SBX Technologies at 45th Annual William Blair Growth Stock Conference: Strategic Growth Focus

On Wednesday, June 4, 2025, SBX Technologies (NYSE:SPXC) presented at the 45th Annual William Blair Growth Stock Conference, outlining its strategic vision and financial performance. The company, transitioning from a power-focused entity to a leader in niche industrial applications, highlighted its commitment to doubling EBITDA in the medium term. While emphasizing growth through strategic acquisitions and product development, the conference also addressed potential market challenges.

Key Takeaways

• SBX Technologies aims to double its EBITDA within 4-5 years through strategic mergers and acquisitions (M&A) and new product development.
• The HVAC segment remains strong, driven by replacement revenue and strategic acquisitions.
• The data center market is a focal point, with new cooling solutions expected to generate revenue in 2026.
• The detection and measurement segment benefits from infrastructure spending, particularly in transportation.

Financial Results

• HVAC revenue reached $1.5 billion, with margins between 22% and 24%.
• Approximately 60% of HVAC revenue is from replacement sales, predominantly in North America.
• Detection and Measurement segment targets revenue of around $710 million.
• 2023 EBITDA was $310 million, with a guided midpoint for the current year at $483 million.
• SBX Technologies plans to double its 2023 EBITDA of $310 million in the midterm.

Operational Updates

• SBX Technologies completed 16 acquisitions over four and a half years, deploying $2 billion and bringing in $800 million in revenue.
• Recent acquisitions include Sigma and Omega for heat pumps and fan coils, and KTS for technology within the Comtech platform.
• New product launches include the Olympus Vmax for data centers, targeting significant revenue by 2026.
• Digital transformation initiatives incorporate AI in products and software development.

Future Outlook

• SBX Technologies aims for 15% annual EBITDA growth, focusing on reinvesting cash flow into growth.
• The data center market expansion includes adiabatic and dry cooling solutions, with project decisions expected by year-end.
• IIJA funding positively impacts the transportation business within the detection and measurement segment.

Q&A Highlights

• Growth is attributed to superior products and market share gains rather than ARPA funding.
• The company sees both price and volume growth, with price increases in the single-digit range.
• Immersion cooling technology does not negate the need for traditional cooling towers.

For further details, readers are encouraged to refer to the full transcript below.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Ross Spermblek, Research Analyst, William Blair: All right. Good morning. Thank you for attending the SBX Technologies presentation. I’m Ross Spermblek, the research analyst here at William Blair that covers SBX. 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 and a. So with that, let me turn to Gene for some opening remarks before heading to q and a. Thank you.

Gene Lowe, President and Chief Executive Officer, SBX Technologies: Thanks, Ross. Alright. Let’s get started. My name is Gene Lowe. I’ve been with the firm for about seventeen years.

I can’t really stand upstage. I’ll walk around a little bit, give you little bit of an overview of who we are, and we’ll open up the floor to questions or any anything you’d like to talk about. Let’s see. We are really a standalone company. We’re gonna be ten years this September.

We’re gonna have our ten year anniversary when we split from flow. We’re in Charlotte, North Carolina, 2 segments, HVAC detection and measurement, about 2,200,000,000.0, 4 thousand 3 hundred 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 we had our first investor day in five years last year where we kinda laid out our growth plan and our strategy to double our EBITDA again.

And this is the chart we call it the Fisher Price chart that that really lays out where we play and how where where we are. What ties us together is our engineered products and niche markets with leading positions with strong technologies. I’ll start on the HVAC side. You can see this is our largest segment. It’s 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, you know, probably the leading player in the cooling tower for a hundred years. We had our hundred 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 of detection and measurement business, where you typically see is we we have outdoor technologies. So what I mean by that is if you kinda 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 rate of detection. We provide underground robots that take care of water and wastewater infrastructure, gas infrastructure. So that all falls into what we call our location and inspect inspection platform. That’s almost about half of our detection and measurement business. And then we have some little bit smaller platforms, our Aton platform, our transportation platform, and our Comtech platform.

I’m gonna go in a little bit more detail on these as we as we go through the presentation. But this gives a good feel for our field of play and and and how we come together. A little more color. You can see our revenue about a billion 5 for HVAC this year, about $7.10. Segment margins in the 2422%.

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 gonna oftentimes we get a question, you’re in HVAC, are you gonna go get into chillers and compete with Carrier and Trane and Daikin and JCI? That’s not 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, Wom, McLean, 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. So we have very strong trade brands in the markets that we serve. Little more color here. Again, about $483,000,000 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 our as a company. Sometimes I get the question of how HVAC and detection, what are they you know, what are the commonalities of these? They do serve different end markets.

