Marriott Vacations Worldwide (VAC) Q2 2025 Earnings Call August 05, 2025 10:00 AM ET Company ParticipantsNeal Goldner - VP - IRJohn Geller - CEO, President & DirectorJason Marino - EVP & CFOC. Patrick Scholes - Managing Director - Lodging & Leisure Equity ResearchBrandt Montour - Director - Equity ResearchDavid Katz - Managing DirectorConference Call ParticipantsBenjamin Chaiken - Equity AnalystStephen Grambling - MD & Senior Equity Research AnalystOperatorGreetings, and welcome to the Marriott Vacations Wo ...

Financial Data and Key Metrics Changes - Mineral royalty production was 33,200 BOE per day in Q2 2025, with total production volumes at 34,600 BOE per day [9] - Net income for Q2 was $120 million, with adjusted EBITDA at $84.2 million [9] - Distributable cash flow for the quarter was $74.8 million, representing 1.18 times coverage [10] - A distribution of $0.30 per unit was declared for the quarter, equating to $1.20 on an annualized basis [9][10] Business Line Data and Key Metrics Changes - 55% of oil and gas revenue in the quarter came from oil and condensate production [9] - The company added 31 million in royalty acquisitions during the quarter, bringing total acquisitions since September 2023 to approximately $172 million [6] Market Data and Key Metrics Changes - The company expects production growth in 2026 of an incremental 3,000 to 5,000 BOE per day over the revised guidance for 2025 [10][11] - The outlook for natural gas remains robust, supported by growing global demand for LNG [7] Company Strategy and Development Direction - The company is focused on expanding its drilling obligations in the Shelby Trough, which is expected to more than double over the next five years [6] - The grassroots acquisition program is progressing well, with ongoing marketing efforts in the Shelby Trough [5][6] - The company aims to maintain a clean balance sheet and ample liquidity to support its commercial strategy, including targeted grassroots acquisitions [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in production growth in 2026 and beyond, despite slower natural gas production growth in 2025 [10][11] - The company is optimistic about the outlook for the partnership, citing strong demand and ongoing development agreements [7][11] Other Important Information - The company has restructured its agreement with Aethon, reducing the number of wells from mid-20s to high teens per year, which is expected to impact production volumes [27] - The company is actively working to place strategically important acreage with other operators [27] Q&A Session Summary Question: Activity response to higher natural gas prices and production trajectory - Management noted subdued activity in the first half of the year but is excited about upcoming development agreements and ongoing activity in the Shelby Trough [14][15][17] Question: Comparison of geology in Shelby Trough and Western Haynesville - Management highlighted analogous subsurface characteristics and increasing productivity in the Western Haynesville, which could benefit the Shelby Trough [18][19] Question: Updated production guidance and activity in Haynesville - Management explained that the restructuring of agreements and strategic decisions have led to a slower production ramp-up, but they anticipate significant well activity in the coming years [27][29] Question: Production outlook and oil volumes - Management indicated that oil volumes are expected to be around 25% to 26% as they look towards 2026, with contributions from various projects [35]

Financial Data and Key Metrics Changes - JBT reported total revenue of $935 million for the second quarter, exceeding the midpoint of guidance by approximately $35 million, driven by higher recurring revenue and favorable foreign exchange [11][12] - Adjusted EBITDA margin for the second quarter was 16.7%, outperforming guidance by about 180 basis points, primarily due to a favorable mix of higher recurring revenue and productivity improvements [12][14] - Adjusted EPS for the second quarter was $1.49, with GAAP EPS at $0.07, reflecting an impairment charge of $11 million on a joint venture investment [13][14] - The company ended the quarter with a backlog of $1.4 billion, providing significant support for revenue conversion in the latter half of the year [8][15] Business Line Data and Key Metrics Changes - JBT segment revenue increased by 13% year-over-year, with adjusted EBITDA of $82 million and an adjusted EBITDA margin improvement of 220 basis points to 18% [13][14] - Morell segment revenue was $480 million, with adjusted EBITDA of $75 million, representing a margin of 15.5%, attributed to integration synergies and favorable revenue mix [14] - The poultry industry, as the largest end market, continued to see strong equipment investment, with a positive pipeline expected