Core Viewpoint - BorgWarner Inc. is facing significant challenges due to higher tariffs and rising selling, general and administrative (SG&A) expenses, leading to a recommendation to offload the stock from portfolios [1]. Group 1: Financial Performance and Guidance - The company has reduced its guidance for adjusted operating margin to a range of 9.6% to 10.2%, down from the previous estimate of 10.0% to 10.2%, reflecting a 20 basis point impact from higher tariffs [2]. - BorgWarner anticipates free cash flow of $650 million to $750 million in 2025, indicating a year-over-year decline of $29 million at the midpoint of the guidance [3]. - The Zacks Consensus Estimate for 2025 sales and earnings suggests a year-over-year decline of 2.57% and 2.78%, respectively, with earnings estimates for 2025 and 2026 moving down by 8 cents and 12 cents [6]. Group 2: Cost Structure and Debt - The company is experiencing high SG&A costs, which are expected to persist, alongside elevated research and development expenses related to electrification programs, limiting profit margins [3]. - BorgWarner's long-term debt increased to $3.8 billion as of March 31, 2025, up from $3.76 billion at the end of 2024, which restricts financial flexibility [4]. Group 3: Competitive Landscape - BorgWarner competes with larger manufacturers and distributors, including Robert Bosch GmbH, Denso Corporation, and others, which may have economic advantages such as lower labor costs and subsidies [5]. - Increased competition could negatively impact BorgWarner's business prospects [5].

Financial Data and Key Metrics Changes - The company reported record first-quarter results for revenue, adjusted EBITDA, and EPS, with contract and net revenue each growing by 24% year over year [5][20] - Adjusted EBITDA rose by 31%, while GAAP diluted EPS increased by 52% and adjusted diluted EPS was up 58% [5][23] - Contract revenue increased to $152 million, and net revenue grew to $85 million, with organic growth rate for net revenue at 12% [20][21] Business Line Data and Key Metrics Changes - Revenue in the Energy segment rose by 25%, driven by strong program and construction management activity [21] - Engineering and Consulting segment revenues increased by 20%, reflecting strong client demand and geographic expansion [21] - The company completed two acquisitions that contributed $6 million to contract revenue in the quarter [20] Market Data and Key Metrics Changes - Commercial customers are forecasted to comprise 15% of revenue, state and local government customers at 44%, and utilities at around 41% [7] - Demand remains healthy across all customer groups, particularly in electricity usage at data centers driven by AI [7][8] - The company has minimal exposure to federal contracts, insulating it from recent federal spending cuts [9] Company Strategy and Development Direction - The company aims to pursue acquisitions that expand capabilities and relationships with commercial customers [8] - A focus on energy efficiency and infrastructure solutions positions the company well for long-term growth [6] - The company is enhancing financial flexibility through expanded credit facilities to support growth and acquisitions [24][25] Management's Comments on Operating Environment and Future Outlook - Management noted a structural shift in the energy landscape, with significant new opportunities arising from electrification and increased electricity demand [15] - The company is preparing for potential tariff impacts by seeking alternative equipment sources and inserting flexible contract terms [17][30] - Management raised 2025 financial targets based on strong Q1 performance, expecting net revenue between $325 million to $335 million [26] Other Important Information - The company ended the quarter with $38 million in cash and access to an undrawn $50 million line of credit, resulting in total liquidity of $88 million [24] - The effective income tax rate was favorable at 9.75%, contributing to a net income of $4.7 million, up 59% from the previous year [22] Q&A Session Summary Question: Impact of tariffs on the company - Management acknowledged potential risks related to equipment costs due to tariffs but noted no immediate impact and ongoing efforts to find alternative suppliers [28][30] Question: Conversations with customers regarding load growth - Management indicated that discussions with utilities and government customers are focused on updating forecasts and CapEx spending due to changing market conditions [32][35] Question: Confidence in raising guidance - The company raised guidance based on strong Q1 performance and customer interest in expanding contracts [36][38] Question: Any signs of slowdown in demand - Management reported no significant headwinds in operations, with strong demand across the board [41][42] Question: Equipment costs in large contracts - Equipment