Gerard Sweeney

Gerard Sweeney questioned the potential for wallet share expansion and access to new customers or new customer segments through the Thermon acquisition, considering CECO's long-cycle and Thermon's short-cycle business models.

Answer

Todd Gleason, CEO of CECO Environmental, affirmed that the acquisition offers opportunities to leverage customer relationships, markets, and growth by going to market together. He noted that both companies solve unique problems for similar reasons, leading to commercial synergies, especially in large, complex projects requiring thermal management and advanced controls.

Gerard Sweeney of Roth Capital Partners sought more details on the Thermon acquisition, specifically exploring opportunities for increased wallet share on existing projects versus gaining access to new customers, and the potential for Thermon's large aftermarket exposure to grow with CECO's customer base. He also asked about the longevity of CECO's power pipeline, inquiring how far out on the curve the company is looking, given that large turbine manufacturers are booking into 2028-2030.

Answer

CEO Todd Gleason highlighted that the Thermon transaction stands on its own before synergies, emphasizing growth pursuits. He noted that both companies solve problems for customers in unique ways, leading to commercial synergies, especially on large, complex projects requiring thermal management. He also mentioned leveraging Thermon's advanced controls applications. Regarding the power pipeline, Mr. Gleason clarified that the $1 billion-$2 billion pipeline represents opportunities expected to be booked within the next 12-18 months, potentially two years. CFO Peter Johansson added that they do joint planning with customers, and while timing changes, demand exceeds supply, positioning CECO to deliver solutions well into the 2030s.

Gerard Sweeney asked about the potential for a derivative, follow-on impact from tariffs on CECO's customers later in the year, the revenue timing for large power project orders, and for updated statistics on the size of the power pipeline.

Answer

Todd Gleason (executive) acknowledged the broader concern about tariff-driven inflation but stated that customer activity remains strong. He confirmed that revenue from large power projects booked now would primarily be recognized in 2026 and 2027. He also reaffirmed that the power pipeline is substantial and consistent with prior commentary of pursuing roughly 4-5 times the historical number of jobs. Peter Johansson (executive) added that international projects are also contributing to the pipeline.

Gerard Sweeney sought more detail on the energy project pipeline, including potential win rates, and inquired about the Profire acquisition's business model, specifically its recurring revenue and cross-selling potential.

Answer

CFO Peter Johansson clarified the $450 million energy pipeline represents the total opportunity size over eight quarters. CEO Todd Gleason noted that for Profire, recurring revenue is about 20-25%, and the primary synergy is leveraging CECO's international infrastructure to expand Profire's model, which is currently 97% North American, into new global markets.

Gerard Sweeney asked about DMC Global's growth opportunities for DynaEnergetics in geothermal and international shale markets, including their go-to-market strategy. He also inquired about Arcadia's margin performance, specifically why anticipated improvements from Q3 did not materialize and if any fixes or investments are needed.

Answer

President and CEO James O'Leary emphasized the focus on maximizing operating leverage in cyclical markets. For DynaEnergetics, he highlighted enhanced geothermal (EGS) as a similar technology to fracking, leveraging existing sales channels and global footprint, particularly in North America. He also mentioned NobelClad's unique position in the U.S. Naval Readiness Program, anticipating a doubling of submarine volume, and DynaEnergetics' efforts in international shale, specifically Vaca Muerta in Argentina and Saudi Arabia. Regarding Arcadia, Mr. O'Leary stated no obvious fixes are needed, attributing margin pressure to a broader industry downturn, worsened by high interest rates, tariffs, and slower rebuilding efforts in key markets like Los Angeles and Vegas, which are impacting the entire construction sector.

Gerard Sweeney asked about DynaEnergetics' growth opportunities in enhanced geothermal and international shale markets, including the go-to-market strategy. He also inquired about Arcadia's margin performance, particularly the unexpected decline in Q4, and potential fixes or investments needed.

Answer

President and CEO James O'Leary explained that DynaEnergetics' product for enhanced geothermal (EGS) is similar to fracking technology, positioning them uniquely for this North American and global opportunity. For international shale, he mentioned efforts in South America (Vaca Muerta, Argentina) and Saudi Arabia. Regarding Arcadia, O'Leary attributed margin pressure to a broader industry downturn, increased interest rates, and delays in the Los Angeles rebuilding efforts, noting no specific internal issues. He emphasized maximizing operating leverage during cyclical downturns.

Gerard Sweeney of ROTH Capital Partners requested more detail on the rightsizing at Arcadia, including the extent of the drag from the high-end residential business, and asked about opportunities for working capital improvements to generate cash.

Answer

Interim CEO James O'Leary explained that the Arcadia rightsizing, which is now 'in the rear view mirror' from an EBITDA drag perspective, involved a significant FTE reduction in the high-cost custom residential business. CFO Eric Walter confirmed that improving working capital management is a key focus for 2025 to drive free cash flow, with specific opportunities identified across all businesses, particularly at Arcadia.

Gerard Sweeney from ROTH Capital Partners LLC requested details on the operational improvement strategy for Arcadia, including the state of its ERP system and potential low-hanging fruit. He also asked about the relative impact of market headwinds versus operational execution on Arcadia's performance and questioned if a lack of sales focus contributed to the backlog decline in high-end residential.

