Greg Palm

Greg Palm asked about the specific drivers that enabled Transcat's service segment to return to high single-digit revenue growth in the quarter, the quantification and normalization timeline for start-up costs related to new customer onboarding, and the distribution segment's strong performance, particularly in AI, data center, and power generation markets, including long-term calibration service opportunities.

Answer

Tom Barbato, CFO, explained that the return to growth was due to delayed decisions ramping up and anticipated deals coming to fruition, reaffirming confidence in Q4. Regarding start-up costs, he noted they are not huge dollars but are a reality of onboarding new customers, with a focus on quality and building strong relationships. Lee Rudow, President and CEO, added that these costs are temporary, similar to past experiences, and normalize over a couple of quarters, emphasizing the high lifetime value of large customers. For distribution, Tom Barbato highlighted strong execution in both traditional sales and rentals, driven by strategic investments in rental products for power generation, conditioning, and management, which align with data centers and EV charging needs, creating recurring calibration opportunities.

Greg Palm asked about the specific drivers that enabled Transcat to return to 7% organic service segment revenue growth, the quantification and normalization timeline for start-up costs related to new customer onboarding, and the activities in the AI, data center, and power generation markets driving strong distribution growth, including long-term calibration service opportunities.

Answer

Tom Barbato (CFO) explained that the service growth was due to delayed decisions ramping up and anticipated deals coming to fruition. Regarding start-up costs, Tom Barbato noted they were not huge dollars but a reality of onboarding new customers, with Lee Rudow (President and CEO) adding that these costs normalize over a couple of quarters due to the high lifetime value of customers. For distribution, Tom Barbato highlighted strong execution in equipment sales and rentals, significant investment in rentals for power generation/conditioning/management aligning with data centers and EV charging, and the expectation of recurring calibration opportunities in these markets.

Greg Palm from Craig-Hallum Capital Group LLC inquired about the drivers behind the Distribution segment's significant outperformance, questioning if it was due to tariff-related pull-ins and what drove the gross margin expansion. He also asked for a comparison of the recent ESCO acquisition to the Martin acquisition, focusing on similarities, differences, and potential for success.

Answer

CFO Thomas Barbato clarified that the Distribution segment's strength reflects consistent demand in both core distribution and rentals, not just a tariff pull-in. He attributed the record 35.2% gross margin to the higher mix of rental business, noting that while that specific level isn't sustainable quarterly, meaningful year-over-year margin growth is expected. President & CEO Lee Rudow added that long-term margin expansion will continue as the strategic rental business grows. Regarding the acquisitions, Rudow explained that ESCO and Martin are similar in size and regional dominance but differ in technical specialty. ESCO is a premier provider of high-end electronics calibration, rare in the industry, serving aerospace and defense. In contrast, Martin's strength is in dimensional and mechanical measurements, crucial for the medical device industry.

Greg Palm from Craig-Hallum Capital Group LLC inquired about the significant outperformance in the Distribution segment, asking if it was driven by tariff-related pull-in revenue and which end markets showed strength. He also questioned the cause of the high gross margin and sought a comparison between the recent ESCO acquisition and the Martin acquisition.

Answer

CFO Thomas Barbato clarified that the strong Distribution demand is consistent and not merely a tariff pull-in, attributing the significant margin expansion to a strong quarter for the high-margin rentals business. President & CEO Lee Rudow added that long-term margin expansion in Distribution is expected as rentals become a larger part of the mix. Regarding the acquisitions, Rudow explained that while ESCO and Martin are similar in size and regional dominance, their specialties differ: ESCO focuses on high-end electronics for aerospace and life sciences, whereas Martin's strength is in dimensional and mechanical measurements for sectors like medical devices.

Greg Palm inquired about the significant outperformance in the Distribution segment, asking if it was driven by tariff-related pull-in revenue and what the outlook is for Q2. He also questioned which end markets drove the strength and if the high gross margin was skewed towards rentals. Additionally, he asked for a comparison of the recent ESCO acquisition to the Martin acquisition.

Answer

CFO Thomas Barbato clarified that the strong Distribution demand is consistent and not merely a tariff-related pull-in. He confirmed that the high-growth rentals business drove the 130 basis point gross margin expansion to 35.2%, but cautioned that while this level isn't sustainable quarterly, meaningful year-over-year margin growth is expected. CEO Lee Rudow added that long-term margin expansion will continue as rentals become a larger part of the mix. Regarding the acquisitions, Rudow explained that ESCO and Martin are similar in size and regional dominance but differ in technical specialty; ESCO focuses on high-end electronics, while Martin's strength is in dimensional and mechanical measurements, making them complementary.

