SPX Technologies, Inc. (SPXC) Earnings Call Transcript & Summary

Good afternoon, and thank you for attending virtually the UBS Global Industrials and Transportation Conference. I'm Damian Karas from the UBS Electrical Equipment and Multi-Industry team. And in this session, we'll be hearing from SPX Corporation. We're pleased to have leading the presentation today, Gene Lowe, Chief Executive Officer. Also joining us are Scott Sproule, Chief Financial Officer; and Paul Clegg, Vice President of Investor Relations and Communications. Thank you very much for taking the time out of your busy schedule to join us. For those listening who aren't familiar with the company, SPX is a $1 billion -- $1.5 billion in revenue, 12% EBIT margin and $1.7 billion market cap diversified manufacturer of highly engineered industrial HVAC products, Detection & Measurement Technologies and power grid equipment. I'll leave the rest of the interesting details for Gene to discuss. And after completion of his presentation, we'll move to an interactive question-and-answer session. And with that, the floor is yours Gene.

Thanks, Damian. Appreciate you for having us here, and we're glad to be speaking about SPX where we are today and where we're going into the future. So we're working off the UBS presentation that I think most of the people on the call have access to. If not, you can also dial -- you can also pull this off of our spx.com under Investor Relations. So I'll guide us through the page numbers to make sure we're aligned since we don't -- we're not in the same room here. So yes, thank you, Damian, for kicking us off. SPX was really created around 5 years ago in September of 2015, where a spin occurred, and we were the 1/2 of that spin. As Damian alluded to, we are 3 segments: HVAC, Detection & Measurement and Engineered Solutions. We're on Page 4 of the presentation right now. We are predominantly North American based. You can see approximately 89% of our revenue comes from North America and about $1.5 billion of revenue. Going on to Page 5. Why is SPX of interest to long-term holders? And why are we good holding for your portfolio? We think we have a very attractive story at SPX, and it starts with -- we have some really good businesses and some really good platforms that are in growth markets. And frankly speaking, we think we're in the early innings of our growth strategy. There are some good trends in our businesses and our end markets, and we have a, I'd say, a solid growth strategy both in terms of organic and inorganic initiatives. And I'll give some examples of what we've done to date and then also where we're going as we look out over the next couple of years. Our businesses generate a lot of cash. We've cleared 110% conversion of adjusted net income each of the past 4 years. And we have a very robust business system. This is a system that we have been refining over the past 5 years, and we think adds a lot of value to both our company but also companies that we bring in and that we integrate and become members of the family. We have a very strong balance sheet, and we have the capacity to invest for more shareholder value creation as we look forward here. So moving to Page 6. If you look at our businesses, this gives a little more detail of the composition of our businesses. So you can see on the left the different product lines, the predominant product lines we have within each of our categories. Cooling towers, boilers, electric heat within HVAC, some of the platforms within Detection & Measurement and our 2 core product areas within Engineered Solutions. You can also see the revenue and EBITDA margin that we have associated with these segments. And one of the things that, I think, is important to point out is if you look at our businesses, the thing that really distinguishes us is that we are engineered products in niche markets where we are typically the leader. In the lower right-hand corner, you can actually see that approximately 90% of our revenue were #1 or #2 in the end market that we service. And those products they really are trade brands. And those brands have a tremendous amount of brand equity. We're typically the technology leader in the markets that we serve. So we have some really good businesses and some nice platforms that we can build off of. From that -- those businesses, we have a very large installed base, which really leads to the chart right above it. And that is the fact that approximately 70% of our revenue comes from replacement sales. So we think these are the 2 areas that really distinguish our businesses, if you look across our portfolio in terms of what makes us unique. Moving to Slide 7, just a quick slide of the performance over the past 5 years. Approximately, $1.5 billion top line, 11.3% net income. That's about 13.5% EBITDA in 2019, and we see some real opportunities to continue growing the top line as well as expanding the margins on the bottom line. But I think our business system has paid dividends over the past 5 years, and we think there's a lot of runway as we look ahead. So I'll go through our value creation framework, and I'm on Slide 8 right now. And what you can see is on the left, what defines us. We're engineered products in niche markets with strong brands and leadership positions. And you can see our 3 segments in the middle there. Really, our focus is on growth. We spend an enormous amount of time on organic growth, NPI, new channels, different ways to deliver through channels, different ways to enter adjacent markets. And we also spend time on inorganic growth. If you're new to SPX, this is an important lever for us that we think is a very attractive opportunity for us to continue to build out predominantly our HVAC and our Detection & Measurement platforms. We have done 5 bolt-ons over the past 2 years within the HVAC and Detection & Measurement segments. And we have a very attractive pipeline in front of us. This starts -- in every time, we start with strategy. And for each of our businesses and our platforms, we have very clear plans for how we expect to grow that. It is worth noting of our 5 bolt-ons, 4 of them were proprietary deals that came out of our