Bobby Brooks

Bobby Brooks asked for clarification on how Graham Corporation achieves growth in existing defense programs, specifically if it involves winning more wallet share despite contracts being set. He also questioned the long-term 1.1x book-to-bill target given the current year's higher ratio and asked for an update on Q4 orders. Additionally, he inquired about the visibility and lumpiness of material receipts impacting gross margin, and whether these receipts are for anticipated future work. Finally, he asked for specific Q3 updates on facility investments and the activity/customer base for the new testing facilities in Jupiter, Florida, and Arvada, Colorado.

Answer

President and CEO Matt Malone confirmed that growth in defense programs comes from both additional scope (e.g., spare assets) and successfully meeting customer requirements, leading to new opportunities. CFO Chris Thome clarified that the 1.1x book-to-bill is a long-term average, not a fiscal 2026 target, and material receipts are lumpy, expected to normalize after Q3, and are placed only for existing backlog. Malone detailed that the Arvada liquid nitrogen and assembly/test facilities showed real-time impact in Q3, while the Jupiter cryogenic facility is in commissioning, prioritizing existing backlog testing with a healthy pipeline of mostly current customers.

Bobby Brooks inquired about the activity at the new testing facilities in Jupiter, Florida, and Arvada, Colorado, specifically regarding future booking slots and whether customers are existing relationships or new commercial partners.

Answer

Matt Malone, President and CEO, explained that the Arvada liquid nitrogen facility is dedicated and essentially booked for a specific production program, with a healthy pipeline for future use. For the Jupiter cryogenic facility, commissioning is the focus, prioritizing testing products already in backlog for existing customers, not yet offering 'testing as a service.' He confirmed an active pipeline, primarily with current customers.

Bobby Brooks of Northland Capital Markets asked for details on the momentum in small modular nuclear reactors (SMRs), the drivers behind the record-high gross margin, the rationale for not raising guidance, and the company's international growth strategy.

Answer

CEO Matthew Malone explained that Graham is supplying critical components like helium circulators for SMRs, which is an early-stage but significant growth area. CFO Chris Thome stated the high gross margin was primarily due to a higher mix of aftermarket business and that lower-margin material receipts are expected later in the year, justifying the decision to maintain guidance. Malone also detailed the international strategy, focusing on a 'China for China' approach and leveraging India as a global supply hub.

Bobby Brooks of Northland Capital Markets asked for details on Graham's involvement and momentum in the small modular reactor (SMR) space. He also questioned the key drivers behind the record gross margin, why guidance wasn't raised, and later followed up on the company's international growth strategy.

Answer

President & CEO Matthew Malone described Graham's role in SMRs, supplying helium circulators and molten salt pumps, noting it's in an early development phase with long-term growth potential. CFO Chris Thome attributed the high gross margin primarily to the strong aftermarket mix and expected lower-margin material receipts later in the year. Malone also detailed the evolving international strategy, focusing on a "China for China" approach and using India as a hub for global supply.

Bobby Brooks from Northland Capital Markets asked for details on products for small modular reactors (SMRs), the drivers of the record gross margin, the rationale for not raising guidance, and the company's evolving international growth strategy.

Answer

President & CEO Matthew Malone described providing helium circulators and molten salt pumps for the developing SMR market. CFO Christopher Thome stated the high gross margin was primarily due to a strong aftermarket mix and that lower-margin work expected later in the year supports maintaining current guidance. Malone also detailed the international strategy, focusing on a 'China for China' approach and leveraging their India operations for global supply.

Bobby Brooks asked about the drivers of military program sales strength, specifically if it was solely F-16 related, and requested a breakdown of non-F-16 military revenue. He also inquired about the underlying assumptions for the company's 2029 revenue and EBITDA margin targets, and what customers found most appealing about the new Liberty Flight Deck.

Answer

CFO Jeff DiGiovanni clarified that military sales strength was not exclusive to F-16s, also including C-130 and other Boeing programs, with approximately $2 million from non-F-16 military platforms in Q4 2025. He stated the $250 million revenue target assumes high single-digit organic growth supplemented by strategic acquisitions, and the 25%-30% EBITDA margin target is based on leveraging existing operating expenses with future growth and R&D investments. President, CEO and Director Shahram Askarpour explained that customers appreciated the Liberty Flight Deck's customizable design without significant non-recurring engineering (NRE) costs, noting a memorandum of agreement with one new customer and ongoing negotiations with others, driven by new OEM needs for specialized solutions.