Greg Palm from Craig-Hallum Capital Group LLC asked about the drivers of the strong Distribution segment results, questioning if it was a pull-in ahead of tariffs and what drove the significant gross margin expansion. He also requested a comparison of the new ESCO acquisition to the recent Martin acquisition.

Answer

CFO Thomas Barbato clarified that the Distribution segment's strength was due to consistent demand, not a tariff-related pull-in, and that the high gross margin was driven by a strong quarter for the high-margin rental business. President and CEO Lee Rudow added that while the current 35% margin isn't the new baseline, margins are expected to expand over time as the rental mix grows. Regarding ESCO, Rudow explained that it is similar to Martin in size and regional dominance but differs in specialty; ESCO focuses on high-end electronics, while Martin's strength is in dimensional and mechanical measurements.

Greg Palm from Craig-Hallum Capital Group LLC inquired about the drivers behind the Distribution segment's 19% revenue growth, questioning if it was due to tariff-related pull-ins and which end markets were strongest. He also asked about the significant gross margin expansion and sought a comparative analysis of the recent ESCO acquisition against the successful Martin acquisition.

Answer

CFO Thomas Barbato clarified that the Distribution segment's strength was driven by consistent, broad-based demand, not a tariff pull-in, with high-margin rentals significantly boosting gross margins to a record 35.2%. President and CEO Lee Rudow added that while Martin Calibration's strength is in dimensional and mechanical measurements, ESCO is a premier provider of high-end electronics calibration, making the acquisitions complementary rather than redundant.

Greg Palm from Craig-Hallum Capital Group LLC inquired about the drivers behind the Distribution segment's significant outperformance, questioning if it was due to a pull-in of revenue ahead of tariffs and what drove the substantial gross margin increase. He also asked for a comparison of the newly acquired ESCO Calibration to the successful Martin Calibration acquisition.

Answer

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.

Greg Palm of Craig-Hallum Capital Group LLC asked about the drivers of the Distribution segment's outperformance, questioning if it was a tariff-related pull-in and seeking details on end-market strength and gross margin expansion. He also requested a comparison between the recent ESCO acquisition and the prior Martin acquisition.

Answer

CFO Thomas Barbato clarified that the strong demand in distribution was consistent and not merely a tariff-related pull-in, with the high-margin rental business driving the record 35.2% gross margin. President & CEO Lee Rudow added that while 35% is not the new quarterly baseline, margins are expected to grow over time with the rental mix. Regarding the acquisitions, Rudow explained that while ESCO is similar to Martin in size and regional dominance, its specialty in high-end electronics complements Martin's strength in dimensional and mechanical measurements.

Greg Palm inquired about the business cadence in Q4 following earlier timing issues, recent demand trends, the status of large opportunities in the Service segment, and the impact of tariff announcements on the Distribution business, particularly regarding customer purchasing versus rental behavior.

Answer

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.

Greg Palm questioned the rationale for lowering the full-year guidance despite January's recovery, sought more visibility on the sales pipeline for fiscal 2026, and asked if any structural changes were impacting the long-term organic growth profile.

Answer

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.

Greg Palm sought more detail on the NEXA business's sudden underperformance after a period of success, asking about the specific causes, revenue impact, and whether the issues were company-specific. He also asked about the Becnel hurricane impact, questioning if it affected revenue or costs and if it could be quantified.

Answer

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.

Greg Palm of Craig-Hallum Capital Group requested an updated metric for homes sold through company-owned stores, including American Homestar, and if possible, a like-for-like or same-store basis excluding the acquisition's impact.

Answer

Corporate Controller and Investor Relations Mark Fusler stated that American Homestar contributed 343 total homes. He reported that company-owned store sales were 1,339 homes in Q3 fiscal 2026, up 25% from 1,075 in the prior year quarter. President and CEO Bill Boor clarified that the 1,339 figure was consolidated with company-owned stores.

Greg Palm asked about the activity by channel, specifically the relative weakness observed in communities compared to retail, and sought insights into the general sentiment and plans from community operators. He also questioned the cadence of activity in December and throughout the quarter, the nature of retail gross margin compression, and the impact of American Homestar's acquisition on gross margins and homes sold through company-owned stores.

