Bobby Brooks

Bobby Brooks requested an update on dropshipping testing, plans for 2026, categories involved, and vendor selection for beta testing. He also asked about other exciting initiatives aimed at driving incremental supply beyond Smart Sales and dropshipping, including potential brand partnerships.

Answer

President and CEO Rati Levesque stated that 2025 focused on testing and expanding dropshipping categories like watches, handbags, and fine jewelry with targeted partners, including international markets. She noted that while growth is healthy, it's not the main driver and testing will continue. Levesque highlighted other supply initiatives including Smart Sales, high-growth referral and affiliate programs, the retail strategy (a quarter of new sellers from retail), improved marketing ROI with higher LTV, and the accelerating buyer-to-consignor flywheel.

Bobby Brooks asked for an update on dropshipping testing, plans for 2026, the categories it started in, how vendors were selected for beta testing, and its expected evolution. He also asked about other exciting initiatives aimed at driving incremental supply beyond Smart Sales and dropshipping, including potential brand partnerships.

Answer

President and CEO Rati Levesque stated that 2025 focused on testing and expanding dropshipping categories (watches, handbags, fine jewelry) with targeted partners, including international markets. She noted its healthy growth but not as the main driver. Levesque also highlighted referrals and affiliate programs as high-growth supply channels, the retail strategy (a quarter of new sellers from retail), improved marketing ROI, and the accelerating buyer-to-consignor flywheel.

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 asked for clarification on the modularity of TETRA's 25,000 barrel per day desalination plants and why the company is re-engineering for 100,000+ barrel plants instead of deploying multiple smaller units. He also inquired about the acceleration of engineering for the larger plants, the ability of the U.S. water and flowback services business to outperform a flat onshore activity environment, and the domestic versus international supply of industrial calcium chloride for chip production.

Answer

Brady Murphy, President, Chief Executive Officer, and Director, explained that while modularity was anticipated, starting with 100,000+ barrel per day plants offers greater efficiencies and economies of scale. He confirmed that the engineering for larger plants would be accelerated due to existing foundational work, expecting a commercial discussion range within 3-4 months. For water and flowback services, Murphy noted continued uptake of SandStorm technology and a strategic de-emphasis on the lower-margin water transfer business, expecting the flowback side to increase market share and drive overall segment margins up in 2026, supported by Argentina's growth. He confirmed that industrial calcium chloride for chip production is supplied to domestic manufacturers and is in the early stages of significant growth.

Bobby Brooks asked for clarification on the modularity and scalability of TETRA's desalination plants, specifically why the company would re-engineer for a 100,000 barrel per day plant rather than deploying four 25,000 barrel per day modular units. He also inquired about the expected acceleration of the engineering timeline for the larger plant, the potential for the U.S. water and flowback services business to outperform a flat onshore activity environment, and the growth drivers and supply origin (domestic vs. international) for industrial calcium chloride used in chip manufacturing.

Answer

Brady Murphy, President, CEO, and Director, explained that while 25K plants were designed to be modular, building a 100K+ plant from the outset offers economies of scale that four separate 25K facilities would not. He anticipates the engineering for the larger plant to be accelerated, potentially finalized within three to four months, leveraging existing fundamentals. For U.S. water and flowback services, Murphy noted continued SandStorm technology uptake and a de-emphasis on lower-margin water transfer, expecting the higher-margin flowback side to increase share and drive overall segment margins up in 2026, along with Argentina's growth. He confirmed that the 144% growth in tech-grade calcium chloride for chip manufacturing in 2025 was for domestic chip production, driven by its role in neutralizing fluorides, and expects continued growth.

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 asked about the multi-year maintenance CapEx plan, inquiring about the nature of investments and if they would uplift current EBITDA or improve recontracting terms. He also sought clarification on the sequential step-up in SG&A in Q4, asking about its drivers and if it represented a new run rate.

Answer

Steven Kobos, President and CEO, emphasized that 99.9% uptime is a result of deliberate planning, with the longevity program expected to scale down by 2028. David Liner, Chief Operating Officer, explained that investments focus on replenishing equipment to mitigate single points of failure and maintain high reliability. Dana Armstrong, Chief Financial Officer, attributed the Q4 SG&A increase to $2 million from Hurricane Melissa impacts (CSR, employee assistance) and a $2 million rise in business development spend (including Iraq project readiness), clarifying it is not a run rate due to lumpiness from business development.

Bobby Brooks inquired about Excelerate Energy's multi-year maintenance CapEx plan, seeking details on the types of investments and enhancements aimed at ensuring high uptime, and whether these would uplift current EBITDA or improve recontracting terms. He also asked for clarification on the sequential step-up in SG&A in Q4, questioning if it was due to one-off bonuses or other factors, and how to view it on a run-rate basis.

