Luke Junk

Luke Junk inquired about the upside and downside risks influencing Gentex's 2026 revenue guidance, considering the uneven performance in 2025, vehicle and product mix shifts, and specific customer dynamics. He also asked for clarification on the drivers behind the strong Q4 2025 gross margin performance, its sustainability into 2026, and the company's exposure to DRAM supply chain issues, including pricing trends and internal mitigation efforts, particularly for Full Display Mirror (FDM) components.

Answer

Steve Downing, President and CEO, explained that North America and Western Europe offer potential upside due to expected market stability and improvement, while the China market's deterioration and Tesla's role in EV acceptance represent key risk factors. Regarding gross margins, Downing highlighted strong internal factors like product mix, operational efficiencies, labor, yield, and solid supplier pricing, which offset significant tariff impacts (150 basis point headwind in Q4). Neil Boehm, COO and CTO, clarified that FDM uses older DDR3 technology, posing less supply risk but significant pricing challenges due to recent RAM price increases. He also noted some DDR4 exposure for DMS products, confirming supply allocation but ongoing efforts for ultimate supply sources.

Luke Junk asked about the upside and downside risks relative to Gentex's revenue guidance range, considering the uneven growth in the past year, vehicle and product mix, and any customer-specific impacts. He also inquired about the drivers behind the strong Q4 2025 gross margin performance, its sustainability into 2026, and the impact of DRAM supply chain issues on pricing and FDM bill of materials.

Answer

Steve Downing, President and CEO, highlighted North American market stability and potential improvements in Western Europe as tailwinds, while China market deterioration and exposure to Tesla's EV acceptance were identified as risk factors. Regarding gross margin, he attributed the strong Q4 performance to solid product mix, operational efficiencies, labor, yield, and supplier pricing, noting that tariff impacts were a significant headwind. Neil Boehm, COO and CTO, explained that FDM uses older DDR3 technology with pricing risk, while DMS products have some DDR4 exposure, confirming supply allocation but ongoing work on alternative sources.

Luke Junk of Baird inquired about the growth headwinds in Europe, specifically distinguishing between temporary impacts (like OEM shutdowns) and more persistent issues such as trim mix changes. He also asked about the company's strategy for recovering tariff costs into Q4 and next year, and any incremental costs anticipated. Finally, he questioned Gentex's direct supply chain exposure to Nexperia and real-time customer feedback.

Answer

President and CEO Steve Downing explained that temporary impacts in Europe were minor, with the primary headwind being a shift to lower-trim vehicles (A and B segments) which typically have less Gentex content. He expects some trim mix impact to continue in Q4 but less drastically. Regarding tariffs, Mr. Downing noted that 70-80% of Q2 tariff costs were recovered in Q3, and most of the Q3 tariff costs are expected to be reimbursed in Q4 due to a lag effect. COO and CTO Neil Boehm confirmed Gentex's use of Nexperia supplies and ongoing efforts to find alternate sources, with Mr. Downing adding no significant Q4 impact is expected from Gentex's side.

Luke Junk asked about the growth headwinds in Europe, specifically distinguishing between temporary impacts like OEM shutdowns and more persistent issues such as trim mix shifts, and inquired about anticipated incremental trim mix impacts for the fourth quarter. He also sought clarification on the company's strategy for recovering tariff costs into Q4 and next year, and asked about any direct supply chain exposure to Nexperia and real-time customer feedback.

Answer

President and CEO Steve Downing explained that temporary impacts were minor, with the primary headwind being a shift in European vehicle mix towards lower-trim A and B segments, which carry less Gentex content, a trend expected to continue into Q4 but less drastically than Q3. He noted that Q2 tariff costs were largely recovered in Q3, and the step-up in Q3 tariffs is expected to be reimbursed in Q4. COO and CTO Neil Boehm confirmed Gentex's Nexperia supply chain exposure but stated that in-house inventory and efforts to find alternate suppliers mean no significant Q4 impact is expected from their side, though OEM exposure could pose challenges.

Luke Junk from Robert W. Baird & Co. asked about the key drivers behind Gentex's gross margin improvement, the company's evolving strategic approach to the challenging China market, and whether the 24-month production timeline for large area devices might be conservative.

Answer

President & CEO Steve Downing confirmed that the company has 'turned the corner' on margins, citing significant savings from suppliers, labor, and overhead that outweighed negative tariff impacts. He explained that the China revenue decline is primarily due to OEM de-contenting amid profitability pressures, not just local competition. COO & CTO Neil Boehm acknowledged the 24-month timeline for large area devices could be conservative given strong engineering progress, but noted variables remain.

Luke Junk asked for a detailed breakdown of how new tariffs are contemplated in the updated guidance, including the impact on revenue and gross margin, and whether potential tariffs on electronics and semiconductors are included. He also inquired about the China-related supply chain footprint for the VOXX acquisition and the reasons behind the revised Full Display Mirror (FDM) shipment forecast.

Answer

President and CEO Steve Downing explained that the China revenue guidance is down about $100 million from the start of the year, while primary markets are down $100-$150 million due to weakening North American production. He noted the gross margin range was lowered by 50 basis points to account for tariff costs and reimbursements without margin. For VOXX, he confirmed its supply chain is mostly imports from China. COO and CTO Neil Boehm added that the reduced FDM forecast is primarily due to lower vehicle production volumes, though the product is still expected to grow by about 100,000 units in 2025.

Luke Junk asked for details on the Q4 2024 revenue shortfall, questioning the split between temporary inventory adjustments and lingering vehicle mix issues, and inquired about the 2025 gross margin trajectory and strategic priorities for the pending VOXX acquisition.

Answer

CEO Steve Downing attributed about half of the Q4 revenue miss to temporary inventory adjustments and the other half to a weaker vehicle mix, which may persist. He expects Q1 gross margin to improve over Q4 due to higher sales volumes. Downing also noted the VOXX acquisition is targeted for a late Q1 close, with more details to follow.

Luke Junk inquired about the primary drivers of market outperformance in Q3, focusing on the Full Display Mirror's (FDM) contribution and the outlook for operating expense (OpEx) growth amid a challenging production environment.

