Gowshihan Sriharan

Gowshihan Sriharan asked about the growth in the maintenance segment beyond the large retailer, specifically if smaller and mid-sized enterprises are adopting similar preventative maintenance models. He also questioned how Orion is underwriting execution risk for new large contract wins, considering past delays, and the room for potential delays within current margins and guidance.

Answer

Sally Washlow, CEO, noted that while no other customer matches the scale of the large retailer in the maintenance division, they are observing month-over-month increases with other customers and actively pursuing new contracts in the space. Per Brodin, CFO, addressed execution risk by stating that the company's outlook temporarily accounts for such potential issues, having tried to factor in any foreseeable delays.

Gowshihan Sriharan asked if smaller and mid-sized enterprises are adopting Orion's preventative maintenance model, similar to a large retailer, or if it remains a one-customer phenomenon. He also questioned how Orion underwrites execution risk for large contracts, considering past delays and potential impacts on margins.

Answer

CEO Sally Washlow clarified that while no other customer matches the scale of the large retailer in maintenance, Orion is observing month-over-month increases with other customers and actively pursuing new contracts in this segment. CFO Per Brodin responded that execution risk is an ongoing consideration, and the company's outlook accounts for potential issues with at least some current visibility.

Gowshihan Sriharan asked how Orion plans to sustain gross margin improvements with a flat EV forecast. He also questioned the rationale for using stock for the earn-out settlement at current prices and inquired if Nasdaq compliance is part of management's compensation milestones.

Answer

CFO Per Brodin stated that margin improvements are expected from the lighting and services segments through pricing and supply chain initiatives, with EV margins remaining consistent. He explained the earn-out settlement structure was a mutual agreement to mitigate near-term liquidity impact. CEO Sally Washlow confirmed that management compensation is tied to performance, which implicitly includes maintaining Nasdaq compliance.

Gowshihan Sriharan asked about pricing discipline in the Metals and Glass segments, changes in bid approval thresholds, and potential under-absorption risks. He also questioned pricing differences between strategic and transactional customers, the growth drivers and margin aspirations for Performance Services, and the sustainability and competitiveness of the incentive compensation structure given recent reductions.

Answer

Don Nolan, Apogee's Chief Executive Officer, stated that Glass is maximizing EBITDA dollar contribution while protecting premium margins, operating in the teens EBITDA margin, a significant improvement from the last downturn. He noted no noticeable pricing differences between customer types but observed a higher volume of smaller Glass projects. For Performance Services, growth stemmed from gaining retail shelf space in distribution and the UW Solutions acquisition, which expanded into the high-growth flooring market for warehouses. Mark Augdahl, Interim Chief Financial Officer, confirmed the compensation structure is competitive, with lower payouts this year due to not meeting targets, but expected to normalize.

Gowshihan Sriharan asked about the pricing discipline in the Metals and Glass segments, including bid approval thresholds and potential flexibility, and whether there are noticeable pricing differences between strategic and transactional customers. He also questioned the growth drivers in Performance Services (high-margin vs. mid-tier) and the sustainability and competitiveness of the incentive compensation structure.

Answer

CEO Don Nolan stated that the Glass team focuses on maximizing EBITDA dollar contribution while protecting premium margins, noting the business is stronger than in the last downturn. Interim CFO Mark Augdahl added that solid pricing strategies are in place, and the company actively manages its cost structure. Don Nolan also mentioned taking share in the distribution business and the growth from UW Solutions in the flooring market. Mark Augdahl clarified that incentive compensation is lower this year due to not meeting targets but expects normalization.

Gowshihan Sriharan inquired about competitive dynamics in the architectural markets and Apogee's confidence in its ability to pass on costs. He also asked about the M&A strategy in the current environment and whether the company was building any significant inventory buffers.

Answer

CEO Ty Silberhorn described a rational competitive environment, particularly in Metals, and noted that the company is actively looking for opportunities to win projects from international suppliers affected by tariffs. On M&A, he stated Apogee remains active and opportunistic but acknowledged some market slowness. CFO Matt Osberg clarified that the company is not building unusual inventory buffers, as most of its business is made-to-order.

Gowshihan Sriharan asked about the key factors that could drive EPS performance to the upper end of the guidance range in Q4. He also requested more detail on the expected synergies from the UW Solutions acquisition and an update on its long-term margin target for the Architectural Framing segment.

