Scott Schneeberger

Scott Schneeberger from Oppenheimer asked about potential upside or downside drivers for H&R Block's 1% industry volume growth forecast. He also inquired about the nuances of this year's marketing approach, including spending and timing, and sought clarification on increased year-over-year consulting costs.

Answer

CFO Tiffany Mason stated that while larger refund sizes could offer some upside to industry growth, it's not expected to be outsized, and the 1% forecast remains appropriate, with an anticipated shift from DIY to assisted. President and CEO Curtis Campbell detailed the marketing focus on high lifetime value customers and leveraging tax pro expertise, noting no significant change in spend but an evolution to AI engine optimization. He emphasized AI as an enabler for client and tax pro experience, not a disruptor. Mason explained increased consulting costs were for a strategic sourcing initiative completed in the first half, expected to yield sustainable savings for reinvestment, all within the current outlook.

Scott Schneeberger from Oppenheimer asked about potential upside or downside drivers for H&R Block's anticipated 1% industry volume growth. He also inquired about the nuances of this year's marketing approach, including timing and spending magnitude, and sought clarification on increased year-over-year consulting costs.

Answer

CFO Tiffany Mason reiterated the 1% industry growth expectation, noting potential upside from larger refunds and a shift from DIY to assisted due to the One Big Beautiful Bill. President and CEO Curtis Campbell stated no incremental changes in marketing spend, focusing on high lifetime value customers and leveraging tax pro expertise, while also detailing how AI is being used to enhance client and tax pro experiences. Tiffany Mason explained that increased consulting costs were for a strategic sourcing initiative aimed at generating sustainable savings to self-fund future growth, which was already factored into the outlook.

Scott Schneeberger of Oppenheimer & Co. Inc. asked for clarity on the upcoming Q1 call, questioning if a new long-term strategy would be presented due to the CEO transition. He also requested a bridge for the FY26 EBITDA guidance, focusing on the impact of one-time items from FY25 like legal fees and severance.

Answer

President & CEO Jeffrey Jones affirmed that the company's strategy is 'locked' and will not change, as his successor was an internal appointment involved in its development. CFO Tiffany Mason explained the EBITDA bridge, noting that elevated FY25 healthcare and legal costs are annualized into the FY26 guide, while severance costs are normalized. She expressed confidence in margin improvement due to cost savings from a recent organizational realignment and other efficiencies. She also confirmed the new tax law is viewed as a tailwind factored into guidance.

Scott Schneeberger asked for clarification on Assisted segment performance, specifically the drivers behind the volume decline in franchise operations versus the growth in company-owned operations. He also requested commentary on the DIY segment, focusing on the flat paid-user volume, strong net average charge (NAC) growth, and the strategic rationale for the significant decline in free filers amid a highly promotional environment.

Answer

CFO Tiffany Mason explained the franchise volume decline was primarily a structural shift resulting from the company's opportunistic buyback of 123 franchise locations year-to-date. Executive Jeffrey Jones added that company-owned performance was boosted by improved client conversion and retention, driven by an enhanced client experience. On the DIY side, Jones stated that strong revenue growth was fueled by attracting more complex filers. He characterized the flat paid volume as a disciplined outcome, as the company chose not to chase unprofitable free filers in an "unprecedented promotional environment" led by a competitor.

Scott Schneeberger of Oppenheimer & Company asked about the competitive value of the Emerald Advance product, H&R Block's DIY product tiering strategy compared to competitors, the details of the current marketing campaign, and the potential impact of the increased child tax credit.

Answer

President and CEO Jeff Jones clarified that H&R Block is not considering discontinuing Emerald Advance but is focused on optimizing its performance. Regarding DIY tiers, he stated the company feels good about its lineup's value proposition, which combines SKU features, pricing, and attached services like AI Tax Assist. Jones described the marketing campaign as leaning into the 'It's better with Block' promise, using digital channels and direct competitive claims. He confirmed the child tax credit change is a customary update not expected to have a material impact.

Scott Schneeberger inquired about the drivers behind the year-over-year increase in Q1 operating expenses, future technology spending levels, the strategy for early-season marketing, and the financial implications of the extended partnership with Pathward for Emerald Financial Services.

Answer

CFO Tiffany Mason attributed the higher Q1 OpEx to increased variable field labor from higher volume, planned corporate wage increases, online marketing spend, and notably, higher legal fees and settlements related to an FTC matter. She clarified that without the legal costs, OpEx growth would align with revenue. CEO Jeff Jones added that technology investments are factored into the outlook and managed via productivity savings. Regarding marketing, Jones noted a competitor's early start but stated H&R Block's main push begins in January. Mason confirmed the Pathward partnership remains strong and the economics are reflected in guidance.

Scott Schneeberger followed up on the matting project delay, asking if its impact on fleet productivity would be abnormal in Q1 2026. He also inquired about United Rentals' technology investment focuses in recent years, how they might differ in 2026, and if the technology budget is increasing or decreasing.

