Q3 2025 SPX Technologies Inc Earnings Call

Operator: Good day. Thank you for standing by. Welcome to the Q3 2025 SPX Technologies Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw the question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today.

Speaker #2: Good day and thank you for standing by . Welcome to the Q3 2025 . SPP technologies Earnings Conference Call . At this time , all participants are in a listen only mode .

Speaker #2: After the speakers presentation , there will be a question and answer session . To ask a question during the session , you need to press star one one on your telephone .

Speaker #2: You will then hear an automated message advising your hand is raised . To withdraw the please press star one one again . Please be advised that today's conference is being recorded .

Speaker #2: I would now like to turn the conference over to your speaker for today .

Mark Carano: Thank you, operator, and good afternoon, everyone. Thanks for joining us. With me on the call today is Gene Lowe, our President and Chief Executive Officer. A press release containing our Q3 results was issued today after market close. You can find the release and our earnings slide presentation, as well as a link to a live webcast of this call in the investor relations section of our website at spx.com. I encourage you to review our disclosure and discussion of GAAP results in the press release and to follow along with the slide presentation during our prepared remarks. The replay of the webcast will be available on our website. As a reminder, portions of our presentation and comments are forward-looking and subject to Safe Harbor provisions. Please also note the risk factors in our most recent SEC filings.

Speaker #3: Thank you . Operator , and good afternoon , everyone . Thanks for joining us . With me on the call today is Jean Lowe , our president and chief Executive officer .

Speaker #3: A press release containing our third quarter results was issued today after market close. You can find the release and our earnings slide presentation, as well as a link to a live webcast of this call in the Investor Relations section of our website at SPX Technologies, Inc.

Gene Lowe: You can find the release and our earnings slide presentation, as well as a link to a live webcast of this call in the Investor Relations section of our website at spx.com. I encourage you to review our disclosure and discussion of GAAP results in the press release and to follow along with the slide presentation during our prepared remarks. A replay of the webcast will be available on our website. As a reminder, portions of our presentation and comments are forward-looking and subject to safe harbor provisions. Please also note the risk factors in our most recent SEC filings. Our comments today will largely focus on adjusted financial results, and comparisons will be to the results of continuing operations only. You can find detailed reconciliations of historical adjusted figures from their respective GAAP measures in the appendix to today's presentation.

Speaker #3: I encourage you to review our disclosure and discussion of GAAP results in the press release, and to follow along with the slide presentation during our prepared remarks.

Speaker #3: A replay of the webcast will be available on our website . As a reminder . Portions of our presentation and comments are forward looking and subject to safe harbor provisions .

Speaker #3: Please also note the risk factors in our most recent SEC filings. Our comments today will largely focus on adjusted financial results, and comparisons will be to the results of continuing operations only.

Mark Carano: Our comments today will largely focus on adjusted financial results, comparisons will be to the results of continuing operations only. You can find detailed reconciliations of historical adjusted figures from their respective GAAP measures in the appendix to today's presentation. Our adjusted earnings per share exclude amortization expense, acquisition-related costs, non-service pension items, mark-to-market changes, and other items. With that, I'll turn the call over to Gene.

Speaker #3: You can find detailed reconciliations of historical adjusted figures from their respective GAAP measures in the appendix to today's presentation . Our adjusted earnings per share exclude amortization expense , acquisition related costs , Non-service pension items mark to market changes and other items .

Gene Lowe: Our adjusted earnings per share exclude amortization expense, acquisition-related costs, non-service pension items, mark-to-market changes, and other items. With that, I'll turn the call over to Gene. Thanks, Mark. Good afternoon, everyone, and thank you for joining us. On the call today, we'll provide you with an update on our consolidated and segment results for the third quarter of 2025, as well as an update on our outlook for the remainder of the year. Our Q3 performance was strong. 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 and the outlook for the fourth quarter, we are raising our full-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.

Speaker #3: And with that , I'll turn the call over to Jean . Thanks . Mark .

Gene Lowe: Thanks, Mark. Good afternoon, everyone, thank you for joining us. On the call today, we'll provide you with an update on our consolidated and segment results for Q3 of 2025, as well as an update on our outlook for the remainder of the year. Our Q3 performance was strong. We grew Q3 adjusted EPS by 32% and drove significant profit and margin growth in both segments. To reflect our strong performance in Q3 and the outlook for Q4, we are raising our full-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. During Q3, we raised additional capital through an equity offering and increased the capacity of our revolving credit facility.

Speaker #4: Good afternoon , everyone , and thank you for joining us on the call today . We'll provide you with an update on our consolidated and segment results for the third quarter of 2025 , as well as an update on our outlook for the remainder of the year .

Speaker #4: Our Q3 performance was strong . 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 and the outlook for the fourth quarter .

Speaker #4: We are raising our full-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: During Q3, we raised additional capital through an equity offering and increased the capacity of our revolving credit facility. These actions provide us with more than $1 billion of additional liquidity to support our organic and inorganic value creation initiatives and do not have a dilutive effect on our 2025 EPS. We also continue to progress on several key organic initiatives, including the expansion plans for our engineered air movement businesses and launch of the Olympus Max product, a new large-scale cooling solution. Inorganically, our M&A pipeline remains robust with several attractive opportunities. Turning to our high-level results. In the third quarter, we grew revenue by 23%, driven by strong organic growth in both segments and the benefit of recent acquisitions. Adjusted EBITDA increased by approximately 31% year-over-year, with 150 basis points of margin expansion. As always, I'd like to update you on our value creation initiatives.

Speaker #4: During Q3 . We raised additional capital through an equity offering and increased the capacity of our revolving credit facility . These actions provide us with more than $1 billion of additional liquidity to support our organic and inorganic value creation initiatives , and do not have a dilutive effect on our 2025 EPs .

Gene Lowe: These actions provide us with more than $1 billion of additional liquidity to support our organic and inorganic value creation initiatives and do not have a dilutive effect on our 2025 EPS. We also continue to progress on several key organic initiatives, including the expansion plans for our engineered air movement businesses and launch of the Marley OlympusMAX product, a new large-scale cooling solution. Inorganically, our M&A pipeline remains robust with several attractive opportunities. Turning to our high-level results. In Q3, we grew revenue by 23%, driven by strong organic growth in both segments and the benefit of recent acquisitions. Adjusted EBITDA increased by approximately 31% year over year, with 150 basis points of margin expansion. As always, I'd like to update you on our value creation initiatives.

Speaker #4: We also continue to progress on several key organic initiatives, including the expansion plans for our Engineered Air movement businesses and the launch of the Olympus Max product.

Speaker #4: A new large scale cooling solution . Inorganically . Our M&A pipeline remains robust . And several attractive opportunities . Turning to our high level results for the third quarter , we grew revenue by 23% , driven by strong organic growth in both segments and the benefit of recent acquisitions .

Speaker #4: Adjusted EBITDA increased by approximately 31% year over year , with 150 basis points of margin expansion . As always , I'd like to update you on our value creation initiatives over the past quarter , we've continued to gain traction on our growth and new product initiatives .

Gene Lowe: Over the past quarter, we've continued to gain traction on our growth and new product initiatives. We're making meaningful progress on expansion plans for our engineered air movement businesses, where we see significant demand in excess of our current production capacity. We closed on a leased facility in Tennessee for U.S. production of our TAMCO Ax-rated dampers. We expect production in this facility to begin in the latter half of next quarter. We're also progressing on our expansion plans to produce Ingenia custom air handling units in the U.S. We are currently targeting a location in the Southeast and will provide more detail next quarter. On the new product front, our Olympus Max product, a dry and adiabatic cooling solution focused on the large-scale needs of data center customers, continues to receive excellent feedback and engagement from customers.

Gene Lowe: Over the past quarter, we've continued to gain traction on our growth and new product initiatives. We're making meaningful progress on expansion plans for our engineered air movement businesses, where we see significant demand in excess of our current production capacity. We closed on a leased facility in Tennessee for US production of our TAMCO actuated dampers. We expect production in this facility to begin in the latter half of next quarter. We're also progressing on our expansion plans to produce Ingenia custom air handling units in the US. We are currently targeting a location in the Southeast and will provide more detail next quarter. On the new product front, our Marley OlympusMAX product, a dry and adiabatic cooling solution focused on the large-scale needs of data center customers, continues to receive excellent feedback and engagement from customers.

Speaker #4: We're making meaningful progress on expansion plans for our engineered air movement businesses , where we see significant demand in excess of our current production capacity .

Speaker #4: We closed on a leased facility in Tennessee for U.S. production of our Tamko actuator dampers. We expect production in this facility to begin in the latter half of next quarter.

Speaker #4: We're also progressing on our expansion plans to produce engineered custom air handling units in the US . We are currently targeting a location in the southeast and will provide more detail next quarter .

Speaker #4: On the new product front , our Olympus Max product a dry and adiabatic cooling solution focused on the large scale needs of data center customers , continues to receive excellent feedback and engagement from customers .

Gene Lowe: We are on track to achieve our objective of booking $50 million of Olympus Max orders in 2025 for revenue in 2026. Now, I'll turn the call back to Mark to review our financial results. Thanks, Gene. Our third-quarter results were strong. Year-over-year, adjusted EPS grew by 32% to $1.84. For the quarter, total company revenue increased 23% year-over-year, primarily driven by higher project sales and Detection & Measurement, as well as inorganic growth from the acquisitions of KTS and Sigma and Omega. Consolidated segment income grew by $32 million, or 28%. To $146 million. While consolidated segment margin increased 110 basis points. In our HVAC segment, revenue grew by 15.5% year-over-year, with 6.7% inorganic growth and a nominal FX impact. On an organic basis, revenue increased 9%, with solid growth from both cooling and heating.

Gene Lowe: We are on track to achieve our objective of booking $50 million of Marley OlympusMAX orders in 2025 for revenue in 2026. Now, I'll turn the call back to Mark to review our financial results.

Speaker #4: We are on track to achieve our objective of booking $50 million of Olympus Max orders in 2025 for revenue in 2026 . Now I'll turn the call back to Mark to review our financial results .

Mark Carano: Thanks, Gene. Our Q3 results were strong. Year over year, adjusted EPS grew by 32% to $1.84. For Q3, total company revenue increased 23% year over year, primarily driven by higher project sales in Detection & Measurement, as well as inorganic growth from the acquisitions of KTS and Sigma & Omega. Consolidated segment income grew by $32 million, or 28%, to $146 million, while consolidated segment margin increased 110 basis points. In our HVAC segment, revenue grew by 15.5% year over year, with 6.7% inorganic growth and a nominal FX impact. On an organic basis, revenue increased 9%, with solid growth from both cooling and heating. Segment income grew by $14 million or 18%, while segment margin increased 50 basis points.

Speaker #3: Thanks , Jean . Our third quarter results were strong year over year . Adjusted EPs grew by 32% to $1.84 for the quarter .

Speaker #3: Total company revenue increased 23% year over year, primarily driven by higher project sales in detection and measurement, as well as inorganic growth from the acquisitions of KTS, Sigma, and Omega.

Speaker #3: Consolidated segment income grew by $32 million , or 28% , to $146 million , while consolidated segment margin increased 110 basis points in our HVAC segment , revenue grew by 15.5% year over year , with 6.7% inorganic growth and a nominal FX impact on an organic basis .

Speaker #3: Revenue increased 9% with solid growth from both cooling and heating segment income grew by $14 million , or 18% , while segment margin increased 50 basis points .

Gene Lowe: Segment income grew by $14 million, or 18%, while segment margin increased 50 basis points. The increases in segment income and margin were largely driven by higher volume and associated operating leverage. Segment backlog at quarter-end was $579 million, up 7% sequentially from Q2, all organic. In our Detection & Measurement segment, revenue increased 38.4% year-over-year, with strong organic growth of 26.5%. The KTS acquisition accounted for an increase of 11.6%, and FX was a modest tailwind. The increase in organic revenue was predominantly driven by higher compact project volumes. Segment income grew by $18 million, or 53%, and margin increased by 240 basis points. The increases in segment income and margin were primarily driven by operating leverage on higher organic sales and the KTS acquisition. Segment backlog at quarter-end was $366 million, flat sequentially. Turning now to our financial position at the end of the quarter.

Mark Carano: The increases in segment income and margin were largely driven by higher volume and associated operating leverage. Segment backlog at quarter end was $579 million, up 7% sequentially from Q2, all organic. In our Detection & Measurement segment, revenue increased 38.4% year-over-year, with strong organic growth of 26.5%. The KTS acquisition accounted for an increase of 11.6%, and FX was a modest tailwind. The increase in organic revenue was predominantly driven by higher Comtech project volumes. Segment income grew by $18 million or 53%, and margin increased by 240 basis points. The increases in segment income and margin were primarily driven by operating leverage on higher organic sales and the KTS acquisition. Segment backlog at quarter end was $366 million, flat sequentially.

Speaker #3: The increases in segment income and margin were largely driven by higher volume and associated operating leverage . Segment backlog at quarter end was $579 million , up 7% sequentially from Q2 , while organic in our detection and measurement segment , revenue increased 38.4% year over year , with strong organic growth of 26.5% kts acquisition accounted for an increase of 11.6% , and FX was a modest tailwind .

Speaker #3: The increase in organic revenue was predominantly driven by higher compact project volumes . Segment income grew , grew by $18 million , or 53% , and margin increased by 240 basis points .

Speaker #3: The increases in segment income and margin were primarily driven by operating leverage on higher organic sales , and the KTS acquisition segment backlog at quarter end was $366 million , flat sequentially .

Mark Carano: Turning now to our financial position at the end of the quarter. During Q3, we accessed the capital markets to further strengthen our balance sheet and support our growth strategy. We completed a $575 million offering of our common stock. A portion of the net proceeds from this offering was used to repay the outstanding amounts under our revolving credit facility. 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. Following these actions, our liquidity increased by more than $1 billion, and our available capacity now exceeds $1.6 billion.

Speaker #3: Turning now to our financial position at the end of the quarter. During the third quarter, we accessed the capital markets to further strengthen our balance sheet and support our growth strategy.

Gene Lowe: During the third quarter, we accessed the capital markets to further strengthen our balance sheet and support our growth strategy. We completed a $575 million offering of our common stock. A portion of the net proceeds from this offering was used to repay the outstanding amounts under our revolving credit facility. 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. Following these actions, our liquidity increased by more than $1 billion, and our available capacity now exceeds $1.6 billion. We ended Q3 with cash of approximately $232 million and total debt of $502 million. Our leverage ratio is calculated under our bank credit agreement, approximately 0.5 times at quarter-end.

Speaker #3: We completed a $575 million offering of our common stock. A portion of the net proceeds from this offering was used to repay the outstanding amounts under our revolving credit facility.

