David Manthey

David Manthey from Baird inquired about Grainger's cautious 2026 market growth outlook despite strong January sales and asked for an update on digital channel order origination percentages.

Answer

D.G. Macpherson, Chairman and CEO, explained that the 2026 outlook is conservatively planned, acknowledging a strong January with a tailwind from a competitive outage in Japan. He also updated that EDI ePro is now closer to 40% of order origination, with GCOM remaining significant and KeepStock growing, emphasizing the increased direct connection with customers.

David Manthey asked about the cautious 2026 market outlook despite strong January sales and 2025 share gains, and requested an update on digital channel order origination percentages.

Answer

Chairman and CEO D.G. Macpherson explained the conservative planning approach, noting a competitive outage tailwind in January and confidence in the full-year sales target. He also updated that EDI ePro is closer to 40% of order origination, GCOM remains significant, and KeepStock has grown.

David Manthey inquired about the impact of LIFO accounting on the second-half outlook and the expected progression of gross and operating margins from Q3 to Q4 2025.

Answer

CFO Deidra Meriwether clarified that while the underlying operations are similar, the outlook would not have included the negative LIFO impact if the company used FIFO accounting, which would have resulted in EPS growth north of 6% instead of 2%. She added that while revenue will follow normal seasonality from Q3 to Q4, gross margins are expected to improve in Q4 as the September price increases take effect.

David Manthey of Robert W. Baird & Co. asked about the impact of LIFO accounting on Grainger's second-half outlook and the expected progression of gross and operating margins from Q3 to Q4 2025.

Answer

CFO Deidra Meriwether clarified that if Grainger used FIFO accounting, its EPS would have been up over 6% instead of 2%, and the outlook would not have included the negative LIFO impact. She explained that while revenue will follow normal seasonality from Q3 to Q4, gross margins are expected to improve in the fourth quarter as the September price increases begin to take effect, which will support operating earnings at year-end.

David Manthey inquired about the sustainability of Zoro's strong SG&A leverage and whether the profitability improvement is due to sales strength or a new equilibrium. He also asked if the company's 20% consolidated contribution margin target could be achieved at a lower growth rate if tariff-driven price increases offset volume softness.

Answer

Chairman and CEO D.G. Macpherson confirmed that Zoro's performance is driven by sustainable revenue growth and improving customer repeat rates, which allows for expense leverage. He also affirmed that if tariff-related price increases do not significantly degrade demand, the company could achieve its contribution margin target at a lower overall growth rate.

David Manthey asked about the expected contribution margin for unexpected incremental volume revenue during the year. He also sought to confirm an estimate for below-the-line items like noncontrolling interests.

Answer

CEO D.G. Macpherson stated that if market conditions improve beyond expectations, the incremental margin on that volume would be north of 20%. CFO Dee Merriwether confirmed the analyst's estimate for the below-the-line items was in the correct range.

David Manthey sought clarification on the market outgrowth calculation, asking if a disconnect with IP and PPI metrics was distorting share gain figures. He also asked to reconcile commentary about a steady MRO market with data showing deceleration in some end markets.

Answer

Chairman and CEO D.G. Macpherson clarified that the current share gain calculation is likely understated because the IP and PPI metrics used in their model seem to overstate actual market growth compared to other data points. He explained that while there are puts and takes across end markets, the overall demand trend has been consistently slow all year, without a significant change from previous quarters.

David Manthey asked about the organic constant currency SD&A growth being less than organic revenue growth, questioning if overall SD&A would align closer to revenue growth next quarter after lapping Hydradyne. He also inquired about any unusual factors in Q4 fiscal 2025's SD&A sequential increase from Q3. Additionally, he asked about capital allocation priorities, specifically if share repurchases take precedence over debt paydown given the company's borrowing capacity and share price.

Answer

President and CEO Neil Schrimsher explained that Q4 fiscal 2025's SD&A increase was due to benefit cost variability and a Rabbi Trust/deferred comp swap. CFO Dave Wells added that Q4 fiscal 2025 was also impacted by AR provisioning. For Q3, they expect the gap between SD&A and sales growth to narrow slightly due to merit increases and lapping Hydradyne, but SD&A growth should remain less than sales growth. Schrimsher stated that while share repurchases are opportunistic, the company prioritizes organic growth investment, M&A, and dividend increases, with debt paydown also being contemplated to neutralize interest expense. Wells noted approximately 700,000 shares remained under the current repurchase authorization.

David Manthey from Robert W. Baird asked about the strong organic constant currency SD&A growth being less than organic revenue growth, questioning if this trend would continue post-Hydradyne and if there were unusual SD&A factors in Q4 FY25. He also inquired about the remaining share repurchase authorization and the company's capital allocation priorities between share repurchases and debt paydown, given ample borrowing capacity.

Answer

Neil Schrimsher, President and CEO, explained that Q4 FY25 SD&A was impacted by increased benefit costs and a Rabbi Trust swap. Dave Wells, VP, CFO, and Treasurer, added that Q4 FY25 also saw AR provisioning. For the current period, Wells stated they aim for SD&A increase less than sales, but the gap might close slightly due to merit increases and lapping Hydradyne. Schrimsher outlined capital allocation priorities: organic growth, M&A, dividend increases (11% this quarter), and opportunistic share repurchases, noting $1.5 billion capacity and 0.3x leverage. Wells mentioned approximately 700,000 shares remaining on the current authorization.

David Manthey inquired about potential holiday shutdowns impacting the December quarter and whether supplier notification periods for price increases have compressed, affecting pass-through to customers.

Answer

Neil Schrimsher, President and CEO, noted it's early to confirm holiday shutdowns but expects some customers to remain active for projects. Ryan Cieslak, Director of Investor Relations and Treasury, added that the Q2 guide accounts for holiday timing. Schrimsher also stated that supplier behavior regarding price increases remains orderly, with typical notice periods, and the team is effectively managing price-cost execution.

David Manthey inquired about potential holiday shutdowns impacting the December quarter and whether suppliers are providing adequate notice for price increases.

Answer

President and CEO Neil Schrimsher noted it's early for holiday shutdown impacts, with some customers active and others taking time off, potentially opening doors for planned maintenance. Director of Investor Relations and Treasury Ryan Cieslak added that the Q2 guide accounts for holiday timing. Regarding supplier pricing, Mr. Schrimsher stated no significant change in behavior, with orderly increases and effective implementation by the team, mentioning potential 232 tariffs and typical calendar year-end adjustments.

