SPX (SPXC) 22 Feb 242023 Q4 Earnings call transcript

Hello, and thank you for standing by. Welcome to SPX Technologies Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions].I would now like to hand the conference over to Paul Clegg.

You may begin.

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

of encourage You at Relations live press to presentation, this along slide webcast are forward-looking results presentation you subject well can a call in spx.com. on recent section a A and be as in factors GAAP and to follow prepared remarks. slide and the available Please earnings most provisions. our release safe Investor of release risk replay SEC portions of of our the website our link I website with find the filing. XX.As disclosure of our our as also our during to webcast in February note will presentation to review and comments a discussion the until the harbor our reminder, in a

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

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

Investor be acquisition event on Our charge The amortization hosting pension expense, we March earnings associated settlement.Finally, York. related and XX New will with share adjusted Day exclude items, per be primarily will a nonservice in costs, mark-to-market changes, webcast. recent legal

our that, a turn as to at today's to noted over press and you of to If please website.And I'll Investor our the would like with email Relations call in-person, on request the Gene. attend end send release

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

We'll adjusted near update consolidated We close provide had of provide and the for delivered call EBITDA also a XXXX.We grew adjusted you the segment guidance XXXX. strong our EPS quarter and with On end results we'll full year today, our for range. full on XX% year our guidance an the fourth to and upper the year.

demand we continue continued QX, robust markets. of and most saw across During our to end execute well

in segment made year initiatives. our digital, period.I'm compared margin progress performance the year. and continuous We very on in HVAC of Our excellent improvement, team's our strong particular accomplishments the past results great achieved over prior proud with sustainability

of positioned schedule.Turning that X the midpoint conditions in We opportunities acquisitions growth market guidance target for would of SPX made achieve continue At XXXX also HVAC electrical robust EPS and heating well the remain of we're of strengthen air high-value results. our year operational completed growth growth midpoint ahead and geographic the that XX% share, XXXX positions key adjusted growth of and support a high-level X execution. to adjusted guidance $X movement.Looking per acquisition for strong handling strategic attractive a and Today, segment our EBITDA Ingenia, in another helped our adjusted SPX our of continued air our provider the to to our providing XX%. systems segment custom EPS broadens significant movement with reach we in HVAC markets.Recently, addition our ahead, engineered air engineered

framework. healthy touch quarter, fourth momentum.As the For operational creation always, by on X.X% positive basis trends, margin expansion. our of XXX and and we like the grew value with year-on-year We XX.X% operating adjusted with by year income points a I'd demand solid to revenue ended overall backlog,

to HVAC see levels record continuous benefits including Over continue the have allowed segment of of customer and serve and improvement quarter, margins. our in to segment efficiency past throughput demand high historically we that achieve initiatives, investments the our

efficiency heat of in AHR solutions water sustainability solution pharmaceutical, trade air adiabatic together demanding end facing our process the showcased production were that in the air-cooled including platform, also benefits products a brings simpler, with the recent is water-cooled flexibility. initiatives. high-quality welcome and and attractive meet our and handling with handling innovative team. customers' This with proprietary just needs.At software. many industrial handling configuration enables the to announced strong launched utilities Ingenia We enables water-saving cooling capabilities Earlier whose customers critical we a buried balances for and to a of outside custom manufacture this accurate we and of speed the a solution. new a of Ingenia, demanding engineering also applications. continued to of XX advance processing, and month, less air our ago acquisition continue custom air to product strong we serves introduce other niche faster, This solution costly units energy Ingenia pipes combination an design pleased show, of that I'm advanced new them inorganic colleagues an instant up growth headquartered our new to the location may has inspection cables years SPX automated utilities. lack and to markets, mapping conservation records.We've to underground This and food configurations healthcare, Montreal. for challenges.In who quality precision very leader reputation location to highly diverse and provide rejection unmatched process

advantages technical the review large our to I'll over their We and and to results. significant excited call this turn and Mark opportunities to are market.Now, growing about financial end Ingenia's address production

