Kinetik (NYSE:KNTK) Q4 2025 Earnings call February 26, 2026 09:00 AM ET Company ParticipantsAlex Durkee - Director of Investor RelationsJamie Welch - President and Chief Executive OfficerKris Kindrick - SVP of CommercialTrevor Howard - SVP and CFOTyler Milam - SVP of Crude, Water and New Energy VenturesConference Call ParticipantsGabriel Moreen - Managing Director and Senior Equity Research AnalystJeremy Tonet - Executive Director and Senior Equity Research AnalystJohn Mackay - AnalystManav Gupta - Senior E ...

Core Insights - Planet Fitness reported fourth-quarter results that exceeded Wall Street expectations, with adjusted earnings per share of $0.83 compared to the consensus estimate of $0.78 and revenue of $376.26 million versus expectations of $366.72 million [1] Group 1: Financial Performance - System-wide same club sales increased by 5.7%, while total system-wide sales rose to $1.3 billion from $1.2 billion in the prior-year quarter [2] - Adjusted EBITDA for the fourth quarter increased to $146.3 million, up from $130.8 million a year earlier [2] - For the full year, adjusted EPS was $3.07, and revenue increased by 12.1% to $1.3 billion, with adjusted EBITDA rising to $551.6 million from $487.7 million in the previous year [2] Group 2: Future Outlook - Looking ahead to 2026, Planet Fitness expects revenue growth of approximately 9% and adjusted EBITDA growth of around 10% [3] - Adjusted net income is projected to increase between 4% and 5%, with adjusted diluted EPS expected to grow by 9% to 10% based on approximately 80 million adjusted diluted weighted-average shares outstanding [3] - System-wide same club sales growth for 2026 is projected to be in the range of 4% to 5% [3]

Strategic Performance and Market Dynamics - Achieved record 2025 adjusted EBITDA with 17% year-over-year growth, primarily driven by the strategic expansion of the high-margin Pipeline segment [5] - Successfully integrated the Midwestern pipeline acquisition within one year, shifting the business mix to 70% pipeline-based revenue to enhance cash flow stability [5] - Expanded the 5-year organic project backlog by 50% to $3.4 billion, reflecting a 'generational investment opportunity' in the Upper Midwest and Gulf Coast [5] - Attributed strong performance to a portfolio with 95% demand-based contracts and an average 8-year tenure, providing high visibility into long-term earnings [5] - Identified a structural shift in the Upper Midwest where coal retirements and data center growth could drive 5 to 8 Bcf per day of incremental gas demand [5] - Leveraged record storage withdrawals and peak pipeline throughput during winter storms as a market signal for critical capacity constraints and expansion needs [5] Growth Outlook and Investment Strategy - Projected 2026 adjusted EBITDA growth of 6% over the 2025 midpoint, supported by new organic investments and steady producer activity [5] - Anticipates growth rates exceeding long-term guidance in the late 2020s as sizable pipeline projects from the $3.4 billion backlog enter service [5] - Plans to fully fund the expanded project backlog using internal cash flows and a healthy balance sheet while maintaining investment-grade credit ratings [5] - Targeting a 2026 year-end proportional leverage of 3.5x, demonstrating a commitment to disciplined capital allocation during a heavy investment cycle [5] - Expects 2027 growth capital expenditures to exceed 2026 levels, with $430 million already committed to sanctioned projects [5] - Reached Final Investment Decision (FID) on the Viking pipeline expansion and Phase 2 of the Interstate modernization program, totaling approximately $180 million to $200 million [5] - Achieved investment-grade credit ratings from all three major agencies in 2025, lowering the long-term cost of capital for future expansions [5] Dividend Policy - Increased the quarterly dividend by 7.3%, maintaining a policy to grow distributions in line with adjusted EBITDA while keeping a coverage ratio above 2.0x [6]

Automotive: Conversion revenue of $122 million, up 2% year over year, despite a 6% decline in shipments. West said high interest rates and tariff-related customer uncertainty weighed on industry shipments, while improved pricing and mix helped offset lower volume.General engineering: Conversion revenue of $331 million, up $14 million (about 4%), supported by a 6% increase in shipments. West cited tariff-driven reshoring activity and KaiserSelect quality attributes as supporting volumes and pricing.Packaging ...