David Manthey from Robert W. Baird & Co. asked for clarification on the expected pricing contribution for fiscal 2026, specific examples within the 'technology' vertical, and whether bonus depreciation is driving automation demand.

Answer

President & CEO Neil Schrimsher projected a pricing contribution similar to Q4's 100 basis points for Q1, ramping to 150-200 basis points for the full fiscal year 2026. He identified data centers and semiconductor manufacturing as the most significant components of the technology vertical. Schrimsher also confirmed that while the project pipeline for automation is already strong, the potential for accelerated depreciation could further stimulate project conversion and investment in fiscal 2026.

David Manthey of Robert W. Baird & Co. Incorporated asked about the company's methodology for setting guidance, specifically how it balances potential tariff-related price increases against the risk of demand destruction, and questioned the demand trends across MRO, production, and capital expenditure-driven sales.

Answer

President and CEO Neil Schrimsher explained that their guidance incorporates expected price inflation, which contributed about 100 basis points to Q3 sales and is expected to be similar in Q4. He emphasized that MRO demand, representing 70% of the business, remains resilient, though some larger projects have seen deferrals. CFO David Wells clarified that the Q4 guidance includes minimal direct tariff impact due to timing, with most price increases being related to general inflation.

David Manthey asked for details on the sources and sustainability of the Q2 core gross margin improvement and requested specifics on the Hydradyne acquisition, including depreciation, amortization, and the breakdown of expected synergies.

Answer

President and CEO Neil Schrimsher attributed the margin strength to execution and favorable mix in the Engineered Solutions segment, noting some supplier benefits were not expected to repeat. CFO David Wells quantified the improvement, stating about 50 basis points came from Engineered Solutions. He also clarified the Hydradyne synergy mix is roughly 70% cost/margin and 30% sales. Executive Ryan Cieslak provided the incremental depreciation and amortization figure of about $3 million per quarter.

David Manthey asked about the Engineered Solutions (ES) segment, inquiring about the mix of customer CapEx versus OpEx spending and whether the strong order trends from September continued into October. He also questioned the company's capital allocation strategy, noting the low M&A activity and dwindling net debt, and asked if share repurchases would become a higher priority.

Answer

President and CEO Neil Schrimsher clarified that ES sales, while often capitalized by customers, are not large investments and have strong returns, akin to OpEx. He confirmed that the encouraging order activity, particularly in automation and technology, continued into October. CFO David Wells and CEO Neil Schrimsher both addressed capital allocation, stating they remain disciplined on M&A but have an active pipeline for bolt-on and midsized deals. They affirmed that share buybacks will continue and that overall capital deployment is expected to increase in fiscal 2025.

David Manthey questioned why MSC isn't projecting more normal or higher sequential sales trends from Q1 to Q2, especially considering the weak Q1, expected government sales recovery, and pricing acceleration. He also asked why incremental margins aren't projected to be higher than 20%, given that growth is largely price-driven and supported by cost reduction efforts.

Answer

Ryan Mills, VP of Investor Relations and Business Development, reiterated that December's weakness was expected due to holiday timing, and Q2 is a seasonal low for the public sector, which won't fully recoup Q1's 100 basis point headwind. He cited limited visibility, contracting macro indicators, and the supplier conference impact as reasons for caution. For incremental margins, he explained that the 18% Q2 midpoint reflects December's challenging operating leverage, implying stronger January/February incrementals. He also noted the $1 million in supplier conference travel expenses and stated that incrementals are expected to be better in the back half, and would be much stronger in a mid-to-high single-digit volume growth environment.

David Manthey questioned why MSC Industrial isn't projecting more normal sequential trends from Q1 to Q2, or even higher trends through the year, given factors like price acceleration, better government sales, and accounting for holidays/supplier meetings, unless market demand is deteriorating. He also asked why incremental margins wouldn't be higher than 20% if revenue growth is primarily price-driven and combined with cost reduction efforts, seeking to understand any offsetting factors.

Answer

Ryan Mills, VP of Investor Relations and Business Development, MSC Industrial, reiterated that December's softness was expected due to holiday timing, and Q2 is a seasonal low for the public sector, which won't fully recoup Q1's 100 basis point headwind. He cited limited visibility, contracting PMI and new orders, and the supplier conference's impact as reasons for the cautious outlook. Regarding incremental margins, Ryan Mills explained that the 18% Q2 midpoint reflects December's challenging operating leverage and $1 million in supplier conference travel expenses, implying stronger incremental margins in January/February and the back half of the year, which would be even higher in a mid-to-high single-digit growth environment.

David Manthey inquired about the percentage of sales represented by direct ship orders, the types of products primarily affected, and the future outlook for this segment. He also asked if MSC Industrial Supply is observing any benefits from reshoring, either through new plant build-outs or increased business for metalworking job shops supplying domestic manufacturers.

Answer

Erik Gershwind, CEO, stated that direct ship orders represent a minority of sales, growing with increased customer penetration in implant programs and public sector relationships, typically involving MRO products. He noted that while direct ship contributed to the Q4 gross margin gap, it's not expected to be a major future headwind or tailwind, especially if core customer traction continues. Regarding reshoring, Erik Gershwind clarified that MSC Industrial Supply is not seeing new greenfield plant build-outs but is observing existing global manufacturers shifting production to the U.S. He added that while there's optimism about more production coming to the U.S., it's not yet reflected in the numbers from metalworking job shops. Ryan Mills, Head of IR, suggested that as manufacturing capacity shifts to the U.S. (e.g., auto), optimism might trickle down to job shops.

David Manthey inquired about the percentage of sales represented by direct ship orders and the types of products primarily affected. He also asked if MSC Industrial Supply is seeing any benefits from reshoring, specifically if metalworking job shops are relaying optimism or experiencing increased business from domestic manufacturers.

Answer

Erik Gershwind, CEO, stated direct ship orders are a minority of sales, growing with customer penetration (implants, public sector), primarily involving MRO products. He doesn't foresee it as a major future headwind/tailwind, with core customer traction potentially offsetting its growth. Ryan Mills, Head of IR, added they don't expect to highlight direct ship for future gross margin performance. Regarding reshoring, Erik distinguished between new plant build-out (not observed) and existing global manufacturers shifting capacity to the U.S. (observed). He noted they haven't seen it in job shop numbers yet, but optimism remains. Ryan mentioned auto industry shifts as a potential future driver for job shops.

David Manthey from Baird questioned the confidence in achieving the 20% incremental margin target given the current business structure and asked for clarification on acquisition contribution and the 'other expense' line.

