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VTDRF 2025 Q3 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Vantage Drilling International's Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to turn the conference over to your speaker today, Rafael Blattner. Please go ahead. Rafael Blattner: Thank you. Good morning, everyone, and welcome to the Vantage Drilling International Limited Third Quarter 2025 Earnings Conference Call. On the call with me today is Ihab Toma, our CEO. This morning, we released our earnings announcement for the quarter ended September 30, 2025. The earnings release is available on our website at vantagedrilling.com. Please note that any comments we make today about our expectations of future events and projections are forward-looking statements pursuant to the Private Securities Litigation Reform Act. We have based forward-looking statements on management's current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, our expectations regarding future results, including expectations regarding our liquidity position, future costs and expenses related to upgrades and out-of-service work as well as contract preparation costs and expenses. Forward-looking statements in today's call are subject to a number of risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from the projections made today. Vantage does not undertake to update any such statement or risk factor that could cause actual results to differ materially from our expectations. We refer you to our earnings release and financials available on our website. We have prerecorded our prepared remarks and are participating on the call remotely to manage the question-and-answer session segment of the call. In the event there are issues with sound quality or of a similar nature, please accept our apologies in advance, and thank you for your understanding. Now let me turn the call over to our CEO, Mr. Ihab Toma. Ihab Toma: Thank you, Rafael, and welcome, everyone. I am pleased to report a successful third quarter of 2025, driven by safe and efficient operations. As previously reported, we sold the Tungsten Explorer on August 11, 2025, for $265 million to the joint venture with TotalEnergies, in which TotalEnergies owns 75% interest and Vantage owns 25%. The consideration consisted of $198.75 million in cash and $66.25 million in equity. Vantage will continue to operate the Tungsten Explorer under a management agreement for 10 years with an option to extend for an additional 5 years. Subsequent to the sale, the Tungsten Explorer completed its scheduled maintenance, certification and upgrade work scope in Las Palmas and has since mobilized back to Congo and successfully commenced operations on November 5, 2025. As a result of the sale, Vantage redeemed its outstanding senior notes of approximately $65.1 million on September 10. In April, we announced a conditional letter of award for the Platinum Explorer for an approximately 260-day campaign, including mobilization and demobilization. Unfortunately, in October, Vantage was required to terminate the contract due to changes in the applicable economic sanctions that made performance of the contract unlawful. Prior to the sanctions being imposed, Vantage was both contractually entitled to and received a payment to cover the preparation costs incurred. Accordingly, we do not expect this termination to have a material financial impact on the company. I would now like to take you through our progress in relation to our three corporate goals of: One, maintaining our stellar safety and operational performance; two, the contracting of our entire fleet; and three, achieving excellent stakeholder returns. I will begin with our first corporate goal and our #1 differentiator, our stellar safety and operational performance. Our safety performance remained strong in the third quarter with 0 recordable and lost time incidents. Environmental performance remained strong this quarter with no reported incidents with our focus remaining on sustainable and efficient operations. The company's sustainability initiatives continue to progress, including enhanced GHG emissions tracking and ongoing waste reduction efforts, whilst all corporate certifications remain fully compliant. Now switching to operations. Revenue efficiency for the Tungsten Explorer during the third quarter of 2025 was 99.8%, while our managed fleet achieved 99.4%. I will now walk you through our fleet status, which is directly aligned with our second corporate objective, contracting the entire fleet. Starting with our own fleet, for Platinum Explorer, our priority remains to focus on opportunities and adding term backlog. The rig is participating in a number of active tenders and will participate to the highly anticipated ONGC tender for a 3-year plus 1-year option campaign. Turning to the Tungsten Explorer. The rig has successfully completed its major out-of-service work scope in Las Palmas and commenced drilling operations in the Republic of Congo for TotalEnergies under the management agreement. The firm duration for this contract is 160 days with additional options for a further 290 days. For the managed jack-ups, the Topaz Driller continues operations with CPOC in the joint development area between Malaysia and Thailand. There is currently over 11 months remaining of the firm term and a further three 3-month options available to be exercised with the first option strike date in the first quarter of 2026. The Soehanah concluded operations with Metco Energies in Indonesia in the third quarter and subsequently demobilized to Johor Bahru, where the rig is idle and is being actively marketed for a number of opportunities. At quarter end, our total backlog was $206.6 million. The majority relates to our managed fleet, primarily the Tungsten Explorer's 10-year management agreement. The remaining balance reflects the Platinum Explorer's backlog as of quarter end, which has now been fully earned and recognized upon contract termination. Turning to market dynamics. We continue to see positive long-term fundamentals in both the shallow water and deepwater segments, while we still expect some idle periods across all segments extending through 2026. This outlook is supported by the issuance of several deepwater longer-term tenders and jack-ups being recalled to operation on long-term contracts after periods of suspension in the Middle East. These signs of renewed contracting activity reinforce our view that utilization will continue to improve gradually, underpinning a resilient offshore market in the years ahead. Moving to our third corporate goal of achieving excellent stakeholder returns. In the third quarter of 2025, we ended with a total cash balance of $197.4 million. This includes $2.4 million of restricted cash and $39.7 million of prefunded cash by managed services clients. The increased liquidity was driven by the sale of the Tungsten Explorer, partially offset by the redemption of senior notes. The monetization of the Tungsten Explorer highlights Vantage's continued success in its managed services business, setting the company asset-light, debt-free and well positioned to return capital to shareholders. In closing, we remain focused on maintaining exceptional safety and operational performance and securing profitable long-term drilling contracts to deliver strong returns for our stakeholders. With that, I would like to turn the call back over to Rafael to take us through the numbers. Rafael Blattner: Thank you, Ihab, and welcome, everyone. I will now provide an overview of our financial performance for the quarter ending September 30, 2025. The company ended the third quarter with approximately $197.4 million in cash, up from $89.6 million at year-end 2024. Excluding cash prefunded by our managed services customers, VDI's cash balance was $157.7 million compared to $61.4 million at year-end. This meaningful improvement reflects the sale of the Tungsten Explorer to the joint venture and demonstrates the continued execution of our asset-light strategy, delivering accretive transactions and strengthening value for our stakeholders. The increase in cash during the quarter of $96.3 million, net of managed services prefunding, was driven primarily by $198.8 million of proceeds from the sale of the Tungsten Explorer and $4 million received from the purchase price adjustment on the Soehanah sale to ADES. These inflows were partially offset by $65.1 million used to redeem the senior notes, $12.5 million used in operations, $11.6 million invested in the joint venture for scheduled out-of-service maintenance and equipment certification, $9.6 million of capital expenditures, $5.2 million of cash interest and $2.5 million in repurchased shares and dividend equivalents. Working capital at September 30, 2025, increased to $154.5 million from $115.3 million at year-end. The increase was driven mainly by higher cash and a rise in accounts receivable, including $20 million from the now terminated Platinum Explorer contract, which we collected in the fourth quarter. These increases were partly offset by a $29.6 million reduction in inventory after the sale of the Tungsten Explorer and a $20 million increase in performance obligations for the Platinum Explorer, which are now fully recognized following the contract termination. Accounts payable also increased by $14.7 million, reflecting out-of-service and mobilization costs for the Platinum Explorer, out-of-service projects for the Tungsten Explorer and ongoing operations. For the third quarter and year-to-date of 2025, we reported revenues of $23.3 million and $89.7 million, respectively, compared to $49 million and $174.9 million in the same period last year. The decline in revenue reflects our strategic shift to an asset-light model, which resulted in fewer operating days for the Tungsten Explorer following its sale, the sale of the Topaz Driller and Soehanah and the completion of the Capella, Polaris and EDC management agreements. These impacts were partially offset by higher management fees. Revenue efficiency in the third quarter of 2025 was 99.8% and 99.4% for the Tungsten Explorer and the managed fleet, respectively. Year-to-date, revenue efficiency was 99.8% and 98.5%, respectively. Operating costs for the third quarter were $40.4 million compared to $38 million in the same quarter of 2024, an increase of $2.4 million. The increase was driven mainly by the $12.9 million write-off of deferred costs related to the sale of the Tungsten Explorer, the early contract termination warranty for the Soehanah of $2.4 million and higher reimbursable costs. These increases were partially offset by the completion of the Capella and EDC management agreements, the sale of the jackups and lower Platinum Explorer costs due to completion of the out-of-service work scope. Year-to-date operating costs for 2025 were $101.7 million compared to $130.3 million in the same period of 2024, a decrease of $28.6 million. The reduction reflects our strategic shift to an asset-light model, driven by the sale of our jackups and the Tungsten Explorer, the conclusion of the Polaris, Capella and EDC management agreements and lower Platinum Explorer costs due to reduced activity. The decreases were partially offset by the write-off of deferred costs related to the Tungsten Explorer sale, the early contract termination warranty expense for the Soehanah and increased reimbursable costs. General and administrative expenses for the third quarter and year-to-date were higher by $900,000 and $2.5 million, respectively. The increase was mainly due to accelerated vesting of share-based compensation of $2.5 million and $5.7 million, respectively, partially offset by lower professional fees related to the Tungsten Explorer transaction, the Bermuda domiciliation and the Oslo listing. Equity investment loss from unconsolidated affiliates totaled $1.8 million for the third quarter and $2.4 million year-to-date in 2025. These losses primarily reflect our share of joint venture expenses associated with the Tungsten Explorer's major maintenance, certification activities and upgrade work performed ahead of and during its out-of-service period. For the third quarter of 2025, gain on sale of assets was $102.1 million associated with the sale of Tungsten Explorer to the joint venture. The year-to-date gain on sale of assets was $102.4 million due to the sale of Tungsten Explorer and purchase price adjustment from the sale of the Soehanah to ADES of $300,000. Interest income was higher by $1.4 million for the third quarter and $1.3 million for year-to-date due to higher cash balance after the sale of the Tungsten Explorer. Interest expense decreased by $4.6 million in the third quarter and by $12.4 million year-to-date, reflecting the redemption of $184.9 million of senior notes in November 2024 and $65.1 million in September 2025. The net result attributed to shareholders for the third quarter and year-to-date was $67.2 million and $32.2 million, respectively. Please note, we will post our September 30, 2025, quarterly report to our website later today. And with that, I will now turn the call back over to the operator to begin the Q&A. Operator: [Operator Instructions] Our first question comes from Fredrik Stene with Clarksons Securities. Fredrik Stene: I wanted to group this a bit thematically touching first on the Platinum Explorer then a bit on the Tungsten and then talking kind of high level about shareholder returns in the end. So let's start with the Platinum Explorer. Just one classification -- sorry, clarification. Did you say, Rafael, that you had received $20 million in the fourth quarter or did I hear... Rafael Blattner: Yes. You're talking about the Platinum Explorer, correct? Fredrik Stene: The Platinum Explorer, yes. Rafael Blattner: Yes. We did receive $20 million during the fourth quarter. Your understanding is correct. Fredrik Stene: Yes. Okay. And those $20 million, if you kind of net that -- this was also my understanding from the prepared remarks, if you net that against the work that you have been doing on the rig in relation to that contract prep, you'll be effectively net 0 around that? And second, what should we think about kind of OpEx-wise for the Platinum Explorer until it gets new work? Rafael Blattner: All right. So your understanding is correct on both the revenue question and on Vantage being somewhat indifferent in terms of inflows, net of outflows. Regarding the Platinum [indiscernible] is a warm stacked or waiting on a contract. For modeling sake, I would use approximately $50,000 a day. It's a proxy for its idle cost. Fredrik Stene: All right. Great. And I guess you're still going to be targeting the ONGC tender as like the main potential long-term work for this rig. Beyond what you said in the prepared remarks, are you any other latest and greatest news around ONGC and the tender that we should be aware of? Ihab Toma: Fredrik, first of all, thank you for being the first on the line for questions. You were in the queue before we even started the meeting. So that's good. So yes, no, so ONGC is scheduled to issue -- to receive the bids on Thursday. As I'm sure you have followed, there has been -- every week, there has been a delay for 1 week, an extension for 1 week. So we hope that this time, we will be submitting on Thursday, but that's the only news at the moment. Fredrik Stene: All right. And then my last one. Regarding the Tungsten Explorer, obviously, there's going to be some nice asset-light cash flow going forward. But can you just elaborate a bit on the dynamic? What would happen with your management fee if the rig itself doesn't have a contract or doesn't get an extension? Is it going to average around $47,000, $48,000 per day over a 10-year period, but how would that dynamic be governed in the short term to gap on the rig? Ihab Toma: I'll take that question, Fredrik. The JV number one, there is a joint venture for the ownership of the asset and the ownership split is going to be -- or it is 75% TotalEnergies and 25% in Vantage. In the event that there is no work for the Platinum Explorer, the JV is kept whole, once it comes to the management fee side, if there is no work, there is a reduced fee to the manager. And then whenever the rig is ramping up to go back to work, the fee increases and then you would get back to the $47,500 on average once the rig is mobilizing, demobilizing or operational. That's how the deal was structured. So no exposure on the ownership side. And on the management side, there are reduced fees in the event that there are no wells to be drilled by TotalEnergies or third-party operators. As a reminder, this deal can operate for third-party operators, and that's worth noting. Fredrik Stene: All right. And actually, one last one. I'm sorry about hijacking all the questions here, but I think kind of in the end there, you said something about being well positioned to return cash to shareholders. And I apologize if that's not the exact quote. But I wondered now that you have received all this cash, has anything changed in the way you view that you think still that having a contract on the Platinum Explorer will be like a prerequisite to paying out a dividend? Or do you feel comfortable that you could potentially do that sooner rather than later? Ihab Toma: Fredrik, there is no decision that has been taken on that. We do have a Board meeting early December, and it's an agenda item, as you can imagine. But for now, there has been no decision taken. Operator: [Operator Instructions] And I'm not showing any further questions at this time. And as such, this does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.

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VIG.VI 2025 Q3 财报电话会议

Operator: Ladies and gentlemen, welcome to today's VIG Conference Call and Live Webcast. I am Matilda, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Hartwig Loger. Please go ahead. Hartwig Loger: Yes. Very warm welcome from Ringturm in Vienna, and thanks for joining our call with information to the main topics we have prepared for you. So we already last week announced the outstanding performance of our group for Q1 to Q3. So today, we have the chance to deepen the information about this very successful first 3 quarters of this year and which was also announced that we already raised the outlook for our profit before taxes for this year 2025 to EUR 1.1 billion to EUR 1.15 billion. And Liane Hirner, our CFO, will then give more details to the topic of the results of the first 3 quarters. The second big topic, and we know that there is big expectation also from your side that we today are ready to give you first information about our interest in Nurnberger, and we also released the information that the public purchase offer, which ended on the 21st of November this year at an acceptance rate of 98.38%. So out of that, Gerhard Lahner, he is responsible Board member of VIG for this project. He also will give some information in detail about this topic. Myself, I will then follow with information about the new strategic program in the name of Evolve '28, which will be the new strategy for '26 to '28, and which will not only further strengthen our group, but mainly will focus also on the long-term profitable growth. Today, I will offer you the structure, the main topics. And I have to excuse that the targets to this strategic program will be approved by the Supervisory Board next week. So we will come to the detailed targets back to you as soon as possible after the approval of next week. We also are happy and glad that Peter Hofinger, Deputy CEO of Vienna Insurance Group is also attending this meeting and is also ready for questions from your side after our presentation. Saying this, I hand over now for the first topic about the performance to our CFRO, Liane Hirner. Please go onward. Liane Hirner: Thank you, Hartwig. Let's start on Slide 4 with the key figures over the first 3 quarters this year, which highlights the ongoing strong performance of VIG. Insurance service revenue of EUR 9.7 billion is up by 8.6%. Here, both P&C and Life & Health showed top line growth of more than 8% each, and I will go into more detail on that on Slide 6 in terms of the individual market development. Profit before taxes as preannounced last week and despite the goodwill impairment taken already at half year for Hungary increased by 31% to EUR 872.8 million. Main driver for this outstanding profit before taxes growth in the third quarter was an excellent technical result in P&C supported by low net combined ratio. The biggest contributor to this more than EUR 200 million additional pretax profit in absolute terms was Czech Republic, followed by Austria in the Special Markets segment. VIG's P&C net combined ratio improved to 92.1%, driven by favorable weather conditions. Our strong capitalization is reflected in a solvency ratio of 286% compared to the solvency ratio at half year of 278%, the SCR of roughly EUR 4.1 billion remained fairly stable, mainly due to the slightly higher capital requirements for non-life, life and health insurance, reflecting the increased business volume. The own funds of VIG of about EUR 11.7 billion increased by almost 4% or more than EUR 400 million in the third quarter. This is driven by operating earnings and the positive development also on the capital markets, resulting in higher market values of our investments. The solvency ratio, excluding transitional measures, stands at equally very strong 267% and increase also compared to the half year. It is clearly above our solvency target range of 150% to 200%, which does not consider transitional measures, and this also underpins the capital strength and the resilience of our group. Now on the next slide, we show the gross written premium development by segment. Premiums overall increased by 8.6% to EUR 12.5 billion. Double-digit growth rates were recorded in Poland, plus 13.5% and the Special Markets segment, plus 18.4%. The strongest contribution in absolute terms is coming from the Extended CEE segment, plus EUR 314 million, where especially Romania, Hungary, Slovakia and the Baltics made up for close to 3/4 of the additional premium. Special Markets, mainly driven by Turkiye as well as Austria, Poland and the Czech Republic, all increased their premium volumes by more than EUR 130 million each. In IFRS terms, this relates or translates into a very solid insurance service revenue development, which is shown on Slide 6. Here, in line with gross written premiums, the insurance service revenue also increased by 8.6% to EUR 9.7 billion. I would like to draw your attention to the Extended CEE segment. Insurance service revenues of overall EUR 2.87 billion already exceeds the level of Austria. Again, it's the market in the Extended CEE segment, for example, Baltics, Slovakia, Romania and Bulgaria, performing extremely well. In the Special Markets segment, it's a dynamic business in Turkiye despite hyperinflation, which accounts for the significant increase. This segment also includes Germany, Georgia and Liechtenstein with Germany and our Life and Non-Life companies InterRisk, they are contributing EUR 140 million in insurance service revenue. Last but not least, Austria, Czech Republic and Poland, all 3 with solid growth rates and a strong performance also in the first 3 quarters this year. The dynamic top line development of our group supported by weather-related claims translated in the third quarter into an exceptionally strong increase of our profit before taxes. On Slide 7, you will find a short summary of the results development and the figure for the net weather-related claims recorded in the first 3 quarters. Compared to about EUR 338 million in last year in the first 9 months last year, which were related to storm Boris, we recorded only EUR 160 million of weather-related claims so far this year, thanks really to the absence of the severe nat cat events. As already mentioned by Hartwig, the strong performance of our group so far this year provides us with the confidence to raise the target range for the group profit before taxes between EUR 1.1 billion to EUR 1.15 billion for the whole year 2025. Finally, I would also like to highlight the rating upgrade by Standard & Poor's, confirming VIG's excellent A+ rating and raising the outlook to positive. This was driven by our progress in broader diversification and followed the announcement of our intention to acquire a controlling stake in NURNBERGER, which was very positively received by Standard & Poor's. With this, I hand over to Gerhard, who will now share his insight to NURNBERGER with you. Gerhard, please go ahead. Gerhard Lahner: Thank you, Liane. Let me provide you with some background and also my personal take on the NURNBERGER transaction to explain you the strategic rationale and why we are highly confident that this is an excellent fit and will increase shareholders' value over the mid and long term. The following slides in this presentation will substantiate my top-down view and provide you with further details on German market and NURNBERGER. Let me draw your attention to the disclaimer on Page #8 and specify that we are still in the nondisclosure phase of the due diligence. And let me stress out that any figures published by NURNBERGER are seen in -- are to be seen as National GAAP German accounting principles, which are not comparable to IFRS 17/9. Well, earlier this year, VIG was approached by NURNBERGER management whether we would be interested to start talks about potential strategic partnership. Given the attractiveness of the German insurance market for VIG as a Special Market, with a high insurance density and penetration while being one of Europe's largest and most mature markets, well governed by BaFin, we entered into these discussions with a clear aim to increase our exposure in Germany in combination with our local company just recently mentioned by Liane, InterRisk Life and Non-life. So it should be clearly stated that this is not a market entry, but this is an expansion on an existing market that is with the VIG portfolio for 35 years plus. After first talks, both sides quickly realized that joining forces and simplifying the shareholder structure would be the most efficient way to return NURNBERGER back to a profitable and stable company. With a state-of-the-art IT landscape to best leverage on the strong brand and the sales footprint in across Germany. From our perspective, it became clear right away that NURNBERGER management has a clear strategic vision for the company to become a profitable player in the German market with a clear focus on prevention, occupational disability and a restructured Non-Life portfolio. Well, against this backdrop of the strong commitment of NURNBERGER's management, the cost efficiency program started by them Back to Black for the Non-Life part, but also the further diversification potential through the partially complementary life insurance portfolio and the experience in turnaround and IT transformation that VIG would bring to the table, we intensified our discussion. We strongly prepared for the nonbinding offer phase and we were finally granted exclusivity for a detailed due diligence. And in this due diligence, we clearly found ourselves confirmed in our basic assumption, which was further supported by the publication of NURNBERGER half year's result that the management is well on track to deliver. Right from the beginning, it became clear that the solid solvency position of NURNBERGER is, of course, combined with the attractive brand, the countrywide operating sales force and the strong determination of the local team to get back to the historic level of profitability, a very attractive asset. The unrestricted Tier 1 of EUR 1.9 billion will strengthen VIG's resilient foundation for further expansion in CEE, which clearly remains the strategic focus of our group. Through this transaction, right after closing the deal, all Tier 1, Tier 2 and 3 limits will increase as NURNBERGER has become part of VIG Group and therefore, provides the potential for further growth in CEE without diluting existing shareholders. At the same time, the risk profile of the SCR of NURNBERGER will provide a buffer when it comes to VIG's sensitivity of shifting interest rates downward out of the Austrian life back book. Most importantly, the investment can be financed from VIG's own liquid funds, providing us with the flexibility to optimize our funding structure in a more opportunistic way and taking benefit of deleveraging the last period. In addition to VIG's own funds, there is also a EUR 500 million revolving credit facility in place. So given the spirit of local entrepreneurship at NURNBERGER, the multichannel distribution system across Germany and a conservative reinsurance policy, we are very confident that the multi-brand approach with a strong NURNBERGER brand, combined with the additional scope for further diversification is going to support our operations in Germany in a profitable way, providing a resilient internal financing structure source when it comes to the future expansion in CEE region. As we are convinced that biometric risk in connection with occupational disability is a core competence that will be increasingly relevant to support our business in different Central and Eastern European countries, the addition with NURNBERGER team and their know-how in this field is just a perfect fit for VIG. In terms of cultural fit, with NURNBERGER being an independent insurance group for the last 140 years, the entrepreneurial management style as well as the historical proximity for Germany and Austria will provide a good foundation for NURNBERGER to become a strong member of VIG. In summary, we had a chance to look into the books of NURNBERGER and are confident that the company's turnaround will be successful. And through the acquisition from VIG truly supported by our involvement. So given, first, VIG's experience in turnaround non-life portfolios in challenging market environment; second, VIG's experience in IT transformation, especially in Austria, where the digital landscape is very similar to the ones at NURNBERGER and was successfully completed in 2023, a strong NURNBERGER management with a clear vision how to generate consistent cash streams for VIG's further growth in Central and Eastern Europe and VIG to leverage on the know-how of NURNBERGER in biometrics and occupational disability, VIG will benefit from the NURNBERGER's strong solvency position from day 1, enhancing its internal financing capacities over the midterm. Please note that after the announcement, intention to acquire NURNBERGER, Standard & Poor's, as mentioned by Liane, upgraded our rating A+ with a positive outlook with a particular focus on our financial strength and diversification potential for further growth in Central and Eastern Europe. If you allow me now, I would like to go -- to hand over to Hartwig Loger, CEO, for the presentation about the strategy. Hartwig Loger: Thank you, Gerhard. I will now give you the first insight about the structure of the new strategic program for '26 to '28. As you all know, we are still in the end spirt of the group-wide strategic program, VIG '25 ending this year. And I think with the expected performance, we raised, as we already said, to EUR 1.1 billion to EUR 1.15 billion, we see also the success of the activities of our running strategic program. With Evolve '28, as you can see also on the Slide #16, we used also a name which gives the first intention what we are looking for. It is not the big revolution, but a dynamic evolution, which is built up on the success of the last years and also the current performance we can show as VIG. The frame, which is shown here is in our understanding of the, I would say, USB model we are living as VIG. Our understanding is not being a big tanker in a centralized form, but being a dynamic fleet with responsible ships and this framing, which is shown here in these 4 parts will secure that this fleet has a common direction and the strategic performance also in the upcoming years. To start, maybe also in the description, you see on the bottom Values and Principles. I will go deeper afterwards, but we already were sure that it is the need maybe also to evaluate and also to a little bit, yes, renew the values and principles for the upcoming years and the challenges we are seeing in front. On the left side, with country portfolio and company strategies, this is more or less the backbone of this strategic part for the next years. What is meant, and I will also show afterwards, there are 50 individual company strategies. So over the last year, we developed under a common structure and on the basis of deep analysis of each market, a common strategic implication for each market of our group. And then the CEOs of the companies in the markets developed their company strategies for the next 3 years, and they were following a common structure of 5 strategic fields. This means that this framework for the next 3 years already has a detailed definition for each company of our group in targeting and action plans for their activities to improve the performance also for the next years. You see the group programs. We defined also 5 group-wide programs. These programs are not initiatives as we have defined it in VIG '25 because initiatives have been the offer to the companies in our group if they will also join these initiatives, the 5 group programs now we are focusing are really for group-wide activities seen, and they are coordinated by the holding or also competence centers out of our group. On the right side, you see also the fourth part, which is ongoing in CO3. Here, we define our activities in communication, collaboration, which is needed to really bring added value out of the best practice and the innovation and creative projects in between the group and cooperation, which is focusing also to find the synergies in between the companies working on one market. On the next slide, you get the overview. I will not now present in detail, but we clearly define the 5 values for our group. Plurality, which is the basis for our fleet. We have not only 50 companies in 30 countries, we also have a very high diversification in between also the different markets, the different brands, also the different sales channels. We are active all over our brands and companies. We have the basis of our 33 million customers already, which will be improved and increased also by incoming NURNBERGER customers in Germany soon. And this is the Plurality basis, which is also our understanding that this Plurality in the activity of the fleet is the added value of our model. Entrepreneurship following this Plurality idea means that especially the local entrepreneurship, the self-responsibility in between the management of the ships in our fleet and the companies, it is the strength and the motivation and identification of all our managers and leaders. Responsibility on one side, of course, to the society, but also as we know, out of the challenges of climate change, there is a broad basis in our understanding that we want to make sure that our economic value today is not in any form destroying the future of our society. Excellence, which is clear in the focus of our company activities on the customer basis to make sure that in all our services, products, processes, we are focusing also to deliver excellent services and products, and that's the base of our performance. And passion, it is needed also to create and find out the right form that we are clear for our 33 million customers, yes, I would say, best partner in all our solutions. The Principles on the next slide, we also evaluated to make sure that the description in the way how we work together in this group. And I'm open to say that the interest also in the partnership, which was developed now also in the purchase of NURNBERGER that NURNBERGER, as it was also said by Gerhard Lahner, it will be a perfect strategic fit also in the understanding of a group-wide common activity also in the future. Now a little bit deeper in the content on Slide #19. You see here the 5 strategic fields. This is the common structure of each individual strategy of each company of our group. The one field, the most important and the first one is the expand of the customer base and also the enrichment in the activities that there, we will focus in all the companies in also cross-selling and upselling potential out of this base we already have and this base, we also want to increase in the number of customers. The second topic in line is to enhance the distribution footprint. As you know, we have a very strong diversified sales channel activity. And including also bank and direct sales, it will be the basis to improve on a better way and also to use also the challenges and advantages which will come up in the development also on digital basis. And also, we will come further on to that in artificial intelligence solutions in services which are provided in this form. Next part is Products. We enlarge also the product offerings. It was mentioned that here, we use the collaboration in between the group really to improve also the broad Plurality of offerings we have. And also besides this, there will be added services also as basis to strengthen our customer experience. Next is Operation. This field, the strategic field in each of the strategies of the companies is focusing on the effectiveness and effectivity of processes in our operations and also with improving the automation in between these processes in best practice forms in between the group. And last but not least, the fifth and very important basis employees to foster the people who are already active and to find also the best experts in our companies, which are needed for the innovation transformation we see all over our base. On the next slide, here, you see the 5 already mentioned group programs. which were developed also on a broad discussion basis in between the CEOs of our group. Here, we build on the relevant trends. We also discussed on broad basis, the trends already existing and upcoming for the next years and the challenges. And out of that, we clearly defined the main programs on one side, sustainability, which is an ongoing program, which has already been started 3 years ago. But there will be, again, a strong focus in delivering also solutions on the basis of underwriting as our key activity, but also in the asset management and operations field and which is important also for VIG to not only focus on the ecological part, but also on the social part, which includes society, our customers and also our employees. Capital management. In the understanding of the group, it's very important also for the efficiency in between the capital management of our companies in the group. And Gerhard Lahner is leading this capital management program starting in a pilot last year, and we will work out for the next 3 years that we have a very professional also management of the upstream of dividends out of the performance of our companies. Banking cooperation, which is mainly driven by the backbone, which we have in the strategic partnership with Erste Group, but we will not only work on the improvement of this strategic partnership with Erste, where we are active already in 7 markets together. And we also see the opportunity all over the group in all the other markets to expand with additional partners beside the 7 markets of Erste. Artificial intelligence, I think it's clear for all of us that there has to be a focus in the activities, which already is on a broad basis. I sometimes already mentioned that in the activities of our VIG Accelerate program, more than 50% of the projects which are brought in by the companies in this kind of platform of project for digital solutions, we have more than 50% already on the basis of AI. But it is needed, and this is what we will focus in the next 3 years to optimize also the efficiency in the use of the use cases in between the group and all over the group. And the fifth program, focusing on health, which we see in all the markets in different forms as a high potential for developing not only on product, but especially on service basis, and there, we also will have a focus in analyzing and then also supporting our companies in a group-wide form on these solutions. The next slide, evolve28, CO3, I already mentioned, I will not go deeper. Just repeat, collaboration here shown in the symbol of Spider-Net. This is really supporting the added value created out of the broad innovation and creative basis of all our companies. This is really, I would say, a boost in the way of creating new solutions in all forms in between our business. Cooperation, yes, inside, we say ensures independence in the way that there is a clear focus in the optimization of the cooperation in between our companies in one market. For example, in the back office optimization between Wiener Stadtische and Donau in Austria, also other companies in Czech, Slovakia, Poland, and there is a big range where we can deepen also the optimization, partly also automization of common activities. Communication already mentioned, we have as information already provided more than 40 communities, which are active in between our experts and specialists in between the group. So there is also a very strong interlink between our fleet. Last but not least, on the Slide #22, I offer to you also knowing your expectation. And we already mentioned by myself and also Gerhard Lahner, there is still a little need of patience from your side. Why? We have now the performance of Q1 to Q3 for this year, and we also raised our outlook for the result of '25. Regarding now the program evolve28, which I shortly presented in its structure and content, there will be the next week, our Supervisory Board meeting where we will approve the targets for the next 3 years, including also the targets coming up from evolve28 strategic program. What we can offer is then next week after the Supervisory Board meeting, there, we will also then comment and declare the targets and the figures for the next 3 years to you. And Peter Hofinger and me, we will join also in a dance program, all bank conferences, which are offered in London, in Frankfurt, in Hamburg and also the others, where we then hope that we will have the chance also to present to you maybe also in personal talks then not only the program, but also the targets and some interesting discussions. The closing of NURNBERGER. And I know that there is a big expectation also regarding the detailed KPIs and targets from the inclusion from NURNBERGER, but we still have the need that the closing, which we expect until the second half -- beginning of second half of '26, there will be then the start of the financial integration, which cannot be done before. But immediately after this financial integration phase, we will also have the chance then to integrate the targets of NURNBERGER also in the strategic targets of this evolve28 program. And then we really can not only opens, but give a deep insight in also the calculations and also the valuation of all this influence of integration of NURNBERGER. So I know that there might be a bigger expectation, but there are also the legal frameworks we have to declare. And out of that, we are also open now to answer your question, and we are looking forward to the first questions you have. Operator: [Operator Instructions] Thank you very much. The first question comes from the line of August Marcan from UBS. August Marcan: I have too many, but let's start with 3. First one on the combined ratio. This year, the 9-month combined ratio benefited a lot from benign weather. And last year, we had worries. So in the last 2 years, we kind of had the opposite extremes. So I was wondering if you could tell us what you see as a normalized combined ratio level for the group going forward? Then the second question, a rather simple one, apologies for that on your new strategic plan. I'm not sure I fully understood the time line. You said that next week, you're going to have the approval from the Board. Are you then immediately going to have an event or publish this? Or what exactly is the time line? And if -- again, on the CMD, you said that the financial targets are going to be published there. Could you just tell us now if -- what the KPIs are, not the numbers, but what the metrics are that we're going to be looking at because I think your last strategic plan didn't have a lot of financial KPIs. So I'm not sure what this one will include. Peter Höfinger: Thank you for the question to the combined ratio. Yes, you are quite right that the comparison of last year to this year is quite difficult as having Boris, which was a gross claim of but you know and we have presented this that we do have a quite conservative reinsurance policy. We are still able also over the last years in the hardening of the reinsurance market, keeping low self-retention. So also last year, for the first 9 months, we had a combined ratio of 94.3%. This year, it is considerably better with 92.1%. But you also see that the difference, if you compare the amount of the events is not so significant as we have as a mitigation element, reinsurance, which we are willing to buy in quite in a bigger amount. What was beneficial this year to our results, and this is outstanding is the phenomenon of having less frequency of small- to medium-sized events. So this has had quite an impact on our improvement of our loss ratio. The mild climate and the absence of this frequency of small to medium events, we are not impacted in a year by the big events due to our reinsurance. So therefore, I think you see the limited volatility of our combined ratio from last year to this year, having a very big event and having this year an outstanding event. So I think between 92% and 94% is what is our combined ratio to be expected going forward. Hartwig Loger: Okay. Thank you, August, for your question. I will take question 2 and 3 from my side. First, yes, there will be also an information immediately next week when we have the approval from the Supervisory Board to the targets 26 to 28 next week. And what you can expect, there will be a very transparent basis also in the information about these targets. It will be a target about the growth a target about profits. It will also include combined ratio, which you asked before to Peter Hofinger. And there will be also a target clear on return on equity as an operative return on equity, and there will be also targeting the solvency ratio. So these are the targets which will be discussed in the Supervisory Board, and then we will clearly make it transparent to the capital market about the targets we have for the next 3 years out of our program. Operator: Next question comes from the line of Rok Stibric from ODDO BHF. Rok Stibric: Yes, I would have just one question and it's -- forgive me if I'm being a bit impatient. Usually, you disclose these things with half year and full year results, but I would still like to hear your view on future investment income expectations. So the question is, do you expect future investment income to be roughly at the same level as this year? Or do you expect this line of your P&L to improve in the future or maybe given the changing interest rate environment to even decrease? I was just wondering what your thought is on developments in the future. Liane Hirner: Liane, I'm happy to take your question regarding the investment income. What I can say is that we have a very positive development in the investment income in the first 3 quarters. So this year, so no impairments, no one-offs. Also, we have a positive development of the interest rates, especially in CEE also, for example, including Turkiye. And due to the increased business volume, also interest income or financial income is increasing. So I would expect a positive development also on this side in the upcoming quarters. I hope this answers your question. Operator: We now have a question from the line of Youdish Chicooree from Autonomous Research. Youdish Chicooree: I've got 2 questions. The first one is on the top line development. I was wondering whether you could provide a split between Life and the main lines in Non-life, like [indiscernible] other property, et cetera? And then secondly, on NURNBERGER, could you tell us, I mean, how long will the turnaround of this business take? And are you able to share what your view is of the sustainable earnings power of that company, please? Peter Höfinger: Okay. I'm happy to take the question about the development of the business lines. If you look on our non-life portfolio, so we are growing all over the group in health business. And what is very positive to see, we are growing by 12% in health. What is very positive to see that we have a quite very good dynamic in health business in Central Eastern Europe. We see a growing demand by our clients and by our markets getting health insurance, and we are having quite innovative concepts and also offering this market-to-market depending on result. On the framework of the social security laws there. We do have a growth in property and casualty of around 5.6% all over the group. Also here, you will see a stronger growth dynamic in Central Eastern Europe as this is also linked to the overall GDP growth and the economic dynamic. And as you know, there is a quite positive GDP growth in Central Eastern Europe, where we are benefiting with our property business. When we come to the motor business, we have to differentiate between motor TPL and motor own damage. In motor TPL, it is around 11%. And in motor own damage, it's more than 6%. The background here is over the last years, we have seen in Central Eastern Europe quite an overproportional salary inflation. Differently to maybe Western Europe, increased salaries more or less go immediately into consumption and not just on the savings book. Part of this consumption also goes in cars and buying new cars. This is the growth driver for motor own damage, but also in motor TPL. If you look on the Life business, I think you also asked, overall, the life business is growing by more than 8%. Here, it is the classical life business, which is growing, but also in unit-linked, we are closer to 6% of the performance. So also here, we have, I think, a quite attractive dynamic. The same true, what I said for the other business lines. The driver of this growth is Central Eastern Europe, where the demand for old age savings is growing, and we also see this as one of our further future potentials of growth in the years to come. I hope I have answered your question. Gerhard Lahner: Let me take the second one on NURNBERGER. I will -- in my first part of the answer, I will refer to publicly available information. NURNBERGER itself has announced that the turnaround for the non-life part will last until 2027. We have seen quite a strong development this year, supported, of course, also by favorable claims development as well as a positive market cycle on the German insurance market when it comes to non-life profitability. So we trust the management to be well on track with the turnaround of the non-life part. The IT part will take probably a little longer. Nevertheless, given the status as which -- in which we are as of today, I think that we will have the chance to have more deep dive with NURNBERGER management on that issue when the closing has been done. Nevertheless, we are aware of that this will, of course, also long term decrease the cost base. So I think that from our point of view, we are -- I think that the NURNBERGER management is well aware of that we are expecting them when you ask me to return to historical profitability levels. As you know, not only you are impatient, but we as well -- I guess this is also well known to the NURNBERGER management. Youdish Chicooree: And can I ask a follow-up question, please? Gerhard Lahner: Yes. Youdish Chicooree: So you're expecting the closing in the second half of next year. So do we have to wait till then to get, let's say, IFRS 17 numbers for NURNBERGER basically? Gerhard Lahner: I would like to give you a different answer, but the answer is clearly yes. Operator: [Operator Instructions] The next question comes from the line of Thomas Unger from Erste Group. Thomas Unger: I'll connect to the last question and answer on. NURNBERGER. What can VIG do here to advance and accelerate the transformation process for NURNBERGER? And you already said that the time line remains about the same as what NURNBERGER guided. But when do you expect the first dividends from NURNBERGER to VIG? That will be my first set of questions. And upon closing, do you expect any significant one-offs to be incurred or immediate major investments that you anticipate for the second half of 2026? And then also, I'd like to ask you now that you're in the process of this takeover, how does that affect your growth strategy in Central and Eastern Europe? Are you able to take advantage of any M&A opportunities or other growth opportunities that may arise in the next 1 to 2 years? I don't know you haven't said anything or any details given any details on the capital hit that you'll be taking as you attractive opportunities in Central and Eastern Europe in the next 1 or 2 years? And if you allow me to also ask you on the dividend, the upcoming dividend from 2025 earnings. Will the NURNBERGER acquisition in any way affect the management Board's decision process leading up to the dividend proposal from 2025 earnings? Gerhard Lahner: On what can VIG bring to the table? I think that in different markets and especially in challenging market circumstances, I guess that VIG has shown that we know what it means to turn around, especially non-life portfolios. But I think that what we see is that the NURNBERGER management is very well in place and know what they do on the restructuring and turning around the non-life portfolio. Nevertheless, I guess that we can bring some know-how. In addition, I think that I'm not sure if everybody is aware of, but VIG has taken advantage of IT transformation program executed by Wiener Stadtische and Donau [Insurance] the last years ended in 2023. And what VIG can bring to the table is that given the fact that the IT landscape is very, very comparable to -- between VIG in Austria and NURNBERGER IT landscape, we are very confident that we know what needs to be done, first point. Second point is when it comes to talent, we have the team that was successfully doing this transformation in the DACH region still on board. You just should probably know that we decommissioned a lot of all systems in Austria which finally gives you also going forward, quite some flexibility on the digital journey that, of course, you need sooner or later. Second of all, dividend expected. I think that, in general, our intention is that NURNBERGER will keep on paying dividends in general. Nevertheless, of course, we -- and this leads to, I guess, your third question, one-off investment, we will need to judge what is the best way to finance the long-term IT transformation program of NURNBERGER. Nevertheless, we don't expect this to be a big upfront amount, but probably be spent over several years. And then we would probably judge on what is the most efficient way to deploy capital in NURNBERGER or within the entire group. I guess the fourth question is twofold. One is the financial part of the flexibility for further -- taking further advantages of inorganic growth or M&A transactions in Central and Eastern Europe. And the second one is the managerial question. I would take the first part. So definitely, given the deleveraging that VIG has gone through the last periods and the financial flexibility that we have from our balance sheet, I do not see any immediate restriction out of either the transaction nor anything upcoming. The managerial part of the answer, I would ask probably Hartwig Loger to give you the answer. Hartwig Loger: Okay. Thank you, Gerhard. I will take also the question about our possibility also to invest and go on in the growth of Central Eastern Europe. This is clear the target, and we also including our investment in NURNBERGER, we are ready and also in part of the program of evolve28, we are still interested in possible profitable growth and also investment in the enlargement of our activities in Central Eastern Europe. And as we expect maybe coming up soon also with some targets, we have also already on our radar. I think the most important thanks also for that question, our investment in NURNBERGER will not have any impact to the dividend payment out of the outperformance of '25, which is expected. So we have the clear definition of our policy to dividends. So there is the floor, and we are clear that with the performance on the operative side, there will be also the definition and the increase on the dividend payment for this year. I hope this gives security to you. Operator: We have a follow-up question from the line of August Marcan from UBS. August Marcan: Two quick questions on NURNBERGER. One is with this acquisition, you're getting some businesses that maybe are not core for Vienna like the banking business. Have you considered what you want to do? Do you want to keep the business, keep NURNBERGER as a whole? Or are you looking to dispose of the non-insurance asset that NURNBERGER has? And then the second question, you're also bringing from NURNBERGER a sizable investment portfolio and their asset allocation is quite different from yours. They have much more equities and a bit more real estate than you do and much less bonds. Have you considered what the plan is here? Are you going to move them to your strategic asset allocation? Or are you going to leave it as is? Gerhard Lahner: Thank you very much for those questions. The first one is it's probably still too early. Definitely, the focus of the acquisition for us is the core business, which is the entire insurance business of NURNBERGER. So this is the focus. The rest we will see further down the road when we are able to judge immediately after closing. The second one is on the asset allocation. VIG will not move away from the conservative asset principles that we have in place. Of course, there is an interlink between the asset portfolio of NURNBERGER. So we will first very thoroughly analyze what are impacts. But definitely, we are supposing to continue VIG's conservative investment approach in the long run. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Nina, Head of Investor Relations, for any closing remarks. Higatzberger-Schwarz Nina: Thank you for your participation in today's call and your questions and interest. As mentioned by Hartwig Loger, our CEO, our evolve28 targets will be announced next week. Investor Relations is available to provide support and assistance with any further questions or requests for meetings. And I hope to be in touch soon. In the meantime, goodbye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines.

