All right, good morning. Thank you for attending the SPX Technologies presentation. I'm Ross Sparenblek, the research analyst here at William Blair that covers SPX. Before we begin, I'm required to inform you that for a full list of research disclosures and potential conflicts of interest, you can visit our website at williamblair.com. With us today, we have Gene Lowe, President and Chief Executive Officer, Mark Carano, Chief Financial Officer, and Paul Clegg, Head of Investor Relations. As a brief background, SPX operates a leading portfolio of niche industrial applications across the HVAC and detection and measurement markets. The company has successfully executed on its portfolio transformation over the last several years, building a strong track record for margin expansion and accretive M&A. With that, let me turn to Gene for some opening remarks. Before we head into the Q&A, thank you.
Thanks, Ross. All right, let's get started. My name is Gene Lowe. I've been with the firm for about 17 years. I can't really stand upstage. I'll walk around a little bit, give you a little bit of an overview of who we are, and we'll open up the floor to questions or anything you'd like to talk about. Let's see. We are really a standalone company. We're going to be 10 years this September. We're going to have our 10-year anniversary when we split from SPX FLOW. We're in Charlotte, North Carolina. Two segments: HVAC, detection, and measurement. About $2.2 billion, 4,300 employees. And you can see we're predominantly North American, about 83%. But we are growing in Europe and Asia. We actually see some interesting opportunities there. This is a chart.
We had our first investor day in five years last year where we kind of laid out our growth plan and our strategy to double our EBITDA again. This is the chart we call the Fisher Price Chart that really lays out where we play and where we are. What ties us together is we're engineered products in niche markets with leading positions with strong technologies. I'll start on the HVAC side. You can see this is our largest segment, about two-thirds of our business. You can see all of the areas we play: cooling towers. We invented the cooling tower. Marley's been probably the leading player in the cooling tower for 100 years. We had our 100-year anniversary a couple of years ago. Hydronics, boilers. If you are in a cold area, you might have our boilers in your basement.
Floor heaters, radiant heaters, dampers, air handling units, critical exhaust. All very nice engineered niches with very attractive growth areas. Now, while this shows an HVAC, you know, a hospital, this same graph could be used for a data center, a commercial office building, any number of applications, a stadium, anywhere where there's a lot of cooling or a lot of heating needs. On the other side, our detection and measurement business, what you typically see is we have outdoor technologies. What I mean by that is if you kind of take precision locators, if you've ever had someone scanning under your ground before you dig, we're the global leader in that technology. A very good business, radio detection. We provide underground robots that take care of water and wastewater infrastructure, gas infrastructure. That all falls into what we call our location and inspection platform.
That's almost about half of our detection and measurement business. Then we have some a little bit smaller platforms: our AtoN platform, our transportation platform, and our CommTech platform. I'm going to go to a little bit more detail on these as we go through the presentation. This gives a good feel for our field of play and how we come together. A little more color. You can see our revenue, about $1.5 billion for HVAC this year, about $710 million. Segment margins in the 24% and 22%. One of the things that I think is unique about us is that we do have a lot of replacement revenue. I think this makes us much more steady and much more reliable in terms of our revenue streams year to year. It's about two-thirds of our revenue does come from replacement sales.
About 90% of our revenue, we're number one or number two in the markets that we serve. We like that. We're not going to, oftentimes we get a question, "You're in HVAC. Are you going to go get into chillers and compete with Carrier and Trane and Daikin and JCI?" That's not our strategy. We go in high-tech engineered niches where we think we can bring value, and we compete in those. You can see, not great to read, but Marley, Cincinnati Fan, Tamco, Ingenia, Weil-McLain, our trade brands are really one of the most valuable assets we have. It's incredible brand equity in the markets that they serve. Oftentimes, these brands are much more known than SPX. We have very strong trade brands in the markets that we serve. A little bit more color here. Again, about $483 million of EBITDA.
