SPXC Q3 2025: 32% EPS Growth Drives $1B+ Liquidity for Expansion and M&A
SPX Technologies delivered standout Q3 results, with margin and profit growth in both core segments and a 32% jump in adjusted EPS, while simultaneously boosting its balance sheet with over $1 billion in new liquidity to fund capacity expansions and a robust M&A pipeline. HVAC and Detection & Measurement segments both outperformed, and new product launches like Olympus Max are positioned to expand addressable markets in 2026 and beyond. Raised guidance and strong backlog signal continued momentum, but investors should monitor project timing shifts and the execution of planned capacity additions as SPX targets outsized growth through 2027.
Summary
- Balance Sheet Transformation: Over $1 billion in new liquidity with no 2025 EPS dilution positions SPXC for aggressive organic and inorganic investment.
- Capacity and Product Expansion: Olympus Max launch and engineered air movement buildouts are set to capture surging data center and institutional demand.
- Guidance Momentum: Raised full-year outlook reflects operating leverage, robust backlog, and accelerating margin improvement across both segments.
Performance Analysis
SPXC’s Q3 was defined by double-digit revenue growth in both HVAC and Detection & Measurement (D&M), with consolidated revenue up 23% and segment income up 28% year over year. Margin expansion was broad-based, as consolidated segment margin increased by 110 basis points, driven by higher project volumes, operating leverage, and the contribution of recent acquisitions (notably KTS, Sigma, and Omega).
HVAC, the company’s largest segment, posted 15.5% revenue growth (9% organic) and expanded margin by 50 basis points, supported by strong demand in cooling and heating solutions. Backlog climbed 7% sequentially to $579 million, reflecting continued strength in data center, healthcare, and institutional end markets. D&M delivered standout performance, with revenue up 38.4% (26.5% organic), and margin surging 240 basis points, as project timing and the KTS acquisition fueled outsized operating leverage. Segment backlog held steady at $366 million.
- Cash Generation Surge: Adjusted free cash flow reached $91 million in Q3, with Q4 expected to be the year’s peak.
- Leverage Reset: Net leverage dropped to 0.5x, providing ample headroom for further capital deployment.
- Backlog as a Visibility Anchor: Both segments’ backlogs are at or near all-time highs, with ~40% scheduled for delivery in 2026, supporting forward revenue confidence.
Financial flexibility is at a multi-year high, with available liquidity exceeding $1.6 billion after the equity raise and revolver expansion—setting the stage for accelerated M&A and capacity investments.
Executive Commentary
"We grew third quarter adjusted EPS by 32% and drove significant profit and margin growth in both segments. To reflect our strong performance in Q3, at the outlook for the fourth quarter, we are raising our four-year guidance range. We now anticipate adjusted EBITDA to exceed $500 million at the midpoint of our updated range, implying approximately 20% growth year-over-year."
Gene Lowe, President & Chief Executive Officer
"During the third quarter, we accessed the capital markets to further strengthen our balance sheet and support our growth strategies. We completed a $575 million offering of our common stock... As a result, there is no dilutive impact to 2025 EPS. We also amended our credit agreement to increase the capacity of our revolving credit facility by $500 million to $1.5 billion and extended the maturity of our credit facilities to 2030."
Mark, Chief Financial Officer
Strategic Positioning
1. Liquidity-Driven Growth Engine
SPXC’s capital raise and revolver expansion have unlocked over $1 billion in incremental liquidity, giving the company rare flexibility to pursue both organic expansion and a robust pipeline of M&A targets. Management emphasized that this balance sheet transformation was executed with no EPS dilution for 2025, preserving shareholder value while enhancing strategic optionality.
2. Capacity Expansion and New Product Launches
Engineered air movement businesses are scaling up, with the new TAMCO facility in Tennessee set to begin production next quarter and plans for a large Ingenia site in the Southeast advancing. Olympus Max, a dry/adiabatic cooling solution for data centers, is on track for $50 million in bookings in 2025—a key wedge into a fast-growing, previously unaddressed market. These investments are intended to capture surging demand from hyperscalers and institutional customers, and management sees substantial runway for further growth as these initiatives ramp through 2027.
3. Disciplined M&A Execution
Recent integrations (KTS, Sigma, Omega) are tracking ahead of deal models, with KTS already delivering margin upside and new joint product launches. Management reiterated its commitment to disciplined capital deployment, targeting acquisition multiples in the 10-12x EBITDA range and prioritizing strategic fit and cash returns. The M&A pipeline remains most active in HVAC, particularly engineered air movement and electric heat, with select opportunities in Detection & Measurement.