184天前Insight Analytics约5分钟阅读

BURL 2025 Q3 财报电话会议

Operator: Hello, everyone, and welcome to Burlington Stores, Inc. Third Quarter 2025 Earnings Webcast. Please note that this call is being recorded. After the speakers' prepared remarks, there will be a question and answer session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. Thank you. I'd now like to hand the call over to Mr. David J. Glick, Group Senior Vice President, Investor Relations. Please go ahead. David J. Glick: Thank you, operator, and good morning, everyone. We appreciate everyone's participation in today's conference call to discuss Burlington Stores, Inc.'s fiscal 2025 third quarter operating results. Our presenters today are Michael O'Sullivan, our Chief Executive Officer, and Kristin Wolfe, our EVP and Chief Financial Officer. Before I turn the call over to Michael, I would like to inform listeners that this call may not be transcribed, recorded, or broadcast without our expressed permission. A replay of the call will be available until December 2, 2025. We take no responsibility for inaccuracies that may appear in this call by third parties. Our remarks and the Q&A that follows are copyrighted today by Burlington Stores, Inc. Remarks made on this call concerning future expectations, events, strategies, objectives, trends, or projected financial results are subject to certain risks and uncertainties. Actual results may differ materially from those that are projected in such forward-looking statements. Such risks and uncertainties include those that are described in the company's 10-Ks and in our other filings with the SEC, all of which are expressly incorporated herein by reference. Please note that the financial results and expectations we discuss today are on a continuing operations basis. Reconciliations of the non-GAAP measures we discuss today to GAAP measures are included in today's press release. As a reminder, as indicated in this morning's press release, all profitability metrics discussed on this call exclude costs associated with bankruptcy-acquired leases. These pretax costs amounted to $11 million during 2025 and 2024 and $28 million and $9 million respectively, for the first nine months of 2025 and 2024. Now here's Michael. Michael O'Sullivan: Thank you, David. Good morning, everyone, and thank you for joining us. I would like to cover four topics this morning. Firstly, I will discuss our third quarter results. Secondly, I will review our updated fourth quarter and full-year guidance. Thirdly, I will provide some early thinking on the outlook for 2026. And lastly, I will comment on the progress we are making towards our longer-range financial goals. Then I will turn the call over to Kristin to provide additional details. Okay. Let's start with our Q3 results. Total sales increased 7% in the third quarter at the high end of our guidance. This was on top of 11% sales growth last year. This means that year-to-date, total sales have increased 8% on top of 11% year-to-date growth last year. Comp store sales for the third quarter increased 1%. We started the quarter well with a strong back-to-school trend, but in September, we saw a significant drop-off in traffic to our stores driven by warmer-than-usual weather. As we have discussed previously, we have very strong brand equity in outerwear. Many shoppers still think of us as Burlington Coat Factory. Outerwear is a great business and a source of competitive strength. But this means that in Q3, our comp trend is very sensitive to weather, much more so than competitors. In some years, the impact is positive. In some years, it is negative. This year, it was negative. That said, in mid-October, once the weather turned cooler, our comp trend picked up to the mid-single digits. And that momentum of mid-single-digit comp growth continued through the first three weeks of November. Finishing up on Q3, I would like to comment on earnings. Despite the weather-driven slowdown in our sales trend in Q3, we still delivered margin expansion that was well ahead of last year and earnings growth that significantly beat our guidance. It's worth calling out that this was despite the considerable headwind that we faced from tariffs. Moving on to the fourth quarter, we are maintaining our previously issued comp store sales guidance of 0% to 2%. We feel good about our recent trend, but it is still early in the quarter, and in the coming weeks, we'll be up against very strong comparisons from last year. So it makes sense to remain cautious. That said, given the strong margin and expense trends that we are seeing, we are increasing our Q4 margin and EPS guidance. To be clear, we are adjusting our full-year 2025 earnings guidance, passing along all of our beat to earnings in Q3 and factoring in our higher Q4 earnings outlook. I would like to call out that we started this fiscal year with EBIT margin guidance of flat to up 30 basis points. Our updated full-year 2025 guidance now calls for expansion of 60 to 70 basis points. This is despite pressure from tariffs and is on top of 100 basis points of margin improvement in 2024. We are excited about the progress we are making on margin expansion. I will return to this topic in a few moments when I talk about our longer-range financial goals. But first, I would like to share our initial thoughts on the outlook for 2026. We are early in the budget process, but as a starting point, we're planning for total sales growth in the high single digits. We now expect to open 110 net new stores in 2026. This is higher than previously discussed and it reflects the strength of our new store pipeline and the performance we are seeing from new stores. We are excited for these new store openings. For comp sales, we are assuming growth of flat to 2% in 2026. This should sound familiar. It is our typical off-price playbook. There is significant economic uncertainty and we do not know how this might affect our business in 2026. So we will plan our business conservatively at 0% to 2% comp sales growth and then be ready to chase if the trend is stronger. In terms of operating margin expansion, for budgeting purposes, we are assuming that at 2% comp growth, our operating margin would be flat versus this year, then 10 to 15 basis points higher for each point of comp above 2%. Before I turn the call over to Kristin, there is one more topic that I would like to talk about. I would like to provide an update on our longer-range financial goals. As a reminder, two years ago, we shared our objective of getting to approximately $1.6 billion in operating income in 2028. The headline is that we feel good about the progress that we are making toward this goal. We are tracking in line with where we thought we would be at this point. We are especially pleased with the progress we have made in driving operating margin. This means that at the high end of our updated 2025 margin guidance, we will have achieved 170 basis points of the 400 basis points of opportunity that we identified two years ago. And of course, we will have achieved this despite the negative headwind from tariffs. Apart from margin expansion, the other drivers of our long-range financial model are new store sales and comp store sales growth. On new store sales, we are even more bullish now about our new store opening program than we were two years ago. Originally, we had assumed that we would open 100 net new stores a year in the period 2024 to 2028. In fact, this year, we will open 104, and in 2026, we are now planning to open 110 net new stores. Based on our new store pipeline, there is a possibility that we could sustain or even exceed this stronger pace of new store openings. The other major driver of our long-range model is comp sales growth. As I discussed in the context of our Q3 results, leaving weather aside, we feel good about the underlying comp trends that we are seeing. We believe that we can achieve average annual comp sales growth in the range of 4% to 5% over the remaining years of the long-range plan. In other words, between now and 2028. Of course, we recognize there are a lot of external variables that can affect comp growth. So in the nearer term, as we always do, we will plan our business conservatively. And then chase. Now I would like to turn the call over to Kristin to review our Q3 results, updated 2025 guidance, and high-level outlook for 2026 in more detail. Kristin Wolfe: Thank you, Michael. And good morning, everyone. I will start with some additional color on Q3. Then I will talk about our updated guidance. Lastly, I will comment on our initial outlook for 2026. Starting with the third quarter, total sales grew 7%, while comp store sales increased 1%, both within our guidance range. As Michael described, our comp trend in the third quarter fell off significantly after the back-to-school period driven by warmer weather, but then picked up to mid-single digits in mid-October. The gross margin rate for the third quarter was 44.2%, an increase of 30 basis points versus last year. This was driven by a 10 basis point increase in merchandise margin and a 20 basis point decrease in freight expenses. Moving down the P&L, our Q3 product sourcing costs were $2 million versus $29 million in the third quarter of last year. Product sourcing costs decreased 40 basis points compared to last year. This was primarily driven by leverage in supply chain, through continued cost savings and efficiency initiatives. Adjusted SG&A cost in Q3 levered 20 basis points versus last year. This leverage was primarily achieved in store-related costs. Our store teams drove significant leverage in store payroll, through numerous efficiency and productivity initiatives. Q3 adjusted EBIT margin was 6.2%, 60 basis points higher than last year. This was well above our guidance range of down 20 basis points to flat. Our Q3 adjusted earnings per share was $1.8, which came in well above our guidance range. This represents a 16% increase versus the prior year. At the end of the quarter, comparable store inventories were down 2% versus the end of 2024. Let me provide a little more context here. In Q3, we saw a significant slowdown in our comp trends, a weather-driven slowdown, but using our merchandising 2.0 tools, our planners and merchants were able to react very quickly to adjust receipts, especially in cold weather categories. So despite the slowdown, our store inventories are well balanced, current, and very clean going into the fourth quarter. Moving on to our reserve inventory. Reserve inventory was 35% of our total inventory versus 32% of our inventory last year. In dollar terms, reserve inventory was up 26% compared to last year. We are pleased with the quality of the merchandise and the values and brands that we have in reserve. And as a reminder, we use reserve inventory as ammunition to chase the sales trend. For example, our reserve includes great out-of-revise that we made earlier this year, that we've been pulling out over the last few weeks to fuel the trend since the weather turned cold in mid-October. We ended the third quarter with approximately $1.5 billion in liquidity. This consisted of $584 million in cash and $948 million in availability on our ABL. We had no outstanding borrowings on the ABL at the end of the quarter. During the third quarter, we repurchased $61 million in stock, and at the end of the quarter, we had $444 million remaining on our repurchase authorization. In Q3, we opened 73 net new stores, bringing our store count at the end of the quarter to 1,211 stores. This included 85 new store openings, 10 relocations, and two closings. We now expect to open 104 net new stores in fiscal 2025, up from our original estimate of 100 net new stores. Now I will turn to our outlook for the fourth quarter and full year for fiscal 2025. We are maintaining our fourth quarter fiscal 2025 guidance for comp sales and total sales. We are guiding comparable store sales to be flat to up 2% with total sales to increase 7% to 9% for the fourth quarter. We are raising our adjusted EBIT margin and adjusted earnings per share guidance for the fourth quarter. We now expect our adjusted EBIT margin to increase by 30 to 50 basis points. This margin outlook now translates to an adjusted earnings per share range of $4.5 to $4.7, an increase of 9% to 14% versus the fourth quarter of last year. For full-year fiscal 2025, after factoring in our actual Q3 results and our improved outlook for Q4, we expect comp store sales growth of 1% to 2%, total sales to increase approximately 8%, and EBIT margins to range from an increase of 60 to 70 basis points. As Michael noted earlier, this fiscal 2025 EBIT margin guidance is 40 basis points higher than our original full-year guidance at the high end, and this is despite the significant pressure from tariffs. Finally, factoring in Q3 actuals and updated Q4 guidance, adjusted earnings per share are now expected to be in the range of $9.69 to $9.89, an increase of 16% to 18% for the full year 2025. Finally, I would like to touch on our preliminary FY 2026 outlook. We are in the early stages of the budgeting process, so this could change. But at this point, we are planning on total sales growth in the high single digits. We are assuming at least 110 net new stores, and we're planning comp store sales in the range of flat to up 2%. For operating margin, as Michael said, we are assuming that at a 2% comp growth, our operating margin would be flat to this year. And we expect leverage of 10 to 15 basis points for each additional point of comp. And now I will turn the call back over to Michael. Michael O'Sullivan: Thank you, Kristin. Before I turn the call over to the operator for your questions, I would like to summarize a few of the key points from today's call. Firstly, Q3 was impacted by warmer weather in September through early October. Once the weather normalized, our trend improved to mid-single-digit comp growth. And we are off to a strong start for Q4 with comps up mid-single digits for the first three weeks of November. Secondly, we are pleased with our margin trends. We are updating our full-year 2025 guidance to reflect the earnings beat in Q3 as well as our improved earnings outlook for Q4. At this point, we are maintaining our previously issued Q4 comp guidance of 0% to 2%. Thirdly, we are pleased with how we are tracking towards our long-range financial goals, especially the pace of margin expansion. And within this long-range financial plan, we think there may be additional upside in terms of our new store opening program. Now I would like to turn the call over for your questions. Operator: We are now opening the floor for the question and answer session. Please press star followed by one on your telephone keypad. Your first question comes from the line of Matthew Robert Boss of JPMorgan. Your line is now open. Matthew Robert Boss: Great. Thanks. Good morning, Michael. Good morning, Matt. Good morning. So on relative performance, your comp this quarter came in below both of your off-price peers. This is a clear reversal from results in the second quarter and over the last year. Clearly, you cited weather was a factor, but how concerned are you by this change in your relative comp versus peers? Michael O'Sullivan: Well, good morning. Good morning, Matt. Thank you for the question. You're right. Just to lay out the facts, we ran a 1% comp in Q3, our peers were 6% to 7%. Very impressive. That's a very significant difference. I can't give you a complete bridge, but at a high level, let me try and dissect that gap. I'll start with the obvious. We know that weather was the biggest driver of our slowdown in Q3. It's not an excuse, but it is a partial explanation. You know, we changed our name some years ago, but shoppers still call us Burlington Coat Factory. So mild weather in September and October has a huge impact on our business. You know, this is a real thing, and it is unique to us, I think, versus our peers. Now in September and October, cold weather merchandise balloons to more than 20% of our assortment. In the third quarter, our comp sales for ladies and men's coats, jackets, boots, and cold weather accessories, all these important categories were down double digits. Now they bounced back in mid-October, once it turned cold, but by then it was too late to really drive the comps up. Let me go a little further and try to quantify the weather impact on our comp in Q3. If you strip out the drag on our overall comp from cold weather categories, the categories I just listed, and if I make an adjustment for the impact that lower weather-related traffic had on the rest of the store, then I can get to the low end of a mid-single-digit comp. In other words, I do not get to 6% or 7% comp. So in my view, weather only explains half of the gap versus peers. Now, you know, usually, in off-price, when your comp is lower than your peers, it's just the customer telling you that they preferred the value and the assortment that they found elsewhere. In the second quarter, when we ran a 5% comp, growth ahead of our peers, the customer was voting for us. But in Q3, that changed. Now we have some hypotheses on why, but we have more work to do to really tear that apart. And then aggressively go after that performance difference. But before I leave the question, let me just call out a silver lining. The comp numbers that our peers have just reported reaffirm that the off-price shopper at all income levels is alive and well. You know, leaving aside the weather, the major implication for us is that we need to take better advantage of that than we did in the third quarter. Matthew Robert Boss: Great. And then, Kristin, as a follow-up, could you provide more color on the 60 basis points of operating margin expansion in the quarter, particularly just given as we think about the pressures that you faced from tariffs and the 1% comp? Kristin Wolfe: Good morning, Matt. Thanks for the question. Yes. First, it's worth reiterating that we really are pleased with the 6.2% operating margin in the quarter, up 60 basis points versus last year on a 1% comp, as you noted in your question. Let me provide the major puts and takes starting with gross margin. First, our merchandise margin increased 10 basis points. And within merchandise margin, there was a lot going on. Tariffs had a negative impact on markup, but we were able to offset this impact through numerous actions such as negotiating with our vendors, adjusting the mix, and driving a faster turn. The net impact of all this was much more favorable than we originally guided back in August. This was really driven by our tariff mitigation strategies. Now staying in gross margin, freight levered by 20 basis points. This was due to greater efficiencies and cost savings initiatives, particularly in transportation. So our overall gross margin increased 30 basis points versus the third quarter of last year, all this despite the impact from tariffs. On product sourcing costs, moving down the P&L, we drove 40 basis points of leverage here. This was driven by supply chain and efficiency initiatives in our DCs. We're excited about the consistent progress we've made in streamlining our chain costs. And moving on to SG&A, we showed about 20 basis points of leverage here on a 1% comp, and this was driven by efficiency initiatives in stores, such as speeding up checkout times at point of sale. Offsetting this leverage was higher depreciation, which delevered about 20 basis points driven by increased CapEx in supply chain and new stores. So taken altogether, this drove the 60 basis points of EBIT expansion in the quarter. Thanks, Matt. Operator: Next question comes from the line of Ike Boruchow of Wells Fargo. Your line is now open. Ike Boruchow: Hey, good morning, Michael, Kristin, and David. I guess my question kind of piggybacking off of Matt's is, so the comp growth in Q3 was lower than peers. But the margin and earnings were actually pretty much better. How should we reconcile that? And then really more importantly, were there choices that you made during the quarter that may have driven the higher margin at the expense of sales? Michael O'Sullivan: Well, I'll take that, Ike. Good morning. Thank you for the questions. It's a good question. I think the direct answer is yes. There were decisions or choices that we made that helped drive our margin in Q3 but may have had a negative impact on our sales. And I'll give you a couple of examples, but maybe I should just preface what I'm gonna say with a couple of points. Firstly, our margin and earnings performance in Q3 was very strong. Margins were up 60 basis points and adjusted EPS grew 16%. We've also taken up full-year earnings guidance. In other words, we've rolled right over tariffs. Secondly, on comp sales, to reiterate, the biggest driver of the slowdown that we saw was weather. If I adjust our comp for weather, we probably would have been pretty happy with the outcome. But as I explained a moment ago, that only explains half of the gap between our 1% comp growth and our peers' 6% to 7% comp. So if I come back to your question, yes, there were choices that we made that might explain our relatively strong margin and earnings performance, and our weaker comp growth in Q3. Now these were choices that we made as part of our tariff mitigation strategies. And let me describe two specific examples. Firstly, when tariffs were first introduced, we reduced our sales and receipt plans for categories where the margin impact was too significant. We did not feel like we could raise retails in those categories. And we did not want to accept the margin compression. That meant that in some businesses, especially some categories in home, our inventory levels and assortments were very light in Q3. And we saw that in terms of the sales in those categories. The sales were lower. Now that wasn't an error. It was a deliberate decision. I would say it was an economically rational decision. And it worked. It may have hurt sales, but it drove our earnings in Q3. Now I should add that as tariff rates have come down, we've gone back and we've taken up sales and receipt plans in most of the categories that were affected. So I would expect this impact to be less significant in Q4. A second example, as Kristin described a moment ago, another step that we took to help offset tariffs was to trim inventory levels in many businesses across the store and force a faster turn. Again, this helped to offset the margin pressure from tariffs. Now we only really took that step in Q3, not in Q4. We already turned very fast in Q4, so we didn't want to try and force a faster turn going into holiday. But again, in Q3, that approach drove earnings, but it may have hurt sales. So for both of the examples I've just given, at a high level, those decisions worked. You know, we fully absorbed tariff pressure on our margin, and we drove very strong margin and earnings growth in Q3. And all this happened actually despite a slowdown in comp sales due to weather, normally a slowdown like that would drive deleverage. Anyway, with that said, we really need to do a full after-action assessment on Q3. Now that we have our competitors' comp results, we need to go back and hindsight our performance and identify anything we could have done or should have done differently. Ike Boruchow: Got it. Thanks, Michael. And then maybe, Kristin, just to elaborate maybe a little more on the 2026 initial outlook, key risk opportunities in the outlook, anything else you could share? Kristin Wolfe: Yes. Great. Thanks, Ike. It's still somewhat early in the process. We're actively working through the budget for 2026. But let me give some headlines or how we're thinking about it. The outlook for next year is pretty hard to predict, with significant economic and political uncertainty that could absolutely affect consumers' discretionary spending. There are potential tailwinds like the possibility of higher tax refunds in the early part of next year. And then there are potential headwinds like tariff-driven price increases, which could put additional inflationary pressure on our core customer. Michael spoke to this earlier, but given this uncertainty, we're planning to stick with our off-price playbook. That really means planning comps at flat to 2% and positioning us to chase the trend if it's stronger. In terms of new stores, we mentioned this in the prepared remarks, but it's worth reiterating, we feel very good about the new store pipeline. We are planning to open at least 110 net new stores in 2026. So combined with our comp guidance, this should drive a high single-digit increase in total sales. On the operating margin side, as we said, we're modeling operating margin flat to last year at the 2% comp. We do expect 10 to 15 basis points of leverage for every point above a 2% comp. And then there's a couple of things in the margin. A couple of puts and takes. We are planning for slightly higher merch margin as we look to offset any impact of tariffs, particularly as we lap the fall season next year. We're planning for continued supply chain productivity gains next year, but there will be offsets here due to the start costs and the initial ramp-up of our new Southeastern distribution center, which we plan to open in 2026. And finally, we do expect fixed cost leverage on the high single-digit total sales growth, but we also are expecting higher depreciation, which creates deleverage. The higher depreciation is really due to the higher CapEx spend in supply chain and our increased number of new stores. Those are really the main callouts for 2026 at this point. Operator: Your next question comes from the line of Lorraine Hutchinson of Bank of America. Your line is now open. Lorraine Hutchinson: Thank you. Good morning. Michael, one of your off-price peers is accelerating comps with more focus on marketing, more in-store inventory, and a store refresh. Do you see any risk that Burlington Stores, Inc. will lose market share? Michael O'Sullivan: Good morning, Lorraine. Thank you for the question. It's a good question. I'm going to avoid talking about any specific competitor, but I think I can still try to answer your question maybe in more general terms. You know, I'll start by saying that actually we like innovation and fresh ideas. We believe in off-price retail. And anything that drives off-price awareness and excitement is a good thing. In fact, I'd go further and say that a strong off-price sector is important for us. So it's good that our off-price peers are achieving very strong results. But your question was more about potential risks to Burlington Stores, Inc. So let me come at it from that angle. I think there are two important points that I would make here. Firstly, when we talk among each other and when we talk to analysts and when we talk to investors, I think we sometimes talk about off-price as if it were a separate isolated ring-fenced segment of retail. But the customer does not think of it that way. The customer does not respect the boundaries of off-price. If she needs a pair of pants or a dress, she might shop Burlington Stores, Inc. or one of our off-price peers, but we know from our own research that she also cross-shops department stores, specialty retailers. In fact, any retailer where she likes the assortment. She doesn't care about our off-price business definition. She just cares about finding a great deal and great value in the categories, brands, and styles that she's looking for. Now if you're an investor in off-price, I think it's very important that you understand this. This is not like the retail market for office supplies. We aren't three companies just scrapping it out for market share in a limited space off-price. It's bigger than that. We compete in a very large and competitively fragmented market for apparel, accessories, shoes, home, beauty, and so on. Off-price is really just a small part of that overall market. Our opportunity is to take share from non-off-price retailers. That's what has been happening over a long period of time. So, I mean, just to bring it up to just to throw in some numbers. Today, we announced 7% total sales growth in Q3, on top of 11% growth last year. You know, at those growth rates, it's self-evident that we are taking market share. But so are our off-price peers. These share gains are not coming at the expense of each other. Mathematically, that wouldn't be possible. These share gains are coming from non-off-price. And, you know, I think that the shift from traditional full-price retail to off-price is unlikely to end anytime soon. So that's the first point. The second point I would make is that despite everything I've just said, I think it's very important and useful for us to pay close attention to our off-price peers. They matter. They operate a similar business model to us. They've been very successful over the years, and we can learn a lot from them. So if our off-price peers come up with new ways of doing things, new processes in stores, new innovative marketing programs, then we need to pay close attention. Now not all of those ideas will work, of course. And certainly, not all of them will make sense for us. But we need to be open to new ideas that could help drive our business and actually drive off-price retail in general. Let me finish up. Your question was about risk to Burlington Stores, Inc. Right now, I see off-price as a whole as being very healthy. For 2025, we now expect to grow total sales by 8% on top of 11% last year. And at the high end of our guidance, we now expect to achieve EPS growth of 18% on top of 34% last year. Those are by any metric, those are very healthy numbers. I anticipate that our off-price peers are going to be successful too. But I don't see that as a risk. In fact, it's better for us if the off-price segment as a whole continues to perform well. Lorraine Hutchinson: Thank you. And I wanted to follow-up on pricing. Did you take price in 3Q? And what impact did that have on your comp? And then what's your strategy on pricing for the fourth quarter? Michael O'Sullivan: Yes. That's a good question. I would sum up our pricing strategy in three words: be very careful. We recognize that because of tariffs, prices are going up across the retail industry. But we will not raise prices unless we've seen them go up elsewhere. And even then, we will test and monitor the impact of those price increases. We've said this many times before, we have a very price-sensitive customer. We know that the reason that they shop at Burlington Stores, Inc. is that they're looking for a great deal. Our core strategy is to offer great value. And, of course, that means keeping prices low. Now our approach to tariffs this year has been to avoid retail pricing increases, and to focus instead on finding other margin and expense offsets. Kristin described those actions earlier. We're very pleased with how that approach has worked. It's allowed us to avoid price increases but still to grow margin and earnings this year. Now of course, we have tested some things. We've tried some higher prices. And in Q3, when we saw other retailers take prices up, we tested higher retails in some categories. But I would say that those pricing tests were in a very limited number of areas. And mostly, the higher retails worked. We saw very little resistance from customers. So going forward, I would say that we will probably get more aggressive, but we kind of have to see what happens in Q4. And, also, of course, we need to see what happens with tariff rates going forward. Operator: Your next question comes from the line of John David Kernan of TD Cowen. Your line is now open. John David Kernan: Good morning. Happy almost Thanksgiving. Michael, it sounds like you see store openings and the cadence of growth. Sounds like you see an opportunity to take up the number of new stores. Can you expand a bit upon this? What are you seeing in terms of the new store pipeline, both from a real estate perspective and also potential new store productivity? Kristin Wolfe: Good morning, John. It's Kristin. I'll take this one. We're really pleased with the performance of our new stores across the board. They've been delivering results that are in line or better than expectations as well as our financial hurdles. It really reinforces the strength of our site selection process and the Burlington Stores, Inc. brand really across markets. And it's worth pointing out just with some data. Our Q3 comp course is at the midpoint of our guidance. But our total sales growth in Q3 was at the high end of our guidance, up 7%. And this was driven by new stores. And based on our Q4 guidance, our total sales increase is planned at 9% at the high end as we benefit from the slew of new stores we just opened in the third quarter, 73 net new. Now as I mentioned in the prepared remarks, we now expect to open 104 net new stores this year. This is a modest step up from our original plan of 100 net new. And this increase reflects really two things. First, the ability to pull forward some openings that were originally slated for 2026, and secondly, the strength of our real estate pipeline. Looking ahead to 2026, we're raising that new store target to at least 110 net new stores. This is supported by this robust pipeline, but also by 40 leases we secured from the Joanne Fabrics bankruptcy. These incremental sites really give us confidence in sustaining the high level of growth next year. And as for the pipeline for 2027 and beyond, it's still early to provide specific numbers, but I will say we feel very good about the long-term opportunity. Our real estate team continues to identify attractive locations. And we already have a very healthy pipeline for new stores beyond 2026. John David Kernan: Got it. Maybe as a follow-up, obviously, three off-price retailers are resonating strongly with consumers. I like how Michael framed the industry's opportunity. You're clearly feeling more bullish on the number of stores, maybe a little bit more cautious on comp sales, but more bullish on the potential margin expansion potential for the business. Is that the right way to think about it? Kristin Wolfe: Great. Yes. John, thanks for that question. It's a good question. So two years ago, we shared our objective of getting to approximately $1.6 billion in operating income by 2028. The headline is that we feel very good about the progress we're making towards this goal. We're tracking in line with where we thought we would be at this point. And we're especially pleased with the progress we made in driving operating margin at the high end. Michael said this thoroughly, but worth repeating. At the high end of our updated 2025 margin guidance, we will have achieved 170 basis points of the 400 basis points of opportunity that we identified two years ago. And we will have achieved this despite the negative headwinds from tariffs. So really, to sum up, we're pleased with the progress. But the way you characterize the long-range model in your question is about right. It's true. We're more bullish on new stores. And we are more bullish on margin expansion. On the comp, we still believe we can drive an average annual comp growth of 4% to 5% over the remaining three years of the long-range plan, but we recognize that there is external uncertainty so we are slightly more cautious here. Operator: Your next question comes from the line of Brooke Siler Roach of Goldman Sachs. Your line is now open. Brooke Siler Roach: Good morning and thank you for taking our question. Michael, I'd like to ask you about the trends that you're seeing with the lower-income customer. How did these customers perform in the third quarter? And are there any other callouts in terms of customer demographics that are worth sharing? Michael O'Sullivan: Well, good morning. Good morning, Brooke. Thank you for the question. The headline is that we feel very good about the lower-income customer. We've been and the trends that we're seeing with that demographic. We've been watching this particular demographic segment very closely all year. This is a critical customer for us. You know, given the economic uncertainty and the cost of living issues, we've been concerned about lower-income customers. But the good news is that this customer has been very resilient. When we look at our stores in lower-income trade areas, they continue to outperform the chain. This has been true for several quarters now. I should say as we listen to other retailers, it seems like this is a consistent pattern. You know, many retailers are reporting strength with lower-income consumers. In terms of other demographic callouts, there's one other callout. Specifically relating to Hispanic customers. Again, we've been watching this demographic very closely all year. It's an important customer for us. We have many stores across the country that are in trade areas with a high proportion of Hispanic households. You may recall that in previous quarters, we've said that our stores that are in trade areas with a high proportion of Hispanic households have been slightly outperforming the chain in terms of comp growth. Well, in Q3, the trend in those stores slipped. They've gone from slightly outperforming the chain to trailing the chain. Now the change in trend for those stores varies a lot depending on the specific market and even the specific particular location of the store. In other words, it's very localized to what's happening in those particular cities. And, of course, it's difficult for us to say how long those localized slowdowns might last. Brooke Siler Roach: Great. And then my follow-up would be for Kristin. Kristin, can you give us more color about your guidance for the fourth quarter, both in terms of comp sales and for earnings? Kristin Wolfe: Good morning, Brooke. Thanks for the question. Sure. Let me repeat a little bit. I think it's worth reiterating some of what we described earlier. On comp store sales and total store sales, we're maintaining our Q4 previously issued guidance. So comp of flat to 2% and total sales growth 7% to 9%. We do, as we said, feel really good about our recent trend in Q4, but it's still early in the quarter. The critical weeks are ahead of us. And in those coming weeks, we'll be up against very strong comparisons from last year. So we'll continue to take a cautious approach on sales. On the margin side, we are increasing our margin and EPS guidance for Q4. We now expect our Q4 adjusted EBIT margin to increase by 30 to 50 basis points. We do anticipate some tariff-driven pressure on merch margin in Q4, but we expect to more than fully offset that pressure and drive overall operating margin expansion in Q4 versus last year. And the drivers of the margin leverage should be similar to what we saw in Q3. We expect continued cost savings in freight and supply chain and in-store related initiatives. And finally, we should also see additional leverage in SG&A given the higher incentive comp accrual in the fourth quarter of last year. Operator: Your next question comes from the line of Alexandra Ann Straton of Morgan Stanley. Your line is now open. Alexandra Ann Straton: Great. Thanks for taking the question. Michael, can you talk about the availability of off-price merchandise as you're heading into the fourth quarter? And then I have a quick follow-up. Michael O'Sullivan: Yes. Good morning, Alex. Thank you for the question. I would characterize the buying environment for off-price as very, very strong. Earlier in the year when tariffs were first introduced, there were some concerns, a lot of concerns about whether vendors would be reluctant to bring potentially excess merchandise into the country. But frankly, concerns have just not materialized. Even some of the categories where supply was tighter in the summer, categories like housewares and home, also housewares and toys, have come back. I think that's probably pretty consistent with what you've heard from our off-price peers. A lot of great merchandise at great values, and we're taking advantage of it, both to flow to stores and to build up reserve. Alexandra Ann Straton: Perfect. And then just on the cold weather merchandise in the quarter, is there any just detail you can provide on that dynamic, the impact on the overall comp for the chain? I know you've given a lot of details, but anything else worth highlighting there? Michael O'Sullivan: Sure. Yeah. So after back-to-school, the cold weather merchandise becomes very important to our mix. As I said earlier, it expands to more than 20% of our total assortment during the quarter. Now, cold weather merchandise, just to define it, includes categories like coats, jackets, boots, and accessories like gloves and scarves. It's only stuff you need if it's cold outside. And our customer is very need-driven. For September through mid-October, our comp sales in those businesses were down in the negative mid-teens. Then in the last two weeks of October, once the weather turned cold, they grew up double-digit comp. You know, maybe if I step back for a moment, there are two ways in which milder weather in September and October affects our business. There is the direct drag on our overall comp growth from lower sales in the cold weather categories that I just mentioned. That's one impact. But there is also an impact on our non-cold weather businesses. Because if you think about it, if the customer comes in to buy a coat, she's probably gonna put some other things in the basket too. So if because the weather is mild, she doesn't come into the store to buy that coat, then this doesn't just hurt our coat sales. It impacts other businesses as well. Now mathematically, the drag on our overall comp from cold weather categories alone was worth about 200 basis points in Q3. If you then add the impact that lower traffic had on other non-cold weather categories, you can easily get up to a few points of comp. And I think that's somewhat consistent with the fact that we saw a bounce back to mid-single-digit comp growth in October, once the weather had turned cold. Operator: Your last question comes from the line of Mark R. Altschwager of Baird. Your line is now open. Mark R. Altschwager: Kristen, could you give us some more detail on regional trends, category trends as well as any of the detailed comp metrics for Q3? Kristin Wolfe: Good morning, Mark. Yes, absolutely. In terms of regional performance, the Southeast was our strongest region in the quarter. The West, Northeast, and Midwest were in line with the chain, while the Southwest trailed the chain. On category performance, we saw the strongest performance in beauty, accessories, and shoes. Apparel comped slightly above the chain, while home was softer, comping below the chain in Q3. In terms of the comp metrics, our traffic was down in the third quarter. That was largely driven by September and early October when weather was unseasonably warm, and this lower traffic was offset by a higher average basket size. So for the quarter, we were pleased to see that both conversions and basket size or average transaction size were higher than last year. So this tells us that once she's in the store, she liked what she saw. Mark R. Altschwager: Excellent. Thank you. And then, Michael, as we look at the Q4 comp guidance, do you view that as conservative just given typically less weather sensitivity in the fourth quarter? Thank you. Michael O'Sullivan: Good morning, Mark. Sometimes when we give comp guidance, we'll also sort of signal, if you like, if we think there may be upside. I don't think I don't see a lot of upside in our Q4 comp guidance. The reason I say that is that we're up against 6% comp growth from Q4 last year. So 6%. If you take our 0% to 2% guidance, that gets you to a two-year stack of 6% to 8%. Now we exceeded that in Q2 of this year, but we were well below it in Q3. I should also add that when I look at our off-price peers, the way I'm interpreting their guidance, it looks like they are slightly below us on a two-year stack basis. So even though we're happy with our recent trends, and with how we started the quarter, and we're excited for our holiday assortments, we're not anticipating significant upside to our Q4 comp sales guidance at this point. Operator: I'd now like to hand the call back to Mr. Michael O'Sullivan for final remarks. Michael O'Sullivan: Let me close by thanking everyone on this call for your interest in Burlington Stores, Inc. We would like to wish you all a very happy Thanksgiving. We look forward to talking to you again in March to discuss our fourth quarter and full-year 2025 results. Thank you for your time today. Operator: Thank you for attending today's call. You may now disconnect. Goodbye.

