• Revenue Growth: Increased by 7.8% year-on-year.
• Adjusted EBITDA: Increased approximately 27% year-on-year with 320 basis points of margin expansion.
• Adjusted EPS: Grew 31% to $1.39.
• HVAC Segment Revenue: Grew 15.9% year-on-year; organic growth of 9%.
• HVAC Segment Margin: Increased 370 basis points.
• Detection & Measurement Segment Revenue: Decreased 7% year-on-year.
• Detection & Measurement Segment Margin: Increased 190 basis points.
• Cash Position: $129 million at the end of Q3.
• Total Debt: $738 million at the end of Q3.
• Leverage Ratio: 1.4 times, expected to decline to 1.2 times by year-end.
• Adjusted Free Cash Flow: Approximately $61 million for the quarter.
• HVAC Revenue Guidance: Narrowed to $1.365 billion to $1.385 billion, reflecting 22.5% growth at the midpoint.
• HVAC Margin Guidance: Midpoint of 23.5%, a 260 basis points increase year-on-year.
• Detection & Measurement Margin Guidance: Increased to a range of 21.25% to 22%, with a midpoint of 21.6%.

• Warning! GuruFocus has detected 5 Warning Sign with META.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SPX Technologies Inc (NYSE:SPXC) reported a solid revenue growth of 7.8% for Q3 2024, driven by strength in the HVAC cooling segment.
• The company achieved a significant margin expansion of 320 basis points, reflecting strong operational performance.
• Adjusted EBITDA increased by approximately 27% year-on-year, showcasing effective cost management and operational efficiency.
• SPX Technologies Inc (NYSE:SPXC) achieved a 30% reduction in carbon intensity, demonstrating progress in sustainability initiatives.
• The company is well-positioned to achieve its full-year guidance, with expected growth in adjusted EBITDA of 35% and adjusted EPS of 28%.

Negative Points

• The Detection & Measurement segment experienced a 7% year-on-year revenue decline, primarily due to lower contract sales from a large pass-through project.
• Segment backlog in the Detection & Measurement segment decreased by 5.8% sequentially, indicating potential challenges in future project deliveries.
• The HVAC heating platform faced flat growth due to a slower start to the heating season and normalized lead times.
• Despite strong cash flow, the company anticipates a leverage ratio below its target range, which may limit flexibility for future capital deployment.
• The wide guidance range for the Detection & Measurement segment suggests uncertainty in project timing and revenue realization.

Q & A Highlights

Q: How should we think about the sustainability of the 2024 growth rates into 2025 for the HVAC segment? A: Paul Clegg, VP of Investor Relations and Communications, mentioned that while they are cautious about discussing 2025 too early, they feel good about the strength of markets like data centers, healthcare, and institutional that have benefited them this year. They expect these trends to continue into next year.

Q: Can you provide insights into the Detection & Measurement segment's demand sustainability and project activity outlook? A: Eugene Lowe, CEO, noted that the run rate has been flattish with modest growth, with regional variations. The U.S. market is holding steady, and they are cautiously optimistic about 2025. Project activity remains healthy, with large projects in the pipeline, though timing is crucial for revenue realization.

Q: What is the status of your M&A pipeline, and are there potential deals that could utilize your expanded credit facility? A: Eugene Lowe expressed optimism about the M&A pipeline, with strong activity on both the Detection & Measurement and HVAC sides. They see interesting opportunities in various segments and have the financial capacity to pursue growth through acquisitions.

Q: How did the hurricanes impact your operations, and do you see any potential uplift in activity from post-storm rebuilds? A: Mark Carano, CFO, stated that their facilities were not impacted by the hurricanes, and they haven't seen significant replacement activity related to storm damage yet. However, they are positioned to support rebuild efforts with their solutions.

Q: What opportunities do you see in the nuclear sector, especially with the growing interest in nuclear power generation? A: Eugene Lowe highlighted that SPX Technologies has a strong position in nuclear power generation, particularly with cooling towers. While there is activity in small modular nuclear reactors, significant revenue from these projects is expected to be a few years out. They are well-positioned to capitalize on these opportunities as they develop.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.