Bryan Blair

Bryan Blair asked for more details on Mueller's ongoing transformation, specifically the next steps in the team's journey and its implications for through-cycle growth prospects and margin entitlement. He also questioned the company's capital deployment strategy, including M&A funnel developments and areas of greatest interest.

Answer

Paul McAndrew, President and COO, highlighted improved commercial and operational investments, increased discipline, and future capital expenditures in iron foundries to drive capacity and efficiencies for further margin expansion. He emphasized continued commercial initiatives and leveraging the specialty valves portfolio for project work. Regarding capital deployment, Paul stated that acquisitions are a higher priority, with a strong focus on drinking water, wastewater, and infrastructure exposure for synergy. Melissa Rasmussen, CFO, added that capital expenditures are expected to be 4-5% of net sales in the coming years, primarily for iron foundries to enhance domestic capabilities, efficiencies, and capacity.

Bryan Blair (Oppenheimer) asked Paul McAndrew to elaborate on his statement that Mueller Water Products' transformation is in its early stages, seeking details on the next steps in the company's strategic journey and their implications for long-term growth prospects and margin expansion. He also inquired about Mueller Water Products' capital deployment strategy, specifically regarding inorganic growth opportunities (M&A), given the company's strong balance sheet and cash flow, and asked about the types of assets of greatest interest for potential acquisitions.

Answer

Paul McAndrew (President and COO) explained that the transformation involves continued commercial and operational investments, driving discipline, and leveraging capital expenditures in iron foundries for increased domestic capacity and efficiencies, leading to further margin expansion. He confirmed that acquisitions are a higher priority, with a focus on drinking water, wastewater, and infrastructure exposure to drive synergies. Melissa Rasmussen (CFO) added that capital expenditures for organic growth, particularly in iron foundries, are expected to be 4-5% of net sales in the coming years.

Bryan Blair of Oppenheimer & Co. Inc. requested a more detailed outlook for Q4 to establish a realistic starting point for fiscal 2026, asking about segment contributions, the volume versus price mix, and the implied carryover price benefit. He also inquired about the long-term outlook for gross profitability between the WMS and WFS segments.

Answer

SVP & CFO Melissa Rasmussen provided Q4 segment expectations, projecting slower growth for WFS with margins around 29% due to tariffs, while WMS is expected to continue its strong performance. CEO Marietta Zakas added that targeted pricing actions have been implemented to offset tariffs, with benefits expected in Q4 and carrying into 2026, in addition to the carryover from the annual February price increase. Regarding long-term profitability, Rasmussen stated that WMS margins are expected to improve and move closer to pre-war levels in 2026, while benefits from the foundry exit will continue.

Bryan Blair of Oppenheimer inquired about the commercial benefits of the new brass foundry beyond margin improvement, such as market share or pricing power. He also asked for an assessment of the potential impact from announced tariffs, before any mitigation.

Answer

President and COO Paul McAndrew stated that the new foundry's commercial advantages include improved customer service and better positioning for lead service line replacement projects. CEO Marietta Zakas addressed tariffs, emphasizing that with 92% of sales in the U.S. and vertical integration, the exposure is manageable. She noted that guidance excludes tariff impacts and that the company has previously used pricing and strategic sourcing to mitigate similar costs.

Bryan Blair sought an update on the integration and phasing of the Orenco acquisition, its progression against the deal model, current margins, and any changes to the 1,000-basis point expansion target.

Answer

Craig Taylor, President of Infiltrator, reported that the Orenco acquisition integration is progressing well, with combined commercial teams and projects. He noted that synergies are exceeding expectations, and the company is on track for the 1,000 basis point margin improvement. Scott Barbour, President and CEO, highlighted outstanding safety performance, including an 80% reduction in TRIR since the acquisition. Blair also inquired about infrastructure project visibility, the impact of IIJA-funded projects, and optimism for the 2026-2027 pipeline in transportation verticals. Barbour indicated improved quoting activity and visibility in infrastructure, though the market remains choppy and competitive, with orders showing slight improvement. He also mentioned that a government shutdown created friction in project flow.

Bryan Blair requested an update on the integration of the Orenco acquisition, including its phasing, progression against the deal model, current margins, and any changes to the 1,000 basis point expansion target. He also inquired about the visibility of infrastructure projects, particularly those funded by the IIJA, and whether the pipeline for transportation verticals shows increased optimism for calendar years 2026 and 2027.

Answer

Craig Taylor, President of Infiltrator, reported that Orenco's integration is progressing well, with commercial teams combined and synergies exceeding expectations, confirming work towards the 1,000 basis point margin improvement target. Scott Cottrill, CFO, and Scott Barbour, President and CEO, highlighted an 80% reduction in Orenco's recordable incident rates. Barbour indicated improved quoting activity and visibility for infrastructure projects, though the market remains competitive, noting that orders are slightly better and a recent government shutdown created friction in project flow.

Bryan Blair of Oppenheimer & Co. Inc. asked for clarification on the first quarter's outperformance, seeking to understand the net impact of weather-related project deferrals versus prior-year timing. He also inquired about the price-cost outlook for the second quarter and the full year.

Answer

President & CEO D. Scott Barbour and VP of Corporate Strategy & IR Michael Higgins explained that while some project timing shifted due to weather, the overall impact largely evened out, characterizing underlying demand as "tepid" and "flattish." CFO Scott Cottrill confirmed the full-year price-cost outlook remains neutral, noting that a prior-year pricing headwind will be lapped in the second quarter.

Bryan Blair inquired about current order rate trends relative to the full-year guidance and asked for an update on the Renco integration, including margin targets, and the strategic rationale for the River Valley Pipe acquisition.

Answer

An executive confirmed that order rates are trending positive and support the guidance, but noted they want to get past the seasonal shift from Q4 to Q1 to better understand underlying market strength. Regarding acquisitions, an executive stated the Renco margin expansion is a 3-to-5-year outlook focused on top-line growth and manufacturing efficiencies. The River Valley acquisition provides increased market share in Illinois and Iowa, offering future footprint optionality and securing key assets.

Bryan Blair asked for clarification on the price/cost spread in the Q4 guide and sought a high-level outlook for fiscal 2026 growth prospects across the company's end markets.

Answer

CFO Scott Cottrill stated that while a year-over-year price/cost headwind will persist in Q4, the key trend is the sequential stabilization of both pricing and material costs. Executive Michael Higgins and CEO D. Barbour noted it was too early for specific fiscal 2026 guidance, describing the current market as fluid with solid residential demand but variable performance in nonresidential and infrastructure.

Bryan Blair asked about the expected decremental margins for the second half of the year, given the impacts from storms and a slower nonresidential market. He also sought details on the normalized growth and long-term margin potential for the newly acquired Orenco business.