184天前Insight Analytics约5分钟阅读

ZH 2025 Q3 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Zhihu Inc. Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Today's conference is being recorded and webcasted. At this time, I would like to turn the conference over to Yolanda Liu, Director of Investor Relations. Please go ahead, ma'am. Yolanda Liu: Thank you, operator. Hello, everyone. Welcome to Zhihu's Third Quarter 2025 Financial Results Conference Call. Joining me today on the call from the senior management team are Mr. Zhou Yuan, Founder, Chairman and Chief Executive Officer; and Mr. Wang Han, Chief Financial Officer. Before we begin, I'd like to remind you that today's discussion will include forward-looking statements made under the safe harbor provisions of U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. As such, actual results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward-looking statements, except as required under the applicable law. Additionally, the discussion today will include both GAAP and non-GAAP financial measures for comparison purpose only. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to our earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our IR website at ir.zhihu.com. This quarter, Victor Zhou, Zhou Yuan's AI agent will once again deliver the prepared remarks in English on his behalf. Victor is still in training, so we appreciate your patience as he continues to improve. Victor, please go ahead. Yuan Zhou: Thank you, Yolanda. Hello, everyone, and thank you for joining Zhihu Third Quarter 2025 Earnings Call. I am Victor Zhou, and I am pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, Founder, Chairman and CEO of Zhihu. The third quarter marked another meaningful step toward our goal of achieving non-GAAP breakeven on a full year basis. As our structural optimization initiatives continue to take effect, we further refined our service offerings and balanced commercialization with community health. We also maintained disciplined cost control and improved operating efficiency. As a result, our non-GAAP operating loss narrowed by 16.3% year-over-year in the third quarter. At the same time, our community ecosystem continues to strengthen user mix and engagement improved, while MAUs increased modestly from the second quarter. Daily time spent continued to trend higher year-over-year and quarter-over-quarter. Our users and creators remain highly active, supporting improved core user retention and a steady stream of reliable high-quality content on the platform. With our high-quality content, expert network and AI capabilities working greater synergy. We are accelerating our agentic AI upgrades to deliver trusted and differentiated experiences to users, both within and beyond the community. As the AI industry enters a new phase of real-world integration and accelerated deployment, Zhihu as a trusted source of high-quality content and data upstream of Chinese LLMs and AI applications is gaining prominence, creating expanding opportunities for collaboration. With rising high-quality content, a highly active base of professional creators and accelerating AI integration, our community ecosystem radiates vitality. Our competitive moat of trusted content continues to strengthen. In the third quarter, daily creation of high-quality content increased by over 25% year-over-year, with professional AI-focused content up by more than 30% compared to the same period last year. As AI technologies and applications rapidly advance in China, Zhihu remains a go-to platform for frontline engineers and researchers for sharing and lively discussions. AI-focused content covers a range of subjects, including deep technical analysis, innovative product applications, emerging industry trends, personal growth, career development and a growing array of emerging topics driven by rapid AI adoption from the technical debate between MiniMax and Moonshot AI over efficient attention, which sparks heated discussions on Zhihu and highlighted China's diverse approaches to LLM innovation to the in-depth engineering analysis of new models shared by leading companies. Zhihu has become a trusted source for authentic first-hand exchanges. These discussions have made our platform a place where AI innovations are first interpreted, validated and shared. Meanwhile, we continue to strengthen our trustworthy content ecosystem through ongoing improvements to content governance mechanisms and recommendation algorithms. Professional creators are a vital force in our community. In the third quarter, daily active high-tier creators increased significantly on both year-over-year and a sequential basis. The number of verified honored creators also grew by 29% year-over-year. Engagement among AI-focused creators also continues to strengthen. Zhihu now brings together more than 60 million continuous learners and 3.56 million proficient creators in science and AI and 150,000 ecosystem builders. These contributors not only add consistent high-quality input to our AI content ecosystem, but also show significant potential as future service providers for enterprises. Beyond the science and AI, creator activity in humanities and social sciences also remains strong across the platform. In September, we launched the co-benefit co-creation initiative [Foreign Language] in collaboration with leading institutions such as Alibaba Foundation, Tencent Charity Foundation, One Foundation, and Greenpeace alongside the psychologists, medical experts and the writers. This initiative generated a wide range of high-quality content across disability rights, mental health, environmental protection and more joining over 80 million views. We also hosted the 2025 Zhihu Humanities Season, Zhihu Renwenji event, which brought creators together through a blend of online and offline engagement. The campaign attracted nearly 30 influential creators, driving a 7.5% quarter-over-quarter increase in creator activity in the humanities category and generating 5.82 million topic views, reinforcing Zhihu's professional influence and cultural relevance. To better support professional creators, we continue to enhance the content creation and distribution experience. Our ideas product supports knowledge-based expression from high-tier creators and enables more diverse short-form content creation among mid-tier creators. As a result, average daily content volume and interactions increased by 21.7% and 33.1% quarter-over-quarter, respectively. Our Circles product also continues to serve as a focused space for users with shared interests to gather and interact with average daily views more than tripling sequentially during the quarter. We also continue to advance our agentic AI upgrades across the community. From a product perspective, Zhihu Zhida evolved into the agentic mode at the end of September, delivering more accurate and smarter search results. Most notably, Zhihu Zhida now serves as a helpful partner for deep thinking and creativity, capable of understanding user intent, performing multistep reasoning and synthesizing information across research, learning and content creation. Our advancements in agentic AI are also amplifying the value of our creators. By strengthening the attribution of content to trusted creators across the knowledge base and search, AI-generated responses now sites to verify the knowledge during the reasoning stage, significantly reducing hallucination and improving trust. This strengthens creator influence within the generative AI landscape and gives Zhihu a distinct advantage as a trusted content provider in the emerging AI ecosystem. Now moving on to commercialization. In the third quarter, our commercialization continued to recover on a healthier base with total revenues reaching RMB 658.9 million in the third quarter. We also made notable progress in exploring new monetization avenues by leveraging our core strengths. Let's take a closer look at our performance by business unit. In the third quarter, marketing services revenue was RMB 189.4 million. Notably, the year-over-year decrease narrowed, indicating the bottoming out of our adjustment cycle. We expect marketing services revenue to begin growing on a sequential basis in the fourth quarter. During the quarter, we made a solid progress in both optimizing our client mix and upgrading our advertising products. We continue to optimize client mix by deepening our focus on high-value accounts with our brand power and expanding commercial IP, driving strong uptake from enterprise clients, particularly in technology and other high-value verticals. In late September, we hosted the TechClub Conference, bringing together AI experts and some of the most influential tech creators from the Zhihu community to explore the latest developments and future applications of AI. The event showcased the technology's transforming role in everyday life and our unique ability to connect professional content with meaningful brand engagement, further expanding our high-value client base. Through the Zhihu platform, leading companies such as Gree, China Mobile, Huawei and FY Tech further strengthened their brand positioning in technological innovation and product excellence. Backed by the credibility of our brand and strong commercial efficiency created by professional discussions across our community, we made a solid progress in acquiring new clients across diverse sectors such as automotive, consumer and health care. This quarter, we also further upgraded a wide range of our commercial products by integrating AI more deeply across our portfolio. Our dual ecosystem optimization and product efficiency engines drove a significant increase in positive feedback from clients. For example, we launched the upgraded CCS for idea scenarios and introduced the product to more clients. By offering this short content plus precise scenarios format, it bridges authentic experiences and purchase decisions for brands and merchants. At the same time, it makes content consumption and the decision-making for users substantially more efficient. We are also seeing rising demand from clients to improve brand and product presentation in AI-generated answers. Leveraging our trusted content and high citation rate across the Internet, we launched our new GEM marketing solution in early November. This new solution provides core insights such as visibility across AI platforms and citation analytics. Leading technology clients we have worked with include Lenovo, FlightTech, Vivo and Proa. We have received a positive endorsement as we help enhance both their SEO and GEO performance for brands and new products. Looking ahead, with a healthier ecosystem, stronger client base and more robust service offerings, we will continue to leverage AI to drive a steady recovery and long-term growth in our marketing services business. And now for our paid membership business. In the third quarter, average monthly paid members increased by 8.1% sequentially to 14.3 million, with revenue reaching RMB 386 million. Our efforts to boost member retention and ARPU through diversified initiatives continue to generate positive feedback from both creators and users. The Yanyan Story long-form writing marathon came to a successful close in late October after 6 months campaign, generating tens of thousands of submissions in the third quarter alone. This initiative opened up new development pathways for aspiring creators and provided a steady pipeline of content for our library and the future IP development. At the same time, voice live streaming saw a further improvement in paid conversion rates. We also unlocked further commercial potential for our IP adaptations in China and overseas. During the quarter, revenue from IP licensing maintained its triple-digit growth rate year-over-year and generated high double-digit growth quarter-over-quarter. Year-to-date, revenue has nearly doubled compared with the same period last year. In mid-October, Yanyan Story debuted at the Frankfurt Book Fair, showcasing Chinese digital literature on a global stage for the first time. It also draw coverage from the U.K. magazine, the bookseller, which noted the new growth path for Chinese short-form digital literature in the international markets. By the end of October, Yanyan Story licensed more than 100 titles for publication across major Asian markets, including Japan, South Korea, Thailand and Vietnam. A number of works have also been adapted into short dramas for overseas markets and performed well, reflecting the growing popularity of Chinese short-form content abroad. Meanwhile, Yanyan Story has established partnerships with international platforms such as Mobile Reader and GoodNovel to translate works into English, Spanish, Japanese, Korean, Portuguese, Thai, Indonesian and other languages, further expanding its international reach. Going forward, we will pursue a diversified set of initiatives to improve member retention and ARPU. By enhancing content supply, membership benefits and personalized experiences, we aim to strengthen long-term member value. As AI enables more efficient content creation, the potential for IP development and commercialization will expand, unlocking new growth opportunities for our membership business. Starting this quarter, we are simplifying our revenue breakdown and will begin reclassifying vocational training revenue into other revenues to align with our overall strategy. Other revenues were RMB 83.9 million, of which we will continue to adjust our vocational training business with a focus on improving operational efficiency and prioritization. Although our vocational training business has been reclassified, we continue to build on its creator-driven foundation with the development of our column product. Designed primarily to serve super creators, column is intended to enhance the creator ecosystem rather than act as a new commercial growth driver. During the quarter, we enhanced the product by rolling out a PC version and AI tools that help creators generate column descriptions and cover designs. This enhancement drove sequential growth in both the number of leading column creators and creator user engagement. Monetization models for column creators is also becoming more diversified with overall GMV more than doubling compared with last quarter. Going forward, we will continue to operate with discipline, maintaining stability while investing prudently for sustainable growth. With the ongoing enhancements in efficiency and steady cost optimization, we are confident in achieving our full year profitability target. Building on this foundation, we will continue to invest with a long-term view to strengthen our AI capabilities and improve the efficiency of our core operations. Deeper AI integrations will drive greater synergies across content creation, distribution and monetized on Zhihu. Meanwhile, we will further refine our product and marketing strategies to capitalize on new growth opportunities from high-quality users and enterprise clients. With a healthier operating structure and ongoing innovation, we are well positioned to thrive in this next stage of high-quality growth. With that, I will hand the call over to our CFO, Wang Han. Han, please go ahead. Wang Han: Now I will review the details of our third quarter financials. For a complete overview of our third quarter 2025 results, please refer to our earnings release issued earlier today. In the third quarter, we maintained disciplined cost management and drove further improvements in operational efficiency. As a result, our non-GAAP operating loss narrowed by 16.3% year-over-year. We continue to invest in areas that reinforce our long-term growth potential, striking a healthy balance between efficiency and investment. Our total revenues for the quarter were RMB 658.9 million compared with RMB 845 million in the same period of 2024. The decrease was mainly the result of our continued efforts to optimize revenue mix and focus on sustainable, high-quality growth. Notably, the year-over-year decrease narrowed for the third consecutive quarter, in line with our expectations. Our marketing services revenue for the quarter was RMB 189.4 million compared with RMB 256.6 million in the same period of 2024. This decrease was mainly driven by our proactive refining of service offerings and optimization of client mix. Encouragingly, the year-over-year decrease narrowed meaningfully, indicating that our adjustment cycle has bottomed out. Paid membership revenue was RMB 385.6 million compared with RMB 459.4 million in the same period of 2024. While the number of average monthly subscribing members fell year-over-year, they rebounded and grew 8.1% sequentially to 14.3 million. We also continued to enhance retention and ARPU through diversified content and membership initiatives. Other revenues were RMB 83.9 million compared with RMB 129 million in the same period of 2024. The decrease was primarily due to the strategic refinement of our vocational training business. Our gross profit for the quarter was RMB 403.6 million compared with RMB 540.1 million in the same period of 2024. Gross margin was 61.3% compared with 63.9% in the same period of 2024. Our total operating expenses for the quarter decreased by 19.4% year-over-year to RMB 503.5 million. The decrease was primarily due to a more efficient cost structure and disciplined resource allocation across key operating areas. Selling and marketing expenses decreased by 14.9% to RMB 330.1 million from RMB 388 million in the same period of 2024. The decrease was mainly due to tighter control over promotional spending and optimized personnel-related expenses. Research and development expenses decreased by 36.2% to RMB 114.4 million from RMB 179.3 million in the same period of 2024. The decrease was primarily driven by continued improvement in research and development productivity and efficiency. General and administrative expenses were RMB 59 million compared with RMB 57.2 million in the same period of 2024. Our GAAP net loss for this quarter was RMB 46.7 million compared with RMB 9 million in the same period of 2024. On a non-GAAP basis, our adjusted net loss was RMB 21 million compared with RMB 13.1 million in the same period of 2024. As of the 30th of September 2025, we had cash and cash equivalents, term deposits, restricted cash and short-term investments of RMB 4.6 billion compared with RMB 4.9 billion as of the 31st of December 2024. As of the 30th of September 2025, we repurchased 31.1 million Class A ordinary shares for an aggregate value of USD 66.5 million on the open market. Additionally, we repurchased a total of 22.5 million Class A ordinary shares for an aggregate value of USD 34.5 million through the trustee of the company as of the end of the third quarter. Looking ahead, we are on track to achieve full year breakeven on a non-GAAP basis. We will continue to further strengthen our monetization capabilities and pursue new revenue opportunities that leverage Zhihu's strength in high-quality content creator expertise and AI-driven innovation. Together, these efforts will reinforce our business resilience and support sustainable long-term growth. This concludes my prepared remarks on our financial performance for this quarter. Let's turn the call over to the operator for the Q&A session. Operator: [Operator Instructions] We will now begin with our first question, and this is from Vicky Wei from Citi. Yi Jing Wei: Will management share some color about the AI progress of Zhihu? For example, the penetration rate of Zhihu Zhida and the progress of the AI integration with the Zhihu Community. Yuan Zhou: [Interpreted] Thank you for question. This is from Zhou Yuan, Zhihu CEO. First of all, I would like to say sorry about my weak voice because I didn't recover yet from my cold. Anyway, I would just start with your first question. So as you can see, Zhida remains one of our key products. Its overall usage and penetration rate continued to increase in the third quarter with the penetration rate existing 15%, nearly 4x higher than the same period last year. This not only reflects the ongoing evolution of our foundational AI capability across the community, but also demonstrates strong user endorsement of a very strategic depending of AI plus community. This also gives us a very strong confidence to continue upgrading this AI plus community experience updates across more touch points. Now let me just share some recent progress and upcoming plans. First of all, in the search scenario, by late November, Zhida will fully augment our general AI search capability to include Zhida-generated content for all users. Additionally, we will soon launch pilot features such as cross-topic content aggregation and the community trend summaries. This will formally navigate Zhida from secondary entry point to a primary one, further boosting AI adoption across the entire community. And second of all, on the content creation side, we are empowering professionals with strong AI copilot. In this quarter, we launched a suite of AI assistant writing tools for our creation assistant, which includes smart headlines, grammar and fact checking and lead paragraph generation. This will help creators optimize long-form structures and expert-level content. So by the end of 3Q, adoption of these new AI features has already surpassed 20%. Looking ahead, we plan to introduce additional capabilities such as AI-powered multi-model content conversion, intelligent formatting and short-form content generation and et cetera. These tools will significantly lower the barrier to entry for mid-tier creators, enabling more users to express themselves effortlessly to increase posting frequency, creation frequency and engage more actively. In addition, on the content consumption and distribution side, we are also expanding Zhida into high-frequency consumption scenarios. For example, AI-powered daily briefing on Zhihu's training topics and other vertical-specific topics as well as the ability to mention Zhida in threats or to also summarize discussions and surface key insights will help users quickly grasp complex conversations and participate more meaningfully. We believe this will further strengthen user engagements and community stickiness. Thank you. Operator: We'll now take the next question. This is from Luqing Zhou from Goldman Sachs. Luqing Zhou: So my question is on how do you see the current status of Zhihu's user ecosystem? And based on that, could management share more color on the directions for improving Zhihu's future product design and how is the progress so far? Yuan Zhou: [Interpreted] Thank you for your question. This is from Zhou Yuan, Zhihu CEO. We believe, overall, the community ecosystem is very healthy. We do not rely on any single metric to assess its health. Instead, we focus on content quality, user structure and user quality and whether our content creator incentives are forming a virtuous cycle. We have also deployed AI as a core product driver at a strategic level. Over the past few quarters, we have made the synergistic development of high-quality content, multiply expert network, multiply AI capabilities as a core path for driving our ecosystem in a positive direction. From this perspective, our ecosystem is stable and continuously improving. This is fully in line with our expectations as well. First of all, the trustworthiness and professionalism of our content are very crucial. They are crucial indicators of the ecosystem health. Over the past few quarters, we have continued to strengthen our trustworthy content ecosystem and our expert network while also cracking down on low-quality content and traffic to keep the ecosystem healthy at its core and reinforce the virtuous cycle. As a result, we have delivered several consecutive quarters of double-digit growth in daily high-quality content creation. The AI category is the most reflective of this progress with the professional AI-related content regarding double-digit growth for 4 consecutive quarters. On this basis, users' trust in our content has also continued to increase steadily. And secondly, our user structure and user quality have improved and users' need across different scenarios has been addressed. As we can see from last Q4, our MAU has remained stable on a sequential basis for 4 consecutive quarters. And building on that, average daily user time spent, which we believe as a proxy for engagement and retention has delivered double-digit year-over-year growth for 6 consecutive quarters. Our users remain mainly young and focused on learning and growth with user age between 18 to 30, accounting for more than 65% of our total user base. Among them frontline professionals in technology and AI have become one of the most representative groups. They have long-term professional learning, frontier exploration and interest development needs and contribute more content and provide a stronger positive feedback to the ecosystem. And last but not the least, the content -- the creator ecosystem continues to grow and expand. Output from top-tier professional creators have remained stable over 7 consecutive quarters. At the same time, by using AI tools, we are continuously lowering the creation threshold for mid-tier creators and increasing the creation frequency of the entire creator group. This makes the supply side of the community more diverse and keep social interaction within the community growing. So in summary, ecosystem health is foundational to Zhihu. Going forward, we'll continue to invest in trust content and expert network so that as a community scales, it can maintain its professionalism, vibrancy and trustworthiness. Let me just turn to the second question you mentioned. It's about our core product going forward plan. Here, we hold a few key beliefs. First of all, over the next 3 years, people will consume more AIGC content. At the same time, human-to-human interaction will become more valuable. So we believe both trends will coexist. And the second belief we hold here is that stronger AI becomes, the more people will experience a sense of diminished presence, which means the participation, social capital and relationships enabled by community will become increasingly scarce and increasingly demanded. And the third belief here is that high-quality human-generated content and data will become extremely scarce as well as valuable on the supply end. This supply matters on both ends. It's crucial for the advancement of AI as well as for human development. So going forward, Zhida will definitely integrate with our users' functional social needs. For example, when a user wants to ask a question, search or look for resources, AI will dramatically raise efficiency. And Zhida will push the community further towards utility, enabling even the first day users to get a meaningful experience immediately. At the same time, we will double down on the social needs that come from real human connection things like building recognized, growing together and finding people who share your identity. We want to build these things with user feel like a sense of belonging in an environment grounded in real people, real culture and trusted interactions. So our future product direction is built around 2 pillars: utility and identity. My hope is for Zhihu to become the connection layer for humans in AI era as a place where people can use AI tools to understand the world as well as a community where they can find renaissance and understanding from one another. At the same time, we plan to build a trusted content and expert network as 2 foundational layers of infrastructure. Thank you. Thank you again for your question. Operator: We will take next question. This is from Daisy Chen from Haitong International. Kewei Chen: Could management update the progress of the adjustments in each business line? Did you see any signs that the revenue has bottomed out or started to rebound? In particular, how do you expect the future of the advertising business? And also, could you share your outlook on the company's profitability? Wang Han: [Interpreted] Thank you for your question, Daisy. This is from Wang Han, Zhihu CFO. So I will just pick up your second question. Here's a quick take on our profitability outlook. After delivering solid profits in the first 2 quarters, we now see a very high likelihood of achieving our first full year non-GAAP profitability in 2025. So with that buffer in place, we are using Q3 and Q4 as a window to keep fine-tuning and investing where needed. That's why you will see -- you can see a small loss in Q3, which is well within what we can comfortably take. Let me just walk through the adjustments across our major revenue lines. First, about the marketing services. As we mentioned last quarter, this Q3 is -- it will become the bottom. And we expect a sequential recovery starting in Q4. What we see now give us confidence to maintain that guidance. Looking ahead to next year, our goal is for each quarter to stay above the baseline set by Q3 this year. And second, about the pay membership. This segment is still in a transition period. As we said before, even the best libraries and bookstores separate fiction from nonfiction, the real challenge here is how to differentiate and integrate them in a way that feels natural to users. We will continue experimenting here. So we cannot say membership -- pay membership revenue has hit its bottom yet. But even if there is some decline, it will be about products or cohorts with lower ROI and weaker profitability or less than ideal retention. Search is about vocational training. This business is no longer a drag on our overall bottom line. Given this relatively low base or small scale, we have now reclassified it into others. So overall, you've seen us deliver several consecutive quarters of profitability followed by the small loss in Q3. Even though we remain confident in achieving full year profitability. With that foundation, we are taking this period to make necessary adjustments and targeted investments. As we approach our first full year of profitability, we also want to use this moment to shed some legacy inefficiencies and to start fresh. We have no intention of staying where we are and simply just squeezing out profits. We are now operating from a healthier foundation and getting back onto a trajectory that aligns with Zhihu's long-term development. Also, we have a solid -- very solid cash position, and we are not reverting to the old model of spending aggressively just forth go. And this new AI cycle or in this AI era, our focus is on strengthening Zhihu's position in real people interactions, expert network and trusted content areas. And these capabilities are becoming increasingly important and carry real social value. Thank you for your questions. Operator: We will now take the next question. And this is from [ Jing Yi Wang from Guangfa ]. Unknown Analyst: Could management share some more color about the shareholder return pay in progress. Wang Han: [Interpreted] Thank you for your question. This is from Wang Han, Zhihu CFO. We can see over the past 2 years, we've been one of the most active buyback companies among U.S.-listed Chinese names. That conviction came from our confidence in reaching profitability. And this year, we expect to demonstrate that our outlook and the targets set 2 years ago are being delivered. Even so Zhihu's current market cap remains significantly below the cash on our balance sheet. So we believe we are super undervalued. Therefore, we intend to maintain our buyback program and expect to remain one of the most active repurchase in this sector. Thank you again for your question. Operator: That concludes today's Q&A session. At this time, I will turn the conference back to Yolanda for any additional or closing remarks. Yolanda Liu: Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or Christensen Advisory. Thank you so much. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

184天前Insight Analytics约5分钟阅读

2390.HK 2025 Q3 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Zhihu Inc. Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Today's conference is being recorded and webcasted. At this time, I would like to turn the conference over to Yolanda Liu, Director of Investor Relations. Please go ahead, ma'am. Yolanda Liu: Thank you, operator. Hello, everyone. Welcome to Zhihu's Third Quarter 2025 Financial Results Conference Call. Joining me today on the call from the senior management team are Mr. Zhou Yuan, Founder, Chairman and Chief Executive Officer; and Mr. Wang Han, Chief Financial Officer. Before we begin, I'd like to remind you that today's discussion will include forward-looking statements made under the safe harbor provisions of U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. As such, actual results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward-looking statements, except as required under the applicable law. Additionally, the discussion today will include both GAAP and non-GAAP financial measures for comparison purpose only. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to our earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our IR website at ir.zhihu.com. This quarter, Victor Zhou, Zhou Yuan's AI agent will once again deliver the prepared remarks in English on his behalf. Victor is still in training, so we appreciate your patience as he continues to improve. Victor, please go ahead. Yuan Zhou: Thank you, Yolanda. Hello, everyone, and thank you for joining Zhihu Third Quarter 2025 Earnings Call. I am Victor Zhou, and I am pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, Founder, Chairman and CEO of Zhihu. The third quarter marked another meaningful step toward our goal of achieving non-GAAP breakeven on a full year basis. As our structural optimization initiatives continue to take effect, we further refined our service offerings and balanced commercialization with community health. We also maintained disciplined cost control and improved operating efficiency. As a result, our non-GAAP operating loss narrowed by 16.3% year-over-year in the third quarter. At the same time, our community ecosystem continues to strengthen user mix and engagement improved, while MAUs increased modestly from the second quarter. Daily time spent continued to trend higher year-over-year and quarter-over-quarter. Our users and creators remain highly active, supporting improved core user retention and a steady stream of reliable high-quality content on the platform. With our high-quality content, expert network and AI capabilities working greater synergy. We are accelerating our agentic AI upgrades to deliver trusted and differentiated experiences to users, both within and beyond the community. As the AI industry enters a new phase of real-world integration and accelerated deployment, Zhihu as a trusted source of high-quality content and data upstream of Chinese LLMs and AI applications is gaining prominence, creating expanding opportunities for collaboration. With rising high-quality content, a highly active base of professional creators and accelerating AI integration, our community ecosystem radiates vitality. Our competitive moat of trusted content continues to strengthen. In the third quarter, daily creation of high-quality content increased by over 25% year-over-year, with professional AI-focused content up by more than 30% compared to the same period last year. As AI technologies and applications rapidly advance in China, Zhihu remains a go-to platform for frontline engineers and researchers for sharing and lively discussions. AI-focused content covers a range of subjects, including deep technical analysis, innovative product applications, emerging industry trends, personal growth, career development and a growing array of emerging topics driven by rapid AI adoption from the technical debate between MiniMax and Moonshot AI over efficient attention, which sparks heated discussions on Zhihu and highlighted China's diverse approaches to LLM innovation to the in-depth engineering analysis of new models shared by leading companies. Zhihu has become a trusted source for authentic first-hand exchanges. These discussions have made our platform a place where AI innovations are first interpreted, validated and shared. Meanwhile, we continue to strengthen our trustworthy content ecosystem through ongoing improvements to content governance mechanisms and recommendation algorithms. Professional creators are a vital force in our community. In the third quarter, daily active high-tier creators increased significantly on both year-over-year and a sequential basis. The number of verified honored creators also grew by 29% year-over-year. Engagement among AI-focused creators also continues to strengthen. Zhihu now brings together more than 60 million continuous learners and 3.56 million proficient creators in science and AI and 150,000 ecosystem builders. These contributors not only add consistent high-quality input to our AI content ecosystem, but also show significant potential as future service providers for enterprises. Beyond the science and AI, creator activity in humanities and social sciences also remains strong across the platform. In September, we launched the co-benefit co-creation initiative [Foreign Language] in collaboration with leading institutions such as Alibaba Foundation, Tencent Charity Foundation, One Foundation, and Greenpeace alongside the psychologists, medical experts and the writers. This initiative generated a wide range of high-quality content across disability rights, mental health, environmental protection and more joining over 80 million views. We also hosted the 2025 Zhihu Humanities Season, Zhihu Renwenji event, which brought creators together through a blend of online and offline engagement. The campaign attracted nearly 30 influential creators, driving a 7.5% quarter-over-quarter increase in creator activity in the humanities category and generating 5.82 million topic views, reinforcing Zhihu's professional influence and cultural relevance. To better support professional creators, we continue to enhance the content creation and distribution experience. Our ideas product supports knowledge-based expression from high-tier creators and enables more diverse short-form content creation among mid-tier creators. As a result, average daily content volume and interactions increased by 21.7% and 33.1% quarter-over-quarter, respectively. Our Circles product also continues to serve as a focused space for users with shared interests to gather and interact with average daily views more than tripling sequentially during the quarter. We also continue to advance our agentic AI upgrades across the community. From a product perspective, Zhihu Zhida evolved into the agentic mode at the end of September, delivering more accurate and smarter search results. Most notably, Zhihu Zhida now serves as a helpful partner for deep thinking and creativity, capable of understanding user intent, performing multistep reasoning and synthesizing information across research, learning and content creation. Our advancements in agentic AI are also amplifying the value of our creators. By strengthening the attribution of content to trusted creators across the knowledge base and search, AI-generated responses now sites to verify the knowledge during the reasoning stage, significantly reducing hallucination and improving trust. This strengthens creator influence within the generative AI landscape and gives Zhihu a distinct advantage as a trusted content provider in the emerging AI ecosystem. Now moving on to commercialization. In the third quarter, our commercialization continued to recover on a healthier base with total revenues reaching RMB 658.9 million in the third quarter. We also made notable progress in exploring new monetization avenues by leveraging our core strengths. Let's take a closer look at our performance by business unit. In the third quarter, marketing services revenue was RMB 189.4 million. Notably, the year-over-year decrease narrowed, indicating the bottoming out of our adjustment cycle. We expect marketing services revenue to begin growing on a sequential basis in the fourth quarter. During the quarter, we made a solid progress in both optimizing our client mix and upgrading our advertising products. We continue to optimize client mix by deepening our focus on high-value accounts with our brand power and expanding commercial IP, driving strong uptake from enterprise clients, particularly in technology and other high-value verticals. In late September, we hosted the TechClub Conference, bringing together AI experts and some of the most influential tech creators from the Zhihu community to explore the latest developments and future applications of AI. The event showcased the technology's transforming role in everyday life and our unique ability to connect professional content with meaningful brand engagement, further expanding our high-value client base. Through the Zhihu platform, leading companies such as Gree, China Mobile, Huawei and FY Tech further strengthened their brand positioning in technological innovation and product excellence. Backed by the credibility of our brand and strong commercial efficiency created by professional discussions across our community, we made a solid progress in acquiring new clients across diverse sectors such as automotive, consumer and health care. This quarter, we also further upgraded a wide range of our commercial products by integrating AI more deeply across our portfolio. Our dual ecosystem optimization and product efficiency engines drove a significant increase in positive feedback from clients. For example, we launched the upgraded CCS for idea scenarios and introduced the product to more clients. By offering this short content plus precise scenarios format, it bridges authentic experiences and purchase decisions for brands and merchants. At the same time, it makes content consumption and the decision-making for users substantially more efficient. We are also seeing rising demand from clients to improve brand and product presentation in AI-generated answers. Leveraging our trusted content and high citation rate across the Internet, we launched our new GEM marketing solution in early November. This new solution provides core insights such as visibility across AI platforms and citation analytics. Leading technology clients we have worked with include Lenovo, FlightTech, Vivo and Proa. We have received a positive endorsement as we help enhance both their SEO and GEO performance for brands and new products. Looking ahead, with a healthier ecosystem, stronger client base and more robust service offerings, we will continue to leverage AI to drive a steady recovery and long-term growth in our marketing services business. And now for our paid membership business. In the third quarter, average monthly paid members increased by 8.1% sequentially to 14.3 million, with revenue reaching RMB 386 million. Our efforts to boost member retention and ARPU through diversified initiatives continue to generate positive feedback from both creators and users. The Yanyan Story long-form writing marathon came to a successful close in late October after 6 months campaign, generating tens of thousands of submissions in the third quarter alone. This initiative opened up new development pathways for aspiring creators and provided a steady pipeline of content for our library and the future IP development. At the same time, voice live streaming saw a further improvement in paid conversion rates. We also unlocked further commercial potential for our IP adaptations in China and overseas. During the quarter, revenue from IP licensing maintained its triple-digit growth rate year-over-year and generated high double-digit growth quarter-over-quarter. Year-to-date, revenue has nearly doubled compared with the same period last year. In mid-October, Yanyan Story debuted at the Frankfurt Book Fair, showcasing Chinese digital literature on a global stage for the first time. It also draw coverage from the U.K. magazine, the bookseller, which noted the new growth path for Chinese short-form digital literature in the international markets. By the end of October, Yanyan Story licensed more than 100 titles for publication across major Asian markets, including Japan, South Korea, Thailand and Vietnam. A number of works have also been adapted into short dramas for overseas markets and performed well, reflecting the growing popularity of Chinese short-form content abroad. Meanwhile, Yanyan Story has established partnerships with international platforms such as Mobile Reader and GoodNovel to translate works into English, Spanish, Japanese, Korean, Portuguese, Thai, Indonesian and other languages, further expanding its international reach. Going forward, we will pursue a diversified set of initiatives to improve member retention and ARPU. By enhancing content supply, membership benefits and personalized experiences, we aim to strengthen long-term member value. As AI enables more efficient content creation, the potential for IP development and commercialization will expand, unlocking new growth opportunities for our membership business. Starting this quarter, we are simplifying our revenue breakdown and will begin reclassifying vocational training revenue into other revenues to align with our overall strategy. Other revenues were RMB 83.9 million, of which we will continue to adjust our vocational training business with a focus on improving operational efficiency and prioritization. Although our vocational training business has been reclassified, we continue to build on its creator-driven foundation with the development of our column product. Designed primarily to serve super creators, column is intended to enhance the creator ecosystem rather than act as a new commercial growth driver. During the quarter, we enhanced the product by rolling out a PC version and AI tools that help creators generate column descriptions and cover designs. This enhancement drove sequential growth in both the number of leading column creators and creator user engagement. Monetization models for column creators is also becoming more diversified with overall GMV more than doubling compared with last quarter. Going forward, we will continue to operate with discipline, maintaining stability while investing prudently for sustainable growth. With the ongoing enhancements in efficiency and steady cost optimization, we are confident in achieving our full year profitability target. Building on this foundation, we will continue to invest with a long-term view to strengthen our AI capabilities and improve the efficiency of our core operations. Deeper AI integrations will drive greater synergies across content creation, distribution and monetized on Zhihu. Meanwhile, we will further refine our product and marketing strategies to capitalize on new growth opportunities from high-quality users and enterprise clients. With a healthier operating structure and ongoing innovation, we are well positioned to thrive in this next stage of high-quality growth. With that, I will hand the call over to our CFO, Wang Han. Han, please go ahead. Wang Han: Now I will review the details of our third quarter financials. For a complete overview of our third quarter 2025 results, please refer to our earnings release issued earlier today. In the third quarter, we maintained disciplined cost management and drove further improvements in operational efficiency. As a result, our non-GAAP operating loss narrowed by 16.3% year-over-year. We continue to invest in areas that reinforce our long-term growth potential, striking a healthy balance between efficiency and investment. Our total revenues for the quarter were RMB 658.9 million compared with RMB 845 million in the same period of 2024. The decrease was mainly the result of our continued efforts to optimize revenue mix and focus on sustainable, high-quality growth. Notably, the year-over-year decrease narrowed for the third consecutive quarter, in line with our expectations. Our marketing services revenue for the quarter was RMB 189.4 million compared with RMB 256.6 million in the same period of 2024. This decrease was mainly driven by our proactive refining of service offerings and optimization of client mix. Encouragingly, the year-over-year decrease narrowed meaningfully, indicating that our adjustment cycle has bottomed out. Paid membership revenue was RMB 385.6 million compared with RMB 459.4 million in the same period of 2024. While the number of average monthly subscribing members fell year-over-year, they rebounded and grew 8.1% sequentially to 14.3 million. We also continued to enhance retention and ARPU through diversified content and membership initiatives. Other revenues were RMB 83.9 million compared with RMB 129 million in the same period of 2024. The decrease was primarily due to the strategic refinement of our vocational training business. Our gross profit for the quarter was RMB 403.6 million compared with RMB 540.1 million in the same period of 2024. Gross margin was 61.3% compared with 63.9% in the same period of 2024. Our total operating expenses for the quarter decreased by 19.4% year-over-year to RMB 503.5 million. The decrease was primarily due to a more efficient cost structure and disciplined resource allocation across key operating areas. Selling and marketing expenses decreased by 14.9% to RMB 330.1 million from RMB 388 million in the same period of 2024. The decrease was mainly due to tighter control over promotional spending and optimized personnel-related expenses. Research and development expenses decreased by 36.2% to RMB 114.4 million from RMB 179.3 million in the same period of 2024. The decrease was primarily driven by continued improvement in research and development productivity and efficiency. General and administrative expenses were RMB 59 million compared with RMB 57.2 million in the same period of 2024. Our GAAP net loss for this quarter was RMB 46.7 million compared with RMB 9 million in the same period of 2024. On a non-GAAP basis, our adjusted net loss was RMB 21 million compared with RMB 13.1 million in the same period of 2024. As of the 30th of September 2025, we had cash and cash equivalents, term deposits, restricted cash and short-term investments of RMB 4.6 billion compared with RMB 4.9 billion as of the 31st of December 2024. As of the 30th of September 2025, we repurchased 31.1 million Class A ordinary shares for an aggregate value of USD 66.5 million on the open market. Additionally, we repurchased a total of 22.5 million Class A ordinary shares for an aggregate value of USD 34.5 million through the trustee of the company as of the end of the third quarter. Looking ahead, we are on track to achieve full year breakeven on a non-GAAP basis. We will continue to further strengthen our monetization capabilities and pursue new revenue opportunities that leverage Zhihu's strength in high-quality content creator expertise and AI-driven innovation. Together, these efforts will reinforce our business resilience and support sustainable long-term growth. This concludes my prepared remarks on our financial performance for this quarter. Let's turn the call over to the operator for the Q&A session. Operator: [Operator Instructions] We will now begin with our first question, and this is from Vicky Wei from Citi. Yi Jing Wei: Will management share some color about the AI progress of Zhihu? For example, the penetration rate of Zhihu Zhida and the progress of the AI integration with the Zhihu Community. Yuan Zhou: [Interpreted] Thank you for question. This is from Zhou Yuan, Zhihu CEO. First of all, I would like to say sorry about my weak voice because I didn't recover yet from my cold. Anyway, I would just start with your first question. So as you can see, Zhida remains one of our key products. Its overall usage and penetration rate continued to increase in the third quarter with the penetration rate existing 15%, nearly 4x higher than the same period last year. This not only reflects the ongoing evolution of our foundational AI capability across the community, but also demonstrates strong user endorsement of a very strategic depending of AI plus community. This also gives us a very strong confidence to continue upgrading this AI plus community experience updates across more touch points. Now let me just share some recent progress and upcoming plans. First of all, in the search scenario, by late November, Zhida will fully augment our general AI search capability to include Zhida-generated content for all users. Additionally, we will soon launch pilot features such as cross-topic content aggregation and the community trend summaries. This will formally navigate Zhida from secondary entry point to a primary one, further boosting AI adoption across the entire community. And second of all, on the content creation side, we are empowering professionals with strong AI copilot. In this quarter, we launched a suite of AI assistant writing tools for our creation assistant, which includes smart headlines, grammar and fact checking and lead paragraph generation. This will help creators optimize long-form structures and expert-level content. So by the end of 3Q, adoption of these new AI features has already surpassed 20%. Looking ahead, we plan to introduce additional capabilities such as AI-powered multi-model content conversion, intelligent formatting and short-form content generation and et cetera. These tools will significantly lower the barrier to entry for mid-tier creators, enabling more users to express themselves effortlessly to increase posting frequency, creation frequency and engage more actively. In addition, on the content consumption and distribution side, we are also expanding Zhida into high-frequency consumption scenarios. For example, AI-powered daily briefing on Zhihu's training topics and other vertical-specific topics as well as the ability to mention Zhida in threats or to also summarize discussions and surface key insights will help users quickly grasp complex conversations and participate more meaningfully. We believe this will further strengthen user engagements and community stickiness. Thank you. Operator: We'll now take the next question. This is from Luqing Zhou from Goldman Sachs. Luqing Zhou: So my question is on how do you see the current status of Zhihu's user ecosystem? And based on that, could management share more color on the directions for improving Zhihu's future product design and how is the progress so far? Yuan Zhou: [Interpreted] Thank you for your question. This is from Zhou Yuan, Zhihu CEO. We believe, overall, the community ecosystem is very healthy. We do not rely on any single metric to assess its health. Instead, we focus on content quality, user structure and user quality and whether our content creator incentives are forming a virtuous cycle. We have also deployed AI as a core product driver at a strategic level. Over the past few quarters, we have made the synergistic development of high-quality content, multiply expert network, multiply AI capabilities as a core path for driving our ecosystem in a positive direction. From this perspective, our ecosystem is stable and continuously improving. This is fully in line with our expectations as well. First of all, the trustworthiness and professionalism of our content are very crucial. They are crucial indicators of the ecosystem health. Over the past few quarters, we have continued to strengthen our trustworthy content ecosystem and our expert network while also cracking down on low-quality content and traffic to keep the ecosystem healthy at its core and reinforce the virtuous cycle. As a result, we have delivered several consecutive quarters of double-digit growth in daily high-quality content creation. The AI category is the most reflective of this progress with the professional AI-related content regarding double-digit growth for 4 consecutive quarters. On this basis, users' trust in our content has also continued to increase steadily. And secondly, our user structure and user quality have improved and users' need across different scenarios has been addressed. As we can see from last Q4, our MAU has remained stable on a sequential basis for 4 consecutive quarters. And building on that, average daily user time spent, which we believe as a proxy for engagement and retention has delivered double-digit year-over-year growth for 6 consecutive quarters. Our users remain mainly young and focused on learning and growth with user age between 18 to 30, accounting for more than 65% of our total user base. Among them frontline professionals in technology and AI have become one of the most representative groups. They have long-term professional learning, frontier exploration and interest development needs and contribute more content and provide a stronger positive feedback to the ecosystem. And last but not the least, the content -- the creator ecosystem continues to grow and expand. Output from top-tier professional creators have remained stable over 7 consecutive quarters. At the same time, by using AI tools, we are continuously lowering the creation threshold for mid-tier creators and increasing the creation frequency of the entire creator group. This makes the supply side of the community more diverse and keep social interaction within the community growing. So in summary, ecosystem health is foundational to Zhihu. Going forward, we'll continue to invest in trust content and expert network so that as a community scales, it can maintain its professionalism, vibrancy and trustworthiness. Let me just turn to the second question you mentioned. It's about our core product going forward plan. Here, we hold a few key beliefs. First of all, over the next 3 years, people will consume more AIGC content. At the same time, human-to-human interaction will become more valuable. So we believe both trends will coexist. And the second belief we hold here is that stronger AI becomes, the more people will experience a sense of diminished presence, which means the participation, social capital and relationships enabled by community will become increasingly scarce and increasingly demanded. And the third belief here is that high-quality human-generated content and data will become extremely scarce as well as valuable on the supply end. This supply matters on both ends. It's crucial for the advancement of AI as well as for human development. So going forward, Zhida will definitely integrate with our users' functional social needs. For example, when a user wants to ask a question, search or look for resources, AI will dramatically raise efficiency. And Zhida will push the community further towards utility, enabling even the first day users to get a meaningful experience immediately. At the same time, we will double down on the social needs that come from real human connection things like building recognized, growing together and finding people who share your identity. We want to build these things with user feel like a sense of belonging in an environment grounded in real people, real culture and trusted interactions. So our future product direction is built around 2 pillars: utility and identity. My hope is for Zhihu to become the connection layer for humans in AI era as a place where people can use AI tools to understand the world as well as a community where they can find renaissance and understanding from one another. At the same time, we plan to build a trusted content and expert network as 2 foundational layers of infrastructure. Thank you. Thank you again for your question. Operator: We will take next question. This is from Daisy Chen from Haitong International. Kewei Chen: Could management update the progress of the adjustments in each business line? Did you see any signs that the revenue has bottomed out or started to rebound? In particular, how do you expect the future of the advertising business? And also, could you share your outlook on the company's profitability? Wang Han: [Interpreted] Thank you for your question, Daisy. This is from Wang Han, Zhihu CFO. So I will just pick up your second question. Here's a quick take on our profitability outlook. After delivering solid profits in the first 2 quarters, we now see a very high likelihood of achieving our first full year non-GAAP profitability in 2025. So with that buffer in place, we are using Q3 and Q4 as a window to keep fine-tuning and investing where needed. That's why you will see -- you can see a small loss in Q3, which is well within what we can comfortably take. Let me just walk through the adjustments across our major revenue lines. First, about the marketing services. As we mentioned last quarter, this Q3 is -- it will become the bottom. And we expect a sequential recovery starting in Q4. What we see now give us confidence to maintain that guidance. Looking ahead to next year, our goal is for each quarter to stay above the baseline set by Q3 this year. And second, about the pay membership. This segment is still in a transition period. As we said before, even the best libraries and bookstores separate fiction from nonfiction, the real challenge here is how to differentiate and integrate them in a way that feels natural to users. We will continue experimenting here. So we cannot say membership -- pay membership revenue has hit its bottom yet. But even if there is some decline, it will be about products or cohorts with lower ROI and weaker profitability or less than ideal retention. Search is about vocational training. This business is no longer a drag on our overall bottom line. Given this relatively low base or small scale, we have now reclassified it into others. So overall, you've seen us deliver several consecutive quarters of profitability followed by the small loss in Q3. Even though we remain confident in achieving full year profitability. With that foundation, we are taking this period to make necessary adjustments and targeted investments. As we approach our first full year of profitability, we also want to use this moment to shed some legacy inefficiencies and to start fresh. We have no intention of staying where we are and simply just squeezing out profits. We are now operating from a healthier foundation and getting back onto a trajectory that aligns with Zhihu's long-term development. Also, we have a solid -- very solid cash position, and we are not reverting to the old model of spending aggressively just forth go. And this new AI cycle or in this AI era, our focus is on strengthening Zhihu's position in real people interactions, expert network and trusted content areas. And these capabilities are becoming increasingly important and carry real social value. Thank you for your questions. Operator: We will now take the next question. And this is from [ Jing Yi Wang from Guangfa ]. Unknown Analyst: Could management share some more color about the shareholder return pay in progress. Wang Han: [Interpreted] Thank you for your question. This is from Wang Han, Zhihu CFO. We can see over the past 2 years, we've been one of the most active buyback companies among U.S.-listed Chinese names. That conviction came from our confidence in reaching profitability. And this year, we expect to demonstrate that our outlook and the targets set 2 years ago are being delivered. Even so Zhihu's current market cap remains significantly below the cash on our balance sheet. So we believe we are super undervalued. Therefore, we intend to maintain our buyback program and expect to remain one of the most active repurchase in this sector. Thank you again for your question. Operator: That concludes today's Q&A session. At this time, I will turn the conference back to Yolanda for any additional or closing remarks. Yolanda Liu: Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or Christensen Advisory. Thank you so much. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

