David Silver

David Silver asked for details on the production reductions at Millsdale and the UK facility (Stalybridge) as part of Project Catalyst, specifically if all affected areas were in commodity surfactants. He also questioned if the 2026 CapEx guidance represented a new base for sustaining CapEx or included discretionary/growth-oriented projects, and how Stepan is adapting to consumers trading down in personal care. Finally, he inquired about the impact of the global tariff situation on Stepan's asset competitiveness, particularly in Mexico, and the company's overall positioning.

Answer

Luis Rojo, President and CEO, confirmed that all Project Catalyst actions discussed were within the surfactants segment, involving ethoxylation assets at Millsdale (moving volume to Pasadena) and exiting a low-margin, high-CapEx organics business at Stalybridge. He explained that the 2026 CapEx guidance of $105-$115 million includes a normal base CapEx (under $100 million) plus some growth capital projects to support innovation. Rojo noted that Stepan is adapting to consumers trading down in personal care by focusing on Tier 2/3 customers and sulfate-free products. Regarding tariffs, he acknowledged a significant impact in 2025 from inflationary pressures and tariffs, stating that Stepan leverages its global production footprint and supply chain options to mitigate risks and will continue to evaluate opportunities, including seeking refunds for past tariffs.

David Silver questioned the specific production reductions at Millsdale and the U.K. facility under Project Catalyst, asking if all affected operations were in commodity surfactants. He also sought details on the 2026 CapEx guidance, whether it represents a new base for sustaining CapEx, and areas for discretionary growth. Additionally, he asked how Stepan is adapting to consumers trading down in personal care and assessed the company's positioning in the evolving global tariff environment.

Answer

Luis Rojo, President and CEO, confirmed that all affected facilities (Millsdale and Stalybridge) are in the surfactants segment, with Millsdale's ethoxylation assets moving to Pasadena and Stalybridge exiting a low-margin organics business to improve profitability. He explained that the $105-$115 million CapEx guidance includes a base level (under $100 million) plus small growth projects for innovation. Rojo noted Stepan's strategy for adapting to consumer trading down involves focusing on Tier 2/3 customers and sulfate-free personal care products. Regarding tariffs, he acknowledged a significant impact in 2025 and expects continued volatility in 2026, with Stepan leveraging its global footprint and seeking refund opportunities.

David Silver of CL King & Associates probed the sustainability of double-digit growth in agricultural surfactants, questioning the level of pre-buying. He also asked for clarification on the unfavorable product mix in Polymers and inquired about both the direct and indirect impacts of potential tariffs on Stepan's operations and customer collaborations.

Answer

President and CEO Luis Rojo responded that the majority of the growth was in the ag business and the company does not see signs of significant inventory buildup, unlike in 2022, due to the current high-interest-rate environment. He explained the unfavorable Polymer mix was due to strong double-digit growth in lower-margin commodity Phthalic Anhydride (PA) business, while higher-margin Rigid Polyols grew only low-single digits. Regarding tariffs, Rojo noted that while most business is regional, they are mitigating raw material import impacts through sourcing changes and pricing. He confirmed products from Mexico and Canada are covered by the USMCA. He stated there has been no significant change in R&D collaborations yet but expects more customer requests for formulation changes once the tariff situation stabilizes.

David Silver inquired about the CapEx outlook for next year, specific growth opportunities with strategic Tier 1 customers, and how new CEO Luis Rojo's strategic direction might differ from his predecessors.

Answer

CEO Luis Rojo stated that CapEx will return to a normal level of $120-$130 million annually. He noted discretionary spending will target high-return, low-capital projects like enhancing blending capabilities for the oilfield business. For Tier 1 customers, he highlighted growth opportunities in Latin American consumer markets, functional products like agriculture, and leveraging the company's leading low 1,4-dioxane capacity. Regarding his new role, Rojo emphasized focusing the existing strong team on key priorities and making 'surgical changes' to accelerate growth, rather than a major strategic overhaul.

David Silver asked about AdvanSix's nylon outlook, specifically recent industry capacity rationalization announcements in Europe and China, and the anticipated impact on end markets. He also inquired about sulfur market dynamics, including key drivers for recent price increases, expectations for year-end pricing, and confidence in supply availability. Additionally, he questioned the size and timing of Section 45Q carbon credits for 2026, the impact of a recent federal ruling on CO2, and the status of 2025 credit receipts. Finally, he asked if record ammonia and sulfuric acid production in 2025 indicates a permanent increase in capacity.

Answer

Erin Kane (President and CEO) detailed capacity rationalization efforts in Europe (Fibrant shutdown, DOMO insolvency) and China's managed operating rates, expecting more balanced supply and demand. She noted sulfur prices are near 20-year highs, driven by both supply constraints and stronger demand, anticipating prices to moderate in 2026, and confirmed ample supply. Chris Gramm (Interim CFO) clarified that the federal ruling on CO2 does not impact 45Q credits, which are tax-law based, and expects $18 million in credits for 2021-2023 upon DOE approval, with 2025 credits awaiting audit completion. Erin Kane attributed record ammonia and sulfuric acid production to focused repair, maintenance, capital investments, and incremental debottlenecking, indicating ongoing efforts to optimize asset utilization.

