Gerry Sweeney

Gerry Sweeney inquired about the anticipated timing for Corkscrew Grove Villages approval, the subsequent development steps, and the potential cash flow from Alico's 97% farmland utilization.

Answer

President and CEO John Kiernan indicated that the Corkscrew Grove Villages approval is expected by the end of fiscal year 2026 (Q3 or Q4), noting that local calendar control is limited. He outlined the necessary approvals (local, state, federal, with federal expected to take the longest) before construction can begin, and confirmed ongoing conversations with national homebuilders. Regarding farmland cash flow, Mr. Kiernan stated that specific forecasted information is not currently provided but will be considered for future calls.

Gerry Sweeney with Roth Capital inquired about the anticipated timing for the Corkscrew Grove Villages approval in 2026, specifically if it leans towards the third or fourth fiscal quarter. He also asked about the subsequent key steps for the Corkscrew project post-approval, leading up to construction, and whether these steps involve potential partnerships with developers or builders. Finally, Sweeney questioned the potential cash flow generation from the 97% utilization rate of Alico's farmland, seeking guidance for future modeling.

Answer

President and CEO John Kiernan stated that while the exact timing for Corkscrew Grove Villages approval isn't pinned down, a fiscal year 3Q or 4Q (by end of September) decision is not unreasonable, though local calendars are beyond their control. Regarding post-approval steps, Kiernan clarified that discussions with national home builders are ongoing but not solidified. He emphasized the need for local, state, and federal approvals (Army Corps of Engineers, Fish and Wildlife), with federal approval expected to be the longest process before permits can be issued. For the farmland cash flow, Kiernan indicated that Alico has not yet provided specific forecasted information or guidance but would consider addressing the request in the next quarter.

Gerry Sweeney inquired about the cadence of the 700 non-bearing avocado acres coming into production and the expected operating income per acre for avocados.

Answer

Mark Palamountain, EVP and CFO, explained that the 700 non-bearing acres, plus an additional 250-300 acres to be planted this year and next, will begin maturing in phases starting in 2027, with new plantings being twice as dense (120 trees/acre). He projected an average yield of 17,000 pounds per acre over a 10-year period, with a long-term average price of $1.30+ per pound, resulting in an estimated $12,000-$14,000 of operating profit per acre.

Gerry Sweeney asked about the high probability of the $38 million fire service tenders, what makes them high probability, and if the total $178 million opportunity could expand with upcoming NFPA determinations. He also inquired about margin recovery through higher absorption/production levels and the importance of the ERP system rollout for visibility.

Answer

CEO Jim Jenkins and CRO Barry Phillips explained that the $38 million tenders are high probability due to incumbent status, competitor struggles, multiple-brand strategy, and being written into specifications. They noted that the $178 million pipeline could expand significantly once new NFPA certifications are adopted in March 2026, which have caused tender delays. Jim Jenkins clarified that margin recovery is expected from increased operating leverage at full capacity and a shift back to higher-margin custom turnout gear from current commodity products. He also mentioned the impact of Latin America's high-margin softness and industrial geopolitical components. Regarding the ERP system, Jim Jenkins and Interim CFO Calven Swinea stated that the North American SAP implementation is prioritized for a June/July rollout, with other regions and acquisitions to follow, providing crucial visibility for the organization's "brains."

Inquired about the drivers of the gross margin decline, the reasons for high operating expenses, and the progress of the "head-to-toe" growth strategy in the fire services segment.

Answer

Management explained that gross margin was impacted by a temporary purchase variance issue (expected to reverse), purchase accounting from acquisitions, and inventory build. High OpEx was due to one-time travel, freight costs, and acquired company expenses, with $4M in savings identified. The "head-to-toe" strategy is gaining traction, leading to new opportunities, though a pending change in NFPA standards is causing some near-term purchase delays.

Gerry Sweeney inquired about opportunities for CECO in disaggregated power solutions for data centers, whether the power generation build-out might become elongated due to capacity constraints, and if CECO is exploring M&A opportunities on the power side.

Answer

CFO Peter Johansson explained that opportunities in disaggregated power depend on the microgrid's power source, with no single standard concept. He also stated that the power generation expansion would likely be elongated due to insufficient supply, driven by multiple demands beyond AI, extending through 2030-2040. CEO Todd Gleason confirmed that CECO's M&A pipeline is balanced, actively seeking organic and inorganic growth across all businesses, including the energy sector, citing past successful investments like Transcend.

Gerry Sweeney inquired about opportunities for CECO Environmental in disaggregated power solutions for data centers, the potential for the power generation build-out to be elongated due to capacity constraints, and the company's M&A strategy regarding expansion in the power sector.