184天前Insight Analytics约5分钟阅读

MARS.L 2025 Q4 财报电话会议

Conversation: Justin Platt: Good morning, everybody. Thank you for joining us today. Welcome to the Marston's preliminary results for financial year '25. My name is Justin Platt, CEO. And with me, I have Stephen Hopson, our new Chief Financial Officer. We'll take you through our results today, and we'll do that with the following running order. I'll start with the headlines. Stephen will then share the financial results, and I'll then give some insight into the strategic progress we've been making through the year before wrapping up and taking any questions you might have. So the headlines, 2025 has been a very strong year for Marston's. It's been a year when we've been very focused on delivery, delivery of the strategy we outlined a year or so ago at the Capital Markets Day. And the results bear out that the strategy is working and driving real progress for us as a business, with profit before tax of GBP 72 million, that's year-on-year growth of 71%, and that's on top of the 65% growth we delivered a year ago. And that profit delivery has helped us drive cash flow. So cash flow at GBP 53 million. That's ahead of our GBP 50 million target, and it's also earlier than planned. Alongside that, it's really pleasing we've made great progress with our new pub formats, 31 launches this year. They're performing very strongly for us and driving big revenue uplifts. It's very clear now that these formats can be a significant growth engine for us in the future. And we've been doing all of that while giving our guests a great time. So record satisfaction scores with a reputation score at 816. So overall, a really good set of results, and it's a set of results that leave us feeling very positive in our outlook going forward. So that's the summary. I'll now hand over to Stephen, and he'll take you through the financials. Stephen Hopson: Thanks, Justin, and good morning, everyone. As Justin said, this is my first set of full year results at Marston's, and I joined the business at what is clearly an exciting time for Marston's. As these numbers show, we're making great progress and delivering against our goals with lots more to come. On my first slide, I'd like to begin by looking at some of the key group financial metrics. Total revenue was GBP 898 million, which showed growth of 1.6% on a like-for-like basis. EBITDA was up 7% to GBP 205 million, with the margin expanding by 140 basis points to 22.8%. That's been driven by good operational discipline, particularly on labor and controlling input costs alongside the revenue growth. As a result of the EBITDA growth and lower finance costs, PBT stepped on significantly. Underlying profit before tax was GBP 72 million, nearly 3x where we were just 2 years ago. And importantly, this has translated into stronger cash generation. Recurring free cash flow was GBP 53 million, which is up 22% year-on-year and ahead of our GBP 50 million recurring free cash flow target. Finally, we've made real progress on the balance sheet. Net debt has reduced from 5.2x, to 4.6x EBITDA as we continue to delever. So overall, excellent progress on both profit and cash. Turning now to look at our income statement in a bit more detail on the next slide. As I mentioned, FY '25 marked another year of substantial profit growth for Marston's with PBT up 71%. Reported revenue was flat, although this masks the impact of the FY 2024 disposal program, which I'll show on the next slide. I've already mentioned that EBITDA was up 6.5%, and that GBP 12.6 million of EBITDA improvement basically flowed through to operating profit, which was up 8.6% to GBP 159.9 million. Net finance costs were significantly lower year-on-year as a result of ongoing delevering and last year's CMBC disposal, leading to that very significant jump upwards in PBT. And whilst our effective tax rate increased, this simply reflects a return to the U.K.'s headline rate of corporation tax after a period of a lower rate. Together, this income statement shows a stronger and more profitable business with improved earnings quality and stronger margins. Turning to revenue performance. As I've already touched on, revenue for 2025 was GBP 898 million and was broadly flat year-on-year, but I would like to pick out 2 points on this chart. First, that the revenue includes a negative movement of about GBP 40 million in relation to the disposal of pubs over FY 2024 and 2025. To put the disposals into context, about GBP 50 million of assets were sold as part of the disposal program. So it's important to consider that impact when assessing year-on-year revenue progression. And the second point is that our like-for-like performance continues to be ahead of the market, which grew by 0.7% in the year, with positive contributions across all key categories of drink, food and machines. Turning now to look at margin. A key target for the group outlined at the CMD was to grow our underlying EBITDA margin by 200 to 300 basis points from FY '24 levels, giving a target range of 23.4% to 24.4%. And I'm pleased to say that this year, we've delivered 140 basis points of margin expansion, achieving total EBITDA margin of 22.8% in the year. Labor productivity gains were the single biggest contributor, supported by the rollout of improved scheduling tools, which Justin will cover in a bit more detail later on. The labor productivity benefits in the year were enough to fully offset the increases in the National Living Wage and National Insurance contributions, which came in from April 2025. We also saw benefits from improved food and drink margins, energy savings and other operational efficiencies. These gains were partially offset by inflationary pressures, including those employment cost increases that I mentioned and some investment in key areas, including more marketing. But overall, we've made real progress embedding cost discipline and delivering margin expansion across the business, and we feel that our EBITDA margins really do benchmark very well across the whole pub sector. We view ourselves as a high-margin local pub company, and we see further opportunity to increase the EBITDA margin in FY '26 as we move towards our CMD target. Turning now to look at capital expenditure. Total CapEx for the year was GBP 61.2 million, which is equivalent to 6.8% of revenue, and we're now approaching the 7% to 8% of revenue range that we talked about in the CMD. This is an increase from GBP 46.2 million last year, with the main driver being our pub format conversions, which I'll come back to shortly. Of this total, GBP 53.2 million was in maintenance and other CapEx deployed across our 1,300-strong pub estate. This includes works such as maintenance, estate management, investment in new IT platforms and other items. But I also want to pull out a bit more granular information on our pub format conversions, which are very important to our overall growth plans and which Justin will cover in more detail. In the year, we covered 31 conversions to our differentiated formats, which are delivering strong results. Average revenue uplifts were 23% year-on-year, and EBITDA returns are over 30% to date, in line with our CMD targets. At an average cost of GBP 260,000 a site, we believe these conversions represent excellent value for money. And of course, we've only completed a small number so far in comparison to our estate. So there's a lot more to go at in this space. Clearly, the driver of increasing our capital expenditure is to improve the quality of our estate. So let's turn to that now. On this slide, we show that we ended the year with 1,328 pubs following the continuation of our estate optimization strategy. This included a small number of disposals in the T&L estate as well as conversion of some pubs to the partner model. As a result, the managed and partnership estate consisted of 1,182 pubs and the T&L estate had 146 sites at the year-end. EBITDA per pub increased to GBP 154,000, which, as you can see, is a 28% improvement over the last 2 years. This uplift reflects both operational improvements and tighter estate management with gains in both, our managed and partnership estate and the remaining T&L pubs. The result is a higher-quality, better-performing pub estate that's delivering stronger returns at a site level. I think this is a really important slide as it shows how the improvements being made to the business model are feeding through at pub level. Turning now to our cash performance in the year, which was another highlight. The takeout from this slide is that we delivered and, in fact, exceeded our CMD target of GBP 50 million of recurring free cash flow ahead of schedule, with GBP 53.2 million delivered in the period. And how was that delivered? Well, cash from ops increased year-on-year by GBP 5.6 million, which included the improvements in EBITDA I described earlier. Within that number, we also had a GBP 6 million saving from lower contributions to our DB pension scheme. And offsetting that, we had a small working capital gain, but it wasn't as large as last year's gain. Finally, we started making cash tax payments again of GBP 5.3 million as our profits improved. And as a smaller side, investors and analysts should note that in FY '26, we expect to move into the very large company corporation tax regime, which will accelerate our cash tax payments this year. And then in the second line on the chart, we had a GBP 15 million saving on interest, offset by GBP 15 million more CapEx year-on-year, as I just described, together with lower banking fees. So recurring cash was strong and now over GBP 50 million, which we expect to be able to exceed again this year. I also wanted to draw out on this slide that this strong free cash flow is fully absorbed by scheduled debt repayments, GBP 43.8 million of securitized debt repayments and GBP 8.6 million of lease liabilities. Clearly, this does mean that the group is delevering, as I'll show on the next slide, but also that our cash generation is currently fully utilized. And then just to complete the chart, after other movements in borrowing and disposals, there was a cash outflow of GBP 9.6 million in the year. And I'm now going to return to that progress about delevering in the group. This slide shows the different elements of the group's financing structures and the overall movement in net debt year-on-year. So starting at the bottom, net debt, excluding lease liabilities, reduced by GBP 46.2 million, to GBP 837.5 million. This takes our net debt-to-EBITDA multiple, excluding leases, down to 4.6x from 5.2x last year. That continues the recent downward trend and reflects the group's stronger cash generation and disciplined approach to capital investment. And then to briefly cover what makes up our financing structures, the largest element shown at the top is the securitization, which provides long-term predictable financing for the group. It does also impose some restrictions, both in terms of the assets that are tied up in the securitization structure and in our ability to move assets and cash around the group. However, these restrictions are manageable at present. Swaps are in place to fix the interest that we pay on the securitized debt. Other lease-related borrowings are essentially loans that were raised against other properties in the group outside the securitization. They were legally structured as sale and leasebacks, but where we have the option to buy back the properties at the end of the period for a nominal fee. Therefore, we treat these properties as effective freehold. And as noted in the slide, we're currently paying interest only on those borrowings. And I've put a new slide in the appendices showing investors how those structures will work over coming years. Our GBP 200 million bank facility was renewed in the year and now extends to July 2027 with relatively low drawings at the year-end, and cash balances ended the year at GBP 35.9 million. So in summary, we're continuing to delever at pace while preserving the secure long-term funding arrangements in the group. If I then broaden this to look at the group's whole balance sheet rather than just the net debt elements, this slide shows the evolution of our balance sheet and our net asset value per share, which increased to GBP 1.25 this year. And actually, the movements year-on-year are pretty straightforward. Our balance sheet is underpinned by GBP 2.2 billion of property assets, of which 81% of the estate by number of pubs are effective freeholds. The net book value of those assets increased by over GBP 100 million in the year, reflecting our annual estate reval and also our ongoing investment into the business. Net debt, as I've just described, reduced GBP 837.5 million, excluding lease liabilities, and lease liabilities were GBP 5.5 million lower. So total net debt was GBP 51.7 million lower year-on-year. Other liabilities increased by GBP 28.4 million, almost entirely due to an increase of GBP 28.5 million in deferred tax liabilities relating to the upward property revaluation. So overall, the property reval with its associated tax movements as well as the net cash generation of the group, drove GBP 136 million increase in net assets, which was a 21% increase year-on-year, to GBP 791 million, which equates to GBP 1.25 per share. Given the progress made on the balance sheet, I want to finish by looking at our capital allocation framework. And if I start by saying that this is not a change to our capital allocation policy, which remains consistent with what we laid out at the CMD, we remain focused on delivering sustainable shareholder value through a disciplined balance of investment in the business, delevering and ultimately, shareholder returns. That said, there are a couple of updates we wanted to share this morning. On the right-hand side of the chart, you'll see our continued progress on leverage, which, as I mentioned, has reduced substantially. We are pleased with that progress, but would like to see leverage continue to decrease. And today, we're committing to reduce leverage to below 4x on a pre-IFRS 16 basis. When we get to that level, we anticipate the start of capital returns to shareholders through dividends, share buybacks or a combination of both. What that looks like will depend on circumstances at the time, including the share price and investor preferences. To be clear, we also expect to see the group continue to delever below 4x even after the recommencement of shareholder returns. We believe this disciplined approach continues to be the right strategy to create and sustain long-term value. So to conclude, we've delivered a strong financial performance this year with clear progress on margin, profit and cash flow, and we expect further progress this year. And before I hand back to Justin, I'll briefly touch on 5 forward-looking points. First, we remain confident in the trading outlook for FY '26 with like-for-like sales currently tracking in line with last year and Christmas bookings up 11%. Second, we expect further progress towards our margin target of 200 to 300 basis points of growth versus 2024 following the 140 basis point gain this year. Our format growth engine will be accelerated this year with at least a further 50 refurbishments and our CapEx is expected to be within the target range of 7% to 8% of total revenue. And after achieving our CMD target ahead of schedule this year, we expect to deliver another year of GBP 50 million in recurring free cash flow in FY '26. And lastly, we've significantly reduced our debt profile over the past couple of years and expect to continue to do so with leverage now at 4.6x and progressing well towards our sub-4x target. So overall, we're delivering against our targets, and we remain firmly on track to drive further financial and strategic progress in the year ahead. Thanks very much, and I'll now hand back to Justin. Justin Platt: Thank you, Stephen. So I'll now take you through the progress we've been making as we've implemented our strategy through the year. You will remember from the Capital Markets Day, we're very focused on being a high-margin, highly cash-generative local pub company. And we'll do that with a portfolio of brands that appeal across a range of consumer segments. 5 key value drivers that get us there: executing a market-leading operating model; using CapEx to deliver differentiated formats; unlocking value with digital transformation; expanding our excellent managed and partnership management models; and in time, supporting that with targeted acquisitions. So I'll now deep dive on each of those value drivers to give you a flavor of some of the work that we've been doing. The first one I will spend some time on is the operating model. Really, this is the bread and butter of running a great pub business. It's the balance of revenue growth, cost efficiency and guest satisfaction. So first of all, I'll talk to revenue. Really good momentum this year. We've continued to do well, especially in our peak trading periods. Across our peak trading periods, we're up almost 6% on the year. And that's enabled us to grow our like-for-likes ahead of the market at 1.6%. And a lot of what's behind that is our event plan. Our event plan has been a key thing for us this year. In 2025, Marston's Pubs have been home to a darts tournament led by Luke Humphries, the world #1. Paddington and his new movie joined us from Peru. We had a national Trivial Pursuit quiz event. And through the summer, when Oasis Mania was sweeping the U.K., we had a series of '90s throwback events with tribute bands and the like in our pub life. So all of these are designed to give people reasons to visit our pubs, a range of guest demographics. I think that's essential at any time of year, but especially so in the summer when, of course, this year, we had no big football tournament. So events are big success for us and an important driver in supporting our revenue growth. So secondly, on costs. As Stephen has shown you, we've made excellent progress during '25 on our journey to being a high-margin business in adding 140 basis points to our margin despite significant and well-known headwinds. And we've done this with a relentless drive for efficiency across all areas of our cost base. The biggest area of our cost base is labor, where we've saved almost GBP 10 million, a little bit more than 1 percentage point on our margin. And this has been about continually getting smarter with the way we use our technology to enhance and optimize our labor teams and our labor schedules, all about getting the right people in the right place at the right time. I think probably the best way to bring to life for you the work we've done on labor is to pick a case study of one of our pubs. The lady pictured on the right is Kati. She's one of our fantastic general managers. She runs the King Charles pub in Chesham, a lot of work with our labor planning this year. They've actually reduced their labor costs through the year by 8%. And despite doing that, they've grown their revenue by 19% and also grown their guest satisfaction well ahead of our company average. So a good example in the way labor is playing out for us in one of our pubs, but it also represents our approach across the company. So secondly, in terms of food and drink, our formats allow us to simplify the ranges we offer because we're a lot clearer about the demographic by format. And so that allows you to be clear which food offer and which drink offer you need by pub. So that's allowed us to simplify our range. That's helped us with efficiencies. But alongside that, we've also renegotiated our key food and drink contracts to drive efficiencies where we can. So that's labor and food and drink. Finally, energy and estates. Every pound counts on energy. We've been that way for a number of years now, whether it be the usage that we manage, but also the contracts, there's a relentless focus on attempting to drive efficiencies there. But as Stephen said, we take a very judicious approach to estates more broadly with our CapEx, looking at our maintenance cycles, spending strictly in maintenance cycles, and that helps us on efficiencies with our repairs budget. So overall, really good progress on the cost side of things. And then finally, on the operating model, guest satisfaction. I mean this is all about ensuring that when our guests come and see us, they have a great time. And it's very pleasing in the context of the efficiency gains I've just talked to that we're still delivering better and better experiences through our guests. So from a score of 766 in '23 to 800 last year, 816 this year is a very pleasing performance. And this really is a combination of many of the initiatives coming together, whether it be our events program, and the visual there is of our Oktoberfest event that we run during September, whether it be through digital ordering or some of the menu enhancements we've made. All of these things together add up to make a difference to the guest experience. It's worth saying, though, that the #1 factor that dominates, that really drives a great guest experience is, really strong guest service. That requires almost an obsession, a relentless obsession with getting that right day in, day out. And the work on that is never done. Our teams are very focused on delivering that experience all the way through the year. And as I say, it's pleasing that this year, we've been able to continually improve on that. So that's the operating model. When you take revenue, cost, satisfaction together, it's good that we've made strong progress across the piece. And this has been complemented with the work we've done on the digital transformation value driver. I think a key example of this would be the new order and pay app that we launched in March. Really well received. It's paying dividends with our guests in terms of both revenue and reputation, and it's complementing the personal service for those guests who want it. So we've got a 10% revenue uplift when using the app. And those pubs with a higher mix of order and pay usage do significantly better on reputation. What's also good about the app is it can work hand-in-hand with our events. So the Trivial Pursuit: Win a Wedge event drove a big uptake in the use of the app. So good progress overall on this area, digital, but a lot more opportunity here in the future as digital transformation can help us both on revenue and on cost. The third value driver I want to focus on is our new pub formats. So against 5 core consumer target segments across the market, we've designed 5 pub formats that are specifically designed to meet the needs of those target audiences. And through a series of test and learn launches in '25, we've been assessing the potential of these pubs to drive appeal and importantly, drive powerful CapEx returns. Now in May, I did a deep dive on the Two-Door format. So I thought this time around, we'd share some more information on the Grandstand brand. Grandstand is a local sports pub. So it targets adults who want an entertainment experience when they go to their local pub. I mean this is an absolute sports lover's dream. It's similar to a city center sports bar environment, but in the local community pub. Number of constituent parts to it. At its heart, state-of-the-art technology ensures that we've got 3-meter stadium screens, amazing sound systems. Alongside that, there's great match-day food suited to watching the big game. And these pubs will always be run by sports enthusiast general managers who know what their guests want and can work with them to give them a great experience. It's an absolute must visit for the big game, the atmosphere that we create. But more than that, because it's a local pub and it's a great environment, it's a place that you would want to go to on any night of the week, and we support that with a program of sports events through the week to give people reasons to come every night. So Grandstand has done really well this year. The guest reaction and the returns that we've had have been very, very impressive, and it's been a key part of our test and learn year. And test and learn overall this year has exceeded our expectations. We've done 31 launches through the year. So we did 21 Two Doors, 5 Grandstand and 5 Woodie's. Woodie's is our new family pub. All have done well. Guests love them. They've driven strong uplifts in revenue of 23% and all of that off relatively modest levels of CapEx. We've been driving ROIC of more than 30% on only GBP 260,000 per pub. So the test and learn phase really has proven the potential of this stream for us, real growth opportunity as we roll out across the estate. And all of our pubs have been mapped to the format opportunity they can play to over time. So over time, this really does give us an opportunity as a significant driver of growth. So great progress across our value drivers in '25, and this leaves us feeling very positive as we look towards 2026. Through this year, we'll have a big program of exciting events, all designed to encourage guests to come and visit us, not least with a big football tournament on the horizon that everybody will be very much focused on in the summer. And we'll complement that with our revenue management and order and pay disciplines to drive spend per guest. But alongside the demand drive, as I've just said, our new formats will play an increasingly important role in driving growth through the year. Given our success in '25, we're now accelerating the rollout plan. We'll have 50 or so launches focused on Two Door and Grandstand, and all of these will make a meaningful difference to both revenue and EBITDA performance through the year. So to summarize, another year of strong delivery in '25, significant growth in both profit and cash flow. We're very excited by the growth potential of our new formats, and we see a very promising outlook for the year ahead as we continue to deliver as a reliable growth company. And with that, we can now take some time for questions. Operator: [Operator Instructions]. The first question we have comes from Douglas Jack of Peel Hunt. Harold Jack: So I've got 2 questions, if that's okay. In terms of the new formats in 2026, is the choice of Grandstand and Two Door largely because they're the ones that have the greatest uplift potentially, adding to the number of reasons to visit, I think, obviously, they've got quite a lot of opportunity there. And then the second one was about margins. In 2026, what are the best margin opportunities do you see over this year? Justin Platt: Thanks for your questions. I'll take the first one on formats and then, Stephen, if you want to come to margins. In terms of choices, as you know, we were very clear to have the plank of a test and learn phase first to guide our implementation. So the primary choice is certainty of return in the sense that Two Door and Grandstand both launched earlier in the year last year than Woodie's, which allowed us to get more data on those through the year. Most of the Woodie's launches came sort of the summer onwards. So whilst all are performing well, we've just got longer data on the other 2. The other attraction, of course, with Grandstand is you absolutely want a bigger footprint of those pubs in the market in a year with the World Cup, which we've certainly got an eye on. But really, it's about certainty of returns, Doug. Stephen Hopson: And Doug, on your question on margins, I mean, yes, look, we've made really good progress in 2025. I think we do expect EBITDA margins to increase in 2026, but not to the same extent as 140 basis points we did in 2025. I mean I think the best opportunities for me, so there's a bit of flow-through stuff. So we made really good progress on labor. And Some of those things didn't come through until the second half last year. And so I think some of them will help H1 2026. And also, that is a continuing journey for us. So matching right people, right place, matching demand with supply of labor is something that we're going to be relentlessly focused on going forward. That may come through in terms of reduced cost. It may come through in terms of better customer service and therefore, improved sales, but I think there will be some upside from that. And then I think on gross margins, I mean, we've got pretty good visibility of both food and drink cost prices moving into next year. We're lock in quite a few contracts on that quite early. And I think, therefore, that gives us certainty on those lines. We'll continue the journey on things like revenue management and upselling and so on, and it should be an opportunity to move that further forward as well. Operator: The next question we have comes from Karan Puri of JPMorgan. Karan Puri: I've got 2 quick ones. One, on the 1.6% like-for-like momentum in '25. Just wondering if you could provide a split between pricing and volumes, number one. And number two, just coming back on the cash tax payment in '26. I know it's going to be higher than 2025, but in terms of magnitude, if you could share a bit more on that front would be helpful. Justin Platt: So I'll start with the like-for-likes. As we said in the release, food, drink and machines were all in growth, and that's a mix across them. As you'd expect in that, revenue management has played an important part for us and will continue to do so, particularly actually the premiumization as consumers are upgrading to more premium beers and also adding and upgrading on the menu. And then the second one, Stephen? Stephen Hopson: Yes, the cash tax. So yes, you're right. We flagged that it would increase. Last year, the cash tax payments were GBP 5.3 million. That will approximately double next year, to about GBP 10 million, Karan. So that's about the extent of it. We are still using some losses from previous trading period. So the cash tax is still relatively low, but it will be about GBP 10 million in FY '26. Karan Puri: Perfect. And then just a quick follow-up on that one. So do we -- can we expect it to be sort of normalized cash tax starting in 2027? Or will you still benefit from some loss in the previous period there as well? Stephen Hopson: Yes. 2027 will still be a little bit low. And then from 2028, it will go back to normalized levels. So it will be a step-up in 2027, but it won't be up to normalized levels, yes. And then from 2028, you should expect normalized levels of cash tax. Operator: [Operator Instructions]. The next question we have comes from Anna Barnfather of Panmure Liberum. Anna Barnfather: Just a couple of questions. Firstly, on the reformats, you've mentioned sort of acceleration sort of 50. Could you update us on your thinking of what proportion of the estate at this stage you think could benefit from a reallocation into 1 of the 5 formats? So how many of your sort of 1,300 pubs? And have you only done managed or have you done partnership ones as well? The second question, I was just thinking about the sort of peak trading. Obviously, you're doing really well in those big events, with peak trading periods up 5.8%. Are you tempted to sort of reduce opening hours on the sort of nonevent days? Or is there any sort of thinking on that as a way to cut down on overheads? And then just third question on the revenue mix. I think obviously, higher margins and gross margins, can you just give us a bit more color on perhaps some of the shifts in your sales mix? Justin Platt: Thanks, Anna. I'll take the first 2 and then Stephen, if you could take the third one. Let me start on peak trading, and then I'll come back to formats. We do look at our hours on a regular basis, but there's not a massive need to start big closure periods by any means. I mean one of the things that's most notable in pub trading today certainly versus 5 years ago is the growth of the early evening at the expense of the late evening. So if you look at booking patterns now, peak time for a table, the busiest time to get a table is 6:30 to 7:00. You go back 5 years, that was more like 8:00. So there's definitely an earlier day point to your business. And we do look at hours, but I don't think there's anything significant there in cost, particularly the local community environment where people are around the corner from their houses quite a lot. On the formats. So first of all, yes, we've actively launched formats across our managed and our partner estate, and they're performing equally well in each, neither is a differentiator actually in terms of performance, but they do work across both managed and partner. And then in terms of the numbers, as we showed earlier, 5 formats. The 2 that we didn't deep dive on were locals pubs and adult dining, signature pubs. Both of those, we have some of them in market already. I would say in terms of the opportunity, it's probably the locals pubs is the only bit that we wouldn't see as a sort of significant ROIC north of 30% opportunity, which probably takes you to 75% or so of our estate with the opportunity for those new formats. Stephen Hopson: And then, Anna, on the revenue mix, I mean, we're about 35% food in our business overall, but there is a big variation in that, as you'd expect between format and some of those local pubs versus, for example, our adult dining business, which is very, very different. And that has been growing. I mean, clearly, food across the market really has been growing quicker than drink over a period of time, but it's not huge. I mean that number has probably changed by 0.5% year-on-year. So it's not a huge mix. So hopefully, it gives you some idea about the sort of the food and drink pub. Operator: [Operator Instructions]. The next question we have comes from Fintan Ryan of Goodbody. Fintan Ryan: Two questions from me, please. Firstly, can you give us a sense of what your sort of base case expectations are for the budget tomorrow in terms of, I guess, labor costs, anything that you might be expecting or hoping for business rates. Just to sort of get a sense of what the base case is for the outlook currently and maybe what can change within the next 24-odd hours. And then secondly, could you give some color on like like-for-like trading in Q4 and over the last 8 weeks, obviously, you reported flat like-for-likes. How much -- what's been sort of the volume versus pricing split in that? Can you give some color on the visibility for the Christmas trading? Obviously, you've got bookings up 11% year-on-year, but like typically how much of bookings are -- of your Christmas trading are bookings? And what you'd be at this point, assuming for incremental pricing for FY -- for the calendar '26, would be great. Stephen Hopson: Thanks, Fintan. If I start on, I guess, the hot topic of the day and tomorrow, which is the budget and expectations for that. I mean, our base expectations and sort of what's embedded into the guidance that we've given to the market is that we expect National Living Wage to increase, obviously. Our expectations are about a 4% increase in the headline rate of National Living Wage, and we're expecting the differential for under 21-year-olds to close slightly compared to where it is at the moment. We're not expecting any further changes to things like National Insurance. And then really, I know there have been lots of stories in the press, but at the moment, we're not making any expectations on changes for things like machine, gaming duty or business rates either. I mean the Chancellor has flagged that there'll be a review of the way business rates is levied. So that will be interesting to see. But we're not making any assumption on that because simply, we just don't have the information available to us at this point. Justin Platt: And before I answer the like-for-like, Fintan, if you've got any assumptions on the budget tomorrow, please share them with the group. In terms of the like-for-likes, look, as you know, quarter 1 is all about Christmas. October and November are relatively small months in the grand scheme of things. December performance is really what matters. And within that, it's the key 2 weeks from kind of 19th of December until 2nd of January, quite time, tight time. And bookings pace, as we've said, is very good at 11%, and that's off the back of last year. I think we grew Christmas at about 11% last year in like-for-like terms. So it's pleasing the stage we're at. But to your point, walk-ins are also important at Christmas. So we've still got a lot of work to do in order to land that. And that's both in encouraging people to spend their Christmas with us but also then in managing spend per guest, so we drive the revenue return as well. Fintan Ryan: Great. And just in terms of the pricing and current expectations? Justin Platt: Well, again, we -- as you know, we don't -- we kind of manage price through the year in a broader revenue basis. So in terms of our revenue management initiatives around booking density, around premiumization. And yes, lead price is part of that mix, but we don't have like a hard and fast target. It's overall spend per that we look at. Operator: Ladies and gentlemen, at this stage, there are no further questions. I would now like to hand back to the management team for closing comments. Justin Platt: Well, just to say, thanks, everybody, for joining us. Really good engagement. Obviously, we'll all see what comes tomorrow. And I'll wish you an early best wishes for the festive season. Thank you. Operator: Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines. Justin Platt: Good morning, everybody. Thank you for joining us today. Welcome to the Marston's preliminary results for financial year '25. My name is Justin Platt, CEO. And with me, I have Stephen Hopson, our new Chief Financial Officer. We'll take you through our results today, and we'll do that with the following running order. I'll start with the headlines. Stephen will then share the financial results, and I'll then give some insight into the strategic progress we've been making through the year before wrapping up and taking any questions you might have. So the headlines. 2025 has been a very strong year for Marston's. It's been a year when we've been very focused on delivery, delivery of the strategy we outlined a year or so ago at the Capital Markets Day. And the results bear out that the strategy is working and driving real progress for us as a business, with profit before tax of GBP 72 million, that's year-on-year growth of 71%, and that's on top of the 65% growth we delivered a year ago. And that profit delivery has helped us drive cash flow. So cash flow at GBP 53 million. That's ahead of our GBP 50 million target, and it's also earlier than planned. Alongside that, it's really pleasing we've made great progress with our new pub formats, 31 launches this year. They're performing very strongly for us and driving big revenue uplifts. It's very clear now that these formats can be a significant growth engine for us in the future. And we've been doing all of that while giving our guests a great time. So record satisfaction scores with a reputation score at 816. So overall, a really good set of results, and it's a set of results that leave us feeling very positive in our outlook going forward. So that's the summary. I'll now hand over to Stephen, and he'll take you through the financials. Stephen Hopson: Thanks, Justin, and good morning, everyone. As Justin said, this is my first set of full year results at Marston's, and I joined the business at what is clearly an exciting time for Marston's. As these numbers show, we're making great progress and delivering against our goals with lots more to come. On my first slide, I'd like to begin by looking at some of the key group financial metrics. Total revenue was GBP 898 million, which showed growth of 1.6% on a like-for-like basis. EBITDA was up 7% to GBP 205 million, with the margin expanding by 140 basis points to 22.8%. That's been driven by good operational discipline, particularly on labor and controlling input costs alongside the revenue growth. As a result of the EBITDA growth and lower finance costs, PBT stepped on significantly. Underlying profit before tax was GBP 72 million, nearly 3x where we were just 2 years ago. And importantly, this has translated into stronger cash generation. Recurring free cash flow was GBP 53 million, which is up 22% year-on-year and ahead of our GBP 50 million recurring free cash flow target. Finally, we've made real progress on the balance sheet. Net debt has reduced from 5.2x to 4.6x EBITDA as we continue to delever. So overall, excellent progress on both profit and cash. Turning now to look at our income statement in a bit more detail on the next slide. As I mentioned, FY '25 marked another year of substantial profit growth for Marston's with PBT up 71%. Reported revenue was flat, although this masks the impact of the FY 2024 disposal program, which I'll show on the next slide. I've already mentioned that EBITDA was up 6.5%, and that GBP 12.6 million of EBITDA improvement basically flowed through to operating profit, which was up 8.6% to GBP 159.9 million. Net finance costs were significantly lower year-on-year as a result of ongoing delevering and last year's CMBC disposal, leading to that very significant jump upwards in PBT. And whilst our effective tax rate increased, this simply reflects a return to the U.K.'s headline rate of corporation tax after a period of a lower rate. Together, this income statement shows a stronger and more profitable business with improved earnings quality and stronger margins. Turning to revenue performance. As I've already touched on, revenue for 2025 was GBP 898 million and was broadly flat year-on-year, but I would like to pick out 2 points on this chart. First, that the revenue includes a negative movement of about GBP 40 million in relation to the disposal of pubs over FY 2024 and 2025. To put the disposals into context, about GBP 50 million of assets were sold as part of the disposal program. So it's important to consider that impact when assessing year-on-year revenue progression. And the second point is that our like-for-like performance continues to be ahead of the market, which grew by 0.7% in the year, with positive contributions across all key categories of drink, food and machines. Turning now to look at margin. A key target for the group outlined at the CMD was to grow our underlying EBITDA margin by 200 to 300 basis points from FY '24 levels, giving a target range of 23.4% to 24.4%. And I'm pleased to say that this year, we've delivered 140 basis points of margin expansion, achieving total EBITDA margin of 22.8% in the year. Labor productivity gains were the single biggest contributor, supported by the rollout of improved scheduling tools, which Justin will cover in a bit more detail later on. The labor productivity benefits in the year were enough to fully offset the increases in the National Living Wage and National Insurance contributions, which came in from April 2025. We also saw benefits from improved food and drink margins, energy savings and other operational efficiencies. These gains were partially offset by inflationary pressures, including those employment cost increases that I mentioned and some investment in key areas, including more marketing. But overall, we've made real progress embedding cost discipline and delivering margin expansion across the business, and we feel that our EBITDA margins really do benchmark very well across the whole pub sector. We view ourselves as a high-margin local pub company, and we see further opportunity to increase the EBITDA margin in FY '26 as we move towards our CMD target. Turning now to look at capital expenditure. Total CapEx for the year was GBP 61.2 million, which is equivalent to 6.8% of revenue, and we're now approaching the 7% to 8% of revenue range that we talked about in the CMD. This is an increase from GBP 46.2 million last year, with the main driver being our pub format conversions, which I'll come back to shortly. Of this total, GBP 53.2 million was in maintenance and other CapEx deployed across our 1,300 strong pub estate. This includes works such as maintenance, estate management, investment in new IT platforms and other items. But I also want to pull out a bit more granular information on our pub format conversions, which are very important to our overall growth plans and which Justin will cover in more detail. In the year, we covered 31 conversions to our differentiated formats, which are delivering strong results. Average revenue uplifts were 23% year-on-year and EBITDA returns are over 30% to date, in line with our CMD targets. At an average cost of GBP 260,000 a site, we believe these conversions represent excellent value for money. And of course, we've only completed a small number so far in comparison to our estate. So there's a lot more to go at in this space. Clearly, the driver of increasing our capital expenditure is to improve the quality of our estate. So let's turn to that now. On this slide, we show that we ended the year with 1,328 pubs following the continuation of our estate optimization strategy. This included a small number of disposals in the T&L estate as well as conversion of some pubs to the partner model. As a result, the managed and partnership estate consisted of 1,182 pubs and the T&L estate had 146 sites at the year-end. EBITDA per pub increased to GBP 154,000, which, as you can see, is a 28% improvement over the last 2 years. This uplift reflects both operational improvements and tighter estate management with gains in both, our managed and partnership estate and the remaining T&L pubs. The result is a higher-quality, better-performing pub estate that's delivering stronger returns at a site level. I think this is a really important slide as it shows how the improvements being made to the business model are feeding through at pub level. Turning now to our cash performance in the year, which was another highlight. The takeout from this slide is that we delivered and, in fact, exceeded our CMD target of GBP 50 million of recurring free cash flow ahead of schedule, with GBP 53.2 million delivered in the period. And how was that delivered? Well, cash from ops increased year-on-year by GBP 5.6 million, which included the improvements in EBITDA I described earlier. Within that number, we also had a GBP 6 million saving from lower contributions to our DB pension scheme. And offsetting that, we had a small working capital gain, but it wasn't as large as last year's gain. Finally, we started making cash tax payments again of GBP 5.3 million as our profits improved. And as a smaller side, investors and analysts should note that in FY '26, we expect to move into the very large company corporation tax regime, which will accelerate our cash tax payments this year. And then in the second line on the chart, we had a GBP 15 million saving on interest, offset by GBP 15 million more CapEx year-on-year, as I just described, together with lower banking fees. So recurring cash was strong and now over GBP 50 million, which we expect to be able to exceed again this year. I also wanted to draw out on this slide that this strong free cash flow is fully absorbed by scheduled debt repayments, GBP 43.8 million of securitized debt repayments and GBP 8.6 million of lease liabilities. Clearly, this does mean that the group is delevering, as I'll show on the next slide, but also that our cash generation is currently fully utilized. And then just to complete the chart, after other movements in borrowing and disposals, there was a cash outflow of GBP 9.6 million in the year. And I'm now going to return to that progress about delevering in the group. This slide shows the different elements of the group's financing structures and the overall movement in net debt year-on-year. So starting at the bottom, net debt, excluding lease liabilities, reduced by GBP 46.2 million, to GBP 837.5 million. This takes our net debt-to-EBITDA multiple, excluding leases, down to 4.6x from 5.2x last year. That continues the recent downward trend and reflects the group's stronger cash generation and disciplined approach to capital investment. And then to briefly cover what makes up our financing structures, the largest element shown at the top is the securitization, which provides long-term predictable financing for the group. It does also impose some restrictions, both in terms of the assets that are tied up in the securitization structure and in our ability to move assets and cash around the group. However, these restrictions are manageable at present. Swaps are in place to fix the interest that we pay on the securitized debt. Other lease-related borrowings are essentially loans that were raised against other properties in the group outside the securitization. They were legally structured as sale and leasebacks, but where we have the option to buy back the properties at the end of the period for a nominal fee. Therefore, we treat these properties as effective freehold. And as noted in the slide, we're currently paying interest only on those borrowings. And I've put a new slide in the appendices showing investors how those structures will work over coming years. Our GBP 200 million bank facility was renewed in the year and now extends to July 2027 with relatively low drawings at the year-end, and cash balances ended the year at GBP 35.9 million. So in summary, we're continuing to delever at pace while preserving the secure long-term funding arrangements in the group. If I then broaden this to look at the group's whole balance sheet rather than just the net debt elements, this slide shows the evolution of our balance sheet and our net asset value per share, which increased to GBP 1.25 this year. And actually, the movements year-on-year are pretty straightforward. Our balance sheet is underpinned by GBP 2.2 billion of property assets, of which 81% of the estate by number of pubs are effective freeholds. The net book value of those assets increased by over GBP 100 million in the year, reflecting our annual estate reval and also our ongoing investment into the business. Net debt, as I've just described, reduced GBP 837.5 million, excluding lease liabilities, and lease liabilities were GBP 5.5 million lower. So total net debt was GBP 51.7 million lower year-on-year. Other liabilities increased by GBP 28.4 million, almost entirely due to an increase of GBP 28.5 million in deferred tax liabilities relating to the upward property revaluation. So overall, the property reval with its associated tax movements as well as the net cash generation of the group drove GBP 136 million increase in net assets, which was a 21% increase year-on-year, to GBP 791 million, which equates to GBP 1.25 per share. Given the progress made on the balance sheet, I want to finish by looking at our capital allocation framework. And if I start by saying that this is not a change to our capital allocation policy, which remains consistent with what we laid out at the CMD, we remain focused on delivering sustainable shareholder value through a disciplined balance of investment in the business, delevering and ultimately, shareholder returns. That said, there are a couple of updates we wanted to share this morning. On the right-hand side of the chart, you'll see our continued progress on leverage, which, as I mentioned, has reduced substantially. We are pleased with that progress, but would like to see leverage continue to decrease. And today, we're committing to reduce leverage to below 4x on a pre-IFRS 16 basis. When we get to that level, we anticipate the start of capital returns to shareholders through dividends, share buybacks or a combination of both. What that looks like will depend on circumstances at the time, including the share price and investor preferences. To be clear, we also expect to see the group continue to delever below 4x even after the recommencement of shareholder returns. We believe this disciplined approach continues to be the right strategy to create and sustain long-term value. So to conclude, we've delivered a strong financial performance this year with clear progress on margin, profit and cash flow, and we expect further progress this year. And before I hand back to Justin, I'll briefly touch on 5 forward-looking points. First, we remain confident in the trading outlook for FY '26 with like-for-like sales currently tracking in line with last year and Christmas bookings up 11%. Second, we expect further progress towards our margin target of 200 to 300 basis points of growth versus 2024 following the 140 basis point gain this year. Our format growth engine will be accelerated this year with at least a further 50 refurbishments and our CapEx is expected to be within the target range of 7% to 8% of total revenue. And after achieving our CMD target ahead of schedule this year, we expect to deliver another year of GBP 50 million in recurring free cash flow in FY '26. And lastly, we've significantly reduced our debt profile over the past couple of years and expect to continue to do so with leverage now at 4.6x and progressing well towards our sub-4x target. So overall, we're delivering against our targets, and we remain firmly on track to drive further financial and strategic progress in the year ahead. Thanks very much, and I'll now hand back to Justin. Justin Platt: Thank you, Stephen. So I'll now take you through the progress we've been making as we've implemented our strategy through the year. You will remember from the Capital Markets Day, we're very focused on being a high-margin highly cash-generative local pub company. And we'll do that with a portfolio of brands that appeal across a range of consumer segments. 5 key value drivers that get us there: executing a market-leading operating model; using CapEx to deliver differentiated formats; unlocking value with digital transformation; expanding our excellent managed and partnership management models; and in time, supporting that with targeted acquisitions. So I'll now deep dive on each of those value drivers to give you a flavor of some of the work that we've been doing. The first one I will spend some time on is the operating model. Really, this is the bread and butter of running a great pub business. It's the balance of revenue growth, cost efficiency and guest satisfaction. So first of all, I'll talk to revenue. Really good momentum this year. We've continued to do well, especially in our peak trading periods. Across our peak trading periods, we're up almost 6% on the year. And that's enabled us to grow our like-for-likes ahead of the market at 1.6%. And a lot of what's behind that is our event plan. Our event plan has been a key thing for us this year. In 2025, Marston's Pubs have been home to a darts tournament led by Luke Humphries, the world #1. Paddington and his new movie joined us from Peru. We had a national Trivial Pursuit quiz event. And through the summer, when Oasis Mania was sweeping the U.K., we had a series of '90s throwback events with tribute [ bans/bands ] and the like in our pub life. So all of these are designed to give people reasons to visit our pubs, a range of guest demographics. I think that's essential at any time of year, but especially so in the summer when, of course, this year, we had no big football tournament. So events are big success for us and an important driver in supporting our revenue growth. So secondly, on costs. As Stephen has shown you, we've made excellent progress during '25 on our journey to being a high-margin business in adding 140 basis points to our margin despite significant and well-known headwinds. And we've done this with a relentless drive for efficiency across all areas of our cost base. The biggest area of our cost base is labor, where we've saved almost GBP 10 million, a little bit more than 1 percentage point on our margin. And this has been about continually getting smarter with the way we use our technology to enhance and optimize our labor teams and our labor schedules, all about getting the right people in the right place at the right time. I think probably the best way to bring to life for you the work we've done on labor is to pick a case study of one of our pubs. The lady pictured on the right is Kati. She's one of our fantastic general managers. She runs the King Charles pub in Chesham, a lot of work with our labor planning this year. They've actually reduced their labor costs through the year by 8%. And despite doing that, they've grown their revenue by 19% and also grown their guest satisfaction well ahead of our company average. So a good example in the way labor is playing out for us in one of our pubs, but it also represents our approach across the company. So secondly, in terms of food and drink, our formats allow us to simplify the ranges we offer because we're a lot clearer about the demographic by format. And so that allows you to be clear which food offer and which drink offer you need by pub. So that's allowed us to simplify our range. That's helped us with efficiencies. But alongside that, we've also renegotiated our key food and drink contracts to drive efficiencies where we can. So that's labor and food and drink. Finally, energy and states. Every pound counts on energy. We've been that way for a number of years now, whether it be the usage that we manage, but also the contracts, there's a relentless focus on attempting to drive efficiencies there. But as Stephen said, we take a very judicious approach to estates more broadly with our CapEx, looking at our maintenance cycles, spending strictly in maintenance cycles, and that helps us on efficiencies with our repairs budget. So overall, really good progress on the cost side of things. And then finally, on the operating model, guest satisfaction. I mean this is all about ensuring that when our guests come and see us, they have a great time. And it's very pleasing in the context of the efficiency gains I've just talked to that we're still delivering better and better experiences through our guests. So from a score of 766 in '23 to 800 last year, 816 this year is a very pleasing performance. And this really is a combination of many of the initiatives coming together, whether it be our events program, and the visual there is of our October Fest event that we run during September, whether it be through digital ordering or some of the menu enhancements we've made. All of these things together add up to make a difference to the guest experience. It's worth saying, though, that the #1 factor that dominates, that really drives a great guest experience is, really strong guest service. That requires almost an obsession, a relentless obsession with getting that right day in, day out. And the work on that is never done. Our teams are very focused on delivering that experience all the way through the year. And as I say, it's pleasing that this year, we've been able to continually improve on that. So that's the operating model. When you take revenue, cost, satisfaction together, it's good that we've made strong progress across the piece. And this has been complemented with the work we've done on the digital transformation value driver. I think a key example of this would be the new order and pay app that we launched in March. Really well received. It's paying dividends with our guests in terms of both revenue and reputation, and it's complementing the personal service for those guests who want it. So we've got a 10% revenue uplift when using the app. And those pubs with a higher mix of order and pay usage do significantly better on reputation. What's also good about the app is it can work hand-in-hand with our events. So the Trivial Pursuit: Win a Wedge event drove a big uptake in the use of the app. So good progress overall on this area, digital, but a lot more opportunity here in the future as digital transformation can help us both on revenue and on cost. The third value driver I want to focus on is our new pub formats. So against 5 core consumer target segments across the market, we've designed 5 pub formats that are specifically designed to meet the needs of those target audiences. And through a series of test and learn launches in '25, we've been assessing the potential of these pubs to drive appeal and importantly, drive powerful CapEx returns. Now in May, I did a deep dive on the Two-Door format. So I thought this time around, we'd share some more information on the Grandstand brand. Grandstand is a local sports pub. So it targets adults who want an entertainment experience when they go to their local pub. I mean this is an absolute sports lover's dream. It's similar to a city center sports bar environment, but in the local community pub. Number of constituent parts to it. At its heart, state-of-the-art technology ensures that we've got 3-meter stadium screens, amazing sound systems. Alongside that, there's great match-day food suited to watching the big game. And these pubs will always be run by sports enthusiast general managers who know what their guests want and can work with them to give them a great experience. It's an absolute must visit for the big game, the atmosphere that we create. But more than that, because it's a local pub and it's a great environment, it's a place that you would want to go to on any night of the week, and we support that with a program of sports events through the week to give people reasons to come every night. So Grandstand has done really well this year. The guest reaction and the returns that we've had have been very, very impressive, and it's been a key part of our test and learn year. And test and learn overall this year has exceeded our expectations. We've done 31 launches through the year. So we did 21 Two Doors, 5 Grandstand and 5 Woodie's. Woodie's is our new family pub. All have done well. Guests love them. They've driven strong uplifts in revenue of 23% and all of that off relatively modest levels of CapEx. We've been driving ROIC of more than 30% of only GBP 260,000 per pub. So the test and learn phase really has proven the potential of this stream for us, real growth opportunity as we roll out across the estate. And all of our pubs have been mapped to the format opportunity they can play to over time. So over time, this really does give us an opportunity as a significant driver of growth. So great progress across our value drivers in '25, and this leaves us feeling very positive as we look towards 2026. Through this year, we'll have a big program of exciting events, all designed to encourage guests to come and visit us, not least with a big football tournament on the horizon that everybody will be very much focused on in the summer. And we'll complement that with our revenue management and order and pay disciplines to drive spend per guest. But alongside the demand drive, as I've just said, our new formats will play an increasingly important role in driving growth through the year. Given our success in '25, we're now accelerating the rollout plan. We'll have 50 or so launches focused on Two Door and Grandstand, and all of these will make a meaningful difference to both revenue and EBITDA performance through the year. So to summarize, another year of strong delivery in '25, significant growth in both profit and cash flow. We're very excited by the growth potential of our new formats, and we see a very promising outlook for the year ahead as we continue to deliver as a reliable growth company. And with that, we can now take some time for questions. Operator: [Operator Instructions]. The first question we have comes from Douglas Jack of Peel Hunt. Harold Jack: So I've got 2 questions, if that's okay. In terms of the new formats in 2026, is the choice of Grandstand and Two Door largely because they're the ones that have the greatest uplift potentially, adding to the number of reasons to visit, I think, obviously, they've got quite a lot of opportunity there. And then the second one was about margins. In 2026, what are the best margin opportunities do you see over this year? Justin Platt: Thanks for your questions. I'll take the first one on formats and then, Stephen, if you want to come to margins. In terms of choices, as you know, we were very clear to have the plank of a test and learn phase first to guide our implementation. So the primary choice is certainty of return in the sense that Two Door and Grandstand both launched earlier in the year last year than Woodie's, which allowed us to get more data on those through the year. Most of the Woodie's launches came sort of the summer onwards. So whilst all are performing well, we've just got longer data on the other 2. The other attraction, of course, with Grandstand is you absolutely want a bigger footprint of those pubs in the market in a year with the World Cup, which we've certainly got an eye on. But really, it's about certainty of returns, Doug. Stephen Hopson: And Doug, on your question on margins, I mean, yes, look, we've made really good progress in 2025. I think we do expect EBITDA margins to increase in 2026, but not to the same extent as 140 basis points we did in 2025. I mean I think the best opportunities for me, so there's a bit of flow-through stuff. So we made really good progress on labor. And Some of those things didn't come through until the second half last year. And so I think some of them will help H1 2026. And also, that is a continuing journey for us. So matching right people, right place, matching demand with supply of labor is something that we're going to be relentlessly focused on going forward. That may come through in terms of reduced cost. It may come through in terms of better customer service and therefore, improved sales, but I think there will be some upside from that. And then I think on gross margins, I mean, we've got pretty good visibility of both food and drink cost prices moving into next year. We're lock in quite a few contracts on that quite early. And I think, therefore, that gives us certainty on those lines. We'll continue the journey on things like revenue management and upselling and so on, and it should be an opportunity to move that further forward as well. Operator: The next question we have comes from Karan Puri of JPMorgan. Karan Puri: I've got 2 quick ones. One, on the 1.6% like-for-like momentum in '25. Just wondering if you could provide a split between pricing and volumes, number one. And number two, just coming back on the cash tax payment in '26. I know it's going to be higher than 2025, but in terms of magnitude, if you could share a bit more on that front would be helpful. Justin Platt: So I'll start with the like-for-likes. As we said in the release, food, drink and machines were all in growth, and that's a mix across them. As you'd expect in that, revenue management has played an important part for us and will continue to do so, particularly actually the premiumization as consumers are upgrading to more premium beers and also adding and upgrading on the menu. And then the second one, Stephen? Stephen Hopson: Yes, the cash tax. So yes, you're right. We flagged that it would increase. Last year, the cash tax payments were GBP 5.3 million. That will approximately double next year, to about GBP 10 million, Karan. So that's about the extent of it. We are still using some losses from previous trading period. So the cash tax is still relatively low, but it will be about GBP 10 million in FY '26. Karan Puri: Perfect. And then just a quick follow-up on that one. So do we -- can we expect it to be sort of normalized cash tax starting in 2027? Or will you still benefit from some loss in the previous period there as well? Stephen Hopson: Yes. 2027 will still be a little bit low. And then from 2028, it will go back to normalized levels. So it will be a step-up in 2027, but it won't be up to normalized levels, yes. And then from 2028, you should expect normalized levels of cash tax. Operator: [Operator Instructions]. The next question we have comes from Anna Barnfather of Panmure Librium. Anna Barnfather: Just a couple of questions. Firstly, on the reformats, you've mentioned sort of acceleration sort of 50. Could you update us on your thinking of what proportion of the estate at this stage you think could benefit from a reallocation into 1 of the 5 formats? So how many of your sort of 1,300 pubs? And have you only done managed or have you done partnership ones as well? The second question, I was just thinking about the sort of peak trading. Obviously, you're doing really well in those big events, with peak trading periods up 5.8%. Are you tempted to sort of reduce opening hours on the sort of nonevent days? Or is there any sort of thinking on that as a way to cut down on overheads? And then just third question on the revenue mix. I think obviously, higher margins and gross margins, can you just give us a bit more color on perhaps some of the shifts in your sales mix? Justin Platt: Thanks, Anna. I'll take the first 2 and then Stephen, if you could take the third one. Let me start on peak trading, and then I'll come back to formats. We do look at our hours on a regular basis, but there's not a massive need to start big closure periods by any means. I mean one of the things that's most notable in pub trading today certainly versus 5 years ago is the growth of the early evening at the expense of the late evening. So if you look at booking patterns now, peak time for a table, the busiest time to get a table is 6:30 to 7:00. You go back 5 years, that was more like 8:00. So there's definitely an earlier day point to your business. And we do look at hours, but I don't think there's anything significant there in cost, particularly the local community environment where people are around the corner from their houses quite a lot. On the formats. So first of all, yes, we've actively launched formats across our managed and our partner estate, and they're performing equally well in each, neither is a differentiator actually in terms of performance, but they do work across both managed and partner. And then in terms of the numbers, as we showed earlier, 5 formats. The 2 that we didn't deep dive on were locals pubs and adult dining, signature pubs. Both of those, we have some of them in market already. I would say in terms of the opportunity, it's probably the locals pubs is the only bit that we wouldn't see as a sort of significant ROIC north of 30% opportunity, which probably takes you to 75% or so of our estate with the opportunity for those new formats. Stephen Hopson: And then, Anna, on the revenue mix, I mean, we're about 35% food in our business overall, but there is a big variation in that, as you'd expect between format and some of those local pubs versus, for example, our adult dining business, which is very, very different. And that has been growing. I mean, clearly, food across the market really has been growing quicker than drink over a period of time, but it's not huge. I mean that number has probably changed by 0.5% year-on-year. So it's not a huge mix. So hopefully, it gives you some idea about the sort of the food and drink [ pub/part ]. Operator: [Operator Instructions]. The next question we have comes from Fintan Ryan of Goodbody. Fintan Ryan: Two questions from me, please. Firstly, can you give us a sense of what your sort of base case expectations are for the budget tomorrow in terms of, I guess, labor costs, anything that you might be expecting or hoping for business rates. Just to sort of get a sense of what the base case is for the outlook currently and maybe what can change within the next 24-odd hours. And then secondly, could you give some color on like like-for-like trading in Q4 and over the last 8 weeks, obviously, you reported flat like-for-likes. How much -- what's been sort of the volume versus pricing split in that? Can you give some color on the visibility for the Christmas trading? Obviously, you've got bookings up 11% year-on-year, but like typically how much of bookings are -- of your Christmas trading are bookings? And what you'd be at this point, assuming for incremental pricing for FY -- for the calendar '26, would be great. Stephen Hopson: Thanks, Fintan. If I start on, I guess, the hot topic of the day and tomorrow, which is the budget and expectations for that. I mean, our base expectations and sort of what's embedded into the guidance that we've given to the market is that we expect National Living Wage to increase, obviously. Our expectations are about a 4% increase in the headline rate of National Living Wage, and we're expecting the differential for under 21-year-olds to close slightly compared to where it is at the moment. We're not expecting any further changes to things like National Insurance. And then really, I know there have been lots of stories in the press, but at the moment, we're not making any expectations on changes for things like machine, gaming duty or business rates either. I mean the Chancellor has flagged that there'll be a review of the way business rates is levied. So that will be interesting to see. But we're not making any assumption on that because simply, we just don't have the information available to us at this point. Justin Platt: And before I answer the like-for-like, Fintan, if you've got any assumptions on the budget tomorrow, please share them with the group. In terms of the like-for-likes, look, as you know, quarter 1 is all about Christmas. October and November are relatively small months in the grand scheme of things. December performance is really what matters. And within that, it's the key 2 weeks from kind of 19th of December until 2nd of January, quite time, tight time. And bookings pace, as we've said, is very good at 11%, and that's off the back of last year. I think we grew Christmas at about 11% last year in like-for-like terms. So it's pleasing the stage we're at. But to your point, walk-ins are also important at Christmas. So we've still got a lot of work to do in order to land that. And that's both in encouraging people to spend their Christmas with us but also then in managing spend per guest, so we drive the revenue return as well. Fintan Ryan: Great. And just in terms of the pricing and current expectations? Justin Platt: Well, again, we -- as you know, we don't -- we kind of manage price through the year in a broader revenue basis. So in terms of our revenue management initiatives around booking density, around premiumization. And yes, lead price is part of that mix, but we don't have like a hard and fast target. It's overall spend [ per ] that we look at. Operator: Ladies and gentlemen, at this stage, there are no further questions. I would now like to hand back to the management team for closing comments. Justin Platt: Well, just to say, thanks, everybody, for joining us. Really good engagement. Obviously, we'll all see what comes tomorrow. And I'll wish you an early best wishes for the festive season. Thank you. Operator: Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.

