Isaac Sellhausen

Isaac Sellhausen inquired about the Advanced Surface Technologies (AST) segment's margin expectations and ramp throughout the year, specifically asking if higher operating expenses associated with 2025 qualification work would continue into 2026, and for additional color on the ramp. He also followed up on the Sealing Technologies segment, asking how the recently acquired AlpHa and Overlook businesses are anticipated to perform, particularly in comparison to the segment's mid-single-digit growth rate.

Answer

EVP and CFO Joe Bruderek stated that the company is materially at the run rate for additional operating expenses, approximately $2 million per quarter, ahead of demand for multiple growth programs. He expects revenue from these programs to start leveraging against these costs throughout 2026, leading to margin expansion, particularly in the second half. President and CEO Eric Vaillancourt reported that both AlpHa and Overlook have strong backlogs and order rates, currently exceeding expectations, with seamless integration. Joe Bruderek added that these businesses are expected to grow at least high single digits combined, making them accretive to the Sealing Technologies segment's growth rate.

Isaac Sellhausen asked about AST's margin expectations and ramp through the year, specifically whether higher operating expenses associated with 2025 qualification work would continue this year, and requested additional color on the ramp. He also inquired about the anticipated performance of the Alpha and Overlook acquisitions within the Sealing Technologies segment, particularly in comparison to the segment's mid-single-digit growth rate.

Answer

Joe Bruderek, EVP and CFO, clarified that AST's operating expenses for growth programs are at a run rate of approximately $2 million per quarter, with no incremental spending expected in the near term. He anticipates revenue leverage against these costs throughout 2026, leading to margin expansion, especially in the second half, driven by improving demand and growth programs delivering revenue. Eric Vaillancourt, President and CEO, stated that both Alpha and Overlook have strong backlogs and order rates, exceeding expectations with seamless integration. Joe Bruderek added that these businesses are expected to grow at least high single digits, making them accretive to the Sealing Technologies segment's growth rate.

Isaac Sellhausen from Oppenheimer, on behalf of Ian Zaffino, inquired about the specific levers EnPro plans to use to achieve its long-term 30% EBITDA margin target for the AST segment and sought details on customer conversations regarding the semiconductor market outlook beyond 2025.

Answer

President and CEO Eric Vaillancourt and CFO Joe Bruderek outlined that reaching the 30% margin target in AST will be driven by a combination of market recovery, outsized growth from strategic positioning, and significant operational efficiencies modeled after the Sealing segment's success. Regarding the long-term outlook, Vaillancourt noted that customers remain hesitant to forecast beyond a 'choppy' 2025 due to persistent market uncertainty.

Isaac Sellhausen followed up on the Travel and Membership segment's profitability, asking about the sustainability of its mid-thirties EBITDA margin given exchange revenue headwinds and past cost actions, and any puts and takes on the margin outlook.

Answer

President and CEO Michael Brown reiterated modeling 2026 consistent with 2025 trend lines for the Travel and Membership business. CFO Erik Hoag elaborated that while the travel clubs business is growing nicely, there is a structural contribution margin difference between the exchange business and travel clubs. If current trends continue, this could lead to some broad-based erosion in the segment's EBITDA margins over the longer term.

Isaac Sellhausen, on for Ian Zaffino from Oppenheimer & Co. Inc., asked about the key drivers behind the growth in the international currency business, specifically regarding mix, volume, and the adoption of micro-optic security features.

Answer

SVP & CFO Christina Cristiano attributed the strong performance to Crane NXT's differentiated technology, which drives recurring revenue from existing customers and new wins. She highlighted that the core backlog was up nearly 20% year-over-year and is expected to remain above $300 million. She also noted the company is on track to achieve its target of 10 to 15 new micro-optic customer wins for the full year, underscoring a rich pipeline of opportunities.

Isaac Sellhausen, on behalf of Ian Zaffino, requested more detail on the drivers of international currency growth for 2025, specifically the mix between new wins and existing customers.

Answer

CEO Aaron Saak responded that the growth is a combination of both, with a directional split of approximately 70% from existing customer contract renewals and 30% from new wins. He reiterated high confidence in the international currency business for 2025, supported by new orders already in hand for Q1 and a strong overall sales funnel.

Isaac Sellhausen, on for Ian Zaffino, asked about the drivers of CPI's margin strength, including pricing and productivity, despite mix shifts. He also inquired about the outlook for free cash flow conversion next year following the downward revision for 2024.

