Joseph Giordano

Joseph Giordano questioned the sustainability of the high order growth for Svanehøj and kSARIA, asking how ITT plans to prepare these companies to maintain business levels and prevent difficult comparisons in future years. He also asked about ITT's internal preparations for the SPX FLOW acquisition, specifically what actions are being taken pre-closing to ensure a fast and efficient early-stage integration.

Answer

CEO Luca Savi differentiated between the two businesses: kSARIA's order performance is sustainable due to increasing defense expenditure (80% of its business). Svanehøj's 44% order growth in 2025 will be difficult to repeat, but ITT is working on expansion through new product introductions and small organic additions like the KOHO acquisition. Regarding SPX FLOW integration, Luca Savi highlighted close collaboration between ITT and SPX teams, including joint meetings to plan day-one readiness, organizational structure, synergy delivery (especially G&A), and commercial strategies. He mentioned personal engagement with major customers and leadership teams ahead of closing.

Joseph Giordano asked about the sustainability of high order growth for Svanehøj and kSARIA, and how ITT plans to prevent difficult comparisons in future years. He also inquired about internal preparations for the SPX FLOW integration, given its larger scale, before the deal officially closes.

Answer

CEO Luca Savi indicated kSARIA's defense-driven growth is sustainable in the short to medium term. For Svanehøj, he acknowledged that 2025's 44% order growth would be difficult to repeat but highlighted efforts to expand opportunities through new product introductions and organic additions like Uncertain. Mr. Savi detailed close collaboration between ITT and SPX teams on day-one readiness, organizational structure, year-one synergies (G&A, procurement, footprint rationalization), and commercial efforts ahead of closing.

Joseph Giordano asked about the impact of chip shortages in Europe on auto production, potential shutdowns, and near-term visibility. He also questioned the sustainability of high order levels, particularly for businesses like Svanehøj, and how ITT prepares for potential declines or calibrates for underlying multi-year trend lines.

Answer

Luca Savi, CEO and President, noted Europe's slight 1% production growth in Q3, with full-year forecasts for Europe and North America declining by approximately 2%, indicating ongoing challenges for customers. Emmanuel Caprais, CFO, mentioned monitoring headlines about chip shortages but no direct customer concerns, with October deliveries for Europe being stronger than expected. Regarding Svanehøj's order levels, Mr. Caprais stated that the >50% year-to-date growth was unexpected, driven by customers pulling in orders to secure capacity in the first half. He anticipates normalization next year but expects Svanehøj to still deliver low double-digit growth over the long term.

Joseph Giordano asked about the impact of chip shortages in Europe on auto production and potential shutdowns, seeking ITT's near-term visibility on the situation. He also questioned the sustainability of high order levels, particularly for businesses like Svanehøj, and how ITT prepares for potential dramatic shifts in order trends to calibrate its multi-year operational strategy.

Answer

CEO Luca Savi and CFO Emmanuel Caprais noted Europe's slight 1% auto production growth in Q3, with a forecasted 2% decline for the full year, and acknowledged customer challenges. They stated customers are not voicing direct concerns about chip shortages, with strong October deliveries in Europe. Mr. Caprais acknowledged Svanehøj's exceptional 50%+ order growth year-to-date due to customers pulling in orders, expecting normalization in 2026 but still projecting low double-digit growth over the long term.

Joe Giordano questioned if the mid-single-digit growth guidance for the Industrial Process (IP) segment was conservative given strong orders, and asked if geopolitical risks are altering the M&A strategy for non-U.S. companies.

Answer

CFO Emmanuel Caprais defended the IP guidance, explaining that large projects have 12-24 month conversion timelines, delaying the full revenue impact of recent orders. CEO Luca Savi added that the M&A strategy remains focused on flow and connectors, which has proven successful despite geopolitical shifts. He noted that the company's 'in the region, for the region' strategy and the divestiture of Wolverine have actually improved its position relative to tariff risks.

Joseph Giordano asked how ITT's strong results, particularly in Industrial Process (IP), reflect underlying market conditions and inquired about the company's M&A appetite and the reasons for the unchanged free cash flow guidance despite an earnings raise.

Answer

CEO Luca Savi stated that ITT's outperformance stems from differentiation and operational excellence, such as on-time delivery driving share gains. CFO Emmanuel Caprais added that order growth was broad-based across all end markets. Regarding M&A, Savi confirmed the pipeline is active and the company has bandwidth for more deals. Caprais explained that the free cash flow guidance was held steady due to working capital timing, specifically a slower-than-anticipated reduction in inventory.

Joe Giordano asked about the R&D spend run rate, considering some costs moved to COGS, and its implications for systems gross margins. He also inquired about the composition of the 10 new system starts in the quarter.

Answer

CFO Izzy Martins clarified that while R&D spend declined sequentially due to paid development, it will be lumpy, and a higher R&D OpEx is expected in Q2. She advised modeling annual R&D spend as relatively consistent with prior assumptions. Regarding the 10 new starts, Ms. Martins noted one was for Exol, with the remainder being a mix, emphasizing that some included next-gen structures offering higher density.

Joe Giordano inquired about the run rate for R&D spend, considering some costs were reallocated to COGS, and its implications for Systems gross margins. He also asked for details on the makeup of the 10 system starts in the quarter, differentiating between traditional, break pack, and micro-fulfillment systems.

Answer

CFO Izzy Martins clarified that the Q1 R&D decline was due to more resources allocated to paid development, with associated costs in COGS. She expects R&D in OpEx to be higher in Q2, and annual R&D spend to remain relatively consistent with prior assumptions. For the 10 system starts, Ms. Martins noted no micro-fulfillment deployments, one for Exol, and the remainder being a mix, with some benefiting from the density of the next-gen structure.

Joseph Giordano asked for details on the Medline engagement, including the number of sites, technology types (Breakpack, micro-fulfillment), and its contribution to the backlog. He also sought clarification on the definition of 'new systems started' given the integration of two phases into one for larger customers, and if reporting should shift to dollar terms.

Answer

Rick Cohen (CEO, Symbotic) explained that Medline is a single proof-of-concept site, initially a straightforward moving case system, with potential for upsell to micro-fulfillment and Breakpack. Izzy Martins (CFO, Symbotic) clarified that future systems will generally be slightly larger, and Rick Cohen (CEO, Symbotic) added that next-gen storage allows for more work in the same space, offering flexibility for various system sizes.

Joseph Giordano asked for more specifics on the Medline deal, including the number of sites, the types of technology involved (e.g., Breakpack, micro-fulfillment), and the immediate impact on the backlog. He also sought clarification on how the integration of two phases into one for large customers like Walmart affects the definition and reporting of 'new systems' and whether reporting should shift to dollar terms instead of site numbers.

Answer

CEO Rick Cohen clarified that the Medline deal is for one site, serving as a proof of concept, with potential for future upsell opportunities like micro-fulfillment and Breakpack. CFO Izzy Martins explained that while not every system is equal, future systems will generally be slightly larger, allowing more work in the same space, which impacts how system deployments are viewed.

Joseph Giordano of TD Cowen asked for a technical explanation of how the new storage structure achieves greater density and inquired about its impact on project cost and pricing. He also questioned the future trend of stock-based compensation.

Answer

Founder, Chairman & CEO Richard Cohen explained the density increase comes from a cantilever design that eliminates support posts and a tine system that allows for more shelves per level. Regarding cost, he stated Symbotic is value-pricing the new system, expecting to save customers money on space while achieving higher margins for itself. CFO Carol Hibbard added that stock-based compensation will likely continue at the current trend for the next few quarters due to talent acquisition and the ASR acquisition.

Joseph Giordano of TD Cowen asked about the certainty of tariff pass-through clauses in customer contracts and whether there is any ambiguity. He also inquired about updated thoughts on leveraging technology and best practices across Symbotic's three main product modules (core, BreakPack, and ASR).

Answer

CFO Carol Hibbard affirmed they are certain that contracts allow for tariff costs to be passed through, noting their primary exposure is from Europe. CEO Rick Cohen explained that the ASR technology is like a new app on the same iOS, using the same basic software platform. He highlighted the potential to combine all three modules in one building or use ASR as a modified e-commerce solution, which is generating significant customer interest.

Joseph Giordano of TD Cowen asked for an update on control procedures related to prior audit issues, the deployment time for recently completed systems, and how the company balances M&A complexity with operational efficiency.

Answer

CFO Carol Hibbard reported that deficiency remediation controls have been deployed with encouraging test results, though full remediation will take several quarters. CEO Rick Cohen addressed M&A, stating that recent acquisitions have been small and strategic, involving known teams, and that the integration of the larger Walmart robotics business is expected to be smooth due to its proximity and talent.

Joe Giordano asked how IDEX's 2026 guidance, particularly the Q1 to Q4 progression, differs from 2025, considering the strong HST orders and backlog. He also inquired about the current size and realistic growth potential of newer markets like data center power, and the capital intensity required for IDEX to capitalize on these opportunities.

