SPX (SPXC) 2 Nov 232023 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Q3 2023 SPX Technologies Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Paul Clegg, VP of Investor Relations and Communications. Please go ahead.

afternoon, good and you, everyone. Thank us. Thanks for joining Gene With and President Chief Officer. are Mark me the call Financial on Lowe, Chief our our Carano, today Executive and Officer; issued our XXXX A third release market close. containing results press was today after quarter

press and find webcast encourage presentation, live as of release earnings can discussion our I call, this to in a the on You of review GAAP will X. the November along our results Relations our our be until to to website disclosure with and in section spx.com. slide prepared as of link and slide follow you release the remarks. this a of well available the during presentation Investor website A at our replay webcast

portions comments subject and reminder, a factors are Please note presentation our Safe to our the of filings. and in SEC also risk provisions. Harbor recent forward-looking most As

adjusted operations largely comments comparisons continuing of on today will will results financial Our only. results, the and focus be

You reconciliations of today's figures in GAAP adjusted can find respective the to presentation. detailed from measures appendix their historical

primarily Our costs, earnings exclude changes acquisition-related expense. share per mark-to-market non-service pension and amortization adjusted items,

Finally, we the Baird months, at that, with over call Conference to with will the meetings over the Beach, and Summit at Gene. the in be in Chicago Industrial in November. And investors Industrials UBS including Palm coming both conducting Florida, I'll turn

and afternoon, Good everyone, you thank for Paul. Thanks, us. joining

results on performances significant recent an for margin quarter. On guidance on solid consolidated from call achieved full We'll update the including an year-on-year growth update segment acquisitions. We our provide our results XXXX. QX, and we'll with you our the and strong also provide and revenue for third today in year

saw for year-over-year performance the well, outlook, many we XX%. our raising our and by of continue year-to-date markets. guidance end are $X.XX adjusted growth strong QX, midpoint, across During full and reflecting Considering our EPS strong at executed demand businesses approximately our year of we

is with agreement after remaining years, allows Mitsubishi related development projects an between us finalized the we quarter, very to brings claims to This all which, to the During a settle positive Africa. end with South an many our focus quarter in detail. pleased third value Mark us continued performance to involvement our more will projects execution Overall, and these this roadmap. discuss growth. our I'm in creation on in on and further strong

Turning to our results. high-level

updated For organic growth XX.X%, XXX driven the approximately approximately with our including strength Adjusted and grew momentum, solid year-on-year efforts. points income creation quarter, are by segments. in we order revenue grew & Detection of well-positioned we backlog, on XX% you operational XX%, to by I'd positive HVAC trends Measurement to both operating basis of achieve guidance.As margin With always, value expansion. and our strong like our full update year

During sustainability QX, our successes, digital and including we initiatives. in several had

reduce underground in These features. locators such insights assets provides assets. to easier scan by and of Online, recently value public Genfare This rollout to our technicians In enhanced significant collection our more we getting of efficient new front, of and version business, newly as digital customers and new our X.X interest of and field providing an quality in faster the enables that platforms that value-added cloud-based use offer for incidents a of the reporting collection geospatial drive fare transit customer data solution solution continued the damage we business, are launched to Radiodetection Manager launched data. the improve Link the On software performance our for cloud-based enhanced further In platform. help functionality. we

Mark and validate to usage. been I'll process making company On improvements the report our costs. most the is website. sustainability now, front, improvements over financial on investments and available our notable And turn reflects progress The water reduce These and target review towards significant our to utilization report results drive our to help reduction the and efficient guidance. resource recent call we've carbon results in