Answer

Executive Chairman James O'Leary explained that as a former family business, Arcadia's systems and personnel were underestimated and not robust enough for a public company, contributing to the goodwill write-off. CEO Michael Kuta detailed specific initiatives, including improving supply chain sourcing, S&OP processes, demand planning, and finishing operations to improve lead times. O'Leary confirmed that underperformance in the high-end residential business, with its high contribution margins, had a disproportionate negative impact on factory absorption and profitability. Kuta also confirmed that after building an 18-month backlog, the focus shifted to fulfillment, creating a "valley" in new orders.

Gerard Sweeney asked about the contracted capacity for the 70,000 metric ton India facility, the mix of packaging and textile customers, pricing and margin differences between textile and packaging, the continuation of 'Made with Loop' marketing, and the detailed timeline for the India facility's construction and commissioning.

Answer

Daniel Solomita, CEO of Loop Industries, stated that the company expects 5-6 total customers for the India facility, with Tyrell Plus and Nike currently secured, and negotiations ongoing for additional CPG and textile brands to cover the entire capacity. He noted that while Loop is agnostic between packaging and textile, textile currently commands higher premiums due to new European regulations and the unique quality of Loop's virgin-like material. Solomita confirmed the intent to continue 'Made with Loop' marketing, especially leveraging co-branding opportunities around circularity for textile waste. Regarding the timeline, he clarified that the project is greenlit, detailed engineering is underway, and construction is scheduled for completion in Q4 2027, moving methodically without a traditional 'groundbreaking' event.

Gerard Sweeney asked about the contracted capacity for the 70,000 metric ton India facility, the pricing and margin differences between textile and packaging output, the continuation of co-marketing and co-branding initiatives like 'Made with Loop,' and the detailed timeline for the India facility's construction and commissioning.

Answer

Daniel Solomita, CEO of Loop Industries, stated that the India facility expects to have five to six total customers, with Tyrell Plus and Nike currently under contract, and negotiations ongoing with other CPG and textile brands to secure the remaining capacity. He explained that while Loop's technology is versatile for both packaging and textile, the textile side currently commands higher premiums due to European regulations and the unique textile-to-textile recycling capability. Solomita confirmed plans to continue co-marketing, introducing a sub-brand 'Twist' for textile material, and leveraging circularity for co-branding. Regarding the timeline, he clarified that the project is approved, detailed engineering is underway, and construction is scheduled for completion in Q4 2027, emphasizing that the project is on schedule and budget.

Asked for details on offtake agreements, including timing, structure (cost-plus vs. fixed price), and their relation to project milestones. Also inquired about the next steps for the company regarding financing and site selection.

Answer

Offtake discussions are progressing well for long-term (3-5 year) contracts. Due to India's low-cost structure and locked-in feedstock prices, Loop can offer fixed-price contracts with a take-or-pay element, which is attractive to customers. The next major milestones are securing customer contracts, finalizing the land selection in Gujarat, and arranging debt financing, for which KPMG has been hired.

Gerard Sweeney of Roth Capital Partners, LLC inquired about the timing and structure of offtake agreements, their connection to the India project's progress, and the company's next steps regarding financing and site selection.

Answer

CEO Daniel Solomita explained that offtake discussions are advancing, focusing on 3-5 year fixed-price contracts with 'take or pay' clauses to ensure bankability. He noted that due to India's low-cost structure, pricing is very competitive. Solomita confirmed that KPMG has been hired to syndicate debt financing and that site selection in Gujarat has been narrowed to two locations, with customer contracts being the next major milestone.

Asked about the timing for recognizing engineering services revenue, key milestones to track for the India project, and the potential for future licensing opportunities beyond the current deals.

Answer

Engineering revenue will start to be recognized in the next quarterly filing. Key milestones for the India project include completing the engineering package, securing debt financing, finalizing customer contracts, and establishing spinning partnerships. Loop is actively discussing other licensing opportunities, particularly in high-cost manufacturing countries in Asia.

Gerard Sweeney of ROTH Capital asked about the remaining hurdles for closing the Reed financing, the funding timeline post-closure, and the potential for licensing Loop's technology. He also questioned whether future growth would prioritize a second facility in India or focus on licensing agreements.

Answer

CEO Daniel Solomita clarified that the only remaining step for the Reed deal is final regulatory approval, which is expected imminently, with a full close in November. He confirmed the financing includes an initial EUR 10 million tranche. Solomita noted strong interest in licensing the technology, particularly in high-cost regions, and confirmed that Loop is actively planning for a second, larger facility on the same site in India, which would be dedicated to fiber-to-fiber recycling.

Gerard Sweeney inquired about Farmer Bros. Co.'s growth opportunities in a challenging macro environment, specifically regarding driving better penetration, reducing churn, stabilizing volumes, and the traction gained with larger restaurant groups. He also asked about leveraging allied products through the DSD network.

Answer

President & CEO John Moore acknowledged the difficult macro environment but emphasized a pivot to street-level execution to improve customer retention and address volume degradation. He detailed plans to activate the DSD network for new customer acquisition and product penetration, leveraging the company's scale for large enterprise groups. Moore confirmed existing traction with major restaurant groups and highlighted the significant role of allied goods in the business, with ongoing initiatives to maximize sales per truck stop.

