COAST-TO-COAST. WITH CAROLINE HYDE IN NEW YORK AND ED LUDLOW IN SAN FRANCISCO. CAROLINE: WELCOME TO A VERY SPECIAL EDITION OF "BLOOMBERG TECHNOLOGY." LIVE FROM CALIFORNIA.ED: TODAY WE GO ALL IN ON DEFENSE TECH. AND DISCUSS WITH SOME OF THE BIGGEST NAMES IN THIS BOOMING INDUSTRY, COMP COMPETITION WITH CHINA, WORKING WITH THE U.S. GOVERNMENT AND A LOT MORE. WE KICK THINGS OFF WITH BRIAN SCHIMPF, C.E. O. , OF THE FIRST OF MANY CONVERSATIONS.BRIAN, WE’RE GRATEFUL TO BE HERE. THERE’S BEEN A LOT OF HYPE AROUND TH ...

Group 1 - The Voya Infrastructure, Industrials and Materials Fund (NYSE: IDE) is a closed-end fund aimed at providing global equity exposure to companies in the infrastructure, industrials, and materials sectors [1] - The fund has a modest expense ratio of 122 basis points [1] - The investment strategy is based on a comprehensive view of the investment ecosystem rather than evaluating companies in isolation [1] Group 2 - Michael Del Monte, a buy-side equity analyst with over 5 years of experience, is associated with the fund [1] - Del Monte has a background in professional services across various industries including Oil & Gas, Oilfield Services, Midstream, Industrials, Information Technology, EPC Services, and consumer discretionary [1]

CRH's Overall Strategy and Performance - CRH aims to be the leading compounder of capital, driven by growing megatrends and its winning way[33] - The company has a proven track record of superior value creation, with revenues of $35.6 billion and adjusted EBITDA of $6.9 billion in 2024[25] - CRH's annualized TSR (Total Shareholder Return) since 1970 is 16.2%[29] - CRH is raising its ambition and maximizing value creation with 2030 financial targets[12] Growth and Capital Allocation - CRH has ~$40 billion in financial capacity for growth investments and shareholder returns from 2026-2030[134] - The company plans to allocate ~70% of its financial capacity to growth investments and ~30% to shareholder returns[134] - CRH has a strong M&A track record, with >320 acquisitions from 2015-2025, primarily bolt-on acquisitions[116] Market Positions and Opportunities - CRH is the 1 infrastructure player in North America, with leading positions in high-growth markets[12] - The company is aligned with growing megatrends, including infrastructure, transportation, water, and reindustrialization[33] - CRH has a $41 billion total addressable market in water infrastructure[461] Financial Targets - CRH's 2030 financial targets include 7% to 9% revenue growth, 22% to 24% adjusted EBITDA margin, and >100% adjusted free cash flow conversion[145]

Core Insights - Dassault Aviation inaugurated a new production facility in Cergy, marking its first new facility since the 1970s, which is a significant development for the aerospace sector and the French industry as a whole [2][3] Group 1: Facility Overview - The Cergy facility has a total size of 110,760 m², with 39,700 m² dedicated to production, and features such as a fully solar panel-equipped roof, integrated green space, innovative ventilation systems, and smart lighting [4] - The facility is operational since summer 2024 and has taken over operations from the outdated Argenteuil plant, focusing on the assembly of Falcon and Rafale skin panels, forward fuselages, and metal hose production [3][4] Group 2: Workforce and Operations - The new facility employs over 600 engineers, technicians, foremen, and skilled workers, primarily transferred from the Argenteuil plant [4] - Key activities at the Cergy facility include the assembly of Falcon and Rafale skin panels, forward fuselages, and outfitting of Rafale fuselages with various systems and equipment [4] Group 3: Background and Development Timeline - The project for the Cergy facility was launched in 2019, with ground-breaking occurring in 2021 and completion in July 2024 [4] - The transfer of teams and machinery from Argenteuil to Cergy took place between July 2024 and January 2025 [5] Group 4: Company Profile - Dassault Aviation has delivered over 10,000 military and civil aircraft globally, including 2,700 Falcons, and reported revenues of €6.2 billion in 2024, employing 14,600 people [6]