Answer

Steven Kobos, President and CEO, and David Liner, Chief Operating Officer, explained that the maintenance CapEx is a deliberate program to maintain 99.9% operational reliability, focusing on addressing vulnerabilities and ensuring spare equipment availability, with expectations for the program to scale down by 2028. Dana Armstrong, CFO, attributed the Q4 SG&A increase primarily to the financial impact of Hurricane Melissa (CSR efforts, employee assistance) and higher business development spend, clarifying that it was not indicative of a new run rate.

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 asked about Thermon's end market splits, their flexibility in adapting to market changes, and which end markets present the best cross-selling opportunities with CECO.

Answer

Peter Johansson, CFO of CECO Environmental, explained that Thermon's end markets are complementary, with some distinct differences, including substantial rail and transit opportunities and unique capabilities in renewables. Todd Gleason, CEO, added that Thermon has successfully diversified from a high reliance on oil and gas to general industrial and new geographies, demonstrating athleticism to expand into adjacent markets.

Bobby Brooks of Northland Capital Markets asked about Thermon's end market splits, their similarity to CECO's, the flexibility of their end markets, and the best opportunities for cross-selling. He also inquired why CECO's produced water opportunity appears more internationally focused than domestically.

Answer

CFO Peter Johansson noted complementary but distinct differences in Thermon's end markets, highlighting their substantial rail and transit opportunities and unique capabilities in renewables. He explained that Thermon's technology is adaptive to various temperature management issues, and their late-project installation complements CECO's early-project procurement, extending client touchpoints. CEO Todd Gleason added that Thermon has successfully diversified away from a high concentration in oil and gas over the last 10-15 years. Regarding produced water, Mr. Johansson explained that CECO's solution set is designed for large fields and fixed process equipment, which differs from the mobile equipment used in domestic basins like the Permian, and treats magnitudes of water far greater than what comes from a fracked well.

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 asked about the top three most important levers Talkspace has to drive higher utilization in 2026, the early commercialization plans and potential licensing discussions for Talk AI, and for a reiteration of the CEO's past remark about payers seeking rate increases in mental health, contrary to other medical fields.

Answer

CEO Dr. Jon Cohen identified key levers as directory integrations, continuous patient journey improvements (reducing drop-offs, increasing session completion), and partnership expansion. For Talk AI, he stated the go-to-market is direct-to-consumer first, with ongoing discussions with other entities about licensing. CFO Ian Harris noted high engagement in Talk AI beta testing. Dr. Cohen reiterated that Talkspace expects single-digit increases in payer reimbursement rates, a positive anomaly compared to his past experiences, due to mental health's cost-saving benefits and Talkspace's attractive, scalable offerings.

Bobby Brooks asked about the top three levers for driving higher utilization in 2026, early commercialization plans for Talk AI, and a reiteration of the CEO's observation about payers not seeking lower prices in the mental health space.

Answer

CEO Dr. Jon Cohen identified directory integrations, continuous patient journey improvements, and partnership expansion as key utilization levers, alongside ongoing payer relationships. He stated Talk AI's primary focus is a direct-to-consumer launch to test models and price points, with ongoing discussions for potential licensing. Dr. Cohen reiterated that Talkspace expects single-digit increases in payer reimbursement rates, a unique trend in mental health due to its affordability, scalability, and positive impact on overall healthcare costs.

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 asked about additional high-margin, low-cost revenue opportunities similar to lithium extraction, leveraging existing infrastructure. He also sought an update on the strategic alternatives for the Peak Rentals business, including likely outcomes and details on its gen set equipment. Finally, he requested more information on the successful beneficial reuse pilots, covering collaboration, technology, basins involved, key learnings, and factors contributing to their success.

Answer

EVP and Chief Strategy and Technology Officer Mike Lyons highlighted ongoing efforts to characterize the asset base for mineral extraction, expecting more lithium deals and potential iodine, strontium, and magnesium extraction news in H1 2026, leveraging the company's treated water infrastructure. Founder, Chairman, President, and CEO John Schmitz and EVP and CFO Chris George discussed Peak Rentals, noting its origin in accommodations support with diesel-powered mobile generators, expansion into production phase power solutions (including natural gas gen sets and battery packs), and its role in supporting Select's own New Mexico infrastructure build-out. Mike Lyons and EVP and COO Michael Skarke detailed beneficial reuse pilots, emphasizing the advantage of starting with treated produced water, various technologies tested, and a large-scale project involving land application and greenhouse tests to prove water quality and inform regulatory efforts, with a focus on techno-economics for future commercialization.

Bobby Brooks (Northland Capital Markets) asked about Select Water Solutions' diversification strategy, specifically inquiring about other high-margin, low-cost opportunities similar to lithium extraction, an update on the strategic alternatives for the Peak Rentals business including its equipment, and details on the successful beneficial reuse pilots, their scope, and key learnings.