Answer

CFO Scott Cottrill guided that second-half margins are typically 300-400 basis points weaker than the first half due to seasonality, and this year the drop would be closer to 400-450 basis points. Regarding Orenco, he stated it is expected to contribute $40-$50 million in revenue for the rest of fiscal 2025 with mid-teens margins, but emphasized significant margin expansion is expected over the next several years through synergies.

Bryan Blair inquired about Timken's demand trends, specifically how orders progressed through Q4 2025, any lull in December shipments, and real-time order progression into January 2026. He also asked for more color on the full-year 2026 guidance, including segment contribution to top line and margin, and the divergent performance between Engineered Bearings and Industrial Motion in Q4.

Answer

Lucian Boldea, President and CEO, noted that Q4 2025 performed better than expected, with the order book ending up high single digits, driven by off-highway, general industrial, wind, and aero. Sequential order movement from Q3 to Q4 was nearly flat, and December was more normal compared to a weak prior year. Regional performance was positive except for Latin America and China, and January trends were consistent with Q1 guidance despite ongoing uncertainties like India tariffs. Mike Discenza, CFO, explained that Q4 margin divergence was largely due to unfavorable mix in Engineered Bearings (more OE, less distribution) and strong performance in Industrial Motion. For 2026, margins are expected to improve year-over-year with a 30% incremental on volume growth, supported by pricing actions, cost savings, and favorable mix. Lucian added that the 2% organic sales midpoint for 2026 reflects both price and modest volume growth, given market volatility and supply chain ramp-up limitations.

Bryan Blair asked about Timken's demand trends, specifically how orders progressed through Q4 2025, any lull in December shipments, and real-time order activity into January 2026. He also inquired about the full-year 2026 guide, segment contribution to top line and margin, and the divergent performance between Engineered Bearings and Industrial Motion in Q4 2025.

Answer

Lucian Boldea (President and CEO) noted Q4 2025 performed better than expected with an easier comparison, and the order book ended up high single digits, driven by off-highway, general industrial, wind, and aerospace. Sequential order movement from Q3 to Q4 was low/flat, and January 2026 was consistent with the Q1 guide. Mike Discenza (CFO) explained Q4 margin divergence was due to unfavorable mix in Engineered Bearings (OE outperforming distribution) and strength in Industrial Motion (higher volume and favorable portfolio mix). For 2026, margins are expected to increase to the high 17% range, with a ~30% incremental on volume growth, supported by pricing actions, cost savings, and favorable mix. Lucian added that the 2% organic sales midpoint for 2026 reflects modest volume growth due to ongoing market uncertainty.

Bryan Blair inquired about the month-by-month order trends through Q2 and into July to gauge the conservatism of the revised guidance. He also requested an update on discussions with automotive OEM customers, including the timeline and potential margin impact.

Answer

EVP and CFO Philip Fracassa stated that July sales rates were tracking in line with the guide's midpoint and that order intake has been improving, describing the outlook as cautious rather than conservative. President & CEO Richard Kyle confirmed that discussions with auto OEMs are active and are expected to result in a positive margin uplift in 2026 through a combination of repricing and exiting certain business.

Bryan Blair from Oppenheimer & Co. Inc. asked for details on month-over-month order trends through Q2 and into July, and sought an update on the discussions with automotive OEM customers, including the timeline and potential margin impact.

Answer

EVP and CFO Philip Fracassa stated that July sales rates were tracking in line with or slightly ahead of the guide's midpoint and that order intake rates have been improving through the year. President & CEO Rich Kyle commented on the auto OEM discussions, confirming they are active and focused on over half of the auto OE revenue, with an expected positive margin impact in 2026 from a combination of repricing and exiting business.

Bryan Blair from Oppenheimer & Co. Inc. asked for more detail on monthly order trends through Q2 and into July to gauge the conservatism of the revised guidance. He also requested an update on the timeline and expected margin impact from ongoing discussions with automotive OEM customers.

Answer

EVP and CFO Philip Fracassa stated that July sales rates were tracking in line with the guide's midpoint and that order intake has been improving, but the outlook remains cautious. President & CEO Rich Kyle confirmed that discussions with auto OEMs are active, targeting over half of the auto OE revenue, and are expected to yield a positive margin uplift in 2026 through a combination of repricing and portfolio exits.

Bryan Blair of Oppenheimer & Co. Inc. asked for details on month-over-month order trends through Q2 and into July. He also requested an update on the discussions with automotive OE customers, including the timeline for finalization and the potential margin impact.

Answer

EVP and CFO Philip Fracassa noted that July sales rates were tracking in line with or slightly ahead of the guide's midpoint and that order intake rates have been improving throughout the year. President & CEO Richard Kyle stated that discussions with auto OEMs are active, focusing on just over half of the auto OE revenue. He anticipates a positive margin impact in the second half of 2026 from a combination of repricing and exiting business, with more clarity expected with the 2026 guidance.

Bryan Blair from Oppenheimer & Co. Inc. asked for details on month-by-month order trends through Q2 and into July to gauge the conservatism of the revised guidance. He also requested an update on discussions with automotive OEMs, including the timeline and potential margin impact.

Answer

EVP and CFO Philip Fracassa noted that July sales rates were tracking in line with the guide's midpoint and order intake has been improving, but the cautious outlook reflects push-outs in discretionary spending. President and CEO Richard Kyle stated that discussions with auto OEMs are active, with an expected positive margin uplift in the second half of 2026 from a combination of repricing and exiting parts of the portfolio.

Bryan Blair inquired about the updated guidance, seeking a breakdown of the underlying price versus volume assumptions and any significant differences between business segments. He also asked for more detail on renewable energy trends, particularly in China, and the full-year growth outlook for that sector.

Answer

CFO Philip Fracassa explained that the unchanged organic revenue forecast of -1% now includes a price increase of nearly 1.5% to offset tariffs, with a corresponding decrease in the volume outlook. He noted the volume adjustment is more weighted to the Industrial Motion segment. Regarding renewables, Fracassa stated that Q1 demand was surprisingly strong, leading them to upgrade the full-year outlook for the sector from flat to mid-single-digit growth. CEO Richard Kyle added that the inventory glut in the wind energy channel has been resolved.

Bryan Blair requested a breakdown of the $75 million in cost savings between COGS and SG&A, as well as across business segments. He also asked CEO Tarak Mehta for his view on the most attractive growth opportunities.

Answer

CFO Philip Fracassa detailed the savings as roughly two-thirds from Engineered Bearings and one-third from Industrial Motion, with an approximate 80/20 split between COGS and SG&A. CEO Tarak Mehta identified key opportunities in focusing on profitable growth, enhancing customer-centricity for local markets, and reducing vertical integration.

Bryan Blair asked for an update on order rates across major end markets through Q3 and into Q4, and for more detail on the anticipated production slowdowns. He also questioned the extent of EBITDA compression in the Industrial Motion segment due to the belts and chain platform and the potential for margin improvement in 2025 as the new Mexico facility fully ramps up.