to support growth into next year [6][8] Market Data and Key Metrics Changes - EMEA was the strongest region for demand, while North America experienced relative softness [7] - Latin America showed strong performance, and Asia Pacific remained choppy [8] - The company noted healthy order bookings despite a dynamic macroeconomic backdrop, with total orders amounting to $938 million, including $22 million from favorable foreign exchange translation [6][8] Company Strategy and Development Direction - The integration of JBT and Morell is on track, with a focus on capitalizing on the expanded portfolio and cross-selling opportunities [9][20] - The company aims to transition from unit sales to system sales, enhancing customer partnerships and service delivery [20][21] - Continuous improvement initiatives are being advanced to optimize operational efficiency and capacity utilization across manufacturing facilities [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment, particularly in poultry, with visibility extending into the first half of 2026 [30][31] - The company is taking steps to mitigate tariff impacts on direct material costs through supplier negotiations and sourcing adjustments [9][12] - Full-year 2025 guidance has been reestablished, with expected revenue of $3.7 billion at the midpoint, including a favorable foreign exchange translation benefit [15][16] Other Important Information - The company incurred approximately $9 million in gross tariff costs during the second quarter, with net impacts offset by inventory benefits and mitigating actions [12] - Free cash flow for the first half of 2025 was $106 million, with $88 million generated in the second quarter, supporting balance sheet deleveraging [14][15] Q&A Session Summary Question: Insights on poultry investments and customer conversations - Management noted good visibility into the first half of 2026, with poultry companies making significant investments in automation and efficiency [30][31] Question: Margin performance at Morell - Margin improvements were attributed to integration synergies, restructuring efforts, and a favorable mix of recurring revenue [41][44] Question: Expectations for Q4 margins and tariff impacts - Management expects Q4 to be the strongest quarter from a margin perspective, despite headwinds from tariffs and a shift in revenue mix [50][51] Question: Impact of tariffs on order delays - Some episodic delays were noted, particularly for customers importing food into the U.S., but overall demand remains strong [64][82] Question: FX impact on revenue and margins - FX is expected to contribute approximately $70 million to $85 million for the year, with a typical margin impact in line with company averages [106][105]

Financial Data and Key Metrics Changes - Consolidated net sales increased by 6.6% to $380.3 million, setting a new quarterly record [18][6] - Gross margin exceeded 38%, reflecting a sequential improvement of 320 basis points [7][19] - Adjusted EBITDA reached a record $86.4 million, an increase of 1.4% year over year [22] - Adjusted net income per diluted share increased by 6.3% year over year to $0.334, setting a new third-quarter record [23] Business Line Data and Key Metrics Changes - Water Supply Solutions (WSS) net sales increased by 4.1% to $216.6 million, driven by volume growth in iron gate and specialty valves [23] - Water Management Solutions (WMS) net sales increased by 10.2% to $163.7 million, led by strong volume growth of repair products and hydrants [26] - Adjusted operating income for WSS increased by 4.7% to $60.5 million, while WMS adjusted operating income increased by 12.6% to $30.3 million [24][26] Market Data and Key Metrics Changes - The residential construction market is experiencing a slowdown, particularly in single-family housing starts, influenced by high interest rates and macroeconomic uncertainty [38] - The municipal repair and replacement market remains strong, driven by the need to repair aging infrastructure [40] Company Strategy and Development Direction - The company aims to enhance manufacturing efficiencies and operational excellence while navigating external challenges such as tariffs [17][12] - The closure of the legacy brass foundry is expected to yield benefits in the fourth quarter and into the next year [13][19] - The company is focused on sustainability and innovation, as highlighted in their annual ESG report [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record results for the second consecutive year, despite external uncertainties [9][17] - The anticipated impact of tariffs has been lower than initially expected, with updated estimates for annualized tariff impact decreasing to approximately 3% to 4% of cost of sales [14] - The company is prepared to implement additional pricing actions to offset higher input