Gerard Sweeney questioned Farmer Brothers' ability to drive growth, improve penetration, reduce churn, and stabilize coffee volumes within the current challenging macro environment, acknowledging the difficulty of cutting costs indefinitely. Sweeney also followed up on the traction Farmer Brothers has achieved with larger restaurant groups, asking if this growth initiative is still in its early stages. He further inquired how the recent split of sales and field operations leadership, with Brian Miller and Travis Young, specifically enables a greater focus on acquiring and serving larger restaurant groups. Sweeney sought clarification on whether "business acquisition" referred to acquiring new customers rather than corporate mergers and acquisitions, and asked if Farmer Brothers could leverage its extensive DSD network and "white glove service" footprint to add more allied products beyond coffee, thereby maximizing truck stops and increasing sales.

Answer

President & CEO John Moore acknowledged the difficult macro environment but outlined a pivot from pricing actions to street-level execution to improve customer retention. He emphasized activating the DSD network for both product penetration and new customer acquisition, and targeting larger enterprise groups by leveraging Farmer Brothers' unique national scale and comprehensive service capabilities. Moore clarified that Farmer Brothers already has a significant presence with diverse client types, including large restaurant groups, across various channels like healthcare, gaming, and institutional catering, leveraging its national footprint, indicating it's an area of existing strength with further growth opportunities. He explained that Brian Miller's role involves realigning business development efforts, fostering growth through referrals from existing top food and beverage organizations, and implementing new KPIs and incentive structures specifically for pure business acquisition activities. Moore confirmed that "business acquisition" refers to the acquisition of new customers. He also confirmed that allied goods are a significant part of their business and they continuously run initiatives to drive interest in different product types, highlighting the opportunity to aggressively meet customer needs with their good, better, best portfolio, efficient inventory, and improved product mix delivery.

Gerard Sweeney inquired about Farmer Bros. Co.'s growth strategy in a challenging macro environment, focusing on opportunities to drive better product penetration, reduce customer churn, and stabilize coffee volumes. He also asked about the company's traction with larger restaurant groups, the impact of the new leadership structure on sales focus, and the potential to leverage the DSD network for allied product sales beyond coffee.

Answer

CEO John Moore acknowledged the difficult macro environment but outlined a pivot to execution, emphasizing customer retention and aggressive DSD network activation for both product penetration and new customer acquisition. He noted Farmer Bros. Co. already serves large enterprise groups nationally across diverse channels and that the new leadership structure, particularly Brian Miller, allows for greater focus on business development and leveraging referrals. Moore confirmed that allied goods are a significant part of the business and the company actively runs initiatives to maximize sales off trucks, utilizing the good, better, best portfolio and improved inventory/working capital management.

Gerard Sweeney of ROTH Capital Partners asked about the progress of the recently split sales and operations teams, the primary challenges to expanding growth, and the timing of financial benefits from recent corporate rightsizing actions.

Answer

CEO John Moore detailed the restructuring of the business development and field operations teams, highlighting a new focus on 'centers of excellence' and leveraging route sales representatives for customer acquisition. He identified the competitive landscape and macroeconomic backdrop as key growth challenges. Executive Vance Fisher clarified that the benefits from recent rightsizing would begin to appear in Q4 results and set a new baseline for fiscal year 2026.

Gerard Sweeney asked for details on Farmer Bros.' top-line growth strategy, including the impact of hiring a new VP of Sales, and inquired about the progress of operational optimization efforts.

Answer

CEO John Moore explained that the new VP of Sales, Brian Miller, is tasked with energizing business development, allowing Tom Bauer to focus solely on optimizing DSD operations. Moore characterized the optimization as being in the 'early to mid-innings,' with significant untapped potential in increasing product penetration within the existing customer base now that foundational issues like out-of-stocks have been addressed.

Gerard Sweeney of ROTH Capital Partners inquired about the company's initiatives for route growth and density, trends in customer churn, the role of SKU rationalization in resolving out-of-stock issues, and strategies for unlocking further growth from the existing customer base.

Answer

CEO John Moore explained that customer churn is stabilizing and retention is better than anticipated despite necessary price increases. He noted that out-of-stock and equipment availability issues have been resolved through better inventory management and SKU rationalization, all while reducing inventory days-on-hand and CapEx. Moore emphasized that the primary growth strategy is not adding new routes but rather optimizing existing ones and increasing product penetration within the current customer base by better equipping the sales team.

Gerard Sweeney asked for an update on customer retention and churn trends and inquired about the company's roadmap and timeline to achieving positive free cash flow.

Answer

Executive John Moore explained that while customer attrition rates are now in line with industry averages, total pounds per customer have declined due to industry trends and economic pressures. He noted that the focus on higher-profitability customers is improving margins but isn't yet fully offsetting attrition in terms of customer count. CFO Vance Fisher added that achieving sustainable positive free cash flow depends on renewed sales growth, margin protection, and working capital management, but stated it was too early to provide a specific timeline.

Gerard Sweeney from ROTH Capital Partners asked for more details on Mission Produce's international segment, including opportunities, investments, and the potential to expand further in Europe and Asia by replicating the success of the U.K. facility. He also inquired about pricing strategies with international retailers and whether the profitability in these markets is more contingent on the volume of Peruvian and Mexican harvests. Additionally, Sweeney sought clarification on the expected SG&A run rate, considering the recent increase due to performance-based incentives.

