Noah Kaye • Oppenheimer & Co. Inc.

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CFO Brian Delghiaccio clarified that the higher free cash flow guidance is driven by an $80 million benefit from 100% bonus depreciation, partially offset by a $25 million increase in CapEx. Regarding margins, he explained that a positive mix shift from high-margin, event-driven landfill volumes (related to hurricane and wildfire cleanup) is helping expand margins. CEO Jon Vander Ark added that achieving margin expansion in a challenging demand environment highlights the underlying strength and resilience of the business.

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CFO Brian Delghiaccio explained the free cash flow increase is due to an $80 million benefit from bonus depreciation, partially offset by a $25 million increase in CapEx for lease buyouts. For the margin outlook, Delghiaccio noted a positive mix shift, as high-margin event-driven landfill volumes from cleanup activities are offsetting lower-margin collection and ES volumes. CEO Jon Vander Ark added that expanding margins in a challenging demand environment highlights the business's underlying strength.

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CFO Brian DelGhiaccio stated that Q1 organic growth in Environmental Solutions was impacted by weather and project timing, but March performance was strong. He clarified that net fuel had no year-over-year impact on margins, while one less workday provided a 40 basis point benefit. Regarding M&A, CEO Jon Vander Ark expressed confidence in exceeding the target, stating, 'I like our chances to beat it.'

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CEO Jon Vander Ark estimated cost inflation at approximately 4%, indicating a positive spread against the 5% yield. CFO Brian DelGhiaccio stated that margin expansion should be more balanced quarterly in 2025 than in prior years, with positive expansion expected in every quarter.

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CEO Jon Vander Ark explained that organic volume in Environmental Solutions was relatively flat due to a strategic focus on pricing and shedding less profitable accounts, a trade-off he endorsed. He reiterated that a margin expansion pace of 80-100 basis points annually across the cycle is a reasonable expectation for the segment.

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CEO Doron Blachar explained that supportive administrative policies are significantly accelerating BLM permitting timelines, enabling faster project releases. He also detailed the company's multi-stage safe harbor process for its energy storage pipeline, confirming that projects through 2028, and some beyond, have secured ITC eligibility without FEOC limitations by safe-harboring batteries in 2024 and 2025.

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CEO Doron Blachar and CFO Assaf Ginzburg confirmed that 2025 generation would see a modest increase due to late-year project completions and curtailments, setting up stronger growth in 2026. They explained the higher exploration budget is a strategic response to PPA prices exceeding $100/MWh, aimed at de-risking greenfield sites for post-2028 growth. PPA discussions with hyperscalers are for offtake after 2028 and involve both direct and utility-intermediated negotiations.

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CEO Doron Blachar confirmed that Ormat successfully acquired all the lands it nominated in the BLM auction, plus additional sites, bolstering its growth portfolio. He described the proposed NEPA categorical exclusion as a "big step" that will shorten the exploration phase and expedite permitting. Consequently, Blachar expects 2025 CapEx to be higher than 2024, driven by a shift from less expensive core hole programs to more costly full-size well drilling.

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EVP & CFO Andrea Funk confirmed the $80 million in savings equates to a significant potential margin uplift but emphasized the program's strategic goal is to increase speed and customer focus, not just cut costs. President & CEO Shawn O'Connell highlighted early wins from the new COE structure in supply chain, which is helping mitigate tariff impacts. For growth, he cited examples of expanding wallet share with existing customers by adding IoT monitoring and future battery energy storage systems (BESS) to their core battery offerings.

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Incoming CEO Shawn O'Connell described near-term tariff-related disruptions in Motive Power but noted a return to normal order cycles. CFO Andrea Funk provided the EPS bridge, explaining that the year-over-year increase is driven by the Bren-Tronics acquisition and 45X benefits, which offset FX pressure and lower volumes. CEO David Shaffer added that full-year guidance was paused to await clarity on reciprocal tariff negotiations, which could have both positive and negative impacts.