Answer

Bill Boor, President and CEO, stated that the volume decrease was primarily focused on the community side, attributing it to potential year-end capital management and allocation adjustments, but noted no bearish tone from community discussions regarding future plans. He indicated that December's activity, on a seasonally adjusted basis, likely mirrored November's. Bill Boor clarified that retail margin compression was a localized, company-specific observation, not necessarily an industry trend. Allison Aden, EVP and CFO, confirmed no significant impact on consolidated gross margins from purchase accounting related to American Homestar, and Mark Fusler, Corporate Controller and Investor Relations, provided figures for homes sold through company-owned stores, including American Homestar's contribution.

Greg Palm of Craig-Hallum Capital Group LLC asked for clarification on the Southeast region's performance, demand from the community channel, the impact of input costs and tariffs on gross margins, and an update on the regulatory environment, specifically a bill concerning chassis removal.

Answer

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.

Greg Palm from Craig-Hallum asked for details on the February weather impact, including which regions were affected and if the margin impact could be quantified. He also requested more information on the rationale behind the company's major rebranding initiative and later followed up on how the company might handle potential tariffs and why demand appears stronger than the general housing market.

Answer

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.

Greg Palm from Craig-Hallum Capital Group asked about Cavco's volume outperformance and potential market share gains, questioning if they were driven by geography or product strategy. He also questioned why factory-built gross margins were not higher given increased volume and lower input costs, and inquired about the company's capital allocation strategy, particularly the M&A pipeline.

Answer

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.

Greg Palm inquired about the specific product lines contributing to the fiscal Q4 revenue upside, the drivers behind the strong new orders, and how the Liberty Flight Deck and UMS-2 platforms are factored into the company's targeted high single-digit organic growth rate.

Answer

CFO Jeff DiGiovanni attributed Q4 upside to resolving prior margin issues, increased demand in the high-margin retrofit air transport market, and a rebound in business aviation. He linked the strong new orders to investments in the sales team, which has grown from one person in 2023 to six currently. CEO Shahram Askarpour clarified that while Liberty Flight Deck and UMS-2 OEM production is targeted for 2030-2031, aftermarket certifications could begin as early as 2027. He noted that near-term organic growth would come from existing platforms like air transport aftermarket, 737, and C-130 military programs, benefiting from competitors' lack of investment. He explained that while past organic growth was higher on a smaller revenue base, high single-digit is a realistic target for the current $100 million revenue level.

Greg Palm inquired about specific product lines contributing to the Q4 2025 revenue upside beyond air cargo and business jets, details regarding the strong $27 million orders number, and the extent to which the Liberty Flight Deck and UMS-2 platforms are factored into the company's targeted high single-digit normalized organic growth rate.

Answer

CFO Jeff DiGiovanni attributed Q4 2025 upside to resolving a prior quarter margin issue, increased demand in the higher-margin air transport retrofit market, and a rebound in business aviation. He noted the strong orders were a result of investments in the sales team, which has expanded from one person in 2023 to six currently. President, CEO and Director Shahram Askarpour clarified that OEM production for Liberty Flight Deck and UMS-2 is targeted for 2030-2031, with aftermarket certifications potentially starting in 2027. He explained that current organic growth is driven by existing platforms like air transport aftermarket, 737 cockpit solutions, and C-130 military programs, and that achieving double-digit organic growth becomes more challenging at higher revenue bases, hence the high single-digit target.

Greg Palm (Craig-Hallum) inquired about the impact of changing immigration policy on labor, potential for share gains, and the biggest near-term growth levers for 2026 versus longer-term impacts.

Answer

CEO Dale Asplund stated that investments in frontline employees and E-Verify position BrightView well, potentially creating a tailwind for share gains as competitors struggle with labor availability. He identified key growth levers for 2026 as continued customer retention improvement (aiming for 100-200 basis points annually), improving underperforming branches (reducing those below 70% retention from 20% to 10%), expanding ancillary services (e.g., tree trucks), and adding sales resources.

Greg Palm from Craig-Hallum Capital Group LLC asked about the significant operating leverage and SG&A reduction in the quarter, seeking to understand the primary drivers of the cost savings. He also sought to clarify if the positive Q4 outlook was based on improved sentiment or actual July results.