4. Margin Expansion and Operating Leverage
Both segments are delivering improved operating leverage, with D&M margins up 240 basis points and HVAC showing steady incremental gains. Management expects further margin progress as scale and mix improve, though startup costs from new facilities and product launches could create near-term drag. Structural cost discipline at the corporate level should support incremental P&L leverage as revenue rises.
5. End Market and Backlog Dynamics
Data center, healthcare, and institutional markets remain robust, with backlog strength providing multi-quarter revenue visibility. Commercial and industrial markets are “flattish” but stable, while residential exposure is limited and mostly tied to replacement demand, insulating SPXC from broader consumer softness. Management noted that approximately $20 million of D&M project sales were pulled forward into 2025 from 2026, creating a modest headwind for next year but supporting current-year performance.
Key Considerations
SPXC’s Q3 marks a pivotal inflection, as the company leverages operational momentum, a fortified balance sheet, and expanding addressable markets to target above-market growth through 2027.
Key Considerations:
- Capital Allocation Flexibility: The equity raise and revolver expansion provide unmatched agility to pursue M&A, capacity investments, and organic growth initiatives without near-term dilution.
- Backlog Quality and Timing: Record backlog underpins revenue visibility, but project timing shifts (notably $20 million pulled forward in D&M) will require careful management to avoid growth air pockets in 2026.
- Olympus Max Market Entry: Success in scaling Olympus Max could unlock a new growth vector in data center cooling, but adoption cycles with hyperscalers are inherently lumpy and require sustained execution.
- Disciplined M&A Approach: Management’s focus on value-accretive, strategically aligned acquisitions remains a core element of the growth playbook, with a clear aversion to overpaying for assets.
- Margin Expansion Trajectory: Operating leverage and mix improvements are driving margin gains, but near-term startup costs and integration efforts will need to be monitored for execution risk.
Risks
Execution on capacity expansions and new product ramps present operational risk, especially as Olympus Max seeks to penetrate hyperscaler accounts with complex buying cycles. Project timing volatility, as evidenced by D&M revenue pull-forwards, could create uneven growth in future quarters. M&A discipline must be preserved as balance sheet capacity grows and acquisition multiples in target markets remain elevated. Macro shifts in data center, healthcare, or institutional demand could also impact backlog conversion and revenue realization.
Forward Outlook
For Q4, SPXC guided to:
- Adjusted EPS of $6.65 to $6.80 for the full year (up from prior $6.35 to $6.65 range)
- Adjusted EBITDA to exceed $500 million at the midpoint, implying ~20% YoY growth
For full-year 2025, management raised guidance:
- HVAC segment revenue and margin guidance maintained with confidence in Q4
- D&M margin guidance increased to 23.25–23.75% (midpoint up 140 bps YoY)
Management highlighted several factors that will shape results:
- Continued strong backlog and robust demand in key end markets
- Olympus Max bookings targeted at $50 million for 2025, with revenue impact in 2026
Takeaways
SPXC is executing on a multi-year transformation, combining organic and inorganic growth to outpace end markets and expand margin structure.
- Balance Sheet Firepower: Over $1 billion in liquidity supports a step-change in M&A and capacity investment, with management signaling no shift in acquisition discipline.
- Growth Vectors Converge: Capacity expansion, new product launches, and record backlogs position SPXC for sustained above-market growth into 2026 and beyond.
- Execution Watchpoints: Investors should monitor project timing, Olympus Max adoption, and integration of recent acquisitions as key drivers of future earnings quality.
Conclusion
SPXC’s Q3 was a demonstration of operational strength and strategic agility, with margin expansion, robust cash generation, and a fortified balance sheet setting the stage for accelerated growth. Disciplined capital deployment and execution on new initiatives will be critical as the company aims to exceed its medium-term targets ahead of schedule.
Industry Read-Through
SPXC’s results underscore the strength of engineered HVAC and detection solutions in data center, healthcare, and institutional sectors, with demand outpacing capacity and new product innovation (like Olympus Max) opening incremental addressable markets. Record backlog and robust M&A activity signal a broader industry trend toward consolidation and vertical integration, as well-capitalized players seek to capture scale and operating leverage. Investors in adjacent industrials and building technologies should note the premium placed on margin expansion, disciplined M&A, and the ability to translate backlog into profitable growth, especially as project timing and supply chain dynamics remain volatile.