HVAC and Measurement strong million, quarter are by practice. from $XX.X of with In adjusted & increased Segment growth about XX% earlier basis evenly was increased Technologies. results contributed XX% to Total million, It by Detection Gene. for organic QX, points. year-on-year. GAAP Thanks, historical XX.X% SPX consistent was XXX tailwind. income margin year-on-year growth, a another covered company our $X.XX. to Paul our to segment grew XX.X%. and EPS FX revenues while XX.X% contributed The $XX.X Acquisitions modest adjustments grew or

organic segment quarter our by included For cooling HVAC grew growth driven our and basis, $XX.X in contributed Segment while segment, margin by points. of platform. benefit increased Acquisitions the margin from continued in XX.X%, demand million, performance cooling our heating XX.X% and income grew platform. XXX in operational ASPEQ XX% basis platform an Segment and cooling. revenues On and strong in year-on-year. grew XX%, revenues TAMCO our or to income

segment Despite QX deliveries, QX backlog strong from margin. was $XXX reflecting to unchanged virtually Our million, orders. at recent accretive strong acquisitions were

of For year-on-year. in the to currency Detection platforms Measurement, favorable revenues organic quarter contributed X.X%. while had XX.X% of XX.X%, growth our a grew & Each impact of

backlog with some to deliveries. flat orders. Our was for a Segment by at and income including X.X% particular million strong $X environment show continue earlier-than-anticipated quarter-end experience million, to project prior Overall, QX was project margin the increased despite or deliveries. solid year. similar or $XXX businesses strength, we Segment

to the $XXX million. our position debt now of with $XXX total Turning quarter. of QX million the cash and at We financial of ended end

free to full income. X.Xx adjusted our adjusted flow Our to cash in net year we from approximately and similar leverage was cash declined to free to $XXX million, be ratio QX. X.Xx flow adjusted Year-to-date, continue expect

D&M us our the Mitsubishi the repositioning our South many the focus After settle reprioritize growth these During our businesses and legacy in related to African we South reducing from our complex with to projects, involvement this HVAC projects. all with we and segments. Africa ends power-related the legacy remaining agreement to of as agreement finalizes an strengthen resources on associated away of claims years successfully finalized QX, between risks

third year settlement associated QX were payment usage awards full dispute $XX the expect tax tax This with we in on the of net by and remain final cash cash the cumulative various approximately settlement legal South related anticipate Africa After agreement, positive granted settlement we that Mitsubishi payments during in position XXXX, a includes bodies. in the the approximately payment quarter to now XXXX, awards to cash net a one benefit. million. benefit. payment quarter, received relative $XX of related the we million, including For the a dispute In

economics, of future of and removes us. roughly settlement We line to in $XX are very $XX legal the agreement pleased residual million related dispute with reflects to including This million elimination spending favorable payment. put chapter behind the this uncertainty remaining resolution to annually, the process

on impact capacity a leverage deployment to ratio Importantly, our capital net we and year-end of at anticipate see continue lower. X.Xx no or

Moving on guidance. to our

for range a from our of $X.XX $X.XX adjusted of increasing prior guidance year-on-year new XX%. EPS to are growth The XXXX to $X.XX range $X.XX a $X.XX. of of reflects to a We midpoint

segment guidance unchanged. remains Our HVAC

midpoint. year-on-year to revenue million. anticipate segment, with income at the range increase compares margin anticipate million midpoint XX% the to or $XXX XX.X% a segment continue Measurement $XXX our approximately million, now XX%. to we growth of revenue $XXX of of in This of approximately prior In a at We & of the $XXX approximately range Detection and segment million

in deliveries anticipate continue income from XX%. The margin project largely the results stronger D&M third increase of approximately in quarter. guidance segment to We

comments. As markets considerations always, the in our now and our turn a you closing to call appendix I'll the for will find his Gene end presentation. to over modeling of back review

demand conditions supportive market solid industrial data centers, Current In see a heating, strong Within and Mark. Thanks, demand broad we remain channels segment, our across various of facilities. commercial our cooling semiconductor industrial, and end set applications, of for HVAC products continue remain plants market balanced. remained and to outlook. other including

year's backlog to As normalize last levels. from anticipated, heating continued elevated has

of with a again project winter and momentum, positive achieve well-positioned is solid. while weather key very year-to-date full run during the result, a & strong In are Detection I'm demand level operational performance. orders a Measurement, regional we backlog As our environment third remain some is with guidance. influencing rate quarter for and the With summary, year pleased variation, our the updated in In our demand months. factor steady once to

to Looking to our growth, come. I'll elimination pipeline. in And and continue active that agreement to outcome framework investing settlement years end I'm that, our in very the there the multiple opportunities executing favorable Paul. our long of for this involvement creation I ability M&A including also in South to with risk. call our a for near-term ahead, value with back an to through the our economic pleased turn see I brings on remain confident continue Africa

