SPX Technologies, Inc.

kind of the macro environment. I understand that's a very helpful color. I'd like to dive in a bit on NG&U. 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 the growth continues to accelerate. Just curious if you're willing to share what your team's projecting in terms of NG&U revenue for this year and then speak to the visibility that you have for multi-year growth with that asset.

Maybe one of the things, hey Brian, well maybe one of the things I can do to just kind of constrain that for you. We anticipated being at 100 million, kind of

a

run rate at the end of last year. Didn't quite get there, but due to some equipment delays we talked about, those were subsequently installed and we really are hitting that pace now. So between now and the end of the year, the capacity, the revenue capacity at NG&U, we think we'll get to 140, so it's somewhere between those two to kind of constrain it there. Obviously we would be certainly less than 140 for the full year, given that's the capacity that you're gonna hit at the end of the year.

You know Brian, on the demand side, as we've talked about, we're gonna be expanding to the US, but 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. So we actually see, 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 excuse me, Sigma and Omega increase TAM going forward?

Yeah, the TAM is a lot smaller than the cooling towers, to be frank, because cooling towers and everything, every application has cooling towers, whereas this is more of a particular, I would say a niche of buildings, really multi-story is 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 and meaningfully, but it is a smaller TAM than, for us, let's say, the cooling tower market, but it's a very attractive addition. 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, we're already in there selling to the engineers and the contractors, having 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 a line of Ross Baramblack of William Blair, your line is now open.

Hey, good evening, guys. Hey, Rossy. Hey, Mark, really quick, on the DNM order growth, was that all organic, or what was the contribution there from the recent acquisition of KTS?

Yeah, it was the order growth, so- Specifically, are you talking about the revenue side, Ross?

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

backlog, I'm with you. So backlog overall, just repeat the numbers for everyone, 346 million with 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, it's been accelerating. You get the sense that there's been a capital release from the IIJA funds, and we're kind of hearing some early rumblings of this, and this business seems to be immediately kicking up here.

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

So. Probably more on the calm.

Yeah. But it was nice, backlog growth, as Paul mentioned, really, both in Genfer 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 talks at a certain point, but it just continues to grow.

I think they have different applications and different product categories, data links, there's spectrum monitoring, the battlefield. 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 edition, 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 good business has 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, generally, the team that runs that business just feels like we've got the right technology. We're well positioned for those markets. You think about KTS, and obviously a lot of that is funded by government spending. It's DOD-related, but it's in those areas where the US military, in particular, is allocating dollars, because it's kind of moving towards the future of where warfare is going.

Yeah, that makes sense. Just really quick on the margin of D&M, a bit nitpicky, tapping down the full year guide after a pretty strong first quarter. I mean, it's already tough comps, they underline the business seems like it's performing pretty well. Can you maybe just kind of walk us through several hundred bit, or slight kick down here in the margins for D&M for the year? Presumably, perhaps, or more HVAC-related?

They're actually, from a cost perspective, they're more &M-related. So when you think about what happened in Q1, we obviously had a very strong margin performance year over year. There's a couple comments I would make around that. One is we actually had a drop-in project in there that was very fine 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 gonna be largely offset by the tariff impact that you're gonna see across the overall D&M segment. And then we had some slightly lower margin projects move out of Q1 and shift 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, Rolf.

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 a line of Steve Ferentani of Seroti. Your line is now open.

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

Yes, Steve, it's a good question. So, maybe just big picture. You're right. 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, projects and other parts that are in backlogs. 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 through price, and other levers that we'll look at with respect to the supply chain, things of that nature.

Yeah, Steve, I think your inclination about the cadence of the impact of that eight to 12 cents is about right. It would be a little bit more, let's call it sort of, if you had to size it, maybe 40% in the second quarter, and then 30 and 30 in the third and fourth quarter.

And again, we're talking about pretty small numbers here, but helpful to know. I gotta ask about the demand side and how you're factoring it in. I know, Gene, for years I've covered 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 US 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 gonna 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 a lot of our HVAC equipment, the replacement stuff is replacement, your cooling power goes down in your hospital, or your commercial office building, or your data center, you're not gonna go without cooling, it's really, you know, critical, you know, you have to replace a lot of, so the replacement tends to be very strong, very real. What I would say is, if let's take cooling towers, for example, we've talked about how we typically trail on cooling towers, the Dodge index by about seven months. You know, so

the project gets

funded, they get rolling, it shows up in the Dodge report, they don't order cooling towers 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 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 other industrial tech companies, because of our backlog, because of our service, our 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 on-shoring, 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.