2026.10.09 | TB | Industrials | AirX Climate Solutions Primer

Primer • 24 Sep 2026

Companies: CARR US

Expert Former C-level Executive

Fatema Patel (Analyst) — Third Bridge Sector Analyst

Agenda

• Over eight years' experience in the HVAC (heating, ventilation and air conditioning) space
• Over two years' experience at AirX Climate Solutions (left within the last two years)

Introduction

Analyst: Please could you just state I agree or I disagree to the following statement. You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during the Primer Interview today.

Expert: I agree.

Questions

Could you describe what AirX Climate Solutions does? What products and services does the company provide?

Expert: Highly configured up to custom HVAC products in small batches to customer-engineered requirements in critical applications for industrial and commercial use.

What is the value proposition of AirX's products and services?

Expert: Customer gets their specific HVAC design needs met in both form and function and then they manufacture it in small batches, sizes and deliver in a timely manner.

Analyst: What is the problem that AirX is trying to solve in the industry?

Expert: A lot of people cannot take industry-generic product, machines and apply them to their needs. They have static pressure needs for airflow. They have critical redundancy needs. They have corrosion needs. They have things that are not done in the normal course of business. The large players, the amount of business is too small for them because of their overhead footprint, but the need is too large for the individual companies to do the engineering and work themselves. They kind of fit in the niche to provide what's needed that the bigger players cannot.

What is the full range of industries and business sizes that could use AirX's products and services? What is the TAM for the company?

Expert: All sizes of businesses, really. When we come down and I give you the names of the businesses, you'll understand. It could be a one-off small business contractor that has one application or it could be up to a Fortune 50 company. All of those, primarily companies that are in the infrastructure space, mainly in infrastructure, telecom, data centre, power control, anywhere equipment is generating heat loads. All types of industries and businesses that run equipment-based infrastructure that are generating heat loads and need to be cooled.

Analyst: Could you comment on the industries? What are the top industries that AirX caters to?

Expert: I'll share with you customer names. Most of these are out there. They're on lots of documents. These are publicly traded. This is not anything overly sensitive. Amazon.

Analyst: To clarify, could you provide the customer names later? Could you currently focus on the industry names, be it data centre hyperscalers or Fortune 500?

Expert: Data centre, telecom, power control. I mentioned those already. There's a large rental chiller business, and I'll explain that a little later. For Herc, they take a standard chiller and they turn it into a rental platform for them. It's more conversion than it is product, but I can go into that.

Analyst: Are there any industries that AirX is not currently catering to but could serve?

Expert: I guess they could go into light commercial, which has got a little more scale, but you would then start competing against companies that have scale like Trane, Carrier, Rheem, York, Johnson. I guess they possess the ability. They do not possess the scale. Could they? Yes. Do they have the ability? Yes. Would they be competitive at it? Probably not.

Analyst: To confirm, does AirX also sell through contractors and distributors?

Expert: Yes.

Could you profile AirX's typical target customers across industries and business sizes within the discussed range? Could you also mention the names of any publicly known customers of the company?

Expert: The target customer is usually a large multisite infrastructure-type company or a company that supports critical applications, like companies that will be in the power consumption or power control business.

Analyst: What percentage range of AirX's total revenue comes from data centres vs telecoms vs power control companies vs rental chillers?

Expert: 11-20% rental chiller, 21-30% data centre, 0-10% telecom and then generic industrial would be like power control, that would be about 21-30%. Then, the rest is other, just generic applications for different things.

Analyst: How would you define a small-, medium- and large-sized organisation for AirX using a quantifiable metric?

Expert: Small could be USD 0-10m [in revenue]. USD 0-10m would be a contractor and then up to probably USD 100m-150m would be medium size and then large would be anything up to probably billions of dollars, USD 20bn, USD 30bn, USD 40bn.

Analyst: What is the sweetest spot for AirX within the business sizes it caters to?

Expert: That is hard to say. For a majority of everything, [even though] they have intermediaries, but the end customers are large. AT&T, Google, Amazon, Verizon and Herc, all these are USD 20bn-30bn up to hundreds of billion companies. They're the end users. They use intermediaries to purchase and perform the work, but in the end, it's a very large company base.

Analyst: Could you comment on the paying customers for AirX, ie, people who pay AirX or the intermediaries? What might be the sweetest spot that the company caters to within intermediaries?

