AI Investor Insight

LSCC 2025 Q3 财报电话会议

Operator: Ladies and gentlemen, greetings, and welcome to the Lattice Semiconductor Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lattice Semiconductor's Vice President of Investor Relations, Rick Muscha. Please go ahead. Rick Muscha: Thank you, operator, and good afternoon, everyone. With me today are Ford Tamer, Lattice's CEO; and Lorenzo Flores, Lattice's CFO. We will provide a financial and business review of the third quarter of 2025 and the business outlook for the fourth quarter of 2025. If you have not obtained a copy of our earnings press release, it can be found at our company website in the Investor Relations section at latticesemi.com. I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially. We refer you to documents that the company files with the SEC, including our 10-Ks, 10-Qs and 8-Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This call includes and constitutes the company's official guidance for the fourth quarter of 2025. If at any time after this call, we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release or publicly announced conference call. We will refer primarily to non-GAAP financial measures during this call. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends. For historical periods, we provided reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website at latticesemi.com. Let me now turn the call over to our CEO, Ford Tamer. Fouad Tamer: Thank you, Rick, and welcome, everyone, to our third quarter earnings call. As I marked my first year as CEO, I'm more confident than ever in Lattice's upward trajectory. Our strong Q3 performance and forward-looking guidance reflect the strength of our strategy and execution. With a world-class team and a robust innovation pipeline, we are well positioned to capitalize on the ever-expanding investments in AI and data center infrastructure. At the Open Compute Summit last month, we saw increasing interest in Lattice's low-power data center offerings. We also witnessed accelerated momentum for Lattice's security and board management solutions that we provide to hyperscalers, neo-cloud and server and communications OEMs and ODMs. And at the same event, we demonstrated our leadership position in post-quantum cryptography or PQC for short. I'm pleased to report that the adoption of Lattice's PQC technology is also accelerating due to the NIST requirement that systems be CNSA compliant. We exited Q3 with even higher confidence demonstrated by new use cases for Lattice products across our core markets as well as the acceleration of design wins, which were on pace for a record year in 2025. This momentum highlights our differentiated value proposition, low power, small size, fast boot time and high reliability and sets the foundation for rapid growth into 2026. In general, we continue to see data center investments expand across all payers and applications in the AI infrastructure tsunami. Lattice is benefiting from a corresponding revenue growth evidenced by increasing bookings now and into 2026. This is giving us increased confidence to invest further for growth in 2027 and beyond. We firmly believe that delivering above-average revenue growth is consistent with why our shareholders invest in Lattice. For Q3, we delivered revenue of $133.3 million, up 7.6% over Q2. This represents the highest sequential growth in more than 4 years. Our Q4 revenue guidance of $143 million at the midpoint equates to 22% year-on-year growth. This estimate is the largest increase in nearly 2 years and shows our belief in a strong recovery and upward momentum. With respect to end markets in the third quarter of 2025, Communications and computing grew 8% sequentially and 21% on a year-over-year basis to a record level. The computing subsegment growth is being driven by our expanding footprint and increased use cases in both general purpose and AI-optimized servers. And the communications subsegment growth continues to be driven by wired data center infrastructure, including network interface cards, switches, routers and security appliances. As expected, the Industrial and Automotive segment increased 6% sequentially. The growth rate is tempered as we continued to strategically shift under true demand to normalize channel inventory. As we told you on prior calls, we are on track to normalize channel inventory by year-end, positioning us for renewed growth into 2026. We are confident that we're gaining share across smart factory, robotics, medical and aerospace and defense applications based on customer feedback and design win activity. While we remain subject to macroeconomic and industry conditions, there are several factors fueling confidence in our prospects moving forward. Lattice's addressable market is growing due to the size of the infrastructure capital expenditures growing fast, our diversified position in the largest and fastest-growing applications, growing attach rates, increasing average selling prices from our new products, broadening the application footprint of our small and mid-range FPGA portfolio; and finally, increasing AI usage. Taken together, we believe these dynamic factors are expanding dollar content for Lattice per customer system. We also continue to win with pre-Nexus, Nexus and Avant products. Customers are consistently choosing Lattice over our competition as evidenced by the growth in our design wins, which are on pace for a record in 2025. Revenue from our new products continues to grow at a strong rate, and we are on track to exceed our 2025 goal that we projected in prior earnings calls. Lastly, we estimate the percentage of AI usage across our products will be in the high teens in 2025 and mid-20% range in 2026. In summary, Q3 was a strong quarter marked by consistent execution and strategic progress. We remain focused on delivering differentiated innovation, deepening customer relationships and driving long-term shareholder value. We have increased confidence in our outlook, led by our leadership position and ability to capitalize on the compelling opportunities in front of us to drive accelerating growth in 2026 and beyond. Let me now turn the call over to Lorenzo for a detailed review of our Q3 results and Q4 guidance. Lorenzo? Lorenzo A. Flores: Thank you, Ford, and good afternoon, everyone. We will begin with a brief overview of our third quarter 2025 financial performance, followed by our fourth quarter outlook. We are pleased to report that Lattice again delivered on expectations with revenue, gross margin and operating profit all in line with our outlook for the quarter. Revenue increased 7.6% quarter-on-quarter and 4.9% on a year-over-year basis to $133.3 million. Overall, this was the highest revenue we have obtained in 5 quarters, and we are expecting continued growth in Q4 and in 2026. We set a new record for communications and computing revenue, which grew 21% year-over-year and 8% sequentially. We expect strong growth in this end market in Q4 and in 2026. Our gross margin expanded by 20 basis points quarter-over-quarter and 50 basis points year-over-year, 69.5% on a non-GAAP basis. This performance continues to reflect the durability of our business model and the value and differentiation our products provide for our customers. Non-GAAP operating expense was $53.9 million, in line with our guidance. OpEx was flat on a year-over-year basis. Roughly 4% sequential increase in operating expense reflects our strategy to invest in the products, infrastructure and talent that will further strengthen our leadership position and enable us to drive accelerating growth. We have built confidence in our 2026 revenue expectations. Aligned with those expectations, this quarter, we accrued stock-based compensation expense for PRSUs. This accrual was the primary driver of the increase in our GAAP operating expenses. Our non-GAAP operating margin expanded 150 basis points to 29%, and our EBITDA margin also increased 