Andrew Percoco

Andrew Percoco asked about Adient's strategy to manage margins in Europe given increasing Chinese import volumes, and whether there's an opportunity to support Chinese OEMs as they export more to other markets, potentially aiding European margin improvement. He also inquired about conversations with China domestic OEMs regarding their aspirations to enter the US or Canada market.

Answer

President and CEO Jerome Dorlack outlined a three-pronged strategy for Europe: going up-segment to insulate from Chinese competition (A&B segments), winning components business as Chinese OEMs localize in Europe, and gaining content on export vehicles through strategic JVs (e.g., with Geely's seating supplier). He affirmed that Adient will be a net beneficiary of onshoring in North America. Regarding Chinese OEMs in North America, he confirmed ongoing discussions with companies like BYD and Geely about servicing them if they explore expansion into Canada or Mexico, leveraging Adient's strong China relationships.

Andrew Percoco inquired about China domestic OEMs' aspirations to enter the U.S. or Canada market and if Adient is having preliminary conversations to support them.

Answer

Jerome Dorlack, President and Chief Executive Officer, affirmed Adient's position as a net beneficiary of onshoring. He confirmed ongoing discussions with Chinese OEMs (e.g., BYD, Geely) regarding potential expansion into Canada or Mexico, leveraging Adient's strong relationships in China, while noting that OEM appetite and long-term trade ties are key factors.

Andrew Percoco questioned General Motors' 2026 gross tariff cost disclosure of $3B-$4B, the impact of potential changes to the South Korea tariff, and the expected tariff mitigation for 2026. He also asked about regulatory approvals for Super Cruise's international expansion and its future functionality roadmap.

Answer

Mary Barra, Chair and CEO, and Paul Jacobson, EVP and CFO, discussed the 15% South Korea tariff assumption in guidance, potential impacts of changes, and mitigation strategies (go-to-market, footprint, fixed cost reductions) expected to result in lower net tariffs in 2026. Mary Barra stated that a roadmap exists for Super Cruise expansion and new features, with no current barriers to global rollout.

Andrew Percoco questioned GM's 2026 gross tariff cost assumption of $3 billion-$4 billion, particularly regarding the South Korea tariff rate and the expected offset percentage for tariff mitigation. He also asked about regulatory approvals and the functional roadmap for Super Cruise's international expansion and future improvements.

Answer

Mary Barra, Chair and CEO, stated that the guidance assumes a 15% South Korea tariff rate and that GM is working to offset any periods where it's not 15%. Paul Jacobson, EVP and CFO, explained that 2026 tariff offsets would be slightly more than 40% due to annualization of go-to-market actions, manufacturing footprint changes, and fixed cost reductions, leading to lower net tariffs than in 2025. Mary Barra added that Super Cruise's global expansion is planned with no anticipated regulatory barriers, and a roadmap for new features is in development.

Andrew Percoco of Morgan Stanley & Company questioned why customers facing tariff uncertainty are not opting for a 100% U.S. domestic cell solution from Fluence now. He also asked for context on the weak Q2 bookings, noting the significant tariff hikes occurred late in the quarter.

Answer

CEO Julian Nebreda explained that customers are hesitant to commit to a 100% domestic solution because of the prevailing belief that U.S.-China trade negotiations could lead to lower tariffs, making a long-term commitment premature. Regarding weak Q2 bookings, he clarified that anticipation of the tariffs began impacting customer decisions in late February and early March, causing them to pause signings to await clarity. He added that international order intake was seasonally lower as expected, with a ramp-up anticipated in the second half of the year.

Andrew Percoco asked if strong demand for domestic content in the U.S. is translating to premium pricing and higher margins, and inquired about the cost trajectory of the Utah manufacturing facility.

Answer

President and CEO Julian Nebreda responded that U.S. domestic content margins remain within the 10-15% target range without a significant premium. He expressed great satisfaction with the Utah facility's performance, stating it is operating very well and proves the U.S. can manufacture competitively.

Andrew Percoco asked for more details on the significant back-end loaded revenue seasonality for 2025 (20% first half, 80% second half) and inquired about customer booking activity and sentiment since the U.S. election.

Answer

President and CEO Julian Nebreda explained the seasonality is not driven by market factors but likely by internal sales incentives, which the company is working to correct over time. Regarding post-election sentiment, he noted that international business is unaffected and U.S. projects are progressing normally with no major changes in customer behavior.

