Jonathan Tanwanteng

Jonathan Tanwanteng questioned the decision to bring on a third-party bromine supplier, asking if it indicated issues with the current supplier, delays in the new facility, or purely increased demand, and whether higher input costs would be passed to customers. He also asked about the plan for excess bromine supply once the new plant reaches its 75 million pounds capacity in 2029, the potential for short-term bromine supply shortfalls for the completion or battery business, the earliest timeline for a large-scale Oasis desalination plant to be online, and the long-term impact of changes in Venezuela on the offshore business and overall energy market.

Answer

Brady Murphy, President, CEO, and Director, clarified that the third-party bromine supply is due to increased demand from both deepwater completion fluids and Eos electrolyte production, with no issues with the long-term contract which winds down by 2029. He stated that innovation leadership allows for some pricing success to offset higher spot market bromine costs, keeping segment margins within the 25%-30% range. For excess bromine, Murphy indicated that the 75 million pounds capacity is from the current tower, with potential for additional capacity build-out from brine resources, and any short-term excess would go to the open market. He confirmed that 2026 bromine supply is contractually secured, with plans to secure 2027 needs. The earliest expectation for a 100K+ Oasis desalination plant to be online is mid-2027. Regarding Venezuela, Murphy views it as long-term positive for the country and oilfield services, with potential for TETRA to re-engage in that market, but not expecting a significant short-term impact on the overall energy market.

Jonathan Tanwanteng asked about the decision to bring on a third-party bromine supplier, specifically whether it indicates issues with the current supplier, delays with the new facility, or simply demand exceeding contracted supply, and if higher input costs will be passed on to customers. He also inquired about plans for excess bromine supply after the new plant reaches capacity in 2029, any expected shortfalls in bromine supply in the short term, the earliest timeline for a large-scale Oasis plant to be online, and the long-term impact of changes in Venezuela on the offshore business.

Answer

Brady Murphy, President, Chief Executive Officer, and Director, clarified that there are no issues with the long-term bromine contract, which aligns with the new plant's 2028 operational date. He stated that third-party supply is needed because demand for deepwater completion fluids and Eos electrolyte production is exceeding the long-term contract. Pricing power from innovation helps offset some increased costs, maintaining the 25-30% segment margin guidance. Murphy indicated that after the new plant reaches its 75 million pounds capacity, TETRA has resources for additional capacity and would likely go to market with incremental bromine supply. He confirmed that supply for 2026 is contractually secured, with plans to do the same for 2027. For the large-scale Oasis plant, Murphy estimated an earliest online date of mid-2027, acknowledging that TETRA's timeline is realistic for its role. He viewed changes in Venezuela as positive long-term for the country and oilfield services, but not significant in the short term for the overall energy market, with TETRA considering re-entering or selling completion fluids into that market.

Jon Tanwanteng from CJS Securities inquired about the underlying volume and price components within Nomad Foods' guidance for the year, specifically asking for insights into net pricing strategies relative to anticipated inflation. He also asked about the company's long-term growth expectations beyond 2026, especially considering new operating structure and efficiency initiatives, and how these align with previously stated long-term targets. Additionally, he sought details on the timing and expected conclusion of current pricing negotiations with European retailers, the anticipated impact on market share throughout the year assuming competitor responses, and any changes to the corporate capital allocation plan, particularly regarding the priority of share repurchases.

Answer

Ruben Baldew, CFO, explained that the guidance is for net sales, not broken down by volume and price, but noted an expected negative decline due to negotiation delays, fish cost inflation requiring price increases (with anticipated competitor lag), and disruption from internal changes. He expects price to contribute positively but volume to be negative. Dominic Brisby, CEO, expressed confidence in returning to growth in 2027-2028, with multi-year plans to be shared at an upcoming Analyst Day, and highlighted personal share purchases as a sign of belief. Regarding negotiations, Mr. Brisby stated most are expected to conclude in Q1. On market share, he emphasized strategies to maintain consumer preference through superior products (e.g., new fish finger coating), stronger brands via effective A&P, and disruptive point-of-sale presence. For capital allocation, Mr. Brisby affirmed that investing in organic growth is the top priority, followed by share repurchases at current valuations, balanced against leverage and liquidity, with M&A potentially re-emerging under different market conditions. He assured a focus on maximizing shareholder returns.

Jon Tanwanteng followed up on pricing negotiations, asking about their expected conclusion timeline and whether they would be a rolling process. He also inquired about anticipated changes in market share throughout the year, assuming competitors follow pricing, and if volume/value share is expected to recover. Lastly, he asked about any changes to the corporate capital allocation plan and the continued priority of share repurchases.

Answer

Dominic Brisby (CEO) stated that most European pricing negotiations are expected to conclude in Q1. He explained that Nomad Foods focuses on maintaining share by providing strong reasons for consumers to pay, through superior products (e.g., new fish finger coating), stronger brands via effective A&P, and disruptive point-of-sale presence. He reiterated that the top capital allocation priority is organic growth investment, followed by buybacks (given shares are undervalued) balanced against leverage, with M&A as a future possibility, all aimed at maximizing shareholder returns.

Jon Tanwanteng from CJS Securities asked about the company's long-term portfolio strategy to structurally address hotter summer weather patterns and also inquired about current capital allocation priorities, including share repurchases and debt repayment.

Answer

CEO Stéfan Descheemaeker outlined a strategy to improve summer performance by leveraging a wider portfolio, including chicken for barbecues, natural fish, and potatoes, and exploring ice cream expansion beyond the Adriatic. CFO Ruben Baldew addressed capital allocation, highlighting the $100 million in H1 share buybacks and the dividend. He stated the company aims to maintain flexibility and is not actively pursuing M&A in the short term given its current valuation.

Jonathan Tanwanteng asked if the ability to adjust A&P investment was already factored into the revised guidance and sought details on which input costs were rising. He also questioned pricing elasticity amid consumer trade-downs and asked for the expected mix of volume versus price in the new full-year organic growth outlook.

Answer

CEO Stéfan Descheemaeker confirmed that current A&P investment plans are included in the new guidance. CFO Ruben Baldew identified proteins, specifically chicken and red meat, as the source of cost pressure. Regarding the outlook, Ruben Baldew projected that Q2 growth would be more volume-driven due to the Easter shift, while H2 growth would be more price-driven as pricing actions are implemented, with Stéfan Descheemaeker adding the full-year result would be a combination of both.

Jonathan Tanwanteng asked if the potential to adjust A&P spending was already included in the revised guidance, the source of input cost inflation, the expected price elasticity amid consumer trade-downs, and the volume vs. price mix in the new organic growth outlook.

Answer

CEO Stéfan Descheemaeker confirmed that A&P investment levels are factored into the new guidance and the company remains committed to brand building. CFO Ruben Baldew identified protein costs (chicken, red meat) as the primary driver of inflation. Regarding pricing, Stéfan Descheemaeker stated their strategy is a holistic combination of renovation, advertising, and in-store activation, not just price. Ruben Baldew projected that Q2 growth would be volume-led, while H2 would be more price-driven, resulting in a mix of both for the full year.

Jonathan Tanwanteng asked if the annual EPS guidance includes assumptions for share repurchases. He also inquired about the potential impact of U.S. tariffs on European markets and the company's procurement of U.S. dollar-denominated seafood.

Answer

CFO Ruben Baldew clarified that the EPS guidance assumes a flat share count, meaning any significant buybacks would be a tailwind. He stated the company sees minimal direct risk from U.S. tariffs, as it doesn't export to the U.S. and has hedging strategies for currency. He added that the company is strategically focused on diversifying its fish sourcing long-term to mitigate broader supply risks.

Jonathan Tanwanteng asked for an expansion on the data center opportunity, including its contribution to 2026 growth and whether its incremental margin is higher than the corporate average.

Answer

Executive Vice President and CFO David Jackola stated that data centers represented approximately 5% of revenue in 2024, 8% in 2025, and are expected to comprise about 10% in 2026, contributing a couple of percentage points to growth. He confirmed that the margin profile for data center work is very strong due to the specialized nature and limited competition. President and CEO Russ Becker concurred.

Jonathan Tanwanteng asked for an expansion on the data center opportunity, specifically its contribution to APi Group's growth in 2026 and whether its incremental margin is higher than the corporate average due to technical expertise.

Answer

Executive Vice President and CFO David Jackola explained that data centers represented approximately 5% of revenue in 2024, 8% in 2025, and are expected to comprise about 10% in 2026, contributing a couple of percentage points to growth in both years. He confirmed that the margin profile of data center work is very strong due to limited market players capable of performing the specialized work, allowing for strong gross margins.