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CFO Andrea Funk detailed the Q4 outlook, noting that while the 8-10% margin for Energy Systems is a near-term goal, it's unlikely in Q4 due to a slower-than-expected recovery and under-absorption at the Missouri plants. COO Shawn O'Connell and CEO David Shaffer explained that the communications recovery is bifurcated, with product sales rebounding ahead of service revenue, which is currently lagging. They noted encouraging signs of project work related to AI data demand, which is driving network power upgrades.

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CEO David Shaffer stated they anticipate no change to the DOE award, as a domestic defense supply chain is a bipartisan priority. CFO Andrea Funk detailed the project timeline, with production expected in calendar 2028, and explained that government funds would likely be reimbursed quarterly and booked as a reduction to the asset's basis. Regarding Bren-Tronics, she noted that while performance and synergies are exceeding expectations, they are forecasting conservatively.

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CEO Craig Cornelius stated that the company's safe harbor strategy is secure, its supply chain was proactively designed to comply with FOC provisions, and its pipeline has minimal exposure to new federal permitting risks. CFO Sarah Rubenstein confirmed that the full $850 million notional amount of the 2028 bond maturity has been pre-hedged to lock in the base interest rate.

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CEO Jennifer Rumsey explained that R&D is currently peaked and focused on the 2027 product launches, with minimal resources spent on contingency plans. Regarding data centers, she noted that Cummins has limited offerings in stationary energy storage and is evaluating the microgrid space, but its primary role remains backup power generation with no firm decisions on expansion to announce.

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Chair and CEO Jennifer Rumsey explained that engineering efforts are primarily focused on the planned 2027 product launches, though some contingency work is being done. Regarding microgrids, she noted that Cummins has limited offerings in stationary energy storage and natural gas today and, while it's an interesting area, no firm decisions have been made to expand the portfolio significantly.

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CEO Jennifer Rumsey confirmed that R&D spending is at a record level and is expected to normalize after the 2027 product launches are complete. Regarding the medium-duty market, she described demand as remaining strong, with the market expected to be flat to up 5% for the year, and noted that this strength is likely to continue into next year, partly driven by the outlook for future regulations.

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Joshua Baribeau, SVP & Chief Investment Officer, stated that while no specific leverage target is being issued, the company is comfortable with its current position and expects leverage to decrease as EBITDA grows. George Sakellaris, Chairman, CEO & President, attributed the 46% year-over-year growth in contracted backlog to heightened market demand for infrastructure upgrades. Both Sakellaris and CFO Mark Chiplock confirmed that margins on this backlog are trending slightly upward. Nicole Bulgarino, President of Federal Solutions & Utility Infrastructure, added that Ameresco is well-positioned to provide energy supply solutions for the growing data center market and has several projects in early stages.

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CFO Mark Chiplock confirmed a favorable resolution for the previously paused or canceled federal contracts, with one being rescoped and two unpaused with minor adjustments. CEO George Sakellaris added that the budget-neutral nature of their projects remains attractive to any administration. Regarding margins, Mr. Chiplock expressed confidence in the full-year guidance of 15.5% to 16%. Mr. Sakellaris also commented that events like the European blackouts highlight the growing need for distributed generation and battery storage to support grids with high renewable penetration, representing a core opportunity for Ameresco.

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President Nicole Bulgarino explained the project pauses are specific to the General Services Administration (GSA), which is evaluating the sale of certain buildings, potentially requiring projects to be rescoped. CEO George Sakellaris added that the administration still favors these budget-neutral projects. CFO Mark Chiplock detailed that 2025 EBITDA growth will come from the contracted project backlog, incremental contributions from newly operational energy assets, and linear growth in O&M.

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CEO George Sakellaris explained the new structure aims to improve project selection, investment decisions, and procurement by consolidating responsibilities and fostering collaboration among the new presidents. On capital allocation, he reiterated the goal of growing the asset base by about 20% annually while not overstressing the balance sheet. He noted that Ameresco develops more projects than it can hold and monetizes the excess, which generates strong cash flow.

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President & CEO Neil Brinker confirmed they have long-term visibility (1-3 years) and are coordinating capacity additions with customer timelines, noting existing facilities will be retooled first, followed by greenfield sites. He attributed the growth to accelerated customer demand and new wins. EVP & CFO Michael Lucareli added that the European HQ sale is pending regulatory approval and the process to exit the light-duty automotive business is ongoing.