Answer

President and CEO Tarak Mehta noted softness in general industrial markets and confirmed the company is reducing production to align with demand. CFO Philip Fracassa added that the order book was flattish sequentially and supportive of guidance. Regarding Industrial Motion, Mehta explained the "trifecta" of lower volumes, overhead from three plants, and a slower-than-desired Mexico ramp-up is creating headwinds. Fracassa projected that once the U.S. plant closes and Mexico ramps in early 2025, it should provide a nice margin improvement.

Bryan Blair asked for a breakdown of HST's Q4 order growth, specifically how much was AI-related versus other markets and applications, to better dimensionalize the drivers. He also requested an update on municipal and industrial water trends and outlook, including Q4 revenue and order growth, and the factors driving confidence in sustainable mid-single-digit growth.

Answer

Eric Ashleman, President and CEO of IDEX, noted the difficulty in precisely separating AI-related growth due to tangential links (e.g., semiconductors for data centers). He estimated that just under half of the backlog growth was in direct data center applications, with much of the remainder (semiconductor, memory production, lithography components) within the broader ecosystem. For municipal water, Eric Ashleman reported double-digit Q4 growth, with a projected mid-single-digit plus outlook. This confidence stems from IDEX's critical inspection and analytics work, which supports infrastructure refurbishment and operational mitigation during weather events. He also highlighted strong Q4 orders in high-purity semiconductor water, which will contribute more significantly to the overall water platform going forward.

Bryan Blair asked for a breakdown of Q4 HST order growth, specifically how much was AI-related versus other markets and applications. He also inquired about municipal and industrial water trends, Q4 revenue and order growth, and the basis for confidence in sustainable mid-single-digit growth.

Answer

Eric Ashleman (President and CEO) explained that while direct data center applications accounted for just under half of HST's backlog growth, much of the semiconductor growth (memory, lithography components) is tangentially AI-related. Municipal-facing water saw double-digit growth in Q4, with a mid-single-digit plus outlook, driven by the critical nature of inspection/analytics for infrastructure refurbishment and operational mitigation of weather events. High-purity semiconductor water also saw nice order growth in Q4.

Bryan Blair from Oppenheimer asked for more details on the intelligent water platform's contribution in Q3 2025, including underlying demand trends, visibility, and growth prospects for 2026. He also inquired about the expected incremental margins for the HST segment once a more supportive demand environment emerges.

Answer

Eric Ashleman, President and CEO, confirmed high single-digit revenue growth for the municipal-facing intelligent water platform in Q3. He explained its critical role in helping municipalities understand underground systems and allocate capital for infrastructure, augmented by Nexsight's analytical intelligence and Subterra's extended reach. Akhil Mahendra, Interim CFO, stated that HST incrementals are expected to be in the 35-40% range in a supportive demand environment, with the lower end if demand dynamics are not strong. Ashleman highlighted HST's strong performance, growing orders, sales, and profitability in each of the past three quarters.

Bryan Blair from Oppenheimer asked for more details on the intelligent water platform's contribution in Q3, specifically clarifying if the high single-digit growth was revenue or orders. He also sought insights into the platform's underlying demand trends, visibility, and growth prospects for 2026, and how HST incrementals would perform in a more supportive demand environment given recent restructuring.

Answer

Eric Ashleman, President and CEO of IDEX Corporation, confirmed the high single-digit growth was on the revenue side for the municipal-facing water platform, noting strong orders as well. He described the platform's critical role in flow monitoring, data capture, and analytical intelligence for municipalities, driving capital specification for infrastructure. Akhil Mahendra, Interim CFO, projected HST incrementals to be in the 35-40% range in a supportive demand environment, while Ashleman highlighted HST's strong performance in Q3 with growth in orders, sales, and profitability.

Inquired about the unexpected weakness in the water segment during the quarter and asked for details on the new Microlam acquisition, including its strategic fit and how it compares to other M&A prospects.

Answer

The company clarified that the water segment's Q2 performance was due to order timing issues, similar to other parts of the business, and that the underlying outlook remains strong. Regarding Microlam, they described it as a strategic, complementary tuck-in for their MSS platform, providing precision optics manufacturing that fits well with their existing capabilities and is representative of their current M&A focus.

Bryan Blair of Oppenheimer asked for an update on real-time order trends in short-cycle 'canary' businesses, particularly before and after recent tariff news. He also inquired about the current M&A environment and activity.

Answer

CFO Abhi Khandelwal stated that order trends in these businesses have remained 'steady and in line with our expectation' through April, with no identifiable pivot based on news. CEO Eric Ashleman added that while near-term M&A transactions are slow industry-wide, IDEX's work on its proprietary pipeline of long-term conversations continues uninterrupted. The current focus is on integrating recent deals and exploring bolt-on acquisitions for the new growth platforms.

Bryan Blair asked about Zurn Elkay's core sales outlook for 2026, specifically the early 2026 performance and the components contributing to the mid-single-digit growth, including market outgrowth and price carryover. He also inquired about the M&A deal environment, the development of the funnel, and the actionability of transactions given the company's strong balance sheet and cash flow.

Answer

Chairman and CEO Todd Adams indicated a strong start to Q1 2026 with 7-8% projected growth, noting more price impact in the first half. He expressed optimism regarding the M&A funnel, highlighting a fresh perspective on adjacencies and ongoing cultivations, while affirming the company's flexibility for share repurchases and dividends.

Bryan Blair followed up on Zurn Elkay Water Solutions' M&A strategy, asking about the current deal environment, the development of the acquisition funnel, and the potential for actionable transactions in 2026, given the company's strong balance sheet and cash flow.

Answer

Todd Adams, Chairman and CEO, stated that the strategic planning process has provided a fresh view on adjacencies and the M&A funnel continues to progress. He expressed optimism about the company's flexibility to repurchase shares, review dividends, and execute M&A that meets their criteria, without having missed any significant transactions.

Bryan Blair inquired about any significant divergence in growth rates across legacy Zurn product categories in Q3 and Q4, and the team's outlook on momentum heading into the first half of 2026. He also asked for an update on the reception of Elkay Pro Filtration and the market opportunity and growth impact of the new LIV EZ line.

Answer

Todd Adams, Chairman and CEO, stated that core categories are experiencing solid unit growth, with no significant change from Q2, and momentum is expected to continue into Q4. Regarding Elkay Pro Filtration, Mr. Adams noted strong uptake due to ease of installation and increased filter capacity. For the LIV EZ line, he described it as a nice extension to tap into a niche market, offering commercial-grade filtration for homes, expecting nice uptake but not a primary pillar of commercial drinking water.

Bryan Blair asked about any meaningful divergence in growth rates across legacy Zurn Elkay product categories in Q3 or Q4, and the team's thinking on momentum into the first half of 2026. He also inquired about the reception of Elkay Pro Filtration, any surprises, and the market opportunity and growth impact of the LIV EZ line.