David Silver noted AdvanSix's record ammonia and sulfuric acid production in 2025 despite the age of the facilities, asking if this indicates a permanent increase in nameplate capacity due to debottlenecking or process improvements, or if it was due to shorter-term operating performance variables.

Answer

President and CEO Erin Kane attributed the record production to improved rates, focused repair, maintenance, capital investments, preventative maintenance programs, and incremental debottlenecking efforts. She stated that currently disclosed capacities remain good reference points, but they will assess if updates are needed, emphasizing the ability to monetize additional profitable volumes from these assets.

David Silver asked for qualitative details regarding the recent intellectual property settlement for 'Easy Blocks,' specifically inquiring about the nature of the settlement, such as whether it involved a new customer relationship or a monetary component.

Answer

CEO Erin Kane characterized the settlement as a win for AdvanSix, emphasizing the importance of protecting intellectual property. She confirmed a monetary settlement and an agreement regarding patent use and licensing, stating that it helps establish the right customer and distribution base while deterring importers violating SADAP, ultimately positioning the company for increased sales.

David Silver of Freedom Capital Markets inquired about the outlook for the ammonium sulfate business, including the fall fill program and pricing dynamics relative to urea. He also asked about the predictability of profitability in the current chemical industry environment, strategies for managing the vertically integrated production chain amid mixed demand for products like nylon, and the key drivers for improved second-half free cash flow, specifically questioning the timing of cash receipts from 45Q tax credits.

Answer

President & CEO Erin Kane highlighted a strong start to the fertilizer year with a robust order book for the fall fill program, expecting ammonium sulfate premiums to urea to remain healthy. She expressed cautious optimism about the overall business, citing the company's diversified portfolio and U.S.-based operations as key strengths. On operations, Kane noted the company is selectively managing nylon exports and investing in production flexibility. Interim CFO Christopher Gramm explained that second-half cash flow is expected to strengthen, driven by anticipated 45Q tax credit refunds within the current calendar year and the seasonal cash inflow from the ammonium sulfate pre-buy program in Q4.

David Silver of Freedom Capital Markets inquired about the outlook for the ammonium sulfate business, the stability of the chemical portfolio amid macro uncertainties, strategies for managing the integrated production chain with varying demand, and the drivers for second-half cash flow improvement, including the timing of 45Q tax credit receipts.

Answer

President & CEO Erin Kane addressed the market dynamics, explaining that a strong fall fill program is expected for ammonium sulfate with robust pricing premiums to urea. She expressed cautious optimism for the chemical portfolio, citing the company's U.S.-centric, diversified model as a buffer against macro headwinds and tariff impacts. Kane also detailed strategies for maintaining high utilization, such as selective exports and investments in production flexibility. Interim CFO Christopher Gramm detailed the path to improved second-half cash flow, highlighting the ammonium sulfate pre-buy program's seasonal cycle and the anticipated cash refunds from 45Q tax credits, which are expected within the calendar year following a standard IRS audit.

David Silver of Freedom Capital Markets inquired about the outlook for the ammonium sulfate business, the stability of the chemical portfolio amid market weakness, strategies for managing the vertically integrated model, and the drivers for second-half cash flow improvement, including the timing of 45Q tax credit receipts.

Answer

President & CEO Erin Kane addressed the market outlook, highlighting a strong fall fill program for ammonium sulfate and the resilience of their diversified, U.S.-focused portfolio. She explained that strategic selectivity in nylon exports and investments in production flexibility help manage the integrated model. Interim CFO Christopher Gramm detailed the key levers for second-half cash flow improvement, noting the ammonium sulfate pre-buy program's seasonal benefit and the expected cash refund from 45Q tax credits within the calendar year following a standard IRS audit.

David Cyrus Silver of CL King & Associates inquired about AdvanSix's strategic playbook for navigating economic uncertainty, focusing on inventory management and financial flexibility. He also asked for details on the sulfur supply chain, the demand outlook for ammonium sulfate post-spring, marketing strategies for the protracted downturn in the nylon market, and the status of patent infringement proceedings for the company's EZ-BLOX additives.

Answer

CEO Erin Kane and CFO Siddharth Manjeshwar addressed the questions. Manjeshwar highlighted the company's strong balance sheet, with leverage around 1x, and a focus on cash flow and working capital efficiency rather than building inventory. Kane stated that the sulfur supply is believed to be ample and more balanced than current pricing suggests. She also noted that while the company receives overseas inquiries for ammonium sulfate, the primary focus remains on growing domestic demand. Regarding nylon, Kane clarified the strategy involves optimizing product mix and managing productivity amid a persistent global oversupply. She also confirmed that legal proceedings are underway to protect the EZ-BLOX patent in Europe, seeking damages and a permanent injunction.

