Steve Barger

Steve Barger inquired about Plexus' alignment with semi-cap OEMs' outlook for strong growth and the puts and takes in non-semi-cap industrial markets. He also asked for details on automation and AI initiatives, including their breadth, timeline, and expected financial benefits.

Answer

Oliver Mihm (EVP and COO) expressed bullishness for semi-cap in FY2026, noting it's still early days for the demand uptick, and highlighted growth in energy and data center support within industrial. For automation, he detailed automated robots for material deployment (full site deployment by spring 2026, <12 months ROI) and AI applications for work order handling and labor efficiency. Todd Kelsey (CEO) added a two-pronged AI approach: dedicated data scientists and AI tools deployed to all employees.

Steve Barger asked about Plexus' outlook for the semi-cap equipment market, specifically if they align with OEM forecasts for greater than 20% calendar year growth, and for an overview of the non-semi-cap industrial markets. He also sought details on Plexus' automation and AI initiatives, including their breadth, timeline, and expected financial benefits.

Answer

Oliver Mihm, Executive Vice President and Chief Operating Officer, expressed bullishness on semi-cap for fiscal 2026, expecting to outgrow the market, while noting it's still early days. For non-semi-cap industrial, he highlighted muted but inflecting demand in comms, excitement in energy, and strong funnel opportunities in data center support. Regarding automation and AI, Oliver detailed the full site deployment of automated robots for material handling by spring 2026, yielding significant efficiency gains and ROI under 12 months. Todd Kelsey, President and Chief Executive Officer, added that AI applications also include speeding up the quoting process to impact revenue.

Steve Barger asked about Plexus Corp.'s long-term operating margin expansion strategy, specifically if the company expects to return to a similar margin expansion trajectory after fiscal 2026, given current investments and future mix. He also inquired if the strong wins in engineering and sustaining services, which are high-margin businesses, are influencing the company's broader pricing strategy.

Answer

Pat Jermain, EVP and CFO, stated that after fiscal 2026, the company might reevaluate its 6%+ operating margin target, citing confidence from overcoming incentive compensation headwinds, better fixed cost leverage from revenue growth, and productivity gains from automation and capacity improvements within existing sites. Todd Kelsey, President and CEO, clarified that while strong wins in engineering and sustaining services are positive and these businesses have high margin potential (engineering already above corporate target), they are not broadly changing the company's overall pricing strategy.

Steve Barger asked about the long-term operating margin expansion plan, specifically if Plexus expects to return to a similar expansion rate as the 40 basis points achieved over the past three years, and whether the strong wins in engineering and sustaining services are influencing their broad pricing strategy.

Answer

Pat Jermain, EVP and CFO, expressed confidence in potentially re-evaluating the 6% operating margin target next year, citing benefits from overcoming incentive compensation headwinds, better fixed cost leverage from revenue growth, and future productivity gains from automation and improved capacity utilization in existing sites. Todd Kelsey, President and CEO, stated that while they are optimistic about growing the engineering and sustaining services businesses (which have high margin potential), these wins are not broadly changing their overall pricing strategy.

Steve Barger asked for a performance breakdown of the Industrial sector excluding semi-cap, inquired about any uptick in industrial aftermarket services, and later asked for specifics on the drivers of semi-cap strength.

Answer

CEO Todd Kelsey stated that excluding high-teens growth in semi-cap, the rest of the industrial sector is down year-over-year, with pressure in areas like test & measurement and heavy equipment. Executive Shawn Harrison added that non-semi-cap industrial is up quarter-over-quarter and there is no notable uptick in MRO services. On semi-cap, Todd Kelsey emphasized the strength is broad-based across customers and technologies, driven by market share gains, and confirmed Plexus captures upgrade cycle business for its original builds.

Steve Barger questioned whether the demand increase in semicap for existing programs is durable or related to inventory building, and asked for clarification on the company's 'conservatism' in its aerospace and defense guidance.

Answer

President and CEO Todd Kelsey responded that semicap demand does not seem to be in excess of end demand and described the environment as 'stable on aggregate,' with modest sequential increases expected. Regarding aerospace, he explained that their conservative modeling involves 'derating' production forecasts for certain aircraft models based on a potential worst-case scenario to mitigate risk from OEM production slowdowns.

Steve Barger asked about the shift towards RDL formats replacing silicon interposers in compute, inquiring how much CapEx supports RDL and if this shift drives higher value-add/unit margins or primarily volume. He also questioned the gating factors for high-density fan-out adoption in higher-volume applications like PC or mobile.

