Christopher Moore • CJS Securities

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SVP & CFO Brad Lakhia detailed that current integration costs are mainly people-related and for advisor fees, and he anticipates similar levels of expense in 2026. He also reiterated the company's seasonal cash flow profile. President & CEO Jerry Grisko identified the exceptional quality and collaborative spirit of the Markham team as the most pleasant surprise of the integration, noting that minor process frictions have been quickly addressed.

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President and CEO Jerry Grisko identified deal-related private equity work as another area susceptible to softness due to market uncertainty. He expressed confidence in the government healthcare consulting business, noting its role in cost containment supports its pipeline. Grisko also stated that of the approximately $75 million in integration costs, a large portion will be incurred in 2025, with significant IT-related expenses extending into 2026. CFO Brad Lakhia added that facility optimization costs are still being evaluated and will likely be more pronounced in 2026.

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CFO Ware H. Grove confirmed the $3.60 to $3.65 adjusted EPS guidance does not double-count by adding back the cash flow tax asset, ensuring an apples-to-apples comparison. He noted that while cash flow will accelerate, 2025 will include cash outlays for integration. CEO Jerry Grisko added that the increased scale allows for greater investment in technology, branding, and talent, and highlighted the powerful synergistic fit between CBIZ's advisory practice and Marcum's established industry groups. Both executives also discussed the amplified but manageable seasonality of the combined entity.

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CFO Ware Grove explained that pricing and engagement efficiencies continue to be the primary drivers of organic growth, accounting for 80-90% of the increase in Financial Services. He noted that while pricing is higher than 1-2%, it has moderated from recent peaks. Grove also confirmed the government health care business is performing very well as expected. Regarding leverage, he detailed that due to business seasonality, deleveraging will accelerate in the second half of each year, with the company on track to reach its target of approximately 2x EBITDA within 24 months post-closing.

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CEO David Watson attributed the strong 19% gross margin to solid execution and a favorable project mix, expecting margins to remain strong for the year. He noted that while backlog can fluctuate, the overall trajectory is increasing. Watson confirmed that project timelines have extended to 3-4 years, primarily due to supply chain constraints, and this is the current expectation for new projects.

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Executive David Watson attributed the high gross margin to strong execution, a favorable project mix with more U.S.-based power revenues, and positive closeouts on several jobs. He noted that while this specific level may not be consistently repeatable, margins are expected to benefit from an increasing mix of higher-risk, higher-reward gas projects. Watson stated the SLEC project requires a final notice to proceed, which is expected in the summer. He also mentioned that while grid operators are making progress on interconnects, the larger headwind is the supply chain for long-lead items like turbines. The 405-megawatt solar project is described as a massive undertaking that is currently in the midst of execution.

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Executive David Watson attributed the strong margins to excellent project execution, positive closeouts, a favorable project mix shifting toward domestic revenue, and economies of scale. He projected future margins to normalize in the 14% to 16% range. Watson also noted that while there is some labor crossover, the company aims to keep renewable and gas teams distinct, allowing for a capacity of over 10 blended projects. Regarding the backlog, he expressed confidence it would surpass $1 billion by early next year, with multiple gas-fired projects expected to commence within the next eight months.

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Executive David Watson acknowledged that turbine supply and interconnection agreements are headwinds but noted that developers are proceeding with 'behind the meter' projects to mitigate delays. He stated an optimal backlog would be in the 'multiple of billions,' with a mix typically favoring natural gas over renewables. Watson expressed confidence in securing multiple new gas plant contracts within the next 5 to 10 months, citing strong market signals. Regarding the Kilroot project, he confirmed the previously disclosed $12.8 million loss and stated Argan will continue to 'vigorously' pursue its claims, which exceed $25 million.

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CFO Lauri Hanover clarified that for tariff purposes, the key factor is the cost-plus transfer price of goods from Israel to the U.S. subsidiary, not the end-customer's contract type. She stated the company expects only a modest cost impact. CEO Ronen Samuel added that while there are rumors of competitors exploring similar models, Kornit has not seen any viable offerings, citing competitors' weaker balance sheets as a barrier to scaling such a program.

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CEO Ronen Samuel stated that the 30 Apollo systems would be split roughly 50/50 between existing customers adding more units and net new customers buying their first system. He confirmed the AIC model is also crucial for the Atlas MAX family, as it successfully attracts new screen printers who lack the volume for an Apollo but can commit to the output of one or more Atlas MAX systems.