costs are estimated to be 25% to 30% of overall contract value, indicating some exposure to tariff impacts [44][45] Question: Integration of recent acquisitions - The company is facilitating cross-selling between teams from recent acquisitions without merging them physically [51][53]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $132.8 million, down 9% year-over-year due to demand softness in vehicle and industrial markets, with an unfavorable FX impact of $1.8 million [11] - Sequentially, revenue decreased by $10.8 million or 9%, but adjusted EPS increased nearly 50% from Q4, reaching $0.46 per share [7][20] - Gross margin expanded 70 basis points sequentially to 32.2%, while operating margin rose 130 basis points to 6.6% [7][15] Business Line Data and Key Metrics Changes - Aerospace and defense revenue increased by 25%, driven by key program deliverables [12] - Vehicle revenue declined by 34%, reflecting softness in powersports demand and a shift from lower-margin programs [13] - Industrial markets showed mixed results, with power quality solutions for HVAC and data center infrastructure growing, but overall industrial market sales were down due to reduced demand in automation [14] Market Data and Key Metrics Changes - Sales to U.S. customers represented 52% of revenue, down from 58% in Q1 last year, with contributions from Europe, Canada, and Asia Pacific [11] - The industrial sector contributed 47% of trailing twelve-month sales, primarily driven by strong demand for power quality solutions [14] - The medical market was down 2% on a trailing twelve-month basis due to softness in pump-related products [14] Company Strategy and Development Direction - The company is focused on long-term growth themes such as electrification, energy efficiency, automation, and infrastructure investment [9] - The "Simplify to Accelerate Now" program is central to improving operational efficiency and aligning resources with demand [7][27] - The company is taking proactive steps to address global trade challenges, particularly regarding tariffs and rare earth magnet sourcing [28] Management's Comments on Operating Environment and Future Outlook - Management noted solid order momentum with total orders increasing 17% sequentially and 13% year-over-year, indicating a healthy book-to-bill ratio of 1.04 times [25] - The external environment remains fluid, but the company is built for resilience with a diverse customer base and global manufacturing footprint [26] - Management expressed confidence in achieving sustainable, profitable growth while continuing to invest in capabilities [30] Other Important Information - Operating cash flow was $13.9 million, up 52% from last year, and net debt decreased by $13.6 million to $174.4 million [21][23] - Capital expenditures for the quarter were $1.1 million, with an anticipated full-year spend of $10 million to $12 million [24] Q&A Session Summary Question: Demand and Supply Environment - Management observed positive signs in demand at the start of the quarter, with expectations for incremental growth [36] - Tariff impacts are being managed through cost mitigation strategies and localization of supply chains [37] Question: Competitive Positioning - The company believes it is well-positioned to win business due to its existing footprint and localization efforts [39] Question: Vehicle Business Strategy - Management confirmed a strategic shift away from lower-margin automotive applications towards higher-margin opportunities [46][49] Question: Inventory Turn Targets - The company aims to improve inventory turns beyond 3.1, but acknowledges potential short-term challenges due to geopolitical factors [56] Question: Rare Earth Elements Impact - Management provided insights on the cost impact of rare earth elements, indicating a significant portion of costs could be affected [65] Question: Recreational Vehicle Market - The company is not exiting the recreational vehicle market and sees opportunities for competition, particularly in industrial applications [73][75]

Financial Data and Key Metrics Changes - The company reported Q1 revenue of $78.7 million, reflecting a 17% year-over-year decline, aligning with expectations for the quarter [15] - Adjusted EBITDA for Q1 was $4.9 million, with a negative adjusted operating income of $2.9 million [18] - Gross profit margins increased to 29%, but gross profit fell by 35% year-over-year to $22.8 million [17] Business Line Data and Key Metrics Changes - The Energy Industrial segment's revenue increased by 2% year-over-year to $29.8 million, indicating a modest recovery [15] - EV Thermal Barrier revenue decreased by 25% year-over-year to $48.9 million, attributed to lower vehicle production schedules [16] Market Data and Key Metrics Changes - The company noted a destocking trend in the distribution channel, which is expected to stabilize and lead to revenue