Answer

Peter Johansson (CFO) explained that microgrid opportunities depend on the power source (e.g., small gas turbines), and the power build-out will be elongated due to insufficient supply to meet demand across data centers, reshoring, electrification, and general computing. Todd Gleason (CEO) confirmed a balanced M&A pipeline, noting past acquisitions skewed towards water and industrial, but expressed openness to smart investments in the energy space.

Gerry Sweeney of Roth Capital Partners, LLC asked about the achievability of mid-teens EBITDA margins in the next 1-2 years, the strategic trade-off between growth investment and margin expansion, any foreign exchange impacts, and the typical time lag for CECO's orders following a major power gen announcement.

Answer

CEO Todd Gleason reiterated that mid-teens EBITDA margins remain a long-term goal but stated the company is currently prioritizing investments to capture significant growth opportunities, which he considers a worthwhile trade-off. He confirmed any foreign exchange impact was de minimis and that the typical lag between a major OEM power generation order announcement and CECO securing its portion of the project is six to twelve months.

Inquired about the nature of the increased non-core project work, the potential for change orders, the expected margin trends over the next few years, the strategy for expanding the Axia electrical business into new markets, and future SG&A targets.

Answer

The increase in non-core work is a combination of pulling work forward from 2026 and some scope growth, for which change orders are being negotiated. Future margins are expected to trend up gradually towards the high end of the 9-12% guided range as new work is bid at an average of 14-15%. The Axia electrical division expands by leveraging a mobile team and acting as a subcontractor, which is less risky. The company has an aspirational goal to reduce SG&A as a percentage of revenue to 7.5%.

Gerry Sweeney of Roth Capital Partners, LLC inquired about the market opportunity pipeline for the U.S. services segment (PERC and REC) in the Southwest, growth prospects in the Caribbean, and how the manufacturing facility expansion will impact growth and market access.

Answer

CEO Frederick McTaggart detailed a U.S. pipeline of $10-30 million wastewater projects in Arizona and growth opportunities in Colorado. He confirmed a Caribbean focus on the Cayman Islands and the Bahamas. McTaggart and CFO David Sasnett explained the manufacturing expansion increases capacity for larger projects, with key drivers being nuclear, Florida municipal work, and pipe fabrication.

Gerry Sweeney of Roth Capital Partners, LLC inquired about the market opportunity pipeline for the company's U.S. operations, PERC and REC, particularly in the water-scarce Southwest. He also asked for an update on opportunities in the Caribbean, specifically The Bahamas, and questioned how the expansion of the Aerex manufacturing facility would impact its market potential and growth drivers.

Answer

CEO Frederick McTaggart detailed a strong U.S. pipeline, citing $10-30 million wastewater design-build projects in Arizona and growth opportunities in Colorado. For the Caribbean, he confirmed a focus on the Cayman Islands and The Bahamas. Regarding manufacturing, McTaggart and CFO David Sasnett explained the facility expansion increases throughput capacity for larger projects, driven by nuclear industry work, Florida municipal projects, and pipe fabrication.

Gerry Sweeney of Roth Capital Partners, LLC inquired about market opportunities in both the U.S. and Caribbean, specifically asking about the project pipeline for PERC and REC in the U.S. Southwest and growth prospects in The Bahamas. He also questioned how the expansion of the Aerex manufacturing facility would impact growth and what the key drivers are for that segment.

Answer

CEO Frederick McTaggart detailed a strong wastewater project pipeline in Arizona with projects ranging from $10-30 million, O&M renewals in California, and new design-build opportunities in Colorado. In the Caribbean, he confirmed the focus remains on the Cayman Islands and The Bahamas. Regarding manufacturing, McTaggart and CFO David Sasnett explained that the facility expansion increases capacity for larger projects and improves throughput. They identified the nuclear sector, new municipal water treatment plants in Florida, and pipe fabrication as the primary growth drivers for the segment.

Gerry Sweeney of Roth Capital Partners, LLC inquired about the market opportunity pipeline for the US Services segment (PERC and REC), particularly in the water-scarce Southwest. He also asked about growth prospects in the Caribbean and how the manufacturing facility expansion will impact the business.

Answer

CEO Frederick McTaggart noted strong interest in Arizona for wastewater projects ($10-30M) and smaller upgrade opportunities in Colorado. He stated the Caribbean focus is on the Cayman Islands and The Bahamas. McTaggart and CFO David Sasnett explained the manufacturing expansion increases capacity and throughput, driven by nuclear, municipal, and pipe fabrication work.