Answer

CEO Matthew Flannery acknowledged that the matting delay could cause abnormal lumpiness in Q1 fleet productivity, but emphasized that the full-year expectation remains positive. CFO Ted Grace stated that technology spend will be up in 2026, focusing on driving greater operating efficiency (e.g., fleet efficiency, repositioning costs) and mandatory areas like cyber protection, with excitement about the ROI on these initiatives.

Scott Schneeberger followed up on the matting delay's impact on Q4 fleet productivity, asking if any abnormal effects should be expected in Q1. He also inquired about United Rentals' technology investment focuses in recent years, how they might differ in 2026, and whether the technology budget is increasing or decreasing.

Answer

Matthew Flannery, President and Chief Executive Officer, acknowledged potential for Q1 abnormality due to project mobilization but stressed that the focus remains on positive full-year fleet productivity rather than quarterly volatility. Ted Grace, Chief Financial Officer, confirmed that technology spend would be up in 2026, with investments aimed at driving greater operating efficiency (e.g., fleet efficiency, repositioning cost mitigation) and critical areas like cyber security.

Scott Schneeberger of Oppenheimer & Co. Inc. asked how the additional cash flow from the new tax bill affects the company's propensity for M&A versus share repurchases. He also requested more detail on the new 'Workplace Ready Solutions' offering.

Answer

EVP & CFO William Grace reiterated the company's capital allocation framework: prioritize the balance sheet, fund organic growth, pursue disciplined M&A, and return the residual excess cash to shareholders via dividends and buybacks. The tax benefit flows through this framework, leading to the increased buyback. President & CEO Matthew Flannery described Workplace Ready Solutions as part of a broader strategy to be a value-added partner, offering solutions that enhance customer productivity and safety, thereby moving beyond price-based competition.

Scott Schneeberger asked for a deeper dive into the drivers of the impressive double-digit growth in specialty rentals, questioning if it was broad-based across its product categories. He also inquired about the potential for expanding ancillary services through acquisitions or insourcing.

Answer

Executive Matthew Flannery confirmed the specialty growth is broad-based, with even mature businesses like Power continuing to be leaders. He attributed the success to market penetration and their go-to-market strategy of bundling services for targeted customers, likely taking share. On ancillary services, he stated they are always looking for efficiencies, including insourcing, and balancing that with third-party providers to best serve customers from both a service and margin perspective.

Scott Schneeberger asked about the flow of funds from the infrastructure bill and the company's related expectations for 2025. He also inquired about the M&A outlook following the large H&E acquisition, asking if other sizable deals were paused and about the state of the M&A pipeline.

Answer

Executive William Grace confirmed that the company continues to see nice growth from infrastructure projects and noted that a large portion of IIJA funds has yet to be spent, representing a significant future opportunity. On M&A, Executive Matthew Flannery stated that the immediate focus is on integrating the H&E acquisition and reducing leverage. While the M&A pipeline remains strong, priorities are integration and deleveraging, though a strategic tuck-in deal might be considered.

Scott Schneeberger asked about M&A prioritization between General Rent and Specialty and sought clarification on the strategy of not needing to be the #1 market player in every category. He also questioned the reason for a large increase in new equipment sales.

Answer

Executive Matthew Flannery clarified that M&A is prioritized by customer value, whether through new Specialty offerings or added GenRent capacity. He explained the goal is to be #1 with their core customers on large projects, not necessarily the largest in every niche market. Executive William Grace attributed the spike in new equipment sales primarily to the inclusion of the recently acquired Yak business.

Scott Schneeberger inquired about behavioral differences (softness or strength) observed between large and small customers, and Cintas's propensity to take leverage higher for aggressive share buybacks, given the large Q2 buyback and current leverage levels.

Answer

President and CEO Todd Schneider reported no specific behavioral differences to call out between large and small customers, noting the broad and stable customer base. Regarding buybacks, he stated Cintas views them as an excellent, opportunistic use of cash for shareholder return, but will not simply 'lever up' for aggressive buybacks, maintaining a consistent, transparent capital allocation approach as in the past.

Scott Schneeberger inquired about any behavioral differences or shifts in strength/softness observed between large and small customers, and Cintas's propensity to increase leverage for future share buybacks given the recent large repurchase.

Answer

Todd Schneider, President and CEO, stated there were no specific behavioral differences to highlight between large and small customers, noting the overall customer base has been stable with slight improvement. Regarding buybacks, he affirmed Cintas's view of them as an excellent, opportunistic use of cash for shareholder return, emphasizing a consistent and transparent approach to capital allocation without expecting a change to their opportunistic strategy.

Scott Schneeberger asked if Cintas was reconsidering greater international expansion, particularly via existing multinational customers, given what he perceived as quiet M&A. He also requested an update on the myCintas portal's progress, including metrics like sales or payments mix, and its productivity leverage.

Answer

Todd Schneider, President and CEO, clarified that M&A has not been quiet, noting the previous year was Cintas' best in 20 years (excluding the G&K acquisition). He stated that Cintas does not *need* international expansion due to the immense opportunity in the U.S. and Canada (servicing 1M out of 16-17M businesses) but would evaluate opportunities if they arose. Regarding myCintas, he described it as a platform for customer account management and payments, and for employee partner productivity, declining specific metrics for competitive reasons but affirming continued investment and its competitive advantage.