Answer

EVP and Chief Strategy and Technology Officer Mike Lyons (Select Water Solutions) stated that more lithium extraction deals are expected, along with potential iodine, strontium, and magnesium extraction, leveraging their unique water infrastructure and treatment capabilities. Founder, Chairman, President, and CEO John Schmitz, along with EVP and CFO Chris George, discussed Peak Rentals, noting ongoing strategic engagement. They explained Peak's origin in accommodations support with diesel generators, its expansion into production phase power solutions (including battery packs and natural gas generation), and its role in supporting Select's own infrastructure build-out in power-constrained areas. Lyons further elaborated on beneficial reuse pilots, highlighting various technologies tested, a large-scale project for land application and plant growth, and the goal to prove water quality, inform regulations, and develop techno-economically viable commercial solutions for disposal challenges.

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 asked about sales initiatives, specifically where the new head of sales sees growth opportunities, comparing it to Farouq Tuweiq's past margin shift, and then asked for a more granular breakdown of the Q1 guide across the three segments.

Answer

Farouq Tuweiq (President and CEO) explained that Bel's business involves long design cycles (1-2 years for A&D, a couple of quarters for fuses/consumer), so Q4 wins reflect earlier efforts. He highlighted new wins across most end markets, ongoing CRM implementation, and efforts to improve compensation structures and data. He noted A&D, data centers, and AI as key growth areas, but also strong consumer business. Lynn Hutkin (CFO) added that Q1 strength is similar to Q4, with Lunar New Year being the main variable impacting magnetics and power.

Bobby Brooks asked about Bel Fuse's sales initiatives, the new head of sales' (Uma) opportunities for growth, and whether there's 'low-hanging fruit' similar to past margin improvements. He also inquired about granular expectations for growth across the three segments for the Q1 2026 guide.

Answer

Farouq Tuweiq, President and CEO, explained that Bel Fuse operates in medium to long-term design cycle businesses, meaning new wins take 1-2 years to monetize, with shorter cycles (e.g., fuses) taking a couple of quarters. He noted that recent performance reflects past global team efforts, with new wins across most end markets including A&D, data centers, AI, and consumer. He highlighted ongoing efforts like CRM implementation and rep contract renewals to move the system forward. Lynn Hutkin, CFO, added that Q1 2026 drivers are similar to Q4 2025, with the Lunar New Year holiday primarily impacting Magnetics and, to a lesser extent, Power segments.

Bobby Brooks questioned if the Industrial Solutions sales guidance of $155 million-$165 million for 2026 seemed conservative, given favorable market conditions and Koch's prior sales. He also asked about the impact of the administration's rollback of emissions legality pieces on customers and the 2027 NOx standards.

Answer

Steph Disher, CEO, explained that the Industrial Solutions guidance, excluding a $3 million stub period, represents a 1%-8% growth range, with the midpoint driven by 1% price, 1%-2% share, and market growth around 2.5% GDP. She noted that the range allows for stronger performance if higher growth markets are quickly pivoted into. Regarding emissions, Ms. Disher stated that while the rule rescinds the 2009 EPA endangerment finding for greenhouse gases, it does not repeal criteria pollutant standards like NOx. Based on customer feedback, the company still expects NOx standards to hold for the 2027 engine launch, with a pre-buy element included in the 2026 guide due to anticipated cost increases.

Bobby Brooks questioned the conservatism of the Industrial Solutions sales guidance of $155 million-$165 million for 2026, considering favorable market conditions (1%-4% growth) and Koch's fiscal year 2025 sales of $155 million. He also asked for the company's broad thoughts on the administration's rollback of emissions legality pieces and its impact on customer engineering decisions.

Answer

CEO Steph Disher clarified the Industrial Solutions guidance, explaining that the 1%-8% growth range (excluding a $3 million stub period) accounts for 1% price, 1%-2% share, and market growth pulsing around 2.5% GDP. She noted that the 1%-4% market range allows for stronger performance if the team can pivot into higher-growth markets. Regarding emissions, Ms. Disher stated that the rule rescinds the 2009 EPA endangerment finding for greenhouse gases but does not repeal criteria pollutant standards like NOx. She expects NOx standards for the 2027 engine launch to hold, based on customer feedback, and the 2026 guide includes an element of pre-buy due to anticipated $10,000-$15,000 cost increases for 2027 NOx standards. Longer-term, she sees implications for electrification and potential tailwinds for Atmus.

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 inquired about the financial benefit and dollar-based net retention from the renewed authentication and security contracts with professional sports leagues, specifically asking if additional technology or services were layered on. He also asked for clarification on the previous staffing levels for micro-optics production and banknote printing (e.g., 40-hour vs. 80-hour workweek) and the timeline for transitioning to 24/7 shifts.