Gerry Sweeney from Roth Capital Partners, LLC inquired about the drivers behind the revenue decline, particularly the weakness in the industrial sector and its outlook. He also asked about the scope of margin pressure from client renewals and the progress of internal operational efficiency initiatives.

Answer

CEO Perry Moss explained that the industrial sector's performance tracks the general economy, but other sectors like food and grocery are performing well. He noted that while margin pressure on renewals is broad, it is most acute in the industrial space, and Quest negotiates for concessions like a greater share of savings or expanded business in return. Moss provided a detailed update on process improvements across source-to-contract, procure-to-pay, and order-to-cash workflows, stating they are in the 'bottom of the fourth' inning of these efforts, which are already improving efficiency and gross profit extraction.

Gerry Sweeney inquired if PureCycle plans to narrow its market focus to maximize returns and sought clarification on the exclusivity agreement with Procter & Gamble in Asia.

Answer

CEO Dustin Olson explained that while the company will eventually focus on the most profitable market segments, the current strategy for the Ironton facility is to prove its technology across a broad range of applications. This approach facilitates price discovery and builds a robust demand pipeline for future large-scale plants. Olson clarified that under its public license agreement with P&G, building a facility in a region like Asia grants PureCycle technology exclusivity in that region for the life of the patents.

Questioned about geographic expansion opportunities into new areas and the strategic thinking behind the pace of growth, specifically whether they would accept a short-term margin hit for faster long-term growth.

Answer

The company is focused on increasing fleet density in the Midwest, an area with growth potential. The pace of expansion is a constant balance; they avoid a 'build it and they will come' strategy, leveraging their vertical integration to manage inventory and fleet deployment in line with pipeline opportunities, while always assessing the trade-off between short-term costs and long-term growth.

Gerry Sweeney asked about geographic markets where NPKI has a limited presence but sees growth potential and how the company plans to enter those areas. He also explored the trade-off between accelerating growth, which might temporarily impact margins, and maintaining a more measured expansion.

Answer

President and CEO Matthew Lanigan identified the Midwest as an area where the company is looking to increase fleet density to capture opportunities. He explained that while they have a national footprint, they are managing inventory scale based on market demand. Lanigan acknowledged the constant evaluation of balancing fleet build-out with pipeline opportunities, stating they resist a "build it and they will come" approach by leveraging their vertically integrated model.

Gerry Sweeney asked about geographic areas where NPKI is not currently present but sees growth opportunities, and how it plans to enter those markets. He also explored the trade-off between accelerating growth, which might temporarily impact margins, versus a more measured expansion.

Answer

President and CEO Matthew Lanigan identified the Midwest as an area where the company is looking to increase fleet density. He explained that NPKI is managing inventory scale in line with opportunities and uses its vertically integrated model to avoid getting too far ahead of demand. He acknowledged they constantly assess the balance between ramping up fleet build for future opportunities and managing near-term performance.

Gerry Sweeney from Roth Capital Partners asked about geographic areas where NPKI is not yet present but sees growth opportunities, and whether the entry strategy would be organic or through M&A. He also questioned the balance between accelerating growth and potential short-term margin impacts.

Answer

President and CEO Matthew Lanigan highlighted the Midwest as an area where NPKI is looking to increase fleet density. He explained that the company is managing inventory scale in line with opportunities and continuously assesses the trade-off between ramping up fleet build for future projects and its immediate financial impact, avoiding a speculative 'build it and they will come' approach.

Gerry Sweeney of Roth Capital Partners, LLC inquired about DMC Global's Arcadia segment, asking about the sources of its market weakness, the roadmap for rightsizing the business, and other potential profitability initiatives. He also asked about progress on improving the balance sheet.

Answer

CFO Eric Walter explained that Arcadia's weakness was split between its high-end residential segment and deferred commercial exterior projects, attributing it to tariffs and high interest rates. CEO James O'Leary added that rightsizing in the residential division is effectively complete and that the company is focused on restoring customer service levels and controlling costs across all segments. Regarding the balance sheet, Eric Walter noted strong free cash flow performance and expects to continue converting 40-45% of EBITDA to free cash flow.

Asked about the sources of weakness and rightsizing roadmap for the Arcadia segment, other profitability initiatives across the business, and balance sheet improvements.

Answer

Arcadia's weakness stems from both residential and commercial sectors due to high interest rates and project deferrals; rightsizing is largely complete while preserving capacity for a rebound. Other initiatives focus on improving customer service and strict cost controls across all segments. The balance sheet improved through strong free cash flow conversion, a trend expected to continue.