Answer

President and CEO Steve Downing confirmed that FDM growth was the bulk of the outperformance, with General Motors being a particularly strong contributor. Regarding OpEx, Downing explained that the high R&D spend is driven by committed customer launches for new technologies like DMS and CMS, and that the growth rate should moderate in 2025 as these programs move into production.

Luke Junk asked about the initial integration steps for CommScope (CCS) and the importance of the deal closing earlier than anticipated for bringing the broader portfolio to market, especially for AI and data centers.

Answer

Adam Norwitt (CEO) clarified that the early closing was due to efficient approval processes. He emphasized Amphenol's approach of empowering existing CommScope leadership and teams to accelerate their business, rather than traditional integration, highlighting the excitement of the CommScope team to join Amphenol.

Luke Junk asked about the initial integration steps for CommScope (CCS) and the significance of the deal closing earlier than anticipated, particularly in bringing the new, broader portfolio to market for data center applications.

Answer

CEO Adam Norwitt explained that the early closing was due to efficient approval processes. He clarified that Amphenol's approach is not traditional 'integration' but rather empowering the existing CommScope leadership and teams to identify and accelerate new business opportunities as part of Amphenol, emphasizing the excitement and smooth transition of the CommScope team into the Amphenol culture.

Luke Junk questioned the relevance of the book-to-bill ratio given Amphenol's current high growth levels, particularly in the IT Data Communications segment where sales might be shorter-term, and how this impacts the metric's meaningfulness.

Answer

CEO Adam Norwitt acknowledged that while bookings grew 38% year-over-year and revenue exceeded expectations, the book-to-bill ratio was 0.99. He explained that earlier in the AI ramp-up, book-to-bill was stronger due to investment needs, but now, shortened lead times in IT Data Communications naturally contribute to a slightly shorter sales cycle and impact the book-to-bill metric.

Luke Junk questioned the meaningfulness of the book-to-bill metric at current high growth levels, especially given the shorter-term nature of some IT Data Comm sales, and its impact on the measure.

Answer

CEO Adam Norwitt acknowledged that with strong growth and significant revenue upside, a book-to-bill just under 1 (0.99) was still impressive. He noted that as lead times for IT Data Comm products have shortened, it naturally impacts book-to-bill, creating a slightly shorter cycle.

Luke Junk of Robert W. Baird & Co. asked about the operational execution, or 'blocking and tackling,' required to manage a 41% organic growth rate and bring billions in incremental sales online so effectively.

Answer

President & CEO R. Adam Norwitt described the achievement as the team 'moving mountains,' which involved hiring, automation, new facility setups, and geographic diversification. He credited the 'Amphenolian culture' of maximizing resource efficiency, rather than just spending money, as the key to converting such massive growth into strong profitability.

Luke Junk from Robert W. Baird & Co. posed a philosophical question about IT Datacom growing to 33% of total sales, asking how management views this level of concentration regarding capital allocation and risk management, given the company's historical emphasis on diversification.

Answer

CEO Adam Norwitt affirmed his commitment to a balanced market exposure but stated the company will never shy away from a major organic growth opportunity. He compared the current AI revolution to the scale of the internet's initial build-out and emphasized that the growth is organic, not from a single large acquisition. He also noted that recent major acquisitions like CIT and Andrew have actually increased diversification in other markets.

Luke Junk inquired about potential 'below the radar' opportunities for Amphenol in 2025, beyond the widely discussed topics of AI and major acquisitions like CIT and Andrew.

Answer

CEO R. Norwitt highlighted the convergence of technologies like robotics, next-generation vehicles, IoT, and accelerated computing (AI) as a major source of future opportunity. Drawing from his experience at the Consumer Electronics Show (CES), he expressed excitement about the new, unforeseen industries that will emerge from this technological convergence, which Amphenol is positioned to enable across all its end markets.

Luke Junk inquired about the automotive business, asking about the bookings pipeline amid market volatility, particularly in Europe, and whether market conditions are constraining Amphenol's ability to grow.

Answer

CEO R. Norwitt stated that while the European auto market has moderated, robust growth in Asia and North America provided an offset. He expressed confidence in the company's ability to continue outperforming the market by gaining content across all vehicle types—EV, hybrid, and combustion engine—due to the ongoing proliferation of electronics.

Luke Junk inquired about the key incremental drivers for data center growth in Q1 and through 2026, including share gain opportunities, the impact of 2x backlog growth, and initial tailwinds from higher voltage sockets. He also asked for specifics on the broad-based industrial recovery anticipated for 2026, identifying improving segments and business impacts, and Littelfuse's strategy for managing metals inflation (copper, ruthenium, silver, gold), including purchasing methods, cost pass-through to customers, and Q1 guidance assumptions for price-cost neutrality.

Answer

President and CEO Greg Henderson highlighted significant data center progress from sales realignment, with design wins more than doubling in 2025, and noted higher voltage systems offer at least twice the opportunity. He also identified broad-based momentum in diversified industrial and industrial automation, while residential HVAC remains soft. Regarding metals inflation, he explained the strategy involves supply chain optimization and passing costs to customers, aiming for full-year price-cost neutrality. EVP and CFO Abhi Khandelwal added that data center was a strong double-digit Q4 contributor, Q4 bookings were up 20% (similar to Q3), and confirmed Q1 guidance factors in commodity prices, but price-cost neutrality is a full-year goal.

Luke Junk inquired about Littelfuse's strategy for managing metals inflation, specifically regarding procurement of materials like copper and silver, mechanisms for passing costs to customers, and assumptions factored into the Q1 guidance.

Answer

President and CEO Greg Henderson stated that teams are focused on supply chain opportunities and pricing inflation through surcharges or direct pricing. He noted that while there might be timing differences between quarters, the goal is to be price-cost neutral for the full year. EVP and CFO Abhi Khandelwal confirmed that the impact of current commodity prices is factored into the Q1 guide, but price-cost neutrality is a full-year comment, not specific to Q1.