Answer

John Pawlowski, President and Chief Operating Officer, explained that Mission Produce's international strategy leverages excess fruit from Peruvian and Mexican harvests, with the U.K. facility serving as a successful anchor for building value with retailers through global sourcing and promotional planning. He noted that while Europe might present inorganic expansion opportunities in the long term, the current focus is on strategic programming with key customers. In Asia, the company is upgrading its team and talent to drive future growth. Pawlowski confirmed that international market opportunities and margins are indeed more dependent on the size of the Peruvian and Mexican harvests. Bryan Giles, Chief Financial Officer, clarified that over 50% of the SG&A increase was due to variable costs, particularly profit-sharing in the farming segment, which peaks in Q3/Q4, making a fixed run rate difficult to peg.

Gerard Sweeney asked for more details on Mission Produce's international strategy, including opportunities and investments, particularly regarding the UK facility's momentum and potential expansion in Europe and Asia. He also questioned if international market opportunities and margins are more dependent on the size of Peruvian and Mexican harvests. Finally, Sweeney inquired about the expected SG&A run rate, considering the increase attributed to performance and incentive-based compensation.

Answer

President and COO John Pawlowski explained that Mission Produce's global sourcing strategy primarily supports the U.S. market, with excess fruit opening opportunities in international markets. He highlighted the UK facility's success in building value with retailers and its role as an anchorhead, noting potential inorganic expansion in Europe long-term. Pawlowski confirmed that international market opportunities are indeed more dependent on the size of Peruvian and Mexican harvests. CFO Bryan Giles clarified that SG&A includes a variable profit-sharing component from the farming segment, which tends to peak in Q3 and Q4, attributing over 50% of the Q3 increase to these variable costs.

Gerard Sweeney asked for a deeper dive into Mission Produce's international strategy, including opportunities, investments, the success of the UK facility, potential expansion in Europe and Asia, and pricing dynamics with international retailers. He also inquired if international market opportunities are primarily driven by harvest size from Peru and Mexico, and sought clarification on the underlying SG&A run rate given the reported increase.

Answer

John Pawlowski, President and Chief Operating Officer, detailed Mission Produce's strategy of optimizing for the U.S. market while leveraging excess fruit for international growth. He highlighted the UK facility's success in building value with retailers and mentioned potential inorganic expansion in Europe, also noting investments in upgrading the Asia team and talent. He affirmed that international market opportunities are largely dependent on harvest volumes from Peru and Mexico. Bryan Giles, Chief Financial Officer, clarified that SG&A includes a significant variable component, particularly profit sharing from the farming segment, which peaks in Q3 and Q4, making a fixed run rate difficult to determine.

Gerard Sweeney of ROTH Capital Partners asked about consumer price elasticity for avocados, the expansion plans and acreage for the Blueberries segment, and the company's long-term capital allocation strategy after debt paydown.

Answer

President & COO John Pawlowski and CFO Bryan Giles confirmed that consumer demand for avocados has become more resilient at higher price points, driven by adaptation to inflation and a growing base of younger consumers. Regarding the Blueberries segment, CEO Stephen Barnard and CFO Bryan Giles detailed plans to roughly double acreage with new, premium varieties over the next couple of years. Giles stated that the near-term priority for free cash flow is debt reduction, after which returning capital to shareholders will be considered.

Gerard Sweeney of ROTH Capital Partners asked for a longer-term view on margins, questioning the balance between pricing benefits and cost-saving initiatives and whether further operational fine-tuning is possible.

Answer

CFO Bryan Giles explained that Q3 margin improvement was primarily driven by strong performance and astute buy-sell management in the Marketing segment, rather than cost savings. He noted that cost-cutting in the International Farming segment successfully mitigated the impact of lower volumes, establishing a lower cost base for future growth. President and COO John Pawlowski added that new internal processes enabled agile execution and expressed excitement about future growth from sales, marketing, and the expanding mango business. CEO Stephen Barnard concluded that the farming outlook is positive and the mango category is leveraging existing assets effectively.

Gerard Sweeney of Roth Capital Partners, LLC inquired about SKYX's path to achieving cash flow breakeven, the progress on mandatory code standardization, and the strategic impact of the new e-commerce executive hire from Amazon.

Answer

Rani Kohen, Founder & Executive Chairman, outlined the strategy for reaching cash flow breakeven, which involves reducing cash expenses and launching new high-margin products like the smart heater fan. Regarding code standardization, Kohen expressed confidence that it is a matter of 'when, not if,' citing progress with government safety organizations. He also detailed the extensive experience of the new e-commerce hire, Huey Long, in building major online brands and platforms for companies like Amazon and Walmart, positioning him to drive significant growth.

Gerard Sweeney of Roth Capital Partners, LLC asked about the potential market size represented by the five new PowerTech pilot customers, the differences in due diligence between oil & gas and energy infrastructure clients, and the company's manufacturing capacity to meet future demand.

Answer

CEO Ryan Ezell explained that the five new pilot customers all have footprints similar in size to or larger than their anchor customer, ProFrac. He detailed the diligence process, which begins with proving the Varex monitoring system's capabilities. Regarding capacity, he stated Flotek has a backlog of analyzers and can build larger units within a four to eight-week timeline, with over 200 units available for custody transfer deployment.

Gerard Sweeney inquired about the sales cycle for the Data Analytics custody transfer business and the growth strategy for the newly acquired PWRtek power generation assets, including team expansion and market positioning.