David Silver of CL King & Associates asked for a breakdown of the 2025 CapEx guidance, the impact of regional natural gas spreads, competitive sulfur sources, details on increased nylon market competition, and the outlook for AdvanSix's non-fertilizer agricultural chemicals.

Answer

CFO Siddharth Manjeshwar detailed the $140-$160 million CapEx guidance, attributing the increase primarily to the SUSTAIN growth program spend rising to $20-$25 million. CEO Erin Kane explained that high EU natural gas prices support global urea prices, which benefits their ammonium sulfate pricing. She also noted that increased domestic nylon competition stems from restored supply after prior year disruptions. Kane concluded that the non-fertilizer ag chemical business remains challenged by low-priced Chinese imports, lagging the positive trends seen in dry fertilizers.

David Silver from Freedom Capital Markets sought clarification on the 'new technology commercializations' mentioned in the concluding remarks for Performance Chemicals and Oilfield Services, asking if these refer to expanding existing functional surfactant products or a new wave of product introductions, and requested qualitative insights into these developments.

Answer

President and CEO Patrick Williams explained that for Performance Chemicals, these are a series of specialized products for multiple applications, not mass markets, with typically 2-4 launches per year that will gradually build margin profile and revenue, with significant impact expected in Q3/Q4. For Oilfield Services, he highlighted the group's creativity in bringing new ideas and market approaches, emphasizing differentiation through technology, service, or innovation, which is expected to help overcome Q1/Q2 manufacturing barriers by Q3/Q4.

David Silver from Freedom Capital Markets asked about the drivers behind Fuel Specialties' record revenue and near-record operating profit in Q4, and whether this strength could continue into 2026. He also inquired about consumer trading-down trends impacting Performance Chemicals' product mix and its implications for growth, and sought clarification on the new technology commercializations mentioned for Performance Chemicals and Oilfield Services in 2026.

Answer

President and CEO Patrick Williams attributed Fuel Specialties' strong Q4 performance to product mix, expansion into new technologies beyond fuels, and global innovation, expecting another consistent year with potential M&A interest. He confirmed consumer trading down in Performance Chemicals, leading to a focus on manufacturing efficiencies, and projected flat growth for the business in 2026 before a later spike. For new technologies, he described specialized product launches throughout the year for Performance Chemicals and emphasized differentiation through technology and service in Oilfield Services, anticipating these efforts to drive improvements in the latter half of 2026.

David Silver inquired about the impact of tariff uncertainty on long-term R&D collaborations, the specific drivers behind the strong margin performance in Fuel Specialties, and the company's strategy for its share repurchase authorization.

Answer

President and CEO Patrick Williams stated that R&D collaborations have not slowed down and, in some cases, have accelerated as customers seek innovation. EVP and CFO Ian Cleminson attributed the strong Fuel Specialties margin to a favorable sales mix and good performance across all regions, noting that new GDI business is beginning to contribute. Regarding capital allocation, Patrick Williams confirmed the company intends to be 'more opportunistic' with share buybacks while maintaining a balanced approach that includes M&A, dividends, and organic investment.

David Silver of CL King & Associates questioned the integration and strategic role of the Latin American acquisition within Performance Chemicals. He also asked about the current demand profile for Performance Chemicals relative to initial expectations, the drivers behind the strong margins in Fuel Specialties, and for an update on the customer situation in the Latin American Oilfield business.

Answer

Patrick Williams, President and CEO, described the Latin American acquisition as a strategic move for in-country manufacturing that is meeting expectations and could serve as a model for future bolt-ons. He stated the 2025 goal for Performance Chemicals is to return to 2022 performance levels as customer demand shifts back to higher-value products. The strong Fuel Specialties margin was attributed to a favorable product mix, lower raw material costs, and internal improvement efforts. On the Oilfield situation, Williams reiterated it is a political issue and that Innospec is waiting for the customer to resolve it, confident that their product is essential.

David Silver sought clarification on the pace and total amount of cost savings, specifically reconciling the $32 million run rate, the $13 million related to Germany, and a previously mentioned $30 million. He also asked for a qualitative explanation of the 'enhanced innovation strategy' mentioned in the press release, inquiring if it refers to an enlarged selling effort, increased R&D, or other aspects. Lastly, he questioned the impact of lingering or targeted tariff-related announcements on Rogers' business with offshore OEM customers, including any signs of diversification away from US suppliers or changes in day-to-day strategies.