150 basis points to 35.6%. We delivered non-GAAP EPS of $0.28, which was at the midpoint of our guidance and represented 17% growth on both a year-over-year and quarter-over-quarter basis. GAAP net cash flow from operating activities for the third quarter of 2025, increased to $47.1 million, up from $38.5 million in Q2, with a GAAP operating cash flow margin of 35.4%, up from 31.1% in Q2. Free cash flow in Q3 was $34 million with a 25.5% free cash flow margin, up from $31.3 million and 25.2% in Q2. This remains a focus area for Lattice, and we expect to continue to generate strong free cash flow. We are achieving these levels of free cash flow while strategically investing in CapEx in support of our product road map and operational improvement projects. We are pleased with the continued improvement in industrial and auto channel inventory. We continue to track to plan and expect inventory normalization by the end of 2025. As we noted last quarter, comps and compute channel inventory has already normalized. Now let me turn to capital allocation. Our balance sheet remains strong. We remain debt-free and have ready access to capital to support both organic and inorganic growth opportunities, and we remain well positioned to navigate macro uncertainty. Given our balance sheet strength and our business model, returning capital to shareholders remains a key component of our capital allocation strategy. During the quarter, we repurchased approximately $15 million of common stock under our existing buyback program. Through the first 9 months of 2025, we've repurchased approximately $86 million of common stock. We have $14 million left on our current authorization, and we will be reviewing our next authorization with our Board of Directors in December. Now let me turn to our Q4 guidance. This guidance reflects the recovery of our business and sets the stage for continued growth into 2026. In Q4, we expect revenue to grow and be in the range of $138 million to $148. At the midpoint, this represents revenue growth of 22% over Q4 of last year. This would be the highest year-on-year growth in nearly 2 years and is supported by the strongest booking patterns we have seen in at least 6 quarters. We expect gross margin to be 69.5%, plus or minus 1% on a non-GAAP basis. Non-GAAP operating expenses are expected to be between $54.5 million and $56.5 million. The income tax rate for Q4 is expected to be between 3% and 5% on a non-GAAP basis. Non-GAAP EPS is expected to grow to be between $0.30 per share and $0.34 per share. In closing, Q3 was another strong quarter for Lattice. We delivered results in line with our guidance, and we expect further acceleration given our position in high-growth markets. We are driving near-term operational improvements, investing to strengthen our leadership in small and midrange FPGAs and positioning the company for an even stronger 2026. Operator, that concludes our formal remarks. We can now open the call for questions. Operator: [Operator Instructions] Lorenzo A. Flores: Operator, this is Lorenzo Flores at Lattice. I'd like to tell all our audience that we found a typo in our press release that relates to our operating expense guidance. The guidance that I provided in my prepared remarks of between $54.5 million and $56.5 million is correct, and we will correct the press release, which says between $54 million and $55 million immediately after this call. So with that, we can start our questions. Thank you. Operator: We take the first question from the line of Kevin Garrigan from Jefferies. Kevin Garrigan: Congrats on the results. So first question, you said you had increased confidence in your outlook for 2026. Is that confidence contingent on the expected normalization in industrial and auto channel inventory in Q4? Or can the strong comms and compute growth you guys are seeing more than offset any potential macro industrial and automotive softness? Fouad Tamer: Thank you, Kevin. This is Ford. As you've seen from our Q3 results and Q4 guidance, our comms and compute business revenue growth continues to accelerate, and it will accelerate further into 2026. Our comms and compute business as a percent of total revenue went from 35% of total revenue in 2023 to 45% of total revenue in 2024 to an expected over 55% of total revenue in 2025, and we expect that to grow to about 60% of revenue into 2026. With that growth, that segment becomes very significant to our acceleration of revenue growth. And in 2025, we have accelerated server and communications faster than the underlying CapEx growth. So our server business has been up 85% year-to-date compared to 2024, and our communications business has been up 63% year-to-date compared to 2024. So you could see both server and comms are growing faster than the underlying CapEx, and that should continue into '26. So you would expect that comms and compute business to drive accelerated growth in '26. Furthermore, as you indicated, we are on track to get industrial automotive inventory normalized by end of the year. Our comms and compute inventory is already normalized. And our overall channel inventory is expected to get in the 3.x by end of the year as we had previously told you on prior calls. And with that, we should also see the industrial and automotive shift to natural demand as opposed to chip to under natural demand like we're doing through 2025. So with both comms and compute accelerating and industrial and automotive recovering and shipping to natural demand, we expect 2026 revenue growth to be very strong. Kevin Garrigan: Perfect. And just as a follow-up on the Industrial and Automotive segment, can you just talk about what you're seeing on a regional basis? Any geographies that are stronger than you had expected? Fouad Tamer: Yes. Thank you, Kevin. So we are seeing China automotive to continue to be strong. Automotive for us overall is less than 5% of our overall revenue, but China is probably the region where automotive is strong. We are seeing the aerospace and defense to be strong worldwide, and we are winning increasing share of designs in that segment. We are also seeing this physical AI, a lot of design win activities, wins are companion chips for physical AI across all the various segments from industrial robotics to humanoids to automotive, to medical, aerospace, defense, test and measurement and all the various segments in industrial and automotive. So we're pretty positive on where that segment is going to go into '26 and inflect even further into '27. Operator: We take the next question from the line of David Williams from The Benchmark Company. David Williams: Congrats on the real shift in your tone. And I guess that's my first question is just around your confidence. Clearly, you outlined all the nice drivers there. But I guess what do you think has changed over the last 90 days that maybe has changed your confidence? It feels like that inventory is clearing up. And so you kind of talked about that last quarter. But just wondering if there's any demand issues or demand things that have changed driving that greater confidence. Fouad Tamer: Yes. No, great question. David, thank you. We had a very successful Open Compute Summit. It was a show attended by most of the hyperscalers, server and OEMs and ODMs as well as the related wireline communication equipment OEMs and ODMs. And at that show, attendees were noticing that somebody like flipped the switch. And all of a sudden, the past 90 days, we've seen definitely an increase in activity and spend. As you've seen from the most recent hyperscaler earnings, the forecast for next year has been up, and we've seen that. We also are starting to work closer with some of the neo-cloud and enterprise vendors, and we're seeing them being more aggressive in wanting to increase their AI CapEx. One of the hyperscalers gave us a quite a big increase forecast for '26, '27 and even into 2028. And we're seeing our adoption as a companion