quarter or Thanks, grew to grew SPX year of X% Gene. EPS $X.XX. our Full Technologies. our guidance adjusted EPS the approximately upward $X.XX, $X.XX QX was to $X.XX. another end adjusted range, XX% near Year-on-year, for solid to

higher basis, to heating EPS XXX settlement. well increased X.X% lower XX% ] items, revenues sales $XX.X basis as or million in was revenue by income for The X.X% impact segment, total year the associated the margin dispute income addition points.For in $X.XX. Segment driven the On and tailwind. at of was sales by year demand continued customer quarter decline unique, event & while cooling modest grew platform. benefit increased $XXX unseasonably and a adjusted segment income to from HVAC driven As by weather XX% increased prior growth while year points. $XXX.X year-on-year. grew cooling our $XX.X partially of TAMCO a at million, with business a our while or in in Measurement, offset increased modestly. the higher highly throughput.Segment platform, Backlog the with leverage drove higher with up slight to legal from revenues by and by quarter, warm segment a charge and acquisitions. XX.X% increase year-on-year end.For excluded quarter, with Acquisitions organic results This ASPEQ a product approximately [ the margin The substantial volumes Detection was remained noted adjusted a the our revenue sales by basis cooling strong prior isolated related Acquisitions markets. equipment This TAMCO XX%, after-tax approximately organically volumes period. our of typical Segment the hydronic our followed and [ an company and accretion QX healthy flat FX in year-on-year in declined full Paul, million our revenues operating compared associated with continued included contributed end former tailwind. to heating throughput ].For XX.X% and as in declined grew increase, X% FX organic revenues our XX ASPEQ in margin was organic our platform year-on-year. million, to

incremental have achieved margin margin rate declined basis high of lower-than-anticipated a segment shipments in guidance. volumes future point CommTech million, revenue of also product of the QX $XXX the end quarter. we financial higher the we a our year.Turning that offset expenses higher QX Year-on-year cash by $X.X initiatives. We project In debt down the and within have income backlog our in to with modestly that content, run at a elevated total $XXX at disappointing. points midpoint ended $XXX including While mix.During quarter our we from sales our full-year guidance, resulting approximately margin, R&D XXX for million. end full-year million by Segment in path-through prior incurred with of segment, the below was quarter, XX resulting margins. QX, was margin, was growth million reduction basis performance position experienced lower-than-anticipated This now

midpoint, is XX% segment Ingenia range performance of anticipate guidance declined Full-year the adjusted note generation. was million of our ratio EBITDA covenant adjusted under net adjusted the a reflects of impact million, bank from this of leverage our calculated in income as our flow Ingenia as revenue segment EBITDA We end the growth full Xx to anticipate are average.Starting company billion strong XX%, to guidance. $XXX guidance, and million. increase uses X.Xx net in XX%, include or current in XX% ratio margin approximately anticipated of that our the a closing prior will assuming $XXX EBITDA by EBITDA, to leverage $XXX cash revenue of with a Today, capital approximately was XXXX range adjusted our depreciation. deployment.Moving adjusted leverage agreement primary X.Xx X.Xx difference XXXX, to of adjusted measure Please margin X.Xx to margin At growth billion, to credit year. anticipate and defined revenue agreement.In introduced flow a additional declining in QX following XXXX, $XXX credit and different EBITDA Our between Ingenia. year the to free as and the income cash that acquisition, QX, includes approximately have income. the XX%. million free for of operating a which We XXX% we above XXXX. annualized approximately bank leverage Including rates reflecting our $X year adjusted end, in on a also XXXX, of to our lower no in we $X.XX total in range, range in of year-on-year

