Lance Vitanza

Lance Vitanza inquired about Strategy's recent Bitcoin acquisitions that resulted in negative Bitcoin Yield, asking for clarification on the strategy behind these dilutive transactions and the potential use of the $2.25 billion cash reserve to redeem convertible notes.

Answer

Executive Chairman Michael Saylor acknowledged the dilutive transactions were primarily associated with building the USD reserve to improve creditworthiness and address market concerns about dividend payments. He stated that such actions are not expected to be programmatic going forward, as the reserve is now sufficient. Saylor confirmed the cash reserve could be used for any corporate purpose, including redeeming convertible notes.

Lance Vitanza from TD Securities inquired about Strategy's Bitcoin acquisition strategy, specifically addressing weeks with negative Bitcoin Yield and the rationale behind these dilutive transactions. He also asked about the potential use of the $2.25 billion cash reserve for redeeming convertible notes.

Answer

Executive Chairman Michael Saylor explained that dilutive transactions, such as those leading to negative Bitcoin Yield, were undertaken to improve the company's creditworthiness, particularly in response to market feedback regarding dividend payment ability and to remove toxic debt. He confirmed the $2.25 billion cash reserve could be used for any corporate purpose, including redeeming convertible notes.

Lance Vitanza of Cowen asked if Strategy's significant concentration of Bitcoin holdings could impede broader adoption and whether the growing number of other public Bitcoin treasury companies poses a competitive threat.

Answer

Executive Chairman Michael Saylor responded that Strategy accelerates adoption by channeling new capital into the ecosystem and that the company competes with traditional credit instruments, not other Bitcoin companies. CEO Phong Le added that more treasury companies increase market knowledge and that competitors are not close in size or strategy, making the trend additive to Strategy's goals.

Lance Vitanza inquired about the sales funnel and pipeline for school security, door locking, and remote access projects, including expectations for awards in the second half of the fiscal year and the typical lag before revenue generation. He also asked about the outlook for radio sales growth and its contribution to recurring service revenue in the latter half of the fiscal year, and how NAPCO is considering its increasing cash balance for capital allocation, including potential acquisitions or shareholder returns.

Answer

Kevin Buchel, President and COO, explained that school and other projects vary significantly in size, custom requirements, and revenue timelines, with some spanning multiple years, but confirmed they are consistent contributors. He expressed encouragement regarding recurring revenue growth and the $99 million run rate, highlighting the ongoing copper conversion opportunity (millions of buildings by 2029) and new relationships with large dealers, which are expected to drive continued radio sales and recurring service revenue growth. Dick Soloway, Chairman and CEO, addressed the growing cash balance, stating that all options—acquisitions (with strict criteria for accretion and operational fit), increased dividends, and other shareholder returns—are actively being contemplated to enhance shareholder value.

Lance Vitanza inquired about the sales funnel and pipeline for school security, door locking, and remote access projects, including expected awards in the second half and revenue generation lag. He also asked for the outlook on radio sales and their contribution to recurring service revenue growth, and how NAPCO is considering capital allocation given its growing cash balance.

Answer

Kevin Buchel, President and COO, explained that school projects vary in size and revenue timeline, with ongoing efforts to secure more. He expressed encouragement for radio sales, citing the large market for copper line conversion and growing relationships with major dealers, expecting continued strong recurring revenue. Dick Soloway, Chairman and CEO, confirmed that all capital allocation options, including accretive acquisitions and increased shareholder returns (like dividends), are under careful consideration, emphasizing the desire for strategic fits that enhance the business without disruption.

Lance Vitanza questioned the historical sensitivity of security system demand to economic downturns, particularly a potential tariff-driven recession. He also asked about future capital allocation strategy, specifically regarding share repurchases given the strong cash flow conversion.

Answer

CEO Richard Soloway and President/CFO Kevin Buchel asserted that the security business is largely 'recession-resistant,' as demand is driven by the fundamental need for safety. Regarding capital allocation, Buchel acknowledged the significant spending on buybacks and dividends, stating that while he likes holding cash in uncertain times, the company's strong cash flow provides the flexibility to continue buybacks if conditions are favorable.

Lance Vitanza of TD Cowen inquired about the potential business impacts from the recent fires in California and ongoing tariff discussions.

Answer

Chairman and CEO Dick Soloway stated that potential tariffs on Chinese and Mexican goods could enhance NAPCO's competitive position, as many rivals manufacture in those regions while NAPCO produces in the Dominican Republic. He believes this could help gain market share. Regarding the California fires, Soloway noted that subsequent rebuilding efforts, particularly for commercial properties, could increase demand for fire alarm and communicator systems. President and CFO Kevin Buchel added that existing projects in the affected area are expected to continue.

