Core Insights - Precision Optics Corporation reported a record quarterly revenue of $6.2 million for Q4 2025, representing a 31% increase year-over-year, driven by strong demand from aerospace and surgical robotics sectors [6][7] - The company anticipates fiscal year 2026 revenue to exceed $25 million, indicating over 30% growth compared to fiscal year 2025 [6][8] - The appointment of Joseph Traut as the new Chief Operating Officer is expected to enhance operational efficiency and production capacity [9][10] Financial Highlights for Q4 2025 - Quarterly revenue reached $6.2 million, up from $4.7 million in Q4 2024, marking a growth of approximately 31% [6][7] - Production revenue was $5.1 million, a 54% increase from $2.8 million in the same quarter last year [7] - Gross margins decreased to 13.0% from 21.7% in the same quarter of the previous fiscal year [7] Financial Highlights for FY 2025 - Total revenue for FY 2025 was $19.1 million, consistent with the previous fiscal year [7][24] - Production revenue increased by 34% to $14.2 million compared to $10.6 million in FY 2024 [7] - The net loss for FY 2025 was $(5.8) million, compared to $(3.0) million in FY 2024 [7][24] FY 2026 Financial Guidance - The company projects FY 2026 revenue to exceed $25 million, representing a growth of approximately 31% over FY 2025 [6][8] - Expected gross margin for FY 2026 is approximately 30%, an improvement from 18% in FY 2025 [7][8] - Projected Adjusted EBITDA for FY 2026 is approximately $0.5 million, compared to $(3.7) million in FY 2025 [7][8] Operational Challenges and Improvements - Margins were impacted by production yields, staffing, and efficiency challenges, along with unexpected tariff costs [8] - The company has renegotiated pricing agreements to address yield shortfalls and anticipates improvements in gross margins throughout FY 2026 [8] - New product development initiatives are expected to enhance the utilization of engineering resources [8] Leadership Changes - Joseph Traut has been appointed as the new Chief Operating Officer, effective October 1, 2025, bringing extensive experience in operations management within the medical device sector [9][10] - The company expects Traut's expertise to contribute significantly to scaling operations and improving manufacturing efficiency [10]

Financial Data and Key Metrics Changes - Q2 2025 marked a strong quarter with continued revenue growth, improved margins, and progress towards breakeven, with overall company gross margins improving from 39% to 43% [4][5] - Pathology services business is growing at an annualized growth rate of about 70%, while products revenue grew by 23% from the previous quarter, representing almost a 100% annualized growth rate [4][6] Business Line Data and Key Metrics Changes - The pathology services division continues to deliver consistent revenues, with a record of exceeding $2,000,000 in revenue in a single month in July [7][9] - The products division faced operational challenges in the past year but is now seeing revenue growth as issues are resolved and new customers are onboarded [10][11] Market Data and Key Metrics Changes - A strong pipeline of new customers is expected to contribute to continued growth in Q3, with efforts to scale market penetration through distributors [5][14] Company Strategy and Development Direction - The company is focused on strengthening its revenue base and mitigating future disruptions through strategic investments and customer support initiatives [5][12] - A commitment to customer service continuity has led to the implementation of a backup testing program for customers, ensuring uninterrupted patient testing [12][13] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the strength of the business and believes it is well-positioned to reach breakeven without additional capital, targeting this milestone in 2025 [6][21] - The company has begun to engage with investors and tell its story, which has contributed to increased interest and demand for its shares [22][23] Other Important Information - The company structured a recent warrant exercise to balance capital inflow with dilution control, minimizing the impact on share price [20] - The stock price has tripled in the last quarter due to solid revenue growth, improved margins, and increased investor interest [21][22] Q&A Session Summary Question: What drove the stock price increase in the last quarter? - The increase is attributed to company performance, with three consecutive quarters of solid revenue growth and reduced cash needs, making the company attractive relative to its valuation [21] - The company began to engage with investors and share its story, transitioning from being relatively unknown to gaining more attention in the market [22][23]