Answer

CFO Matt Osberg stated that the company expects to finish at the bottom of its EPS range, primarily due to greater-than-expected volume pressure, making an upside scenario unlikely. He reiterated the UW Solutions target of $100 million in revenue at a 20% adjusted EBITDA margin for fiscal 2026 and confirmed they are on track for a $5 million synergy target. For Framing, he expects the segment to finish fiscal 2025 within its 10-15% margin range and sees an opportunity for it to remain there in fiscal 2026.

Gowshi Sriharan with Singular Research inquired about the conversion of the Q2 pipeline into Q3 closures, the impact of the government shutdown on sales acceleration, and the expected timeline for improvement. Sriharan also asked about how Conduent measures productivity and quality gains from GenAI deployments in both government and commercial sectors, including potential for client stickiness, cross-sell opportunities, public sector wins, and expected contract size and margin uplift. Furthermore, Sriharan questioned the remaining stranded costs from divestitures given negative operating cash flow and the timeline for realizing benefits, and whether Conduent is implementing contract clause changes to mitigate churn risk or budget delays in government and commercial deals.

Answer

Cliff Skelton, President and CEO, explained that pipeline closures were exacerbated by the Q3 government shutdown, particularly affecting federal approvals for state healthcare deals, but anticipated these deals would eventually close. He noted that GenAI pilots in the government space, specifically in the Direct Express program, focus on fraud reduction through expedited address validation, with potential expansion to Medicaid and SNAP. In the commercial space, GenAI targets customer experience improvements like language translation, agent assist, and automated indexing for claims adjudication, creating both revenue and expense opportunities. Giles Goodburn, EVP and CFO, added that positive expense impacts from fraud initiatives are already visible in the P&L. Skelton clarified that the government shutdown primarily affects the timing of milestones and sales opportunities, not the core revenue stream, and therefore, no changes to the contract model are deemed necessary. Goodburn also mentioned that while initial stranded costs from divestitures are largely addressed, cost optimization efforts are continuous, including spans and layers and real estate portfolio.

Gowshi Sriharan asked if Conduent is changing contract clauses or making structural changes in government and commercial deals to mitigate churn risk or exposure to budget delays.

Answer

Cliff Skelton, President and CEO, confirmed that Conduent is not changing contract models, as the government shutdown primarily affects milestone timing and sales opportunities, not the core revenue stream, especially given the company's focus on state and local government business.

Gowshihan Sriharan from Singular Research asked about the pull-through effect of AI solutions on other services, whether the market is underestimating revenue catalysts from regulatory changes like Medicaid redeterminations, the impact of talent initiatives on attrition and wages, and the strategic implications of the new Chairman of the Board.

Answer

President, Director & CEO, Cliff Skelton, stated that AI is in 'execution mode' as an enhancement to improve efficiency and quality across the business, rather than a standalone offering. He agreed that regulatory changes present a real opportunity dependent on state implementation speed. He also confirmed that wage pressure has muted and attrition has lowered, especially in senior roles. Regarding the new Chairman, Mr. Skelton and CFO Giles Goodburn clarified that it was a timely leadership transition and no significant strategic shift is expected, with near-term objectives remaining consistent.

Gowshihan Sriharan questioned the drivers for the sequential change in gross margin, the customer adoption and qualification timeline for the new multi-beam mask writer in Boise, the flexibility to redeploy cash from joint ventures for U.S. needs, and the potential business impact from U.S. government support for Intel.

Answer

CFO Eric Rivera attributed the gross margin change primarily to the overall business mix in Asia. CTO Christopher Progler reported that qualifications for the multi-beam writer are well underway with 3-5 customers already qualified, and noted it is the only such tool in a commercial U.S. mask shop. Rivera explained that the company controls the JV cash and can dividend it to the U.S. if needed. Both Rivera and Progler agreed that government support strengthening Intel, a key customer, would be beneficial for Photronics, especially for trusted government-related products.

Gowshi Sriharan of Singular Research inquired about the new CEO's priorities regarding the balance between U.S. capacity expansion and growth in Asia. He also asked for the underlying reasons for the weaker demand reflected in the Q3 forecast and questioned the company's future share repurchase strategy, given the significant buyback in Q2.