But really, we play in engineered niches, leading positions, tech enabled with strong moats, with a sustainable position. So this is where we’ve been over the past couple of years. EBITDA has gone from the neighborhood of a 60 to around 483 this year. Margins in the low twenties and you can see, the adjusted earnings per share. Probably is worth noting, we had transformed our business.

So I mentioned that we’ve been around about ten years. When we actually came out, the bulk of our business was power. And we did not see that being a sustainable value creation business for us to own. So we ultimately really divested more than two thirds of our business. So at that point in time, we had divested our last business.

So we’re a little bit lower and had a lot of cash at that time, which we promptly reinvested in growth. So it’s a little bit lower than it might normally be due to our portfolio repositioning in 2021. So this is really from our investor day. What is our strategy? In 2023, we had 310,000,000 of EBITDA.

We said we believe we can double it, and we actually think there’s a lot of runway with our strategy. We’ve been executing our strategy with our new portfolio really about five, six years. And we’ve really been in the growth mode. We’ve done 16 acquisitions over the past four and a half years. I’m gonna get a little more detail of the composition of those.

But as you can see, we said we think we can double this in the midterm. What is that? We said four to five years. And so right now, this is 23, 20 five. Like I just said, we’re in the 483 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. You know, we really play in engineered niches. Know, for example, cooling tower. Our largest business is cooling towers.

Every single one of these is unique. We don’t make a single one of these your stock. This is 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 it’s it’s predominantly engineered products in our portfolio. If you look at our business system, how we drive value, the way we think about 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. So it’s 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 to 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. And then 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 we train them for a year and we we help them grow and expand. And as you can see, we’ve been growing very rapidly.

You have to have talent that can support that, whether it’s a a very competent head of engineering or head of commercial or head of product development or general manager. You have to invest in that talent. We’re very 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 and a. I’m gonna get a little more color on this, going forward, But a very important part of who we are.

You know, if you think about our capital allocation, we don’t do dividends. We do buybacks only if the stock’s located, I think, dislocated. We’ve done one set of buybacks in the past ten years. Really, our focus is investing for growth. So we generate an enormous amount of cash, probably 95%, hundred % net income every year, and we invest that in growth.

That’s really our business model. That’s who we are. So a lot of that is strategic M and A. New product development, you’ve heard, if you’ve followed us over the past couple of years, we’ve launched a lot of new products that have been very successful. The one that I’m most excited about right now is in the data center market where we’re very strong with cooling towers.

We’ve just launched to get into a new adjacent market, the dry and the adiabatic market with what we call our Olympus v max product. This is a product that we’ve 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 who are predominantly a rep oriented firm.

These are reps that are exclusive to us and it’s very important to how we how we win in the market. And so we we really target 15% EBITDA growth every year. And, if you look over the past nine years, we’ve cleared that pretty significantly with the exception of the two COVID years. We’re more flattish. So 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 is is is has some nice positions globally. Our heating business tends to be much more North American based.

And you can see that’s grown from around 900,000,000 to about a billion 5 over the past couple of years. Really like our HVAC segment, really good leadership team, very good product categories. And I actually think some of the m and a we’ve done here has really helped strengthen our competitive position in some areas. So we feel very good about our HVAC segment. We believe there’s a lot of runway here.

Last thing, can see it’s about 60% replacement revenue. If you look at the nonreplacement revenue, the, the Dodge index, you know, 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, it’s health care, whether it’s institutional, whether it’s data centers, whether it’s hotels. It’s anything large needs a cooling tower. Because you save so much money when you have a cooling tower.

Anything go we’re we’re in Charlotte. Our Panther 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’s four platforms here. We’ve been told that before. Location and inspections, 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 in the world and in North America. And then on the gas side, we believe we’re the only player that can can do what we do there. You can also see Eton contact transportation. Eton 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 in a real time basis monitors that light to make sure it’s on. So if the light goes out, you have to notify the FAA within thirty minutes, and they’ll actually have planes go away from that obstruction. And so as you might imagine, a very regulated market. We’re the very strong leader in that area. We’ve we’ve gone from being 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 547,000,000,000, we think that’s around 710,000,000. 20 2 to 24% is our target ranges there. A little bit more global of a business here, 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 ten years ago. We’re gonna actually have our ten year anniversary in September. But we’ve 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 and a. So those start you know, starting in 2018, we’ve been very, consistent. I think we have a very good flywheel rolling on our m and a machine. We have a phenomenal front end team, gentleman who runs our m and a. But not only that, our segment presidents who are phenomenal operators are very, very strong, m and a leaders.

They both have very strong strategy capability come out of the large strategy houses, but have also done a lot of m and a in their history. So I think it’s a nice blend. You can see where we are today. We’re at one six according to our filings, but we did do an acquisition, Sigma and Omega. On a pro form a basis, we’re a little bit closer to one nine.