Answer

Eric Ashleman, President and CEO of IDEX, stated that IDEX is in a different position this year, with HST building over $100 million in backlog year-over-year, which is broadly applied across the segment, not just data centers. This provides significantly higher assurance levels for 2026, despite some Q1 seasonality. Regarding data center power, Eric Ashleman noted that the capital intensity is light, similar to typical IDEX operations, primarily requiring increased manpower rather than significant capital deployment. He sees substantial growth potential across various data center applications, including behind-the-meter power, thermal management, optical switching, and PowerGen support, which are coordinated at the segment level to maximize opportunities.

Joe Giordano asked how the 2026 Q1 guidance progression should be viewed differently than 2025, given the strong HST orders. He also inquired about the current and realistic future size of the data center power market and the capital intensity required to capitalize on this growth.

Answer

Eric Ashleman (President and CEO) stated that IDEX is in a stronger position this year due to HST's significant backlog growth (over $100 million year-over-year), providing higher assurance for 2026. He explained that capital intensity for data center power is low, similar to typical IDEX operations, requiring more manpower but not significant capital. The market potential is substantial, with IDEX playing in various areas like behind-the-meter power, thermal management, optical switching, and PowerGen support, coordinating efforts at the segment level.

Joe Giordano from TD Cowen asked for a post-mortem on IDEX's M&A strategy over the last 18 months, questioning if the pursuit of growth in new areas deviated from what made IDEX unique. He also inquired about how current policy changes might structurally position IDEX's businesses differently for a five-year growth outlook compared to five years ago, particularly in med tool and lab-based clinical applications.

Answer

Eric Ashleman, President and CEO of IDEX Corporation, expressed confidence in the line of sight between acquired technologies and growth markets, noting that the work performed is consistent with IDEX's historical approach of solving critical problems with cutting-edge technology. He highlighted the company's agility in responding to change, citing the rapid development in data center cooling applications within the Material Science Solutions platform. Ashleman also mentioned that IDEX's localized business model helps protect against unexpected trade policy shifts.

Joe Giordano with TD Cowen requested a post-mortem analysis of IDEX's M&A strategy over the past 18 months, comparing recent acquisitions to historical ones, and how the company is refocusing on 80/20. He also asked about the structural positioning of businesses for a five-year outlook given current policy, specifically in med tool and lab-based clinical applications.

Answer

Eric Ashleman, President and CEO, expressed confidence in the line of sight between acquired technologies and market access points to growth areas. He emphasized that the core business filter of delivering criticality at a low bill of materials remains constant. Ashleman highlighted IDEX's agility in responding to change, citing Material Science Solutions and data center applications as examples. He also noted the tunability of IDEX's technology to adapt to pressures in life sciences and the protection offered by its localized business model against trade policy shifts.

Joseph Giordano of TD Cowen questioned the company's confidence in a second-half semiconductor recovery given negative industry news. He also asked about the go-to-market branding strategy for the new strategic growth platforms.

Answer

CEO Eric Ashleman acknowledged a push-out in the recovery for core semiconductor equipment but highlighted a positive tailwind from the MRO-facing side of the business, including contributions from Mott. CFO Abhi Khandelwal confirmed that the H2 ramp in the HST segment is now supported by the Mott backlog and other growth areas, effectively replacing the previously expected semi ramp. On branding, Mr. Ashleman described a hybrid model where they present as a unified platform (e.g., IDEX Health & Science) while retaining the valuable equity of individual product brands.

Questioned whether the $40 million in Q4 projects were previously anticipated, sought clarity on the semi-outlook, and asked about risks to the life sciences forecast from funding and export controls. He also probed how much of the expected revenue ramp is secured by firm orders.

Answer

Management confirmed the Q4 projects were expected and included in prior guidance. The semi-outlook involves a temporary H1 customer inventory issue that reverses in H2, alongside positive MRO trends. The life sciences forecast is a net positive, with core fluidics growth offsetting some genomics softness. The revenue ramp is supported by firm blanket orders with scheduled 2025 deliveries.

Joseph Giordano of TD Cowen asked if the $40 million in Q4 projects was included in the original Q4 guidance. He also sought clarity on the semiconductor market outlook, which appeared to decelerate exiting Q4 yet is expected to drive a second-half recovery, and how the life sciences forecast aligns with potential headwinds like NIH funding and export controls.

Answer

CFO Abhishek Khandelwal confirmed the Q4 projects were specifically highlighted in the Q3 earnings call as a key driver of the sequential Q4 ramp. CEO Eric Ashleman clarified the semiconductor outlook: while the MRO business shows positive growth, the larger tool equipment business faces a customer-specific inventory adjustment in H1 that will reverse in H2. For life sciences, he projected a net positive outlook, with low-to-mid-single-digit growth in core fluidics and optical filters offsetting some softness in genomics, which is more exposed to government funding uncertainty.

Joseph Giordano of TD Cowen asked if the $40 million in Q4 projects were included in the original Q4 guidance, given that margins were below the guided range. He also sought clarity on the semiconductor outlook and how the life sciences forecast aligns with potential NIH funding issues, questioning how much of the expected ramp is secured by firm orders.

Answer

CFO Abhi Khandelwal confirmed the Q4 project shipments were specifically included in the guidance provided during the Q3 call. CEO Eric Ashleman clarified the semiconductor outlook involves a near-term dip in H1 due to a specific customer inventory adjustment, but with positive MRO trends and long-term bookings. For life sciences, he anticipates a net positive year with low-to-mid single-digit growth in core fluidics and optical filters offsetting some weakness in government-funded genomics areas.

Joe Giordano from TD Cowen asked for an update on the Muon acquisition, given semi market pushouts and weakness at a key customer. He also sought to clarify whether the sequential growth in HST life sciences was driven by bioprocessing or lab and analytical instrumentation.

Answer

CEO Eric Ashleman clarified that Muon is not entirely a semiconductor business, as it also serves med-tech and other adjacencies, and is being integrated into a broader applied material science strategy with Mott. He also confirmed that the life science demand improvement was primarily in the analytical instrumentation space, where IDEX has a stronger presence compared to bioprocessing.

Joe Giordano from TD Cowen asked for an update on the Muon acquisition in light of semi-market pushouts and questioned whether the recent life science demand growth in HST was from bioprocessing or lab instrumentation.

Answer

CEO Eric Ashleman clarified that Muon is not solely a semiconductor business, as it also serves med-tech and other markets, and its advanced work is not always tied to current production cycles. He also specified that the life science demand growth is primarily from the analytical instrumentation space, where IDEX has a more significant presence compared to bioprocessing.

Joe Giordano questioned the conservatism of AMETEK's low single-digit organic growth guide for the process business in 2026, given its acceleration through 2025 and positive Q4. He also asked for more granularity on the process segment, identifying what areas are improving versus stable, and inquired about the size and margin opportunity of the new LKC Technologies acquisition.

Answer

Chairman and CEO David Zapico acknowledged the conservatism in the process business guide, noting that Q4 2025 was the first quarter with positive low single-digit growth. He specified that semiconductor, metals instrumentation, and Rauland businesses are positive within the segment, while oil and gas and research areas are less so. Regarding LKC Technologies, Mr. Zapico described it as a smaller, technology-focused deal (terms undisclosed), a leading provider of advanced eye care testing instruments with a rapidly growing technique, portable devices, and nearly 40% recurring revenue from sensor strips. It fits well with AMETEK's Reichert business, broadening the ophthalmic portfolio.

Joe Giordano questioned the conservative low single-digit organic growth guide for the process business in 2026, given its Q4 2025 acceleration, and asked for granularity on sub-segment performance. He also requested details on the new LKC Technologies acquisition, including its size and margin opportunity.

Answer

Chairman and CEO David Zapico acknowledged the conservatism in the process business guide, noting Q4 2025 was the first quarter with positive low single-digit growth. He specified that semiconductor, metals instrumentation, and Rauland businesses are positive within the segment, while oil and gas and research are less so. Regarding LKC Technologies, Mr. Zapico described it as a smaller, undisclosed technology deal, a leading provider of advanced eye care testing instruments with nearly 40% recurring revenue from sensor strips, fitting well with the Reichert business.

An associate on behalf of Joe Giordano asked about the commercial aerospace aftermarket, specifically if AMETEK is seeing airlines reduce maintenance spend. He also asked if the company saw any customer pre-buying ahead of tariffs.

Answer

CEO David Zapico stated that any impact from airline maintenance spending is currently muted, and they are not seeing a downturn in their aftermarket business. Regarding pre-buys, he noted that since they build customized products, they saw very little customer pre-buying, but individual business unit operators are empowered to make smart inventory decisions.

Joe Giordano of TD Cowen asked for the Q4 book-to-bill ratio, a detailed 2025 outlook by business segment, and an update on the M&A pipeline, including the potential for larger, Paragon-sized deals.

Answer

Executive David Zapico reported a Q4 book-to-bill of 1.01 and provided a segment outlook: Process up low-single-digits, Aerospace & Defense up mid-single-digits, Power & Industrial flat, and Automation & Engineered Solutions up mid-single-digits. He stated the M&A pipeline includes both large and small deals, and the company has capacity to spend ~$5 billion in 2025 while maintaining a healthy balance sheet, signaling optimism in the M&A environment.

Joe Giordano asked about the assumptions for Boeing OEM exposure in the fourth-quarter forecast and requested an updated 2024 revenue expectation for the Paragon acquisition.