Jon Tanwanteng asked if the incremental margin expectation going forward implies an absence of very large project start quarters in the near future, which typically impact margins.

Answer

David Jackola, EVP and CFO, clarified that the impact of projects on year-over-year margins is viewed as an 'inflection point' when revenue significantly ramps up. He expects Specialty Services margins to be year-over-year accretive in Q4 and into Q1/Q2 of next year, becoming part of the 'ebbs and flows' of margins rather than a major issue.

Jon Tanwanteng from CJS Securities followed up on the incremental margin expectation, asking if it implies an absence of very large project start quarters in the upcoming schedule, given their historical impact on margins.

Answer

EVP and CFO David Jackola clarified that project starts impacted margins during an 'inflection point' of significant revenue acceleration, particularly in Specialty Services. He anticipates Specialty Services margins to be year-over-year accretive in Q4 and into Q1/Q2 of the next year, becoming a more normalized 'ebb and flow' rather than a major drag.

Jonathan Tanwanteng from CJS Securities asked about the margin profile of the latest elevator acquisition and inquired about the M&A opportunity set in international markets.

Answer

President and CEO Russ Becker clarified that the new elevator acquisition's margin is closer to the company's fleet average, with potential for improvement. He also revealed that while most recent M&A was domestic, the company has one small international business under a letter of intent and is selectively evaluating opportunities on a country-by-country basis.

Jonathan Tanwanteng from CJS Securities asked about the risk related to a delayed semiconductor project and questioned why guided interest expense for 2025 is flat despite strong cash flow.

Answer

President and CEO Russ Becker clarified the project delay was due to customer leadership changes, not funding, and is now resolved. He emphasized APi's risk is lower than peers due to smaller average project sizes and a focus on recurring services. Interim CFO David Jackola explained the flat interest expense guidance is partly an accounting matter, as a prior-year favorable item is not expected to repeat, and that the guide supports the 75% free cash flow conversion target while funding organic growth.

Jonathan Tanwanteng sought more detail on the M&A pipeline, including the potential timing and size of deals. He also asked if the company plans to provide a formal inorganic growth or capital deployment target at its upcoming Investor Day.

Answer

President and CEO Russ Becker stated that bolt-on M&A should occur consistently, with some deals expected to close in Q4 2024 and activity continuing into 2025. He noted a larger, transformational deal would be more likely in 2025 than 2024. Regarding targets, Becker was 'reticent' to commit to a specific annual M&A dollar amount, emphasizing the need to remain disciplined rather than doing deals just to meet a quota.

Jonathan Tanwanteng inquired about the competitive landscape for 800-volt data center solutions, including pricing and technology advantages, the evolution of Navitas' partnership with Infineon, and an update on the incremental margin of high-power products.

Answer

CEO Chris Allexandre confirmed the ongoing partnership with Infineon, sharing a vision for GaN/SiC adoption in AIDC. He noted that while many vendors are listed in the 800VDC ecosystem, few have both high-voltage GaN and ultra-high-voltage SiC for grid infrastructure, highlighting Navitas' unique position. Regarding margins, Chris Allexandre and CFO Todd Glickman explained that continuous gross margin expansion is expected due to increased scale absorbing fixed costs, higher margins from high-power products compared to mobile, and cost reductions from ramping new suppliers, particularly for packaging, throughout 2026 and beyond.

Jonathan Tanwanteng asked about the competitive landscape for 800V data center solutions, including pricing and technology differentiation, and the evolution of Navitas' partnership with Infineon in this space. He also inquired about the incremental margin for high-power products.

Answer

CEO Chris Allexandre confirmed an ongoing partnership with Infineon, noting that few competitors offer the comprehensive GaN and high-voltage SiC portfolio needed for 800V HVDC and grid infrastructure. He and CFO Todd Glickman explained that gross margin expansion is expected from increased scale, higher margins of high-power products, and cost reductions from new suppliers.

Jon Tanwanteng questioned if Navitas is generating any engineering revenue during the transition period before the 800V ramp and asked for the cash flow outlook.

Answer

CEO Gene Sheridan clarified that while the 800V opportunity is a 2027 event, Navitas has over 40 design wins in 48V data centers that will ramp in 2026, providing growth. CFO Todd Glickman projected that quarterly operating cash usage would remain around $10-11 million. Sheridan also noted that a broader market recovery in 2026 should provide additional tailwinds.

Jonathan Tanwanteng asked for details on Navitas's China exposure, whether tariffs have caused customers to alter plans, and if the company plans to diversify its SiC foundry base outside the U.S.

Answer

CEO Eugene Sheridan explained that GaN has low tariff risk due to its Taiwan manufacturing base. The primary risk is for SiC, which is a minority of revenue but mostly sold to China. He noted that while current packaging locations avoid tariffs, a potential shift in rules to fab location (U.S.) could have an impact. He confirmed that Navitas has contingency plans to move production to other territories if necessary.

Jonathan Tanwanteng asked for the expected ramp timing of the $450 million in design wins, the margin profile for the second half of the year based on product mix, and the split of OpEx reductions between R&D and SG&A.

Answer

CFO Todd Glickman explained that the $450 million in design wins represents lifetime revenue for programs ramping in '25, '26, and '27, with lifetimes of 1-2 years for consumer and 3-4 years for industrial. He reiterated that higher power markets like EV and data center carry margins above the corporate average, which should lead to modest margin growth in the second half. He also noted the R&D vs. SG&A split for OpEx cuts would be consistent with historical splits.

Jonathan Tanwanteng sought clarification on the Infineon partnership, asking if Infineon would use Navitas IP. He also asked about the timing of a return to growth, the outlook for Q1, and how the appliance business fits into the new focused strategy.

Answer

CEO Eugene Sheridan clarified the Infineon partnership is a dual-sourcing arrangement with a shared footprint enabled by a cross-license, not a transfer of manufacturing IP. He projected a soft, seasonally down Q1, followed by a return to strong growth in Q2/Q3 driven by design wins and delayed projects. He confirmed the appliance business remains important, noting 30 new design wins and explaining that technology from core markets will be reused there.

Jonathan Tanwanteng sought more details on the Quantum laser license agreement, its technological application, and whether it signals more non-core licensing opportunities. He also asked about the specific programs driving the increased CapEx and the expected growth of OpEx and R&D as a percentage of revenue.

Answer

President and CEO John Baylouny explained the Quantum Cascade Laser technology is used to excite ions for quantum computing and confirmed DRS's strategy to license non-core technologies to maintain focus on defense. EVP and CFO Michael Dippold detailed CapEx increases are primarily for capacity expansion in naval power, Counter-UAS, tactical radars, and missile sensing, along with demo assets. He expects IRAD to remain a similar percentage of revenue, with OpEx seeing a more moderate increase than in 2025.

Jonathan Tanwanteng asked for more details on the Quantum laser license, specifically what the technology enables the customer to do, and if there are more opportunities for such licenses as quantum technology advances. He also inquired about the specific programs tied to the increased CapEx for the year and how OpEx and R&D are expected to grow as a percentage of revenue.

Answer

President and CEO John Baylouny explained that the Quantum Cascade Laser technology is used to excite ions for quantum computing. He noted that DRS focuses on defense and seeks to license non-core commercial applications, with this being the second such license. EVP and CFO Michael Dippold stated that CapEx increases are primarily for capacity expansion in naval elements (Charleston and overall naval portfolio), Counter-UAS, and tactical radars due to robust demand, along with demo assets. Mr. Dippold expects IRAD to remain a similar percentage of revenue (mid-3% range) and OpEx to increase more moderately than in 2025.

Jonathan Tanwanteng asked for more details on the germanium supply, specifically if constraints are expected in coming quarters and how programs will be filled. He also inquired about the price of alternative supplies and their impact on ASC margins, and any changes to capital allocation strategy.

Answer

COO and incoming CEO John Baylouny expressed confidence in the plan to bridge germanium supply from 2025 into 2026 through recycling and alternative sources. CFO Michael Dippold noted that higher pricing for alternative supplies would be inherent in fixed-price programs for 2026, impacting ASC margins. Chairman and CEO William Lynn reiterated a balanced capital allocation strategy, including a dividend and moderate buyback, with a priority on M&A opportunities that meet strategic and financial criteria, expecting more M&A activity going forward.

Jonathan Tanwanteng asked for more details on the germanium supply, specifically if constraints are expected in coming quarters and how programs will be filled. He also inquired about the price of alternative supplies and their impact on ASC margins, and any changes to capital allocation strategy.