to questions. we Operator, Gene. now are Thanks, to go ready

Oppenheimer. comes [Operator from Instructions] of line Bryan with question first the And Blair our

through any provide that in growth could more QX order And demand early underlying from divergence you great trends would and opportunities hear how the hoping if and was I SPX (indiscernible). little it obviously you're 'XX about the then, into QX. on visibility there's thinking color across favorable to rates a be were

at a that. Yes, crack take Bryan, I'll

There's there. very break seeing very segments, a is drivers it our our which remains nice of But think, feel I what different down strong. cooling largest we're cooling couple in really overall we I If is say we're business, board, across overall, platform. good about our the even across what seeing. would strength I

business there.Shifting has a over forward to very normalized. largely A I well-positioned that in we're replacement lot I heating more situation. our into heating is think So normal demand, look our we're think as and of business, XXXX we

and demand the board. it solid up heat, see boiler to bit. there And on seeing electric every then year, little can we're of weather there or So winter the going you're across demand the particular steady any side, suppress drive Hydronics a side, growth the

our about we HVAC Detection to looking on projects think seeing today So what is look say a past I but of and the businesses. feel projects. XXXX. actually rate we're we would on nice good year and on job If feel had the ahead the lot the X I a revenuing Management feel XXXX. very side, across over what and the and about very strong good typically we've run years, into a going booking good orders, we done projects Both We've businesses

And and to So lot the run businesses, think of awards, get we're run there's you side up steady. and very of we really, remains rate been then a set rate on equation. that well

still to feel got about and holding planning economy good the to early. add? and So you'd we've year, But direction if there's keep it's I moving positive see a but else would the like anything know today, are there. going we're pulling Obviously, an I in feel don't together up. think our what's balance the our on we Mark, like from I eye of We're we what still 'XX, say on for that very there. markets we

and tailwinds about spending, general the Thanks, of drivers last whether Yes. sort at that I industrial some say, it's HVAC in infrastructure would I positive trends driving Gene. in handful think spending both we've Bryan, some all when cases. business of over or and talked And positive remain the the mean side, I they this reshoring whether just the federal government bill many today. D&M it's from quarters, broader look that's I across solid or the those remain on opportunities of activity, the of

about So good we we it's as don't the backdrop, think sit and really I feel today. changed

go accelerating enough, having you to believe into if up we very be our a 'XX, nicely to on really year, even we're we going Yes. And and revenue shipments 'XX. year look this good we're backlog though interestingly as ahead

to be we're I a position. So going in starting strong think

positive. we So what yes, we're in feeling our from today end markets, see

has willing side? Would HVAC 'XX? centers into numbers should be segment and much And what XXXX? factor HVAC how we to seen in data expect And the growth in to the plants some kind confidence those your in verticals you of put on semiconductor what

Yes. We've comments always in a been can data make few I centers. there.

we XX% from of about would revenue come probably cooling centers. data Yes, anticipate this year's

those, and into example, up of us forward from have semiconductor visibility nicely of Bryan, year. an there all probably customer amount For the as exposure the And manufacturing those, their plants.And battery if pretty good say at seeing that's heard has look base for increasing pretty you X also, you prior are we years.

very feel we So about the opportunity good there.

markets, the Yes. end thing we're growth end those our across And I other if even other say seeing would is, you markets. nice then strip out

even demand So do in forward that and nice we're as market has take are like segments, But no some institutional, well. that feel education. doubt, nice drivers, that you Those growth success there's nice and TAM, other we there seeing there hospitality, our expanded.

yes, [pride] good So we into that as 'XX. look feel 'XX about we and

update integration ASPEQ, should and XXXX carryover year year any accretion? you cases? in on both How TAMCO And How the last about tracking? be partial And can is one. great. deal the Any offer, additional into And relative to that is update would on we think contribution detail plans XXXX? X financial how

Yes, I'll start.

