 182018 Q2 Earnings call transcript