184天前Insight Analytics约5分钟阅读

IDGXF 2025 Q3 财报电话会议

Ahmed Moataz: Hello, everyone. This is Ahmed Moataz from EFG Hermes and welcome to IDH's Third Quarter of '25 Results Conference Call. I'm pleased to be joined with Dr. Hend El Sherbini, Chief Executive Officer; Sherif El Zeiny, Vice President and Group CFO; and Tarek Yehia, Director of Investor Relations. The company, as usual, will start with a brief presentation and then we'll open the floor for Q&A. IDH management, please go ahead. Tarek Yehia: Thank you, Ahmed. Good afternoon, ladies and gentlemen and thank you for joining us for our third quarter analyst call. My name is Tarek Yehia, I'm Head of Investor Relations. Joining me today, Dr. Hend El Sherbini, our CEO; Mr. Sherif El Zeiny, our CFO and VP. Dr. Hend will begin the call with a summary of latest period main highlights. After that, I will discuss in more details the main macroeconomics and geopolitical trends seen across our markets. Then after my presentation, Mr. Sherif will offer a deeper analysis of our financial performance. Then we will open for Q&A. Dr. Hend will start now. Thank you. Hend El Sherbini: Thank you, Tarek and good afternoon, everyone. I'm Dr. Hend El Sherbini, CEO of IDH. As we approach the end of what has been another very strong year for the group, I'm pleased to report a robust set of results for the first 9 months of 2025. The performance we are presenting today reflects not only healthy market dynamics but also the tangible results of the strategic initiatives we have been implementing over the past 2 years, particularly around network and geographic expansion, operational optimization, digitization and service diversification. Throughout the year, we have continued to strengthen our core business in Egypt and Jordan, while making pronounced progress in newer markets, namely Nigeria and Saudi Arabia. We are also very encouraged by the sustained improvements in our profitability metrics, which confirm the scalability of our model and our ability to translate revenue growth into margin enhancement. We are particularly pleased to see the continued strength and stability of operating conditions in our home market of Egypt, where macroeconomic sentiment has improved and demand for high-quality diagnostic services remain strong. Turning to our performance in more detail. During the first 9 months of the year, we continued to build on the strong momentum established earlier, delivering 41% revenue growth year-on-year, supported by growth across both volume and value metrics. Test volumes increased by 10% with all operation geographies contributing to this expansion, supported by stronger patient engagement, deeper penetration in walk-in and corporate channels and improved referral flows. At the same time, our average revenue per test rose 28%, reflecting a richer test mix, broader uptake of high-value radiology and specialized diagnostics and favorable price adjustments introduced earlier in the year. These trends also helped us further strengthen our average test per patient, which reached 4.6 tests per encounter, demonstrating the continued depth of patient relationships and our success in expanding cross-service utilization across our platform. In Egypt, momentum strengthened further through Q3, supported by solid growth in both volumes and value alongside strong brand equity and stable market conditions. Test volumes in Egypt continued to grow steadily, while average revenue per test saw a significant uplift, owing to favorable mix dynamics and strong -- with strong traction in radiology, specialized diagnostics and corporate channels. Egypt remains the core engine of group performance, contributing 84% of total revenues in the 9 months of 2025 and continued to demonstrate high scalability, resilience and operating efficiency. The ongoing expansion of our physical network in Egypt continues to be a key growth driver. Over the past 12 months, we have added 103 new branches in Egypt, bringing the total up to 670 locations nationally as of September. These new sites have helped deepen our presence, not only in Greater Cairo but also in fast-growing regional cities, allowing us to better serve both corporate and walk-in patients. Our household service remains a strategic differentiator, sustaining its strong contribution of around 20% of Egypt's revenue, continues to demonstrate the effectiveness of our post-pandemic strategy and reinforces our position as an early mover in home-based diagnostics in the region. Al Borg Scan continues to demonstrate strong momentum as a key component of our long-term strategy to build a fully integrated diagnostics platform. Year-to-date scan volumes and patient traffic recovered well following the Q1 of Ramadan slowdown with Q3 recording clear sequential volume growth. The integration of Cairo Ray for radiotherapy, which was consolidated this quarter, is progressing well. This acquisition provides us with direct access to radiotherapy service and strengthens our positioning in oncology diagnostics, a fast-growing and strategically important segment. We expect radiology to play an increasingly prominent role in our growth mix over the coming quarters, supported by continued network expansion, enhanced service capability and rising demand for specialized imaging. Over the past 2 years, a key strategic priority for IDH has been the successful launch and scale up of our Saudi operations. I'm pleased to share that our presence in the Kingdom continues to develop very encouragingly with strong momentum supported by growing demand, deep market visibility and sustained improvement in both volume and value metrics. Year-to-date, we have seen revenues more than quadruple compared to the same period last year, reflecting rising test volumes, improving mix and early network scale benefits. This growth continues to highlight the effectiveness of our ramp-up strategy in the market, which aims to accelerate revenue growth and establish Biolab KSA as a key player in the large but high fragmented Saudi diagnostics market. As part of this plan, we inaugurate our third branch in Riyadh during the third quarter and we remain on track to open 3 additional locations over the coming months. These new branches will help extend our footprint across high potential catchment areas. At the same time, we continue to advance our growth approach, which includes targeted marketing campaigns to build brand recognition, selective promotional initiatives to drive patient acquisition and ongoing discussions with the insurers and corporate health care providers to broaden our referral and partnership networks. While still in the early stages of development, Biolab KSA is demonstrating strong operation traction and reaffirming our belief in the long-term potential of Saudi Arabia as a key pillar in the group's regional growth strategy. As always, profitability remains a core focus for us and we are very pleased to see sustained improvements across all levels of the income statement. We continue to benefit from strong operational leverage, tighter cost controls and better resource allocation across our subsidiaries, including Nigeria, where Echo-Lab remained positive EBITDA throughout the 9-month period, marking a key milestone in its turnaround and confirming the potential of its high -- of this high-growth market. Overall, both COGS and SG&A and share of revenue continued to decline, supported by disciplined cost management and our growing digitization efforts. COGS to revenue fell to 57%, while SG&A declined to 15% from 17% last year, underscoring the success of our optimization initiatives. Consequently, our EBITDA margin expanded to 35% from 30% last year, while gross profit margin rose to 43% compared with 38% in the 9 months of 2024. These efforts, combined with strong top line growth and improved pricing dynamics have translated into meaningful margin expansion and greater earnings quality with adjusted net profit more than doubling year-on-year while excluding FX effects. Before handing the call over to Tarek, I would like to briefly reiterate our full year guidance in light of our year-to-date performance and the momentum we are seeing across all markets. Given the strong results delivered over the first 9 months, coupled with relatively stable operating conditions, continue to expect full year revenue growth to come in at more than 35% in the full year of 2025. On the profitability front, we remain confident in delivering an EBITDA margin more than 30%, supported by sustained cost discipline, stronger operating leverage and the continued improvement in our Nigerian operations. With that, I will hand the call back over to Tarek and Sherif, who will take you through key trends across our markets and a more detailed breakdown of our financial performance of the period. Thank you very much. Tarek Yehia: Thank you, Dr. Hend. This year, we have continued to operation in relatively stable conditions with supportive macro trends and constructive across all our key markets as we approach the end of 2025. In Egypt, we are continuing to see slower inflation compared to prior years with the latest trading of September coming at a multi-month low of 11.7%. [ Decreasing ] increasing inflation pressure have been supported by relative strengthening of EGP versus dollar as well as increased ForEx inflows into Egypt as investor confidence recovers and remittance continue to rise. In fact, in recent weeks, we have seen EGP continuing to appreciate, reaching a low of 47.3 to dollar in October and as low as 46.92 last week. Successful rate cuts throughout the year continued to reach 6.25 points have now brought the overnight deposits to 21%. This will undoubtedly help prop up local investments activity and drive further recovery in consumer spending. Similar to Egypt, Nigeria also has seen relative stability in 2025. Inflation has come down from last year highs and expected to support gradual recovery in consumer spending. Over in Jordan and Saudi, the economic situation remained largely stable despite increased regional uncertainty. While Saudi Arabia economic could be tested by the ongoing global trade tensions, we remain confident that the excellent work done by the Saudi government to build resilience in the economy will help safeguard the country. Turning quickly to our latest results. Egypt continued to deliver strong growth with revenue rising 44% year-on-year, supported by both volume expansion and significant increase in average revenue per test, particularly driven by radiology and high-volume diagnostics. Meanwhile, Jordan continued its solid performance, reporting revenue growth in both AP and local currency terms. Test volume increased by 21% year-on-year, supported by Biolab ongoing promotion campaign and digital outreach initiatives. In a market where volume-driven growth is critical for long-term sustainability, we are pleased to see Biolab's strategy continue to deliver strong volume momentum and patient retention through community engagement and service quality. In Nigeria, Echo-Lab has maintained its positive EBITDA momentum supported by successful implementation of our turnaround strategy launched last year. We are increasingly confident in long-term potential for our Nigerian subsidiary to expand its radiology and specialized testing capability and capture the significant upside of a growing market. In Saudi, the ramp-up progressed ahead of expectations with revenue more than quadrupling year-on-year and [ subscription ] growth supported by increasing brand visibility and network expansion. Finally, in Sudan, operation remains significantly constrained by the ongoing conflict with only one branch partially operating and no material updates to report at this stage. I will now handle the call to Mr. Sherif, who will provide a more detailed overview of our cost and profitability for the first 9 months. Sherif Mohamed El Zeiny: Good morning -- good afternoon, ladies and gentlemen and thank you for your time today. As Tarek mentioned, during my presentation, I will focus on costs, margins, profitability and our working capital position before opening up the floor to your questions. In line with our guidance, profitability for the first 9 months of the year has continued to improve, supported by our group-wide efforts to boost operational efficiency and keep spending at bay. A major focus area over the last 18 months has been digitalization, where we have continued integrating advanced data tools and analytics into our internal platforms, procurement systems and financial planning to enhance decision-making and improve cost discipline. These efforts, combined with a stronger operation leverage and better resource allocation helped drive meaningful improvements in efficiency with both COGS and SG&A as a share of revenue declining versus last year. In parallel, we also -- we are also keenly focused on keeping costs down. Our efforts here have translated in a 9 percentage point drop in our total cost to revenue ratio for that period compared to last year. More specifically, our COGS to revenue ratio improved to 57% in 9 months '25, down from 62% in the same period of last year, supported by disciplined inventory management and stronger purchasing processes. The most notable improvements came within raw materials, which decreased to 19.6% of revenue, down from 21.9% last year, reflecting our scale advantages and smarter procurement practices. At the same time, total wage and salaries as a share of revenue remained broadly stable, underscoring our balance between supporting our staff with appropriate salary adjustment while continuing to optimize headcount. As you can see in the bottom right chart, these efficiency gains translated directly into a stronger profitability with gross profit margin expanding to 43% from 38% last year and EBITDA margins rising to 35% from 30% in 9 months 2024. On the SG&A front, spending remains well contained with SG&A as a share of revenue declined to 15%. The main increase within SG&A was in advertising and marketing expenses, which continued to support the ramp-up in Saudi Arabia and targeted promotional initiatives in Egypt and Jordan. Moving to our bottom line. We reported a net profit of EGP 964 million in 9 months 2025, up 33% year-on-year. As highlighted earlier, last year's reported net profit, including substantial ForEx gains, which distort direct comparisons. When controlling for those ForEx gain, adjusted net profit increased more than 119% year-on-year with an associated adjusted net profit margin of 17% versus 11% last year. As always, we maintained a disciplined approach to working capital management as we supported rising demand while preserving strong liquidity. Similarly, we saw our cash conversion cycle improved further to reach 127 days in September 2025 versus 155 days at the end of '24. It is also important to mention that as expected, we saw a decline in days inventory outstanding, stronger sales momentum and more efficiency inventory turnover during the second and third quarters of the year following the seasonal Ramadan slowdown in March. Finally, as 30th of September 2025, our total cash reserves stood at EGP 1.8 billion with a net cash balance of EGP 271 million. Thank you for your attention. We now welcome any questions you may have. Thank you. Ahmed Moataz: [Operator Instructions] There is one question in the chat on whether you're at a position right now to disclose the planned price increases in Egypt that would start from January of 2026. Tarek Yehia: We're still in the process of preparing the budget, and it's too early to comment on this but of course, will be a price increase for next year. Ahmed Moataz: Understood. The second is on whether you can disclose a time line for the breakeven for Nigeria -- sorry, Saudi operations. And if you have a targeted revenue contribution over, let's say, 3, 5 or even longer than that as a percentage of total revenue. Tarek Yehia: For the EBITDA, we are expecting a breakeven by end of 2026. Ahmed Moataz: Understood. And is there something on the revenue contribution as well? Tarek Yehia: Revenue continued to grow year-over-year and contribution to the top line still less than 1% but by time, gradually will increase. Still Egypt represents 82% and Jordan represents 14%, 84% for Egypt and 14% for Jordan. Ahmed Moataz: All right. Two questions from [ Johannes ]. Can you talk us through the change of ownership of the Actis stake and what you expect from Elliott? That's one. The second is, what is your dividend policy at the moment? Hend El Sherbini: So I mean the Actis stake has been bought by Elliott as a part of a bigger deal. We don't really have any visibility on this right now. And regarding the dividends, as usual, any money that we have, which are not used for investments and for the work, we give it back as -- we give it back to investors as dividends, as long as it's -- we are able to do that. Ahmed Moataz: [Operator Instructions] We'll take questions from the line of [ Darren ]. Unknown Analyst: Dr. Hend, you just -- you commented that the Actis sale is part of a bigger deal. What does that mean exactly? Do you have any other color there you can share? Hend El Sherbini: I know that Actis have [ exited ] private equity and they sold their shares in IDH and other companies to Elliott. But I don't know exactly -- I don't have the exact details of this deal. Unknown Analyst: Okay. Understood. So you're saying there's other businesses that have been sold to Elliott. And you haven't had -- the management team hasn't had any correspondence with Elliott at all? They haven't reached out to you or you guys haven't reached out to them to get a sense of what their plans are? Hend El Sherbini: I've seen them when I was in London. I've met with them. And -- but this was like an introductory meeting, nothing -- no specifics. Unknown Analyst: And do you have a sense, is it their intention just to be passive shareholders? Is it a purely financial investment? Or is there something more strategic? My understanding is they have, I think, interest in another Egyptian diagnostics business, if that's correct? Hend El Sherbini: No, this I don't know. Which other diagnostic business? Unknown Analyst: I think it's a much smaller one but they were part of a transaction in last year, I believe. But I can't remember the name of the firm but anyways. Hend El Sherbini: I haven't heard -- and they didn't mention it, no. Ahmed Moataz: We received 2 questions in the chat. I'll take them one by one. First one is how much CapEx have you got planned for Saudi operations and expansions? Tarek Yehia: For Saudi, we have a plan for the next 5 years with a CapEx of $20 million. Ahmed Moataz: All right. This is 2025 included? Or when you say 5 years, this is 2026 and beyond? Tarek Yehia: This starts from 2026. Ahmed Moataz: Starts from 2026. Okay. Two more questions in the chat. The first one, [indiscernible]. Please, can you share your expectations on growth beyond this year in terms of volume and value? And can you also comment on market-specific growth expectations? Tarek Yehia: We're still in the process of preparing the budget but we are aiming to targeting growth across all the geographies we are working at -- operating in. Ahmed Moataz: Understood. [ Ali Masood ] is asking, how many Actis Board representatives are on IDH's Board? And any expectations on if and when those members will step down? Hend El Sherbini: So there's only one Board member from Actis and he's also representing -- I mean, he's not stepping down because he's -- I think he's going to be also Elliott's representative. Ahmed Moataz: Understood. Can you comment on your expectations for branch additions in Egypt in 2026? Will it be at a similar level to 2025, higher or low? Tarek Yehia: It is -- we're still also the same for the budget. We're still in the process but we will see growth in the number of branches as -- and our growing brand -- ongoing process of growth each year. Ahmed Moataz: Sure. [indiscernible] is asking, how will the growing contribution from Saudi impact group returns and margins when Saudi is in steady state? Tarek Yehia: After 5 years for the 5-year plan for Saudi to represent 7% from the group revenue. Ahmed Moataz: Okay. And the question was more on how do you expect this when it has a 7% revenue contribution to impact your overall returns and margins. I think the question is trying to assess whether Saudi operations by itself is margin accretive or not relative to what you're generating right now and at the same time, return accretive or not? Do you want me to repeat the question? Hend El Sherbini: We're expecting it in the 5 years to be in the vicinity of the 30%, if this is -- if this answers the question. Ahmed Moataz: [Operator Instructions] All right. We haven't received any -- no, we actually did one, sorry, 2 questions. What does the $20 million Saudi CapEx imply for the number of branches in Saudi 2030 Vision. Sorry, one second, I'll re-read the question. Actually, we'll skip this one and I'll go back to it. Are margins at 38% sustainable? Or do you think it's a function of the strong EGP FX taking place this year? Hend El Sherbini: I mean, as long as we have a stable currency, I think this is sustainable. We're getting back to our 40% margins. And the strong FX has nothing to do with our improvement in margin. However, the stabilization of the currency is, of course, is helping in maintaining our margins. Ahmed Moataz: All right. Back to [ Farooq's ] question. How does the $20 million Saudi CapEx imply for the number of branches by 2030? So by the end of the year plan, how many -- or by the end of the 5 years, how many total branches you have in Saudi? That's one. And the second is, is the Saudi strategy branch-focused more? I think he means corporate or wholesale contract focus because [ Farooq ], can you send a clarification on the second part of the question until they answer the branches part? Hend El Sherbini: So we're expecting 45 branches by the end of the 5 years. And this is where the CapEx is going together with, of course, the instruments and everything else. This in terms of CapEx. In terms of revenue, we're expecting a breakdown of 50% corporate and 50% walk-in. Ahmed Moataz: Understood. Could you also please talk us through the outlook on margins for Jordan? Tarek Yehia: Jordan margin for the current year, in the range of 30%. Ahmed Moataz: All right. [ Ali Naser ] is asking, can you please provide details on the Cairo Ray acquisition? What was the investment size? And what is the annualized P&L impact on the consolidated level? And lastly, how much did it impact third quarter results? Tarek Yehia: The total investment cost was around $400 million. sorry, EGP 400 million. Ahmed Moataz: And the rest of the question, please, what is the annualized P&L impact? And how much did it impact third quarter results? Tarek Yehia: For the quarter, it is minimal because we already consolidated for a small portion in Q3. The same will apply for Q4 and more contribution will be done in the full year next year. Ahmed Moataz: Understood. [indiscernible] is asking, what is a stable long-term level for COGS and SG&A as a percentage of revenue? How much more cutting or savings do you expect and the potential uplift to EBITDA margins? Tarek Yehia: For the COGS to revenue ratio, which already improved to 57% in the 9 months, coming down from 62%, we're expecting we can go down 1% or 2 more percent going forward. And also for the SG&A, it already went down from 21.9% to 19.6%. And going forward, we can see 1% or 2% more advantage from recruitment and a lot of cost optimization that we are in process improvement year-over-year. Ahmed Moataz: Understood. [ Marina ] is asking, how do you see the contract and walk-in dynamic play out in Egypt over time, let's say, for the next -- sorry, 3 to 5 years? Do you expect contract volumes to continue growing faster than walk-ins? And what does that mean for longer-term margins? Hend El Sherbini: So yes, we expect the contract contribution to grow. However, we're also seeing increase in the walk-in volumes. So both are increasing. And this -- I mean, this is not -- this is affecting -- this is not really affecting our margins directly because in the corporates, we are seeing increased volumes. So the test per patient in the corporate side is much higher than in the walk-in side. And as this is an economy of scale, we always want both things, the increase in volume as well as the increase in pricing. So this is -- I think this dynamic we have been seeing for a few years now and it hasn't affected our margins. Ahmed Moataz: Understood. [indiscernible] is asking, volume growth in Egypt was solid at 9%. Is this primarily driven by the 103 new branches opened over the last year? Or are you seeing same-store sales growth in the more mature branches? Hend El Sherbini: We are seeing volume growth in both the new and the existing branches on both sides, corporate and walk-ins. Ahmed Moataz: [indiscernible] has a question. Unknown Analyst: Just a follow-up on the question I asked about Cairo Ray. I don't think you answered that. Please again but I know you bought it for EGP 400 million but I wanted to ask about what is the revenue of this company? What's the EBITDA of this company? What's the net income of this company on a trailing 12-month basis or maybe '26 basis? Sherif Mohamed El Zeiny: Our full year estimates on the top line is around EGP 52 million and on the EBITDA level, around EGP 16 million. This translates to around 30% EBITDA margin. Ahmed Moataz: All right. I'll pass it back to you, Dr. Hend, Sherif or Tarek for any concluding remarks. Tarek Yehia: Thank you, everyone. If you have any more questions, you have our contact. We're happy to have a follow-up call, any -- respond to any e-mails. Thank you, everyone, for attending today and thank you, Ahmed, for hosting the call. Hend El Sherbini: Thank you. Thank you, everyone. Ahmed Moataz: Thank you, everyone, and to IDH's management as well. Have a good rest of the day, everyone. This concludes today's earnings call. Tarek Yehia: Thank you.