Answer

Chairman and CEO David Zapico clarified that for the Q4 forecast, any direct sales to Boeing have been removed, though sales to lower tiers of the supply chain with confirmed orders remain. He did not provide a new revenue figure for Paragon but stated that its performance was in line with expectations for Q3 and that prior guidance still holds.

Joseph Giordano asked about the implications of a potential industry shift towards 800-volt DC power for data centers, specifically how it might affect copper and fiber capabilities and different diameters. He inquired how this dynamic would net out for Amphenol given its broadening portfolio.

Answer

CEO Adam Norwitt stated that Amphenol thrives on increased complexity, as it leads to more opportunities. He emphasized Amphenol's industry-leading and broadest capability to enable customers facing challenging technological trends, now even stronger with the CommScope acquisition. Norwitt expressed confidence in Amphenol's ability to work with customers on next-generation systems, regardless of changes in voltages, speeds, or densities.

Joseph Giordano asked about the implications of a potential move to 800-volt DC power for data centers (regarding copper, fiber, and diameters) and how Amphenol's broadened portfolio, including fiber capabilities, would fare in such a dynamic.

Answer

Adam Norwitt (CEO) stated that Amphenol thrives on increased complexity in transmission chains, which leads to more opportunities. He emphasized their industry-leading and broadened capabilities (even stronger post-CommScope) to enable customers facing challenging technological trends, whether it's different voltages, speeds, or densities.

Joseph Giordano (Michael on for Joe) asked for details on the content or share gains in the commercial aerospace market, specifically identifying the applications or parts of aerospace driving this growth.

Answer

CEO Adam Norwitt expressed satisfaction with the commercial air business, highlighting the quantum increase in product breadth from the CIT acquisition. He noted that Amphenol now offers the broadest range of interconnect products for all parts of an airplane, from engines to cabin systems, supported by a strong global footprint, enabling content expansion.

Joseph Giordano from TD Cowen inquired about the AI business, asking whether it is becoming more or less concentrated from a customer perspective and if the company is positioned for further sequential growth after smoothing out the Q2 pull-forward.

Answer

President & CEO R. Adam Norwitt clarified that the AI business is broad and not overly concentrated, with exposure across the entire ecosystem from web-scale providers to chip companies. He noted that while long-term growth is expected, quarter-to-quarter performance may see some lumpiness and not every quarter will show sequential growth.

Joseph Giordano of TD Cowen challenged the assertion that there was no significant demand pull-in outside of mobile devices, asking how management could be confident given that a pull-in might simply appear as "normal demand."

Answer

CEO Adam Norwitt acknowledged the difficulty of having perfect visibility but reiterated that the company can only judge by the data it sees. He pointed to the fact that IT Datacom customers are asking for more products than can be supplied, which contradicts the idea of a pull-in. He also noted that sales to distribution, a key channel to watch, only saw modest low-single-digit sequential growth, showing no anomaly.

Joseph Giordano asked about the 'Amphenolian way,' inquiring how the company motivates teams in slowing markets to find new business while also preparing teams in high-growth areas like AI for inevitable cycles.

Answer

CEO R. Norwitt described the core entrepreneurial culture of agility. In down markets, teams are encouraged to 'plant seeds' and find new applications for their technologies. In booming markets, teams work exceptionally hard but always manage with 'one foot on the gas and one on the brake,' staying prepared for cycles, a discipline proven by the company's historical resilience.

Joseph Giordano asked how Roper Technologies weighs capital deployment between the certainty of repurchasing its own stock, given current valuation dislocation, versus the risk-reward of M&A for less known assets. He also asked if the new AI talent identified any areas where opportunities might be harder to drive.

Answer

Neil Hunn, President and Chief Executive Officer, and Jason Conley, Executive Vice President and Chief Financial Officer, reiterated that capital allocation aims for the best risk-adjusted path to long-term cash flow per share compounding. They find buybacks attractive due to current valuation dislocation and confidence in Roper's future, while also affirming the M&A thesis with a robust pipeline. Neil Hunn stated that the new AI talent's early takes are positive, with constructive points focusing on the need to improve the quantity of AI talent within businesses, rather than a lack of market opportunity.

Joseph Giordano of TD Cowen asked how Roper Technologies weighs capital deployment between known internal opportunities like buybacks and external M&A, considering current valuation dislocations and inherent risks. He also inquired if the new AI talent identified any negative instances or harder-to-drive opportunities within the business.

Answer

Neil Hunn, President and Chief Executive Officer, stated that the objective is the best risk-adjusted path to long-term cash flow compounding, balancing buybacks (attractive in the short run) with M&A (generally better long-term). He emphasized the robust M&A pipeline and Roper's position as a preferred buyer. Jason Conley, Executive Vice President and Chief Financial Officer, added confidence in underlying business quality and AI opportunities. Hunn noted that the new AI team's early takes are positive, with constructive feedback primarily on the need to improve the quantity of AI talent within businesses.

Joe Giordano asked about the catalysts for accelerating organic growth in the Application Software segment, excluding Deltek's GovCon business, to move from around 6% to a high single-digit framework. He also inquired about Roper's thought process on capital allocation between buybacks and M&A, considering the company's stock multiple versus acquisition multiples.

Answer

President and CEO Neil Hunn identified several catalysts for Application Software, including Deltek GovCon returning to normalized growth, AI opportunities at Vertafore, strong performance from Aderant and PowerPlan, CentralReach becoming organic, Frontline re-accelerating, and Clinisys U.S. achieving mid-single-digit growth. Regarding capital allocation, Mr. Hunn stated that the decision is always about optimizing long-term cash flow compounding, with the buyback serving as an additional lever.

Joe Giordano asked about the catalysts for accelerating Roper Technologies' Application Software organic growth from around 6% to a high single-digit framework, and inquired about the thought process behind the buyback decision, specifically weighing the company's stock multiple versus acquisition multiples in capital allocation.

Answer

Neil Hunn, President and CEO, cited several catalysts for Application Software growth, including Deltek returning to normalized growth, AI opportunities in Vertifor, strong performance from Adarat and Power Plant, CenturyEqual turning organic, Frontline reaccelerating post-COVID funding normalization, and Clinisys (legacy Sunquest) achieving mid-single-digit growth. Mr. Hunn stated that the buyback decision is not about Roper's stock multiple but about optimizing the long-term cash flow compounding of the enterprise, with the buyback serving as an additional capital deployment lever.

Joseph Giordano asked how Roper applies lessons learned from ProCare's initial challenges to newer acquisitions like Central Reach and Subsplash to prevent similar issues. He also inquired about the competitive landscape and market dynamics for Subsplash.

Answer

President and CEO Neil Hunn explained the key learning from ProCare was to act faster on challenges and not wait. EVP & CFO Jason Conley added that diligence and integration plans are now more rigorous. For Subsplash, Hunn detailed a favorable market with a large, underpenetrated TAM, a significant digitization wave, and Subsplash's position as a leading technology platform with a strong value proposition that drives increased donations for its customers.

Joseph Giordano requested a walk-through of the updated full-year guidance, asking how the company absorbed Centralreach's dilution while still raising its outlook, and questioned if the 'DOGE' risk at Deltek was now past.

Answer

EVP and CFO Jason Conley explained that the guidance was raised by utilizing some margin and interest contingency from the prior forecast, along with the Q1 beat. President and CEO Neil Hunn clarified that the Deltek headwind is broader than just DOGE, encompassing general government budget uncertainty, which they view as a short-term issue, not a structural one.

Joseph Giordano inquired about the quantifiable impact of deployed AI tools on pricing, new revenue capabilities, or internal cost savings, and asked about the validity of concerns regarding potential U.S. policy headwinds for Deltek's government contracting business.

Answer

President and CEO Neil Hunn explained that while it's hard to mathematically quantify AI's impact in 2024, there is a clear 'halo effect' driving increased bookings at businesses like Aderant and Deltek. Regarding Deltek, he noted it's early, but potential policy changes requiring more contractor accountability and system modernization could play to Deltek's strengths, and recent bookings have remained robust.

Joseph Giordano asked about order patterns at Neptune, specifically if there's any change in incoming flow as backlogs normalize, and inquired if any business leaders are particularly concerned or excited about the upcoming election's outcome.

Answer

President and CEO Neil Hunn explained that while order duration at Neptune is shortening from 12-18 months to 6-9 months as lead times normalize, the actual order volume on an account-by-account basis remains healthy. Regarding the election, Hunn stated that Roper's businesses are generally apolitical and not significantly impacted, noting that for Deltek, government spending always occurs, and only the nature of the spend changes with administrations.

Joseph Giordano asked about the impact of rising memory prices on Teledyne's businesses, specifically instrumentation, test and measurement, and digital imaging, inquiring about the percentage of sales affected and the company's ability to pass through costs. He also asked about government discussions regarding restrictions on defense companies' balance sheet activities and Teledyne's position on such potential regulations.

Answer

Executive Chairman Robert Mehrabian stated that Teledyne sees no significant net risk from rising memory prices, noting that while some businesses use memory, memory and storage suppliers are also large customers of their test and measurement instrumentation, leading to a higher margin contribution. Regarding government restrictions, Robert Mehrabian emphasized Teledyne's long-standing strategy of prioritizing acquisitions and internal investments (CapEx and R&D), rarely buying back shares, and not paying dividends. He highlighted Teledyne's commercial focus (despite significant defense business) and fixed-price defense contracts, suggesting such regulations would not significantly apply to them. He also quickly reiterated organic revenue growth expectations for each segment (around 3.5%-4%).