Answer

CEO Erik Gershwind expressed confidence in the 20%+ target over a cycle, citing latent leverage from prior fixed-cost investments and a new, stronger focus on productivity. CFO Kristen Actis-Grande confirmed acquisition contribution will be zero in Q4 and explained the low 'other expense' was due to a non-recurring currency revaluation.

David Manthey highlighted MSC's performance gap versus the Industrial Production (IP) index and asked which initiatives would close this gap the soonest. He also inquired about the long-term net margin impact from the mix shift between vending/In-Plant solutions and the reacceleration of core customer growth.

Answer

CEO Erik Gershwind acknowledged the gap but pointed to sequential improvement late in the quarter as key initiatives in web, marketing, and sales are beginning to take effect. CFO Kristen Actis-Grande explained that core customers have higher gross margins, and their reacceleration is key to improving profitability. Erik Gershwind added that the expanded vending/In-Plant footprint has fixed costs, creating significant operating leverage for when demand rebounds.

David Manthey of Baird sought clarification on the timing of savings from the Columbus distribution center, details on personnel-related OpEx increases, and the potential impact of government efficiency initiatives.

Answer

CFO Kristen Actis-Grande confirmed the Columbus savings are on track and at a run rate, and broke down the sequential personnel cost increase into merit, benefits, and variable comp reset components. President and COO Martina McIsaac stated that the company is well-positioned to capitalize on any government purchasing changes due to its recent public sector restructuring, seeing potential upside.

David Manthey of Robert W. Baird & Co. asked about the historical Q4-to-Q1 sales seasonality to contextualize the weak Q1 guidance. He also questioned why operating expenses were not flexing down more in response to lower sales and inquired about incremental costs from upcoming web and marketing initiatives.

Answer

CEO Erik Gershwind and CFO Kristen Actis-Grande confirmed a typical Q4-to-Q1 sequential sales increase is 1%, underscoring the current weakness. Gershwind explained that the company is avoiding deeper cost cuts to protect long-term growth investments. Actis-Grande acknowledged incremental marketing costs in Q2 but noted they are part of a broader plan that includes productivity savings and significant full-year headwinds from compensation resets and D&A.

David Manthey from Baird questioned the confidence in returning to a 20% incremental margin target, given historical performance. He also asked for clarification on Q4 acquisition contribution and a variance in the 'other expense net' line.

Answer

CEO Erik Gershwind affirmed the 20%+ incremental margin goal is achievable over the cycle, citing latent leverage from prior fixed-cost investments and a new, intensified focus on productivity. CFO Kristen Actis-Grande confirmed that Q4 acquisition contribution will be zero and explained the 'other expense' variance was due to a non-recurring balance sheet revaluation tied to the Mexican peso.

David Manthey of Baird questioned whether Ferguson should continue to expect incremental margins to exceed the targeted 11%-13% rate, given the positive pricing contribution anticipated in the coming calendar year. He also inquired about the percentage of large projects where Ferguson leverages its "One Ferguson" multi-product and customer group approach.

Answer

Bill Brundage, Ferguson's CFO, expressed satisfaction with the operating margin improvement in calendar 2025, guiding to 9.4%-9.6%. He noted an "outsized gross margin gain" in mid-2025 due to supplier price timing, which is normalizing, and cautioned against expecting a repeat. He anticipates modest operating margin progression in 2026, assuming a supportive market. Kevin Murphy, CEO, explained that for large capital projects (over $400 million construction value), Ferguson engages multiple non-residential customer groups (industrial, fire and fabrication, waterworks, commercial mechanical) early in the process, leveraging a "new way of working" to deliver end-to-end solutions.

David Manthey asked if Ferguson expects incremental margins to exceed the targeted 11-13% rate in the coming calendar year, given positive pricing and easier deflation-affected comparisons. He also sought to quantify the percentage of major projects where Ferguson utilizes more than one product and customer group through its 'One Ferguson' initiative.

Answer

CFO Bill Brundage expressed satisfaction with the operating margin improvement from 9.1% in calendar 2024 to an expected 9.4-9.6% in calendar 2025. He cautioned that outsized gross margin gains seen in mid-calendar 2025, due to supplier price increase timing, are normalizing, and while modest operating margin progression is expected in calendar 2026 with supportive markets, it won't be driven by similar outsized gains. CEO Kevin Murphy explained that large capital projects, valued over $400 million, involve early engagement with general contractors and owners. He stated that Ferguson engages most of its non-residential customer groups, including industrial, fire and fabrication, waterworks, and commercial mechanical, on these projects, varying by job type, as part of a new, integrated working approach.

David Manthey asked for details on commodity pricing by segment, specifically the high-end versus low-end of the pricing spectrum, and further clarification on the gross margin reversion, including any implied incremental temporary benefits and residual effects in the October quarter. He also inquired about HVAC pricing, the benefit from pricing and acquisitions, the refrigerant transition (specifically R410 systems remaining), and any commentary on multifamily.

Answer

Bill Brundage (CFO) explained that non-residential currently sees more inflation due to copper and steel, while waterworks is slightly down due to PVC deflation, with most other customer groups slightly up. He reiterated that gross margins are expected to normalize to the 30%-31% range, with temporary benefits from supplier price increase timing waning. Kevin Murphy (CEO) stated that HVAC equipment has some inflation due to the 410A to A2L transition, but parts and supplies have less due to a repair-over-replacement mix, resulting in low single-digit overall HVAC inflation. He confirmed the majority of 410A systems were sold through in Q4 and highlighted bifurcated performance (strong East/Midwest vs. challenging West), reiterating the strategy of counter conversions, geographic expansion, and M&A for HVAC.

David Manthey requested more detail on HVAC, including pricing and acquisition benefits, the status of the R410A to A2L refrigerant transition, and any commentary on multifamily trends or other HVAC insights.

Answer

CEO Kevin Murphy stated that HVAC equipment has low single-digit inflation due to the A2L transition, but parts and supplies have less, resulting in overall low single-digit inflation. He noted strong performance on the East Coast/Midwest offset by challenges in the Western U.S., and confirmed most R410A systems were sold through by Q4. He highlighted continued expansion through counter conversions, new locations, and M&A, despite near-term market challenges from new residential construction and consumer affordability.

David Manthey asked for a breakdown of the updated fiscal year guidance, separating the impact of Q3 outperformance from underlying Q4 expectations. He also questioned the status of the HVAC refrigerant transition and its price/mix impact on growth.

