Guy Hardwick

Guy Hardwick asked for clarification on the significant sequential and year-over-year increase in HVAC revenue, questioning if it represented real growth or a segmental reclassification.

Answer

Stephan von Schuckmann, Sensata Technologies' Chief Executive Officer, confirmed that the growth was 'real growth,' primarily fueled by new business wins and market share gains for HL gas leak detection products. Andrew Lynch, Sensata Technologies' Chief Financial Officer, clarified that gas leak detection revenue was recast from the industrial segment to HVAC, which contributed to the reported increase.

Guy Hardwick from Barclays Capital sought to confirm if the significant sequential and quarter-on-quarter step-up in HVAC revenue, reaching 6% of total revenues, represented real growth or a segmental change.

Answer

Stephan von Schuckmann, Sensata Technologies' Chief Executive Officer, confirmed it was real growth, primarily fueled by HL gas leak detection products and new business wins. Andrew Lynch, Sensata Technologies' Chief Financial Officer, clarified that gas leak detection revenue was recast from the industrial segment into HVAC, contributing to the observed increase.

Guy Hardwick inquired about the long-term margin potential of the business given the new strategic pillars and asked about any financial impact from the recent ransomware attack.

Answer

Chief Executive Officer Stephan Von Schuckmann stated it was too early in his tenure to provide a long-term margin target but confirmed they are working on many levers to drive improvement. Chief Financial Officer Brian Roberts reported that the ransomware attack is not expected to have a material impact on the quarter's financial results.

Guy Hardwick asked CEO Stephan Von Schuckmann for his impressions on the industrial and aerospace businesses and their opportunities. He also asked if Sensata could eventually achieve 100% free cash flow conversion.

Answer

Chief Executive Officer Stephan Von Schuckmann highlighted opportunities in industrial solutions around thermal management and electrical protection, specifically mentioning heat pumps and the new A2L leak detection sensor, and noted he is exploring the data center market. Chief Financial Officer Brian Roberts responded that while he is pushing to get conversion to 80% in 2025, reaching 100% is challenging due to the company's strategic but less inventory-efficient redundant global manufacturing footprint.

Guy Hardwick commended Zebra's supply chain navigation, noting the intent to reduce China's share of U.S. imports below 20%. He asked about the long-term target for this percentage and the future footprint of contract manufacturers. He also inquired at what point technological obsolescence in the installed base of Enterprise Mobile Computing (EMC) would force customers to upgrade to benefit from agentic AI.

Answer

CFO Nathan Winters stated that the team has done a phenomenal job reducing China concentration from over 80% to below 20%, aiming for the 'teens' long-term, while acknowledging some components are China-exclusive. The focus is on broader supply chain resilience. CEO Bill Burns confirmed that AI creates an opportunity for technology-driven refresh in mobile devices, requiring faster processors and more memory for on-device AI models, which will drive higher ASPs. He sees this as a multi-year refresh cycle, contributing to sustainable growth, alongside other factors like device health, longevity, and cybersecurity.

Guy Hardwick commended Zebra's supply chain navigation, particularly the reduction of China imports to below 20% for U.S. imports, and asked about the long-term target for China's footprint and the future of contract manufacturers. He also questioned at what point technological obsolescence in the installed base would compel customers to upgrade for AI benefits.

Answer

CFO Nathan Winters highlighted the team's success in reducing China concentration from over 80% to below 20%, expecting it to stabilize in the teens for certain components. He emphasized the focus on broader supply chain resilience with multiple options globally. CEO Bill Burns stated that AI creates a clear opportunity for technology-driven refresh, requiring higher processing speeds and more memory for on-device AI models. This, combined with factors like device health, longevity, and cybersecurity, will contribute to a multi-year, sustainable refresh cycle rather than a compressed, pandemic-like acceleration.

Guy Hardwick noted that Q1's sequential performance appeared better than typical seasonality and asked which end markets or businesses performed better than expected.

Answer

CEO William Burns attributed the strong performance to a broad-based recovery across all product categories, regions, and verticals. He specifically highlighted that the retail and e-commerce vertical continued to outperform, driven by ongoing needs for inventory visibility and omnichannel fulfillment, with other verticals also showing strong double-digit growth, except for manufacturing.

Guy Hardwick of Freedom Capital Markets asked about the potential long-term business model for the Zebra Companion AI product, specifically the mix between hardware and recurring software revenue. He also questioned if there was any pre-buy activity in Q4 ahead of anticipated tariffs.

Answer

CEO William Burns outlined that the Zebra Companion business model is still developing but aims to monetize through premium hardware sales, market share gains, and recurring revenue from AI agents and software suites. He also stated there was no significant customer pre-buy activity related to tariffs.

Guy Hardwick asked about the company's plans for acquisitions now that leverage has decreased and how M&A would be balanced with share repurchases. He also inquired if the upcoming NRF showcase of AI-enabled computers signals faster commercialization.