Scott Schneeberger asked if international expansion, particularly via existing multinational customers, is a current consideration for Cintas and what their approach would be, and also requested an update on the MyCintas portal's progress, including metrics like percentage of sales or payments running through it.

Answer

President and CEO Todd Schneider clarified that M&A has been very active, and while Cintas evaluates international opportunities, they don't *need* to expand internationally due to the immense white space in the U.S. and Canada (servicing just over 1 million of 16-17 million businesses). He described MyCintas as a platform for customer account management and payments, as well as enhancing employee partner productivity. He declined to provide specific metrics for competitive reasons but emphasized it's a continuous investment and a competitive advantage.

Scott Schneeberger asked about Cintas' past considerations for greater international expansion, particularly via existing multinational customers, and whether this is a current consideration given recent M&A activity.

Answer

Todd Schneider, President and CEO, clarified that M&A has not been quiet, noting the prior year was their best in 20 years (excluding G&K acquisition) and the pipeline remains attractive. Regarding international expansion, he stated Cintas evaluates it but doesn't 'have to' pursue it due to the immense 'white space' opportunity in the U.S. and Canada (servicing 1 million of 16-17 million businesses). He confirmed Cintas has the ability, bench, culture, balance sheet, and know-how if the right opportunity arises. For a follow-up on the myCintas portal, Mr. Schneider described it as a platform for customers to manage accounts and make payments, and for employee partners to be more productive. He declined to provide specific metrics for competitive reasons but stated it's an area of continued investment and a competitive advantage, well-liked by both customers and employee partners.

Scott Schneeberger from Oppenheimer & Co. Inc. asked for more details on progress with the SmartTruck initiative and sourcing improvements, and also inquired about the fiscal 2026 CapEx outlook and any potential tax impacts.

Answer

President & CEO Todd Schneider highlighted SmartTruck as a key technology investment for improving route efficiency. EVP & CFO Scott Garula confirmed that CapEx is expected to be in the 3.5% to 4.0% of revenue range going forward and stated that the company does not anticipate any material impact from recent tax legislation on its financials or cash flow.

Scott Schneeberger from Oppenheimer & Co. Inc. requested more details on progress with the SmartTruck platform and sourcing improvements. He also asked about the outlook for CapEx as a percentage of revenue and any potential tax law impacts.

Answer

President & CEO Todd Schneider highlighted that SmartTruck technology improves efficiency by reducing driving time, while the sourcing team provides a competitive advantage in the current tariff environment. EVP & CFO Scott Garula projected that CapEx would remain in the 3.5% to 4.0% of revenue range and stated that the company does not expect any material impact from the tax bill mentioned.

Scott Schneeberger requested a progress report on the Huebsch acquisition and an explanation of the drivers behind the company's strong free cash flow performance.

Answer

President and CEO Todd Schneider praised the Huebsch acquisition as a source of great people, customers, and market capacity, emphasizing that Cintas learns from every acquired company. EVP and CFO Mike Hansen attributed the strong free cash flow to operational excellence, stating the company targets a 90-100% net income conversion rate and expects this to continue, despite potential short-term investments in areas like inventory.

Scott Schneeberger followed up on the significant M&A activity, asking if it was driven by a single large deal and what types of assets and multiples Cintas is seeing. He also requested a progress report on the myCintas customer portal and its contribution to margins.

Answer

CEO Todd Schneider clarified that M&A was active across all route-based businesses, focusing on quality companies within existing segments, and declined to comment on multiples. He confirmed the myCintas portal is an important tool that improves customer experience and drives efficiencies by streamlining payments and account management, thereby contributing positively to margins.

Scott Schneeberger from Oppenheimer asked for elaboration on the organic decline in the Uniform Direct Sales business and its outlook. He also inquired about the drivers of the strong Q1 free cash flow and its sustainability for the fiscal year.

Answer

President and CEO Todd Schneider attributed the direct sale performance to the lumpy nature of national account rollouts and difficult comparisons to prior high-growth years. EVP and CFO Mike Hansen explained that the strong free cash flow was partly due to timing and partly to sustainable improvements in accounts payable. He expects full-year free cash flow conversion to be in the typical 90-100% range of net income.

Scott Schneeberger from Oppenheimer inquired about the progress and impact of Ferguson's SG&A investments, specifically in trainee programs, HVAC counter expansion, and large project teams, and sought an outlook for these investments in the coming year. He also asked about Ferguson's inventory management strategy heading into 2026.

Answer

Bill Brundage, Ferguson's CFO, confirmed continued investment in the foundational trainee program, adding 250-300 trainees this year and planning expansion for 2026. He reported approximately 650 HVAC counter conversions completed, which he believes is driving market outperformance despite a challenging HVAC environment. Brundage also highlighted ongoing investments in technology and digital tools for HVAC and plumbing contractors. He stated that Ferguson has managed costs effectively, including prior cost actions, to achieve good SG&A leverage while investing for future growth. Kevin Murphy, CEO, further elaborated on investments in waterworks diversification, large capital project engagement, value-added services (fabrication, valve actuation, virtual design), and the Ferguson Home experience, all contributing to success in a challenging environment. Brundage concluded that inventories are in a good spot, with no significant changes expected for 2026.