Answer

CEO Kevin Murphy explained that the guidance increase was primarily due to the flow-through of strong Q3 performance and deflation moderating a quarter earlier than expected. He added that the refrigerant transition is largely complete and that price inflation contributed only low-single digits to the 10% HVAC growth.

David Manthey sought to confirm if the guidance implies that OpEx will continue to grow at a mid-single-digit rate, with leveraging dependent on revenue acceleration in the second half of the fiscal year. He also asked for clarification on the impact of having one fewer selling day in the third quarter.

Answer

CFO Bill Brundage confirmed the interpretation was 'about right,' stating that mid-single-digit cost growth reflects 3% volume growth plus investments and wage inflation. He reiterated the expectation that easing deflationary pressures and volume growth would improve SG&A leverage as the year progresses, and that the outlook assumes revenue acceleration in the back half. Regarding the selling day, he noted it was one fewer day in Q3, likely in February due to the prior year's leap day, with no other unique impact on expenses.

David Manthey of Robert W. Baird & Co. inquired about the macroeconomic assumptions underpinning the FY25 budget and asked for confirmation of the components driving the low single-digit revenue growth guidance.

Answer

CFO Bill Brundage explained that their forecast relies on leading indicators like housing starts and the ABI, which embed some expectation of rate cuts, rather than broad GDP projections. He confirmed the guidance components (market decline, deflation, acquisition contribution, market share gain) and noted the loss of one sales day. CEO Kevin Murphy added that achieving broadly flat profit in a down market is a solid result, with potential for faster acceleration if market conditions improve.

David Manthey asked for an update on the residential market, specifically if the stabilization seen in Q3 was more optimistic than previously expected, and sought more detail on the magnitude of private label's gross margin benefit and other sourcing/pricing initiatives.

Answer

CFO Robyn Bradbury clarified that residential softening continued as expected through Q3, declining low double digits to mid-teens, with no significant movement towards strengthening. She explained that private label is a significant margin driver, contributing substantially over the years, with a long-term target of 10-15% of sales and an expected annual 10-20 basis point impact, complemented by disciplined sourcing and purchasing strategies.

David Manthey asked for the residential market's growth rate in the first half of 2025 and what the low double-digit full-year outlook implies for the second half.

Answer

CEO Mark Witkowski stated that residential was down mid-single to high-single digits in the first half, implying a slightly worse low double-digit decline in the second half to reach the full-year forecast.

David Manthey asked for the residential market's growth rate in the first half of the year and what that implies for the second half, inquired about the organic revenue and same-store SG&A figures for the current quarter, questioned if Q2 SG&A dollars would be the high watermark for the year, and sought clarification on normal sales seasonality excluding acquisitions.

Answer

Mark Witkowski (CEO) indicated that residential was down mid-single to high-single digits in the first half, implying a slightly worse decline in the second half to reach the full-year low double-digit forecast. Robyn Bradbury (CFO) noted M&A contributed about 2 points to top-line growth and 3 points to SG&A growth, and confirmed Q2 SG&A dollars are expected to be the high watermark due to synergy realization and one-time items. She also outlined typical seasonality with Q2 and Q3 being similar in size, followed by a 15-20% decline from Q3 to Q4.

David Manthey asked for details on the pricing environment, specifically the difference between commodities and finished goods, and sought clarification on the second-half outlook, considering tougher comps and the absence of the 53rd week from the prior year.

Answer

CFO Robyn Bradbury explained that pricing improved sequentially to flat in Q1, with steel improving and PVC stabilizing, leading to an expectation of flat to slightly up pricing for the full year. She confirmed the prior year's 53rd week creates a Q4 headwind and noted Q2 has a favorable comp while Q3 will be tougher.

David Manthey inquired about the pricing environment, specifically the percentage of COGS represented by PVC, and the price expectations for other product categories embedded in the 2025 guidance. He also asked for color on Q1 trends and whether unannounced M&A is included in the outlook.

Answer

CFO Mark Witkowski stated that municipal PVC pipe is less than 15% of COGS and expects an overall neutral pricing environment for 2025, with some supplier increases sticking while other categories face headwinds. He confirmed that unannounced deals are not in the guidance and noted that Q1 was off to a good start, in line with expectations, with strong bidding activity.

David Manthey asked if fiscal 2025 is expected to be a 'normal' year relative to the company's growth algorithm and inquired about potential impacts from labor conditions and tariffs, including the percentage of COGS from foreign sources.

Answer

CFO Mark Witkowski affirmed that fiscal 2025 is shaping up to be a more typical year, with expectations for slightly positive end market volumes and 30-50 basis points of operating margin expansion. CEO Steve LeClair stated that tariffs are generally viewed as neutral to positive, noting that less than 15% of products are imported and direct imports constitute less than 2% of COGS.

David Manthey asked for the sales and gross margin contribution from PVC pipe, the company's contingency plan for a potential drop in PVC pricing, and clarification on the strong August sales growth versus the outlook that weather-related shortfalls won't be recovered.

Answer

CFO Mark Witkowski stated that municipal pipe (PVC and ductile iron) is 25-30% of the business and emphasized the company's flexible, variable cost structure as its contingency plan. He clarified that August sales represented a return to normal organic volume growth, not a surge that would recover all sales lost to weather, due to customer capacity constraints.

David Manthey sought clarification on whether the previously mentioned -5% to 10% revenue decline for Q4 referred to overall revenue or equipment-only. He also asked about Watsco's capital allocation strategy, specifically considering more aggressive share repurchases versus acquisitions given the company's cash position and stock valuation.

Answer

Aaron J. Nahmad (President, Watsco Inc) clarified that the -5% to 10% Q4 revenue decline referred to overall sales. Albert Nahmad (Chairman and CEO, Watsco Inc) stated that while share repurchases were considered, the company prioritizes remaining open to acquisition opportunities, leveraging its strong financial position to potentially step up M&A activity without incurring debt.

David Manthey asked for clarification on the -5% to 10% revenue decline mentioned for Q4, specifically if it pertained only to equipment. He then inquired about the company's thoughts on allocating cash towards more aggressive share repurchases, given its strong cash position, no debt, healthy dividend, and current stock valuation.

Answer

Aaron J. Nahmad (President, Watsco Inc) clarified that the -5% to 10% decline was for 'overall' revenue, not just equipment, and was based on October trends, not guidance. Albert Nahmad (Chairman and CEO, Watsco Inc) stated that while share repurchases are considered, the current industry softness creates opportunities for more acquisitions. He emphasized their preference to use capital for M&A to grow the business, leveraging their strong financial position.

