Alex Hantman

Alex Hantman inquired about the margin profile of the current backlog, specifically how it is protected by recent price increases and tariff surcharges. He also asked about any demand impact from recent legislative acts like the 'One Big Beautiful Bill Act'.

Answer

CEO Matt Tobolski clarified that the AAON brand backlog is favorably priced and will see a meaningful, margin-accretive impact from the 3% price increase and 6% tariff surcharge in the second half of the year. The Basics brand backlog is considered more margin-neutral due to escalation clauses and long-term supply contracts. He noted that recent legislation has provided a positive sentiment lift for US investment but has not been a 'light switch' driver of demand.

Speaking for Julio Romero, Alex Hangman asked about the demand for denser data centers and its impact on liquid cooling, and requested an update on the development of the clean rooms end market.

Answer

President and COO Matthew Tobolski explained that higher-density computing for AI is driving growth in both liquid cooling solutions and the necessary air-side cooling required in those data centers. Regarding clean rooms (for semiconductor, pharma, and EV battery facilities), he described the market as "lumpy" with more project-based volatility compared to the consistent growth in data centers, but noted that AAON continues to see strong investment in onshoring and battery facility build-outs.

Alex Hantman of Sidoti & Company inquired about KLX Energy's confidence in its Q3 revenue guidance amid a declining rig count, opportunities in gas basins like the Haynesville and Marcellus, and the company's cash flow outlook for the second half of 2025.

Answer

President & CEO Christopher Baker confirmed the Q3 guidance is supported by strong momentum exiting Q2, customer completion programs restarting, and new contract wins, which factor in the current rig count. Baker also noted a 25% sequential revenue increase from gas basins (Haynesville and Northeast) with ample room for further growth. EVP & CFO Keefer Lehner added that while no explicit free cash flow guidance was given, he expects liquidity to improve in H2 2025, driven by higher EBITDA and managed CapEx, despite some temporary working capital intensity in Q3.

Asked about the confidence in Q3 revenue guidance given the declining rig count, opportunities in gas basins like the Haynesville and Marcellus, and the outlook for second-half cash flow, potential asset sales, and cost reductions.

Answer

Management is confident in the Q3 guidance, citing strength exiting Q2 and recent customer wins, which already factor in the current rig count. They see significant growth opportunities in gas basins, noting a 25% quarter-over-quarter revenue increase from the Haynesville and Northeast. For the second half, they expect liquidity and cash to improve, driven by higher Q3 EBITDA, despite slightly more intensive working capital needs in Q3, and provided a net CapEx forecast.

Alex Hantman of Sidoti & Company, LLC questioned how the new affiliate model impacts order and lifetime values compared to the previous MLM structure, and asked if the company was exploring AI-driven features for its fitness and nutrition planning.

Answer

CEO Carl Daikeler noted the new affiliate model is simplified and more accessible, making direct comparisons difficult. Executive Chairman Mark Goldston provided a key financial distinction: the new model eliminates commission payments on renewals, which significantly increases customer lifetime value. Regarding AI, Daikeler confirmed that while all departments are exploring AI for efficiencies, the immediate focus for the P90X launch is on the proven formula of great talent and content. Goldston highlighted a key tech-enabled cross-marketing innovation: retail nutritional products will feature QR codes with offers for digital fitness programs.

Alex Hantman inquired about the financial impact of the new affiliate model on customer lifetime value and asked about the potential integration of AI into new fitness programs like P90X.

Answer

The new affiliate model significantly improves customer lifetime value because commissions are no longer paid on renewals, unlike the old MLM structure. While the company is exploring AI across all departments for efficiency, the upcoming P90X launch will focus on its proven formula of great talent and production. However, it will feature an innovative cross-marketing strategy linking retail nutritional product purchases with offers for the digital fitness program.

Alex Hantman from Sidoti & Company, on for Julio Romero, asked for more color on growth expectations for the remainder of 2025 and into 2026, and sought clarification on what constitutes 'solid' earnings performance going forward.

Answer

EVP & COO Trent McKenna pointed to very robust project pipelines. CEO Brian Lane highlighted the consistent 10% growth in the service business. EVP & CFO William George expressed bullishness on meeting foreseeable demand profitably, while Brian Lane noted that the strong 22.5% gross margin, driven by pricing and execution, supports an optimistic outlook.

Alex Hantman from Sidoti & Company asked for color on growth prospects for the remainder of 2025 and into 2026, given the strong backlog, and sought clarification on the outlook for "solid earnings."

Answer

EVP & COO Trent McKenna highlighted the robust project pipelines supporting future growth. CEO Brian Lane added that the service business is also showing consistent growth. EVP & CFO William George expressed strong confidence in meeting foreseeable demand profitably but did not provide specific margin guidance, while CEO Brian Lane pointed to the strong gross margin as a positive indicator for future results.

Alex Hantman, on behalf of Sidoti & Company, asked for additional color on growth expectations for the remainder of 2025 and into 2026, and sought clarification on whether management's outlook for "solid earnings" implies sustaining current record levels.

Answer

EVP & COO Trent McKenna confirmed that project pipelines remain robust. CEO Brian Lane highlighted the consistent 10% growth in the service business. EVP & CFO William George expressed strong confidence in future demand and profitability, describing current margins as "eye-popping." Lane concluded that the company is optimistic about results for the rest of the year and into the next, citing strong pricing and execution.

