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CFO Erica Wei confirmed a retrospective reclassification of delivery fees from product to service revenue to provide greater transparency, effective Q1 2025. She attributed the guided Q2 slowdown primarily to the Noble House integration, as the company is replacing seasonally strong outdoor SKUs from the prior year. She also noted that any impact from recent tariff pauses would likely be seen in Q3, not Q2, due to shipping and inventory cycles.

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CFO Erica Wei explained that the SKU retirement is a dynamic process without a fixed target, making it difficult to quantify precisely. She estimated that legacy Noble House revenue would be flat to slightly lower in Q1. On tariffs, Wei stated that the company does not expect a material impact, as the cost increase translates to a very low single-digit retail price change on bulky items. She added that GigaCloud's platform can help partners navigate supply chain shifts, such as sourcing from new regions.

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CFO Sarah Oughtred outlined cost mitigation efforts, including supply chain efficiencies and disciplined G&A spending. CEO Trina Spear explained the reluctance to raise prices, emphasizing the importance of affordability for their core customer base of healthcare professionals and noting that internal cost-saving measures are the priority. Spear also affirmed that underlying business fundamentals remain strong, with positive trends in repeat frequency, AOV, and active customers indicating a normalization of demand post-COVID.

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CFO Sarah Oughtred explained the promotional shift is possible now due to a healthier inventory position. The goal is to solidify long-term brand health. She noted that while their guidance implies a scrubwear decline, it's due to their own promotional changes, as underlying customer trends like traffic and frequency are improving.

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CFO Sarah Oughtred stated the cautious Q4 outlook reflects ongoing footwear trends and the inconsistent promotional response seen in Q3. Co-Founder and CEO Trina Spear explained that top-of-funnel campaigns can yield results over six months to several years, highlighting immediate positive indicators like increased web traffic and leads, which build long-term brand value.

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Co-CEO Michael Karanikolas identified lower AOV and a modest growth deceleration as the primary behavioral shifts. He stated that they have not yet seen a meaningful impact on the product return rate, though it can be a lagging indicator. He noted that while some sentiment indicators improved late in April, the environment remains highly volatile.

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CFO Jesse Timmermans clarified that while the store build-out is a factor in higher G&A, it is not the most significant one, with investments in owned brand expansion also being key. On overall margins, he confirmed that operating margin expansion is a possible scenario but is largely dependent on achieving strong top-line growth.

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Co-CEO Michael Karanikolas responded that while pre-pandemic levels are an aspiration, the primary focus is on making meaningful business and customer experience improvements, not just hitting a number. Co-CEO Michael Mente added that over the long term, physical retail presents a "tremendous opportunity" to reduce return rates through an omnichannel approach, though this would be a multi-year journey.

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CEO David Dunbar confirmed that grid modernization, data centers, and AI are the primary growth drivers for Amran/Narayan, with capacity at 60-70% and expansions planned. CFO Ademir Sarcevic added that European margins for the new plant are expected to be consistent with the group average. Sarcevic also highlighted that core electronics orders were up 10% year-over-year, indicating an inflection point for organic growth is imminent. Regarding leverage, Sarcevic stated the priority is paying down debt from the current 2.8x level, with Dunbar adding this is as high as they are comfortable going.

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President and CEO William Presley stated that Q1 new business awards were in line with historical Q1 trends and internal expectations, and he remains confident in a robust full year for bookings. CFO Jonathan Douyard added that while lower North American volume pressures the revenue forecast, this is partially offset by favorable foreign exchange rates and tariff pass-through revenue, allowing the company to maintain its full-year guidance range, albeit likely toward the lower end.

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CEO William Presley identified his top priorities as scaling core technology platforms beyond automotive seats and standardizing operating systems to improve asset utilization and margins. CFO Jon Douyard clarified that while the footprint reduction will create a 50-basis-point headwind in 2025, it is critical for achieving mid-to-high teens EBITDA margins long-term, declining to provide a specific savings figure at this time. Mr. Presley added that the 2025 outlook assumes a more pessimistic auto production environment than S&P forecasts, reflecting market uncertainty.

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Phillip Eyler, President and CEO, explained that while Q4 bookings would be solid, they were unlikely to match the record $900 million from the prior year. He attributed the guidance cut primarily to steeper-than-expected light vehicle production declines, particularly in Asia and with customers like Stellantis, along with some EV program delays. Eyler stated that the expected Q4 margin improvement would be driven by the ramp-up of Fit-for-Growth cost savings initiatives, which would offset headwinds from new plant start-up costs in Mexico and Morocco.