Answer

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.

Greg Palm asked about the impact of strong snow revenue on the core land business and inquired about the company's strategy for its new share repurchase program versus M&A.

Answer

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.

Greg Palm asked about labor trends, including availability and inflation, and how BrightView's initiatives are creating a competitive advantage. He also questioned the trends in ancillary revenue and its link to customer retention.

Answer

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.

Greg Palm of Craig-Hallum Capital Group LLC sought more detail on the key levers for land growth, including route density and new customer acquisition, and also asked about the timeline and strategy for resuming M&A activity.

Answer

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.

Greg Palm followed up on substantial production applications with longer sales cycles that were previously pushed out, asking if the opportunities mentioned by management were the same or additional. He also inquired about the year-over-year trend in consumables revenue through the first nine months of 2025 and the implied revenue range for Q4.

Answer

CEO Dr. Yoav Zeif confirmed that the opportunities are the same, noting a slight improvement in the long sales cycles (1-2 years) for production applications. He provided an example of the AM Craft collaboration in aerospace, detailing how Stratasys Direct Manufacturing is expanding to become a major service bureau for certified aviation parts, addressing supply chain issues. Regarding consumables, Dr. Zeif stated that revenue is flat or stable this year despite challenges, but expects gradual consumption increases as the company focuses on manufacturing machines (e.g., F3300, H350) which have significantly higher material utilization than prototyping machines.

Greg Palm from Craig-Hallum Capital Group LLC inquired about the specific factors causing the significant reduction in the earnings forecast, particularly the impact on gross margin, and asked for the magnitude of the new cost-reduction efforts planned for Q4.

Answer

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.

Greg Palm inquired about the current market environment, customer feedback, and the expected revenue cadence for 2025. He also asked for details on the assumptions behind the 2025 gross margin guidance, particularly concerning logistics and tariffs.

Answer

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.

Greg Palm of Craig-Hallum asked for a ranking of macroeconomic headwinds and whether policy certainty could unlock pent-up demand. He also questioned the seemingly conservative Q4 gross margin guidance given higher expected revenue and inquired about the execution status of the share repurchase plan.

Answer

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.

Greg Palm of Craig-Hallum Capital Group LLC requested an update on the broader macro environment's impact on sales cycles, questioned if the new Dental opportunity could face similar headwinds, and asked about the progress of the cost-reduction program and confidence in reaching profitability targets.

Answer

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.

Greg Palm questioned the specific drivers behind the Q1 revenue miss relative to expectations, asked for quantification of the year-over-year materials sales decline, and sought clarity on the breakeven revenue run-rate after the new cost savings are implemented.

Answer

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.

Greg Palm of Craig-Hallum Capital Group LLC asked about the current customer tone compared to year-end 2024. He also questioned the potential revenue impact of the $50 million cost-cutting plan and how much of the savings are permanent. Lastly, he inquired about the expected timeline for achieving positive operating and free cash flow.

Answer

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.

Greg Palm of Craig-Hallum Capital Group LLC inquired about the current market environment, asking for confirmation on the end of destocking and signs of recovery in the industrial sector. He also sought more detail on Allient's exposure in the Aerospace & Defense (A&D) market and the current risk profile related to rare earth magnet supply.

Answer

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.

Greg Palm inquired about the current demand and supply environment, the potential impact of tariffs, and whether Allient is positioned to gain market share from its localization efforts.

Answer

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.

Greg Palm asked for a high-level outlook on geographies and end markets, the potential for a return to growth in 2025, the impact of potential stimulus in Europe, and specifics on Allient's data center market exposure and growth expectations.

Answer

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.

Greg Palm of Craig-Hallum Capital Group LLC inquired about whether the quarter's performance met expectations, the quantifiable impact of inventory destocking on revenue, the growth outlook for the data center and AI end markets, and the internal and P&L benefits of the 'Simplify to Accelerate NOW' initiative.

Answer

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.

Greg Palm from Craig-Hallum Capital Group LLC highlighted the strong operating leverage in the quarter and asked if any one-time benefits contributed to the high incremental margins. He also inquired about the origin of the new storage system, asking if it was a long-planned innovation or a customer-driven request.

Answer

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.

Greg Palm of Craig-Hallum Capital Group asked about the drivers of the strong gross margin, questioning if there were one-time benefits beyond ASR. He also inquired about the revenue contribution timeline for the next 10 targeted GreenBox locations.