Financial Data and Key Metrics Changes - For the full year 2025, total net sales were $3.4 billion, with conversion revenue of $1.5 billion, consistent with 2024 [6] - Adjusted EBITDA for 2025 was $310 million, up approximately $69 million from 2024, with adjusted EBITDA as a percentage of conversion revenue improving to 21.3% [11] - Reported net income for 2025 was $113 million, or $6.77 per diluted share, compared to $66 million, or $4.02 per diluted share in 2024 [10] Business Line Data and Key Metrics Changes - Aerospace and high-strength conversion revenue totaled $457 million, down 14% due to a 16% decrease in shipments attributed to commercial aerospace OEM destocking [7] - Packaging conversion revenue for the year totaled $544 million, up 11%, driven by a transition to coated products [8] - General engineering conversion revenue totaled $331 million, up 4% year over year, on a 6% increase in shipments [8] - Automotive conversion revenue totaled $122 million, up 2% year over year, despite a 6% decrease in shipments [8] Market Data and Key Metrics Changes - Shipments in the aerospace sector decreased significantly in the second half of 2025, primarily due to destocking [16] - Demand in the packaging sector is improving, supported by long-term contracts, with expected shipment growth of 5%-10% in 2026 [18] - General engineering is expected to grow approximately 3%-5% year-over-year, driven by improving GDP and semiconductor market demand [19] Company Strategy and Development Direction - The company aims to harvest returns from recent investments and strengthen margins while generating free cash flow [5] - In 2026, the company expects record years for both conversion revenue and EBITDA, with a focus on operational execution rather than relying on metal pricing [23] - The company plans to retool select facilities and add capacity to support automotive demand, particularly for internal combustion engine vehicles [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum in the aerospace market and expects a recovery in commercial aircraft production [17] - The company does not foresee demand destruction in any product lines and anticipates continued strong bookings and shipments [40] - Management highlighted that operational gains will be the primary driver of performance in 2026, rather than metal price tailwinds [39] Other Important Information - The company returned approximately $51 million to shareholders through dividends, marking the 19th consecutive year of dividend payments [15] - Capital expenditures for 2025 were $137 million, with expectations for 2026 in the range of $120 million-$130 million [14] Q&A Session Summary Question: Insights on 2026 outlook regarding aerospace and packaging conversion revenue - Management noted that aerospace conversion revenue is expected to recover as plate capacity is restored, while packaging revenue is benefiting from improved throughput and pricing due to new investments [25][26][29] Question: Clarification on automotive opportunities and capacity expansion - Management indicated that the automotive opportunity involves high-margin specialty products, with plans for retooling facilities to support increased demand for trucks and SUVs [31][34] Question: CapEx guidance context and implications - The increase in CapEx guidance is primarily driven by the automotive opportunity, with customers currently utilizing steel products due to aluminum shortages [35][36] Question: Demand destruction concerns and tariff impacts - Management reported no evidence of demand destruction and remains neutral to positive regarding potential tariff changes, emphasizing operational gains as the focus for 2026 [39][41]

Financial Data and Key Metrics Changes - For the full year 2025, total net sales were $3.4 billion, with conversion revenue at $1.5 billion, consistent with 2024, and total shipments were 1.1 billion pounds, down 5% from 2024 [6][10] - Adjusted EBITDA for 2025 was $310 million, up approximately $69 million from 2024, with adjusted EBITDA as a percentage of conversion revenue improving to 21.3% [11][12] - Reported net income for 2025 was $113 million, or $6.77 per diluted share, compared to $66 million, or $4.02 per diluted share in the prior year [10] Business Line Data and Key Metrics Changes - Aerospace and high-strength conversion revenue totaled $457 million, down 14% due to a 16% decrease in shipments attributed to commercial aerospace OEM destocking [7] - Packaging conversion revenue for the year totaled $544 million, up 11%, driven by a transition to coated products [8] - General engineering conversion revenue totaled $331 million, up 4% year-over-year, supported by tariff-driven reshoring activity [9] Market Data and Key Metrics Changes - The aerospace market saw a decrease in shipments due to OEM destocking, but demand in other aerospace applications remained strong [7] - The packaging market is expected to see shipment growth of 5%-10% and conversion revenue growth of 15%-20% in 2026 [18] - The automotive market is anticipated to decline in shipments and conversion revenue by 5%-10% in 2026 due to planned outages [21] Company Strategy and Development Direction - The company aims to harvest returns from recent investments and strengthen margins while generating free cash flow [5] - In 2026, the company expects record years for both conversion revenue and EBITDA, with a focus on operational execution rather than relying on metal pricing [22][23] - The company plans to reduce manufacturing and operating costs to drive additional operating leverage and maximize returns on investments [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum in the aerospace market and expects a recovery in commercial aircraft production [17] - The company does not foresee demand destruction in any product lines and anticipates continued strong bookings and shipments [40] - Management highlighted that operational gains will be the primary driver of performance in 2026, rather than metal pricing [39] Other Important Information - The company returned approximately $51 million to shareholders through dividends, marking the 19th consecutive year of dividend payments [15] - Capital expenditures for 2025 were $137 million, with expectations for 2026 to be in the range of $120 million-$130 million [14] Q&A Session Summary Question: Insights on 2026 outlook regarding aerospace and packaging conversion revenue - Management noted that aerospace conversion revenue is expected to recover as plate capacity is restored, while packaging conversion revenue is benefiting from improved throughput and pricing due to new investments [25][30] Question: Clarification on automotive opportunities and capacity expansion - Management indicated that the automotive opportunity involves high-margin specialty products and that planned outages will temporarily affect shipments but are necessary for future growth [31][34] Question: Concerns about demand destruction and tariff impacts - Management reported no evidence of demand destruction and expressed confidence in the strength of the market, while also addressing potential tariff changes as unlikely to impact their business negatively [39][41]