Expert: Probably the half of the business or more that's done through intermediaries. Probably USD 500m in revenue or less. USD 10m-500m.

Analyst: What is the percentage range of total revenue that AirX generates from its sweetest-spot business size?

Expert: I would say probably 51-60%.

Analyst: Could you provide some insights on the intermediaries that AirX works with, given that you have already mentioned customer names that are on AirX's website or have been shared in the public domain?

Expert: Some of the intermediaries will be HVAC rep firms. Hoffman & Hoffman, Texas Air. Distributors, Nolan is a distributor. Multi HVAC in Canada is a manufacturer's rep. Klass Mechanical in Canada is a manufacturer's rep. There are dozens and dozens of manufacturers' reps and distributors and they all make up that thing. Then, you have some end customers like Fibrebond or Sabre, they're not making their product for themselves. They are making it to someone else's spec, they're an intermediary manufacturer for a larger entity.

What are the key regions that AirX derives its revenue from? What is the revenue split across the key regions?

Expert: Almost 100% North America. Probably 91-100% the US. It's across the country. It's not regional. It's every state.

Analyst: Which key region constitutes the remaining 0-10% of revenue?

Expert: Canada.

What are AirX's core revenue-generating segments? What products and services does the company offer?

Expert: Manufactured products. This is the units they produce, the physical products. Then, aftermarket parts. Then, services.

What is the relative size of each core segment in percentage ranges of total revenue?

Expert: Manufactured products is probably 81-90% and then 0-10% are the other two.

What is the typical revenue model for each core segment? Is the revenue model for manufactured products transactional, reoccurring or recurring?

Expert: I would say it is reoccurring, unpredictable yet regular. It's kind of a project by project. I would say it's reoccurring, unpredictable but regular. The parts are going to be transactional. The services is going to be transactional.

Analyst: Could you elaborate on each revenue model? Does the manufactured products segment have a written formal contract in place?

Expert: There are purchasing contracts in place, but they are not exclusive supplier contracts. They are more terms and conditions.

Analyst: What is the typical average contract size or average contract value for AirX?

Expert: It's more along the lines of what's the average size of a PO more than I would say a contract. We have signed contracts before and never gotten an order. Do terms and conditions. It's not so much that you win a contract. Contract is the wrong word. The contract is the purchase order. I would say your average purchase order is USD 1m-2m.

Analyst: What is the purchase order based on?

Expert: A project or a production schedule or a completion schedule.

Analyst: Is there a minimum project size that AirX accepts, or is there no such threshold?

Expert: No. When we were talking about what is their value prop, that is their value prop. They are able to do one piece if that's what's necessary.

Could you provide a use case for each core segment? What does each segment entail? How do customers use each offering? Could you describe a customer journey and the process, starting with manufactured products?

Expert: First, I'll give you a manufactured product use case. Let's take the rental chiller market. There are large rental companies like Herc or United Rentals who have representation throughout the country. They have a store in cities throughout the country. They have a yard with equipment in it. They purchase equipment and then they rent it out to customers on demand. A customer will have some type of need. Say, they need a bulldozer. They'll rent them a bulldozer. Same thing with a chiller. They'll have a need because they're going to do work on their chiller. They'll have a need for a chiller to fill some temporary need that they want to get it brought in and they need to rent it for a while for some reason. A project, a construction, anything. They can rent it for any reason what they want to. Herc wants to have chillers that are mobile, they want to have it on a mobile platform and that mobile platform is able to be dispatched to a customer's job site. Herc don't sell chillers on a mobile platform. You have to take a chiller that's been made by one of the large chiller companies, Daikin, Trane, Carrier. You have to take a chiller that was designed for a building. You have to mount it to a sled, some type of steel understructure. You have to put a pump and control valves on it and some type of hookups so that you can connect hoses and you have to make it into a package that's mobile and sell it to Herc to have in stock. AirX does not. AirX CS, CAPS do not make the chiller and they do not rent the chiller. Herc rents the chiller. Johnson or Carrier or Trane make the chiller. CAPS takes the chiller and puts it on a platform that allows Herc to make it mobile and rent out.

Analyst: Could you provide a use case for a data centre or any other industrial application?

