SPX Technologies' 2025 Q3 Earnings Call: Contradictions Emerge in Data Center Growth, HVAC Backlog, and Operational Leverage

Date of Call: October 30, 2025

Financials Results

• Revenue: Total company revenue increased 23% year-over-year in Q3 (no dollar amount disclosed)
• EPS: Adjusted EPS $1.84 in Q3, up 32% year-over-year
• Operating Margin: Adjusted EBITDA margin expanded ~150 basis points year-over-year

Guidance:

• Updated full-year adjusted EPS guidance to $6.65–$6.80.
• Adjusted EBITDA expected to exceed $500M at the midpoint (implying ~20% YOY growth).
• Detection & Measurement full-year margin guidance raised to 23.25%–23.75% (midpoint 23.5%, +140 bps YOY); Q4 D&M revenue expected modestly lower sequentially due to project timing.
• HVAC revenue and margin guidance maintained.
• Targeting $50M of Olympus Max bookings in 2025 (revenue recognized in 2026).
• Liquidity increased by >$1B with no dilution to 2025 EPS.

Business Commentary:

* Strong Financial Performance: - SPX Technologies reported third-quarter adjusted EPS growth by 32% to $1.84, with total company revenue increasing 23% year-over-year. - Profit growth was driven by higher project sales in Detection & Measurement and inorganic growth from acquisitions.

• Segment Performance:
• Revenue in the HVAC segment grew 15.5% year-over-year, with a 6.7% inorganic growth, while Detection & Measurement saw an increase of 38.4%.

• Growth in Detection & Measurement was particularly strong, with 26.5% organic growth, driven by higher CommTech project volumes.

• Capital and Margin Improvement:

• The company raised additional capital through an equity offering, providing over $1 billion in liquidity.

• This move, along with increased capacity in revolving credit facilities, supports SPX's organic and inorganic value creation initiatives without diluting 2025 EPS.

• Capacity Expansion and New Product Launch:

• SPX is progressing on expansion plans, including production facilities for engineered air movement businesses and the launch of the Olympus Max product.
• These initiatives are designed to meet strong demand and capitalize on market opportunities in data centers and heating, ventilation, and air conditioning (HVAC) segments.

Sentiment Analysis:

Overall Tone: Positive

• Management: "We grew third quarter adjusted EPS by 32%" and "revenue by 23% year-over-year." Company raised full-year guidance: "adjusted EBITDA to exceed $500 million at the midpoint... approximately 20% growth year-over-year." Management also highlighted "liquidity increased by more than $1 billion" and multiple capacity expansions and product initiatives (Olympus Max) driving confidence.

Q&A:

• Question from Bryan Blair (Oppenheimer & Co. Inc.): Visibility into 2026 — which platforms/end markets are you most confident in and any watch items for the new year?
  Response: Management is positive on 2026: strong demand in data centers, healthcare and institutional; industrial modest; some commercial softness; Olympus Max bookings and capacity expansions (TAMCO, Ingénia) are key growth drivers.

• Question from Bryan Blair (Oppenheimer & Co. Inc.): Update on KTS and Sigma & Omega integration and M&A pipeline — performance vs model and near-term actionable targets?
  Response: KTS is integrated and performing well; Sigma & Omega is early but encouraging; M&A pipeline is robust (more active in HVAC) and the enlarged, non-dilutive balance sheet supports disciplined deal activity.

• Question from Damian Karas (UBS Investment Bank): Details on capacity expansion — TAMCO and Ingénia initial production capacity and expected investment outlay financed by the equity raise?
  Response: TAMCO: 150,000 sq ft facility, capital-light, commissioning to start with ramp by end of Q1; Ingénia: a much larger (~3x) facility requiring more capex with details to be disclosed next quarter; equity raise provides capital to fund these plans.

• Question from Damian Karas (UBS Investment Bank): Thoughts on opportunity in nuclear — entitlement and near-term prospects?
  Response: Company has high share in existing cooling towers and sees retrofit opportunities (can add MW via upgrades); meaningful new nuclear opportunities are unlikely in the next 2–3 years.