Answer

COO and incoming CEO John Baylouny expressed confidence in the plan to bridge germanium supply from 2025 into 2026 through recycling and alternative sources. CFO Michael Dippold noted that higher pricing for alternative supplies would be inherent in fixed-price programs for 2026, impacting ASC margins. Chairman and CEO William Lynn reiterated a balanced capital allocation strategy, including a dividend and moderate buyback, with a priority on M&A opportunities that meet strategic and financial criteria, expecting more M&A activity going forward.

Jon Tanwanteng of CJS Securities asked for a breakdown of the drivers behind the raised revenue guidance, the outlook for R&D intensity, and the timeline for normalizing margins on products affected by germanium costs.

Answer

EVP & CFO Michael Dippold attributed the revenue guidance increase to strong bookings demand and consistent supply base performance. He noted that internal R&D (IRAD) spending has increased to the mid-3% range to develop 'ReadyNow' solutions for areas like counter-drone and space. Regarding germanium, he stated that margin recovery will be pursued through contract modifications on a program-by-program basis, with mixed customer receptiveness so far.

Jonathan Tanwanteng of CJS Securities asked if maintaining full-year guidance after a strong Q1 provides extra cushion or offsets higher costs, how DRS's market share might evolve with a larger defense budget, and for details on the opportunity in next-generation missile systems.

Answer

CEO William Lynn clarified that the Q1 outperformance reflects a push for improved quarterly linearity, not conservatism. He expressed confidence that DRS is well-positioned for defense budget growth due to its alignment with key priorities like shipbuilding and force protection. Lynn characterized the next-generation missile systems market as a significant 'greenfield' opportunity, leveraging the company's core sensor technology to secure new design wins.

Jonathan Tanwanteng of CJS Securities inquired about the opportunity presented by the Navy's investment in the Charleston facility and asked for a breakdown of the path to achieving the 14% EBITDA margin target in 2026, considering the increased R&D spending.

Answer

CEO William Lynn and CFO Michael Dippold described the Navy's $45 million investment as a major strategic move that expands DRS's steam turbine capacity and solidifies its role in the submarine industrial base, creating significant long-term revenue opportunities. Dippold reiterated commitment to the 14% margin target for 2026, stating that while the path isn't perfectly linear, strong execution on the Columbia program remains the key driver, and robust revenue growth is outpacing original plans.

Jonathan Tanwanteng requested clarification on the M&A diligence expenses incurred in Q4 2025, specifically whether the opportunities were too early in the process or tripped up in diligence, and the M&A outlook for 2026. He also asked for a quantification of the gross profit or EBITDA impact associated with the customer outage, raw material disposals, and weather issues in Q4 2025.

Answer

Joseph Berquist, President and CEO, stated that no specific details could be provided regarding the M&A diligence, other than no costs are carrying into Q1 2026 and no imminent transactions are expected. He estimated the combined impact of the customer outage, disposals, and weather on Americas' gross margin percentage was a little over 1%, and the revenue impact was between $5 million and $10 million.

Jonathan Tanwanteng of CJS Securities asked for details on the double-digit growth in advanced products, including its revenue share and margin profile, and questioned the specifics of the new $20 million cost savings program, including its cash cost and COGS vs. OpEx split.

Answer

CEO Joseph Berquist clarified that the 'Advanced and Operating Solutions' portfolio, representing about 20% of revenue, is experiencing high growth. CFO Tom Coler explained the new $20 million cost program will have a cash restructuring cost of 1 to 1.5 times the run-rate savings. He noted current actions are more weighted to G&A, but future initiatives will also address manufacturing network optimization, particularly in Europe.

Jonathan Tanwanteng asked for details on the expected financial contribution from recent acquisitions, particularly the growth and synergy potential of Dipsol. He also sought to understand the specific tariff assumptions underlying the full-year outlook and questioned the company's capital allocation priorities, weighing M&A against share repurchases.

Answer

CFO Tom Coler provided specifics on the Dipsol acquisition, noting it generated approximately $80 million in sales and $15 million in EBITDA in 2024. President and CEO Joseph Berquist added that the full-year outlook is based on the current tariff situation without speculating on future changes. On capital allocation, Coler reiterated a balanced approach focused on investing for growth through M&A and organic projects, while also utilizing dividends and opportunistic share repurchases, supported by a healthy balance sheet.

Jonathan Tanwanteng questioned if the go-to-market strategy refocus could improve growth beyond the historical 2-4% target, asked for a breakdown of the new cost savings plan between COGS and SG&A, and inquired about the CSI acquisition and the capital allocation priority between M&A and share repurchases.

Answer

President and CEO Joseph Berquist maintained that the 2-4% above-market growth target is still appropriate, with the new strategy focused on execution. He detailed that the CSI acquisition enhances the portfolio and logistics in South Africa. He affirmed M&A is the top priority for shareholder value creation, though repurchases remain an option. CFO Tom Coler added that the cost savings primarily target SG&A, which is expected to be flat to modestly up in 2025 due to investments and compensation rebuild.

Jonathan Tanwanteng asked for more specific details on the incremental impact of customer shutdowns and strikes on Q4, the degree to which product or geographic mix affected Q3 results, and for an update on capital allocation priorities.

Answer

CEO Andrew Tometich and CFO Tom Coler identified ongoing outages in auto and steel, with new challenges emerging in aerospace that could create a several-million-dollar EBITDA headwind in Q4 if they persist. Mr. Tometich noted that negative mix impact was most pronounced in Europe. Regarding capital allocation, he reiterated a disciplined approach with a preference for growth via internal investment and M&A, supplemented by dividends and opportunistic share repurchases, all supported by a strong balance sheet.

Jon Tanwanteng inquired about the 800-V data center opportunity, asking if Vicor is seeing any traction or orders for products beyond current vertical/lateral power or NBMs.

Answer

CEO Patrizio Vinciarelli confirmed Vicor has technology and relevant IP for high-density bus conversion from 800V/1000V, with more products in the pipeline for later this year. However, he expressed skepticism about the 'hype' around 800V, arguing that the real issues lie in point-of-load solutions where multi-phase mainstream approaches are handicapped, leading to much larger efficiency losses than the few percent gained by 800V distribution.

Jon Tanwanteng asked for more details on the lead customer's decision to launch with Gen 4 VPD products instead of Gen 5, and inquired about Vicor's plans for a new facility, specifically if they intend to build it themselves or partner, and what capacity it would have.

Answer

CEO Patrizio Vinciarelli explained that the Gen 4 system is mature and has a track record of success, while the Gen 5 system is not yet fully mature. He noted that the lead customer's Gen 4 system will utilize a significant share of capacity by year-end, with Gen 5 providing additional capacity next year. Regarding the new facility, Patrizio Vinciarelli mentioned exploring both building on new land (1.5-2 year lead time) and acquiring an existing building (1.5 years shorter lead time), with a potential capacity increment on the same scale as the first fab.

Jon Tanwanteng asked for color on the end markets affected by order cancellations, the outlook for future royalty growth, Vicor's position in the emerging 800-volt server ecosystem, and the forward-looking trend for operating expenses.

Answer

Corporate VP Philip Davies identified the industrial market in China as the primary source of cancellations due to tariffs. CEO Patrizio Vinciarelli affirmed Vicor's commitment to aggressively protecting its IP, suggesting more enforcement actions are coming. He and Davies also highlighted Vicor's pioneering technology for 800-volt conversion. CFO James Schmidt noted that excluding a one-time legal fee, OpEx would have declined and will likely be lumpy going forward based on legal activities.

Jonathan Tanwanteng inquired about the direct and indirect impacts of tariffs, the production ramp timeline for second-generation VPD products, and the outlook for operating expenses.

Answer

CEO Patrizio Vinciarelli and VP Philip Davies explained that a 10% across-the-board tariff surcharge will be implemented in Q3 to maintain margins without significantly impacting demand. They also expressed confidence in the VPD product ramp for a lead customer following the receipt of a key ASIC. CFO Jim Schmidt noted that while specific guidance isn't provided, operating expenses should stabilize now that one-time SAP implementation costs are complete.

Jonathan Tanwanteng of CJS Securities inquired about the delay and shipping timeline for Vicor's Gen 5 VPD product, the lead customer's sourcing strategy, and the broader IP licensing landscape, including the number of potential licensees and efforts to address infringement.

Answer

CEO Patrizio Vinciarelli explained the VPD delay was due to a necessary ASIC redesign to meet performance goals, with shipments to the lead customer expected to ramp in the second half of 2025. He stressed the solution is proprietary and not dual-sourced. Regarding IP, Philip Davies, VP of Global Sales and Marketing, noted the recent ITC ruling is driving more licensing discussions. Vinciarelli added that while customers of infringing products will be treated fairly, the infringing suppliers are being held accountable and have no viable design workarounds.