Answer

CEO Giel Rutten stated that a significant majority of Amkor's CapEx is allocated to high-density fan-out (RDL-based technology), noting that capital investments are highly fungible across various packaging types. He explained that this technology will be applied across multiple domains, including data centers, PCs, and mobile, using the same production lines, with basic capacity supporting products across these segments despite individual specification differences.

Steve Barger inquired about the proportion of Amkor's CapEx supporting RDL (Redistribution Layer) formats, and whether this shift drives higher value-add/unit margins or primarily volume. He then asked about the gating factors for high-density fan-out technology to move into higher volume applications like PC or mobile.

Answer

President and CEO Giel Rutten stated that a significant majority of their CapEx is allocated to high-density fan-out (RDL-based technology), noting that much of their equipment is fungible across various packaging types. He explained that this technology will be applied across data center, higher volume PC, and ultimately mobile communication domains, using the same production lines with application-specific specifications.

Steve Barger of KeyBanc Capital Markets asked for an update on customer conversations in the auto and industrial markets for the second half of the year, and for details on the tester fleet investment, including timeline and scope.

Answer

CEO Giel Rutten described a two-sided automotive market: high demand for advanced packaging in areas like ADAS, and stabilization with slow improvement in the mature analog/MCU side, leading to an outlook for low single-digit growth in H2. Regarding the tester fleet, he explained the investment is a combination of upgrading existing platforms and purchasing new equipment. This is an ongoing process, with Phase 1 of the test expansion in Korea finishing this year and Phase 2 planned for 2026, with these capabilities to be mirrored in the new U.S. facility.

Steve Barger asked if the content and pricing of the recovering communications socket would allow Amkor to outgrow the prior program and whether there was visibility into further share gains. He also questioned how costs would be handled if customers requested program moves to mitigate tariffs, asking if it would be a complete pass-through.

Answer

CEO Giel Rutten explained that the new socket's revenue potential is in the same order of magnitude as the prior program, with final results depending on unit volumes, which remain uncertain. He confirmed clear visibility on socket positions, though market share can vary. Regarding tariff-related moves, Rutten stated that costs are handled on a case-by-case basis through collaborative discussions with long-term customers to find pragmatic solutions, rather than a general pass-through policy.

Steve Barger questioned if the prolonged automotive decline was purely inventory-driven or if Amkor was losing share, asked for the mix of advanced vs. mainstream auto products, and inquired about the outlook for tester utilization.

Answer

CEO Giel Rutten clarified the decline is concentrated in the mainstream portfolio (est. 60% of auto revenue), while advanced packaging (est. 40%) remains stable to up. He sees test as a key opportunity, noting that the high concentration of test in Taiwan is a supply chain risk, and Amkor is actively working to expand its test capacity, particularly for the compute segment.

Steve Barger asked about the visibility into the premium tier smartphone build plan for early 2025, whether this was the primary variable in the wide Q4 revenue guidance range, and which segments were expected to be down sequentially in Q4.

Answer

CEO Giel Rutten stated that visibility for 2025 is currently limited but noted the 2024 seasonality deviated from the norm with a stronger first half and weaker second half. He anticipates a potential up-cycle in 2025 driven by AI functionality in new phones. Rutten confirmed the phone build plan's unusual seasonality accounts for about 75% of the Q4 weakness, with a device changeover contributing the other 25%. He specified that Communications is the main segment expected to be down in Q4, while Automotive & Industrial and Computing are expected to be slightly up, and Consumer slightly down.

Steve Barger asked if the Kazakhstan deal for new locomotives included the full suite of digital products upfront with subscriptions and requested an update on digital penetration for international markets more broadly. He also inquired about the integration of Frauscher and Delner's technology with Wabtec's existing software and service stack, and how quickly cross-selling momentum could be achieved.

Answer

President and CEO Rafael Santana confirmed that the Kazakhstan deal does not include digital products, presenting a future opportunity for proven products like TO, Zero2Zero, and PTC. He noted continued growth in CIS countries and government support for landing fleets in the region, seeing opportunities to expand digital penetration for onboard electronics and PTC globally. Regarding Frauscher and Delner, Santana stated that their technology integrates very well, and Wabtec's scale will help these businesses gain momentum and growth in various markets, leading to growth and share wallet gains beyond just cost synergies.