Expert: Data centre, let's say, Google has a data centre. That data centre is going to bring in large amounts of power. It's going to bring in large amounts of power and you need switch gears to control that power. You need large breaker circuits. You need conditioners. You need power management that is very specialised. In order to build out your data centre facility quicker, you are going to have a company like Fibrebond or Sabre, you're going to have them build you a modular box that can be transported to the data centre site, mount it on the building and instantly give you a place where you could hook up your external power and then hook up your internal wiring. All of that large power management is in a box that's made modular at their factory. All of those components, when they are handling electrical load, they put off heat, lots of heat. AirX makes air conditioners that go on the boxes that Fibrebond makes for Google's data centre to manage the heat load of the switch gear in the modular unit that Fibrebond makes for Google. Just so you'll have this on recording, all of this is out there. If I mentioned like Fibrebond, which is now part of Eaton or Sabre, all of this is out there that explains how that works on their websites. It's not a kind of hidden technology. If you take the keywords, put in searches that I have given you, you can understand the use case a little better if it's not clear.

Analyst: What is a use case for aftermarket parts?

Expert: You have a failure. You have a part that fails on a machine. You need to get your machine back in service, a breaker, a contactor, a circuit board, just like an appliance at your house. They have a failure. They buy a part. They want a part that they know works and is the correct one for the unit. They usually buy that from the OEM because the cost of the part is not as important as the uptime. That's how that works.

Analyst: Are the products internal to AirX or could they be purchased from anyone?

Expert: They could be purchased [from others], most of them are purchased parts from manufacturers other than AirX. They could be sourced from other sources. If you can do good parts ID, you can source them from other sources. It's not that hard. Motors from Regal Beloit, motors from Broad-Ocean, motors from Ziehl-Abegg, contactors from Hartland, contactors from Eaton, breakers from Eaton or Square D, all kinds of. You could source any of that.

Analyst: Does AirX manufacture all the products or does the company have partners and supply chain relations?

Expert: They have supply chain for component parts, but no, almost everything is manufactured in-house. Now, they have supply chain for constituent parts, like a compressor is made by Copeland, then put into an AirX unit. A circuit breaker is made by Eaton and put into an AirX unit. A coil is made by Modine and put into an AirX unit. Similar to how any type of large complex appliance or a car. You buy the parts and then the OEM puts together the engineered system. That's how that works.

Analyst: What is a use case for services?

Expert: Service is very unique. CAPS in Houston, they have 50 service vans that service any type of equipment in and around Houston. They have a very traditional service model in and around commercial and industrial in Houston. They'll service anybody's equipment in and around the Houston Metro Area and they have 50 vans. It's very unique to the CAPS business in and around Houston.

Analyst: To confirm, does AirX not install the units?

Expert: They could install them. CAPS has done installs, but it's mostly services. AirX does not really install its own products across the nation. That's not typically how it works. There have been a few installs, but when you're looking at percentage, you're way below 1%. It's not any type of revenue stream that amounts to anything material.

Analyst: How much of the profit does AirX retain if it uses a third-party distributor or contractor to sell its equipment?

Expert: Usually, it's by resale. It's hard to know how much of the profit they keep. Usually, distributors, because they are in the middle, they do not usually wish to share how much they're [earning] because their money is made by getting the best price on the piece of equipment from the manufacturer and getting the most price from the customer. That is hard to know. It'd be very much a market-by-market, case-by-case basis. I would say, at a minimum, almost all distributors and reps at a minimum are trying for 11-20% at a minimum.

Which of AirX's three segments do you anticipate being the fastest growing and potentially driving the largest share of revenue in future?

Expert: That would be the data centre.

Analyst: To clarify, might it be manufactured products, aftermarket parts or services?

Expert: Manufactured products. The aftermarket parts works off your installed base, so it's more of an annuity. It's not going to boom unless you do something. Unless you acquire someone who's specifically in the parts business, it's more of an annuity. The services don't really have scale unless you buy more hourly talent. It's your manufactured products by far.

Could you specify the industry that best describes AirX's core operations? What is the industry that the company is currently operating in? What industry is it part of?

Expert: HVAC industrial and commercial.

What has the historical AAGR been of the HVAC [heating, ventilation and air conditioning] industrial and commercial industry?

Expert: 6-10%. If you look, that's also what's available. That 6-10% is what is out there for Carrier, Trane, all of their public reports. It's about the same. The organic growth rate has been 6-10%.

Analyst: To clarify, are you referring to the industry growth rate?