This is at the midpoint of our guidance, about 22% EBITDA margin, six and a quarter. The thing I'll point out is these five elements, this is what I just mentioned, this is really what defines us as a company. Sometimes I get the question, "HVAC and detection, what are the commonalities of these?" They do serve different end markets. Really, we play in engineered niches, leading positions, tech-enabled with strong moats, with a sustainable position. This is where we've been over the past couple of years. Our EBITDA has gone from the neighborhood of $160 million to around $483 million this year. Margins in the low 20%. You can see the adjusted earnings per share. Probably is worth noting we had transformed our business. I mentioned that we've been around about 10 years. When we actually came out, the bulk of our business was power.
We did not see that being a sustainable value creation business for us to own. We ultimately really divested more than two-thirds of our business. At that point in time, we had divested our last business. We were a little bit lower and had a lot of cash at that time, which we promptly reinvested in growth. It is a little bit lower than it might normally be due to our portfolio repositioning in 2021. This is really from our investor day. What is our strategy? In 2023, we had $310 million of EBITDA. We said we believe we can double it. We actually think there is a lot of runway with our strategy. We have been executing our strategy with our new portfolio really about five, six years. We have really been in the growth mode.
We've done 16 acquisitions over the past four and a half years. I'm going to get a little more detail of the composition of those. As you can see, we said we think we can double this in the midterm. What is that? We'd say four to five years. Right now, this is 2023, 2025. Like I just said, we're in the $483 million range at the midpoint for our EBITDA. This is the one-page strategy for who we are as a company. Again, the foundation is really the definition of who we are. We really play in engineered niches. For example, a cooling tower. Our largest business is cooling towers. Every single one of these is unique. We don't make a single one of these or stock. This is uniquely configured to that particular customer. Most of our products are that way.
They're uniquely configured or engineered to the customer that's buying it. We don't buy stuff, stock it somewhere, and hope it sells. It's predominantly engineered products in our portfolio. If you look at our business system, how we drive value, the way we think about it is excellence and growth. Excellence is digital. We have digital everywhere. AI is a very big component of digital. We actually have AI in a couple of our products now that's expanding. We're actually using AI for our software development, code generation, and so forth. It is a very big initiative for us is digital. CI is lean.
We have approximately 20 full-time lean people put across our enterprise and probably in the neighborhood of 60-70 part-time people that are continuously working on how to make our operations more efficient, how to drive more cost out, how to do things smarter and more efficiently because we're all in very competitive markets. It's been a key part of our value creation, and we're making nice progress on that. Talent. I would argue I have the best team I've ever had. I feel really good about our talent processes and our talent development. We have our fourth, what we call our EDP program. That's where we bring our top 20 young executives, and we train them for a year, and we help them grow and expand. As you can see, we've been growing very rapidly.
You have to have talent that can support that, whether it's a very competent head of engineering or a head of commercial or head of product development or general manager. You have to invest in that talent. I believe we're very good at doing that. That's been a key part of how we've been able to grow. If you look on the growth side, I mentioned strategic M&A. I'm going to get a little more color on this going forward. A very important part of who we are. If you think about our capital allocation, we don't do dividends. We do buybacks only if the stock's, I think, dislocated. We've done one set of buybacks in the past 10 years. Really, our focus is investing for growth.
We generate an enormous amount of cash, probably 95%-100% net income every year, and we invest that in growth. That is really our business model. That is who we are. A lot of that is strategic M&A. New product development, you have heard. If you have followed us over the past couple of years, we have launched a lot of new products that have been very successful. The one that I am most excited about right now is in the data center market where we are very strong with cooling towers. We have just launched to get into a new adjacent market, the dry and the adiabatic market with what we call our Olympus Vmax product. This is a product that we have said we want to book tens of millions of dollars this year and would like to revenue that in 2026. Last thing is commercial excellence.
What I mean by this is how we run our product management and how we manage our channel. We have a lot of reps. We're predominantly a rep-oriented firm. These are reps that are exclusive to us, and it's very important to how we win in the market. We really target 15% EBITDA growth every year. If you look over the past nine years, we've cleared that pretty significantly with the exception of the two COVID years. We were more flattish. Going into our HVAC segment, I'll peel back the onion a little bit. Cooling is our biggest, about two-thirds of our business there. Heating is about one-third. You can see predominantly North American, about 90% of our revenue. Our cooling business has some nice positions globally. Our heating business tends to be much more North American-based.