We think by the end of the year, we’ll be in the one three range, a little bit below that, just normal cash flow. So point being, we’ve done two acquisitions this year, about a little under a half a billion dollars. 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 2,000,000,000.

We brought in about 800,000,000 of revenue. Average margin, a little higher than 20%. That’s before synergies. We typically get 200 basis points of synergy out of them. The average deal size

It’s about a hundred and 30,000,000. Multiples, I think our blended multiple is in the range of just a hair below 11, but in the 11 range before synergies. So you can typically take one and a half times off of that. So 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 arbitrage here.

And we actually think we can grow these typically a lot faster than they grow themselves. We have some great examples of that, 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 it’s 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 see this in hotels very commonly.

And so we acquired Sigma and Omega. These are heat pumps, fan coils that are fit almost hand and glove synergistically with what we provide to the market. Very strong in Canada. They’re smaller in The US, and we’re very strong in The US. So we actually think we can help them accelerate growth.

Again, very similar to what we saw and what we’ve been able to accomplish with both Ingenia and Tamco over the past couple of years. So very nice acquisition. We’re we’re off to a nice start there. The other acquisition we did this year is KTS. Really good technology.

Fits very well within our Comtech platform. We see very nice synergies on the front end, in terms of, commercial. TCI is much, much more global, has like a hundred customers globally. We actually think we can help KTS get there. Then KTS has really good technology that we already have programs under place to leverage some of that in both ECS and TCI.

Those don’t happen overnight. It takes a little bit of time to build those products, to integrate them, but we see some very nice synergy here both on the commercial side and on the R and D side. And then 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.

So if you think about what a cooling tower is, it’s air movement and then it’s heat exchange. So we have phenomenal competence in we engineer on fans. We have we 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 the the competence there is very high.

So it’s a it’s a good adjacency for us. Oftentimes, it goes through our same channel. We’ve added Tam, Cone and Genya, like I said, we’ve really helped them grow. I actually think this this business area can be a lot larger. Very good business for us, very aligned with our R and D competencies, and very aligned with our channel.

So there’s a lot of runway there. Electric heat, we’ve 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 ten years. They they invented Indeco is their brand. They basically invented duct heating. And they have the patent on the original duct heating, patent. But very good synergy.

And again, we think this makes us stronger, a lot of cross selling opportunities and so forth. So, you know, that that’s that’s us. And I know I’ve gone a little bit over. Ross, why don’t we kinda jump to m and a, and, we’ll be glad to answer any questions you guys have.

Ross Spermblek, Research Analyst, William Blair: Perfect. Thank you, Gene. Maybe just kicking off on the HVAC. Been notable strength the last several years and 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. So 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 and what’s the visibility going forward in some of those markets?

Gene Lowe, President and Chief Executive Officer, SBX Technologies: Sure. Mark, you wanna take that?

Mark Carano, Chief Financial Officer, SBX Technologies: Yeah. I 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.

You know, we really we haven’t really seen that be a significant driver of our revenue. What’s really been driving our business in the health care and the institutional market, quite frankly, is a couple 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 our customer 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.

So, you know, 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 health care and the institutional markets.

Ross Spermblek, Research Analyst, William Blair: Okay. And then 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, 20 three more price, more volume near term.

Mark Carano, Chief Financial Officer, SBX Technologies: Yeah. You know, with respect to that, I

Gene Lowe, President and Chief Executive Officer, SBX Technologies: would

Mark Carano, Chief Financial Officer, SBX Technologies: say, you know, we’ve had good pricing power in the markets that we participate in, but we’ve seen strong volume really across the HVAC segment. Price has been typically kind of, I would say, single digits across all of the businesses.

Ross Spermblek, Research Analyst, William Blair: All right. And then just on the data center side, secular tailwinds there. How should we think about the coming value unlock with the new, you know, abiotic and the coming dry cooling towers?

Gene Lowe, President and Chief Executive Officer, SBX Technologies: 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 cooling tower portion of the market is less than half of the market. So by getting into, adiabatic and dry, it really increases our TAM. Now we gotta go out there and win.

Gotta go compete. We have to be able to prove that we can win in this market. But I I do believe we can. So I think as we’ve said before, this is you know, if you look at that adiabatic 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. You know, the size of these units are 40 feet long. It is a true engineered it is it is a, truly a high engineered product. It’s also a product that these big sophisticated customers want a company they can rely on. And they’ve been relying on us for for years.

And 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, gear boxes, cooling tower motors. We are porting that almost exactly over. So we have a real advantage on mechanical equipment that we don’t think our competitors can match. So having said that, we gotta we gotta prove it.

