Greg Wasikowski

Greg Wasikowski followed up on power generation capacity, asking about Kirby's physical handling limits for growth in 2026-2028 and potential reinvestment needs. He also inquired about the persistent softness in the chemical market for inland marine and what factors could drive a turnaround.

Answer

CEO David Grzebinski and President and COO Christian O'Neil stated that Kirby has significant remaining capacity in its two major manufacturing facilities (Oklahoma, Houston) as they are not running 24/7. The primary constraint is adding service technicians, especially specialized ones for electric equipment. They are investing under $20M in a larger Houston facility for higher power nodes. David Grzebinski explained that chemical market softness stems from global customers shutting down feedstock-disadvantaged European/Asian plants. He expressed optimism for a turnaround due to U.S. plants being more efficient, increasing new home construction, and potential auto production recovery, believing the market is closer to a bottom.

Greg Wasikowski asked about Kirby's internal capacity for power generation, including any natural ceilings or needs for reinvestment to support future growth. He also sought insights into why the inland chemicals market has been softer and what factors could drive a turnaround.

Answer

David Grzebinski, CEO, stated Kirby has two major manufacturing facilities (Oklahoma, Houston) with significant remaining capacity, as they are not running 24/7. The primary constraint is adding service technicians. Growth CapEx includes a new Houston building (under $20M) for higher power nodes. Christian O'Neil, President and COO, added that a larger installed base will increase parts and service opportunities. David Grzebinski attributed chemical market softness to global customers shutting down less efficient European/Asian plants, making U.S. plants more competitive. He expressed optimism for a turnaround driven by increased home building and potential auto production recovery.

Greg Wasikowski asked for the general percentage of Kirby's inland term contract book that typically rolls over in Q4 versus other quarters. He also inquired about the revenue cycle for the data center business, from order to recognition, and Kirby's capacity to handle larger, gigawatt-scale projects, including any operational or OEM supply limitations.

Answer

David Grzebinski (President and CEO) explained that approximately 40% of the inland term contract portfolio renews in Q4, sometimes extending into Q1. For data centers, the revenue cycle from order to delivery can be 1-2 years, depending on OEM engine supply. He mentioned Kirby is developing higher power node offerings (15-20 MW range) to participate in larger projects, leveraging EFRAC experience, and revenue is recognized as shipped, not on a percentage-of-completion basis.

Greg Wasikowski asked for the general percentage of inland term contracts that roll over in Q4 compared to other quarters, and for details on the revenue cycle for the data center business, including timing from order to delivery, capacity for larger projects, and revenue recognition practices.

Answer

David Grzebinski, Kirby's Chief Executive Officer, stated that approximately 40% of the inland term contract portfolio (which constitutes 70% of the book) typically renews in the fourth quarter. For data centers, he explained that the revenue cycle from order to delivery can range from one to two years, depending on OEM engine supply. He also mentioned that Kirby is developing higher power node offerings (15-20 MW range) to participate in larger projects and confirmed that revenue is recognized as shipped, not on a percentage-of-completion basis, contributing to quarterly lumpiness.

Greg Wasikowski from Webber Research & Advisory sought clarification on the backlog's delivery timeline into 2023 and asked about the leading demand segments and partnership strategy in the U.S. market.

Answer

CEO and Founder Thomas Speidel reiterated that the current backlog is scheduled for delivery through the end of 2023 and highlighted that long component lead times necessitate early procurement. For the U.S. market, he identified the automotive OEM dealership network as a key segment, noting that their partnership with GenZ, similar to their JOLT partnership in Europe, is addressing this area.