Justin Lin

Justin Lin from Sidoti & Company inquired about the drivers behind the sustained strength in Elektron's Q4 2025 margins and the anticipated trajectory for Elektron's margins in 2026. He also sought further details on the expected impact and timeline of benefits from the North American Gas Cylinder plant consolidation and magnesium powders plant investment. Additionally, Lin asked for elaboration on new product developments in both Elektron and Gas Cylinders, specifically inquiring about the adoption trends of existing detection products. Finally, he questioned Luxfer's capital deployment priorities for 2026, given the low net leverage, and sought insights into M&A valuations and target business sizes.

Answer

CEO Andy Butcher attributed Elektron's strong Q4 and full-year 2025 margins to robust demand for differentiated products in aerospace, defense, magnesium alloys, magnesium heaters, and specialty oil and gas, coupled with strong manufacturing output. CFO Steve Webster stated that Elektron's aspirational EBITDA margin remains around 20% for 2026, supported by mix and restructuring programs, while Andy Butcher noted potential upsides from overperformance in core defense/aerospace or faster realization of restructuring benefits. Regarding Gas Cylinders, Andy Butcher detailed the relocation of aerospace and life support product lines from Pomona to Riverside, expecting up to $4 million in savings, with equipment moves nearing completion and initial production starting. He also outlined a significant $6 million CapEx investment in the Saxonburg site for the Elektron Powder Center of Excellence, projecting around $2 million in efficiency benefits by late 2026. For new products, Andy Butcher highlighted Elektron's upcoming organophosphate and nerve agent detection products, and Gas Cylinders' next-generation SCBA and space market offerings, noting the LeadCheck detection product is a small but foundational commercial platform. On capital allocation, Steve Webster outlined elevated 2026 CapEx ($15M-$20M) for optimization and growth, continued dividends, annual share buybacks of approximately $2.5 million with opportunistic additions, and a focus on bolt-on M&A up to $80 million, as per the SOAR framework.

Asked about long-term profitability levers beyond scale and about the sales rep hiring plans for 2024, questioning if recent investments mean more hires than previously expected.

Answer

Long-term profitability will come from leveraging past G&A investments and finding efficiencies in selling and marketing, while R&D spend will remain consistent as a percentage of revenue. The company does not provide specific hiring targets but focuses on the 'producing rep count' and confirmed there is significant room for sales force expansion.

Asked about end-market strength and patient backlogs for 2024, and about the commercial strategy regarding rep deployment and future geographic expansion.

Answer

The company sees buoyant end markets with steady demand rather than a backlog bolus. A potential tailwind is increased OR availability. Their commercial strategy involves gaining share in established international markets while expanding into new large markets like Germany, Italy, and soon Japan, focusing on winning in each market they enter.

Asked about the timing of HFX iQ availability for Android users and for qualitative color on the performance of the PDN business.

Answer

Nevro recently launched a solution for patients with Android phones, which involves providing them with a locked iPhone to use the app, ensuring data consistency for the AI algorithm. The PDN business performed in line with expectations, remains a strong part of the business, and continues to have a large, underpenetrated market opportunity.

Asked about pricing headwinds for intraoral scanners and the reasons for the flat performance in the Dental value-added services category.

Answer

The company is seeing stabilization in intraoral scanner pricing headwinds. The flat performance in value-added services was attributed to normal quarter-to-quarter fluctuations, and they still expect long-term growth in this category.