Luke Junk of Robert W. Baird & Co. asked for context on the significant margin upside in the Transportation and Industrial segments relative to historical performance and targets, and inquired about the nature of a tariff timing impact. He also asked about the strategic potential of the Industrial segment and the size and growth trajectory of the data center business.

Answer

President & CEO Greg Henderson attributed the margin gains to strategic initiatives, including scaling operational excellence in the Transportation segment and focusing on high-growth markets like energy storage and data centers in the Industrial segment. EVP & CFO Abhi Khandelwal clarified the tariff impact was a $0.15 timing benefit in Q2 that will reverse in Q3. Henderson noted that data center exposure is materially important and growing, with the company leveraging its full portfolio to capture new design wins.

Luke Junk from Baird inquired about the impact of tariffs on Q2 guidance, the drivers behind the strong sequential margin improvement in the Electronics segment, and the materiality of the company's data center and AI-related opportunities.

Answer

CEO Greg Henderson and CFO Meenal Sethna explained that the company's "tariff playbook," which includes flexing its global footprint, sourcing adjustments, and pricing actions, is expected to prevent a material impact on Q2 earnings. Sethna noted that about 15% of U.S. sales are sourced from China, primarily impacting the Electronics segment. She attributed the strong Electronics margin performance to significant operating leverage on volume growth in passive and protection products, with no unusual items. Henderson highlighted the growing data center opportunity, driven by the shift to higher voltage architectures similar to automotive, which increases demand for Littelfuse's protection, power semiconductor, and switching solutions.

Luke Junk from Robert W. Baird & Co. inquired about the specifics of the book-to-bill ratio for Passive components, distributor feedback on restocking, early signs of industrial recovery for power semiconductors, and the Transportation segment's margin profile heading into 2025. He also asked a modeling question regarding the seasonal impact of incentive compensation.

Answer

President and CEO Dave Heinzmann confirmed that the electronics inventory correction is largely over, with the overall electronics book-to-bill above 1 for the first time since Q2 2022. He noted Passives are firmly above 1, while power semi is improving but still below 1, with momentum in North America and Asia. CFO Meenal Sethna addressed transportation margins, expressing confidence in continued expansion in 2025 due to pricing and cost actions. She also indicated that the Q2 incentive comp impact would be more of a run rate and less of a spike than in prior years.

Luke Junk inquired about the Q4 electronics guidance, asking for a breakdown between seasonal factors and the ongoing weakness in power semiconductors, and what current orders imply for early 2025. He also asked about the Q3 margin upside in the Transportation and Industrial segments and whether this performance establishes a higher floor for margins moving forward.

Answer

President and CEO Dave Heinzmann explained that the passives and protection semiconductor businesses are seeing normal seasonality with healthy channel inventories, while the power semiconductor business is facing a more significant pullback due to slowing industrial demand, particularly in Europe. He noted visibility into 2025 is low, but they feel they are nearing a bottom. EVP and CFO Meenal Sethna addressed the margin question, stating that while they are confident in their margin initiatives, Q3 benefited from one-time factors, including a 200 basis point tailwind from foreign exchange in both segments. She affirmed they expect continued margin expansion in 2025 from cost actions and eventual volume recovery.

Luke Junk inquired about the trends within the Automation and Connected Living (ACL) business, particularly the industrial trends, and whether the strength in Industrial Solutions should be considered an incremental margin driver.

Answer

CEO Terrence Curtin confirmed improving market conditions in ACL, especially in factory automation applications across all regions, after a multi-year downturn. He noted that while residential HVAC and appliances remain soft, the CapEx side of the industrial business is recovering. CFO Heath Mitts added that both segments are expected to achieve 30%+ flow-through on growth for FY26, with the industrial segment benefiting significantly from volume leverage, potentially exceeding 30% in some quarters.

Luke Junk asked for further insight into the improving trends within TE Connectivity's Automation and Connected Living (ACL) business, particularly in industrial applications, and whether this strength should be considered a significant incremental margin driver for the Industrial Solutions segment.

Answer

CEO Terrence Curtin confirmed improving market conditions in ACL, especially in factory automation across all regions, after a multi-year downturn. He noted that while residential HVAC and appliances remain soft, the CapEx side of the industrial business is recovering. CFO Heath Mitts affirmed that both segments are expected to achieve 30%+ flow-through on growth for FY2026, with ACL's recovery naturally benefiting Industrial segment margins due to its higher profit pools.

Luke Junk inquired about transportation orders, particularly the reported growth across all regions this quarter, and whether this signals a potential shift towards a more balanced outgrowth algorithm for auto, especially given recent outgrowth has been more weighted to Asia and China.

Answer

CEO Terrence Curtin acknowledged that the imbalance in production, with Asia growing and Western regions declining, had created a headwind for content outperformance. He anticipates that as Western declines stabilize to flattish levels, content per vehicle growth will become more even across all regions, contributing to the 4%-6% content outperformance target. Curtin highlighted that while opportunities differ by region (e.g., electrified powertrain in Asia, data connectivity everywhere), all regions are seeing increasing content, just at different rates.

Luke Junk of Robert W. Baird & Co. asked about the industrial book-to-bill ratio, specifically if AI demand was causing any timing distortions, and inquired about new AI awards beyond the current hyperscaler and chipmaker opportunities.

Answer

CEO Terrence Curtin clarified that the improvement in Industrial orders was broad-based across all businesses, not just from a single large AI order. Regarding AI awards, he stated the momentum is a continuation of traction with existing customers across the ecosystem, including chipmakers and hyperscalers, rather than a new incremental platform or customer.

Luke Junk asked for a breakdown of the Automation & Connected Living (ACL) business, specifically whether the automation subsegment is inflecting and what the geographical trends are.

Answer

CEO Terrence Curtin confirmed that the appliance business has been growing, but the key positive development was an inflection in the automation business, with orders picking up in Europe and Asia. Despite this momentum, TE is maintaining a conservative flat sequential sales outlook for the overall ACL business due to broader tariff-related uncertainty.