Answer

Senior Vice President and CFO Laura Russell clarified that the $25 million run rate initiative has a full-year benefit of $32 million, with an incremental $7 million hitting the P&L in 2026. The $13 million from Curamik Germany restructuring will deliver savings in the second half of 2026. She noted that approximately 70% of the $25 million was realized in 2025, impacting both expenses and gross margin/COGS. Interim President and CEO Ali El-Haj explained that the enhanced innovation strategy involves both an improved selling process and, more importantly, specific, differentiated product development projects targeting high-growth applications like data centers, communication, and EV batteries, aiming to solve existing and future problems. Regarding tariffs, Mr. El-Haj stated that Rogers' global manufacturing footprint neutralizes the issue, allowing local supply to customers in Asia, North America, and Europe. He noted that some OEMs shifting to local buying has been beneficial for Rogers, with plans to enhance European manufacturing capabilities.

David Silver sought clarification on Rogers Corporation's total cost savings, specifically the $32 million run rate, the $13 million related to Germany restructuring, and how these figures reconcile with a $30 million mention. He also asked for a qualitative explanation of the 'enhanced innovation strategy' mentioned in the press release, inquiring if it refers to enlarged selling efforts, increased R&D, or other aspects. Finally, he questioned the impact of tariffs and geopolitical shifts on Rogers' business with offshore OEMs, including any signs of diversification away from U.S. suppliers or changes in day-to-day strategies.

Answer

Senior Vice President and CFO Laura Russell clarified that $25 million was the run rate for previous initiatives (70% realized in 2025), with a full-year benefit of $32 million (incremental $7 million in 2026). The $13 million from Germany ceramic restructuring will materialize in H2 2026, impacting both operating expenses and gross margin/COGS. Interim President and CEO Ali El-Haj explained that the enhanced innovation strategy involves both enhanced selling and, more importantly, distinct R&D projects for differentiated, unique products targeting high-growth applications like data centers, communication, and EV battery technologies where Rogers seeks to increase participation. Regarding tariffs, Ali El-Haj stated that Rogers' global manufacturing footprint neutralizes the impact, allowing local supply to customers in Asia, North America, and Europe. He noted that OEMs shifting to local buying has been beneficial, and Rogers plans to enhance European manufacturing capabilities within 12 months.

David Silver of CL King & Associates questioned whether the current tariff environment has altered long-term customer attitudes toward collaborating with a U.S.-based company and asked for details on the balance of opportunities in the China sales funnel between the AES and EMS segments.

Answer

President and CEO Randall Gouveia responded that he has not seen any anti-American sentiment from customers and that the dialogues remain constructive, with a shared belief that the current trade issues will eventually normalize. He clarified that the opportunity funnel in China is fairly well balanced between the EMS business (with PORON, BISCO foams) and the AES business (with ADAS radar, power modules, and bus bars), serving diverse end markets like portable electronics, industrial, and EV/HEV.

David Silver asked about potential bottlenecks preventing targeted 2026 growth, specifically regarding Electronic Materials capacity and the status of the acquired Korea facility. He also sought clarification on the timeline for the next stage of precision clad strip capacity for the key customer. Additionally, he inquired about the consistent net use of capital for working capital, its drivers, and the impact of the clad strip quality event. Finally, he questioned whether Materion's contracts are contingent on metals prices and if procurement prices pose a risk to the order book.

Answer

CEO Jugal Vijayvargiya stated that Materion is well-positioned to support Electronic Materials demand with existing capacity and investments, with the acquired Korea facility expected to be qualified in the back half of 2026 for meaningful sales in 2027. He reiterated focus on ramping current precision clad strip production and supporting year-over-year volume improvement, without specific timelines for future capacity. CFO Shelley Chadwick explained that working capital increases are tied to growth and acquisitions, with the clad strip issue temporarily impacting Q4. She highlighted ongoing initiatives to manage inventory, AR, and AP more efficiently. Jugal Vijayvargiya clarified that contracts generally do not have contingencies on metals prices, and substitution due to price is unlikely given requalification requirements.

David Silver from Freedom Capital asked about potential bottlenecks for 2026 growth, particularly in Electronic Materials given recent investments, and the status of the Korea facility acquisition. He also sought clarification on the timeline for the next stage of Precision Clad Strip capacity, Materion's working capital needs given a five-year trend of net capital use, and whether any contracts are at risk due to fluctuating critical metals prices.

Answer

CEO Jugal Vijayvargiya stated Materion is well-positioned to support Electronic Materials demand with existing capacity and ongoing improvements, with the Korea facility expected to contribute meaningful sales by 2027 after qualification. He reiterated focus on ramping Precision Clad Strip production in Q1 to support year-over-year volume improvement. CFO Shelley Chadwick explained working capital increases were due to growth and acquisitions, with the Q4 quality event causing a temporary inventory halt, and outlined initiatives to improve efficiency. Mr. Vijayvargiya confirmed that Materion generally does not have contracts contingent on metals prices, and substitution due to price spikes is unlikely given requalification hurdles.

David Silver asked if the double-digit sequential order growth across all segments reflected deferred activity or pure organic growth. He also inquired about the overall impact of tariff issues on financial results to date and heading into 2026, the factors contributing to Electronic Materials' record 27% EBITDA margin, and the development and marketing potential of Materion's molybdenum-based ALD products.