Expert: Yes. The industry growth. You said market growth rate. Yes.

What do you think have been the 1-2 key drivers of historical industry growth?

Expert: Data centre and reshoring, manufacturing and data centre. Typically, in commercial, it would have been people-occupied spaces. Offices are down. Commercial spaces for retail are down. What's driving the whole industry right now, if you go read any reports for Carrier, Trane, York, Johnson, is data centre. Data centre and reshoring. Manufacturing and data centre, there are chip plants going up. There are battery plants. There are all kinds of things like that. Typically, what has been driving it probably since 2022 when we came out of COVID is reshoring and data centre.

What do you think the industry's AAGR will be over the next three years?

Expert: For the entire industry, it's probably 6-10%.

What do you think will be the 1-2 key drivers of future market growth?

Expert: Data centre and reshoring.

Analyst: How will data centre and reshoring continue to be the key drivers of the market's future growth? Could you emphasise on the reshoring part?

Expert: If you look at data centre expenditures, each one of the hyperscalers, Amazon, all of them give a capital expenditures budget. They forecast into future. 2027 is expected to be as good, if not better than 2026, into 2028. A lot of the capacity in the HVAC markets is already purchased and in the backlog for next year. Then, reshoring, you have a lot of chip plants, battery plants, electric vehicle manufacturing, although that's kind of fallen off. You have a lot of reshoring taking place, that's what I mean by reshoring is primarily manufacturing. All of that will take power management. It'll take air conditioning and a lot of that will drive the market to be higher than GDP. Gross domestic product grow 2-3%, but the industry will grow 6-10% and that'll be the drivers.

To what degree do you think the industry is correlated to economic cyclicality? Is it counter-cyclical, very cyclical, somewhat cyclical, somewhat resilient or resilient, and why?

Expert: I would say very cyclical. What are the reasons for the answer? The build-out cycle for the data centre will be important. If that slows down, all of this, the deliveries will slow down. There's nowhere for the equipment to go if the data centre slows down. Within the next 1-2 years, the build-out itself will slow down. It can't help but slow down. Then, AirX CS is just patient, those units are built to last 20 years. There will be a parts annuity, but I would say that you have a build-out cycle. It will also depend on economy. If that cycle pulls off because of interest rates, debt, you will see a pretty precipitous decline once the build-out's over and if the cycle cools off.

Analyst: How would HVAC industrial and commercial industry perform or react to an economic downturn?

Expert: In 2008-2009, we shrunk. In 1999-2000, when we had the dot-com bust, we shrunk fairly dramatically because we were heavy in commercial. The industry will shrink capacity very quickly.

Based on public information, what impactful technological evolutions or innovations should we anticipate in the industry over the next 3-5 years?

Expert: The industry, water cooling. Water cooling for batteries, water cooling for chips, water cooling quite a bit, low water use, ambient heat management, increased heat load management, meaning your equipment, the equipment that you're cooling can handle increasing heat loads. The chips will be able to handle increasing heat loads. They'll get more efficient. The switch gears and all of those will be hardened, so they can operate at a higher temperature and, as they're able to operate at a higher temperature, you'll use more ambient outside air cooling or more ambient-type cooling than you will forced DX or chilled water.

Do you see any downside risks that might materially impact growth in the HVAC industrial and commercial market over the next three years?

Expert: I would say the data centre build-out. At some point, you'll have a critical mass of data centres. It won't always build out like this. There are so many companies bringing home, bringing on massive amounts of capacity. It'll be a classic boom-bust cycle. You'll bring on way too much capacity and that capacity will crash.

How fragmented do you consider the HVAC industrial and commercial industry to be? Do 2-5 strong players capture the majority of market share or is it a monopoly?

Expert: Highly fragmented because of the solutions. The high fragmentation is not because you don't have dominant players, but you have 5-10 dominant players. In the HVAC markets, you have almost an infinite number of solutions that they don't participate in. The market just has hundreds of companies that are offering specialised and other solutions in lots of different things. HVAC encompasses quite a range of things. While you do have very large dominant players, you have high fragmentation, in that, you have just hundreds of vendors for almost anything you could imagine.

How protected is the market? What are the barriers to entry in it?

Expert: Usually, the barriers to entry is, the large players have IP. Trane, Carrier, Daikin, they'll have IP. The smaller players' barrier to entry will be just capital. If you have a little bit of capital and you don't really infringe on IP, you can get into some form of this market.

