SPX Technologies Q4 2024 Earnings Report

SPX Technologies EPS Results

• Actual EPS: $1.51
• Consensus EPS: $1.50
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A

SPX Technologies Revenue Results

• Actual Revenue: $533.70 million
• Expected Revenue: $532.88 million
• Beat/Miss: Beat by +$820.00 thousand
• YoY Revenue Growth: N/A

SPX Technologies Announcement Details

• Quarter: Q4 2024
• Date: 2/25/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, February 25, 2025
• Conference Call Time: 4:45PM ET

SPX Technologies (NYSE:SPXC) (NYSE:SPXC) is a diversified global supplier of highly engineered products and solutions serving industrial, municipal, energy and utility markets. The company designs, manufactures and supports a broad range of equipment that helps customers monitor, control and manage critical processes in water distribution, power generation, HVAC, refrigeration and industrial applications.

The company’s Detection & Measurement Technologies segment offers leak detection systems, pipe and asset assessment tools, fluid flow measurement devices, gas detection equipment and related services. Its Infrastructure Technologies segment provides heat exchangers, cooling towers, boilers, valves and other thermal management and power generation products. SPX Technologies integrates advanced instrumentation, control systems and digital services to enhance operational efficiency and safety.

Headquartered in Charlotte, North Carolina, SPX Technologies operates manufacturing, distribution and service facilities in more than 35 countries. The company’s global footprint spans North America, Europe, Asia, the Middle East and Latin America, enabling it to support customers with local expertise and a wide aftermarket network. By combining engineering innovation with service excellence, SPX Technologies helps organizations improve reliability, reduce downtime and optimize performance in critical infrastructure.

SPX Technologies Q4 2024 Earnings Call Transcript

Key Takeaways

• SPX delivered 36% growth in full-year adjusted EBITDA and adjusted EPS near the top of its guidance range, with free cash flow conversion at 108%.
• In Q4, revenue rose 13.7% year-over-year and adjusted EBITDA jumped 28.1% with a 250 basis point margin expansion, driven by strong performance in HVAC cooling and Detection & Measurement projects.
• The January acquisition of CRON’s Technology Solutions (KTS) adds approximately $90 million in annual revenue and significantly expands SPX’s communications technology platform and defense market reach.
• For 2025, SPX targets double-digit growth with adjusted EBITDA of $460 million–$490 million (≈13% growth) and EPS of $6.00–$6.25 (≈10% growth), underpinned by recent acquisitions and solid end-market demand.
• Backlog stood at $437 million in HVAC and $221 million in Detection & Measurement (+14% sequentially), and SPX expects healthy demand in data centers, healthcare, institutional and defense despite modest thermal-season variability.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Fourth Quarter twenty twenty four SPX Technologies Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

[Operator]

I would now like to hand the conference over to your first speaker today, Paul Chegg, Vice President of Investment Relations. Please go ahead.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

Thank you, operator, and good afternoon, everyone. Thanks for joining us. With me on the call today are Gene Lowe, our President and Chief Executive Officer and Mark Carrano, our Chief Financial Officer. A press release containing our fourth quarter and full year results was issued today after market close. You can find the release in our earnings slide presentation as well as a link to a live webcast of this call in the Investor Relations section of our website at spx.com.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

I encourage you to review our disclosure and discussion of GAAP results in the press release and to follow along with the slide presentation during our prepared remarks. A replay of the webcast will be available on our website. As a reminder, portions of our presentation and comments are forward looking and subject to safe harbor provisions. Please also note the risk factors in our most recent SEC filings. Our comments today will largely focus on adjusted financial results and comparisons will be to the results of continuing operations only.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

You can find detailed reconciliations of historical adjusted figures from their respective GAAP measures in the appendix to today's presentation. Our adjusted earnings per share exclude amortization expense, acquisition related costs, non service pension items, mark to mark changes and other items. Finally, we will be meeting with investors at various events over the quarter. On April 1, we are planning to host a tour of our Ingenia Custom Air Handling Unit production facility outside of Montreal. This tour is open to investors and analysts.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