strategic growth plans, where we saw a technology or a product line that we wanted. And we went and negotiated a deal on a sole source basis. Our business system, I talked about, this is something that we think is a differentiator for how we run our company today. This has to do with how we do strategic planning, how we do our operating planning, to how everyone in our company does their KPIs and how we performance manage and track those. Also, I would say, a very robust system with regards to how we do due diligence and integration. And of course, everything first starts with people. I would say I think we have a really a great team here at SPX, and we've spent a lot of time in terms of getting the right people and the right positions, but also investing a lot in employee development, leadership development and making sure we have all of the right incentives. I believe we're a high integrity organization and the amount of time we spend on leadership development and team development is quite high. And we think that's -- obviously, everything derives off of that. So the next 2 slides are slides that we included in our Q1 earnings, and this is really as a result of the pandemic to give a little bit of a feel for what the pandemic could mean to us. So on Slide 9, what we do is we give more data about what is our end market exposure. And you can see, really, on the left side, this is Slide 9, we're talking about our HVAC segment. And 29% of our business is in non resi, 11% is residential. Really, residential, the bulk of that would be our Weil-McLain would be our boiler business. And down below in the blue, you can see what percentage of our business is replacement sales. So in our residential business, it's predominantly replacement sales. For our non-resi business, you can see there's many subcategories here, data centers, health care, institutional, hospitality, light manufacturing, office, retail that it's a very diverse set of end markets. Some of which are growing very fast. Some of which are more stable, and you can see the approximate replacement sales percentage below around 50%. Going over to the right side of the slide, you can see our Detection & Measurement and Engineered Solutions segments. And the key takeaway here is we have a very significant portion of our revenue, approximately 52% that is derived from government regulated utility and wastewater utility type of business. And this is important because this type of business is typically less sensitive to economic fluctuations. And you can see the product categories below within the dotted boxes, what product categories fit into that. And then the last end market is really the industrial and that's transformers and process cooling. And again, that accounts for about 8% of our business, approximately 75% replacement sales. Looking at what this means in terms of near-term demand sensitivity, we have some businesses that are highly -- that are really not correlated to short-term GDP. And we tried to group our businesses to what might be the impact that you would see in terms of whether a large-scale economic disruption, how impactful that would be to us. And if you start in the less sensitive, you can see the businesses that we really don't think will be impacted that heavily. And on the other side, with location and commercial heating, these are businesses that we will see some demand impacts and that we've talked about in our Q1 earnings call. So this is just to give a feel for the portfolio of businesses that we have. We really like our portfolio. We have, we believe, a very resilient portfolio. And we have some very different demand drivers across our portfolio. So moving on to the next slide, which is Slide 12. A little bit more depth on our segments. I'll start with our HVAC segment. This is in the neighborhood of $600 million, a little under $600 million in 2019. This is roughly split between heating and cooling. These product lines are very similar in terms of their margin profile. And what you'll see is the heating business is very North American based, very little business outside of North America, whereas the cooling is more of a global business while the largest business is clearly in North America. We have a nice China, Southeast Asia and a growing European business there. This generates around $100 million of EBITDA, $102 million in 2019 and approximately 16.3% in terms of segment income. The next slide gives a little bit of a feel of the types of products that we sell. If you look at the cooling products, this is really most typically cooling towers that get paired with a water-cooled chiller. This would be in any large application, a stadium, a hospital, a commercial building, a school, a university, a light industrial, variety of applications and then a variety of other applications. There are some areas within industrial, refrigeration and commercial refrigeration, but the bulk is really that core nonresi business. Really good business for us, and we like our innovation and market position here. On the heating products, there's really 2 broad categories, boilers, which is approximately 2/3 of heating. Weil-McLain is the primary brand there. And our most recent acquisition was done in this segment, that's Patterson-Kelley. And then electric heat, which we call Marley Engineered Products, very good business for us that serves a lot of nonresi commercial, but to a lesser degree, some resi as well. Shifting to Detection & Measurement. You can see 3 primary platforms that we have here: fare collection, communication, tech and location and inspection. These tend to be more global businesses. Some businesses are very global here. And this is approximately $100 million -- a little under $100 million of EBITDA, segment EBITDA, segment margins of 23.7%. Really good businesses, high-tech businesses here that we actually think there's some nice growth opportunities. You can see the growth from 2016, we've had really nice growth organically and then also some nice inorganic growth in this segment. I'm going to get into a few examples of that when we get to the end of the presentation here. The Slide 15 gives a feel for the product categories that