Speaker #3: 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 .

Speaker #3: Following these actions, our liquidity increased by more than $1 billion, and our available capacity now exceeds $1.6 billion. We ended Q3 with cash of approximately $232 million and total debt of $502 million.

Mark Carano: We ended Q3 with cash of approximately $232 million and total debt of $502 million. Our leverage ratio, as calculated under our bank credit agreement, was approximately 0.5 times at quarter end. Q3 adjusted free cash flow was approximately $91 million. As is typical, we anticipate Q4 to be our highest cash flow generating quarter of the year. Moving on to our full year 2025 guidance. We are updating adjusted EPS to a range of $6.65 to $6.80, reflecting our strong Q3 results and Q4 forecast. This represents an increase from our previous range of $6.35 to $6.65 and reflects year-over-year growth of approximately 21% at the midpoint.

Speaker #3: Our leverage ratio , as calculated under our bank credit agreement , is approximately 0.5 times at quarter end Q3 adjusted free cash flow was approximately $91 million .

Gene Lowe: Q3 adjusted free cash flow was approximately $91 million. As is typical, we anticipate Q4 to be our highest cash flow-generating quarter of the year. Moving on to our full-year 2025 guidance, we are updating adjusted EPS to a range of $6.65 to $6.80, reflecting our strong Q3 results and Q4 forecasts. This represents an increase from our previous range of $6.35 to $6.65 and reflects year-over-year growth of approximately 21% at the midpoint. For our HVAC segment, we are maintaining revenue and margin guidance and remain confident in the fourth-quarter forecast. In Detection & Measurement, we are increasing full-year margin guidance to a range of 23.25% to 23.75%, raising the midpoint to 23.5%. This represents year-over-year growth of 140 basis points. We expect Q4 revenue for the D&M segment to be modestly lower sequentially due to the timing of project deliveries between Q3 and Q4.

Speaker #3: As is typical , we anticipate Q4 to be our highest cash flow generating quarter of the year . Moving on to our full year 2025 guidance , we are updating adjusted EPs to a range of $6.65 to $6.80 , reflecting our strong Q3 results and Q4 forecasts .

Speaker #3: This represents an increase from our previous range of $6.35 to $6.65, and reflects year-over-year growth of approximately 21% at the midpoint.

Mark Carano: For our HVAC segment, we are maintaining revenue and margin guidance and remain confident in the Q4 forecast. In Detection & Measurement, we are increasing full year margin guidance to a range of 23.25% to 23.75%, raising the midpoint to 23.5%. This represents year-over-year growth of 140 basis points. We expect Q4 revenue for the DM segment to be modestly lower sequentially due to the timing of project deliveries between Q3 and Q4. As always, you will find modeling considerations in the appendix to our presentation. With that, I'll turn the call back over to Gene.

Speaker #3: For our HVAC segment , we are maintaining revenue and margin guidance and remain confident in the fourth quarter forecast in detection and measurement , we are increasing our full year margin guidance to a range of 23.25% to 23.75% , raising the midpoint to 23.5% .

Speaker #3: This represents year-over-year growth of 140 basis points. We expect Q4 revenue for the segment to be modestly lower sequentially due to the timing of project deliveries between Q3 and Q4.

Gene Lowe: As always, you will find modeling considerations in the appendix to our presentation. With that, I'll turn the call back over to Gene. Thanks, Mark. Market conditions support our increased full-year outlook for 2025. Within our HVAC segment, we continue to see solid demand in key end markets. Our strong backlog of highly engineered solutions and efforts to increase production capacity further reinforce our confidence in HVAC's growth opportunities. In our Detection & Measurement segment, we are seeing steady run-rate demand. For our project-oriented businesses, we have a strong backlog and feel confident in our forecast for the fourth quarter. Looking to next year, front-log activity remains steady. However, as we highlighted last quarter, approximately $20 million of project sales shifted from early 2026 into 2025, creating a modest headwind for next year.

Speaker #3: As always , you will find modeling considerations in the appendix to our presentation . And with that , I'll turn the call back over to Gene .

Gene Lowe: Thanks, Mark. Market conditions support our increased full year outlook for 2025. Within our HVAC segment, we continue to see solid demand in key end markets. Our strong backlog of highly engineered solutions and efforts to increase production capacity further reinforce our confidence in HVAC's growth opportunities. In our Detection & Measurement segment, we are seeing steady run rate demand. For our project-oriented businesses, we have a strong backlog and feel confident in our forecast for Q4. Looking to next year, front log activity remains steady. However, as we highlighted last quarter, approximately $20 million of project sales shifted from early 2026 into 2025, creating a modest headwind for next year.

Speaker #4: Thanks , Mark . Market conditions . Support our increased full year outlook for 2025 within our HVAC segment . We continue to see solid demand in key end markets .

Speaker #4: Our strong backlog of highly engineered solutions , and efforts to increase production capacity further reinforce our confidence in HVAC growth opportunities in our detection and measurement segment .

Speaker #4: We are seeing steady run rate demand for our project oriented businesses . We have a strong backlog and feel confident in our forecast for the fourth quarter .

Speaker #4: Look , in the next year , front log activity remains steady . However , as we highlighted last quarter , proximately $20 million of project sales shifted from early 2026 into 2025 , creating a modest headwind for next year .

Gene Lowe: In summary, I'm pleased with our strong Q3 performance, including significant profit growth in both segments and equity offering and expansion of our revolving credit facility, which together provides more than $1 billion of additional liquidity with no dilution to 2025 EPS, and the continued progress on our US capacity expansion and new product initiatives. We are well-positioned to achieve our increased full year guidance, which implies 20% growth in adjusted EBITDA and adjusted EPS at the midpoint. We also see multiple opportunities to continue growing our businesses both organically and through our robust M&A pipeline. Looking ahead, I remain excited about our future. With a proven strategy and a highly capable, experienced team, I see significant opportunities for SPX to continue growing and driving value for years to come. With that, I'll turn the call back to Mark.

Gene Lowe: In summary, I'm pleased with our strong Q3 performance, including significant profit growth in both segments, an equity offering, an expansion of our revolving credit facility, which together provides more than $1 billion of additional liquidity with no dilution to 2025 EPS, and the continued progress on our U.S. capacity expansion and new product initiatives. We are well-positioned to achieve our increased full-year guidance, which implies 20% growth in adjusted EBITDA and adjusted EPS at the midpoint. We also see multiple opportunities to continue growing our businesses both organically and through our robust M&A pipeline. Looking ahead, I remain excited about our future. With a proven strategy and highly capable, experienced team, I see significant opportunities for SPX Technologies Inc. to continue growing and driving value for years to come. With that, I'll turn the call back to Mark. Thanks, Gene. Operator, we will now go to questions. Thank you.

Speaker #4: In summary , I'm pleased with our strong Q3 performance , including significant profit growth in both segments and equity offering and expansion of our revolving credit facility , which together provides more than $1 billion of additional liquidity with no dilution to 2025 EPs and the continued progress on our US capacity expansion and new product initiatives , we are well positioned to achieve our increased full year guidance , which implies 20% growth in adjusted EBITDA and adjusted EPs at the midpoint .

Speaker #4: We also see multiple opportunities to continue growing our businesses , both organically through our robust M&A pipeline . Looking ahead , I remain excited about our future with a proven strategy and highly capable , experienced team .

Speaker #4: I see significant opportunities for SPX to continue growing and driving value for years to come . With that , I'll turn the call back to Mark .

Mark Carano: Thanks, Gene. Operator, we will now go to questions.

Speaker #3: Thanks , Gene . Operator . We will now go to questions .

Operator: Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. The first question today will be coming from the line of Bryan Blair of Oppenheimer. Your line is open.

Gene Lowe: As a reminder, if you would like to ask a question, please press star 11 on your telephone. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. The first question today will be coming from the line of Bryan Blair of Oppenheimer. Your line is open. Thank you. Good afternoon, guys. Another very solid quarter. Given we're almost in November and you have supportive backlog in both segments, maybe speak to your team's visibility into 2026 and which platforms are across which end markets you're most confident in sustained growth and to balance that where there may be some watch items as you look to the new year. Is your line on mute? Oh, okay. Can you guys—I'll assume you can hear us now. We can hear you now. Okay.

Speaker #2: Thank you . As a reminder , if you would like to ask a question , please press Star One on your telephone . We also ask that you please wait for your name and company to be announced before proceeding with your question .

Speaker #2: One moment while we compile the Q&A roster . The first question today will be coming from the line of Bryan Blair of Oppenheimer .

Speaker #2: Your line is open .

Bryan Blair: Thank you. Afternoon, guys. Another very solid quarter. Given, you know, we're almost in November, and you have supportive backlog in both segments, maybe speak to your team's visibility into 2026 and which platforms or across which end markets you're most confident in sustained growth, and, you know, to balance that where, you know, there may be some watch items as you look to the new year?

Speaker #5: Thank you . Afternoon , guys . Another very solid quarter given we're almost in November and you have supportive backlog in both segments .

Speaker #5: Maybe speak to your team's visibility into 2026 and which platforms are across which end markets your most confident in sustained growth and to balance that where there may be some watch items as you look to the new Year .

Operator: Is your line on mute?

Speaker #2: Is your line on mute ?

Gene Lowe: Okay. Can you guys like I'll assume you can hear us now.

Speaker #4: Oh , okay . Can you guys I'll assume you can hear us now .

Bryan Blair: We can hear now, yeah.

Speaker #5: We can hear her now.

Gene Lowe: Okay. Thanks for your question, Bryan. Yeah, I think if you step back and you look ahead to 2026, overall, we feel very good. If you look across our HVAC businesses, you know, we do have a diversity of product lines and frankly, we're feeling pretty positive across all of our business areas. If you look at, you know, the markets that we see the most strength, those really haven't changed from what we've talked about over the past couple of quarters. We're seeing really sustained strength in data centers. We feel like we have some nice momentum there. Same in healthcare, institutional, we're also seeing a lot of activity. You know, I would say the industrial markets, we're seeing a little bit. Those have been kind of flattish.

Speaker #4: Okay . Thanks for your question , Bryan . So yeah , I think if you step back and you look ahead to 2026 overall , we feel very good .

Gene Lowe: Thanks for your question, Bryan. I think if you step back and you look ahead to 2026, overall, we feel very good. If you look across our HVAC businesses, we do have a diversity of product lines. Frankly, we're feeling pretty positive across all of our business areas. If you look at the markets that we see the most strength, those really haven't changed from what we've talked about in the past couple of quarters. We're seeing really sustained strength in data centers. We feel like we have some nice momentum there. Same in healthcare, institutional, we're also seeing a lot of activity. I'd say the industrial markets are seeing a little bit—those have been kind of flattish. We're seeing some modest growth there, which I think is a positive. We're seeing more power activity in terms of some bidding and so forth, which could yield some opportunities.

Speaker #4: If you look across our HVAC businesses , you know , we do have a diversity of product lines and and frankly , we're feeling pretty positive across all of our business areas .

Speaker #4: If you look at , you know , the markets that we see the most strength . There's really haven't changed from what we've talked about over the past couple of quarters .

Speaker #4: We're seeing really a sustained strength in data centers . We feel like we have some nice momentum there . Same in healthcare institutional .

Speaker #4: We're also seeing a lot of activity . You know , I'd say the industrial markets are seeing a little bit . Those have been kind of flattish .

Gene Lowe: We're seeing some modest growth there, which I think is a positive. We're seeing more power activity in terms of some bidding and so forth, which could yield some opportunities. Some of the markets that have been relatively lower are also similar, more commercial buildings, more hotels, things like that. Net, net, we feel very good about the markets. You know, when I look at the markets, I feel good, but then I think about our initiatives on top of that. Probably the biggest one we've talked about is the Marley OlympusMAX. That's our new data center cooling solution that's either dry or adiabatic. Very good product. Feel very good about that. That's a whole new market for us that we have not served.

Speaker #4: We're seeing some modest growth there , which I think is a positive . And we're seeing more power activity in terms of some some bidding and so forth , which , which could yield some some of the markets that have been relatively lower are also similar , more commercial buildings , more hotels , things like that .

Speaker #4: We're seeing some modest growth there , which I think is a positive . And we're seeing more power activity in terms of some some bidding and so forth , which , which could yield some opportunities , .

Gene Lowe: Some of the markets that have been relatively lower are also similar—more commercial buildings, more hotels, things like that. Net-net, we feel very good about the markets. When I look at the markets, I feel good, but then I think about our initiatives on top of that. Probably the biggest one we've talked about is the Olympus Max. That's our new data center cooling solution. That's either dry or adiabatic. Very good product. Feel very good about that. That's a whole new market for us that we have not served. We see the opportunity, as we've said, to targeting $50 million in bookings this year, which would really revenue next year. We believe we're on track for that. We also have some capacity expansions for some businesses that there's just a lot more demand. For our products, notably TAMCO, Ingenia, and Marley.

Speaker #4: And then , you know , when I look at the markets , I feel good . But then I think about our initiatives on top of that , probably the biggest one we've talked about is the Olympus Max .

Speaker #4: That's our new data center cooling solution . That's either dry or adiabatic . Very good product . Feel very good about that . That's a whole new market for us that we have not served .

Gene Lowe: You know, we see the opportunity, as we've said, to targeting $50 million of bookings this year, which would really revenue next year. We believe we are on track for that. We also have some capacity expansions for some businesses that there is just a lot more demand for our products, notably TAMCO, Ingenia, and Marley. You know, when I look at HVAC, I feel very good about the end markets and then our initiatives to drive further growth. You know, I think if you look at some of the third-party people who track markets, they would predict for the non-resi market probably mid-single digit. You know, we would believe that we would target to be higher than that with our initiative-driven growth that I just highlighted.

Speaker #4: So , you know , we see the opportunity , as we've said , targeting 50 million of bookings this this year , which would really revenue next year .

Speaker #4: We believe we're on track for that . We also have some capacity expansions for some businesses that there's just a lot more demand for our products , notably Timco , Ingenia and Morley .

Gene Lowe: When I look at HVAC, I feel very good about the end markets and then our initiatives to drive further growth. If you look at some of the third-party people who track markets, they would predict for the non-res market probably mid-single digit. We would believe that we would target to be higher than that with our initiative-driven growth, as I just highlighted. On D&M, I would say overall run rate is steady. We're seeing some modest growth there. It is a little bit of very different geographically where the U.S. remains stronger. We are anticipating that into 2026. See some good pockets and some areas that are really going nicely there. I'd say more flattish ex-U.S., talking about continental Europe. We are seeing an uptick in the UK in some areas. Overall, I would say steady, modest growth in our run rate. Our projects, we have very good activity.