Answer

CEO Ryan Ezell stated that the custody transfer sales cycle is accelerating now that its new XSPCT unit is in full production, with a major E&P operator's adoption serving as a key proof of concept. For PWRtek's growth, Ezell outlined a hybrid push-pull strategy involving direct sales to large E&Ps and channel partnerships with energy service providers. He confirmed the sales force is already expanding and that the technology provides the certainty of gas quality needed to enable sales to data centers and for grid support.

Gerard Sweeney of ROTH Capital Partners asked for key milestones to watch for the Data Analytics segment in 2025. He also inquired about the outlook for North American natural gas demand and how an increase in gas-directed activity would benefit Flotek's prescriptive chemistry business.

Answer

CEO Ryan Ezell highlighted key milestones including double-digit increases in flare monitoring units, acceleration of custody transfer solutions in the second half of the year, and the addition of at least nine power gen units for diverse applications like AI data centers. Ezell stated that a strong natural gas market is a 'great hedge' for Flotek, as gas-heavy basins like the Haynesville require more complex, higher-margin chemistry systems, playing directly into the company's value proposition and long-term strategy.

Gerard Sweeney from ROTH Capital Partners asked for details on the Data Analytics sales pipeline and cycle, including the impact of regulations and the political environment. He followed up on the number of deployed flare monitoring units and their revenue impact, and questioned if the flare and chain of custody businesses were growing faster than anticipated.

Answer

CEO Ryan Ezell detailed a bifurcated sales cycle, with the core business at 9-12 months and the newer, regulated flare monitoring business cycle shortening to just weeks. He confirmed the number of active flare units grew from 3 to 11 since the last call and that the chain of custody business is ahead of schedule. CFO Bond Clement provided specific figures, noting flare monitoring revenue grew from $100,000 in August to $600,000 in September, demonstrating rapid traction.

Gerard Sweeney asked about current refrigerant volume trends amid strong summer heat, the status of EPA discussions regarding the AIM Act, and qualitative feedback on contractor adoption of refrigerant reclamation programs.

Answer

SVP of Sales and Marketing Kate Houghton confirmed strong volume since mid-June and expects a solid Q3. President and CEO Brian Coleman stated that despite the AIM Act's bipartisan roots, the administration is reviewing regulations, but Hudson is reinforcing the Act's importance with the EPA and Congress. Houghton added that contractor adoption of reclamation is growing, especially after they experience the process and payment firsthand.

Gerard Sweeney of Roth Capital Partners inquired about Hudson's visibility into upstream channel destocking, the company's own inventory management strategy amid falling prices, and the operational importance of virgin HFC gas distribution.

Answer

Brian Coleman, an executive, responded that while upstream inventories are expected to have declined in 2024, they remain significant, warranting caution on 2025 pricing. He clarified that Hudson manages its inventory to be sold within the next season and that the dollar value is decreasing as they reload at lower costs. Coleman also confirmed that virgin HFCs still constitute the majority of the market and Hudson's supply, although Hudson's mix includes a higher percentage of reclaimed gas than others.

Gerard Sweeney inquired about the revenue recognition timeline and gross margins for the $204 million Hawaii project, the sustainability of retail volume growth in Grand Cayman, and the execution timeline for three smaller upcoming projects.

Answer

CFO David Sasnett explained that Hawaii project revenue is recognized based on costs incurred, with a significant ramp-up expected to begin in Q1 2026. He and CEO Frederick McTaggart declined to disclose construction margins. McTaggart affirmed that recent retail growth is a permanent lift driven by population and business expansion, not just seasonality. Regarding the smaller projects valued at ~$20 million, the executives projected revenue recognition over a 12-month period, starting in the second half of 2025.

Gerard Sweeney of ROTH MKM inquired about the Hawaii desalination project's construction timeline and revenue allocation, the U.S. project backlog for the PERC and REC subsidiaries, and the potential size of the opportunity in the Bahamas' Family Islands.

Answer

Executive Frederick McTaggart and CFO David Sasnett responded. McTaggart stated the Hawaii project's construction phase is planned to start in Q4 2025. Sasnett clarified that while the development phase has a $27 million draw, revenue will be recognized based on costs incurred, and the final construction price includes inflation adjustments. Regarding the U.S. market, McTaggart described the bidding pipeline as 'quite busy' and the opportunity universe as 'getting stronger,' though competition is also increasing. For the Bahamas, he noted that smaller projects on the Family Islands, like Cat Island, can generate significant recurring revenue due to pricing scale, and that the high utilization of the Nassau plants presents a potential expansion opportunity.

Gerard Sweeney inquired about the current project pipeline, the strategic importance and scale of the new Cat Island project, a breakdown of the O&M revenue growth from PERC and REC, and the company's capital allocation plans following the Mexico settlement.

Answer

Executive Frederick McTaggart and CFO David Sasnett confirmed the project pipeline is active with many ongoing conversations, highlighting the Hawaii and Cat Island projects. McTaggart described the Cat Island project as a strategic catalyst for expansion into the Bahamas' family islands. Regarding capital allocation, McTaggart effectively ruled out share buybacks but noted the dividend would be reviewed by the board. Sasnett clarified that of the 75% increase in O&M revenue, $1.9 million was from the REC acquisition, with the remainder from new PERC contracts.