Luke Junk asked for an expansion on the opportunity related to data connectivity in software-defined vehicles, particularly the design pipeline in Asia and the potential impact on content per vehicle (CPV).

Answer

CEO Terrence Curtin highlighted that 'electronification' is a critical content driver, with Asian OEMs leading the adoption of software-defined architectures. He revealed that TE's product set for this area is already a $600 million business and cited a recent $1 billion design win with a single Chinese OEM as evidence of the accelerating momentum and significant positive impact on CPV.

Luke Junk of Baird requested an updated perspective on TE's automotive positioning in China, focusing on achievements with local OEMs versus multinationals and any changes in the competitive landscape.

Answer

CEO Terrence Curtin emphasized China's importance, noting it accounts for about $2 billion in auto revenue. He stated that TE's strong growth outperformance in Asia is mirrored in China, driven by success with local Chinese OEMs, which now represent two-thirds of the market. To support this growth, TE is opening its sixth automotive factory in China. He described the competitive landscape as stable, comprising primarily Western and Japanese competitors alongside some traditional Chinese players.

Luke Junk asked about the progress and milestones for achieving a vehicle platform award, including potential updates at CES, and followed up on the Luxury China EV win, asking what specific QNX capabilities enable compelling BOM positions and if safety solutions are gaining traction in the Chinese market.

Answer

CEO John Giamatteo highlighted the significant internal focus on the vehicle platform, emphasizing the collaboration with Vector to integrate QNX SDP8 and middleware seamlessly, with more details expected at CES. For the China EV win, Giamatteo reiterated cost savings and time-to-market as compelling, and noted a growing awareness and concern in the Chinese market for safety-certified SDV platforms due to past safety issues, creating opportunities for QNX's core RTOS.

Luke Junk inquired about the progress and milestones for securing a vehicle platform award, including any expected announcements at CES, and sought further details on how QNX enables cost savings and improved Bill of Materials (BOM) for Chinese OEMs, particularly in the context of the luxury China EV win.

Answer

CEO John Giamatteo explained that significant focus is on integrating QNX SDP8 with middleware from partner Vector to create a seamless product, with good progress being made and more information expected at CES. On cost savings for Chinese OEMs, Giamatteo highlighted QNX's ability to reduce BOM and accelerate time-to-market, noting a growing awareness in China for safety solutions like SDP8 due to past safety issues.

Luke Junk inquired about the operating leverage within BlackBerry's QNX division, specifically how the company anticipates maintaining strong leverage given current growth rates, R&D credits, and investment in sales and marketing, and any one-time factors or seasonality impacting Q3 guidance. He also asked about BlackBerry's strategic approach to the China market for QNX, particularly for ADAS applications, and the potential for repatriating benefits globally.

Answer

CFO Tim Foote highlighted QNX's strong 83% gross margins, which are expected to improve with increased royalty mix. He acknowledged a $4 million benefit from CIF funding in the quarter but emphasized that despite ongoing investments in R&D and sales & marketing for GEM expansion, the business model inherently provides leverage. CEO John Giamatteo further elaborated on the strategic importance of the China market for QNX, noting a shift towards safety-critical software due to recent incidents, which plays into BlackBerry's differentiated capabilities and strong ecosystem partnerships with Qualcomm and NVIDIA.

Luke Junk asked for context on the materiality of the 55% growth in the SDP 8.0 pipeline and how it relates to QNX backlog disclosures. He also sought clarity on the strategy for the new share buyback program, asking if it would be opportunistic.

Answer

CEO John Giamatteo confirmed SDP 8.0 is a high-demand product but did not provide a specific dollar size for the pipeline. CFO Tim Foote affirmed the share buyback approach will be opportunistic, not linear, based on factors like cash flow, share price, and alternative capital uses to maximize shareholder value.

Luke Junk asked for details on the vehicle OS initiative, specifically its initial scope with OEMs and the potential increase in content per vehicle. He also inquired about the risks to the Secure Communications business from potential government changes, asking about contract cancelability, typical terms, and the materiality of annual renewals.

Answer

CEO John Giamatteo explained the vehicle OS initiative is driven by OEM demand for BlackBerry to handle more of the software stack, which expands both the number of addressable models and the content per vehicle. CFO Tim Foote added this could be a significant transformation in content value by including middleware and partner components. Regarding government contracts, Giamatteo emphasized their long-term, sticky, and mission-critical nature, suggesting it's unlikely they would be ripped out and that there may even be opportunities for consolidation.

Luke Junk questioned why the full-year EBITDA guidance was maintained despite reaching breakeven ahead of schedule in Q2. He also asked about the organizational changes for IVY, specifically how the company is balancing cost reductions with retaining key talent.

Answer

CFO Tim Foote described the full-year EBITDA guidance as prudent, stating that while the Q2 beat was positive, sequential improvements are still needed to achieve a positive result for the full year. CEO John Giamatteo added that integrating the IVY team into the core QNX organization was a move to gain operational efficiencies now that the IVY platform has reached a baseline level of maturity.

Luke Junk from Robert W. Baird & Co. asked about the drivers for the recent improvement in IoT royalties and their sustainability. He also inquired about BlackBerry's perspective on emerging OEM software partnerships, such as the VW-Rivian deal, and its impact on customer relationships.

Answer

CEO John Giamatteo attributed the strong IoT royalties to both new implementations and existing design wins from the $815 million backlog. Regarding OEM partnerships, Giamatteo emphasized that customers view BlackBerry as a trusted software advisor, and these deals reinforce their collaborative role. CFO Steve Rai added that the competitive moat for QNX remains deep and that such industry moves do not create headwinds for BlackBerry.

Luke Junk sought a deeper understanding of Sensata Technologies' aerospace portfolio, focusing on its IP, innovation cycle, and strategies to accelerate growth beyond the recent low single-digit rates.

Answer

Stephan von Schuckmann, Sensata Technologies' Chief Executive Officer, highlighted steady mid-single-digit growth in both commercial and defense markets, with Q3 2025 marking a record revenue and the fifth consecutive quarter of positive outgrowth. He cited high customer backlogs, FAA approval for increased aircraft production rates, and strong exposure to the defense sector as key drivers for future growth.