Scott Schneeberger inquired about Ferguson's SG&A investments, specifically in trainees, HVAC counter expansion, and large project teams, seeking an update on their trends, future plans, and impact to date. He also asked about the company's inventory management strategy heading into calendar year 2026.

Answer

CFO Bill Brundage detailed that Ferguson's trainee program, a foundational investment, added 250-300 trainees this year and will expand in calendar 2026. Over 650 HVAC counter conversions have been completed, integrating plumbing and HVAC products and expertise, which is helping Ferguson outperform the challenging HVAC market. Investments in technology and digital tools for HVAC and plumbing contractors are also ongoing. Bill Brundage confirmed that Ferguson has managed its cost base effectively, taking actions earlier in the year, allowing for continued investment while delivering SG&A leverage. CEO Kevin Murphy added that investments in waterworks diversification, large capital projects (including value-added services like fabrication and virtual design), and Ferguson Home's digital and showroom experience are yielding solid results. Regarding inventory, Bill Brundage stated that levels are in a good spot, well-managed through recent price increases, and no significant changes are expected entering calendar 2026.

Scott Schneeberger asked for elaboration on the company's technology spend and investments in projects, their magnitude, and the expected returns.

Answer

Joe Hanna (CEO) explained that technology investments are part of normal operations, focusing on updating systems, migrating to the cloud, and ensuring systems remain relevant and customer-friendly. He also noted strong performance in wired communications and data centers for TRS-RenTelco, which are technology-oriented growth areas.

Scott Schneeberger inquired about the sales activity's run rate and future growth trajectory for McGrath RentCorp's Mobile Modular segment, seeking clarity on its upward trend beyond 2025.

Answer

Joe Hanna, Chief Executive Officer, explained that sales are more balanced in 2025 compared to a lumpy Q3 2024, with a strong backlog and anticipated continued growth. He emphasized the strategic importance of sales in meeting diverse customer needs.

Scott Schneeberger inquired about the expected balance of EBITDA between Q3 and Q4, visibility into Mobile Modular sales, the outlook for education and commercial rentals, the rationale for the modest EBITDA guidance increase, and the cash flow impact of new federal tax legislation.

Answer

CFO Keith Pratt explained that sales gross profit is expected to be more balanced between Q3 and Q4, unlike the prior year's Q3 spike, though visibility remains fluid. CEO Joseph Hanna noted a good outlook for the education sector despite later orders and highlighted vibrant activity in commercial verticals like data centers and industrial projects. Pratt attributed the modest guidance raise to offsetting factors, including planned expenses for readying fleet, strategic hiring costs, and a cautious outlook on the mixed demand environment. He also estimated the new tax legislation would provide a $10 million to $15 million free cash flow benefit for the year.

Scott Schneeberger inquired about the order flow for the education sector within Mobile Modular, the size of commercial projects, and the pricing environment for new shipments. He also asked about the demand trends driving the recovery at TRS-RenTelco and the rationale for the slight reduction in full-year guidance.

Answer

Executive Joseph Hanna noted that while Q1 education bookings were slightly light, activity increased in April, and the fundamental demand drivers remain unchanged. He confirmed larger commercial projects are solid, but smaller projects face some client hesitation despite strong overall quoting activity. Executive Keith E. Pratt stated that the 12% year-over-year increase in monthly revenue per unit on new shipments is very strong, creating a positive pricing tailwind as the fleet turns over. Hanna attributed the TRS-RenTelco recovery to previously delayed semiconductor and computer projects starting up. Pratt explained the guidance was trimmed slightly out of caution for potential project delays in the second half of the year due to macro uncertainty, rather than direct negative feedback from customers.

Scott Schneeberger inquired about the performance breakdown between the commercial and education sub-segments within Mobile Modular for Q4 and the full year, as well as the outlook for 2025. He also requested a high-level 2025 outlook for each of the three main business segments, dug into the pricing convergence tailwind in Mobile Modular, and questioned how the dynamic between higher operating expenses and lower capital expenditures would impact the 2025 EBITDA guidance. Finally, he asked about capital allocation priorities given the company's strong balance sheet.

Answer

Keith E. Pratt, an executive, detailed that in Q4, Mobile Modular's rental revenue growth was balanced, with commercial up 9% and education up 7%. Executive Joseph Hanna added that he expects this balance to continue in 2025, citing strong early quote activity. Hanna provided a segment outlook: good momentum for Modular, a challenging start for Portable Storage, and signs of stabilization for TRS-RenTelco. Pratt explained the significant pricing tailwind, noting a 47% gap between new shipment pricing and the fleet average. He clarified that the flat EBITDA guide despite revenue growth is due to three factors in order of impact: 1) a shift to higher operating expenses to prepare existing fleet for rental, 2) a lower EBITDA run-rate in Portable Storage entering the year, and 3) a mix shift toward faster-growing but lower-margin equipment sales. Regarding capital, Pratt stated that the company has many options, including M&A or increased CapEx if demand warrants, and will remain flexible.