Steve Barger followed up on the Kazakhstan deal, asking if the new locomotive contract included the full suite of digital products upfront with subscriptions and service, and sought an update on digital penetration for international markets more broadly. He also inquired about the high-level integration of Frauscher and Delner's technology with Wabtec's existing software and service stack, and the potential speed for cross-selling.

Answer

President and CEO Rafael Santana clarified that the Kazakhstan deal for new locomotives does not include digital products, presenting a future opportunity for proven products like TO, Zero2Zero, and PTC. He noted positive growth momentum in CIS countries and government support for fleet expansion in the region, with ongoing opportunities to expand digital penetration across onboard electronics (TO, SmartHPT, Zero2Zero) and PTC globally. Regarding Frauscher and Delner, Santana stated that their technology integrates very well with Wabtec's stack, offering scale to gain further momentum and growth in various markets, beyond just cost synergies, through share gain and wallet share with customers.

Steve Barger asked if the positive international margin variance is consistent across regions and product lines and if there's room for further expansion. He also questioned if emerging market customers are changing infrastructure plans due to trade policy.

Answer

CEO Rafael Santana confirmed the margin growth has been consistent, though it varies by country and product mix, driven by integration and lean efforts. Regarding trade policy, Santana stated that major infrastructure projects are decade-long decisions not typically swayed by short-term tariff issues. He emphasized that Wabtec is focused on managing controllable factors and maintaining constructive customer dialogues.

Steve Barger of KeyBanc Capital Markets inquired about the market size for international digital intelligence, its penetration rate compared to North America, and the company's long-term target for recurring revenue in that segment.

Answer

CEO Rafael Santana described the international opportunity for products like PTC as 'very significant' and noted that recurring revenues for the digital business have grown from below 20% to the 30% range. He stated the long-term goal is to reach 50% or higher, driven by software and services built on the PTC platform. He also highlighted recent positive progress in North America with a waiver for a next-generation automation product.

Steve Barger inquired about the strategic focus for M&A—whether on Freight, Transit, or opportunistic—and asked if the strength in international Digital Intelligence sales represents a new trend.

Answer

CFO John Olin and CEO Rafael Santana outlined the M&A focus on digital, near-in adjacencies like mining, and bolt-ons with high recurring revenue, all guided by maximizing returns. Santana explained the international digital strength reflects both market momentum and a strategic business model shift from one-time sales to recurring revenue.

Steve Barger from KeyBanc Capital Markets inquired about Park-Ohio's portfolio transformation, asking about underperforming business lines, future plans for them, and specific operating margin targets. He also asked whether deleveraging would come from EBITDA growth or debt reduction and the expected timeline for achieving margin improvements.

Answer

Chairman & CEO Matthew Crawford described a three-phase transformation focused on exiting non-core assets, consolidating facilities, and now investing in technology for long-term competitiveness. He identified the forge group as a key area for margin improvement. Crawford stated that deleveraging will be driven by both robust free cash flow and higher EBITDA, allowing for simultaneous investment. VP & CFO Patrick Fogarty provided margin targets, aiming for a 200 basis point improvement in Assembly Components and double-digit margins in Engineered Products over the long term.

Steve Barger from KeyBanc Capital Markets Inc. asked about the drivers behind the decade-high gross margin, the strategy of investing in top products, potential for further divestitures, and the optimal number of facilities.

Answer

Executive Matthew V. Crawford attributed the margin strength to a long-term portfolio repositioning strategy since 2018, focusing on productivity, divesting low-margin businesses, and allocating capital to make existing operations more sustainable. He highlighted new business pipelines and investment in high-margin areas like aftermarket and aerospace. Crawford clarified that while they are not planning major business line divestitures, they are continuously rationalizing facilities. Executive Patrick Fogarty added that facility consolidation is a normal, ongoing process to improve margins and react to customer needs, noting they are experienced in managing these changes effectively.

Steve Barger of KeyBanc Capital Markets asked if the momentum in chemistry equipment orders is a sustainable trend and inquired about the company's strategic priorities for the upcoming year.

Answer

President and CEO John Lee confirmed that substrate makers are seeing high utilization driven by AI. He noted that while historically lumpy, chemistry equipment has seen four consecutive quarters of strong bookings, mostly for AI capacity. Lee stated that strategic priorities remain unchanged: outgrowing the semi market with optics and power for etch, and providing complete solutions in Electronics and Packaging.