Luke Junk from Baird requested more details on Sensata's aerospace portfolio, focusing on its IP, innovation cycle, and the levers available to accelerate growth beyond the recent low single-digit rates, especially given faster market growth.

Answer

Stephan von Schuckmann, Sensata Technologies' Chief Executive Officer, highlighted steady mid-single-digit growth in both commercial and defense markets, with Q3 being a record revenue quarter. He noted persistent high customer backlogs and an FAA-approved increase to 42 aircraft per month for a major customer, alongside growing exposure to the defense business, as key growth drivers.

Luke Junk asked about the company's sense of urgency and strategy for reinvigorating growth in non-automotive markets within the Sensing Solutions segment, beyond the current success in leak detection.

Answer

CFO Andrew Lynch confirmed that diversifying end market exposure is part of the strategy. He noted that while the near-term focus is on expanding the successful A2L leak detection product, longer-term secular opportunities in areas like grid hardening and broader electrification are being evaluated for their electrical protection content.

Luke Junk asked CEO Stephan Von Schuckmann for his initial impressions of Sensata's automotive business in China and for high-level commentary on segment margins, particularly with the reallocation of megatrend spending.

Answer

Chief Executive Officer Stephan Von Schuckmann emphasized the need to be highly selective with OEM partners in China, focusing on those positioned for success both domestically and in their expansion into Southeast Asia and Europe. Chief Financial Officer Brian Roberts added that about 90% of the former megatrend spending will be allocated to Performance Sensing. He expects Sensing Solutions margins to remain strong or improve, while Performance Sensing margins will likely stay in a similar range.

Luke Junk asked what the CEO search process has revealed about the company's future strategic direction, particularly regarding the balance between automotive and diversification.

Answer

Executive Martha Sullivan reiterated that the board is seeking a leader with the ability to drive technology roadmaps, enhance innovation, and who possesses automotive experience. She emphasized that any changes to the company's strategy will be determined and laid out by the new CEO once they are in place.

Luke Junk asked about the upcoming NBI-770 readout, specifically what type of result in the Phase II study would support a confirmatory Phase II as compared to moving directly into a pivotal Phase III trial.

Answer

Sanjay Keswani, Chief Medical Officer, explained that the Phase II is a small signal-finding study with 72 patients. He indicated that encouraging results would likely lead to a confirmatory Phase II-B, though a direct move to Phase III isn't ruled out. He expressed a desire to see esketamine-like efficacy without the dissociative side effects.

Luke Junk asked about expectations for the upcoming NBI-770 data readout, specifically what type of results would support a confirmatory Phase II study versus moving directly into pivotal trials.

Answer

Sanjay Keswani, Chief Medical Officer, explained that the Phase II study for NBI-770 (NR2B NAM) is a small, 72-patient signal-finding study. He indicated that encouraging results would likely lead to a confirmatory Phase IIB, though a direct move to Phase III is not ruled out. Keswani expressed a desire to see esketamine-like efficacy without the dissociative side effects.

Luke Junk asked about Visteon's expected return to growth in China, specifically inquiring about the trajectory into 2026 and the impact of high-value SmartCore CDC wins in the latter half of the year. He also followed up on the indirect impacts of the Nexperia trade restrictions and customer production risks.

Answer

CEO Sachin Lawande explained that Visteon's China business stabilized in Q3 and is expected to grow in 2026, driven by 20 new model launches, particularly high-performance compute SmartCore systems in the back half. He anticipates outperforming customer vehicle production and will gain more visibility next month. Regarding Nexperia, CEO Sachin Lawande provided detailed context on the supplier's background, the nature of the components, the diplomatic issue leading to supply stoppage, Visteon's higher semiconductor inventory cushion, and ongoing mitigation efforts, expressing hope for a swift resolution.

Luke Junk of Robert W. Baird & Co. asked for an updated perspective on Visteon's ability to operate at "China speed" and play offense in the region as headwinds bottom out, inquiring about progress on both the software and hardware fronts.

Answer

President and CEO Sachin Lawande provided examples of Visteon's speed, such as winning a display program with Chery that will launch within a year and developing cockpit domain controllers in under two years. He credited this to a mature platform approach that allows Visteon to meet about 70% of customer requirements out of the gate. He highlighted a recent infotainment win with Mitsubishi as an example of this rapid development capability. SVP and CFO Jerome Rouquet added that speed to market, along with innovation and cost, has been a key differentiator in recent wins.

Luke Junk requested context on the full-year growth outlook for the display product line and asked about the business dynamics of working with Chinese OEMs on export programs versus domestic programs.

Answer

CEO Sachin Lawande stated that strong double-digit growth in displays is expected to continue throughout the year, driven by a robust pipeline of new launches. He explained that for export business, Chinese OEMs have higher quality expectations and aggressive timelines, which plays to Visteon's strengths and allows the company to defend its pricing better than on China-for-China business.

Luke Junk asked about the growth drivers for Visteon's digital cluster business, considering product launches and geographic mix, and inquired about the factors behind the lower-than-expected net R&D spending, including project timing, recoveries, and R&D rationalization in China.

Answer

CEO Sachin Lawande explained that digital cluster sales grew double-digits excluding China, with the overall flat performance attributed to headwinds in that region. He noted continued growth in the mass-market segment and with new customers like Toyota. CFO Jerome Roquet added that net engineering costs were lower due to strong recoveries and cost-flexing in China to match market conditions, while maintaining a cost-effective platform approach.

Luke Junk requested an update on Mobileye's progress towards driver-out robotaxi operations in Europe, considering regulatory homologation differences compared to the U.S., and the general dynamics between the two regions. He also asked about the trend of more OEMs adding REM to front-facing camera programs, inquiring if it's for data collection or a precursor to advanced product engagements.