Core Insights - Powell Industries, Inc. reported strong financial results for the third quarter of fiscal 2025, with a gross margin improvement and significant new orders, indicating robust operational performance and market demand [3][4][10]. Financial Performance - Revenues for the third quarter totaled $286.3 million, a slight decrease of 1% from $288.2 million in the prior year, but an increase of 3% from $278.6 million in the previous quarter [4][9]. - Gross profit was $87.9 million, representing 30.7% of revenue, which is an 8% increase compared to $81.7 million (28.4% of revenue) in the prior year [5][9]. - Net income reached $48.2 million, or $3.96 per diluted share, marking a 4% increase from $46.2 million ($3.79 per diluted share) in the prior year [7][9]. Order Activity and Backlog - New orders amounted to $362 million, up from $356 million in the prior year and significantly higher than $249 million in the second quarter [6][9]. - The backlog as of June 30, 2025, was $1.4 billion, reflecting a 7% increase from the previous quarter and a 5% increase from the same period last year [6][9]. Strategic Initiatives - The company announced the acquisition of Remsdaq Ltd., enhancing its Electric Automation platform and supporting its strategic growth initiatives [8][9]. - Powell Industries is focused on diversifying and expanding its product portfolio, which is expected to drive continued demand across key markets [8][10]. Market Performance - The Electric Utility market saw a 31% revenue increase, while the Commercial & Other Industrial markets grew by 18%. However, revenues from the Oil & Gas and Petrochemical markets declined by 8% and 36%, respectively [4][9]. - The Light Rail Traction Power market experienced a significant revenue increase of 61% [4]. Cash Position - As of June 30, 2025, the company had cash and short-term investments totaling $433 million, up from $358 million in the prior year [9][18]. Outlook - The company remains optimistic about its operational and financial performance, with strong demand expected to continue into fiscal 2026 [10].

Summary of Microchip's Conference Call Company Overview - **Company**: Microchip Technology Inc. - **Industry**: Semiconductor Key Points and Arguments Financial Performance and Guidance - Microchip recently updated its financial guidance, removing the low end of the range due to stronger-than-expected demand in the quarter [5][6] - Bookings in May reached the highest level seen in two years, indicating a rebound in demand [5] - Revenue fell to approximately $970.4 million last quarter, down from a peak of nearly $2.3 billion per quarter [10] Inventory Management - The company has been focusing on inventory reduction as part of its nine-point plan [6] - Inventory write-offs amounted to over $90 million in March, combined with underutilization charges of about $54 million, totaling nearly $145 million in charges [7] - Microchip aims to achieve a non-GAAP gross margin target of 65%, with underlying product gross margins reaching almost 67% when excluding inventory reserve charges [8] Demand Recovery - The current recovery is attributed to both improved end demand and the need for inventory replenishment after a period of depletion [10][11] - The recovery is broad-based across all end markets and geographies, with no significant distinction between industrial and automotive sectors [16][17] - Industrial markets account for about 30% of Microchip's business, with aerospace and defense contributing an additional 18% [18] Customer Relationships and Market Position - Microchip has been actively engaging with customers to rebuild relationships that may have been strained during previous cycles [29][30] - A survey indicated that 24% of customer relationships improved, while 12% were damaged, with efforts focused on the latter group [29][30] - The company is confident in its ability to regain market share and return to higher revenue levels [30] Pricing Environment - Pricing is expected to decline in the mid-single digits this fiscal year, with a return to more stable pricing conditions anticipated thereafter [48][49] - The company has adjusted its long-term gross margin target from 68% to 65% to reflect a more achievable model [48] Operational Efficiency - Microchip has implemented a reduction in force, with operational expenses (OpEx) expected to stabilize around $356 million, which is significantly lower than previous peaks [56][57] - The company aims to align OpEx with revenue growth, targeting 25% of revenue in the long term [58] Future Outlook - The company anticipates a gradual increase in factory output, which could positively impact gross margins in the coming quarters [64] - Microchip is committed to maintaining its dividend while focusing on reducing leverage before considering stock buybacks [75][76] Tariff Impact - Approximately 14% of Microchip's revenue is subject to US-China tariffs, but the direct impact on the company is expected to be minimal [70][71] - The company has flexibility in its supply chain to mitigate potential tariff impacts by shifting production as needed [71] Seasonality and Market Trends - Seasonality is not expected to significantly impact performance, as inventory replenishment may override typical seasonal trends [72] - The company is optimistic about multiple quarters of strong performance driven by inventory replenishment [73] Additional Important Insights - Microchip is utilizing AI and machine learning to better manage customer data and inventory, aiming to avoid past issues related to capacity and order management [43][44] - The company is focused on ensuring that its pricing strategies align with market conditions and competitive pressures [52][56]