Gerry Sweeney asked for details on the operational improvement plans for Arcadia, the readiness of its systems, the primary sources of its current headwinds (market vs. operations), and whether a lack of sales focus contributed to the residential segment's weakness.

Answer

Executives explained that Arcadia, as a former family business, lacked robust systems and processes, which they are now upgrading with new leadership. Key initiatives focus on supply chain, S&OP, and finishing operations. The primary headwind is the high-end residential market slowdown, causing significant factory under-absorption. They also confirmed that working down a previously long backlog created a temporary valley in new orders, compounding the market weakness.

Gerry Sweeney from ROTH Capital Partners asked about the Canton acquisition, specifically its spin galvanizing capabilities, the potential to leverage existing customers, and the facility's revenue capacity.

Answer

President & CEO Thomas Ferguson explained that the Canton facility is located near an existing, larger AZZ plant, allowing for operational optimization. He noted that Canton brings a new customer base, including vertically integrated clients, and anticipates an incremental volume increase of $5-6 million across the combined local operations. He added that the deal was important for getting the company back into the bolt-on acquisition process.

Gerry Sweeney from Roth Capital Partners, LLC inquired about the spin galvanizing capabilities from the Canton acquisition, asking how they could be leveraged with existing customers and about the facility's potential revenue capacity.

Answer

President & CEO Thomas Ferguson explained that they will optimize operations between the new Canton facility and a larger, nearby AZZ plant. The deal brings a new customer base that can be cross-sold services. He estimated the potential for $5-6 million in incremental volume across the combined local operations, noting it was a good strategic bolt-on to re-engage their M&A activity.

Gerry Sweeney of ROTH Capital Partners asked about the Canton acquisition's spin galvanizing capabilities, inquiring if AZZ could leverage its existing customer base and what the potential revenue capacity of the new facility might be.

Answer

President & CEO Thomas Ferguson explained that AZZ will operate the new Canton facility in conjunction with its other nearby plant to optimize capabilities and customer service. He noted the acquisition brings a new customer base, including some vertically integrated clients, that can be served by AZZ's existing site. He estimated a potential for $5-6 million in incremental volume across the combined operations, emphasizing it was a good strategic move to get back into the bolt-on acquisition game.

Gerry Sweeney from ROTH Capital Partners asked about the Canton acquisition, specifically its spin galvanizing capabilities, the potential to leverage existing AZZ customers, and the facility's revenue capacity.

Answer

President & CEO Thomas Ferguson explained that the Canton facility is located near an existing, larger AZZ plant, allowing for operational optimization. The acquisition adds new customers that can be served by both sites. He estimated a potential for $5-6 million in incremental volume across the combined operations and expressed satisfaction with re-engaging in the bolt-on acquisition market.

Gerry Sweeney of ROTH Capital Partners, LLC requested details on the recent Canton acquisition, focusing on its spin galvanizing capabilities, the potential to leverage existing AZZ customers, and the facility's revenue capacity.

Answer

President & CEO Tom Ferguson explained that the Canton facility adds spin galvanizing services and a new customer base that can be cross-leveraged with a nearby AZZ structural galvanizing plant. He characterized the deal as a strategic way to optimize capabilities in the region, estimating it could add $5-6 million in incremental volume and marked a welcome return to the bolt-on acquisition market for the company.

Gerry Sweeney from Roth Capital Partners, LLC asked about the newly acquired Canton facility's spin galvanizing capabilities, inquiring how it could be leveraged with existing customers and its potential revenue capacity.

Answer

President & CEO Thomas Ferguson explained that the Canton facility will be operated in conjunction with a nearby, larger AZZ plant to optimize capacity and offer a broader set of services. He noted the acquisition brings a new customer base and creates cross-selling opportunities, estimating a potential for $5-6 million in incremental volume. He emphasized it was a positive, accretive deal that marks their re-entry into bolt-on acquisitions.

Gerry Sweeney of ROTH Capital Partners asked for details on the product rollout schedule with Home Depot and Wayfair, the production timeline for the Gen 3 platform, the licensing strategy for Gen 3, and any updates on achieving a mandatory National Electric Code (NEC) designation.

Answer

Co-CEO Ran Kohen stated that the product rollout in Home Depot stores and on both retailers' websites will accelerate as more inventory arrives in the coming months. He noted that the Gen 3 platform is in the final safety clearance stages before mass production begins. Kohen emphasized that the GE collaboration is central to the Gen 3 licensing strategy and confirmed that while the NEC mandatory process is lengthy, the company continues to make progress.