growth in the second half of the year [10] - Major oil and gas companies maintained their capital expenditure guidance for 2025, providing a stable outlook for the Energy Industrial business [10] Company Strategy and Development Direction - The company aims to strengthen resilience by broadening commercial activities in EV thermal barriers and energy industrial businesses, optimizing the cost structure, and building a flexible supply chain [7][11] - The target for adjusted EBITDA breakeven is set at approximately $245 million in revenue, significantly lower than the previous year's levels [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of both core segments and adjacent markets, despite current uncertainties in the energy markets [11] - The company anticipates a revenue range of $70 million to $80 million for Q2, with a net income loss projected between $4 million and $11 million [29] Other Important Information - The company is actively working to mitigate tariff risks through pricing strategies and optimizing raw material sourcing [12][23] - The balance sheet remains strong with $192 million in cash and equivalents, providing flexibility for future operations [20] Q&A Session Summary Question: Plans for the Georgia facility - The company aims to capture value from the Georgia facility as soon as possible, with plans to sell equipment and hold an auction for the remainder [41][42] Question: Signals from customers regarding inventory clearing - Management noted a decrease in inventory levels held by distributors and contractors, indicating a potential revenue build-up in the second half of the year [44][45] Question: Trends in content per vehicle for thermal barriers - The company expects a decrease in content per vehicle due to the shift towards prismatic cell battery packs, but remains focused on maintaining gross margins [50][51] Question: Opportunities for European expansion - The company prefers to supply products from Mexico to European customers, leveraging existing investments and minimizing risks associated with European labor costs [55][56] Question: Engagement with South Korean EV OEMs - The company is actively engaged with South Korean OEMs and aims to partner with them for future product launches [64][65] Question: Timeline for additional OEM wins to impact P&L - Additional OEMs could contribute over $200 million in revenue by 2027, with production start dates for some awards expected in early 2028 [66]

Financial Data and Key Metrics Changes - The company reported Q1 2025 revenue of $78.7 million, a 17% year-over-year decline, aligning with expectations for the quarter [14] - Adjusted EBITDA for Q1 was $4.9 million, with a negative adjusted operating income of $2.9 million [18] - The net income for Q1 was negative $301.2 million, or $3.67 per diluted share, which would have been negative $4.8 million or $0.06 per diluted share excluding impairment and restructuring costs [18] Business Line Data and Key Metrics Changes - The Energy Industrial segment's revenue increased by 2% year-over-year to $29.8 million, reflecting inventory rebalancing [14] - EV thermal barrier revenue was $48.9 million, representing a 25% decrease year-over-year due to lower vehicle production schedules [15] - Gross profit margins for the company were up 29%, with gross profit of $22.8 million, a 35% decline year-over-year [17] Market Data and Key Metrics Changes - The company noted that major oil and gas companies maintained their 2025 capital expenditure guidance, indicating stability in the energy markets [9] - The company is experiencing destocking in its distribution channel, which is expected to stabilize and lead to revenue growth in the second half of the year [9][44] Company Strategy and Development Direction - The company aims to build resilience by broadening commercial activities in EV thermal barrier and energy industrial businesses, optimizing cost structures, and enhancing supply chain flexibility [6][10] - The focus is on reducing fixed cash costs to 2022 levels and lowering the revenue required for positive adjusted EBITDA performance to approximately $245 million [12] - The company is strategically positioned to leverage its technology in both energy industrial and EV thermal barrier segments, anticipating significant growth opportunities by 2027 [32][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt and innovate, emphasizing the importance of electrification as a major driver for growth [35] - The company expects Q2 revenue to range from $70 million to $80 million, translating to a net income loss of $4 million to $11 million [29] - Management highlighted ongoing efforts to mitigate risks associated with international trade and tariffs, which are not expected to significantly impact operations [28] Other Important Information - The company has successfully diversified its raw material supply chain