If you have an interest in attending, please email me or contact me through the email address on our Investor Relations website. And with that, I'll turn the call over to Gene. Thanks, Paul.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Good afternoon, everyone, and thank you for joining us. On the call today, we'll provide you with an update on our consolidated and segment results for the fourth quarter and full year of 2024. We'll also provide full year guidance for 2025. We had a strong close to the year. We grew full year adjusted EBITDA by 36% and delivered adjusted EPS near the upper end of our guidance range.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Adjusted free cash flow was 108% of adjusted net income. During the first quarter, our company continued to execute well. We drove strong margin performance across both segments and made great progress on several key initiatives. Recently, we made another significant addition to our Detection and Measurement segment with the addition of CRON's Technology Solutions or KTS, which significantly scales our position in our communication technologies platform and positions us for further growth. Looking ahead, market conditions support continued solid growth for SPX and we remain well positioned to continue our strong operational performance.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Today, we're providing 2025 midpoint guidance that reflects another year of double digit adjusted EBITDA and adjusted EPS growth. Turning to our high level results. For the fourth quarter, we grew revenue by 13.7% with growth in both segments, including a particularly strong performance in HVAC cooling. Adjusted EBITDA increased 28.1% year on year with two fifty basis points of margin expansion. As always, I'd like to update you on our value creation initiatives.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

2024 is a big year for innovation at SPX and we introduced a number of new products that significantly enhance our customers' efficiency and safety. In our HVAC segment, we continue to extend our range of sustainability focused products. Within our heating platform, we introduced solutions that allow our customers to reduce their carbon footprint, including biofuel boilers and a heat pump boiler combination. In our cooling platform, we introduced an adiabatic line of cooling products that enables customers to optimize between power and water usage for various cooling applications. This year, we're expanding our range with a larger scale version ideal for data center cooling.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

In Detection and Measurement, we introduced a survey grade precision locator that enables our customers to meet exacting requirements for mapping critical utility infrastructure. We also introduced an innovative technology that uses acoustics to detect problematic intersections between different underground utilities such as gas and water lines. In January, we completed the acquisition of KTS, which significantly expands the scale of our communication technologies platform within our Detection and Management segment. KTS' advanced digital interoperability and tactical networking solutions integrate and distribute real time information across multiple communications domains and platforms. Their solutions enhance situational awareness, coordination and tactical execution during operations.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

KTS' solutions are highly complementary to our existing tactical data links and radio frequency or RF countermeasure offerings from TCI and UCS. Together, we see significant further growth opportunities for our Comtech platform. KTS enhances and strengthens our position in communication solutions, broadens our access to attractive growth markets and expands our global customer base. We also believe their highly differentiated technology creates attractive new product development opportunities that can be leveraged through our existing sales channels to ultimately address a wider range of potential applications. Over the last several years, our approach to value creation, including capital deployment, has been highly successful.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

We've grown earnings per share an average of 28% per year over the past four years. Looking ahead, we remain very well positioned to continue driving value for our shareholders, both organically and through further acquisitions. Now, I'll turn the call over to Mark to review our financial results.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Thanks, Gene. Our fourth quarter results were strong. Year on year adjusted EPS grew 21% to $1.51 Full year adjusted EPS grew 29% to $5.58 or towards the upper end of our guidance range of $5.45 to $5.6 For the quarter, total company revenue increased 13.7 year on year. Organically revenue grew 9.9% while the Ingenia acquisition drove an increase of 4%. FX was a modest headwind.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Consolidated segment income grew by $26,600,000 or 25.9% to $129,400,000 while segment margin increased two thirty basis points. For the quarter in our HVAC segment, revenues grew 18.6% year on year. On an organic basis, revenues increased 12.8% driven primarily by continued growth in cooling and to a lesser extent in heating. The acquisition of Ingenia in our cooling platform contributed growth of 6%. FX was a modest headwind.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Segment income grew by $18,600,000 or 25.4%, while segment margin increased 140 basis points. The increases in segment income and margin were due to operating leverage on higher organic sales and the Ingenia acquisition. Segment backlog at quarter end was approximately $437,000,000 or similar to Q3. For the quarter in our Detection and Measurement segment, organic revenues grew 4.2% year on year, while FX was a modest headwind. The increase in revenue was driven largely by stronger sales of location and inspection and ATON products.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Year on year segment income grew $8,000,000 or 27%. Segment margin increased four ten basis points. The increases in segment income and margin were driven by operating leverage on higher revenue and favorable project execution, as well as further benefits from our continuous improvement initiatives. Segment backlog at quarter end was $221,000,000 up 14% sequentially from Q3. Turning now to our financial position at the end of the quarter.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