Answer

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.

Greg Palm of Craig-Hallum asked for an update on when cost overruns might moderate and inquired about the moderating revenue growth from non-Walmart customers.

Answer

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.

Greg Palm asked about the implications of the Walmex win in a low-wage region for the company's total addressable market. He also inquired about a restructuring charge and the margin drag from the operation services segment.

Answer

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.

Greg Palm from Craig-Hallum Capital Group LLC inquired about the reasons for the subdued second-half outlook, asking for a breakdown of impacts from inventory destocking, system sales timing, and upgrade orders. He also asked for more detail on why the ink inventory destocking was impacting results now.

Answer

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.

Greg Palm of Craig-Hallum inquired about the market impact of recent trade policy shifts and tariffs on customer behavior, and asked for an update on the full-year sales forecast for the Apollo system, specifically whether the target of 30 placements was still achievable. He also sought clarity on a major customer delaying a multi-system Apollo order.

Answer

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."

Greg Palm asked about Kornit's primary goals for 2025, how they relate to top-line growth potential, and whether the company could return to double-digit growth.

Answer

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.

Greg Palm from Craig-Hallum Capital Group asked for an outlook on 2025, considering the Apollo ramp-up and market stabilization, and requested more details on the initial upgrade orders from Kornit's global strategic account.

Answer

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.

Greg Palm asked for commentary on the current business environment, why Q1 results significantly outperformed guidance, and the specific impact of delayed shipments from the previous quarter.

Answer

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.

Greg Palm inquired about the current business environment compared to late May, the specific drivers behind the significant Q1 outperformance versus prior guidance, and the quantifiable impact of shipments that were delayed from the previous quarter.

Answer

President & CEO Tim Larson explained that the Q1 beat was driven by stronger-than-anticipated community channel sales, increased production in high-backlog regions, improved captive retail pricing, and lower material costs. He cautioned that these favorable dynamics are not expected to repeat in Q2. EVP & CFO Laurie Hough added that most of the delayed shipments from Q4 2025 were recognized in Q1, contributing to the outperformance, but declined to quantify the exact amount.

Greg Palm from Craig-Hallum Capital Group LLC asked about the impact of unfavorable weather on home shipments during the quarter. He also sought a broader perspective on the manufactured housing industry's potential for market share gains against stick-built homes, focusing on customer demographics and the role of deregulation.

Answer

President & CEO Tim Larson confirmed that weather had slowed activity in Texas and the South, which was factored into the Q1 outlook. He elaborated that market share gains are being pursued through an expanded captive retail footprint, consumer financing programs, and product innovation. Larson also highlighted the importance of advocacy and potential deregulation, such as removing the permanent chassis requirement, to increase consumer awareness and acceptance.

Greg Palm from Craig-Hallum Capital Group LLC inquired about order trends during Q3, the outlook for January, and customer sentiment for 2025. He also asked for new CEO Tim Larson's perspective on the company's strategy and potential changes.

Answer

CEO Tim Larson explained that Q3 results were bolstered by a faster-than-expected recovery from hurricane impacts and increased capacity utilization to 63%. While orders slowed seasonally late in the quarter, he noted that healthy store traffic and recent quoting activity support the Q4 outlook for low double-digit growth year-over-year. Regarding strategy, Larson, having been with the company for 3.5 years, affirmed his commitment to the existing strategic themes, emphasizing a focus on executing fundamentals, product innovation, enhancing the customer experience, and disciplined capital deployment.

Greg Palm inquired about the return on investment for Latham's marketing campaigns and sought an update on the progress of the Sand State expansion strategy, including dealer recruitment and community penetration.

Answer

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.

Greg Palm asked if there has been any change in demand sentiment recently and whether Latham is gaining market share. He also inquired about the ability to track conversion rates from marketing initiatives and if these efforts are expected to impact results this year or in the future.

Answer

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.

Greg Palm of Craig-Hallum Capital Group questioned if the 2025 revenue guidance assumes an acceleration in fiberglass penetration and asked about the key performance indicators (KPIs) used to measure the success of the sand state strategy.

Answer

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.

Greg Palm asked about the specific drivers for the significant Q2 revenue beat against guidance, the business cadence through May and June, and whether similar strength was continuing in July. He also inquired about any standout end markets and the relative size of the aerospace and defense vertical.