What are the barriers to scale in the market?

Expert: Distribution. Getting your product out there and getting it in front of customers is probably the biggest barrier to scale. Almost anybody can, for USD 2m-3m, make an air conditioning box. Getting it in the marketplace and in front of customers is not easy because a lot of those decisions are made regionally. They're made locally. You have to have someone, it's a very contact-driven market in a lot of places for a lot of products.

Who are AirX's top three direct competitors?

Expert: I would say Bard is a large competitor for Marvair, a large competitor for CAPS Resale. They also participate in some of the industrial and commercial side.

Analyst: Who might be the second competitor?

Expert: Airsys. They're a Chinese company with domestic manufacturing. They have got a plant in South Carolina and they have an engineering centre in California. Then, the third one for the rental chiller business would be Trane, Carrier, Daikin, all the majors. Each one of them have their own rental chiller business. They not only make the chiller, make the rental, they also rent it. They bypass both the converter and the distribution. They go straight to customers. They're your biggest player.

Analyst: Could you name one direct competitor for AirX among Trane, Carrier and Daikin?

Expert: I would say Carrier. They happen to be right next door to CAPS in Houston. I would call them a competitor. Yes.

What are the market shares in percentage ranges for AirX, Bard, Airsys and Carrier? Alternatively, could you rank the players?

Expert: I would say Bard's market share in their type of business, again, the fragmentation. Bard is number one in the markets it plays in. AirX would be, for that against Bard, ranked two. I would say Airsys is probably three.

Analyst: What might be Carrier's rank?

Expert: This is going to sound odd. In the market they participate in their, they're probably number one.

Analyst: Would you want to consider a different competitor instead of Carrier?

Expert: Not really. It's hard for me to tell you that. They're different. Within AirX CS, there is a breadth to the product portfolio that is encompassed by different competitors. Carrier doesn't compete in the same markets with AirX CS as Bard does. Carrier competes in a different market that they are a competitor in a different market that AirX CS participates in. I don't know if I'm explaining that right.

Analyst: Could you comment on AirX's three direct competitors in the same market it is participating in? Would you say Bard is number two, AirX is number three and Carrier is number one, or would you like to change the competitors?

Expert: To give you the best information, [let's say], Carrier is one. Bard, two. AirX, three. Airsys, four. It's a little more nuanced than that, but that's going to take a conversation.

What were AirX, Bard and Airsys's revenues for the last fiscal year in approximations of USD 100m ranges? Carrier is part of a public company.

Expert: [AirX], USD 350m-450m. I don't know if you want to list it USD 400m-500m because, within a year, it would probably be solidly in the USD 400m-500m with a 6-10% growth. USD 400m-500m. Bard is probably USD 500m-600m. Bard is very closely held, so that's very difficult to know. Airsys is probably just North America. It's probably USD 0-100m. Carrier, billions.

What might be AirX, Bard and Airsys's organic revenue growth rates, in percentage ranges?

Expert: [AirX], 6-10%. Bard, 6-10%. Airsys is probably a little bit higher, at about 11-20%.

What have been AirX, Bard, Airsys and Carrier's growth drivers for the last fiscal year? Has AirX's growth been organic, acquisition-based or mixed?

Expert: Acquisition. [Bard], organic. Bard doesn't acquire. Airsys is organic and Carrier is probably organic.

What might be the average EBITDA margin for the players, expressed as a percentage range? How profitable do you think the players are on average?

Expert: I got to be kind of transparent on this. Bard is private, so I have no idea. I would think it's at least as good as AirX CS, so it'd be in the 21-30% range.

Analyst: To clarify, could you provide the industry average?

Expert: I would say 11-20% is industry average.

How would you define each player's performance based on the 11-20% industry average EBITDA margin? Has AirX's performance been above, on or below industry?

Expert: I would say it might be slightly above industry. [Bard], on industry. [Airsys], it's probably below industry. They're trying to take market share, so I think they're below. [Carrier], on industry because Carrier is the industry.

How do you think the players differentiate themselves? Could you comment on each's nuances, starting with AirX?

Expert: I would say AirX is breadth. They can offer almost anything. Breadth and quality.

Analyst: Could you elaborate on AirX's breadth and quality?