• Question from Andrew Obin (BofA Securities): Are you seeing pushouts of large data-center projects due to capacity constraints?
  Response: No material pushouts observed; customers express high demand and timing variability is typical but nothing out of the ordinary.

• Question from Andrew Obin (BofA Securities): Any consumer/headwind impact on residential HVAC demand?
  Response: Residential is a small, replacement-driven part of the business (Weil-McLain boilers); bookings are healthy and ahead of plan, with no consumer-related headwinds observed.

• Question from Ross Sparenblek (William Blair & Company): Adoption expectations and run-rate for Olympus Max (targeting $50M this year) — what's the 2026 base case?
  Response: On track for $50M bookings (revenue in 2026); product is well-received and, if successful, could scale rapidly in 2027–2028.

• Question from Ross Sparenblek (William Blair & Company): Do you have a seat at the table in hyperscaler design phases?
  Response: Yes — company has established data-center customer engagements; sees a secular shift toward water-cooled chiller designs that increases addressable opportunity for their solutions.

• Question from Ross Sparenblek (William Blair & Company): KTS modeling — was it expected to be second-half weighted and any modeling notes?
  Response: Yes, KTS is second-half weighted and Q4 is expected to be its largest quarter.

• Question from Joseph O'Dea (Wells Fargo Securities): Please elaborate on Detection & Measurement performance — why did revenue and margin come in stronger than anticipated?
  Response: D&M margin uplift driven by higher-than-expected KTS margins (~40–50 bps), operating leverage from stronger volumes (including ~$20M of projects pulled into 2025), and deferral of some NPI initiatives into 2026.

• Question from Joseph O'Dea (Wells Fargo Securities): HVAC backlog up 7% sequentially — is this better-than-normal seasonality and what contributed?
  Response: Backlog is up 32% YoY (two-thirds organic); sequential dynamics reflect hydronics preseason buying and inventory timing; management expects backlog to increase into year-end.

• Question from Bradley Hewitt (Wolfe Research): Does the $1B of additional capacity make M&A funnel more actionable and increase appetite for larger deals?
  Response: Equity raise expands capacity but strategy/discipline unchanged; pipeline active and typical target range remains ~$50M–$500M EV, with most opportunities in that band.

• Question from Bradley Hewitt (Wolfe Research): Ingénia capacity — still targeting $140M run rate exiting the year and is the Southeast facility incremental to the $300M ultimate run rate?
  Response: On track for a ~$140M run rate in Q4 (ramp phase); the $300M run rate by Q4 2027 includes both Mirabel and the new U.S. facility (i.e., combined capacity).

• Question from Jamie Cook (Truist Securities): Is D&M's back-half cadence a sustainable base for 2026 given implied run-rate and margins?
  Response: Q4 strength is primarily driven by KTS margin improvements and prior operating leverage from higher volumes; some benefits were Q3-specific but KTS contribution continues into Q4.

• Question from Jamie Cook (Truist Securities): Any updated view on the 2027/2028 EBITDA doubling targets given current momentum?
  Response: Management remains committed to doubling EBITDA from ~$310M within the medium term (4–5 years) and believes they are tracking ahead of that plan.

• Question from Jeff Van Sinderen (B. Riley Securities): Thoughts on building incremental P&L leverage and EBITDA margin expansion for 2026 — any anomalies to model?
  Response: Expect operating leverage from top-line growth to support margin expansion; modest start-up costs for new HVAC plants may be a limited drag but not material to next year's margin profile.

• Question from Jeff Van Sinderen (B. Riley Securities): Are you seeing pull-forwards in data-center demand as well as pushouts?
  Response: Yes — the data-center market is dynamic: projects can both accelerate (pull-forward) and delay; company sees examples of both.

• Question from Steve Ferazani (Sidoti & Company): With expected sizable 4Q cash generation, how will you deploy that cash?
  Response: Excess cash will be deployed toward the M&A pipeline and planned plant expansions as primary uses of capital.

• Question from Steve Ferazani (Sidoti & Company): Will you maintain M&A valuation discipline given larger balance sheet capacity?
  Response: Yes — management will maintain disciplined M&A (average multiples ~11x historically), focus on cash returns and strategic fit, and avoid chasing very high multiples.

