Greg Palm • Craig-Hallum Capital Group LLC

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CFO Eitan Zamir attributed the lower gross margin forecast to a combination of sales mix changes, higher absorption costs from a $30 million year-over-year inventory reduction, and a temporary impact from tariffs. He noted the new cost mitigation efforts target non-essential projects, variable costs, and discretionary spending like travel. CEO Yoav Zeif added that the magnitude of the delayed deals approximates the gap between the old and new revenue guidance.

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CEO Yoav Zeif expressed long-term optimism despite short-term capital spending constraints, highlighting strong customer engagement and the value of additive manufacturing for supply chain resilience. CFO Eitan Zamir noted that the 2025 gross margin is expected to be similar to 2024's strong 49.2% level, reflecting a balance of investments and cost savings. Yoav Zeif added that tariffs represent a business opportunity, as on-shore production with Stratasys systems helps customers avoid such costs.

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CEO Dr. Yoav Zeif identified the high-cost capital environment as the primary headwind delaying customer investments but emphasized that long-term mega-trends like onshoring remain intact. CFO Eitan Zamir explained that the Q4 gross margin guidance reflects a higher mix of hardware sales but is still expected to be slightly above Q3's record level. He also confirmed that the company began executing its share repurchase plan in Q4.

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President and CEO Jeffrey Graves described the macro environment as challenging, with tariff uncertainty causing customer CapEx delays, which in turn is creating demand for interim parts production. He expressed confidence that the Dental business is more resilient due to non-discretionary demand and a faster ROI for customers. Graves confirmed the cost-reduction plan is on track to enable profitability at current revenue levels, though the timing of facility-related savings can be variable.

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CFO Jeffrey Creech and CEO Jeffrey Graves attributed the revenue shortfall to two main factors: timing of materials shipments that slipped into the next quarter and a notable increase in customers pausing equipment purchase orders due to capital spending freezes amid tariff uncertainty. Creech confirmed that materials revenue was down 23% year-over-year. Graves stated the company's goal is to achieve profitability and positive cash flow at the current revenue levels (approx. $95 million) once the full $70 million in cost savings are realized.

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CEO Jeffrey Graves described the customer environment as interested but hesitant due to macro and geopolitical volatility, leading the company to plan for a flat environment and focus on internal cost controls. He asserted that the vast majority of the cost cuts are permanent, stemming from efficiency improvements like site consolidations, and will have a very immaterial impact on revenue. Regarding cash flow, Graves stated the goal is to reach EBITDA breakeven by late 2025 and to achieve operating and free cash flow positivity in 2026, though the exact timing depends on demand and the execution of back-end loaded cost actions.

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Richard Warzala, Chairman, CEO & President, confirmed the positive market trends and elaborated on the A&D market, noting a mix of program accelerations and delays but overall strong positioning. Regarding rare earths, he explained that customer concerns led to a $3-4 million revenue pull-in during Q2. While the supply situation is improving, he acknowledged a potential $1-3 million shipment risk for the remainder of the year but noted the company is actively managing it.

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Richard Warzala, an executive, responded that demand signs are positive and that the company's tariff exposure is manageable, with a high-end estimate of $3 million for the remainder of the year before mitigation. He confirmed that Allient's global footprint and resourcing efforts put it in a good position to win new business and that they are seeing increased inbound interest from both new and existing customers.

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Richard Warzala, an executive, stated that North America is strengthening but awaits an industrial sector recovery, while Europe remains soft, with a 'wait-and-see' approach to potential stimulus. He highlighted significant tailwinds from the data center market, where Allient has unique high-power solutions and has seen growth around 40% year-over-year. Warzala also emphasized strong momentum in the defense sector, driven by new programs and increased demand for munitions.

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Richard Warzala, Chairman, President and CEO, confirmed the quarter played out as expected with accelerating operational improvements. He noted that a return to normal run rates from just one major customer could represent a $2 million per month revenue improvement. Warzala highlighted the data center and AI opportunity as a significant bright spot with potential for exponential growth. He also emphasized that the 'Simplify to Accelerate NOW' program is driving excitement by realigning the company closer to customers and creating tangible new business opportunities, particularly in defense, beyond just the P&L cost savings.

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President and CEO Dale Asplund attributed the savings to breaking down legacy silos, centralizing functions, and leveraging scale, with benefits being reinvested into the sales force and frontline service hours. EVP & CFO Brett Urban emphasized these initiatives are in their early stages with more opportunity ahead. Regarding Q4, Asplund refrained from giving specific intra-quarter numbers but conveyed strong optimism from market leaders, stating he believes the worst headwinds are behind them and Q4 will show improvement.

