Michael Fisher

Michael Fisher, on for Amit Daryanani, requested an overview of Carmen's exposure to various drone programs, including lower-cost systems. He also asked whether the company anticipates the Golden Dome program's launch volume will be dominated by a single provider like SpaceX or involve multiple launch partners.

Answer

CEO Tony Koblinski confirmed involvement in key programs like Switchblade and Coyote and stated a goal to partner across the unmanned systems spectrum, which he sees as a major growth driver. He asserted that the Golden Dome program will "without question" require multiple launch providers, noting Carmen is agnostic as it supplies components to nearly all major US launch companies.

Speaking for Amit Daryanani, Michael Fisher requested an overview of Carmen's exposure to various drone programs, from high-end loitering munitions to lower-cost systems. He also asked if the launch volume for the Golden Dome program is anticipated to come from a single provider or multiple providers.

Answer

CEO Tony Koblinski confirmed Carmen's broad partnership across the unmanned and counter-unmanned systems spectrum, while declining to disclose non-public program details. On the Golden Dome program, he stated that multiple launch providers will be required to build out the space layer and that Carmen is launch-agnostic, supplying components to nearly all major players.

Michael Fischer from Evercore ISI asked about the long-term potential for free cash flow conversion from EBITDA in a normalized environment, excluding current working capital and capex headwinds. He also questioned the reasoning behind the guidance for a sequential decline in NICS adjusted EBITDA for Q2.

Answer

CFO Kyle Lorentzen indicated that in a normalized environment, the over $200 million invested in working capital and capex in 2025 would theoretically fall back into free cash flow. He explained the expected Q2 sequential decline in NICS EBITDA is due to one-time favorable inventory adjustments in Q1 and the timing of booking incentive compensation costs, with a return to growth expected in the second half of the year.

Speaking on behalf of Amit Daryanani, Michael Fisher of Evercore ISI asked about the drivers of ADI's significant gross margin improvement, specifically questioning the contribution from the 34% growth in exclusive brand revenue. He also inquired about the factors behind the Snap One acquisition synergies coming in ahead of schedule.

Answer

Robert Aarnes, President of ADI Global Distribution, clarified that the 34% growth was on legacy ADI exclusive brands and that distributing Snap's exclusive brands to the larger ADI customer base presents a significant future margin opportunity. He attributed the accelerated synergy realization, primarily from cost savings, to a successful integration strategy that blended the leadership teams of both companies, allowing for faster identification and execution of opportunities.