very I'm there. our of feeling seeing have a cross-selling a wins EAM bit we're overall, some is bolting into very We're feeling more think, nice We're there. good. done little data the TAMCO The nice in I straightforward job. business. that's seeing some center really both good one guys Those about sense actually them. that

machine business, and the the on the are, So but of I I is together. it integration is little that complex believe, the are of because scale a bringing a we've of both made a side, built on bit like a plans really their X little it we side, ahead is TAMCO of along, you're businesses complicated ASPEQ more talked well. for progress there. very we've ASPEQ profit models more that feeling lot feel performing them very good. about is all there.As bit They

very We are there. tracking well

We leader take seasoned a those together. who's have will bit businesses that time there, little all those. fully really direction a very there. more of We feel the to integration really coming actually the about of overseeing good processes Data, But integrate Randy

is upside like the you Anything to So very else good. guys add?

say Yes, acquisition. outlined Bryan, they're a financial plan as made just we perspective, originally that had would when I from we the on

the businesses, $X.XX about related cost, feel of, we X and that obviously, performance. to that this be accretion we will hold believe be there'd year indicated we true I So earlier funding still good net those the and believe really financial case. their to about of

comes And from question De next of Blair. with your the Lawrence William line Maria

by on So is focused obviously, just the $X.XX. you big beat question people that

You $X.XX. only about raised by

wary Or some question to So obviously, forward any there be fourth how come, you maybe of? pulled seeing some demand. is, built is And conservativism the are into we quarter? signs

to So can you just talk of the guidance, aspect that please?

Yes. Larry, this is Paul.

by raising We $X.XX. are

originally that lot whether out were to $X.XX that of from was about of -- improvement beat About for and a saw to of there, relative was than the Measurement segment of we for terms half the bit was Detection there get of expecting we anticipating, we quarter on that what we actually, pull-forward And by fourth a In $X.XX, some that was quarter, these project about do basis, with and cash. did that.We this $X.XX. that impact and tax had a the & what higher about in quarter. we due impact some also a repatriation was were the models the to the

a would I the just of sort given there balanced I perspective, we're today. conditions we seeing say mean, that I think as from market out it guidance view

you out seeing there, if weakness, concerns are what just well. signs So about you're we pockets XXXX. as of been looking strength tea concerning of some there towards And Any much as that's obviously, actual care Then about guys than exceptionally anything? any We doing we're of tangible of XQ, have you out leaves? there other talked macro kind weakness? Are the seeing. the also specifically

we're we economic overall, seeing the sort right? of Larry, as tangible sit positive mixed could environment, But your perspective, the really depending kind We weakness, you're on seeing are anything today, that's be of which, monitoring anywhere. to not we're broader in markets in. not

of closely. steady monitor characterized largely to our continue target. watch and on run them we kind those and very rate We've businesses, We as

as we what it's So today. kind see of we sit

having I things. trends a the some and exiting backlog, year out about strength talked of you're there seen You think, and the higher and

just we're margin about should assume margins based modeling? next just So be on think we of in some can on next either that? perspective improvement, margins we How terms year, continuous incremental overall if we're talk improvement how year or about going our about talking just versus incremental to thinking you should

blowing Gene the favorably mentioned several us around HVAC tailwinds Larry, Yes, that cooling. are think we in for space

a we we're in So position think good very there.

mix previously and we at in opportunities. segment if have and You've about our points we the profile. some there & improve margin price/cost think which our were issue to back. we progression some this processes at benefit continue this good to equation, good Larry, business.I some cooling I that next year the in year. did we margin probably XXX in talk chain investments price/cost in HVAC somewhat point. about overall quarter, to pushing we know, heard you opportunities our the Detection our In with there in to about capacity year as those Measurement, some that and point, in could points for the feel see had XXX been get expand the But continuous of this supply our that headwind we some even of was technologies we're place throughput a improvement think basis us making go communication resolved expecting the basis business. We're We some very HVAC of about associated that had has that about overall, away third mention that overall we of feel

the stage, good So think set good with as for us, look we also. set project the we which opportunities our there I think about for orders, we next pretty table year feel

from your comes And line Sidoti. Ferazani Stephen next with question of the

up some sort can questions. you're how a of left, follow back I XQ. the with quarter into want of for guiding we Obviously, other to on

versus And trying right, through some that and looks because back on quarter, You I of are flat you you year pressures ago? and I margins simply flattish XQ get said that the another think of in D&M for margins fourth particularly next was addressed I'm just just year. where to quarter of expectations hitting we're down year-over-year. it when of are the the sense down up XQ bit, this that your quarter. to D&M, of to a a hit how another just projects revenue, down little can into pick And quarter better and at in down margins looking

