Kevin Gainey

Kevin Gainey asked about project bidding opportunities across various verticals like mining, rail, renewables, and water, and if the company sees new opportunities in areas like data centers. He also questioned if the $7 billion CAP raised any operational concerns regarding labor or equipment, and what factors could lead to the high or low end of the EBITDA margin guidance.

Answer

Kyle Larkin, President and CEO, highlighted a strong market, particularly in public funding (IIJA). He noted continued strength in mining, intermodal rail opportunities, growing solar projects in renewables, and new pursuits in data centers in Texas and Ohio. Mr. Larkin expressed no operational concerns regarding the $7 billion CAP, citing varied burn rates for different project types and high operational excellence. For EBITDA margin guidance, he identified weather, the need to secure new work, and execution (viewed as an opportunity) as key factors influencing the range.

Kevin Gainey asked about project bidding opportunities across various verticals, including mining, rail, renewables, and water. He also raised concerns about potential operational issues, such as labor or equipment availability, given the $7 billion CAP. Finally, he sought clarification on the factors that would lead to the high and low ends of the EBITDA margin guidance.

Answer

President and CEO Kyle Larkin described a strong market with public funding (IIJA) driving over 85% of the business. He noted continued strength in mining (processed water, site development), rail (intermodal opportunities), and renewables (solar projects), with new pursuits in data centers across various regions. Mr. Larkin expressed no operational concerns regarding the $7 billion CAP, explaining that the 50/50 split between best value and bid-build projects results in a manageable burn rate of just over 40% of CAP this year. For EBITDA margin guidance, he cited weather in Q1 and Q4, the need to secure and start new work in the first half, and execution (viewed as an opportunity due to high operational excellence) as key factors.

Kevin Gainey asked about GXO's North American expansion strategy, specifically whether it's primarily an organic growth opportunity or if acquisitions are considered, and if North America represents the most significant organic growth potential. He also inquired about the confidence and drivers behind the raised cash flow conversion guidance.

Answer

CEO Patrick Kelleher confirmed North America is a priority and primary driver for organic growth, representing an outsized opportunity. He stated M&A is selective and not a short-term focus, prioritizing organic growth and deleveraging to 2x net debt to EBITDA by end of 2026. CFO Baris Oran attributed the raised cash flow conversion guidance to lower M&A transaction costs and improved working capital management in 2026.

Kevin Gainey of Thompson Davis asked for color on the customer pipeline dynamics, including customer urgency, and inquired about the competitive landscape and signs of green shoots in warehousing.

Answer

CEO Malcolm Wilson described a very strong sales pipeline, up 15% YoY to $2.3B, which excludes the Wincanton pipeline. He noted a resurgence in e-commerce projects and new inquiries related to potential U.S. tariff changes. He stated the competitive landscape is stable. CSO Kristine Kubacki added that GXO's proprietary AI technology is a key differentiator, delivering productivity gains of 3-4x and helping to win new business.

Kevin Gainey asked about the timeline for achieving the remaining $15 million in synergies towards the $45 million ultimate goal, and the breakdown of how these synergies are being approached from cost, procurement, and footprint perspectives.

Answer

Scott Zuehlke (CFO, Quanex Building Products Corporation) clarified that less than $15 million remains, with $5 million-$10 million expected in fiscal 2026 (depending on volumes impacting procurement synergies) and additional synergies in 2027. He also noted specific timing for SG&A synergies in 2026.

Kevin Gainey asked about the timing to achieve the remaining $15 million of the ultimate $45 million in synergies and the approach to realizing these synergies (cost, procurement, footprint). He also inquired about the nature of 2025 pricing gains (inflation-linked vs. structural) and concerns about potential give-backs in 2026. Additionally, he asked about demand trends parsed between new residential and repair & remodel (R&R) for 2026, and if there's any reason not to expect slightly negative free cash flow in Q1, given the typical cash burn.

Answer

Scott Zuehlke (CFO, Quanex) clarified that less than $15 million in synergies remains, with $5 million-$10 million expected in fiscal 2026 (volume-dependent for procurement synergies) and more in 2027, including specific SG&A timing in 2026. George Wilson (Chairman and CEO, Quanex) explained that pricing increases are primarily inflation-linked, with margin improvements driven by operational performance, not predatory pricing, which he believes will allow them to hold price strongly. For demand, George Wilson noted similar impacts on R&R and new construction, expecting R&R to lead any recovery due to their weighting, with new construction driven by interest rates and housing affordability. Regarding Q1 cash flow, Scott Zuehlke stated it's possible to have slightly negative free cash flow, depending on December/January performance, while George Wilson added that lower incentive payouts for 2025 will help Q1 cash flow.