Joseph Giordano asked about the impact of rising memory prices on Teledyne's businesses, including applicability, percentage of sales, and pass-through effectiveness. He also requested organic growth expectations by segment for the upcoming year and Teledyne's perspective on potential government restrictions on defense companies' balance sheet activities.

Answer

Robert Mehrabian (Executive Chairman) stated that Teledyne sees no significant net risk from rising memory prices, noting that memory suppliers are also customers of their test and measurement businesses. He projected organic revenue growth of approximately 3.5%-4% across digital imaging, aerospace and defense, and instruments, with no expected declines. Regarding government restrictions, Mr. Mehrabian emphasized Teledyne's conservative share repurchase history, preference for acquisitions, and increased investments in CapEx and R&D, believing such restrictions would not significantly apply due to Teledyne's commercial focus and fixed-price defense contracts.

Joe Giordano from TD Cowen asked about the long-term growth potential of the unmanned business beyond its current $500 million, projecting 3-4 years out, and sought clarification on the attribution of full-year EPS growth between M&A and organic efforts.

Answer

Executive Chairman Robert Mehrabian confirmed the unmanned business is now at $500 million and is expected to grow, with future plans under review. President and CEO George Bobb highlighted significant growth in subsea unmanned systems, including gliders and propelled AUVs. Robert Mehrabian stated that most of the full-year EPS growth is organic, with acquisitions contributing approximately $0.20-$0.25, initially impacting margins.

Joseph Giordano asked for a long-term outlook on the unmanned business, specifically how the current $450M-$500M figure could evolve over the next three to four years and its potential materiality. He also inquired about the attribution of Teledyne's full-year EPS growth to M&A versus organic contributions.

Answer

Executive Chairman Robert Mehrabian confirmed the unmanned business is currently around $500 million and is expected to grow, with plans for the next couple of years being finalized. President and CEO George Bobb elaborated on growth in subsea unmanned vehicles, including gliders for anti-submarine warfare and propelled AUVs for mine countermeasures, driven by demand in various regions. Robert Mehrabian estimated that for the full year, most EPS growth is organic, with M&A contributing perhaps $0.20-$0.25, noting that acquisitions initially lower margins but improve over time.

Joseph Giordano asked if there was tangible evidence, such as a drop in early July orders, to support the demand pull-forward theory. He also questioned if the company had removed the demand contingency previously built into its guidance related to tariff-driven price increases.

Answer

Executive Chairman Robert Mehrabian confirmed there was no tangible evidence of an order drop in July and that the cautious outlook reflects the company's conservative nature. He also stated that Teledyne has become 'less cautious' regarding potential demand destruction from tariffs and has adjusted its internal forecast accordingly, as 82% of its revenue is largely insulated from direct tariff impacts.

Joseph Giordano asked if there was tangible evidence, such as a drop in early July orders, to support the demand pull-forward theory. He also questioned if the company had removed its prior contingency for demand destruction from tariff-related price hikes.

Answer

Executive Chairman Robert Mehrabian stated there was no direct evidence of a pull-forward and that the cautious outlook reflects the company's nature. On tariffs, he confirmed that while there is a cost impact to mitigate, the company has become 'less cautious' about potential demand destruction from necessary price increases, given the unique nature of many of its products and the fact that 82% of revenue is insulated from direct tariff impacts.

Joseph Giordano asked if there was tangible evidence, like a drop in July orders, to support the demand pull-forward theory. He also questioned if the company had removed its previously built-in demand contingency related to tariff-driven price hikes.

Answer

Executive Chairman Robert Mehrabian confirmed there was no tangible evidence of a slowdown to validate the pull-forward concern; it is simply a cautious stance. He also stated that the company has become 'less cautious' and has reduced the demand destruction contingency that was previously factored in due to tariff uncertainty.

Joseph Giordano of TD Cowen asked for a breakdown of the backlog excluding the recent Qioptiq acquisition, the margin profile of at-risk government programs versus growth areas, and whether non-essential sales to China are nearing zero due to tariffs.

Answer

Executive Chairman Robert Mehrabian stated the total backlog is a record $4 billion, of which about $450 million is from Qioptiq. He explained that at-risk NASA programs are the company's lowest-margin business, while growth areas in defense space are higher-margin, suggesting a potentially favorable margin mix shift. He noted that while sales to China are impacted, they are not at zero as some customers still require the products.

Joseph Giordano asked for the free cash flow outlook for 2025 and questioned management's position on initiating a dividend to attract new investors, given the company's strong cash generation and recent flexibility with buybacks.

Answer

Executive Chairman Robert Mehrabian stated that the 2025 free cash flow target is over $1 billion, following a record $1.11 billion in 2024. Regarding a dividend, he explained that the company's current priority is deploying capital for acquisitions, given a rich M&A pipeline. He reiterated that opportunistic share repurchases remain the preferred method for returning cash to shareholders when the stock is perceived as undervalued.

Joseph Giordano asked about the assumptions for the Boeing situation in the Q4 guide, the specific weakness in the environmental business, and the drivers behind strong Digital Imaging margins.

Answer

Executive Chairman Robert Mehrabian estimated a potential Boeing strike could create a revenue headwind of up to $5 million in Q4. He identified the weakness in environmental instruments as being in air quality monitoring systems but was not concerned, expecting improvement in Q4. He attributed the robust Digital Imaging margins to significant improvements at FLIR combined with cost-cutting measures in other DI businesses, which offset revenue declines in high-margin camera lines.

Joe Giordano inquired about the implications of exploding metal prices (copper, gold, silver) for TE Connectivity, specifically regarding procurement, the need to pass on costs, and customer acceptance of these price adjustments.

Answer

CFO Heath Mitts confirmed significant inflationary pressure on metals, which is the company's largest purchase category. He stated that the team is hyper-focused on reducing costs through supply chain investments and leverage. He emphasized that the company has improved its agility in passing on pricing for these inflationary measures more quickly, through both distributors and direct OEM discussions, and does not expect it to be an excuse for margins or flow-through.

Joe Giordano asked about the implications of exploding metal prices (copper, gold, silver) for TE Connectivity's procurement, the need to pass on costs, and customer acceptance of these price adjustments.

Answer

CFO Heath Mitts confirmed significant inflationary pressure on metals, TE Connectivity's largest purchase category. He stated that the team is focused on leveraging purchases and finding cost reductions, but acknowledged that price increases are necessary and are being passed on quickly through various mechanisms, ensuring that metal price inflation will not be an excuse for margin or flow-through issues.

Joseph Giordano of TD Cowen asked for details on pricing in the quarter and its future outlook, specifically wondering if price could become a headwind if tariff-related surcharges are de-escalated.

Answer

CEO Terrence Curtin explained that the tariff cost impact was lower than expected, at about 1.5% of sales with minimal earnings impact, due to policy changes and mitigation efforts. He noted that pricing actions were mainly in the Industrial segment to offset this. Going forward, he stated that overall pricing trends, excluding surcharges, will be primarily driven by material costs, which the company is watching closely.

Joseph Giordano asked if the U.S. automation market is experiencing a pause as customers wait for more clarity on trade policy and the 'rules of engagement'.

Answer

CEO Terrence Curtin acknowledged that broad uncertainty and supply chain concerns can be a distraction for customers. However, he noted that TE actually saw automation orders pick up in the U.S. during the quarter. The company's cautious guidance reflects a desire to see this momentum sustain before changing its outlook, given the macro environment.

Joseph Giordano asked for clarification on two end markets: whether Industrial Equipment orders are merely stabilizing or set to ramp, and if the sharp decline in the Medical business was a one-time correction or a new trend.

Answer

CEO Terrence Curtin confirmed that Industrial Equipment is currently stabilizing, and while a future ramp is hoped for, current models should reflect stability. For the Medical business, he stated the decline was a one-time inventory correction by customers and that sequential improvement is expected, supported by an already improved book-to-bill ratio of well above 1.

Joseph Giordano from TD Cowen asked how potential nationwide strikes by auto workers in Germany are factored into the company's guidance for the upcoming quarter.

Answer

CEO Terrence Curtin responded that all known factors, including potential labor disruptions, are incorporated into the company's guidance. He reiterated the expectation for global auto production to be down in Q1 at a similar rate as Q4, with weakness in the West, particularly Europe, being a significant contributor to that decline, while Asia is expected to be the driver of growth.

Joseph Giordano requested more details on the partnership with Sojitz and the TRECA project. He also asked about advancements seen in Mexico during Q4 2025 and when operations are expected to return to 2024 operating leverage levels.

Answer

Suso Zamora, Executive Chairman and President, stated that the Sojitz MOU will be updated to the market as it progresses. Regarding TRECA, he explained it's an 18-year public-private partnership with ESALUD, with a building permit recently authorized. The project, expected to start construction early next year, will deliver 3.2 million services annually, generating over $200 million in sales when scaled, and is structured to be debt-neutral for Auna. Gisele Remy, CFO and Executive Vice President, confirmed TRECA's debt-neutral structure. Suso Zamora added that 2025 would be a flat year, but 2026 is anticipated to be a growth year, especially for Mexico, regarding operating leverage.