Asked about trends in end-market weakness, the health of the sales pipeline amidst economic uncertainty, and the company's strategy for reducing the high Days Sales Outstanding (DSO).

Answer

No increased market weakness has been observed. While some sales cycles have slowed slightly, overall demand is up, and the late-stage pipeline is robust. DSOs are high due to payment timing with a few large clients and billing process inefficiencies, which are being addressed with a new AP system to accelerate the billing cycle.

Gerard Sweeney asked if the successful implementation of the vendor management system is the primary key to resolving broader operational execution issues. He also questioned whether the changing political and environmental sentiment was affecting client demand and the sales pipeline.

Answer

CEO Perry W. Moss explained that while the system's completion is helpful, the broader solution involves applying a disciplined, metric-driven approach across the entire company, similar to what was done in sales. Chairman Daniel M. Friedberg added that the previous disruption was a unique event and not expected to repeat. On the macro front, Moss noted that prospective clients are increasingly focused on cost efficiency, which aligns perfectly with Quest's value proposition.

Gerard Sweeney asked about the strategic shift in the vehicle business away from lower-margin programs and its long-term implications for margins, as well as the company's target for inventory turns.

Answer

Executive Richard Warzala explained the strategic decision to exit high-volume, commoditized automotive applications that require heavy upfront investment, focusing instead on specialty applications to improve margins. Executive James Michaud added that while they aim to improve on the 3.1x inventory turns, they are cautious due to potential short-term inventory investments needed to manage geopolitical and trade issues.

Gerard Sweeney asked for a detailed explanation of the GAC commissioning process, questioning the root cause of production inconsistency and the basis for management's confidence in resolving the delays. He also inquired about the strong performance of the PAC business, specifically asking if there was a take-or-pay benefit in the quarter and seeking clarification on the margin impact from GAC start-up costs.

Answer

CEO Robert Rasmus explained that the commissioning issue is centered in "Zone 3," involving the fine-tuning of a chemical additive that binds the product. He emphasized that the company has successfully produced small, commercial-scale volumes, which is the basis for their confidence, and the current focus is on improving consistency and throughput for uninterrupted production. Treasurer and Chief Accounting Officer Stacia Hansen confirmed there were no take-or-pay impacts in Q1 results and that gross margin would have been approximately 5% higher without the GAC start-up costs and a one-time 2024 accounting adjustment.

Gerard Sweeney asked for a detailed explanation of the GAC commissioning delays, seeking to understand the root cause of production inconsistency and the basis for management's confidence in the revised timeline. He also questioned the strong PAC margins, asking about potential take-or-pay benefits and the impact of GAC start-up costs.

Answer

CEO Robert Rasmus confirmed the core issue is in "Zone 3," involving the binding and reagglomeration process, and stated the team is fine-tuning it for consistency and throughput. He expressed confidence because the mechanical process is proven and they have produced small volumes, allowing them to provide a conservative new timeline. Treasurer and Chief Accounting Officer Stacia Hansen clarified that there were no take-or-pay impacts in Q1 and that gross margin was suppressed by approximately 5% due to GAC start-up costs and a one-time accounting adjustment in the prior year.

Gerard Sweeney inquired about the commissioning and ramp-up process for the Red River GAC plant, the potential impact of rising natural gas prices on PAC sales, and the outlook for 2025 CapEx, including the timeline and funding for a potential Phase 2 expansion.

Answer

Robert Rasmus, CEO and President, detailed the six-zone commissioning process, confirming they have produced GAC and are now optimizing for repeatability. He noted that higher natural gas prices boost PAC volumes, which is additive to results. For 2025, he projected $8-$12 million in total CapEx, excluding a potential Phase 2, and stated that a decision on Phase 2 would follow the full ramp-up of Phase 1, with an expectation to fund it from the balance sheet and operational cash flow.

Gerard Sweeney inquired about the remaining risks and major hurdles for commissioning the Red River GAC facility, sought confirmation on the production run rate timeline, and asked for details on the 'detuning' process. He also questioned the impact of low natural gas prices and the political landscape on the foundational PAC business.

Answer

CEO Robert Rasmus explained that with most structural work complete, the focus is on electrical and piping, with a modular commissioning process mitigating risks. He confirmed the goal for a full 25 million pound run rate by the end of Q1 2025, with potential production enhancements impacting Q3 2025. Regarding the PAC business, Rasmus noted that natural gas headwinds are not new and that strong results are from business optimization, not commodity prices. He also stated that PFAS regulation has strong bipartisan support, so the election outcome presents no change to their strategy.

Gerard Sweeney asked about the progress made on the Augusta facility against its 2027 target and questioned if any impediments are slowing down customer trials or if early successes could accelerate the process for others.

Answer

CEO Dustin Olson confirmed that the design for the next-generation plant is solid and that the company has already purchased the majority of long-lead equipment, which will allow for rapid acceleration once financing is secured. Regarding trials, he explained that while customer qualification timelines vary, PureCycle's proven ability to make product for diverse applications creates significant sales optionality, and current progress points to a strong commercial ramp in the second half of 2025.

Gerard Sweeney sought clarification on why PureCycle doesn't run Ironton at higher rates to build inventory for future compounding, and asked if Procter & Gamble is expected to be the largest customer for the year.