Financial Data and Key Metrics Changes - For the full year 2025, total net sales were $3.4 billion, with adjusted EBITDA of $310 million, reflecting a 25% growth year-over-year and margins above 21% [6][12] - Reported net income for 2025 was $113 million, or $6.77 per diluted share, compared to $66 million, or $4.02 per diluted share in 2024 [11] - Adjusted net income for 2025 was $100 million, or $6.03 per diluted share, up from $60 million, or $3.67 per diluted share in 2024 [12] Business Line Data and Key Metrics Changes - Aerospace and high-strength conversion revenue totaled $457 million, down 14% year-over-year, primarily due to a 16% decrease in shipments [8] - Packaging conversion revenue increased to $544 million, up 11% year-over-year, driven by a transition to coated products [9] - General engineering conversion revenue rose to $331 million, a 4% increase, supported by a 6% increase in shipments [9] - Automotive conversion revenue totaled $122 million, up 2% year-over-year, despite a 6% decrease in shipments [9] Market Data and Key Metrics Changes - Shipments for the full year were 1.1 billion pounds, down 5% from 2024 [7] - The aerospace market saw a decrease in shipments due to commercial aerospace OEM destocking, while demand in defense and business jet markets remained strong [8][19] - Packaging demand is improving, with expectations for 5%-10% shipment growth in 2026 [20] Company Strategy and Development Direction - The company aims to harvest returns from recent investments and strengthen margins while generating free cash flow [5] - In 2026, the company expects record years for both conversion revenue and EBITDA, with a focus on operational execution rather than relying on metal pricing [24][25] - The company plans to reduce manufacturing and operating costs to drive additional operating leverage and maximize returns from investments [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in commercial aircraft production and the expected increase in shipments for aerospace products [19] - The automotive market is expected to see a decline in shipments due to planned outages, but the company is preparing for higher demand in the future [22][36] - There are no signs of demand destruction in any product lines, and the overall market outlook remains strong [41] Other Important Information - The company returned approximately $51 million to shareholders through dividends, marking the 19th consecutive year of dividend payments [17] - Capital expenditures for 2025 were $137 million, with expectations for 2026 to be in the range of $120 million-$130 million [16] Q&A Session Summary Question: Insights on 2026 outlook regarding aerospace and packaging conversion revenue - Management noted that aerospace conversion revenue is expected to recover as plate capacity is restored, while packaging revenue is benefiting from improved pricing and mix due to new investments [27][30] Question: Clarification on automotive opportunities and capacity expansion - Management indicated that the automotive opportunity involves high-margin specialty products, with plans for retooling facilities to support increased demand [33][36] Question: CapEx guidance context and implications - The increase in CapEx guidance is primarily driven by the automotive opportunity, with customers currently seeking aluminum products due to limited availability [37][38] Question: Demand destruction concerns and tariff impacts - Management reported no evidence of demand destruction and expressed confidence in the market outlook, while also addressing potential impacts from derivative tariffs [41][43]