Answer

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.

Greg Palm questioned the Q2 revenue guidance, noting that the implied sequential growth appears weaker than typical seasonality, especially given the commentary on robust current demand.

Answer

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.

Gregory Palm asked about observed changes in buyer behavior due to tariffs and requested the proportion of revenue currently supplied from China, questioning if the move to other geographies like India was related.

Answer

CEO Randolph Altschuler confirmed that customers are showing increased awareness and are looking to mitigate risk by using multiple or different sourcing geographies. CFO James Miln declined to provide a specific revenue breakdown from China but framed the global sourcing expansion as a core strategy to provide flexibility and resilience, which is well-suited to the current environment.

Greg Palm asked if the growth in the global supplier base was benefiting from a softer manufacturing environment and requested more detail on the addition of new suppliers with specific capabilities or certifications for larger customers.

Answer

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.

Greg Palm from Craig-Hallum Capital Group LLC asked new CEO Suresh Krishna for his early impressions and strategic priorities. He also probed for details on the gross margin impact from tariffs, questioning the specific cause and whether the issue was resolved. He concluded with requests for the network gross margin and the revenue mix from the aerospace and defense sector.

Answer

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.

Greg Palm from Craig-Hallum Capital Group asked about April order trends, the reason for lower margin guidance in Q2, whether the current environment is providing a tailwind, and if the company plans to expand its US manufacturing partner base.

Answer

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.

Greg Palm asked for the network gross margin, the reason for the sequential decline in consolidated gross profit, the basis for confidence in a return to revenue growth in 2025, and whether growth would come at the expense of margins.

Answer

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.

Greg Palm asked if the Q3 revenue outperformance was attributable to the recent realignment, sought clarity on October order trends relative to normal seasonality, questioned whether strong Network margins were due to algorithms or market capacity, and requested quantification of the P&L impact from the European facility consolidation.

Answer

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.

Greg Palm asked for an update on broader industry conditions, competitive behavior, and the financial implications of the growing multifamily business, including its impact on gross margin and working capital. He also inquired about working capital expectations for the second half of the year.

Answer

CEO & President, Shyam Reddy, stated that the competitive environment remains intense but consistent with the prior quarter, and that certainty around tariffs could unlock pent-up demand. He explained that multifamily projects can require holding committed inventory longer, impacting working capital turns but providing a key value-add. SVP, CFO & Treasurer, Kelly Wall, added that working capital was impacted by a normalization of accounts payable from Q1. She anticipates inventory levels will become a source of cash in the second half of the year, with full-year 2025 free cash flow expected to be similar to 2024.

Greg Palm from Craig-Hallum Capital Group LLC asked for an update on broader industry conditions, competitive behavior, and a deeper explanation of the margin and working capital implications of the growing multifamily business, including expectations for the second half of the year.

Answer

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.

Greg Palm from Craig-Hallum Capital Group LLC asked for an update on broader industry conditions and any emerging 'green shoots.' He also inquired about changes in competitive behavior since the last quarter and sought more detail on the gross margin and working capital implications of the growing multifamily business, as well as the outlook for working capital in the second half of the year.

Answer

CEO & President Shyam Reddy stated that the competitive environment remains intense and is 'more of the same theme,' but BlueLinx is controlling its narrative through demand creation. He explained that multifamily projects have longer cycles, which can mean holding committed inventory longer and impacting working capital turns, but this is a key part of their value proposition. SVP, CFO & Treasurer Kelly Wall added that while inventory was high in Q2, it is expected to be a source of cash in the second half, with full-year 2025 free cash flow projected to be similar to 2024.

Greg Palm inquired about the drivers behind specialty gross margin pressure, seeking to distinguish between market-related challenges and the impact of tariffs. He also asked if pricing had already been adjusted for tariffs and questioned the reasons for elevated inventory levels.

Answer

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.

Greg Palm inquired about the recent rebound in sales volumes, asking if it was a catch-up from weather disruptions or if pent-up demand remains. He also asked for an update on the ramp-up of the Portland greenfield location and the company's planned cadence for future greenfield openings.

Answer

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.

Greg Palm requested an update on the competitive landscape, asking where BlueLinx is specifically gaining market share and which areas hold the most promise for future gains. He also posed a strategic question about how the company's growth focus might change if interest rates remain high and large production builders continue to dominate the housing market.