Speaker #4: So , you know , when I look at HVAC , I feel very good about the end markets . And then our initiatives to drive further growth .

Speaker #4: You know , I think if you look at some of the third party people who track markets , they would predict for the Non-residue market , probably mid-single digit .

Speaker #4: You know , we would we would believe that we would we would target to be higher than that with our initiative driven growth that I just highlighted on .

Gene Lowe: On D&M, I would say overall run rate is steady. We're seeing some modest growth there. It is a little bit of, you know, very different geographically, where the US remains stronger, and we are anticipating that into 2026. See some good pockets in some areas that are really going nicely there. I'd say more flattish, ex-US, you know, talking about continental Europe. We are seeing an uptick in UK in some areas. Overall, I would say steady, modest growth in our run rate. Our projects, we have very good activity. You know, we did, and Mark can tie this out. We did some of that which we had in 2026 that's accelerated into 2025. We have a very high backlog.

Speaker #4: I would say overall run rate is steady . We're seeing some modest growth there , and it is a little bit of , you know , very different geographically where the US , remains stronger and we are anticipating that into 26 see some good , some good , some good pockets and some areas that , that that are really going nicely there .

Speaker #4: And then I'd say more flattish ex us you know , talking about continental Europe . We are seeing an uptick in UK in some areas .

Speaker #4: But overall I would say steady modest growth in our run rate and then our projects , we , we we have very good activity .

Gene Lowe: We did, and Mark can tie this out, we did some of that, which we had in 2026, is actually accelerated into 2025. We have a very high backlog. Some of that backlog is not only 2026, but we actually are having a lot more multi-year projects, which is really good, but we have to make sure we understand what falls into the full year of 2026. Overall, I would expect growth in D&M as well. I think the backdrop for what we see is positive. Mark, what color would you like to add overall on D&M? Yeah, I think I might just add across really both segments, right? We're in very strong backlog positions. They're kind of, for both segments, really both at or near all-time highs. Really good position from that perspective.

Speaker #4: You know , we did and Mark and can can tie this out . We did some of that which we had in 26 .

Speaker #4: It's actually accelerated into 25 . And then we have a very high backlog . Now some of that backlog is more is not only 26 , but we actually are having a lot more multiyear projects , which is really good .

Gene Lowe: Now some of that backlog is more, is not only 2026, but we actually are having a lot more multi-year projects, which is really good. We have to make sure we understand what falls into the forward year of 2026. Overall, you know, I would expect growth in D&M as well. I think the backdrop for what we see, positive. Mark, what color would you like to add overall on D&M?

Speaker #4: But we have to make sure we understand what falls into the forward year of 26 . But overall , you know , I would expect growth in M as well .

Speaker #4: So I think the backdrop for what we see is positive . Mark , what color would you like to add overall on Dam ?

Mark Carano: Yeah, I think I might just add across really both segments, right? We're in very strong backlog positions. For both segments really, both at or near all-time highs. You know, really good position from that perspective. As I look into 2026 and I think about how much of that backlog is scheduled to deliver in 2026, it's about 40%. That's similar across both segments. We're in a nice position as we sit today looking out into next year. Gene did mention this one handful of projects that were originally in our 2026 backlog. They actually delivered in Q3 in our DNM segment. I think we referenced that in our Q2 call. They ultimately were delivered and the revenue was recognized in Q3.

Speaker #4: Yeah , I .

Speaker #3: Think I might just add across really both segments . Right . We're in very strong backlog positions . They're kind of for both segments really both at or near all time highs .

Speaker #3: So you know really good position from that perspective as I look into 26 . And I think about how much of that backlog is scheduled to deliver in 2026 , it's about 40% .

Gene Lowe: As I look into 2026 and I think about how much of that backlog is scheduled to deliver in 2026, it's about 40%. That's similar across both segments. We're in a nice position as we sit today looking out into next year. Gene did mention this one handful of projects that were originally in our 2026 backlog. They actually delivered in Q3 in our D&M segment. I think we referenced that in our Q2 call, but they ultimately were delivered and the revenue was recognized in Q3. Understood. I appreciate the walkthrough. Encouraging trends overall. Maybe offer a quick update on KTS and Sigma and Omega integration. How are those assets performing relative to deal model? Given your now quite significant balance sheet capacity, it'd be great to hear more about your M&A pipeline by platform. Where do you see the most attractive opportunities?

Speaker #3: And that's similar across both segments . So we're in a nice position as we sit today looking out into next year . Gene did mention this one handful of projects that were originally in our 26 backlog .

Speaker #3: They actually delivered in Q3 in our segment . I think we referenced that in our Q2 call , but they ultimately were delivered and the revenue was recognized in Q3 .

Gene Lowe: Understood. I appreciate the walkthrough. Encouraging trends overall. Maybe offer a quick update on KTS and Sigma & Omega integration. You know, how are those assets performing relative to deal model? Given your now quite significant balance sheet capacity, that'd be great to hear more about your M&A pipeline. You know, by platform, where do you see the most attractive opportunities? I believe you mentioned several attractive targets, you know, any that are potentially actionable over the near term. Thank you. Yeah, I would say we feel very good about both KTS and Sigma & Omega. Sigma & Omega is a little bit newer, so you know, it's at an earlier stage. KTS is already, it's really kind of built in and operating, you know, to me, operating as one with our Comtech business. Couple of points there.

Speaker #5: Understood . I appreciate the walk through encouraging trends overall , maybe offer a quick update on KTS and Sigma and Omega integration . How are those assets performing relative to deal model ?

Speaker #5: And then given your now quite significant balance sheet capacity , it'd be great to hear more about your M&A pipeline by platform . Where do you see the most attractive opportunities and of the I believe you mentioned several attractive targets , any that are potentially actionable over the near term .

Gene Lowe: I believe you mentioned several attractive targets. Any that are potentially actionable over the near term? Thank you. Yeah. I would say we feel very good about both KTS and Sigma and Omega. Sigma and Omega is a little bit newer, so it's at an earlier stage. KTS is already really kind of built in and operating. To me, operating is one with our comp tech business. A couple of points there. We're actually seeing some nice wins. They have gotten a few new things, proclamations from the government where they are becoming the basis of design and the standard. They've expanded into some different areas. KTS, we feel very positive about. We love their technology. I believe we mentioned in our last call, we're launching a joint product with KTS and then the legacy TCI business in Q4 in this quarter.

Speaker #5: Thank you .

Speaker #4: Yeah , I would say we feel very good about both KCS and Sigma and Omega six . And Omega is a little bit newer .

Speaker #4: So we haven't you know , it's at an earlier stage . KTS is already it's really kind of built in and operating . You know , to me operating is one with our Comtec business .

Speaker #4: A couple of points there . We're actually seeing some nice , nice wins . You know , they have gotten a few new things .

Gene Lowe: We're actually seeing some nice wins. You know, they have gotten a few new things, proclamations from the government where they are becoming the basis of design and the standard. They've expanded into some different areas. KTS, we feel very positive about. We love their technology. I believe we mentioned in our last call, we're launching a joint product with KTS and then the legacy TCI business in Q4 in this quarter. I think there's a lot of excitement around that. KTS, I would say we're feeling very positive about. Sigma & Omega similarly, really good team, a really nice win rate. That's, you know, the way that we think about that market is really multi-level applications.

Speaker #4: Proclamations from from the government where they are becoming the basis of design and the standard . They've expanded into some different areas . So we feel we feel very positive about we love their technology .

Speaker #4: I believe we mentioned in our last call that we're launching a joint product with KTS, and then the legacy TCI business in Q4.

Speaker #4: In this quarter . And I think there's a lot of excitement around that . So so KTS , I would say we're feeling very positive about .

Gene Lowe: I think there's a lot of excitement around that. KTS, I would say we're feeling very positive about. Sigma and Omega similarly, really good team, really nice win rate. The way that we think about that market is really multi-level applications, hospitals, or it could be hotels, or it could be condos, things like that. There's typically a boiler, and there's typically a cooling tower. A key part of our thesis there was they're very strong in Canada. We think we can help them grow more in the States where we have an established channel. Particularly, our Marley channel is very strong. Our Patterson Kelly channel, that's our commercial boiler line. We have already signed up. I don't have the latest numbers in front of me, but I know of three or four that have already picked up and are very excited about Sigma and Omega.

Speaker #4: And then Sigma and Omega similarly really good team , really nice win rate . That's you know , the way that we think about that market is really multi-level applications .

Gene Lowe: You know, hospitals, or could be hotels, or it could be, you know, condos, things like that. There's typically a boiler, and there's typically a cooling tower. A key part of our thesis there was they're very strong in Canada. We think we can help them grow more in the States where we have an established channel. Particularly our Marley channel is very strong, and then our Patterson-Kelley channel, that's our commercial boiler line. We have already signed up. I don't have the latest numbers in front of me, but I know of three or four that have already picked up and are very excited about Sigma & Omega. Not only are we expanding geographically, but they've launched some new products with coil and then within their self-contained units. They have some good innovation going on.

Speaker #4: You know hospitals or could be hotels or it could be , you know , condos , things like that . And there's typically a boiler and there's typically a cooling tower .

Speaker #4: And so a key part of our thesis there was we they're very strong in Canada . We think we can help them grow more in the States where we have an established channel , particularly our Marley channel is very strong .

Speaker #4: And then our Patterson-kelley channel , that's our commercial boiler line . So we have already signed up . I don't have the latest numbers in front of me , but I know of 3 or 4 that have already picked up and are very excited about Sigma and Omega .

Gene Lowe: Not only are we expanding geographically, but they've launched some new products with coil and then within their self-contained units. They have some good innovation going on. I think that fits very nicely within our hydronics business. The teams are working well. I will say with both of those, really good leaders and really good teams and really good cultural fit. It's still early, but off to a very positive start. The second question you had on M&A, I would say, and I know we've said this, we have a very high level of activity. We have a number of processes underway. As we look into 2026, we feel very good about strategic capital deployment. We're going to remain disciplined, but there is a very attractive set of opportunities. On the HVAC side, we've talked about engineered air movement as well as electric heat.

Speaker #4: And not only are we expanding geographically , but they've launched some new products with coil and then within their self-contained units . So they have some good innovation going on .

Gene Lowe: Yeah, I think that that fits very nicely within our hydronics business. The teams are working well. I will say with both of those, really good leaders and really good teams and really good cultural fit. You know, it's still early, but off to a very positive start. The second question you had on M&A, I would say, and I know we've said this, we have a very high level of activity. We have a number of processes underway. I would say as we look into 2026, we feel very good about strategic capital deployment. You know, we're gonna remain disciplined, but there is a very attractive set of opportunities. On the HVAC side, I would say, you know, we've talked about engineered air movement as well as electric heat.

Speaker #4: So yeah , I think that that fits very nicely within our hydraulics business . The teams are working well and I will say with both of those really good leaders and really good teams and really good cultural fit , so , you know , it's still early , but off to a very positive start .

Speaker #4: The second question you had on M&A , I would say , and I know we've we've said this , it is very we have a very high level of activity .

Speaker #4: We have a number of processes underway . And I would say as we look into 2026 , we feel very good about strategic capital deployment .

Speaker #4: You know , we're going to remain disciplined . But but there is a very attractive set of of opportunities on the HVAC side .

Speaker #4: I would say , you know , we've talked about engineer engineered air movement as well as electric heat in each of these areas .

Gene Lowe: In each of these areas, we see several opportunities, that, you know, very attractive opportunities. Also on Detection & Measurement, we see some very interesting opportunities. I'd say a smaller number. We still have a right now a more active pipeline on the HVAC side, but some very good opportunities. We feel very good as we think about, you know, moving into 2026. As Mark alluded to on the call, I mean, we got basically $1 billion almost for free. You know, there's no EPS dilution. It's kind of a really unique circumstance where you can expand your balance sheet so much and have the same level of earnings.

Gene Lowe: In each of these areas, we see several opportunities that are very attractive opportunities. Also, on Detection & Measurement, we see some very interesting opportunities. I'd say a smaller number. Right now, a more active pipeline on the HVAC side, but some very good opportunities. We feel very good as we think about moving into 2026. As Mark alluded to on the call, we really got basically a billion dollars almost for free. There's no EPS solution. It's kind of a really unique circumstance where you can expand your balance sheet so much and have the same level of earnings. That gives us the opportunity to invest in growth opportunities. We're also going to be investing in some organic opportunities as well. Yes, overall, I would say feeling very good about the pipeline and the opportunities that we have in front of us. Very helpful color. Thanks again. Thank you.

Speaker #4: We see several opportunities that very attractive opportunities . And then also on detection and measurement , we see some very interesting opportunities . I'd say a smaller number .

Speaker #4: We still see have a say a right now , a more active pipeline on the HVAC side , but but some very good opportunities .

Speaker #4: So we feel very good as we think about , you know , moving into 26 and you know , as Mark alluded to on the call , I mean , we really we got basically $1 billion almost for free .

Speaker #4: You know , there's no EPs dilution . So it's kind of a really unique circumstance where you can expand your balance sheet so much and have the same level of earnings .

Gene Lowe: you know, that gives us the opportunity to invest in growth opportunities. you know, we're also gonna be investing some organic opportunities as well. Yeah. overall, I would say feeling very good about the pipeline and the opportunities that we have in front of us.

Speaker #4: And so , you know , that that that gives us the , the opportunity to invest in growth opportunities . And , you know , we're also going to be investing some organic opportunities as well .

Speaker #4: So yes , overall I would say feeling feeling very good about the , the the pipeline and the opportunities that we have in front of us .

Bryan Blair: Very helpful color. Thanks again.

Speaker #5: Very helpful color . Thanks again .

Operator: Thank you. One moment for the next question. The next question will be coming from the line of Damian Karas of UBS. Please go ahead.

Gene Lowe: One moment for the next question. The next question will be coming from the line of Damian Karas of UBS. Please go ahead. Hey, good evening, everyone. Hey, Damian. Hey. I wanted to ask you first about the capacity expansion plans. Gene, you talked a little bit earlier about the TAMCO production going to be coming online later this year in Tennessee, and you're looking for a spot in the Southeast for Ingenia. Could you just maybe give us a sense for initial production capacity, how to think about that, how much you're planning to bring online, and then just in terms of the equity raise that you guys just did, how much kind of investment outlay for these expansion plans are you expecting? Yeah, I'll give a little bit of color. Some of it we're not prepared to talk to. The TAMCO one is basically done.

Speaker #2: Thank you . One moment for the next question . And the next question will be coming from the line of Damian Karras of UBS .

Speaker #2: Please go ahead .

Damian Karas: Hey, good evening, everyone.

Speaker #6: Hey , good evening everyone .