Answer

Nimrod Nehushtan, EVP of Business Development and Strategy, explained that Europe's process involves homologation and engagement with regulatory bodies, unlike the U.S.'s self-certification. He highlighted strong support from the German government, with plans to launch first in Germany (Munich, Hamburg, Berlin) in collaboration with Volkswagen Group. Amnon Shashua, CEO and President, confirmed that adding REM is for both data collection (harvesting) and as a precursor to using REM for hands-free driving. Nimrod Nehushtan added that a new major OEM recently signed for REM, expanding the data pool (over 7 million vehicles globally), which is crucial for AI training and competitive advantage.

Luke Junk requested an update on Mobileye's progress towards driver-out robotaxi operations in Europe, contrasting it with the U.S. self-certification process and discussing the regulatory homologation dynamics. He also asked about the trend of OEMs adding REM to front-facing programs, inquiring if it's primarily for data collection or a precursor to advanced product engagements.

Answer

Nimrod Nehushtan, EVP of Business Development and Strategy, explained that Europe requires homologation and engagement with regulatory bodies, with Mobileye working with Volkswagen Group and the German government, aiming for a first launch in Germany (Munich, Hamburg, Berlin). He noted strong government support, as evidenced by the German Chancellor's visit and positive remarks. Amnon Shashua, CEO and President, confirmed that adding REM is for both data collection (harvesting) and as a precursor to using REM for hands-free driving. Nimrod added that a new OEM recently signed for REM, expanding the data pool for AI training and development, with over 7 million vehicles globally now uploading data.

Luke Junk asked for more detail on the better-than-expected business trends in China and inquired if the imminent Imaging Radar award is connected to a broader Chauffeur program win.

Answer

CEO Amnon Shashua and CFO Moran Rojansky noted that China volumes are outperforming expectations, with a stable 20-30% market share and demand running ahead of their conservative initial forecast. Regarding the radar, Shashua clarified that the imminent award is for the sensor itself, separate from other opportunities that bundle it with the Chauffeur system.

Luke Junk (Baird) asked for insights into the Snap-on Franchisee Conference (SFC) orders, particularly regarding big-ticket items or diagnostics momentum, the specific growth rate of diagnostics within the Tools Group, and an update on the Asia-Pacific business, including supply chain exposure.

Answer

CEO Nick Pinchuk noted SFC orders were up nicely in mid-single digits with no unusual mix, emphasizing they are orders, not sales. He confirmed that diagnostics growth in the Tools Group was as strong as or exceeded the double-digit growth seen in RS&I. For Asia-Pacific, he distinguished between poor internal export business due to supply chain adjustments and relatively good external sales in markets like China, India, and Southeast Asia despite regional turbulence.

Luke Junk of Robert W. Baird & Co. asked about the drivers behind the Tools Group's improved performance in Q2 versus Q1, focusing on internal execution, credit originations, and end-market trends within the C&I group's critical industries.

Answer

CEO Nicholas Pinchuk attributed the Tools Group's Q2 rebound to stabilizing technician uncertainty and a successful pivot to faster-payback items. He noted that credit originations improved from Q1 but remained down. CFO Aldo Pagliari added that within C&I's critical industries, demand was slow in April but improved through the quarter, especially in aviation and military sectors.

Luke Junk of Robert W. Baird & Co. asked about the significant performance shift in the Tools Group from Q1 to Q2, inquiring about the key internal execution drivers and the outlook for credit originations. He also questioned the end-market trends within the C&I group's critical industries.

Answer

Nicholas Pinchuk, Chairman & CEO, attributed the Tools Group's Q2 improvement to the company's 'pivot' to faster-payback items gaining traction as technician uncertainty stabilized. He noted that credit originations improved but remained down, with a full recovery dependent on customer confidence. Aldo Pagliari, SVP - Finance & CFO, added that within C&I, April was the slowest month, with momentum improving in aviation, military, and general industry as the quarter progressed.

Luke Junk of Robert W. Baird & Co. asked how the Tools Group can 'play offense' in the current environment, focusing on marketing and investment allocation, and also inquired about franchisee sentiment regarding their own business operations and working capital.

Answer

CEO Nicholas Pinchuk stated that the company will focus its 'offense' by shifting development and promotion to the lower end of big-ticket categories, like the SOLUS diagnostic tool and tool carts, where they have seen success. Regarding franchisees, he noted their financial health is down but not at threatening levels, and while franchisee exits are stable, recruiting new ones is more challenging in the current environment.

Luke Junk asked for more detail on the current strength in the specialty torque business, including thoughts on future organic investment and potential M&A. He also questioned how much of a recovery in big-ticket item sales would be needed for the Tools Group to achieve its long-term growth targets.

Answer

CEO Nicholas Pinchuk identified specialty torque as a key area for investment, both organically through combining technologies from units like Norbar and Mounts, and potentially through further acquisitions. Regarding big-ticket sales, he explained that while the company can continue to grow by pivoting to smaller items, a reduction in macro uncertainty would be necessary to 'fire on all cylinders' and accelerate growth by re-engaging customers in larger purchases.

Luke Junk asked about the specific execution drivers behind the Tools Group's sequential growth, such as capacity and promotions, and requested a deeper analysis of diagnostics performance across both the RS&I and Tools Group segments.

Answer

CEO Nicholas Pinchuk credited the Tools Group's success to a combination of pivoting product development, improved factory capacity from recent expansions, and company-wide RCI initiatives. On diagnostics, he noted relative year-over-year strength fueled by the successful launch of the Apollo Plus platform and highlighted that rising software subscriptions are a significant positive profitability driver for the corporation.

Luke Junk asked about the automotive segment's contribution to Methode Electronics' projected EBITDA doubling and its long-term operating vision, specifically beyond non-repeating items.

Answer

CEO Jonathan DeGaynor detailed regional performance, noting significant improvements in EMEA, challenges in North America due to legacy program roll-offs and EV delays, and stable operations in Asia. He anticipates EV volume stabilization and growth in fiscal 2027, which will benefit North America, alongside data center activity in Mexico. He also clarified that the Asia team is leading EV product development and serves as a key launch and validation facility, contributing to global growth.

