SPX Technologies, Inc. Q1 FY2026 earnings call

• Strong start to 2026 with year-over-year growth in adjusted EBITDA (23%) and adjusted EPS (22%). - Raising four-year guidance range due to strong Q1 performance and outlook, partially offset by Section 232 tariffs impact. - HVAC capacity expansions progressing well, including production of highly engineered aluminum dampers in Tennessee and Olympus Max in Kansas. Madison, Alabama facility build out underway. - Detection and measurement segment advancing new product initiatives, like launch of locate performance management software for location and inspection platform.

HVAC segment: Revenue grew 22% year-over-year, with 11.5% inorganic growth and modest FX tailwind. Organic revenue increased 9.6%, segment income grew $15 million (20%), segment margin decreased 40 basis points due to startup costs. Segment backlog $755 million, up 38% organically. Detection and measurement segment: Revenue grew 8.3% year-over-year, 3.9% from one month of inorganic revenue from KTS, organic revenue up 3%. Segment income grew $10 million (28%), segment margin increased 410 basis points. Segment backlog $333 million, down modestly year over year.

• Increasing adjusted EPS guidance by 15 cents to midpoint of $7.95. - Updated guidance reflects $0.05 to $0.10 impact from Section 232 tariffs, predominantly affecting HVAC in Q2. Excluding tariff headwind in Q2, first-half adjusted EPS gating similar to prior year. - Confident in increased four-year guidance implying 21% adjusted EBITDA growth at midpoint.

Q: On HVAC business, what end markets stand out besides data centers?

A: Healthcare and pharma, power, heavy industrial, aftermarket are strong. Commercial real estate, hotels, universities, government relatively flattish, battery and semiconductor lower but new opportunities emerging.

Q: On detection and measurement, strength in transportation and military?

A: Transportation is U.S. municipal markets. Iran impact on ComTech business, but strong demand expected to continue, no material step change in growth rate.

Q: HVAC orders, shipments, and backlog strength?

A: Backlog strong due to data centers, orders and bookings going into 2026, opportunities in 2027.

Q: Tariff and cost inflation, pricing and cost mitigation?

A: $10 million gross costs, offset 50% by price, other levers, 75-80% impact in Q2, no impact in 2027. Manufacturing in region of sale.

Q: HVAC margin missed due to capacity ramp?

A: $8-9 million startup costs, expected, margin performance on track, 40 basis points margin lift absent startup costs.

Q: DNM revenue outlook, margin bump?

A: Expanded scope on existing transportation project with high-margin software, driving full-year guide margin increase.

Q: Margins and end markets comfort?

A: Confident in delivering margins, end markets feeling good, small sales in Middle East under 1%, bookings ahead of expectations.

Q: Radio detection performance, Q2 and full-year?

A: Modestly flattish past years, but seeing momentum, end market demand and innovation, mid-single-digit growth forecast.

Q: Integration of Air Enterprises, RON, Thermalek?

A: Pleased with acquisitions, Air Enterprises and ROM strengthen, Thermalek has good team and synergies, attractive valuations. M&A pipeline robust with capacity, opportunities in HVAC and detection and measurement.

Q: Discipline in M&A market?

A: Strategy starts with organic growth, half M&A targets proprietary, disciplined in valuations, not playing high valuation segments.

Q: Inflation planning?

A: Input costs like steel, aluminum mid single digits of exposure, ability to pass costs on, not overly concerned.

Q: Second quarter calibration, organic growth and margin by segment?

A: Markets healthy, first half gating similar to prior year, HVAC revenue expected to be up sequentially, D&M impacted by project revenue timing.

Q: Data center revenue percentage, capacity ramp and revenue unlock?

A: Data center revenue low teens, Olathe facility online earlier, capacity expansions to serve circa $550 million revenue, ramp up in facilities.

Q: Data center supply chain and semiconductor bidding?

A: Supply chain managed with new suppliers, semiconductor bidding ongoing, well positioned to capture opportunities.

Q: Middle East impact on business?

A: Less than 1% of business, no material impact due to engineered product nature and real-time pricing.