we participate in, cable and pipe locators. This is our largest platform within Detection & Measurement. Cable avoidance and inspection equipment, really good businesses. We actually think there's a very nice opportunity to continue building and growing this opportunity. We have a nice global footprint, really good technologies and some strong competitive positions here. Comtech over here on the right, I'll start with the specialty lighting. We're the leader in obstruction lighting in North America. And with the acquisition of Sabik, we are now the global leader in marine lighting that has very similar technologies, very similar communication platforms as well as back-end management capabilities. For example, in the U.S., all of your obstruction lighting needs to be monitored on a real-time basis. And if you have a light that is down, you have to notify the FAA within half an hour. So really good business as far as signal monitoring. This is the TCI brand is another business that we have in this portfolio. And then transportation is our third platform, really good business, very strong competitive position and a lot of innovation going on in that market. Moving on to Slide 16, Engineered Solutions. We see this as the biggest portion of this in terms of revenue and even a bigger portion of EBITDA is transformers. This is approximately a 10% EBITDA business in 2019. We do see this expanding, and we are focused on bringing these margins up. Good steady business. A little bit slower growth than our HVAC and Detection & Measurement businesses, but very much generating a substantial amount of cash for SPX. You can see on Slide 17, some examples of the products that we have here. Medium power transformers are the bread and butter of the transformers business. High-voltage is a relatively new -- somewhat new entrants where we've been in that business around a decade. And we've done a nice job of getting a foothold and expanding our market position there as well as a nice installation and service business. If you look on the process cooling side, this is predominantly aftermarket service business as well as selling components such as the components that you see here. Gear reducers, heat transfer media, air flow components, drift eliminators, those types of equipment that is very important to our customers. Shifting to Page 19, you can see our leverage ratio. We have a very strong balance sheet. We target between 1.5 and 2.5x net debt to EBITDA. We're sitting at the lower end of that range right now. We're at 1.6x, and we would anticipate generating a substantial amount of cash this year. So without further capital allocation, we would expect that debt to be going down. Moving to Slide 20, you can see that we did refinance our credit facility in Q4. And we feel very comfortable with our position. There's really no payments this year, half of payment in 2021 and then you get to the more steady amortization payments in 2022, 2023. And really the principal is due in 2024. So again, very strong financial position. Very nice to take advantage of the refinance credit facility in Q4, and our finance team did a really nice job there. A couple of quick examples of our growth strategy and how we have created value with our growth strategy. And these are some of the bolt-ons that we've done. And you can see here on Page 21. By combining radio detections, inspection business with CUES inspections business, we really think we've created a global leader in inspection equipment. Radio detection is very global, very strong in all markets around the globe. CUES is very strong with very good technology in the North American market, however, has very low penetration or presence outside of North America. So we think by putting these 2 together, we see a very attractive growth opportunity. Another example Flash Technology, I talked about obstruction lighting earlier by bringing in Sabik, very similar technology. We've already done some nice sharing of designs and some of the communication software that is benefiting both Flash and Sabik as these businesses come together and really operate as one. So that's been a really nice addition to the portfolio. Moving on to Slide 22. Marley, our HVAC cooling business. The SGS acquisition, this is a company that we had already had a pre-existing relationship where we had created a product and sold approximately $5 million of evaporative condensers in there very successfully. This is the acquisition of that business, which also further gave us an evaporator product line and essentially gave us a really nice expansion into an adjacent market. So our addressable opportunity has really advanced with the acquisition of SGS Refrigeration. And then lastly, Weil-McLain, who has historically been a very strong leader in the residential boiler market. As we have stated, our strategy is to really expand our footprint in the commercial market and in the high-efficiency market. Patterson-Kelley is both commercial and high efficiency for the bulk of their business. That is a really nice addition to the family that we believe gives us a really nice channel, whereas Weil-McLain is very strong with distributors. Patterson-Kelley is very strong with engineers. And as you move into the commercial side, having those relationships is very important. So we view the acquisition of Patterson-Kelley is a nice accelerator to our strategy of advancing our position in commercial and in high efficiency boilers. So in summary, I'd say that we like our business portfolio. We think we have some really nice and some diverse end market drivers. We have a strong balance sheet, and we're very well prepared to manage through the current environment. And we believe our business system is a real asset that we have to manage through this. And then as things start to return to normalcy, we believe in our strategy. And we believe that we're looking forward to executing on that strategy because we think we're in the early innings of our growth strategy. And we plan on executing that as we start to get back into a more normalized environment. So thank you for your time today. I'll turn it back over to Damian, who will open it up to Q&A.