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CEO Dale Asplund and CFO Brett Urban explained that heavy snowfall on the East Coast boosted revenue but slightly suppressed land services by about $6 million. Regarding capital allocation, they stated the company's strong balance sheet allows them to aggressively repurchase undervalued shares while also remaining positioned to execute strategic M&A without having to choose between the two.

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CEO Dale Asplund highlighted the stability of their workforce, noting an average frontline tenure of over five years. He explained that investments in employees, such as better equipment, flexible schedules, and benefits, are reducing turnover and creating a competitive advantage. Regarding ancillary revenue, Asplund stated it is directly correlated to customer satisfaction, noting that two-thirds of their markets have already returned to stable year-over-year ancillary levels.

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President and CEO Dale Asplund identified improved customer retention, which drives ancillary revenue, and funding more salespeople as key growth levers. CFO Brett Urban highlighted that the company is well-positioned with a strong balance sheet and record capital spending to support these initiatives. On M&A, Dale Asplund confirmed it is not in the 2025 guide and will be accretive. The focus will be on specialty businesses like tree care and irrigation, with a new, faster integration playbook.

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CFO Thomas Barbato clarified that the Distribution segment's strength stemmed from consistent, broad-based demand in both core distribution and rentals, not a tariff-related pull-in. He confirmed the record gross margin was driven by the higher mix of rental business. CEO Lee Rudow added that while margins will normalize slightly, the long-term trend is upward as rentals grow. He compared ESCO and Martin, noting ESCO's specialty in high-end electronics for aerospace and life sciences complements Martin's strength in dimensional and mechanical measurements, positioning both as highly strategic acquisitions.

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President and CEO Lee Rudow explained that Q4 was solid, with some pent-up demand contributing to high-single-digit organic growth in the Service segment. He noted that while the pipeline of new opportunities is healthy, the full impact will play out over time due to market volatility. For the Distribution segment, Rudow stated that business has held up well, speculating that customers may be purchasing ahead of potential tariffs, which currently obscures the typical leading-indicator nature of that business.

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President and CEO Lee Rudow explained that while core calibration demand rebounded in January, continued softness in the NEXA Solutions channel and delays in closing some large deals prompted a more conservative full-year outlook. Rudow emphasized that the core calibration pipeline is the strongest he has ever seen and that there are no structural changes to the business model, competition, or market drivers. He expressed confidence in returning to historical growth rates in fiscal 2026, viewing the recent slowdown as a temporary issue.

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President and CEO Lee Rudow explained that NEXA was given more autonomy than typical acquisitions due to its initial strong performance, which led to a failure to fully integrate it into Transcat's proven sales and marketing processes. He confirmed the issues are company-specific and fixable. Regarding Becnel, Rudow clarified the hurricanes caused both a revenue and profit issue, and he expects distribution margins to recover to levels seen in the second half of fiscal 2024.

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CFO Carol Hibbard attributed the strong margins to a favorable mix with higher-margin ASR business, continued improvements in deployment timelines, and the step-up in software margins. Founder, Chairman & CEO Richard Cohen explained that the new structure concept has been in development for a couple of years, originating from his own designs and later refined with structural engineers to optimize for installation speed.

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CFO Carol Hibbard explained that besides the accretive ASR margin and improved project execution, there was a one-time benefit in recurring revenue from high-margin training associated with the 8 systems that reached acceptance. Regarding GreenBox, she reiterated that they have launched 3 of 5 previously identified locations and that the venture has been slower to ramp, but activity is expected to increase with the new CEO in place.

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CFO Carol Hibbard stated that systems gross margin saw a slight improvement and will benefit in the second half of the year as several complex, lower-margin systems go live, improving the overall mix. Regarding non-Walmart revenue, CEO Rick Cohen highlighted growing inbound interest from CPG companies for mixing centers and from other retailers for back-of-store systems, as well as exploration of new verticals like medical supplies.

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CEO Richard Cohen and CFO Carol Hibbard explained the Walmex deal proves their ROI extends beyond labor savings to inventory and transportation efficiencies, opening up new markets. Hibbard clarified the 'restructuring charge' was a benefit from selling previously obsoleted inventory. She attributed the negative operation services margin to adding resources at a few large project sites and expects it to improve.

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CEO Ronen Samuel explained that Q2 softness was driven by lower-than-expected ink and service revenues, which offset strong system sales growth. He attributed the ink revenue decline to a "technical correction" as a few key customers began drawing down large inventory stockpiles built up in late 2023. He noted these customers increased inventory from 2-3 months to 6 months and only began normalizing in 2025. Samuel also stated that Apollo system shipments are tracking below plan due to longer sales cycles with new screen-printing customers.