Steve Barger of KeyBanc Capital Markets commented on the strong Q1 free cash flow and asked if the lower working capital usage was a matter of timing. He also questioned why the company wasn't more opportunistic with share repurchases given the stock's recent volatility and discount to intrinsic value.

Answer

CFO Ram Mayampurath attributed the strong cash flow to sustained working capital improvements, strong revenue, and good margins, noting that only CapEx was light due to timing. On capital allocation, he confirmed that debt repayment is the primary focus, but the company does evaluate accretive buyback opportunities, as evidenced by the modest Q1 repurchase. CEO John Lee added that the company is also exploring other avenues to accelerate debt repayment, including portfolio reviews.

Steve Barger from KeyBanc inquired if optical assembly design wins are from product refreshes or new programs and asked about demand trends across different advanced packaging variations.

Answer

CEO John Lee responded that design wins in world-class optics are a mix of both next-generation upgrades for existing programs and entirely new, highly complex applications where fewer competitors can participate. Regarding packaging, he emphasized MKS's focus on the foundational substrate layers, where increasing complexity and layer counts are driving demand for the company's chemistry and laser drilling solutions.

Steve Barger inquired about the drivers behind the guided sequential gross margin decline for Q4. He also asked new CFO Ram Mayampurath how he plans to balance cost control with strategic investments and inventory management as end markets recover. Later, he asked how initiatives in photonics and lithography affect the company's long-term TAM and growth rates.

Answer

President and CEO John Lee attributed the Q4 gross margin dip to product mix, specifically higher sales of lower-margin equipment within the Electronics and Packaging segment tied to AI applications. CFO Ram Mayampurath stated his focus is on maintaining cost discipline, driving profitability, and maximizing cash for debt management. Lee added that strategic R&D and CapEx are not being starved and that photonics initiatives are key to their strategy of outgrowing the WFE market by gaining share in under-indexed areas.

Steve Barger of KeyBanc Capital Markets highlighted that Kennametal's revenue has been stagnant for five years and asked whether this is due to increased competitive pressure or a structural decline in demand. He also questioned the Board of Directors' sense of urgency and whether new perspectives are needed given the board's long average tenure.

Answer

President and CEO Sanjay Chowbey attributed the flat revenue to a prolonged and unusually deep cyclical downturn in key markets like transportation and oil & gas, not a loss of market share. He affirmed that both management and the board have a 'very high sense of urgency' to address performance through structural cost actions. CFO Patrick Watson added that the board has recently added new members, bringing in fresh perspectives.

Steve Barger from KeyBanc Capital Markets noted that revenue has been stagnant for five years and asked if this was due to increased competitive pressure or a structural decline in demand. He also questioned the Board of Directors' sense of urgency regarding these persistent challenges and the potential need for new perspectives given the board's long average tenure.

Answer

Sanjay Chowbey, President, CEO & Director, attributed the flat revenue to a prolonged down-cycle in key markets, not a loss of competitive share, and asserted the company is winning share in areas like aerospace. He emphasized that both management and the Board have a 'very high sense of urgency' to address structural costs. Patrick Watson, VP & CFO, added that there have been recent additions to the Board, bringing in new perspectives.

Steve Barger asked for specifics on the plans of the two recently appointed segment heads and how these leadership changes will translate into broader operational changes. He also questioned why the company doesn't divest or shut down consistently underperforming product lines and asked if the plant consolidation process could be accelerated.

Answer

CEO Sanjay Chowbey stated that the new leaders are aligned with the company's strategic pillars of growth, continuous improvement, and portfolio optimization, including pruning underperforming assets and pursuing targeted M&A. He assured that the company is actively reviewing its portfolio but must balance these actions with maintaining customer service. Regarding footprint consolidation, Chowbey confirmed they are working diligently on it while managing the risk of business disruption.

Steve Barger asked about current inventory levels relative to demand and whether temporary shutdowns could be used to accelerate structural cost savings like plant closures.

Answer

CFO Pat Watson stated the goal is to reduce inventory, implying production will run slightly below demand to reach the target of ~30% primary working capital to sales. CEO Sanjay Chowbey clarified that recent shutdowns were for short-term maintenance, not major footprint changes, which are part of a separate, longer-term plan.

Steve Barger from KeyBanc Capital Markets inquired about the power content per server for AI versus traditional data centers, how AE forecasts this demand, and whether new semiconductor products are ramping as expected.