Bobby Brooks asked about the specific military programs driving sales strength, the underlying assumptions for the company's 2029 revenue and EBITDA margin targets, and what customers found most appealing about the new Liberty Flight Deck.

Answer

CFO Jeff DiGiovanni clarified that military sales strength was not solely F-16 related, with C-130 and other Boeing platforms contributing approximately $2 million, while F-16 had nominal Q4 revenue. He stated the $250 million revenue target assumes high single-digit organic growth supplemented by strategic acquisitions, and the 25%-30% EBITDA margin target is based on leveraging existing operating expenses with future growth and R&D investments. CEO Shahram Askarpour explained that customers appreciated the Liberty Flight Deck's customizable design, which can be tailored without significant non-recurring engineering (NRE) costs, differentiating it from competitors like Garmin and Honeywell. He noted a memorandum of agreement with one new customer and ongoing negotiations with others, seeing opportunities with new OEM entrants focused on hybrid engine technologies.

Bobby Brooks asked about the macroeconomic backdrop assumed in the 2026 guidance, an update on cross-selling opportunities with Profire Energy since its acquisition, and the confidence behind the commentary that Q4 could be the largest booking quarter ever.

Answer

Todd Gleason (CEO) stated a stable macroeconomic assumption, emphasizing that CECO's industrial customer base and multi-year investment themes are less sensitive to short-term shifts. He noted good progress with Profire, with programs in place for cross-selling into new industrial and international markets, aiming for Profire to become a $100 million business. Confidence for a record Q4 booking quarter stems from consistent $200M+ quarters without mega jobs, and current close timing on several large projects.

Bobby Brooks asked about the macroeconomic assumptions underpinning the 2026 guidance, for an update on cross-selling opportunities with Profire Energy, and what gives management confidence in Q4 potentially being the largest booking quarter ever.

Answer

CEO Todd Gleason stated that the 2026 outlook assumes a stable macroeconomic backdrop, as CECO's industrial customer base is driven by multi-year investment themes less sensitive to short-term shifts. He noted Profire cross-selling is a significant opportunity, with programs being implemented to grow it into a $100 million business. Confidence for a record Q4 booking stems from four consecutive quarters of strong orders without mega jobs in Q3, and being very close to securing purchase orders for several large projects, potentially leading to a $300 million+ quarter.

Bobby Brooks from Northland Capital Markets inquired about the scale of international opportunities, particularly following the Saudi Arabia office launch, compared to the domestic market. He also asked for clarification on why the project delays that affected 2024 results have now subsided.

Answer

CEO Todd Gleason and CFO Peter Johansson detailed their strategic international expansion, noting the business is approaching a 50/50 revenue split between North America and the rest of the world. The Saudi office is part of a broader push into high-growth regions. Regarding project delays, management explained that the unique issues from 2024, where a few large projects were held up by customers, have been resolved and the execution schedule has returned to normal, with no similar widespread delays anticipated.

Bobby Brooks inquired about the drivers behind PHINIA's 5.1% year-over-year sales growth, excluding acquisition and currency impacts, specifically asking for a breakdown between pricing, tariff recoveries, increased volumes, and new product shipments. He also asked about the stickiness of pricing and tariff recoveries and the potential for the initial aerospace program shipments to attract new customers and expand the company's presence in the aerospace industry.

Answer

CEO Brady Ericson explained that the 5.1% sales growth was a balanced contribution from pricing, tariff recoveries, and increased volumes, with a slight FX headwind. He clarified that pricing linked to tariffs is expected to be sticky as long as tariffs remain. CFO Chris Gropp added that some tariff pass-throughs have been replaced by other concessions and aftermarket pricing increases are not material. Ericson confirmed that the aerospace milestone is indeed serving as a catalyst, significantly increasing interest, RFIs, and RFQs from other aerospace companies, with expectations for additional awards in coming quarters.

Bobby Brooks at Northland Capital Markets inquired about the specific drivers behind the 5.1% year-over-year sales growth, asking for a breakdown between pricing, tariff recoveries, and increased volumes. He also questioned the stickiness of tariff-related pricing and the potential for new aerospace business following initial program shipments.

Answer

CEO Brady Ericson explained that the 5.1% sales growth was equally balanced across pricing, tariff recoveries, and volume increases, with a slight FX headwind. He noted that tariff-related pricing is expected to be sticky, impacting EBITDA margins as these carry zero margin. CFO Chris Gropp added that some tariff pass-throughs involve concessions in other areas and aftermarket pricing increases are not material. Ericson confirmed that initial aerospace shipments are attracting significant interest from other potential customers, with expectations for additional awards in coming quarters.