Gene Lowe: Hey, Damian.

Mark Carano: Hey.

Speaker #4: Hey , hey .

Damian Karas: I wanted to ask you first about the capacity expansion plans. Gene Lowe, you talked a little bit earlier about the TAMCO production gonna be coming online later this year in Tennessee, and you're looking for a spot in the southeast for Ingenia. Could you just maybe give us a sense for, you know, initial production capacity, how to think about that, how much you're planning to bring online? Then just, you know, in terms of the equity raise that you guys just did, like, how much kind of investment outlay for these expansion plans are you expecting?

Speaker #6: I wanted to ask you first about the capacity expansion plans . Gene , you talked a little bit earlier about the Timco production going to be coming online later this year in Tennessee .

Speaker #6: And you're looking for a spot in the southeast for Ingenia . Could you just maybe give us a sense for , you know , initial production capacity , how to think about that , how much you're planning to bring online and , and then just , you know , in terms of the equity raise that you guys just did , like how much kind of investment outlay for for these expansion plans , are you expecting ?

Gene Lowe: Yeah. I'll give a little bit of color, and then I think some of it we're not prepared to talk to. I think smart for the Tamco one is basically done. We've signed a lease. We're actually very excited about this. This is a 150,000 square foot facility, very similar to our existing facility. We actually think we can ramp this up over time. You know, we're very excited about that. As we said, we're, you know, we're targeting to get some of the equipment commissioned and to start. You know, it takes a while to ramp up, by the end of Q1, we should get going there. Very good opportunity. That's in Tennessee.

Speaker #4: Yeah . I'll give I'll give a little bit of color . And then I think some of it will not prepared to talk to I think the , the Timco one is , is basically done .

Gene Lowe: We've signed the lease. We're actually very excited about this. This is a 150,000 square foot facility, very similar to our existing facility. We actually think we can ramp this up over time. We're very excited about that. As we said, we're targeting to get some of the equipment commissioned and to start. It takes a while to ramp up, but by the end of Q1, we should get going there. Very good opportunity. That's in Tennessee. We actually think that that will really give us the opportunity to grow quite a bit. That's very capital light. I actually think most of the capital is for a good—it's already been deployed there. Some of it will be this year and then some into next year, a little bit next year. The bigger one will be the expansion of Ingenia.

Speaker #4: We've signed a lease. We're actually very excited about this. This is a 150,000 square foot facility, very similar to our existing facility.

Speaker #4: We actually think we can ramp this up over time . So , you know , we're very excited about that . And as we said , we're you know , we're targeting to get some of the equipment commissioned and to start , you know , it takes a while to ramp up .

Speaker #4: But by the end of Q1 , we should get going there . But very good opportunity . That's in Tennessee . And we actually think that that will really give us the opportunity to to grow quite a bit .

Gene Lowe: We actually think as well that that will really give us the opportunity to grow quite a bit. That's very capital light. I actually think most of the capital has already been deployed there.

Speaker #4: That's very capital light . I actually think most of the capital is for a good , you know , it has already been deployed there .

Mark Carano: Some of it will be this year and then some into next year.

Speaker #3: Some of it will be this year and then some into .

Gene Lowe: A little bit next year. The bigger one will be the expansion of Ingenia. That's gonna be a much larger site, you know, probably, you know, in the neighborhood of, you know, could be three times as high. But again, we're making great progress there, but we're not at the point at which we can really say anything. What we are anticipating is by our next earnings report, we should be able to kinda lay out very specifically what the investments as well as the revenue expansion capacity is for all of those. Mark, would you like more color there?

Speaker #4: A little bit next year. The bigger one will be the expansion of Ingenia. That's going to be a much larger site.

Gene Lowe: That's going to be a much larger site, probably in the neighborhood of—it could be three times as high. Again, we're making great progress there, but we're not at the point at which we can really say anything. What we are anticipating is by the end of—by our next earnings report, we should be able to kind of lay out very specifically what the investments as well as the revenue expansion capacity is for all of those. Mark, would you like more color there? Yeah, I think we're just working through the finer details of the site. When we actually acquire that facility, it's going to drive a little bit of the timing and the timing of the capital spend.

Speaker #4: You know , probably , you know , in the neighborhood of , you know , could be three times as high , but again , we're making great progress there , but we're not at the point at which we can really say anything .

Speaker #4: What we are anticipating is by the end of by our next earnings . Report , we should be able to kind of lay out very specifically what the .

Speaker #4: The investments as well as the , the revenue expansion capacity is for all of those . And Mark , we'd like more color there .

Mark Carano: Yeah. I think we're just working through the finer details, you know, of the site and, you know, when that ultimately we actually acquire that facility, you know, it's gonna drive a little bit of the timing and the timing of the capital spend. As Gene mentioned, we're gonna be prepared to provide more color to you in, you know, at our Q4 call. We'll really walk people through kind of the step function of what our plan is. Obviously it's a much larger facility, so the capital-

Speaker #3: Yeah , I think we're just working through the finer details . You know , of the site and you know , we when that ultimately we actually acquire that facility .

Speaker #3: You know , it's going to drive a little bit of the timing and the timing of the capital spend . So as Gene mentioned , we're going to be prepared to provide more color to you in , you know , at our Q4 call .

Gene Lowe: As Gene mentioned, we're going to be prepared to provide more color to you in our Q4 call, and we'll really walk people through kind of the step function of what our plan is. Obviously, it's a much larger facility, so the capital—it's more capital in there. For those of you who've—into Ingenia, yeah, went to Ingenia, think of an Ingenia and you'll see the lasers, the punches, the night train, the robotics. It would be a similar level of capital equipment. Okay, gotcha. That makes sense. We'll look forward to getting that updated in another few months. I wanted to ask you about the opportunity in nuclear. I think I asked you guys about that maybe a little over a year ago, but we've had a lot of developments in the market since then.

Speaker #3: And we'll really walk people through kind of the step function of what our plan is . Obviously , it's a much larger facility .

Speaker #3: So the .

Gene Lowe: There's more capital in there, you know.

Speaker #4: Capital or more capital in there , you know , for those of you who've who went to Ingenia , think of an engineer , you know , and you'll see the lasers , the punches , the night train , the robotics , you know , so it would be a similar level of capital equipment .

Mark Carano: Been to Ingenia.

Gene Lowe: Yeah, went to Ingenia, think of an Ingenia, you know. You'll see the lasers, the punches, the Night Train, the robotics, you know. It would be a similar level of capital equipment.

Damian Karas: Okay. Gotcha. That makes sense. We'll look forward to getting that update in another few months. Then I wanted to ask you about the opportunity in nuclear. I think I asked you guys about that, you know, maybe a little over a year ago, but we've had a lot of developments in the market since then. I was curious if you've maybe started seeing some of those opportunities come the way of your HVAC business. You know, what do you think your entitlement is in that specific market? Really appreciate any thoughts on just nuclear.

Speaker #6: Okay . Gotcha . That makes sense . We look forward to getting that updated in in another few months . And then I wanted to ask you about the opportunity in nuclear .

Speaker #6: I think I asked you guys about that maybe a little over a year ago. But we've had a lot of developments in the market since then.

Gene Lowe: I was curious if you've maybe started seeing some of those opportunities come the way of your HVAC business. What do you think your entitlement is in that specific market? We really appreciate any thoughts on just nuclear. So nuclear, if you kind of take the existing nuclear market, rough order of magnitude, there's about 100 nukes in the U.S. About half of them have cooling towers. The other half would have what's called once-through cooling. That's where you use a lake or an ocean or something to provide your cooling. Of those. That have cooling towers, we have a very high percentage of those units. You could see natural draft towers as the big towers people think of when you think of nuclear power plants. They could be mechanical draft. There's a variety of technologies, but we have a very strong position there. How does that affect us?

Speaker #6: So I was curious if you've maybe started seeing some of those opportunities come the way of your HVAC business . You know what ?

Speaker #6: What do you think you're entitlement is in that specific market ? We really appreciate any thoughts on on just nuclear .

Gene Lowe: Nuclear, if you kinda take, you know, the existing nuclear market, you know, rough order of magnitude, there's about 100 nukes in the US. About half of them have cooling towers. The other half would have what's called once-through cooling. You know, that's where you use a lake or an ocean or something to provide your cooling. Of those that have cooling towers, we have a very high percentage of those units. You could see natural draft towers. Those are the big towers people think of when you think of nuclear power plants. They could be mechanical draft. There's a variety of technologies, but we have a very strong position there. How does that affect us?

Speaker #4: So nuclear if you kind of take , you know , the existing nuclear market , you know , rough order of magnitude , there's about 100 nukes in the US , about half of them have cooling towers .

Speaker #4: The other half would have what's called once through cooling . That's where you use a lake or a an ocean or something to , to to provide your cooling of those that have cooling towers .

Speaker #4: We have a very high percentage of those units . You could see natural draft towers . Those are the big the big towers .

Speaker #4: People think of when you think of nuclear power plants . They could be mechanical draft . There's a variety of technologies , but we have a very strong position there .

Speaker #4: So how does that affect us as as people want to keep power as a scarce resource right now . And there's a lot of demands on power .

Gene Lowe: As people want to keep power as a scarce resource right now, and there's a lot of demands on power, upgrading your cooling towers, oftentimes you can get an extra 50 or 80 MW out of your power plant very quickly. That could provide some opportunities for us in the existing infrastructure. Could be nuclear, could be gas, could be coal. You know, we're seeing some of those types of opportunities. As it pertains to new nuclear, I would say that we haven't seen. You know, we see a lot of combined cycle power plants. There's a lot of combined cycles going all across the US. That seems to be the go-to.

Gene Lowe: As people want to keep power as a scarce resource right now, and there's a lot of demands on power. Upgrading your cooling towers, oftentimes, you can get an extra 50 or 80 megawatts out of your power plant very quickly. That could provide some opportunities for us in the existing infrastructure. Could be nuclear, could be gas, could be coal. We're seeing some of those types of opportunities. As it pertains to new nuclear, I would say that we haven't seen—we see a lot of combined cycle power plants. There's a very active—there's a lot of combined cycles going all across the U.S. That seems to be the go-to. Really, if you want baseload power within the next few years, it looks like that's really your only option. You're seeing a lot of activity there, sometimes paired with data centers.

Speaker #4: So upgrading your cooling towers , oftentimes you can get an extra 50 or 80MW out of your power plant . Very quickly . And so that could provide some opportunities for us in the existing infrastructure .

Speaker #4: Could be nuclear , could be gas , could be coal . You know , the you know , we're seeing some of those types of opportunities as it pertains to new nuclear .

Speaker #4: I would say that that we haven't seen , you know , we see a lot of combined cycle power plants that there's a very active there's a lot of combined cycles going all across the US .

Speaker #4: That seems to be the go to really , if you want baseload power within the next few years , it looks like that's your really your only option .

Gene Lowe: Really, if you want base load power within the next few years, it looks like that's really your only option. You're seeing a lot of activity there, sometimes paired with data centers. We, you know, we do have an opportunity to go after the cooling towers there. Combined cycles tend to be a little smaller. Yeah, we see it as an opportunity. The brand-new nuclear, I don't think we see anything in our planning horizon, I would say over the next 2 or 3 years.

Speaker #4: So you're seeing a lot of activity there sometimes paired with data centers . And we you know , we do have an opportunity to to go after the cooling towers .

Gene Lowe: We do have an opportunity to go after the cooling towers there. Combined cycles tend to be a little smaller. We see it as an opportunity. The brand new nuclear, I don't think we see anything in our planning horizon, I would say, over the next two or three years. Okay. That's helpful. Thanks a lot. I'll pass it along. Thanks. Thank you. One moment for the next question, please. The next question will be coming from the line of Andrew Mobin of Bank of America. Please go ahead. Hi, guys. Good afternoon. Hey, Andrew. Hey, Andrew. Hey, how are you? First question, I guess. Some of you are—well, I don't know if they're competitors per se, but some of the HVAC players have been talking about push-out of large projects related to data centers.

Speaker #4: There . Combined cycles tend to be a little smaller . But yeah , we see it as an opportunity . The but the brand new nuclear I don't think we see anything in our planning horizon .

Speaker #4: I would say over the next 2 or 3 years .

Damian Karas: Okay. That's helpful. Thanks a lot. I'll pass it along.

Speaker #6: Okay , that's helpful . Thanks a lot . I'll pass it along .

Mark Carano: Thanks.

Speaker #3: Thanks .

Operator: Thank you. 1 moment for the next question, please. The next question will be coming from the line of Andrew Mulven of Bank of America. Please go ahead.

Speaker #2: Thank you . And one moment for the next question , please . The next question will be coming from the line of Andrew Obin of Bank of America .

Speaker #2: Please go ahead .

Andrew Mulven: Hi. Yes, good afternoon.

Speaker #7: Hi . Yes . Good afternoon .

Gene Lowe: Hey, Andrew.

Speaker #4: Hey , Andrew .

Mark Carano: Hey, Andrew.

Speaker #3: Hey , Andrew .

Andrew Mulven: Hey, how are you?

Speaker #7: Hey . How are you ? So , first question , I guess some of your . Comment . Well , I don't know if there competitors per se , but some of the HVAC players have been talking about push out of large projects related to data centers .

Gene Lowe: Good

Andrew Mulven: First question, I guess, some of you Well, I don't know if they're competitors per se, but some of the HVAC players have been talking about push out of large projects related to data centers. I would imagine it's because the industry is sort of out of capacity across the value chain. Any comments? Did you see any push outs on large projects? Did you guys observe? Thank you.

Gene Lowe: I would imagine it's because the industry is sort of out of capacity across the value chain. Any comments that you see, any push-outs on large projects that you guys observe? Thank you. Andrew, not that we've seen, and we have a number of large accounts in the U.S. and Asia and Europe. I think when you get into some of the large projects, they tend to be imperfect in terms of planning. You could take a large power project or a large automotive project or a large semiconductor. I would put data centers in that same capacity. There's always a little bit of uncertainty on timing. But I haven't seen anything out of the ordinary. What I would say is there's a very high demand from our key customers.

Speaker #7: I would imagine is because the industry is sort of out of capacity across the value chain . Any comments that you see , any pushouts on large projects that you guys observe ?

Speaker #7: Thank you .

Gene Lowe: Andrew, not that we've seen, and we have a number of large accounts in US and Asia and Europe. You know, I think when you get into some of the large projects, they tend to be, you know, imperfect in terms of planning. You know, you could take a large power project or a large automotive project or a large semiconductor, and I would put data centers in that same capacity. There's always a little bit of uncertainty on timing, but I haven't seen anything out of the ordinary. What I would say is there's a very high demand from our key customers. They're very open with us about the demand profile, and they are very much pushing us to make sure that we can meet their timelines.