and created a second source for aerogel, enhancing resilience against fluctuating tariff regimes [10] - The company ended the quarter with $192 million in cash and equivalents, indicating a strong balance sheet [20] Q&A Session Summary Question: Plans for the Georgia facility - The company aims to capture value from the Georgia facility as soon as possible, with plans to sell equipment and list the plant for sale [41][42] Question: Signals from customers regarding inventory clearing - The company has observed a decrease in inventory levels held by distributors and contractors, indicating a potential for revenue growth in the second half of the year [44] Question: Trends in thermal barriers and content per vehicle - The company expects a decrease in content per vehicle due to the shift towards prismatic cell battery packs, but remains focused on maintaining gross margins [50][51] Question: Opportunities for European expansion - The company prefers to supply products from Mexico to European customers, leveraging existing investments and minimizing risks associated with European labor costs [56][57] Question: Engagement with South Korean EV OEMs - The company is actively engaged with South Korean OEMs and is determined to partner with them for future product launches [65][66] Question: Timeline for additional OEM wins - The company anticipates that new OEM partnerships could contribute over $200 million in revenue by 2027, with ongoing demand expected to build from 2027 onwards [67]

Core Insights - Aspen Aerogels reported total revenues of $78.7 million for Q1 2025, a decrease of 17% compared to $94.5 million in Q1 2024 [2][6] - The company experienced a net loss of $301.2 million, which included a significant impairment charge of $286.6 million related to the demobilization of a planned manufacturing plant [3][21] - Adjusted EBITDA for Q1 2025 was $4.9 million, down from $12.9 million in Q1 2024 [4] Financial Performance - Revenue breakdown: Thermal Barrier segment generated $48.9 million (25% decrease YoY), while Energy Industrial segment saw $29.8 million (3% increase YoY) [6] - Gross margins were reported at 29%, reflecting an eight-percentage point decrease year-over-year [6] - Operating cash flow for the quarter was $5.6 million, with cash and equivalents at the end of the quarter totaling $192.0 million [6][24] Business Developments - Aspen secured a new PyroThin contract with a leading American OEM for a next-gen prismatic lithium iron phosphate (LFP) vehicle platform, with production expected to start in 2028 [5][6] - The company is focusing on optimizing its cost structure and fortifying its supply chain to enhance financial performance [5] Q2 2025 Financial Outlook - Revenue is projected to range between $70 million and $80 million, with a net loss expected between $11 million and $4 million [7] - Adjusted EBITDA is anticipated to be between breakeven and $7 million [7] - Capital expenditures, excluding costs related to the Statesboro plant, are expected to be less than $10 million [7]

Summary of Custom Truck OneSource (CTOS) FY Conference Call Company Overview - **Company**: Custom Truck OneSource (CTOS) - **Industry**: Specialty equipment rental and sales, focusing on electric, utility transmission and distribution, communications, and rail markets in North America - **Business Model**: One-stop shop offering rental, sales, and aftermarket parts and services [1][2] Key Points and Arguments Rental Fleet Characteristics - **Fleet Size**: Over 10,000 units, with 70% focused on utility markets, 10% on rail and telecom, and the remainder on specialty vocational trucks [5][6] - **Asset Life**: Equipment has a useful life of 10 to 20 years, with an average rental duration of just over one year [7][8] - **Fleet Age**: The average age of the fleet is just over three years, which is considered a competitive advantage [9] Integrated Production Capabilities - **Production Model**: Custom Truck sources attachments and chassis directly from major suppliers, allowing for economies of scale and cost advantages [11][12] - **Customer Flexibility**: The company caters to customer needs through rentals, sales, and aftermarket services, enhancing customer retention [13][14] End Markets and Demand Trends - **Revenue Breakdown**: 55% from utility, just under 30% from infrastructure, and each rail and telecom contributing just under 5% [15][16] - **Market Drivers**: Strong demand for utility grid upgrades, infrastructure projects, and ongoing investments in rail and telecom, with a noted softness in telecom [17][19] Growth Opportunities - **Future Drivers**: Anticipated growth from utility grid upgrades, electrification, manufacturing onshoring, and data center investments [20][21] - **Q1 Performance**: Reported a 13% growth in the ERS segment, with improved rental fleet utilization at 78% [25] Tariff Impact and Procurement