XX% Measurement project a the sales, favorable $X.XX reflects strong in and at to order a a range content we to Detection adjusted growth XX.XX% $XXX flat from in to basis leverage & as HVAC guidance with we anticipate $X.XXX benefit to billion XX% anticipate approximately for the in the Despite past-week our the EPS almost $X.XXX we midpoint a of XXXX. Measurement our with an bulk reduction revenue acquisitions.In from million CommTech million, of of operating XX further project XXXX of over we large year. $XXX range an in increase reflecting approximately segment, margin as anticipate headwind, our deliver billion, $X.XX mix Detection at this of significant Our with & results.In We segment, we prior anticipate our at revenue of HVAC the points segment margin midpoint. midpoint XX.XX% increase range the midpoint, segment of

pass-through CommTech project the expect the products.We first in half we net to reduction cadence largely expect Detection CommTech [ XX% and with year-on-year. HVAC, underlying segment This stronger includes solid run we the from to conditions margin in in Measurement In a of anticipate XXXX, to will EPS half. results income a similar XX% year-on-year with XX%, market decline segment the sales while anticipate in and sales. earnings be year-on-year flat project, the project XX% the we sales ], flatter a D&M a second With growth mix Excluding in range of digits. gating adjusted the for favorable increase roughly rate mid-single be QX, grow of & of to we more continuation significantly respect in to anticipate delivered due associated to with our

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

outlook. plants, facilities.In across industrial applications, commercial in demand supportive see XXXX conditions our centers, market heating, continue see cooling our semiconductor to industrial markets. data strong a are broad of Current we including our end to associated we Mark. Within products and solid Thanks, demand set of decarbonization continue HVAC, with for market and

experiencing we As businesses, our always, global demand residential sales are short-cycle orders Detection in remain Measurement, project healthy. & while winter uneven are temperatures.In affected by

infrastructure.In [indiscernible] performance. solid summary, XXXX customers strong to full-year pleased close with significant the and our signal I'm Our demand continue approaching to

future. continued further our year guidance Ingenia ahead of in acquisition and cooling reach very positioned excited our schedule.Looking are ahead, X momentum, our our broadens targets remain strength to platform SPX solid we in demand positive engineered air. well Our achieve With markets, of XXXX growth and scales our and I XXXX key a opportunities backlog, about operational

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

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

of line question Instructions] Blair first comes the [Operator Company. Our Bryan with from Oppenheimer &

XXXX. targets That's you're Xx guided. pace X Obviously, about and to you XXXX in on quite growth year impressive early. Great hit EPS initially came the you

I there, nitpick let's That little that a a bit a the did the out, how said, bit. that offer anticipated with run in throughout the Maybe impact rate and there, mixed assume, detection. and came rate quarter. pressure, obviously, of lower hit All you D&M start to results see variance run And radio more the us for progression color than little surprised XXXX.

and Bryan, out relative Yes. to some you're rate saw I'll for out expectations flatten our to in respect start were quarter. where With right, run of our here. we QX guide the business, the it

to we expect and it year, We -- remain as next today. expect into that flat see look we as we

are depends products tends those you hadn't on or there. being is our feel on U.S. particular, a Europe than prepared into, outside be in forecasted, The in resilient, mentioned the the continent. whether our to you're originally a in more there as pretty others. when that market sort world in know, some that's the global of weakness and we you remarks, sold the But U.S. bit end we so fairly that seeing we little those are where of U.K. markets As business look some good uneven,

revenue Okay. you fit platform Maybe will suppose. more like are there? a with the What Maybe deal mention another Time accretion your in seems did And the overall think prospects growth great on sub-platform, And color offer for X? you Ingenia. contribution. Understood. little It you for or how year touch baking team. tell. I on about EAM

there, on past the to step it's the start think It growth. I don't And back. a XX really inorganic why makes Bryan? Yes, year probably sense I been over months positive

electric I We ] these X an [ movement. think deals, ASPEQ we've Ingenia now an TAMCO us. engineered heat, engineered [ actually air ] and done great movement, really an strengthen ] [ think really

we capital XX Now, to about $XXX past deployed put of have million months. context, this in the over