We ended Q4 with cash of $161,000,000 and total debt of $615,000,000 Our leverage ratio as calculated under our bank credit agreement was one times. Including the effect of the KTS acquisition, which closed in January, our leverage ratio was 1.7 times or well within our target range of 1.5 times to 2.5 times. We anticipate our leverage ratio declining below our target range by year end, assuming no further capital deployment. Full year adjusted free cash flow was approximately $284,000,000 reflecting conversion of adjusted net income of 108%. Moving on to our guidance.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Today, we introduced full year 2025 guidance including KTS. We anticipate revenue in a range of $2,130,000,000 to $2,190,000,000 segment income margin in a range of 23% to 24% We anticipate adjusted EBITDA in a range of $460,000,000 to $490,000,000 At the midpoint, this reflects a margin of approximately 22% and year on year adjusted EBITDA growth of 13%. Our adjusted EPS guidance range of $6 to $6.25 reflects approximately 10% growth at the midpoint. In our HVAC segment, we anticipate revenue in a range of $1,440,000,000 to $1,480,000,000 and segment margin in a range of 23.5% to 24.5%. In our Detection and Measurement segment, we anticipate revenue in a range of $690,000,000 to $710,000,000 including the KTS acquisition and segment margin in a range of 22 to 23%.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

For Q1, we anticipate modest revenue growth driven by the KTS acquisition and a full quarter of Ingenia, which we acquired in February of twenty twenty four. We expect flat organic revenue with growth in HVAC offset by a year on year decline in Detection and Measurement related to the timing of project deliveries during the year. We anticipate margins in both segments to be similar year over year. We also expect higher interest costs associated with acquiring KTS and a tax rate consistent with our full year 2025 guidance. As always, you'll find modeling considerations in the appendix to our presentation.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Before I turn the call back over to Gene for a review of our end markets, I wanted to touch briefly on tariffs. For

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

China, we've reflected the recently enacted tariffs in our guidance for 2025. For Mexico, sourcing and revenue exposure is nominal. For Canada, sales into The U. S. From our Canadian operations make up a mid single digit percentage of our total revenue.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

SPX is well positioned to navigate potential tariff changes and we have multiple mitigation measures available. More than 80% of our revenue comes from The United States. We largely follow an in country for country sourcing model. Supply chain management is a core component of our business system and we have pricing power across our businesses. While the current situation is dynamic, we remain nimble and are prepared to act quickly.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

And with that, I'll turn the call back over to Gene. Thanks, Mark.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Current market conditions support our 2025 outlook for solid growth. Within our HVAC cooling platform, we continue to see solid demand for our products across several key end markets, including data centers, healthcare and institutional. In our HVAC heating platform, we're experiencing order rates consistent with the more typical heating season and steady demand for non residential projects. In our Detection and Measurement segment, we're seeing healthy demand for projects with delivery times more targeted towards 2026 and beyond. In our run rate businesses, we're seeing flattish overall demand with regional variation.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

In summary, I'm very pleased with the close to 2024 and our strong full year performance. Our acquisition of KTS further scales our attractive Comtech platform and positions us for future growth. With a solid demand background and strong operational execution, we are well positioned for another year of double digit growth in adjusted EBITDA and adjusted EPS in 2025. We also have an active pipeline of attractive acquisition opportunities to enhance our growth. Looking ahead, I remain very excited about our future.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

With the right strategy and a highly capable experienced team, I see significant opportunities for SPX to continue growing and driving value for years to come. And with that, I'll turn the call back to Paul.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

Thanks, Dean. Operator, we will now go to questions.

[Operator]

Thank you. Our first question comes from the line of Brian Blair of Oppenheimer. Your line is now open.

[Brian Blair, Managing Director & Senior Analyst at Oppenheimer & Co. Inc.]

Thank you. Good afternoon, guys.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Hey, Brian.

[Brian Blair, Managing Director & Senior Analyst at Oppenheimer & Co. Inc.]

Hey.

[Brian Blair, Managing Director & Senior Analyst at Oppenheimer & Co. Inc.]

Another good quarter, solid momentum into 2025. It would be helpful if you offer a little more color on how your team is thinking about the full year. What are the key watch items to keep in mind, thinking about the lower end guidance, what leverage could perhaps drive upside to the 06/25 high end? And then that framework in mind, how should we think about the cadence of revenue and earnings through the year?

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Yes, Brian, thanks. I'll start off here. As we look at the year and I would say when I think about our HVAC business, broadly we remain bullish on those end markets, right? Data centers, institutional, healthcare, some of the markets we've mentioned throughout last year remain solid and we continue to see a good opportunity there. As you think about what could drive those that guidance to the upper or the lower end within HVAC, you obviously you've got the weather dynamic that we always see on the heating side of the business that's out of our control. On the cooling side, it's when I think about non resi momentum, does that accelerate throughout the year? Does it slow down? Those are key things. We're always watching some of the key indicators like Dodge and PMI. And then the data center market, which represents fairly large projects at times, right?