Answer

CEO Todd Adams noted solid unit growth across almost all core categories, consistent with Q2, with no expected change in momentum into Q4. He highlighted strong uptake for Elkay Pro Filtration due to ease of installation and increased filter capacity. Regarding the LIV EZ filtered bottle filler, Mr. Adams described it as an easy, DIY extension of their commercial offering to a relatively small residential market, providing an opportunity to test new designs and technology. CFO David Polley clarified that an $8 million pull-forward from Q4 to Q3 was offset by residential market weakness, maintaining high-quality growth.

Bryan Blair of Oppenheimer & Co. Inc. inquired about the drivers of Q2 growth by product category and the M&A pipeline's current status and actionability.

Answer

President, CEO & Chairman Todd Adams explained that growth was driven by innovation across drinking water, flow systems, and water safety, leading to sustainable share gains. Regarding M&A, Adams confirmed the company is actively cultivating its pipeline, has the management capacity and balance sheet to execute, and is confident a deal will materialize at the right time.

Bryan Blair asked for an updated view on the full-year guidance, specifically the new expected contribution from volume versus price given the tariff situation, and inquired about any recent changes in project timing or MRO order trends.

Answer

Todd Adams, Chairman and CEO, explained that while announced price increases will likely exceed the original 1% forecast, it is too early to formally update the full-year guidance framework. He expressed high confidence in achieving the current guidance through supply chain actions and pricing. Adams noted a brief acceleration in orders ahead of the April price increase but has not seen any significant project delays or changes in MRO activity.

Bryan Blair of Stephens Inc. inquired about the expected dynamics between the first and second half of 2025 for Zurn Elkay's end markets and sought details on the company's M&A pipeline and confidence in closing deals.

Answer

David Pauli, an executive, responded that based on Dodge starts data, institutional and commercial markets could see an acceleration in the second half of 2025, while the first half is expected to resemble recent 2024 quarters. CEO Todd Adams addressed the M&A question, confirming active work on several strategic opportunities and highlighting the company's strong balance sheet optionality, while emphasizing a disciplined approach without committing to a specific timeline.

Bryan Blair inquired about the growth rate differences among product categories for Q3 and the Q4 outlook, the 2025 growth prospects for drinking water given Michigan's 'filter-first' legislation, and the expected timing and benefit of supply chain repositioning.

Answer

CFO David Pauli noted that product category growth was similar, with drinking water performing exceptionally well with double-digit growth in filtered bottle fillers, a trend expected to continue in Q4. He detailed the Michigan legislation's two-year adoption timeline ('25-'26). CEO Todd Adams added that supply chain initiatives are expected to yield $5M-$10M at full run rate, with at least $5 million anticipated in 2025.

Bryan Blair asked about the buildout and prospects of A. O. Smith's water management platform, including TAM expansion, Leonard Valve's foundational role, and the team's aggressiveness on incremental M&A. He also sought further color on the ongoing strategic assessment in China, specifically if options have narrowed or if there's a connection to current turnaround actions.

Answer

CEO Steve Shafer expressed excitement about the water management market, defining it as moving, mixing, and controlling water in residential and commercial units, which expands TAM. He noted a healthy M&A pipeline, leveraging A. O. Smith's industry reputation, and emphasized that this pivot doesn't detract from water treatment investments. Regarding China, Shafer stated they are moving with urgency and thoughtfulness, having high-quality discussions with potential partners, but haven't narrowed the scope of options yet. He reiterated the goal is to make the business more competitive and eventually grow again.

Bryan Blair from Oppenheimer sought further insight into the water management platform buildout, inquiring about the potential for Total Addressable Market (TAM) expansion with new products and applications, how Leonard Valve is foundational to this strategy, and the company's M&A aggressiveness for incremental opportunities. He also asked for an update on the strategic assessment in China, specifically if options have narrowed or if there's a connection to ongoing turnaround actions.

Answer

CEO Steve Shafer expressed excitement about the water management market, which expands TAM by focusing on water movement, mixing, and control, and noted a healthy M&A pipeline. He emphasized Leonard Valve's foundational role in enabling innovation and integrated solutions, particularly for energy-efficient commercial applications, while affirming continued investment in water treatment. Regarding China, Mr. Shafer stated the assessment is proceeding with urgency and thoughtfulness, involving high-quality discussions with potential partners, but no narrowing of options has occurred yet.

Bryan Blair inquired about the China strategic review, asking if the range of potential outcomes had narrowed given the insights from the assessment so far. He also asked about the long-term organic growth potential for North America water treatment priority channels, given the encouraging Q3 growth.

Answer

Stephen Shafer, CEO, stated that it was still too early in the China strategic review process to narrow down potential outcomes, as they are still profiling the market and reaching out to participants. Regarding North America water treatment, he confirmed that the 10%-12% organic growth target for priority channels is how they think about the business long-term, acknowledging more work and investment are needed to build out the platform.

Bryan Blair from Oppenheimer asked for an update on the China strategic review, specifically if the range of potential outcomes had been narrowed given the insights gathered so far. Blair also inquired about the North American water treatment business, asking if the 11% growth in priority channels indicated that the 10-12% organic growth target from Investor Day was now consistently in play.

Answer

Stephen Shafer, Chief Executive Officer, stated that it was too early in the China strategic review process to narrow down potential outcomes, as the company is still profiling the market and engaging with third parties. Regarding North American water treatment, Shafer confirmed that the 11% growth aligns with long-term thinking for the business, acknowledging that further work and investment are still needed to build out the platform.

Bryan Blair of Oppenheimer & Co. Inc. asked if the strategic assessment of the China business could potentially include the India business. He also inquired if the North America water treatment business was still on track for its margin expansion target and what its future incremental margin profile might look like.

Answer

CEO Stephen Shafer clarified that the strategic review announcement is specific only to the China business. CFO Charles Lauber confirmed the water treatment business is tracking toward its 250 basis point margin expansion goal for the year, driven by the intentional de-emphasis of the less profitable retail channel. Shafer added that further margin gains could come from integration synergies.

Bryan Blair of Oppenheimer & Co. Inc. requested confirmation that the tariff impact on COGS includes the full run-rate of tankless imports and asked for management's perspective on the competitive risks and opportunities arising from trade policy uncertainty.

Answer

CFO Chuck Lauber confirmed the 6-8% COGS impact includes tankless products based on 2024 volumes, noting that existing inventory might mitigate the 2025 impact. He mentioned that calculating a precise pro forma number is complex due to the accelerated transition. President and COO Stephen Shafer stated that uncertainty creates an opportunity to respond faster and more effectively than competitors. Chairman and CEO Kevin Wheeler emphasized that their 'in-country, for-country' manufacturing strategy provides a competitive advantage in navigating global volatility.

Bryan Blair sought more detail on the shift in North American water treatment strategy, asking if it was driven by changing competitive dynamics or simply the better economics of other channels. He also asked about the margin profile and medium-term profitability expectations for the newly acquired Pureit business in India.