Answer

CFO Nathan Winters confirmed the balance sheet provides flexibility for both M&A and buybacks. CEO William Burns added that while the M&A philosophy is unchanged, the bar is higher due to market conditions. Regarding AI, Burns confirmed they are getting closer to commercialization and expect to have a commercial offering in 2025, with an advanced demo planned for NRF.

Guy Hardwick asked about Amphenol's content strategy and competitive positioning across different AI architectures, specifically mentioning concerns about the Kyber architecture versus Oberon, given the significant incremental growth from IT Data Communications.

Answer

CEO Adam Norwitt declined to comment on specific AI architectures or customers. He highlighted Amphenol's multi-decade investment in high-speed and power product capabilities, which has established the company as a leader across the entire AI ecosystem, from service providers to chip designers, ensuring a strong position in both current and future platforms.

Guy Hardwick asked for reassurance regarding Amphenol's content on specific AI architectures, such as Kyber versus Oberon, to allay investor concerns about future growth drivers.

Answer

CEO Adam Norwitt declined to discuss specific customer architectures but emphasized Amphenol's long-term capabilities in high-speed and power products, enabling wins across the entire AI ecosystem, from service providers to chip designers, ensuring a strong position in current and future platforms.

Guy Hardwick of Freedom Capital Markets asked for an expansion on how Amphenol's decentralized structure, with over 130 general managers, provides a competitive advantage in managing challenges like tariffs and supply chain issues.

Answer

CEO Adam Norwitt described the entrepreneurial culture as the core reason for Amphenol's success. He explained that the 140 general managers have full authority and accountability, allowing for highly specific, fine-tuned responses to issues like tariffs, rather than a blunt, company-wide approach. He stated this structure has been preserved and scaled, making the company "purpose-built" for dynamic environments.

Guy Hardwick requested a breakdown of the growth drivers in the defense business beyond general budget increases, asking about specific areas like unmanned systems or electronic warfare.

Answer

CEO R. Norwitt explained that the 9% organic growth in defense was very broad-based. While certain areas like space showed particularly strong growth, he also cited strength in ground vehicles (especially in Europe), airframes, and communications. He emphasized that the primary driver is the redirection of military spending towards next-generation electronics, where Amphenol has a premium market position.

Guy Hardwick asked if the accelerated closing timeline for the Andrew (from CommScope) acquisition indicated that potential antitrust concerns had been resolved.

Answer

CEO R. Norwitt clarified that the company never anticipated substantive antitrust issues. The updated Q1 2025 closing timeline reflects good progress on the necessary global regulatory filing processes, which were always expected to be time-consuming but were not viewed as a material obstacle.

Guy Hardwick asked for further insight into Digital Imaging margins, specifically whether the R&D increase is a permanent step-up funded by cost reductions and how margin mix dynamics (FLIR vs. medical vs. industrial) might evolve for Digital Imaging in 2026.

Answer

Executive Chairman Robert Mehrabian explained that R&D investments are strategic and specific, targeting test and measurement systems (protocol analyzers, high-end oscilloscopes) and sensor businesses (visual and infrared sensors). President and CEO George Bobb noted that while it's early to detail 2026 mix, the segment should benefit from cost reductions taken this year, with machine vision margin recovery being positive and defense growth potentially neutral to overall margin.

Guy Hardwick from Barclays questioned the nature of R&D as a permanent step-up for Digital Imaging margins, the benefits of severance costs, and the expected margin mix dynamics for Digital Imaging in 2026, considering FLIR, medical, and industrial segments.

Answer

Executive Chairman Robert Mehrabian clarified that R&D investments are targeted at specific high-growth areas like high-end oscilloscopes, protocol analyzers, and sensor businesses. President and CEO George Bobb noted that while the mix for 2026 is likely neutral, margins should benefit from the cost reductions implemented in the current year.

Guy Hardwick from Freedom Capital Markets requested more detail on the Canadian business, including its commercial versus government mix and potential tariff exemptions, and asked for clarification on the composition of the $700 million in COGS impacted by tariffs.

Answer

Executive Chairman Robert Mehrabian explained that the $700 million figure includes both internal product transfers and external material supplies. He estimated the Canadian business is weighted more towards commercial sales (roughly 70-80%) and confirmed the company is actively studying and pursuing tariff exemptions, particularly for defense products imported into the U.S. from Canada.

Guy Hardwick asked about the potential peak margin for Digital Imaging if the short-cycle business recovers and requested more color on the booking trends that suggest stabilization.

Answer

Executive Chairman Robert Mehrabian stated that Digital Imaging margins, currently 22.6%, could return to the 24% range seen last year and potentially exceed 25% if the high-margin sensor business recovers strongly. He confirmed that the book-to-bill for short-cycle cameras has been above 1.0 in recent months, indicating a bottom, but cautioned that the billing base is lower than historical peaks and that the sensor business has not yet seen a similar recovery.

Guy Hardwick asked about the internal and external impact of Agentic AI, including potential R&D leverage and future revenue models, considering possible dilution from high compute costs. He also sought clarification on whether the RPO guidance of $2.11 billion to $2.15 billion excludes FX.