chip for some of these AI in both the data center and the physical AI accelerate. So for example, on the cloud data center, we're seeing our adoption as companion chip for CPU across x86 and ARM, AI accelerators from NVIDIA, AMD, Intel, hyperscalers, various accelerator ASICs across networking, across Broadcom, Mirvan, Mellanox and Cisco, security, board management, rack management, cooling, power management as a companion chip, the small and midrange FPGA from Lattice are doing quite well, and we're being adopted at an accelerated pace. And we're seeing the same as a companion chip on physical AI around sensors for like camera, LiDARs, radars as well as various industrial and automotive applications. Lorenzo A. Flores: I think -- and really finally, I'll repeat that what I said in my commentary, we've got the strongest book-to-bill that we've had in 1.5 years or so, and it's booked into the first half of next year. So all the sentiment and enthusiasm that Ford has just described and the reasons for that are actually showing up in our orders. So we see not just the spirit, but the actual business coming. David Williams: Great. A lot of great color there. I certainly appreciate that. And maybe just from the Avant platform, you talked about seeing growth across all. But just kind of curious if we can get an update on the Avant platform, how the design wins are trending there and maybe what the expectations are for growth into 2026. Fouad Tamer: Yes, both Nexus and Avant are doing quite well as well as some of the pre-Nexus platforms as well. What we said in the past is that we believe that 2026 will be the year of Nexus and '27 will be the year of Avant. We see 2026 as being the year of the data center with '27 being a big recovery in industrial and automotive. Nexus seems to be more related to the data center as Avant is more related to some of these midrange applications in industrial and automotive. And so that's how we're seeing the revenue stagger over the next couple of years. Operator: David, does that answer all the questions you have? David Williams: Yes. Operator: We take the next question from the line of Tristan Gerra from Robert W. Baird. Tristan Gerra: Thanks for the color about AI-related demand. And as we see an acceleration in AI demand, I guess we shouldn't read much into a little bit of a sequential slowdown in Q3 for communication and computing because it looks like that line was up 20% sequentially in Q2, up 8% in Q3. So first, should we assume a re-acceleration of the growth in communication computing in Q4? And is the strength in Q2 perhaps linked to the fact that this is the first quarter where inventory levels normalized? And as such, you kind of caught up with end demand and now you're back in line shipping with real end demand. Is that how we should read into this? Lorenzo A. Flores: Yes. Let me handle parts of this, Tristan. I think the guidance we've given for Q4 actually shows significant sequential growth in comms and compute. I think there is some of the non-server business in our comms and compute business that impact the measured growth rates. But I want to refer you back to earlier comments that we've had previous quarters and again this quarter about the real driver of the comms and strength is our server demand. And that's over 80% growth year-over-year. I think that's a very strong indicator of what's going to drive that. Now that may not stay exactly that high, but the point is it's growing faster than hyperscaler CapEx by a significant amount, and it is showing the expanding footprint in terms of the design wins we have, the number of chips in design, ASSP design, and we expect that to continue to grow, as David's question pointed out, as we go from generation to generation from pre-Nexus to Nexus to Avant. So I think all those things point to a strong acceleration. So I don't think I would get too hung up on the couple of decimal points on a quarter-to-quarter change. I think if you think of the overall trajectory through time, you see it's quite strong. Tristan Gerra: That's very useful. And then when should we look at gross margin picking up from current levels? And what will be the catalyst? I mean it sounds like with the growth that you're seeing in computing that there should be gross margin expansion next year. And I understand you're not guiding, but is it fair to say that we should see gross margin expansion next year? Or are there any offsetting factors? And also wanted to understand the commentary about '26 being the year of Nexus. Historically, and back in the days, as you know, high-end FPGA will typically see revenues peaking after about 7 years. For Nexus, it looks like after a fairly muted ramp the first few years because you used to provide a breakdown. And earlier this year, we were kind of in the low teens as a percent of revenue for Nexus, which given the launch date of late 2019 was probably a little bit below what I would have thought at least at the time. But now it looks like the momentum is accelerating, and I wanted to understand the dynamic of that. Why is Nexus getting after all those years, even more momentum? Lorenzo A. Flores: Yes. So I will -- we're going to parse this question out probably amongst us here in the room. And I want to start with the gross margin question, which is actually one of my favorite questions because it gives me the opportunity to reflect back on the level we are actually at 69.5%, which is pretty good, and it takes a lot of work to get there. Your question is actually in terms of the impact of comms and compute on the overall gross margin. I think we hear the other side of the question, whether industrial recovery will impact it positively. I think you all have to take into account that there's a spectrum of profitability across our end markets and within those end markets, within particular design wins as they ramp up. So we manage the overall portfolio to get to the margin, and it would be potentially plus or minus a few basis points going through time. But I think we're pretty comfortable with this margin for now, anticipating several different mix scenarios. So I think we're not looking for very big improvement from one factor or another as we go through time, but pretty much staying where we are. On the Nexus ramp, I do think the -- I'll start on this and Ford can fill in. One of the things to keep in mind is we are just now expanding the product line with Nexus, bringing out more products. The phenomenon you talked about before is more where there's a burst of products, but we are ramping new Nexus products through this year and next. So Ford, do you want to fill in anything on the Nexus ramp? Fouad Tamer: Yes, absolutely. Tristan, good question. The Nexus products continues to be introduced. So if you think about it, we've introduced a new I/O optimized Nexus in Q2 of 2025. We've introduced 4 to 5 new SKUs of Nexus in '25. We expect another 5 to 6 in '26. So yes, 2019 was the first product introduction, but we continue to roll new Nexus product. We've introduced a Nexus 2 that is going to, again, start to be rolled out. So Nexus is the whole family with quite a few devices. And so when we say Nexus, Nexus really is what we call our small FPGA, and that's going to be going on for the next 10 years. And we're seeing a tremendous bunch of new applications. So we went from booting and I/O expansion and buffer and control to now Root of Trust and to PQC and to board management and to rack management, the latest OCP, we had leak detection. So the number of applications that we are finding are immense. And you wouldn't be growing 80% -- over 80% year-on-year in server if we weren't widely adopted and continue to being adopted at even faster rate. So we're very positive on Nexus for the next quite a few years here. And again, think of Nexus as what we're calling our small FPGA family. And we're leading there. We're going to continue to lead. We're going to