Good morning, everyone. Welcome to the final day of the 20th Annual Oppenheimer Industrial Growth Conference. We're closing out on a high note. We have outperform, rated, and top pick SPX Technologies. CEO Gene Lowe awaiting today. CFO Mark Carano is with us as well, as well as VP of IR Paul Clegg. Gene, I believe you have some slides to walk through, introduce the SPX story, and then we'll get to questions after.
That sounds good. Thanks, Bryan. I'll get started. We have a couple of slides here. We'll go through an overview of SPX Technologies, who we are, and then we'll open it up to Q&A. An overview of who we are. This gives a good snapshot. We're based in Charlotte, North Carolina. Really two segments, HVAC and detection measurement. I'll dive into those a little bit further in some upcoming slides. About $2.2 billion of revenue. You can see we're predominantly North American based. About 83% of our revenue is the Americas, with some in Europe, about 11%, a little bit smaller in Asia-Pac. One of the things we launched last year to give people an easier understanding of who we are is what we call the Fisher Price Charts. This kind of highlights our breadth of products and how it all fits together.
I'll start on the right side on HVAC. What we have here is an example hospital. This could be a data center. This could be an office building. This could be an airport, a stadium, really anything where there's typically a large application. You can see the breadth of products that we provide to these end markets. Anything from cooling towers to hydronics, boilers, floor heaters, custom air handlers, dampers, duct heating, critical exhaust. Some examples of the range of engineered products that we would provide on a typical solution like this. If you look on the other side, detection and measurement, we have four platforms. Here's where we have typically very good measurement technologies that are typically paired with software almost always in an outdoor environment. Our biggest segment here or our biggest platform here is location and inspection. This would be things like precision locators.
You can see scanning underground for identifying potential conflicts if you're digging, robotics, underground robotics for water and wastewater, underground robotics for managing your natural gas. We have an AtoN segment, which does obstruction lighting, marine lighting. We also have a CommTech business, which I'll talk about a little bit further in some upcoming slides, but some really good technologies that are typically paired with software, as I had mentioned earlier. This is just another slice, a little bit more data about our segments. HVAC's about $1.5 billion, around 24% segment margin this year. Detection and measurement, those are the four platforms listed below there. Around $710 million, around 22% margins. A couple of things of note about SPX is we get a substantial amount of our revenue from replacement sales. It's very nice. We have very large install bases across our platform.
In many of our businesses, we actually created the industry that we're talking about. For example, cooling towers. We invented the cooling tower. More than 100 years ago, every cooling tower that is in the world today really has spawned off of our cooling towers and many of our innovations over the years. As you might imagine, we have a tremendous install base out there. The other thing I'll mention is in terms of market leadership, we'll tell you that we play in engineered niches. Typically, we're the market leader. We're typically number one or two in approximately 90% of the revenue of the markets that we serve. We lead with our trade brands. For example, I mentioned cooling towers. Marley is our brand in cooling towers. Radiod etection is our brand for underground locators.
Q's is our brand for underground robotics for water and wastewater maintenance. And these trade brands are very well known in the markets that they serve. So these are some more characteristics of our portfolio. Again, another snapshot here. We're approaching $500,000,000 in EBITDA. We're around $483,000,000 this year at the midpoint. You can kind of see our composition of revenue by segment and geography. I think the next slide will give a little more color in terms of how it all fits together. Or the slide after. Anyway, the point here on this slide is the financial performance. You've seen our improvement in EBITDA and in margins. We've had a very strong couple of years.
I think a lot of the work we've done on CI, a lot of the work we've done on commercial excellence, as well as a lot of the M&A we've done has really strengthened our company and has really changed who we are. You can see the momentum we have on both the profit line and also the EPS line over the past five years. Last year in Q1 of 2024, we hadn't done an Investor Day in five years. We laid out really our forward vision for where we are and then where we're going. What we laid out then was if you looked at our 2023 EBITDA, we saw a very clear path to doubling this over the medium term. What we said here is here's how we're going to double it.
It is really driving digital, driving CI, driving talent, driving NPD, commercial excellence, and strategic M&A. I would say if you look at where we are in 2025, we are tracking very nicely on this, and we feel very good about where we are going here. This is really our one-page strategy in a box. What you start with is on the left is really what defines our businesses. Our businesses are really defined by the fact that we are engineered niches. We are typically market leaders in the markets that we serve. We are typically tech-enabled. We do not play in commodity areas. We typically have some unique value prop differentiation.
