SPX Technologies, Inc.

kind of the macro environment. I understand. That's very helpful, Keller. I'd like to dive in a bit on Ingenia. We recently saw the facility, and feedback has been universally positive on that event. For what it's worth, your team presented very well. It's obviously a rather unique asset, so appreciate you guys putting that together. It looks like with limited inorganic contribution time in this quarter, that growth continues to accelerate. Just curious if you're willing to share what your team is projecting in terms of engineering revenue for this year and then speak to the visibility that you have for multi-year growth with that effort.

Maybe one of the things I can do to just kind of constrain that for you, uh you know we we uh anticipated being at 100 million you know kind of a run rate at the end of this year at the end of last year didn't quite get there but uh due to some equipment delays we talked about uh those were subsequently you know installed and we really are hitting that you know that pace now so between now and the end of the year the capacity the revenue capacity at ingenia we think we'll get to 140 so it's somewhere between those two to kind of constrain it there. Obviously, we would be, you know, certainly less than 140 for the full year, given that's the capacity that you're going to hit at the end of the year.

You know, Brian, on the demand side, as we've talked about, we're going to be expanding into the U.S. The demand is very high for that product. As you saw, we really have a unique value proposition there. And I can tell you that there is a lot of our reps that are dying to get their hands on Ingenia for their line card because, frankly, I believe they have a better solution. And so we actually see, you know, the constraint for us is not going out and finding sales. I mean, you still have to do that, but it's really building the capacity And it's hard to scale capacity, and they've grown tremendously from just two years ago, and they're still growing. But a very good business, a very good leadership team there, and we're excited about it. So we have a lot of attention on continuing to scale that, both in Maribel, up in Canada, but also expanding capability in the States.

That's great to hear. And one last one, if I may. Sigma and Omega, again, seems like a great fit for your strategy. And there's an intriguing stat on the value of the combined technology. For HVAC overall, to what degree does Sigma and Omega increase TAM going forward?

Yeah, you know, the TAM is a lot smaller than the cooling towers, to be frank, because cooling towers in everything. Every application has cooling towers, whereas this is more of a particular, you know, I would say a niche of buildings, you know, really multi-stories, really where this shines. So typically, it will always have a cooling tower and a boiler attached to it, or most commonly. But that is the smaller. So it does expand the TAM in meaningful ways. meaningfully, but it is a smaller TAM than, you know, for us, let's say, like the cooling tower market. But it's a very attractive addition. And I think that slide might have been a little bit confusing. The way we talked about that is for the order of the hospital or the order of the building or what have you. On that particular order, yeah, there's a lot more dollars there. So definitely, You know, we're already in there selling to the engineers and the contractors. Having, you know, the full solution there is a very attractive part of what we can provide.

Dr. Smith. Thanks again, guys. Thanks, Brian.

Thank you. One moment for our next question. Our next question comes from the line of Ross Berenblech of William Bear. Your line is now open.

Hey, good evening, guys. Hey, Rusty. Hey, Mark, really quick. On the D&M order growth, was that all organic, or what was the contribution there from the recent acquisition of KTS?

Yeah, it was the order growth. Specifically, are you talking about the revenue side, Rusty?

Well, the backlog, I guess, the kind of organic backlog.

Gotcha, backlog. I'm with you. So backlog overall, just repeat the numbers for everyone. $346 million was the ending backlog, and that was up quarter to quarter from the fourth quarter by 56%. About 22% of that was KTS, and the rest of it was organic.

Okay, so still, I mean, pretty solid growth. Gene, when you kind of look over the last couple of quarters here, I mean, it's been accelerating. Do you get the sense that there's been a capital release from the IIJA funds? I mean, we're kind of hearing some early rumblings of this, and this business seems to be immediately kicking up here.

Yeah, it's interesting. We still look. We can't point to a lot of cases. I know some things a few guys are bidding on. I think that could be in the background of our transportation business. which is, you know, really our smallest platform. We are seeing a lot of activity out there. Outside of that, you know, and Mark, I know you studied, you practiced. I haven't seen a lot across our business.

Yeah, I would say you're right, Gene. That's the only area where we can kind of put our finger on it and say it's maybe directly being funded by it.

Probably more on the comm.

Yeah. But it was nice back on growth this year. as Paul mentioned, really, you know, both in GenFair and ComTech.

Okay. Can you maybe just remind us of kind of the undercurrent that's driving ComTech? It has been several strong years here. Presumably, we have tough costs at a certain point, but it just continues to grow.

I think, you know, they have different applications and different product categories, data links, their spectrum monitoring, the battlefields, I think all three have been doing well. Battlefield has been very strong in some larger projects. As a reminder, this product does very well at tracking drones. And we are seeing different applications for that. So I think some of the global unrest between countries tends to drive demand. So we have seen a number of countries, a number of orders over a number of years. So that portion has grown. Our KTS business, our newest addition, digital interoperability, we feel good about that business. Very nice synergies with our existing ComTech business. We also see some very nice growth there. But overall, Mark, anything you'd like to add? Any kind of good business that's had some good growth? Yeah, there's a project-oriented business, so you have to refill that every year.

Yeah, that's right. I feel like we're, you know, generally the team that runs that business just feels like we've got the right technology. We're well-positioned for kind of those markets. You think about KTS, and obviously a lot of that is funded by government spending. You know, it's DOD-related, but it's in those areas where, you know, the U.S. military in particular is allocating dollars. kind of moving towards the future of where warfare is going.