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

That could represent incremental opportunity for us if it plays out. With respect to D and M, we've talked about the short cycle or the run rate side of the business. That's obviously going to remain tied to the economic environment that we're operating in. I would say with respect to our L and I business that tends to be the most sensitive to that. In certain markets, we actually feel more optimistic about what we're seeing in U.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

S. And in the project side of the business, that pipeline or front log of opportunities remains very robust. We feel good about what we're seeing across Genfare, Comtech and some of our other businesses. But I think as you know, there's always a timing element to those and where they fall within the quarters and sometimes within the year. We are seeing this front log, while it's very attractive, we're seeing actually more and I think we mentioned this in our last call, we're seeing good opportunities in 2025.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

We're also seeing quite a few that are kind of rolling into 2026 and 2027. So that's kind of the broad comments. I would say just overall on the economy, we're cautiously optimistic about what we're seeing. The sentiment is obviously improved, but you do have this kind of short term policy disruption that's out there that I think is impacting the general market. Just think about some of the things that are happening with respect to the new administration and what that means for businesses across particularly the North America and The United States.

[Brian Blair, Managing Director & Senior Analyst at Oppenheimer & Co. Inc.]

That all makes sense. I appreciate the color. I mean you mentioned data centers there. There's obviously been consternation lately in terms of where spending will trend or growth rates will shake out. Unrelated exposures, I guess, to level set, where did data center revenue shake out for SVX in 2024 and what are you contemplating in the guide for 2025?

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

So it was about Brian actually came in about what we thought it would be at around 7% of the total company or around 10% of HVAC. And it's one of the drivers of our growth along with healthcare and institutional on the HVAC side as we look into 2025. So we expect that to represent a similar or a better share.

[Brian Blair, Managing Director & Senior Analyst at Oppenheimer & Co. Inc.]

Understood. And one last one, if I may. KTS, you walked through the portfolio fits the differentiated technology. What should we think about in terms of year one financial contribution, where may that climb over time? And then most intriguingly, are you willing to speak to the TAM expansion that having brought that asset into the fold, it was now in play for Comtech and G and M?

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Sure, Brian. I'll kick that off.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

When we announced that deal, we indicated that it would have about $90,000,000 in revenue on an annual basis and segment margins slightly higher than the current segment income margins of the D and M business. Obviously, we're only going to own it for eleven months of the year. So you can kind of do the math around that.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

It's probably about $80,000,000 or so of revenue contribution throughout the year.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

On a yes, if you look at it on the first half, second half basis, Brian, we're looking at the first half being closer to kind of one third contribution and the second half two thirds contribution. And that really goes to the timing of the installations and the programs that they're involved in. And then the other comment I'd make, which I think you guys have worked out is that you see a heavier interest burden in the front half of the year and that interest burden starts to decline as you get into the second half and generate more cash flow. Modest as you said in the when we bought them that it would be a modest contribution for this year and that will pick up in the subsequent year when you pay down some of that debt.

[Brian Blair, Managing Director & Senior Analyst at Oppenheimer & Co. Inc.]

Got it.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

And then Brian,

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

I think you asked further about kind of a market opportunity going forward, right? This is a key program for the Marines in that branch of the U. S. Military. We've got high visibility into that program and visibility into the deployment of it over the coming years.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

When you think about broadening that out, there's considerable opportunity to expand that capability within the other branches of the government, whether that's Navy or other areas.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Yes, I think just a few comments there. As we've stated before, KTS is embedded in many platforms. And These are multi year installs on a variety of different aircraft, helicopter platforms that have a very strong position in a significant number of those and very good visibility to that. And as Mark alluded to, one of the areas of a very attractive synergy that we see is our TCI business has very strong global presence, very strong in MOD in The UK and Canada, Five Eyes, and we see some attractive growth opportunities there. We also have a nice presence in the Air Force.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

We see some growth opportunities there. We also see some very nice technology synergy here where they have very, very good technology. And then this technology overlaps very well with our DatalinX technology, and we think there's going to be some good opportunities to work together here on some different opportunities.

[Brian Blair, Managing Director & Senior Analyst at Oppenheimer & Co. Inc.]

All sounds good. Thanks again, guys.

[Operator]

Thank you.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Thanks, Ron.

[Operator]

Thank you. One moment for next question. Our next question comes from the line of Damian Karas of UBS. Your line is now open.

[Damian Karras, Executive Director at UBS Investment Bank]

Hey, good evening, everyone.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

Hey, Damian.

[Damian Karras, Executive Director at UBS Investment Bank]

A follow-up question on data centers. Paul, correct me if I misheard you, but I think you said that you ended the year around 7% of your total sales into data centers, the HVAC cooling business. And I think you said you'd expect a similar level this year or maybe a little higher. So one, just if my math's right, that kind of suggests you're maybe expecting data center growth of like 8% high single digits, something like that. Could you just confirm that?