Answer

CEO Jugal Vijayvargiya attributed sequential order growth primarily to good organic growth and market trends, with some potential deferred orders. CFO Shelly Chadwick highlighted the commercial impact of tariffs on China business, which was down 20% year-to-date, and a smaller raw material tariff impact. CEO Jugal Vijayvargiya explained Electronic Materials' record margins were due to cost structure adjustments during the semiconductor downturn, a stronger product mix (power, data storage, precious metals), and lower China business. He clarified that molybdenum-based ALD products were developed organically with Materion's investments and are marketed to multiple customers, replacing tungsten in the semiconductor market.

David Silver inquired about Materion's molybdenum development efforts, specifically whether the product was developed in collaboration with a single customer or on a proprietary basis, and its broader marketing potential.

Answer

Jugal Vijayvargiya, President and CEO, clarified that molybdenum is part of Materion's organically developed ALD product set, a result of 7-8 years of internal investment and collaboration with multiple customers. He emphasized its exciting potential as it replaces tungsten in the semiconductor market, with broad marketing opportunities across various customers.

David Silver of CL King & Associates asked about the effect of tariff uncertainty on long-term customer product development, the multi-year outlook for the defense market specifically, and what scenario planning steps, such as building inventory or increasing borrowing capacity, the company is taking.

Answer

President and CEO Jugal Vijayvargiya stated there has been no impact on long-term R&D collaboration, as customers still have future product needs. He affirmed a strong multi-year outlook for the defense market, calling the current quarter's softness a matter of timing. He confirmed Materion is leveraging its COVID-era playbook, balancing strategic inventory builds with overall inventory reduction. CFO Shelly Chadwick added that the company is reviewing its borrowing options as its credit facility is up for renewal this year.

David Silver of CL King & Associates asked for clarification on the $25 million CapEx for HCS, the nature of a $7.4 million M&A-related charge, and a broader strategic question about the company's marketing approach to capitalize on its strong position in the diverse Aerospace & Defense market.

Answer

President and CEO Jugal Vijayvargiya explained the HCS CapEx is for previously announced investments in additional and more cost-effective capacity to support growth in semi, industrial, and A&D. VP and CFO Shelly Chadwick clarified the M&A charge was primarily related to the divestiture of the Albuquerque business and a related facility closure. Jugal Vijayvargiya then detailed the A&D strategy, highlighting strong, diversified relationships with top players across commercial aerospace, commercial and government space, and global defense contractors.

David Silver asked about the company's evolving tax positioning, including the negative tax rate in Q1, the impact of the Ontario mining tax settlement, the ability to claim offsets with losses, valuation allowances, and the outlook for full-year 2026 cash taxes.

Answer

President and CEO Edward Dowling confirmed the Ontario mining tax settlement's impact. CFO Peter Fjellman explained that the effective tax rate swings are due to income in Canada and losses in the U.S., noting it's still early in the year to determine the full impact of valuation allowances and utilization for 2026 cash taxes.

David Silver from Freedom Capital Markets questioned the salt segment's economics, focusing on the increase in production and logistics costs per ton despite higher volumes. He also asked if salt shortages in specific metropolitan areas led to unusual impacts on logistics or per-ton margins, and sought clarification on the company's evolving tax rates, including the impact of the Ontario mining tax settlement, valuation allowances, and the full-year 2026 cash tax outlook.

Answer

Edward Dowling, President and CEO, explained that higher production costs are normal during the Goderich Mine's development sequence. Ben Nichols, Chief Commercial Officer, attributed increased distribution costs to basic inflationary pressures and shipping salt across a wider network to further destinations due to robust Q1 demand. Mr. Dowling noted the company prioritizes meeting customer obligations and that low industry-wide de-icing inventories are constructive for future planning. Regarding taxes, Mr. Dowling highlighted the positive impact of the Ontario mining tax settlement. Peter Fjellman, CFO, added that the effective tax rate swings are due to income/losses in Canada/U.S. and that the full impact of valuation allowances and cash tax for 2026 is still being determined.

David Silver of CL King & Associates inquired about the unusual increase in accounts receivable in the March quarter, early indicators from the upcoming salt bid season, and the long-term strategy for improving margins and production costs in the Sulfate of Potash (SOP) business.

Answer

CFO Peter Fjellman attributed the higher accounts receivable to the accounting treatment of insurance settlements, noting the balance will normalize. Regarding the bid season, CEO Edward Dowling and CCO Ben Nichols described a constructive market with low inventories and early municipal tenders indicating higher volume needs. For the SOP business, CEO Edward Dowling and COO Pat Merrin outlined a multiyear plan involving pond restoration and a future capital project at the dryer plant to materially reduce production costs.

David Silver inquired about the potential impact of tariffs on the salt business for the current winter season and asked whether recent performance improvements at the Ogden SOP facility were due to capital projects or operational changes, especially in light of the reduced CapEx budget.