Scott Schneeberger from Oppenheimer & Co. Inc. inquired about the performance of McGrath's Mobile Modular segment, specifically the growth in commercial versus education markets, pricing dynamics, and quoting activity. He also asked about the cyclical pressures in the Portable Storage and TRS-Rentelco segments, including demand trends and pricing. Finally, he sought clarification on the use of the $180 million merger termination fee and associated costs.

Answer

Executive Joseph Hanna stated that Mobile Modular growth was balanced, with education up 10% and commercial up 8%, and noted that strong pricing is expected to continue. Executive Keith E. Pratt addressed the other segments, noting continued demand softness in Portable Storage and a prolonged but stabilizing downturn in TRS-Rentelco. Pratt also clarified that the net proceeds from the merger termination fee are approximately $86 million after all costs and taxes, which were initially used to pay down debt, and confirmed that substantially all related costs have been incurred.

Scott Andrew Schneeberger questioned the drivers of Q3 gross margin improvement, specifically asking for more detail on pricing (full impact of tariff increase, competitor reactions, sustainability) and the supply chain piece (how structural and permanent the fixes are, with anecdotes of improvements).

Answer

SVP and CFO Melanie Hart stated that the full quarter impact of mid-season price increases has flushed through, with market acceptance and no significant competitive impact on pricing. President and CEO Peter Arvan highlighted increased sophistication in supply chain management, including better technology and AI tools, leading to sustained gains through optimized buying and vendor partnerships.

Scott Schneeberger asked for details on the 'expanding product offerings' driving higher inventory and inquired about the potential impact of recent tax legislation on the company and consumer spending.

Answer

CEO Peter Arvan clarified that the inventory increase is a routine result of stocking new products from manufacturers. CFO Melanie Hart added that the new tax bill is expected to provide a slight cash flow benefit from accelerated depreciation but does not anticipate an immediate impact on consumer discretionary spending.

Scott Schneeberger asked about the potential for further tariff-related price increases from suppliers, the timing of margin impact given early-buy inventory, and the level of confidence in new pool construction volumes, particularly in light of strong permit data from Florida.

Answer

CFO Melanie M. Hart stated that no additional price increases beyond those already announced are factored into the current guidance. She noted that while there is an opportunity for margin benefit from selling through lower-cost inventory, overall price sensitivity in the current market is a key factor. CEO Peter Arvan commented that permit data is just one piece of the puzzle, alongside weather and dealer feedback, and that his confidence in new construction is tempered by macro factors like interest rates and consumer confidence.

Scott Schneeberger asked for more detail on the competitive pressures and customer mix impacting the business, and also inquired about the outlook for the renovation and remodel market, including homeowner behavior and interest rate assumptions.

Answer

SVP and CFO Melanie M. Hart explained that customer mix has shifted towards larger, national accounts, partly due to private equity-led consolidation, which POOLCORP is well-positioned to serve. President and CEO Peter Arvan described the remodel market as bifurcated, with cash buyers proceeding while financing-dependent projects are delayed. He noted significant pent-up demand for these semi-discretionary projects, which should drive growth when interest rates ease.

Scott Schneeberger inquired about the financial impact of recent hurricanes in Q3 and Q4, and how repair activity might affect results into the next year. He also asked about the company's current inventory levels and its strategy for the upcoming pre-buy season, particularly concerning vendor pricing.

Answer

President and CEO Peter Arvan explained that while storms caused brief closures, the net effect is an expected uptick in maintenance and repair demand, which could offset headwinds in new construction. VP and CFO Melanie M. Hart stated they are satisfied with current inventory levels, noting gained efficiencies, and expect preliminary 2025 equipment price increases from vendors to be in the 2% to 3% range.

Scott Schneeberger from Oppenheimer & Co. Inc. asked about the key drivers behind the sustained growth in average revenue per funeral contract. He also inquired about the potential impact of the recent Federal Tax Act on the company's free cash flow.

Answer

CEO Carlos Quezada attributed the growth in average revenue per funeral to three key initiatives: strategic pricing reviews conducted quarterly with local managers, a cremation conversion strategy that educates families on additional service options, and the new urn core line strategy which has expanded margins. CFO John Enwright stated that the company expects a $5-6 million benefit to cash taxes in 2025 from the new tax act, with smaller incremental benefits in subsequent years.

Scott Schneeberger from Oppenheimer & Co. Inc. asked about the mix of new business, noting its strong contribution in the quarter, and inquired about the progress and financial impact of the company's ERP system implementation.

Answer

CEO Malcolm Wilson highlighted that over half of Q2 wins came from a resurgence in e-commerce, which also drove outsized growth in reverse logistics. CFO Baris Oran reported that the first phase of the ERP implementation is now live in the UK and is expected to drive significant back-office productivity, reduce SG&A, and accelerate future acquisition synergies, with the US implementation planned next.

Scott Schneeberger from Oppenheimer asked about transactional volume trends with existing customers in Q4 and the outlook for 2025. He also sought details on the new $2.5 billion healthcare contract and its potential to accelerate organic growth in that vertical.