David Manthey from Robert W. Baird & Co. asked about consumer preferences during the product transition, specifically on R-410A premiums and A2L product tiering. He also asked if the 'other' category's outperformance signaled a stronger fix-versus-replace trend.

Answer

EVP Paul Johnston stated the market remains focused on entry-level efficiency products, with consistent brand performance. President A.J. Nahmad noted an exception where their OnCallAir platform drives sales of high-efficiency systems. Regarding the product mix, Johnston explained that while parts sales saw an uptick, the volume is insufficient to offset the top-line impact from lower equipment sales, and the trend is not a radical shift to repair.

David Manthey questioned the drivers of top-line performance, asking if softness in residential new construction was a significant factor and whether Watsco was maintaining market share. He also asked about the expected gross margin cadence for the year.

Answer

Executive Barry S. Logan explained that one less sales day had a larger impact than new construction, which was also affected by contractors' choices regarding refrigerant types. Paul Johnston added that he believes Watsco has not lost share. Regarding margins, CEO Albert Nahmad reiterated the company's aspirational goal of achieving a 30% gross profit margin over the long term.

David Manthey inquired about the drivers of the double-digit residential unit growth in Q4, asking if the A2L transition contributed to the implied price/mix and when the full transition is expected. He also asked for confirmation on expected 8-10% pricing and questioned Watsco's ownership position in HouseCall Pro.

Answer

Executive Paul Johnston stated that A2L had a minimal impact in Q4, with pricing actions around 8% and more expected due to tariffs. Executive Barry S. Logan clarified that residential unit growth was 16% with an additional 3% from price/mix. Executive Aaron Nahmad explained that Watsco has a commercial relationship with HouseCall Pro but no ownership, instead highlighting their proprietary OnCall Air platform.

David Manthey asked about the net impact of hurricanes Helene and Milton on Q3 results and the October outlook, and also questioned if the medium-term gross margin target of 27% remains achievable.

Answer

Executive Paul Johnston and EVP Barry S. Logan explained that hurricanes cause short-term local disruptions but are not material to national results, confirming that October's mid-single-digit growth was not a temporary storm-related snapback. An unnamed executive and Barry Logan affirmed the 27% gross margin goal, with ambitions for 30%, stating that recent pressure was from product and customer mix, not price degradation, and that the upcoming A2L transition offers a significant opportunity to reprice the market.

David Manthey asked for the specific incineration pricing growth rate and detailed revenue growth rates for industrial services, field services, Safety-Kleen Environmental (SKE), and technical services. He also questioned whether the SDA unit investment reflected any changes in the company's M&A outlook and sought an update on the progress and market perspective since the Vision 2027 goals were set, considering acquisitions like Thompson and HEPACO.

Answer

Eric Dugas (EVP and CFO) reported mid-single-digit incineration pricing growth. He detailed revenue growth for technical services (double-digit), SKE (8%), field services (9-11% decline due to lack of large projects), and industrial services (3-4% decline due to turnaround services). Mike Battles (Co-CEO) clarified that the SDA unit investment does not reflect a change in M&A appetite, being a long-discussed internal project. He emphasized that Clean Harbors has ample cash and strong debt market appetite for M&A, and the Vision 2027 goals remain a disciplined approach to capital deployment, with M&A being lumpy but continuously pursued for value-accretive opportunities.

David Manthey asked for specific incinerator pricing trends and detailed revenue growth rates for industrial services, field services, Safety-Kleen Environmental, and technical services. He also questioned whether the SDA unit investment reflects any changes in the M&A outlook and sought an update on the Vision 2027 goals, considering recent acquisitions and market conditions.

Answer

EVP and CFO Eric Dugas reported mid-single-digit incineration pricing growth. He provided specific revenue growth rates: technical services saw double-digit growth, Safety-Kleen branch grew 8%, field services declined 9-11% due to a lack of medium/large projects, and industrial services declined 3-4% due to turnaround services. Co-CEO Mike Battles clarified that the SDA unit investment does not reflect a change in M&A appetite, but rather a planned internal project. He reiterated that the company has ample cash and strong debt market appetite for M&A, and that Vision 2027 remains a guiding vision for disciplined capital deployment, with M&A being lumpy but pursued for strong returns and synergies.

Questioned the confidence in the SKSS full-year guidance given the first-half performance and seasonality, and asked if the positive outlook on turnaround activity represents potential upside to guidance.

Answer

Confidence in SKSS comes from easier year-over-year comps and the successful shift to a "charge for oil" model. The back-half guidance for Environmental Services does not rely on a major turnaround recovery, so any significant improvement there would be upside.

David Manthey of Baird asked for clarification on which business areas were most affected by Q1 weather and whether the associated revenue is deferred or permanently lost. He also questioned the sensitivity of the PFAS business to changes in allowable contaminant levels.

Answer

Co-CEO Mike Battles explained that when customer sites shut down due to weather, the waste generation is lost, but noted strong performance in March and April suggests the issue was temporary. Co-CEO Eric Gerstenberg added that deferred inventory increased, and the network can catch up. On PFAS, Gerstenberg stated that customers act on any contamination level, so a change in the official limit is not expected to impact business.

David Manthey sought clarification on which business areas were impacted by weather, whether the associated revenue is recoverable, and if a change in PFAS allowable contaminant levels would significantly alter the business opportunity.

Answer

Co-CEO Mike Battles explained that revenue from weather-related production shutdowns is permanently lost, but Co-CEO Eric Gerstenberg added that a buildup of deferred inventory creates a backlog that can be worked through. On PFAS, Gerstenberg stated that a change in contaminant levels would not be a significant factor, as customers are motivated to remediate any level of contamination, not just to meet a specific threshold.

David Manthey from Baird asked for the current SKSS re-refining capacity, the drivers of the expected SKSS EBITDA ramp-up after Q1, the organic growth rate for Field and Emergency Response services ex-HEPACO, and the rationale for expecting growth in Industrial Services.

Answer

Co-CEO Mike Battles and Co-CEO Eric Gerstenberg clarified that SKSS capacity is comparable to the prior year after the Noble acquisition and Newark idling. CFO Eric Dugas explained the SKSS EBITDA run-rate improves after Q1 as higher-cost inventory is sold through and the benefits of 'charge-for-oil' pricing are realized. Battles noted Field Services grew organically in the high single digits. Gerstenberg stated the Industrial Services outlook is positive because the number of booked turnarounds for 2025 is up substantially, suggesting projects were pushed from 2024 into 2025.

David Manthey questioned whether the historical $200 million EBITDA target for the SKSS segment is still a realistic expectation. He also asked for details on the unplanned delay in accounts receivable collection from the HEPACO acquisition and requested the current remaining balance on the share repurchase authorization.