Joseph Giordano inquired about further details on the Sojitz partnership and the Trecca project, advancements seen in Mexico during Q4 2025, and the expected timeline for Mexico's operations to return to 2024 operating leverage levels.

Answer

Suso Zamora, Executive Chairman and President, Auna, stated that updates on the Sojitz MOU would be provided as progress is made. He described the Trecca project as an 18-year public-private partnership in Peru, with a recently authorized building permit, expected to generate over $200 million in annual sales and be debt-neutral for Auna. Gisele Remy, CFO and Executive Vice President, Auna, confirmed the debt-neutral nature of the Trecca project. Suso Zamora also indicated that 2025 would be a flat year, but 2026 is anticipated to be a growth year, particularly for Mexico.

Joseph Giordano requested an update on network expansion plans in Peru and asked how Auna is accrediting new service providers for OncoMexico in key cities like Mexico City and Guadalajara.

Answer

Executive Chairman and President Suso Zamora indicated that Auna is assessing a capacity expansion in Peru, likely at Clinica Delgado, for a potential 2027 inauguration. For OncoMexico, he confirmed Auna is actively closing agreements with service providers in Guadalajara, Mexico City, and Tijuana to establish a national footprint, with potential for deeper integration in the future.

Joseph Giordano asked about the faster maturation of new store vintages, questioning if the maturation level (sales at regime) is still a moving target given increasing client numbers and larger baskets. He also inquired about the return levels of new cohorts compared to the previously mentioned 60% cash-on-cash return and implications for future expansion acceleration.

Answer

CEO K. Anthony Hatoum confirmed new vintages mature faster due to stronger brand recognition and value proposition, leading to improved returns on invested capital. He stated that returns for new cohorts are as good, if not better, than older ones. CFO Eduardo Pizzuto added that models are updated yearly, and maturation is still a moving target, with even the 2005 vintage showing strong increases, indicating improved numbers for coming years.

Joseph Giordano asked about the faster maturation of new store vintages, questioning if the maturation level (sales at regime) is still a moving target given increasing client numbers and larger baskets. He also inquired about the return levels of new cohorts compared to the previously mentioned 60% cash-on-cash return, and the implications for further expansion acceleration.

Answer

K. Anthony Hatoum, Founder, Chairman, and CEO, Tiendas 3B, confirmed that new vintages mature faster with improved return on invested capital due to better brand recognition and value proposition. He stated that returns are as good, if not better, and that the maturation level remains a moving target, with even 2005 vintages showing strong increases. Eduardo Pizzuto, CFO, Tiendas 3B, added that models are updated yearly with improved numbers, and they are far from a saturation point.

Joseph Giordano from JPMorgan Chase & Co. asked about the evolution of private label penetration and its contribution to same-store sales growth. He also posed a technical question regarding the increase in total lease expenses and the potential impact from new DCs and refrigeration equipment.

Answer

CEO Anthony Hatoum confirmed that private label penetration is a key driver of same-store sales growth and that the trend of increasing penetration is expected to continue. CFO Eduardo Pizzuto clarified that higher lease expenses are a result of new store growth, in-store equipment, and equipping new distribution centers with cold rooms, confirming there were no unusual upfront payments.

Joseph Giordano from JPMorgan Chase & Co. posed two questions. First, he asked about the evolution of private label penetration and its role in driving same-store sales acceleration. Second, he inquired about the higher-than-expected total lease expenses, questioning if they were related to refrigeration equipment and new distribution centers.

Answer

CEO Anthony Hatoum confirmed that private label development is a core part of their strategy and a main driver of same-store sales growth, a trend he expects to continue. CFO Eduardo Pizzuto addressed the lease expenses, explaining that the increase is due to store growth, new store equipment, and equipping the upcoming distribution centers with cold and frozen rooms, confirming there were no upfront payments.

Joseph Giordano asked about the evolution of private label penetration and its contribution to same-store sales acceleration. He also had a technical question regarding the higher-than-expected total lease expenses and their potential recurring level.

Answer

CEO Anthony Hatoum confirmed that increasing private label penetration is a main driver of same-store sales growth and expects this trend to continue. CFO Eduardo Pizzuto clarified that the rise in lease expenses is driven by store growth, new in-store equipment, and equipping the four new distribution centers with cold and frozen rooms, confirming there are no upfront payments affecting the run rate.

Joseph Giordano from JPMorgan Chase & Co. questioned the dynamics behind gross margin volatility given rising private label penetration, asked about the competitive environment, and inquired about the company's ability to offset personnel expense pressures this year.

Answer

Executive Kamal Hatoum stated that gross margin dynamics are unchanged, driven by scaling benefits with normal quarterly volatility, and the company is not facing pricing pressure. He explained that personnel expense increases from wage inflation and pre-training for new stores are largely diluted by strong sales growth.

Joseph Giordano from JPMorgan Chase & Co. sought to explore the composition of same-store sales, asking for a breakdown of the strong ticket growth in mature stores. He questioned whether growth is from new clients or higher visit frequency and how the average basket size is increasing despite higher private label penetration, which should theoretically lower the average ticket. He also asked about the sustainability of the performance gap versus ANTAD and the outlook for H1 2025.

Answer

Executive Kamal Hatoum responded that sustained same-store sales growth is driven by continuous improvements in the value proposition of their product portfolio. He confirmed that growth comes from both new clients (increased ticket count) and larger basket sizes, even with deflationary pressures from private labels. This implies a significant increase in the number of units sold per transaction. While not providing a specific forecast, he expressed confidence that as long as the value proposition improves, strong growth metrics will be maintained.

Joseph Giordano from JPMorgan Chase & Co. posed several questions, asking for a breakdown of same-store sales between ticket and traffic, guidance on a normalized gross margin level for modeling purposes, and a reconciliation of the strong SG&A leverage with the timing of new store openings during the quarter, which could have been back-loaded.

Answer

Executive Kamal Hatoum explained that same-store sales growth was primarily driven by a strong increase in the number of transactions, followed by a healthy increase in average ticket size, despite flat year-over-year item prices. On gross margin, he reiterated that the company does not target a specific percentage but optimizes SKU-by-SKU for volume and peso profit, advising analysts to model a flat margin over time. He also noted that store openings fluctuate monthly and the focus remains on annual guidance.

Joseph Giordano (asked by Chris) inquired about Fortive's double-digit recurring revenue growth, which is outpacing the overall average. He asked about the long-term potential for recurring revenue as a percentage of total revenue and the key levers in both segments to sustain this above-corporate-average trajectory.

Answer

Olumide Soroye, Fortive's President and CEO, stated that Fortive expects the recurring revenue percentage to continue increasing with no set ceiling. He identified Fluke as the biggest lever, noting its significant shift from near 0% recurring revenue a decade ago to 15% today, with plans to attach more recurring offerings. He also cited Industrial Scientific's successful transition to a hardware-as-a-service model as a template for some Fluke offerings, emphasizing 'driving recurring customer value' as a core pillar of the accelerator strategy.

Joseph Giordano (speaking on behalf of Chris) inquired about Fortive's double-digit recurring revenue growth, its potential long-term percentage of total revenue, and the key levers in both segments to sustain this above-corporate-average trajectory.

Answer

President and CEO Olumide Soroye stated that Fortive has not set a ceiling for recurring revenue percentage, expecting it to continue growing. He identified Fluke as the biggest lever, noting its recurring revenue grew from almost 0% ten years ago to 15% today. He also mentioned the successful shift of businesses like Industrial Scientific to a 'hardware as a service' model as a template for Fluke offerings, emphasizing the intentional focus on driving recurring customer value.

Joseph Giordano of TD Cowen asked if hospital margin pressures could drive a shift to single-use products and inquired about the company's appetite for software M&A given current valuations.

Answer

CEO Olumide Soroye argued that hospitals will increasingly focus on profitable, complex procedures requiring advanced reusable devices, which benefits Fortive. Regarding M&A, he stated that all potential deals, including software, are subject to the same rigorous financial and strategic criteria, with a focus on proprietary deals at accretive prices.

Joseph Giordano from TD Cowen asked if reimbursement and margin pressures on hospitals could drive a shift toward single-use medical applications over capital equipment. He also questioned the company's appetite for software M&A, given potentially high valuation multiples.

Answer

CEO Olumide Soroye argued against a shift to single-use, explaining that hospitals will likely focus on high-profitability procedures that require advanced, reusable instruments needing sophisticated sterilization. Regarding M&A, he stated that all potential acquisitions, including software, are subject to the same rigorous strategic and financial criteria. He emphasized a focus on proprietary deal cultivation to acquire assets at prices compatible with Fortive's valuation and return objectives.

Joseph Giordano asked about the competitive landscape for Tektronix's manufacturing footprint regarding tariff-related price adjustments and questioned if the Advanced Healthcare Solutions (AHS) core growth of 2.5% was below internal expectations.

Answer

President and CEO James Lico detailed that Tektronix has a flexible global manufacturing footprint, allowing them to mitigate tariffs by shifting production. For AHS, Lico clarified that the 2.5% growth was in line with expectations, as it translates to the mid-single-digit range when adjusting for the impact of fewer business days in the quarter.