costs as needed [16] Other Important Information - Free cash flow for the first nine months of the year was $103 million, representing 71% of adjusted net income [28] - The company ended the quarter with $451 million in total debt and $372 million in cash and cash equivalents, maintaining a strong balance sheet [29] Q&A Session Summary Question: Insights on end markets and stability - Management noted a slowdown in the residential construction market, particularly in single-family housing starts, while the municipal market remains strong [38][40] Question: Margin outlook and FX impact - Management indicated that the FX headwind was a one-time event and discussed expectations for margins moving forward [41][42] Question: Legacy brass foundry impact on margins - The legacy brass foundry closure is expected to improve margins, with management anticipating an 8-10 basis point improvement [47] Question: Infrastructure funding and market conditions - Management highlighted that infrastructure funding has been slow, with no immediate benefits expected from the infrastructure bill [74][75] Question: Pricing actions and demand pull forward - Management confirmed no significant pre-buy demand was observed, and pricing adjustments were made in response to tariffs [66][72]

Financial Data and Key Metrics Changes - Second quarter revenue increased by 10% sequentially and 2% year over year, marking the first year-over-year revenue increase since 2022, driven by modest demand improvement across multiple markets [5][18] - Revenue for the quarter was $251 million, with a gross margin of 37.3%, remaining flat year over year [22][23] - Adjusted earnings per diluted share were $0.30, exceeding guidance [24][27] Business Line Data and Key Metrics Changes - Revenue from materials processing decreased by 6% year over year due to divestitures and lower sales in cutting, welding, and additive manufacturing, partially offset by higher revenue in micromachining and the Clean Laser acquisition [18][19] - Medical and advanced applications revenue increased by 21%, driven by higher sales in these segments [18] - Emerging growth products accounted for 54% of sales, indicating strong performance in various laser sources and systems [20] Market Data and Key Metrics Changes - North America sales increased by 31% sequentially but were down 4% year over year, primarily due to higher sales in medical and advanced applications [20] - European sales were stable with less than a 1% sequential decline and down 11% year over year, impacted by lower cutting and welding sales [20] - Asia saw a 4% sequential increase and a 14% year-over-year increase, benefiting from higher sales in welding and cutting, as well as advanced applications [21] Company Strategy and Development Direction - The company is targeting a $5 billion total addressable market (TAM) with strategic initiatives aimed at driving profitable growth [5] - Focus on developing innovative lasers and photonic solutions for medical, micromachining, and advanced applications, with significant progress reported in these areas [9][11] - Capital allocation strategy emphasizes organic growth investments and strategic M&A, with plans to spend approximately $100 million on CapEx in 2025 [12][25] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding demand stabilization, noting improvements in industrial production and inventory normalization among customers [16][46] - The company is adapting to tariff-related challenges by leveraging supply chain flexibility and has successfully mitigated potential delays in customer orders [15][17] - Future guidance anticipates revenue between $225 million and $255 million for 2025, with adjusted gross margins between 36% and 38% [26][27] Other Important Information - The company repurchased $30 million of its stock during the quarter, continuing a trend of returning cash to shareholders [12][25] - The Crossbow laser counter UAV solution has been delivered to Lockheed Martin, showcasing the company's capabilities in directed energy systems [9][10] Q&A Session Summary Question: Can you provide any color on book to bill by region? - Management indicated that the book to bill ratio was approximately one across all regions, which is a positive sign [30][32] Question: How do you view the opportunity for directed energy over the next few years? - Management highlighted the directed energy market as a significant growth area, particularly addressing threats from smaller drones, with ongoing partnerships and extensive testing [34][37] Question: Can you walk us through the Q3 guidance? - Management noted that they were able to ship a significant portion of anticipated orders due to effective tariff mitigation strategies and observed broad-based improvements in demand [42][46] Question: What is the outlook for the systems business? - Management expressed excitement about the Clean Laser acquisition and noted improvements in other systems areas, including micro machining and robotic systems [63][65] Question: How is the competitive environment in the medical business changing? - Management reported strong positioning in the urology market and continued growth with new customer acquisitions [66][68]