Answer

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.

Greg Palm inquired about the reasons for increased confidence in the A&D outlook without a guidance raise, the specific nature of tariff risks for the A&D sector, and the rationale for drawing down the line of credit despite a healthy cash balance.

Answer

CEO Scott Keeney attributed the confidence to market traction but cited tariff uncertainty as a reason for caution. He confirmed A&D tariff risk is mainly from secondary supplier exposure. CFO Joe Corso explained the credit line draw was a prudent step to fund anticipated working capital needs for A&D growth, stating there is no 'magic number' for a cash buffer but that they feel well-capitalized around $100 million.

Inquired about the increased confidence in the A&D outlook without raising guidance, the specific tariff risks for the A&D business, mitigation strategies for tariffs, and the rationale for drawing down the line of credit despite a healthy cash balance.

Answer

Increased confidence in A&D stems from traction in U.S. and international markets, but the full-year guide was not raised due to global uncertainty from tariffs. A&D tariff risk comes from secondary exposure through the supply chain. Mitigation includes shifting production to Thailand. The line of credit was drawn to prudently fund anticipated working capital needs for second-half growth in a bumpy economy.

Greg Palm questioned why the A&D full-year outlook remained unchanged despite increased confidence, asked for specifics on tariff-related risks for the A&D segment, and inquired about the rationale for drawing down the line of credit given the substantial cash balance.

Answer

CEO Scott Keeney explained that while traction in U.S. and international markets boosts confidence, broader economic uncertainty from tariffs justifies maintaining the current A&D guidance. He noted tariff risk is indirect, stemming from suppliers' supply chains. CFO Joe Corso clarified the credit line drawdown was a prudent measure to fund anticipated working capital growth for the A&D ramp in H2, ensuring capital flexibility in a bumpy economic environment.

Inquired about the assumptions behind Q1 guidance, specifically regarding the Q4 revenue shortfall and potential inventory reserves. Also asked for the outlook on the commercial business for Q1 and the full year, and the potential impact of tariffs on Chinese competition.

Answer

The Q1 guide does not include the Q4 revenue shortfall and no further inventory reserves are expected. Commercial revenue is expected to decline sequentially in Q1 and be down 15-20% for the full year. The company's growth will be driven by the A&D business. Tariffs could be beneficial but are not being relied upon.

Greg Palm inquired about the assumptions within the Q1 2025 guidance, specifically regarding the Q4 revenue shortfall, potential inventory reserves, and the outlook for the commercial business, as well as the potential impact of tariffs.

Answer

CFO Joe Corso clarified that the Q1 guidance does not assume a significant rollover of the Q4 revenue shortfall and that no unusual inventory reserves are anticipated. He also noted the commercial business is expected to decline sequentially. CEO Scott Keeney added that for the full year, the commercial business is projected to be down 15-20%, with overall growth driven by A&D. Keeney also stated that while potential tariffs could be beneficial, they are not factored into the company's current plans.

Greg Palm questioned the significant shortfall in the Q4 commercial business forecast compared to prior expectations, whether commercial market challenges would worsen in 2025, the competitive impact of Chinese suppliers in the U.S., and if the A&D segment's strong growth is repeatable next year.

Answer

CFO Joe Corso attributed the commercial business shortfall to market volatility and lack of visibility, noting Q3's microfabrication strength won't repeat and industrial pressure persists. CEO Scott Keeney added that headwinds from massive excess capacity in China are expected to continue into 2025. Regarding A&D, Corso confirmed growth is expected in 2025, but the timing is uncertain due to the innovative nature of the products, making a specific growth rate difficult to predict.

Greg Palm questioned the significant shortfall in the Q4 commercial business outlook, whether commercial markets would worsen or stabilize in 2025, the competitive impact of Chinese suppliers in the U.S., and if the A&D segment's growth is repeatable next year.

Answer

CFO Joe Corso attributed the commercial weakness to market volatility and lack of visibility, noting a strong Q3 in microfabrication would not repeat. CEO Scott Keeney and Corso clarified they expect commercial business to remain at depressed Q4 levels into 2025, not necessarily worsen, citing massive excess capacity in China as a primary headwind. Corso affirmed that while A&D growth is expected to continue in 2025, the timing of revenue from cutting-edge products makes specific growth-rate predictions difficult.