Answer

Co-CEO Michael Battles indicated that the $200 million SKSS EBITDA target is aggressive for the near term, suggesting modest improvement from the current ~$150 million run rate is a more realistic expectation for 2025. An executive, likely CFO Eric Dugas, explained the HEPACO AR issue was a temporary timing delay caused by billing system integration and not a credit risk. Battles confirmed the remaining share repurchase authorization was $545.5 million.

David Manthey asked about SiteOne Landscape Supply Inc.'s decision not to exclude a branch consolidation charge from adjusted EBITDA guidance and sought clarification on price realization for agronomic versus landscape products, as well as the outlook for Q4 and 2026 pricing.

Answer

John Guthrie, EVP, CFO, and Assistant Secretary, explained that SiteOne Landscape Supply Inc. maintains strict guidelines for adjusted EBITDA, primarily adjusting for acquisitions within the first year, and provides information for investors to make their own adjustments. Regarding pricing, Mr. Guthrie noted landscape products were up 1% and agronomic products were flat for the quarter. He anticipates Q4 pricing to be between 1% and 2%, with 2026 expected to return to a more normal 1-3% range as commodity deflation diminishes.

David Manthey inquired about the rationale for not excluding the branch closure charge from adjusted EBITDA guidance and sought clarification on pricing trends, specifically the realized price in agronomic versus landscape products, the impact of Q4 seasonality and mix on pricing, and the outlook for pricing in 2026.

Answer

EVP, CFO, and Assistant Secretary John Guthrie explained that SiteOne's adjusted EBITDA guidelines are strict, primarily reflecting acquisitions and first-year adjustments, and that the company provides information for investors to make their own adjustments. Regarding pricing, Mr. Guthrie stated that landscape products were up 1% and agronomic products were flat for the quarter. He projected Q4 pricing to be between 1% and 2%, with 2026 expected to see more normal inflation, likely in the 1%-3% range, with a midpoint outlook of 2%.

David Manthey of Baird asked for an update on SG&A leverage drivers, specifically inquiring if the Pioneer integration is complete and what other efforts are contributing to the leverage. He also questioned if the company might pursue more aggressive share repurchases given the current M&A environment.

Answer

CEO Doug Black confirmed that the Pioneer integration is complete and it is now part of the broader 'focus branch' initiative, which has seen over 200 basis points of margin improvement. He highlighted delivery efficiency, sales force productivity, and digital tools like siteone.com as key drivers of sustained SG&A leverage. CFO John Guthrie added that approximately $250 million remains on the share repurchase authorization and it is a key method for returning value to shareholders when acquisition activity is lighter.

David Manthey inquired about recent progress on the DispatchTrack and focused branch initiatives, and also asked about specific strategies being deployed to increase share of wallet with existing customers.

Answer

CEO Doug Black detailed that the DispatchTrack software is driving SG&A efficiency by centralizing delivery dispatch, with tangible progress seen in Q1. He noted that the focused branch efforts, including the Pioneer integration and 22 branch closures, have successfully reduced overhead, contributing to a 3% decrease in base business SG&A. To increase wallet share, Black highlighted a multi-pronged strategy: targeting smaller customers where market share is low, enhancing sales force productivity to cover more revenue with the same headcount, and utilizing inside sales associates to onboard new customers and win back lapsed ones.

David Manthey from Robert W. Baird & Co. inquired about the most significant cost initiatives for 2025, specifically the impact of improving 'focused branches' and the Pioneer acquisition, and also asked about risks from grass seed deflation and customer labor supply.

Answer

CEO Doug Black and executive John Guthrie confirmed that the focused branches and Pioneer integration are the primary drivers for expected SG&A leverage and margin improvement in 2025. Doug Black noted that while customer labor supply is a persistent concern, no significant new impacts have been seen yet. John Guthrie added that grass seed deflation is expected to continue in the first half of the year, with more clarity on the second half outlook expected in the spring.

David Manthey inquired about the specific price impact on agronomic versus landscape products and asked for a timeline for when commodity price deflation might normalize. He also questioned the strategy behind the 16 branch closures and whether this was a one-off event or a new ongoing approach.

Answer

EVP & CFO John Guthrie detailed that agronomic product prices were down 8% while landscape product prices were down 2%. He projected normalization for grass seed and PVC pipe prices around mid-2025. CEO Doug Black described the branch closures as a 'one-time catch-up' to aggressively address underperforming locations, distinct from routine post-acquisition consolidations, though it signals a more aggressive future stance.

David John Manthey asked about the weakness in chemical sales, requesting a breakdown of inflation/deflation across chemicals, building materials, and equipment, and whether the chemical trend represents a recent change. He also sought clarification on the SG&A growth algorithm, specifically how the 60-80% of top-line growth rule applies in a year of mid-single-digit growth, considering incentive compensation reinstatement.

Answer

President and CEO Peter Arvan explained that chemical deflation is primarily in the sanitizer category (Trichlor), which he considers a slight pressure rather than an alarming trend, noting overall chemical demand is stable. He described building materials inflation as slight and equipment pricing as consistent with recent years. SVP and CFO Melanie Hart confirmed the SG&A model remains intact, with initial recovery of variable expenses (drivers, warehouse personnel) and incentive compensation tracking sales growth.

David Manthey sought clarification on the link between interest rate cuts and pool demand, and questioned why guidance was lowered despite encouraging sales trends in June and July.

Answer

CEO Peter Arvan clarified that the main benefit from rate cuts would be stimulating housing turnover, a key driver for new pool demand, more so than just lowering project financing costs. He explained the guidance was adjusted because, despite strong maintenance trends, there has been no material improvement in new construction permit data to suggest a second-half rebound.

David Manthey asked about the weather as a comp for 2025 and inquired about the long-term strategic vision and capital allocation priorities for the Horizon landscape supply business.

Answer

President and CEO Peter Arvan acknowledged that 2024's mild early-season weather creates a tougher comp, which is factored into guidance. Regarding Horizon, Arvan explained it is heavily tied to new home construction and is positioned to thrive when the housing market recovers. Capital allocation for Horizon is focused on protecting its competitive position in the Sunbelt rather than aggressive national expansion, making it a less capital-intensive part of the business currently.

David Manthey questioned the continued validity of the company's long-term 6% to 9% growth algorithm over the next five years, asking if any components needed adjustment. He also inquired whether the average price of a new pool, now around $80,000, might see any retrenchment due to mix or component costs.

