Eric Gregg

Eric Gregg asked about the exclusivity terms of the Trane partnership for commercial HVAC and whether the oil-free centrifugal commercial compressor technology is additive to the $1 billion 2030 zero-emission sales target or merely a means to meet it given slower EV penetration.

Answer

Olivier Rabiller (President and CEO) clarified that new product lines are developed based on differentiated technology and growth opportunities, not to compensate for weaknesses elsewhere. He confirmed that the e-cooling technology is part of the $1 billion ambition, providing multiple drivers for growth. He also stated that while initial focus is with Trane, it does not preclude developing relationships with other players over time.

Eric Gregg from Foretree Island Advisory asked about the exclusivity duration of the Trane partnership for commercial HVAC. He also questioned whether the oil-free centrifugal commercial compressor technology is additive to the $1 billion 2030 zero-emission sales target or if it serves to compensate for a potential slowdown in zero-emission vehicle penetration.

Answer

Olivier Rabiller (President and CEO) explained that while initial focus is on Trane, Garrett will pursue other partnerships over time. He clarified that new product development is driven by differentiated technology and growth, not to offset other areas, and confirmed the new technology is part of the $1 billion zero-emission ambition for 2030, supported by diverse industry drivers.

Eric Gregg asked about the performance, form factor, and potential pricing attributes that differentiate Garrett Motion's eco-link centrifugal compressor technology for data centers and industrial use. He also sought clarification on the future capital allocation strategy, specifically regarding the balance between stock repurchases and debt paydown.

Answer

Olivier Rabiller (President and CEO, Garrett Motion) highlighted that the eco-link compressor's differentiation stems from high-speed electric motors for superior efficiency, low noise, and leveraging airfoil bearing technology developed for automotive fuel cell compressors. He emphasized benefits in weight, efficiency, and manufacturing maturity, particularly relevant with new low global warming refrigerants. Sean Deason (CFO, Garrett Motion) reiterated the commitment to returning 75% or more of adjusted free cash flow to shareholders over time, utilizing dividends, share buybacks, and debt repayment as levers, without committing to specific quarterly numbers due to market volatility.

Eric Gregg asked about the performance, form factor, and pricing attributes that differentiate Garrett Motion's eco-link centrifugal compressor technology for data centers and industrial use, and sought clarification on the future capital allocation strategy, specifically regarding stock repurchases versus debt paydown.

Answer

Olivier Rabiller (President and CEO, Garrett Motion) explained that the eco-link compressor's differentiation stems from high-speed electric motors for efficiency, low noise, and leveraging airfoil bearing technology, offering benefits in weight, efficiency, and maturity, especially relevant with the shift to low global warming refrigerants. Sean Deason (CFO, Garrett Motion) reiterated the commitment to returning 75% or more of adjusted free cash flow to shareholders through dividends, share buybacks, and debt repayment, without committing to specific quarterly numbers.

Eric Gregg of Four Tree Island Advisory LLC asked about the long-term revenue potential for the large turbo business for data center backup power and sought more detail on the non-linear stock repurchase strategy, given strong cash flow and a low valuation.

Answer

CEO Olivier Rabiller projected the large turbo business for gensets and marine applications could reach the "hundreds of millions of dollars" in revenue within three to five years, driven significantly by aftermarket sales. Regarding buybacks, CFO Sean Deason reiterated that the program is not linear and mentioned the company maintains "dry powder for block trades," while reaffirming the board's commitment to returning at least 75% of free cash flow to shareholders.

Eric Gregg followed up by highlighting the company's negative enterprise value and asked CEO In Keuk Kim why management has been slow to consider share buybacks, especially given WHOW Games' buyback activity, and if it's a cultural issue.

Answer

CFO Joseph Sigrist first noted that the sale of STIC shares last year positively impacted the public float, making buybacks less concerning regarding float size. CEO In Keuk Kim stated he could not speak for WHOW Games but understood their focus is also on growth. Joseph Sigrist further clarified that DoubleU's primary strategy is not buybacks, and their focus, similar to DoubleDown Interactive's, is on growth.