Answer

President and CEO Steve Kelley explained that AI data centers have 5-10x the power consumption, leading to higher, though not linearly scaled, revenue content for AE. He noted that revenue is modeled based on direct customer forecasts. Regarding semiconductors, he confirmed that new products are entering low-rate initial production, which validates customer success and signals significant growth in 2026.

Steve Barger asked about the potential scale of high-volume production for the new eVoS and eVerest products and whether they are for new tools or upgrades. He also inquired about demand visibility for the Data Center segment into 2026 and if there are any capacity constraints.

Answer

CEO Stephen Kelley projected that high-volume production for the new semi products would be 'much more than double' the current qualification units and are primarily for newly built tools. For Data Center, he noted strong 2025 visibility and new design wins for 2026 ramps. CFO Paul Oldham added that they are increasing 2025 CapEx guidance to 5-6% of revenue specifically to build out capacity for high-power data center supplies, ensuring they can meet future demand.

Steve Barger from KeyBanc asked about the conversion rate of design wins to revenue, noting that some wins can go stale. He also sought confirmation of the high single-digit full-year revenue growth outlook and the expected operating leverage for the year. Finally, he asked a modeling question about sequential revenue for the I&M segment in Q1.

Answer

CEO Stephen Kelley confirmed that the design win pipeline is strong but the conversion to revenue has been slowed by market conditions, though he expects an outsized recovery. CFO Paul Oldham confirmed the high single-digit growth outlook for the company and stated that the long-term operating margin leverage model of 35% to 45% still applies. Regarding Q1 I&M revenue, Oldham reiterated that the business is 'bouncing along the bottom' and could see growth as early as Q2, implying a stronger second half.

Steve Barger from KeyBanc Capital Markets requested quantification of the 'record funnel of new opportunities' and asked if the ~$400 million quarterly revenue level could serve as a baseline for 2025.

Answer

CEO Stephen Kelley did not provide a specific dollar amount for the funnel but highlighted a strong conversion rate of over one in three opportunities turning into design wins, driven by the company's website and distribution channels. CFO Paul Oldham addressed the revenue baseline, cautioning that typical Q1 seasonality in the Industrial & Medical and Semiconductor segments could cause revenue to dip from Q4 levels.

Steve Barger of KeyBanc Capital Markets asked if the industrial market has entered a sustainable expansion, inquired about the duration of the new $1 billion backlog, and sought details on the integration plan and margin progression for the VACCO acquisition.

Answer

Chairman, President & CEO Dr. Michael Hartnett expressed confidence in the industrial recovery, citing 10% growth in the distribution business. He stated the multi-year, defense-heavy backlog has a chance to double in the next twelve months, with deliveries extending to 2030-2032. Regarding VACCO, he expects a margin ramp similar to the Sargent acquisition but faster, over 18-24 months, calling the integration synergies "known knowns."

Steve Barger of KeyBanc Capital Markets asked about the sustainability of the industrial market's expansion, the duration and potential growth of the new $1 billion backlog, and the integration plan and margin progression for the VACCO acquisition.

Answer

Dr. Michael Hartnett, Chairman, President & CEO, noted that the industrial economy felt strong, citing 10% growth in industrial distribution. He stated a goal to potentially double the backlog over the next 12 months, driven by defense programs with deliveries extending to 2030-2032. For VACCO, he anticipates an 18-24 month margin improvement timeline, similar to the successful Sargent integration, calling the synergies "known knowns."

Steve Barger of KeyBanc Capital Markets questioned whether the industrial business has turned a corner into a sustainable expansion. He also asked about the duration of the new $1 billion backlog and the integration plan and margin goals for the VACCO acquisition.

Answer

Chairman, President & CEO Michael Hartnett noted that Q1 felt like a turn, with industrial distribution up 10%. He stated the multi-year backlog could potentially double in the next 12 months, driven by defense. Regarding VACCO, he expects a margin ramp similar to the Sargent acquisition but faster, targeting an 18-24 month timeframe, calling the integration process 'all known knowns'.

Steve Barger of KeyBanc Capital Markets inquired about the nature of organic growth initiatives, whether they target new or existing customers, the specific geographic regions being targeted for expansion, and the current capacity flexibility to support future growth.