Thanks, Gene. Just a reminder to listeners, please continue to enter any questions you might have through your chat window. While we take inventory of those, maybe, Gene, you could just kick things off by giving us a bit of an update on how things have progressed with the business since late April? I think in the first quarter earnings, you had discussed really that resilience and that stability in your business with only a few small pockets of weakness, I think, in your locators and in cooling. But you guys have been preparing as if you are going to see pressures across other parts of the business. Could you -- have you started seeing those pressures elsewhere? Maybe just kind of an update on what you're seeing?

Sure. Yes. In our Q1 guidance, we did release guidance for the year. However, we did give an update on Q2. And what we did say is that we would expect the magnitude of the impact of revenue decline to be in the neighborhood of 10%. And we got a lot of feedback that that's a lot lower than a lot of our peers and -- but what I would say is we feel very good about that. We're already 2 months in. We've said that -- and we've shown that we have a lot of our businesses that have asynchronous drivers that are not very correlated to fluctuations in economic activity. And I think you hit the nail on the head, Damian, where the 2 areas where we do expect to see and where we saw in 2008, for example, if we were to go into a recession, I'm not saying we believe that. Frankly, we see things trending positively. The 2 areas that would be impacted would first would be radio detection or our locator business. And then you would see some commercial impact. So if new building activity were to decline significantly, say, the Dodge index, that would ultimately affect us in some period of time. We typically lag that by about 6 months or so. But yes, I'd say, net-net, we're feeling comfortable with our guidance. And we're feeling comfortable with our businesses. And Scott, I don't know if you'd like to add anything else or give any other additional color here?

The only thing I would add is that 10% was inorganic impact for the quarter, we do -- just as a reminder, Gene just went over the acquisition. So we did those 2 acquisitions, Patterson-Kelley and SGS in the second half of the year. So we'll have the reported results included. So that will lessen the overall revenue impact on our reported results. But as Gene said, I would say things are trending consistent with our expectations coming into the quarter. And we continue -- one thing that, I think, people -- we try to explain and people haven't fully understood. But that transformers business is doing really well. We expect growth for the year for transformers. That is also assumed within that 10% organic decline. So there's net growth in transformers as well with margin performance more similar to Q1 than the Q2 of the prior year.