Bobby Brooks of Northland Capital Markets inquired about the key dynamics driving the strong Q2 business rebound, the nature of conversations at the Paris Air Show regarding PHINIA's aerospace initiatives, and the strategic rationale behind the acquisition of SEM.

Answer

President & CEO Brady Ericson explained that the Q2 rebound followed a slower-than-expected Q1 ramp-up due to customer inventory adjustments, with momentum now carrying into the second half. Regarding aerospace, he noted positive meetings with partners like Safran and confirmed certification is on track for a Q4 launch. For the SEM acquisition, Ericson highlighted the opportunity to create integrated system solutions by combining SEM's ignition systems with PHINIA's fuel injection and control units for alternative fuels, while leveraging PHINIA's global scale to accelerate SEM's growth.

Bobby Brooks from Northland Capital Markets sought clarification on the Caribbean hub-and-spoke model, asking if it would involve acquiring new vessels. He also requested a broader update on global growth initiatives, particularly in Europe and Vietnam.

Answer

EVP & Chief Commercial Officer Oliver Simpson confirmed the hub-and-spoke model would likely require expanding their asset base with new, smaller vessels and onshore facilities to deliver a complete solution to customers on other islands. President, CEO & Director Steven Kobos addressed global strategy, affirming that while the Caribbean is a key focus, the company remains global. He cited the successful operation of the FSRU Excelsior in Germany as a key part of their European presence and reiterated their continued engagement and willingness to invest significantly in Vietnam with partners like Petro Vietnam.

Bobby Brooks of Northland Capital Markets followed up on the organic entry into the industrial filtration space announced in the prior year, asking about market reception and any lessons learned from the product launch.

Answer

CEO Steph Disher responded that while M&A remains the primary path for industrial filtration expansion, the company is taking organic steps. She characterized the growth from new organic products as modest, around $5 million for the year, and noted it primarily serves to build organizational capability and market understanding. Key lessons learned reinforced the importance of leveraging the company's strength in channel management and ensuring speed to market.

Bobby Brooks from Northland Capital Markets asked for more details on the expansion to 'luxury vendors' and 'international consignors' via the dropship program. He also inquired about the scalability and headcount changes of the luxury manager sales force relative to GMV growth, and later followed up on where the Athena platform creates the most cost savings.

Answer

President and CEO Rati Sahi Levesque clarified that the international expansion refers to the dropship channel, which is in a 'test and learn' phase but could be a future growth driver. She explained that sales force efficiency is driven by improved processes and compensation structures, not just headcount. CFO Ajay Gopal added that the Athena platform drives efficiency from item arrival to listing, impacting the 'operations and technology' expense line.

Bobby Brooks of Northland Capital Markets inquired about the specific actions being taken to improve margins at the acquired De La Rue business and asked for commentary on the market opportunity in luxury goods authentication.

Answer

President & CEO Aaron Saak detailed that margin enhancement actions are well underway, including organizational simplification, site footprint consolidation, and product line rationalization using the Crane Business System (CBS). He confirmed the rising trend of counterfeiting validates the large market opportunity for authentication, stating that while brand adoption can be slow, the trajectory is clear, and Crane NXT is positioned as the leading technology provider to capture this demand.

Bobby Brooks inquired about the growth strategy for the product authentication business and its potential to exceed mid-single-digit growth. He also asked for more details on the OpSec sports league pilot program and whether future M&A would continue to focus on authentication or shift toward CPI.

Answer

President and CEO Aaron Saak stated that while the market grows at mid-single-digits, Crane NXT has an opportunity to outperform through share-of-wallet expansion and new technology offerings. Executive Christina Cristiano described the sports league deal as a pilot program with a few teams, born from strong customer relationships, with potential for expansion. Aaron Saak concluded that M&A will remain disciplined and focused on shareholder value, with a healthy funnel in authentication and other areas, maintaining a pace of 1-2 deals per year.

Bobby Brooks asked for details on the drivers of AI-powered search growth, the execution strategy for the 200+ 'microcategories,' plans for capital allocation following the refinancing, and the reasons for the divergence between billings and revenue growth.