[Damian Karras, Executive Director at UBS Investment Bank]

And the second part of my question is just given some of the commentary out there on some of these big companies like Microsoft and maybe having a little bit overcapacity. I'm just curious if you've seen any changes in your project funnel or your visibility for data center since we last talked?

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

I'll talk about the second one first. And I'd say the answer to that is no, Damian. We actually feel really good. As you know, if you think about data centers, AI is actually still a pretty small portion of the overall demand, obviously growing very fast. But majority of data centers is really people moving to the cloud or other applications like that.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

But I would say the demand for us, we see in front of us in our current product line is very attractive. And then also as a reminder, we have launched new products that expand our addressable opportunity here, in particular on the adiabatic and the dry. And we actually think that's going to open up some very interesting opportunities for us going forward. But I would say that data center demand we see is healthy and steady. And you want to go to Mark?

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

Yes, sure. Damian, the only thing I'd take into account in your math there is that remember that we have a couple of acquisitions that benefit us in the twenty twenty five numbers that don't have anything to do with data centers. And so obviously, Ingenia is part of that that rolls into this year and the other is KTS. And so those are going to raise your overall revenue number a little bit there that affects the math. So I'm not sure I agree with your conclusion there.

[Damian Karras, Executive Director at UBS Investment Bank]

Okay. Appreciate it. I can follow-up with you offline on that. My second question is just on detection and measurement. And Gene, you said project activity is healthy, but a lot of that stuff you're saying is kind of 2026 and beyond.

[Damian Karras, Executive Director at UBS Investment Bank]

I think that's a little bit longer lead times than you typically see in that business. So could you just maybe elaborate on the nature of these projects and why they're longer dated? And just thinking about the flat underlying sales guidance for this year for D and M, how are you kind of thinking about that, the short cycle run rate part of the business versus projects?

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Yes. Why don't I start and then I'll throw it over to Mark to kind of put it into more of the numbers. If you look at D and M, I would say on our run rate businesses, it's steady. It's maybe some modest growth there. It does vary by region, I think.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

The U. S. Is pretty steady. The continent of Europe, a little more modest. UK is pretty steady.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Overall, I'd say our run rate business, which is the bulk of the Detection and Measurement segment is performing well and performing steady. On the projects, as you know, Damian, there's a couple of different business units that have project activity. So on the transportation side, the Genfare brand, we've seen a lot of larger orders, I would say, very large orders, which are very good. And you see some of that in our backlog. You'll see more of this that's where we've been verbally awarded.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

I think some of these could even hit Q1, Q2 that have a good chunk. These are multi year projects that are, I would say, larger than the projects we've seen historically over the past five years. And these are not in and out in the same year. A lot of the transportation business, you get an order, could be $1,000,000 could be $5,000,000 could be $8,000,000 oftentimes that gets in and out in the same quarter or two. A number of these opportunities are more multi year projects where you're doing broader range of work for them and we're actually very excited about it.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

We have had the team's done a really nice job winning a lot of that business. And so I think that positioned us well for twenty six. Two other ones in our Eton business, we have some project, in a portable airport lighting has been very good business for us. We actually see some nice projects rolling into '26, '20 '7. A lot of that is more on the military side.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

So you do see longer lead times, which is very similar to the portion in our Comtech business, which we've always talked about. We do have, some longer lead times there. So yes, I'd say project activity is healthy, and we feel good about what we're seeing.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Yes, I think I mean just to add to that, what Gene's comments were, when I think about the run rate side of the business, I mean, we've talked about that being flattish. I think we are optimistic as we sit today about what we're seeing in certain parts of the globe, particularly in The U. S. But our guide today still contemplates kind of a flattish run rate business, much like we experienced last year. With respect to the project side, really all three of those are seeing a high level of activity.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

And when I think about that front log, some of those projects will be bid and executed within the year, but we're just seeing a fair number of projects that will get bid and later in the year that will either execute in 2026 or beyond or will be on a multi year execution.

[Damian Karras, Executive Director at UBS Investment Bank]

Great. Thanks for all the color guys. Best of luck.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Thanks, Damian.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Ross Permlek of William Blair. Your line is now open.

[Ross Sparenblek, Equity Research Analyst at William Blair & Company, L.L.C]

Hey, good evening guys.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Hey, guys.

[Ross Sparenblek, Equity Research Analyst at William Blair & Company, L.L.C]

Hey guys, taking through just some of the product commentary within HVAC. Can you maybe just help us get a sense of demand levels and some of the dynamics between Everest cooling and the EMA business?

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

EAM business? Yes.