Answer

President and CEO Edward Dowling stated that potential tariffs pose little risk to the current highway deicing season as inventory is already forward-deployed, though it could affect next year's planning. He clarified that the recent positive results at the Ogden SOP facility stem from operational improvements in managing pond health and brine chemistry, which are lowering operating costs. Key capital projects for the Ogden dry plant and Goderich mill are still planned for the future and are not part of the current deferrals.

David Silver of CL King & Associates asked about the long-term path to improving the Plant Nutrition segment's cost structure, the company's free cash flow outlook and potential cash tax liability for 2025, and the reasons for strong salt margins despite low volumes. He also requested an update on the Goderich mill relocation project and what the current management team is doing differently.

Answer

CEO Edward Dowling outlined a two-pronged approach for Plant Nutrition involving pond restoration and plant capital projects. CFO Jeffrey Cathey confirmed an expectation for positive free cash flow in 2025 and explained the complexity of forecasting cash taxes due to jurisdictional profit mix. On salt margins, Cathey noted a favorable DD&A accounting impact in low-volume quarters, while Dowling detailed the Goderich project's future cost benefits and attributed recent success to a renewed 'back-to-basics' strategy and leadership changes.

David Silver questioned why free cash flow for Q4 and full year 2025 came in below expectations, asking about differences in working capital or CapEx, and if a drag would extend into 2026 or if it would rebound.

Answer

Erik Aldag, CFO, attributed the lower free cash flow primarily to lower income compared to earlier expectations. He noted that working capital was elevated at year-end due to FX (weakness in US dollar), but benefits would be realized as receivables are collected and inventory sold. He expects free cash flow to rebound to the typical 6%-7% of sales range for 2026, with Q1 2026 expected to be better than Q1 2025.

David Silver asked for clarification on the lower-than-anticipated free cash flow for Q4 and full-year 2025, seeking insights into the differences compared to earlier projections, particularly regarding working capital or CapEx, and whether any drag might extend into 2026 or if a rebound to long-term targets is expected.

Answer

CFO Erik Aldag attributed the biggest driver to lower income relative to earlier expectations. He noted that working capital was slightly elevated at year-end due to FX (weakness in USD), but the benefits would be realized as receivables are collected and inventory sold. He expects free cash flow for 2026 to be in the typical 6%-7% of sales range, with Q1 2026 being better than Q1 2025, and Q2-Q4 2025 already at the 7% range.

David Silver asked if tariff uncertainty was affecting long-term R&D and customer collaboration on new projects. He also requested a detailed update on the PFAS remediation business, including trial progress and a significant new contract, and questioned if MTI was facing any competitive pressure in China for its PCC and foundry businesses.

Answer

CEO Douglas Dietrich stated that tariff uncertainty is not impacting long-term development activities, as products that drive efficiency and cost savings remain in high demand. On PFAS, Dietrich and executive Brett Argirakis provided an update, noting a strong pipeline, 15 new projects in Q1, and a large-scale municipal drinking water project in the Northeast being commissioned. Argirakis highlighted this project's unique reactor-based design and its potential for expansion. Regarding China, Dietrich asserted that MTI has not seen any loss of competitiveness and continues to win new contracts, as customers value their technology and the comprehensive value proposition they offer.

David Silver of CL King & Associates asked for details on productivity gains in the Engineered Solutions segment, clarification on a new FLUORO-SORB project, an update on the talc litigation status, and the outlook for new project start-ups in 2025.

Answer

CEO Douglas Dietrich and CFO Erik Aldag highlighted broad productivity improvements, including mining and back-office efficiencies, and growth in high-value refractory products. They described a new, large-scale FLUORO-SORB drinking water project in the Northeast. Regarding talc, Dietrich confirmed that mediation is progressing constructively. Executive D.J. Monagle outlined new satellite start-ups in Asia for 2025, with a strong pipeline focused on packaging and NewYield technology.

David Silver requested a breakdown of the $6 million cost performance benefit, the financial impact of scaling up pilot projects for new products like FLUORO-SORB, the effect of Chinese economic stimulus on business, and the strategy behind the second consecutive annual dividend increase after a history of infrequent hikes.

Answer

CFO Erik Aldag attributed the cost savings to a mix of lower raw material and energy costs, as well as significant productivity gains, particularly in acquired pet care facilities. Executive Brett Argirakis and CEO Douglas Dietrich clarified that most of the 250+ active FLUORO-SORB pilots are paid for and that the product can be used in existing equipment, minimizing capital outlay. Dietrich noted that despite a weaker Chinese economy, their foundry business grew 8% due to market penetration. He explained the dividend hike reflects the company's transformed profile, with more stable growth and cash flow, and the confidence to support shareholder returns alongside M&A.

David Silver of CL King & Associates requested a breakdown of the $6 million year-over-year cost benefit, asking about the contributions from raw materials, efficiency, and other factors. He also inquired about the financial impact of scaling up PFAS pilot testing and whether Chinese economic stimulus was affecting MTI's business there. Finally, he asked about the strategy behind the company's recent, historically infrequent, dividend increases.