Answer

President and CEO Peter Arvan affirmed the long-term growth algorithm remains intact, with the only caution being that the 1% growth contribution from acquisitions is becoming harder to achieve at their current scale. He explained that the high average pool price is partly due to a mix skewed towards high-end projects and that while a return of entry-level pools could lower the average, he doesn't foresee significant deflation in labor or material costs.

David Manthey of Baird sought clarification on a prior-year unusual benefit and asked for commentary on event-based work opportunities in the Environmental Solutions (ES) segment.

Answer

CFO Brian Delghiaccio clarified that the Q3 2024 results included a $20 million benefit, comprising a $15 million insurance recovery and a $5 million bad debt recovery. CEO Jon Vander Ark explained that ES event work has been slower this year due to fewer large-scale emergencies and because customers are pausing discretionary projects, like on-site cleanups, amid macro uncertainty related to trade policy.

David Manthey of Baird sought clarification on the components of the unusual benefit in Q3 2024. He also asked for commentary on event-based work opportunities within the Environmental Solutions (ES) business.

Answer

CFO Brian Delghiaccio clarified that the Q3 2024 period included a $20 million benefit, comprising a $15 million insurance recovery and a $5 million bad debt recovery. CEO Jon Vander Ark addressed ES event work, noting a slower first half for emergency response jobs. He added that discretionary work like on-site cleanups is being paused by customers due to macro uncertainty around trade policy, though the project pipeline remains good.

David Manthey of Baird questioned the key factors driving the significant margin expansion in the Environmental Solutions business to 24.4% (adjusted), beyond the initial synergy targets from the US Ecology acquisition.

Answer

CEO Jon Vander Ark attributed the margin improvement to a multi-lever approach, including optimizing customer mix, strategic pricing to reflect service value, and improved cost discipline through better labor utilization. He noted the team has made faster progress than anticipated toward its 25% midterm margin target and has high aspirations for future growth.

David Manthey from Baird asked if the reduction in expected tariff impact and the corresponding guidance raise was primarily a reflection of timing. He also sought to confirm that Hillman expects to over-earn on price in Q3 before reaching price-cost neutrality in Q4.

Answer

CFO Robert Kraft confirmed the math was directionally correct but emphasized the timing, noting tariff costs will only begin to hit late in Q3. President & CEO Jon Michael Adinolfi affirmed this dynamic, stating Hillman expects a timing benefit in Q3 before reaching alignment on price and cost in Q4.

David Manthey asked for a comparison of the current tariff environment to the COVID-era supply chain disruptions and inquired about the business outlook for 2026. He also sought details on shipping container contracts, specifically if they are tied to country of origin.

Answer

President and CEO Jon Michael Adinolfi differentiated the current situation from COVID, noting that service levels are strong and supply chains are not similarly disrupted. For 2026, he stated it's too early for guidance but sees significant pent-up demand. He confirmed shipping contracts are based on ports (country of origin) and that Hillman is well-positioned with its 2025 contracts.

David Manthey asked about the long-term implications for EBITDA margins, referencing the original 20%+ IPO target, and inquired about the expected trajectory for return on invested capital (ROIC).

Answer

CEO Jon Adinolfi stated that a 20% EBITDA margin is 'not out of the question' in the future. He explained that as the high-margin RDS business returns to growth, it will provide a favorable mix shift, lifting the consolidated margin. Adinolfi also confirmed they expect to see a 'nice expansion in ROIC over the next several years,' which is now tied to executive compensation.

David Manthey asked for details on the recent Intex acquisition, including its current retail partners, any sales limitations, and whether its lower gross margin profile is structural. He also questioned what would drive growth in the Robotics and Digital Solutions (RDS) segment in 2025, noting the MinuteKEY 3.5 rollout seemed to be tapering off.

Answer

CEO Doug Cahill clarified that Intex serves many of Hillman's major customers and also provides entry into new channels like paint and auto, with no sales restrictions. CFO Rocky Kraft confirmed Intex's margins are structurally lower but will be improved over time through Hillman's operational scale. Cahill corrected the premise on RDS, stating the MinuteKEY 3.5 rollout is accelerating, not tailing off, with plans to reach 1,200 units by year-end and ramp up further in 2025, which is expected to return the segment to growth.

David Manthey asked for clarification on pricing, questioning if known price increases are factored into guidance, how the price benefit is distributed across segments, and what the potential gross margin lift from inventory gains might be in Q3 compared to the 2022 inflationary period.

Answer

EVP & CFO David Schulz confirmed that known, realized price increases are in the guidance, but potential future tariff-related increases are not. He noted the price benefit was relatively consistent across segments in H1. Schulz anticipated sequential gross margin improvement in H2 but cautioned against a direct comparison to 2022, citing a different pricing environment and the difficulty in quantifying the potential gain.

David Manthey of Baird sought confirmation that the guidance excludes announced price increases as a hedge against potential demand destruction and asked about the expected SG&A cost progression into the second quarter.

Answer

David Schulz, EVP and CFO, confirmed the guidance intentionally excludes recent price increase notifications, consistent with past practice, viewing any potential pricing benefit as a mitigant to possible demand destruction. For SG&A, Schulz identified the annual merit increase as the primary driver of the sequential cost increase from Q1 to Q2, applying an approximate 3% increase to the company's people-related costs.

David Manthey asked for color on the sequential progression of SG&A expenses, considering incentive comp resets and merit increases, and questioned if there was a structural change in the profitability of the UBS segment.

Answer

EVP and CFO David Schulz confirmed SG&A would see a sequential increase from Q4 to Q1 due to incentive compensation, followed by another step-up in Q2 from merit increases effective April 1. He and CEO John Engel clarified that the recent UBS margin pressure was due to operating deleverage from lower sales, not a structural change, and that profitability is expected to recover as sales growth returns.

David Manthey asked about the significance of storm-related demand versus planned upgrades for utility sales and requested an update on the UBS segment's business mix between distribution and transmission.

Answer

CFO David Schulz quantified the recent storm benefit for the utility business at approximately $15 million, primarily from replenishment orders, with any rebuild recovery being a 2025 event. CEO John Engel stated that an updated transmission vs. distribution mix would be provided with the 2025 outlook. He emphasized that the company is seeing strong growth in the transmission and substation portions of the utility power chain, driven by secular trends like electrification and rising power demand.

David Manthey of Baird requested a high-level bridge for the sequential revenue and margin changes from Q2 to the Q3 guidance and asked about the potential impact on the business if short-term interest rates were to fall by 50 basis points.