Jonathan Tanwanteng of CJS Securities asked for clarification on the initial Gen 5 VPD shipments, questioning if they were for testing or production. He also inquired about the drivers behind Q3's revenue strength, the sequential growth in licensing revenue, and the breadth of market interest for Gen 5 technology beyond GPUs, such as in network processors.

Answer

CEO Patrizio Vinciarelli clarified that initial Gen 5 units are for customer bring-up, with production being a first-half 2025 event, and noted that orders are already in hand. Corporate VP Philip Davies attributed Q3 strength to the industrial and aerospace/defense markets, offsetting temporary weakness in lumpy HPC orders. Davies also confirmed a sequential increase in royalty revenue and highlighted strong interest in Gen 5 for network processors, ATE, and aerospace systems.

Jonathan Tanwanteng from CJS Securities followed up on whether the Q1 2026 weather-related losses in operating income for Oilfield Services and Performance Chemicals are expected to be recovered in subsequent quarters or if they represent a permanent loss for the full year.

Answer

Executive Vice President and CFO Ian Cleminson explained that while Oilfield Services might recover some losses, the production time lost in Performance Chemicals is unlikely to be made up, with costs permanently lost. He anticipates Q3 to show stronger benefits from ongoing changes and discipline. President and CEO Patrick Williams added that the company is using this event to make the plant even better by Q2.

Jonathan Tanwanteng from CJS Securities inquired about the evolving mix and diversification strategy within the Oilfield Services business, as well as the financial impact of the historic winter storm on Q1 2026 results for both Oilfield Services and Performance Chemicals, and the potential for recovery in subsequent quarters.

Answer

President and CEO Patrick Williams highlighted progress in Oilfield Services, including DRA expansion and Middle East growth, while acknowledging Q1 weather impacts. Executive Vice President and CFO Ian Cleminson quantified the Q1 operating income impact, noting a $2M-$3M hit for Oilfield Services and a $5M-$6M hit for Performance Chemicals, and explained that while Oilfield Services might partially recover, Performance Chemicals' lost production time would not be fully recouped, with stronger benefits expected from Q3 onwards.

Jonathan Tanwanteng of CJS Securities asked for an update on the Oilfield Services business, focusing on customer diversification and the status of the major Latin American customer. He also sought more detail on the specific drivers of the record Fuel Specialties margin in Q2, inquired about the company's capital allocation strategy, including M&A and buybacks, and asked for the full-year tax rate outlook.

Answer

President and CEO Patrick Williams stated that he does not expect the Latin American customer in Mexico to return in 2025 due to their internal financial issues, but believes they will eventually come back. He noted the Oilfield team is making progress diversifying in the Middle East. EVP and CFO Ian Cleminson clarified that the exceptional Fuel Specialties margin was due to a favorable product mix that is not expected to fully repeat in Q3, though margins will remain at the high end of their normal range. Regarding capital allocation, Cleminson mentioned opportunistic buybacks and a likely dividend increase, while Williams added that M&A activity is on hold until the Performance Chemicals margin issues are resolved. Cleminson confirmed the full-year effective tax rate is expected to be around 26%.

Jonathan Tanwanteng questioned the resilience of the Fuel Specialties business against potential fuel volume declines, requested quantification of tariff exposure from U.S.-Europe and China trade, and asked if the recent pickup in Performance Chemicals was also seen in Oilfield Services.

Answer

President and CEO Patrick Williams affirmed the historical stability and resiliency of the Fuel Specialties business, stating that order patterns and customer communications remain strong. EVP and CFO Ian Cleminson described the financial exposure to tariffs as 'pretty immaterial,' with very low trade with China and manageable, flexible trade flows with Europe. Patrick Williams clarified that the expected improvement in Oilfield Services is primarily driven by internal cost and growth initiatives, not a demand pickup similar to that seen in Performance Chemicals.

Jonathan Tanwanteng from CJS Securities inquired about the drivers behind the year-over-year volume growth in the Fuels and Chemicals segments, the sustainability of this demand into Q1, and the maintainability of the high margins in Fuel Specialties. He also sought clarification on the long-term outlook for the major Latin American customer in the Oilfield Services segment and asked for details regarding the pension settlement charge.

Answer

President and CEO Patrick Williams attributed the volume growth to the successful execution of organic projects and stabilized market conditions, confirming these positive trends have continued into Q1. He affirmed that the strong margins in Fuel Specialties are maintainable. Regarding the Oilfield Services customer, Williams expects a potential return in the second half of the year, possibly at a lower volume. EVP and CFO Ian Cleminson explained the pension settlement charge was a non-cash, one-off event from a U.K. pension scheme buyout that removes future liability from the balance sheet, but creates a $0.22 EPS headwind for 2025.

Jonathan Tanwanteng of CJS Securities asked for the normalized quarterly corporate cost run rate following a one-off pension credit. He also inquired about the pipeline for organic investments and the potential impacts or benefits to the business from the recent U.S. election results.

Answer

Ian Cleminson, EVP and CFO, clarified that the adjusted quarterly corporate cost is approximately $20 million, which serves as a good run rate for 2025. Patrick Williams, President and CEO, discussed organic investment opportunities in Performance Chemicals in Brazil, potential DRA expansion in Oilfield, and other geographic expansions, which are being considered alongside M&A. Regarding the election, Williams expressed hope for global political stability and noted that while potential tax changes could be a boost, the company is well-positioned regardless of the outcome.

Jon Tanwanteng asked about changes in capacity under contract versus a normal year, the presence of contract minimums, and sought clarification on a large Q4 tax item and a timing benefit in the Specialty segment.

Answer

CEO Corning Painter confirmed that contract minimums exist with financial incentives. He noted that capacity under contract is slightly lower due to declining tire manufacturing forecasts, but overall loading percentage remains similar due to capacity rationalization. CFO Jon Puckett explained the Q4 tax item was primarily due to the non-deductible Q3 Goodwill impairment charge, expecting a return to normal tax rates. Painter added that Q4 Specialty upside included stronger demand in coatings, which boosted margins.

Jon Tanwanteng inquired about the proportion of Orion's capacity under contract versus a normal year, the amount left open for spot, and the presence of minimums in contracts. He also asked about a large tax item and a timing benefit in the specialty segment in Q4.

Answer

Corning Painter, CEO, stated that capacity under contract is slightly lower due to reduced tire manufacturing forecasts, but loading percentage remains similar after 3-5% capacity rationalization. He noted that minimums in contracts often include financial incentives. Jon Puckett, CFO, attributed the Q4 tax item primarily to the non-deductible Goodwill impairment charge from Q3 and valuation allowances, expecting a return to normal tax rates. Corning Painter added that the specialty segment saw upside from stronger demand in areas like coatings, contributing to positive mix.

Jonathan Tanwanteng of CJS Securities asked about the outlook for Q4, wondering if it would see a typical seasonal decline or a potential uptick due to tariff certainty and inventory drawdowns. He also inquired about the current price gap between imported and domestic tires post-tariffs and whether there are signs of a consumer shift back to higher-value tires. Lastly, he asked about any incremental tariff impacts from recent announcements concerning India.

Answer

CEO Corning Painter responded that while a stronger Q4 is possible, it is too early to predict with confidence. He confirmed a price gap still exists between tire tiers but noted that tariffs have narrowed it, prompting major producers to promote their Tier 2 brands. On consumer behavior, he has not seen a definitive shift but observed that Tier 2 brand factories have performed well. Regarding India, Painter highlighted that the proposed tariffs would make carbon black imports from there less economically viable.

Jonathan Tanwanteng of CJS Securities inquired about Q4 expectations, asking if the typical seasonal downtick would be offset by factors like tariff certainty and lower inventories. He also asked about the price gap between imported and domestic tires post-tariffs and the impact of recent tariff announcements concerning India.

Answer

CEO Corning Painter responded that while a stronger Q4 is possible due to the tariff situation, it is too early to call with certainty. He explained that tariffs have considerably closed the price gap, improving the value proposition for domestic Tier 1 and Tier 2 tire brands. Painter also noted that new tariffs on Indian carbon black would make those imports less economically viable, supporting local producers.

Jonathan Tanwanteng of CJS Securities asked about the expected allocation of free cash flow to share buybacks, sought an update on the La Porte plant's progress toward offtake agreements and qualifications, and inquired if the pressure from tire imports has changed relative to recent quarters.