Answer

Executive Mike Hartnett explained that initiatives involve invigorating the Dodge OEM business by targeting both new and existing customers, with a focus on productive regions in North America and higher-risk areas like South America, India, and Mexico. He detailed that about 70% of A&D revenue comes from plants where demand exceeds capacity, necessitating significant investment in labor, machinery, and plant optimization to increase throughput.

Steve Barger from KeyBanc Capital Markets asked for clarification on the fiscal 2026 growth outlook, questioning if Aerospace growth could accelerate beyond mid-teens and if the Industrial segment could return to mid-single-digit growth.

Answer

CEO Dr. Michael Hartnett suggested that 15% growth for Commercial Aerospace in fiscal 2026 could be considered a 'floor' and is expected to accelerate, citing strong visibility and long-term contracts. He also affirmed that a return to mid-single-digit growth for the Industrial segment is a reasonable expectation, though the oil and gas recovery may lag slightly.

Steve Barger of KeyBanc Capital Markets sought clarification on the industrial growth outlook, asking if an inflection point had been reached. He also asked for the current percentage of the portfolio classified as defense and as 'exceptionally strong,' and what Q2 revenue would have been without the strike.

Answer

CFO Robert Sullivan clarified his guidance implied sequential improvement in the industrial growth rate, not necessarily in absolute dollars. CEO Mike Hartnett stated that defense constitutes about one-third of the A&D segment, and the 'exceptionally strong' portion of the business represents about 30% of total company revenues. Executive Robert Moffatt declined to provide a hypothetical revenue figure ex-strike, citing too many variables.

Steve Barger of KeyBanc Capital Markets questioned the drivers behind the 8% compound annual growth rate target for the Access segment through 2028, asking for a breakdown between market growth, share gains, and new products. He also asked about the expected revenue cadence for the Transport segment in the second half of the year.

Answer

CEO John Pfeifer explained the 8% CAGR target is entirely organic and achievable, driven by core product innovation, contributions from recent acquisitions, and investments in future technologies, all supported by long-term market tailwinds like data center and infrastructure spending. CFO Matthew Field stated that Transport revenue is expected to grow progressively and sequentially through the year, driven by the NGDV production ramp and the new FHTV contract.

Steve Barger questioned if the Vocational segment could sustain its high incremental margin of over 27% and asked for an update on the expected drivetrain mix for the NGDV program.

Answer

CFO Matthew Field indicated that while performance is strong, ongoing capacity investments will likely moderate the high incremental margin, but affirmed the segment's overall strength. CEO John Pfeifer stated there has been no change to the NGDV mix, with the U.S. Postal Service continuing to order both ICE and BEV models as planned.

Steve Barger asked if the supply chains for new electric offerings like Volterra are fully developed to handle potentially rapid uptake. He also questioned whether the strong pricing in the long-term fire truck backlog is locked in or subject to adjustment.

Answer

EVP and CFO Michael Pack confirmed the fire truck pricing is locked in. Regarding EV supply chains, he and CEO John Pfeifer noted it is a top focus and that while the supply base is still developing, they are working in lockstep with suppliers to manage the ramp-up for what they see as a long-term growth trend.

Steve Barger of KeyBanc Capital Markets asked if Q3 revenue should follow normal sequential seasonality given strong pricing and easy comps. He also inquired about the dynamics of the robotics market, asking if major investments by large players tend to spur activity from competitors, or if each deal is more idiosyncratic.

Answer

EVP, CFO & Treasurer Gabriel Bruno confirmed that assuming normal seasonality for Q3 is a fair approach. President, CEO & Chair Steven Hedlund added the caveat that Q3 will not have the one-time inventory load-in for a new retail partner that benefited Q2. On robotics, Hedlund stated that Lincoln Electric is focused on its own strategy of making automation easier to adopt to solve labor challenges, rather than reacting to competitor moves.

Steve Barger asked about the potential for operating margin expansion in a future upcycle, given the strong performance in a downturn. He also sought to clarify if the uptick in long-cycle automation projects was from new or existing customers.

Answer

CFO Gabe Bruno affirmed expectations for continued margin expansion in the next cycle, consistent with their historical performance. CEO Steven Hedlund clarified that the long-cycle project uptick is from existing automotive customers, while the growth strategy for medium-cycle business involves gaining new customers by making automation more accessible.

Steve Barger asked about the potential size and delivery timeline of automotive OEM orders once decisions are finalized. He also questioned how the company is balancing cost actions with maintaining inventory for a recovery, and whether there were any concerns about market share.