Answer

CEO Malcolm Wilson noted strong growth in Continental Europe, some softness in the UK, and a pickup in the U.S. CFO Baris Oran added that underlying volumes were slightly positive in Q4 and are expected to be flattish in 2025. Regarding the healthcare win, Wilson described it as a 'milestone' contract originating from the Clipper acquisition that will organically open up the vertical for GXO, similar to how Wincanton is expected to open up the aerospace and defense sectors.

Scott Schneeberger of Oppenheimer & Co. Inc. asked about GXO's confidence level for Q4 organic growth, the trajectory into 2025, and the drivers behind the strong Q3 free cash flow conversion.

Answer

CEO Malcolm Wilson reaffirmed full-year guidance, expressing high confidence in hitting the midpoint for adjusted EBITDA, driven by contract visibility and efficiency gains. CFO Baris Oran added that Q4 would benefit from lapping a weak prior-year period and improved margin from better multi-tenant warehouse utilization. Oran also confirmed the 30-40% free cash flow conversion target for the year, attributing the strong performance to diligent working capital and CapEx management.

Scott Schneeberger of Oppenheimer & Co. Inc. asked about the drivers of the improved free cash flow guidance, the future impact of new tax legislation, M&A multiples and contribution, and the capital allocation priorities between M&A and buybacks.

Answer

EVP & CFO Matthew Jacobsen explained that the improved free cash flow guidance is driven by the elimination of about $50 million in 2025 federal cash taxes due to new legislation, with similar benefits expected for the next few years, plus $10-15 million from working capital improvements. He noted the recent 'Portable' acquisition was the larger of two deals and that while the purchase multiple was not disclosed, the company sees significant margin expansion opportunities via its logistics network. He confirmed the M&A pipeline remains active for the second half of the year.

Scott Schneeberger questioned the impact of recent tariff policy changes on the retail end market outlook for the second half of the year. He also asked about the company's capital allocation strategy regarding share buybacks versus M&A.

Answer

President and COO Timothy Boswell stated there has been no real change in their view on retail, noting that conversations with large accounts are ongoing and contributing to order book growth. CFO Matthew Jacobsen reiterated that their capital allocation approach is unchanged: they will pursue accretive M&A as opportunities arise while remaining consistent with their framework for share repurchases and dividends.

Scott Schneeberger from Oppenheimer & Co. Inc. requested a breakdown of the 2024 to 2025 EBITDA bridge, asking about the key swing factors for the guidance range. He also questioned the recent stall in VAPS delivered rates and the initiatives planned to reaccelerate growth in 2025.

Answer

CFO Matt Jacobsen explained the EBITDA bridge, citing volume headwinds from 2024, moderating through 2025, offset by rate and VAPS. He noted cost pressures from variable compensation, a company meeting, and new sales hires. President & COO Timothy Boswell addressed VAPS, highlighting a new guided selling/bundling tool to improve sales consistency. He also mentioned that a mix shift towards FLEX units, which have lower VAPS penetration, has been a headwind, while core storage VAPS rates are improving.

Scott Schneeberger asked for substantiation of the view that volume headwinds are moderating and inquired about current pricing integrity and spot rates for both the modular and storage segments.

Answer

President and CFO Timothy Boswell explained that the year-over-year deficit in average units on rent is shrinking, from ~5% entering 2024 to ~3% in Q3, indicating moderating headwinds. On pricing, he noted modular rental rates (ex-VAPS) were up ~7% YoY with sequentially flat spot rates, while traditional storage AMR was up ~1% YoY, showing stability despite a challenging market.

Scott Schneeberger of Oppenheimer & Co. Inc. asked about the specific drivers of core preneed cemetery sales (velocity vs. pricing), the sustainability of the strong 3.3% growth in funeral revenue per service, and guidance for modeling G&A expenses in the second half.

Answer

Chairman, President & CEO Thomas Ryan confirmed that core cemetery sales growth was broad-based, driven by both positive velocity and pricing. He stated that while 3.3% funeral average growth is high, a 2.5% to 3% range is sustainable, supported by managing discounts and a favorable preneed backlog. Executive VP & CFO Eric Tanzberger advised modeling G&A around $40-$42 million per quarter, but noted potential variability from incentive compensation accruals.

Scott Schneeberger asked about the drivers for the significant positive swing in funeral volume growth in Q1 compared to the prior quarter and questioned the trend in the cremation mix shift.

Answer

CEO Thomas Ryan attributed the strong funeral volume to growing market share from their preneed program and effective competition, while noting that quarter-to-quarter volatility can be high. He maintained the full-year guidance of flat to slightly down volume but expressed increased optimism. Regarding cremation, he suggested that as the rate approaches 60%, the pace of growth naturally slows, and future increases are likely to be under 100 basis points annually.

Scott Schneeberger inquired about the outlook for recognized cemetery preneed sales revenue for the remainder of 2024 and into 2025, the impact of construction at the Rose Hills location on large sales, and the company's confidence in achieving flattish funeral volume growth in 2025.