Okay. That's very helpful color. And you had discussed last quarter the potential, I guess, for $15 million to $20 million-or-so in cost savings, kind of depending on how the macro environment and demand plays out for the rest of the year. Has anything changed? I mean, are you still kind of planning for that level and you're not ready to sort of maybe bring back some of the nondiscretionary spend at this point?

I'll jump in, Gene. So that 15% to 20% is the kind of the run rate of the efforts that we had in place already. And that will be on the full year front. So what I would say is, I think as things are still so dynamic, we need a little bit more time and see how June plays out, how does the reopening that's occurring across the U.S.? Or is everybody -- can we stay reopened? How does that impact both the demand profile and the stability of our end markets and our customers and then kind of have a better sense of what the second half looks like. We obviously, did pull the guide. We would love to get the guide back out there, but it will be depending on what kind of comfort and visibility we have in the second half here as we close out Q2. And then we'll moderate those cost actions the ones that are currently in place, the ones that we have prepared on the shelf and to align with how we see the second half playing out.

Okay. That makes sense. Gene, you had -- kind of switching to the HVAC segment here for a second. Gene, you had highlighted some of those newer products and technologies that you taken to market in recent years. Just curious, in light of the COVID-19, there's a lot of increased focus out there on air filtration and disinfection kind of within commercial buildings. I'm wondering if you guys are thinking about any potential implications for your business?

Yes. And Damian, we've been asked that question a couple of times. There could be some modest impact. Now we're not directly in the air filtration or the airflow portion of the building. But if you look at our products, they are typically the most efficient way to cool. So if you care about things like lead points or high efficiency. If people are caring about making more comfortable environments for their employees, I think, there could be a modest benefit, but it would be a very indirect benefit to us. I don't think it would be a direct benefit.

Okay. But you mentioned still kind of being the highest efficiency out there with those Everest products. You've been to market now for 3, maybe -- well, 3 years or so, have you seen any competitive response to the early success you've had on these technologies?

Yes. I would say it's a great question. And the Everest has really been a nice launch for us. And not to get technical, but we have -- there's the original NC Everest what's called a cross-flow Everest and then we've introduced another flavor of Everest. And we've taken -- we've really built a nice business there. And as we have said, and as you know, Damian, we have the largest cooling tower in the world. This is CTI certified. This is certified by the Cooling Tower Interest -- I'm sorry, Cooling Tower Institute. We have seen one of our competitors tried to compete in an ultra-large solution like ours. However, it's substantially less capacity than what we've gotten to. So yes, you're always going to see people trying to catch you and that's going to always be the case, and we're going to continue to innovate to ensure that we do stay in the strongest position there. But we still believe that we have the largest package cooling tower in the world. And then with the second generation, the -- what we call the Marley MD Everest, and that has even further extended the size and then the advantage that we would have over competitors there.

Okay. It doesn't sound like you're too concerned in the near term, at least from a market positioning standpoint. And maybe switching over to the heating side of HVAC. You sort of have your legacy Weil-McLain and then you discussed the Patterson-Kelley acquisition. Could you just maybe kind of take a step back and tell us sort of what kind of trends are you seeing in the market when you think about kind of forced air versus hydronic or direct heating systems when you think out condensing versus noncondensing boilers, gas versus electric, right, the whole high-efficiency question? When you think about these various market drivers, how is SPX positioned?