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CFO Blaine Browers explained that core armor and duty gear are expected to grow around 3%, while the nuclear business growth is higher due to the full-year inclusion of the Alpha Safety acquisition. He attributed the soft Q1 outlook to a very strong comparison in U.S. Armor from Q1 2024 and lighter, back-end loaded project timing for the EOD business. Blaine Browers specified the tariff exposure is roughly 60% from Mexico and 40% from Canada, with minimal China impact. President Brad Williams reiterated that mitigation plans are in motion, covering pricing, production shifts, and productivity improvements, but the evolving nature of tariffs makes it difficult to quantify the offset.

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CFO Blaine Browers detailed that July was most impacted, with a ramp in August and a strong September despite the second incident. He noted ICOR's contribution was consistent, while Alpha's ramped up sequentially. For Q4, he explained the significant EBITDA margin expansion is driven by SG&A leverage on higher sales, supported by inventory built in Q3 and detailed operational plans to increase production capacity.

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Patrick Maciariello, an executive, attributed Lugano's strong performance to market strength and the growing acceptance of its disruptive business model, rather than a one-time event. He confirmed plans for new salon openings in 2025. For 5.11, he described the 2025 retail strategy as a 'test and learn' approach, with plans to launch a few stores with a different profile towards the end of the year.

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Executive Patrick Maciariello described Lugano's growth as balanced across all salons, transaction values, and transaction volume, driven by its disruptive business model. He cautioned against extrapolating Q3's high margins but affirmed strong Q4 expectations. Executive Elias Sabo characterized the M&A market as muted but expressed optimism for 2025. He stated the company is comfortable with its leverage, given the portfolio's higher growth rate, strong cash generation, and available financing options, allowing flexibility for both M&A and buybacks.

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Executive Patrick Maciariello described Lugano's growth as balanced across all salons, with increases in both transaction value and volume, but cautioned against extrapolating Q3's high margins. Executive Elias Sabo characterized the M&A market as muted but expressed optimism for a 2025 rebound, emphasizing a disciplined approach. He stated the company is comfortable with its current leverage due to higher portfolio growth and has access to additional capital via term loans and bonds if needed.

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Executive Elias Sabo explained that while the weakening economy impacts their valuation of potential deals, they still seek premium, innovative companies and expect to pay premium multiples. Executive Ryan Faulkingham stated that leverage is declining organically due to strong performance and that they are confident in their balance sheet. Executive Patrick Maciariello noted the London salon's success validates their international expansion model. Sabo added that Lugano's inventory-to-sales model remains consistent, with accelerating growth requiring more upfront capital.

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Executive Elias Sabo explained that the economic outlook impacts forward earnings views, making them cautious on valuation, and clarified that the 'not meeting standards' comment refers to a lack of A+ quality businesses on the market, for which they would expect to pay premium multiples. CFO Ryan Faulkingham stated that leverage is already declining organically and they feel the balance sheet is in good shape. Executive Patrick Maciariello shared that Lugano's London success validates their model for Europe, with Elias Sabo adding that Lugano's accelerating growth requires significant, but high-return, inventory investment.

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Executive Bryan Ganz stated that Q1 2025 will see strong year-over-year growth, becoming a record quarter excluding the seasonally high Q4 2024. He noted the new administration has led to more platforms accepting Byrna's ads and downplayed the financial impact of losing the Huckabee endorsement. CFO Lauri Kearnes explained that while variable selling costs are stable, EBITDA leverage will be impacted by increased marketing spend and initial operating expenses from new retail stores, which she quantified at approximately $400,000 to $500,000 per quarter before they ramp up over six months. Bryan Ganz added that the Sportsman's partnership is crucial for rapid expansion, outlining the criteria for success and the faster rollout potential compared to company-owned stores.

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Executive Chairman Bryan Ganz confirmed the $25 million Q4 run rate based on September's performance, which would place full-year revenue over $80 million. He noted strong momentum from celebrity endorsers and retail expansion. CFO Laurilee Kearnes clarified that due to the November 30 fiscal year-end, the impact from Black Friday sales will largely be recognized in Q1 2025. Ganz added that the company's email list has grown to over 526,000 active subscribers, and email frequency will increase in Q4. Regarding new channels, he stated marketing spend is growing by about $200,000 per month and is expected to increase by 50% in the next year, while maintaining a 5x return on ad spend.

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