Financial Data and Key Metrics Changes - Net sales reached $7.6 billion, an increase of 4.3% year-over-year, driven by organic growth of 5% and acquisition growth of 1%, despite a 1.7% negative impact from one fewer sales day and foreign exchange [7][19] - Gross margin improved to 31%, up 50 basis points year-over-year, attributed to actions taken to capture value and moderating deflation [20] - Operating profit increased by 6.1% to $715 million, with an operating margin of 9.4%, expanding by 20 basis points [21] - Diluted earnings per share rose by 7.8% to $2.5, supported by operating profit growth and share repurchases [9][21] Performance by Business Lines - HVAC customer group saw a 10% revenue increase, primarily due to focused growth initiatives [12][15] - Residential trade plumbing revenues declined by 1%, consistent with recent trends, while repair and maintenance performed better [12] - Waterworks revenue grew by 12%, driven by public works and municipal activities [13][16] - Commercial Mechanical revenue increased by 10%, with strong activity in large capital projects [14] Performance by Markets - U.S. net sales grew by 4.5%, with organic growth of 5% and a 1% contribution from acquisitions [23] - Canadian net sales were down 0.3%, with organic growth of 3% offset by foreign exchange impacts [23] - Non-residential end markets showed stronger growth, particularly in large capital projects, with a 7% increase in revenue [11][23] Company Strategy and Industry Competition - The company continues to invest in key growth areas, including HVAC, Waterworks diversification, and large capital projects, while streamlining operations to enhance efficiency [31][32] - The launch of Ferguson Home aims to provide a seamless omnichannel experience for customers, integrating showroom and digital channels [17] - The competitive landscape remains challenging, but the company has managed to balance market share gains with gross margin improvements through strategic pricing and sales management [105] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in medium-term market conditions despite a dynamic and uncertain environment [9][28] - The company updated its full-year guidance to low to mid-single-digit revenue growth, reflecting strong performance in the third quarter [28] - Management noted that deflation moderated ahead of expectations, contributing to improved gross margins [31] Other Important Information - The company completed three acquisitions during the quarter, enhancing its market position [27] - A nonrecurring business restructuring charge of $68 million was incurred, expected to yield $100 million in annualized cost savings [21][78] - The company returned $759 million to shareholders through share repurchases year-to-date, reducing share count by approximately 4.1 million [27] Q&A Session Summary Question: How much of the organic volume strength is attributed to internal initiatives versus market improvement? - Management attributed the 5% organic growth to internal initiatives, particularly in non-residential markets, and noted that the market is expected to improve in the coming years [36] Question: What factors contributed to the strong gross margin of 31%? - Management indicated that the strong gross margin was due to actions taken in pricing strategy and moderating deflation, with expectations for margins to remain above 30% in the fourth quarter [38][39] Question: How is bidding activity progressing in the commercial industrial sector? - Management reported strong bidding activity, particularly in data centers, and noted that open order volumes in commercial mechanical continue to grow [45][46] Question: How is the company managing price increases in the current tariff environment? - Management emphasized a focus on value rather than price competition, with a strategy to work closely with customers to ensure project completion on time and budget [48][51] Question: Can you provide insights on the Waterworks business growth and bidding activity? - Management highlighted strong growth in Waterworks, particularly in public works and wastewater treatment, and noted supportive bidding activity in residential new construction [60][62] Question: What is the timeline for realizing benefits from the restructuring program? - Management indicated that the restructuring is largely complete, with expectations for operational improvements and cost savings to materialize in the near term [78]