Financial Data and Key Metrics Changes - For the full year of 2025, total adjusted constant currency revenue growth was 13% and adjusted EBITDA growth was 26% year-over-year, resulting in positive free cash flow while investing significantly in future growth [5][15] - Total adjusted revenues for Q4 of 2025 were $118.3 million, up 18.5% compared to Q4 of 2024, with adjusted EBITDA increasing approximately 29% from $17.6 million to $22.7 million [15][16] - Adjusted EBITDA margin was 19.2% in Q4 of 2025, an improvement of approximately 110 basis points over the prior year [16] Business Line Data and Key Metrics Changes - Stent graft revenues grew 36% on a constant currency basis in Q4 compared to the same period last year, driven by AMDS in the U.S. and strong international growth [6][19] - On-X revenues increased 24% year-over-year on a constant currency basis, supported by global market share gains and new U.S. market opportunities [7][8] - Tissue processing revenue increased 6% year-over-year on a constant currency basis, while BioGlue revenues were flat compared to the same period last year [8][19] Market Data and Key Metrics Changes - Revenues in Asia Pacific increased 32%, North America increased 18%, EMEA increased 17%, and Latin America increased 9% compared to Q4 of 2024 [20] - Q4 gross margins were 63% in both 2025 and 2024, with the 2024 gross margin negatively impacted by an idle plant charge due to a cybersecurity incident [20] Company Strategy and Development Direction - The company plans to replicate its proven strategy by introducing additional stent graft products already generating revenue in Europe to the U.S. and Japan, aiming to expand the total addressable market [7] - Future growth is expected to be driven by AMDS commercialization in the U.S., On-X heart valve data, NEXUS PMA, and the ARTISAN IDE trial [32][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering sustainable double-digit revenue growth and driving EBITDA margin expansion, with expectations for constant currency growth between 10%-14% for 2026 [23][26] - The company anticipates challenges in the second and third quarters of 2026 due to tougher comparisons and recovery of the tissue backlog [25] Other Important Information - The company recorded a $2.3 million adjustment to revenue for estimated payback obligations due to Italian government legislation, which has been excluded from adjusted revenue [17][18] - Free cash flow for the full year was approximately $1 million, despite significant investments in the business [22] Q&A Session Summary Question: Impact of Italian clawback on growth - The Italian clawback was specific to the EMEA line and did not impact major product lines, thus not skewing growth rates [36][38] Question: Commentary on AMDS sell-in versus sell-through - Management does not typically break out details on AMDS revenue but noted that implantations are continuing to grow positively [40][41] Question: Progress on AMDS target accounts - The company is in the early stages of AMDS rollout, with significant opportunities to open new accounts and increase implants in existing accounts in 2026 [44][45] Question: Market opportunity for NEXUS - The NEXUS device is positioned in a nascent market with a $150 million U.S. opportunity, and the company believes it is well-positioned against competitors [46][48] Question: Pricing for AMDS and NEXUS - The company sees strong demand for AMDS and NEXUS at their current price points, supported by favorable reimbursement dynamics [54] Question: CapEx plans for 2026 - CapEx is expected to be approximately $50 million in 2026, primarily for capacity expansion and IT system improvements [71][72]