continue to invest to continue to lead. Operator: We take the next question from the line of Gary Mobley from Loop Capital. Gary Mobley: Can you size in industrial and automotive, how much you're undershipping is embedded in your Q4 guide as you work down that inventory? And then on the other side of the coin, are you running into shortages or extended lead times for the comms and compute segment? Fouad Tamer: Yes. Thank you. So we don't break it up exactly, Gary, but we have said in the past that we're undershipping by about a couple of weeks a quarter, so call it $15 million to $20 million a quarter. And we expect that to be normalized by end of the year. So you could see this being a headwind in '25 becoming a tailwind in '26. The lead time on the comms and compute are expanding, but we are on top of it and are very focused on making sure our customers get supply, and we have done a very good job so far. Lorenzo A. Flores: Yes. We announced the extension of lead times a couple of months ago, actually in August and in parallel, work with both our suppliers and our customers to make sure that our deliveries were matching up. And so we have the visibility from our order book to keep doing that. I think our customers have been satisfied with our delivery performance. And the extension of lead time is really actually helpful for us to plan the business and plan our loadings with suppliers. And as I indicated earlier, we now have good visibility into a very strong book of business going forward for the next 3 quarters at least, including Q4. Gary Mobley: As you think about your data center opportunity or sizing the served available market, do you use any sort of benchmark like what your dollar opportunity is per gigawatt of capital spending plans by the different hyperscalers or maybe differently, your content per rack scale solution, all-in GPU, CPU, networking? Anything there that you can share would be helpful. Fouad Tamer: Yes. No, we do have that, Gary. We have an attach rate per server, attach rate per rack, attach rate for different companion chip that we are, if we're companion chip to a CPU or a GPU or a switch or a NIC or storage or board management, these are all very different dollar per chip. So we are -- we have very detailed models. We obviously don't share those. What I can tell you is we're going to grow faster than CapEx. The CapEx is increasing fast, as you know. But we're growing faster because our attach rates are growing faster. The users of Lattice FPGAs and these data center applications continues to expand. We're going to newer products like Nexus and Avant, hence, a higher average selling price for these newer products. We have an increased AI server adoption, which again is driving higher content for Lattice. So overall, you could see we'll continue to grow faster than the underlying market. Operator: We take the next question from the line of Christopher Rolland from Susquehanna International Group. Christopher Rolland: So Ford, I wanted to go back to your comment about data center at 60% of total for next year. So I think previously. 60%, right? Sorry, CNC, yes. So I think previously, you guys have said like 15% to 20% growth year-over-year that in I&A, inventories are normalizing by year-end. I think you guys reconfirmed that. I would have thought that just as that normalizes for I&A, it would create a great deal of growth for next year. So I would have assumed I&A is growing here. I mean there's 2 parts to that 60% comment that you made. CNC could be much higher, but also conversely, I&A could be much lower. And so I'm trying to balance that like to understand like what I&A growth could be next year. You also made the comment that next year is really the year of CNC and I&A is 2027. So trying to read the tea leaves, particularly for I&A. Are you thinking it is a much more flatter year than perhaps we are? Lorenzo A. Flores: So let me start at the beginning and at the high level, and you recall in my remarks, I said we're growing in confidence and with respect to our growth in 2026. And because of that, I had to make an accrual for some performance-based, revenue-based stock compensation. That threshold was 20% into 2026 from where we expect to end the year today at the midpoint of our guidance. So that's where we are. And Ford, do you want to add the color around the end markets? And go ahead or I can do it. Fouad Tamer: Yes. No. So at the high level, Chris, I&A is expected to go back to growth next year. We think it would be in the sort of mid-single digit to, call it, 15% range. But the comms and compute could be more in the 20% to 40% range. So that's how to think about these 2 segments. Lorenzo A. Flores: Right. I wouldn't -- we wouldn't have the confidence in the growth if we were thinking we were highly dependent upon significant growth in industrial and auto because as you know that's more subject to the macro environment, and we are still working through the end of the year on the inventory. So when we look out into 2026, we didn't want to drive our expectations assuming a bigger than mid-single-digit growth rate, as Ford, said in industrial and auto. Christopher Rolland: Excellent. And then maybe bigger picture, Ford, just thinking about your legacy kind of in AI, but also networking and maybe the next steps for Lattice, perhaps maybe even becoming more than just an FPGA company. I think we've talked about putting hardened ARM cores into an FPGA before. But what about putting hardened MAC cores or an NPU into an FPGA and/or building kind of an ASIC capability to guide some of your customers to FPGA into a hardened ASIC? Or just any other thoughts on the next steps for this company and what you're exploring or thinking about without, of course, mentioning the specifics? Fouad Tamer: Yes. Look, we're very excited about where we can take Lattice into the future. On the hardened processing core, if you wish, we have adopted the strategy of being partners with microcontrollers and microprocessor companies. And we've had some very good success to date. The most recent customer meeting we had in Asia, we had NXP Semiconductor be there with us. We worked together at OCP and the partnership with NXP is actually becoming quite strong and customers quite like the 2 of us together. We're expanding it across others. So on the microcontroller, we're seeing interest from other players in that space to do the same. And you'll hear more partnerships in the future. So we do believe that on the processing side, whether it's microprocessor or microcontroller, you're going to see 1 plus 1 equal 3, where we'll be providing joint solutions to customers that leverage the best out of FPGA and these processor next to us. On where we're going to take this longer term, there's definitely quite a few discussions going on and exploration, but we're not ready to discuss at this point. We're being asked by customers to do some specific stuff that we're investing in and that may be part of the increased investment into 2026 that Lorenzo has hinted to in his prepared remarks. So stay tuned on that. We'll have more detail as we go. Operator: We take the next question from the line of Ruben Roy from Stifel. Ruben Roy: Ford, I wondered if you could add a little detail to the AI usage comment. I think you previously said high teens going into the mid-20s for next year. How are you thinking about mix on that relative to compute and comms versus industrial and automotive? And maybe a little detail on how you're defining AI usage would be great. Fouad Tamer: Thank you, Ruben. We are still on track for the mid-teens in this year, 2025, going into the mid-20s by next year, 2026. And the ratio is about 60% comms and compute versus 40% industrial and automotive. On the comms and compute, we play a role of a companion chip where to the various ASICs and ASSP I've mentioned before. On the industrial and auto, we can play a far edge AI near sensor intelligence, if