Answer

Newly appointed CEO George Macricostas explained that the company will continue to evaluate U.S. reshoring opportunities and invest appropriately in capacity, while also managing end-of-life tool replacements. CFO Eric Rivera attributed the cautious Q3 outlook to customer uncertainty stemming from the current tariff environment. Regarding capital allocation, Rivera stated that the remaining $23 million on the buyback authorization will be used opportunistically, and any future expansion of the program will be weighed against other investment opportunities to ensure long-term growth.

Gowshihan Sriharan of Singular Research asked for clarification on the expected magnitude of the F-16 revenue dip, the future trajectory for gross margins, the impact of defense budgets on the backlog, and the prioritization of acquisitions with the new credit facility.

Answer

CFO Jeffrey DiGiovanni explained that F-16 revenue is expected to be nominal for Q4 2025 and Q1 2026 during the production transition and reiterated a gross margin target in the 45% range. CEO Shahram Askarpour noted increased interest from defense contractors, clarified that the backlog only includes firm purchase orders, and stated that organic growth remains a significant part of the company's strategy alongside acquisitions.

Asked about the magnitude of revenue pull-forwards from the Honeywell acquisition, the drivers of air transport revenue growth, the outlook for gross margins, and the expected impact of the new ERP system and expanded facility.

Answer

Management confirmed the >30% growth guidance for FY25 but noted that the magnitude of revenue pull-forwards is difficult to predict due to supply chain variables. The strength in air transport is driven by aftermarket demand from new aircraft production delays. They reiterated a focus on EBITDA over the more volatile gross margins. The new ERP system is intended to provide actionable data for better decision-making, and the expanded facility will provide capacity for over $250 million in revenue, far exceeding current growth needs.

Gowshihan Sriharan asked about the magnitude of revenue pull-forwards from the Honeywell product lines, potential order delays, and the outlook for the company's FY25 growth guidance. He also inquired about the drivers of the air transport revenue improvement, the future of commercial retrofits, and whether gross margins would stabilize or face headwinds from the military business mix. In a follow-up, he asked about productivity gains from the new ERP system, the expected SG&A run rate, and the facility utilization required to meet growth targets.

Answer

Executive Shahram Askarpour stated that while the Honeywell transition has supply chain risks, they don't anticipate further delays and are confident in achieving over 30% growth for FY25. He noted that strong aftermarket demand is driving air transport revenue. Askarpour reiterated that gross margins will remain lumpy due to acquisition mix and urged focus on EBITDA and profit margins. Executive Jeffrey DiGiovanni added that the new ERP system's goal is to provide actionable data, but it's too soon to quantify P&L impact. He confirmed the SG&A run rate will remain around $3-4 million quarterly to support growth and that the expanded facility could eventually support over $250 million in revenue.

Gowshihan Sriharan inquired about ISSC's strategy for gaining market share in the military sector, the margin profiles of foreign versus domestic military contracts, the expected consolidated gross margin profile given the shift towards military business, and how the company balances infrastructure spending with its pursuit of strategic acquisitions.

Answer

Executive Shahram Askarpour explained that the company is investing heavily in infrastructure, systems, and DFARS compliance to become a Tier 1 supplier to the DoD, which is necessary for larger contracts. He noted that foreign military sales not funded by the U.S. are treated as commercial deals with better margins. While military programs have lower gross margins, they have minimal SG&A and engineering overhead, making their EBITDA contribution comparable to commercial business. Executive Jeffrey DiGiovanni added that the company is funding its expansion through operations and its credit facility, aiming to keep leverage around 3x post-acquisitions.

Gowshihan Sriharan asked about the margin impact of end-to-end transformation deals, hurdles for clients scaling AI, ISG's value proposition as a vendor-agnostic advisor, and the company's capital allocation priorities.

Answer

Chairman & CEO Michael Connors explained that AI-related work is strongly priced, supporting margin expansion, and that client hurdles to AI adoption are primarily cost and the state of their data management. He emphasized that ISG's value comes from its trusted, independent research and advisory role. EVP & CFO Michael Sherrick reiterated that the capital allocation strategy remains consistent: dividends, share buybacks, and M&A, based on disciplined ROI analysis.

Gowshihan Sriharan inquired about ISG's pricing strategy amid AI-driven productivity gains, the level of activity with global capability centers (GCCs) due to tariffs, and what investments are still needed to capture new opportunities.