We gotta go out and earn it. We haven’t done anything yet. So but I would say I’m optimistic. I feel really good about the pipeline, and I feel like I feel like that that’s gonna be a winner for us. So it should should accelerate our opportunity in data centers.

Ross Spermblek, Research Analyst, William Blair: Can you maybe give us a sense on what you’re hearing from the customers in regards and timing on when we should start seeing orders flow and, you know, projects deliver for those products?

Gene Lowe, President and Chief Executive Officer, SBX Technologies: Yeah. As you might imagine, on some you know, we we’re 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 gonna have. We believe we will have decisions on a number of projects by the by year end. And if we are awarded these projects, we think these would be meaningful revenue opportunities in in in 2026.

I’d say by by q four at the latest, we should have a good feel for where we are in terms of our Olympus Vmax product and and the momentum we have there.

Ross Spermblek, Research Analyst, William Blair: Alright. Well, thinking through kind of the real acceleration in the Dodge Momentum Index, primarily data sends centers since April of last year and knowing that you guys are in the very early stages in the, you know, kind of architecture process on these projects, you get the sense that maybe you’ve missed some of that 2024, or can you still get specked into any of those projects going forward?

Gene Lowe, President and Chief Executive Officer, SBX Technologies: I think 2025 is really baked for the most part. I think that really most of the activity now is looking the year ahead. So, yeah, I think, if you look at dry and adiabatic, most of the activity for this year is has been decided, and really a lot of the people are looking ahead ’26, ’20 ’7, ’20 ’8, oftentimes in multiyear programs.

Ross Spermblek, Research Analyst, William Blair: Okay. And no concerns with immersion or directed chip or any of the new types of cooling?

Gene Lowe, President and Chief Executive Officer, SBX Technologies: Yeah. I mean, we get that question a lot is, hey. Does immersion, does that make cooling towers go away? Or you know? And the answer is no.

It doesn’t. I mean, the way that I would think about it is there’s a certain amount of heat that’s generated by the chips. There’s different technologies to cool it down. It could be air. It could be rear door.

It could be liquid. It could be immersion. But nonetheless, however you get that heat off the chip, you still gotta take it out of the building and reject that heat. So that’s where we play. So all the technologies under the roof, that’s not really where we play.

And irregardless of what technology wins, we’re like Switzerland. We really don’t we don’t have a a big dog in that hunt. Right? So I guess I don’t know if Switzerland and dog fit together, but, you know, we we we we don’t see we we feel like we have a solution that can meet that. We don’t think that’s gone away.

We haven’t seen any technologies. And at the end of the day, it’s the laws of physics. Right? You have to get the heat out and you have to do that in some way. So Well, when we

Ross Spermblek, Research Analyst, William Blair: think about the competitive landscape and, you know, some of your private competitors on the cooling towers, I mean, do they have a holistic offering with water, hybrid, and dry?

Gene Lowe, President and Chief Executive Officer, SBX Technologies: Yeah. I would say our two predominant competitors in cooling tower are two private companies. They actually come you know, they’ve been in the market and have been more, I’d say, a little little ahead in in adiabatic and dry, but it would be the same competitors that we’re very comfortable competing with in cooling towers. We feel like we can we know who they are. We feel like we know how to compete against them.

Good companies, good technology, good innovation, but we feel like, we feel very comfortable competing against them.

Ross Spermblek, Research Analyst, William Blair: Okay. And maybe just switching to detection and measurement. Some early indications that IIJ funds are finally here as we think about that portfolio. You know, what areas do you see as potential beneficiaries?

Mark Carano, Chief Financial Officer, SBX Technologies: Yeah, I would say, you know, we are seeing benefit from those funding in our transportation business. You know, this is is driven by the municipalities, and I think those dollars are finally flowing to these opportunities. So we’re seeing some, you know, fairly large scale and and regular way opportunities materialize. You saw that show up in our backlog over in q one, and and, you know, we’re pretty enthusiastic about what we’re seeing in that market over the next few years driven by, you know, federal funding. Many of these projects, you know, are on the shelf.

Right? Municipalities are looking to move forward with these projects. Now there’s incremental dollars to move them forward, so it’s a benefit for us. That’s really the one area I would point to. It’s hard to put our finger on where we’re benefiting otherwise.

Clearly, if there’s more economic activity driven by infrastructure spending, that would benefit some of our location and inspection businesses, but but it’s hard for us to sort of say directly that we’re benefiting from a specific element of it.

Ross Spermblek, Research Analyst, William Blair: Okay. Well, Jean, Mark, thank you for the time. We’re gonna be holding a breakout session in the Richardson Room beginning at 09:20. Thank you.

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