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EVP and CFO Mick Lucareli detailed the Climate Solutions outlook: data centers growing over 30%, heating/IAQ up low-double digits, and heat transfer products flat to slightly down. President and CEO Neil Brinker confirmed the capacity doubling is specific to North America. Mick Lucareli clarified that no divestitures are included in the fiscal 2026 guidance. Regarding margins, he explained that Performance Technologies is expected to see margin improvement from cost reductions, while Climate Solutions margins will be relatively flat due to reinvestment for growth, resulting in the blended company-wide incremental margin.

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President and CEO Neil Brinker reiterated his confidence in the Investor Day goals, citing the expansion from 1.5 to roughly 10 global facilities, which provides the footprint to exceed $1 billion in revenue by adding equipment and assembly lines. EVP and CFO Mick Lucareli clarified that the Performance Technologies baseline should be viewed as having a flat top line, with earnings growth driven by margin improvements from 80/20 initiatives and planned divestitures, which are separate from the cyclical market weakness.

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President and CEO Neil Brinker attributed Scott Springfield's success to increased capacity driving volume and cross-selling opportunities. EVP and CFO Mick Lucareli projected a seasonally lower Q3 margin followed by a Q4 rebound, with Climate Solutions remaining strong while the PT segment faces temporary softness from market headwinds and customer shutdowns. He noted PT's Q4 outlook should firm up with customer orders and new product launches.

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CFO Joan Hooper attributed the strong margins to structural improvements in the Device Solutions segment, such as exiting lower-margin product lines, and stated the current margin profile is a solid baseline. CEO Tom Deitrich clarified that the revenue outlook adjustment is due to customers stretching out deployment timelines for projects already in the backlog, citing labor and annual budget constraints, rather than project cancellations. He characterized the issue as a temporary phasing of revenue.

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CEO Tom Deitrich stated it was premature to update full-year guidance, a practice typically done after Q2, but acknowledged the strong first-half performance amidst tariff uncertainty. CFO Joan Hooper added that first-half EPS is tracking 10% ahead of prior consensus and noted that while Device Solutions margins are ahead of plan, some quarterly variability is expected due to factors like seasonality.

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CFO Joan Hooper confirmed expectations for continued improvement in free cash flow as a percentage of revenue in 2025, noting the current cash balance contributes to EPS via interest income. CEO Tom Deitrich added that Itron is actively evaluating M&A targets, focusing on 'outcomes forward' and Grid Intelligence technologies to round out the portfolio. Deitrich also stated that the Outcomes business should be the fastest-growing segment, with significant runway to add more applications per endpoint and an ultimate target of 75-80% recurring revenue.

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CEO Tom Deitrich explained that Grid Edge Essentials broadens the market for distributed intelligence (DI) to smaller utilities and that the Outcomes segment's revenue mix should shift back toward higher-margin SaaS and licensing revenue over time. CFO Joan Hooper stated that the normalized tax rate going forward is approximately 25%, noting the Q3 benefit was a one-time resolution of an old foreign tax audit.

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CEO Giordano Albertazzi confirmed a clear acceleration in modular solutions, driven by the industry's need for deployment speed. He clarified that for Vertiv, this involves prefabricating its own core technology—power, cooling, and controls—into integrated systems, which is a key value-add rather than simple integration.

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CEO Giordano Albertazzi confirmed the trend is accelerating, driven by customers' need for deployment speed and challenges with skilled labor. He clarified that for Vertiv, modular solutions are not a separate business but an integrated way to prefabricate and package their own core technologies, like power and cooling, to deliver more value.

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CEO Giordano Albertazzi confirmed that the market is unfolding in line with the 5-year model presented at the Investor Day. He stated that the cloud and colocation segments remain strong, consistent with the previously guided growth rate, and noted that other demand areas like sovereign AI and enterprise are also beginning to contribute.