you wish. And that's our focus, less than 1 tops, these very power-sensitive applications that are really tied to these camera, LiDAR, radar, other industrial sensors. I hope that answers the question. Ruben Roy: Yes. That's helpful. And then just a follow-up on your comment regarding Nexus -- year of Nexus next year and then Avant '27. And you mentioned that Nexus sort of plays into data center and Avant may be a little more slated for industrial and auto. And I'm just wondering why you wouldn't see some mid-range FPGA kind of usage in some of the, I guess, higher-end comm and compute applications that are coming up. Am I reading that wrong or listening to you wrong or anything to add on that comment? Fouad Tamer: No. I mean we would see Avant applications in the comms and compute. We'll see Nexus application in industrial and auto. So I wasn't trying to imply exclusion. I was trying to imply a majority, if you wish, of the design win will be Nexus on the comms and compute and Avant on industrial and auto. And we, for example, had Ericsson at our developer conference, who was showing an Avant application. And so again, we'll have applications of Avant in comms and compute for sure. Operator: We take the next question from the line of Melissa Weathers from Deutsche Bank. Since there is no response, we'll move on to the next question, which is from the line of Joshua Buchalter from TD Cowen. Joshua Buchalter: I guess I wanted to ask about some of the assumptions behind the growth rates you just talked about for 2026 or the revenue split, I should say. Any metrics you can give us on what would -- or details you can give us on what would allow you to come in at the lower end versus the high end of the 20% to 40% range, given it's such a wide range and maybe any details on how much contribution you're expecting from general purpose versus AI servers? And then on the industrial and auto side, is that sort of assuming just shipping to normal seasonality with the 5% to 15% and no restocking? And I'm trying to understand what's the sort of normalized sell-through for auto and industrial at this point given all the volatility. Lorenzo A. Flores: So I'm going to -- Josh, I'm going to go kind of a little backwards on this. The industrial and auto, like I said, for us to be confident, given what's happening in the world and what could happen, we thought that it would be prudent really to, as you indicated, just say we're back to kind of a normal -- I don't know, seasonal is the right word, but normal demand cycle as we start shipping to where consumption and our revenue are aligned versus undershipping demand as we have been. That's not -- I think that's not aggressive at all. On the comms and compute side, I think we are pretty confident that the $20 million to $40 million range that Ford said earlier, we have good support in with the fundamental driver, which is the CapEx of the industry. And that range aligns with what we see the CapEx for the industry being. And as Ford said earlier, we could have upside as our footprint actually grows against that CapEx based on the design wins we have and the opportunities that we're beginning to ship to now. So that's -- hopefully, that answers your question. I don't I think that AI mix, and this is something -- you can jump in and correct me if I'm wrong. The AI mix will continue to grow just as the nature of the prevalence of AI in the overall footprint in both comms and compute and industrial grows as well. We haven't broken that out separately. Is that helpful? Joshua Buchalter: Yes, it was. I appreciate all the color there. And then for my follow-up, I mean, you guys called out a bunch of different applications for companion chips and use cases that you're seeing in both general purpose and AI servers. Could you maybe speak to which ones you're seeing the most traction for now and which ones you expect to grow more as Nexus and Avant product portfolio layers into the mix? Fouad Tamer: Yes. Josh, I'm not sure we're prepared to break it up to such a level of detail by application. I think as Lorenzo was saying, what gives us confidence, if you see the overall CapEx expected to grow 20% to 30% next year, we expect to grow faster than that underlying CapEx. Hence, the numbers that we're mentioning. I think starting to break this down by application is beyond this call. We can discuss on post calls, if you like. Operator: We take the next question from the line of Melissa Weathers from Deutsche Bank. Melissa Weathers: Can you hear me now? Fouad Tamer: Yes. Melissa Weathers: Great. Sorry, having some phone issues. Maybe my line needs more FPGAs. I guess -- sorry if I missed this in an earlier question, but you guys have been talking about PQC a lot. And I'm still a bit uncertain like how big that market could be. So could you just talk about like what -- how big is that opportunity for you guys? Is it growing? What are you seeing? Just anything else on the PQC side? Fouad Tamer: I mean PQC is a big driver of our security adoption. We do believe we're ahead. It is being mandated in all systems right now. So we're being designed in now into both comms and compute type of applications. And we haven't broken it up, Melissa. So again, I think we're probably not going to be ready here to break down percent of applications per use case on this call. Melissa Weathers: That's fair. And then on the pricing side, I just want to make sure as we're kind of bottoming out in the semi cycle, are you seeing anything interesting on the pricing side either from your industrial and automotive customers or maybe on the content compute side, a little bit more leverage? Just anything on pricing? Lorenzo A. Flores: No. So our pricing strategy is obviously to price to value, as you can tell by our gross margins. And as I said earlier in the commentary around gross margin, that varies a lot between the segments and within the segments between the different design wins depending on how the customers are going to use it. We also have had consistently a strategy of working with our customers to provide a long-term value proposition. So we're not tactically taking advantage necessarily of certain demand trends because we think we're going to work a long time with these customers and over time, we'll get the full value of what we offer from our product set to these customers. So we do see, at the same time, candidly, pressure from our suppliers based on demand, and we're managing through that on both sides of the supply chain with them and with our customers to mitigate the impacts of that. Operator: We take the next question from the line of Quinn Bolton from Needham & Company. Quinn Bolton: I just want to come back to the auto industrial. That business has been running at about $50 million a quarter all year, and that's been very consistent. You've also said you've been undershipping by $15 million to $20 million every quarter. So consumption feels like it's been very consistently at $65 million to $70 million for the last 4 to 5 quarters. I guess I really struggle to see why would that drop to something in the $55 million range implied by your 5% to 15% guidance in 2026, that just seems like there's a massive change in the consumption level implied by your guidance. Lorenzo A. Flores: Yes. I'm -- I think the challenge in reconciling these -- what you're saying and what we're seeing is there is a direct aspect, meaning non-channel piece of our industrial and auto. And what we're talking about in terms of where you see the phenomenon of undershipping demand, it's really primarily in the channel. But I don't want to underwrite, if you will, that level of increase into 2026 until we actually see the strength underlying the overall industrial and auto business. Quinn Bolton: And the backlog coverage -- sorry, go ahead Ford. Fouad Tamer: No. What is the number that you're mentioning then for.... Lorenzo A. Flores: He's saying 52%, 47%, 50% something like that