Contradiction Point 1

Data Center Market Share and Growth

It pertains to the company's perceived market share and growth in the data center segment, which is crucial for understanding market positioning and competitive dynamics.

What are your growth expectations for 2026 and key markets? What risks should be monitored in the new year? - Bryan Blair (Oppenheimer & Co. Inc.)

2025Q3: The initiatives like Olympus Max and expansion plans for TAMCO, Ingénia, and Marley are expected to drive growth. - Eugene Lowe(CEO)

What growth are you seeing in the data center market, and what are your 2025 expectations? How will the rollout of dry and adiabatic technologies support 2026 growth? - Bryan Blair (Oppenheimer & Co. Inc.)

2025Q2: The introduction of OlympusV Max, a large-scale cooling solution for data centers, is expected to strengthen SPX's position and increase addressable market. - Eugene Joseph Lowe(CEO)

Contradiction Point 2

HVAC Segment Backlog Growth

It involves differing explanations for the growth in the HVAC backlog, impacting expectations on segment performance and strategic planning.

Why is the HVAC segment backlog increased by 7% sequentially? - Joseph O'Dea (Wells Fargo Securities, LLC, Research Division)

2025Q3: Organic growth and year-over-year increases account for backlog growth. - Mark Carano(CFO)

What caused the mid-single-digit increase in D&M sales guidance: 2026 projects shifting to 2025 or new activity? - Damian Karas (UBS Investment Bank, Research Division)

2025Q2: With current facilities running at a $100 million run rate and progressing towards $140 million by the end of 2024, SPX aims to reach a $300 million run rate capacity at the end of 2027 with new facilities in the U.S. and Canada. - Eugene Joseph Lowe(CEO)

Contradiction Point 3

Operational Leverage and Margin Expansion

It pertains to the company's expectations for operational leverage and margin expansion, which are critical for financial performance and investor expectations.

How do you plan to increase P&L leverage for the enterprise in 2026? - Jeff Van Sinderen (B. Riley Securities, Inc., Research Division)

2025Q3: Focus on continued operating leverage and margin expansion. - Mark Carano(CFO)

How do you expect organic growth and margins to perform in Q3 and the rest of the year? - Bradley Hewitt (Wolfe Research, LLC)

2025Q2: Q3 guidance suggests mid-teens organic growth in HVAC with a 40 basis point margin increase year-over-year. - Mark A. Carano(CFO)

Contradiction Point 4

Growth and Market Confidence

It involves differing levels of confidence in market growth and demand for specific segments, which could impact strategic planning and investor expectations.

What is your outlook for 2026, and which platforms/end markets show the strongest growth potential? What are the key risks or concerns for the new year? - Bryan Blair (Oppenheimer & Co. Inc.)

2025Q3: Overall, we feel very good about 2026. Strong markets include data centers, healthcare, institutional, and some industrial segments. - Eugene Lowe(CEO)

What is your data center growth rate, and what are your 2025 growth expectations and the impact of dry/adiabatic tech on 2026 growth? - Bryan Blair (Oppenheimer & Co. Inc.)

2025Q2: Data center has grown to around $150 million-$200 million in 2025, reflecting high single-digit company share. Growth is expected to continue into 2026. - Eugene Joseph Lowe(CEO)

Contradiction Point 5

Data Center Demand and Revenue Expectations

It involves differing perspectives on the demand and revenue expectations for the data center segment, which is a key growth area for the company.

What are KTS's financial expectations and market expansion plans for the first year and beyond? What impact will these have on CommTech and D&M? - Bryan Blair (Oppenheimer)

2025Q3: Data center revenue was about 7% of total company revenue or 10% of HVAC, in line with expectations. - Paul Clegg(Vice President, Investor Relations)

What was SPX's data center revenue in 2024, and what are the expectations for 2025? - Bryan Blair (Oppenheimer)

2024Q4: Data center revenue was about 7% of total company revenue or 10% of HVAC, in line with expectations. Expected to maintain similar share or slightly higher in 2025. - Paul Clegg(Vice President, Investor Relations)