You can see that's grown from around $900 million to about $1.5 billion over the past couple of years. Really like our HVAC segment, really good leadership team, very good product categories. I actually think some of the M&A we've done here has really helped strengthen our competitive position in some areas. We feel very good about our HVAC segment. We believe there's a lot of runway here. Last thing, you can see it's about 60% replacement revenue. If you look at the non-replacement revenue, the Dodge Index, if you look at some of the commercial or non-RESI larger companies, that's a good proxy for where we say because if you think of our products, they're used everywhere, whether it's healthcare, whether it's institutional, whether it's data centers, whether it's hotels.
Anything large needs a cooling tower because you save so much money when you have a cooling tower. Anything big, we're in Charlotte. Our Panthers Stadium has cooling towers. The airport has all of our Marley towers. The Bank of America building has all of our Marley towers. The way to think about a lot of our products is anywhere where it's big, you'll see our products. Detection and measurement, this is a little bit harder to understand segment. There are four platforms here. We've been told that before. Location and inspection is the biggest portion of that. That's what I talked about, the underground locators and the robots that do inspections and remediation of our water and wastewater and gas lines. We believe we're the largest player in the world and in North America.
On the gas side, we believe we're the only player that can do what we do there. You can also see AtoN, CommTech, Transportation. AtoN is if you ever look outside and you see lights blinking on a windmill or a radio tower, those lights are FAA regulated. Not only do you have to have the lights, you have to have a communication platform that on a real-time basis monitors that light to make sure it's on. If the light goes out, you have to notify the FAA within 30 minutes, and they'll actually have planes go away from that obstruction. As you might imagine, a very regulated market, we're the very strong leader in that area. We've gone from being the leaders in North American obstruction, and we've expanded into marine, and we've expanded global. Very good business for us.
You can see here from about $547 million, we think that's around $710 million. 22%-24% is our target range is there. A little bit more global of a business here. You can see about 28% in Europe, about 6% in Asia.
We're very careful on our balance sheet. As I mentioned, we spun as a separate company 10 years ago. We're going to actually have our 10-year anniversary in September. We have been very careful about how we manage our balance sheet. This is how we've managed it over time. One thing to note is at the bottom, you can see our investment in M&A. Starting in 2018, we've been very consistent. I think we have a very good flywheel rolling on our M&A machine. We have a phenomenal front-end team, gentlemen who run our M&A.
Not only that, our segment presidents, who are phenomenal operators, are very, very strong M&A leaders. They both have very strong strategy capability, come out of the large strategy houses, but have also done a lot of M&A in their history. I think it is a nice blend. You can see where we are today. We are at $1.6 billion according to our filings, but we did do an acquisition, Sigma and Omega, on a pro forma basis. We are a little bit closer to $1.9 billion. We think by the end of the year, we will be in the $1.3 billion range, a little bit below that, just normal cash flow. Point being, we have done two acquisitions this year, about a little under $0.5 billion. We think we have a lot of firepower to continue investing for growth as we look ahead. This is some of the color.
If you look at our metrics, we've deployed about $2 billion. We brought in about $800 million of revenue. Average margin a little higher than 20%. That's before synergies. We typically get 100-200 basis points of synergy out of them. The average deal size is not massive. It's about $130 million. Multiples, I think our blended multiple is in the range of just a hair below $11, but in the $11 range before synergies. You can typically take one and a half times off of that. I think there's a lot of value creation here. Not only are these really good businesses with good technologies, but we think there's multiple arbitrages here. We actually think we can grow these typically a lot faster than they grow themselves.
We have some great examples of that in Ingenia, Tamco, where we get a good technology, but we are everywhere. We've got reps everywhere. We can help expand them and help grow them much faster than they could on their own. Not only that, it's increased our TAM quite a bit. This is one of the examples. This is our most recent one. You take an average hospital or school that is a multi-level building. Oftentimes, you'll see our cooling tower on the top, our boilers in the basement, but we did not have a solution for the rooms. You'll see this in hotels very commonly. We acquired Sigma and Omega. These are heat pumps, fan coils that fit almost hand and glove synergistically with what we provide to the market. Very strong in Canada. They're smaller in the U.S., and we're very strong in the U.S.