Answer

Chairman and CEO Thomas Ryan acknowledged a tough comparison for Q4 large sales but expressed confidence in returning to low to mid-single-digit growth in 2025 for both sales production and recognition. He confirmed that development activities at Rose Hills limited customer access, impacting large sales, but expects this to resolve in 2025. Regarding funeral volumes, Ryan stated that company models show the pandemic's pull-forward effect diminishing, which, combined with demographic shifts, should lead to volume stabilization in 2025. He also anticipates preneed funeral sales will improve as the company normalizes its transition to a new insurance provider.

Daniel, on for Scott Schneeberger at Oppenheimer, asked if there is a meaningful opportunity to further reduce maintenance cost per mile, given the significant reduction in fleet age.

Answer

Chief Strategy Officer Ali Faghri confirmed that there is further opportunity. He noted that with the average fleet age now under four years, maintenance cost per mile was already down in the low-to-mid single-digit range in Q2. He stated that XPO expects to continue driving this cost lower in the second half of the year and into 2026.

Scott Schneeberger from Oppenheimer & Co. asked about stress-testing a 'draconian' scenario with double-digit tonnage declines and whether the operating ratio could still improve. He also requested an update on the European business.

Answer

CFO Kyle Wismans responded that XPO has modeled severe downturns and believes it can outperform historical industry decremental margins (around 25% in the GFC) by managing its variable costs. Chief Strategy Officer Ali Faghri added that the European business continues to outperform its market with strong sequential EBITDA growth and a growing sales pipeline, positioning it well for an eventual recovery.

Scott Schneeberger of Oppenheimer & Co. asked about a stress-test scenario with double-digit tonnage declines and whether OR could still improve. He also requested an update on the European business.

Answer

CFO Kyle Wismans confirmed they have stress-tested such scenarios and believe they can perform well by managing variable costs and productivity, noting they expect to achieve better than historical industry decremental margins. Chief Strategy Officer Ali Faghri reported that the European business continues to outperform the market, with five consecutive quarters of organic revenue growth and a strong sales pipeline, positioning it well for a recovery.

Scott Schneeberger from Oppenheimer & Co. requested more details on the new premium services and asked if the investment in the sales force was complete or ongoing.

Answer

Executive Mario Harik provided examples of new services, including 'retail store rollout,' 'must arrive by date,' and expanded Mexico cross-border solutions. Regarding the sales team, he stated that the initial plan to grow the local sales force by 25% has been achieved, and while some hiring continues, a decision on further significant expansion for 2025 is still under review.

Scott Schneeberger from Oppenheimer asked a two-part question regarding the potential impact of the 'One Big Beautiful Bill Act' on free cash flow and the outlook for managing tariffs in the second half.

Answer

CFO Scott Kirkland stated the bill is expected to be a net positive by encouraging U.S. investment, with no material impact on the tax rate. CEO Christophe Beck expressed high confidence in managing tariffs through a combination of supply chain optimization and the trade surcharge, which he expects will be a net positive and support the company's 12-15% EPS growth commitment.

Scott Schneeberger asked for an update on the investment cycle for the Pest Intelligence program and the progress of the cross-sell initiative with top customers.

Answer

Christophe Beck, Chairman and CEO, explained the Pest Intelligence digital conversion is a multi-year, 'pay-as-you-go' investment. Regarding cross-selling, he highlighted the F&B business as a key beneficiary of the One Ecolab initiative. He confirmed that focused, enterprise-wide plans are in place for the top 35 customers to capture a $3 billion opportunity by delivering best-in-class outcomes.

Scott Schneeberger asked for a look back at the past two years of significant price increases, inquiring how customer retention rates were affected and about the current competitive environment.

Answer

CEO Christophe Beck stated that the customer retention rate has remained remarkably stable at close to 95% throughout the recent period of high inflation and pricing actions. He credited this stability to the company's focus on 'Total Value Delivered,' ensuring that the savings customers receive in their operations exceed the price increases. This has created a strong balance of stable retention, strengthening volume, and robust pricing.

Scott Schneeberger asked for elaboration on the outsized growth in the assisted tax category and Intuit's role, and also for learnings from this year's consumer marketing spend strategy.

Answer

CEO Sasan Goodarzi explained that Intuit is disrupting the manual, opaque assisted category with a seamless, transparent, and lower-cost virtual alternative, which contributed to the category's growth. CFO Sandeep Aujla added that the marketing strategy involved shifting spend earlier in the season to target assisted filers before they made their decision, which proved effective. He affirmed they feel very good about the ROI on their marketing spend across the entire business.

Scott Schneeberger asked for more detail on the outsized growth of the assisted tax category and Intuit's role in it, as well as learnings from this year's earlier and potentially higher marketing spend.

Answer

CEO Sasan Goodarzi explained Intuit is disrupting the assisted category by offering a more seamless, transparent, and lower-cost digital alternative. CFO Sandeep Aujla clarified that the marketing spend increase was not outsized but was strategically timed earlier in the season to capture assisted filers who make decisions before year-end. He affirmed they feel very good about the ROI on this marketing spend.