Luke Junk asked about the automotive segment's contribution to Methode's projected doubling of EBITDA, particularly beyond non-repeating operating items, and the long-term operating vision for the business. He also inquired about the strategic outlook for the Asia automotive business following legacy program roll-offs, especially concerning EV opportunities in China. Lastly, he asked about the impact of the appliance program roll-off on the interface business and any offsets from trim taper business.

Answer

President and CEO John DeGaynor explained that EMEA automotive performance significantly improved, Asia showed stability, while North America faced challenges from program roll-offs and EV delays, particularly with Stellantis. He anticipates EV volumes to stabilize and grow in fiscal 2027, providing tailwinds for North American facilities, complemented by data center activity in Mexico. For Asia, Mr. DeGaynor highlighted the team's leadership in EV product development, such as battery interconnects, and its role as a launch and validation facility, noting its strong operational, engineering, and working capital performance. Regarding the interface business, Mr. DeGaynor confirmed that the impact of appliance and Whirlpool program roll-offs was consistent with previous guidance, with new program ramp-ups and data center activity providing backfill.

Luke Junk asked about the automotive segment's contribution to Methode Electronics' projected doubling of EBITDA, its long-term operating vision, and the strategic outlook for the Asia automotive business, particularly regarding EV opportunities after legacy program roll-offs. He also inquired about the impact of appliance program roll-offs on the interface business in Q1 and any offsets from new programs or data center activity.

Answer

President and CEO John DeGaynor explained that EMEA automotive performance has significantly improved, while North America faces challenges from legacy program transitions and EV delays, particularly with Stellantis. He anticipates EV volumes to stabilize and grow in fiscal 2027, benefiting North America. For Asia, Mr. DeGaynor highlighted its leadership in EV product development, serving as a key launch and validation facility, and noted its strong operational, engineering, and working capital performance despite legacy program headwinds. Regarding the interface business, he confirmed that the impact of user interface and Whirlpool business roll-offs in Q1 is consistent with previous guidance, with new program ramp-ups and data center activity providing offsets.

Luke Junk from Robert W. Baird & Co. asked about the key operational levers enabling Methode to double its EBITDA in fiscal 2026 despite a projected $100 million sales decline. He also inquired about the percentage of the 30 new launches that are for EV platforms and how the company is mitigating risks from program delays, like the one with Stellantis. Finally, he requested details on the balance sheet's leverage waiver.

Answer

CEO Jonathan DeGaynor explained that the EBITDA growth is driven by the elimination of significant one-time expenses from fiscal 2025, including $22 million in inventory reserves, $12 million in warranty/quality issues, and other legal and restructuring costs. He noted that while many new launches are for EVs, the company is repurposing capabilities to support growth in the data center market. CFO Laura Kowalchik added that the leverage covenants were relaxed, starting at 4.25 in Q1 and adjusting thereafter, and the company is confident in meeting them.

Luke Junk of Robert W. Baird & Co. asked about the key earnings levers enabling Methode to project a doubling of EBITDA in fiscal 2026 despite a $100 million sales decline, the mix of EV platforms in the 30 upcoming launches, and the specifics of the amended leverage covenant waiver.

Answer

CEO Jonathan DeGaynor explained that the EBITDA growth is driven by the elimination of significant one-time costs from fiscal 2025 (including inventory, warranty, and legal expenses) and ongoing operational improvements. He noted that guidance is based on conservative third-party data and that some EV-related assets will be repurposed for data center growth. CFO Laura Kowalchik clarified that the amended leverage covenant was relaxed, starting at 4.25x in Q1 and providing flexibility.

Luke Junk from Robert W. Baird & Co. Incorporated asked for an analysis of the sequential margin momentum in the Automotive segment, an update on new business awards, clarification on the fiscal 2026 high single-digit growth forecast, and Methode's strategy regarding potential U.S. tariffs on products from Mexico.

Answer

President and CEO Jonathan DeGaynor addressed the margin question by highlighting that despite a $19.6 million year-over-year revenue decline, adjusted operating income improved by $1.6 million, indicating a lower breakeven point due to reduced scrap, freight, and overtime costs. He reported $20 million in new awards for the quarter ($130 million year-to-date). DeGaynor clarified that the fiscal 2026 high single-digit growth expectation is an organic, like-for-like comparison that excludes the impact of a non-core appliance program roll-off. Regarding tariffs, he stated that Methode has proactively communicated to customers that it will not absorb the extra costs and that about one-third of the company's total sales are potentially impacted.

Luke Junk from Robert W. Baird & Co. asked for an analysis of the sequential margin momentum in the automotive segment, an update on new business awards, clarification on the high single-digit growth forecast for fiscal 2026, and the company's strategy regarding potential U.S. tariffs on products from Mexico.

Answer

President and CEO Jonathan DeGaynor responded by highlighting significant year-over-year operational improvements, such as reduced scrap and freight costs, which improved adjusted operating income despite a $20 million sales decline, indicating a lower breakeven point. He stated new business awards were $20 million for the quarter. DeGaynor clarified the high single-digit growth for FY26 is an organic, like-for-like comparison excluding a non-core appliance program roll-off. Regarding tariffs, he asserted that Methode has communicated to customers that it cannot absorb the extra costs.

Luke Junk asked for clarification on the Q3 pretax income outlook, the current status of the 30+ program launches, potential for delays, and specific color on the major Stellantis launch. He also inquired about the data center business and whether its growth was driven by AI.

Answer

CEO Jonathan DeGaynor clarified that the weaker Q3 outlook is due to normal seasonality (holidays and shutdowns) and not any one-off issues from Q2. He stated that many of the 30+ launches are in ramp-up, split between North America and EMEA, and acknowledged some potential customer-driven timing shifts in EV programs. Regarding Stellantis, he confirmed its importance as a future $200M+ customer and noted some publicized timing shifts in their EV launches, but stressed Methode is not overexposed. He also confirmed data center growth is driven by both AI and core demand.

Luke Junk of Robert W. Baird & Co. inquired about the drivers of the sequential gross margin improvement in the Automotive segment, the strategic outlook for the Interface business amid a major appliance program roll-off, and new CEO Jon DeGaynor's primary focus areas during his initial months.