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CEO Ronen Samuel explained that macro disruptions like tariffs and the closure of the de minimis loophole are accelerating the apparel industry's shift to on-demand, nearshore production, making Kornit's technology more relevant. He confirmed the company still expects to deliver approximately 30 Apollo systems in 2025, noting that while one major customer delayed a large order, the strong pipeline of new screen-printer customers is filling the gap. He emphasized the customer's order is "delayed, not canceled."

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CEO Ronen Samuel outlined 2025 as a year of execution focused on profitable growth. Key goals include delivering 30 Apollo systems, expanding Annual Recurring Revenue (ARR) through the All-Inclusive Click (AIC) model, and further penetrating the screen printing market. While noting improved visibility from Apollo commitments and growing ARR, he stated the company would continue its practice of guiding only one quarter at a time and did not commit to a full-year growth target.

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CEO Ronen Samuel stated that while the company sees growth and improved profitability ahead, 2025 will be a transitional year due to the business model shift and market volatility, with acceleration expected in 2026. Regarding the global strategic account, he confirmed that initial upgrades were implemented with positive feedback, but there is no firm commitment for further upgrades yet, with more visibility expected after the peak season.

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President & CEO Tim Larson attributed the Q1 outperformance to stronger-than-anticipated community channel sales, increased production rates in high-backlog regions, and better pricing in captive retail. EVP, CFO & Treasurer Lori Hough added that lower material costs also contributed and confirmed that most delayed shipments from Q4 were realized in Q1, but declined to provide a specific quantification.

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CEO Tim Larson explained that Q3 benefited from a faster-than-expected recovery from hurricane impacts and increased capacity utilization to 63%. He noted that while orders slowed seasonally late in the quarter, healthy traffic and quoting activity support a low double-digit growth outlook for Q4. Larson emphasized that he does not foresee major strategic changes, as he helped build the current strategy. The focus will be on executing fundamentals, product innovation, enhancing the customer experience, and disciplined capital deployment.

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CEO Scott Rajeski explained that marketing success is measured by increased brand awareness and lead generation, noting a substantial uptick in website activity from a recent DIRECTV campaign. He stated this is building a future sales pipeline for 2026. Regarding the Sand States, Rajeski confirmed they are ahead on dealer recruitment and expect the region's revenue contribution to grow from ~17% toward 19-20% by year-end, despite some market-related slowdowns.

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CEO Scott Rajeski responded that the demand trajectory remains consistent with their expectations for a flat pool start market and that it's too early to determine market share shifts. He noted that while precise tracking is complex, lead conversion rates are around 10-20%, and current marketing investments are building brand awareness that will drive both near-term and long-term growth.

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CFO Oliver Gloe confirmed the guidance does imply an acceleration in fiberglass adoption, driven by the sand state strategy and auto cover initiatives. Executive Scott Rajeski elaborated on measuring success, citing the increase in fiberglass sales in sand states from 15% to 17% of revenue as a key metric. He added that the focus is on increasing dealer productivity, establishing dealers in master planned communities (MPCs), and driving lead generation through targeted marketing, with the ultimate goal of raising penetration in those states toward the national average.

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CFO James Miln attributed the Q2 outperformance to stronger-than-expected marketplace revenue, robust gross profit, and strong enterprise account growth. CEO Randy Altschuler reiterated that Q3 started strong but the company remains mindful of the macro environment in its outlook. He also emphasized that Xometry's strength is diversified across many verticals, which provides durable growth, rather than being dependent on one or two.

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CFO James Miln cited a tougher year-over-year comparison but pointed to the raised full-year marketplace growth guidance (to at least 22%) as a sign of confidence. Executive Shawn Milne cautioned against a direct seasonal comparison to the prior year's Q1, which had a slower start, and reiterated that Q2 demand is robust despite the uncertain macro environment.

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CEO Randy Altschuler attributed supplier growth not to a soft macro environment, but to growing awareness of the value Xometry provides, including access to profitable jobs via AI and free tools like Workcenter. He explained that new suppliers with specific certifications are being added to support new processes like tube bending and cutting, as well as to expand production capabilities. He also noted that the Thomasnet platform is a significant asset for finding and onboarding these new suppliers.

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President and CEO William Boor explained that Southeast orders were flat while other regions grew, prompting a close watch on backlogs there. He described community channel demand as stable. EVP and CFO Allison Aden quantified the Q1 tariff impact at approximately $700,000, noting future increases are possible. Boor provided a detailed overview of a recent housing bill, highlighting the inclusion of manufactured housing and chassis removal as significant positives for the industry's potential for innovation.

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CEO William Boor explained that unusual weather in February, particularly in Texas and the Southeast, caused 24 lost production days, which created a directional downward pressure on margins, though not a huge impact. Regarding the rebrand, he detailed the shift from legacy factory names to a unified Cavco brand with distinct product lines to improve digital marketing and customer experience. On tariffs, Boor stated the company will react to cost changes based on regional supply-demand dynamics rather than preemptively adding surcharges. He attributed Cavco's relative market strength to different customer dynamics compared to the site-built market, which is more affected by the existing home inventory.