Answer

CEO Corning Painter explained that the allocation to share buybacks will be opportunistic, heavily influenced by the company's share price and business needs. Regarding the La Porte plant, he confirmed it should be completed late in the current year, with qualifications in 2025 and a commercial ramp through 2026 and 2027. He stressed that pressure from tire imports has not eased and the company's strategy does not rely on any potential tariff relief, viewing it as pure upside.

Jonathan Tanwanteng of CJS Securities asked about the potential volume that could return to Orion if tariffs are implemented and demand remains flat. He also questioned the reason for increased working capital despite lower crude prices and asked if the industry might build tire inventories ahead of potential tariffs, creating a future headwind.

Answer

CEO Corning Painter suggested that if tire imports returned to historical levels and manufacturing recovered, volumes could reach 2017-2019 levels, significantly improving EBITDA. CFO Jeff Glajch explained that the working capital increase was driven by a deliberate inventory build in Q3 to restore safety stock levels for certain grades. Mr. Painter acknowledged the possibility of a short-term spike in *tire* imports ahead of tariffs but noted it would not affect carbon black imports, which are minimal.

Jon Tanwanteng asked if there were any material pull-ins or push-outs of orders in the quarter, and the extent to which the strength in orders was attributable to the U.S. chain hoist business, given its upcoming divestiture. He also asked if underlying trends were stronger compared to previous guidance.

Answer

David Wilson, President and CEO, confirmed there were no material pull-ins or push-outs in the quarter, unlike previous periods. He stated that the chain hoist and chain production orders were not materially outsized or influential on the overall order number, performing in line with prior periods. He acknowledged robust U.S. business trends but noted continued softness in Europe due to macro factors. He emphasized the strong backlog and execution ability, despite mix challenges, and expressed optimism for the combined businesses and synergy delivery.

Jon Tanwanteng asked if the company experienced any material pull-ins or push-outs of orders in the quarter. He also inquired about the contribution of the U.S. chain hoist business to the quarter's strength and orders, given its upcoming divestiture. Finally, he asked if the underlying trends were stronger compared to when guidance was last provided, despite the guidance withdrawal.

Answer

CEO David Wilson stated there were no material pull-ins or push-outs in the quarter. He clarified that the chain hoist orders or chain production orders were not materially outsized or a big influencer of the order rate in the third quarter, performing in line with prior periods. He affirmed that U.S. business trends are robust, though Europe continues to show some softness. He highlighted the strong backlog and execution capability, emphasizing that the combined businesses are well-positioned to deliver value and execute synergies.

Representing Jon Tanwanteng of CJS Securities, an analyst asked for a breakdown of the 1.1x book-to-bill ratio between price increases and organic demand. They also requested an update on the pending Keto Crosby acquisition, specifically regarding the expected post-close leverage and any surprises in the process.

Answer

President and CEO David Wilson clarified that of the 2% year-over-year order growth, approximately 1% was from price, with the remainder driven by volume from new long-term projects. Wilson also confirmed the Keto Crosby acquisition is progressing toward a close by the end of the calendar year. CFO Gregory Rustowicz added that expected net leverage at close is now projected to be roughly 5.0x, a slight increase from the initial 4.8x estimate, due to tariff impacts on both companies' EBITDA.

Jon Tanwanteng of CJS Securities inquired about the tariff mitigation plan, seeking details on the mix of pricing versus cost actions and the underlying demand assumptions. He also asked about the sources of strength in precision conveyance orders, the e-commerce end market, and the expected timing of backlog conversion.

Answer

David Wilson, President, CEO & Director, explained that the flat-to-slightly-up revenue guidance balances the positive impact of surcharges with potential negative volume impact from price increases. He attributed precision conveyance strength to the Montrotech and Dorner businesses, serving end markets like battery production, life sciences, and e-commerce. Wilson noted encouraging traction in e-commerce and explained that large project revenue is recognized over time, reducing lumpiness in backlog conversion. Gregory Rustowicz, SVP Finance, CFO & Treasurer, added that approximately 20% of the total backlog extends beyond fiscal 2026.

Jonathan Tanwanteng questioned how the Kito Crosby acquisition aligns with the company's simplification strategy, whether it would pause current consolidation efforts, the confidence level in synergy and cash flow targets amid trade war risks, the expected blended interest rate, and potential regulatory hurdles.

Answer

President and CEO David Wilson stated the deal strengthens and grows the core, accelerating their strategy. CFO Gregory Rustowicz confirmed existing footprint consolidation plans will continue. Wilson expressed high confidence in the synergy targets, noting the potential tariff impact is manageable and doesn't account for price pass-throughs. Rustowicz projected a blended interest rate below 8%. Wilson acknowledged product overlap in power chain hoists but assessed the overall regulatory risk as low.

Jon Tanwanteng of CJS Securities asked about the rapid drivers of strength in the Test business and whether the energy business is nearing its trough. He also inquired about the layering of large Maritime orders into future revenue and their impact on growth expectations. Additionally, Tanwanteng sought details on the military aircraft business (excluding Navy) and how ESCO Technologies' commercial aerospace guidance aligns with OEM production rates.

Answer

Bryan Sayler, President and CEO, explained that Test business strength came from a strong return in traditional markets like electromagnetic compatibility and medical shielding, along with EMP filter orders, primarily in Europe and the US. He indicated the energy business is expected to normalize in the second half of 2026 or early 2027 after developers complete tax credit-driven projects. Sayler clarified that large Maritime orders align with expectations, impacting revenue mostly in 2027-2028. He also highlighted broad-based military aircraft strength, including F-15EX and F-47 programs, and confirmed that commercial aerospace guidance includes a modest cushion against OEM production targets.

Jon Tanwanteng asked about the drivers behind the rapid strength observed in the Test business and how such a significant change occurred within a 90-day period. He also inquired whether the energy business is nearing its trough or if the current market weakness is expected to persist, and about the layering of large orders within the Maritime business. Later, he followed up on the military business within the A&D segment (excluding Navy) and how closely ESCO Technologies' commercial airplane guidance aligns with OEM production rates.

Answer

President and CEO Bryan Sayler attributed the Test business strength to a strong rebound in traditional core markets like electromagnetic compatibility and medical shielding, securing significant early-year orders, and a return to regular orders for EMP filter products, with Europe and the US leading. He explained that energy developers are currently focused on completing existing projects for tax credits, leading to lower new project investments, anticipating a return to normal growth in H2 2026 or early 2027. Bryan Sayler confirmed that large Maritime orders are in line with expectations, with minimal revenue in Q4 and the majority layering into 2027 and 2028. He indicated broad-based strength in the military business, highlighting F-15EX and F-47 programs, and confirmed that commercial airplane guidance includes a cushion due to modest skepticism regarding OEMs' ability to fully meet production targets.

Jonathan Tanwanteng asked for more details on the over $200 million in ESCO Maritime orders, including associated programs and future growth expectations. He also inquired about potential aerospace headwinds from flight cancellations and the underlying assumptions for the 6%-8% aerospace growth rate in 2026, particularly regarding OEM build rates. Additionally, he sought insight into a potential inflection point for the energy business given new policy impacts and asked about future capital allocation priorities.

Answer

Bryan Sayler, President and CEO, confirmed the over $200 million in Maritime orders are for U.K. submarine-related programs, with revenue expected to run out over two years, starting in Q2/Q3 2026. He stated no impact was seen from flight cancellations on aerospace manufacturing, and the 6%-8% aerospace growth is driven by strong build rates for platforms like the 787 and 737, plus military content. For the energy business, he noted a current downstroke due to tax credit expirations but anticipates a return to high single-digit growth by 2027, with ESCO gaining market share. Regarding capital allocation, he highlighted a strong balance sheet and active M&A focus on disciplined acquisitions in aerospace, navy, or utility markets due to their durable, long-term secular growth characteristics.

Jonathan Tanwanteng asked for more details on the over $200 million in ESCO Maritime orders, including associated programs and future growth expectations. He also inquired about potential aerospace headwinds from flight cancellations and the underlying assumptions for the 6%-8% aerospace growth rate in 2026, particularly regarding OEM build rates. Additionally, he sought insight into a potential inflection point for the energy business given new policy impacts and asked about future capital allocation priorities.

Answer

Bryan Sayler, President and CEO, confirmed the over $200 million in Maritime orders are for U.K. submarine-related programs, with revenue expected to run out over two years, starting in Q2/Q3 2026. He stated no impact was seen from flight cancellations on aerospace manufacturing, and the 6%-8% aerospace growth is driven by strong build rates for platforms like the 787 and 737, plus military content. For the energy business, he noted a current downstroke due to tax credit expirations but anticipates a return to high single-digit growth by 2027, with ESCO gaining market share. Regarding capital allocation, he highlighted a strong balance sheet and active M&A focus on disciplined acquisitions in aerospace, navy, or utility markets due to their durable, long-term secular growth characteristics.