Lance Vitanza asked about the composition of the rebound in radio sales, specifically the mix between fire and burglary alarms, and how this will impact future service revenues and gross margins. He also sought to clarify if the new radios being sold are attaching at a higher, lower, or similar monthly recurring revenue rate compared to the existing installed base.

Answer

President, COO, and CFO Kevin Buchel confirmed that the recent radio sales were heavily weighted towards fire alarm communicators, which is a positive trend as they command higher recurring fees than burglary radios. He stated that while the per-unit revenue might be similar to past fire radios, the richer mix towards the more profitable fire products bodes well for future recurring revenue and could potentially push the 91% gross margin even higher. Chairman and CEO Richard Soloway added that the company continues to innovate its radio line, which will contribute to long-term recurring revenue growth.

Lance Vitanza from TD Cowen inquired about pricing trends for recurring services, particularly for fire radios, and whether promotional pricing could be a future headwind. He also asked for detail on the drivers of increased R&D and SG&A expenses.

Answer

Kevin Buchel, President, COO & CFO, stated that the company promotes as necessary but tries not to alter the successful pricing formula, especially for fire radios which have 90% margins. For expenses, he explained the SG&A spike was partly due to the timing of the ISC West trade show. He confirmed the new ~$3 million quarterly run rate for R&D is the new standard, reflecting strategic hiring of engineers to accelerate product development.

Lance Vitanza questioned the monetization strategy for the 9 million activated MiniPay stablecoin wallets and sought clarity on the drivers behind the rebound in search revenue, asking if it was due to volume, revenue per search, or user mix.

Answer

Co-CEO Song Lin explained that MiniPay already generates revenue through ecosystem partner integrations where Opera receives a share, comparing its natural monetization to that of search. CFO Frode Jacobsen added that the search revenue rebound was expected and is part of a broader trend of 'information discovery,' which makes the browser increasingly relevant.

Lance Vitanza asked if the rapid growth of e-commerce was masking underlying seasonality, questioned the slight decline in MAUs, and sought commentary on the potential impact of U.S. antitrust actions on the browser ecosystem.

Answer

CFO Frode Jacobsen and Co-CEO Lin Song confirmed that strong underlying growth in e-commerce offset typical Q1 seasonality. Regarding users, Jacobsen stated the company's strategy is to focus on high-ARPU users, not the total MAU count, which drives significant ARPU growth. Song commented that regulatory focus on competition and opening up the ecosystem is a net positive for an agile company like Opera.

Lance Vitanza asked for confirmation on the low iOS penetration in Europe, inquired about anecdotal download spikes in the U.S., and questioned if the advertising revenue share would continue to grow versus search.

Answer

Co-CEO Lin Song confirmed that iOS penetration in Europe is still very low but has significant growth potential, and also verified a spike in U.S. downloads due to increased user awareness. CFO Frode Jacobsen affirmed that the trend of advertising growing faster than search is expected to continue, further shifting the revenue mix.

Lance Vitanza asked for clarification on the strong cash balance, wondering about below-the-line factors like working capital or taxes, and requested an update on the valuation and potential monetization of the OPay stake.

Answer

CFO Frode Jacobsen attributed the strong cash flow primarily to a favorable change in working capital, which decreased by over $4 million. Regarding the OPay stake, Jacobsen stated that its valuation remains unchanged from prior quarters and will be reassessed at year-end. He reiterated that Opera is a financial investor and plans to divest the stake either through a private offer or following a future IPO.

Lance Vitanza inquired about the specifics of a new multi-million dollar enterprise agreement, its validation of the channel partner model, and the drivers behind the win. He also asked about the impact of a removed $10 million educational deal on Q3 guidance and the general puts and takes for the forecast.

Answer

CEO Juho Sarvikas explained the enterprise deal was secured via the Inseego IGNITE channel program, highlighting the unique value of Inseego's hardware combined with its Inseego Connect software platform. CFO Steven Gatoff confirmed the Q3 guidance of $40M-$43M in revenue completely excludes the potential $10M+ deal. Gatoff and Sarvikas both characterized the Q3 forecast as being based on solid execution, modest growth in mobile, and strong, visible traction with the new FWA products through carrier channels.