Andrew Percoco asked about customer sensitivity to potential price increases driven by tariffs and whether consumer demand has changed since April. He also requested an update on the company's cash generation outlook for 2026.

Answer

CFO Danny Abajian stated that while Sunrun sees headroom for price adjustments, they are avoiding premature changes. President and CRO Paul Dickson added that macroeconomic uncertainty often drives demand for Sunrun's offering of price stability. Regarding 2026, Abajian noted it was too early for specific guidance but that positive cash generation could be achievable.

Andrew Percoco asked about Sunrun's strategy for managing potential tariff risks, particularly for solar panel supply, and how the company is diversifying its supply chain. He also questioned if uncertainty around the IRA could impact the health of the ABS and tax equity markets or change counterparty behavior in 2025.

Answer

CFO Danny Abajian explained that since modules are less than 10% of the total cost stack, tariff impacts would be minimal. He highlighted Sunrun's already diverse supplier base and noted the shift to domestic content provides a natural hedge. Regarding market health, he expressed confidence, stating the industry and its financing partners have 'built-in experience' from past cycles to manage potential changes to tax provisions thoughtfully.

Andrew Percoco, on for Mark Strouse, asked about the market's capacity to absorb higher prices due to tariffs and how SolarEdge's price increases might compare to competitors. He also inquired how the updated free cash flow outlook affects the company's plans for its convertible debt.

Answer

CEO Yehoshua Nir addressed pricing, stating that market uncertainty persists but SolarEdge's U.S. manufacturing position limits cost adjustments primarily to sourcing. CFO Asaf Alperovitz handled the debt question, confirming that the plan to use cash on the balance sheet to pay down the convert remains unchanged, supported by a strong cash position.

Andrew Percoco asked for the rationale behind the second consecutive inventory write-down and the risk of future occurrences. He also inquired about the growth expectations for the U.S. market in 2025.

Answer

CFO Ariel Porat attributed the Q4 inventory write-down to a weaker-than-anticipated European market outlook, stating it reflects their best current judgment. CEO Yehoshua Nir did not provide specific 2025 guidance but expressed confidence in stronger momentum in the second half of the year, driven by financial stability and inventory normalization in Europe.

Andrew Percoco of Morgan Stanley sought to understand if the recent price reductions are a one-time measure to clear inventory or a structural shift to compete with low-cost rivals. He also asked about the company's view on its core markets, particularly the U.S. versus Europe, following the election.

Answer

Interim CEO Ronen Faier clarified that the actions include both permanent price decreases to align with pre-COVID levels and temporary promotions to help clear channel inventory. He noted that while both the U.S. and European markets are critical, the U.S. market appears stronger in the short term, potentially shifting revenue weight toward the U.S. He also expressed confidence in the long-term viability of both markets.

Andrew Percoco asked about Bloom Energy's 2025 guidance, questioning if there were any shifts in the timing of data center project conversions, how the company could reiterate gross margin guidance despite a 100 basis point tariff impact, and the reason for the CFO's departure.

Answer

K.R. Sridhar (Founder, Chairman, and CEO) affirmed confidence in the guidance, stating that Bloom's culture of cost reduction would offset the tariff impact, allowing them to maintain the 29% margin target. He noted strong confidence in the second-half revenue pipeline. Daniel Berenbaum (CFO) commented on his departure by expressing confidence in Bloom's future but did not provide specific reasons.

Andrew Percoco asked about the likelihood of more utility agreements similar to the AEP deal in 2025, the status of those discussions, and how the company plans to fund its significant growth pipeline, questioning if positive free cash flow is sufficient.

Answer

CEO KR Sridhar confirmed that Bloom is in discussions with several utilities for AEP-like arrangements, noting the main hurdle is establishing the right regulatory constructs. He and CFO Dan Berenbaum affirmed that the company's growth is capital-efficient and can be funded through operations without needing to raise external capital, highlighting positive free cash flow and no Q4 factoring.

Andrew Percoco asked about the potential for more utility agreements similar to the AEP deal in 2025, the company's strategy for funding its growth, and the proportion of 2025 guidance expected from existing backlog versus new "book-and-ship" business.