We typically have nice moats in our businesses, some nice barriers that kind of make it hard for a lot of competition to compete with us because we've created so much innovation and so much uniqueness over the years. If you look at our portfolio, I think it's a very sustainable portfolio. If you look at it, where we're going to be in 20 years, we feel very good that we're positioned where the puck is going. We are generally serving markets that have good trends behind them. On the right side is really how we drive value. We really think about this in terms of excellence and in terms of growth. Excellence would be how we drive more efficiency, how we drive better performance. Digital, we do digital everywhere. It is a critical initiative for us. I think we've really upped our game.
This could be anything from the software we provide to customers, the configurators that make it very easy to create an engineered solution that you're going to buy from us. It's a lot of ways we touch customers. CI is lean. We do lean across all of our businesses. We have many full-time professionals doing this in every business. Very important to us. Talent is probably the most important area that we focus on. On growth, strategic M&A is an important part of our value creation framework. We've done a fair amount of acquisitions over the past five years, I think in the neighborhood of 16. These have really benefited us. We also spend an enormous amount of time on product management and new product development and commercial excellence. The bulk of all this is we would target 15% EBITDA growth every year over the cycle.
We feel very good. We have achieved that over the past decade. We actually think that this model will give us that opportunity to continue our trajectory. I'll drill down a little bit into the segments, give a little bit more color. If you look at the HVAC segment, cooling is the majority of the business there. It's almost two-thirds of the business. We also have a heating platform. A good amount of replacement revenue here, about 60%. You can see this is North American focused. North of 90% of our revenue is really in the Americas, with a smaller percentage in Europe and some in Southeast Asia and China. You can see our progression here on the right. We've had very nice growth over the past couple of years. We believe we've structurally reset the margins in this segment.
We're approximately 24% this year. We feel like we have a really good set of businesses with some real competitive strength. Frankly, we see a lot more runway to keep building our HVAC segment. Switching to D&M, these businesses, there's four platforms in D&M. Location and inspection is the largest platform. It's approximately 42%. That would be our locators. That would be our underground inspection equipment, components like that. What you see here is we're a little bit more global. It's still predominantly North American, but you see more European presence here and a smaller amount of Asia-Pac. Really where we are is in the neighborhood of $700 million. Around 22% margins this year. We see some opportunities to continue to drive those up. A very good business that we've grown over time.
At the time of spin, which was about nine years ago, this was around $200 million. We have more than tripled that business over the past nine years. We would like to significantly increase this size going forward. We actually think there are some very nice opportunities to continue building this platform. Just a quick note on balance sheet. We have been very disciplined on our balance sheet. Those lines, if you can see them, the bottom and the top, we target to keep our net debt between one and a half and two and a half times. We have been very consistent about that. You see a big dip down. One of the things we did was we exited power at the time of spin.
That was the final sale, which was our transformer business, which we have since redeployed our capital into HVAC and detection and measurement. Today, where we sit today, with the acquisition, our most recent acquisition, pro forma, Sigma & Omega, we are about 1.9 times. Below in the bold, you can see the amount of capital deployment every year of how much we have invested in strategic M&A. Now, there is a little bit, the Sigma & Omega is actually listed here under 2024. It is actually in 2025, but we do not have a year-end there yet. That is a little bit being counted in 2024. It is a little bit more of Q1 of 2025. A very good model for us. The point being, we have consistently managed our balance sheet very smartly. We have the opportunity to continue investing our cash flow for growth.
Here's some metrics of our program. If you look at it, we've invested about $2 billion, $2.1 billion since 2018. We've brought in a good amount of our revenues, about $812 million. This has come in at attractive margins, around 20%. That's actually before synergies. Our average deal size is around $130 million. Our average deal price is a little below 11x . It's between 10.5 and 11x . That is before synergies. Typically, we capture some real synergies from these businesses, which will trade that down 1.5-2x . We believe on a blended basis, these very good acquisitions, if you look at our acquisitions, I really think we have some fantastic companies that were brought into the fold. We've on average been getting them after synergies at around nine times.