Core Insights - Sypris Solutions, Inc. reported a net loss of 4 cents per share for Q1 2025, an improvement from a loss of 10 cents per share a year earlier, despite a revenue decline of 17% year-over-year to $29.5 million [2][3] - The company’s stock has underperformed, declining 0.6% since the earnings report, compared to a 1.4% increase in the S&P 500 and a 15.4% rise in the broader market over the past month [1] Financial Performance - Revenue for Sypris Technologies fell to $13.6 million from $18.4 million, while Sypris Electronics saw a decline to $15.9 million from $17.2 million, attributed to cyclical and operational factors [5] - Gross profit increased by 16.7% year-over-year to $3.4 million, with a consolidated gross margin improvement of 330 basis points [3] - The Electronics segment experienced a significant gross profit increase of 51.1% to $1.3 million, driven by a favorable program mix and cost efficiencies [3] Management Strategy - CEO Jeffrey T. Gill highlighted a backlog exceeding $80 million in Sypris Electronics, which is more than a year’s worth of sales, allowing for proactive inventory management [4] - The company has withdrawn its full-year 2025 guidance due to macroeconomic uncertainties, particularly regarding new tariffs, and will suspend future guidance until more visibility is achieved [6]

Financial Data and Key Metrics Changes - The company reported Q1 sales of $50.7 million, an increase from $41.9 million in the same quarter last year, representing a year-over-year growth of 21% [10] - Operating income for Q1 was $3.4 million, down from $4.1 million in the previous year, leading to a decrease in operating margin to 6.7% from 9.7% [15] - Net income was $1.9 million or $0.11 per share on a GAAP basis, compared to $2.9 million or $0.18 per share for the same quarter last year [15][16] - Adjusted EBITDA was $5.4 million, or 10.7% of sales, compared to $5.2 million or 12.5% for the prior year quarter [16] Business Line Data and Key Metrics Changes - Revenues from the Battery and Energy Products segment were $46.3 million, up from $35 million last year, with a 10.6% organic growth excluding Electrochem sales [10][11] - Government defense sales in the Battery segment increased by 53.6%, while medical battery sales decreased by 12.3% [11] - The Communications Systems segment saw revenues decline by 36.2% to $4.4 million, primarily due to large shipments in the prior year [12] Market Data and Key Metrics Changes - The sales split between commercial and government defense for the battery business was 64% to 36%, with a domestic to international sales split of 78% to 22% [11] - The total backlog exiting Q1 was $95 million, representing 55% of trailing twelve-month sales, indicating a healthy demand outlook [12] Company Strategy and Development Direction - The company is focused on completing the integration of the Electrochem acquisition, including ERP system setup, by the end of Q2 [18][26] - There is a commitment to improve sales pipelines and stabilize gross margins through pricing adjustments and lean productivity projects [19][20] - The company aims to leverage vertical integration opportunities from the Electrochem acquisition to enhance product offerings and market reach [18][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in profitable growth despite macroeconomic uncertainties, citing a strong backlog and expected recovery in medical sales in the latter half of the year [40][52] - The government defense sector is expected to remain robust, with potential increases in spending due to global conflicts and NATO commitments [52] - The company anticipates consistent free cash flow throughout 2025, with plans to pay down acquisition debt ahead of schedule [53][54] Other Important Information - The company is actively managing tariff impacts by passing along known costs as surcharges and exploring alternative supply sources [8][34] - The integration of Electrochem is expected to yield favorable contribution margins and enhance overall profitability [38] Q&A Session Summary Question: How have conversations with customers on tariff pass-throughs evolved? - Management noted that customers are concerned about cash flow impacts due to tariffs, which could affect their ability to invest in product development [32][33] Question: What are the major milestones left for the Electrochem integration? - The integration is on track, with most systems set up and the focus now on finalizing the ERP system [35][36] Question: What markets are targeted for the IVAS battery? - The primary focus is on foreign military markets, with some commercial engagements anticipated [39] Question: Can you discuss trends across key end markets? - The medical market is steady with known replacement cycles, while government defense remains strong with no expected downturn [50][52] Question: How do you expect free cash flow to trend over 2025? - Free cash flow is expected to be consistent, with a focus on maintaining a positive cash gap and paying down debt [53][54]