Answer

CEO Dusan Senkypl explained that AI traffic growth is driven by platform enhancements for direct AI engine integration and that the 'microcategory' strategy is a long-term, iterative process. He also stated that capital allocation will focus on value creation through disciplined share buybacks and potential M&A. COO Jiri Ponrt attributed the billings-to-revenue gap to higher redemption rates and a business mix shift toward lower take-rate categories like enterprise deals and 'Things to Do'.

Bobby Brooks of Northland Capital Markets inquired about the drivers of AI-powered search growth, the execution of the "microcategory" strategy, potential triggers for share buybacks after the recent refinancing, and the dynamic between billings and revenue growth.

Answer

CEO Dusan Senkypl attributed AI traffic growth to platform investments that make Groupon a better partner for AI engines, noting this is a key growth area. He described the microcategory strategy as a long-term process of deep dives to customize the user experience. On capital allocation, he confirmed both buybacks and M&A are being considered with discipline. COO Jiri Ponrt explained the billings-to-revenue growth gap is driven by higher redemption rates and a business mix shift toward lower take-rate deals.

Bobby Brooks of Northland Capital Markets inquired about the drivers of AI-powered search growth, the execution of the 'microcategory' strategy, potential triggers for share repurchases following the refinancing, and the dynamic between billings and revenue growth.

Answer

CEO Dusan Senkypl attributed AI traffic growth to platform enhancements making Groupon a better partner for AI engines, noting this channel is growing 50% month-over-month. He described the microcategory strategy as a long-term, iterative process. On capital allocation, he stated that the company is evaluating both share repurchases and M&A with a disciplined focus on value creation. COO Jiri Ponrt explained the gap between billings and revenue growth is driven by higher customer redemption rates and a business mix shift towards lower take-rate enterprise deals and the 'Things to Do' category.

Bobby Brooks of Northland Capital Markets inquired about the drivers for the 43% YoY growth in North American merchants billing over $1 million. He also asked about a new, seamless checkout process for sports tickets and questioned if the expansion of double-digit growth from 5 to 10 top metros indicated a broader rollout of the go-to-market strategy.

Answer

CEO Dusan Senkypl attributed the strong merchant performance to a 'hyper geo approach' focusing on quality inventory in key locations and confirmed the metric was on a trailing 12-month basis. He stated the improved checkout is a direct result of the new, more agile tech platform. Senkypl also explained that the metro growth expansion was due to sales capacity timing and confirmed they are now applying the successful go-to-market strategy more broadly, moving from 'defense to offense'.

Bobby Brooks of Northland Capital Markets questioned if a new Eddy County contract would accelerate payback on existing projects, asked about the economics of customers conveying assets to Select, and sought to confirm the implied $400M+ annual revenue run-rate for Water Infrastructure exiting 2026.

Answer

EVP & CFO Christopher George explained the new contract requires about $40 million in additional CapEx but improves overall system economics and commercialization opportunities. EVP & COO Michael Skarke added that the value of customers conveying assets lies in the network effect it creates, allowing Select to provide better service. George confirmed that the guided growth trajectory implies a quarterly revenue run-rate for the Water Infrastructure segment that would surpass $400 million annually by the end of 2026.

Bobby Brooks from Northland Capital Markets asked if the strong new user sign-up momentum continued through Q2 and into July, questioned the drivers behind the sequential decline in revenue per payer session, and inquired about the monetization strategy for the new LLM models.

Answer

CFO Ian Harris confirmed that user sign-up momentum accelerated through Q2 and into July. He attributed the lower revenue per session to payer mix and improved no-show management, which boosts retention. CEO Jon Cohen stated that the LLMs could be used internally, licensed, or leveraged in partnerships, with all options being considered post-development.

Bobby Brooks from Northland Capital Markets inquired if the strong new user sign-up momentum continued through Q2 and July, asked about the cause of the sequential decline in revenue per payer session, and questioned the monetization strategy for the new LLM models.

Answer

CFO Ian Harris confirmed that user sign-up momentum accelerated through Q2 and into July. He attributed the lower revenue per session to payer mix and better management of no-shows, which improves retention. CEO Jon Cohen stated that the LLMs could be used internally, licensed, or partnered, with the immediate focus on building the foundational model.

Bobby Brooks from Northland Capital Markets sought clarification on the Q3 adjusted EBITDA guide of 4.5%, which is above the 4% reinvestment threshold previously mentioned. He also asked for more detail on supply dynamics, specifically the mix of items across different payout bands, and the balance between new suppliers and new customers.