If we the by you lower at of also end down X.Xx. X.Xx less. the planned of end end the Even of of Ingenia, we'll doing had look think this be after X.Xx the lower we range, end by it, or being the on down We're year, our our year. range, about at at

We more for it's been tracking good than we we about really space good feel know well. say So would model.Specifically, the Ingenia, where a are X I very the Literally, in We've company. years. space years. about this

the this robotics gives market. think times, in but lead terms advantage best company, is I in of of the believe, nice we they them terms in this They This actually have make in are automated with. a efficient. make and how competitors product. they We many product. terms see to both highly also labor actually of have half of more than a they amount the cases people the They're less much compete they in of that certain

to do what very We them the they're than looking faster they're time And attractive So configure down And them markets. a can allows custom good this fine software really lead competitors. their very much they gives which They for. technology. think advantage. this solution, really have end to a innovative serving details

said those all typically there's they've in only very and air very You in that, areas so them very Canada, in requirements, terms see rate.Having have going they higher in getting strong or the U.S. thermal a leakage win healthcare, markets industrial, in well either of nice pharmaceutical markets, and of where do they're started performance,

have revs we some in after after. actually but that well, Marley corner, Marley really have really their or North out the smaller to of them in [ every strong penetrated the gone that's see terms to ] states of that There's one we synergies. number we're really I and maybe business, synergy, they've in think they have a gone channel, states we X America, and cooling they've business, think be where able going we help nice build also very

hospital of it, type needs goes about cooling type it think number this and time TAMCO movement, a dampers. a needs of air it needs towers, every you If of in this

which we lot see but have different why these yes, excited synergy them of about all categories, You really we're product Ingenia. is across a together,

excited they're the and going we're a think part to I of forward. team, we're forward looking

is Paul. this Bryan, Yes,

most On higher there. XXXX. the burden be late it that, are that Obviously, to won't accretion took place in down -- is result as the question, in X%, paying will of start borrowing quarter, somewhere on middle And there there a rate until accretive. at a the we first million of interest $XXX during X.X% a that revolver about of the a

run that $XXX than -- something average, we've for our little so months, that. the have average. less is that would around We'll margin revenue than million. updated about HVAC a you're higher said the to than and higher for little The midpoint according being be new about XX On segment right guidance for HVAC the the rate little a a XXXX, XX.XX%,

Okay, understood.

We the on kind there, a any this you we as see and scale? rates this dip segue XXXX? And we've HVAC that just investor time given what's be reason new guided should higher the day enhancements surmise And the gave both strategic and platform breadcrumbs the I not margin low even Paul, on why get to what seen, very me or perhaps to to any for structural D&M. reason the point, on then there run color back why below D&M profile and Is of side, mid-XXs key and they helpful HVAC, set. should over topic, a Gene, have at will the the HVAC margin,

good When we're drivers that year. backdrop and about think we're with and Yes. very demand market step got you very around the the our to in think and Bryan, we've backlog the particularly the really feel year with, the coming there, the look HVAC for into capabilities guide margins, with with position, you we respect a I comfortable back it. at

we've with to So drive into margins some that us investments for throughput, XXXX. the the gives platform help drive combination efficiency, in confidence in made of incremental those

this about at obviously, businesses, that dynamic we margin pass-through the issue the typical to That than around So project were in past QX contracts think business. with in some respect of discussed some these the run that mixed lower D&M, offset, when you of by that a had we've weakening rate. for was

bit flowing but little those year, the still into have we will year, pass-through or in this be next half largely roll the quarter the As first of behind a will we of contracts first us. through

think margin pressuring impact was about here, a the your So when respect with you the I to up question path rate back maybe business, that midpoint to basis I'll response and when is the about first which guide in that we have that flat XXX sort think to our when margins, guidance.So, come back there's of I the guide year-on-year come there. and points to my of run