[Ross Sparenblek, Equity Research Analyst at William Blair & Company, L.L.C]

Yes. Engineered air movement

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

business. Yes. I think at Coolidge, I'd say, you hit on probably our two biggest product categories for data center. I would say cooling is healthy. As a reminder, we're very strong in cooling towers.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

We do well in data centers, not only in North America, but we have a nice position in Asia, where we run a lot. Actually a big chunk of the Asian business is really oriented around data centers. We also do well in Europe. Let's say, the business there is doing well. Frankly speaking, there's a lot of excitement about the expansion of the product opportunity because we were really servicing one portion of that area, which is the cooling tower, but the two other areas, dry cooling and adiabatic, we really have not been servicing.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

So we did launch this at the ASHRAE show, the large HVAC show last month. And I think there's a lot of excitement there. These tend to be longer lead times. We would be focused on getting a material amount of bookings in '25 and targeting to get a chunk of that revenue into '26. So I'd say on the cooling side, we feel very good about what we're seeing there.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

And then on the TAMCO side, demand is very strong. I think our product I think we have a better product. It's very similar to Inginia, where our challenge is getting the production to meet the demand. And we are expanding both in Canada and in The U. S.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

There. And our focus is being able to sell more because we are in a situation where we are at full capacity there. So I'd say on both sides, we're feeling good about what we're seeing.

[Ross Sparenblek, Equity Research Analyst at William Blair & Company, L.L.C]

Got it. That makes sense. Yes. Well, I'm just trying to understand kind of the sensitivity in the HVAC top line and almost get the sense that maybe you're reserving some of the new capacity for Everest for these new products. I mean maybe just any updates on where you are in kind of absorbing that Springfield site?

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

I think the site has done really well. It's ramped up very rapidly. We've gone from zero. Have we shared the numbers there publicly, Paul? But I think you're talking tens and tens and tens of millions of dollars.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

It's been a really nice facility. We focus most of our NC and our MD Everest through that facility. That's not only for data centers. We will see that those larger scale products also used in semiconductor. We're seeing in a variety of applications of battery plants.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

We've seen them in steel, a variety of larger applications, but it's been a very nice addition. But we still have more room to grow there. So I think that there is if we find the demand, we can scale a material amount further in our cooling business.

[Ross Sparenblek, Equity Research Analyst at William Blair & Company, L.L.C]

Okay. So when you kind of think about the high and the low end of the HVAC margin range then, I mean, there's still some overhead absorption to go. If you hit the midpoint of kind of that organic guide, I mean, what gets us towards that low end? Is that kind of diluted M and A that was in the medium term targets that you guys gave last March? Or is there something else around additional capacity for Inginia that would kind of hit that, I think, twenty three percent range?

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

No, Ross, that would really be if you're talking about the lower end of the range, that would really be where you don't see as much drop through on the top line, you're not seeing as much absorption. Some of that could come from the heating side. If you're talking about a weaker winter, some of that could just come if you start to see deterioration in the macro.

[Ross Sparenblek, Equity Research Analyst at William Blair & Company, L.L.C]

Okay. One more if I can then. It still looks like it's been a pretty abnormally cold winter and a little surprised on the low single digit growth on the heating side for the boilers. Is this kind of maybe January loaded, so it's going through in the first quarter or is there something else there?

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

Yes. So actually for fourth quarter, it was really quite warm. In the it did turn cold in January and we have seen stronger bookings in the first quarter in hydronics.

[Ross Sparenblek, Equity Research Analyst at William Blair & Company, L.L.C]

Okay. That sounds good.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

As you would expect, but.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Steve Farrisani of Sidoti. Your line is now open.

[Steve Ferazani, Senior Equity Analyst - Diversified Industrials & Energy at Sidoti & Company, LLC]

Good evening, everyone. When you guided for the full year, a few months back, Looking at the numbers, the segment results for 4Q, it looks like D and M actually came above the high end of your range, while HVAC was at the very low end. I'm just trying to see what transpired as the quarter went on that sort of generated those kinds of results.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Yes, I think Steve with respect to the D and M business, we did have a very strong fourth quarter with respect to our execution there. Really what you saw was given the incremental revenue that we saw, particularly from the L and I side of the business, you saw operating leverage in the business. You also saw some very favorable project execution on some of the Comtech projects that were executed within the quarter. And then I think as you know, we've been on this year journey over the last year or two, really using CI and other synergies to drive margin across the D and M platform as a segment. And really it was a kind of a blend of all three of those elements that drove that outsized performance in the quarter.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

And some of that dynamic you obviously saw throughout the year, right, as we continue to drive D and M margins up to the levels where we finished the year. With respect to HVAC margins and the dynamic there being on the lower end, relative to where we were guiding, is really related to revenue and the drop through related to that, right, which was a function of heating and the dynamic that we saw in the fourth quarter.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

Yes, we had set sorry, we had set heating at a fairly low bar for the quarter because it had been warm. It turned out to be we didn't see a lot of uptake. It remained warm. You guys were all on T shirts up in the North and nobody was buying boilers. So that was a key driver that caused us to come in a little bit lower on HVAC.