Answer

Executive Christina Cristiano attributed the strong CPI margins to disciplined execution of pricing, which remains price/cost positive, and productivity initiatives driven by the Crane Business System (CBS). Regarding cash flow, she emphasized that the business model's ability to generate strong cash flow is unchanged and the 2024 revision is purely due to the timing of collections on late-quarter shipments, which will be received in Q1 2025. She reiterated the long-term expectation of ~100% conversion.

Isaac Sellhausen, on behalf of Ian Zaffino from Oppenheimer & Co. Inc., asked for an update on the Dollar and Thrifty brands and inquired about the timing and anticipated DPU for model year 2026 vehicle purchases amidst supply chain issues.

Answer

EVP & CCO Sandeep Dube responded that the goal is to drive higher RPU across all brands, but noted that the premium Hertz brand mix is growing, which is margin accretive. CEO Gil West addressed the vehicle buys, stating that after delays, model year 2026 purchases are gaining momentum, and the company remains disciplined to achieve its North Star DPU target, with flexibility provided by the accelerated 2025 buys.

Representing Oppenheimer & Co. Inc., Isaac Sellhausen asked for clarification on the drivers behind the strong restaurant EBITDA margin and inquired about the company's strategy for mitigating its tariff exposure.

Answer

CFO Brian Webb-Walsh attributed the restaurant margin strength to growth in software, services, and payments, projecting a full-year margin of around 32%. CEO James Kelly added that if tariffs persist, the company will need to discuss sharing the cost with customers, as it may not be sustainable for NCR Voyix to absorb the full impact long-term.

Isaac Sellhausen, on for Ian Zaffino, asked for more detail on the planned investments in the restaurant segment, including what the investments entail and how they will position the business competitively.

Answer

CEO David Wilkinson clarified that the investments are designed to accelerate the existing product roadmap. Key initiatives include expanding into the QSR segment, enhancing platform capabilities like kitchen and payments management, and migrating these features to the cloud to speed up customer conversions. He also noted the use of aggressive commercial packages to drive adoption.

Isaac Sellhausen of Oppenheimer asked about the positive RevPAR trends in Midwest and industrial markets, seeking to understand if the growth was driven by ADR, occupancy, or specifically by infrastructure-related demand.

Answer

CEO Geoffrey Ballotti attributed the strength to steady rate and an occupancy uplift from infrastructure spending. He noted that hotels near large infrastructure projects saw RevPAR growth over 500 basis points higher than market averages. He also highlighted data center construction as a significant multi-year tailwind for Wyndham's hotels, with sales teams actively targeting these projects.

Isaac Sellhausen, on for Ian Zaffino, requested an update on the early performance of the Echo Suites brand, specifically regarding ADR and RevPAR trends compared to traditional economy and mid-scale hotels.

Answer

CEO Geoffrey Ballotti reported that developers are finding that Echo Suites properties are ramping up faster than they had anticipated. He noted strong performance from both an average daily rate (ADR) and an extended-stay occupancy standpoint, which is generating excitement and encouraging further ground breaks among developers.

Isaac Sellhausen, on behalf of Ian Zaffino, asked about new customer additions in the corporate business, specifically if there were any notable wins with larger enterprise accounts. He also inquired about the general sentiment from large enterprise prospects regarding their purchasing decisions.

Answer

Johnny Hecker, CRO and EVP of Operations, confirmed that Consensus is successfully adding new customers across the entire spectrum, from smaller accounts via upsell programs to very large enterprises. He stated that the company maintains a robust pipeline and has been effectively converting these opportunities into new customers, indicating positive momentum across the entire corporate customer continuum.

Speaking for Ian Zaffino, Isaac Sellhausen asked for an update on the vocational truck demand environment, seeking details on specific areas of strength and whether any weakness is emerging among customers or in municipal spending.

Answer

CEO David Graziosi confirmed that the North America vocational market remains robust and strong, consistent with prior expectations and OEM commentary. He noted that Allison is well-positioned with increased capacity and benefits from sustained demand from municipal customers, who are generally insulated from broader macroeconomic uncertainty.

Isaac Sellhausen of Oppenheimer inquired about the key drivers for the high single-digit growth guidance in the real estate channel despite housing market trends, and asked for insight into the sustainability and drivers of the strong 80% retention rate.