Answer

CEO KR Sridhar confirmed active discussions with several utilities, noting regulatory constructs are the main timing factor. He and CFO Dan Berenbaum stated that Bloom's capital-efficient model and strong working capital management negate the need for external funding for foreseeable growth. Sridhar highlighted that the business velocity has increased, with a majority of 2024 revenue coming from same-year bookings, a trend expected to continue.

Andrew Percoco of Morgan Stanley inquired about the business outlook for 2025, considering the ITC phase-down, and requested an update on the timeline for securing large data center deals.

Answer

CEO K.R. Sridhar noted strong momentum in the U.S. C&I market and stable Korea volumes, which he expects to continue into 2025. Regarding data centers, he confirmed active negotiations on complex, large deals are progressing well but declined to provide a specific date, stating he expects "good news in that area soon."

Andrew Percoco questioned the drivers behind the significant volume reduction in the updated guidance, asking for details on customer conversations and the expected mix of U.S. versus international shipments. He also asked if the company's strategy on tax credit monetization has changed due to working capital headwinds.

Answer

CEO Mark Widmar clarified that the guidance reduction reflects the direct economic impact of potential tariffs, not a drop in customer demand. The low end of the guidance assumes reciprocal tariffs make international shipments uneconomical, forcing potential plant idling. CFO Alex Bradley specified that U.S. volume guidance is unchanged, but Southeast Asia production is reduced by 700 MW at the high end and 2.5 GW at the low end. Bradley added that while the company has not yet sold its 2025 tax credits, it remains an option to manage liquidity, alongside a $1 billion untapped revolver.

Andrew Percoco of Morgan Stanley inquired about the extent to which U.S.-based project delays influenced the revised volume guidance and whether customers are requesting longer delays due to factors like election uncertainty.

Answer

Executive Alexander Bradley clarified that the guidance reduction was primarily driven by the strategic shift of India production to the U.S. (~0.9 GW), which delays revenue recognition. He noted that while there have been slightly more requests for delays in the U.S., some for incrementally longer periods, the company has largely mitigated these impacts by reallocating volume or enforcing contracts to ship to warehouses. He attributed the delays more to development issues like interconnection rather than financing.

Andrew Percoco questioned if there has been any change in customer behavior since the tariff implementation and increased recession fears, and if contract structures are being modified to protect against future tariff changes.

Answer

CEO Scott Strazik responded that the growth outlook remains strong and unchanged, though the company must now manage new cost pressures. He noted that many contracts already had protections, and adjustments are being made where necessary. CFO Ken Parks added that the company is scrutinizing contract cash curves to ensure they remain cash-positive throughout project execution.

Andrew Percoco inquired about the potential impact of the new political administration on GE Vernova's business outlook, noting positives for AI-driven gas demand and potential headwinds for wind.

Answer

CEO Scott Strazik responded by highlighting that market fundamentals for Gas and Grid have strengthened since the December investor day, with diversified demand. He acknowledged that the wind market remains soft and the company is cautious about the timing of an inflection point in North America.

Andrew Percoco asked a high-level question about the Power segment's long-term margin potential, questioning if the current pricing environment could support a return to historical high-teens or low-20s EBITDA margins.

Answer

CEO Scott Strazik explained that while the business structure is different today with a larger services base, the current pricing environment for new equipment is substantially better than for units currently shipping. He anticipates these favorable prices will begin benefiting revenue and margins in late 2026 and 2027, expressing confidence in continued margin expansion for the Power segment throughout the decade.

Andrew Percoco inquired about the cost environment for non-China LFP cells, given expected competition for that supply. He also asked for a high-level view on how market demand will evolve in 2025 amid policy uncertainty and macroeconomic pressures.

Answer

President and CEO Badri Kothandaraman stated they have tangible plans with two key suppliers and that avoiding the 145% China tariff makes non-China cells cost-effective even if the base price is higher. For market demand, he pointed to positive seasonality, rising utility rates, the stabilizing California market, and long-term drivers like AI-related electricity demand as reasons for optimism, expecting a boost once policy is clarified.

Andrew Percoco asked about the company's capital allocation strategy, questioning if Enphase might increase its share buyback activity given its strong balance sheet, confident outlook, and the current stock valuation.

Answer

President and CEO Badrinarayanan Kothandaraman reiterated Enphase's disciplined capital allocation strategy. The first priority is funding business needs, including manufacturing and R&D. The second is pursuing small, bolt-on M&A opportunities. Any remaining capital is used for share repurchases, provided the stock trades below a conservatively estimated intrinsic value. He highlighted the nearly $200 million buyback in Q4 as an example of executing this strategy and indicated similar actions could continue if conditions warrant.