Not only have these been value accretive to shareholders, but these have expanded our TAM pretty materially. We are now a bigger company with a bigger TAM and more opportunities for growth organically as well as inorganically. The most recent one we just announced is Sigma & Omega. What I really like about this one is if you look at multi-story, pretty common building type, you'll oftentimes have this type of solution in a hospital, a hotel. You'll see it in commercial. You'll see it in residential buildings where you'll have our products on the top and the bottom. You'll typically have cooling towers on the roof. You'll typically have our boilers in the bottom. We were not doing the heat pumps in the middle. With the acquisition of Sigma & Omega, we now provide that solution.
As you might imagine, there's a lot of overlap here in terms of channel overlap. The way that most of our businesses compete is we work with the engineers. We try to become the basis of design. You typically work with the contractor who's installing it, which is where you get your purchase orders from. We see a lot of synergy here with Sigma & Omega, who's very strong in Canada, about two-thirds of their revenues in Canada. We can help them grow very significantly, we believe, in America. If you look at our Marley channel, we have an exceptional rep network. You look at our Patterson-Kelley rep network, again, two very strong rep networks which we think can help accelerate the revenue growth here. The dollars on these systems are not small.
If you look at it on an average hospital, for example, you'll see 2x the value in the heat pumps as in the cooling towers and boiler combined. This actually has some meaningful revenue associated with it. It is a pretty exciting opportunity for us. There are a couple of examples here of how we've built our platforms to give a little more color. The most recent acquisition before Sigma and Omega was KTS. KTS does advanced digital interoperability and tactical networking. It is a great strategic fit in our CommTech platform. Really, our CommTech platform is TCI, a bolt-on in the U.K., ECS, and now KTS, which has really built it from a more nichy, high-tech, very good tech business.
There's a lot of drone detection, a lot of drone management that has gotten some real scale by being $200 million with a very strong customer base, a very strong value proposition, and a good profitability profile here. One of the things we really like about KTS, KTS has great technology. We actually think they can help us on the technology side on both ECS and TCI. We see some real R&D synergies there. We also see some real commercial synergies from TCI and ECS. ECS is very strong in the U.K. and in NATO and in Europe. TCI is very global with some very long-standing customer relationships that we think we can help KTS grow. Two other ones, I'm not going to get in the details here, but engineered air movement is just, I am so excited about this platform.
This shows up in our cooling business. We really have a really good set of businesses here. We feel we saw air movement is something we do all day in cooling towers. We saw a great opportunity to continue to expand that. This oftentimes goes through the same channel as our cooling tower business. With these acquisitions, we've gotten into some very strong adjacencies with some great opportunities to build. I actually think engineered air movement, we can double this again. Very good businesses with some good organic growth prospects, with some good opportunities for further strategic M&A. Electric heat, Marley Engineered Products is a business we've been in for a long time. Very strong spec position, very good products, very established. ASPEQ is a great addition. In particular, their duct heating. They have the original patents on duct heating and a very strong market position there.
We see a very nice combination there. Also, electric heat, we see some nice opportunities for further growth. Just some examples of how we build our platforms and get them to scale, which we think gives them more competitive heft. We also see synergies typically across the product categories that we are bringing together. In summary, what I would say is we really like our portfolio of businesses. Our detection and measurement and our HVAC businesses are very good businesses, very strong competitive positions. We actually have had very strong growth, as I have shared earlier. Our business system is where the magic lies. That is how we drive improvement in our core businesses, but it is also how we drive improvement in our acquired companies and how we integrate these into our businesses. A very important linchpin of our value creation framework. We feel very good about our pipeline.
We actually see some very, very attractive opportunities as I look out to the back half of 2025 as well as into 2026. As I pointed out earlier, one of the things about our business is we generate a ton of cash. We're typically in the 95% of net income, and we've been very careful with our balance sheet management. That's all I had, Bryan. I'll be glad to dive in if you have any questions.
Thanks, Gene. Very helpful. I have covered the stock since early March 2020, which is relevant for a couple of reasons, one of which is quite obvious in terms of your team navigating through the timeframe. The other is that it's been since about that time that the word asynchronous has been a regular part of my vocabulary. You mentioned the replacement sales base that SPX enjoys.
You have always sounded very confident that regardless of what comes in terms of macro, that your team is ready. Maybe speak to the historical cyclicality of the platforms that you have and your team's readiness if the recession fears that are somewhat prevalent now do come to pass.
Yeah, that's a great question, Bryan. I do think as you look at the macro, there's a little bit of choppiness out there where I think our team's managing very well. Yeah, perfect data point for us when you look at this. I think you highlighted on a couple of the elements. If you look at our business, a big chunk of it is replacement revenue, which is very stable. That's something that is very low beta.