Yes, sure. So I think so if you kind of look at forced air versus hydronic to take a residential house, it's either one or the other. And what you'll typically see is hydronic is a portion of the market. We think it's somewhere in the neighborhood of 15%, less than 20% of the overall housing stock in the United States and Canada. However, what you see is once people go to one technology, it is extraordinarily hard to change and would be very expensive. And we're not aware of any -- of a customer who has said, we're going from hydronic to forced air, forced air to hydronic because the way you build the house that's something that's very, very difficult to change. I think that you see typically in the warm areas, you see less hydronic and you see a lot more hydronic, which gives a very nice warm heat, very nice radiant heat in really the colder areas. So you'll see mostly hydronic in New England, New York, Chicago, Minnesota, those types of areas is where you see a really high incidence rate of boilers. So we don't really see that shifting a lot. With the efficiency of standard efficiency and high efficiency, I think you are seeing a slow shift where the majority of the market is still standard efficiency. And you're seeing every year the high-efficiency market will outgrow the standard efficiency market. So over time, things are moving towards high efficiency. But interestingly, we have seen a few things that have slowed that down a little bit in terms of low oil or gas prices, you don't really -- the savings you get are a little bit lower on the high efficiency. And then the second thing I would say is the durability. When you think of a cast iron boiler, which is a standard efficiency boiler, those last a very long time, let's say, 40 years, whereas the high efficiency solutions, which are stainless steel or aluminum, are typically going to be less than half that. I'd say you can see a lot of them in that 15-year range or last 10- to 15-year range. So depending on your needs and requirements, we would expect a longer-term migration to high efficiency. We have a very nice product offering in our high-efficiency product categories. We had some holes a couple of years ago. The team over the past 5 years has done a really nice job to, I would say, have a really good full line to grow with the high efficiency market. But I do think as a mega trend, you're going to continue to see movement towards high efficiency there. And what was the last question, Damian, the last component? Damian, if you're speaking, you're on mute.

I apologize. Yes. The last question was part of the question was just kind of how you're positioning around that for these differences -- high efficiency versus the kind of the standardized normal and how...

Yes. One other thing that's probably worth noting, Damian, that I didn't mention is the bulk of our boiler business, let's say, before Patterson-Kelley, were about 75% resi, 25% commercial. And then really, our commercial was oriented off of our resi boiler. So we typically participated in the smaller boilers for like churches or Chili's restaurants or elementary schools. We didn't really have a robust product line for the large applications. We have launched a product line called the SVF that we now have a really robust product line, a very competitive product line for large applications. And then the acquisition of Patterson-Kelley really gives us the channel that we were lacking. Because while we're very strong in the distribution side, which is how the smaller portion of the market buys, we did not really have a great channel to the larger end of the market. And that's what Patterson-Kelley has a very good channel there.

Got it. That's really helpful. And we actually have someone kind of pointing -- drawing our attention to that in the Patterson-Kelley deal, you also did bring on kind of a small water heaters business. That's a new area to SPX. I mean how are you thinking strategically about that asset?

Yes. I think, we think that's a good product line. I think that's a smaller portion of the portfolio. The bulk of that business is commercial boilers and predominantly high efficiency boilers. I know we do like that product. I don't know if we've completed the analysis of how big can we grow that product to. But we do participate in a number of water heating areas, and that could be an area that we look to continue to build further.

Okay. Makes sense. Maybe switching to Detection & Measurement. You talked about that being one of your higher growth opportunities. You have sort of a wide range around your organic target, kind of 2% to 6%. That's obviously the high end of that, it suggests of higher than kind of a run rate kind of recurring type of profile. How do you think about the fundamental drivers for Detection & Measurement? And why sort of that wider band?

Yes. And I think, as you know, Damian, you know our businesses very well. We think that segment is a 4% plus growth business. And if you look over the past 4 years, organically, we have grown organically faster than that. But I would say the biggest thing that can drive the difference in the growth rates there is really the projects. When we think about Detection & Measurement as a whole, typically, approximately 2/3 of it is run rate, very much ongoing recurring business. And then you have approximately 1/3, which is more larger projects. And this could be projects that are, $5 million, $10 million, sometimes $20 million, very attractive margin profiles on these. So depending on whether you have a higher number of projects or a less amount of projects can be an influencer to whether you're towards the higher end or the lower end of that growth range. And Scott, anything you'd like to add with regards to the bands and how to think about them?