Joseph Giordano of TD Cowen asked whether Tektronix has greater structural exposure to the EV and China markets compared to its peers. He also questioned the sequential decline in Precision Technologies' (PT) Q4 margins despite higher revenues.

Answer

President and CEO James Lico stated that while the EA business adds some EV exposure, he believes Tektronix's overall exposure is relatively in line with peers based on multi-year performance comparisons. Regarding Q4 PT margins, Lico and Executive Elena Rosman attributed the contraction to lower volumes in higher-margin businesses, including Tektronix, and some unfavorable business mix.

Joseph Giordano of TD Cowen questioned the recovery timeline for the EA Elektro-Automatik business given EV market weakness and asked if Fluke's performance might lag industrial declines. He also inquired when Tektronix's positive order trends might translate to revenue growth.

Answer

President and CEO James Lico stated that a significant recovery in the EV-related EA business is not expected until late 2025 or 2026. He emphasized Fluke's durability, with its industrial business still growing, and projected that Tektronix's positive order inflection could begin to benefit revenue in late Q1 or early Q2 2025.

Joe Giordano asked about Flowserve's capacity to meet the projected nuclear growth, how the company evaluates and selects customers, especially new SMR companies without established revenues, and if there are any obvious portfolio gaps for nuclear-specific products. He also inquired if the percentage of delivery over the next 12 months from backlog would decrease due to nuclear bookings.

Answer

Scott Rowe, Flowserve's President and CEO, expressed confidence in capacity expansion at designated facilities and through a planned nuclear center of excellence, noting multi-year lead times provide visibility. He detailed a selective customer approach, guided by a nuclear expert, narrowing SMR partners to 10-12. Mr. Rowe clarified that the focus is on packaging more existing content and potentially programmatic M&A for certified companies rather than significant portfolio gaps. Amy Schwetz, Flowserve's CFO, stated that while nuclear content might slightly pressure backlog conversion, it's offset by improving conversion rates in quicker-turn aftermarket business.

Joe Giordano questioned the feasibility of building all the projected nuclear/power generation capacity, the reliability of backstopping entities (especially SMRs with no current revenues), and how Flowserve judges where to pursue opportunities. He also asked about potential gaps in Flowserve's portfolio for nuclear-specific product tuck-ins and if the percentage of backlog delivered over the next 12 months would decrease due to increased nuclear bookings.

Answer

Scott Rowe, President and CEO, expressed confidence in Flowserve's capacity to ramp up, citing designated facilities, expansion potential, and long visibility for nuclear awards. He noted that Flowserve is selective in its customer engagements, guided by a nuclear expert, and has narrowed its focus to 10-12 SMR players. He also mentioned that while Flowserve has a strong product portfolio, there's an opportunity to package more content (e.g., control valves) and pursue programmatic M&A for companies with existing certifications. Amy Schwetz, CFO, added that while nuclear content might slightly pressure backlog conversion, this is offset by improving conversion rates in quicker-turn businesses and strong aftermarket performance.

Joseph Giordano of TD Cowen asked how management handled internal communications to maintain employee morale after terminating the transformative Chart merger. He also asked for color on the Mogus revenue shortfall versus initial expectations and whether there are inherent structural challenges to improving margins in the FCD segment compared to FPD.

Answer

President & CEO R. Scott Rowe emphasized a strategy of open and active communication, reassuring employees that their core roles were not impacted and that the company's values would guide any decisions. SVP & CFO Amy Schwetz added that the merger was an extension of existing strategy, not a complete change in direction. On Mogus, R. Scott Rowe attributed the revenue shortfall to delayed projects but noted the funnel is improving and the $200M revenue goal remains. Amy Schwetz stated there are no structural barriers to FCD margin recovery and that past restructuring actions should now provide a tailwind for improvement.

Joseph Giordano asked how management handled internal communications regarding the terminated Chart merger to maintain employee morale. He also questioned the lower-than-expected revenue from Mogus and whether FCD poses inherent challenges for margin improvement compared to FPD.

Answer

President & CEO R. Scott Rowe emphasized a strategy of open and continuous communication, assuring employees that the core businesses were not overlapping and that the focus should remain on their jobs. On Mogus, he attributed the revenue shortfall to light project bookings but noted the funnel is improving. SVP & CFO Amy Schwetz stated there is nothing structurally preventing FCD margins from returning to historic levels, explaining that past challenges related to upstream exposure have been addressed through site rationalization.

Joseph Giordano of TD Cowen asked about the internal management challenge of communicating the failed Chart merger to employees after positioning it as a transformative future for the company. He also questioned the revenue shortfall at Mogus compared to initial expectations and asked if there were inherent structural challenges in improving FCD margins compared to FPD.

Answer

President & CEO R. Scott Rowe explained that consistent, open communication was key, emphasizing that most employees in operations were not directly impacted and were told to focus on their jobs. SVP & CFO Amy Schwetz added that the M&A was an extension of their existing 3D strategy, not a complete change in direction. On Mogus, Rowe attributed the revenue shortfall to a temporary lightness in project orders but expressed confidence in reaching the $200M target as the mining project funnel improves. Schwetz stated there are no structural impediments to restoring FCD margins, noting past restructuring actions have already addressed historical challenges.

Joseph Giordano asked how to reconcile the strong momentum in 3D strategy bookings with recent policy shifts, such as potential cuts to clean energy funding. He also questioned the assumptions in the full-year guidance, suggesting that maintaining the same organic growth forecast despite price hikes might imply a contingency for lower volumes.

Answer

President and CEO Robert Rowe addressed the 3D strategy, noting that while the mix is evolving, demand for carbon capture and LNG remains robust, offsetting shifts in other areas. CFO Amy Schwetz explained the guidance range reflects different scenarios: the low end assumes some demand destruction and tariff timing mismatch, while the high end assumes continued strong execution and bookings. CEO Rowe reiterated confidence in delivering the guided 18-25% EPS growth for the year.

Joseph Giordano asked for an explanation of the elevated corporate expenses and an update on the commercialization timeline for the in-process R&D related to cryogenic pumps for the LNG market.

Answer

CFO Amy Schwetz clarified that corporate costs are expected to be neutral in 2025 compared to 2024, with recent elevated levels driven by higher performance-based incentive compensation due to strong company results. President and CEO Scott Rowe reported that the LNG pump commercialization is progressing well, with a market launch anticipated in the second half of 2025. He also noted that aftermarket revenue related to this new technology is already being generated.

Joseph Giordano of TD Cowen asked about Flowserve's opportunity in emerging nuclear technologies like Small Modular Reactors (SMRs) compared to traditional plants, and questioned the feasibility of selling its asbestos liability.

Answer

CEO Scott Rowe stated that while Flowserve is partnered with SMR consortiums, he does not foresee SMRs becoming a meaningful part of the portfolio for the next decade. CFO Amy Schwetz noted that the company periodically reviews offloading its asbestos liability but currently believes it is well-managed internally.

Joe Giordano asked how Sensata Technologies plans to balance internal innovation and future capital deployment for external growth (M&A) once debt reduction targets are met.

Answer

Andrew Lynch, Sensata Technologies' Chief Financial Officer, emphasized a short-to-medium-term focus on the core business, improving cash generation, and prioritizing debt reduction. Stephan von Schuckmann, Sensata Technologies' Chief Executive Officer, added that excess cash is currently being used to strengthen operations and increase productivity through smart automation, with future cash deployment strategies to be reevaluated.

Joe Giordano from TD Cowen asked how Sensata balances internal innovation with the desire for future capital deployment outside the current portfolio, specifically regarding the target leverage level for considering M&A.

Answer

Andrew Lynch, Sensata Technologies' Chief Financial Officer, emphasized a short-term focus on the core business, improving cash generation, and prioritizing debt reduction. Stephan von Schuckmann, Sensata Technologies' Chief Executive Officer, added that excess cash is currently used to strengthen operations and increase productivity through smart automation, with deleveraging remaining the focus for upcoming quarters.

Joseph Giordano inquired about the current status of portfolio rationalization and SKU reduction, and asked for an update on Sensata's strategic positioning and recent wins with local OEMs in China.

Answer

CEO Stephan von Schuckmann stated that while portfolio cleansing is a continuous process, much of the significant work was done last year. He highlighted a return to outgrowth in China, with 90% of new business wins coming from top local OEMs and leading NEV players, which should materialize into revenue later in the year.

Joseph Giordano sought to understand if the negative impact from automotive production cuts was being offset by other areas and asked about the primary drivers behind the company's margin confidence despite this headwind.

Answer

Chief Financial Officer Brian Roberts confirmed the auto production cuts are a headwind but noted the Sensing Solutions business has a solid foundation. He attributed the margin confidence primarily to operational productivity, procurement efficiencies, and benefits from restructuring actions taken in the second half of 2024.

Joseph Giordano asked about the drivers behind the 350 basis points of outperformance in the automotive segment and its sustainability, particularly with EV timelines being pushed out. He also inquired about the timeline for Sensata to gain its fair share of the European EV market with its newer contactor portfolio.