Core Insights - Investment in industrial machinery and equipment in Canada has significantly declined, reaching its lowest level on record in Q2, while the U.S. investment has remained stable [1][3] - The divergence in investment trends between Canada and the U.S. is alarming, with Canada experiencing a collapse in investment since 2012 [1][3] - Analysts attribute Canada's investment decline to excessive regulation and a lack of ambition from successive governments, compounded by U.S. protectionist policies [2][3] Investment Trends - Real investment in industrial machinery and equipment in Canada fell to its lowest level since 1981, indicating a severe downturn in the sector [1] - Prior to 2012, investment trends in both Canada and the U.S. were similar, but Canada has since diverged sharply, with U.S. investment continuing on a stable trajectory [3] Manufacturing Sector Implications - The decline in investment has eroded Canada's manufacturing base, putting the country at risk of becoming irrelevant in global supply chains [12] - There is a call for a multi-pronged strategy to revitalize Canada's industrial sector, including competitive tax regimes and reduced regulatory burdens [13] Government Response - The Canadian government has pledged to increase military spending to 3.5%-5% of GDP, which could potentially catalyze a reindustrialization effort [12] - Historical references to Canadian industrialization highlight the need for determined leadership to rebuild the industrial base before further decline occurs [13]

Core Insights - Apollo-managed funds have agreed to acquire a majority stake in Kelvion, a leading provider of energy-efficient heat exchange and cooling solutions, while Triton will retain a minority interest in the company [1][4]. Company Overview - Kelvion, founded and headquartered in Germany, has over a century of experience and is recognized for its thermal management solutions across various industrial and high-growth markets [2][8]. - The company is a leader in advanced cooling technologies for data centers, which is its largest and fastest-growing segment, and plays a significant role in energy transition markets such as carbon capture and renewables [2][3]. Strategic Transformation - Since Triton's acquisition and rebranding of the company in 2014, Kelvion has transformed its portfolio to focus on megatrends in High Tech and Green Tech, enhancing operational excellence and expanding its global customer base [3][4]. - The management team has successfully positioned Kelvion at the forefront of global industrial innovation, emphasizing the importance of energy-efficient solutions [4][9]. Investment and Growth Potential - Apollo's investment is expected to support Kelvion's growth trajectory, innovation, and talent acquisition, leveraging Apollo's expertise in clean energy and industrial technology [4][5]. - Over the past five years, Apollo-managed funds have committed approximately $58 billion to climate and energy transition-related investments, indicating a strong focus on sustainable growth [4][11]. Market Position and Future Outlook - Kelvion is well-positioned to benefit from significant secular tailwinds, including the AI and cloud revolution, energy transition, and reindustrialization [4][5]. - The transaction is anticipated to close between Q4 2025 and Q1 2026, pending regulatory approvals [5].

Group 1 - Cognex Corporation (NASDAQ: CGNX) is positioned to benefit from a strong market as the U.S. attracts over $1 trillion in foreign investments aimed at reindustrialization [1] - New trade deals are facilitating significant outside investments into the U.S., enhancing the market environment for companies like Cognex [1] Group 2 - The analyst, Michael Del Monte, has over 5 years of experience in equity analysis and has worked across various industries including Oil & Gas, Information Technology, and Industrials [1]

Core Viewpoint - Powell Industries, Inc. (POWL) is positioned as a key player in the nuclear build-out and power capacity expansion driven by AI data centers, despite a recent revenue miss impacting short-term sentiment [1][5][6]. Group 1: Company Performance - Powell Industries reported strong earnings per share (EPS) but missed revenue expectations, leading to a sell-off in the stock [5][6]. - The recent performance of nuclear-adjacent companies like OKLO, Inc. and Centrus Energy Corp. highlights the ongoing investor interest in the energy sector [2]. Group 2: Market Sentiment and Strategy - The near-term sentiment has shifted negatively due to the revenue miss, causing a compression of multiples and a reaction from fast money investors [6][7]. - The company plans to leverage the post-earnings drop to establish a bullish options position, taking advantage of elevated put pricing while maintaining upside potential [9]. Group 3: Structural Drivers - The fundamental drivers for Powell Industries remain intact, including the increasing power needs of data centers, grid modernization, and the momentum in nuclear energy [8]. - Powell's role in supplying essential equipment for power distribution continues to be critical, unaffected by the fluctuations of a single quarter [8]. Group 4: Macro Context - The investment aligns with broader themes of Reindustrialization, Embodied AI, and Energy, emphasizing the need for robust power supply for factories, robots, and AI data centers [10].

