Sam Darkatsh

Sam Darkatsh asked for clarification on first-quarter sales, gross margin, and EBITDA expectations, and also inquired about the gross margin, general and administrative expenses, and tariff expectations for the low and high ends of the 2026 guidance.

Answer

CFO Santiago Giraldo indicated that Q1 expectations are generally in line with Q4, considering scheduled maintenance. For 2026, gross margins are projected to vary by 200 basis points between the high thirties and low forties, primarily influenced by raw material input costs and foreign exchange. SG&A as a percentage of revenue is expected to decrease due to the absence of aluminum tariffs incurred in 2025, though nominal G&A will rise with revenue growth. Tariffs are anticipated only on standalone products, with their impact mitigated by sourcing aluminum from the U.S.

Sam Darkatsh asked for clarification on Tecnoglass's Q1 2026 sales, gross margin, and EBITDA expectations, as well as the 2026 guidance framework for gross margins, general and administrative expenses, and tariffs.

Answer

Santiago Giraldo, Chief Financial Officer, indicated that Q1 2026 is expected to be in line with Q4 2025, factoring in scheduled maintenance. For 2026, he projected gross margins in the high thirties to low forties, depending on raw material costs and FX. G&A as a percentage of sales is expected to decrease due to the absence of aluminum tariffs incurred in 2025, despite nominal increases from growth.

Sam Darkatsh of Raymond James inquired about the conclusion of the company's strategic review, including its valuation implications, the potential use of the newly expanded share repurchase program, the initial outlook for 2025, and contingency plans for potential port strikes.

Answer

Executive Santiago Giraldo stated that the board determined organic growth is the best path for shareholder value and that share repurchases would be opportunistic, dependent on cash flow. While too early for specific 2025 guidance, he expects margins to trend upwards. Executive Christian Daes added that the company utilizes private ports unaffected by potential strikes and maintains a two-week inventory buffer to ensure supply continuity.

Sam Darkatsh asked about WESCO's anticipated data center growth for the first half versus the second half of 2026, or the expected exit rate for data centers within the current guidance. He also inquired about the fourth-quarter free cash flow miss, primarily on the receivables side, and sought reconciliation for the 2026 guidance of roughly 100% free cash flow of net income, questioning why it wasn't higher given improving vendor lead times.

Answer

EVP and CFO Dave Schulz indicated that data center activity levels are expected to be relatively consistent by quarter in 2026 on a dollar basis, despite tough comparisons in the first half of 2025. He explained that the Q4 free cash flow miss was due to higher receivables and inventory balances. For 2026, he noted that the $500 million-$800 million free cash flow guidance includes some Q1 collection benefits, and that 100% free cash flow generation typically occurs at lower organic growth rates, implying continued working capital investment for the projected 4%-7% organic sales growth.

Sam Darkatsh asked for clarification on WESCO's data center growth projections for 2026, specifically regarding the anticipated performance in the first half versus the second half, and the expected exit rate for the fiscal year.

Answer

EVP and CFO Dave Schulz noted that Q1 2025 had tough comparables (up 70%) for data centers. He anticipates relatively consistent dollar-based activity levels across quarters in 2026, despite increasing comparables from 2025. Sam Darkatsh also questioned the 2026 free cash flow guidance, which implies roughly 100% of net income, suggesting it might be higher given Q4 2025's receivables impact and improving vendor lead times. Dave Schulz confirmed Q4 2025 free cash flow was impacted by higher receivables and inventory, and stated the $500M-$800M 2026 FCF range includes some Q1 receivables collection benefit. He explained that 100% FCF generation typically aligns with 3-5% organic growth, and with 4-7% organic sales expected, further working capital investments are anticipated, making the current FCF guide appropriate.

Sam Darkatsh of Raymond James inquired whether prospective price increases were weighted more heavily in certain business units and asked how WESCO's contracts handle price hikes on existing backlog.

Answer

John Engel, Chairman, President and CEO, clarified that prospective price increases are more heavily weighted toward the EES and UBS businesses due to greater offshore manufacturing exposure in their supply chains. David Schulz, EVP and CFO, explained that long-lead-time project contracts often have cost escalator clauses to pass through tariff impacts, while for shorter-term projects, pricing is typically locked in with suppliers. He noted that suppliers have not attempted to reprice existing backlog.

Sam Darkatsh asked about the company's confidence in the second-half recovery of the utility vertical and whether gross margins are expected to increase for the full year.

Answer

Chairman, President and CEO John Engel stated that confidence in the utility recovery stems from new customer wins ramping up in H2 2025 and direct discussions with customers who are expected to resume purchasing. EVP and CFO David Schulz added that full-year gross margins are expected to rise, partly due to an anticipated increase in supplier volume rebates from historically low levels in 2024.

Sam Darkatsh inquired about the pricing outlook for 2025, the specific basis point benefit from the one-time supplier rebate in September, and the company's goal for inventory days reduction in the upcoming year.