in terms of the industrial auto through the year. Is that right, Quinn? Quinn Bolton: Yes, I'm just -- industrial and auto. Lorenzo A. Flores: That's our number. Fouad Tamer: So to answer your question -- so your number for -- well, maybe we should do this reconciliation after the call? Quinn? Quinn Bolton: Yes. Yes, we can take offline. The other question I had just on the comms and compute, guys, you talked about servers up over 80% year-to-date, and I think the comms up over 60% year-to-date. Yet if I look at the total comms and compute in '25, even with a healthy increase Q-on-Q in December, kind of looks like you're going to be up mid-20s for the year. And so it feels like there must be a portion of comms and compute that's down pretty substantially to bring the total bucket to mid-20s when I think the 2 biggest components of comms and compute, servers and wired comms are growing 3 faster. So what's the offset? Fouad Tamer: Yes, yes. Yes, the offset is the client business. So we had a big client business last year that pretty much has disappeared now. So we've had a big headwind in the client business, Quinn, with 3 client OEMs, large 1 and 2 medium-sized ones. And that headwind disappears now. Operator: We take the next question from the line of Chris Myers from Rosenblatt Securities. Christopher Myers: This is Chris Myers on for Kevin Cassidy. First, can you guys just share your current view on the automotive market right now? Are you guys seeing any inventories come down or any backlog start to build up again? And then on the data center side, what's the trend that you guys are seeing in terms of your dollar content per traditional server versus AI servers? And then do these devices play different roles in the 2 different types of systems? Fouad Tamer: Yes. We -- on the AI server versus traditional server, we definitely have more content in AI servers because of the aggregated nature of these servers. So we -- so yes. And then on the... Lorenzo A. Flores: On the auto, first, let's remind everybody that the automotive business is a very small part of our business. And what we see on a global basis is not -- we don't see any tailwinds there yet, except the place that seems to be moving the fastest is in China automotive. But again, that's a portion of our overall business, which is a small part of our overall industrial and auto business. So that's what we see. We don't see auto strength anywhere but China. Operator: Ladies and gentlemen, this concludes the question-and-answer session. I would now hand the conference over to Lattice Semiconductor's Vice President of Investor Relations, Rick Muscha, for closing comments. Rick Muscha: Yes. Thanks, everyone, for joining us today. We'll be attending the following investor events this quarter: the Stifel 2025 Midwest One-on-On Conference in Chicago on November 6, The AllianceBernstein 2025 Buy-Side Small and Mid-Cap Summit in New York City on November 18. And then lastly, the UBS Global Technology and AI Conference on December 2 in Scottsdale. This completes our call. Thank you very much for your participation, and have a good evening. Operator: Thank you. Ladies and gentlemen, the conference of Lattice Semiconductor has now concluded. Thank you for your participation. You may now disconnect your lines.

196天前Insight Analytics约5分钟阅读

SRPT 2025 Q3 财报电话会议

Operator: Good afternoon, and welcome to Sarepta's Third Quarter 2025 Financial Results Conference Call. As a reminder, today's program is being recorded. At this time, I'll turn the call over to Tam Thornton, Director of Investor Relations. Please go ahead. Tamara Thornton: Thank you, and thank you all for joining today's call. Earlier this afternoon, we released our financial results for the third quarter of 2025. The press release and slides are available on the Investors section of our website at sarepta.com, and our 10-Q will be filed with the Securities and Exchange Commission on Thursday after market. Joining us on the call today are Doug Ingram, Dr. Louise Rodino-Klapac, Patrick Moss, Ian Estepan and Ryan Wong. After our formal remarks, we'll open the call for Q&A. I'd like to note that during this call, we will be making a number of forward-looking statements. Please refer to Slide 2 on the webcast, which contains our forward-looking statements. These forward-looking statements involve risks and uncertainties, many of which are beyond Sarepta's control. Actual results could materially differ from these forward-looking statements, and any such risks can materially and adversely affect the business, the results of operations and trading prices for Sarepta's common stock. For a detailed description of applicable risks and uncertainties, we encourage you to review the company's most recent SEC filings. The company does not undertake any obligation to publicly update its forward-looking statements, including any financial projections provided today based on subsequent events or circumstances. As noted on Slide 3, we will discuss non-GAAP financial measures on this webcast. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release and the slide presentation available on the Investors section of our website. And now I'll turn the call over to our CEO, Doug Ingram, who will provide an overview of our recent progress. Doug? Douglas Ingram: Thank you, Tam. Good afternoon, everyone. Thank you for joining us for our third quarter 2025 financial results conference call. Next slide, please. We have much to discuss this evening, but let's begin by reviewing the completion of our confirmatory study for our 2 ultra-rare disease CMOs, VYONDYS and AMONDYS, before coming back to our quarterly update. Next slide. I'm going to turn the call over to Dr. Rodino-Klapac very shortly, but let me first give some broad conclusions. First, we are very proud to have completed our primary confirmatory obligations, both AMONDYS and VYONDYS serve ultra-rare populations with total prevalence numbering for each no more than about 500 to 800 patients in the United States and an incident rate per year of maybe a few dozen patients. This disease is also heterogeneous and degenerates not over months or years, but literally over decades. These together make the powering and conduct of a placebo-controlled trial particularly challenging. I want to give a huge thanks to our investigators and then very importantly, to the brave families who have had the courage to enroll and risk a placebo arm for 22 months. Without this special community that we serve, we would not have completed this unusually onerous study. Second, when reviewing the evidence to support transition from accelerated to traditional approval of a therapy, one, of course, looks to the totality of the evidence. Here, the division recognized the challenges associated with this ultra-rare disease trial and set out a very specific standard for continuing marketing authorizations. As referenced in our VYONDYS approval material, the FDA gave us a very specific written language about voluntarily withdrawing marketing authorization, which would only occur if "no relevant analyses find sufficient evidence of a clinical benefit. As you will hear from Dr. Rodino-Klapac, we believe that we have met that standard and that we have sufficient evidence to discuss with the agency transitioning from accelerated to traditional approval. Consider as you will have seen in our press release, the study missed its statistical significance. However, the data demonstrated a consistent and clinically favorable trend across the trial population. Importantly, a portion of this study was conducted over the COVID pandemic period. And as with many studies over that period, the study results were impacted for a variety of reasons. During the pandemic, the rate of missed doses was unusually high with nearly all patients missing doses and approaching half of whom missed substantial consecutive doses. Participants in the study were also largely shut