Financial Data and Key Metrics Changes - The fourth quarter results exceeded internal expectations, with strong growth in the offshore pipeline transportation segment driven by steady base volumes and contributions from new wells [5][11] - The quarterly common unit distribution was increased to $0.18 per unit, representing a 9.1% year-over-year increase [6] - The company exited the year with effectively zero outstanding under its $800 million senior secured revolving credit facility [6] Business Segment Data and Key Metrics Changes - The offshore pipeline transportation segment saw a 19% increase in segment margin and a 16% increase in total volumes compared to the previous quarter, marking the third consecutive quarter of sequential improvement [11] - The marine transportation segment returned to normalized operating performance, benefiting from increased refinery runs of heavy crude oil [5][16] - The onshore transportation and services segment performed in line with expectations, with increased throughput volumes across Texas and Riceland terminals [20] Market Data and Key Metrics Changes - The recent BOEM lease sale generated over $300 million in high bids for 181 tracts, indicating strong long-term interest in the central Gulf of Mexico [14][15] - The market for marine transportation remains structurally tight due to effectively zero net new supply of Jones Act vessels [19] Company Strategy and Development Direction - The company is focused on deepwater Gulf of America growth, with ongoing discussions with offshore producer customers regarding expected production volumes and drilling schedules for 2026 and beyond [7][8] - The management emphasized a disciplined approach to capital allocation, including debt reduction and evaluating future distribution increases [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in exceeding the top end of the 2026 EBITDA guidance range, despite potential disruptions from hurricanes and maintenance [9][28] - The company views the recent acquisition of LLOG by Harbour Energy as a positive development, with plans to double production from the acquired asset by 2028 [46][47] Other Important Information - The company anticipates a heavier maintenance capital year due to dry dockings, with an expected increase in maintenance CapEx of $15 million to $20 million [55] - The management team remains committed to building long-term value for stakeholders and maintaining flexibility for future opportunities [22] Q&A Session Summary Question: Guidance for 2026 and EBITDA impact from disruptions - Management expects a $5 million to $10 million reduction in segment margin due to anticipated downtime and higher marine maintenance [26][27] Question: Capital allocation and leverage ratio targets - The long-term target leverage ratio is around 4, with the board evaluating distribution growth quarterly based on performance [30][31][32] Question: Opportunities for acquiring remaining interests in offshore systems - Management is open to increasing exposure in existing offshore systems but emphasized the substantial existing capacity already available [37][39] Question: Impact of customer consolidation on long-term expectations - The acquisition of LLOG by Harbour Energy is seen as a positive, with plans to double production benefiting the company [46][47] Question: Specifics on offshore guidance for Salamanca and Shenandoah - Management is comfortable with achieving the 15%-20% guidance based on discussions with producer customers [51][53]

Financial Data and Key Metrics Changes - The company is guiding for EBITDA of approximately $1 billion for the current year, with expectations for stronger growth in 2027 and 2028 to reach a long-term target of $1.2 billion [19][21] - The company expects to see same-store volume pressure of 1%-3% in a lower-price environment, necessitating competitive pricing strategies [33][36] Business Line Data and Key Metrics Changes - The company anticipates that each new class of 50 stores will generate between $35 million and $40 million of EBITDA at maturity after a three-year ramp [58] - The company has seen strong performance in the nicotine category, particularly in pouches and other products, despite some volume declines in cigarettes [67] Market Data and Key Metrics Changes - Competitive pressures vary by market, with some states like Texas showing higher margins and volumes, while others like Colorado and Florida are experiencing lower metrics [7][8] - The company is experiencing a relatively stable and low fuel price environment, which impacts customer price sensitivity [27][28] Company Strategy and Development Direction - The company is focusing on a culture shift towards quicker collaboration and more nimble decision-making, while maintaining its core strategies [80] - The company aims to reduce reliance on fuel and tobacco while exploring innovation opportunities in its portfolio, customer engagement, and advanced technology [81][82] Management's Comments on Operating Environment and Future Outlook - Management believes that competition, while disruptive, ultimately leads to higher margins as markets stabilize [9] - The company is preparing for potential volatility in the fuel environment, which could impact same-store performance [21][27] Other Important Information - The company is proactively investing in maintenance to enhance uptime and customer experience, expecting to save approximately $6 million to $8 million in maintenance costs [12] - The company has a modest exposure to SNAP changes, which are expected to have a limited impact on overall sales [70][72] Q&A Session Summary Question: Competitive pressure compared to 6-8 months ago - Management indicated that competitive pressures vary by market and that new entrants typically price low initially, impacting same-store volumes [5][6] Question: Maintenance capital spending and its impact - Management clarified that increased maintenance capital spending is a proactive measure to avoid future disruptions and enhance customer experience [10][11] Question: Long-term EBITDA growth drivers - Management discussed the importance of sustaining 50+ new store openings annually and the impact of a normalized fuel environment on EBITDA growth [20][21] Question: Fuel margins outlook - Management expects fuel margins to remain stable, with a target of around $0.30 per gallon, despite low volatility [27][28] Question: Nicotine environment outlook - Management believes the company is well-positioned to take share in the nicotine market and will continue to be promotion-driven [37][38] Question: Per-store expense growth drivers - Management highlighted successful expense management strategies and expects per-store expense growth to be around 4% going forward [42][44] Question: Impact of winter storms on operations - Management acknowledged higher maintenance costs due to winter storms but also noted higher margins leading into those storms [46][47] Question: QuickChek brand performance - Management reported stronger sales at QuickChek but acknowledged margin pressures and the need to refocus on core offerings [84][85]