[Steve Ferazani, Senior Equity Analyst - Diversified Industrials & Energy at Sidoti & Company, LLC]

I know I'm not the first one to ask this, but does the start of the season, is that how the season goes? Because it obviously was the coldest at least three years as we got into January, February. But if you don't order the boiler in October, are you not ordering it, you'll wait till next year? Or how does that usually play out? You guys have done this for so many years.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

Steve, I think you hit the nail on the head. It's not only the number of heating degree days, but when it does get cold and what you do see is, if it gets cold early September, October, November, people will replace the boiler. If it gets kind of cold in January and February, which you see is a lower pickup rate. You might get parts orders, you might get some service work, but you're exactly right. So the two numbers we always look at are the heating degree days, but also when specifically when it gets cold.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

We have also some regression models and historical data about what drives our TAM for that year. But I think the way you described it is accurate.

[Steve Ferazani, Senior Equity Analyst - Diversified Industrials & Energy at Sidoti & Company, LLC]

Okay. That's helpful. On the backlog builds with D and M and the expectation that 2026 could be a very strong year, So much at D and M is supported by government spend. Given the new administration, does that put any of these projects at risk?

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Yes, Steve, great question. When I think about the two areas where you would see that would be one around our Genfare business on the transportation side. I will tell you as we sit today, we're not seeing any impact from the change in administration or any of the sort of noise that you're seeing coming out of Washington regarding that business. The opportunities remain robust there and there's really been no timing change. With regard to the Comtech side of the business where you would see a tie to defense spending, We obviously are watching that very closely.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

We are not seeing anything as we sit today that would lead us to believe that there would be a change in the order rate or the opportunity there as we look out. Clearly, when you look at particularly the KTS business, but some of the other elements of Comtech, right, these are businesses that are really they're really skewed to kind of what is the modern technology of the U. S. Military, right? It's kind of where the U.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

S. Military is going. And it's not really tied to sort of these kind of large traditional equipment that you see out there. And frankly, they're essential, I would argue to the kind of the strategy of the U. S.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Military. So I think we feel good about where we're positioned there from a defense perspective, but we'll be watching it closely clearly.

[Steve Ferazani, Senior Equity Analyst - Diversified Industrials & Energy at Sidoti & Company, LLC]

That's fair. I just wanted to flip back to KTS for a second. I mean that looks like really unique technology. It looks like it would be very, very hard to just place on any projects. It looks like it fits perfectly with your past M and A strategy.

[Steve Ferazani, Senior Equity Analyst - Diversified Industrials & Energy at Sidoti & Company, LLC]

But I wanted to get a sense, Gene, is your M and A strategy evolving at all? Have you shifted priorities and what you're looking at now versus what you maybe were looking at two, three, four years ago in terms of targets?

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

I don't think so. I think we stayed true to our values in terms of how and where, what types of businesses are we good at that we can build and in growing our platforms, its engineered products, leadership positions, it's tech heavy. It's all of the same types of things that we've always been focused on over the past ten years. What I would say that does evolve as you think about our different platforms as you build, you will see new opportunities grow. Perfect example of that would be Engineered Air Movement, where a couple of years ago, we were not in that business, right?

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

We're in cooling towers, which is a very close adjacency to that. But by getting into Cincinnati Van and then TAMCO and now Inginia, our TAM is dramatically larger and how we can build that out. Now it's the same strategy in terms of the types of business. We're not a commodity guy. We're not a cheap guy.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

We run engineered businesses where product management is very important. We have a very strong focus on the customers and innovation, very strong focus on digital. And I would say if you look across our platforms today, there is a lot more opportunity. This is, on the M and A side, the busiest I have ever seen us in ten years. Really?

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

And we see some very attractive opportunities on the HVAC side in a couple of different areas and also on the detection and measurement side. So I believe our strategy is sound. We're not but we're not changing anything in terms of how we think about it really and Steve, we kind of laid out in March our strategy. It's very similar. So we're executing against that. We feel good about what we're seeing.

[Steve Ferazani, Senior Equity Analyst - Diversified Industrials & Energy at Sidoti & Company, LLC]

Great. Thanks, Gene. Thanks, Efra.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

Thanks, Steve.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Brad Hewitt of Wolfe Research. Your line is now open.