Answer

CFO Erik Aldag attributed the $6 million cost improvement to roughly one-third each from lower raw material costs, reduced energy expenses, and strong productivity gains, particularly in acquired pet care facilities. On PFAS, CEO Douglas Dietrich and Group President Brett Argirakis noted that with over 250 active pilots globally, many of which are paid, the financial impact is manageable as the product works in existing customer equipment, minimizing upfront costs for MTI. Regarding China, Douglas Dietrich explained that despite a weaker economy, business is growing due to increased market penetration of their advanced solutions. He concluded that the recent dividend hikes reflect the company's transformation into a more stable generator of cash flow, providing the financial strength to support shareholder returns, buybacks, and M&A simultaneously.

David Silver from CL King & Associates asked if the current trade uncertainty is affecting long-term customer R&D collaboration and sought clarification on the drivers behind the significant Q1 share repurchase activity.

Answer

CEO Greg Henderson stated that while short-term tariff discussions are frequent, the company has not seen significant changes to long-term strategic R&D priorities with customers, as key megatrends like electrification continue to drive investment. CFO Meenal Sethna characterized the share buyback as the third priority in their capital allocation strategy, after organic growth/M&A and dividends. She noted the repurchases in Q4 and Q1 were periodic and based on market conditions and other uses of cash, confirming no change to the overall capital allocation strategy.

David Silver of CL King & Associates asked a big-picture question for the retiring CEO, requesting him to reflect on the most impactful structural changes implemented over the last 3-5 years that position the company well for the future. He also asked about the major challenges or opportunities Littelfuse must navigate to achieve its long-term goals.

Answer

CEO Dave Heinzmann responded that a key success factor has been aligning the company's strategy with long-term megatrends like sustainability, connectivity, and safety, which are stronger today than when first identified. He believes these investments have served the company well. As for challenges, he cited geopolitical situations but emphasized that the company's increased diversification across applications and markets, along with a strong team, will serve it well in a global business environment.

David Silver from CL King & Associates asked what current demand for the Systems business signals about longer-term industry trends and requested clarification on the FICT partnership, specifically its manufacturing footprint in relation to tariffs.

Answer

CEO Mike Slessor explained that while the Systems business provides good visibility into broad industry trends like CPO, it doesn't provide precise volume forecasting due to rapid innovation cycles. Regarding FICT, he clarified their manufacturing is in Japan but disassociated the partnership from the broader tariff discussion, noting the 1% margin headwind is from various global suppliers, not just FICT. The partnership's value is strategic access to unique substrate technology.

David Silver asked if tariff uncertainty is causing customer caution and delaying collaborative R&D or product development. He also requested an update on the company's aerospace initiatives and its new product commercialization rate for the year.

Answer

CEO Brady Ericson responded that development is 'full speed ahead' with no delays, noting increased customer interest in extending combustion programs and developing new engines for hybrid applications. On aerospace, he confirmed that a key quality certification is ongoing and customer reception has been very positive. He also stated that PHINIA expects to continue adding a 'couple of thousand-plus' new SKUs per year, consistent with its strategy.

David Silver of CL King & Associates asked about the potential sources of upside and downside risk to PHINIA's 2025 guidance and questioned how major customers are thinking about the current tariff environment.

Answer

CEO Brady Ericson identified a delayed commercial vehicle market rebound as the primary downside risk, while upside could come from a stronger-than-expected market, a weaker U.S. dollar, or continued Aftermarket strength. Regarding tariffs, Ericson noted that while customers are already regionalizing supply chains, proposed tariffs would likely impact consumer prices and volumes. CFO Chris Gropp added that PHINIA has minimal direct exposure to China tariffs.

David Silver asked about the indirect impact of tariffs on customer behavior, specifically regarding their willingness to engage in long-term R&D and collaborative projects. He also requested an update on the PFAS remediation business, including the number of pilot projects and details on a significant new contract. Lastly, he questioned if MTI was facing a competitive disadvantage in China due to its U.S. base.

Answer

CEO Douglas Dietrich stated that tariff uncertainty has not impacted long-term customer collaborations for high-value products like PCC satellites or Scantrol systems, as these projects drive efficiency and cost savings. Executive Brett Argirakis provided an update on PFAS, noting 15 new projects in the quarter, 6 full-scale systems now operational, and detailed a large-scale, unique reactor project in the Northeast. Dietrich asserted that MTI has not seen any competitive disadvantage in China, emphasizing that customers value their technology and reliability, and recently won a new contract there.

David Silver asked for details on the sources of efficiency gains in the Engineered Solutions segment, specifics about a new large FLUORO-SORB project, an update on talc litigation progress, and the outlook for new project start-ups in 2025.