Answer

President and COO Steve Schafer and CEO Kevin Wheeler clarified that the water treatment strategy shift is a result of learning where the company's strengths and products play best, leading to a de-emphasis of the retail channel to focus on more profitable areas. CFO Chuck Lauber stated that the Pureit acquisition is expected to contribute about $50 million in revenue in 2025 with a mid-single-digit operating margin, similar to the existing India business, as the current focus is on integration and growth.

Bryan Blair asked if cost optimization efforts in China and North America are structural or variable, and requested details on how the pending Pureit acquisition will accelerate profitable growth in India.

Answer

CFO Charles Lauber explained that North America actions were variable (e.g., headcount reduction via attrition), while China efforts are ongoing and more structural, including product redesign and streamlining the store footprint. CEO Kevin Wheeler stated the Pureit acquisition will double their business in India, providing critical scale, a larger distribution footprint, and complementary brand strengths to drive both top-line growth and margin enhancement.

Bryan Blair of Oppenheimer sought further details on Graco's upfront licensing agreements, specifically the markets and applications being targeted outside of Graco's existing exposures. He also asked for an update on the M&A pipeline, including its size, composition, and actionability, and any recent changes in these areas.

Answer

President and CEO Mark Sheahan clarified that licensing targets motor manufacturers and OEMs for diverse applications like process industries, agriculture, and robotics, leveraging the proven technology in Graco products. He also highlighted growing confidence and momentum in Graco's M&A strategy, with a pipeline of over 100 potential targets and optimism for disciplined, strategic acquisitions in 2026.

Bryan Blair sought more specific details on the upfront licensing agreements Graco has secured, particularly the markets or applications where these wins are occurring outside of Graco's existing exposures. He also asked for finer points on the overall size, composition, and actionability of Graco's M&A funnel, and if anything has changed on these fronts recently.

Answer

President and CEO Mark Sheahan explained that Graco is licensing the electric motor technology to motor manufacturers and OEMs for non-competitive applications, including process industries, agriculture, and robotics, where the compact, high-torque, quiet, and energy-saving features are valued. He noted that Graco products incorporating the motor serve as effective proof points. Regarding M&A, he expressed increased confidence in identifying strategic companies, highlighted building momentum within Graco for M&A, and mentioned a pipeline of over 100 names with actionable opportunities anticipated in early 2026, while emphasizing continued discipline.

Bryan Blair inquired how the 'One Graco' organizational structure has helped navigate volatility and position for recovery, and if it impacted M&A funnel development. He also requested an update on Corab and Color Service integration and their performance relative to deal models.

Answer

CEO Mark Sheahan highlighted 'One Graco's' margin improvement (e.g., industrial incremental margins at 220% YTD) and commercial benefits like broader distributor access and international penetration. He expressed satisfaction with the M&A pipeline, noting the Color Service acquisition. Mark Sheahan confirmed Corab is performing as expected, and Color Service is in early integration, expanding into new markets like textile and tire, with CFO David Lowe emphasizing its powder technology expertise.

Bryan Blair inquired about how the 'One Graco' organizational structure has helped navigate volatility and position for recovery, asking for 'proof points' and any noticeable difference in M&A funnel development. He also asked for an update on the integration and performance of Corab and Color Service acquisitions relative to their deal models.

Answer

CEO Mark Sheahan highlighted margin improvement from cost initiatives and improved commercial penetration through distributors carrying multiple product lines as 'One Graco' benefits. He expressed satisfaction with the M&A pipeline and recent acquisitions. He confirmed Corab is performing as expected, and Color Service, though early stage, is being integrated by the Gama powder business leadership team, bringing new market exposure (textile, tire) and powder technology expertise.

Bryan Blair of Oppenheimer & Co. Inc. requested color on order trends before and after the tariff announcements and asked for an update on the COROB acquisition, including its integration progress and early traction in North America.

Answer

Executive Mark Sheahan stated that April order trends showed no real degradation, though some pre-buying was likely included in strong post-quarter bookings. Regarding COROB, Sheahan characterized the integration as having 'no surprises,' with revenue on track and teams working well together. He noted the current focus is on introductory meetings with major North American customers to establish Graco's value proposition. Executive David Lowe added that the financial integration is also proceeding smoothly.

Bryan Blair from Oppenheimer asked for an update on the Corob acquisition, including integration progress, the 2025 outlook, and long-term profitability goals. He also questioned the key drivers behind the expected return to growth in China for the upcoming year.

Answer

Executive Vice President Mark Sheahan reported that the Corob integration is proceeding well, with an expectation of low single-digit growth for that business in 2025. He highlighted the opportunity to expand Corob's presence in North America. For China, Sheahan attributed the expected growth to the legacy Graco business having stabilized against easier comps. CFO David Lowe added that they are seeing renewed project activity in previously weak Chinese markets like battery, solar, and automotive.

Bryan Blair asked about Lincoln Electric's cycle positioning and the potential for demand recovery and acceleration into 2026, noting underlying momentum in consumables and equipment. He also inquired about the consistent rationale behind the broad acceleration in automation orders across automotive and other sectors after a period of pause.

Answer

Gabriel Bruno (EVP, CFO and Treasurer) stated Lincoln Electric is well-positioned for market expansion, noting positive trends in short-cycle consumables as a key indicator. He emphasized the need for more consistency in order activity before confirming a sustained growth pattern. Steven Hedlund (Chairman, President and CEO) highlighted efforts to strengthen the business for the long term through structural cost savings without compromising future demand capture. Gabriel Bruno added that the broad-based automation order uplift, including automotive program launches, reflects differentiation through high-quality solutions. Steven Hedlund also pointed to increased confidence in future production rates from heavy industry (e.g., CAT) and anecdotal evidence of reshoring/nearshoring investments driving capital spending.

Bryan Blair of Oppenheimer & Co. Inc. sought more detail on the strong automation quoting activity and its potential for a demand inflection in 2026. He also asked for color on the weakening demand in the International Welding segment, specifically which regions were most affected and how its order trends looked into July.

Answer

President, CEO & Chair Steven Hedlund explained that high quoting activity is tied to customer contingency planning around trade policy, but the outlook remains conservative until final rules are set. EVP, CFO & Treasurer Gabriel Bruno noted that the overall stable July trends included the International segment. He specified that international weakness was driven by project timing in Asia and economic challenges in Turkey, while core Europe saw low-single-digit organic trends.

Bryan Blair asked for a breakdown of the announced mid-single-digit pricing between direct price and surcharges, the price-cost impact in Q1, and the outlook for the rest of the year. He also requested an update on the integration and performance of the RedViking and Vanair acquisitions and the current M&A pipeline.