I any about to it rate pressure think should think on flat, downward today. run with seeing it's the we're thing other not but respect the really you business,

radio through create margins businesses, high side. up other when see about where should flow that we given of today, extent business turns if the on to think beyond the is the So it materializes. upside margin benefit those, some you We those incremental that you that it think and about you'll have to in

question Ferazani next with comes from of the Sidoti. Our line Steve

did obviously, this HVAC start have warm organic winter. to on we cited, very and quarter, you On the a growth

last very too. weak, was the wasn't. I sales? think point What's the I was stopped of difference? you winter to boiler was the mild sort seeing the pretty December, Because strong. breaking record be of last and What's year going this sort thought It but where it was a

can differentiate. of you If sort

was a Sure. bit little Yes, situation. different sure. year of a Last

could had send to of year. but plant. just normalized the the actually to weather absolutely right level last and matter of conditions. supply weather, us more the You're return and seeing That get didn't out backlog, an about much as elevated chain we were as We labor we allowed out

by XX% year, about So last heating our the was in up fourth year-on-year. quarter, business

year. we've strong So against a this very, year in comp the weak prior got comp a very

Okay.

answer if -- we'll so ahead. that, go you sorry, Yes,

mild? But when is mild to

Yes.

to that get because think I is... it me let one, So

I inflection impact? predict breaking point. us I with you point, of any that? obviously, long what's noted, December breaking, really the of don't but this an Is but You've question. to way you is want my start say And guess for way seeing Is been record a sort there Were to this? us was sort can there help the time. doing any as

you has the have in Yes, I of think post-COVID the changes coming weather world been it confusing here. given that dynamics against up just

still got the the that have you respect we're XXXX. warm QX, So We of it quarter, beginning weather. to did let again. at seeing cold with then kind for run a of but me promising through snap In warmer

and I the that heating living that against, So quarter expect we were year you one off in actually down comp very is would think the first where backlog. be to again, prior strong organically, And still year-on-year. a up was

talking I'm year-on-year. first of XXXX about around was XX% Now up quarter

quarter quarter. weak post-COVID So against off again, a sort living a weather strong of backlog

of this the to the forecasting weather be quarter, our -- XXXX. fourth in heating then be winter, other roll quarter would quarter which big quarter to fourth quarter, a fourth that You year-on-year in the so long-term of normal up the year, fourth and for is forward we're

little a bit. that helps hopefully So

in back expect when really year, because half we think full organic going of at to come we but I that's the more some in those look dynamics. heating, growth the

On makes helpful. That Okay. It's Ingenia... sense.

Steve, one on point data other that.

if you in the out look at you be up to QX If single to business you going organically, right, strip would HVAC, the be digits. of look at, probably hydronic right, obvious, in this we if and is were impact

is business that, but flow, about market, think very that sense, cash I much you that's When make same very less us that not cyclical, the quite a obviously cash -- expecting. would it flow typically and good the is that you that tell were probably replacement had a good margin margin? indicate, should better Right. hydronics a but that type good than and Should

similar in side margin, margin heating heating that higher the said -- historically We've Yes. has fair. side. That's is the while are hydronic cooling right. that's than a electrical and Yes,

like you really, success the and good lot any 'XX, historic This you often -- a talk you you give us doing Paul, Ingenia, of a overpaying. look pre-synergy it On to not And about what the they're types of been like pay, acquisitions? you post-synergy. has Okay. 'XX multiples when looked of into sense paid really your acquisition what technology-wise. and Can how versus your

Yes.

So historically, X result we've being talked just terms wouldn't It's of And under about a that that. average changed the hasn't that. ranges little XX. about our say all in it's It really includes from that to XXx. I similar a very of changed average. very, as

of Okay. the some this to it's and this Any it, cooling of extension the the and uses Given less given extension -- other technology of of any technology? of businesses? robotics your precision labor-intensive

could materials, type have sophistication bill of forth. solution in similar very cooling In much is very our business, they incredibly business, impressive. package applications so level that of And software there be. particular, which of package could that the lasers, be build, in a their is Either our punches, of

an as -- They actually very think good think where synergy earlier, have have very we that have portion that of think accelerate the I potential well. much in market, North solution that's can and you're mentioned only a could play the and question a in I be. playing So the more key if really of you you there them help better across is, also think We I we America. can another, market? we that's another area as coverage

with Our Walter next Research. the line of Liptak question Seaport from comes

a great Yes, year. congratulations on

could XXX your ask great. of to improvement automation improve with And follow-ons, couple and a the strategy what's wanted us margin going you whatever on looks points I of there basis help on to if margins? So the go-to-market wonder I one HVAC. understand,