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CEO Giordano Albertazzi attributed confidence in the price-cost outlook to good visibility into pricing in the backlog and pipeline, combined with strong visibility on the cost side. CFO David Fallon explained that the Q4 CapEx ramp is a typical seasonal pattern, not a strategic acceleration, with spending on identified capacity expansion projects often concentrating late in the year.

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EVP & CFO Chris Kuehn updated the full-year pricing assumption to 'a bit above three points,' with volume contributing closer to five points. He explained that the EMEA investments, part of their bolt-on M&A strategy, have lower initial margins but are crucial for fortifying their channel position. This provides greater long-term optionality and confidence in outperforming the market in that region.

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CEO David Regnery responded that while he did not have the specific level of detail on hand, it would be a 'great assumption to make' that the mix is indeed shifting more towards retrofit projects.

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CEO Dave Regnery acknowledged that these policies provide a tailwind and make project paybacks more attractive, but emphasized that Trane's solutions offer great paybacks even without them. He used ESSER funding as a specific example, confirming it is part of their backlog with orders for schools being fulfilled through next year. He concluded that the company is optimistic and will be successful regardless of future policy changes, as their value proposition is fundamentally strong.

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SVP Rafael Carrasco confirmed WM is targeting the upper end of the $80-100M synergy range for 2025, with internalization benefits ramping in H2. EVP & CFO Devina Rankin added that this positions them well for 2026. SVP & Chief Sustainability Officer Tara Hemmer stated that 90% of 2025 RNG offtake is contracted at favorable prices and that recycling EBITDA grew 17% despite lower commodity prices due to automation.

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Executive Tara Hemmer stated that a passive receiver exemption for PFAS would be positive and that PFAS is viewed as a business opportunity. Executive Rafael Carrasco confirmed a $16 million synergy capture in Q1. He added that while commodity prices had some impact, the plan is to leverage WM's experience to accelerate the shift to a full fee-for-service model in the Secure Information Destruction business.

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EVP and CFO Devina Rankin explained that yield is impacted by business mix, such as growing landfill volumes. President and CEO Jim Fish added that significant margin opportunity remains in the residential business. Rafael Carrasco, head of WM Healthcare Solutions, detailed that the increased synergies come from larger SG&A and OpEx opportunities. Devina Rankin outlined the cash flow bridge, noting higher cash interest and taxes will partially offset strong EBITDA growth, with working capital providing less of a tailwind than in 2024.

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EVP & COO John Morris confirmed nearly $800 million in acquisitions in strategic markets like Arizona, Florida, and Long Island, with a strong pipeline remaining. EVP & CFO Devina Rankin quantified the 2025 rollover contribution at approximately $150 million in revenue and $35 million in EBITDA. Rankin also clarified that the Q4 outlook anticipates volume trends consistent with Q3, with any revenue moderation stemming from caution around commodity prices, not core volumes.

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CFO Michael Quenzer explained the inventory build was a strategic decision to ensure a smooth R-454B transition and support new initiatives like Samsung products and emergency replacement. He expects inventory to normalize in the second half, consistent with the full-year free cash flow guide. CEO Alok Maskara stated he does not expect a significant demand pull-forward from the 25C credit expiration, as it impacted a relatively small percentage of units sold.

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CFO Michael Quenzer stated that in Q1 Home Comfort Solutions, 2-step revenue grew 11% while 1-step grew 5%, reflecting sell-through of R-410A in the channel. CEO Alok Maskara addressed the USMCA hypothetical, stating Lennox has multiple scenarios planned, which could involve shifting mix towards higher-margin U.S.-made products and other productivity and pricing actions to offset impacts.

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CEO Alok Maskara detailed that Lennox would be a net beneficiary of China-specific tariffs due to its diversified supply chain and Samsung JV. He explained that potential Mexico tariffs would likely be managed through productivity, currency effects, and industry-wide price increases. He also highlighted a focus on supply chain redundancy and monitoring consumer confidence as part of their strategy.

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CFO Michael Quenzer, credited by CEO Alok Maskara for driving cash flow discipline, reiterated the capital deployment priorities: annual dividend growth, disciplined bolt-on acquisitions, and using share repurchases to return excess cash. Quenzer and Maskara noted the M&A focus is on bolt-on technologies, commercial product offerings, and distribution opportunities to enhance the product assortment for dealers.