Asked for details about a new multi-million dollar enterprise win, the impact of a removed $10M+ deal on Q3 guidance, and the factors contributing to the Q3 revenue forecast range.

Answer

The enterprise win was secured via a channel partner due to the unique value of Inseego's hardware and software. The removed $10M+ deal is not included in the Q3 forecast, which would have been higher otherwise. The Q3 guidance is based on core business execution, modest mobile growth, and strong FWA traction, with some variability from channel performance.

Lance Vitanza inquired about the impact of the new CEO's customer relationships on the go-to-market strategy and the timeline for a sustainable revenue ramp. He also asked about the implementation timeline for procurement and supply chain improvements and whether the company's current asset mix is now considered final following the telematics sale.

Answer

CEO Juho Sarvikas confirmed he is already leveraging his industry relationships to build a revenue pipeline, which supports the company's confidence in its 2025 growth forecast. He explained that operational and supply chain improvements are underway and will be engaged differently in 2025. Regarding the asset mix, he stated the focus is on becoming a leader in mobile and fixed broadband, which includes continued investment and consideration of inorganic opportunities.

Inquired about the impact of customer M&A and inventory reduction on the fixed wireless business, the progress of the new channel program, and the reason for the high profitability of the remaining services business compared to the divested Telematics unit.

Answer

Executives explained that one customer's M&A situation has led to a conservative purchasing posture not expected to recover, while another's inventory reduction is viewed as temporary. The channel program is making gradual progress and remains a strategic focus. The high margin of the remaining services business is due to its nature as a SaaS platform, and the Telematics sale was a strategic decision to focus on the core 5G business and deleverage.

Lance Vitanza questioned the drivers behind the fixed wireless access (FWA) revenue pressure, asking for details on customer M&A and inventory reduction impacts. He also sought an update on the new channel program's progress and asked about the significant gross margin difference between the retained subscribe business and the divested Telematics business.

Answer

Executive Philip Brace explained that FWA pressure came from a customer being acquired, which he does not expect to 'magically get back better,' and another customer managing inventory, which may recover. He described channel program progress as 'gradual' and an area for continued investment. CFO Steven Gatoff clarified the retained subscribe business is a high-margin SaaS platform, and the Telematics divestiture was a strategic decision to focus capital on the core U.S. 5G business and deleverage.

Lance Vitanza asked for details about the Winnebago win, the demand environment in healthcare, whether the highlighted Q1 wins were new logos, and the pipeline's mix between new and existing customers.

Answer

CEO Ronald Totton detailed the Winnebago win as a competitive process for a new logo, secured via a partner over a nine-month cycle with a minimum revenue commitment. He confirmed that Medicare/Medicaid funding changes do not impact their strong Connected Health business. Totton clarified that three of the four highlighted wins were new logos. He estimated the pipeline is weighted about 75% to new logos, with CFO Paul Holtz adding that existing customer growth often comes from new departments consolidating vendors.

Lance Vitanza asked about the drivers behind the strong connection growth but lower-than-expected ARPU in Q4. He also questioned the modest 2% revenue growth guidance for 2025 despite brisk market demand, inquired about the cause of the 10-K filing delay, and asked about the company's stance on a potential balance sheet restructuring given its debt load.

Answer

CFO Paul Holtz explained that the connection increase came from low-ARPU use cases added late in the quarter, which minimally impacted revenue and thus lowered the average ARPU. CEO Ronald Totton addressed the revenue guidance by highlighting the company's strategy to exit unprofitable contracts, which tempers top-line growth but boosts profitability, urging a focus on the strong EBITDA and free cash flow guidance. Paul Holtz attributed the 10-K delay to specific year-end audit items that have been resolved. Regarding the balance sheet, Ronald Totton stated that while the company is always open to ideas beneficial to shareholders, the primary focus remains on executing its operational plan and building on current business momentum.

Lance Vitanza asked about the strategic shift to prioritize IoT Connectivity over the Solutions business and its impact on growth. He also questioned the company's liquidity, access to its revolver, and plans for managing its significant debt load, including potential restructuring versus growing into the balance sheet.

Answer

President and CEO Ronald Totton clarified that the company is not deemphasizing IoT Solutions but is moving away from low-margin hardware deals with minimal connectivity linkage. CFO Paul Holtz addressed the balance sheet, confirming an expected improvement in free cash flow for 2025. Holtz acknowledged the high debt level, stated the company is exploring refinancing options, and expressed confidence in their liquidity position for the upcoming year, noting an $18.6 million cash balance.