We actually think we can help them accelerate growth. Again, very similar to what we saw and what we have been able to accomplish with both Ingenia and Tamco over the past couple of years. Very nice acquisition. We are off to a nice start there. The other acquisition we did this year is KTS, really good technology. Fits very well within our CommTech platform. We see very nice synergies on the front end in terms of commercial. TCI is much, much more global, has like 100 customers globally. We actually think we can help KTS get there. KTS has really good technology that we already have programs under place to leverage some of that in both ECS and TCI. Those do not happen overnight. It takes a little bit of time to build those products, to integrate them.
We see some very nice synergy here, both on the commercial side and on the R&D side. Lastly, just a couple of other examples of how we invest for growth or engineered air movement. This is a really good platform for us. We were not in this business five years ago. If you think about what a cooling tower is, it is air movement, and then it is heat exchange. We have phenomenal competence in how we engineer on fans. We understand how to engineer products to avoid back pressure, to do different flow rates. Basically, the engineered blower market is a cooling tower without any heat exchange. The competence there is very high. It is a good adjacency for us. Oftentimes, it goes through our same channel. We have added Tamco and Ingenia. Like I said, we have really helped them grow.
I actually think this business area can be a lot larger. Very good business for us, very aligned with our R&D competencies and very aligned with our channel. There is a lot of runway there. Electric heat, we have been in Marley engineered products forever. This would be electric heat. This would be like supplemental heat in a building like this when you walk in or heat on the way to the parking lot or duct heat in the room. Aspect was a really nice acquisition. This is our number one target, actually, for the past 10 years. They invented Indico as their brand. They basically invented duct heating. They have the patent on the original duct heating patent. Very good synergy. Again, we think this makes us stronger, a lot of cross-selling opportunities and so forth. That is us. I know I have gone a little bit over.
Ross, why don't we kind of jump to M&A? We'll be glad to answer any questions you guys have.
Perfect. Thank you, Gene. Maybe just kicking it off on the HVAC. Been notable strength the last several years. There's this kind of building concern that there's been an over-earning in the market from ARPA funding that's not winding down. I would just like to kind of get a sense from your perspective. We take data centers out of it. What has been behind the growth the last couple of years? What's the visibility going forward in some of those markets?
Sure. Mark, can take that.
Yeah. It's a great question. We often get questions with respect to I don't know if this is working if folks can hear me. Okay. With ARPA, we haven't really seen that be a significant driver of our revenue.
What's really been driving our business in the healthcare and the institutional market, quite frankly, is a couple of things. One, we have a better product, we believe, out there. When I think about our Ingenia business, which for those of you who are familiar with a custom air handling business, I think we've done a site visit up there. It's just a really very well-engineered, top-of-the-market product. On one hand, we've got a better product. That's allowed us to actually take share across that market and really drive penetration into the healthcare and the institutional markets.
Okay. When we think about double-digit organic growth the last three years, can we just get a sense of what's been price versus volume? Probably $22, $23 more price, more volume near term.
Yeah.
With respect to that, I would say we've always had good pricing power in the markets that we participate in. We have seen strong volume really across the HVAC segment. Price has been typically kind of, I would say, low single digits across all of the businesses.
All right. Just on the data center side, strong secular tailwinds there. How should we think about the coming value unlock with the new ADB Attic and the coming dry cooling towers?
Yeah. I think the way I would think about it is right now, if you look at it, we serve the cooling tower portion of the market. We actually think the cooling tower portion of the market is less than half of the market. By getting into ADB Attic and dry, it really increases our TAM. Now we have to go out there and win.