Financial Data and Key Metrics Changes - The company reported record consolidated revenue in the second quarter, with same-store hospitality adjusted EBITDAre at $187 million, a decline of approximately $18 million year-over-year, but still the second highest quarter of all time [21][30] - Adjusted EBITDAre guidance for the full year 2025 was revised to a range of $767 million to $813 million, reflecting the acquisition of JW Marriott Desert Ridge and adjustments for transient rate risks [30][34] - The company expects AFFO for the year in the range of $5 million to $5.46 million, with AFFO per fully diluted share between $7.93 and $8.49 [30] Business Line Data and Key Metrics Changes - The same-store hospitality segment's RevPAR was essentially flat compared to last year, with total RevPAR declining by 160 basis points due to a shift in group mix and timing of the Easter holiday [18][19] - Leisure demand increased approximately 4% year-over-year, driven by strong performance at Gaylord Palms and Gaylord Rockies, while Gaylord Opryland faced softness due to increased hotel supply in Nashville [20][21] - The entertainment segment delivered record revenue of $143 million and adjusted EBITDAre of $34 million, although the adjusted EBITDAre margin declined year-over-year due to investments in Southern Entertainment [25][26] Market Data and Key Metrics Changes - In Nashville, transient occupancy trends lagged behind the top 25 markets, but visitation and tourism remained robust, with rooms sold in the market increasing year-over-year [9][10] - The company noted that the influx of new hotel supply in Nashville is pressuring room rates, but they expect transient occupancy and rate trends to improve as tourism grows [27][28] - Group room revenue on the books for 2026 and 2027 is up 910% compared to the same time last year, indicating strong future demand [25] Company Strategy and Development Direction - The company completed the acquisition of JW Desert Ridge, which is expected to unlock incremental group rotation opportunities and enhance the overall portfolio [5][14] - The company is focused on long-term growth, emphasizing strong relationships with customers and the importance of advanced bookings for future years [12][18] - The company plans to continue investing in capital projects to drive growth and enhance customer experiences, particularly in the entertainment segment [25][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unpredictable operating environment, citing factors such as tariffs, inflation, and interest rates impacting customer behavior [8][9] - Despite near-term uncertainties, management expressed optimism about future group demand and the health of the business, particularly for 2026 and beyond [24][30] - Management expects the transient market dynamics in Nashville to improve as new demand generators are developed, including a new stadium and infrastructure projects [63][64] Other Important Information - The company ended the quarter with $421 million of unrestricted cash and total available liquidity of approximately $1.2 billion [32][33] - The company reiterated its expectations for capital expenditures in 2025 at $350 million, including investments at Desert Ridge [34] Q&A Session Summary Question: Lead volumes were down 16% year-over-year; how do you expect that to trend? - Management noted that lead volumes have faced pressure but expect improvement in 2026 and beyond, indicating that current challenges are primarily short-term [36][37] Question: What is the long-term strategy for JW brand acquisitions? - Management expressed interest in acquiring more JW properties in key markets to create rotation opportunities and enhance the portfolio [39][40] Question: What is driving the resilience in out-of-room spending? - Management attributed the strong out-of-room spending to investments in capital improvements and the overall health of the economy, which supports consumer spending [50][52] Question: What are the expectations for Gaylord Opryland regarding transient business? - Management indicated that while Opryland does more transient business, it is in line with the overall brand's performance, and they expect transient demand to improve in the long term [72] Question: How is the transient side performing across the Ryman portfolio? - Management reported steady performance in Orlando and Gaylord Rockies, while acknowledging short-term challenges in Gaylord Hill