in and suffered deep conditioning and loss of mobility. All of this appears confound in the results. When one excludes the COVID participants, we see a meaningful treatment benefit slowing disease progression by about 30%, which Dr. Rodino-Klapac will further explain. Likewise, to enroll this study, we were required to admit a broad population from as young as 6 years old to as old as 13 years old, including those who clearly have confounding ceiling and floor effects. In the subgroup analysis of those likely to progress, there was a strong statistically significant benefit, and this was across not only the primary but the other endpoints as well. There is also a wealth of published real-world evidence for the PMOs as just a few examples of the multiple real-world studies across our PMOs, we see that when tracking VYONDYS over 6 years, there is an 88% reduction in risk of loss of ambulation with a Kaplan-Meier analysis of delay of about 3 years. Likewise, with both VYONDYS and AMONDYS, we see over time a significant attenuation in pulmonary decline and a significant delay in time to cough assist and ventilation. We see the same trend in our own study, ESSENCE. As part of the benefits they are seeing, patients are required to be infused weekly, a fairly onerous protocol and yet their compliance rate has been well over 90% commercially year over year over year. When one considers all of the evidence for benefit and then weighs a favorable stable safety profile has tracked over many years. We believe the risk benefit remains positive. We not only anticipate continuing marketing authorization, but we believe we have a good argument for traditional approval. Our plan is to schedule a meeting with the division to review the totality of the evidence. Dr. Rodino-Klapac will now discuss those results in more detail. Louise? Louise Rodino-Klapac: Thank you, Doug. I'll turn to the next slide. Today, we announced the top line results from our ESSENCE trial, the first placebo-controlled Phase III study of exon skipping therapies, VYONDYS 53 or golodirsen and AMONDYS 45 or casimersen to treat patients with Duchenne muscular dystrophy amenable to exon 53 or 45 skipping, respectively. To remind you, VYONDYS and AMONDYS are designed to address the underlying cause of Duchenne by restoring the messenger RNA or mRNA reading frame. The therapies use Sarepta's proprietary PMO chemistry and exon skipping technology to skip exons 53 and 45 of the dystrophin gene. Promoting the synthesis of a short and functional dystrophin protein is intended to slow decline in Duchenne patients. VYONDYS and AMONDYS were approved by FDA via the accelerated approval pathway in 2019 and 2021, respectively. Next slide, please. As shown on this slide, initiated in September 2016, the 225-person ESSENCE study was designed as a double-blind, placebo-controlled trial spanning 96 weeks, followed by a 48-week open-label extension, reflecting the scale, rigor and long-term commitment required to validate targeted treatments and select rare disease populations such as Duchenne. The trial was conducted across 75 centers in 24 countries. Next slide, please. In terms of baseline demographics, patients were well matched with 2:1 treated versus placebo with numbers of exon 45 and exon 53 amenable patients consistent with the prevalent Duchenne population. Functional baseline characteristics were also well matched. Now turning to the top line results on the next slide. ESSENCE demonstrated numerical superiority across the primary and most secondary endpoints. However, the study did not reach statistical significance on the primary endpoint, the 4-step Ascend at 96 weeks. Let me first highlight the key results, and then I'll provide more detail on each. First, and as mentioned, we believe COVID impacted study results. A post-hoc analysis of participants not impacted by COVID improved study results on the 4-step Ascend, with a lease square mean difference of 0.11 steps per second and a p-value of 0.09. Second, when a prognostic score is applied to identify the subpopulation at risk for decline on 4-step Ascend, a meaningful and significant treatment response is evident with a lease square mean difference of 0.186 steps per second and a p-value of 0.01. And importantly, there were no new safety signals with comparable AE rates between treated and placebo. AEs were largely mild or moderate. Next slide, please. As you will see on this slide and as I mentioned previously, although the data showed numerical superiority, the primary endpoint of this study was not met. Next slide, please. As Doug mentioned, COVID appears to have had an impact on study results. The study itself was challenged operationally during the COVID period with twice as many consecutively missed doses during COVID versus COVID-free patients and compressed clinical evaluation schedule. 43% of COVID-impacted patients had consecutively missed doses with an average of 8 missed doses. In addition, published studies specifically on the impact of the COVID pandemic in Duchenne have demonstrated a negative impact on function due to immobility, contractures and increased weight gain. On this slide, I've highlighted the COVID period that falls in the middle of the ESSENCE study, which began in late 2016 and completed in 2025. We define patients that began and completed their 96 weeks outside of this window as COVID-free. Next slide, please. Notably, a post-hoc analysis of the COVID-free participants improved study results on the 4-step Ascend primary endpoint as shown on the left, with a least square mean difference of 0.11 steps per second and a p-value of 0.09. This equates to an approximately 30% reduction in disease progression over 2 years on the 4-step Ascend. This is in stark contrast to those individuals impacted by COVID on the right. Had we seen this effect size in a sample size similar for the whole trial population, we would expect it would have reached statistical significance. Secondary endpoints also demonstrated improved study results in COVID-free participants. Next slide, please. Separately, we also performed an analysis using a prognostic scoring method published by the well-respected CTAP, a collaborative trajectory analysis project group, which is focused on Duchenne. This method published after we commenced ESSENCE is used to identify the population most at risk for decline and consequently, a maximum treatment benefit can be identified by avoiding floor and ceiling effects. The method includes baseline age 4-step Ascend velocity, rise from floor velocity, 10-meter walk run velocity and corticosteroid duration and type. The 4-step Ascend was the most sensitive endpoint and reached statistical significance with this prognostic score applied. With a clinically meaningful lease square mean difference of 0.186 steps per second and a p-value of 0.01, this equates to a 35% reduction in disease progression over 2 years on the 4-step Ascend. Next slide, please. There were no new safety signals with comparable adverse event rates between treated and placebo, reinforcing the favorable and manageable safety profile observed with our exon skipping therapies. Adverse events were largely mild or moderate. We believe the totality of these data along with the real-world evidence are compelling for AMONDYS and VYONDYS, and we'll be sharing these data with FDA to support sNDA filings. Next slide, please. Of note, and as you will see here, a number of factors generated from real-world evidence supports casimersen, including a mean age of 15 years for casimersen-treated patients to meet a wheelchair versus 9.5 to 12.3 years in the literature for standard of care. It also shows a 2.6-year delay in time to reach FVC percent predicted of less than 60% for patients 10 to 18 years old versus matched control and a 70% reduction in mortality rate for our PMO. Next slide, please. On this slide, you will see how the real-world evidence supports golodirsen, including