Scott Schneeberger asked about the market reception to the new form-based pricing for TurboTax Live Full Service and the potential impact of the delayed 1099-K reporting threshold change on revenue per return.

Answer

CEO Sasan Goodarzi explained that pricing is now part of a dynamic, AI-driven personalized lineup, so different customers see different offerings, leading to strong monetization for both simple and complex filers. He cited the product's high recommendation score (85) as evidence of positive reception for the full-service experience and price. He concluded by stating that any impact from the 1099-K threshold change is considered immaterial for the season.

Scott Schneeberger asked for more details on the early tax marketing strategy and its initial success, and also requested clarification on why the Q2 EPS guidance is guided down year-over-year despite revenue growth.

Answer

CEO Sasan Goodarzi shared that the early tax campaign successfully drove engagement and confirmed that price is a significant positive factor. A key learning was to focus on the benefits of the 'new way' of tax prep without denigrating traditional experts. CFO Sandeep Aujla explained the Q2 EPS guide reflects a strategic front-loading of expenses, including continued early consumer marketing, increased spend at Credit Karma due to strong ROI, and earlier GBS campaigns compared to last year.

Scott Schneeberger of Oppenheimer & Co. Inc. asked about new growth opportunities, specifically inquiring about potential M&A or new asset builds for the Government segment and the maturity of the non-government project pipeline. He also questioned the outlook for Average Daily Rate (ADR) and demand in the HFS segment.

Answer

President and CEO Brad Archer highlighted strong bid activity in non-government sectors, particularly for data centers, noting these projects are often shovel-ready with capital in place. CFO and CAO Jason Vlacich added that immediate government opportunities, like West Texas, likely won't require significant capital, but future growth could involve new builds with protective contract structures. Vlacich also addressed the HFS segment, stating that while the market is competitive and ADR is down slightly, utilization is up, and he expects Q1 trends to continue through 2025.

Scott Schneeberger of Oppenheimer & Co. Inc. asked for clarity on Q1 2025 guidance, the forward run-rate for major contracts, the marketing status of an asset acquired in May 2023, and plans for capital allocation given the strong balance sheet post-refinancing.

Answer

CFO Jason Vlacich detailed the contract run-rates, noting the Dilley contract is similar to its predecessor and the Lithium Americas revenue will be back-half weighted in 2025. CEO James Archer provided a comprehensive overview of the Government segment, stating a significant need for beds and active quoting on numerous opportunities where existing assets are in play. Mr. Vlacich confirmed a minimal draw on the credit facility for the note redemption and stated that capital allocation priority is on organic growth opportunities.

Scott Schneeberger asked about cross-selling opportunities with managed transportation and for details on the reductions in the 2025 and 2026 CapEx guidance.

Answer

CEO Drew Wilkerson explained that managed transportation and brokerage have strong synergies, with brokerage acting as a key capacity backstop and sales tool for new managed trans customers. CFO James Harris detailed that the 2025 CapEx reduction was part of a normal course evaluation, while the larger 2026 reduction reflects the end of one-time integration spend and a strategic real estate investment.

Scott Schneeberger asked about the company's confidence level in achieving volume growth in 2025, the potential impact of tariffs on cross-border business, and for details on the planned CapEx spend, including the Charlotte headquarters expansion.

Answer

CEO Drew Wilkerson expressed high confidence in year-over-year volume growth, citing positive early returns from bid season. He also outlined potential tariff impacts, seeing a short-term tailwind from inventory pull-forwards and a long-term tailwind from near-shoring. CFO Jamie Harris clarified that the $15 million for the Charlotte HQ expansion is a one-time 2025 cost and projected a lower CapEx run-rate of $50-$60 million for 2026.

Scott Schneeberger from Oppenheimer & Co. Inc. inquired about the normal Q4 seasonality for the combined RXO-Coyote entity and the nature of the special projects in October. He also asked for an update on Last Mile's performance and pricing initiatives.

Answer

CSO Jared Weisfeld noted that recent market tightening makes direct seasonal comparisons difficult. CEO Drew Wilkerson clarified the special projects were tied to hurricane relief, port tightness, and retail needs, highlighting RXO's ability to capture opportunistic freight. Regarding Last Mile, Weisfeld confirmed strong Q3 growth with an expectation for slower, but still positive, growth in Q4. CFO Jamie Harris added that cost-saving initiatives in Last Mile are progressing as planned.

Dan, on behalf of Scott Schneeberger from Oppenheimer & Co. Inc., asked for the puts and takes on 2025 gross margins, the assumed impact from potential tariffs, the outlook for rental yield, and the current status of benefits from the infrastructure bill.

Answer

CFO Chris Eperjesy reiterated margin targets: low-to-mid 70s for rental, mid-20s for used equipment, and mid-teens for TES. CEO Ryan McMonagle addressed tariffs, noting a natural hedge from their large rental fleet and inventory, and ongoing work with suppliers to mitigate costs. McMonagle also stated that rental yields are expected to hold and improve in 2025, and that benefits from the infrastructure bill are in the 'mid-innings' and represent a continued tailwind.