Answer

CEO John Engel stated that while the number of products with price increases is stable, the magnitude of those increases is lower than a year ago but consistent with the prior quarter. CFO David Schulz quantified the one-time supplier volume rebate benefit as being between 10 and 20 basis points and noted that billing margins have remained stable. He deferred providing a specific 2025 inventory days goal until the Q4 earnings call.

Sam Darkatsh with Raymond James posed three questions: the rationale for a joint venture versus an outright sale, the specific reasons for including Hunter Fan with Home and Building Products (HBP) instead of the JV, and why a strategic review wasn't conducted for the entire company rather than just the European and Australian businesses.

Answer

Ron Kramer, Chairman and CEO, explained that the JV structure allows Griffon to unlock substantial immediate and future value, especially in a weak consumer market, by combining companies for increased economies of scale. He stated Hunter Fan's strong strategic alignment and upside potential with HBP, citing its iconic brand, asset-light model, and double-digit EBITDA, making a sale now poor timing. He concluded that Griffon intends to run and build the remaining company for the foreseeable future.

Sam Darkatsh asked why Griffon opted for a joint venture instead of an outright sale, why Hunter Fan was not included in the JV but combined with HBP, and why a strategic review wasn't conducted for the entire company rather than just the European and Australian businesses.

Answer

Ron Kramer, Chairman and CEO, explained that the JV structure allows Griffon to unlock substantial value immediately and realize additional future value through its minority interest, especially given the current weak market for consumer companies. He stated that Hunter Fan was combined with HBP due to stronger strategic alignment and upside potential, citing its iconic brand, asset-light model, and double-digit EBITDA even in a weak consumer environment. He concluded by stating that Griffon likes its company and intends to stay, run, and build it for the foreseeable future.

Sam Darkatsh asked about the current status of retailer inventories within the Consumer and Professional Products (CPP) category, inquiring whether sell-in and sell-through are expected to be at parity in 2026 or if retailers might need to reload inventory. He also sought clarification on the board's signal regarding business prospects and equity value, given the simultaneous dividend increase and sequential decrease in share repurchases.

Answer

Ron Kramer, Chairman and CEO, indicated that the weak consumer has led to higher retailer inventory, so he doesn't foresee immediate repurchasing or restocking in early 2026, expecting the year to resemble 2025. He noted that potential interest rate reductions and clearer tariff situations could lead to improvements in the second half. Regarding capital allocation, Kramer stated there's no conflict, as Griffon intends to continue all three strategies: share buybacks (having repurchased 19% of outstanding shares), deleveraging (down to 2.4x leverage), and increasing dividends, leveraging significant free cash flow.

Sam Darkatsh asked about the current status of retailer inventories within the Consumer and Professional Products (CPP) category, and whether Griffon expects sell-in and sell-through to be at parity in 2026 or if there might be a need for retailers to reload inventory. He also questioned the board's signal regarding business prospects and equity value, given the simultaneous dividend increase and sequential decrease in share repurchases, which he perceived as conflicting messages.

Answer

Ron Kramer, Chairman and Chief Executive Officer, stated that the weak consumer has resulted in higher inventory levels, so he does not foresee any immediate repurchasing or restocking. He expects 2026 to largely resemble 2025, with potential for reorder/restocking in the second half if conditions improve. Regarding capital allocation, Ron Kramer clarified that there is no conflict, as Griffon intends to continue all three strategies: share buybacks, debt reduction, and dividend increases. He highlighted $560 million in share repurchases (nearly 19% of outstanding shares), deleveraging to 2.4 times, and significant free cash flow, affirming the company's ability to pursue all these actions.

Sam Darkatsh asked about the amount of share repurchases conducted in January and the expected pace for the remainder of the year. He also inquired whether the CPP segment's spring product inventory had already landed, considering potential tariff implications.

Answer

CEO Ronald Kramer stated that the company repurchased $42 million in stock during the first quarter ending in December and that second-quarter repurchase details would be provided in May. He affirmed the company's intention to continue buying back shares at current price levels. Executive Brian Harris confirmed that a significant portion of the spring product for CPP has already landed.

Sam Darkatsh asked for clarification on the impact of steel costs on the Home & Building Products (HBP) segment in Q4 and fiscal 2025, and questioned the potential dollar impact of a 60% tariff on Chinese products for the CPP segment.

Answer

Executive Brian Harris explained that the steel cost headwind from Q3 reversed in Q4 and that he anticipates steel costs will be roughly flat year-over-year in fiscal 2025. Regarding tariffs, Harris stated it was premature to speculate on specifics but expressed confidence in the company's ability to manage any new policies and meet its long-term 15% EBITDA margin target for CPP.

Sam Darkatsh inquired about the inherent assumption for industry like-for-like net pricing within Whirlpool's $175 price mix guide for 2026. He also asked about the flat RMI guide for 2026, considering recent moves in resins and base metals, and how hedging strategies might impact exposure to higher copper, aluminum, nickel, and zinc prices.