Answer

Chief Financial Officer Brian Roberts attributed the 2024 outperformance to the strength of Sensata's ICE portfolio, which provides confidence regardless of the ICE/EV penetration mix. He noted that while China remains a challenge, more normal outgrowth should return in H2 2025. Regarding European EVs, Roberts stated that Sensata is designed into next-generation platforms, but the launches are more likely a 2026-2027 event, which will then improve content per vehicle.

Joseph Giordano inquired about Sensata's evolving strategy in China amidst the market share shift to local OEMs and asked Martha Sullivan for her perspective after returning to the CEO role.

Answer

Executive Martha Sullivan explained that Sensata is strategically focusing on Chinese local OEMs that have global aspirations, where the company's innovation and global footprint are valued. She noted that this approach leverages existing technologies rather than requiring unique investments. Regarding her return, she highlighted a renewed clarity on Sensata's strengths and a sense of urgency to drive performance.

Joe Giordano questioned Zebra's Q4 guidance approach, comparing it to last year's conservative stance, and asked about the EPS accretion from the Elo acquisition. He also sought insights into the outlook for next year, specifically if growth could return to a typical cycle range after the Covid-driven deployments and subsequent decline.

Answer

CEO Bill Burns explained that customers are proceeding with planned projects but are hesitant to accelerate future ones due to macro and trade policy uncertainties, keeping the demand trajectory consistent. CFO Nathan Winters clarified that Q4 guidance assumes similar year-end spend levels as last year, with some pipeline still needing conversion. He stated that Elo's EPS impact is approximately $0.10, contributing to the $0.30 full-year EPS guide raise, alongside lower tariffs and favorable interest rates/share count. Bill Burns reiterated no 2026 guidance but expressed confidence in driving sustainable profitable growth despite current uneven demand.

Joe Giordano asked about the nature of the Q4 guidance, comparing it to last year's conservative, backlog-driven approach, and how much market risk is currently factored in. He also inquired about the EPS accretion from Elo. For next year, he asked for reasons why 2026 might not return to a typical cycle range, given the bounce back from post-COVID deployments and a multi-year decline.

Answer

CEO Bill Burns explained that customers are proceeding with planned projects but are hesitant to accelerate future ones due to macro uncertainty and trade policy. He characterized the demand trajectory as consistent, with Q3 performing well and Q4 expected to play out as guided. CFO Nathan Winters clarified that this year's Q4 guide assumes similar year-end spend to last year, requiring pipeline conversion. He stated Elo's EPS impact is about $0.10. For 2026, Mr. Burns reiterated customer caution and uneven demand, but expressed confidence in driving sustainable profitable growth, deferring more specific guidance to Q1.

Joseph Giordano asked about the strategic rationale for the Elo Touch Solutions acquisition, specifically how its technology integrates with Zebra's, its unique capabilities, and the extent of customer overlap. He also inquired about the second-half outlook, seeking clarity on customer budget releases and the assumptions underpinning the company's guidance.

Answer

CEO Bill Burns explained that Elo expands Zebra's addressable market by $8 billion into customer-facing and self-service solutions like point-of-sale and kiosks. He highlighted that Zebra's global reach and service capabilities will scale Elo's business, noting customer overlap in retail but new strengths in quick-serve restaurants. Burns described the full-year guidance as 'balanced,' reflecting resilient demand and a strong pipeline while acknowledging customer caution amid trade policy uncertainty.

Joseph Giordano asked about preparations for the potential expiration of temporary semiconductor tariff exclusions and questioned the dynamic of companies pre-buying inventory while their customers reportedly are not.

Answer

CFO Nathan Winters said the team is actively working with semiconductor suppliers to assess mitigation options ahead of any policy changes. CEO William Burns and CFO Nathan Winters both clarified that the rapid implementation of tariffs limited significant pre-buying and that underlying demand trends have been in line with expectations, suggesting no major demand distortion.

Joseph Giordano of TD Cowen asked for context on the perceived conservatism of the full-year guidance compared to the previous year's framework. He also requested details on the puts and takes for the 2025 free cash flow forecast versus the strong performance in 2024.

Answer

CEO William Burns explained the conservative guide reflects current market uncertainty impacting visibility, which is causing customers to finalize budgets slowly. CFO Nathan Winters stated that 2025 free cash flow will see less benefit from working capital improvements than 2024, which had a significant inventory reduction, but still implies over 90% conversion.

Joseph Giordano requested an update on Zebra's manufacturing footprint in China and its ability to shift production. He also asked about 2025 seasonality, questioning if a Q1 step-down is still expected given the current recovery dynamics.

Answer

CFO Nathan Winters reported that nearly 50% of finished goods production is now outside China, though the component supply chain remains largely there. Regarding seasonality, he affirmed that a historical pattern is expected to return. He noted Q4 includes several large deployments, so a sequential step-down into Q1 would align with typical business cycles.

Joe Giordano asked if Pentair was observing an increase in dealers and installers using more foreign or low-cost products, potentially from Asia, in response to recent price increases. He also inquired if this trend was targeted at specific application or product types, or if it was more pervasive across the business.

Answer

CFO Bob Fishman confirmed that the emergence of lower-cost foreign products is being observed, though he noted it's not expected to have a huge short-term impact. He emphasized the company's need to offer superior value, innovate, and maintain brand quality. CEO John Stauch added that this trend is primarily seen in more commodity-based, lower-end products that are not intelligent or connected to technology, such as basic filters in the Pool segment. He stressed the importance of Pentair's value promises, brand reputation, service levels, and warranties in justifying price differences.

Joe Giordano asked if Pentair was observing dealers and installers increasingly using more foreign or low-cost products, potentially from Asia, and sought color on its impact. He then followed up by asking if this trend was targeted to a specific application set or product type, or if it was pervasive.

Answer

CFO Bob Fishman confirmed that the trend of foreign/low-cost products is emerging but expects a limited short-term impact, emphasizing the need for Pentair to offer better value, innovation, and superior quality. CEO John Stauch clarified that these alternatives are primarily seen in more commodity-based, lower-end products not connected to intelligence or technology, such as basic filters in Pool or lower-end filtration applications, stressing the importance of Pentair's value promises and service levels.

Joseph Giordano of TD Cowen asked if the significant price increases in the Pool segment were creating an opening for lower-priced foreign competition. He also questioned if the KBI divestiture alters the strategic rationale for the Manitowoc Ice acquisition.

Answer

President and CEO John L. Stauch acknowledged the risk of foreign competition but noted it is not yet a significant factor, particularly at the high end where Pentair's automated product ecosystem creates customer stickiness. He clarified that the KBI acquisition was a defensive move for the Everpure brand made *before* acquiring Manitowoc, and the combined scale of Everpure and Manitowoc now makes a captive service arm less critical.

Joseph Giordano asked if the current price increases are specifically tied to tariffs and could be reversed, and inquired about potential exposure from tariffs on electronics that are currently on a temporary exclusion list.

Answer

CEO John Stauch confirmed the price actions are general increases, not temporary surcharges, and are not designed to be reversed. He and CFO Bob Fishman highlighted the new phased approach allows for more agility. Regarding tariff exclusions, Stauch believes the impact of them expiring is not meaningful but acknowledged the overall situation remains highly fluid and has already exceeded their 'worst-case' planning scenarios.

Joe Giordano's representative, Vance, asked about the company's plans for debt paydown in 2025 and whether the guidance assumes any debt reduction. He also inquired about the expected cadence of the residential end-market recovery, particularly comparing Q2 to the second half of the year.

Answer

CFO Bob Fishman outlined a balanced capital allocation strategy for 2025 that includes some debt paydown to continue lowering the leverage ratio, alongside dividends, share repurchases, and bolt-on M&A. President and CEO John Stauch stated that the guidance assumes only very modest improvements in residential markets during the second half of 2025, driven more by easier year-over-year comparisons than a significant market rebound.

Joseph Giordano of TD Cowen inquired about the early market uptake for Pentair's new PFAS filtration products and the risk of industrial CapEx project delays turning into cancellations.

Answer

President and CEO John Stauch reported that while revenue is still small, the uptake of PFAS products has been strong, particularly in commercial and hospitality. Regarding industrial projects, he stated that if delays extend for several more quarters, they would be considered out of the funnel, but the current issue is more a moderation of growth than a major headwind.

Joseph Giordano from TD Cowen asked for clarification on the $6 million price-cost benefit, the current size and growth of the data center business, and the revenue model for the Nexa smart water platform.

Answer

CFO Shashank Patel confirmed the $6 million benefit was a timing issue from selling lower-cost inventory. CEO Robert Pagano stated the data center business was about 2% of sales last year and is now growing at a high double-digit rate. For Nexa, he described a flexible model combining an upfront installation cost with an annual recurring fee for monitoring, upgrades, and support.

Joseph Giordano noted that the full-year revenue guide for the Americas seems conservative given the strong first-half outlook and easier back-half comparisons. He also asked about the long-term margin potential for the Americas business, given its current high levels.

Answer

CFO Shashank Patel attributed the conservative second-half guide to caution around potential demand destruction from tariff-related price increases. CEO Robert Pagano added concerns that strong Q2 demand could be a pull-forward from the second half. Regarding long-term margins, Pagano stated the company's goal remains to drive 30 to 50 basis points of margin expansion annually through productivity, new products, and pricing to value.