If your cooling tower goes down and you're a hospital or you're a stadium or you're a data center, you need cooling. That is not a discretionary area. What we provide is typically very, very mission-critical, and those replacements are very steady. If you look at the new, one of the things that I think is worthwhile noting is a lot of our products are mandated. Take our AtoN business. You have to have obstruction lighting no matter what. It goes down or you put up a new building. It's something you have to do. You have to maintain your water and your wastewater. You have to do some of the things that we provide. I think that buffers us from some market fluctuations up or down.
A good data point that I would share is if you look at the industrial tech companies that we will oftentimes get grouped with, when COVID hit in 2020, a lot of people lost about 20% of their revenue in going into 2020. We certainly felt a lot of pain. I mean, it was a horrible time. Just for example, our revenues were flat during that time. I think that that shows to the resiliency of our revenue streams and the fact that we are, I would consider us a lower beta type of stock. Mark, why don't you give a little more color in how this would break down and how you think about it?
Yeah, you touched on a lot of good points there.
I think one other comment I would add to Gene's is you think about this asynchronous dynamic and some of the trends that are driving our businesses that are somewhat interrelated. I mean, not directly related, rather. Think about some of the mega trends around data centers and the opportunity there that we participate in. You think about decarbonization and some of the process industries that are moving into electric-related heat sources for their process industries. I think about our transportation business that is benefiting. We've said this in a couple of calls from some of this infrastructure money that is flowing out there that is benefiting as municipalities and cities are out there upgrading their bus fleets and their transportation fleets. You have some unique streams of activity that are, while they're connected to the broader economy, obviously, they're sort of on their own cycle as well.
We benefit from that. Maybe the last thing I'll say just around being prepared for any weakness, this is something that we look at as part of our annual operating plans. As our teams are developing their forecasts and their budgets for next year, a core part of that is making sure we understand if there is weakness, what levers do we have to pull to make sure that we're best positioned to navigate whether it's the policy uncertainty we're seeing today in tariffs or other dynamics.
That all makes sense. It's very helpful color. Given the backdrop that your team's now navigating, everyone is week by week, month by month, trying to get a sense of what playing field may be there going forward.
There's understandably a lot of concern from investors on the possibility of meaningful demand deterioration as more prices push through channel by channel and the customer set of each business adjusts accordingly. With that in mind, maybe just offer some color on what you guys have seen, what your businesses have seen late Q1, early Q2 in terms of order rates, and whether there's been any shift, an end trend, anything of concern that you would call out at this point.
Yeah, Bryan, what I would say is it's something we're watching very closely. In the markets that we serve, we have not seen really any impacts. We would not have raised our guidance if we had some concerns or we had some slowing order rates or anything going on.
What I would say, typically the business that we use as our canary in the coal mine, our earliest cycle business would be our Radiod etection business. It's feeling good with what we're seeing in terms of demand profile there. Right now, I would say we feel good. As a reminder, take our biggest segment, cooling towers. A lot of these cooling towers are projects that really got launched two years ago. They got funding. If there were to be a material slowdown in, let's say, the Dodge Index for new towers, it would take some time to work its way to get to us. Typically, some of our product categories would trail the Dodge Index by seven, eight months. Once these projects get going, they're typically good. I'd say the signs we see are right now, we feel good.
I don't know, Mark, you have any other color you'd like to add?
Yeah, I mean, we came out, I think we mentioned this on our call, right? Book to bills, north of one when I think about orders in Q1, north of that in HVAC and closer to one and a half times on the D&M side. And that's largely being driven by some of these project opportunities that we are seeing. I mentioned that on the GenFair side. We are watching it very closely, as Gene said. We are watching the key indicators out there that we track within the business. Things feel stable for the moment. We are not seeing any degradation today.
That's good. Stable is incredible. Gene, you mentioned data centers. It has been a hot topic for a while. A key focus for investors.
For better or worse in terms of the trade of SPXC, you're sometimes viewed as a data center player, which I think is fundamentally a tad unfair. DC's have been a growth driver. The way that your team's framed opportunity, I think that likely remains the case. Maybe speak to what you're seeing in terms of data center opportunity, where you're playing now. I know there are a couple of newer technologies that your team has developed. Maybe touch on those and then the opportunity that there's now.