Answer

CEO Steven Hedlund stated that auto projects are percentage-of-completion and vary widely in size and duration, but the key is getting OEMs to commit to new programs. On inventory, Hedlund confirmed they are balancing the need to serve customers with opportunities to trim working capital. He also stated that the company is not seeing significant or broad market share losses, attributing the sales decline primarily to an unfavorable business mix heavily weighted towards large OEMs.

Steve Barger asked if the high 18% margin for the ESG business represents a new normalized run rate and inquired about the future expansion of digital revenue streams like the Third Eye platform.

Answer

SVP & CFO Jennifer Kong-Picarello indicated that while H2 margins will moderate slightly, the full annualized synergy benefit of over $25 million will be realized more significantly next year, suggesting future upside. President & CEO Simon A. Meester added that the company is expanding both the Third Eye platform's capabilities and its application across other Terex products to enhance safety and productivity.

Steve Barger of KeyBanc Capital Markets asked about the expected organic growth rate for the new ESG business and inquired about current customer ordering behavior, such as delivery delays or accelerations.

Answer

CEO Simon Meester projected that while Terex's overall revenue would increase in the next year, individual business performance would vary, with ESG and Utilities expected to grow while Aerials and MP decline, all hovering in the high single-digit range. He noted that in MP, 'rate anxiety' is delaying rental conversions and new orders, while in AWP, customers are rephasing deliveries to match fleet needs as lead times have normalized.

Steve Barger asked if Timken's organic growth lagging some peers was due to market share issues or pricing competitiveness. He also inquired about the sales team integration for the automation portfolio and the growth outlook for that sector into 2026.

Answer

President & CEO Richard Kyle attributed any performance differences versus peers to portfolio mix, asserting that Timken is not losing share and that pricing is increasing. He explained that the automation sales strategy uses both product and market specialists for cross-selling. He noted recent flatness in automation was due to a factory automation downturn but that order trends point to future improvement.

Steve Barger of KeyBanc Capital Markets asked if there were any market share issues, given some peers are returning to growth. He also inquired about the integration of sales teams for the automation portfolio and the growth outlook for that sector in 2026.

Answer

President & CEO Rich Kyle stated definitively that Timken is not losing share and that any performance differences versus peers are due to mix. He explained the sales approach for automation involves both product and market specialists to leverage cross-selling. He noted the recent decline in automation sales was tied to a down factory automation market but that customer sentiment and order trends point to better times ahead.

Steve Barger of KeyBanc Capital Markets questioned if Timken was facing any market share or pricing challenges, given that some peers were returning to growth. He also asked about the sales team integration for the automation portfolio and the growth outlook for that sector in 2026.

Answer

President & CEO Rich Kyle asserted that the company is not losing market share and that any performance differences with peers are due to business mix. He described the sales strategy as a combination of product and market specialists driving cross-selling. He noted that recent flatness in automation sales was tied to a weak factory automation market but expects improvement. EVP and CFO Philip Fracassa added that off-highway exposure also impacted the lubrication systems business.

Steve Barger from KeyBanc Capital Markets asked about potential market share issues, given that some peers are returning to growth. He also inquired about the integration of sales teams for the automation portfolio and whether the automation sector is expected to outgrow the broader portfolio in 2026.

Answer

President and CEO Richard Kyle stated that any performance difference versus peers is due to market mix, not share loss, and that pricing is increasing. He described the sales approach as using both product and market specialists. On automation, he and CFO Philip Fracassa noted that while factory automation has been down, order trends suggest better times ahead, positioning the segment for a return to growth.

Steve Barger of KeyBanc Capital Markets asked if market share issues or competitive pricing were causing Timken's organic growth to lag some peers. He also inquired about the sales team integration across the automation portfolio and the growth outlook for that sector.

Answer

President & CEO Richard Kyle asserted that the company is not losing market share and that any performance difference versus peers is due to business mix, not competitive pressure, noting that pricing is increasing. He explained that the automation sales strategy utilizes both product and market specialists to drive cross-selling. He attributed recent flatness in automation sales to a downturn in the factory automation market but noted that order trends are improving.

Steve Barger asked for practical examples of the new 'customer-centric' strategy and whether the focus on more profitable products could lead to exiting certain product lines.

Answer

CEO Tarak Mehta explained that being 'customer-centric' involves tailoring products for local market needs and leveraging deep customer relationships to cross-sell the broader portfolio. He stated it was too early to comment on potential product line exits, with more details on the portfolio review to come later in the year.