Eric Gregg expressed surprise at the $8 million goodwill write-down for SuprNation, given the business has roughly doubled since its acquisition, and sought a clearer understanding of the magnitude and rationale behind it. He also pressed management on the company's negative enterprise value, arguing that buying back its own shares is incredibly compelling, and asked CEO In Keuk Kim why management is taking so long to adopt such a capital allocation policy, especially given WHOW Games' history of stock buybacks.

Answer

Joseph Sigrist (CFO) confirmed the goodwill write-down was approximately $8 million, noting that such valuations are driven by third-party experts who consider various factors including comparables and weighted average cost of capital. Regarding capital allocation, Joseph Sigrist mentioned that the sale of STIC shares last year positively expanded the public float, reducing concerns about further shrinking it through buybacks. In Keuk Kim (CEO) stated he could not speak for WHOW Games directly but understood their focus is also on growth, leveraging DoubleDown's growth. Joseph Sigrist further clarified that WHOW's primary strategy is growth, similar to DoubleDown's, rather than primarily buybacks.

Eric Gregg from Four Tree Island Advisory LLC asked for clarification on the average utilization rate for the quarter, the employee count, the ongoing P&L impact from the sale of the Bridgend consulting business, and the reason for the negative margin in maintenance services revenue.

Answer

CFO Scott Flaherty stated the average utilization for the quarter was 87.2%, trending up from prior periods. CEO Austin Willis added that the employee count is approximately 420. Regarding the Bridgend sale, Willis explained that while its direct P&L was not material, the freed-up capital will be leveraged to acquire profit-making assets, driving positive future impact. He also clarified that the negative margin in maintenance services was due to the strategic buildup of labor to support a new contract with Jet2.com.

Eric Gregg of Four Tree Island Advisory questioned why the Q1 gain on sale of flight equipment was significantly below the 2024 average, sought clarity on the baseline for the $11.4 million increase in consultant fees, and asked for the rationale behind a 60% increase in employee headcount since 2022 despite modest growth in the number of engine assets.

Answer

CFO Scott Flaherty explained that trading activity is inherently 'lumpy' and one quarter is not indicative of long-term margins. President Austin Willis and CFO Scott Flaherty clarified that the consultant fees for the SAF project were an increase from a previously immaterial baseline and represent the 'lion's share' of the year's expected spend. Austin Willis attributed the headcount growth to the build-out of people-intensive services businesses, such as the engine MRO facilities in the U.S. and U.K.

Eric Gregg asked a series of questions regarding new engine purchases, including potential discounts on LEAP engines and their delivery timeline, the status of a Pratt & Whitney engine purchase, plans for investing in HPT durability kits, the impact of new, more durable engines on MRO growth strategy, and the reasons for lower JV earnings in recent quarters.

Answer

President Austin Willis and CFO Scott Flaherty addressed the questions. Willis declined to comment on specific OEM discounts but confirmed 9 of the previously announced Pratt & Whitney engines were purchased. He stated that durability kits will be implemented in the future and that their MROs are well-positioned for next-gen engines. Regarding JVs, Flaherty noted that earnings can fluctuate based on the timing of asset sales, similar to the core business.

Eric Gregg of Four Tree Island Advisory asked about the average remaining lease term, potential provisions for customer Azul, capital allocation strategy regarding buybacks, the cause of negative operating leverage in G&A, and the lumpiness of maintenance reserve revenues.

Answer

Executive Austin Willis stated the average remaining lease term is about two years and confirmed a zero accounts receivable balance with Azul, with no immediate provisions expected. He noted the appreciated stock price provides optionality for capital allocation. Both Willis and CFO Scott Flaherty attributed higher G&A to stock-based compensation and explained that maintenance reserve revenue lumpiness comes from long-term reserves tied to lease extensions, while short-term reserves are growing strongly.