Answer

CFO Christina Cristiano expressed excitement about the renewed partnerships with MLB and NFL, noting they provide product authentication and licensing management software, representing a sticky, recurring revenue stream, though specific financial details cannot be disclosed. CEO Aaron Saak clarified that previous staffing for micro-optics and banknote printing was generally around 24/5, and the transition to 24/7 operations, involving hiring, security clearance, and intense training, is expected to be completed by the end of Q1, supported by investments in new production lines.

Bobby Brooks asked about the financial benefit and any additional technology or services layered on from the renewed authentication and security contracts with professional sports leagues (MLB, NFL), seeking insight into dollar-based net retention. He also inquired about previous staffing levels for micro-optics and banknote printing and the timeline for transitioning to 24/7 shifts.

Answer

CFO Christina Cristiano could not reveal specific contract details but highlighted the MLB partnership for product authentication and licensing management software as a sticky, recurring revenue stream. CEO Aaron Saak clarified that previous staffing was directionally 24/5, and the ramp-up to 24/7 operations, including security clearance and training, is expected to be completed by the end of Q1.

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 with Northland Capital Markets inquired about the specific products and aircraft retrofits driving the impressive organic growth in the commercial aftermarket segment during the first quarter. He also sought clarification on whether any demand pull-forward contributed to the strong Q1 results, given the full-year flat organic revenue guidance, and asked about the F-16 platform's revenue scaling and future growth opportunities.

Answer

CEO Shahram Askarpour explained that the commercial aftermarket growth was primarily driven by new product sales in air transport, specifically mentioning the ICAT system and LPV for 757/767, along with software upgrades. He reiterated that while Q1 was strong, the full-year organic growth is still expected to be in the single digits, augmented by potential acquisitions. Regarding the F-16, Mr. Askarpour noted that Q1 included full deliveries of the Digital Flight Control Computer, with the iPDG integration expected to drive further revenue growth. He highlighted future growth opportunities from Lockheed Martin's F-16 production plans and increasing RFPs for subassemblies and full units.

Bobby Brooks inquired about the specific products and aircraft retrofits driving the impressive organic growth in commercial aftermarket demand and sales during the first quarter, and sought clarification on whether this growth represented new demand or a pull-forward, given the full-year flat organic revenue guidance. He also asked about the drivers behind the expected scaling of F-16 platform revenue and identified growth opportunities.

Answer

CEO Shahram Askarpour explained that the commercial aftermarket growth was primarily from the air transport sector, driven by new products certified last year, such as the ICAT system and LPV for 757/767, and software upgrades. He clarified that while Q1 saw strong organic growth, the full-year organic growth is still projected in the single digits, potentially augmented by acquisitions. Regarding F-16, Mr. Askarpour noted that Q1 included full deliveries of Digital Flight Control Computers, with the Integrated Programmable Display Generator (IPDG) integration underway for future growth. He highlighted opportunities from Lockheed's F-16 production plans and increasing RFPs for subassemblies and full units.

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 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 for clarification on PHINIA's 2026 guidance regarding commercial vehicle growth in Europe, inquiring if the mid to upper single-digit projection referred to industry expectations or the company's specific outlook. He also questioned the Adjusted EBITDA margin expansion given projected revenue growth, sought details on the third aerospace and defense contract, and asked for insights into the upcoming Investor Day.

Answer

CEO Brady Ericson and CFO Chris Gropp clarified that the European commercial vehicle growth figures represent the overall industry outlook, noting positive customer signs. Chris Gropp explained that the 20% incremental Adjusted EBITDA margin is a strong rate, with FX and tariffs diluting the reported percentage. Brady Ericson confirmed the third aerospace contract is with the same customer, with the first project starting Q4 2025, the second Q1 2026, and the third in 2027. For Investor Day, Brady Ericson outlined a focus on technology differentiation, deep dives into end markets, a 2030+ outlook, and showcasing unique manufacturing processes, emphasizing continued financial discipline and product leadership.

Bobby Brooks asked about the 2026 guidance for commercial vehicle growth in Europe, clarifying if it represented industry trends or PHINIA's expectations. He also inquired about the Adjusted EBITDA margin expansion, seeking to understand why it wasn't more robust given projected revenue growth. Additionally, Brooks asked for details on the third aerospace and defense supply contract, including customer identity and the expected start dates for all three A&D projects.

Answer

CEO Brady Ericson clarified that the commercial vehicle growth figures for Europe were industry-wide expectations, noting positive signs from customers. CFO Chris Gropp explained that the 20% incremental margin expansion was considered a good rate, especially when accounting for the dilutive effects of FX and tariffs. Ericson confirmed the third A&D contract was with the same customer, with the third project slated to start in 2027, following the first in Q4 2025 and the second in Q1 2026.

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 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 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 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 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 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 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 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 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.