184天前Insight Analytics约5分钟阅读

CALEF 2026 Q2 财报电话会议

Operator: Good morning, everyone, and thank you for joining us today for Caledonia Investments Plc Half Year Results Presentation. [Operator Instructions] Please note that this call is being live streamed to a webcast for a wider audience and will be recorded. I would now like to hand over to Mat Masters, Chief Executive Officer, to open the presentation. Please go ahead. Mat Masters: Hello. I'm Mat Masters, CEO of Caledonia Investments, and welcome to our results presentation for our half year to 30th September 2025. You will also hear from Tom Leader, who leads our private capital strategy; and Rob Memmott, our Chief Financial Officer. Before we go through these results, a short reminder about Caledonia. We are long-term stewards of our shareholders' capital, including the Cayzer family who have entrusted us with theirs for generations. Looking after multigenerational capital shapes everything we do. We need to make returns, but do so whilst limiting the risk of losing capital. We target absolute returns of inflation plus 3% to 6%, and this influences the level of risk we're prepared to take. Over time, our approach to investing has delivered results at the top end of this target range at 9.8% per annum, outperforming inflation by 6.5% per annum, and we have consistently increased our dividend for over half a century. Our approach to investing is straightforward. We invest in high-quality businesses and hold them for the long term. Our maximum time well invested captures the essence of our approach perfectly. Our in-house investment team is fully aligned with shareholders. We do not manage anyone else's money, and there is no fundraising. Performance is measured against NAV per share over time and rewarded in Caledonia shares. So our incentives are directly tied to long-term value creation. Our investment strategy is perfectly encapsulated by time well invested. We use our strong balance sheet, long-term approach and in-house investment team to underpin our focus on long-term results and be robust during downturns and in fact, aim to use these to our advantage. We're organized across 3 main strategies, providing access to private and public companies across different sectors and geographies. We're looking for the same 3 key ingredients, which are attractive markets to operate in, resilient businesses with strong fundamentals and return characteristics and that are well managed and aligned with shareholders. The strategies have together generated Caledonia's overall performance, which is shown in the chart. Over 5 and 10 years, we have delivered at or beyond the top end of our targets and across all periods, both NAV per share total return and share price total return have kept ahead of inflation, which is our core aim. In the last 3 years, share price total return has been stronger than NAV per share total return as the discount has reduced from 37% to 33%. Moving on to the highlights for the half year. We're pleased to report another positive performance with NAV total return of 4.4% and total shareholder return of 8.5%. This was driven by strong public companies and private capital performance, partially offset by funds and including the impact of the pound strengthening against the dollar, reducing NAV by approximately 2%. Today, we are announcing our interim dividend of 3.68p per share, which reflects the change in dividend payment profile to 50% of the prior year's annual total dividend. This dividend will be paid on 8th of January 2026. Moving on to public companies. This comprises 2 portfolios, each taking a concentrated approach to making long-term investments in high-quality companies. We're looking for high-quality, durable businesses, which we think have got great futures ahead of them. We aim to buy well and hold for the long term. The overall public company strategy delivered 9.9%, driven by a capital portfolio and within that, primarily Oracle, Microsoft and Alibaba who are benefiting from continuing demand for cloud-based services, including AI. We initiated a new position in Charles Schwab, the U.S.-listed brokerage business that we've been tracking since 2017. We like Schwab because of its massive scale with just over $10 trillion in client assets and market-leading focus on driving down costs for its clients. Its track record speaks for itself with annualized total shareholder return of 17% since it listed in 1987. It's well managed with good continuity of leadership with the eponymous Charles Schwab still on the board. We deployed GBP 35 million, mostly on 7th of April, shortly after President Trump's Liberation Day, which was followed by a downturn in the equity markets and presented the lowest price that Schwab and the market traded in the last year. This derisked our point of entry and is a good demonstration of our time well invested approach. We purposely set ourselves up to buy shares in wonderful companies when they become more attractively priced. On the same theme, Oracle delivered a standout performance for us, and we were able to realize gains, selling 3/4 of the value of our holding at the start of the period as its share price doubled and its risk characteristics changed. We first invested in Oracle in 2014 when it was rated as legacy tech and judged late to the cloud and as a service. We look closer and saw a business with a good market position in an attractive market, excellent business fundamentals with high levels of recurring revenue and plans to increase this and excellent returns metrics, run by a management team that was certainly aligned with shareholders and very well proven. Our analysis helped us establish that long-term ownership was very likely to be rewarded. And as you can see from the chart, Oracle took a little while to get going, but we could see that they were doing what great long-term businesses do, which is accept some short-term pain as they invested in a comprehensive move to the cloud and as-a-service offering, whilst using their low rating to undertake a massive share buyback with them buying back $120 billion of their shares and the share count reduced by 38%. As their transition to the cloud and as a service became better understood by the market, share price performance improved. And more recently, Oracle's cloud offering and incumbent position in corporate and governmental data places them very well for AI, and this has driven the doubling of its share price during the first half of our year. Our overall investment performance from only Oracle has been good with GBP 35 million invested, delivering GBP 101 million in cash returns through top slicing and dividends with the position worth GBP 89 million at the end of the period, so 5.4x our money. I will now hand over to Tom to talk about private capital. Tom Leader: Thank you, Mat. Today, I'll walk you through our performance, portfolio highlights and recent developments, focusing on how we continue to support private companies in creating enduring value. As a reminder, Caledonia Private Capital is focused on making direct investments, usually on a majority basis into high-quality mid-market U.K.-centric businesses. Our model is built on permanent capital, genuine partnership, a patient long-term perspective with moderate use of leverage. Unlike private equity firms whose funds have limited life spans, restricting the time when investments must be made, grown and sold, we have no time limitations on our investments. We can build genuine partnerships with strong management teams and help them create enduring value without the constraints of short-term capital. Our current portfolio has a net asset value of GBP 907 million, invested across 8 companies and represents approximately 30% of the NAV of Caledonia as a whole. For the half year, we delivered a total return of 7.7%. This result was primarily driven by the agreed sale of our minority stake in Stonehage Fleming to Corient Wealth, on which we exchanged contracts in September, along with continued good operating performance from AIR-serv. I will cover Stonehage Fleming in a bit more detail on the next slide. But clearly, the sale, when it completes, will deliver an excellent result for Caledonia. AIR-serv was another strong performer, valued at GBP 193 million as at 30th of September. In the half year, it delivered an 11% return, driven by strong revenue and profit growth. The business paid Caledonia a dividend of GBP 24.5 million in the period. The other companies in the portfolio continue to make progress in executing their value creation plans. Looking at our long-term performance, Private capital has delivered annualized returns of 8.5% over 3 years, 20.7% over 5 years and 12.5% over 10 years, all versus our 14% target. Stonehage Fleming is a full-service multifamily office, helping discerning clients address the challenges of creating and preserving wealth. It is focused on the ultra-high net worth market, which is the fastest-growing segment of the wealth market. The firm's clients have entrusted it with the management, fiduciary oversight and administration of assets in excess of USD 175 billion. Stonehage Fleming provides its services from 20 offices in 14 geographies. With an initial investment of approximately GBP 90 million in July 2019, we acquired a minority stake alongside Giuseppe Ciucci and the other founder partners. The management were not looking for a conventional private equity investor, but instead for a capital provider, which shared their long-term perspective and multigenerational approach to preserving and growing capital. Together, we restructured the balance sheet and the shareholder base of the group to position it for the next phase of growth. Over the following 6 years, we have worked in close partnership with the leadership team to deliver upon our original investment thesis, which entailed, first, streamlining the governance structure by financing and supporting succession management; second, investing in technology, which improved margins and allowed Stonehage Fleming to internalize services that were previously outsourced; third, enhancing business development, which delivered strong organic growth; and fourth, completing 4 strategic acquisitions, which have expanded the firm's geographic reach and diversified its product and service offering. The business has been a consistent performer, a true compounder. Strong cash generation and disciplined reinvestment have driven returns steadily upward through our ownership. This investment is a hallmark example of our unique approach, long-term partnership-driven and unconstrained by fixed fund life and has delivered exceptional value for all stakeholders. We expect the deal to close in mid-2026, subject to the required regulatory consents at which point it should deliver cash proceeds of approximately GBP 288 million, representing including dividends received along the way, a 3.2x multiple on cost of investment. As of 30th September, Stonehage Fleming was valued in the portfolio at GBP 259.7 million, net of approximately 10% discount to reflect the transaction execution risk and the time value of money. The bubble chart here illustrates for all our major realizations since 2012 on the X-axis, the realized IRR and on the Y-axis, the NAV uplift at exit compared to the carrying value 12 months prior to exit. For Stonehage Fleming, the expected exit proceeds of GBP 288 million represent a 30% uplift to its carrying value as at the 31st of March 2025. This result is comparable with a 37% uplift relative to the carrying value when we sold 7iM in January 2024. Overall, across the portfolio, we have a strong track record of realizations. Since 2012, we've generated GBP 1.4 billion in proceeds, returning around GBP 700 million in net cash to Caledonia. Our realized investments have delivered a 17% IRR and a 2x multiple on cost, which, given the low appetite for and use of leverage, compares very favorably with the returns delivered by U.K. mid-market private equity. Let me finish by saying we continue to deliver strong and consistent returns, underpinned by our disciplined approach and the strength of our partnerships. The success of Stonehage Fleming exemplifies the power of our permanent capital model, enabling us to back exceptional businesses and management teams, support their long-term growth and realize substantial value for our shareholders. Thank you, and I'll now hand over to Rob. Rob Memmott: Thank you, Tom. Our funds pool has been running for more than 15 years. The opportunity is significant. These funds tend not to market in Europe, meaning that we are often the only European investor, a real differentiator. The pool NAV of GBP 884 million is a diverse portfolio invested in some 82 funds by 46 managers and in more than 600 underlying businesses. 64% of the NAV is focused on the North America lower mid-market buyouts. The funds are typically the first institutional investment into relatively small often owner-managed businesses. The playbook is to transform the companies by strengthening the management team, improving operational efficiency, growing sales by product and geography, both organically and through bolt-on acquisitions. These improved companies with greater scale provide feedstock to mid-market private equity. It's a very pure form of capitalism. Of the North American companies, 2/3 are providing services with the balance having very little exposure to international trade flows. 36% of the pool NAV is invested in Asian buyout, growth and venture. The buyout assets are focused on domestic consumption and supply chains, fueled by the aging population, growing middle class and tech adoption. The venture and growth funds are invested in government supported new technologies and health. Whilst there is very limited exposure to the direct impact of trade tariffs, as expected, economic uncertainty has reduced investment and realization activity in the short term. The pool has delivered solid returns of 13.3% over 5- and 10-year periods. Performance over the 6 months reflects the continuation of trends experienced for the last 3 years. During that period, the North American pool delivered local currency returns of 8.9%, driven by the trading performance of the underlying companies. In Asia, the companies are making progress. However, the continued reduction in capital market flows has impacted on fundraising and exits suppressing our returns. Overall, the pool NAV grew by 4.3% in local currency, but reduced by 1.8% in sterling. Our capital commitments are GBP 394 million, 75% of which is to North America. GBP 52 million was invested in the 6-month period and $55 million of new commitments were made to 2 North American managers. Looking at the cash flows in a bit more detail. The chart shows the realization and investment activity over recent 6-month periods. As I mentioned earlier and as expected, economic uncertainty has reduced investment activity in the last 6 months, which can be seen on the graph. The pie chart details the weighted average life of the primary portfolio. For North America, the weighted average life is 4.3 years. For Asia, it's 5.5 years. We expect a longer hold period in Asia given that the assets are weighted towards venture growth and fund of fund investments. And so to the numbers. During the 6-month period, our NAV total return was 4.4%, growing our NAV to just over GBP 3 billion, of which GBP 2.9 billion is invested in a diversified portfolio of listed and privately held companies and funds that have got global reach. Cash on balance sheet was GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million, enables us to act quickly to invest in companies and funds that we find attractive. This was demonstrated in April when we deployed approximately GBP 50 million into the public company strategy, taking advantage of opportunities provided by the market volatility around Liberation Day. We have reprofiled the interim dividend such that it is 50% of the prior year total. This equates to 3.68p, which will be paid to shareholders on the 8th of January 2026. And now to my beloved waterfall chart. This chart shows the movement in NAV over the period. We started the year at GBP 2.9 billion. The portfolio return of GBP 145 million includes the negative impact of foreign exchange. We then deduct management expenses of GBP 17 million. There is then the cash returned to shareholders, GBP 14 million allocated to share buybacks and GBP 28 million for the final dividend from the prior year. That results in a closing NAV of just over GBP 3 billion. Our OCR is 87 basis points, slightly up on the prior year, reflecting some investment in our teams. I expect this to increase slightly over the next 12 months, taking account of full year effects. 54% of our assets are domiciled in U.S. dollars and 37% in sterling. Movements in the sterling-dollar exchange rate will, therefore, impact our in-period results. In the last 6 months, we suffered an FX loss of GBP 59 million, reducing our NAV by approximately 2%. We have a robust balance sheet with no structural leverage. Walking you through the cash movements, we started the year with GBP 151 million, and net GBP 27 million has been invested. The investment income from our assets was GBP 47 million, higher than in previous periods as it includes the GBP 25 million dividend from AIR-serv. We have consumed GBP 24 million in the cash cost of management expenses and working capital. And next, there is the payment of the prior year final dividend, GBP 28 million and GBP 14 million allocated to share buybacks, resulting in a closing cash position of GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million means that we have liquidity of GBP 430 million. Of the revolving credit facility, GBP 150 million has just under 4 years remaining duration and GBP 175 million just under 2 years. We expect to complete the sale of Stonehage Fleming in Q2 2026 once all the regulatory approvals are obtained. GBP 251 million will be received on completion with 2 further amounts of GBP 18 million being due 6 and 12 months following. These amounts will come back on to the balance sheet. We feel no pressure to invest, and we will continue to appraise investment opportunities on their merits and as they arise. The discount at the end of the period was 33%. We believe this fundamentally undervalues the quality of the portfolio, our track record and prospects. We are taking actions over the things that we can control, including share buybacks, which remain an attractive investment for us. We have a prudent capital allocation policy to investments, our dividend and when appropriate, share buybacks. During the 6 months, we allocated GBP 14 million to share buybacks, increasing the total since March '24 to GBP 78 million, delivering a 7.44p NAV per share accretion. We continue to evolve our IR and communications to ensure that the Caledonia investment proposition is understood and rated. We held capital market spotlight events in January and June, focused on private capital and public companies. If you've not had the opportunity, I would encourage you to visit the website and watch the presentations. They provide a great insight into how the pools operate, what differentiates us and how we add value. When you visit the website, you will see that this has been significantly improved with new content. A date for your diaries, the 27th of January 2026, we will be holding the third spotlight session focused on the funds pool. We believe Caledonia is a great home for long-term investors. Following shareholder approval, we have completed the 10 for 1 share split. In addition, we have rebalanced the profile of the dividend, increasing the interim to 50% of the prior year total rather than the historic rate of approximately 25%. These measures will improve visibility of income, make payments more balanced, and I expect will improve accessibility for all shareholders. I'll now pass back to Mat. Mat Masters: Thanks, Rob. We're pleased with our 6-month performance, which supports our track record of delivering NAV total return of 9.8% per annum over the last 10 years, which is at the top end of our target range. Across both public and private markets, our portfolio is high quality, diversified and deliberately positioned to withstand short-term market volatility while compounding value over time. And none of this would be possible without our strong balance sheet, exceptional team fully aligned with shareholders and focused on long-term value creation. Thank you very much for joining us today, and we will now take questions. Operator: [Operator Instructions] Our first question comes from Iain Scouller with Stifel. Iain Scouller: I just wanted to ask about the valuation of Stonehage. I think in the statement, you're saying it's at a 5% discount to the expected proceeds. But in the presentation, you're talking about a 10% discount. So I just wondering if you could clarify that. Tom Leader: Certainly, the total discount relative to the expected proceeds is approximately 10%, comprising 2 separate adjustments: one, approximately 5% discount for execution risk and a 5% discount for the time value of money. The total discount relative to the expected proceeds is 10%. Iain Scouller: Okay. And when do you expect to receive the proceeds? Tom Leader: We expect to receive the proceeds on completion of all the regulatory approvals. But there are, in fact, slightly more than 20 regulatory approvals required in multiple jurisdictions. That process will take several months. So we expect the deal to complete towards the back end of the first half of calendar 2026. Operator: Our next question comes from Anthony Leatham with Peel Hunt. Anthony Leatham: A couple of questions, if I may. You were particularly active kind of April, that liberation day volatility on the public company side. How are you feeling about the environment and the positioning of the portfolio today? And then I had a couple of questions on the private equity side. Maybe a comment on the maturity profile of the funds portfolio. And then we're hearing from private equity trusts and managers that realization activity is actually improving. And I didn't know whether you had seen the same trend within your holdings. Mat Masters: Anthony, thanks for the question. Mat here. So yes, we did. So following President Trump's what's been Liberation Day sort of announcements and things, the stock markets sold off. And we added -- very pleased to add Charles Schwab to the portfolio. And that is absolutely sort of the playbook when we sort of invest in the quoted markets is to keep our powder dry until opportunities present themselves. And we also topped up other holdings in the wake of that, and that's all thus far performed very well for us. The portfolio is a long-term portfolio. We try not to judge precisely where it is on any particular day, but we do feel as we risk manage the portfolio as we go forward, we obviously talk about the fact that we to Oracle as that went up in value and loss rating went up, we did that across the whole portfolio. So we feel good about the medium and long-term prospects of the portfolio. Obviously, impossible to predict what share prices do on a day-to-day basis, I'm sure you'll appreciate. Maybe Rob could tackle the funds questions. Rob Memmott: Yes. Thanks, Anthony. Just in terms of the fund’s activity, as we mentioned in the presentation, the level of realization and investment activity in the last 6 months has reduced quite significantly. And what we're seeing is that start to increase the weighted average life of the portfolio compared to where we were a year ago. In terms of recent activity in the market, certainly, there is sort of noise of increased activity taking place. We're yet to see that sort of flow through into sort of real pound notes coming back through to us. And certainly, from a sort of planning and thinking about sort of liquidity, we're sort of still quite cautious in terms of the speed of that recovery getting back up to the norms, which I guess we were experiencing in the prior financial year. Operator: [Operator Instructions] There are no further questions on the webinar. I will now hand over to [Beck Hughes] to read out the written questions. Please go ahead. Unknown Executive: So the first question is about Oracle. What is your view and future prospects for your Oracle holding? And have you sold any more since the period end? Mat Masters: Thanks for the question. Mat here again. So we think Oracle has a fantastic future ahead of it. Most of its current trading is still sort of legacy type business. And what's really happened is its forward order book, it's grown a lot and a lot of that is sort of AI related. So actually, that's reflecting the opportunity expanding ahead of it. So we're quite excited about the future for Oracle. Nevertheless, the rating has changed materially during the period. And so we do sort of respond to that. And so we have also the size of the position during the we talked about the money we've had it over the course of our investment period. But over the year -- over the half year rather, we've taken GBP 54 million of it. So we have trimmed the holding according to the change in risk -- really around rating risk with it. We remain pretty excited about its medium and long-term future. Unknown Executive: A question on Stonehage. Are the proceeds contingent on anything or just deferred? And what are the most attractive areas for new investment? Tom Leader: So dealing with the Stonehage completion mechanism first. As I alluded to earlier, completion is conditional on reg approval in multiple jurisdictions. That will crystallize payment of the bulk of the proceeds, just over GBP 250 million. There is a deferred element, which is payable in 2 tranches 6 and 12 months post completion. Those deferred proceeds are interest-bearing, and they are subject to adjustment depending on the finalization of a closing balance sheet audit, which includes a true-up mechanism. So that could go either up or down, positive or negative against the estimated closing balance sheet just prior to closing. So there is bound to be a small difference between the 2, but we do not expect it to be material. In terms of the second part of the question, future opportunities, we scan somewhere between 300 and 350 new opportunities a year across a very broad range of sectors. Our historic strengths have been in financial services and business services and technology-driven industrial businesses. And there is a regular flow of opportunities in all of those sectors. But I would add that it is a difficult market in which to deploy capital. Good quality assets are still transacting at very high prices, and less good quality assets are either taking longer to sell or not selling at all. So we will remain selective and we have the liquidity to finance new acquisitions if and when we can find the right opportunity. Unknown Executive: Thanks, Tom. A question around discount. What plans do you have to reduce the very large discount now the buyback may have marginal benefits, but does not seem to benefit? And why have you only bought back GBP 13 million worth of stock given the discount is just over 30% and you have a lot of liquidity. Rob Memmott: Yes. Thank you, Beck. So as you rightly point out, the discount of around 33%, we certainly feel undervalues the value of the portfolio, our track record and our prospects. I guess the buybacks, we sort of see those as an investment opportunity for us. We don't see that -- we don't have a discount control mechanism. The things that we are doing to influence the discount are the things that we can control, which is continue to invest in a good quality, high-quality portfolio, make sure that we communicate with as large an investor base as possible to make sure that we -- the proposition is properly understood and rated. And then there are some smaller sort of tactical things that we've done around the share split, rebalancing the dividend payment to make sure that the shares are as attractive to a broader investor base as possible. Unknown Executive: Another question here about hedging. You mentioned return in sterling is diminished by your U.S. dollar weakness. Do you hedge? Rob Memmott: And the answer to that is that we do not hedge. We're a long-term investor. And if you like, the short-term volatility coming from exchange rates, we sort of understand those and sort of monitor them, but it is about sort of long-term sort of value sort of creation. And generally, if you sort of hedge the balance sheet position, you pay a premium in order to end up in the same place. So we don't hedge unless there are specific cash flows that we would do so for. And I think that the weighting of the portfolio is more dollar denominated reflects the fact that the size and the quality of the companies which we're investing in, a lot of those are based in North America or headquartered in North America. Unknown Executive: Another question here on special dividend. In the past, there was a loose policy of providing a special dividend every 3 years or so. Is this policy still operative? Mat Masters: So we have -- thanks for the question. We have a track record of occasionally paying special dividends. I don't think we've ever sort of announced a policy about when we would do it. And we've not made any announcement about paying a special dividend. So that is the case at the moment. Unknown Executive: Another question here about equity market valuations. What do you think of them. Mat Masters: Well, thanks for the question. So equity market valuations vary around the globe, and there'll be one market up and one market not quite so far up. And actually, it's a really difficult question to address and actually respond to in your portfolio. And so what we do is to try and keep it very simple. We invest in good quality companies and hold them for the longer term and try not to worry too much about what's going in the macro and make sure we invest in things where we don't have to worry too much about the macro. Okay. Well, we have gone through the questions now, and we're very grateful for everyone joining us on the call today and for the questions, and we look forward to connecting with you next time. Operator: Thank you for joining today's call. We are no longer live. Have a nice day.