Dan, on behalf of Joe Giordano from TD Cowen, asked if potential reciprocal tariffs in Europe would affect the company's competitive position. He also inquired about what makes water products for the correctional facilities market, served by the new I-CON acquisition, unique.

Answer

CFO Shashank Patel confirmed that since Watts primarily manufactures in Europe for the European market, the impact of reciprocal tariffs would be minimal. CEO Robert Pagano explained that the correctional facilities market involves significant renovation of old plumbing systems, requiring unique, specialized products designed for safety within cells.

On behalf of Joe Giordano, an analyst asked about the potential for the institutional building cycle to be elongated and whether the broader non-institutional building cycle might change in length.

Answer

CEO Robert Pagano reiterated that the institutional market remains steady and is expected to continue growing over the next 12-18 months. CFO Shashank Patel addressed the non-institutional, non-residential market, pointing to leading indicators like the ABI being below 50 for 18 months, which portends continued softness for some time.

Joseph Giordano of TD Cowen asked about the impact of tariff adjustments on customer demand and the extent of pushback on pricing. He also requested an updated view on the timing and potential impact of federal infrastructure funding on underlying market conditions.

Answer

President & COO Paul McAndrew responded that the company worked closely with customers to adjust pricing after China-related tariffs were reduced and has not seen a meaningful change in demand or order patterns. On infrastructure funding, CEO Marietta Zakas reiterated that no significant benefits are expected in fiscal 2025, noting that fund allocation has been slow. However, she stressed the bill's importance in raising awareness for needed investments, which remain primarily funded at the local level. McAndrew added that future capital spending in 2026-2027 will target efficiency and capacity at their mature iron foundries.

Representing Joe Giordano, an analyst asked for details on segment margin performance versus the consolidated results, which were aided by lower corporate costs, and requested a breakdown of the business between new development and repair/replacement.

Answer

CFO Melissa Rasmussen attributed Q2 gross margin pressure to temporary manufacturing inefficiencies from running two foundries and noted SG&A would step up in the second half for strategic investments. CEO Marietta Zakas clarified the end-market mix is approximately 60-65% municipal repair and replacement, 20-25% residential construction (new development), and under 10% natural gas distribution.

Joseph Giordano of Baird inquired about the price versus volume assumptions in the updated 2025 guidance and the outlook for project funding under the infrastructure bill, considering potential political changes.

Answer

CEO Marietta Zakas explained that the guidance includes benefits from both volume and price, with price realization expected in the low to mid-single-digit range. She anticipates volume growth in iron gate valves and hydrants but noted headwinds from lapping a strong prior year. Zakas also clarified that the guidance does not assume a meaningful impact from the infrastructure bill. President and COO Paul McAndrew added that while they see increasing activity related to the bill, it is not yet material.

Joseph Giordano questioned why the company's growth guidance appears low despite healthy municipal and residential markets. He also requested details on the goodwill impairment and warranty charges, including the go-forward plan for the affected businesses.

Answer

CEO Marietta Zakas explained the guidance reflects carryover pricing, some volume growth, and minimal assumed benefit from the infrastructure bill, balanced by external uncertainty and a modest headwind from normalizing service brass backlogs. CFO and CLO Steven Heinrichs detailed that the noncash goodwill impairment and warranty charge were both related to technology products, specifically meters, within the Water Management Solutions segment. Zakas added the go-forward plan involves a more targeted commercial approach for the metering business.

Joseph Giordano of TD Cowen asked for details on the drivers of logistics growth, questioning if it was primarily from greenfield or brownfield projects. He also sought to understand the business model for the new OneVision platform, including its pricing and sales mechanism.

Answer

CEO Matt Moschner described the logistics growth as balanced and multi-pronged, including new facilities but also significant traction from scaling 2D and 3D vision for process improvements in existing fulfillment networks. On OneVision, Moschner stated that while they are not ready to detail a new pricing model, it is currently sold as a complementary part of a technology bundle to solve more advanced vision applications, leveraging the existing go-to-market approach.

Joseph Giordano of TD Cowen questioned the sustainability of Q1's operating expense decline and inquired about Cognex's long-term strategy regarding embedded versus cloud-based computer vision.

Answer

CFO Dennis Fehr attributed the OpEx decline to disciplined cost management and a favorable FX impact, emphasizing a continued focus on leveraging the expense base for profitable growth. CEO Robert Willett addressed the vision question, stating that while embedded vision remains preferred by customers for its performance and security, Cognex is actively investing in cloud connectivity to 'supercharge' its embedded systems, leveraging its strengths in both areas.

Joseph Giordano of TD Cowen requested an explanation for the sequential margin improvement in the M&CS segment from Q4 to Q1, given the energy mix headwind was present in both periods. He also asked what underpins the company's confidence in a significant back-half acceleration in M&CS orders.

Answer

CFO Bill Grogan clarified that the sequential margin improvement from Q4 was partly due to one-time items in the fourth quarter, such as incentive true-ups, that had suppressed the margin then. He stated that confidence in the second-half order recovery is based on visibility into the commercial funnel and the expectation that customers will work through existing channel inventory and return to more normal ordering patterns.

Joseph Giordano sought to understand the relevance and evolution of new product categories, their impact on revenue and margins, and the rationale behind the 2025 cash generation and deleveraging guidance of 2.6x net debt-to-EBITDA.

Answer

Executive Belmiro de Gomes clarified that expanding categories often involves broadening the brand assortment within existing product lines to cater to diverse income levels. Executive Anderson Castilho added that the company is testing 'in and out' products to drive revenue. CFO Vitor Faga de Almeida reinforced the 2.6x leverage guidance, explaining it will be achieved through a balanced combination of EBITDA growth and net debt reduction, continuing the trend seen in late 2024.

Joseph Giordano from TD Cowen inquired about the Process Automation division, asking if its margins are approaching a structural peak after 17 consecutive quarters of positive book-to-bill and what could drive them higher.

Answer

Executive Morten Wierod responded that the strategy is to grow high-margin business lines faster and use M&A to expand into more profitable areas. He cited recent acquisitions like Födisch Group and DTS as examples of adding higher-margin businesses to the portfolio. He asserted that there are still 'quite a few steps to take' before the division hits any margin ceiling.

Joseph Giordano of Cowen and Company asked about margins in the Process Automation segment, questioning if the business was approaching a structural peak after 17 quarters of positive book-to-bill and how performance could be pushed higher.

Answer

Executive Morten Wierod stated that the strategy is to grow high-margin business lines faster through both organic efforts and M&A. He cited the recent acquisitions of Födisch Group and DTS as examples of adding higher-margin businesses. He asserted that there are still 'quite a few steps to take' before the segment hits any margin ceiling.

Joseph Giordano of TD Cowen inquired about margins in the Process Automation segment, asking if they are approaching a structural peak and what levers exist to drive them higher.

Answer

CEO Morten Wierod stated that margins are not at a ceiling and that the strategy is to grow high-margin business lines faster, partly through M&A. He cited the recent acquisitions of Födisch Group and DTS as examples of adding higher-margin businesses to the portfolio. He asserted that there are 'quite a few steps to take still' to improve profitability.

Joseph Giordano asked if absolute order dollars in North America and International were similar to the prior quarter. He also inquired about the leading indicators Parker monitors to distinguish between temporary project delays and outright cancellations.

Answer

CEO Jenny Parmentier confirmed that the industrial backlog in dollar terms was steady at $4.2 billion, implying similar order intake. To differentiate delays from cancellations, she said the company analyzes the backlog weekly and monitors for signals like additional plant shutdowns and changes in customer production schedules. She noted that unlike in past cycles, they are currently seeing delays rather than cancellations.

Joseph Giordano pressed on the Water Quality segment's margins, noting a lack of leverage despite strong growth, and asked about long-term CapEx needs. He also sought clarity on the customer experience and integration of TraceGains with Esko.

Answer

SVP and CFO Sameer Ralhan defended the Water Quality margin, noting the profit fall-through was near 30% and in line with their long-term algorithm, attributing any softness to growth investments. He guided long-term CapEx to 1-2% of sales. President and CEO Jennifer Honeycutt explained the TraceGains/Esko combination allows for cross-pollination between enterprise and mid-market customers, with the go-to-market approach varying by customer and region.

Pressed for details on a reasonable CapEx level for 2024, given the plan for fewer openings than in 2023. He also followed up on the working capital discussion, asking what further improvements are possible.

Answer

The company clarified that the 30 openings were for 2023. For 2024, 7 stores are currently under construction with a total investment of BRL 450-500 million. The full 2024 CapEx and store opening plan will be defined in Q4, balancing growth and deleveraging. Regarding working capital, they believe it has reached a healthy, stable level and the focus is now on maintenance rather than seeking significant further gains that could risk competitiveness.

Joseph Giordano from Cowen & Company asked for clarification on Q1 financials, specifically if all restructuring charges were complete in Q4 2016 and when the reduced cash burn would become evident. He also asked about the timing for the release of clinical data for X213.

Answer

CEO Jim Neal clarified that while restructuring charges of $4.6 million were booked in Q4, associated cash payments will continue into 2017. He projected that Q1 2017 would be the highest expense quarter, with costs decreasing thereafter. Regarding X213, Neal stated that the study is nearing completion and data would be disclosed within the next few months.