Speaker #4: Andrew . Not that we've seen and we have a number of large accounts in us and Asia and Europe . You know , I think when you get into some of the large projects , they tend to be , you know , imperfect in terms of planning , you know , so you could take a large power project or a large automotive project or a large semiconductor .

Speaker #4: And I would put data centers in that same capacity. So there's always a little bit of uncertainty on timing, but I haven't seen anything out of the ordinary.

Speaker #4: What I would say is there's a very high demand from our key customers . They're very open with us about the demand profile , and they're very much pushing us to make sure that we can meet their timelines .

Gene Lowe: They're very open with us about the demand profile, and they are very much pushing us to make sure that we can meet their timelines. To answer your question specifically, there's always a little bit of push-outs here and there, but I would say nothing out of the ordinary. Gotcha. Thank you so much. I know you have residential exposure. What we've seen is some pressure on consumer this summer. Are you observing any headwinds related to consumer and HVAC? I'll just leave it at that. Thank you. Andrew, if you look at where we play in residential, it's a pretty small part of our HVAC segment, and it's really the Weil-McLain boilers. That is a very high percentage of replacement demand. If anything, we're actually seeing nice growth there. That's predominantly replacement demand. We think any given year could be 80% to 90% replacement for the residential portion.

Gene Lowe: You know, to answer your question specifically, there is always a little bit of push outs here and there, but I would say nothing out of the ordinary.

Speaker #4: So I , you know , to answer your question specifically , there's always a little bit of pushouts here and there , but I would say nothing out of the ordinary .

Andrew Mulven: Gotcha. Thank you so much. Just I know you have residential exposure, what we've seen is, you know, some pressure on consumer this summer. Are you observing any headwinds related to consumer and HVAC? Yeah, I'll just leave it at that. Thank you.

Speaker #7: Gotcha . Thank you so much . And then just I know you have residential exposure and what we've seen is , you know , some pressure on consumer .

Speaker #7: This summer . Are you observing any headwinds related to consumer and HVAC and yeah , I'll just leave it at that . Thank you .

Gene Lowe: Andrew, I think, you know, if you look at where we play in residential, it's a pretty small part of our HVAC segment, and it's really the Weil-McLain boilers.

Speaker #4: Andrew , I think , you know , if you look at where we play in residential , it's a pretty small part of our HVAC segment .

Speaker #4: And it's it's really the wild . McLean boilers . Yes . And that is a very high percentage of replacement demand . If anything , we're actually seeing nice growth there .

Andrew Mulven: Yeah.

Gene Lowe: That is a very high percentage of replacement demand. If anything, we're actually seeing nice growth there. That's predominantly replacement demand. We think, you know, any given year could be 80% to 90% replacement for the residential portion. I would say the commercial portion has a higher percentage of new. Yeah, we have not seen any slowdown or impact from the customer. You know, I think it's early in the heat season. Even, I spoke to our hydronics leader this morning. I believe we're a little bit ahead of bookings plan, so we're actually feeling on target. Anything else, Mark, you'd like to add?

Speaker #4: That's that's predominantly replacement demand . We think you know any given year could be 80 to 90% replacement for the for the residential portion .

Gene Lowe: I would say the commercial portion has a higher percentage of new. We have not seen any slowdown or impact from the customer. I think it's early in the heat season. I spoke to our hydronics leader this morning, I believe we're a little bit ahead of bookings planned. We're actually feeling on target. Anything else, Mark, you'd like to add? No, I mean, it's really that business, I think, as many of you know, is largely driven because it's largely replacement by the weather cycle, for good or bad. Last year was a tough year for that business, but this year is different. It started off in a much better place. I think we have a little bit of an easy comp versus last year. That's fair to say. We're super excited to be on board, and thanks so much. All right. Welcome. Thanks. Thank you.

Speaker #4: I would say the commercial portion has a higher percentage of new . But yeah , we have not seen any slowdown or impact from the customer .

Speaker #4: You know , I think it's early in the heat season , but even even I spoke to the , the , the higher our hydraulics leader this morning , I believe we're a little bit ahead of bookings plan .

Speaker #4: So we're actually feeling on target . Anything else you'd like to add ?

Mark Carano: No, I mean, that business, I think is, as many of you know, is largely driven, because it's largely replacement by, you know, the weather cycle, for good or bad. You know, last year was a tough year for that business. This year is different. It started off, you know, in a much better place.

Speaker #3: No , I mean it's really that that business I think is , is many of , you know , is is largely driven because it's largely replacement by , you know , the weather cycle for good or bad .

Speaker #3: And , you know , last year was a tough year for that business . But this year is different . It started off , you know , in a much better place .

Gene Lowe: I think we have a little bit of an easy comp versus last year.

Speaker #4: I think we have a little bit of an easy comp versus last year . It's fair to say .

Mark Carano: Exactly

Gene Lowe: it's fair to say.

Andrew Mulven: Well, we're super excited to be on board, and, thanks so much.

Speaker #7: Well , we're super excited to be on board . And thanks so much .

Gene Lowe: All right. Welcome. Thanks.

Speaker #4: Hey , welcome .

Speaker #3: Thanks .

Operator: Thank you. One moment for the next question. The next question is coming from the line of Ross Sparenblek of William Blair. Your line is open.

Gene Lowe: One moment for the next question. The next question is coming from the line of Ross Sparenblek of William Blair. Your line is open. Hey, good evening, gentlemen. Hey, Ross. Hey, guys. Maybe just get a little bit more cultural on kind of your adoption expectations within the new Olympus product. What are you hearing from customers? We're targeting $50 million this year, but what's kind of the run rate, maybe base case for 2026? I think we would target to get $50 million into next year for the product. When I think about this, I actually have conviction on our value prop and our product. I think we have a very unique product on the dry and the adiabatic. I think it leverages a lot of our kind of core Marley strengths where we tend to be known for our engineering, our industrial-grade products.

Speaker #2: Thank you . One moment for the next question and the next question is coming from the line of Ross link of William Blair .

Speaker #2: Your line is open .

Ross Sparenblek: Hey, good evening, gentlemen.

Speaker #8: Hey , good evening gentlemen .

Gene Lowe: Hey, Ross.

Speaker #4: Hey , Ross .

Mark Carano: Hey.

Ross Sparenblek: Hey, guys. Maybe just get a little bit more color on kind of your adoption expectations within the new Marley OlympusMAX. You know, what are you hearing from customers? We're targeting $50 million this year, but, you know, what's kind of the run rate, maybe base case for 2026?

Speaker #8: Hey , guys . Maybe just a bit more color on kind of your adoption expectations within the new Olympus product . What are you hearing from customers ?

Speaker #8: We're targeting 50 million this year . But what's kind of the the run rate , maybe base case for 2026 ?

Gene Lowe: Yeah, I think, you know, we would target to get $50 million into next year for the product. I would say, you know, when I think about this, I actually have conviction on our value prop and our product. I think we have a very unique product on the dry and the adiabatic. I think it leverages a lot of our kind of core Marley strengths, where we tend to be known for our engineering, our industrial-grade, you know, products. I think it transfers very well. You know, having said that, what I would say is, you know, there's four kind of big kahunas, you know, for the hyperscalers. They all have different philosophies on how they design their data centers. You know, do they want wet or dry or there's many different variations.

Speaker #4: Yeah I think , you know , we we would target to get 50 million into next year for the product . I would say the you know , when I think about this , I actually have conviction on our value prop and our product .

Speaker #4: I think we have a very unique product on the dry and the Adriatic . I think it leverages a lot of our kind of core Marley strengths , where we tend to be known for our engineering , our industrial grade , you products .

Gene Lowe: I think it transfers very well. Having said that, what I would say is there are four kind of big players for the hyperscalers. They all have different philosophies on how they design their data centers. Do they want wet or dry? There are many different variations. It does take some time to break in there. What I would say is we're on track, and we feel very good about this brand new product hitting $50 million. I would expect it to kind of grow from there, and if we're successful, it could grow very rapidly into 2027 and 2028. We're off to a nice start. There's a lot of bidding activity, and there's a lot of discussions going on.

Speaker #4: I think it transfers very well , you know , having said that , what I would say is , you know , there's four kind of big kahunas , you know , for the hyperscalers , they all have different philosophies on .

Speaker #4: How they design their data centers , you know , do they want wet or dry or . There's many different variations . So it does take some time to break in there .

Gene Lowe: It does take some time to break in there. What I would say is we're on track, and we feel very good about, you know, this brand-new product hitting $50 million, and I would expect it to kind of grow from there, and if we're successful, it could grow very rapidly into 2027 and 2028. We're off to a nice start. There's a lot of bidding activity, and there's a lot of discussions going on. You know, there is in some of these markets, as we discussed in an earlier question, there's a lot of also budget bidding, where people are trying to get a site and trying to get funding.

Speaker #4: But what I would say is we're on track and we feel very good about this brand new product hitting 50 mil . And I would expect it to kind of grow from there .

Speaker #4: And if we're successful , it could grow very rapidly into 27 and 28 . But we're off to a nice start . There's a lot of bidding activity and there's a lot of lot of discussions going on .

Speaker #4: You know , there is in , in in some of these markets , as we discussed in an earlier question , some of there's a lot of also budget bidding where people are trying to get a site and trying to get funding .

Gene Lowe: In some of these markets, as we discussed in an earlier question, there's a lot of budget bidding where people are trying to get a site and trying to get funding. You get a lot of what you'll typically see on these larger projects, some of the lumpiness and the timing changing. What I would say is there's a very good set of opportunities in front of us, and I think we have the right product set. We're very encouraged and excited to go into next year with our Olympus Max. That's really helpful. It almost sounds like it's kind of some big game hunting with the hyperscalers. Do you guys feel that you have a good seat at the table in that design phase? Yeah. As you know, the hyperscalers typically have confidentiality, so we can't get into some of those.

Gene Lowe: You get a lot of, you know, what you'll typically see on these larger projects, some of the lumpiness and the timing changing. What I would say is there's a very good set of opportunities in front of us, and I think we have the right product set. Yeah, we're very encouraged and excited to go into next year with our Marley OlympusMAX.

Speaker #4: So you get a lot of , you know , what you'll typically see on these larger projects . Some of the lumpiness and the the , the timing changing .

Speaker #4: But but what I would say is there's a very good set of opportunities in front of us . And I think we have the right product set .

Speaker #4: So yeah , we're we're very encouraged and excited to go into next year with our with our Olympus Max .

Ross Sparenblek: All right. No, that's really helpful. You know, it sounds like it's kinda some big game hunting with the hyperscalers. Do you guys feel that you have, you know, a good seat at the table in that design phase?

Speaker #8: That's really helpful . So it sounds like it's kind of some big game hunting with the hyperscalers . Do you guys feel that you have a good seat at the table in that design phase ?

Gene Lowe: Yeah. As you know, the hyperscalers typically have confidentiality, so, you know, we can't get, you know, into some of those. What I would say is, yeah, I do think we have a number of data center customers that we've been very proven with. You know, as you know, there's some customers they say, "We only want cooling towers." Then, you know, you try to be. Some only want dry coolers. I think what is going on at a macro level is you're seeing a movement towards higher heat loads, which tends to mean, you know, the easiest and the simplest is air-cooled chillers.

Speaker #4: Yeah . And I you know , as you know , the hyperscalers typically have confidentiality . So , you know , we can't get , into some of those .

Gene Lowe: What I would say is, yeah, I do think we have a number of data center customers that we've been very proven with. As you know, there are some customers who say, "We only want cooling towers." Some only want dry coolers. I think what is going on at a macro level is you're seeing a movement towards higher heat loads, which tends to mean the easiest and the simplest is air-cooled chillers. If there's an air-cooled chiller, that doesn't really provide an opportunity for us because it's an all-integrated unit. As it goes to water-cooled chillers, we could either do the dry, the adiabatic, or the cooling tower on that. Everything we're hearing and seeing sees a trend moving towards that water-cooled chiller solution because you really can reject more heat, frankly. Yeah, so I think that's a trend that I think is favorable.

Speaker #4: But what I would say is , yeah , I do think we have a number of a number of data center customers that we've been very proven with .

Speaker #4: You know , and , you know , there's some some customers , they say we only want cooling towers . And then , you know , you try to be the some only want dry coolers .

Speaker #4: And I think what is going on at a macro level is you're seeing a movement towards higher heat loads , which tends to mean , you know , the , the , the easiest and the , you know , the simplest is air cooled chillers .

Gene Lowe: If there's an air-cooled chiller, that doesn't really provide an opportunity for us because it's an all-integrated unit. As it goes to water-cooled chillers, we could either do the dry, the adiabatic, or the cooling tower on that. Everything we're hearing and seeing sees a trend moving

Speaker #4: If there's an air cooled chiller that doesn't really provide an opportunity for us because it's an it's an all integrated unit as it goes to water cooled chillers , we could either do the dry , the antibiotic or the cooling tower on that .

Speaker #4: And everything we're hearing and seeing sees a trend moving towards that water cooled chiller solution . Because you can you really can reject more heat , frankly .

Gene Lowe: towards that water-cooled chiller solution because you really can reject more heat, frankly. Yes, I think that's a trend that I think is favorable. It doesn't happen overnight, but it should be shifting over the next couple of years. Which I think what it basically means for us is it can open up more, more addressable opportunity.

Speaker #4: So so yeah . So I think that's a trend that I think is favorable . It doesn't happen overnight , but it should be it should be shifting over the next couple of years , which I think what it basically means for us is it can open up more , more addressable opportunity .

Gene Lowe: It doesn't happen overnight, but it should be shifting over the next couple of years, which I think what it basically means for us is it can open up more addressable opportunity. That's great color. One last question here. Can I just put a finer point on the KTS acquisition? I thought the expectations there previously was it was more second-half weighted, but it looks like it might have been down sequentially in the quarter. Do you have anything to call out from a modeling perspective? Yeah, I don't think so, Ross. No. It is second-half weighted. No doubt. I think the fourth quarter will be its largest quarter. We can chat about that offline just to sync up. Yeah. That's fine. What you're saying. Thanks, guys. Thanks. Thank you. One moment for the next question.

Ross Sparenblek: Yeah, that's great color. Good. One last question here. Can I just put a finer point on the KTS acquisition? I thought the expectations there previously was it was more H2-weighted, but it looks like it might've been down sequentially in the quarter. Is there anything to call out from a modeling perspective?

Speaker #8: Yeah . That's great color . Good 1 or 1 last question here . Can I just put a finer point on the ctz acquisition ?

Speaker #8: I thought the expectations there previously was more second half weighted , but it looks like it might have been down sequentially in the quarter .