184天前Insight Analytics约5分钟阅读

BZUN 2025 Q3 财报电话会议

Operator: Good morning, ladies and gentlemen, and thank you for standing by for Baozun's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today's call, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy. Wendy Sun: Thank you, operator. Hello, everyone, and thank you for joining us today. Our third quarter 2025 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com as well as on PR Newswire services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website where they are available for your download. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer; Ms. Catherine Zhu, our Chief Financial Officer; Mr. Junhua Wu, Director and Chief Strategy Officer of Baozun Group, and Mr. Ken Huang, Chief Financial Officer of Baozun Brand Management. Mr. Qiu will first share our business strategy and company highlights. Ms. Zhu will then discuss our financials and outlook, followed by Mr. Wu and Mr. Huang, who will share more about our e-commerce and brand management segment, respectively. They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the U.S. Securities Act of 1933 as amended, the U.S. Securities Exchange Act of 1934 as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the United States Securities and Exchange Commission and its announcement notice or other documents published on the website of Stock Exchange of Hong Kong Limited. All information provided in this call is as of the date hereof and is based on assumptions that the company believes to be reasonable as of this date, and the company does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this call are in RMB. You may now turn to Slide #2 for the executive highlights for the quarter. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead. Wenbin Qiu: Thank you, Wendy. Hello, everyone, and thank you all for your time. I'm pleased that Baozun is advancing its strategic transformation with steady momentum, delivering a strong quarter marked by 5% total revenue growth and a big improvement in profitability. Fueled by strong gross margin expansion, our non-GAAP operating loss narrowed to RMB 11 million from RMB 85 million a year ago. These results show that our transformation is effective and demonstrate the strength of our business model. Both of our 2 core engines are driving this success. BEC's solid execution and growing agility continue to deliver strong results this quarter. Building on the 56% year-over-year increase in adjusted operating profit from Q2, BEC achieved its most profitable third quarter in recent years with non-GAAP operating profit of RMB 28 million compared with operating loss of RMB 30 million a year ago. This significant improvement in profitability, along with 6% services revenue growth and strong gains in creative content and marketplace connectivity shows that BEC is now more agile and efficient. BBM continued with strong top line growth with revenue up to 20% year-over-year, driven by impactful merchandising and marketing initiatives. This quarter, we engaged our first Gap China brand ambassador, a top-tier actor with 30 million followers on Weibo and 8 million on Douyin. We also launched a series of marketing campaigns and themed products to deepen emotional connections with local consumers. Hunter continued its brand momentum and opened our new store in Qingdao, bringing Hunter's total offline stores to 8, including 5 in China and 3 in Southeast Asia. These efforts contribute to sales growth, stronger gross margin and improved overall profitability for BBM. In summary, we are firmly on track with our strategic transformation. With a resilient e-commerce foundation, accelerating brand management momentum and the technology as our catalyst, we believe 2025 is a highly productive building phase. We anticipate 2026 to mark our inflection point, shifting from transformation investment to sustained profitable growth. Now I will hand the call over to our team for a deeper dive into our financials and the business performances. Catherine Yanjie Zhu: Thanks, Vincent, and hello, everyone. Now let me provide a more detailed overview of financial results for the third quarter of 2025. Please turn to Slide #3. Baozun Group's total net revenues for the third quarter of 2025 increased by 5% year-over-year to RMB 2.2 billion. Of this total, E-Commerce revenue grew by 2.4% to RMB 1.8 billion, while Brand Management revenue rose by 20% to RMB 396 million. Breaking down E-Commerce revenue by business model, services revenue increased 6.3% year-over-year to RMB 1.4 billion. This increase was driven by revenue growth in online store operations and digital marketing and IT solutions. BEC product sales revenue decreased 8.9% year-over-year to RMB 413.4 million, mainly due to decline in Appliances, and Health and Nutrition categories. BBM product sales totaled RMB 395.2 million, representing a 20% year-over-year growth. This growth was mainly driven by the strong performance of the Gap brand. Please turn to Slide #4. From a profitability perspective, our blended gross margin for product sales at the group level was 34.3%, an expansion of 620 basis points year-over-year. Gross profit increased by 26.1% year-over-year to RMB 277.4 million for the quarter. Breaking this down by our key business lines. Gross margin for E-Commerce product sales expanded to 13.1%, reflecting a 300 basis point improvement compared to 10.2% a year ago. This margin expansion was primarily driven by product mix diversification consistent with our progress throughout the year. Gross margin for BBM was 56.5% compared with 52.8% a year ago, reflecting the success of merchandising and marketing initiatives of BBM. Now please turn to Slide #5 for a walk-through of our OpEx. Sales and marketing expenses increased by 10.7% to RMB 886.6 million. This included an increase of RMB 67.5 million for BEC, which was mainly due to higher spending on creative content on Douyin and RedNote, and more revenue contribution from digital marketing for BEC during the quarter. BBM sales and marketing expenses increased by RMB 18.8 million due to higher front-end expenses from expanded offline network and more marketing initiatives for BBM during the quarter. Fulfillment cost for the quarter was reduced by 4.5% to RMB 495.9 million, reflecting our ongoing efforts in cost optimization. Technology and content expenses decreased by 18.2% to RMB 115.2 million as we continue to enhance tech monetization efficiency. G&A expenses decreased by 4.4% to RMB 168.9 million, primarily attributable to our ongoing efforts in efficiency enhancement and cost optimization. Turning to bottom line items, please refer to Slide #6. During the quarter, our non-GAAP loss from operations was RMB 10.8 million, a sharp improvement from RMB 85.2 million in the same period of last year. BEC's adjusted non-GAAP income from operations was RMB 28.1 million, while non-GAAP loss from operations was RMB 29.8 million a year ago. BBM reported a non-GAAP operating loss of RMB 38.7 million, an improvement of 30% compared to the same period of last year. As of September 30, 2025, our cash and cash equivalents, restricted cash and short-term investments totaled RMB 2.7 billion. Lastly, I'd like to quickly address an accounting update on the balance sheet to reflect expiration of options related to the Cainiao minority investment in Baotong, our warehouse and logistics business. According to the agreement with Cainiao, if certain triggering events occur, Cainiao had the right to exercise a put option requiring Baotong to redeem Baotong's shares within 12 months starting from August 2024. As a result, this investment was originally recorded as redeemable noncontrolling interest, which is a complex financial instrument classified between liabilities and equity. With these options expiring during the third quarter, the investment has now been reclassified as noncontrolling interest and equity item. Following this accounting adjustment, our total equity increased to RMB 5.5 billion compared with RMB 4 billion in the previous quarter. Importantly, this adjustment has no impact on our warehouse and logistics operations. Let me now pass the call over to Junhua to update you on BEC, our E-Commerce business. Junhua Wu: Thanks, Catherine, and hello, everyone. I'm pleased to share our progress and achievements for the third quarter. Building on the momentum established in the first half of the year, we continued advancing our strategic priorities with a clear focus on sustainable profitability and growth. As previously outlined, our 2025 roadmap follows a clear progression, Q1 for adjustment, Q2 for stabilization, and the second half for acceleration. I'm pleased to report that Q3 delivered meaningful progress across key business segments. BEC posted solid performance with a stabilizing revenue based a significantly improved revenue mix and quality, leading to a notable improvement in profitability. On a non-GAAP basis, operating profit reached RMB 28 million, making the most profitable third quarter in the recent years for BEC. Please turn to Slide #7. BEC product sales declined by 9% this quarter, reflecting our transition strategy towards a quality-driven portfolio, optimizing selected clients in the Health and Nutrition category and shifting certain clients in Beauty and Cosmetics category from a DC mode to a service model. In the Appliances category, top line softness persisted as we prioritize profitability over volume. These adjustments followed a thorough review of each segment's market dynamics and have led to stronger profitability under a distribution model. As a result, BEC delivered a 300 basis point improvement in gross profit margin to 13.1% for product sales. Just as importantly, enhancements in procurement discipline and turnaround management drove nearly a 20% improvement in inventory turnover days, enabling us to maintain a healthy and efficient inventory levels. In addition, we remain focused on building a more sustainable and quality-driven distribution portfolio. During the quarter, we achieved healthy growth in Beauty and Cosmetics, Alcohol and Apparel categories. Notably, we are expanding our pipeline into nonstandard categories, including Apparel within distribution mode. By leveraging our Brand Management expertise in our core category, we are increasingly able to apply deeper expertise and a more brand owner-oriented mindset. Looking ahead, we expect BEC product sales to return to top line growth in 2026. Turning to Slide #8. Our services revenue grew by 6% in the third quarter, primarily driven by strong performance from online store operations, which saw 16% growth and a 6% growth in DM and IT solutions. Within online store operations, the core apparel and accessory category was a key driver with all key segments generating encouraging top line growth. The strong performance of our services mode reflects how we have advanced the brand empowerment by utilizing our data-driven insights and expertise, and capturing opportunities from ever-changing industry dynamics. We remain committed to leading innovation in creative content as these are critical for consumer engagement and traffic attraction. On RedNote, we plant content seeds to drive interest and brand awareness, which enhances emotional connection and refines the consumer shopping experience. Furthermore, by leveraging enhanced connectivity between marketplaces such as the Tmall Red Cat and JD R.E.D. Jean collaborations, we help brands to generate better marketing conversion and sales performance. This quarter, we were accredited as a premium service partner, further validating our leadership position on this viral live platform and building on our earlier designation as one of the first batch of Red partners in February. On Douyin, we continue to pioneer live stream content and formats, including scenario-based showcases and celebrity collaborations to drive quality business contribution to our brands. In mid-September, we successfully partnered with a leading international electronics brand to launch its flagship stores to further enhance the brand's cultural engagement and product promotion. This initiative was immediately effective. Within a month, we helped the brand gain 3 million consumer followers and achieved the #1 GMV ranking in its category. We are proud to continue setting new industry benchmarks for Douyin brand e-commerce. Overall, this quarter is another solid quarter for BEC, marked by a return to profitability in a lower seasonality quarter, which demonstrates the effectiveness of our strategic focus on sustainable and high-quality growth. We are actively driving the bottom line through efficiency enhancing measures, including the ongoing application of artificial intelligence and automation tools as well as our lean cost control initiatives. We are confident that the foundation built throughout 2025 will continue to accelerate our momentum and deliver long-term value. Now I'll pass to Ken for an update on BBM. Ken Huang: Thank you, team, and hello, everyone. Please turn to Slide #9 for BBM's performance in the third quarter of 2025. I'm pleased to share that BBM maintained its strong growth momentum this quarter with total revenue growing 20% year-over-year to RMB 396 million. The strong growth was driven by improvements across key operating metrics, including same-store sales, traffic, average transaction value and network expansion. Overall, Gap's same-store sales growth was 7% for the quarter. Gross profit for BBM totaled RMB 223 million, an increase of 28% year-over-year, with gross profit margin expanding to 56.5%, up 370 basis points from 52.8% a year ago. This margin expansion, along with strong top line growth, highlights the effectiveness of our merchandising and marketing initiatives. The higher gross profits, combined with improved operating efficiency, further enhanced our overall profitability. As a result, BBM's non-GAAP operating loss for the quarter improved by 30% to RMB 39 million from RMB 55 million in the same period of last year. Now let me expand on our key initiatives for Gap China in the third quarter. First, marketing, as we made a major leap forward in brand storytelling and culture engagement this quarter. On September 15, we announced the appointment of Cheng Yi, one of China's most acclaimed actors, as the inaugural brand ambassador for Gap China. In accordance, we launched Mind the Gap, Bridge the Gap campaign using music as a bridge to engage younger audiences and reintroduce Gap as a comfort, confident, modern lifestyle brand. We also introduced the Gap Club Capsule collection and upgraded the brand image in our offline stores to reflect stronger creative energy and local relevance. To provide immersive experiences, we hosted 2 pop-up experience stores, one in Shanghai's Anfu Road and one on Shenzhen COCO Park, both featuring live performance, vinyl shops and art collaborations, successfully merging lifestyle and fashion. In this campaign, we also introduced innovative interactions with social PGC and UGC content. These efforts helped us attract more customers, strengthen brand awareness and deliver meaningful business results. In total, the campaign had more than 1.2 billion impression, 9 million interactions and 176,000 new followers. These efforts also drove a 25% increase in young customers and strengthened Gap's position as an authentic and aspirational brand for China's younger generation. Meanwhile, we continue to work closely with Gap Inc. to capitalize on its global marketing assets and upward momentum. This August, Gap Inc. partnered with KATSEYE on the Better in Denim campaign, blending Gap's iconic timeless denim with KATSEYE's contemporary and education sensibilities. And China is one of the few countries that offer KATSEYE's exclusive products to the market, also achieved a very satisfying result. Second, merchandising, which remains the core engine of our growth. We continuously sharpened the product offerings and introduced a higher mix of online exclusive and segmented products across different marketplaces over the summer and fall. We also deepened the collaboration with major platforms through exclusive assortments and joint marketing programs such as Tmall Fashion Show and Douyin Super Brand Day. This tailored e-commerce strategy, coupled with our participation in platform promotional events, accelerated traffic and conversion growth. At the same time, our improved supply chain ensured fast and localized fulfillment. We believe that our agility and flexibility in shifting between online and offline channels has become an important competitive advantage. From a channel perspective, we continue to expand our physical presence. For Gap, we opened 11 new stores in Tier 1 and Tier 2 cities, including Guangzhou and Yichang, while closing 4 low productivity stores. We also started to remodel existing stores in Wuhan and Wuxi this quarter to upgrade our store image, visual merchandising and the customers' experience. This brought the total number of Gap stores to 163 by the end of this third quarter. Together with Hunter's network expansion, our Baozun brand management offline portfolio now stands at 171 stores. In addition, we hosted a National Partner Conference in September, convening a dozen top-tier business partners, which cover all important provinces. Notably, half of these partners were new with strong brand portfolio and operating expertise in their regions. Cooperations with these new partners also aligned with our expansion plan by enhancing our business in the key cities in North, Southwest and South China. This event allowed our partners to directly experience our ascending brand influence and our marketing product and channel strategy in the coming year. Their positive feedback reaffirmed the strong partners' confidence in our brand direction. In summary, BBM delivered another quarter of healthy growth and brand revitalization. Furthermore, our integrated marketing campaigns have laid a solid foundation for the Gap brand to further unlock market potential. This was evident in the big improvements in brand rankings across all key divisions, men's, women's and kids during the most recent Double 11 campaign. This success places us on track to achieve Gap's first breakeven quarter in the upcoming fourth quarter. With both Gap and Hunter building stronger emotional relevance and culture momentum, we are confident in sustaining our growth through year-end and beyond. That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session. Operator: [Operator Instructions] Our first question comes from Alicia Yap with Citigroup. Alicis a Yap: Congrats on the solid results. Two questions. First, can you provide some observations on the latest consumer sentiment? So have you seen any shift of the consumer spending behavior recently, especially with the recent Singles' Day promotions? Any change of the consumer preference in terms of the purchase willingness? And then categories that you have seen doing better than you previously expected, and also categories that performing worse than you anticipated? And then also, what are the brands -- how are the brands' willingness to spend on the marketing budget during this year's Singles' Day? How should we be thinking about the impact from the Singles' Day to the fourth quarter outlook? And then second question is, I know it's a little bit early, but then any comments on the 2026 outlook in terms of your different business segments? And also, what are your top strategic priorities? For example, is there any target for margin expansions or any of these brand expansions? And also, how AI will play a role in helping you to achieve some of your 2026 priorities? Junhua Wu: Okay. This is Junhua. So let me address your first question, and maybe Vincent can address the second one. So in terms of the latest consumer sentiment, from our perspective, according to the just finished Double 11, so we realize that the consumer sentiment is getting better. So you can see a lot of consumers, they are paying for value. So they are not just -- they are being very targeted. They know what they want and they wait until all those kind of the values and profitabilities from the brand and all those coupons are addressed. So especially with the recent promotion, we can definitely expect a very strong finish for the Double 11 this year. And from the preference, so as far as our observation, so it's still towards the sports category and apparel category and the FMCG category follows. So if you're talking about some kind of the categories performing worse than we anticipated, I would say, after the pullback of the subsidiaries of the home appliance category, so consumers rather to wait for another kind of benefit from the platform and from another support when their subsidiaries are supported. But the willingness of the consuming power is still getting stronger and the willingness of the brand in spending marketing budget and allocate our new inventory is getting stronger. So after 6/18 this year and after Double 11, we are saying that we definitely can expect a stronger support in terms of the marketing fee from the brand perspective and the inventory allocation for the new year. A lot of brands during this past Double 11, they are focused on their P&L rather than the GMV growth. So a lot of our brand partners, they have increased their P&L to several point percent and which maybe lead better results from their global strategy. So that's my answer for the first question. Wenbin Qiu: Okay. Thank you for the question. This is Vincent. And I think your second question about our strategies is a very important question. Basically, we have 2 business divisions or units, BEC and BBM. One by one, for BEC, I think next year, the most important job for them to do is to expand the margin, and in the meanwhile, to optimize the cost efficiency. I think these 2 are very important. So for the margin expansion part, we are doing more and more distribution model. We are taking more ownership in the process of the sales, trying to get better margin. That is one side. The other side is that we are initiating a lot of these kind of lean operation initiatives to help us to get a better cost. So it is to do more with less strategy for BEC. On the other hand, we have the BBM business, which the priorities are quite different. So firstly, for the existing brands like Gap, Hunter and others, we are trying to make every brand to be successful business operations. That is very important, not only for the quarter-to-quarter business performance, but also for the future potential of how many and how well we can work with the other brands. So the first priority for the BBM is doing well for each brand. The second thing is that we are trying to develop the synergy between BBM and the BEC, trying to convene more and more knowledge, experiences and mechanisms to BEC to enable them to have more ownership in the distribution business. More ownership always means more margin and puts more potential on profitability. So that is very important. Because in the past 3 years, we spent a lot of time and energy in BBM and we gained, as a group, a lot of solid experiences, how to do higher ownership business. So this kind of knowledge, experience and mechanisms can transfer to BEC to make them a better potential to do this kind of high-quality distribution business, especially in the softer goods sections categories. So in the past more than 1 year, we have some of the experiments. We have several projects, which is quite more, apparel, fashion products, distribution model. They are very successful. So next year, we're trying to expand this model into more brands. So we are expecting a huge potential of growth for this soft goods distribution model. So this gives us a huge potential space to grow the business, not only the top line, but more importantly on the margin expansion side. So that is basically our plan for 2026 and the years ahead. So for the -- of course, we are actively looking for brands for the BBM portfolio. But I think we'll be very careful in bringing new brands in to make sure we have a good chance to be successful each brand, as I mentioned, for the first priority. And also, we are investing in data warehouse, AI, all these kind of technology factors, and we are seeing yields from these efforts and investments. We are going to do this in the future as well. So all these kind of technology, AI capability and data warehouse can contribute in the future. So synergy between BBM and BEC is very important. Just like what Ken just said, Mind the Gap, Bridge the Gap, yes. So BEC and BBM are getting more and more as one. Operator: And the next question comes from Yin Jiawei with CITIC. Jiawei Yin: Congratulations on this quarter's strong performance. I have 2 questions regarding BEC. The first question is that, as we have seen recently, premium consumption has shown signs of stabilizing and recovering. Has the company's relevant categories benefited from this trend? And my second question is, in recent years, the growth gap between content e-commerce and traditional e-commerce has narrowed. Meanwhile, China's online traffic and sales channels has become more diversified. With emerging platforms like RedNote and Bilibili, how does the company view the strategic shift brands should make? And how is Baozun adapting to this change? Junhua Wu: Okay. Let me address your 2 questions. The first one is a very positive answer. So yes. So premium luxury category is still taking the lead of the result, especially after Double 11. So I can make one example about a leading American premium brand, which maintains a 60% Y-o-Y, and the pattern keeps going for the past 3 years. So in this category, if you want to drive a higher margin, a higher GMV, it's not relied on listing more products online, it relies on the content-driven, how do you want to just set up the emotion linkage before making transactions. So I cannot review a lot of details, but if you have the chance to go to our live stream studio for that brand, you can see that. They are scenario-based. They are building a lot of different scenes for selling total look instead of a single article for top or for bottom. So the luxury and premium category, they can provide a very big value for consumers to purchase, and they can provide a lot of history, the brand storytelling, a lot of things. So this is very much promising in the future. And we realize that the consumer shopping is pay for value. So they rather wait until the good momentum and a good window to shop in all those premium and luxury brands. And the second question is related to content e-commerce and traditional e-commerce. So I mean, for the past 2, 3 years, there's no such thing to separate the content with the traditional e-commerce. They are merging together. They are interweaved with each other. You need to just build up the content before making transactions, not just getting the traffic to your store and let them convert. So the RedNote, before they had the Red Cat initiative, they were the UGC platform. That was the pure content. And in the past 6/18, their initiatives, all those RedCat initiatives link all those content to the transaction, which makes that the brands are shifting their strategy, putting a lot of marketing fee and marketing spending into an ROI-driven kind of the initiatives. So more and more brands realize that investing in content and getting more investment into the content creation, set up the emotion linkage is the key, because we can trace all those content, how much ROI can be driven from those content to the transaction. So we are providing -- the platforms are also providing a lot of tools and mechanism to validate all those kind of investments from the marketing to EC operations. So if in the future we believe that in that marketing and EC operation they are going to be rebudgeting for the future growth, from the brand perspective, you need to just harmonize the marketing spending and the EC operation, not just inside performance marketing driving traffic, but also invest in the content to drive from the content to transactions. Yes, that's my answer for 2 questions. Operator: And the next question comes from Joanna Ma with CMBI. Joanna Ma: Congratulations on a strong quarter. So I have 2 questions. The first is regarding what can management share with us regarding your revenue and profitability outlook in the last quarter and also for the full year '26. While my second question is, can management share with us your development plan for BBM business in the full year '26, both regarding Gap, Hunter and other new initiatives? Wenbin Qiu: Okay. This is Vincent. Let me answer these questions. For the first one, right now, we are already in late November. So we can see that from day-to-day business management and updates, we are quite confident for both BEC and BBM results in the coming quarter. We are trying to deliver another solid quarter in the near future. So, so far, I think it is quite on track, and we are quite confident for the results. For the coming year, 2026, we are hoping that both business with its performance and also with the synergy in between to be developed, we are expecting a big improvement in profitability for the whole business. Separately, BEC, we are expecting big improvements and also BBM because we are developing synergy. So in general, we are expecting big improvements for profitability. For the BBM business, as I just mentioned, the priority is that we just make each of the single brand to achieve the expectations and plan we made for this year and next and in the coming 3 years. And also, we are developing a synergy between BEC and the BBM. Certainly, we'll be actively looking for new opportunities, but we'll be very careful in bringing in new brands. So that is about the BBM strategy. Yes. Operator: [Operator Instructions] Our next question comes from [ Tao Xiaoming ] with Huatai Securities. Unknown Analyst: I have 2 questions. The first question is about quick commerce. Driven by the traffic from Taobao's quick commerce on the main app, Taobao's DAU recorded a noticeable year-on-year increase in third quarter with further momentum continuing into 4Q. Have we observed any positive impact from the increase in Taobao main site traffic on our third quarter performance, and in which aspect is this mainly reflected? And looking ahead to fourth quarter, should we expect any sustained positive influence or some potential action on the quick commerce? And my second question is about the recent new regulation on advertising spend and tax. Some of our brands under our portfolio in the beauty category, the new tax policy introduced updated requirements on advertising spending. Have we seen any impact on our advertising operations so far? How should we assess the potential magnitude and extent of this policy's impact on revenue and profitability going forward? Junhua Wu: Okay. Thank you for the question. This is Junhua. Let me address your 2 questions. The first one is related to the instant shopping, quick commerce. So when you're talking about the instant shopping, you need to talk about the categories. The category really just have that business nature, like FMCG, food, wine, some kind of category, they are more related to the instant shopping. So this is not our majority battlefield in the Baozun BEC business growth. We are in the fashion business, in the luxury business, electronic devices. Some of our FMCG and wine brands, they are pilot run and they devote themselves into the quick commerce. But it's very hard for us to imagine a premium luxury brand listing their products next to, for example, like birth control products. So that scenario is not our majority part of the battlefield. And this is the second one. The second one is the traffic pool from the instant shopping to the Tmall and Taobao, they are very different. So they are personalized to a very targeted traffic into different brands. So we are not targeting all those instant shopping traffic rather than we just targeted the OAIPL. So we need to just spend our money wisely in the big pool. So we are focused on more the top tier, I mean, the 300 million among the 800 million traffic among all the Tmall, for example. So this is our target traffic, not the instant shopping traffic. That's the first one. The second one, you mentioned about especially the cosmetics category because we realize that in that category, the marketing spending is mostly bigger than the other categories. But after the pandemic, all the brands are spending their money wisely. So even in the cosmetics brand, the brand doesn't really just spend that much pie like years ago. So within the regulation and policy, we have not realized any kind of impact about the regulation to us. So the brands in that category, also the other categories also still maintain a decent and very logical investment proportion among their GMV. Operator: And the last question comes from Yin Jiawei with CITIC. Jiawei Yin: I have one question regarding BBM. In September, Gap has signed a top-tier brand ambassador, and the Brand Management business also delivered a strong growth this quarter. So what impact has this collaboration had on Gap's brand awareness and user profile? And has there been any synergetic sales growth in other business lines like children's wear? And what is the company's long-term view on Gap's profit potential and the development vision? Ken Huang: Thank you for the question. This is Ken. I will answer your question. Firstly, as I mentioned before, in this campaign, we attracted more customers from the younger generations, 25% increase. It's not only increase in the young generation, but in the whole customer base, we see a big increase in all the AIPL customer base. And more importantly, we see a lot of new UGC content in the social media. Our brand and our products are discussed within the young generations and our consumers. And this campaign also helped us to promote our key category products, especially denim and sweatshirt. Our ambassador wears different colors, different fit, style, logo sweatshirts during the campaign. It helped us further strengthen the brand awareness and the key product awareness to the market. And second, for the kids and baby business, we do see that synergy, because kids and baby is a very strong division of Gap brand. And it's also our advantage because nearly all our stores sell both adult and kids and baby products. So this can be proved from our increase of our units per transaction. So we see more family customers also shop both adult and kids products at the same time. And for your last question about Gap's future profit potential, I think by capitalizing this marketing asset of this full campaign, we will continue using our winning formula to continue to expand our customer base, brand and sales in the coming quarters and the coming year. So we expect to continue our double-digit growth in Q4, around 20% increase. And for next year, we also expect a continuous double-digit increase in our sales. In Q4, we will also introduce our new store image. So with this new store image, we expect a bigger store sales productivity in our new store format in next year. So we will further accelerate our store expansion, keep the momentum of sales growth in both scale and unit stores, which in total, I think, will help us to improve the profit. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Wendy Sun for any closing remarks. Wendy Sun: Thank you, operator. On behalf of the Baozun management team, we'd like to thank you again for your participation in today's call. If you require any further information, feel free to reach out to us. Thank you for joining us today. This concludes the call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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2390.HK 2025 Q3 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Zhihu Inc. Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Today's conference is being recorded and webcasted. At this time, I would like to turn the conference over to Yolanda Liu, Director of Investor Relations. Please go ahead, ma'am. Yolanda Liu: Thank you, operator. Hello, everyone. Welcome to Zhihu's Third Quarter 2025 Financial Results Conference Call. Joining me today on the call from the senior management team are Mr. Zhou Yuan, Founder, Chairman and Chief Executive Officer; and Mr. Wang Han, Chief Financial Officer. Before we begin, I'd like to remind you that today's discussion will include forward-looking statements made under the safe harbor provisions of U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. As such, actual results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward-looking statements, except as required under the applicable law. Additionally, the discussion today will include both GAAP and non-GAAP financial measures for comparison purpose only. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, please refer to our earnings release issued earlier today. In addition, a webcast replay of this conference call will be available on our IR website at ir.zhihu.com. This quarter, Victor Zhou, Zhou Yuan's AI agent will once again deliver the prepared remarks in English on his behalf. Victor is still in training, so we appreciate your patience as he continues to improve. Victor, please go ahead. Yuan Zhou: Thank you, Yolanda. Hello, everyone, and thank you for joining Zhihu Third Quarter 2025 Earnings Call. I am Victor Zhou, and I am pleased to deliver today's opening remarks on behalf of Mr. Zhou Yuan, Founder, Chairman and CEO of Zhihu. The third quarter marked another meaningful step toward our goal of achieving non-GAAP breakeven on a full year basis. As our structural optimization initiatives continue to take effect, we further refined our service offerings and balanced commercialization with community health. We also maintained disciplined cost control and improved operating efficiency. As a result, our non-GAAP operating loss narrowed by 16.3% year-over-year in the third quarter. At the same time, our community ecosystem continues to strengthen user mix and engagement improved, while MAUs increased modestly from the second quarter. Daily time spent continued to trend higher year-over-year and quarter-over-quarter. Our users and creators remain highly active, supporting improved core user retention and a steady stream of reliable high-quality content on the platform. With our high-quality content, expert network and AI capabilities working greater synergy. We are accelerating our agentic AI upgrades to deliver trusted and differentiated experiences to users, both within and beyond the community. As the AI industry enters a new phase of real-world integration and accelerated deployment, Zhihu as a trusted source of high-quality content and data upstream of Chinese LLMs and AI applications is gaining prominence, creating expanding opportunities for collaboration. With rising high-quality content, a highly active base of professional creators and accelerating AI integration, our community ecosystem radiates vitality. Our competitive moat of trusted content continues to strengthen. In the third quarter, daily creation of high-quality content increased by over 25% year-over-year, with professional AI-focused content up by more than 30% compared to the same period last year. As AI technologies and applications rapidly advance in China, Zhihu remains a go-to platform for frontline engineers and researchers for sharing and lively discussions. AI-focused content covers a range of subjects, including deep technical analysis, innovative product applications, emerging industry trends, personal growth, career development and a growing array of emerging topics driven by rapid AI adoption from the technical debate between MiniMax and Moonshot AI over efficient attention, which sparks heated discussions on Zhihu and highlighted China's diverse approaches to LLM innovation to the in-depth engineering analysis of new models shared by leading companies. Zhihu has become a trusted source for authentic first-hand exchanges. These discussions have made our platform a place where AI innovations are first interpreted, validated and shared. Meanwhile, we continue to strengthen our trustworthy content ecosystem through ongoing improvements to content governance mechanisms and recommendation algorithms. Professional creators are a vital force in our community. In the third quarter, daily active high-tier creators increased significantly on both year-over-year and a sequential basis. The number of verified honored creators also grew by 29% year-over-year. Engagement among AI-focused creators also continues to strengthen. Zhihu now brings together more than 60 million continuous learners and 3.56 million proficient creators in science and AI and 150,000 ecosystem builders. These contributors not only add consistent high-quality input to our AI content ecosystem, but also show significant potential as future service providers for enterprises. Beyond the science and AI, creator activity in humanities and social sciences also remains strong across the platform. In September, we launched the co-benefit co-creation initiative [Foreign Language] in collaboration with leading institutions such as Alibaba Foundation, Tencent Charity Foundation, One Foundation, and Greenpeace alongside the psychologists, medical experts and the writers. This initiative generated a wide range of high-quality content across disability rights, mental health, environmental protection and more joining over 80 million views. We also hosted the 2025 Zhihu Humanities Season, Zhihu Renwenji event, which brought creators together through a blend of online and offline engagement. The campaign attracted nearly 30 influential creators, driving a 7.5% quarter-over-quarter increase in creator activity in the humanities category and generating 5.82 million topic views, reinforcing Zhihu's professional influence and cultural relevance. To better support professional creators, we continue to enhance the content creation and distribution experience. Our ideas product supports knowledge-based expression from high-tier creators and enables more diverse short-form content creation among mid-tier creators. As a result, average daily content volume and interactions increased by 21.7% and 33.1% quarter-over-quarter, respectively. Our Circles product also continues to serve as a focused space for users with shared interests to gather and interact with average daily views more than tripling sequentially during the quarter. We also continue to advance our agentic AI upgrades across the community. From a product perspective, Zhihu Zhida evolved into the agentic mode at the end of September, delivering more accurate and smarter search results. Most notably, Zhihu Zhida now serves as a helpful partner for deep thinking and creativity, capable of understanding user intent, performing multistep reasoning and synthesizing information across research, learning and content creation. Our advancements in agentic AI are also amplifying the value of our creators. By strengthening the attribution of content to trusted creators across the knowledge base and search, AI-generated responses now sites to verify the knowledge during the reasoning stage, significantly reducing hallucination and improving trust. This strengthens creator influence within the generative AI landscape and gives Zhihu a distinct advantage as a trusted content provider in the emerging AI ecosystem. Now moving on to commercialization. In the third quarter, our commercialization continued to recover on a healthier base with total revenues reaching RMB 658.9 million in the third quarter. We also made notable progress in exploring new monetization avenues by leveraging our core strengths. Let's take a closer look at our performance by business unit. In the third quarter, marketing services revenue was RMB 189.4 million. Notably, the year-over-year decrease narrowed, indicating the bottoming out of our adjustment cycle. We expect marketing services revenue to begin growing on a sequential basis in the fourth quarter. During the quarter, we made a solid progress in both optimizing our client mix and upgrading our advertising products. We continue to optimize client mix by deepening our focus on high-value accounts with our brand power and expanding commercial IP, driving strong uptake from enterprise clients, particularly in technology and other high-value verticals. In late September, we hosted the TechClub Conference, bringing together AI experts and some of the most influential tech creators from the Zhihu community to explore the latest developments and future applications of AI. The event showcased the technology's transforming role in everyday life and our unique ability to connect professional content with meaningful brand engagement, further expanding our high-value client base. Through the Zhihu platform, leading companies such as Gree, China Mobile, Huawei and FY Tech further strengthened their brand positioning in technological innovation and product excellence. Backed by the credibility of our brand and strong commercial efficiency created by professional discussions across our community, we made a solid progress in acquiring new clients across diverse sectors such as automotive, consumer and health care. This quarter, we also further upgraded a wide range of our commercial products by integrating AI more deeply across our portfolio. Our dual ecosystem optimization and product efficiency engines drove a significant increase in positive feedback from clients. For example, we launched the upgraded CCS for idea scenarios and introduced the product to more clients. By offering this short content plus precise scenarios format, it bridges authentic experiences and purchase decisions for brands and merchants. At the same time, it makes content consumption and the decision-making for users substantially more efficient. We are also seeing rising demand from clients to improve brand and product presentation in AI-generated answers. Leveraging our trusted content and high citation rate across the Internet, we launched our new GEM marketing solution in early November. This new solution provides core insights such as visibility across AI platforms and citation analytics. Leading technology clients we have worked with include Lenovo, FlightTech, Vivo and Proa. We have received a positive endorsement as we help enhance both their SEO and GEO performance for brands and new products. Looking ahead, with a healthier ecosystem, stronger client base and more robust service offerings, we will continue to leverage AI to drive a steady recovery and long-term growth in our marketing services business. And now for our paid membership business. In the third quarter, average monthly paid members increased by 8.1% sequentially to 14.3 million, with revenue reaching RMB 386 million. Our efforts to boost member retention and ARPU through diversified initiatives continue to generate positive feedback from both creators and users. The Yanyan Story long-form writing marathon came to a successful close in late October after 6 months campaign, generating tens of thousands of submissions in the third quarter alone. This initiative opened up new development pathways for aspiring creators and provided a steady pipeline of content for our library and the future IP development. At the same time, voice live streaming saw a further improvement in paid conversion rates. We also unlocked further commercial potential for our IP adaptations in China and overseas. During the quarter, revenue from IP licensing maintained its triple-digit growth rate year-over-year and generated high double-digit growth quarter-over-quarter. Year-to-date, revenue has nearly doubled compared with the same period last year. In mid-October, Yanyan Story debuted at the Frankfurt Book Fair, showcasing Chinese digital literature on a global stage for the first time. It also draw coverage from the U.K. magazine, the bookseller, which noted the new growth path for Chinese short-form digital literature in the international markets. By the end of October, Yanyan Story licensed more than 100 titles for publication across major Asian markets, including Japan, South Korea, Thailand and Vietnam. A number of works have also been adapted into short dramas for overseas markets and performed well, reflecting the growing popularity of Chinese short-form content abroad. Meanwhile, Yanyan Story has established partnerships with international platforms such as Mobile Reader and GoodNovel to translate works into English, Spanish, Japanese, Korean, Portuguese, Thai, Indonesian and other languages, further expanding its international reach. Going forward, we will pursue a diversified set of initiatives to improve member retention and ARPU. By enhancing content supply, membership benefits and personalized experiences, we aim to strengthen long-term member value. As AI enables more efficient content creation, the potential for IP development and commercialization will expand, unlocking new growth opportunities for our membership business. Starting this quarter, we are simplifying our revenue breakdown and will begin reclassifying vocational training revenue into other revenues to align with our overall strategy. Other revenues were RMB 83.9 million, of which we will continue to adjust our vocational training business with a focus on improving operational efficiency and prioritization. Although our vocational training business has been reclassified, we continue to build on its creator-driven foundation with the development of our column product. Designed primarily to serve super creators, column is intended to enhance the creator ecosystem rather than act as a new commercial growth driver. During the quarter, we enhanced the product by rolling out a PC version and AI tools that help creators generate column descriptions and cover designs. This enhancement drove sequential growth in both the number of leading column creators and creator user engagement. Monetization models for column creators is also becoming more diversified with overall GMV more than doubling compared with last quarter. Going forward, we will continue to operate with discipline, maintaining stability while investing prudently for sustainable growth. With the ongoing enhancements in efficiency and steady cost optimization, we are confident in achieving our full year profitability target. Building on this foundation, we will continue to invest with a long-term view to strengthen our AI capabilities and improve the efficiency of our core operations. Deeper AI integrations will drive greater synergies across content creation, distribution and monetized on Zhihu. Meanwhile, we will further refine our product and marketing strategies to capitalize on new growth opportunities from high-quality users and enterprise clients. With a healthier operating structure and ongoing innovation, we are well positioned to thrive in this next stage of high-quality growth. With that, I will hand the call over to our CFO, Wang Han. Han, please go ahead. Wang Han: Now I will review the details of our third quarter financials. For a complete overview of our third quarter 2025 results, please refer to our earnings release issued earlier today. In the third quarter, we maintained disciplined cost management and drove further improvements in operational efficiency. As a result, our non-GAAP operating loss narrowed by 16.3% year-over-year. We continue to invest in areas that reinforce our long-term growth potential, striking a healthy balance between efficiency and investment. Our total revenues for the quarter were RMB 658.9 million compared with RMB 845 million in the same period of 2024. The decrease was mainly the result of our continued efforts to optimize revenue mix and focus on sustainable, high-quality growth. Notably, the year-over-year decrease narrowed for the third consecutive quarter, in line with our expectations. Our marketing services revenue for the quarter was RMB 189.4 million compared with RMB 256.6 million in the same period of 2024. This decrease was mainly driven by our proactive refining of service offerings and optimization of client mix. Encouragingly, the year-over-year decrease narrowed meaningfully, indicating that our adjustment cycle has bottomed out. Paid membership revenue was RMB 385.6 million compared with RMB 459.4 million in the same period of 2024. While the number of average monthly subscribing members fell year-over-year, they rebounded and grew 8.1% sequentially to 14.3 million. We also continued to enhance retention and ARPU through diversified content and membership initiatives. Other revenues were RMB 83.9 million compared with RMB 129 million in the same period of 2024. The decrease was primarily due to the strategic refinement of our vocational training business. Our gross profit for the quarter was RMB 403.6 million compared with RMB 540.1 million in the same period of 2024. Gross margin was 61.3% compared with 63.9% in the same period of 2024. Our total operating expenses for the quarter decreased by 19.4% year-over-year to RMB 503.5 million. The decrease was primarily due to a more efficient cost structure and disciplined resource allocation across key operating areas. Selling and marketing expenses decreased by 14.9% to RMB 330.1 million from RMB 388 million in the same period of 2024. The decrease was mainly due to tighter control over promotional spending and optimized personnel-related expenses. Research and development expenses decreased by 36.2% to RMB 114.4 million from RMB 179.3 million in the same period of 2024. The decrease was primarily driven by continued improvement in research and development productivity and efficiency. General and administrative expenses were RMB 59 million compared with RMB 57.2 million in the same period of 2024. Our GAAP net loss for this quarter was RMB 46.7 million compared with RMB 9 million in the same period of 2024. On a non-GAAP basis, our adjusted net loss was RMB 21 million compared with RMB 13.1 million in the same period of 2024. As of the 30th of September 2025, we had cash and cash equivalents, term deposits, restricted cash and short-term investments of RMB 4.6 billion compared with RMB 4.9 billion as of the 31st of December 2024. As of the 30th of September 2025, we repurchased 31.1 million Class A ordinary shares for an aggregate value of USD 66.5 million on the open market. Additionally, we repurchased a total of 22.5 million Class A ordinary shares for an aggregate value of USD 34.5 million through the trustee of the company as of the end of the third quarter. Looking ahead, we are on track to achieve full year breakeven on a non-GAAP basis. We will continue to further strengthen our monetization capabilities and pursue new revenue opportunities that leverage Zhihu's strength in high-quality content creator expertise and AI-driven innovation. Together, these efforts will reinforce our business resilience and support sustainable long-term growth. This concludes my prepared remarks on our financial performance for this quarter. Let's turn the call over to the operator for the Q&A session. Operator: [Operator Instructions] We will now begin with our first question, and this is from Vicky Wei from Citi. Yi Jing Wei: Will management share some color about the AI progress of Zhihu? For example, the penetration rate of Zhihu Zhida and the progress of the AI integration with the Zhihu Community. Yuan Zhou: [Interpreted] Thank you for question. This is from Zhou Yuan, Zhihu CEO. First of all, I would like to say sorry about my weak voice because I didn't recover yet from my cold. Anyway, I would just start with your first question. So as you can see, Zhida remains one of our key products. Its overall usage and penetration rate continued to increase in the third quarter with the penetration rate existing 15%, nearly 4x higher than the same period last year. This not only reflects the ongoing evolution of our foundational AI capability across the community, but also demonstrates strong user endorsement of a very strategic depending of AI plus community. This also gives us a very strong confidence to continue upgrading this AI plus community experience updates across more touch points. Now let me just share some recent progress and upcoming plans. First of all, in the search scenario, by late November, Zhida will fully augment our general AI search capability to include Zhida-generated content for all users. Additionally, we will soon launch pilot features such as cross-topic content aggregation and the community trend summaries. This will formally navigate Zhida from secondary entry point to a primary one, further boosting AI adoption across the entire community. And second of all, on the content creation side, we are empowering professionals with strong AI copilot. In this quarter, we launched a suite of AI assistant writing tools for our creation assistant, which includes smart headlines, grammar and fact checking and lead paragraph generation. This will help creators optimize long-form structures and expert-level content. So by the end of 3Q, adoption of these new AI features has already surpassed 20%. Looking ahead, we plan to introduce additional capabilities such as AI-powered multi-model content conversion, intelligent formatting and short-form content generation and et cetera. These tools will significantly lower the barrier to entry for mid-tier creators, enabling more users to express themselves effortlessly to increase posting frequency, creation frequency and engage more actively. In addition, on the content consumption and distribution side, we are also expanding Zhida into high-frequency consumption scenarios. For example, AI-powered daily briefing on Zhihu's training topics and other vertical-specific topics as well as the ability to mention Zhida in threats or to also summarize discussions and surface key insights will help users quickly grasp complex conversations and participate more meaningfully. We believe this will further strengthen user engagements and community stickiness. Thank you. Operator: We'll now take the next question. This is from Luqing Zhou from Goldman Sachs. Luqing Zhou: So my question is on how do you see the current status of Zhihu's user ecosystem? And based on that, could management share more color on the directions for improving Zhihu's future product design and how is the progress so far? Yuan Zhou: [Interpreted] Thank you for your question. This is from Zhou Yuan, Zhihu CEO. We believe, overall, the community ecosystem is very healthy. We do not rely on any single metric to assess its health. Instead, we focus on content quality, user structure and user quality and whether our content creator incentives are forming a virtuous cycle. We have also deployed AI as a core product driver at a strategic level. Over the past few quarters, we have made the synergistic development of high-quality content, multiply expert network, multiply AI capabilities as a core path for driving our ecosystem in a positive direction. From this perspective, our ecosystem is stable and continuously improving. This is fully in line with our expectations as well. First of all, the trustworthiness and professionalism of our content are very crucial. They are crucial indicators of the ecosystem health. Over the past few quarters, we have continued to strengthen our trustworthy content ecosystem and our expert network while also cracking down on low-quality content and traffic to keep the ecosystem healthy at its core and reinforce the virtuous cycle. As a result, we have delivered several consecutive quarters of double-digit growth in daily high-quality content creation. The AI category is the most reflective of this progress with the professional AI-related content regarding double-digit growth for 4 consecutive quarters. On this basis, users' trust in our content has also continued to increase steadily. And secondly, our user structure and user quality have improved and users' need across different scenarios has been addressed. As we can see from last Q4, our MAU has remained stable on a sequential basis for 4 consecutive quarters. And building on that, average daily user time spent, which we believe as a proxy for engagement and retention has delivered double-digit year-over-year growth for 6 consecutive quarters. Our users remain mainly young and focused on learning and growth with user age between 18 to 30, accounting for more than 65% of our total user base. Among them frontline professionals in technology and AI have become one of the most representative groups. They have long-term professional learning, frontier exploration and interest development needs and contribute more content and provide a stronger positive feedback to the ecosystem. And last but not the least, the content -- the creator ecosystem continues to grow and expand. Output from top-tier professional creators have remained stable over 7 consecutive quarters. At the same time, by using AI tools, we are continuously lowering the creation threshold for mid-tier creators and increasing the creation frequency of the entire creator group. This makes the supply side of the community more diverse and keep social interaction within the community growing. So in summary, ecosystem health is foundational to Zhihu. Going forward, we'll continue to invest in trust content and expert network so that as a community scales, it can maintain its professionalism, vibrancy and trustworthiness. Let me just turn to the second question you mentioned. It's about our core product going forward plan. Here, we hold a few key beliefs. First of all, over the next 3 years, people will consume more AIGC content. At the same time, human-to-human interaction will become more valuable. So we believe both trends will coexist. And the second belief we hold here is that stronger AI becomes, the more people will experience a sense of diminished presence, which means the participation, social capital and relationships enabled by community will become increasingly scarce and increasingly demanded. And the third belief here is that high-quality human-generated content and data will become extremely scarce as well as valuable on the supply end. This supply matters on both ends. It's crucial for the advancement of AI as well as for human development. So going forward, Zhida will definitely integrate with our users' functional social needs. For example, when a user wants to ask a question, search or look for resources, AI will dramatically raise efficiency. And Zhida will push the community further towards utility, enabling even the first day users to get a meaningful experience immediately. At the same time, we will double down on the social needs that come from real human connection things like building recognized, growing together and finding people who share your identity. We want to build these things with user feel like a sense of belonging in an environment grounded in real people, real culture and trusted interactions. So our future product direction is built around 2 pillars: utility and identity. My hope is for Zhihu to become the connection layer for humans in AI era as a place where people can use AI tools to understand the world as well as a community where they can find renaissance and understanding from one another. At the same time, we plan to build a trusted content and expert network as 2 foundational layers of infrastructure. Thank you. Thank you again for your question. Operator: We will take next question. This is from Daisy Chen from Haitong International. Kewei Chen: Could management update the progress of the adjustments in each business line? Did you see any signs that the revenue has bottomed out or started to rebound? In particular, how do you expect the future of the advertising business? And also, could you share your outlook on the company's profitability? Wang Han: [Interpreted] Thank you for your question, Daisy. This is from Wang Han, Zhihu CFO. So I will just pick up your second question. Here's a quick take on our profitability outlook. After delivering solid profits in the first 2 quarters, we now see a very high likelihood of achieving our first full year non-GAAP profitability in 2025. So with that buffer in place, we are using Q3 and Q4 as a window to keep fine-tuning and investing where needed. That's why you will see -- you can see a small loss in Q3, which is well within what we can comfortably take. Let me just walk through the adjustments across our major revenue lines. First, about the marketing services. As we mentioned last quarter, this Q3 is -- it will become the bottom. And we expect a sequential recovery starting in Q4. What we see now give us confidence to maintain that guidance. Looking ahead to next year, our goal is for each quarter to stay above the baseline set by Q3 this year. And second, about the pay membership. This segment is still in a transition period. As we said before, even the best libraries and bookstores separate fiction from nonfiction, the real challenge here is how to differentiate and integrate them in a way that feels natural to users. We will continue experimenting here. So we cannot say membership -- pay membership revenue has hit its bottom yet. But even if there is some decline, it will be about products or cohorts with lower ROI and weaker profitability or less than ideal retention. Search is about vocational training. This business is no longer a drag on our overall bottom line. Given this relatively low base or small scale, we have now reclassified it into others. So overall, you've seen us deliver several consecutive quarters of profitability followed by the small loss in Q3. Even though we remain confident in achieving full year profitability. With that foundation, we are taking this period to make necessary adjustments and targeted investments. As we approach our first full year of profitability, we also want to use this moment to shed some legacy inefficiencies and to start fresh. We have no intention of staying where we are and simply just squeezing out profits. We are now operating from a healthier foundation and getting back onto a trajectory that aligns with Zhihu's long-term development. Also, we have a solid -- very solid cash position, and we are not reverting to the old model of spending aggressively just forth go. And this new AI cycle or in this AI era, our focus is on strengthening Zhihu's position in real people interactions, expert network and trusted content areas. And these capabilities are becoming increasingly important and carry real social value. Thank you for your questions. Operator: We will now take the next question. And this is from [ Jing Yi Wang from Guangfa ]. Unknown Analyst: Could management share some more color about the shareholder return pay in progress. Wang Han: [Interpreted] Thank you for your question. This is from Wang Han, Zhihu CFO. We can see over the past 2 years, we've been one of the most active buyback companies among U.S.-listed Chinese names. That conviction came from our confidence in reaching profitability. And this year, we expect to demonstrate that our outlook and the targets set 2 years ago are being delivered. Even so Zhihu's current market cap remains significantly below the cash on our balance sheet. So we believe we are super undervalued. Therefore, we intend to maintain our buyback program and expect to remain one of the most active repurchase in this sector. Thank you again for your question. Operator: That concludes today's Q&A session. At this time, I will turn the conference back to Yolanda for any additional or closing remarks. Yolanda Liu: Thank you once again for joining us today. If you have any further questions, please contact our IR team directly or Christensen Advisory. Thank you so much. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