Steve Barger asked about the competitive environment in the wind energy business, specifically which competitors are driving down pricing, and whether similar pressures exist in other end markets. He also questioned if the company has enough levers within its control to achieve double-digit EPS growth in 2025.

Answer

President and CEO Tarak Mehta identified the main pricing pressure in wind as coming from a few local competitors in China, noting it's not a widespread issue in other segments. CFO Philip Fracassa added this behavior is isolated to the China wind market. Regarding 2025 EPS growth, Mehta stated it was too early to say, emphasizing a cautious stance given the uncertain broader environment. Fracassa agreed, noting the market's development will be the primary driver.

Steve Barger from KeyBanc Capital Markets inquired about the impact of the 'good, better, best' strategy on the ESG group's addressable market, sought details on technology from the Hog acquisition, and asked about M&A valuation multiples.

Answer

President & CEO Jennifer Sherman positioned the 'good, better, best' strategy as a key driver of above-market organic growth. She identified Hog's virtual reality training and advanced control systems as technologies to be leveraged across the platform. Regarding M&A, she stated that while Federal Signal is a 'buyer of choice,' valuation multiples in the market vary widely.

Steve Barger of KeyBanc Capital Markets asked if the 9% sequential growth in robotics was due to the recent organizational consolidation or pre-existing deals. He also inquired about plans for building internal manufacturing capacity to meet future robotics demand.

Answer

President & CEO Greg Smith explained the growth was positive despite the restructuring, which was executed successfully without negative impact. He expects the positive top-line effects of the new combined sales and service organization to materialize in 2026. Regarding capacity, he stated the North American facility is more for resilience and customer intimacy, and the company will use a blended strategy of internal manufacturing in the US/Europe and partners in APAC.

Steve Barger asked what percentage of data center customers utilize Flex's complete suite of IT integration and power products and about the company's success in cross-selling. He also inquired whether data center solutions are becoming more standardized or if they remain custom for each client.

Answer

CEO Revathi Advaithi explained that most hyperscalers engage with a full suite of products, while colocation providers are more varied but are moving toward integrated solutions as they scale. She emphasized that technology trends toward higher power density are driving demand for Flex's unique integrated compute, power, and cooling offerings. She clarified that solutions remain highly custom for each hyperscaler, while colos often standardize based on their largest customers' needs.

Steve Barger posed a high-level question about cyclicality, asking what portion of Flex's portfolio has a clear line of sight to sustainable growth versus areas with less confidence. He also inquired about the next steps for margin expansion, questioning whether future gains will come from fixing large, lower-margin businesses or from smaller, incremental improvements.

Answer

CEO Revathi Advaithi responded that both the Agility and Reliability segments have clear growth paths, but Flex is selective about where it pursues growth to optimize its portfolio mix. She noted that unpredictable macro volatility, like in the automotive sector, is the biggest challenge to forecasting. On margins, Advaithi expressed bullishness, stating there are still significant opportunities in both mix and efficiency. She highlighted adding more high-value products in data centers and auto, expanding value-added services, and continued factory automation as key levers for future margin improvement.

Representing Steve Barger, Christian Zyla inquired about potential M&A interests in capabilities outside of the data center, such as the next-gen mobility portfolio. He also asked if a 6%+ operating margin target is a reasonable goal, especially if the Reliability segment recovers, and what the key factors would be to achieve it.

Answer

CEO Revathi Advaithi stated that M&A targets are always focused on technology and portfolio completion, noting automotive as another area of interest, though the current portfolio is comprehensive. She emphasized a financially disciplined M&A approach. Both Revathi Advaithi and Interim CFO Jaime Martinez affirmed that the 6%+ long-term margin target, set at the last Investor Day, is achievable. They cited improved mix from power and medical, better cyclical management in Reliability, and continued growth in high-value services as the primary drivers.

Steve Barger asked about AMETEK's ability to grow relative to the semiconductor capital equipment market as the cycle improves and whether the high-volume production cycle appears to be inflecting.

Answer

Chairman and CEO David Zapico expressed confidence in outgrowing the market, noting AMETEK's semiconductor businesses grew mid-single digits in the quarter, driven by a unique portfolio balancing lab and production technologies. He highlighted the recent Polygon Physics acquisition as enhancing their capabilities. While acknowledging industry signs of an inflection, he remained cautious due to geopolitical factors.