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President and CEO William Boor acknowledged the market share gains but cautioned that quarter-to-quarter figures can be volatile. He attributed volume growth to an optimistic market view, early rehiring efforts, and a national sales team focused on REITs and community operators. EVP and CFO Allison Aden explained that the year-over-year ASP decrease, which impacted margins, was primarily due to a lower proportion of higher-priced homes sold through company-owned retail stores. Regarding capital allocation, Aden highlighted recent acquisitions and ongoing plant improvements as priorities, while Boor added that incremental M&A opportunities are always being evaluated.

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CEO Suresh Krishna shared that his immediate focus is on removing friction for customers and employees to reaccelerate growth, with a more detailed strategy to be shared later. CFO Dan Schumacher explained that the temporary margin pressure was from tariffs on aluminum and steel, which impacted the network's backlog. He confirmed pricing has been adjusted and margins recovered in June. Schumacher also stated the network margin was 29% and aerospace and defense revenue was over 20% of the total.

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CFO Dan Schumacher noted that order trends have improved month-to-month and the Q2 margin guidance reflects an expected increase in network-fulfilled orders. CEO Rob Bodor explained that customers are excited about their production offerings and are exploring supply chain diversification, which presents a growth opportunity. He also stated that the current US partner network has sufficient capacity but can be expanded as needed.

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CFO Dan Schumacher stated the network gross margin was around 32% and attributed the consolidated margin decline to lower volumes in the factory. CEO Robert Bodor expressed confidence in a return to growth, expected in the second half of the year, based on traction in the production business. Both executives affirmed that current investments are intended to drive top-line growth, which in turn is expected to drive long-term earnings growth.

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CEO Rob Bodor credited the newly focused go-to-market teams for helping drive the Q3 beat. CFO Dan Schumacher stated that October order rates reflect a normal seasonal decline from the August-September levels. Bodor attributed strong Network margins to both improved pricing algorithms and excess capacity in the current manufacturing macro environment. Regarding the European changes, Schumacher noted the P&L impact would be minimal on revenue but should improve gross margin by shifting the fulfillment strategy to better align with the company's long-term production goals.

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CEO Shyam Reddy stated that the competitive environment remains intense but consistent, and that increased certainty around tariffs could unlock pent-up demand. He explained that multifamily projects involve longer inventory holding periods, which impacts working capital turns but is a key value-add service. CFO Kelly Wall added that inventory levels were high in Q2 but are expected to be a source of cash in the second half of the year, with full-year 2025 free cash flow projected to be similar to 2024.

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CEO Shyam Reddy explained that specialty margin pressure stems from competitive pricing, unconstrained supply, and soft market demand. He clarified that while BlueLinx intends to pass through tariff costs via price increases, it may be difficult to maintain historical margin percentages. Reddy stated that no major pricing strategy changes have occurred yet regarding tariffs. He attributed the inventory build to a slow, weather-impacted start to the year, noting that volumes have since recovered heading into Q2.

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Shyam Reddy, President and CEO, confirmed that sales volumes rebounded after weather disruptions in January, attributing the recovery to a combination of pent-up demand and new orders. Regarding the Portland greenfield, Reddy explained that it is in the early stages of ramping up, with a focus on installing equipment and hiring staff, making it too early to provide specific performance metrics. He stated an aspirational goal to open multiple greenfields per year but noted that the primary constraint is the challenge of finding suitable real estate.

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President and CEO Shyam Reddy explained that share gains are being driven by a focus on multifamily and commercial channels, leveraging scale with national accounts, and utilizing private label products to compete effectively. He also noted an increased focus on direct sales. In a scenario of sustained high rates, Reddy emphasized the long-term housing deficit, which supports growth. He stated the strategy would remain focused on new channels like multifamily, geographic expansion via greenfields, and leveraging the company's scale, which will enable continued share gains regardless of market headwinds.

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CFO Farouq Tuweiq stated there was no significant theme of order pull-ins during Q1. CEO Daniel Bernstein and Tuweiq discussed manufacturing flexibility, emphasizing that moving production is complex and requires customer approvals, but highlighted their strategic build-out in India as a key mitigator. Tuweiq explained the AI revenue jump is a result of long-term partners hitting a new growth phase and ramping up their own sales, rather than acquiring many new customers at once.

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CEO Mark Yost explained that hurricane-related disruptions to production and retail would take this quarter and possibly part of the next to resolve, contingent on infrastructure rebuilding. CFO Laurie Hough attributed the strong gross margin to lower forest product costs, which may not persist, stronger-than-expected captive retail sales, and confirmed that purchase accounting headwinds are now immaterial.

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