Answer

CEO Jonathan DeGaynor attributed the margin improvement to operational enhancements, price increases, and supplier cost reductions, noting these efforts are ongoing. He explained that while the Interface business faces a roll-off, the company is seeking new synergies and launching numerous new programs aligned with industry megatrends. DeGaynor outlined his top priorities as executing over 50 new program launches in the next two years, driving integrated financial improvements across the supply chain, and building out the executive leadership team.

Luke Junk asked about the key levers for Methode's projected EBITDA growth in fiscal 2026 despite a significant sales decline, the composition of the 30 new program launches, and how the company is mitigating risks from EV program delays, particularly from Stellantis. He also sought clarification on the company's leverage covenant waiver.

Answer

CEO Jonathan DeGaynor explained that fiscal 2026 EBITDA is expected to double due to the elimination of one-time expenses from fiscal 2025—such as warranty, legal, and consulting fees—and ongoing operational improvements. He noted that while many new launches are for EV platforms, the company is also leveraging its capabilities to support growth in the data center market. DeGaynor clarified that guidance is based on a conservative analysis of third-party data and customer forecasts. CFO Laura Kowalchik added details on the amended credit facility, stating the covenants were relaxed and the company feels confident in meeting them.

Luke Junk of Robert W. Baird & Co sought clarification on the M&A criteria, specifically the comment that acquisitions would not be "purely" strategic. He also asked about the margin outlook for the PowerDrive Systems (PDS) segment, considering the fast product cycles and engineering demands in China.

Answer

CEO Joseph Fadool explained that the company's portfolio is now in a stronger position, so the M&A criteria are tighter, prioritizing near-term earnings accretion and strong industrial logic over purely strategic, money-losing pivots. CFO Craig Aaron stated the goal for PDS is to convert growth at mid-teens margins, which they achieved in H1. Fadool added that China's fast cycles can lower R&D costs and allow for capital reuse, supporting profitability.

Luke Junk asked for a breakdown of tariff recovery impacts by business segment, specifically between foundational and eProducts, and inquired about any unique tariff-related challenges for the U.S.-based battery business.

Answer

CEO Joseph Fadool stated the company would not break out tariff impacts by segment, emphasizing a unified approach of clarifying, mitigating, and recovering costs across all businesses. He confirmed the battery business is subject to the same process. Executive Craig Aaron added that for the battery business, a major component consideration is the cells imported from Korea.

Luke Junk sought to understand the directional outgrowth assumptions for eProducts and PowerDrive in Europe and China, and how recent foundational product awards could impact growth in 2026-2027.

Answer

CFO Craig Aaron pointed to the new four-segment reporting structure as the best way to track performance transparency going forward. CEO Joseph Fadool added that the increase in foundational awards, often program extensions, demonstrates the strength of their portfolio and their ability to support customers as they adjust their vehicle cycle plans.

Luke Junk asked for an update on BorgWarner's hybrid product pipeline in light of evolving regulations and requested more detail on incremental cost controls and productivity efforts that might extend into 2025.

Answer

Executive Frederic Lissalde highlighted that the company's portfolio is 'fully fungible' for hybrids, as combustion components are carried over and key e-products like inverters are the same for BEVs and hybrids. Executive Craig Aaron added that the company is focused on all areas of cost control, including restructuring and productivity, and this focus will continue given market volatility.

Luke Junk inquired about the sequential decline in the service parts business, asking if there were any one-time factors and how it aligns with the flattish full-year outlook.

Answer

COO G. Bohley clarified there were no specific one-time issues. He attributed the softness to general weakness in global service parts after two very strong years and a cyclical effect where lower-volume vehicle years (e.g., 2020) are now entering the post-warranty service period. This dynamic was consistent with their initial full-year guidance for the segment.

Luke Junk asked for more detail on the moving pieces within the Outside North America On-Highway guidance, questioning why it was projected to be flat despite the company's long-term double-digit growth target for the segment.

Answer

G. Bohley, COO, CFO & Treasurer, attributed the flat guidance to a challenging global market backdrop. He detailed regional dynamics, including success in wide-body mining dumps, a tough comparison in Japan/Australia due to a prior pull-ahead, soft European truck markets offset by defense wins, and new penetration in Brazil's school bus market. The overall outlook for commercial vehicle builds in 2025 is weak.

Luke Junk asked about Allison's levers to increase production throughput, especially in North America, to meet potential pre-buy demand without adding significant overhead, and how the India expansion aids this strategy.

Answer

CEO David Graziosi explained that capacity initiatives involve investments in both Allison's operations and its suppliers. He emphasized that the industry is running at challenging, high rates and is not motivated to add inefficient capacity. The India investment is crucial for relieving system-wide pressure, enabling a return to more efficient 'lean capacity rate operations' and generating cost savings, rather than just adding raw output.

Luke Junk inquired about the key product drivers for the 2025 revenue forecast, the context behind the push for business process standardization, and how the 'Fit for Growth' initiative integrates with the new management's strategy.

Answer

CEO William Presley explained that core Climate and Comfort Solutions (CCS), pneumatics, and steering wheel heaters are all growing, but overall revenue is weighed down by the intentional pruning of non-core businesses like battery performance systems. He characterized the need for process standardization as a normal outcome for a company with Gentherm's history of M&A and rapid growth. CFO Jon Douyard added that 'Fit for Growth' will be institutionalized as a cultural continuous improvement mechanism rather than a discrete program with specific targets.

Luke Junk asked about the near-term performance of Climate Control Seat (CCS) solutions, the sustainability of strong growth in lumbar and massage products, and which new technologies might see an uptick in awards.

Answer

Phillip Eyler, President and CEO, clarified that CCS performance was mainly impacted by production declines from global OEMs in China and specific Hyundai models in Korea. He affirmed that the growth in lumbar and massage is in its early stages, with many new awards yet to launch with customers like GM and Stellantis. For future technology wins, Eyler highlighted strong customer activity around the Pulse A massage system, the new CompactVent solution, and continued discussions for ClimateSense and WellSense.