Answer

CFO Gabriel Bruno stated that Lincoln Electric was price-cost neutral in Q1 and will not disclose the specific split between price increases and surcharges. Regarding acquisitions, Bruno confirmed that the integrations of RedViking and Vanair are on schedule but are expected to remain dilutive for up to three years, as planned. He also noted the M&A environment remains sluggish, prompting the company to increase its share repurchase guidance.

Bryan Blair asked for details on October order rates to understand the Q4 trend and the starting point for 2025, and also requested a breakdown of cost savings between temporary and structural actions within the automation business.

Answer

CFO Gabriel Bruno stated that Q4 organic sales are expected to decline in the high single-digits, continuing the decelerating trends seen in Q3 across all product profiles. He noted that external indicators like PMI and industrial production support this outlook. Regarding automation-specific cost savings, Bruno did not provide a detailed breakdown but highlighted that operational improvements are helping the business track towards its low-teens EBIT margin target.

Bryan Blair from Oppenheimer inquired about Carlisle's preparedness and potential advantages/disadvantages if the industry shifts further towards a direct sales model, considering some competitors are already operating with a significant direct business.

Answer

Chris Koch, Chair, President, and CEO, acknowledged that the shift to a more direct model is already underway, with some competitors doing 30% direct sales. He stated that Carlisle has historically lagged, doing 3-5% direct five years ago, but has since increased to the mid-teens. Koch emphasized Carlisle's flexibility due to its scale, factory presence, warehousing, and extensive sales teams, noting that they can adapt to how contractors prefer to buy, even though their preference remains selling through distribution partners.

Bryan Blair asked about Carlisle Companies Incorporated's positioning if the industry shifts more towards a direct sales model, and the potential positives and negatives of such a change.

Answer

Chris Koch, Chair, President, and CEO, acknowledged that a direct model shift is already occurring, with competitors at ~30% direct sales, while Carlisle has increased from 3-5% to mid-teens. He stated that while Carlisle prefers distribution, they are capable of direct sales, already shipping 70% of products directly to job sites and interfacing with end-users. He emphasized Carlisle's scale, factory presence, warehousing, and sales teams as strengths for adapting to market changes.

Bryan Blair from Oppenheimer & Co. Inc. asked about monthly order and revenue phasing through Q2 and into July, the potential impact of recent political developments on construction, and financial details for the Bonded Logic acquisition.

Answer

CEO D. Christian Koch noted that market anxiety increased through Q2, causing decision delays in new construction, a tone that remained consistent into July. He highlighted a potential U.S. manufacturing renaissance as a positive catalyst. Regarding Bonded Logic, Koch targeted gross margins north of 50% over time, while CFO Kevin Zdimal projected a very high double-digit revenue CAGR for the new product line.

Bryan Blair of Oppenheimer inquired about the price-cost phasing for Q2 and the full year, the performance and financial contribution of the MTL acquisition, and the current state of the M&A pipeline amid macro uncertainty.

Answer

CFO Kevin Zdimal stated that both price and cost are expected to be neutral in Q2, with low single-digit price increases in the second half leading to a positive 1% price-cost benefit for the full year. CEO D. Koch reported that the MTL acquisition is exceeding expectations, with strong integration progress and cross-divisional collaboration. He noted that while the M&A pipeline is active, macro uncertainty has created valuation gaps, slowing deal closures, but expects activity to resume with more market stability.

Bryan Blair requested more detail on CCM's volume trends in Q4, asking about the monthly cadence and whether the company observed project deferrals. He also asked about recent trends versus the Q1 outlook and sought clarification on the full-year price-cost assumption and the margin expansion breakdown between the CCM and CWT segments.

Answer

CEO D. Koch stated that market sentiment grew more positive toward the end of Q4, noting the resilience of the reroofing business. He also mentioned that dry weather on the West Coast negatively impacted the CWT segment. Koch clarified that the full-year outlook is for positive pricing against neutral raw material costs, resulting in a positive price-cost dynamic weighted to the second half. CFO Kevin Zdimal confirmed this positive price-cost outlook applies to both the CCM and CWT segments for 2025.

Bryan Blair of Oppenheimer & Co. Inc. asked for a quantification of the Q3 top-line and margin impact from the combined effects of hurricanes and port strikes. He also requested a discussion of the puts and takes for the CWT segment's outlook heading into 2025.

Answer

CFO Kevin Zdimal quantified the Q3 top-line impact from hurricanes and port strikes at $10 million to $15 million, with a recovery of that business expected in 2025. For the CWT outlook, CEO Chris Koch highlighted positive drivers like retail channel expansion and new products but noted that a significant rebound depends on broader economic factors like interest rate cuts and improved housing affordability, which he anticipates more in the second half of 2025.

Bryan Blair inquired about the sequential improvement in the Americas segment, specifically the extent to which ESAB caught up on deferred automation shipments and Mexico sales from Q2, and any remaining risks.

Answer

Shyam Kambeyanda, President and CEO of ESAB Corporation, explained that while there was some catch-up on automation push-outs, the improvement was primarily due to strong team execution, commercial excellence, and stabilized Mexico sales. He noted that some automation push-outs would feed into Q4 and Q1.

Bryan Blair of Oppenheimer & Co. Inc. asked for more detail on underlying order trends in the Americas, including a mentioned July improvement, and sought to quantify the expected revenue catch-up from delayed automation and Mexico orders. He also requested details on the EWM acquisition's financials and strategic impact.

Answer

President & CEO Shyam Kambeyanda stated that automation orders are expected to recover in the second half, though the Mexico recovery may be slower. He confirmed order stability and a slight improvement in July. Regarding EWM, he highlighted its proprietary technology, €120M revenue, and gross margins over 40%. CFO Kevin Johnson added the deal is highly synergistic with an expected ROIC above 10% within 3-4 years.

Asked for details on underlying order trends in the Americas, the expected impact of demand catch-up in H2, and the financial and strategic rationale behind the EWM acquisition.

Answer

Order trends in the Americas stabilized with a slight improvement in July. Automation demand is expected to recover in H2, while Mexico's recovery will be slower. The EWM acquisition is a strategic, proprietary deal valued for its advanced REACT technology, which opens new markets. It's a €120M business with >40% gross margins and is expected to achieve a 10% ROIC within 3-4 years.

Bryan Blair asked for more detail on the Americas' underlying Q2 order trends, the reported improvement in July, and the expected revenue impact from the catch-up in automation and Mexico orders in the second half. He also requested financial and strategic details on the EWM acquisition.

Answer

President & CEO Shyam Kambeyanda confirmed that automation orders are expected to recover in H2, while the Mexico recovery may be slower pending trade agreement clarity. He expressed unique enthusiasm for the EWM acquisition, highlighting its proprietary REACT technology. CFO Kevin Johnson noted EWM's strong synergies and projected a 10% ROIC within a 3-4 year period.

Bryan Blair asked for details on the impact of tariffs, the balance of volume versus price in the full-year guidance, and trends in the gas control equipment business, including the potential impact of upcoming acquisitions.