Country due to weather [78][80]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $1.25 for the second quarter of 2025, an increase from $1.18 in 2024, reflecting strong performance across electric utilities [19][7] - The company is reaffirming its 2025 guidance range of $6.17 to $6.42 and a long-term EPS growth rate of 5% to 7% through 2029 [25][7] Business Line Data and Key Metrics Changes - Electric Utilities and Infrastructure segment saw an increase of $0.10 compared to last year, driven by top line growth from new rates implemented across Carolinas, Florida, and Indiana [19] - Gas Utilities and Infrastructure results remained flat compared to last year, consistent with the seasonality of the LDC business [19] Market Data and Key Metrics Changes - Population migration in the Southeast and Midwest continues to drive sustained customer growth, particularly over 2% in the Carolinas [20] - The economic development pipeline remains robust, with significant projects like the $10 billion AWS data center investment in North Carolina expected to create at least 500 new high-skilled jobs [22][9] Company Strategy and Development Direction - The company is increasing its Florida capital plan by $4 billion, funded by a portion of the sale proceeds from the Tennessee LDC business [6][5] - The strategic transactions, including the minority investment from Brookfield Infrastructure, are aimed at efficiently financing record growth and enhancing the credit profile [5][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the targeted EPS and credit objectives for 2025, supported by strong regulatory outcomes and operational performance [19][20] - The company is focused on advancing large-scale economic development projects and securing favorable regulatory outcomes to meet growing demand [10][8] Other Important Information - The company has announced the sale of its Tennessee LDC business for $2.5 billion, reflecting a premium valuation [6] - The company is actively advancing regulatory approval processes for new generation investments and plans to file its next Carolinas resource plan by October 1 [14] Q&A Session Summary Question: How do you think about positioning yourself within the EPS CAGR? - Management indicated that recent transactions enhance confidence in achieving the EPS growth range and solidify the company's position for the back end of the plan [31] Question: Can you elaborate on the latest Carolinas legislation? - Management noted that the legislation enhances growth attractiveness in North Carolina and supports customer affordability while maintaining the overall plan [34] Question: How are you thinking about additional opportunities across the portfolio? - Management stated that they are comfortable with the equity plans laid out and will focus on implementing current transactions [40] Question: What feedback have you received from rating agencies regarding the increased FFO to debt target? - Management reported that rating agencies have been supportive of their metrics and the recent transactions will enhance that support [42] Question: Should we assume you need to complete the Florida sell-down steps to get to the 15% FFO to debt? - Management indicated that progress through the deal is necessary to reach the 15% target [49] Question: Can you provide any color on the timing of the Amazon investment? - Management stated that the Amazon deal will ramp up starting in 2027 and will be included in future capital plans [76] Question: What drove the decisions for the recent sales? - Management emphasized the need for efficient funding of growth and maximizing opportunities in Florida [81]

Financial Data and Key Metrics Changes - Comparable FFO for Q2 2025 was $0.56 per share, beating analyst consensus of $0.53 per share and remaining flat compared to Q2 2024 [27] - New York office occupancy increased to 86.7% from 84.4% in the previous quarter [28] - Net debt to EBITDA improved by 1.4 turns to 7.2 times from 8.6 times [24] Business Line Data and Key Metrics Changes - In Q2 2025, the company leased 2,700,000 square feet overall, with 2,200,000 square feet in Manhattan office space [12] - Average starting rents for Manhattan office leasing were $101 per square foot, with mark-to-markets of +11.8% GAAP and +8.7% cash [13] - PENN1 occupancy reached 90% after leasing 183,000 square feet at an average starting rent of $101 per square foot [13] Market Data and Key Metrics Changes - The Manhattan office market is described as a landlord's market with tight availability and no new supply expected through the end of the decade [11] - Replacement costs for Class A towers in Manhattan have risen to approximately $2,500 per square foot, with rents in the $200s now commonplace [10] - The overall demand for office space in Manhattan is strong, with significant expansion