Financial Data and Key Metrics Changes - The company reported Q1 sales of $50.7 million, an increase from $41.9 million in the same quarter last year, representing a year-over-year growth of 21% [10][12] - Operating income for Q1 was $3.4 million, down from $4.1 million in the previous year, leading to a decrease in operating margin to 6.7% from 9.7% [15] - Net income was $1.9 million or $0.11 per share on a GAAP basis, compared to $2.9 million or $0.18 per share for the same quarter last year [15][16] - Adjusted EBITDA was $5.4 million, or 10.7% of sales, compared to $5.2 million or 12.5% for the prior year quarter [16] Business Line Data and Key Metrics Changes - Revenues from the Battery and Energy Products segment were $46.3 million, up from $35 million last year, with a 10.6% organic growth excluding Electrochem sales [10][11] - Government defense sales in the Battery segment increased by 53.6%, while medical battery sales decreased by 12.3% [11] - The Communications Systems segment saw revenues decline by 36.2% to $4.4 million, primarily due to large shipments in the prior year [12][14] Market Data and Key Metrics Changes - The sales split between commercial and government defense for the battery business was 64% to 36%, with a domestic to international split of 78% to 22% [11] - The total backlog exiting Q1 was $95 million, representing 55% of trailing twelve-month sales, indicating a healthy demand outlook [12] Company Strategy and Development Direction - The company aims to complete the integration of the Electrochem acquisition by the end of Q2, focusing on ERP system setup and leveraging vertical integration opportunities [19][27] - There is a commitment to improve sales pipelines and stabilize gross margins through pricing adjustments and lean productivity projects [20][21] - The company is expanding its product offerings in both the Communications Systems and Battery segments, targeting military and medical markets [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in profitable growth despite macroeconomic uncertainties, noting that Q1 performance exceeded expectations [42][43] - The government defense sector is expected to remain strong, with potential increases in NATO spending anticipated over the next 18 to 24 months [54] - The medical battery segment is expected to stabilize as replacement cycles for COVID-related devices approach [52] Other Important Information - The company ended Q1 with working capital of $70 million and a current ratio of 3.2, indicating solid liquidity [17] - The company received $1.5 million from the employee retention credit, which was used to reduce acquisition debt [17] Q&A Session Summary Question: How have conversations with customers on tariff pass-throughs evolved? - Management noted that customers are concerned about cash flow impacts due to tariffs, which could affect their ability to invest in product development [32][34] Question: What are the major milestones left for the Electrochem integration? - The integration is on track for completion by Q2, with most systems set up and data transitioned [36][37] Question: What markets are targeted for the IVAS battery? - The focus is primarily on foreign military markets, with some commercial engagements anticipated [41] Question: Can you discuss trends across key end markets? - The medical market is steady with known replacement cycles, while government defense remains strong with a good backlog [52][54] Question: How is free cash flow expected to trend over 2025? - Free cash flow is expected to be consistent, with plans to continue paying down debt ahead of schedule [55][56]

Financial Data and Key Metrics Changes - Q1 2025 revenue was €37.6 million, meeting guidance but down 13% year over year and almost flat compared to the previous quarter [6][29] - Gross margin improved to 38.1%, within the guided range of 37% to 39%, reflecting a 634 basis point improvement from the last quarter [9][30] - Adjusted EBITDA loss for Q1 2025 was €7.8 million, the best result since becoming a public company, representing a 42% improvement year over year [12][32] - Labor costs and operating expenses decreased by 13% quarter over quarter and 23% year over year [11][30] Business Line Data and Key Metrics Changes - AC sales in Europe were down 14% year over year, while North America saw a 142% year over year growth, contributing €11.4 million or 30% of total revenue [15][14] - DC fast charging sales increased by 41% compared to the previous quarter, with over 36,000 AC units and more than 100 DC units delivered in Q1 [8][30] - Software and services generated €8 million in revenue, representing 21% of total revenue and a 60% increase year over year [20] Market Data and Key Metrics Changes - The European EV market showed solid growth of 21% year over year, contributing €25.5 million or 68% of total revenue [13] - North America contributed €11.4 million, with significant growth driven by AC and DC charger sales [14] - APAC and LATAM regions contributed approximately €600,000 and €480,000 respectively, indicating potential for future growth [15] Company Strategy and Development Direction - The company is focused on cost savings and expanding sales, leveraging a newly implemented business unit structure to improve efficiency [11][12] - There is a commitment to rightsizing the organization and expanding gross margins while stabilizing sales and building a strong backlog [12][27] - The company aims to become a global leader in recharging energy management solutions, with a focus on optimizing existing platforms and partnerships [37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about stabilizing sales and building a strong backlog, despite a volatile macro