Jonathan Tanwanteng of CJS Securities asked for details on the drivers behind the increased full-year earnings guidance, the modeling impact of the VACCO divestiture for fiscal 2026, and the expected pace of naval deliveries.

Answer

SVP & CFO Chris Tucker explained the guidance increase was driven by outperformance in the Test segment and incremental volume in A&D, which offset weakness at NRG. He also noted a lower-than-expected tariff impact and interest savings from the VACCO sale proceeds. Regarding the VACCO divestiture's FY26 impact, Tucker advised focusing on the continuing operations and highlighted growth drivers like strong navy and aircraft component demand and the full-year contribution from Maritime. President and CEO Bryan Sayler added that while the pace of naval deliveries is expected to increase, a more detailed guide will be provided in November, but the company remains very upbeat about the Navy's progression.

Jonathan Tanwanteng of CJS Securities inquired about the specific business drivers behind the raised full-year guidance, how to model the impact of the VACCO divestiture for fiscal 2026, and whether the pace of naval program deliveries is expected to accelerate.

Answer

SVP & CFO Chris Tucker attributed the improved outlook to outperformance in the Test segment, higher A&D volume, lower-than-expected tariff impacts, and reduced interest expense from the VACCO sale proceeds. He advised that for 2026 modeling, VACCO is now a discontinued operation. President and CEO Bryan Sayler stated that he expects the pace of naval deliveries to increase, driven by demand in both the US and UK, and will provide more detail in the next quarter.

Jonathan Tanwanteng of CJS Securities asked for details on the sources of the increased full-year earnings outlook, the modeling impact of the VACCO divestiture for fiscal 2026, and the anticipated pace of naval business deliveries.

Answer

SVP & CFO Chris Tucker detailed that the improved outlook stems from outperformance in the Test segment, incremental A&D volume, lower-than-expected tariff impacts, and reduced Q4 interest expense from the VACCO sale proceeds. For 2026 modeling, he advised that VACCO will be in discontinued operations and growth will be driven by the core business and a full-year contribution from Maritime. President and CEO Bryan Sayler added that he expects the pace of naval deliveries to increase, supported by both US and UK operations.

Jonathan Tanwanteng of CJS Securities asked for details on the drivers behind the increased full-year guidance, the modeling impact of the VACCO divestiture for fiscal 2026, and the expected pace of naval business deliveries.

Answer

SVP and CFO Chris Tucker explained the guidance increase was driven by outperformance in the Test segment and incremental volume in A&D, which offset weakness at NRG. He also noted lower-than-expected tariff impacts and reduced interest expense from the VACCO sale proceeds. For FY26 modeling, he advised focusing on continuing operations and strong growth drivers in navy and aircraft components, plus the full-year impact of Maritime. President and CEO Bryan Saylor added that they believe the pace of naval deliveries will increase, considering both US and UK operations, and will provide a more detailed guide in November.

Jonathan Tanwanteng of CJS Securities asked for details on the drivers behind the increased full-year earnings outlook, specifically which businesses contributed. He also inquired about the modeling impact of the VACCO divestiture for fiscal 2026 and whether the pace of naval deliveries is expected to accelerate.

Answer

SVP & CFO Chris Tucker explained that the improved outlook was driven by outperformance in the Test segment and incremental volume in A&D, which offset weakness at NRG. He added that lower tariff impacts and reduced Q4 interest expense from the VACCO sale proceeds also contributed to the earnings lift. Regarding 2026, Tucker noted VACCO is now a discontinued operation and the focus is on core growth. President, CEO & Director Bryan Sayler stated that he believes the pace of naval deliveries will increase, considering both US and UK operations, with a more detailed guide to come.

Jonathan Tanwanteng of CJS Securities inquired about the status of the VACCO business sale, its recent performance, the net impact of anticipated tariffs, the moderation in commercial aircraft orders, and the stability of Department of Defense programs.

Answer

Executive Bryan Sayler stated that a decision on selling or retaining VACCO is expected by the end of May. Executive Christopher Tucker added that VACCO's performance has stabilized, and the guided $2-$4 million tariff impact is a net figure after mitigations. Bryan Sayler attributed the commercial aerospace order moderation to inventory management and Boeing's production adjustments, expressing confidence in a recovery. He also affirmed that ESCO's key defense programs, particularly in submarines, remain high-priority for the DOD with strong order flow.

Jonathan Tanwanteng of CJS Securities, Inc. inquired about the source of improving demand at VACCO (space vs. Navy), the composition of the strong orders in the Test segment, the M&A environment beyond current initiatives, and the recent performance of the pending SMMP acquisition.

Answer

Executive Bryan Sayler clarified that improving demand at VACCO was primarily from the Navy's submarine procurement, with some space business also contributing. He described the Test segment's orders as 'very broad-based' across EMC, medical, and EMP filters, with the exception of wireless. Regarding M&A, Sayler stated that the priority is closing the SMMP acquisition and the VACCO strategic review before pursuing new deals. He also confirmed that SMMP's 2024 performance was in line with expectations and that its outlook remains optimistic.

Jonathan Tanwanteng of CJS Securities asked for an update on the VACCO space business, questioning if the related financial issues are fully resolved and seeking details on the status of its strategic review. He also asked about potential risks to the business from a change in the U.S. administration.

Answer

CEO Bryan Sayler responded that while risk is never zero, the issues are largely mitigated as the troubled projects are now in production, allowing for more accurate cost estimates. He revealed that splitting the business was deemed uneconomical, and the company is now evaluating a potential sale of the entire VACCO business, with a decision expected by February. He also acknowledged a potential long-term risk to the SLS program under a different administration.

Jonathan Tanwanteng inquired about Super Micro's expected future mix of large versus smaller customers and its potential impact on pricing leverage. He also asked if the upcoming Vera Rubin and 800-volt data center migration presents opportunities for greater differentiation compared to previous platform cycles.

Answer

CEO Charles Liang emphasized the aggressive strategy to grow both large and enterprise/mid-size customer accounts for diversification. He explained that Super Micro optimizes NVIDIA's solutions with its DCBBS to help customers build data centers quicker, more reliably, with easier management and lower costs, including energy consumption and backup, hinting at a complete solution plan.

Jonathan Tanwanteng inquired about the future customer mix, specifically if smaller/enterprise customers would become a greater percentage of sales, given the pricing leverage of larger customers. He also asked about opportunities for greater differentiation in the upcoming 800-volt data center migration cycle (Vera Rubin).

Answer

Charles Liang (CEO) stated Super Micro is aggressively growing both large and enterprise/mid-size customer accounts for diversification. He explained that Super Micro optimizes NVIDIA's solutions into complete DCBBS for quicker, more reliable, and cost-effective data center builds, including energy management, though some details are still early.

Jonathan E. Tanwanteng questioned Super Micro's philosophical approach to growing gross margins after taking hits for initial large customer orders, asking how future margin erosion will be prevented and if higher margins have been realized from follow-on orders from previously validated customers. He also inquired about how the company accounts for the risk of further revenue push-outs given recent occurrences.

Answer

David Weigand, CFO, outlined several initiatives to raise margins, including leveraging additional business, pursuing manufacturing in other geographies to lower costs, and expanding DCBBS strategies. He noted that different customers have varying margin profiles based on design complexity and order size, and that gaining market share with high-profile customers adds brand value. Regarding push-outs, David Weigand explained that large projects involve complex logistics and customer readiness factors beyond their control, but emphasized the consistent long-term revenue growth trend despite quarterly fluctuations.

Jonathan Tanwanteng from CJS Securities expanded on the prior discussion regarding margin hits for new customers, asking philosophically how Super Micro expects to grow margins going forward and prevent similar situations. He also asked if higher margins have been observed from follow-on orders from customers where initial investments were made. Additionally, he inquired about how Super Micro is accounting for the risk of further revenue push-outs, given recent high-profile delays.

Answer

David Weigand, CFO, outlined several initiatives to raise margins, including leveraging additional business, manufacturing in other geographies for lower costs, and expanding Data Center Building Block Solutions (DCBBS). He emphasized that gaining market share and attracting new customers (emerging CSPs, sovereigns, NeoClouds, enterprises) due to Super Micro's brand recognition will collectively improve the margin profile. Mr. Weigand clarified that margin profiles vary by customer based on design complexity and order size, noting that large orders naturally have different pricing strategies. Regarding push-outs, he explained that managing very large projects with thousands of parts and coordinating with customer readiness and supply chain logistics makes perfect quarterly alignment challenging, but stressed that the overall growth trend of increasing revenues and profits remains intact despite quarter-to-quarter fluctuations.