Answer

CFO Pete Beckmann identified the main drivers for the sequential Q3 decline as a weakening single-family starts environment, continued multifamily normalization, and commodity deflation. CEO Peter Jackson added that a 50 basis point rate cut would be a tailwind, potentially unlocking stalled multifamily projects and boosting consumer confidence, which could release pent-up demand.

David Manthey asked why the 2025 EBITDA guidance range is wider than the prior year's and questioned the slower-than-expected uptake of the digital platform, asking if the $1 billion incremental sales target by 2026 is delayed.

Answer

CEO Peter Jackson attributed the wider EBITDA range to increased uncertainty from potential policy changes and a volatile competitive environment. On digital, he acknowledged a slower pace, explaining they are resetting their adoption strategy. He remains '100% confident' in the $1 billion target, stating it's a question of 'when,' not 'if'.

David Manthey requested clarification on the components of the long-term margin bridge on Slide 17, asking if 'productivity' includes scale benefits and for a definition of 'other commercial benefits'. He also sought to confirm if the company assumes the trend of smaller home sizes will flatten out.

Answer

CFO Designate Pete Beckmann explained that productivity savings stem from process improvements in areas like procurement and manufacturing, while 'other commercial benefits' include better supplier terms and shorter fixed-price contracts. CEO Designate Peter Jackson confirmed that their current assumption is that the value per start, which includes home size and product mix, is flattening out based on recent trends.

David Manthey of Baird inquired about the contribution margins for customers generating over $10,000 per month and sought clarification on the expected payoff timeline for the company's recent inventory investments.

Answer

CEO Daniel Florness explained that the contribution margin for the $10,000+ customer group closely mirrors the overall company profile, as this group constitutes nearly 80% of sales. He clarified that the inventory investment is already providing an attractive return by freeing up time for sales teams, and the payoff will improve further in the second half of 2025 and into 2026 as inventory is rationalized within the distribution network.

David Manthey from Robert W. Baird & Co. asked about the potential impact of a 145% tariff on certain products from China, questioning if customer contracts could absorb such a significant increase and what Fastenal's broader strategy would be.

Answer

CEO Daniel Florness confirmed that contracts allow for price adjustments but emphasized that the primary focus is on providing customers with sourcing optionality. He noted that Fastenal has been diversifying its sourcing teams outside of China for the past five years. CFO Holden Lewis added that the company's direct sourcing capabilities and proprietary pricing tools enable a high degree of transparency and detailed communication with customers, which is crucial for navigating these conversations.

David Manthey questioned whether the 96% of customer sites generating only 22% of sales represents a major opportunity or is simply the nature of the business. He also asked about the company's preparedness for potential future tariffs.

Answer

CEO Daniel Florness framed the large number of smaller accounts as a significant long-term opportunity, especially as Fastenal improves its capabilities for "unplanned spend," which is more characteristic of these customers. Regarding tariffs, Florness stated that the company has well-developed, "surgical" processes from past experiences to manage tariffs, provide visibility to customers, and act as a strong supply chain partner.

David Manthey of Baird inquired about the drivers behind the optimistic sequential outlook for the single-family segment and sought details on the technology enabling recent cost-saving initiatives.

Answer

President & CEO John Turner attributed the single-family strength to recent market share gains with large customers. He and SVP & CFO Scott Deakin explained that sustained investment in a common ERP platform, digital customer portals, and automation has driven operational efficiencies, enabling the $55 million in annualized cost reductions.

David Manthey questioned the flat outlook for steel framing prices given manufacturer increase announcements and tariffs, and also asked if the Q4 forecast implies a simple continuation of recent weak trends.

Answer

CEO John Turner acknowledged that steel price inflation is likely but will probably occur after the current fiscal quarter due to existing inventory and pre-sold contracts. He and CFO Scott Deakin confirmed the Q4 outlook reflects a bottoming of the cycle, with demand that deteriorated in late Q3 continuing. They also confirmed the next $20 million in cost savings will reach its full run rate in Q1 fiscal 2026.

David Manthey from Robert W. Baird & Co. asked about the specific pacing of the announced $25 million in cost cuts and when they would be fully realized on a quarterly basis. He also questioned how long it would take for the company to lap the steep year-over-year declines in steel prices.

Answer

CEO John Turner stated that the company will realize about half of the quarterly benefit from the cost cuts in the upcoming second quarter, with the full run-rate benefit being achieved by the third quarter. Regarding steel prices, Turner indicated that the company would not lap the year-over-year declines until the next fiscal year.

David Manthey asked if potential tariffs could impact pricing for OCC (Old Corrugated Containers) or other materials within WM's commodity basket.

Answer

Executive Tara Hemmer explained that tariffs could positively impact domestic non-fiber commodities like aluminum and steel. While they are monitoring potential retaliatory tariffs on fiber, she expressed confidence in their brokerage team's ability to pivot to a wide variety of domestic and international markets. CEO Jim Fish added that the company's prior shift away from reliance on China for OCC was beneficial.

David Manthey of Baird sought clarification on the Stericycle financial math, asking for the 2024 pro forma EBITDA under WM's definition to better understand the bridge to the 2025 guidance and distinguish organic growth from synergies.

Answer

EVP and CFO Devina Rankin provided a clear breakdown of the figures. She explained that after adjusting Q4's reported $61 million EBITDA for $4 million in synergies, the implied full-year 2024 pro forma EBITDA for the business on a WM-measured basis is approximately $350 million. The 2025 forecast of ~$460 million is built from a 9% organic growth rate on that base, plus $85-$90 million of realized synergies.

David Manthey inquired about the expected financial impact from recent hurricanes and whether the soft industrial vertical could become a source of upside in 2025.

Answer

EVP & COO John Morris stated that no material financial impact from the recent hurricanes is included in the current outlook. President & CEO Jim Fish acknowledged the softness in the industrial economy, reflected in a 4.1% decline in roll-off volumes, and suggested a post-election pickup is possible but uncertain. EVP & CFO Devina Rankin noted that interest rates and housing starts are key macro indicators they are watching for this segment.

Asked three specific factual questions: the expected incremental revenue carryover into 2025 from acquisitions, the reason for the increase in interest expense guidance, and for confirmation on the approximate quarterly sales of the TRI-BUILT private label brand.

Answer

The executive confirmed that revenue carryover from 2024 deals would be 3-4% into 2025. The higher interest expense is due to a larger debt balance and rising floating interest rates. He also confirmed the analyst's math on TRI-BUILT's quarterly sales was 'in the ballpark'.