We've got to go compete. We have to be able to prove that we can win in this market. I do believe we can. I think, as we've said before, if you look at that ADB Attic and dry market, it is right in our power alley. These units are huge. Mark and I were out there, I think, two or three weeks ago. The size of these units are 40 ft long. It is a true engineered. It is truly a high-engineered product. It is also a product that these big, sophisticated customers want a company they can rely on. They have been relying on us for years. One of the great things about that product specifically is we have, we believe, the best mechanical equipment in the world. What I mean by that is fan, gearboxes, cooling tower motors.
We are porting that almost exactly over. We have a real advantage on mechanical equipment that we do not think our competitors can match. Having said that, we have to prove it. We have to go out and earn it. We have not done anything yet. I would say I am optimistic. I feel really good about the pipeline. I feel like that is going to be a winner for us. It should accelerate our opportunity in data centers.
Can you maybe give us a sense on what you are hearing from the customers in regards and timing on when we should start seeing orders flow and projects deliver for those products?
Yeah. As you might imagine, we are talking to a number of large data center customers here.
They typically are looking a year in advance in terms of planning their projects and what's going where and what type of solution they're going to have. We believe we will have decisions on a number of projects by year-end. If we are awarded these projects, we think these would be meaningful revenue opportunities in 2026. I'd say by Q4 at the latest, we should have a good feel for where we are in terms of our Olympus Vmax product and the momentum we have there.
All right. Thinking through kind of the real acceleration in the Dodge Momentum Index, primarily data centers since April of last year, and knowing that you guys are in the very early stages in the kind of architecture process of these projects, do you get the sense that maybe you've missed some of that 2024?
Can you still get specked into any of those projects going forward?
I think 2025 is really baked for the most part. I think that really most of the activity now is looking the year ahead. Yeah, I think if you look at dry and ADB Attic, most of the activity for this year has been decided. Really, a lot of the people are looking ahead 2026, 2027, 2028, oftentimes in multi-year programs.
Okay. No concerns with immersion or directed chip or any of the new types of cooling?
Yeah. I mean, we get that question a lot, "Hey, does immersion, does that make cooling towers go away?" The answer is no, it does not. I mean, the way that I would think about it is there is a certain amount of heat that is generated by the chips. There are different technologies to cool it down.
It could be air. It could be rear door. It could be liquid. It could be immersion. Nonetheless, however you get that heat off the chip, you still got to take it out of the building and reject that heat. That is where we play. All the technologies under the roof, that is not really where we play. Irregardless of what technology wins, we are like Switzerland. We do not have a big dog in that hunt, right? I guess I do not know if Switzerland and dog fit together, but we feel like we have a solution that can meet that. We do not think that is going away. We have not seen any technologies. At the end of the day, it is the laws of physics, right? You have to get the heat out, and you have to do that in some way.
When we think about the competitive landscape and some of your private competitors on the cooling towers, I mean, do they have a holistic offering with water, hybrid, and dry?
Yeah. I would say our two predominant competitors in cooling tower are two private companies. They actually come, they've been in the market and have been more, I'd say, a little ahead in ADB Attic and dry. It would be the same competitors that we're very comfortable competing with in cooling towers. We feel like we know who they are. We feel like we know how to compete against them. Good companies, good technology, good innovation. We feel very comfortable competing against them.
Okay. Maybe just switching to the text measurement, some early indications that the IIJA funds are finally here as we think about that portfolio. What areas do you see as potential beneficiaries?
Yeah. I would say we are seeing benefit from those funding in our transportation business. This is driven by the municipalities. I think those dollars are finally flowing to these opportunities. We are seeing some fairly large-scale and regular way opportunities materialize. You saw that show up in our backlog over in Q1. We are pretty enthusiastic about what we are seeing in that market over the next few years, driven by federal funding. Many of these projects are on the shelf, right? Municipalities are looking to move forward with these projects. Now there are incremental dollars to move them forward. It is a benefit for us. That is really the one area I would point to. It is hard to put our finger on where we are benefiting otherwise. Clearly, if there is more economic activity driven by infrastructure spending, that would benefit some of our location and inspection businesses.
It is hard for us to sort of say directly that we are benefiting from a specific element of it.
Okay. Gene, Mark, thank you for the time. We are going to be holding a breakout session in the Richardson room beginning at 9:20. Thank you.