Alex Hantman from Sidoti & Company, on for Julio Romero, asked for commentary on growth expectations for the rest of 2025 and into 2026, given the strong backlog. He also sought to clarify if the 'solid earnings' outlook implies sustaining current record levels or a reversion to historical performance.

Answer

EVP & COO Trent McKenna confirmed that future project pipelines remain very robust, supporting a positive outlook. CEO Brian Lane highlighted the consistent 10% growth in the service business. EVP & CFO William George expressed bullishness, noting that while current margins are 'eye-popping,' the company is confident in its ability to profitably meet foreseeable demand, without providing specific margin guidance.

Alex Hantman from Sidoti & Company asked for color on the company's growth outlook for the remainder of 2025 and into 2026, given the strong backlog. He also sought clarification on whether the term 'solid earnings' implies a continuation of current high levels or a return to historical norms.

Answer

EVP & COO Trent McKenna explained that while backlog is lumpy, the company's future project pipelines remain robust even after strong Q2 bookings. CEO Brian Lane added that the service business is also contributing consistent growth. Regarding earnings, EVP & CFO William George expressed bullishness, citing strong demand and execution capabilities, though he did not provide specific margin guidance. Mr. Lane reiterated optimism, pointing to the strong 22.5% gross margin as evidence of favorable pricing and excellent execution.

Alex Hantman of Stifel inquired about the launch timeline for the Igniton brand and sought confirmation on the timing of the CEO transition, asking if any other changes to the management team or Board of Directors were expected.

Answer

Executive Chairman Jirka Rysavy announced that the Igniton brand would be introduced at the Biohacking Conference at the end of the month and launched to the market after July 4. CEO James Colquhoun confirmed he will transition to Chief Business Development Officer at the end of Q2. Rysavy added that the board and management team will otherwise remain the same, framing the move as a way to expand the company's strategic coverage.

Alex Hantman of Sidoti & Company asked if the Industrial business is facing a tariff impact and whether medical products are more likely to receive tariff exemptions in China. He also inquired about the expected change in annual net interest expense following the repayment of the company's convertible notes.

Answer

CEO Sunny Sanyal explained the Industrial business sees a cost-side tariff impact from globally sourced components, which Varex plans to pass on to customers. He noted it's undetermined if Chinese customers will receive medical exemptions. CFO Sam Maheshwari projected that annual net interest expense will fall to the $29-$30 million range after the convertible notes are paid down in June.

Alex Hantman of KeyBanc Capital Markets Inc. inquired about the progress on resolving manufacturing inefficiencies and sought clarity on what constitutes a normalized backlog level for the Infrastructure Solutions segment.

Answer

CEO Jaco van der Merwe highlighted a steady, quarter-over-quarter reduction in manufacturing inefficiencies, noting Q4 was one of the lowest despite seasonal factors. Regarding the backlog, he explained that while the overall number has moderated due to strong invoicing and mobile equipment destocking, the backlog for core asphalt and concrete plant equipment remains strong, with some product lines already booking into late 2025.

Alex Hantman, on behalf of Julio Romero-Alarcon, inquired about management's confidence in the fiscal 2025 community count ramp and recent sales pacing trends in October compared to September.

Answer

Executive David Goldberg affirmed strong confidence in the community count growth, citing an expanded land position and clear visibility into new communities. Chairman and CEO Allan Merrill added that October sales momentum was robust and comparable to September's, even as the company began reducing incentives, and noted an encouraging increase in higher-margin to-be-built home sales.

Alex Hantman requested more color on the specific drivers behind the increased activity in the communications business and asked for the solar revenue figure for the third quarter.

Answer

CEO Tom McCormick detailed that the growth in communications is primarily driven by fiber-related work, including building fiber rings for data centers and hyperscalers, as well as fiber-to-the-home initiatives. He also specified that solar revenues for the third quarter were a little over $450 million.

Alex Hantman, on for Julio Romero, asked about the opportunity to cross-sell legacy Arcosa products into Stavola's footprint and inquired about the expected pacing of the company's deleveraging plan.

Answer

Executive Antonio Carrillo sees significant potential to expand the recycled aggregates business in Stavola's Northeast markets, citing the availability of raw material from aging infrastructure. Regarding deleveraging, Carrillo reiterated the 18-month goal to return to the target leverage ratio. He outlined that this will be achieved through a combination of lower growth CapEx, disciplined working capital management, and expected earnings growth in 2025, all of which will generate cash for debt reduction.

Alex Hantman, on for Gabe Hajde, asked about consumer health and promotional activity across geographies, the pricing outlook for 2025, and the reason for maintaining free cash flow guidance despite lower earnings and higher CapEx.

Answer

An executive explained that in Europe, the trend is a trade to private label, while in the U.S., promotions are successful in home and personal care but less so for isotonics. For 2025, they anticipate flat-to-down pricing for U.S. tinplate and stable prices in Europe. SVP and CFO Kimberly Ulmer stated that the $375 million free cash flow guidance is maintained due to expected working capital benefits, primarily from lower inventory, which offsets the earnings adjustment. President and CEO Adam Greenlee noted the CapEx increase includes Weener.