Speaker #8: Just anything to call out from modeling perspective .

Mark Carano: Yeah. I don't think so, Ross. No. It is H2-weighted, no doubt. I think Q4 will be its largest quarter. Yeah, we can chat about that offline just to sync up.

Speaker #4: Yeah I .

Speaker #3: Don't I don't think so Russ . No it is it is second half weighted no doubt . And I think the fourth quarter will be it's largest quarter .

Speaker #3: But maybe we can chat about that offline just to sync up.

Ross Sparenblek: Yeah. Absolutely

Mark Carano: what you're seeing.

Speaker #8: Yeah .

Speaker #4: What you're saying .

Ross Sparenblek: Thanks, guys.

Speaker #8: Thanks guys .

Mark Carano: Thanks.

Speaker #4: Thanks .

Operator: Thank you. One moment for the next question. The next question will be coming from the line of Joe O'Dea of Wells Fargo. Your line is open.

Speaker #2: Thank you . One moment for the next question and the next question will be coming from the line of Joe Oduya of Wells Fargo .

Gene Lowe: The next question will be coming from the line of Joe Odia of Wells Fargo. Your line is open. Hi, guys. Thanks for taking my questions. Hey. Hey, Nathan. Can you just touch a little bit more on Detection & Measurement in the quarter? I think you're heading into the quarter anticipating that margin could have been down. Clearly, strong revenue, strong margin. I think this is an environment where we hear a little bit more about the potential for push-outs. It sounds like things came in. Just to elaborate a little bit more on what you saw over the course of the quarter, maybe why you saw it come forward a little faster than anticipated. Yeah, Joe, let me touch on that. First of all, I think we're really pleased with the initiatives and the success and progress we've had on driving margins across our D&M platform.

Speaker #2: Your line is open .

Joe O'Dea: Hi, guys. Thanks for taking my questions.

Speaker #9: Hi , guys . Thanks for taking my questions .

Mark Carano: Hey.

Mark Carano: Hey, Joe.

Speaker #4: Hey, how you doing?

Joe O'Dea: Can you just touch a little bit more on Detection & Measurement in the quarter? I think you're heading into the quarter anticipating that margin could have been down. Clearly, strong revenue, strong margin. I think this is an environment where we hear a little bit more about the potential for pushouts. It sounds like things came in. Just to elaborate a little bit more on what you saw over the course of the quarter, maybe why you saw it come forward a little faster than anticipated.

Speaker #9: Can you just touch a little bit more on detection and measurement in the quarter ? I think you're heading into the quarter anticipating that margin could have been down .

Speaker #9: Clearly strong revenue , strong margin . I think this is an environment where we hear a little bit more about the potential for Pushouts .

Speaker #9: It sounds like things came in . And so just to elaborate a little bit more on on what you saw over the course of the quarter , maybe why you saw it come forward a little faster than anticipated .

Mark Carano: Yeah. Joe, let me touch on that. First of all, I think we're really, really pleased with the initiatives and the success and progress we've had on driving margins in our, you know, across our D&M platform. Really I would sort of break it down into 3 buckets. When you look at, year over year, you know, sort of 240 basis points of margin improvement at the segment income line. A part of that, probably 40, 50 basis points of it really related to KTS. That business is performing at a higher margin level than, you know, we had originally forecasted. That business is performing nicely. We saw very nice operating leverage in the quarter on the revenue.

Speaker #3: Yeah . Joe , let me let me touch on that . And first of all , I think we're really , really pleased with the initiatives and the success and progress we've had on on driving margins in our , you know , across our DNN platform .

Gene Lowe: I would sort of break it down into three buckets. When you look at year-over-year, sort of 240 basis points of margin improvement at the segment income line, a part of that, probably 40, 50 basis points of it, really related to KTS. That business is performing at a higher margin level than we had originally forecasted. That business is performing nicely. We saw very nice operating leverage in the quarter on the revenue, and this is sort of net of a less favorable mix that we had signaled in the back half of this year, particularly relative to last year. Now, remember, we had $20 million of this project move up from 2026 that sort of added to the volume story here that wasn't originally in there. That really drove very nice operating leverage. Those contracts actually executed at a higher level than we thought.

Speaker #3: But really , I would I would sort of break it down into three buckets . When you look at year over year , you know , sort of through 40 basis points of margin improvement at the segment income line , a part of that probably 4050 basis points of it really related to that business is performing at a higher margin level than , you know , we had originally forecasted .

Speaker #3: So that business is performing nicely . We saw very nice operating leverage in the quarter on the revenue . And this is sort of net of a less favorable mix .

Mark Carano: This is sort of net of a less favorable mix, you know, that we had signaled in H2 of this year, particularly relative to last year. Now remember, we had $20 million of this project move up from 2026 that sort of added to the volume story here that wasn't, you know, originally in there. You know, that really drove very nice operating leverage. Those contracts actually executed at a higher level than we thought. Lastly, we did have some initiatives within D&M related to some NPI and a couple other initiatives that have actually shifted out of the year. They're kind of shifting into 2026.

Speaker #3: You know , that that we had signaled in the back half of this year , particularly relative to last year . Now remember we we had 20 million of this project move up from 2026 .

Speaker #3: That sort of added to the to the volume story here . That wasn't , you know , originally originally in there . So you know that that really drove very nice operating leverage .

Speaker #3: Those contracts actually executed at a higher level than we thought . And then lastly , we did have some initiatives within Dam related to some NPI and a couple other initiatives that have actually shifted out of the year .

Gene Lowe: Lastly, we did have some initiatives within D&M related to some NPI and a couple of other initiatives that have actually shifted out of the year. They're kind of shifting into 2026. That's really largely, I think, just prioritization of where the management team is spending their time and resources right now. I think we probably had more slated than we could really accomplish during the year. Those are still projects that are going to continue. Those costs will be there, but they're going to slip out into 2026, that cost. The latter two, I didn't give you that. It's about, of the balance, call it 200 basis points. It splits about 50/50. That's helpful color. Wanted to ask on the HVAC backlog, up 7% sequentially. Seems like seasonally, from year to year, maybe it tends to be flat or could even move down.

Speaker #3: The kind of shifting into 2026 . And thats really largely , I think , just prioritization of of , you know , where where the management team is spending their time and resources .

Mark Carano: That's really largely I think just prioritization of, you know, where the management team is spending their time and resources right now. I think we probably had more slated than we could really accomplish during the year. Those are still projects that are gonna continue. Those costs will be there, but they're gonna slip out into 2026, that cost. The latter two, I didn't give you that. It's about, of the balance call, 200 basis points, splits about 50/50.

Speaker #3: Right now . I think we probably had more slated than we could really accomplish during the year . So those are those are still projects that are going to continue .

Speaker #3: Those costs will be there , but they're going to slip out into into 2026 . That cost . So the latter two , I didn't give you that .

Speaker #3: It's about of the balance . Call it 200 basis points . Splits about 5050 .

Joe O'Dea: That's helpful color. Wanted to ask on the HVAC backlog up 7% sequentially. Seems like seasonally from year to year, maybe it tends to be flat or could even move down. Not sure if you would observe that as a little bit better than nominal seasonal trend there, and anything that you would point to that's contributing to that.

Speaker #9: That's helpful color . And then I wanted to ask on the the HVAC backlog up 7% sequentially . Seems like seasonally from year to year .

Speaker #9: Maybe it tends to be flat or could even move down . And so not sure if you would observe that as a little bit better than normal seasonal trend .

Gene Lowe: Not sure if you would observe that as a little bit better than normal seasonal trend there and anything that you would point to that's contributing to that. Yeah. I think, I mean, on the backlog, a couple of things. One, when you look at it kind of year-over-year, right, it's up 32%. Organically represents about two-thirds of that. So nice year-over-year. Sequentially, you have a couple of things going on there. Obviously, we typically see backlog reduction at this time of the year related to our hydronics business. As we work through what we call kind of the preseason buy that takes place, that happens at this time of the year. You'll see it again in Q4 as we relieve inventory related to that. That's a little bit what's driving it.

Speaker #9: There . And anything that you would , would , would point to that that's contributing to that ?

Mark Carano: I think, you know, I mean, on the backlog, a couple things. You know, one, when you look at it kind of year over year, right, it's up, you know, 32%. You know, organically represents about two-thirds of that. Nice year over year. Sequentially, you know, you have a couple things going on there. You obviously, you know, we typically see backlog reduction at this time of the year related to our hydronics business. As we work through, you know, what we call kind of the pre-season buy that takes place, that will, that happens at this time of the year, and then you'll see it, you know, again in Q4 as we relieve inventory related to that. You know, that's a little bit what's driving it.

Speaker #3: Yeah . I think , you know , I mean , on the backlog , a couple of things . You know , one , when you look at it kind of year over year , right ?

Speaker #3: It's up , you know , 32% . You know , organically represents about two thirds of that . So nice year over year sequentially .

Speaker #3: You know , you have a couple of things going on there . You obviously you know we typically see backlog reduction at this time of the year related to our hydraulics business .

Speaker #3: So as we work through what we call kind of the preseason by that takes place , that will that happens at this , this time of the year .

Speaker #3: And then you'll see it , you know , again in Q4 , as we relieve inventory related to that . So , you know , that's a little bit what's driving it .

Mark Carano: You know, as I look to the end of the year, what I would tell you is, you know, I think backlog overall, from where we are today, will likely be higher.

Gene Lowe: As I look to the end of the year, what I would tell you is I think backlog overall from where we are today will likely be higher. I appreciate it. Thank you. Thank you. One moment for the next question. The next question will be coming from the line of Brad Hewitt of Wolfe Research. Your line is open. Hey, good afternoon. Thanks for the questions. I guess on the M&A side, curious whether the $1 billion of additional balance sheet capacity that you've secured in recent months would indicate that perhaps M&A funnel is more actionable than it had been in recent months. Would it be fair to say your appetite for a larger deal has perhaps increased? Yeah, Brad, I'd say this is probably the number one question we got in the equity raise. I think from some investors, it's a good question.

Speaker #3: You know , as I look to the end of the year , what I would tell you is , you know , I think backlog overall from where we are today will likely be higher .

Joe O'Dea: I appreciate it. Thank you.

Speaker #9: I appreciate it . Thank you .

Operator: Thank you. One moment for the next question. The next question will be coming from the line of Brad Hewitt of Wolfe Research. Your line is open.

Speaker #2: Thank you . One moment for the next question and the next question will be coming from the line of Brad Hewitt of Wolfe Research .

Speaker #2: Your line is open .

Brad Hewitt: Hey, good afternoon. Thanks for the questions.

Speaker #10: Hey , good afternoon . Thanks for the questions .

Mark Carano: Hey, Brad.

Gene Lowe: Hey.

Speaker #8: Hey .

Brad Hewitt: I guess on the M&A side, curious whether the $1 billion of additional balance sheet capacity that you've secured in recent months would indicate that perhaps M&A funnel is more actionable than it had been in recent months. Would it be fair to say your appetite for a larger deal has perhaps increased?

Speaker #10: So I guess on the M&A side . Curious whether the billion dollars of additional balance sheet capacity that you've secured in recent months would indicate that perhaps M&A funnel is more actionable than it had been in recent months ?

Speaker #10: And would it be fair to say your appetite for larger deal as perhaps increased ?

Gene Lowe: Brad, I'd say this is probably the number one question we got in the equity raise and I think from some investors. It's a good question, but the truth is nothing's really changed. Our strategy is the same. I would say to your point, we do have a very robust pipeline of opportunities. You know, I think that really what predicated the raise was, you know, our EBITDA had kind of outgrown our revolver. You know, we'd gotten so, you know, we'd grown our EBITDA so much that we actually saw some opportunities that, you know, would have been challenging for us to be able to execute on. We didn't wanna get caught in that situation. We actually feel like we're in a very strong situation now.

Speaker #4: Brad , I'd say this is probably the number one question we got in the in the equity raise . And I think from from some investors , it's a good question .

Gene Lowe: The truth is nothing's really changed. Our strategy is the same. I would say, to your point, we do have a very robust pipeline of opportunities. I think that really what predicated the raise was our EBITDA would kind of outgrown our revolver. We'd grown our EBITDA so much that we actually saw some opportunities that would have been challenging for us to be able to execute on. We didn't want to get caught in that situation. We actually feel like we're in a very strong situation now. Very good activity, but no change in strategy. As you know, for us, we've typically said a smaller deal might be in the range of a $50 million enterprise value. A larger deal might be in the neighborhood of $500 million. That's really where the bulk of our opportunities lie. I would say 90%+ fall in that range.

Speaker #4: But but the truth is nothing's really changed . Our strategy is the same . I would say to your point , we do have a very robust pipeline of of opportunities .

Speaker #4: You know , I think that really what predicated the raise was , you know , our EBITDA would kind of outgrown our revolver .

Speaker #4: You know , we'd gotten so no , we'd grown our EBITDA so much that we actually saw some opportunities that , you know , would have been challenging for us to to be able to execute on .

Speaker #4: We didn't want to get caught in that situation . So we actually feel like we're in a very strong situation now . But but yeah , very good activity .

Gene Lowe: Yeah, very good activity and no change in strategy. As you know, for us, we've typically said a smaller deal might be in the range of a $50 million enterprise value. A larger deal might be in the neighborhood of $500 million. That's really where the bulk of our opportunities lie. I would say 90% plus fall in that range. There are a couple smaller, there are a couple larger, but yeah, that's where we sit today.

Speaker #4: And but no , no change in strategy . As you know we you know for us we've typically said a smaller deal might be in the range of a 50 million enterprise value , a larger deal might be in the neighborhood of 500 million .

Speaker #4: And that's really where the bulk of our opportunities lie . I would say 90% plus fall in that range . And there are a couple smaller .

Gene Lowe: There are a couple of smaller, there are a couple of larger, but that's where we sit today. That's helpful. Curious what your latest thinking is around Ingenia capacity exiting the year. I think the previous expectation was around $140 million. When you mentioned the planned Ingenia facility in the Southeast U.S., is that incremental to the $300 million of ultimate run rate capacity that you had previously cited? Yeah. No, I think that we're still on track for hitting a $140 million run rate in this quarter, in Q4. If you look at it, our revenue is going to be materially lower than that, right? We're kind of ramping up, and that's really in our Mirabel facility. Previously, when it was talked about the $300 million run rate, what we're really talking about is that run rate being Q4 of 2027. That is both facilities.

Speaker #4: There are a couple larger , but but yeah , that's that's where we sit today .

Brad Hewitt: Okay, that's helpful. Curious what your latest thinking is around Ingenia capacity exiting the year. I think the previous expectation was around $140 million. When you mentioned the planned Ingenia facility in the Southeast US, is that incremental to the $300 million of ultimate run rate capacity that you had previously cited?