Answer

CEO Shyam Kambeyanda explained that with 80% of manufacturing in-region, tariff exposure is manageable. CFO Kevin Johnson quantified the North American tariff impact at $15-$20 million, which is being offset by price increases. Mr. Kambeyanda also confirmed strong momentum in the gas control business, noting two potential tuck-in acquisitions in Q2 are expected to further boost growth and margins in the medical gas control segment.

Bryan Blair from Oppenheimer & Co. Inc. asked for an update on the integration of Linde Bangladesh and the composition of the M&A funnel. He also inquired about the progress and timeline for the heavy and light industrial equipment portfolio refresh.

Answer

CEO Shyam Kambeyanda reported that the Linde Bangladesh integration is going well, providing capacity for the subcontinent and an opportunity to introduce equipment. He described the M&A funnel as robust in both FABTECH and gas control. Regarding the portfolio, he stated the 'big refresh' is complete but innovation is continuous, with plans to expand the engine-driven welder, robotics, and battery-driven product lines in 2025.

Bryan Blair from Oppenheimer asked about the total addressable market (TAM) for Franklin Electric's new water pressure boosting platform, potential share capture, and the breakdown of energy systems margin impacts from geographic mix versus tariffs in Q3. He also inquired about the current M&A deal environment and the company's strategy for deploying its balance sheet.

Answer

CEO Joe Ruzynski estimated the pressure boosting TAM in the high hundreds of millions, highlighting its growth potential across commercial, industrial, and residential sectors, driven by urbanization and retrofit opportunities. CFO Jennifer Wolfenbarger clarified that tariffs accounted for over two-thirds of the year-over-year margin impact in energy systems for Q3, with the balance primarily due to mix. CEO Joe Ruzynski noted increased M&A activity, a proactive biz dev team, and a global funnel, expressing optimism for balance sheet deployment in 2026.

Bryan Blair asked about the market opportunity for Franklin Electric's new water pressure boosting platform, including the total addressable market (TAM) and potential for market share capture. He also sought clarification on the specific impacts of geographic mix versus tariffs on the Energy Systems segment's Q3 margin and the company's outlook on the current M&A deal environment.

Answer

CEO Joe Ruzynski estimated the pressure boosting TAM in the high hundreds of millions, highlighting growth opportunities in commercial, industrial, and residential sectors globally, driven by urbanization and retrofit needs. He also noted an increasingly active M&A environment, with Franklin Electric proactively pursuing global opportunities. CFO Jennifer Wolfenbarger specified that tariffs accounted for over two-thirds of the year-over-year margin impact in Energy Systems for Q3, with the remainder attributed to mix.

Bryan Blair of Oppenheimer & Co. Inc. asked if Q2 results benefited from any significant order pull-forward, questioned the drivers of the Distribution segment's margin expansion, and requested an update on the integration of the PumpEngine and Barnes acquisitions.

Answer

CEO Joe Ruzynski confirmed that Q2 order patterns were normal with no significant pull-forward. He and CFO Jennifer Wolfenbarger explained that the Distribution segment's margin improvement was driven by a mix of cost actions (about one-third), operational efficiencies, and market share gains. Ruzynski added that the recent acquisitions are integrating well, with plans to expand the Barnes foundry to support growth and near-shoring initiatives.

Bryan Blair asked for details on the newly renamed Energy Systems segment, including growth rates and margins for newer versus legacy products, and inquired about the strategic fit and key financial metrics of the recently announced Barnes de Columbia acquisition.

Answer

CEO Joseph Ruzynski noted that the critical asset monitoring business within Energy Systems gained momentum late in 2024 and is poised for growth with very good margins. He highlighted the Barnes acquisition's strategic value in expanding its commercial pump line and vertical integration in Latin America. CFO Jeffery Taylor added that the two recent acquisitions are expected to contribute approximately $50 million in revenue and $0.03 in EPS for 2025, with a combined purchase price around $125 million.

Bryan Blair of Oppenheimer & Co. Inc. inquired about the company's Q4 expectations by segment, the high-level growth outlook for 2025, and the current state of the M&A pipeline and readiness for capital deployment.

Answer

Executive Jeffery Taylor detailed the Q4 outlook, expecting it to be similar to Q3, impacted by wet weather and a significant headwind from lower large dewatering equipment sales. He noted that Fueling comps are normalizing. CEO Joseph Ruzynski added that despite headwinds, positive order rates and new product integrations provide cautious optimism for 2025. Regarding M&A, Ruzynski confirmed a healthy pipeline focused on adding value-added products to leverage their strong distribution channel, particularly in faster-growing verticals.

Bryan Blair of Oppenheimer & Co. Inc. inquired about the agriculture market, asking for confirmation of a trough and the growth outlook. He also questioned the commercialization timeline for bioprocessing solutions in fiscal 2026 and the expected mix of first-fit versus aftermarket growth in the Industrial Solutions segment.

Answer

Chairman, CEO & President Tod Carpenter confirmed the agriculture market bottomed out during the quarter with low single-digit upticks against a low comparison point. He noted that significant revenue from new bioprocessing products is more likely in fiscal 2027, with current Life Sciences growth carried by traditional businesses. For Industrial Solutions, he and CFO Brad Pogalz highlighted that growth is primarily a replacement part story driven by share gains, with the outlook being broad-based across the segment's businesses.

Bryan Blair from Oppenheimer & Co. Inc. asked for more detail on the Industrial Solutions segment's top-line trends, particularly regarding project-driven business versus connected services revenue. He also questioned the margin impact from the PureLogix earn-out reversal and whether fiscal 2026 targets for the Life Sciences segment remain achievable.

Answer

CEO Tod Carpenter noted that while new equipment sales in Industrial Solutions are pressured, this is offset by strong aftermarket, services, and stationary hydraulics growth. CFO Brad Pogalz quantified the PureLogix earn-out reversal at approximately $6 million and stated that fiscal 2026 targets are currently under review, with an update expected in Q4. Tod Carpenter highlighted that Life Sciences profitability has improved sequentially throughout the year.

Bryan Blair asked for more details on a recent OEM program win in China and inquired about the profitability split within the Life Sciences segment to better understand its future earnings potential.

Answer

CEO Tod Carpenter clarified the China win was in the liquid hydraulics sector for tractors, representing a key technology-led gain. He explained that in Life Sciences, legacy businesses are profitable, while recently acquired, pre-revenue bioprocessing businesses are currently diluting segment margins. CFO Brad Pogalz added that Q1 restructuring helped prioritize investments in Life Sciences to improve its profitability trajectory.

Bryan Blair asked for clarification on the Mobile Aftermarket results, questioning whether the double-digit growth was primarily from lapping OE channel destocking or from share gains in the independent channel. He also inquired about the price-cost dynamic in Q1 and its expected cadence for the year.