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CFO Marc Vandiepenbeeck described the tariff impact as a 'dampener' on margin rate expansion, not a headwind, due to the pass-through cost strategy. CEO Joakim Weidemanis clarified that no new structures are planned; the new regional model will house dedicated teams for key verticals like data centers, a proven approach he has used before.

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CFO Marc Vandiepenbeeck noted that Applied and Industrial Refrigeration would continue to see strong growth, while Controls and Fire & Security face a more challenging second half. He stated the current service attachment rate is in the low-to-high 40% range, with a long-term entitlement goal of 60-70% or higher, similar to the elevator industry.

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CFO Marc Vandiepenbeeck confirmed both assumptions were correct. He described the restructuring program as being focused on simplifying the cost structure and better leveraging resources to enhance the customer experience. The goal is to refine the operating model to facilitate greater simplicity and clarity following the significant portfolio change.

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Co-CEO Eric Gerstenberg confirmed a robust and growing PFAS pipeline, viewing recent EPA actions as positive momentum. He reiterated expectations for 15-20% PFAS revenue growth and noted the EPA/DoD incineration study results are expected in Q2. Regarding incineration, Gerstenberg stated that mid-single-digit price growth is a reasonable expectation and that the Kimball facility is ramping up well without creating overcapacity.

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Co-CEO Eric Gerstenberg confirmed a robust and growing PFAS pipeline, viewing recent regulatory momentum as positive and reaffirming a 15-20% revenue growth path. He stated that mid-single-digit incineration price growth is a sustainable assumption and that the Kimball facility is ramping up well with strong demand, potentially exceeding its 2025 tonnage goals. Co-CEO Mike Battles added that initial concerns about overcapacity from Kimball have not materialized.

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CFO Eric Dugas explained the Q1 ES growth of 5.5% is driven by HEPACO contributions and pricing, offset by a tough comparison to a large project in the prior year. He noted the full-year ES growth is bolstered by the Kimball ramp-up. Co-CEO Eric Gerstenberg detailed the Kimball ramp, expecting 28,000 incremental tons and $8M-$12M in EBITDA for the year. Co-CEO Mike Battles added that Kimball's contribution will be backend-loaded in 2025. On MACT standards, Gerstenberg expects a multi-year implementation process that will create opportunities, particularly from captive operators needing to invest capital.

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Co-CEO Michael Battles stated that the ES segment should see continued margin expansion in Q4, noting Q3 margins would have been up approximately 100 basis points absent challenges in Industrial Services. CFO Eric Dugas explained that working through the SKSS inventory will likely extend into 2025, which will cause a margin squeeze in Q4 but should lead to improvements next year. The idling of the California re-refinery is a key part of this inventory management strategy.

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CEO David Gitlin acknowledged near-term political uncertainty in Germany but pointed to long-term structural tailwinds like EU climate goals and rising fossil fuel costs. He emphasized a key strategic shift towards selling complete home energy systems (PV, heat pump, battery) that are less dependent on subsidies, viewing this as a major opportunity to increase customer wallet share and differentiate the Viessmann channel.

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Patrick Goris, CFO, explained that the Refrigeration segment's margin, excluding commercial refrigeration, would be up about 300 basis points this year, and its absence will provide a 50 basis point lift to Carrier's total margin in 2025. David Gitlin, CEO, noted that while North American truck and trailer is having a tough year, they are positioned for growth in 2025. He also confirmed Viessmann is on track for its $75 million synergy target this year, possibly more, with a ratable capture expected going forward.

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Blake Moret, Chairman and CEO, clarified that these investments are a mix of both OpEx and CapEx. He mentioned the expansion of the Cubic facility, a new facility in India, and IT infrastructure upgrades as examples. While they have an OpEx component reflected in the EPS bridge, they also involve capital spending.

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Executive Frederic Lissalde described the Q3 recovery as 'a little exceptional' and stated that each situation with a customer is specific. He emphasized that BorgWarner focuses on maintaining flexibility in design and production to partner with customers for the long term, rather than anticipating a recurring stream of such payments.

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