I'll in QX driven into by increase just Walter, lot majority guide the of it. elements. that kind what X of start. made The but Yes, of business. I this to XXXX, it capital at look you this automate improvements quality our to referenced the think, the into substantial being is of we've I perspective from operational the is a that investment equipment and that content we've earlier in reduce forecasting we're When on improve that it, the call, in to made in labor there, a

across platform in All of drive throughput those have the HVAC particularly the on the cooling elements helped side. and

are the operate In has traditionally I X the you at Ingenia margins higher and that than XXXX, know, then addition, think operated impacting at. last XXXX in all certainly, acquisitions X segment

both. benefit kind getting you're So of from a

really haven't say from operating side that quantified we've that in the the it X/X but of from probably really of with the the is numbers, businesses would I with quality We balance acquired. coming accretion

Okay.

Now level think leverage, you you'll growth? like with in will you're at margins those nice the incremental that of margins, higher. do pushing some keep the revenue What it operating this margins sounds be HVAC

investment that historically, baked if in support initiatives. for little to there of look of there's incrementals that well, some bit So growth What to some we will is our we the XXs P&L you math say in see XXXX do in HVAC. around our a guidance, you're going

to some those done, Okay. the -- of incorporate some Great. could to D&M about things you it profitability? is that good And possible their improve thinking of has things then HVAC into

on. about we feel Well, D&M the the very is of Yes. path actually good

strong at deeper very at creation the of had D&M. And Measurement. we're going success at things you're feel I HVAC going Investor be have our model the next HVAC. in a good things both to good go value see to doing, McClenaghan is at I And do to it over about and Detection we're from going path on really feel we're John to going the actually and one hear like and and month Swann We actually the there. & Sean at a HVAC you're Day strategy lot over

we've get we're think & do going believe get I a we'll detailed, and I to Measurement. So Detection more historically to been in lot back where

are We lot larger. a

Some a really good little we where of going. margin but the feel profiles had about different bit we're businesses

Okay. All right.

D&M the rate run flatten why Why that business, have business about business mean, pick just it I that did thinking out? and then, I up. the -- just in flattening did And may great. Sounds that the didn't you said

more saw to outside we think Yes, than softness well, U.S. relative -- expected. really, we I originally our had mean, we expectations, I the

As I feel as U.S. economies resilient, But those we're so about mentioned Europe. the in seeing good demand that of has some been it weaker platform we behind know, are that. you was U.S. The than primarily earlier, and the drivers in

the And Great. capital year one good. maybe me then, for look last is this Okay. working a

mean, think XXXX can capital core and about get I working in the If the cash working capital? you more you business, inflow, from

I when I Well, capital approaching normalized say, at yet. is entirely not levels, We're would there Yes. working look particularly inventories.

see case, the in a I think it'll normalize. few mentioned circuit chain this of see isolated areas. By past, we particularly journey, kind the our be still is do 'XX. we're a well around environment. way normalized I upside printed and supply boards we've and end working some But X-year and should it other 'XX of probably on there, specific still to capital We the a incremental 'XX, believe but there's issues,

Instructions] turn questions over showing for remarks. to I'm the no call to I [Operator like in would closing now queue. further the back Paul

and investor March you at forward seeing for Thanks day our of call, XX. joining many all we look on the to

attend website. If on listed you. the in person, email like Thank you to would please our an email invitation investor relations

call. conference today's this you for Ladies and your gentlemen, participation. Thank concludes

now may disconnect. You