from clients [10] Company Strategy and Development Direction - The company remains focused on its New York-centric strategy, with plans to enhance the PENN District through various development projects [20] - Future developments include a residential project and modern retail offerings along Seventh Avenue [20][21] - The company aims to capitalize on rising rents and limited supply in the Manhattan market [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong leasing activity and a robust pipeline [28] - The company anticipates significant earnings growth by 2027 as leases at PENN1 and PENN2 come online [28] - Management highlighted the importance of disciplined capital allocation and the potential for significant rental growth in the coming years [82] Other Important Information - The company completed several financing transactions to bolster liquidity, including a $450 million financing with 1535 Broadway [23] - Cash balances increased to $1.36 billion, with total immediate liquidity of $2.9 billion [24] - The company is actively managing its debt maturities and refinancing opportunities [29] Q&A Session Summary Question: How much of the pending leasing activity is geared towards PENN2? - Approximately 50% of the 560,000 square feet in the leasing pipeline is at PENN2 [32] Question: Is the company looking to sell its assets in San Francisco? - The company is open to selling assets like The Mart and 555 California if the right price and timing arise, but there are no immediate plans [35] Question: What is the physical occupancy and rent coming online over the next year? - The company expects occupancy to increase to the low 90s over the next year, with significant income ramping up in 2027 [38] Question: What are the expectations for same-store NOI in the coming years? - Positive same-store NOI is expected as leasing activity increases, but specific percentages cannot be provided at this time [92] Question: What are the plans for the Forever 21 retail space? - The timing for backfilling the Forever 21 space is uncertain, but the company is optimistic about the retail corridor's potential [73]

Financial Data and Key Metrics Changes - For Q2 2025, the company recorded revenues of $14.7 billion, representing a 10% operational increase year-over-year [33] - Reported diluted earnings per share (EPS) was $0.51, while adjusted diluted EPS was $0.78, exceeding expectations due to strong top-line performance and effective cost management [34][37] - Adjusted gross margin for the quarter was approximately 76%, reflecting the product mix [35] Business Line Data and Key Metrics Changes - The Vyndaqel family achieved 21% year-over-year operational growth, contributing significantly to the company's performance [20] - The recently launched and acquired products generated $4.7 billion in revenue, growing approximately 15% operationally compared to last year [35] - The Paxlovid and Eliquis brands also showed strong contributions, while Ibrance experienced declines [34] Market Data and Key Metrics Changes - The international division saw strong performance, with 9% growth in emerging markets and 7% growth in Europe [84] - The oncology portfolio, particularly products like Lovren, contributed to a 6% growth driven by strong demand [84] - The company maintained leadership in the oral CGRP class with a 47% market share, despite pressures from net revenues due to the IRA Medicare Part D redesign [23] Company Strategy and Development Direction - The top strategic priority is improving R&D productivity, with a focus on key programs that address substantial patient needs [8] - The company is actively engaged in discussions with policymakers to navigate a complex geopolitical environment while maximizing business value [7] - The strategy includes leveraging technology such as AI and automation to drive productivity gains and streamline operations [7][45] Management's Comments on Operating Environment and Future Outlook - Management raised the adjusted diluted EPS guidance for the full year 2025, reflecting strong year-to-date performance [7] - The company is focused on maintaining a strong balance sheet and improving cash flow while managing external complexities [32] - Future guidance assumes favorable revenue impacts from foreign exchange rates and strong operational performance, despite potential volatility in COVID-related revenues [43][44] Other Important Information - The company is pursuing a licensing agreement with 3S Bio, which is expected to enhance its business development capacity [38] - The ongoing cost realignment program aims to achieve approximately $7.7 billion in savings by 2027, contributing to operating efficiencies [41] Q&A Session Summary Question: Guidance on potential price changes and Medicaid impact - Management is engaged in productive discussions