[Brad Hewitt, VP - Equity Research at Wolfe Research LLC]

Hey, good afternoon guys. Hey Brad. Thanks for squeezing me in. Absolutely.

[Brad Hewitt, VP - Equity Research at Wolfe Research LLC]

Hey, so it looks like it looks like revenue was relatively flattish sequentially in Q4, whereas about the expectation was for a modest step up sequentially to get to kind of a $100,000,000 annualized revenue run rate. Was there a timing component to be aware of there? And then how should we think about the growth outlook for Ingenia this year, both on a full year basis and kind of on an exit rate basis?

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

Sure, Brad. I'll kick that off. With respect to Ingenia, we have very, very strong backlog in that business. So we feel good about the opportunity set there. I think as you know, we're doing a facility expansion there currently.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

And that was a little bit slower than I think we had originally intended when we were chatting about this over the last couple of months. Most of that kind of challenge that we had with respect to getting up and running is behind us now. So it's up fully functional, but that did impact revenue within the quarter.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

We came in a little light from the guide based on that, but with that equipment installation, we're back on track. Okay, that's helpful.

[Brad Hewitt, VP - Equity Research at Wolfe Research LLC]

And then maybe on the KTS business, can you walk through what you're assuming from a synergy perspective and maybe a year five ROIC math? And then do you expect to see any impact on the business from Doge?

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

I'll start with, we kind of talked a little bit about the Doge dynamic, just I think in the last question. But we're watching that very carefully, but what I will say and I think Jean has made this point as well. This is just a really critical technology to the U. S. Military.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

It's embedded within one of the branches and the expectation is it will be one of the core technologies across many of the other branches. So and when you think about where the U. S. Military is going and the sort of technologies they need to support, in theater, whether that's drones, communications, things of that nature. This is just a critical component to it.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

So I think generally speaking, I would be surprised if it was impacted, but clearly the future and what's coming out of Washington right now is unpredictable. So we're keeping a close eye on it. With respect to I'm trying to remember the other parts of your question. With respect to ROIC in year five, listen, one of our key elements of any transaction that we do is that it has got to generate a return in excess of our cost of capital within three to five years. So that we wouldn't have moved forward with the transaction should it not have had that sort of return profile.

[Mark Carano, VP, CFO & Treasurer at SPX Technologies]

So you can rest assured it is it's something we're very focused on.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

On the synergy side, just a few more qualitative comments. While KTS has won a number of platforms, multi year installing of their technology and like MB22, the CH53, the A1Z, the MQ9A, that are multi year programs, there's actually a lot of growth within their existing business in other platforms and other areas within their existing infrastructure. The thing we like about this is this solves a real pain point for frontline operations. You're really taking a lot of different proprietary communications where you don't want to have 10 different communication systems, you want to have one where you can actually see everything and manage everything. And that's really the special sauce that KTS has.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

So we think they're very well positioned with their technology. As Mark alluded to, we actually think on the synergy side, we bring a lot of very strong relationships from our Comtech business. We have very strong relationships in The UK and Canada, some of the other five eyes that we think can really help expand this as well as in the Air Force, which is a big with our mobile Air Force lighting, we have a very strong relationship there. That's on the commercial side. Then on the technical side, the teams are very excited about how we can bring our tactical tailings and their solution together and deliver more value, not only to the KTS side of the customers, but to the legacy TCI side of customers.

[Gene Lowe, President and Chief Executive Officer at SPX Technologies]

That's not something that happens overnight. It does take some time to do the joint development, but we see some real opportunities there as well. So, yes, we feel good about the growth opportunities here and the synergy opportunities specifically on the commercial and the technical side. Great. Thanks guys.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

Thanks Brad.

[Operator]

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Paul Clegg for closing remarks.

[Paul Clegg, Vice President of Investor Relations & Communications at SPX Technologies]

Thank you all for joining us. We look forward to updating you on the quarter once we get on the quarter ahead. Once again, if you have an interest in sending our Ingenia facility tour, please email me.

[Operator]

Thank you for choosing your participation in today's conference. This concludes the program. You may now disconnect.

Participants

Executives

• Paul Clegg, Vice President of Investor Relations & Communications
• Gene Lowe, President and Chief Executive Officer
• Mark Carano, VP, CFO & Treasurer

Analysts

• Brian Blair, Managing Director & Senior Analyst at Oppenheimer & Co. Inc.
• Damian Karras, Executive Director at UBS Investment Bank
• Ross Sparenblek, Equity Research Analyst at William Blair & Company, L.L.C
• Steve Ferazani, Senior Equity Analyst - Diversified Industrials & Energy at Sidoti & Company, LLC
• Brad Hewitt, VP - Equity Research at Wolfe Research LLC