Yeah, I think data centers, as we've talked about at a company level, it's maybe 7%-8%. If you look at it on the segment level of HVAC, 11%-12%. That is growing. Where we play predominantly, our biggest area is cooling. We have some very strong relationships, very long-term relationships with some large technology companies.
That is really take our Marley Everest is the predominant product used there. We sell this globally. And a very nice market position. I would say over the past three months, we actually feel stronger in terms of data centers. We are actually seeing more activity in data centers. If I look at it, our two biggest areas are cooling towers and then engineered dampers or kind of the actuated dampers. A very strong position there. Some very nice growth as well. Two new products that we have launched that are very exciting is on the cooling side. We have entered the dry and adiabatic side. This is a very big market that we have not participated in. We are very busy bidding this. Our target would be to get substantial, meaningful bookings into 2025 with substantial revenue into 2026.
I'm talking tens of millions of dollars for that new product. We're getting some very good signals there. We believe we have the right product. We have a number of patents pending. I think we have a winner there. On the other side with TAMCO, TAMCO is growing with its existing customers, but they've also created some new products that have helped them get into a new space called building envelope. That has gone from zero to $10 million very quickly. We actually see that as a nice growth platform. When I think about data centers for us, there are our core products winning with our existing businesses, serving them well and growing with them. I think that's going very well.
But we've also launched a number of new products that we're very excited about that we think are going to position us very well for 2026 and beyond.
That's fantastic. You mentioned TAMCO. So TAMCO and, you know, now Sigma & Omega, Canadian businesses, great technologies, obviously in a great position in the market. There are understandable concerns about tariff and trade policy. Has that affected or perhaps accelerated your team's plans to establish U.S. manufacturing for those assets?
Yeah, and that's a good question. What I would say is, I mean, we're in a really good situation with these businesses because TAMCO, I mean, since we've acquired them, we've approximately doubled their business. I mean, it shows you the value of coming in and expanding your channel. We are completely capacity constrained. They have a small manufacturing in the U.S. We need a lot more.
We are very heavily in the middle of that process of expanding their capabilities in the U.S. Same thing for Ingénia . Ingénia has doubled. We actually see the opportunity to double that business again. That business really has a better solution, I believe, than anything else out there in the market. To do that, we are completely out of capacity. All of our time and effort is being focused on that expanding capacity because a lot of people want what they have to offer. What I would say is we've always planned to put assembly operations into the U.S. I would say some of the tariff uncertainty has certainly kept that moving very briskly. We actually believe by the end of the year, we will be in a very good position on both those product categories to serve the Americas, really from the Americas.
As you know right now, there's no tariff, the USMCA. If that were to change in the future, we'd want to be able to handle that. Irregardless, we need to expand capacity to serve that market because we have very strong momentum on both of those businesses. We see some very attractive areas for growth there. Mark, anything I missed?
No, you got it. I mean, I think it's a keen focus. We're spending a lot of time making sure we get that right. It's a key priority because the opportunity is in front of us, right in front of us today.
Understood. We're almost at time. I think a good one to close on would be just an update on your M&A strategy, flywheel momentum. You've done two nice deals already this year.
Is there any reason to expect that momentum to wane in this environment? How are you feeling about the actionability of the pipeline, the opportunities at hand, both HVAC and Gene?
Yeah, what I would say is, yeah, we're very pleased with these two acquisitions. We think they really strengthen us both in detection measurement and HVAC. If you look at the market data, M&A volume has come down pretty dramatically. If you listen to the bankers or those guys, as a reminder, a lot of our M&A, probably half are proprietary deals. These are one-on-one negotiated transactions without anyone in between. As a reminder, this all comes out of our strategic planning process where we look at the full potential of our businesses, and then we look at how we can strengthen our businesses with M&A. It is a very strategic process, very proprietary.
What I'll tell you and what we've shared previously is we have a target list of about 300 companies that we track. Many of these are family-owned businesses at various stages of where they are and their interest level. What I would say, what I see for the back half of 2025 and 2026, for our level of deals, which are smaller deals, mid-market, smaller deals, activity remains very healthy. I actually feel very good that we're going to continue to keep our momentum going as we look in the back half of 2025 and going into 2026. Yeah, very, very positive.
That's exciting. Good to hear. We're at time. Gene, Mark, thank you very much for your time this morning. Thanks. You have a good day.
Thank you, Bryan.