Strategy - **Tariff Resilience**: The company is well-positioned with a young rental fleet and significant pre-tariff inventory, minimizing the impact of potential tariffs [26][27] - **Supplier Relationships**: Strong relationships with suppliers have allowed for proactive procurement strategies to mitigate cost increases [28][30] Capital Allocation and Free Cash Flow - **Free Cash Flow Target**: Aiming for $50 million in levered free cash flow, with significant investments in the rental fleet projected between $375 million and $400 million [52][53] - **Debt Reduction Priority**: Focus on reducing net leverage to below three times by the end of 2026 [54][56] Backlog and Long-Term Growth - **Backlog Status**: Increased backlog by over $51 million in Q1, with a healthy range of four to six months on hand [60][62] - **Growth Projections**: Expected long-term growth rates in the high single digits to low double digits, with targeted gross profit margins of 15% to 18% for new sales [66][68] Customer Dynamics - **Demand from Customers**: Both larger and smaller customers are showing good demand, with smaller customers leaning towards rentals due to capital expense hesitancy [70][72] Additional Important Insights - **Greenfield Strategy**: The company is expanding its footprint with new locations and acquisitions, targeting areas with customer demand [45][49] - **Pricing Strategy**: Adjusted gross profit margins targeted at low to mid-seventy percent for rentals and mid-twenty percent for asset sales, with recent price increases reflecting market conditions [41][42][43] This summary encapsulates the key insights and strategic directions discussed during the Custom Truck OneSource FY Conference Call, highlighting the company's operational strengths, market dynamics, and future growth potential.

Financial Performance (Q1 2025) - GAAP Revenues were $219.5 million[9] - GAAP Gross Margin was 8.0%[10] - GAAP Net Loss was $(98.5) million[10, 11] - Non-GAAP Net Loss was $(66.1) million[9, 10] - Cash provided by operating activities was $33.8 million[10] - Cash, Deposits and Investments, Net of Debt was $113.2 million[10] Market Trends and Growth - Global population is projected to increase by 22% (+1.7 billion) from 2022-2050[17, 18] - Urbanization is expected to increase from 55% to 80% between 2020 and 2050[19] - Electric Vehicle penetration is projected to increase from 1% to 86% between 2020 and 2050[19] - There is a 68% increase in energy sector investment technologies from 2015-2022, totaling $62 billion in 2022[31]

Financial Data and Key Metrics Changes - Sales increased by 112% organically, driven by the infrastructure vertical, with new products contributing over two points to sales growth [9] - Adjusted operating income grew by 4% year over year, with a return on sales of 20% [9] - Adjusted EPS increased by 10%, and free cash flow grew by 32% [9][15] Business Line Data and Key Metrics Changes - Systems Protection segment sales increased by 16%, driven by the Track D acquisition, while organic sales were flat [16] - Electrical Connections segment sales rose by 3%, with organic sales up by 4% [18] - Infrastructure sales grew in the mid-teens, with strength in Data Solutions and Power Utilities [10][16] Market Data and Key Metrics Changes - The Americas experienced low single-digit sales decline, while Europe was flat and Asia Pacific grew in the high teens [10][16] - Organic orders were up in the mid-teens, with strong double-digit growth in Data Solutions [11][68] Company Strategy and Development Direction - The company is focused on portfolio transformation, having divested the Thermal Management business and acquired the AVAIL Electrical Products Group [8][28] - The infrastructure vertical is expected to account for over 40% of sales, with Data Solutions and Power Utilities each contributing approximately 20% [29][30] - The company is prioritizing growth through new products, acquisitions, and capacity expansion [11][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong sales growth in the second half of the year, particularly in infrastructure and data solutions [11][24] - The company is taking steps to mitigate tariff impacts through pricing, productivity, and supply chain actions [11][25] - Overall, management is optimistic about the company's positioning in the electrification, sustainability, and digitalization trends [35] Other Important Information - The company ended the quarter with over $1.3 billion in cash and repaid $390 million of term loans [21] - A quarterly dividend increase of 5% was announced, with significant capital returned to shareholders through share repurchases [23] Q&A Session Summary Question: Comments on the data solutions business and order pace - Management noted strong double-digit growth in data solutions, with a growing backlog providing visibility into the second half [41][42] Question: Contribution and synergies from recent acquisitions - Management confirmed that the AVAIL acquisition will contribute a nickel to EPS and highlighted potential cost synergies from both AVAIL and Track D [52][46] Question: Organic sales outlook and confidence in second half acceleration - Management indicated strong orders and backlog in data solutions and power utilities, expecting growth to accelerate in the second half [57][58] Question: Impact of tariffs on margins - Management expects first half margins to be impacted by tariffs, with a positive flip in the second half as pricing and productivity measures take effect [61][62] Question: Clarification on tariff impacts and pricing strategies - Management stated that the tariff impact is primarily from steel and aluminum, and they are actively managing pricing through various strategies [92][105] Question: Insights on the power utility segment - Management highlighted that power utilities now represent about 20% of sales, with strong growth expected from recent acquisitions [95][96]

Financial Data and Key Metrics Changes - The company reported a strong first quarter with sales up 112% organically, driven by the infrastructure vertical [11] - Adjusted EPS grew 10% to $0.67, and free cash flow increased by 32% to $44 million [17] - The company raised its full-year sales guidance to 19% to 21% growth and adjusted EPS guidance to $3.30 to $3.13, reflecting strong performance in Data Solutions and Power Utilities [25][26] Business Line Data and Key Metrics Changes - Systems Protection segment sales increased by 16%, driven by the Track D acquisition, while organic sales were flat [18] - Electrical Connections segment sales grew by 3%, with organic sales up 4% [20] - Infrastructure vertical sales grew in the mid-teens, while Commercial Resi declined low single digits [12] Market Data and Key Metrics Changes - Organic orders were up mid-teens, with strong double-digit growth in Data Solutions [13] - The Americas saw low single-digit growth, while Europe was flat and Asia Pacific grew in the high teens [12] - The infrastructure vertical is expected to account for over 40% of sales, with Data Solutions and Power Utilities each contributing approximately 20% [30] Company Strategy and Development Direction - The company is focused on portfolio transformation, having divested the Thermal Management business and acquired the AVAIL Electrical Products Group [10][29] - The strategy emphasizes growth in electrical infrastructure, data solutions, and power utilities, aligning with trends in electrification and sustainability [30][31] - The company plans to invest in R&D and capital expenditures to support growth and supply chain resiliency [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong demand for electrical infrastructure products, anticipating a 50% increase in electricity demand by 2050 [32] - The company is taking steps to mitigate tariff impacts through pricing, productivity, and supply chain actions [13][26] - Management remains optimistic about the second half of the year, expecting strong growth driven by backlog and order strength [60] Other Important Information - The company has a strong balance sheet with over $1.3 billion in cash and $600 million available on its revolver [22] - The company repurchased approximately $250 million in shares year-to-date, exceeding its plan [24] - The recent sustainability report highlighted the company's commitment to reducing CO2 emissions and improving employee satisfaction [34] Q&A Session Summary Question: Can you provide more details on the data solutions business and order demand? - Management indicated strong double-digit growth in data solutions, with a growing backlog providing visibility into the second half of the year [40] Question: What are the contributions and synergies from the recent acquisitions? - The AVAIL acquisition is expected to contribute a nickel to EPS, with strong growth and cost synergies anticipated [51][52] Question: How confident is the company in the second half organic sales growth? - Management expressed confidence in strong orders and backlog, particularly in data solutions and power utilities, which are expected to drive growth [58][60] Question: What is the impact of tariffs on margins and pricing? - Management noted that tariffs are expected to impact margins in the first half, but pricing and productivity measures are anticipated to offset these impacts in the second half [61][62] Question: Can you clarify the order growth and its organic nature? - Management confirmed that organic orders were up mid-teens, with strong contributions from data solutions and infrastructure [68] Question: What is the outlook for the commercial residential segment? - Management revised expectations for commercial residential to flattish growth due to tariff impacts and market uncertainty [90]