Expert: When you take a look at the seven companies that constitute AirX, you can get almost anything from them, engineered HVAC industrial and commercial. They have quite a breadth. Anything from a 1 tonne unit from Marvair standard duty-rated, all the way up to 40 tonne speciality unit designed to fit your wall from CAPS. You can get a rental chiller sled from CAPS. You can get a large stainless steel air handler for phosphorus mines from Specific Systems. You can get runway support air conditioners from Northern Air. Breadth, you can get almost any type of engineered industrial/commercial that you want from one of the portfolio companies of AirX. That's what I mean by breadth. Then, quality is good engineering. It works. The product's work when the engineering works and the manufacturing works is what I would say AirX brings to the table.

Analyst: How does Bard differentiate itself?

Expert: Pricing approach and scale. Bard has very deep relationships with their distribution. Just as a nugget, their number one distributor married the chairman of Bard. The son of the Bard family, this was years ago, 30-40 years ago, he actually married the daughter of their largest distributor. They have deep ties to their distribution channel. They probably have ownership ties. They have a very deep approach, they're in every corner of every market they're in and they have been there for a very long time. Then, price. They have scale in their markets and they usually compete very well on price.

Analyst: What is a differentiating factor for Airsys?

Expert: Airsys is primarily engineering in the variable speed area. They take the Asian technology in variable speed, variable speed compressor, variable speed fan. They have been very aggressive in technology and price.

Analyst: What is a differentiating factor for Carrier?

Expert: Carrier is all of the above. Breadth, stability, deep representation channels, technological moats with IP and property. They can compete on price when they want to or they can command a premium for engineering, controls, just kind of the whole package.

What do you think are the customers' top three KPC [key purchasing criteria] in the industry?

Expert: Willingness to engage is what I [will say]. What I mean by that is that depth of relationship that I was talking about. Being in their geography, discussing their spec with them, a willingness to engage at the customer level, with each level of it, to make sure that the product is the appropriate product delivered in the appropriate way available, that type of thing. Customer and intermediary level. Engineering, contractor, whoever the customer is.

Analyst: What might be the second KPC?

Expert: The quality of solution.

Analyst: What might be the third KPC?

Expert: Price.

How important do you think price is to customers in the HVAC industrial and commercial market? Is the product commoditised, somewhat commoditised or not commoditised, and why?

Expert: Somewhat commoditised. I'm going to explain my reason. A lot of people can meet the threshold of engaging with the customer. Like I said above, the willingness. A lot of people can satisfy the quality of engineering solution, meaning they can deliver product that meets the customer's engineered specification. It then becomes a little more critical to price. Then, the reason I say it's somewhat commoditised is a lot of people can deliver product that meets those criteria. It's not a complete product. They get there a different way. Same way in a car market. Almost everyone in the world can make a car that rolls and gets you from point A to point B. They just get there differently. It is somewhat commoditised, meaning you can buy a vehicle that gets you from point A to point B, but there's a difference between a luxury vehicle and a truck. I don't know how familiar you are with the North American market. Vehicles are commoditised, but they're also differentiated. It's somewhat commoditised.

What do you think have been the key drivers of AirX's historical growth?

Expert: Acquisitions. Most of their growth is going to be acquisitions. They do about 1-2 a year, USD 40m-50m. It's going to be acquisitions.

Analyst: Does the company share the industry's key growth drivers or has it been growing differently compared to the industry?

Expert: I'd say they grow about the same. Their willingness to engage, getting more distributors, more reps, clarifying the sales channel just like the rest of the industry, engineering solutions just like the rest of the industry and cost control. I don't think that their growth drivers are any different. They're a little more acquisitive for smaller niche players than the rest of the industry would be.

How fast do you think the company could grow annually over the next three years, expressed as a percentage range?

Expert: 11-20%.

What could be some of the most interesting ways to grow AirX, in your opinion? How would you look at improving its growth profile organically if you were running the company?

Expert: In terms of organic growth, probably differentiating on speed to market in data centre. If you could figure out how to overcome your supply chain and if you could get a better model for getting product to the market faster. [Also], I believe that price will be more sensitive in near future. I think those two things are not being concentrated as much in the marketplace as they could be. I think that those could be differentiators. It's just like any other boom-bust cycle. You're not going to know you reached the tipping point of capacity until it's too late. In the next couple of years, the companies that get better at what they do and differentiate themselves on that getting better will have a leg up when things are not quite so great, in my opinion.