Jon Tanwanteng inquired about the gross margin profile of the Data Center Building Block Solutions (DCBBS) compared to the corporate average and asked if Super Micro expects to gain a competitive advantage in pricing and allocation for the B300 launch.

Answer

CEO Charles Liang described DCBBS as a pioneering total solution with less competition, resulting in a better profit margin profile than commodity products. Regarding the B300, he asserted that Super Micro's position with its vendors is 'second to none,' ensuring a strong opportunity to promote the product quickly upon its availability.

Jonathan Tanwanteng asked for more details on the 'platform decision' delay that impacted Q3 revenue, specifically if customers were choosing to wait for Blackwell instead of taking Hopper. He also inquired about Supermicro's competitive advantage from its U.S. manufacturing presence in light of potential tariff increases.

Answer

CEO Charles Liang explained that Supermicro's tech-leading customer base is very sensitive to new product cycles, and with Blackwell solutions now ready, they are ramping up production. He stated that as a U.S. company manufacturing in Silicon Valley, they can respond to new technology faster. He also noted that their global footprint in the U.S., Taiwan, and Malaysia provides flexibility to optimize logistics once tariff programs are settled.

Jonathan Tanwanteng asked for a breakdown of the factors that led to the reduction in the fiscal 2025 revenue guidance, questioning the relative impact of pricing, Blackwell availability, and the 10-K filing delay. He also inquired about the company's future capital needs and cash flow expectations as it scales towards significantly higher revenue levels.

Answer

CFO David Weigand identified the delay in new technology availability as the biggest factor impacting the guidance, noting that Super Micro was ready to ship liquid cooling solutions but the broader ecosystem was not. He acknowledged the 10-K delay was a distraction but emphasized technology timing as the primary driver. Regarding capital, Weigand mentioned the recent successful bond issuance and stated the company will continue to use its balance sheet and prepare on the capital side to fund growth. CEO Charles Liang added that loans against inventory and accounts receivable should be available soon.

Jonathan Tanwanteng asked for a breakout of expected Blackwell-related revenue in the Q1 results and Q2 guidance. He also inquired about the risk of NVIDIA reducing chip allocations due to the ongoing auditor and filing issues.

Answer

CEO Charles Liang stated he could not quantify future Blackwell revenue as it depends on NVIDIA's supply volume. He strongly dismissed any risk to allocations, highlighting a multi-decade relationship and ongoing co-development projects. Executive Michael Staiger later explicitly clarified that NVIDIA had confirmed no changes to allocations.

Jon Tanwanteng asked about the encouraging order trends observed in January, seeking quantification of organic growth improvement relative to the fiscal third quarter, and inquired about the expected seasonality and fiscal Q4 contribution from recent acquisitions like MARS Parts and Aspen Manufacturing.

Answer

James Perry, EVP and CFO, and Joseph Armes, Chairman, CEO and President, noted encouraging order rates exiting December and into January, supported by positive customer feedback on destocking, but stated it was too early to quantify organic growth precisely. Perry explained that Aspen and MARS Parts exaggerate seasonality compared to legacy Contractor Solutions, making quarter-by-quarter breakdowns challenging until more data is collected.

Jon Tanwanteng asked for high-level thoughts on housing demand and home improvement demand heading into calendar 2026 and beyond, including specific factors like the refrigerant change. He also inquired about the timing for higher-margin backlog to flow through in the EBS segment and the expected timeline for the SRS segment to consistently achieve a 20% margin. Finally, he requested more details on the two smaller acquisitions (Hydrotex and ProAction Fluids), specifically their revenue contribution, margin profile, and growth potential.

Answer

James Perry discussed housing, noting soft new housing activity but some green shoots in existing home sales, which often lead to unit replacements. He mentioned the industry's focus on repair business last year and the eventual shift to replacements. For EBS, James Perry indicated that higher-margin backlog from the last couple of quarters, with 6-18 month turnarounds, would start to hit, with a clearer picture by the end of the next fiscal year. For SRS, he projected achieving a 20% sustainable margin in the "next few quarters" due to acquisitions and restructuring. Regarding Hydrotex and ProAction Fluids, James Perry stated they are expected to be margin-accretive, diversify end markets (food & beverage, agriculture, horizontal drilling), and contribute mid-single-digit organic growth, with a revenue run rate of about $1 million per month, though seasonality impacts this.

Jon Tanwanteng from CJS Securities asked about the sustainability of the strength in the offshore business, inquiring if any first-fill programs might tail off and what the demand outlook is for the next year. He also asked about the electronic side margins and the EV headwind, specifically if the impact from a larger customer is expected to continue and the overall market outlook.

Answer

President and CEO Benjamin Gliklich explained that the offshore business is longer-cycle, driven by stable energy prices and drilling activity, leading to both large initial sales and ongoing annuity-like orders. He anticipates sustained growth into 2026, though perhaps not at the current high rates. Regarding EV volumes, Mr. Gliklich expects them to be down year-over-year in Q4 globally but believes the worst is past. He sees compelling growth opportunities in power electronics into 2026, not just for EV but also for network infrastructure and data center applications, with a strong pipeline for ArgoMax.

Jon Tanwanteng inquired about the sustainability of the strength in the offshore business, specifically if any first-fill programs might tail off, and the demand outlook for next year. He also asked about the continuation of the EV-related headwind on the electronic side's margins, particularly from a larger customer, and the overall outlook for that market.

Answer

President and CEO Benjamin Gliklich described the offshore business as longer-cycle, driven by stable energy prices and drilling activity, with ongoing annuity orders after initial fills. He noted current good drilling rates but an expected low in drilling activity into 2026, anticipating sustained growth but not at current rates. For the electronic side, Mr. Gliklich expects EV volumes to be down year-over-year in Q4 but believes the worst is past. He sees compelling growth opportunities for the power electronics business into 2026 and beyond, driven by market share gains and new applications in network infrastructure and data centers, not just EVs.

Jonathan Tanwanteng sought more detail on the strong April demand, asking if there were any specific pockets of strength or weakness. He also asked for clarification on whether the full-year guidance assumes zero demand destruction from the current and potential future tariff environment.

Answer

CEO Ben Gliklich described April demand as consistent with Q1, with a modest acceleration in some areas. He and Executive Chairman Sir Martin Franklin confirmed that the guidance assumes the same aggregate demand environment as at the start of the year, meaning no demand destruction is factored in, as the company can mitigate cost impacts and the details of tariff implementation remain volatile and uncertain.

Jonathan Tanwanteng of CJS Securities asked if the company's EV expectations account for significantly weaker sales from a large legacy EV customer and whether they still anticipate net growth in that end market.

Answer

CEO Benjamin Gliklich confirmed their guidance holds. He explained that the Power Electronics business has successfully diversified by winning new business with both Western and emerging Chinese EV OEMs. He believes that any potential volume lost by one customer is being absorbed by others in the growing overall EV market, ensuring the business continues to grow nicely in 2025.

Jonathan Tanwanteng from CJS Securities requested an updated outlook for the power electronics business, asking if it would outgrow the EV market, its current revenue run-rate, and if opportunities exist outside of EVs.

Answer

CEO Benjamin Gliklich confirmed the power electronics business is expected to 'significantly outstrip EV units' growth due to substantial white space and a strong pipeline for its high-performance technology. He estimated the current business run-rate to be between $75 million and $100 million. Gliklich also highlighted expanding opportunities outside of EVs in other power-intensive applications like data centers, smartphones, and utility power conversion.

Jon Tanwanteng of CJS Securities asked for an outlook on the company's cash burn and overall cash usage, considering the recent convertible note buyback and the eMotion3d acquisition.

Answer

Co-Founder, CEO & Director Donald McClymont stated that the company is on track with its operational cash burn plan, with about $15 million remaining over the next two quarters to reach its goal. He clarified that the $20 million for the acquisition is an additional cash use.

Jonathan Tanwanteng asked about the company's M&A plans given its cash position, the timeline for hiring a new CFO, and sought clarification on a comment about '$100 million in incremental annualized revenue' from design wins.

Answer

Executive Donald McClymont stated that M&A is on hold as the company intends to be 'very conservative' with its balance sheet. He confirmed a CFO search is actively underway with several candidates but provided no firm timeline. He clarified that the '$100 million' figure refers to the potential annualized run rate for individual product lines like radar and vision, not the incremental revenue from wins announced this quarter.

Jonathan Tanwanteng asked about the risk of further program pushouts and whether the company might need to use its At-The-Market (ATM) facility again before reaching cash flow positivity.