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CEO Ronen Samuel explained that the market is clearly shifting to on-demand production, driven by brands' need for speed, flexibility, and sustainability. He noted that the AIC model is particularly attractive to new customers from the traditional screen-printing market who are risk-averse and value predictable costs. In contrast, established digital customers with high volume and operational expertise might find the upfront CapEx model more economical.

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CEO Jeff Leonard confirmed that tariff impacts are being mitigated by shifting production of snow removal equipment and potentially large mowers from Canada to the U.S. He identified reciprocal tariffs on components with Chinese content as the main unknown risk, which could flow through as cost inflation. Leonard agreed the biggest risk is a potential demand slowdown in non-governmental markets due to inflation, but he sees no signs of it yet. He stated that pricing power remains strong in the governmental and industrial segments but is currently limited in the recovering Vegetation Management market, where he expects it to improve in the second half of 2025.

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President and CEO Jeff Leonard expressed confidence in exceeding 10% operating margin for 2025, citing the full benefits of cost-reduction initiatives are yet to be realized. He detailed that agricultural equipment inventory is now very low, and tree care inventory has significantly decreased. Leonard is optimistic that Vegetation Management will see growth in 2025, not a decline. CFO Agnes Kamps added that 2024's 10.1% margin was historically strong and expects improvement as cost-saving benefits accelerate.

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President and CEO Jeff Leonard indicated that Vegetation Management margins are "close to the bottom" before additional Q4 restructuring costs. He noted that very low field inventory could spur a rapid recovery. For the Industrial division, he expects margins to stabilize at a high level and potentially expand further. Leonard identified interest rate cuts as the key catalyst for Vegetation growth in 2025, likely benefiting the forestry segment first.

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President and COO Matthew Tobolski acknowledged industry 'noise' but affirmed that AAON's pipeline visibility from data center customers has never been stronger, providing confidence into 2026. Regarding the large order, he stated that approximately $80 million of the $200 million has been recognized to date. The project's timeline has extended slightly, with the remainder now expected to be recognized over the rest of the calendar year, and noted strong follow-on orders and visibility with the customer for 2026 and 2027.

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President and COO Matthew Tobolski stated that AAON's visibility shows the data center market remains strong with increasing capital expenditures, and he framed the $1 billion revenue target as achievable within a "few years," likely in the 3-to-4-year range. CEO Gary Fields clarified that AAON's R-454B units are not more expensive due to the refrigerant itself and that the company's target customers, who seek customized solutions, are not the primary buyers of standard, inventoried R-410A units sold by competitors.

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President and COO Matthew Tobolski confirmed that regulations are in place for the January 1 refrigerant transition. He projected that in 3-4 years, liquid cooling could approach 40-50% of new cooling demand, but emphasized that overall airside cooling demand will still grow due to the market's expansion. Regarding BASX margins, Tobolski stated that while the Oklahoma segment is a good target, he wouldn't commit to BASX having the highest margin. He explained that current BASX margins are pressured by outsourcing, which will decrease as the new, geographically diverse manufacturing fleet comes online, providing a tailwind.

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Executive Gary Kramer explained that client tariff exposure is minimal and indirect, primarily affecting service businesses through supply costs, with some slowdown in logistics. He stated there is no fixed annual goal for new physical offices; openings are based on market readiness, with Chicago, Dallas, and Nashville planned for Q3. Kramer positioned geographic expansion as a long-term profitability investment, not a short-term revenue driver. He also clarified that BBSI already partners with regional carriers in several states to complement its main Aetna and Kaiser Permanente networks as needed.

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Executive Anthony Harris stated that hiring metrics are stable and recovering, with consistent wage inflation. He confirmed the 'lion's share' of WSE growth comes from new client additions. He detailed that healthcare revenue is generated from both market commissions and increased PEO admin fees for the value provided. Executive Gary Kramer added that the company is thoughtfully considering how to best disclose benefits-related income in the future, as it's integrated into the overall value proposition.

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CEO Gary Kramer explained that a return to historical levels of client hiring, which is currently a fraction of what it used to be, would easily push BBSI back into double-digit growth. He differentiated BBSI's model by emphasizing its local service teams, its expertise in the underpenetrated 'blue, gray' collar market, and its derisked strategy of not taking underwriting risk on workers' comp or health insurance. CFO Anthony Harris clarified the goal is earnings leverage of about 1.5x, meaning SG&A grows slower than revenue, but noted Q3 SG&A was higher due to variable compensation tied to strong profits.

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CEO Sean Bagan explained that his listening tour reinforced the need for a more aggressive go-to-market strategy, fortifying the management team, and assessing the company's portfolio. Regarding tariff mitigation, Bagan stated that transferring manufacturing to China was already part of their 'in-the-region, for-the-region' strategy, would incur minimal investment due to existing facilities, and could be ramped up within the next quarter.