Answer

Chairman and CEO Marc Bitzer stated that Whirlpool does not publish industry pricing assumptions but noted that the $175 guide includes components from a better promotional environment, new products, and overall mix, with roughly one-third to half attributed to a less promotional environment. He indicated that if the promotional environment of the last six weeks holds, the outcome would be favorable. Regarding RMI, Bitzer confirmed steel is flat due to multi-year contracts. He noted resins are a 'good guy' and aluminum/copper are 'bad guys,' but buffered by hedging corridors, resulting in an overall assumption of flat or no major surprise from raw materials.

Sam Darkatsh asked about the inherent assumption for industry like-for-like net pricing required for Whirlpool to achieve its 1.75% price mix guide for 2026. He also inquired about the flat raw material index (RMI) guide for 2026, acknowledging stable steel costs but noting recent moves in resins and base metals, asking how hedging strategies impact timing and if there's exposure to higher copper, aluminum, nickel, or zinc in 2026.

Answer

Chairman and CEO Marc Bitzer stated that Whirlpool does not publish industry pricing assumptions but noted that the 1.75% price mix guide includes a component from a less promotional environment, estimated at roughly one-third to half. He expressed satisfaction with recent trends but cautioned against extrapolating for the full year. Regarding RMI, Mr. Bitzer confirmed steel costs are flat due to multi-year contracts. He explained that while resins are a positive factor, aluminum and copper are negative, with the overall impact buffered by hedging corridors, leading to a comfortable flat RMI assumption.

Sam Darkatsh from Raymond James inquired about the magnitude of the April price increase and the extent to which consumers were pulling forward purchases ahead of anticipated tariffs.

Answer

Marc Bitzer (executive) stated the price increase aims to cover higher component costs and that total pricing actions could yield a full-year margin benefit approaching two percentage points. He noted that while the discretionary demand side is weak due to low consumer confidence, there has been only limited evidence of consumers pre-loading purchases ahead of tariffs.

Sam Darkatsh asked for the expected North American margin progression throughout 2025 and for quantification of sell-through trends in Q4 and early January.

Answer

CEO Marc Bitzer and CFO Jim Peters guided to a full-year North American margin of 7.5% and expect a more balanced seasonality rather than a 'hockey stick' progression, citing carryover cost benefits and early-year pricing actions. Bitzer noted that Q4 sell-through was soft pre-election but became very strong post-election, with Whirlpool's sell-out significantly outpacing its sell-in for the quarter. He mentioned January had slowed slightly from the strong December pace.

Sam Darkatsh asked about the specific factors driving favorable performance in pulp and paper and oil and gas verticals, contrasting with competitor headwinds, and sought a breakdown of the 2% pricing realized in the quarter by segment and product category.

Answer

Neil Schrimsher, President and CEO, noted that energy markets are active and pulp and paper benefits from Applied's strong position and value-add efforts, without specific comparison to competitors. Ryan Cieslak, Director of Investor Relations and Treasury, stated that pricing was relatively similar across segments, perhaps slightly higher in Service Centers, and was broad-based across product categories, with no material outliers like bearings despite steel content.

Sam Darkatsh asked about the company's favorable trends in pulp and paper and oil and gas compared to a competitor's headwinds, and sought a breakdown of the 2% pricing contribution by segment and product category.

Answer

President and CEO Neil Schrimsher broadly noted active energy markets and a strong position in paper, focusing on value-add, but couldn't provide a direct comparison to competitors. Director of Investor Relations and Treasury Ryan Cieslak stated that the 2% pricing contribution was relatively similar across Service Center and Engineered segments, perhaps slightly higher in Service Center. He added that pricing impact was broad-based across products, with no materially different outliers in specific categories like bearings versus steel-related items.

Sam Darkatsh of Raymond James Financial inquired about the specifics of the estimated 3% of COGS tariff impact, the dollar-for-dollar mitigation strategy, and the nature of the inventory valuation adjustment in the residential segment.

Answer

Chairman, President & CEO Richard Olson identified the primary tariff exposures as China, steel/aluminum, and reciprocal tariffs, estimating a fiscal 2025 impact of approximately $90 million. He and VP & CFO Angela Drake affirmed the plan to mitigate this fully through productivity initiatives like AMP, sourcing strategies, and targeted price increases. Drake explained the residential inventory valuation adjustment was a significant factor in the margin decline, driven by slower-than-expected battery product adoption, and characterized it as a one-off action.

Sam Darkatsh asked for an update on the company's progress toward normalizing field inventories and red iron DSOs by year-end. He also sought revised thoughts on the fiscal 2025 sales growth outlook and questioned if the lower full-year tax rate guidance implied weaker-than-expected international business performance.

Answer

CEO Richard Olson stated they are on track with inventory normalization, having made 'tremendous progress' and being 80% of the way there. Regarding fiscal 2025, he expressed 'cautious optimism,' citing strength in golf and underground, the full-year benefit of Lowe's, and a potential snow market rebound, offset by macro uncertainty. CFO Angela Drake clarified the lower tax rate was due to a favorable geographic mix and a transfer pricing study, not weaker international results, and expects a rate around 20-20.5% next year.