Speaker #10: Okay . That's helpful . And then curious what your latest thinking is around Ingenia capacity exiting the year . I think the previous expectation was around 140 million .

Speaker #10: And then when you mentioned the planned engineer facility in the southeast US , is that incremental to the the 300 million of ultimate run rate capacity that you had previously cited ?

Gene Lowe: Yeah. No, I think that we're still on track for, you know, hitting a $140 million run rate in this quarter, in Q4. If you look at it, our revenue is gonna be materially lower than that, right? You know, we're kind of ramping up, and that's really in our Mirabel facility. No. Then previously, when it was talked about the $300 million run rate, which we're really talking about is that run rate being Q4 of 2027. That is both facilities. That is both, Mirabel up in Canada, outside of Montreal, and then the new facility, which we're pretty close on, and we should be able to announce here in our next earnings call. Yeah, it'd be both those put together.

Speaker #4: Yeah , no , I think that we're still on track for , you know , the hitting a 140 million run rate in in this quarter in Q4 .

Speaker #4: But if you look at it , our revenue is going to be materially lower than that . Right . You know , we're kind of ramping up .

Speaker #4: And that's really in our Mirabel facility . But no . And then previously , when was talked about the 300 million run rate , which we're really talking about is that run rate being Q4 of 2027 , that is both facilities .

Gene Lowe: That is both Mirabel up in Canada outside of Montreal, and then the new facility, which we're pretty close on, and we should be able to announce here in our next earnings call. It would be both of those put together.

Speaker #4: That is both Mirabel up in Canada , outside of Montreal . And then the new facility , which we're pretty close on . And we should be able to announce here in our next earnings call .

Speaker #4: So yeah , it'd be it'd be both those put together .

Brad Hewitt: Great. Thanks, Gene.

Operator: Thanks, Jean.

Speaker #10: Great. Thanks, Jean.

Operator: Thank you. One moment for the next question. The next question will be coming from the line of Jamie Cook of Truist Securities. Your line is open.

Gene Lowe: Thank you. One moment for the next question. The next question will be coming from the line of Jamie Cook of Truist Securities. Your line is open.

Speaker #2: Thank you . One moment for the next question and the next question will be coming from the line of Jamie Cook of Truist Securities .

Speaker #2: Your line is open .

Jamie Cook: Hi, good evening. Nice quarter. I guess just 2 questions. One's following up on Joe's question about the profitability in D&M. Obviously it was strong in the quarter and there were some, you know, favorable items in Q3. Even if I look at the run rate of what's implied in Q4, like just the run rate on D&M operating income, you know, is quite a bit higher than what we've seen in H1 of the year. Just wondering if that's like a good cadence to think about, like the back half times 2 for base for 2026, just given, you know, what you're seeing on the top line and in the margins.

Mark Carano: Hi. Good evening. Nice quarter. I guess just two questions. One is following up on Joe's question about the profitability in D&M. Obviously, it was strong in the quarter, and there were some favorable items in the third quarter. Even if I look at the run rate of what's implied in the fourth quarter, just the run rate on D&M operating income is quite a bit higher than what we've seen in the first half of the year. I'm just wondering if that's a good cadence to think about the back half times two for base for 2026, just given what you're seeing on the top line and in the margins.

Speaker #11: Hi . Good evening . Nice quarter . I guess . Just two questions . One , following up on on Joe's question about the profitability in damn .

Speaker #11: Obviously it was strong in the quarter and there were some favorable items in the third quarter . But even if I look at the run rate of what's in what's implied in the fourth quarter , like just the run rate on damn operating income , you know , is quite a bit higher than what we've seen in the first half of the year .

Speaker #11: So just wondering if that's like a good cadence to think about , like the back half times , two for base for 2026 .

Speaker #11: Just given what you're seeing on the top line and in the margins . And then I guess my second question , you know , just any updated thoughts on your 2027 , 2028 sort of EBITDA goals ?

Mark Carano: My second question, just any updated thoughts on your 2027, 2028 sort of EBITDA goal, just given, again, where we should end up this year and given how much EBITDA has grown per year since you've put that out, it just seems like that could get pulled forward or potentially it's conservative. Thanks.

Jamie Cook: I guess my second question, you know, just any, you know, updated thoughts on your 2027, 2028 sort of EBITDA goals, just given again, where we should end up this year and given how much EBITDA has grown per year since you've put that out. It just seems like that could get pulled forward or potentially it's conservative. Thanks.

Speaker #11: Just given ? Again , where we should end up this year and given how much EBITDA has grown per year since you've put that out , it just seems like that could get pulled forward .

Speaker #11: Or potentially it's conservative . So thanks .

Mark Carano: Yeah, Jamie, I'll start on the D&M topic. You know, you really have to kind of look back to our, you know, our increase in our guide for the year, which was largely driven by D&M, the majority of it was, and kind of understand what's driving that, as you look out to kind of what's implied in Q4. There's really three things that are similar to Q3, they're connected to it. One is KTS margin improvement. You saw a little bit of that in Q3. You're going to see more of it in Q4. These initiatives that I talked about, that impacts both Q3 and a little bit in Q4, less so. Then the better leverage was really a Q3 element.

[Company Representative]: Yeah. Jamie, I'll start on the D&M topic. You really have to kind of look back to our increase in our guide for the year, which was largely driven by D&M. The majority of it was, and kind of understand what's driving that as you look out to kind of what's implied in Q4. There are really three things that are similar to Q3. They're connected to it. One is KTS margin improvement. You saw a little bit of that in Q3. You're going to see more of it in Q4. These initiatives that I talked about impact both Q3 and a little bit in Q4, less so. The better leverage was really a Q3 element. You think about KTS and the margin benefit from that, given that will be the largest quarter for the— Do we lose someone? Okay. For that business performing this year.

Speaker #3: Yeah , Jamie , I'll start on the I'll start on the damn topic . So , you know , you really have to kind of look back to our , you know , our increase in our guide for the year , which was largely driven by damn , the majority of it was and and kind of understand what's driving that as you look out to kind of what's implied in Q4 and there's really three things that we that similar to Q3 , they're connected to it .

Speaker #3: One is KT's margin improvement. We saw a little bit of that in Q3. You're going to see more of it in Q4.

Speaker #3: These initiatives that I talked about that impacts both Q3 and a little bit in Q4 , less so . And then the better leverage was really a Q3 element .

Mark Carano: You think about KTS and the margin benefit from that, given that will be the largest quarter for that business performing this year. Did we lose someone? Okay. Does that clear it up for you?

Speaker #3: So, you think about KT's and the margin benefit from that, given that will be the largest quarter for the... do we lose someone?

Speaker #3: Okay for that business performing this year ? Does that does that clear it up for you ?

[Company Representative]: Does that clear it up for you?

Jamie Cook: Yeah, that's helpful. Thank you.

Mark Carano: Yeah, that's helpful. Thank you.

Speaker #11: Yeah , that's helpful . Thank .

Speaker #12: You . And then on the 2027 , 2028 EBITDA targets .

Mark Carano: Yeah.

Jamie Cook: On the 2027, 2028 EBITDA targets?

[Company Representative]: Yeah.

Mark Carano: On the 2027, 2028 EBITDA targets?

Gene Lowe: Yeah, I mean, I think why don't I start there, and then you can dive in. When we had our investor day in early 2024, we kind of looked at 2023, which our EBITDA was $320 million. Is that right?

Operator: Yeah. I mean, I think why don't I start there, and then you can dive in. When we had our investor day in early 2024, we kind of looked at 2023, which our EBITDA was $320 million. Is that right? Yeah.

Speaker #4: Yeah , I mean , I think why don't I start there and then you can dive in when we we had our Investor Day in the early 2024 .

Speaker #4: So we kind of looked at 2023 , which our EBITDA was 320 million . Is that right ? Yeah .

Mark Carano: Yeah. $310.

[Company Representative]: 310.

Speaker #3: So three .

Speaker #4: 1003 ten okay . 310 million . And we said , we think we can double this within a medium term , which would be 4 to 5 years .

Gene Lowe: 310. Okay. $310 million. We said we think we can double this within a medium term, which would be 4 to 5 years. To your point, I think we're tracking very, very favorably on that. You know, we went from 310 to 421 last year. I think we're 505 at the midpoint this year. We're seeing nice growth dynamics, particularly on our HVAC side, as well as some good inorganic opportunities. Yeah, if I were to kind of say that was 4 to 5 years, I would say I'd be disappointed if we weren't. The 5 feels too long. I do think we're ahead of plan here. Mark, I don't know if you have any other comments you'd like to add to that.

Operator: $310 million. Okay. $310 million. We said we think we can double this within a medium term, which would be four to five years. To your point, I think we're tracking very, very favorably on that. We went from $310 million to $421 million last year. I think we're $505 million at the midpoint this year. We're seeing nice growth dynamics, particularly on our HVAC side, as well as some good inorganic opportunities. If I were to kind of say that was four to five years, I would say I'd be disappointed if we weren't. The five feels too long. I do think we're ahead of plan here. Mark, I don't know if you have any other comments you'd like to add to that.

Speaker #4: To your point , I think we're tracking very , very favorably on that . So you know , we went from 310 to 421 last year .

Speaker #4: I think we're 505 at the midpoint this year . We're seeing nice growth dynamics , particularly on our HVAC side , as well as some good inorganic opportunities .

Speaker #4: So yeah , if I were to if I were to kind of say that was 4 to 5 years , I would say I'd be disappointed if we weren't .

Speaker #4: The five feels too long . I do think we're we're ahead of plan here . And Mark , I don't know if you have any other comments you'd like to add to that .

Mark Carano: No. I mean, I feel good about where we sit. I mean, particularly as I look out, you know, into, you know, at our end markets that are, you know, in some of the longer term mega trends that are driving the business.

[Company Representative]: No, I mean, I feel good about where we sit, particularly as I look out at our end markets that are in some of the longer-term megatrends that are driving the business.

Speaker #3: No . I mean , I feel good about where we sit . I mean , particularly as I look out , you know , into , you know , at our end markets that are , you know , in some of the longer term megatrends that are driving the business .

Gene Lowe: We very clearly say we want 15% growth every year. This year, we're penciling in around 20. Last year we were at 29%. You know, we think our model, you know, is tracking as we expected. Yeah, we'd expect it You know, assuming we stay on plan, we would exceed that well before the 5 years.

Operator: We very clearly say we want 15% growth every year. This year, we're penciling in around 20%. Last year, we were at 29%. We think our model is tracking as we expected. Assuming we stay on plan, we would exceed that well before the five years.

Speaker #4: We very clearly say we want 15% growth every year . This year , we're penciling in around 20 . Last year we were 29% .

Speaker #4: You know , we think our model , you know , is tracking as we expected . So yeah , we'd expect it . You know , assuming we stay on plan we would exceed that well before the five years .

Jamie Cook: Thank you and congratulations.

Mark Carano: Thank you, and congratulations.

Speaker #12: Thank you . And congratulations .

Gene Lowe: Thanks.

[Company Representative]: Thanks.

Speaker #3: Thanks .

Operator: Thank you. One moment for the next question. The next question will be coming from the line of Jeff Van Sinderen of B. Riley Securities. Your line is open.

Gene Lowe: Thank you. One moment for the next question. The next question will be coming from the line of Jeff Van Sunderan of B. Riley Securities. Your line is open.

Speaker #2: Thank you . One moment for the next question . The next question will be coming from the line of Jeff Van Sindarin of B Riley Securities .

Speaker #2: Your line is open .

Jeff Van Sinderen: Hi, everyone. Let me add my congratulations. Just as a follow-up to the last question, as you plan for 2026, what are your thoughts on building incremental P&L leverage for the enterprise as a whole? Maybe thoughts on potential for EBITDA margin expansion just for next year. Are there any anomalous things that we need to keep in mind that might skew that either way?

[Analyst]: Hi, everyone. Let me add my congratulations. Just as a follow-up to the last question, as you plan for 2026, what are your thoughts on building incremental P&L leverage for the enterprise as a whole? Maybe thoughts on potential for EBITDA margin expansion just for next year. Are there any anomalous things that we need to keep in mind that might skew that either way?

Speaker #13: Hi , everyone , and let me add my congratulations . Just as a follow up to the last question , as you planned for 2026 , what are your thoughts on building incremental PNL leverage for the enterprise as a whole ?

Speaker #13: And maybe thoughts on on potential for EBITDA margin expansion just for next year ? Are there any anomalous things that we need to keep in mind that might skew that ?

Speaker #13: Either way ?

Mark Carano: Yeah, I'll start, Jeff. I mean, I wanna be careful. We're not in a position where we're gonna share a 2026 guidance today.

[Company Representative]: Yeah, I'll start, Jeff. I want to be careful. We're not in a position where we're going to share a 2026 guidance today.

Speaker #4: Yeah .

Speaker #3: I'll start . Jeff . I mean , I want to be careful . We're not we're not in a position where we're going to share 2026 guidance today .

Jeff Van Sinderen: Right.

Mark Carano: You know, I don't think of anything anomalous. I'm just sort of thinking through, you know, a couple things. I mean, when I think about our corporate structure that we have here in Charlotte, I mean, we're scaled, I think, appropriately today and really not a need to continue to really add to that as we scale, the business. You know, clearly, I think, you know, next year, we are gonna have some startup costs related to HVAC. We've got a little bit of that in this year, with respect to some of the initiatives we have underway, you know, regarding the data center development of some of the new technologies there, the new plants that'll be coming online.

Speaker #3: Right . You know , so but you know , I don't think of anything anomalous . I'm just sort of thinking through , you know , a couple of things .

[Analyst]: Right.

[Company Representative]: I don't think of anything anomalous. I'm just sort of thinking through a couple of things. I mean, when I think about our corporate structure that we have here in Charlotte, I mean, we're scaled, I think, appropriately today and really not in need to continue to really add to that as we scale the business. Clearly, I think next year, we are going to have some startup costs related to HVAC. We've got a little bit of that in this year with respect to some of the initiatives we have underway regarding the data center development of some of the new technologies there, the new plants that will be coming online. While the first was kind of a positive, that's something that has potential to be a bit of a potential drag. It shouldn't be a material number, really, when I think about the margin profile for next year.

Speaker #3: I mean , when I think about our corporate structure that we have here in Charlotte , I mean , we're we're scaled . I think , appropriately today .

Speaker #3: And really not a need to continue to really add to that as we scale the business . So , you know , clearly , I think , you know , next year we are going to have some start up costs related to HVAC .

Speaker #3: We've got a little bit of that in this year with respect to some of the initiatives we have underway . You know , regarding the data center development of some of the new technologies there , the new plants that will be coming online .