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CEO Sean Bagan explained the go-to-market strategy is a broad-based, company-wide effort to instill a sales-driven culture, focusing on cross-selling and deepening wallet share with existing customers. He highlighted the Alto-Shaam partnership as a key software-first entry into the commercial foodservice market, which could enable future hardware sales. Regarding free cash flow, both Sean Bagan and Corporate Controller Jeremy Evans indicated that while it will remain a priority, it is not expected to reach the record 2024 levels, which were boosted by significant inventory reduction. They anticipate disciplined CapEx of 3.25% to 3.75% of sales.

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Sean Bagan, Interim President, CEO, and CFO, stated he does not expect a 'hockey stick' recovery but believes Helios can outperform the market due to market share gains, a strong product pipeline, and improved delivery times. He highlighted the 'in the region for the region' strategy in APAC, with growth in Hydraulics from local Chinese OEMs and in Electronics from the health and wellness spa market. Regarding tariffs, Bagan expressed minimal concern due to localized supply chains and sees potential upside from favorable corporate tax policies.

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Michael McCann (executive) detailed that account managers are placed after researching a facility's spending patterns and confirming sales traction, with each branch focusing on about five core strategic customers. He also highlighted the strategy of turning local relationships into national ones. Jayme Brooks (executive) added that while Q1 GCR margins were strong due to project mix, the company maintains a full-year blended gross margin target of 28% to 29%, acknowledging quarterly fluctuations.

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President and CEO William Waltz confirmed that the previous forecast for PVC pricing remains their best estimate. He affirmed Atkore's leadership position but noted market share is difficult to pinpoint due to import dynamics and data limitations. Waltz stressed that PVC conduit is a key part of the portfolio, fitting the 'one order, one delivery, one invoice' value proposition, and the company continues to invest in its productivity.

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CEO William Waltz explained that the company's forecast now assumes PVC pricing will decline to a natural floor at pre-COVID levels by the end of the fiscal year. While this creates a tough year-over-year comparison for the start of fiscal 2026, he believes it establishes a bottom. He pointed to productivity gains and growth from strategic initiatives, such as global mega projects, as the key drivers that will provide upside and lead to improvement beyond the fiscal 2025 trough.

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CEO Bill Waltz confirmed the S&I issue was a one-time event related to a physical inventory adjustment for zinc consumption at the Hobart facility, which has been resolved. CFO John Deitzer noted that while there isn't a single interest rate assumption, the guide reflects the current environment. Waltz expressed his belief that FY25 could be a bottom, citing future pricing stabilization, potential benefits from tariffs in FY26, and the ramp-up of growth initiatives in water, solar, and mega projects.

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CEO David Dunbar explained that tariff mitigation strategies vary by business, with price and productivity actions expected to cover the impact in Electronics and Specialty, while the Scientific segment presents a greater challenge. Regarding growth, both Dunbar and CFO Ademir Sarcevic detailed multiple drivers, including the Amran/Narayan acquisition and new products, suggesting organic growth could resume in fiscal 2026. For the European expansion, Dunbar and Sarcevic clarified the initial investment will be minimal, likely $1-2 million over the first couple of years, focusing first on stocking and testing before adding significant equipment.

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CEO David Dunbar and CFO Ademir Sarcevic indicated improving order trends should lead to a pickup in the Engraving segment by Q4. Sarcevic clarified that the Amran/Narayan acquisition is performing ahead of plan, with an annualized revenue run-rate closer to $120 million versus the initial $100 million estimate. Dunbar confirmed plans to establish a European footprint for Amran within the calendar year. Sarcevic added that the Engraving segment's $4 million in annualized savings will come from both facility consolidation and headcount reductions.

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CFO Ademir Sarcevic detailed the segment-level organic growth expectations, noting a stabilizing Electronics segment poised for H2 growth. CEO David Dunbar explained that Amran/Narayan operates as a single global business despite being two legal entities and suggested a conservative 'mid-teens' growth forecast for planning purposes. Dunbar also clarified that the acquisition's products are agnostic to the source of electricity demand, benefiting from overall grid expansion driven by data centers, infrastructure upgrades, and rising living standards.

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President and CEO Jennifer Sherman confirmed that with over 95% of supplies sourced from North America, the company is well-positioned against tariffs but retains the ability to pass on costs or reprice the backlog if necessary. She affirmed that onshoring initiatives in the SSG business provide a competitive advantage. Regarding M&A, she noted the pipeline remains full and the company is viewed as a 'buyer of choice'.