Andrew Percoco questioned the discrepancy between the DOE loan's implied 67% coverage rate and the previously mentioned 80% advance rate, and also asked about the seemingly high capex per ton for the Texas plant compared to Georgia.

Answer

CFO Paul Middleton clarified that the DOE loan's advance rate is 'up to 80%' and that the project cost estimates include a significant contingency buffer they aim not to use. CEO Andrew Marsh added that the Texas plant's cost before this contingency is closer to $700 million, suggesting the per-ton calculation might be overstated due to the contingency padding.

Andrew Percoco asked if Plug Power would consider refocusing on its core material handling business to regain financial strength and which global markets offer the most attractive economics for electrolyzers.

Answer

CEO Andy Marsh dismissed the idea of retreating from new markets, emphasizing that the electrolyzer and hydrogen production businesses represent larger opportunities with improving margins and are critical to the company's integrated strategy. EVP Sanjay Shrestha noted that despite some industry-wide project delays, Plug's 8 GW pipeline is strong, particularly in Europe and Australia, where they see the most attractive economics and expect significant bookings in 2025.

Andrew Percoco from Morgan Stanley asked if Plug Power would consider scaling back from new markets to focus on its core material handling business for financial stability, and which global regions offer the best economics for electrolyzers.

Answer

CEO Andrew Marsh rejected the idea of scaling back, emphasizing that the electrolyzer and hydrogen production businesses are already larger markets than material handling and are critical for improving margins and enabling the entire ecosystem. Executive Sanjay K. Shrestha reiterated that the most attractive markets are currently Europe and Australia, where a large and growing pipeline of projects exists, driven by customers who have secured offtake and are moving toward financial close.

Andrew Percoco of Morgan Stanley inquired about the pricing dynamics and competitive pressures affecting margins, asking if it was a widespread issue or specific to Voltage. He also asked for more context on how Shoals is gaining greater visibility into customer project schedules.

Answer

CEO Brandon Moss and CFO Dominic Bardos explained that pricing is a strategic tool used to attract new customers and secure long-term agreements, which, along with a product mix shift, has impacted margins. Moss stated the long-term gross margin target remains around 40%. Regarding project visibility, Moss highlighted enhanced customer communication and the use of a CRM tool to better track project variables, leading to cautious optimism for 2025.

Andrew Percoco asked about the impact of volume-driven discounts on gross margins and how the company is approaching pricing to regain wallet share with top EPCs.

Answer

CFO Dominic Bardos explained that volume discounts are a standard part of securing large-scale, long-term Master Supply Agreements (MSAs). CEO Brandon Moss added that the Q3 margin was impacted by temporary issues and that Q4 guidance implies a margin recovery, reaffirming their commitment to the long-term 40-45% target range.

Questioned the source of strong 2025 demand, asking if it's primarily driven by repowering projects, and inquired about how tariff risks with Mexico are being handled with customers.

Answer

The company stated that while some production is for repowering, the strong 2025 demand is based on fulfilling existing customer backlog and they have not seen a drop-off in demand for 2025 deliveries. Regarding tariffs, contracts are typically ex-works, meaning customers are responsible for import duties. TPI is engaged in contingency planning with customers but it's currently business as usual.

Inquired about the drivers of the strong EBITDA guidance, specifically if it includes 2023 domestic content recapture. Also asked about the sustainability of the domestic content benefit given potential competition.

Answer

The EBITDA guide includes only a small amount of 2023 ITC recapture. The contribution from ITC sales is expected to increase in the future, not be a one-time event. The company is confident in capturing the benefits despite competition, as they are currently overrun with origination and have been conservative in their 2025-2026 forecasts.

Asked about the expected cadence of free cash flow into next year, given the anticipated margin pressure, and at what point the company might need to raise additional capital or what liquidity thresholds they are targeting.

Answer

The company acknowledged the negative cash flow in Q3 was due to an imbalance between manufacturing and sales. However, they have taken decisive actions on working capital and manufacturing capacity to address this. They believe that with their current cash balance and these measures, they are in a good position to maintain sufficient cash levels for the existing business without needing to raise additional capital.