No. Yes, and I think that's exactly right. It is that 1/3 of the business that has a little bit more of a -- each year you're having below that order book. It's not a run rate type of a business, and it creates some of that differences on a year-over-year basis as well as can create some variability on a quarterly basis.

Okay. Great. And we're running short on time here, but -- so we're not going to get all the questions, but what kind of the last one, I guess, if we could squeeze in here, just regarding capital deployment, I guess, kind of a multi-part question here. One, sort of how are you nurturing your M&A pipeline during the current pandemic? And how are you thinking about sort of your timing and your capacity for deployment kind of coming out of this? And secondly, what have you learned from your early M&A process, really kind of these last 3 years when you went from kind of transition from sort of deleveraging portfolio cleanup mode into active capital deployment M&A mode?

Yes. Sure, Damian. I think the first thing I would say is, if you look at our growth strategy and the opportunities that we have in front of us, we think it's very attractive. And we talked at the end of Q4 how we believe we have the most attractive and largest pipeline of growth opportunities that we have had in the past 5 years. And that's true. Clearly, the coronavirus has slowed things down. If you cannot travel to a prospect, if you can't travel to do due diligence on site or with customers, facility walk throughs, you're not going to be able to be there day 1 for integration. You're not going to be able to execute on acquisitions when you're in the current circumstances that we have right now. So in terms of capital deployment and how we would think about it, I'd say the 2 pieces that we'd have to have settle with one that the capacity to travel is going to be a really important one. And then the second one is that, as Scott alluded to, a return to some sort of normalcy and visibility. So you have a feel, you have a visibility to how things are trending. There's still variability and a lot of different opinions for how we're going to come out of the coronavirus impact and really for us to be contemplating capital allocation, capacity to travel and visibility to the forward 12. I would say, the 5 bolt-ons we've done have gone very well and I believe, have worked out very well for shareholders. And if you look across these 5 acquisitions, we've significantly enhanced the margins of SPX. We've enhanced the growth profile. We're getting very good cash-on-cash returns. And you look across these 5 bolt-ons, and I believe in 4 out of the 5, we've exceeded our synergy targets. So we went in with targets that were meaningful material targets, and we've beaten them in 4 out of 5 of the cases. So net-net, I think the 5 bolt-ons are evidence of our growth strategy and the fact that we think there's a lot more runway in our growth strategy. And really that we think building out our HVAC and Detection & Measurement businesses, in particular, that we can be -- we think there's a lot more growth there. And to your question of how we've been nurturing, we have -- as we alluded to on our Q4 earnings call, we are in a lot of discussions with various parties and the coronavirus has obviously impacted that. Some of those parties are completely understanding and putting things on hold. Some still are very enthusiastic to keep moving. So you see a variety of, I would say, responses there, but we're focused on doing what's right for our shareholders. And we do believe that this is a really important part of our value creation process here. And Scott, would you like to add as we think about capital allocation and M&A.

Just -- yes, with that backdrop and with the -- we want to get there, it's just a matter of right now, we're focusing on preservation and until we can get those early signs that it's the right time to move forward. But just to give a sense for liquidity coming out of Q1 with the cash on the balance sheet and our access to our revolver, we had capacity of about $350 million of readily available liquidity at our leverage range of 1.6x. And so we're in a very good position from a balance sheet perspective. That didn't take into consideration any cash generation this year, as Gene alluded to earlier, which we fully expect that we will have cash generation in a year. Well -- it's going to be tied to how we firm up the second half viewpoint. So I think we're in a very good position, both from a balance sheet perspective, ability to execute. And then -- so it's really a matter of timing.

Appreciate that. That's really helpful color. And unfortunately, we're out of time. Gene, I don't know if you have any closing remarks you'd want to make?

No. I think we covered a lot of ground here. If you have questions, feel free to reach out. And Paul Clegg is -- can be helpful on many fronts. So feel free to reach out to myself or Scott, and we'd be glad to answer any questions.

Terrific. So I want to thank you, Gene, Scott and Paul, for spending the time with us today and for everyone listening on the line for joining us as well. Have a great rest of your day, everyone.

Thank you.

Thank you.