Yeah, that makes sense. Just really quick on the margin of the DNM, a bit nitpicky, tapping down the full year guide after a pretty strong first quarter. It was already tough comps. The underlying business seems like it's performing pretty well. Can you just kind of walk us through, you know, the, you know, several hundred bit or slight kick down here in the, the margins for DNM for the year. Presumably pairs are more HVAC related.

They're actually, from a cost perspective, they're more DNM related. So when you think about what happened in Q1, we obviously had a very strong margin performance year over year. A couple of comments I would make around that. One is we actually had a drop-in project in there that was very high margin, had software elements to it. It was within our ComTech business. It actually wasn't in our forecast. Then we had some, and that benefit will pass through the year, but it's going to be largely offset by the tariff impact that you're going to see across the overall DNM segment. And then we had some slightly lower margin projects move out of Q1 and shipped into kind of Q2 and beyond. So that's really kind of the drivers in Q1 that kind of set you up for balance of the year.

All right, that's helpful. Thank you, guys.

Thanks, Rob.

Thank you, one moment, for our next question. Again, as a reminder to ask a question, you will need to press star 1-1 on your telephone. Our next question comes from the line of Steve Faranzani of Ceroti. Your line is now open.

Evening, everyone. Appreciate you taking the questions. Mark, I hate to do it, but I hate to circle around back on what are pretty low costs from the tariffs. It's only $6 million, but I'm just trying to think about this from a modeling perspective. I'm guessing the price increases and surcharges, there's a bit of a lag, and probably there's some stuff in backlog you couldn't surcharge before. So I guess what I'm asking is, is most of the impact or should we be assuming it's in 2Q and then it decreases as the year goes on?

Yeah, Steve, it's a good question. So maybe just big picture, you're right. You know, I think we tried to be very thoughtful about the impact here from tariffs and our ability to raise price. We do have in the DNM side of the business, you know, projects and other parts that are in backlog. So our ability to capture price on those in the near term, we have less flexibility there. I will say, though, as we roll into next year, I think our expectation is, well, I should say as we roll through the balance of this year and into next year, our expectation is we should be able to offset all of these costs. you know, through price and other levers that we'll look at with respect to the supply chain and things of that nature.

Yeah, I think, Steve, I think your inclination about the cadence of the impact of that $0.08 to $0.12 is about right. It would be a little bit more, let's call it sort of if you had to size it maybe, you know, 40% in the second quarter and then, you know, 30% and 30% in the third and fourth quarter.

And again, we're talking about pretty small numbers here, but helpful to know. I got to ask about the demand side and how you're factoring it in. I know, Gene, for years of covering you, I know you've talked about you're not that cyclical and you've cited the COVID year, but you do have the location and inspection business. I know as we've gone through earnings season, unless you have certain end market exposure, most companies are not seeing it yet. but we know the expectation is slower U.S. growth as the year goes on, or at least that's what all the smart economists are saying. Were you able to factor that in at all, or do you just think regardless it's going to be so small given your mix of businesses now?

Yeah, I mean, I think so getting very tactically, you're right, on radio detection, that is typically what we call our canary in the coal mine, and it's a very good leading indicator because that's a good proxy for economic activity. If anything, we actually feel better about where radio is today for this year. We are seeing solid activity. As a reminder, you look at a lot of our HVAC equipment, you know, the replacement stuff is replacement. You know, your cooling tower goes down in your hospital or your commercial office building or your data center. You're not going to go without cooling. It's really... critical. You have to replace a lot of, so the replacement tends to be very strong, very real. What I would say is, let's take cooling powers, for example. We've talked about how we typically trail on cooling powers the Dodge Index by about seven months. So the project gets funded, they get rolling, it shows up in the Dodge report. They don't order cooling powers immediately. There's a period of time where they typically start first with some of the bigger equipment, elevators and so forth. And then they get in the middle, they get to our equipment. So point being, I think that what you're saying is there's a lot of uncertainty right now. And if this uncertainty slows down large CapEx, which it could, and move things out i think that there could be air pockets in the future you know and i think that's something that we'd have to keep our eyes on we we don't believe for 25 we're seeing that with everything we have in front of us but i do think if there is a recession it would clearly impact us i think it impacts us a lot less than than other industrial tech companies because of our backlog because of our service or replacement because of our mandated portions of our business by the government and other. But it is something we have to keep our eyes on. But right now, you know, we feel good with what we're seeing, and there's some areas we're winning as well that is driving some higher revenues than we had in our model.

Okay, that's helpful. I guess the flip side is if the end game here is increasing reshoring and onshoring, that could be a very nice tale for you.

Oh, no doubt. You know, almost every manufacturing plant would have an opportunity for us to sell our equipment in. And as you know, we do very well with a lot of those A lot of those types of customers, semiconductors, battery plants, automotive plants, it's an area we have a nice position.

Thanks, Gene. Thanks, everyone. Thanks, Steve. Thanks.

Thank you. I'm showing no further questions at this time. I'll now turn it back to Paul Clegg for closing remarks.

Thank you, everybody, for joining the call. We look forward to seeing many of you at conferences and on the road over the quarter, and we look forward to talking to you again next quarter.

Thank you for your participation in today's conference. To just conclude the program, you may now disconnect.