Answer

CFO Sean Sobers attributed the Q3 EBITDA guidance to seasonality and the flow-through of beats from the first half of the year. CEO James Reinhart added that while growth-oriented, the company is committed to modest EBITDA expansion and generating free cash flow. Regarding supply, Reinhart explained that while they don't disclose the mix by payout band, the growth in premium items at higher payout tiers is driving strong dollar flow-through and attracting buyers. He also confirmed a healthy crossover is occurring, with new buyers becoming sellers and vice-versa, strengthening the marketplace network effect.

Bobby Brooks from Northland Capital Markets asked about the key assumptions underpinning the second-half revenue guidance, given that significant CS Neptune revenue and seasonal chemical sales from H1 would not repeat. He also sought clarification on the design and scalability of the first commercial OASIS desalination project.

Answer

President & CEO Brady Murphy clarified that overall deepwater activity, not just the Neptune project, was exceptionally strong in H1 and confirmed the OASIS project is being designed in scalable 25,000 barrel-per-day increments for versatility across the Permian. SVP & CFO Elijio Serrano added that while U.S. land activity is soft, TETRA's technology is a differentiator, and he pointed to 2026 drivers like the EOS ramp-up and a full year of the Brazil deepwater project.

Bobby Brooks questioned the customer traction for the Oasis beneficial reuse project since its commercial launch, whether any pilot projects are officially secured, and the scale of the CS Neptune project pipeline for 2025 compared to 2024.

Answer

CEO Brady Murphy confirmed that momentum for the Oasis solution is building and customer discussions are deepening, though regulatory and logistical complexities take time to resolve. He expressed extremely high confidence that multiple pilots will begin in H1 2025. For CS Neptune, he clarified the current three-well project underpins H1 guidance and that the overall pipeline of opportunities is expected to increase year-over-year.

Bobby Brooks from Northland Capital Markets asked for an update on selling ultracapacitor products to GE turbines under service contracts and inquired about recent commercial wins for the Green Energy Solutions (GES) business in fiscal 2025.

Answer

Greg Peloquin, EVP of Power & Microwave Technologies, explained that progress with GE is pending legal NDA approval, which would open up 35% of the serviceable available market. He highlighted that fiscal 2025 GES growth was driven by significant market share gains and new agreements with customers like RWE, TransAlta, and Xcel Energy, as well as a new locomotive starter module product.

Inquired about the status of selling ultracapacitors to GE turbines under service contracts, the potential market impact, and recent product wins in the Green Energy Solutions (GES) segment.

Answer

The company is waiting on a legal NDA from GE to complete final testing, which would open up about 35% more of the market. Recent GES wins include major agreements with RWE, TransAlta, and Xcel Energy, contributing to strong growth in FY25. The Wabtec locomotive starter module is another key win expected to ship soon.

Inquired about the details of new program wins, the future trend of SG&A expenses, the timeline for converting the PMT/GES backlog to revenue, and whether that backlog would be fulfilled from existing inventory.

Answer

The new program wins were primarily in the wind turbine sector with new customers for the Ultra 3000. SG&A expenses rose due to performance incentives but are expected to grow slower than sales in the future. The $101M PMT/GES backlog is about 80% scheduled to ship in the next 12 months, much of it fulfilled from existing inventory or raw materials.

Bobby Brooks asked for details on the new program wins, their expected duration, and whether they were concentrated in a specific area. He also questioned the trend of SG&A expenses relative to sales growth and sought clarity on the backlog conversion timeline and its impact on inventory.

Answer

Gregory Peloquin, General Manager of Power & Microwave Technologies, clarified that the program wins were primarily new customers in the wind turbine sector for the Ultra 3000 product. Robert Ben, CFO, explained that the SG&A increase was tied to sales growth incentives, which were not paid in the weaker prior-year quarter, and he expects SG&A growth will lag sales growth going forward. Peloquin later stated the combined PMT/GES backlog was $101 million, with about 80% scheduled to ship in the next 12 months, and noted that many orders, like the Ultra 3000, ship directly from existing inventory.

Bobby Brooks relayed industry feedback suggesting customers are hesitant to sign contracts because Solaris's open capacity is not available until mid-2026, and asked if this logic was impacting deal flow.

Answer

Chairman & CEO William Zartler strongly refuted this idea, stating it 'makes no sense.' He explained that customers for large-scale power are planning on much longer horizons, ordering equipment for delivery in 2026-2029 and beyond. He asserted that having capacity available by mid-2026 is actually viewed as a 'surprise to the positive' in the current market.