Answer

CEO Douglas Dietrich and other executives, including D.J. Monagle, detailed efficiency drivers, including company-wide productivity, high-value refractory products, and the integration of pet care acquisitions. They confirmed the new FLUORO-SORB project is a full-scale drinking water application in the Northeast. Regarding litigation, Dietrich described mediation as 'constructive' but separate from other cases. Monagle outlined several new project start-ups in Asia for 2025, focused on packaging and new yield technologies.

David Silver inquired if the uncertain macro environment has impacted the pace or resourcing of long-term R&D collaborations with major customers. He also asked for clarification on the differing trends between the soft Western smartphone market and the stronger consumer electronics market in Asia.

Answer

CEO Ben Gliklich stated there has been "no pause in momentum" for long-term R&D projects, as they are tied to breakthrough technologies pulled by market demand. He clarified that the consumer electronics strength in the Americas was in PCs and other devices (ex-smartphones), while the strength in Asia was driven by the local Chinese smartphone market, partly due to government subsidies, and was not for export.

David Silver of CL King & Associates questioned the significant increase in R&D spending and asked for an outlook on the China business for 2025, considering various economic and geopolitical factors.

Answer

CFO Carey Dorman clarified the R&D increase is partly due to investments in new labs and Coperion spend. CEO Benjamin Gliklich added that the divestiture of the less R&D-intensive graphics business also affects the ratio. On China, Gliklich expects it to be a growth vector in 2025, driven by the EV market, and noted that while tariffs are an indirect risk, the broader trend of supply chain diversification out of China presents a long-term opportunity.

David Silver of CL King & Associates asked for an update on progress with the ViaForm and Kuprion technologies since their acquisition, particularly on customer collaboration and commercialization. He also inquired about key resourcing needs to meet multiyear growth targets.

Answer

CEO Benjamin Gliklich described the ViaForm transaction as an 'outstanding capital deployment' with a rapidly growing pipeline that is strengthening customer relationships. He noted Kuprion is progressing well, with strong commercial pull and a focus on scaling manufacturing, expecting the first product qualification this year. To support long-term growth, Gliklich highlighted investments in people and applications capabilities, including new labs in Vietnam and Thailand and a research center in India, to enhance customer proximity.

David Silver asked about the lack of an incremental contingent consideration accrual for RavenVolt despite strong ATS growth, the nature of recent share repurchases, and the value proposition driving new business success in the M&D segment.

Answer

CFO Earl Ellis explained that potential RavenVolt earnouts are reviewed quarterly and will be accrued if performance warrants it, and that Q1 share repurchases were to offset dilution. President and CEO Scott Salmirs described the M&D strategy as a focused, bundled offering where ABM acts as a facility resource with subject matter experts, going beyond simple janitorial services.

David Silver questioned the factors that could lead to the low end of the fiscal 2025 EPS guidance range and asked about the company's philosophy on employee count given its decline from pre-pandemic levels.

Answer

EVP and CFO Earl Ellis identified uncertainty in the commercial real estate recovery as the primary risk that could pressure results to the low end of the range. President and CEO Scott Salmirs explained that employee count as a ratio to revenue should moderate over time due to increased labor efficiency from new tools and a strategic shift toward less labor-intensive technical services.

David Silver from CL King & Associates asked for context on the large contingent consideration adjustment for the Ravenvolt acquisition. He also inquired about year-to-date new business wins and the company's evolving philosophy on walking away from underperforming contracts.

Answer

EVP and CFO Earl Ellis explained the adjustment is a mark-to-market of the earn-out based on Ravenvolt's significantly improved performance outlook over its full two-year measurement period. President and CEO Scott Salmirs noted that while they are on track for a record year in new business, they will update the figure at year-end. He clarified that walking away from business reflects a disciplined focus on profitability and value, not a commodity approach.

David Silver asked for a breakdown of the 2025 CapEx budget, more color on the genesis of the Zeolyst JV impairment charge, and clarification on the pass-through timing for rising sulfur costs.

Answer

CFO Michael Feehan stated that about $5-6 million of the $80-90 million CapEx budget is a roll-over from 2024, with the spending predominantly focused on growth projects in Kansas City (polyethylene catalyst) and Chem32 (catalyst activation). He explained the non-cash impairment charge reduced a portion of the accounting 'step-up' in the JV's value from a 2016 transaction, triggered by the revised demand outlook for emission control and sustainable fuels. CEO Kurt Bitting noted that sulfur cost pass-throughs occur mostly within the same quarter and are not a material drag on Q1 results.

David Silver asked for strategic color on the Trachte acquisition being a "new platform," inquiring about long-term plans for scaling the business and whether it might eventually form a new reporting segment.

Answer

CEO Beth Wozniak explained that Trachte fits nVent's M&A framework of acquiring and scaling businesses in high-growth verticals. She views it as a larger enclosure type that strengthens their position in utilities and data centers, with significant synergies within the existing Enclosures segment. For the foreseeable future, it will be managed and grown as a key part of the Enclosures portfolio.