Yes.

period, at that looking our absolutely are you the ago D&M right, year in that was in if quarter So prior year. you're the highest

I the again, a doing that mix in that did prior think that year, did kind of still the items. higher which our quarter quarter impact segment. been subsequent a favorable year.This expect same call We a it been highest XX%, this on Detection was, of fourth points benefit almost in from issue to see year. expect we that the were the products more issues couple XXX was And in margins to One end is what would as we've we and some Comtech our would from of mix concentration out we basis in supply again, quarter resolved. that's Measurement different & to have, of And in in of chain due those absence margin the year.

think as seeing some could impact of next directly with a least moving about clearly impact funneling we bigger through see Reduction infrastructure funding, federal well the Act inflation those year? are that summer, you, it from opportunities you When can funding And forward has now? which as at some been funding and other you

benefit some Steve, of seen government we from that have transportation some in funding, business. particularly our

carefully. then, that HVAC the you we'll as we're our projects We benefit we the begin clearly, see the We've many funding. that, across dollars flow watching of of anticipate of anticipate platform. about businesses. And some and next have well Inspection dollars of benefit will year, Some from some see to as availability those could more that And businesses those additional see from out. businesses benefited that AtoN may talked of Location that have where already we as benefit well.So

from has those anticipated. I think slower next anyone the and we'll those for think distribution beyond, believe that frankly, than believe But the quite we next few year of I most people years. funds benefit been

to deal, continues on where the strong near-term to expecting cash starting or delever ASPEQ Already go out generator. longer-term? clearly targeting be leverage a flow to of targets versus you're Any net

Yes.

kind that has changed next and X.Xx range a Steve, anything to we've between that on I we're don't most into think think, that net today. themselves with makes Obviously, of mean, sort and acquisition as leverage whether leverage we'll M&A we look anything I X.Xx, opportunities I communicated and present respect comfortable perspective. But an will see be there's sense dependent year, what activity. on of from

making towards lean Any think reason to ASPEQ after smaller deal? larger the you'd

No, not necessarily.

any there, I we'll completed these and nicely fit be this that opportunities transactions obviously, all accretive, out right? of of year think Small kind can well. mid-sized as we are more but that consider nicely ones, some

them be a path. value will along a it are there is strategic there and what function think a for I of opportunities with rationale creation

more that's than that obviously, think I important, size.

next Liptak Research. from question of your Seaport comes from the And Walter line

segment. did a I projects. pull-forward I question little up little a Larry's about there was us I bit some on it D&M that. ask can give in you if wanted was better was to than that mentioned And expecting, It the bit wonder more quarter-over-quarter. and you of

Yes.

at (indiscernible) related of the did bit little our but we better to was largely anticipated. from than that we also in the So $X.XX quarter for impact quarter, third fourth about a business, our coming AtoN and collection business fare

backlog the if the looked up like I the orders. on The looks about for and And be well businesses going wonder orders? then same strong in what's might maybe orders talk D&M to year-over-year. and within me, you different it pretty can sequentially thing

Walt and backlog that's at about the overall flat our for million, the was quarter, -- end of $XXX yes, around So the sequentially.

business, a them. bit terms As orders you as projects and in of tends bring large D&M flex in our backlog you know, up the down to then little in deliver our and

have also high Comtech in the some levels. relative that, business. meaningful So maybe what absolute the historical but our than I say our majority size that.But project business are which vast And to are AtoN contributors fare variances would up and less very the D&M backlog collection the little nice make seen of backlog, largest is to think really a of businesses, we are the I

to first thinking whatever? be in, in XXXX the quarter? And ship these those projects, the Or are going going those about are or are to half, I shipping guess larger kind say, of or fourth that projects

into that Walt. question. have good year, a that goes We it's of do backlog next some Yes,

There's little subsequent feel we XXXX. into to into set year, starting a even that it for would we're be up] the of like bit roll [well So XXXX.