How would you look at boosting the company's growth profile through margin improvements?

Expert: Operational efficiency. Right now, the whole industry, I think, is so focused on growing the top line at any cost that the operational efficiency improvements are not as good.

Analyst: What strategies would you implement to improve operational efficiencies across AirX?

Expert: I would probably scale throughput and reduce some of the smaller operating businesses. I would reduce footprint and consolidate them to leverage overhead with some of the larger. I'd increase throughput at the larger and consolidate them down to eliminate overhead. There are lots of business, there are lots of duplicate overhead in the front office, engineering and sales that are going on because each one of them have their own site. You have got a lot of sites that are just eating a bunch of overhead with the idea that they're going to grow forever. I think that consolidation and overhead leverage would do some good.

How would you look at improving the company's growth profile through M&A?

Expert: I don't really have anything for you there. They have consolidated a good bit of the custom industrial. The large custom industrial players, they have consolidated a good bit of that. To go in to acquire beyond that, you're going to be acquiring companies that are in businesses that are different than yours. They're within the industry, but they go to market and their competitive advantages are different. I'm not sure that is an effective strategy for growing. I don't really have anything for you on that.

Based on publicly announced acquisitions, how would you describe the company's M&A strategy? Has it made opportunistic acquisitions or carried out growth-related M&A?

Expert: They're growth and consolidation. They're trying to defrag. Most of them, there have been an occasional opportunistic, like Powrmatic, but most of them are to either to get in, most of them are to consolidate within an industry or to grow the product line. They're more either depth of the product line or they're more to consolidate the industry, meaning you take a bigger market share. CAPS, Northern Air, Specific is a bigger market share play when it comes to custom industrial. AboveAir was a play to get more breadth in the data centre market.

Could it make sense for AirX to acquire, merge with or be acquired by any other players in or outside the HVAC industrial and commercial space, in your opinion?

Expert: In my opinion, it's really too big for its competitors to acquire. Its direct competitors like Bard and Airsys, it is out of Bard's character. Bard would be big enough to acquire, but it's out of their character. They don't do acquisitions. They're too big for most of their competitors. They're too big for Airsys. They're too fragmented for someone like Carrier. Large companies like Johnson, Carrier, Trane, niche businesses at USD 10m, USD 20m, USD 40m or less than USD 100m are difficult for them to administer because you have public company reporting requirements. You just have so much that comes along with it, that having a little niche player in an industry that you don't understand, there's almost more risk than there is opportunity and it doesn't move your needle. I really don't think acquisition by another HVAC player is their play. I think it really is getting sold to another PortCo, not getting sold to another PE, as a PortCo. I think that's the way they go.

What would you say are the 1-2 biggest risks that AirX faces today?

Expert: Slowdown in data centre and rental chiller.

Analyst: Could you elaborate on the risks you mentioned?

Expert: Data centre and rental chiller, both of those are kind of in a boom cycle, if either one of them hiccup at all, AirX CS would go into the dramatic overcapacity stage that I had talked about. They would suffer from the bust a lot and they're very leveraged. Since they are a PE, PortCo, they're very leveraged.

Is there anything that the market does not properly understand about AirX, in your opinion?

Expert: I don't believe that the market understands, and this has come up on our discussion, I don't believe they understand the fragmentation, meaning, within their PortCos, the fragmentation of each individual PortCo and even within their portfolio companies, I don't think they understand. Or, I don't think, within their businesses, people understand how much fragmentation between the businesses there is. I don't think, within each business, people understand the fragmentation within the business itself. When every time we would discuss the business with someone, what we would always run into is, there should be all these synergies and there should be all these opportunities to collapse supply chain and there should be all these opportunities to consolidate go to market, and then there weren't. All of that is because the fragmentation is pretty severe, meaning that a lot of those opportunities just don't exist. That's one thing.

The other thing I would say is they don't understand that a lot of the companies are direct competitors to one another. AirX has businesses that on a daily basis are competing with each other, bidding on the same job with customers. I think there is this idea that the businesses are segmented from one another and each one of them is a separate, for lack of a better way to put it, horse pulling the wagon and they're not. Each one of them competes with one another and don't compete with one another to pull the wagon. On a daily basis, they overlap dramatically. The loss of market, any type of loss of market or addressable market affects many of the businesses. The businesses don't act as diversification among one another.