Answer

Executive Dustin Olson explained the strategy is to pace production with commercial orders to prudently manage working capital, particularly feedstock costs, and to optimize plant output for specific customer needs as they are finalized. Regarding P&G, Olson declined to forecast which customer would be the largest but emphasized the recent 8-K filing as a strong vote of confidence and reiterated the goal of fulfilling P&G's full allocation by year-end.

Gerard Sweeney inquired whether the Ironton plant can be run at a specific, controlled rate for extended periods and asked about the economic opportunity of compounding, specifically if it offers margin premiums beyond fixed cost absorption.

Answer

CEO Dustin Olson stated unequivocally 'yes,' confirming that the Ironton operation is now controllable and production can be dialed up or down as needed. Regarding compounding, he explained it creates value in two ways: by providing a higher-value, customized product for customers, and by allowing PureCycle to capture incremental margin on blended components, which enhances the overall profitability of its recycled polypropylene.

Gerard Sweeney inquired about the 40 new sales hires, their specific roles and ramp-up period, and the company's strategy for entering new metropolitan statistical areas (MSAs), questioning whether it would be organic or via acquisition.

Answer

Michael McCann (executive) confirmed the 40 hires represent about a third of the sales force and are primarily on-site account managers focused on OpEx, with a ramp-up period dependent on the account. For geographic expansion into the 20-30 targeted MSAs, he stated that while organic starts are possible, the primary strategy is through acquisition to achieve scale and leverage national customer relationships more quickly.

Gerard Sweeney asked about the company's progress in achieving the 'trusted advisor' status with existing customers, the impact of the skilled technician labor market on their strategy, and whether the ODR business transformation could be accelerated through further investment.

Answer

Executive Michael McCann stated they have a 'long way to go' but are making progress, moving from reactive repairs to proactive capital planning with clients. He emphasized that the scarcity of specialized labor is an advantage, as clients need their expertise for complex systems, which helps build trust. McCann noted that the strategy inherently takes time to build relationships but that growth will accelerate as they penetrate local capital budgets and expand their national footprint through M&A to serve larger customers.

Gerard Sweeney asked about the source of revenue growth, specifically from existing versus new customers, and the current wallet share with top clients. He also questioned the M&A strategy regarding acquiring specialty services and sought details on the sustainability of gross margins and the nature of future 'evolved offerings'.

Answer

Executive Michael McCann stated that growth is primarily coming from expanding relationships with existing customers through a coordinated local and national approach. He characterized the company's penetration with top clients as being in the 'first or second inning,' as they have intentionally targeted customers with significant scale for future growth. McCann confirmed they would absolutely acquire firms for specialty services to augment their portfolio. He also noted a long-term opportunity for margin expansion through a three-year plan that includes equipment upgrades, energy services, and professional consulting, building on the current OpEx-focused offerings.

Gerard Sweeney inquired about the primary challenges in executing tariff mitigation strategies, such as moving manufacturing. He also asked about the scope of company-wide optimization programs and the revenue impact of the delayed Jolly boot order.

Answer

Executive James Jenkins detailed that moving disposable production to Mexico is a more feasible mitigation strategy than moving it to the U.S., which would be cost-prohibitive. He confirmed the Lean Six Sigma optimization program is being rolled out company-wide. Both Jenkins and CFO Roger Shannon confirmed the delayed Jolly order amounted to EUR 3 million in revenue, the absence of which caused the company to miss its annual guidance.

Gerard Sweeney of Roth MKM inquired about the revenue impact from the transition to the LineDrive sales representative, the development of the sales pipeline, the drivers of the quarterly gross margin decline, and the nature of increased SG&A expenses from recent acquisitions.

Answer

Executive Roger Shannon quantified the U.S. sales decline at approximately $2.8 million year-over-year, attributing most of it to friction from the LineDrive transition. CEO James Jenkins added that they are confident the relationship will improve sales in the second half. Regarding gross margins, Roger Shannon explained the decline was due to a 3.8% headwind from acquisition purchase accounting and a 3.4% impact from profit in ending inventory, the latter of which is expected to reverse as a benefit when the inventory ships. He also noted that some of the $2.4 million in acquired SG&A is temporary integration and marketing costs, and they are actively seeking efficiencies.

Gerard Sweeney of ROTH Capital Partners questioned the significant projected increase in gross margins for Shimmick projects, from 2.5% in Q4 to a guided 9-12% for fiscal 2025. He also inquired about the potential for immediate operational changes to improve existing contracts, the expected cadence of margin improvement throughout the year, and the strategy and timeline for shifting from traditional bid work to more collaborative, negotiated contracts.

Answer

CEO Ural Yal explained that the 9-12% margin guidance is based on the profitability of the existing backlog, anticipated scope growth, and new, higher-margin work expected in 2025. He noted that while risk management improvements could help existing projects, the primary margin driver will be new wins. Yal confirmed that margins are expected to improve quarterly, likely peaking in Q3. Regarding the business mix, he stated the goal is to achieve a 50/50 balance between fixed-price and collaborative delivery projects by 2027 or 2028, viewing this as the ideal long-term portfolio structure.

Gerard Sweeney inquired about the expected trajectory of Shimmick Projects' gross margins, the current state of bid activity, and whether new projects are meeting target margins. He also asked for a breakdown of the remaining Legacy Projects backlog and the future margin profile for those jobs, as well as the status of cash received from a recent settlement.