Answer

CEO Tod Carpenter stated that the primary driver for the strong aftermarket performance was broad-based market share gains, including with a large customer, NAPA. He characterized the impact of lapping prior-year destocking as slight. CFO Brad Pogalz added that price realization was about 1% for the quarter and is expected to remain at that level for the full year, noting that while labor costs are up, the overall cost environment is a mixed bag and currently well-balanced against pricing.

Bryan Blair asked for a breakdown of fiscal 2024 and 2025 growth trends across Life Sciences sub-segments, the drivers of significant margin outperformance in Mobile and Industrial, and whether the lowered Life Sciences outlook was exclusively due to the muted biopharma market.

Answer

CEO Tod Carpenter explained that while specific sub-segment data for Life Sciences is not disclosed, growth is expected to be led by food & beverage while bioprocessing remains muted. He attributed strong Mobile margins to a favorable mix shift toward aftermarket sales, where the company is gaining share. He confirmed the revised Life Sciences outlook is due to a broad market slowdown in biopharma and cell and gene therapy, where development timelines have elongated significantly, but expressed long-term confidence in the portfolio.

Bryan Blair of Oppenheimer & Co. Inc. inquired about the growth outlook for the data center business, the expected revenue capacity increase from manufacturing expansions, and the second-half forecast for the Detection & Measurement segment.

Answer

President & CEO Gene Lowe stated that data center revenue is projected to grow from approximately $150-200 million in 2025 to over 10% of company revenue in 2026, supported by the new Olympus VMAX product. He also detailed capacity expansion plans aiming for a combined ~$300 million run-rate for Ingenia by 2027. CFO Mark Carano added that the D&M project business is expected to grow organically in the high teens in the second half of 2025.

Bryan Blair from Oppenheimer inquired about how order rates have progressed amid tariff uncertainty, asked for an update on the Ingenia acquisition's revenue projections and multiyear growth visibility, and questioned how the Sigma & Omega deal impacts the HVAC segment's total addressable market (TAM).

Answer

President and CEO Eugene Lowe stated that the company's position feels stronger than at the start of the year, with balanced demand in HVAC and a particularly strong outlook for data centers. Executive Paul Clegg provided specifics on Ingenia, noting its revenue capacity is expected to reach a $140 million run rate by year-end. Eugene Lowe added that Ingenia's growth is constrained by scaling capacity, not by demand. Regarding the Sigma & Omega acquisition, he explained that while it meaningfully expands the addressable market in a key niche, the overall TAM for its products is smaller than that for cooling towers.

Bryan Blair asked for more detail on the full-year 2025 guidance, including key watch items for the low end and potential upside drivers for the high end, as well as the expected cadence of revenue and earnings. He also inquired about the 2024 data center revenue contribution and the 2025 outlook, and the financial contribution and total addressable market (TAM) expansion from the KTS acquisition.

Answer

CFO Mark Carano outlined that HVAC end markets remain bullish, with risks tied to weather and non-residential momentum, while D&M's performance depends on the economic environment and project timing. Executive Paul Clegg confirmed data center revenue was about 7% of total 2024 sales and is expected to be a similar or better share in 2025. Mark Carano and Paul Clegg detailed that the KTS acquisition is expected to add about $80 million in revenue in 2025, with a modest EPS contribution. CEO Eugene Lowe added that KTS offers significant growth by expanding into other military branches and leveraging SPX's existing global sales channels.

Bryan Blair of Oppenheimer & Co. Inc. questioned the sustainability of demand in the Detection & Measurement run-rate business, seeking clarity on regional variations and the project pipeline outlook for 2025. He also probed the M&A pipeline's strength and the company's capacity for larger deals following its credit facility expansion.

Answer

CEO Eugene Lowe stated that the run-rate business is flattish with modest growth, noting softness in China and Continental Europe but stability in the U.S. He expressed cautious optimism for 2025, highlighting a healthy but variably-timed project pipeline. Regarding M&A, Lowe confirmed a very strong and active pipeline across both D&M and HVAC segments, feeling optimistic about opportunities over the next 12 months and confirming the expanded revolver provides the necessary dry powder to execute their growth strategy.

Bryan Blair of Oppenheimer followed up on the M&CS segment's margin, asking for the expected magnitude of the mix impact in Q2 and seeking confirmation of confidence in full-year margin expansion. He also asked about April order trends and any early signs of impact from recent price increases.

Answer

CFO Bill Grogan specified that the M&CS margin decline in Q2 would be 'close to double the impact' seen in Q1, primarily due to mix. However, he reaffirmed confidence in full-year margin expansion for the segment, as underlying productivity gains are expected to overcome this headwind in the second half. CEO Matthew Pine reported that April order trends were tracking to forecast with no significant pullbacks observed yet, though the company remains watchful.

Bryan Blair asked for the expected phasing of the remaining transformation benefits for the year and whether the segment-level margin expansion outlooks have changed.

Answer

CFO Bob Fishman stated that the remaining $56 million in transformation savings would be spread evenly across the remaining three quarters, with Flow and Water Solutions being key contributors. CEO John Stauch confirmed that the prior segment-level return on sales (ROS) improvement targets, including approximately 100 basis points for Pool, continue to track with the current forecast.

Bryan Blair asked if the updated 2026 ROS target of 26% implies a meaningful shift in segment contribution compared to the previous Investor Day outlook. He also requested details on the recent GNS (Gulfstream) acquisition, including its strategic fit and financial contribution.

Answer

CFO Bob Fishman confirmed that all three segments are expected to contribute to the ROS expansion story, with the path to 26% being well-defined by productivity programs. Regarding the acquisition, President and CEO John Stauch described it as a strategic tuck-in that strengthens their pool heat pump offerings in key markets. Bob Fishman provided financial details, noting the acquisition is expected to add approximately $35 million in 2025 revenue at a roughly 30% ROS.

Bryan Blair of Oppenheimer & Co. Inc. asked about the pace of transformation savings, the potential for higher margin targets, and the company's capital deployment strategy, including the M&A pipeline.

Answer

CFO Bob Fishman confirmed the company is ahead of its initial transformation savings plan, with 80/20 initiatives increasing confidence. President and CEO John Stauch described the M&A pipeline as a 'trickle' and stated the focus remains on disciplined capital use, including debt repayment and share repurchases, given the current environment.

Bryan Blair of Oppenheimer requested an update on the integration of the Bradley and Josam acquisitions, their performance relative to the deal model, and specifics on the product lines being discontinued. He also asked about the rollout of the Nexa digital solution, customer feedback, and the current scale of SaaS revenue.

Answer

CEO Robert Pagano reported that both Bradley and Josam exceeded their profit and synergy targets. The discontinued products are non-core safety items, lockers, and accessories. Regarding Nexa, he described it as being in the early stages with very positive customer feedback, noting it protects the core business and that all products will be integrated by year-end. He stated that current SaaS revenue is negligible but a growing focus.