Answer

CEO Michael P. Connors explained that ISG's AI strategy enhances margins through advisory services, AI-powered platforms, and internal productivity. He described the GCC space as 'hot,' with ISG advising many clients and hosting a dedicated CEO conference. CFO Michael Sherrick added that future investments are focused on enhancing existing platforms with AI to maintain relevancy, rather than building entirely new systems.

Gowshihan Sriharan of Singular Research asked how AI-centric client conversations are translating into committed revenue and multiyear contracts. He also questioned if ISG's brand in Europe and APAC required reinvestment and inquired about the scalability and market opportunity for the Training as a Service (TaaS) offering.

Answer

Michael P. Connors, Chairman and CEO, stated that AI is driving larger and longer contracts due to efficiency gains. He affirmed the ISG brand is strong globally and that market lag in Europe and APAC is due to geopolitical factors, not brand weakness. He described the TaaS offering as a bullish, multiyear recurring revenue stream that is being scaled efficiently through the use of AI.

Gowshihan Sriharan of Singular Research asked about yield management, questioning if the mix of higher origination fees and lower portfolio yield was an intentional trade-off. He also inquired about any behavioral changes observed in former credit card customers since the portfolio sale.

Answer

CEO Raul Vazquez explained that the company is not seeing competitive pressure on origination fees and actively manages the balance between fees and interest rates to optimize securitization and pricing. He confirmed that no meaningful changes in customer behavior, retention, or cross-sell rates have been observed since the credit card portfolio sale, which has been accretive to the P&L.

Gowshihan Sriharan of Singular Research questioned the drivers behind the 10-15% origination growth guidance for FY25 and asked for an assessment of the competitive landscape's effect on the company's portfolio yield.

Answer

CEO Raul Vazquez explained that the guided growth will be driven by a modest incremental investment in marketing, not by opening the credit box. He described the competitive landscape as rational and constructive, with competitors' pricing reflecting the higher cost of capital, which allows Oportun to maintain its yield and pursue growth.

Gowshihan Sriharan of Singular Research asked about the primary constraints limiting Stride's ability to convert strong demand into enrollments. He also questioned the sustainability of Career Learning's revenue per enrollment growth outpacing General Ed and asked about the strategic options for the adult learning segment, such as selling or overhauling it.

Answer

CEO James Rhyu identified constraints such as structural program caps and operational funnel conversion metrics, which the company continuously works to optimize. CFO Donna Blackman clarified that revenue per enrollment is viewed on a combined basis, with variances driven by student mix rather than different funding rates. Regarding adult learning, Rhyu stated that while it needs better execution, it is not a material drag or distraction, and the company is not currently a seller.

Gowshihan Sriharan of Singular Research asked for a breakdown of Canadian growth between new and existing clients, the drivers behind Q2 margin performance, and details on the profitability and payment terms for recent international projects.

Answer

CEO Ryan Hummer attributed Canadian outperformance to winning new customers in the highly active Montney play and existing clients drilling longer laterals. CFO Mike Morrison clarified that the Q2 adjusted gross margin decline was due to a less favorable product mix, specifically fewer high-margin tracer projects, not price concessions. Hummer added that international projects typically yield above-average margins, with quick payment terms in the North Sea and longer, but priced-in, terms in the Middle East.

Gowshihan Sriharan of Singular Research asked for details on the Q2 international revenue guidance, the North Sea project pipeline, whether strong Canadian activity was a pull-forward, and the pricing environment for new products in the U.S. given tariff pressures.

Answer

CFO Michael Morrison clarified that Q2 international guidance includes both well construction in the Middle East and tracer activity, with North Sea opportunities weighted toward the second half of the year. CEO Ryan Hummer added that strong Q1 Canadian performance was due to favorable weather and a growing customer base that works through the spring break-up, not a pull-forward. Regarding pricing, Hummer acknowledged that passing on tariff-related costs will be challenging but stressed NCSM's commitment to discipline and the value of its differentiated technology.

Gowshihan Sriharan asked about the potential impact of tariffs on Flotek's growing international business and whether margins and lead times in the Middle East were expected to improve.

Answer

CEO Ryan Ezell responded that Flotek mitigates tariff and supply chain risks by sourcing and manufacturing chemicals in-country, aligning with local content requirements in the Middle East. He expressed confidence in the company's preparedness for supply chain disruptions. Regarding Middle East operations, Ezell acknowledged constant margin pressure but noted that as Flotek's presence matures and its product mix evolves, it is working with local partners to shorten lead times and build out its regional footprint.