Answer

President and CEO Eric Clark stated that Agentic AI is providing internal leverage across departments, particularly R&D, enabling more features without layoffs. Externally, its cloud-native, API-first platform allows for rapid deployment (minutes, not months) without data lakes or latency issues, resonating strongly with customers. He noted a conservative approach to revenue impact, with pricing still being finalized, but emphasized the intention for revenue growth and margin expansion, not dilution. CFO Dennis Story confirmed that the RPO guidance excludes FX, meaning reported RPO could be higher with FX included.

Guy Hardwick asked about the internal and external impact of Agentic AI, specifically regarding R&D leverage and potential incremental revenues or changes to the SaaS model. He also sought clarification on whether the RPO guidance of $2.11 billion to $2.15 billion excludes FX movements.

Answer

President and CEO Eric Clark confirmed internal leverage from Agentic AI across departments, especially R&D, enabling more features without layoffs. Externally, he highlighted the unique cloud-native platform allowing agents to be deployed in minutes without data lakes or latency, which resonates strongly with customers. He stated a conservative approach to revenue from Agentic AI, with the intention to preserve and expand margins, not dilute them. CFO Dennis Story confirmed that the RPO guidance excludes FX movements, implying a potentially higher reported basis with FX.

Guy Hardwick inquired about the competitive environment for acquisitions and whether pricing was becoming more favorable. He also asked about the margin impact from the return of large deals and sought clarification on the Q4 free cash flow guidance.

Answer

Chair and CEO Mike Baur stated that ScanSource typically avoids competitive auctions, preferring to build relationships with targets, which facilitates reasonable valuations. CFO Stephen Jones confirmed that while large deals carry lower margins, their impact is offset by higher-margin recurring revenues from recent acquisitions. Regarding free cash flow, Jones explained the guidance wasn't raised because a high volume of sales late in the quarter could increase accounts receivable and temporarily impact period-end cash flow.

Guy Hardwick of Freedom Capital Markets asked what the Q3 revenue guidance assumes in terms of system deployments, completions, and starts. He also requested an update on the progress of building out the GreenBox sales capability and the current stage of the venture.

Answer

CFO Carol Hibbard explained that they do not guide on specific system numbers, but the lower Q3 revenue forecast reflects the smaller number of systems signed a year ago that are now in a heavy installation phase. CEO Rick Cohen described GreenBox as being in an early stage, currently building out its sales force with hires from the 3PL space and actively prospecting for tenants for its new sites, with about a year before they need to be filled.

Guy Hardwick of Freedom Capital Markets asked about the company's confidence in its prior guidance to deliver 10% of its backlog this year and the progress of discussions with non-grocery customers.

Answer

CFO Carol Hibbard updated the guidance, stating that the company now expects to deliver 11% of its remaining performance obligation in the next 12 months, with revenue back-half loaded. CEO Rick Cohen confirmed that discussions are progressing with non-grocery customers in verticals such as general merchandise, medical supplies, and auto parts.

Guy Hardwick asked for clarification on why the backlog remained stable despite significant revenue burn and questioned why the Q1 revenue guidance appeared conservative given the strong deployment momentum at year-end.

Answer

CFO Carol Hibbard explained that the revenue reduction in the backlog was partially offset by final pricing adjustments and configuration changes on existing contracts. She attributed the Q1 guidance to the specific timing of milestones across the large number of systems in deployment, noting Q4 was a uniquely strong quarter for milestone achievement and was not a new baseline.

Guy Hardwick from Freedom Capital Markets asked for an update on the inventory situation with Impinj's second-largest North American supply chain and logistics customer and whether trade flow changes would impact it.

Answer

CEO Chris Diorio stated that Impinj continues to support the customer, sees them continuing to deploy, and expects growth this year over last, with no further pushouts seen. CFO Cary Baker added that while good progress has been made on channel inventory with that customer, the overall dynamic has changed, with some partners now strategically increasing inventory for other reasons.

Guy Hardwick requested an update on the M800 chip's certification status among inlay partners and the progress of its market ramp. He also asked for a specific percentage growth forecast for the systems business in Q4.

Answer

COO Hussein Mecklai reported that two major inlay partners have achieved M800 certification and are designing products, with more partners on the verge of certification. He described the M800 ramp as healthy and promising. CFO Cary Baker declined to give a specific percentage for systems growth, instead instructing analysts to model endpoint ICs down seasonally and then back into the systems figure using the overall revenue guidance.

Guy Hardwick of Freedom Capital Markets questioned the upside potential for Transportation margins beyond the current 20% level, given the Q4 result was slightly below that and considering various dynamics for fiscal 2025.

Answer

CFO Heath Mitts stated he is not concerned by the single-quarter dip to 19.3%, noting other quarters have been above 20% and that Q4 included some heightened investments. He explained that while a recovery in the high-margin commercial transportation business would provide support, the segment's ability to hold the 20% level is not dependent on it. He affirmed that natural growth should support incremental margin expansion but was not ready to call a specific number for upside beyond 20%.