environment impacting the automotive supply chain [27][38] - The company remains cautious about the impact of tariffs and economic uncertainty on the EV market, while believing in the long-term growth potential of EVs [26][27] - Future guidance for Q2 2025 includes expected revenue in the range of €37 million to €39 million and a gross margin between 37% and 39% [38] Other Important Information - The company has surpassed 100,000 chargers produced in Arlington, Texas, enhancing its production flexibility and supporting local job growth [28] - The partnership with Nissan for a home EV charging program in Canada is expected to simplify the charging journey for EV owners [17] Q&A Session Summary Question: Thoughts on ABL integration and industry consolidation opportunities - Management reported successful integration with ABL, achieving significant synergies and operational efficiency improvements, with a focus on cross-selling products across Europe [41][43] Question: Additional traction for Quasar beyond Kia - Management indicated ongoing efforts to drive demand for Quasar in Europe, with expectations for new partnerships and customer interest following recent events [51][52] Question: Competitive landscape and market opportunities - Management highlighted the competitive advantage in the US market due to local manufacturing and a focus on delivering comprehensive solutions, while noting challenges faced by competitors [56][58] Question: Expectations for product mix and its impact on margins - Management discussed the current gross margins for fast charging and home/business segments, emphasizing a strategy to reduce inventory and improve operational efficiency [65][66]

Financial Data and Key Metrics Changes - First quarter revenue was $104.2 million, down 13% year-over-year, aligning with expectations [5][23] - Adjusted EBITDA improved by $8 million, with a margin increase of 650 basis points compared to last year [6][26] - Adjusted gross margins exceeded 40% for the fourth consecutive quarter, improving by 550 basis points year-over-year [6][25] Business Line Data and Key Metrics Changes - Showroom channel revenue grew by 7%, marking the fifth consecutive period of growth, with comparable sales up 11% [5][24] - Direct-to-consumer (DTC) net revenue was $63.4 million, with showroom sales increasing by 7.4% [23][24] - E-commerce sales declined by 8.2%, reflecting challenges in conversion and messaging [15][24] - Wholesale segment revenue decreased by 24.2% to $40.8 million due to reduced door counts and overall volume declines [24] Market Data and Key Metrics Changes - The overall consumer sentiment remains cautious, impacting spending patterns [38][41] - Brand awareness reached 77%, indicating strong recognition but highlighting the need for better communication of product benefits [14] Company Strategy and Development Direction - The company announced a significant expansion of its partnership with Mattress Firm, increasing distribution slots from 5,000 to 12,000, expected to generate over $70 million in incremental revenue [7][9] - The strategy focuses on three pillars: pioneering new technologies, promoting differentiation, and prioritizing gross margin through operational improvements [9][10] - The launch of the new Rejuvenate 2.0 mattress line aims to enhance product offerings and drive sales [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the consumer psyche and macroeconomic uncertainties affecting the second quarter [38][39] - The company reaffirmed its full-year revenue guidance of $465 million to $485 million, anticipating some headwinds from tariffs [21][30] - Management remains focused on executing strategic priorities while navigating industry challenges [31] Other Important Information - The company entered into an amendment to borrow an additional $20 million to support the expanded distribution agreement and ongoing investments [9][28] - The impact of tariffs is being closely monitored, with an estimated annual cost impact of approximately $10 million [20] Q&A Session Summary Question: Can you elaborate on the $70 million from the Mattress Firm partnership? - The number is based on current productivity and projected incremental slots, considering some cannibalization but expecting overall growth [34][36] Question: What are the trends in the second quarter? - There are concerns about consumer sentiment, with cautious spending observed [38][41] Question: How did the new agreement with Omni Group come about? - The relationship developed due to mutual benefits in driving traffic and improving margins for Mattress Firm [46][48] Question: Will tariffs impact the P&L? - Tariffs will start impacting in the second quarter, and the company is working on strategies to mitigate these costs [54] Question: Is there exclusivity in the new partnership with Mattress Firm? - There is no exclusivity; the focus is on serving all wholesale partners effectively [69] Question: How does the expanded partnership affect guidance for 2025? - The ramp-up from the partnership is still being finalized, but there are expected tailwinds in the latter part of the year [76][77]