SPX Technologies (SPXC) Q1 FY26 earnings call: guidance and Q&A

Beyond data centers, which HVAC end markets are showing strength, and which are soft?

Healthcare, pharma, power, and heavy industrial are very strong, with aftermarket also robust. Commercial real estate and hotels remain soft, while institutional markets (universities, government) are flattish. Battery and semiconductor, previously soft, are showing new bidding opportunities.

“I'd say the areas of softness. They really have not changed a lot quarter-to-quarter. I'd say, commercial real estate still remains at a relatively low level, same with hotels.”

asked by Andrew Obin · answered by Eugene Lowe

Given the step-up in HVAC orders and backlog, how should we think about the timing of shipments and the persistence of data center strength into future years?

Data center strength is accelerating, with orders coming through for 2026 and opportunities seen for 2027 and 2028. The company has expanded capacity to meet demand, moving its 2026 data center growth outlook from 50% to 70%.

“We actually see some attractive runway looking ahead in '27 and '28. We think we have a really good customer mix here. We have a number of hyperscalers and colos.”

asked by Joseph O'Dea · answered by Eugene Lowe

Can you quantify the impact of start-up costs on HVAC margins and confirm if the ramp timing or margin impact expectations have changed?

Start-up costs were expected to be $8 million to $9 million, predominantly in H1 2026. Q1 margin performance was on track with expectations. Excluding these costs, HVAC saw approximately 40 basis points of margin lift from operating leverage and acquisitions.

“I think if you did the math around what we said, it would kind of get you to $8 million to $9 million of start-up costs, predominantly landing in the first half of the year.”

asked by Bradley Hewitt · answered by Mark Carano

What is your comfort level in achieving normalized incremental margins as the company exits 2026, considering ongoing capacity additions and tariff impacts?

Management is very confident in delivering traditional incremental margins in HVAC through H2 2026 and into 2027. Stripping out expansion costs and modest tariff impacts, the company is already seeing 60-70 basis points of operating leverage plus 10-20 basis points from inorganic growth.

“I'm very confident in our ability to kind of deliver our traditional kind of incremental margins that we see in the HVAC business, particularly through the back half of the year and as we get into next year.”

asked by Jamie Cook · answered by Mark Carano

Can you provide an update on the integration of recent acquisitions and color on the M&A pipeline and prospects for capital deployment?

Recent acquisitions (Air Enterprises, Rahn, Thermolec) are performing well and were acquired at attractive valuations. The M&A pipeline is robust, with opportunities in engineered air movement, electric heat, and increasingly in Detection & Measurement. The company has significant capacity for further M&A, with a leverage ratio of 0.9x.

“The areas where we see the most opportunity haven't really changed in HVAC, I would say it still remains engineered air movement and electric heat. The one change I would say is we are seeing more Detection & Measurement opportunities.”

asked by Bryan Blair · answered by Eugene Lowe

What is the current percentage of revenue from data centers, and how much more revenue can be unlocked with the new capacity expansions?

Data center revenue is expected to be around $350 million this year (up from $200 million last year). The capacity expansions are designed to serve circa $550 million of incremental revenue, bringing total data center capacity to $750 million. Olathe and TAMCO facilities will be at full capacity by mid-2027, and Madison by mid-2028.

“If you kind of say we're at $200 million last year, say we're in the $350 million neighborhood for data centers this year, you can say that we have about $400 million more capacity.”

asked by Amit Mehrotra · answered by Eugene Lowe