Mark Carano: That's, you know, while the first was kind of a, you know, a positive, that's something that, you know, has potential to be a bit of a potential drag, but it shouldn't be a material number, really, when I think about, you know, the margin profile for next year. I mean, what I would say is I, you know, I feel very good about what we've done over the last few years, whether it's kind of, you know, driving the margin profile of the HVAC business up to where it is and, you know, similarly returning the D&M business to the margin profile that it once was a number of years ago.

Speaker #3: So that's , you know , while the while the first was kind of a , you know , positive that that's something that , has potential to be a bit of a potential drag .

Speaker #3: But it shouldn't be a material number really . When I think about , you know , the the margin profile for next year , I mean , what I would say is I , you know , I feel very good about what we've done over the last few years , whether it's kind of , you know , driving the margin profile of the HVAC business up to where it is and , you know , similarly , returning the business to the margin profile that it that it once was a number of years ago .

[Company Representative]: I mean, what I would say is I feel very good about what we've done over the last few years, whether it's kind of driving the margin profile of the HVAC business up to where it is and similarly returning the D&M business to the margin profile that it once was a number of years ago. As I look forward, you think about as you continue to grow the top line, we should get operating leverage there.

Mark Carano: You know, as I look forward, it, you know, you think about as you continue to grow the top line, you know, we should get operating leverage there.

Speaker #3: So , you know , as I look forward , you know , you think about as you continue to grow the top line , you know , we should get operating leverage there .

[Analyst]: Okay. Great. You touched on potential push-outs in the data center market. Given the nature of that data center beast, on the flip side, are you seeing any pull forwards in demand from any projects there?

Jeff Van Sinderen: Okay, great. You touched on potential push outs in the data center market. Given the nature of that data center beast, on the flip side, are you seeing any pull forwards in demand from any projects there?

Speaker #13: Okay , great . And then you touched on potential pushouts in the data center market . Given the nature of that data center beast on the flip side , are you seeing any pull forwards in demand from any projects there ?

Gene Lowe: Yeah, I would say it's a very fast-moving fluid environment where, yeah, there are some things that accelerate and can move, yeah, can definitely move up well earlier than planned. In some cases, you have some of these colos that will get a facility, and they'll set up a location and then they wanna get a customer or a major tenant. Once they get it, all of a sudden, they're moving 90 miles an hour. Yeah, we do see things moving in both directions there. It is a very fast-moving market with a lot of activity. It's a very dynamic market, as you might expect with the amount of growth that's going on in that market.

Operator: Yeah. I would say it's a very fast-moving, fluid environment where there are some things that accelerate and can move up well earlier than planned. In some cases, you have some of these colos that will get a facility, and they'll set up a location, and then they want to get a customer or a major tenant. Once they get it, all of a sudden, they're moving 90 miles an hour. We do see things moving in both directions there. It is a very fast-moving market with a lot of activity and a lot of—it's a very dynamic market, as you might expect, with the amount of growth that's going on in that market. We have seen it move forward as well as seeing some of the normal project delays.

Speaker #4: Yeah , I would say it's a it's a very fast moving fluid environment where . Yeah , there are some things that accelerate and can move .

Speaker #4: Yeah . Can , can , can definitely move up . Well earlier than planned in some cases you have some of these colos that will get a facility and they'll set up a location .

Speaker #4: And then they want to get a customer or a major tenant. And once they get it, all of a sudden they're moving 90 miles an hour.

Speaker #4: And so yeah , we do see things moving in both directions . There it is a very fast moving market with a lot of activity and a lot of .

Speaker #4: It's a very dynamic market , as you might expect , with the amount of growth that's going on in that market . But yeah , we have seen it move forward as well as , you know , seeing some of the normal project delays .

Gene Lowe: Yeah, we have seen it move forward as well as, you know, seeing some of the normal project delays.

Jeff Van Sinderen: Okay. Thanks for taking my questions and continued success.

[Analyst]: Okay. Thanks for taking my questions and continued success.

Speaker #13: Okay . Thanks for taking my questions . And continued success .

Mark Carano: Thanks.

[Company Representative]: Thanks. Thanks.

Gene Lowe: Thanks.

Speaker #4: Thanks . Thanks .

Gene Lowe: Thank you. One moment for the next question. The next question will be coming from the line of Steve Ferazani of Sidoti. Your line is open.

Operator: Thank you. One moment for the next question. The next question will be coming from the line of Steve Ferazani of Sidoti. Your line is open.

Speaker #2: Thank you . One moment for the next question . And the next question will be coming from the line of Steve Firenze of Sidoti .

Speaker #2: Your line is open .

Steve Ferazani: evening, Gene. Evening, Mark.

[Analyst]: Evening, Gene. Evening, Mark.

Speaker #14: Evening . Gene . Evening , Mark . Hey , it's been a long call , so I'll try to ask you a couple of easy ones .

Gene Lowe: Hey

Steve Ferazani: It's been a long call, so I'll try to ask you a couple of easy ones.

[Company Representative]: Hey.

[Analyst]: It's been a long call, so I'll try to ask you a couple of easy ones. Very strong free cash flow in Q3. I know you had already tipped off the fact that all the remaining cash costs related to the long-ago discontinued ops were taken last year. Nevertheless, much stronger cash flow this quarter. You've got the balance sheet in great shape now, but I'm looking at my model. In Q4, if you get the typical working capital reversal that you usually get, you're looking at a significant cash flow in Q4, given that you've already cleaned up that balance sheet. If you're looking at a number, and I'm sure my number is not far off of yours, how are you thinking about using that Q4 cash?

Gene Lowe: That's okay.

Steve Ferazani: very strong free cash flow in Q3. I know you had already tipped off the fact that all the cash, the remaining cash costs related to the long ago discontinued ops were taken last year. Nevertheless, much stronger cash flow this quarter. You've got the balance sheet in great shape now, but I'm looking at my model, Q4, if you get the typical working capital reversal that you usually get, you're looking at a significant cash flow in Q4, given that you've already cleaned up that balance sheet. If you're looking at a number, I'm sure my number is not far off of yours, how are you thinking about using that Q4 cash?

Speaker #14: Very strong free cash flow in three . Q I know , I know , you had already tipped off the fact that all the cash , the remaining cash costs were related to the long ago discontinued ops were taken last year .

Speaker #14: Nevertheless , much stronger cash flow this quarter . You've you've you've got the balance sheet in great shape now . But I'm looking at my model .

Speaker #14: And for Q if you get the typical working capital reversal that you usually get , you're looking at a significant cash flow in for .

Speaker #14: Q given that you've already cleaned up that balance sheet , if you're looking at a number , and I'm sure you my number is not far off of yours , how are you thinking about using that for Q cash ?

Mark Carano: Yeah, I think Well, I don't know your number. Your presumption is correct.

[Company Representative]: I think your—I don't know your number. Your presumption is.

Speaker #3: Yeah , I think you're you're I don't I don't know your number . Your presumption .

[Analyst]: I don't want to give it, but it's sizable.

Steve Ferazani: I don't wanna give it, but it's sizable.

Speaker #14: I don't want to give it, but it's sizable.

Mark Carano: Yeah. Listen, I mean, it comes back to the M&A pipeline that we have in front of us, right?

[Company Representative]: Yeah. I mean, it comes back to the M&A pipeline that we have in front of us, right? I mean.

Speaker #3: Yeah . Listen , I mean I , I , it comes back to the , the M&A pipeline that we have in front of us .

Speaker #3: Right . I mean . Yeah , we feel really good about the opportunities ahead of us . And you know that that's just part of the pool of capital that will be available to us to to to drive the value creation .

Mark Carano: Yeah

Mark Carano: We feel really good about the opportunities ahead of us. You know, that's just part of the pool of capital that'll be available to us to drive the value creation. Obviously, we've got, you know, the plant expansion. We haven't sized that yet, but, you know, we'll certainly that will be part of the overall deployment of capital.

[Analyst]: Yeah.

[Company Representative]: We feel really good about the opportunities ahead of us. That's just part of the pool of capital that'll be available to us to drive the value creation. Obviously, we've got the plant expansion. We haven't sized that yet, but that will be part of the overall deployment of capital.

Speaker #3: And obviously we've got , you know , the plan expansion . We haven't sized that yet . But you know , we'll certainly that that will be part of the the overall deployment of capital .

Steve Ferazani: Okay. Gene, let me follow up a question that was asked earlier, 'cause obviously, you are getting asked about M&A opportunities and size. I know you've talked previously, and we've discussed this, that if you go larger, typical of multiples get higher. I mean, so much of your success over the last few years has been paying very reasonable multiples for acquisitions. I think investors wanna hear that you're gonna maintain that kind of discipline around businesses you know really well and paying that 10 to 12 times. Given the balance sheet is so much cleaned up, given your access to capital, is there an itch to go higher to find the right deals, or do you expect to maintain that kind of discipline?

[Analyst]: Okay. Gene, let me follow up a question that was asked earlier because obviously, you are getting asked about M&A opportunities and size. I know you've talked previously, and we've discussed this, that if you go larger, typically the multiples get higher. So much of your success over the last few years has been paying very reasonable multiples for acquisitions. I think investors want to hear that you're going to maintain that kind of discipline around businesses you know really well and paying that 10 to 12 times. Given the balance sheet is so much cleaned up, given your access to capital, is there an itch to go higher to find the right deals, or do you expect to maintain that kind of discipline?

Speaker #15: Okay .

Speaker #14: And Gene let me follow up a question that was asked earlier because obviously you are getting asked about M&A opportunities and size . And I know you've talked previously , we've discussed this , that if you go larger typical multiples get higher .

Speaker #14: I mean , so much of your success over the last few years has been paying very reasonable multiples for acquisitions . And I think investors want to hear that you're going to maintain that kind of discipline around businesses .

Speaker #14: You know , really well . And paying that 10 to 12 times given the balance sheet is so much cleaned up , given your access to capital , is there an itch to go higher to find the right deals , or do you expect to maintain that kind of discipline ?

Gene Lowe: No, I think if you look at, it's a great question. I think that, you know, our model has really worked. I think the, you know, our average multiple has been in the neighborhood of 11x. You know, we typically get 1.5x, 2x turns. You kinda get it under your roof at 9x, which is a really good, really good value when you think of our average EBITDA that we've acquired is 20%, and these have also been accretive on growth rates. Not to mention the most important point, you know, the whole purpose of how we do M&A is to really strengthen our competitive position and to be able to expand. Yeah, I think I don't see any deviation from our strategy.

Operator: No, I think if you look at—I mean, it's a great question. I think that our model has really worked. I think our average multiple has been in the neighborhood of 11 times. We typically get one and a half, two turns, so you kind of get it under your roof at 9 times, which is a really good value when you think of our average EBITDA that we've acquired is 20%, and these have also been accretive on growth rates. Not to mention the most important point, the whole purpose of how we do M&A is to really strengthen our competitive position and to be able to expand. Yeah, I think I don't see any deviation from our strategy. Typically, if you see a smaller deal in the $50 million range, something like that, it'll be a turn or two lower.

Speaker #4: No . I think if you look at , I mean , it's a great question . I think that , you know , our model has has really worked , and I think the , you know , our average multiple has been in the neighborhood of 11 times , you know , we typically get one and a half , two turns .

Speaker #4: So you kind of you kind of get it under your roof at nine times , which is a really good , really good value when you think of our average EBITDA that we've acquired is 20% .

Speaker #4: And these have also been accretive on growth rates , not to mention the most important point in the whole purpose of of how we do M&A is to really strengthen our competitive position and to be able to expand .

Speaker #4: So , so yeah , I think I don't see any deviation from our strategy . Typically , if you see a smaller deal in the $50 million range , something like that , it would be a turn or two lower .

Gene Lowe: Typically, if you see a smaller deal in the $50 million range, something like that, it'll be a turn or two lower. If you see a larger deal that has more established management teams, more established IT systems, products, channels as lower risk, you typically see there's always gonna be a turn or two higher. The flip side of that is you can get, you know, you can typically get some more leverage and some more synergy when you have a larger organization like that. Yeah, I think that our model has not changed. You know, we do see deals that, you know, and this is probably more in the Detection & Measurement side. You can see deals going for 19 times, 20 times. That's just not us.

Operator: If you see a larger deal that has more established management teams, more established IT systems, products, channels as lower risk, you typically see it's always going to be a turn or two higher. The flip side of that is you can get, you can typically get some more leverage and some more synergy when you have a larger organization like that. Yeah, I think that our model has not changed. We do see deals that—this is probably more on the Detection & Measurement side—you can see deals going for 19 times, 20 times. That's just not us. That's just not—that's not who we are. We really do focus on cash on cash returns. Yeah, our model is going to stay. We're executing the same strategy that we did a year ago, Steve.

Speaker #4: If you see a larger deal that has more established management teams, more established IT systems, products, and channels as lower risk, you typically see that it's always going to be a turn or two higher.

Speaker #4: But the flip side of that is you can get , you know , you can typically get some more leverage and some more synergy when you have a larger organization like that .

Speaker #4: So , so yeah , I think that our model has has not changed . You know , we do see deals that , you know , and this is probably more in the detection and measurement side .

Speaker #4: You can see deals going for 19 times 20 times . That's just not us . That's just not you know , that's not who we are .

Steve Ferazani: Yeah

Gene Lowe: you know, that's not who we are. We really do focus on cash, on cash returns. Yeah, our model is gonna stay. You know, we're executing the same strategy that we did a year ago, Steve.

Speaker #4: We really do focus on cash . On cash returns . And yeah , I would . Our model is is going to stay , you know we're executing the same strategy that we did a year ago .

Speaker #4: Steve .

Steve Ferazani: Great. Thanks, Gene. Thanks, Mark.

[Analyst]: Great. Thanks, Gene. Thanks, Mark.

Speaker #15: Great .

Speaker #14: Thanks, Gene. Thanks, Mark.

Gene Lowe: Thanks.

[Company Representative]: Thanks.

Speaker #3: Thanks .

Operator: Thank you. That concludes today's Q&A session. I would now like to turn the call back over to management for closing remarks. Please go ahead.

Gene Lowe: Thank you. That concludes today's Q&A session. I would now like to turn the call back over to management for closing remarks. Please go ahead.

Speaker #2: Thank you . That concludes today's Q&A session . I would now like to turn the call back over to management for closing remarks .

Speaker #2: Please go ahead .

[Company Representative]: Thanks, operator.

Gene Lowe: Thanks, operator.

Speaker #3: Thanks . Operator .

Operator: That concludes today's conference call. You may all disconnect.

Gene Lowe: That concludes today's conference call. You may all disconnect.