Lance Vitanza from TD Cowen questioned whether the year-over-year decline in static print revenue was due to cannibalization from digital, and asked if management expects print revenue to return to growth later in the year.

Answer

CEO Scott Wells clarified that the first-quarter decline in print revenue was due to idiosyncratic campaign timing and not a result of cannibalization from digital advertising. He affirmed his expectation that print revenue will show growth for the full year.

Lance Vitanza of TD Cowen questioned the drivers behind Europe-North's cost growth outpacing its strong revenue growth, asking for a breakdown of recurring versus non-recurring expenses and the impact on future margins. He also asked to quantify the impact of the lost Norway contract.

Answer

CFO David Sailer attributed the higher costs to new contract ramps, increased property taxes in the U.K., and higher incentive compensation due to strong performance, stating these would normalize over time. Justin Cochrane, CEO of Clear Channel U.K. & Europe, added that the lost Norway contract was low-margin and had no material impact on profitability. He clarified that underlying business margins are stable and the quarterly result was due to a few small, non-structural one-offs.

Lance Vitanza inquired about the company's tariff mitigation strategies, asking for details on actions taken to date and how CODI's portfolio companies are positioned versus their competitors. He also asked about the M&A environment for 2025 and CODI's expected activity level.

Answer

Patrick Maciariello, an executive, stated that tariff preparation has been a multi-year process of diversifying supply chains geographically, which positions them well against competitors. Elias Sabo, an executive, added that the M&A market is recovering slightly and that CODI is well-positioned to increase its acquisition pace due to its strong balance sheet, reduced leverage, and well-aligned portfolio.

Lance Vitanza asked for an update on the permanent CEO search process and the circumstances surrounding Nick Brien's appointment as Interim CEO.

Answer

Interim CEO Nicolas Brien confirmed that a board subcommittee has initiated a formal search process with a leading recruitment firm. He explained his interim appointment was a collaborative decision with outgoing CEO Jeremy Male to ensure the company had broad leadership expertise during the transition, especially given the rapidly evolving media landscape.

Lance Vitanza requested a breakdown of the increased corporate expenses, seeking to understand which components were non-recurring, including consulting fees, compensation, and an unfunded benefit plan. He also asked if the stronger national advertising performance from Q3 was expected to continue into Q4.

Answer

CFO Matthew Siegel explained the corporate expense increase: the benefit plan cost fluctuates with equity market performance; professional fees are for a year-long engagement with a management consulting firm to optimize asset performance; and higher compensation reflects accruals closer to 100% of target due to strong results. CEO Jeremy Male confirmed that national advertising revenue is expected to be up again in Q4.

Lance Vitanza of TD Cowen asked for the expected cadence of the 350-375 digital conversions in 2025 and inquired if the Q4 spike in CapEx would repeat. He also questioned why Lamar's 3% revenue growth guidance seems conservative compared to industry forecasts of around 5%.

Answer

Sean Reilly (executive) responded that digital conversion spending should be ratable throughout the year. He explained that broader industry growth forecasts include segments where Lamar does not compete, such as retail TV networks and cinema advertising, which accounts for the discrepancy. He also noted that his view of relevant out-of-home growth is closer to 3.5-4%. The Q4 2024 CapEx increase was partly due to hurricane-related costs.

Lance Vitanza from TD Cowen asked for the reason behind the relative weakness in the Gulf Coast region and whether it was recovering. He also inquired about the drivers for the expected pickup in M&A activity and the potential for larger transactions.

Answer

Executive Sean Reilly suggested the Gulf Coast was simply 'catching its breath,' while Jay Johnson added that the region faced a tougher year-over-year comparison due to outperformance in Q3 2023. Regarding M&A, Reilly attributed the expected pickup to both Lamar's decision to re-engage the market after a pause and the favorable impact of a falling interest rate environment. He characterized potential larger deals as 'event-driven' and advised to 'stay tuned.'

Lance Vitanza asked about management's confidence in achieving consolidated revenue growth in 2025 and requested a recap of the long-term growth targets for each business segment from the prior Investor Day.

Answer

President and CEO Barry McCarthy expressed confidence in the 2025 growth trajectory, highlighting the recovery in B2B Payments and sustained strength in Merchant Services and Data Solutions. CFO Chip Zint reiterated the Investor Day targets: mid-single-digit growth for B2B, upper-single-digits for Merchant and Data, and a low-to-mid-single-digit decline for Print. Zint projected that this mix would likely place 2025 consolidated growth at the lower end of the long-term 2-4% goal, around 1-2%.