Greg Palm of Craig-Hallum asked if the strong Q1 performance included any pull-in of orders ahead of tariffs. He also questioned how quickly Bel could move manufacturing to other regions if tariffs become permanent and what capacity exists in those regions. Lastly, he sought clarification on the significant step-up in AI-related revenue, asking if it was driven by existing customers ramping up or new customer wins.

Answer

CFO Farouq Tuweiq stated there was no significant pull-in of orders in Q1. CEO Dan Bernstein and Tuweiq addressed manufacturing flexibility, highlighting their established base in India as a key alternative to China, noting that moving production requires customer approvals and is a longer process. Tuweiq explained the AI revenue growth is a combination of factors, primarily from ramping up with next-gen GPU manufacturers with whom Bel has co-developed products over time. These are newer customers now entering a high-growth phase.

Inquired about the specific trends being observed by end market and geography, the nature of the Q1 order growth and its impact on backlog and future revenue, and whether the uncertain macro environment could delay partnership launches.

Answer

The executive noted tariff-related slowdowns in Q1 in the Americas, especially in automotive, while general manufacturing and aerospace remain stable. The company is prudently planning for a potential market downturn in Q2. The Q1 order growth led to a small backlog build due to the timing of late-quarter orders, which solidifies the Q2 outlook. Regarding partnerships, the executive believes a down market might actually accelerate partners' desire to launch new products to drive growth, rather than delay them.

Inquired about recent market trends, the ranking and timeline of various growth initiatives, initial feedback on the new LEAP ST product, and the potential impact of tariffs on the company's manufacturing and competitive position.

Answer

The executive responded that Q1 market trends are similar to Q4, and it's too early to rank the company's 'evergreen' growth initiatives. He noted that feedback on the new LEAP ST product is positive and ahead of expectations. Regarding tariffs, the company feels prepared due to its manufacturing in Thailand and operational flexibility, with any potential impact not expected to be sizable.

Greg Palm inquired about the 2025 ramp-up of the Amazon commercial agreement, whether the evolving relationship will lead to a higher installed base of new machines, and the potential for a recovery in the European market following recent stimulus announcements.

Answer

Omar Asali, Chairman and CEO, confirmed a significant ramp-up with Amazon is expected in 2025 across geographies and product lines, with dialogues centered on 'very, very sizable opportunities' involving both new and refurbished equipment. Regarding Europe, Asali noted that while the 2025 guidance remains conservative due to macro uncertainty, recent stimulus announcements from Germany are 'very, very encouraging' and could provide a significant tailwind if they translate to economic activity. CFO Bill Drew added that the company expects double-digit volume growth from Amazon.

Greg Palm asked about any surprises during the quarter, the ramp-up status of additional strategic accounts, the outlook for Q4 relative to full-year guidance, and the performance of the automation business, including its role in winning integrated packaging deals.

Answer

Chairman and CEO Omar Asali responded that he was pleasantly surprised by the higher-than-expected volumes from new strategic accounts. He confirmed confidence in the full-year guidance, noting that major account ramp-ups for 2024 are now complete ahead of the peak season. Asali highlighted strong momentum in automation, with bookings up 60% year-to-date and a record Q4 expected, which he believes will be repeated in 2025. He emphasized that offering an integrated solution of automation, protective packaging (PPS), and data analytics is critical to winning large enterprise customers.

Greg Palm inquired about the assumptions in the Q1 guidance, the outlook for the commercial business for the full year, and the potential impact of tariffs on Chinese competition.

Answer

CFO Joe Corso stated the Q1 guide does not assume a significant rollover of the Q4 revenue shortfall and expects no further unusual inventory reserves. CEO Scott Keeney projected the commercial business could be down 15-20% for the full year, emphasizing that A&D will be the primary growth driver. Keeney also noted that while tariffs could be beneficial, the company is not relying on them in its forecast.

Greg Palm asked for quantification of the near-term hurricane impacts on volume and revenue, the expected timeline to catch up on demand, and details on the strong gross margin performance, including the end of purchase accounting headwinds and other contributing factors.

Answer

Mark Yost, President and CEO, explained that hurricane-related disruptions would likely impact results for the current and next quarter, with the recovery timeline dependent on infrastructure rebuilding. Laurie Hough, EVP and CFO, added that gross margins benefited from lower forest product costs and stronger-than-expected captive retail sales, and confirmed that purchase accounting headwinds are now immaterial.