Group 1 - Joby Aviation is acquiring Blade Air Mobility, Inc., which is described as an "Uber for helicopters," leading to a 21% intraday spike in Joby shares [1] - The trade structure involves a net debit of $2.60, with a maximum gain that is uncapped, a maximum loss of $1,020, and a break-even point at $16.80 according to Fidelity's model [1][2] - The trade includes buying an $18 strike call expiring on January 16, 2026, selling a $17.50 strike put expiring on August 8, 2025, and buying a $15 strike put expiring on August 8, 2025 [4] Group 2 - The catalyst for this trade is the upcoming earnings report, which is expected to have additional headline potential in the following weeks [4] - The strategy aims to take advantage of elevated pre-earnings implied volatility to reduce net cost while maintaining uncapped upside potential [4] - The trade is designed to limit drawdown in case the catalyst does not meet expectations, indicating a cautious approach to risk management [4]

Financial Data and Key Metrics Changes - Revenue for the second quarter reached $672 million, an 11% increase year over year, exceeding the high end of guidance [6][17] - Earnings per share (EPS) grew 25% to $1.89, also above the high end of guidance [6][18] - Gross margins increased by 70 basis points year over year to 38.9%, while adjusted EBITDA margins expanded by 50 basis points to 17% [7][18] - Free cash flow for the trailing twelve months was $216 million, aligning with expectations [8][22] Business Line Data and Key Metrics Changes - Automation Solutions revenue grew 10% year over year, with orders up 11% [18][20] - Smart Infrastructure Solutions revenue increased by 13% year over year, with orders up 23% [18][21] - Broadband business revenue also saw growth, including 5% organic growth in fiber products [21] Market Data and Key Metrics Changes - All major regions experienced growth, with a book to bill ratio of 1.05 compared to 1.0 in the prior year [7] - Order activity was strong, with orders up 8% sequentially and 16% year over year [7][17] Company Strategy and Development Direction - The company is focused on solutions transformation, aiming to deliver high-value offerings and enhance earnings power [6][8] - Recent wins include a multi-site solutions award with a hyperscale data center customer and a global specification from a major US automotive manufacturer, showcasing the effectiveness of the solutions strategy [9][12] - The company is pursuing strategic acquisitions to support its solutions transformation and enhance its product offerings [8][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the automation business, noting steady improvement and growth across various geographies [35] - There is cautious optimism regarding the smart infrastructure solutions business, with some uncertainty in broader market conditions [37][39] - The medium and long-term outlook remains positive, driven by trends in reindustrialization, automation, and digitization [28][29] Other Important Information - The company has repurchased 1 million shares for $100 million, demonstrating a commitment to disciplined capital allocation [8][22] - The effective tax rate for the quarter was 12.3%, benefiting adjusted EPS by $0.11 [18][19] Q&A Session Summary Question: Insights on the second half demand environment - Management noted steady improvement in the automation business and growth in key verticals, while the smart infrastructure solutions business showed mixed signals [35][36] Question: Margin performance and future leverage - Management indicated that the EBITDA margin should continue to be modeled with a roughly 25% incremental margin year over year [40][41] Question: Concerns about sequential margin performance - Management acknowledged some noise from quarter to quarter but emphasized that underlying business conditions remain healthy [44] Question: Update on hyperscale market engagement - Management confirmed ongoing focus on both white space and gray space in data centers, with a robust pipeline of opportunities [47][50] Question: Context on the multimillion-dollar contract for modular cooling - Management highlighted the contract's significance in addressing energy management challenges faced by hyperscale data centers [57][58] Question: Tracking of solutions sales towards the 20% target - Management reported that automation solutions are on track to meet the 20% target, with ongoing investments in smart infrastructure solutions [60][61] Question: Sustainability of the lower tax rate - Management indicated that the current tax benefits are more discrete in nature, suggesting a long-term tax rate closer to 20% moving forward [65] Question: Factors affecting Smart Infrastructure Solutions margins - Management attributed margin pressures to investments in solutions initiatives and higher copper costs [70][71] Question: M&A pipeline focus areas - Management outlined a robust M&A pipeline aimed at closing technology gaps and enhancing access to end customers [72][75] Question: Insights on fiber and broadband market dynamics - Management noted strong performance in fiber sales, particularly in DOCSIS upgrades, while maintaining a focus on distribution networks [79][81] Question: Impact of copper volatility on guidance - Management confirmed that current guidance incorporates recent copper price fluctuations, with a typical two-month lag for price adjustments [83][86]