Answer

CEO Steve Richards and Interim CFO Amanda Mobley confirmed that gross margins for Shimmick Projects are expected to increase as higher-margin work replaces legacy projects. Richards noted that bid activity is strong, with opportunities in the upper-teens margin range. Mobley detailed the remaining Legacy backlog, stating the Golden Gate Bridge project has about $40 million left, with the rest belonging to another lock project. She clarified these legacy jobs will carry a zero margin going forward, as high legal costs associated with settlements will not recur. Mobley also confirmed that proceeds from a separate lock settlement were received and used to pay down debt.

Gerard Sweeney of ROTH Capital Partners inquired about the mechanics of the proposed Cost of Service Adjustment (CSA) and the implications of a 'notice to proceed' from Procter & Gamble on future investment and revenue.

Answer

Chief Operating Officer Christopher Krygier detailed the proposed Cost of Service Adjustment (CSA), explaining it's a 5-year, FERC-inspired formula for annual rate updates designed to reduce regulatory lag. President and CEO Ron Fleming clarified that a 'notice to proceed' from Procter & Gamble initiates a 2-3 year design and permitting phase, which precedes a separate 'notice to construct'.

Gerard Sweeney inquired about the newly proposed Cost of Service Adjustment (CSA) mechanism, seeking details on its structure, and also asked about the implications of receiving a 'notice to proceed' from Procter & Gamble, specifically regarding investment and revenue visibility.

Answer

Chief Operating Officer Christopher Krygier explained that the CSA proposal is a FERC-inspired formula for annual rate adjustments based on updated financials, intended to run for 5-year cycles between full rate cases to reduce regulatory lag. President and CEO Ron Fleming clarified that a 'notice to proceed' from Procter & Gamble initiates the design and permit phase for new infrastructure, with a subsequent 'notice to construct' leading to a 2-to-3-year process before revenue generation.

Gerard Sweeney from ROTH Capital Partners inquired about the potential impact of the recent political landscape changes on manufacturing reshoring and semiconductor opportunities in the Greater Phoenix area. He also asked for the specific dollar amount of the Buckeye growth premium for the quarter.

Answer

Ron Fleming, President and CEO, stated that recent political shifts would likely accelerate Arizona's existing economic development boom. He noted that growth is pushing to outlying areas due to housing affordability and better access to large-scale power infrastructure for new manufacturing facilities. Michael Liebman, CFO, specified that the Buckeye premium was just under $920,000 for Q3 2024, a 25% increase year-over-year, bringing the year-to-date total to $2.2 million.

Gerard Sweeney from ROTH Capital Partners inquired about the impact of the changing political landscape on manufacturing reshoring and semiconductor opportunities in the Greater Phoenix area, and its effect on Global Water's operations. He also asked for the specific amount of the Buckeye premium for the quarter.

Answer

President and CEO Ron Fleming stated that the political changes would likely accelerate the already significant industrial manufacturing investment in Arizona. He noted that factors like housing affordability and power supply availability are pushing development towards Global Water's service areas. CFO Mike Liebman specified that the Buckeye premium was just under $920,000 for the quarter, a 25% year-over-year increase.

Inquired about the avocado expansion plan, including the timeline, economics, and yield projections, as well as the status of the real estate joint venture regarding future cash distributions and capital expenditures.

Answer

The company detailed its multi-year avocado expansion, aiming for 30 million pounds by 2029 with highly favorable economics (over $20,000/acre profit). The real estate JV is self-funding its CapEx, including a new bridge, and the timing for the next shareholder distribution is not yet determined.

Gerard Sweeney from ROTH Capital Partners asked for details on the strategic shift to avocados, including the planting timeline for the new 1,000 acres and the underlying economics compared to lemons. He also inquired about the real estate joint venture, specifically the timing of the next cash distribution and the venture's capital expenditure outlook.

Answer

Executive Harold Edwards and Executive Mark Palamountain detailed the avocado expansion, explaining that while 1,300 acres are already planted, the full 1,000-acre expansion will occur over the next 2-3 years. They projected a long-term average yield of 30 million pounds by 2029. Palamountain highlighted the compelling economics, with farming costs around $5,000/acre and potential operating profit of $15,000-$20,000/acre, significantly higher than lemons. Regarding the real estate JV, Edwards stated the timing for the next distribution is uncertain as the venture is now self-funding its CapEx, including an upcoming bridge construction project, after terminating its credit line.

Asked whether the plant downtime impacted revenue, the potential effects of the recent political landscape changes on the business, and for a roadmap of the company's short-term transition plans post-divestiture.

Answer

The plant downtime impacted unabsorbed overhead and repair costs, not top-line revenue. The political changes are viewed as net neutral to positive, with bipartisan support for grid upgrades seen as stable. The short-term roadmap includes completing logistical items like rebranding and industry reclassification in Q4, while the longer-term focus is on organic regional expansion, potential acquisitions, and operational efficiency improvements through 2025.

The analyst asked about the scale and timeline of the Midwest/West expansion, the potential for acquisitions to accelerate it, and the timing of impacts from government stimulus spending.

Answer

The Midwest/West expansion is a significant opportunity expected to ramp up over 12-18 months, with acquisitions being a possibility. The impact from government stimulus spending is anticipated to be more significant in 2025.