[Operator next Karas of question Instructions] Damian comes line UBS. And the from your with

on more. Perhaps literally that official Kusile, we the remember end talking Medupi quarter-in, when if quarter-out, about the were I to and days not

want vivid get projects, any pretty memories all you in Some involved Are to mega-coal-power Gene? don't of you that. sure

think that's safe I a businesses Yes, sold fact pretty by particularly ago. and assumption, those the X about of all years we augmented that

put So it's good rearview (indiscernible) to the in that mirror.

definitely. Most

the how So in environment. appreciate the to you I rates make the quarter year-over-year think, for mentioned But any on about and actual any you've demand last around so level. just I the all want [solid] lining color up? the question I that don't order asked, was the trends. [are Could presumptions those] order numbers share

think strong again, what both off our deliveries. better. could And the a I or better fourth X. give little going book-to-bill one quarter, be into of segments fairly the in I next is is coming bit you expect quarter, really in quarters into than it maybe And that to terms we'd

excess distribution? And kind hear aspects where is carrying indications distribution partners us, HVAC [seeing] any ask wanted third-party of destocking challenges. I just of build-to-order you distribution have could you you on. not some certainly have the inventory. curious industry, manufacturing about touched of something in you kind you experiencing been then, your rely But your they've maybe And It's do I to on across that to A HVAC recognize I'm lot really business. to more you remind companies, guys partners, SPX, right? of

is would I say exactly What you're Damian. right. Yes,

is we think eyes whether distribution feel visibility a the into order, residential sure lot any it's would This not don't for we we there it's where good that. and distributor feel to going Probably residential carrying, the of very good they're business. balanced so the engineered spend I low.And boiler our time where today one that distribution keeping at them, what distributors a making really that of And chunk into is like on boiler what concerns market. is the see but not Right business be we so that exceptions the bulk the our on say are, or I really balanced, or we have would the on is on is we're biggest weather. have are know zone. or our in to that side, hydraulics, actually good now, a every there. of side, a we something of pretty high couple more

distributors, will (indiscernible)? midsize they're about finance are some is therefore, of it's cold smaller missed That's bit drive we big really of what smaller, distributors, typically we I seen some that in a up, inventory. say would with seeing keep orders that don't place second our But very Now, But careful who distributors places they numbers I finance more forth we've And I expensive I little would the chunk of to there. know, I that destocking these their a say I anything inventory, need becoming say, a And the lot think would that which eyes here radiodetection. that so it. extra else and be on.The that's to perhaps And a rates would X be to own. year. already would about there. interest but our those snap we biggest going with this think one regards Obviously,

think I covered you it.

And then quick one. one last

the if boilers. speaking on recently on your front I'm proposal discussions for that DOE at gas could move into there business any regulatory the of Hydronics, that efficiency. kind has might proposed So be out some or of happening curious so heater water rules all

the and always on that lot very regulates line in [app they higher. of after that's business. see takes it moving And then a to getting that are specifications I The towards lot DOE very think we us. years. appropriate more a use], higher. part do, What And efficiencies Yes. We upgrading And the and commercial standards systematically the what's those is of of Typically, do the No, that you our going our typically typically, I yes, never-ending the efficiencies.So X of again, which, very, residential new hard is hydronics. part engineering, update, view of getting actually are lot appropriate high of efficiency. rework. think are something the to all a just a finished benefits actually was as

have you able new so solutions. to higher-efficiency those And have to some scale to be build

advantage So Hydronics, well-positioned view true this typically, typically in a we we as typically in company I raised, being all think standards would of true that the to see when think serve. that most we're we're almost I markets the in take the you then, I positive. leaders that's serve, is but net Because this that, the markets is and

yes, it's still anticipate on, on. with going cycle. to a those are continue going we would So X-year and EPA, the Typically those

I this to call Paul time. turn And the will now no questions Clegg. see over further I at back

we Thank at us, you up for out conferences. have if to catching you look upcoming joining reach with Please forward questions. you all and

Thank This concludes you your for call. today's conference participation.

may You now disconnect.