regarding the MFN situation and tariffs, but cannot provide specific details at this time [50][51] Question: Insights on the CDC recommendations for vaccines - The company anticipates a strong vaccination season and has robust supply and distribution capabilities in place [56][58] Question: Capital allocation and leverage targets - The target leverage has been lowered to 2.7 times due to improved cash generation capabilities, with a focus on smaller deals for business development [61][64] Question: Development of PD-1/VEGF combinations - The company plans to start early development of combinations with ADCs without waiting for phase three readouts [69][70] Question: Efficiency in operating model and resource allocation - The company has implemented a new commercial model that has driven efficiencies and improved growth in key markets [86][88] Question: Competitive pressures and tax outlook - Management is aware of competitive pressures on certain products and is focused on maintaining a sustainable tax rate of approximately 13% going forward [100][101]

Financial Data and Key Metrics Changes - Revenue reached $241 million, representing reported revenue growth of 2% and organic revenue declines of 2% [7] - Adjusted gross margins held at 46% and adjusted EBITDA margin was 22%, both in line with expectations [8][29] - Non-GAAP adjusted earnings per share was $0.76, up 4% versus the prior year [29] - Operating cash flow for the quarter was $15 million compared to $41 million in the prior year, primarily driven by timing of tax payments and increased inventory purchases [29][30] Business Line Data and Key Metrics Changes - New product revenue grew by over 50% year over year, with a vitality index climbing to 21% of total sales [33] - Advanced surgery business experienced 17% growth year over year, driven by strong patient procedural growth rates [35] - Robotics and automation business unit revenue was up nearly 16% year over year, with a book to bill ratio of 1.05 [34] - Precision medicine business saw a 13% decline in sales year over year, but grew 10% sequentially [35] Market Data and Key Metrics Changes - Sales to medical device markets remained strong, driving sustained double-digit growth in advanced surgery [11] - Sales to industrial capital equipment saw declines year over year, but revenue has stabilized and bookings are rising at a double-digit pace [18] - Total China sales were up 15% year over year, despite challenges related to tariffs [80] Company Strategy and Development Direction - Long-term growth strategy focuses on markets with secular tailwinds such as precision and AI-driven robotics, minimally invasive surgery, and precision medicine [10] - The company aims to expand its portfolio into high-growth areas, increasing recurring consumables revenue to approximately 15% of sales [11] - The acquisition of Keon Technologies is expected to enhance the company's capabilities in RFID and AI-enhanced cloud-based software [30][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving $50 million of incremental new product revenue for 2025, mainly due to strong outlook for next-generation medical devices [12] - The company is optimistic about the growth in physical AI applications, expecting sales to double in 2026 versus 2025 [15] - Management acknowledged the impact of tariffs but indicated that mitigation strategies are in place, with a focus on regional manufacturing [37][40] Other Important Information - The company expects full-year 2025 GAAP revenue to be approximately $970 million to $985 million, representing overall revenue growth of 2% to 4% [41] - Adjusted EBITDA for the full year of 2025 is expected to be $225 million to $230 million, or approximately a 23% EBITDA margin [42] - The company has a strong balance sheet and credit facility, positioning it well for future acquisitions [47] Q&A Session Summary Question: Can you break down your revenue guidance? - The full year guidance indicates reported organic growth will likely be down 1% to up 1% [53] Question: What is the FX implied impact for benefit? - The FX impact is expected to carry forward from the second quarter [55] Question: What are the biggest drivers of organic growth in 2026? - Key drivers include advanced surgery product ramps, physical AI applications, and strong design wins [60][64] Question: Have we seen the low point for the year in industrial and precision medicine? - Management believes the industrial business has reached its bottom and will improve sequentially [72] Question: What is the status of the $35 million held up due to tariffs? - This amount is factored into guidance, and recovery is not assumed yet [79] Question: Can you elaborate on the warehouse robotics win? - The technology involves sensing and fast, safe reactions, essential for advanced warehouse automation [90]