Answer

CEO Bill Cobb explained that the real estate channel growth is primarily fueled by the addition of the 2-10 Home Buyers Warranty acquisition, which has a robust real estate business. On retention, Cobb described it as a core company-wide initiative, highlighting drivers like an expanded calling program, increased use of preferred contractors, and new member-facing innovations like the 'video chat with an expert' feature, which improves the customer experience.

Isaac Sellhausen, on for Ian Zaffino, asked if the current high gross profit margins are structurally sustainable long-term and questioned the size of the traditional home warranty business within the 2-10 acquisition.

Answer

CFO Jessica Ross reiterated the company's long-term gross margin target remains in the upper 40s, which already accounts for the growing, but lower-margin, on-demand business. CEO Bill Cobb deferred on providing a breakdown of the 2-10 business, stating that a full look at the combined company will be provided at the future Investor Day.

Isaac Sellhausen, on for Ian Zaffino, asked if the company could quantify the impact of the California wildfires on attendance in the first two months of the year and if growth would have been higher than the reported 2%.

Answer

CEO Richard Zimmerman stated that Magic Mountain only closed for one day and, while acknowledging such events have an impact, he expressed satisfaction with the overall portfolio's momentum. He preferred to focus on the broader positive trends rather than isolating the specific impact of the wildfires on a small portion of the year.

Isaac Sellhausen, on for Ian Zaffino, asked for color on the dynamic pricing strategy for daily tickets and how the $175 million in annual infrastructure CapEx would be allocated between the legacy portfolios.

Answer

CFO Brian Witherow stated that a strong advance commitment base allows their BI team to be 'as aggressive as the market allows' with dynamic pricing, and these tools are being expanded across the entire portfolio. CEO Richard Zimmerman said the allocation of infrastructure CapEx is still being finalized but confirmed that every park will receive investment to address its specific needs.

Isaac Sellhausen, on behalf of Ian Zaffino from Oppenheimer & Co. Inc., asked what specific factors could drive Knife River's 2025 EBITDA margin to the high end of its guidance range. He also followed up with a question about the margin profile and potential accretion from the pending Strata acquisition.

Answer

President and CEO Brian Gray explained that reaching the high end of guidance would likely be driven by a faster-than-expected recovery in private sector work, continued benefits from PIT Crew efficiency initiatives, and strong bidding discipline on public projects. Regarding Strata, Gray stated that while specific details are pending, the business is more heavily weighted toward higher-margin materials than Knife River's current mix, making it accretive to consolidated margins upon closing.

Speaking for Ian Zaffino, Isaac Sellhausen asked about the drivers of the strong Transit OIBDA in Q4 and for growth expectations for the MTA and other transit markets in the coming year.

Answer

CFO Matthew Siegel clarified that the Q4 Transit OIBDA strength was primarily driven by strong performance at the MTA, particularly from national advertisers. He noted that the MTA segment typically turns profitable in Q4 due to revenue seasonality combined with straight-line expense accounting. He confirmed no material contracts were lost and that the overall transit portfolio is performing better than in 2023.

Representing Ian Zaffino, Isaac Sellhausen of Oppenheimer requested details on ADI's organic growth assumptions for 2025 and its primary drivers. He also asked for a follow-up on Snap One's expected contribution to growth, its key drivers, and margin accretion potential.

Answer

Robert Aarnes, President of ADI, expressed cautious optimism for 2025 growth, citing a record commercial project pipeline and healthy backlog. For Snap One, he highlighted its strong new product roadmap, including enhancements to Control4. He emphasized that the primary opportunity for margin accretion lies in introducing the higher-margin Snap product line to ADI's significantly larger customer base, which will drive a more favorable sales mix.

Requested an update on the aircraft conversion timeline for the remainder of the year, particularly for 767s, and asked about the activity and outlook for the Omni passenger flying business.

Answer

The company is actively converting 767 aircraft and sees continuous demand into 2025, reaffirming the 767 as a core asset. The Omni passenger business saw a year-over-year increase in block hours and is expected to remain relatively stable through the second half of the year, following typical seasonal patterns with a contractual rate increase in October.

Asked about the potential upside to guidance from uncontracted leases and flying opportunities, and inquired about recent trends in cargo and passenger block hours.

Answer

The previously guided upside potential of around $30 million is still relevant, with several opportunities in the pipeline, though new flying incurs start-up costs. Block hours were down in Q1 due to 767-200 retirements but are expected to recover as the new Amazon aircraft come online throughout the year.