Kevin Gainey of Thompson, Davis & Company asked about the impact of the oil sands shutdown on revenue versus costs, the outlook for smoother operations in H2, and the expected EBITDA cadence between Q3 and Q4. He later inquired about the strategy for moving equipment to Australia and the revenue outlook for the Nuna joint venture.

Answer

CEO Joe Lambert clarified that the abrupt oil sands shutdown directly impacted revenue and created cost inefficiencies, but he does not expect a recurrence in H2 after discussions with the client. CFO Jason Veenstra stated that Q3 and Q4 EBITDA should be relatively flat quarter-over-quarter. Lambert also explained that moving significant equipment to Australia is contingent on winning specific large contracts, like a key opportunity in 2027, and that while Nuna is in a trough year, significant opportunities exist from 2026 onward.

Kevin Gainey of Thompson Davis & Co. sought more detail on the Acadia's market opportunities, specifically international wind versus asset protection. He also asked about the Q4 dry dock schedule and the cash flow outlook for the second half of the year.

Answer

CEO Lasse Petterson detailed that the Acadia is being actively bid for European offshore wind farms, power cable protection, and safeguarding subsea oil and gas infrastructure. SVP & CFO Scott Kornblau stated two vessels are planned for dry dock in Q4, 2026 will be a light dry dock year, and H2 2025 cash flow is expected to be 'flattish' before significant cash generation begins in 2026.

Kevin Gainey from Thompson, Davis & Company asked about customer conversations in communications and power delivery, and also inquired about the drivers behind higher accounts payable and the cash flow outlook.

Answer

Chairman and Interim CEO David King noted continued demand for growth from communications clients and that major utility capital programs are driving power delivery work. CFO Ken Dodgen stated the accounts payable increase was due to timing and expects it to normalize. He expressed confidence in the full-year operating cash flow outlook, suggesting it could exceed $250 million.

Kevin Gainey asked about the factors that would drive performance to the low or high end of the Q4 EBITDA guidance range. He also requested more detail on the Q4 cash flow outlook and the potential growth impact from recent California utility rate case approvals.

Answer

CFO Ken Dodgen explained that the Q4 EBITDA outcome will be heavily driven by the timing of the seasonal shutdown in Utilities and the timing of project closeouts in the Energy segment. He expects Q4 cash flow to be solid but lower than the prior year, around $100 million, due to some cash being pulled forward into Q3. CEO Tom McCormick noted that while it's still early, the California rate approvals are expected to create project opportunities for the gas distribution business in 2025.

Kevin Gainey of Thompson, Davis & Company inquired about management's current view on market conditions compared to the previous year. He also asked about the competitive landscape, pricing discipline, and the near-term outlook for the upcoming March quarter.

Answer

Executive Bohn Crain responded that while the market remains soft and the near-term will be tough, he is more bullish on Radiant's relative position and long-term prospects than he was a year ago, citing the company's financial flexibility and technology stack. He noted that the market is still 'bouncing along the bottom' and needs more asset-based capacity to exit. CFO Todd Macomber and Crain both indicated the March quarter is seasonally the slowest and will likely perform similarly to the prior year, with tariffs being a wildcard.

Kevin Gainey of Thompson, Davis & Company asked about the company's experience during previous tariff cycles, current trends in specific end markets like retail and industrial, and the operating cash flow for the reported quarter.

Answer

Executive Bohn Crain explained that past tariffs prompted customers to pull forward inventory and reconfigure supply chains, creating service opportunities for Radiant. He anticipates similar dynamics, including tightening warehouse capacity. Crain described the current freight market as 'pretty darn soft' across most verticals, with the exception of e-commerce. CFO Todd Macomber and Bohn Crain specified that quarterly cash from operations was near breakeven at $205,000, primarily due to significant cash outflows for acquisitions.

Kevin Gainey from Thompson, Davis & Company asked for an outlook on fiscal year 2025 based on July and August trends, changes in M&A seller expectations, targeted acquisition segments, and details on the USAID contract's role during Hurricane Francine.

Answer

CEO Bohn Crain suggested that the March quarter likely represented the market bottom and that the current quarter's performance is a more indicative run rate going forward. He highlighted Radiant's strong balance sheet and active M&A stance, noting that while seller expectations haven't changed significantly, there are fewer buyers, creating opportunities. Crain also mentioned the maturing pipeline of agent conversions. He declined to provide specific details on the USAID contract but affirmed Radiant expects to be a key partner in disaster response situations.