Answer

Executive Donald McClymont expressed strong confidence that the specific issues causing past delays are now behind the company, with a conservative view built into future forecasts. CFO Kanwardev Raja Singh Bal stated directly that the company does not anticipate any further use of the ATM facility.

Jonathan Tanwanteng of CJS Securities asked about the key drivers for the strong aerospace momentum that prompted a revenue guidance increase, especially given headwinds like exiting certain product lines, the EAC adjustment, and the delay in the Army radio test program. He also requested clarity on margin expectations for the remainder of the year in light of new tariffs and the EAC charge, and asked if the stated tariff impact was annualized.

Answer

Peter Gundermann, Chairman, CEO & President, attributed the aerospace strength to rising production rates for the Boeing 737 and Airbus A320/A350, a new program for the Airbus A220, and accelerating military development work. He noted that even with a potential delay in the Army radio test program, the Test segment is poised for a strong second half. Regarding margins, Gundermann expressed confidence in achieving adjusted aerospace operating margins around 16%, supported by volume and pricing, but acknowledged uncertainty from tariffs. He clarified the $15-20 million tariff impact is an annualized figure before mitigation efforts.

Jonathan Tanwanteng asked about the potential damages from other open patent cases, the drivers behind increased 2025 CapEx, the outlook for military programs, Boeing's order rates post-strike, and trends in municipal transit markets.

Answer

Chairman, President & CEO Peter Gundermann explained that while the recent U.K. patent ruling was a significant victory, the financial outcomes for cases in France and Germany remain open questions, though the favorable U.K. result helps their position. CFO Nancy Hedges detailed that the higher CapEx is for a facility consolidation and to catch up on deferred spending. Gundermann added that military programs like the V-280 remain well-supported, Boeing's delivery requests are strengthening despite light new orders, and the municipal transit market has not yet materially recovered.

In a follow-up, Jonathan Tanwanteng of CJS Securities asked about the drivers of strength in the Test segment, its future run rate, and the expected impact of its restructuring. He also inquired about the outlook for future legal expenses.

Answer

Chairman, President & CEO Peter Gundermann explained the Test segment's Q3 sales jump was not sustainable and that the business is focused on preparing for the U.S. Army's 4549/T program, expected to begin production in late 2025. The restructuring aims to manage the interim period without expecting high profitability. On legal costs, he anticipates a relatively quiet period for a few months, with potential appeals and other proceedings not expected to ramp up until late 2025 or 2026.

Jonathan Tanwanteng from CJS Securities asked for an update on the profitability of the Industrial Specialties business, details on new investments in areas like activated carbon, and the leadership transition plan for the Performance Materials segment.

Answer

CFO Mary Hall explained that while specific profitability for Industrial Specialties isn't disclosed, a relative sense can be gained by comparing paving-heavy quarters (Q2/Q3) to others. CEO David Li added that the company is pleased to have worked through high-cost CTO inventory. He detailed investments in the Nexeon partnership for EV applications and a new focus on process purification. Regarding leadership, Li confirmed an active search is underway for a successor in Performance Materials and the team is already reorganizing to drive growth.

Jonathan Tanwanteng asked new CEO David Li about his strategic priorities, questioned the confidence in the free cash flow forecast amid potential earnings weakness, and inquired about the impact of the EV slowdown on forecasts and investments like Nexeon.

Answer

CEO David Li outlined his focus on disciplined execution, optimizing business performance, and reducing leverage to create future optionality. CFO Mary Hall affirmed the cash flow guidance, noting that lower sales would reduce working capital needs, thereby supporting cash generation. Both executives stated the EV slowdown does not diminish their enthusiasm for the Nexeon partnership, viewing it as a long-term technology platform, and highlighted that the growing hybrid vehicle segment remains a positive driver.

Jonathan Tanwanteng asked about Performance Chemicals pricing dynamics after the high-cost CTO inventory is depleted and later followed up on the logistics of the potential divestiture of the Industrial Specialties business, including asset separation and early market interest.

Answer

Interim CEO Luis Fernandez-Moreno explained that current pricing already reflects the market, so while profitability will improve post-CTO consumption, the effect is moderated by prior price reductions. Regarding the divestiture, he stated the plan is to separate assets via a 'condominium' structure to maintain raw material flexibility for the Pavement business and confirmed significant inbound interest since the announcement.

Jonathan Tanwanteng asked for a breakdown of the Q1 outperformance drivers, the amount of backlog expected to be executed in Q2, and the outlook for the project mix normalizing. He also questioned the potential impact of trade declines on future port deepening budgets.

Answer

CFO Scott Kornblau attributed the strong Q1 results primarily to excellent project performance on large capital jobs, not timing shifts. He stated that 60% of the current backlog is expected to be completed during the rest of 2025. President and CEO Lasse Petterson addressed the market outlook, explaining that funding from the Harbor Maintenance Trust Fund remains robust and prioritized for dredging, mitigating concerns about budget cuts and supporting a continued strong market for port projects.

Jonathan Tanwanteng from CJS Securities asked for an update on the Acadia vessel's construction timeline, inquired about contractual protections if its offshore wind projects are canceled, and sought clarity on the expected liquidation of backlog in Q1 2025.

Answer

CEO Lasse Petterson updated the Acadia's delivery timeline to late 2025 or early Q1 2026, citing some delays at the shipyard. He confirmed that contracts include protections and that the vessel could be deployed to the strong international market if U.S. projects were canceled. CFO Scott Kornblau affirmed that Q1 2025 is expected to be the highest revenue quarter of the year due to strong utilization before a series of planned dry dockings begin.

Jonathan Tanwanteng from CJS Securities asked about the status of the NextDecade project for 2025, the expected run rate for G&A expenses going forward, and the utilization prospects for the Acadia vessel in late 2026 and 2027.

Answer

CEO Lasse Petterson stated the NextDecade project is proceeding at full blast, and the company has a solid backlog to reassign dredges if needed. CFO Scott Kornblau projected Q4 G&A to be between $18-19 million, with 2025 G&A expected to normalize plus a small increase for wind-related activities. Regarding the Acadia, Petterson confirmed partial utilization in 2026 from the Empire Wind and Sunrise Wind projects, with 2027's utilization to be firmed up later.

Jonathan Tanwanteng of CJS Securities asked for an update on customer sentiment and demand velocity heading into 2025. He also inquired about the potential impact of a new political administration on tariffs and taxes, and sought an update on the company's progress toward its debt and leverage targets.

Answer

CEO Julie Schertell described the demand environment as 'sluggish,' with customers remaining conservative on inventory. She noted that while potential tariffs on Chinese goods could benefit Mativ's films business, it was too early to speculate on broader political impacts. CFO Greg Weitzel stated that due to the slow market recovery, the company's leverage target of 2.5x-3.5x is now expected to be reached in the 2026 timeframe.

Asked about the sustainability of Q1's strong sales and margin performance, the impact of customer pull-forwards, rising input costs like freight, the outlook for M&A, and the impact of recent weather events.

Answer

Executives noted Q1 was exceptional but included some customer order pull-forwards from Q2. They expect solid growth for the year but cautioned that Q1's high margins, driven by volume leverage, may not be fully sustainable. Rising freight costs are a headwind. The M&A pipeline is active and promising. Recent weather events had minor, non-material impacts.

Asked about the Starbucks converter inventory issue, the timeline for the DOE loan, the potential impact of the proposed warrant transaction, input cost trends, OpEx efficiency plans, and the Kentucky facility's capacity ramp-up timeline.

Answer

The company has limited visibility into the converter inventory situation but retains 100% of the Starbucks resin business. They are near the end of the DOE loan process but cannot give specifics. The warrant transaction is intended to be a non-dilutive deleveraging event. Canola input costs are expected to decrease significantly through the year. OpEx reduction plans are on track, and they still expect to reach 70-80% capacity at the Kentucky facility early next year.

Inquired about the timing and ramp-up of contracts for the year, the status and timeline of the DOE loan program, customer commitments for the greenfield project, the earliest potential for commercial volumes of catalytic PHA, and the outlook for 2024 operating expenses and Q1 volumes.

Answer

The company cannot provide a detailed quarterly ramp but expects the major cutlery award to reach full run rate by Q2 2025. The DOE loan is in late-stage due diligence with a conditional commitment expected in Q3 2024. Some customers are proceeding with the expectation that the greenfield project will be completed. Commercial volumes for catalytic PHA are estimated to be about 3 years away. Operating expenses are expected to decrease by about $4 million in 2024, and Q1 PHA volume growth is projected to be around 60% year-over-year. Stock-based compensation is also expected to drop significantly.