184天前Insight Analytics约5分钟阅读

BZUN 2025 Q3 财报电话会议

Operator: Good morning, ladies and gentlemen, and thank you for standing by for Baozun's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today's call, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy. Wendy Sun: Thank you, operator. Hello, everyone, and thank you for joining us today. Our third quarter 2025 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com as well as on PR Newswire services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website where they are available for your download. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer; Ms. Catherine Zhu, our Chief Financial Officer; Mr. Junhua Wu, Director and Chief Strategy Officer of Baozun Group, and Mr. Ken Huang, Chief Financial Officer of Baozun Brand Management. Mr. Qiu will first share our business strategy and company highlights. Ms. Zhu will then discuss our financials and outlook, followed by Mr. Wu and Mr. Huang, who will share more about our e-commerce and brand management segment, respectively. They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the U.S. Securities Act of 1933 as amended, the U.S. Securities Exchange Act of 1934 as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the United States Securities and Exchange Commission and its announcement notice or other documents published on the website of Stock Exchange of Hong Kong Limited. All information provided in this call is as of the date hereof and is based on assumptions that the company believes to be reasonable as of this date, and the company does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this call are in RMB. You may now turn to Slide #2 for the executive highlights for the quarter. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead. Wenbin Qiu: Thank you, Wendy. Hello, everyone, and thank you all for your time. I'm pleased that Baozun is advancing its strategic transformation with steady momentum, delivering a strong quarter marked by 5% total revenue growth and a big improvement in profitability. Fueled by strong gross margin expansion, our non-GAAP operating loss narrowed to RMB 11 million from RMB 85 million a year ago. These results show that our transformation is effective and demonstrate the strength of our business model. Both of our 2 core engines are driving this success. BEC's solid execution and growing agility continue to deliver strong results this quarter. Building on the 56% year-over-year increase in adjusted operating profit from Q2, BEC achieved its most profitable third quarter in recent years with non-GAAP operating profit of RMB 28 million compared with operating loss of RMB 30 million a year ago. This significant improvement in profitability, along with 6% services revenue growth and strong gains in creative content and marketplace connectivity shows that BEC is now more agile and efficient. BBM continued with strong top line growth with revenue up to 20% year-over-year, driven by impactful merchandising and marketing initiatives. This quarter, we engaged our first Gap China brand ambassador, a top-tier actor with 30 million followers on Weibo and 8 million on Douyin. We also launched a series of marketing campaigns and themed products to deepen emotional connections with local consumers. Hunter continued its brand momentum and opened our new store in Qingdao, bringing Hunter's total offline stores to 8, including 5 in China and 3 in Southeast Asia. These efforts contribute to sales growth, stronger gross margin and improved overall profitability for BBM. In summary, we are firmly on track with our strategic transformation. With a resilient e-commerce foundation, accelerating brand management momentum and the technology as our catalyst, we believe 2025 is a highly productive building phase. We anticipate 2026 to mark our inflection point, shifting from transformation investment to sustained profitable growth. Now I will hand the call over to our team for a deeper dive into our financials and the business performances. Catherine Yanjie Zhu: Thanks, Vincent, and hello, everyone. Now let me provide a more detailed overview of financial results for the third quarter of 2025. Please turn to Slide #3. Baozun Group's total net revenues for the third quarter of 2025 increased by 5% year-over-year to RMB 2.2 billion. Of this total, E-Commerce revenue grew by 2.4% to RMB 1.8 billion, while Brand Management revenue rose by 20% to RMB 396 million. Breaking down E-Commerce revenue by business model, services revenue increased 6.3% year-over-year to RMB 1.4 billion. This increase was driven by revenue growth in online store operations and digital marketing and IT solutions. BEC product sales revenue decreased 8.9% year-over-year to RMB 413.4 million, mainly due to decline in Appliances, and Health and Nutrition categories. BBM product sales totaled RMB 395.2 million, representing a 20% year-over-year growth. This growth was mainly driven by the strong performance of the Gap brand. Please turn to Slide #4. From a profitability perspective, our blended gross margin for product sales at the group level was 34.3%, an expansion of 620 basis points year-over-year. Gross profit increased by 26.1% year-over-year to RMB 277.4 million for the quarter. Breaking this down by our key business lines. Gross margin for E-Commerce product sales expanded to 13.1%, reflecting a 300 basis point improvement compared to 10.2% a year ago. This margin expansion was primarily driven by product mix diversification consistent with our progress throughout the year. Gross margin for BBM was 56.5% compared with 52.8% a year ago, reflecting the success of merchandising and marketing initiatives of BBM. Now please turn to Slide #5 for a walk-through of our OpEx. Sales and marketing expenses increased by 10.7% to RMB 886.6 million. This included an increase of RMB 67.5 million for BEC, which was mainly due to higher spending on creative content on Douyin and RedNote, and more revenue contribution from digital marketing for BEC during the quarter. BBM sales and marketing expenses increased by RMB 18.8 million due to higher front-end expenses from expanded offline network and more marketing initiatives for BBM during the quarter. Fulfillment cost for the quarter was reduced by 4.5% to RMB 495.9 million, reflecting our ongoing efforts in cost optimization. Technology and content expenses decreased by 18.2% to RMB 115.2 million as we continue to enhance tech monetization efficiency. G&A expenses decreased by 4.4% to RMB 168.9 million, primarily attributable to our ongoing efforts in efficiency enhancement and cost optimization. Turning to bottom line items, please refer to Slide #6. During the quarter, our non-GAAP loss from operations was RMB 10.8 million, a sharp improvement from RMB 85.2 million in the same period of last year. BEC's adjusted non-GAAP income from operations was RMB 28.1 million, while non-GAAP loss from operations was RMB 29.8 million a year ago. BBM reported a non-GAAP operating loss of RMB 38.7 million, an improvement of 30% compared to the same period of last year. As of September 30, 2025, our cash and cash equivalents, restricted cash and short-term investments totaled RMB 2.7 billion. Lastly, I'd like to quickly address an accounting update on the balance sheet to reflect expiration of options related to the Cainiao minority investment in Baotong, our warehouse and logistics business. According to the agreement with Cainiao, if certain triggering events occur, Cainiao had the right to exercise a put option requiring Baotong to redeem Baotong's shares within 12 months starting from August 2024. As a result, this investment was originally recorded as redeemable noncontrolling interest, which is a complex financial instrument classified between liabilities and equity. With these options expiring during the third quarter, the investment has now been reclassified as noncontrolling interest and equity item. Following this accounting adjustment, our total equity increased to RMB 5.5 billion compared with RMB 4 billion in the previous quarter. Importantly, this adjustment has no impact on our warehouse and logistics operations. Let me now pass the call over to Junhua to update you on BEC, our E-Commerce business. Junhua Wu: Thanks, Catherine, and hello, everyone. I'm pleased to share our progress and achievements for the third quarter. Building on the momentum established in the first half of the year, we continued advancing our strategic priorities with a clear focus on sustainable profitability and growth. As previously outlined, our 2025 roadmap follows a clear progression, Q1 for adjustment, Q2 for stabilization, and the second half for acceleration. I'm pleased to report that Q3 delivered meaningful progress across key business segments. BEC posted solid performance with a stabilizing revenue based a significantly improved revenue mix and quality, leading to a notable improvement in profitability. On a non-GAAP basis, operating profit reached RMB 28 million, making the most profitable third quarter in the recent years for BEC. Please turn to Slide #7. BEC product sales declined by 9% this quarter, reflecting our transition strategy towards a quality-driven portfolio, optimizing selected clients in the Health and Nutrition category and shifting certain clients in Beauty and Cosmetics category from a DC mode to a service model. In the Appliances category, top line softness persisted as we prioritize profitability over volume. These adjustments followed a thorough review of each segment's market dynamics and have led to stronger profitability under a distribution model. As a result, BEC delivered a 300 basis point improvement in gross profit margin to 13.1% for product sales. Just as importantly, enhancements in procurement discipline and turnaround management drove nearly a 20% improvement in inventory turnover days, enabling us to maintain a healthy and efficient inventory levels. In addition, we remain focused on building a more sustainable and quality-driven distribution portfolio. During the quarter, we achieved healthy growth in Beauty and Cosmetics, Alcohol and Apparel categories. Notably, we are expanding our pipeline into nonstandard categories, including Apparel within distribution mode. By leveraging our Brand Management expertise in our core category, we are increasingly able to apply deeper expertise and a more brand owner-oriented mindset. Looking ahead, we expect BEC product sales to return to top line growth in 2026. Turning to Slide #8. Our services revenue grew by 6% in the third quarter, primarily driven by strong performance from online store operations, which saw 16% growth and a 6% growth in DM and IT solutions. Within online store operations, the core apparel and accessory category was a key driver with all key segments generating encouraging top line growth. The strong performance of our services mode reflects how we have advanced the brand empowerment by utilizing our data-driven insights and expertise, and capturing opportunities from ever-changing industry dynamics. We remain committed to leading innovation in creative content as these are critical for consumer engagement and traffic attraction. On RedNote, we plant content seeds to drive interest and brand awareness, which enhances emotional connection and refines the consumer shopping experience. Furthermore, by leveraging enhanced connectivity between marketplaces such as the Tmall Red Cat and JD R.E.D. Jean collaborations, we help brands to generate better marketing conversion and sales performance. This quarter, we were accredited as a premium service partner, further validating our leadership position on this viral live platform and building on our earlier designation as one of the first batch of Red partners in February. On Douyin, we continue to pioneer live stream content and formats, including scenario-based showcases and celebrity collaborations to drive quality business contribution to our brands. In mid-September, we successfully partnered with a leading international electronics brand to launch its flagship stores to further enhance the brand's cultural engagement and product promotion. This initiative was immediately effective. Within a month, we helped the brand gain 3 million consumer followers and achieved the #1 GMV ranking in its category. We are proud to continue setting new industry benchmarks for Douyin brand e-commerce. Overall, this quarter is another solid quarter for BEC, marked by a return to profitability in a lower seasonality quarter, which demonstrates the effectiveness of our strategic focus on sustainable and high-quality growth. We are actively driving the bottom line through efficiency enhancing measures, including the ongoing application of artificial intelligence and automation tools as well as our lean cost control initiatives. We are confident that the foundation built throughout 2025 will continue to accelerate our momentum and deliver long-term value. Now I'll pass to Ken for an update on BBM. Ken Huang: Thank you, team, and hello, everyone. Please turn to Slide #9 for BBM's performance in the third quarter of 2025. I'm pleased to share that BBM maintained its strong growth momentum this quarter with total revenue growing 20% year-over-year to RMB 396 million. The strong growth was driven by improvements across key operating metrics, including same-store sales, traffic, average transaction value and network expansion. Overall, Gap's same-store sales growth was 7% for the quarter. Gross profit for BBM totaled RMB 223 million, an increase of 28% year-over-year, with gross profit margin expanding to 56.5%, up 370 basis points from 52.8% a year ago. This margin expansion, along with strong top line growth, highlights the effectiveness of our merchandising and marketing initiatives. The higher gross profits, combined with improved operating efficiency, further enhanced our overall profitability. As a result, BBM's non-GAAP operating loss for the quarter improved by 30% to RMB 39 million from RMB 55 million in the same period of last year. Now let me expand on our key initiatives for Gap China in the third quarter. First, marketing, as we made a major leap forward in brand storytelling and culture engagement this quarter. On September 15, we announced the appointment of Cheng Yi, one of China's most acclaimed actors, as the inaugural brand ambassador for Gap China. In accordance, we launched Mind the Gap, Bridge the Gap campaign using music as a bridge to engage younger audiences and reintroduce Gap as a comfort, confident, modern lifestyle brand. We also introduced the Gap Club Capsule collection and upgraded the brand image in our offline stores to reflect stronger creative energy and local relevance. To provide immersive experiences, we hosted 2 pop-up experience stores, one in Shanghai's Anfu Road and one on Shenzhen COCO Park, both featuring live performance, vinyl shops and art collaborations, successfully merging lifestyle and fashion. In this campaign, we also introduced innovative interactions with social PGC and UGC content. These efforts helped us attract more customers, strengthen brand awareness and deliver meaningful business results. In total, the campaign had more than 1.2 billion impression, 9 million interactions and 176,000 new followers. These efforts also drove a 25% increase in young customers and strengthened Gap's position as an authentic and aspirational brand for China's younger generation. Meanwhile, we continue to work closely with Gap Inc. to capitalize on its global marketing assets and upward momentum. This August, Gap Inc. partnered with KATSEYE on the Better in Denim campaign, blending Gap's iconic timeless denim with KATSEYE's contemporary and education sensibilities. And China is one of the few countries that offer KATSEYE's exclusive products to the market, also achieved a very satisfying result. Second, merchandising, which remains the core engine of our growth. We continuously sharpened the product offerings and introduced a higher mix of online exclusive and segmented products across different marketplaces over the summer and fall. We also deepened the collaboration with major platforms through exclusive assortments and joint marketing programs such as Tmall Fashion Show and Douyin Super Brand Day. This tailored e-commerce strategy, coupled with our participation in platform promotional events, accelerated traffic and conversion growth. At the same time, our improved supply chain ensured fast and localized fulfillment. We believe that our agility and flexibility in shifting between online and offline channels has become an important competitive advantage. From a channel perspective, we continue to expand our physical presence. For Gap, we opened 11 new stores in Tier 1 and Tier 2 cities, including Guangzhou and Yichang, while closing 4 low productivity stores. We also started to remodel existing stores in Wuhan and Wuxi this quarter to upgrade our store image, visual merchandising and the customers' experience. This brought the total number of Gap stores to 163 by the end of this third quarter. Together with Hunter's network expansion, our Baozun brand management offline portfolio now stands at 171 stores. In addition, we hosted a National Partner Conference in September, convening a dozen top-tier business partners, which cover all important provinces. Notably, half of these partners were new with strong brand portfolio and operating expertise in their regions. Cooperations with these new partners also aligned with our expansion plan by enhancing our business in the key cities in North, Southwest and South China. This event allowed our partners to directly experience our ascending brand influence and our marketing product and channel strategy in the coming year. Their positive feedback reaffirmed the strong partners' confidence in our brand direction. In summary, BBM delivered another quarter of healthy growth and brand revitalization. Furthermore, our integrated marketing campaigns have laid a solid foundation for the Gap brand to further unlock market potential. This was evident in the big improvements in brand rankings across all key divisions, men's, women's and kids during the most recent Double 11 campaign. This success places us on track to achieve Gap's first breakeven quarter in the upcoming fourth quarter. With both Gap and Hunter building stronger emotional relevance and culture momentum, we are confident in sustaining our growth through year-end and beyond. That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session. Operator: [Operator Instructions] Our first question comes from Alicia Yap with Citigroup. Alicis a Yap: Congrats on the solid results. Two questions. First, can you provide some observations on the latest consumer sentiment? So have you seen any shift of the consumer spending behavior recently, especially with the recent Singles' Day promotions? Any change of the consumer preference in terms of the purchase willingness? And then categories that you have seen doing better than you previously expected, and also categories that performing worse than you anticipated? And then also, what are the brands -- how are the brands' willingness to spend on the marketing budget during this year's Singles' Day? How should we be thinking about the impact from the Singles' Day to the fourth quarter outlook? And then second question is, I know it's a little bit early, but then any comments on the 2026 outlook in terms of your different business segments? And also, what are your top strategic priorities? For example, is there any target for margin expansions or any of these brand expansions? And also, how AI will play a role in helping you to achieve some of your 2026 priorities? Junhua Wu: Okay. This is Junhua. So let me address your first question, and maybe Vincent can address the second one. So in terms of the latest consumer sentiment, from our perspective, according to the just finished Double 11, so we realize that the consumer sentiment is getting better. So you can see a lot of consumers, they are paying for value. So they are not just -- they are being very targeted. They know what they want and they wait until all those kind of the values and profitabilities from the brand and all those coupons are addressed. So especially with the recent promotion, we can definitely expect a very strong finish for the Double 11 this year. And from the preference, so as far as our observation, so it's still towards the sports category and apparel category and the FMCG category follows. So if you're talking about some kind of the categories performing worse than we anticipated, I would say, after the pullback of the subsidiaries of the home appliance category, so consumers rather to wait for another kind of benefit from the platform and from another support when their subsidiaries are supported. But the willingness of the consuming power is still getting stronger and the willingness of the brand in spending marketing budget and allocate our new inventory is getting stronger. So after 6/18 this year and after Double 11, we are saying that we definitely can expect a stronger support in terms of the marketing fee from the brand perspective and the inventory allocation for the new year. A lot of brands during this past Double 11, they are focused on their P&L rather than the GMV growth. So a lot of our brand partners, they have increased their P&L to several point percent and which maybe lead better results from their global strategy. So that's my answer for the first question. Wenbin Qiu: Okay. Thank you for the question. This is Vincent. And I think your second question about our strategies is a very important question. Basically, we have 2 business divisions or units, BEC and BBM. One by one, for BEC, I think next year, the most important job for them to do is to expand the margin, and in the meanwhile, to optimize the cost efficiency. I think these 2 are very important. So for the margin expansion part, we are doing more and more distribution model. We are taking more ownership in the process of the sales, trying to get better margin. That is one side. The other side is that we are initiating a lot of these kind of lean operation initiatives to help us to get a better cost. So it is to do more with less strategy for BEC. On the other hand, we have the BBM business, which the priorities are quite different. So firstly, for the existing brands like Gap, Hunter and others, we are trying to make every brand to be successful business operations. That is very important, not only for the quarter-to-quarter business performance, but also for the future potential of how many and how well we can work with the other brands. So the first priority for the BBM is doing well for each brand. The second thing is that we are trying to develop the synergy between BBM and the BEC, trying to convene more and more knowledge, experiences and mechanisms to BEC to enable them to have more ownership in the distribution business. More ownership always means more margin and puts more potential on profitability. So that is very important. Because in the past 3 years, we spent a lot of time and energy in BBM and we gained, as a group, a lot of solid experiences, how to do higher ownership business. So this kind of knowledge, experience and mechanisms can transfer to BEC to make them a better potential to do this kind of high-quality distribution business, especially in the softer goods sections categories. So in the past more than 1 year, we have some of the experiments. We have several projects, which is quite more, apparel, fashion products, distribution model. They are very successful. So next year, we're trying to expand this model into more brands. So we are expecting a huge potential of growth for this soft goods distribution model. So this gives us a huge potential space to grow the business, not only the top line, but more importantly on the margin expansion side. So that is basically our plan for 2026 and the years ahead. So for the -- of course, we are actively looking for brands for the BBM portfolio. But I think we'll be very careful in bringing new brands in to make sure we have a good chance to be successful each brand, as I mentioned, for the first priority. And also, we are investing in data warehouse, AI, all these kind of technology factors, and we are seeing yields from these efforts and investments. We are going to do this in the future as well. So all these kind of technology, AI capability and data warehouse can contribute in the future. So synergy between BBM and BEC is very important. Just like what Ken just said, Mind the Gap, Bridge the Gap, yes. So BEC and BBM are getting more and more as one. Operator: And the next question comes from Yin Jiawei with CITIC. Jiawei Yin: Congratulations on this quarter's strong performance. I have 2 questions regarding BEC. The first question is that, as we have seen recently, premium consumption has shown signs of stabilizing and recovering. Has the company's relevant categories benefited from this trend? And my second question is, in recent years, the growth gap between content e-commerce and traditional e-commerce has narrowed. Meanwhile, China's online traffic and sales channels has become more diversified. With emerging platforms like RedNote and Bilibili, how does the company view the strategic shift brands should make? And how is Baozun adapting to this change? Junhua Wu: Okay. Let me address your 2 questions. The first one is a very positive answer. So yes. So premium luxury category is still taking the lead of the result, especially after Double 11. So I can make one example about a leading American premium brand, which maintains a 60% Y-o-Y, and the pattern keeps going for the past 3 years. So in this category, if you want to drive a higher margin, a higher GMV, it's not relied on listing more products online, it relies on the content-driven, how do you want to just set up the emotion linkage before making transactions. So I cannot review a lot of details, but if you have the chance to go to our live stream studio for that brand, you can see that. They are scenario-based. They are building a lot of different scenes for selling total look instead of a single article for top or for bottom. So the luxury and premium category, they can provide a very big value for consumers to purchase, and they can provide a lot of history, the brand storytelling, a lot of things. So this is very much promising in the future. And we realize that the consumer shopping is pay for value. So they rather wait until the good momentum and a good window to shop in all those premium and luxury brands. And the second question is related to content e-commerce and traditional e-commerce. So I mean, for the past 2, 3 years, there's no such thing to separate the content with the traditional e-commerce. They are merging together. They are interweaved with each other. You need to just build up the content before making transactions, not just getting the traffic to your store and let them convert. So the RedNote, before they had the Red Cat initiative, they were the UGC platform. That was the pure content. And in the past 6/18, their initiatives, all those RedCat initiatives link all those content to the transaction, which makes that the brands are shifting their strategy, putting a lot of marketing fee and marketing spending into an ROI-driven kind of the initiatives. So more and more brands realize that investing in content and getting more investment into the content creation, set up the emotion linkage is the key, because we can trace all those content, how much ROI can be driven from those content to the transaction. So we are providing -- the platforms are also providing a lot of tools and mechanism to validate all those kind of investments from the marketing to EC operations. So if in the future we believe that in that marketing and EC operation they are going to be rebudgeting for the future growth, from the brand perspective, you need to just harmonize the marketing spending and the EC operation, not just inside performance marketing driving traffic, but also invest in the content to drive from the content to transactions. Yes, that's my answer for 2 questions. Operator: And the next question comes from Joanna Ma with CMBI. Joanna Ma: Congratulations on a strong quarter. So I have 2 questions. The first is regarding what can management share with us regarding your revenue and profitability outlook in the last quarter and also for the full year '26. While my second question is, can management share with us your development plan for BBM business in the full year '26, both regarding Gap, Hunter and other new initiatives? Wenbin Qiu: Okay. This is Vincent. Let me answer these questions. For the first one, right now, we are already in late November. So we can see that from day-to-day business management and updates, we are quite confident for both BEC and BBM results in the coming quarter. We are trying to deliver another solid quarter in the near future. So, so far, I think it is quite on track, and we are quite confident for the results. For the coming year, 2026, we are hoping that both business with its performance and also with the synergy in between to be developed, we are expecting a big improvement in profitability for the whole business. Separately, BEC, we are expecting big improvements and also BBM because we are developing synergy. So in general, we are expecting big improvements for profitability. For the BBM business, as I just mentioned, the priority is that we just make each of the single brand to achieve the expectations and plan we made for this year and next and in the coming 3 years. And also, we are developing a synergy between BEC and the BBM. Certainly, we'll be actively looking for new opportunities, but we'll be very careful in bringing in new brands. So that is about the BBM strategy. Yes. Operator: [Operator Instructions] Our next question comes from [ Tao Xiaoming ] with Huatai Securities. Unknown Analyst: I have 2 questions. The first question is about quick commerce. Driven by the traffic from Taobao's quick commerce on the main app, Taobao's DAU recorded a noticeable year-on-year increase in third quarter with further momentum continuing into 4Q. Have we observed any positive impact from the increase in Taobao main site traffic on our third quarter performance, and in which aspect is this mainly reflected? And looking ahead to fourth quarter, should we expect any sustained positive influence or some potential action on the quick commerce? And my second question is about the recent new regulation on advertising spend and tax. Some of our brands under our portfolio in the beauty category, the new tax policy introduced updated requirements on advertising spending. Have we seen any impact on our advertising operations so far? How should we assess the potential magnitude and extent of this policy's impact on revenue and profitability going forward? Junhua Wu: Okay. Thank you for the question. This is Junhua. Let me address your 2 questions. The first one is related to the instant shopping, quick commerce. So when you're talking about the instant shopping, you need to talk about the categories. The category really just have that business nature, like FMCG, food, wine, some kind of category, they are more related to the instant shopping. So this is not our majority battlefield in the Baozun BEC business growth. We are in the fashion business, in the luxury business, electronic devices. Some of our FMCG and wine brands, they are pilot run and they devote themselves into the quick commerce. But it's very hard for us to imagine a premium luxury brand listing their products next to, for example, like birth control products. So that scenario is not our majority part of the battlefield. And this is the second one. The second one is the traffic pool from the instant shopping to the Tmall and Taobao, they are very different. So they are personalized to a very targeted traffic into different brands. So we are not targeting all those instant shopping traffic rather than we just targeted the OAIPL. So we need to just spend our money wisely in the big pool. So we are focused on more the top tier, I mean, the 300 million among the 800 million traffic among all the Tmall, for example. So this is our target traffic, not the instant shopping traffic. That's the first one. The second one, you mentioned about especially the cosmetics category because we realize that in that category, the marketing spending is mostly bigger than the other categories. But after the pandemic, all the brands are spending their money wisely. So even in the cosmetics brand, the brand doesn't really just spend that much pie like years ago. So within the regulation and policy, we have not realized any kind of impact about the regulation to us. So the brands in that category, also the other categories also still maintain a decent and very logical investment proportion among their GMV. Operator: And the last question comes from Yin Jiawei with CITIC. Jiawei Yin: I have one question regarding BBM. In September, Gap has signed a top-tier brand ambassador, and the Brand Management business also delivered a strong growth this quarter. So what impact has this collaboration had on Gap's brand awareness and user profile? And has there been any synergetic sales growth in other business lines like children's wear? And what is the company's long-term view on Gap's profit potential and the development vision? Ken Huang: Thank you for the question. This is Ken. I will answer your question. Firstly, as I mentioned before, in this campaign, we attracted more customers from the younger generations, 25% increase. It's not only increase in the young generation, but in the whole customer base, we see a big increase in all the AIPL customer base. And more importantly, we see a lot of new UGC content in the social media. Our brand and our products are discussed within the young generations and our consumers. And this campaign also helped us to promote our key category products, especially denim and sweatshirt. Our ambassador wears different colors, different fit, style, logo sweatshirts during the campaign. It helped us further strengthen the brand awareness and the key product awareness to the market. And second, for the kids and baby business, we do see that synergy, because kids and baby is a very strong division of Gap brand. And it's also our advantage because nearly all our stores sell both adult and kids and baby products. So this can be proved from our increase of our units per transaction. So we see more family customers also shop both adult and kids products at the same time. And for your last question about Gap's future profit potential, I think by capitalizing this marketing asset of this full campaign, we will continue using our winning formula to continue to expand our customer base, brand and sales in the coming quarters and the coming year. So we expect to continue our double-digit growth in Q4, around 20% increase. And for next year, we also expect a continuous double-digit increase in our sales. In Q4, we will also introduce our new store image. So with this new store image, we expect a bigger store sales productivity in our new store format in next year. So we will further accelerate our store expansion, keep the momentum of sales growth in both scale and unit stores, which in total, I think, will help us to improve the profit. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Wendy Sun for any closing remarks. Wendy Sun: Thank you, operator. On behalf of the Baozun management team, we'd like to thank you again for your participation in today's call. If you require any further information, feel free to reach out to us. Thank you for joining us today. This concludes the call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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CALEF 2026 Q2 财报电话会议

Operator: Good morning, everyone, and thank you for joining us today for Caledonia Investments Plc Half Year Results Presentation. [Operator Instructions] Please note that this call is being live streamed to a webcast for a wider audience and will be recorded. I would now like to hand over to Mat Masters, Chief Executive Officer, to open the presentation. Please go ahead. Mat Masters: Hello. I'm Mat Masters, CEO of Caledonia Investments, and welcome to our results presentation for our half year to 30th September 2025. You will also hear from Tom Leader, who leads our private capital strategy; and Rob Memmott, our Chief Financial Officer. Before we go through these results, a short reminder about Caledonia. We are long-term stewards of our shareholders' capital, including the Cayzer family who have entrusted us with theirs for generations. Looking after multigenerational capital shapes everything we do. We need to make returns, but do so whilst limiting the risk of losing capital. We target absolute returns of inflation plus 3% to 6%, and this influences the level of risk we're prepared to take. Over time, our approach to investing has delivered results at the top end of this target range at 9.8% per annum, outperforming inflation by 6.5% per annum, and we have consistently increased our dividend for over half a century. Our approach to investing is straightforward. We invest in high-quality businesses and hold them for the long term. Our maximum time well invested captures the essence of our approach perfectly. Our in-house investment team is fully aligned with shareholders. We do not manage anyone else's money, and there is no fundraising. Performance is measured against NAV per share over time and rewarded in Caledonia shares. So our incentives are directly tied to long-term value creation. Our investment strategy is perfectly encapsulated by time well invested. We use our strong balance sheet, long-term approach and in-house investment team to underpin our focus on long-term results and be robust during downturns and in fact, aim to use these to our advantage. We're organized across 3 main strategies, providing access to private and public companies across different sectors and geographies. We're looking for the same 3 key ingredients, which are attractive markets to operate in, resilient businesses with strong fundamentals and return characteristics and that are well managed and aligned with shareholders. The strategies have together generated Caledonia's overall performance, which is shown in the chart. Over 5 and 10 years, we have delivered at or beyond the top end of our targets and across all periods, both NAV per share total return and share price total return have kept ahead of inflation, which is our core aim. In the last 3 years, share price total return has been stronger than NAV per share total return as the discount has reduced from 37% to 33%. Moving on to the highlights for the half year. We're pleased to report another positive performance with NAV total return of 4.4% and total shareholder return of 8.5%. This was driven by strong public companies and private capital performance, partially offset by funds and including the impact of the pound strengthening against the dollar, reducing NAV by approximately 2%. Today, we are announcing our interim dividend of 3.68p per share, which reflects the change in dividend payment profile to 50% of the prior year's annual total dividend. This dividend will be paid on 8th of January 2026. Moving on to public companies. This comprises 2 portfolios, each taking a concentrated approach to making long-term investments in high-quality companies. We're looking for high-quality, durable businesses, which we think have got great futures ahead of them. We aim to buy well and hold for the long term. The overall public company strategy delivered 9.9%, driven by a capital portfolio and within that, primarily Oracle, Microsoft and Alibaba who are benefiting from continuing demand for cloud-based services, including AI. We initiated a new position in Charles Schwab, the U.S.-listed brokerage business that we've been tracking since 2017. We like Schwab because of its massive scale with just over $10 trillion in client assets and market-leading focus on driving down costs for its clients. Its track record speaks for itself with annualized total shareholder return of 17% since it listed in 1987. It's well managed with good continuity of leadership with the eponymous Charles Schwab still on the board. We deployed GBP 35 million, mostly on 7th of April, shortly after President Trump's Liberation Day, which was followed by a downturn in the equity markets and presented the lowest price that Schwab and the market traded in the last year. This derisked our point of entry and is a good demonstration of our time well invested approach. We purposely set ourselves up to buy shares in wonderful companies when they become more attractively priced. On the same theme, Oracle delivered a standout performance for us, and we were able to realize gains, selling 3/4 of the value of our holding at the start of the period as its share price doubled and its risk characteristics changed. We first invested in Oracle in 2014 when it was rated as legacy tech and judged late to the cloud and as a service. We look closer and saw a business with a good market position in an attractive market, excellent business fundamentals with high levels of recurring revenue and plans to increase this and excellent returns metrics, run by a management team that was certainly aligned with shareholders and very well proven. Our analysis helped us establish that long-term ownership was very likely to be rewarded. And as you can see from the chart, Oracle took a little while to get going, but we could see that they were doing what great long-term businesses do, which is accept some short-term pain as they invested in a comprehensive move to the cloud and as-a-service offering, whilst using their low rating to undertake a massive share buyback with them buying back $120 billion of their shares and the share count reduced by 38%. As their transition to the cloud and as a service became better understood by the market, share price performance improved. And more recently, Oracle's cloud offering and incumbent position in corporate and governmental data places them very well for AI, and this has driven the doubling of its share price during the first half of our year. Our overall investment performance from only Oracle has been good with GBP 35 million invested, delivering GBP 101 million in cash returns through top slicing and dividends with the position worth GBP 89 million at the end of the period, so 5.4x our money. I will now hand over to Tom to talk about private capital. Tom Leader: Thank you, Mat. Today, I'll walk you through our performance, portfolio highlights and recent developments, focusing on how we continue to support private companies in creating enduring value. As a reminder, Caledonia Private Capital is focused on making direct investments, usually on a majority basis into high-quality mid-market U.K.-centric businesses. Our model is built on permanent capital, genuine partnership, a patient long-term perspective with moderate use of leverage. Unlike private equity firms whose funds have limited life spans, restricting the time when investments must be made, grown and sold, we have no time limitations on our investments. We can build genuine partnerships with strong management teams and help them create enduring value without the constraints of short-term capital. Our current portfolio has a net asset value of GBP 907 million, invested across 8 companies and represents approximately 30% of the NAV of Caledonia as a whole. For the half year, we delivered a total return of 7.7%. This result was primarily driven by the agreed sale of our minority stake in Stonehage Fleming to Corient Wealth, on which we exchanged contracts in September, along with continued good operating performance from AIR-serv. I will cover Stonehage Fleming in a bit more detail on the next slide. But clearly, the sale, when it completes, will deliver an excellent result for Caledonia. AIR-serv was another strong performer, valued at GBP 193 million as at 30th of September. In the half year, it delivered an 11% return, driven by strong revenue and profit growth. The business paid Caledonia a dividend of GBP 24.5 million in the period. The other companies in the portfolio continue to make progress in executing their value creation plans. Looking at our long-term performance, Private capital has delivered annualized returns of 8.5% over 3 years, 20.7% over 5 years and 12.5% over 10 years, all versus our 14% target. Stonehage Fleming is a full-service multifamily office, helping discerning clients address the challenges of creating and preserving wealth. It is focused on the ultra-high net worth market, which is the fastest-growing segment of the wealth market. The firm's clients have entrusted it with the management, fiduciary oversight and administration of assets in excess of USD 175 billion. Stonehage Fleming provides its services from 20 offices in 14 geographies. With an initial investment of approximately GBP 90 million in July 2019, we acquired a minority stake alongside Giuseppe Ciucci and the other founder partners. The management were not looking for a conventional private equity investor, but instead for a capital provider, which shared their long-term perspective and multigenerational approach to preserving and growing capital. Together, we restructured the balance sheet and the shareholder base of the group to position it for the next phase of growth. Over the following 6 years, we have worked in close partnership with the leadership team to deliver upon our original investment thesis, which entailed, first, streamlining the governance structure by financing and supporting succession management; second, investing in technology, which improved margins and allowed Stonehage Fleming to internalize services that were previously outsourced; third, enhancing business development, which delivered strong organic growth; and fourth, completing 4 strategic acquisitions, which have expanded the firm's geographic reach and diversified its product and service offering. The business has been a consistent performer, a true compounder. Strong cash generation and disciplined reinvestment have driven returns steadily upward through our ownership. This investment is a hallmark example of our unique approach, long-term partnership-driven and unconstrained by fixed fund life and has delivered exceptional value for all stakeholders. We expect the deal to close in mid-2026, subject to the required regulatory consents at which point it should deliver cash proceeds of approximately GBP 288 million, representing including dividends received along the way, a 3.2x multiple on cost of investment. As of 30th September, Stonehage Fleming was valued in the portfolio at GBP 259.7 million, net of approximately 10% discount to reflect the transaction execution risk and the time value of money. The bubble chart here illustrates for all our major realizations since 2012 on the X-axis, the realized IRR and on the Y-axis, the NAV uplift at exit compared to the carrying value 12 months prior to exit. For Stonehage Fleming, the expected exit proceeds of GBP 288 million represent a 30% uplift to its carrying value as at the 31st of March 2025. This result is comparable with a 37% uplift relative to the carrying value when we sold 7iM in January 2024. Overall, across the portfolio, we have a strong track record of realizations. Since 2012, we've generated GBP 1.4 billion in proceeds, returning around GBP 700 million in net cash to Caledonia. Our realized investments have delivered a 17% IRR and a 2x multiple on cost, which, given the low appetite for and use of leverage, compares very favorably with the returns delivered by U.K. mid-market private equity. Let me finish by saying we continue to deliver strong and consistent returns, underpinned by our disciplined approach and the strength of our partnerships. The success of Stonehage Fleming exemplifies the power of our permanent capital model, enabling us to back exceptional businesses and management teams, support their long-term growth and realize substantial value for our shareholders. Thank you, and I'll now hand over to Rob. Rob Memmott: Thank you, Tom. Our funds pool has been running for more than 15 years. The opportunity is significant. These funds tend not to market in Europe, meaning that we are often the only European investor, a real differentiator. The pool NAV of GBP 884 million is a diverse portfolio invested in some 82 funds by 46 managers and in more than 600 underlying businesses. 64% of the NAV is focused on the North America lower mid-market buyouts. The funds are typically the first institutional investment into relatively small often owner-managed businesses. The playbook is to transform the companies by strengthening the management team, improving operational efficiency, growing sales by product and geography, both organically and through bolt-on acquisitions. These improved companies with greater scale provide feedstock to mid-market private equity. It's a very pure form of capitalism. Of the North American companies, 2/3 are providing services with the balance having very little exposure to international trade flows. 36% of the pool NAV is invested in Asian buyout, growth and venture. The buyout assets are focused on domestic consumption and supply chains, fueled by the aging population, growing middle class and tech adoption. The venture and growth funds are invested in government supported new technologies and health. Whilst there is very limited exposure to the direct impact of trade tariffs, as expected, economic uncertainty has reduced investment and realization activity in the short term. The pool has delivered solid returns of 13.3% over 5- and 10-year periods. Performance over the 6 months reflects the continuation of trends experienced for the last 3 years. During that period, the North American pool delivered local currency returns of 8.9%, driven by the trading performance of the underlying companies. In Asia, the companies are making progress. However, the continued reduction in capital market flows has impacted on fundraising and exits suppressing our returns. Overall, the pool NAV grew by 4.3% in local currency, but reduced by 1.8% in sterling. Our capital commitments are GBP 394 million, 75% of which is to North America. GBP 52 million was invested in the 6-month period and $55 million of new commitments were made to 2 North American managers. Looking at the cash flows in a bit more detail. The chart shows the realization and investment activity over recent 6-month periods. As I mentioned earlier and as expected, economic uncertainty has reduced investment activity in the last 6 months, which can be seen on the graph. The pie chart details the weighted average life of the primary portfolio. For North America, the weighted average life is 4.3 years. For Asia, it's 5.5 years. We expect a longer hold period in Asia given that the assets are weighted towards venture growth and fund of fund investments. And so to the numbers. During the 6-month period, our NAV total return was 4.4%, growing our NAV to just over GBP 3 billion, of which GBP 2.9 billion is invested in a diversified portfolio of listed and privately held companies and funds that have got global reach. Cash on balance sheet was GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million, enables us to act quickly to invest in companies and funds that we find attractive. This was demonstrated in April when we deployed approximately GBP 50 million into the public company strategy, taking advantage of opportunities provided by the market volatility around Liberation Day. We have reprofiled the interim dividend such that it is 50% of the prior year total. This equates to 3.68p, which will be paid to shareholders on the 8th of January 2026. And now to my beloved waterfall chart. This chart shows the movement in NAV over the period. We started the year at GBP 2.9 billion. The portfolio return of GBP 145 million includes the negative impact of foreign exchange. We then deduct management expenses of GBP 17 million. There is then the cash returned to shareholders, GBP 14 million allocated to share buybacks and GBP 28 million for the final dividend from the prior year. That results in a closing NAV of just over GBP 3 billion. Our OCR is 87 basis points, slightly up on the prior year, reflecting some investment in our teams. I expect this to increase slightly over the next 12 months, taking account of full year effects. 54% of our assets are domiciled in U.S. dollars and 37% in sterling. Movements in the sterling-dollar exchange rate will, therefore, impact our in-period results. In the last 6 months, we suffered an FX loss of GBP 59 million, reducing our NAV by approximately 2%. We have a robust balance sheet with no structural leverage. Walking you through the cash movements, we started the year with GBP 151 million, and net GBP 27 million has been invested. The investment income from our assets was GBP 47 million, higher than in previous periods as it includes the GBP 25 million dividend from AIR-serv. We have consumed GBP 24 million in the cash cost of management expenses and working capital. And next, there is the payment of the prior year final dividend, GBP 28 million and GBP 14 million allocated to share buybacks, resulting in a closing cash position of GBP 105 million. This, combined with our undrawn revolving credit facility of GBP 325 million means that we have liquidity of GBP 430 million. Of the revolving credit facility, GBP 150 million has just under 4 years remaining duration and GBP 175 million just under 2 years. We expect to complete the sale of Stonehage Fleming in Q2 2026 once all the regulatory approvals are obtained. GBP 251 million will be received on completion with 2 further amounts of GBP 18 million being due 6 and 12 months following. These amounts will come back on to the balance sheet. We feel no pressure to invest, and we will continue to appraise investment opportunities on their merits and as they arise. The discount at the end of the period was 33%. We believe this fundamentally undervalues the quality of the portfolio, our track record and prospects. We are taking actions over the things that we can control, including share buybacks, which remain an attractive investment for us. We have a prudent capital allocation policy to investments, our dividend and when appropriate, share buybacks. During the 6 months, we allocated GBP 14 million to share buybacks, increasing the total since March '24 to GBP 78 million, delivering a 7.44p NAV per share accretion. We continue to evolve our IR and communications to ensure that the Caledonia investment proposition is understood and rated. We held capital market spotlight events in January and June, focused on private capital and public companies. If you've not had the opportunity, I would encourage you to visit the website and watch the presentations. They provide a great insight into how the pools operate, what differentiates us and how we add value. When you visit the website, you will see that this has been significantly improved with new content. A date for your diaries, the 27th of January 2026, we will be holding the third spotlight session focused on the funds pool. We believe Caledonia is a great home for long-term investors. Following shareholder approval, we have completed the 10 for 1 share split. In addition, we have rebalanced the profile of the dividend, increasing the interim to 50% of the prior year total rather than the historic rate of approximately 25%. These measures will improve visibility of income, make payments more balanced, and I expect will improve accessibility for all shareholders. I'll now pass back to Mat. Mat Masters: Thanks, Rob. We're pleased with our 6-month performance, which supports our track record of delivering NAV total return of 9.8% per annum over the last 10 years, which is at the top end of our target range. Across both public and private markets, our portfolio is high quality, diversified and deliberately positioned to withstand short-term market volatility while compounding value over time. And none of this would be possible without our strong balance sheet, exceptional team fully aligned with shareholders and focused on long-term value creation. Thank you very much for joining us today, and we will now take questions. Operator: [Operator Instructions] Our first question comes from Iain Scouller with Stifel. Iain Scouller: I just wanted to ask about the valuation of Stonehage. I think in the statement, you're saying it's at a 5% discount to the expected proceeds. But in the presentation, you're talking about a 10% discount. So I just wondering if you could clarify that. Tom Leader: Certainly, the total discount relative to the expected proceeds is approximately 10%, comprising 2 separate adjustments: one, approximately 5% discount for execution risk and a 5% discount for the time value of money. The total discount relative to the expected proceeds is 10%. Iain Scouller: Okay. And when do you expect to receive the proceeds? Tom Leader: We expect to receive the proceeds on completion of all the regulatory approvals. But there are, in fact, slightly more than 20 regulatory approvals required in multiple jurisdictions. That process will take several months. So we expect the deal to complete towards the back end of the first half of calendar 2026. Operator: Our next question comes from Anthony Leatham with Peel Hunt. Anthony Leatham: A couple of questions, if I may. You were particularly active kind of April, that liberation day volatility on the public company side. How are you feeling about the environment and the positioning of the portfolio today? And then I had a couple of questions on the private equity side. Maybe a comment on the maturity profile of the funds portfolio. And then we're hearing from private equity trusts and managers that realization activity is actually improving. And I didn't know whether you had seen the same trend within your holdings. Mat Masters: Anthony, thanks for the question. Mat here. So yes, we did. So following President Trump's what's been Liberation Day sort of announcements and things, the stock markets sold off. And we added -- very pleased to add Charles Schwab to the portfolio. And that is absolutely sort of the playbook when we sort of invest in the quoted markets is to keep our powder dry until opportunities present themselves. And we also topped up other holdings in the wake of that, and that's all thus far performed very well for us. The portfolio is a long-term portfolio. We try not to judge precisely where it is on any particular day, but we do feel as we risk manage the portfolio as we go forward, we obviously talk about the fact that we to Oracle as that went up in value and loss rating went up, we did that across the whole portfolio. So we feel good about the medium and long-term prospects of the portfolio. Obviously, impossible to predict what share prices do on a day-to-day basis, I'm sure you'll appreciate. Maybe Rob could tackle the funds questions. Rob Memmott: Yes. Thanks, Anthony. Just in terms of the fund’s activity, as we mentioned in the presentation, the level of realization and investment activity in the last 6 months has reduced quite significantly. And what we're seeing is that start to increase the weighted average life of the portfolio compared to where we were a year ago. In terms of recent activity in the market, certainly, there is sort of noise of increased activity taking place. We're yet to see that sort of flow through into sort of real pound notes coming back through to us. And certainly, from a sort of planning and thinking about sort of liquidity, we're sort of still quite cautious in terms of the speed of that recovery getting back up to the norms, which I guess we were experiencing in the prior financial year. Operator: [Operator Instructions] There are no further questions on the webinar. I will now hand over to [Beck Hughes] to read out the written questions. Please go ahead. Unknown Executive: So the first question is about Oracle. What is your view and future prospects for your Oracle holding? And have you sold any more since the period end? Mat Masters: Thanks for the question. Mat here again. So we think Oracle has a fantastic future ahead of it. Most of its current trading is still sort of legacy type business. And what's really happened is its forward order book, it's grown a lot and a lot of that is sort of AI related. So actually, that's reflecting the opportunity expanding ahead of it. So we're quite excited about the future for Oracle. Nevertheless, the rating has changed materially during the period. And so we do sort of respond to that. And so we have also the size of the position during the we talked about the money we've had it over the course of our investment period. But over the year -- over the half year rather, we've taken GBP 54 million of it. So we have trimmed the holding according to the change in risk -- really around rating risk with it. We remain pretty excited about its medium and long-term future. Unknown Executive: A question on Stonehage. Are the proceeds contingent on anything or just deferred? And what are the most attractive areas for new investment? Tom Leader: So dealing with the Stonehage completion mechanism first. As I alluded to earlier, completion is conditional on reg approval in multiple jurisdictions. That will crystallize payment of the bulk of the proceeds, just over GBP 250 million. There is a deferred element, which is payable in 2 tranches 6 and 12 months post completion. Those deferred proceeds are interest-bearing, and they are subject to adjustment depending on the finalization of a closing balance sheet audit, which includes a true-up mechanism. So that could go either up or down, positive or negative against the estimated closing balance sheet just prior to closing. So there is bound to be a small difference between the 2, but we do not expect it to be material. In terms of the second part of the question, future opportunities, we scan somewhere between 300 and 350 new opportunities a year across a very broad range of sectors. Our historic strengths have been in financial services and business services and technology-driven industrial businesses. And there is a regular flow of opportunities in all of those sectors. But I would add that it is a difficult market in which to deploy capital. Good quality assets are still transacting at very high prices, and less good quality assets are either taking longer to sell or not selling at all. So we will remain selective and we have the liquidity to finance new acquisitions if and when we can find the right opportunity. Unknown Executive: Thanks, Tom. A question around discount. What plans do you have to reduce the very large discount now the buyback may have marginal benefits, but does not seem to benefit? And why have you only bought back GBP 13 million worth of stock given the discount is just over 30% and you have a lot of liquidity. Rob Memmott: Yes. Thank you, Beck. So as you rightly point out, the discount of around 33%, we certainly feel undervalues the value of the portfolio, our track record and our prospects. I guess the buybacks, we sort of see those as an investment opportunity for us. We don't see that -- we don't have a discount control mechanism. The things that we are doing to influence the discount are the things that we can control, which is continue to invest in a good quality, high-quality portfolio, make sure that we communicate with as large an investor base as possible to make sure that we -- the proposition is properly understood and rated. And then there are some smaller sort of tactical things that we've done around the share split, rebalancing the dividend payment to make sure that the shares are as attractive to a broader investor base as possible. Unknown Executive: Another question here about hedging. You mentioned return in sterling is diminished by your U.S. dollar weakness. Do you hedge? Rob Memmott: And the answer to that is that we do not hedge. We're a long-term investor. And if you like, the short-term volatility coming from exchange rates, we sort of understand those and sort of monitor them, but it is about sort of long-term sort of value sort of creation. And generally, if you sort of hedge the balance sheet position, you pay a premium in order to end up in the same place. So we don't hedge unless there are specific cash flows that we would do so for. And I think that the weighting of the portfolio is more dollar denominated reflects the fact that the size and the quality of the companies which we're investing in, a lot of those are based in North America or headquartered in North America. Unknown Executive: Another question here on special dividend. In the past, there was a loose policy of providing a special dividend every 3 years or so. Is this policy still operative? Mat Masters: So we have -- thanks for the question. We have a track record of occasionally paying special dividends. I don't think we've ever sort of announced a policy about when we would do it. And we've not made any announcement about paying a special dividend. So that is the case at the moment. Unknown Executive: Another question here about equity market valuations. What do you think of them. Mat Masters: Well, thanks for the question. So equity market valuations vary around the globe, and there'll be one market up and one market not quite so far up. And actually, it's a really difficult question to address and actually respond to in your portfolio. And so what we do is to try and keep it very simple. We invest in good quality companies and hold them for the longer term and try not to worry too much about what's going in the macro and make sure we invest in things where we don't have to worry too much about the macro. Okay. Well, we have gone through the questions now, and we're very grateful for everyone joining us on the call today and for the questions, and we look forward to connecting with you next time. Operator: Thank you for joining today's call. We are no longer live. Have a nice day.

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