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CFO Ian Hudson indicated that price realization in 2025 is expected to be similar to 2024's 2.5% contribution and reiterated the long-term target of 100% cash conversion. President and CEO Jennifer Sherman explained the dealer transition is about strategic alignment to drive market share, noting strong interest from existing dealers and other qualified parties to take over the territories.

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President and CEO Jennifer Sherman explained the ecosystem leverages all aftermarket streams (rental, service, parts, used) to serve customers through cycles, citing the shift to rentals for expensive hydro excavators as an example. She emphasized the ability to push new organic and acquired products through this existing channel to common end customers. CFO Ian Hudson added that parts sales grew 83% and rental revenue 32% from 2018-2023. Regarding cancellations, Hudson stated they have not seen anything significant. Sherman noted continued positive feedback and a recent order from New York for their EV street sweeper, with affordability being the main adoption hurdle.

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CEO Tom Logan responded that the company is taking an expansive view of the situation, analyzing how tariff scenarios could shift competitive advantages. He stated that, in aggregate, Mirion believes its competitive position could be strengthened under likely long-term tariff scenarios. This, in turn, could enhance its pricing power and create opportunities to optimize between market share gains and margin expansion.

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CFO Brian Schopfer clarified that the guided EBITDA margin improvement is on a year-over-year basis for each quarter, not sequential. CEO Tom Logan stated that nuclear power, currently 37% of revenue, is expected to grow as a percentage of the total due to its strong growth trajectory. Logan identified key wildcards for the Medical segment as a potential recovery in China's RTQA market, an early resolution to the conflict in Ukraine, and macro factors like foreign exchange, for which the company has taken a conservative stance in its guidance.

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Executive Thomas Logan clarified that the $300 million to $400 million figure represents the total quantum of large projects in their active bid pipeline, which he described as an "unusually large amount." Executive Brian Schopfer added that these deals are expected to be awarded by the end of 2025. Regarding M&A, Logan stated that while the pipeline is strong, no deals are expected in the current quarter as the focus remains on deleveraging to the mid-2x range. He anticipates being active with smaller, strategic "small ball" acquisitions next year to build out key ecosystems.

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CEO Avner Applbaum noted that steel price futures for the second half have moderated and the company is working with suppliers to lower costs. CFO Tom Liguori added that the confidence in exceeding the EPS midpoint stems from successful tariff mitigation and new cost structure optimization initiatives. These initiatives, focused on factory productivity, back-office efficiency, and procurement, could yield $15M-$20M in savings not yet included in the guidance.

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President and CEO Avner Applbaum explained that while North American and Brazilian agriculture markets face pressure from commodity prices, the project pipeline in EMEA remains strong due to food security initiatives. EVP and CFO Tom Liguori added that margin expansion will be driven by improvements in agriculture gross margin, automation in infrastructure, and lower SG&A. Liguori also quantified the potential EPS headwind from tariffs, estimating it at $0.20 at the midpoint of guidance.

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President and CEO Avner Applbaum acknowledged the strong 2024 margin performance, driven by pricing and cost improvements, but noted some one-time tailwinds from steel deflation would not recur in 2025. CFO Tom Liguori added that future margin expansion will be supported by revenue growth, SG&A leverage, and factory efficiencies, despite near-term headwinds from steel deflation. Regarding agriculture, Applbaum confirmed a positive impact from storm-related sales, with some benefits still expected, but anticipates a return to more normalized storm activity next year.

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CFO Brian Herb provided details for modeling interest expense, noting a total debt level of $1 billion with a 4% cap on $600 million plus a spread of around 200-225 bps. For gross margin, he stated that EvolutionIQ has a similar profile and won't impact the metric. While margins may fluctuate quarterly, the company maintains its long-term target of 80%, up from 78% in fiscal 2024.

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CFO Brian Herb confirmed that this is a reasonable assumption. He noted that while CCC has already built significant R&D capacity to support its innovation pipeline over the last two years, the company will continue to invest heavily in this area. He expects R&D spending to grow at a moderate rate, keeping it at a consistent percentage of revenue.

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President and CEO Neil Brinker confirmed that major hyperscaler customers do not anticipate changes to their build schedules in the next few years. He explained that while CDU bidding is competitive, Modine wins by co-developing bespoke solutions with customers, ensuring its products meet specific needs. Brinker also noted that while year-over-year comparisons for heat transfer products are weak, the order rate has stabilized, suggesting the decline is tapering off.

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