SPX Technologies, Inc. (SPXC) Earnings

Management highlights

Overall Quarterly Performance - The company delivered a strong Q2 2026, with 23% year-over-year total revenue growth, 20% year-over-year adjusted EBITDA growth, and 22% year-over-year adjusted EPS growth, reaching $2.02 adjusted EPS. - At quarter end, the company held $168 million in cash, with a leverage ratio of 0.7x (1.4x pro forma for the Neptronic acquisition), and generated ~$72 million in Q2 adjusted free cash flow. Organic Growth & Capacity Expansion - Capacity expansion projects for data center and custom air handling solutions are progressing on schedule and on budget, matching previously outlined timelines and capital requirements. - Assembly of the Olympus MAX product launched at the new Madison, Alabama facility in July 2026, with full production capabilities to be added in H1 2027. Production ramping at TAMCO's new Tennessee damper facility is proceeding as expected. Throughput at the Olathe and Springfield data center cooling facilities has exceeded initial expectations. - Based on construction and operational progress, the company now expects total full-run data center production capacity to reach $1.1 billion, up from the prior target of $750 million. 2026 full-year data center revenue guidance has been raised to $430 million, up from $300 million at the start of the year. Inorganic Growth: Neptronic Acquisition - The recently announced Neptronic acquisition adds complementary intelligent controls, electric duct heaters, humidification solutions, and actuated valves to SPX's HVAC portfolio. - The acquisition deepens SPX's controls and system intelligence capabilities, moving the company toward integrated, controls-enabled HVAC solutions, expands its addressable market across commercial, healthcare, institutional, and mission-critical (including data center) end markets, and allows SPX to leverage its global scale and channels to accelerate Neptronic's growth. - Neptronic has a high sustainable margin profile, with segment income margins in the low 40% range and EBITDA margins in the mid 40% range, and is expected to grow at a high single-digit annual rate, above SPX's medium-term growth target. Organizational Updates - John Swann, current leader of the D&M segment, will retire at the end of 2026, with a planned smooth transition to successor Eric Khaled, who has delivered strong operational results leading SPX's transportation platform since 2019. - Brian Deck, CEO of JBT Morrell, has joined SPX's Board of Directors as an independent director.

Guidance

- Full-year 2026 adjusted EPS guidance has been increased by 45 cents, to a new midpoint of $8.40, reflecting higher expected data center volume, an improved outlook for the D&M segment, and modest accretion from the Neptronic acquisition. - The company now expects 27% adjusted EBITDA growth at the midpoint of its updated 2026 full-year guidance, up from prior guidance. - Full 2027 guidance has not been issued, but management has stated they expect strong demand growth for data center solutions, and visibility into 2027 demand is robust due to multi-year forward planning with hyperscaler customers. - Full $1.1 billion data center capacity is expected to be reached by the second half of 2028, with possible upside to an earlier ramp if current operational performance continues. The TAMCO Tennessee facility is expected to reach full capacity in 2027. - 2026 CapEx guidance remains in the 135 million to 165 million range, with spending back-loaded in H2 2026; almost all required CapEx for the expanded data center capacity was already planned and included in existing guidance, with only a small portion potentially slipping into 2027.

Segment performance

1. HVAC Segment: Year-over-year revenue grew 27.6% (8.5% inorganic growth, negligible FX tailwind, 18.9% organic growth, with double-digit growth in both cooling and heating). Segment income grew $14 million, or 15% year-over-year. Segment margin declined 260 basis points year-over-year. End-of-quarter segment backlog was $919 million, up 59% organically year-over-year, driven by strong data center demand. HVAC accounts for the majority of company revenue, with the acquisition of Neptronic expanding the segment's product portfolio. 2. Detection and Measurement (D&M) Segment: Year-over-year revenue grew 13%. Segment income grew 43% year-over-year, and segment margin increased 610 basis points, driven by favorable high-margin project mix, a large high-margin project pulled forward from Q3 2026 into Q2, and ongoing segment synergy initiatives. End-of-quarter segment backlog was $312 million, down year-over-year due to the higher project volume realized in Q2.

Risks & headwinds

- HVAC segment margins faced expected headwinds in Q2 from capacity expansion startup costs, net tariff impacts, and modest inflationary pressures, totaling ~260 basis points of year-over-year margin decline in the segment. These headwinds are expected to moderate in H2 2026. - D&M segment margins are inherently lumpy due to variable project mix and quarter-to-quarter project timing shifts, making year-over-year comparisons volatile. - Supply chain reliability is a key risk when scaling high-volume data center production, as failure to deliver on time or meet quality requirements can damage key customer relationships with large hyperscaler clients. - Customer concentration among a small number of large hyperscaler data center clients increases business risk if demand from these clients shifts or major contracts are not renewed.

Analyst Q&A

• Q: What portion of D&M's strong Q2 margin growth came from project timing vs. durable underlying demand, and what is the expected margin cadence for H2 2026? /

  A: Approximately half of the 610 basis point year-over-year margin increase came from favorable year-over-year project mix, which was expected. Half of the remaining growth came from a $15 million high-margin project pulled forward from Q3 to Q2, with the balance from ongoing synergy initiatives across the D&M platform. Management expects Q4 revenue to be larger than Q3, with similar expected margins across both H2 quarters.

• Q: Why was total data center capacity raised from $750 million to $1.1 billion, how much incremental 2026 vs 2027 revenue will this add, and what drove the Q2 HVAC margin decline? /

  A: Higher throughput came from two sources: productivity and flow optimization improvements for the Olympus MAX product at existing and new facilities, and lean process improvements, increased space, and augmented staffing for the core Everest cooling product line. This incremental capacity allowed management to raise 2026 full-year data center revenue guidance to $430 million, up from $300 million at the start of the year. The 260 basis point Q2 HVAC margin decline was driven by three expected factors (net tariffs, startup costs, tough year-ago comps) ~80 bps each, plus ~50 bps of modest unexpected inflationary headwinds; full-year HVAC margin guidance was increased modestly solely due to the high-margin Neptronic acquisition, with all other forecasts unchanged.

• Q: What visibility do you have into 2027 data center growth, what is the ramp timeline for the new $1.1 billion capacity, and how will Neptronic contribute long-term? /

  A: Management has strong visibility into 2027 demand, as hyperscaler customers provide multi-year demand visibility to ensure sufficient production capacity, and SPX is seeing growing market share as the market shifts toward its cooling solutions. Olathe and Springfield facilities are already exceeding output targets, TAMCO will hit full capacity in 2027, and Madison will be at full capacity in H2 2028, with upside to an earlier ramp. Half of Neptronic's business aligns with SPX's existing HVAC core; its advanced controls capabilities will strengthen SPX's integrated solution offerings, and SPX expects to accelerate Neptronic's growth via its existing customer and channel relationships.

• Q: After the Neptronic acquisition, does SPX still have capacity for additional M&A, and what does the acquisition pipeline look like? /

  A: Pro forma for Neptronic, leverage is 1.4x, below the company's 1.5-2.5x target leverage range, and strong free cash flow will bring leverage down further by year end, leaving significant acquisition capacity. The most active pipeline opportunities are in detection and measurement (location/inspection), HVAC engineered air movement, and electric heat, with multiple attractive strategic opportunities available over the next six months even after the Neptronic and TAMCO acquisitions.