Jacob Moore

Jacob Moore asked about the value-add from engineering and services, specifically regarding their penetration and margin impact. He inquired about the revenue size of these programs outside of data center and power, the broader opportunity size, their margin contribution compared to the overall portfolio, and any barriers to further penetration. For his second question, he focused on the fiscal fourth quarter's operating margin, asking for the puts and takes behind the suggested sequential step-up from Q3 to Q4, and whether a mid-to-high 6% margin level is sustainable moving forward from Q4.

Answer

CEO Revathi Advaithi mentioned a past figure of approximately $1 billion for value-added services, including vertical integration, but did not provide an updated number. She stressed that these services are crucial for driving margin improvement across all end markets, especially in the data center space due to product deployment and servicing needs. While happy with the growth rates and margins, she did not disclose specific figures. CFO Kevin Kesse reiterated that the Q4 margin step-up is driven by the acceleration of higher-margin products and services businesses, which are accretive to the P&L. He expects similar margin sustainability into early FY2027. Ms. Advaithi added that Flex is ahead of its long-term 6% margin guide and anticipates continued margin growth as the mix shifts towards margin-accretive businesses.

Jacob Moore asked about the revenue size and margin impact of value-added engineering and services programs outside of data center and power, and inquired about the sustainability of the implied mid-to-high 6% operating margin level in Q4 moving forward.

Answer

CEO Revathi Advaithi stated that value-added services, including vertical integration, are important for margin improvement, previously sharing a number in the range of $1 billion, but did not provide updated specifics. CFO Kevin Krumm reiterated that Q4 margin acceleration is driven by higher-margin products and services businesses, expecting similar momentum into early FY2027. Revathi Advaithi expressed confidence in continued margin growth due to mix shift and growth in accretive end markets.

Jacob Moore, on for Steve Barger at KeyBanc Capital Markets, asked for a breakdown of orders and backlog by segment and end market, and whether there was any evidence of a broader demand pull-forward due to tariffs.

Answer

Chairman and CEO David Zapico reported that overall orders grew 6%, with double-digit growth in EMG and single-digit growth in EIG, resulting in a consolidated book-to-bill of 1.0. He dismissed the idea of a significant pull-forward, explaining that the customized, high-value nature of AMETEK's products makes such activity less likely and not meaningful.

Jacob Moore, on behalf of KeyBanc Capital Markets, questioned Plexus's current capacity utilization across its business and the potential revenue run-rate at target utilization. He also requested details on the strategy, current size, and margin profile of the company's engineering solutions business.

Answer

EVP & COO Oliver Mihm stated that Plexus's current capacity can support over $5 billion in revenue and that utilization is consistent across all regions. CEO Todd Kelsey described engineering solutions as a key differentiator, with revenue exceeding $100 million and showing significant diversification into aerospace, defense, and industrial markets. EVP & CFO Patrick Jermain added that the engineering business typically generates margins double that of manufacturing.

Jacob Moore, on for Steve Barger, asked about the structural actions that led to achieving the 6% operating margin target a year early. He also asked if a 6% non-GAAP margin for the full year is achievable and what the near-term capital allocation priorities are.

Answer

EVP and COO Oliver Mihm credited the margin performance to manufacturing efficiency, capital intensity focus, and automation investments. EVP and CFO Patrick Jermain said that while the full-year margin could be slightly below 6%, the goal is to exit fiscal 2025 at the 6.2% level. President and CEO Todd Kelsey outlined capital allocation priorities as executing the $50M share repurchase program and potential further debt reduction, while funding growth.

Jacob Moore of Sidoti & Company, LLC inquired about the primary business segments driving the updated 2025 guidance, the company's cost exposure to China amid tariff concerns, and whether customer behavior is leaning towards demand pull-forwards or pauses.

Answer

Executive Matthew V. Crawford clarified that the updated guidance reflects potential demand volatility in the Supply Technologies and Assembly Components segments, while the Engineered Products group remains strong and is expected to benefit from reshoring. Executive Patrick Fogarty detailed that China represents about 8% of total revenue, and Crawford added that the company's 'in-country' strategy mitigates tariff impacts. Crawford also noted a lack of significant demand pull-forward, with mitigation focused on supply chain optimization and customer collaboration on costs.

Jacob Moore, on for Steve Barger, questioned whether tariffs are causing any demand pull-forwards or pauses and if the current trade environment creates opportunities for M&A or portfolio optimization.

Answer

President and CEO Sanjay Chowbey responded that the company has not seen any significant demand pull-forward, only in the low single-digit millions. He confirmed that the tariff situation does introduce a new element to strategic discussions around the portfolio and potential inorganic actions, which are under review.

Jacob Moore of CJS Securities inquired about Federal Signal's current lead times, available production capacity, and whether the significant backlog could lead to lumpy sales or margin cadence for the remainder of the year.

Answer

President and CEO Jennifer Sherman stated that the company is running at 70-72% capacity, providing ample room for growth, and noted progress in reducing lead times, such as for 3-wheel street sweepers. CFO Ian Hudson added that about half of the $40-$50 million CapEx guidance is for growth investments and that while the backlog provides visibility into 2026, there is no indication of unusual lumpiness in the upcoming quarters.

Jacob Moore, on for Steve Barger, asked for details on the backlog composition between industrial and municipal customers, any shifts in what has been ordered, and the drivers behind the impressive incremental margins. He also questioned if the recent quarterly revenue could serve as a baseline for 2025.

Answer

CFO Ian Hudson stated there have been no dramatic shifts in the municipal backlog, which provides visibility into 2025 and early 2026, but noted a mix shift towards more customer-provided chassis. CEO Jennifer Sherman added that demand remains strong, except for a shift from new to used/rental hydro excavation equipment. Regarding margins, Hudson cited aftermarket mix and material cost normalization as drivers, noting the recent high leverage is not typical long-term. He cautioned against using Q2/Q3 as a baseline for 2025 due to seasonality, emphasizing the goal is to increase production to reduce lead times.

Jacob Moore, on for Steve Barger, asked about the timing of the 2-nanometer ramp and its impact on testers, and also inquired about the growth outlook for non-AI end markets like PC and mobile.

Answer

CEO Greg Smith projected the 2-nanometer ramp to begin in very late 2025, with the bulk occurring in 2026. He noted these new devices will require testers with higher peak power and more memory, creating opportunities. For end markets, Smith anticipates a balanced second-half recovery, with AI cloud continuing to drive compute, a nudge upward in client compute, and a return to normal dynamics for auto and industrial by year-end after a period of inventory digestion.