a 3-year delay in loss of ambulation versus external control, a 7.5-year delay in the need for nighttime ventilation and a 70% reduction in mortality. Next slide, please. As you can appreciate on this slide, the real-world body of evidence supports the effect of our PMOs on the trajectory of Duchenne, including an impressive 5.4-year increase in survival, a 3- to 4-year delay in loss of ambulation and significantly slower rates of pulmonary and cardiac decline. Next slide. Further, it's important to note that our exon skipping therapies have treated over 1,800 patients worldwide from infants to adults in their 30s, providing a robust foundation of clinical experience and real-world evidence showing PMOs have been associated with slowing Duchenne disease progression, including delayed loss of ambulation, preserved pulmonary and cardiac function and extending survival. With a patient adherence rate of more than 90%, the sustained use reflects the clinical value of our exon skippers. And we were also pleased to announce at this year's World Muscle Society meeting that a clinically meaningful attenuation of pulmonary decline was demonstrated in patients with advanced Duchenne treated with casimersen compared to matched external controls. And it's also important to note that most of our post-marketing requirements or PMRs have been completed. Next slide, please. In terms of next steps, with the completion of ESSENCE, we've submitted the top line results to the agency. We plan to submit a request to schedule a meeting with the division by the end of the year to review the totality of evidence and discuss the path to a traditional approval. Our findings will also be shared at future scientific forums with plans for publication in a peer-reviewed journal. I'd like to take this moment to thank the Duchenne community, clinical trial investigators and KOLs for their unwavering support these past years. Drug development often poses what can seem like unmovable obstacles. In the face of those obstacles, particularly in rare and ultra-rare disease, we remain steadfast in the science and focused on taking the best, albeit at times the more challenging path forward for the benefit of patients. We remain committed to our exon-skipping therapies and to the benefit they have provided and continues to provide to those living with Duchenne. I'll now turn the call back to Doug. Douglas Ingram: Thank you, Louise. All right. Next slide, please. Let's move now to performance. Notwithstanding unprecedented disruptions in the quarter, ELEVIDYS and the PMOs together posted solid net product revenue of $370 million for the quarter. Our Chief Commercial Officer, Patrick Moss, will provide more color on that in a moment. As to the ELEVIDYS label, we have had very productive dialogue with OTP, and we expect the label change process with FDA to be concluded very soon. Dr. Rodino-Klapac will discuss our expectations for the label very shortly, along with our planned trial for the prophylactic treatment of sirolimus. As it relates to our portfolio, we are very enthusiastic about our siRNA platform as the rest of biotech appears also to be enthused with the increasingly derisked potential of siRNA. Louise will discuss our progress on that in a bit. Finally, I would note that in the quarter, we took several important actions to strengthen our financial performance and align our resources with our strategic focus on supporting our current therapies while we advance our largely siRNA-based pipeline. Our CFO, Ryan Wong, will provide color on those actions in his remarks. And with that, I will turn the call back over to Louise again to make some remarks on ELEVIDYS and on our pipeline. Louise? Louise Rodino-Klapac: Thank you, Doug. And the next slide, please. Moving now to our ELEVIDYS and pipeline updates. Next slide. To update you on the safety label process for ELEVIDYS, as previously discussed, we've agreed to a black box warning for ALI and ALF. Also, consistent with the action we've already taken to pause shipments to non-ambulatory patients, we've agreed with the FDA that non-ambulatory will be removed from the indication and usage section of the prescribing information. Once we have an understanding of the risk-benefit analysis for sirolimus, we will discuss with FDA if data are sufficient to resume dosing non-ambulatory patients. Next slide, please. As you're aware, we convened an expert committee to discuss ALF and the potential of adding additional immunosuppression regimen for the non-ambulant population. Earlier this month, the committee, which consisted of numerous globally recognized, highly experienced medical specialists, including neuromuscular physicians with ELEVIDYS treatment experience, hepatologists and specialist experience in immunosuppressive therapies, shared their findings at WMS in which they analyzed and reviewed ALF safety data to identify early indicators of ALI and define populations at elevated risk for ALF. They evaluated and recommended strategies to prevent and mitigate ALI and ALF, emphasizing early risk recognition and patient stratification, a focus on intervention, clinical pathways and risk-based management, optimized clinical management approaches for ALI and ALF, including prophylactic immunosuppression and monitoring parameters. Based on these discussions and analyses, the committee endorsed modifying hepatic biomarker thresholds in ALI to facilitate timely intervention. They also recommended enhanced liver characterization of baseline to better understand risk factors of developing ALI. In terms of ALI prevention, they recommended adding prophylactic sirolimus as a second agent to the current corticosteroid regimen versus increasing corticosteroid doses, and this is 1 to 2 weeks prior to infusing ELEVIDYS. In terms of ALI management, the committee recommended prompt initiation of IV corticosteroids if patients do not respond to oral corticosteroids. Lastly, they emphasized the need to generate real-world and clinical data. Toward that end, and as we've communicated previously, Cohort 8 of our ENDEAVOR study is designed to demonstrate the effectiveness of additional prophylactic immunosuppression in non-ambulatory patients receiving ELEVIDYS. We are in discussions with FDA about the design of the study and hope to be able to commence it soon. Next slide, please. Also of note at this year's WMS meeting were the results of an independent study led by Dr. Jonathan Soslow from the Department of Pediatrics at Vanderbilt University Medical Center. The study included 20 Duchenne patients who received ELEVIDYS. The first 14 patients received ELEVIDYS with a standard protocol, including corticosteroids, but no additional immunosuppression. The 6 subsequent patients underwent a modified immunosuppression protocol with sirolimus. The objective was to show the initial safety, tolerability and efficacy of sirolimus prophylaxis. What the results demonstrated was that a low dose of sirolimus prophylaxis appeared to be safe and well tolerated in the Duchenne patients receiving ELEVIDYS, and there were no observed increases in liver enzymes in the 6 patients treated with sirolimus. Next slide, please. Moving now to our pipeline updates. Next slide and beginning with our LGMD Type 2E program. Regarding SRP-9003 for LGMD Type 2E, we recently presented positive Phase III emerging data at the WMS meeting. The study met its primary endpoint, demonstrating a significant increase in beta-sarcoglycan expression. In addition, restoration of other sarcoglycan complex proteins in both ambulatory and non-ambulatory patients was demonstrated. Further, our safety and tolerability results were consistent with previous results. We are encouraged by these data to support SRP-9003's clinical benefit in patients living with LGMD Type 2E. To determine the path forward, we have scheduled a meeting with the FDA this quarter. Following this regulatory dialogue, we will assess the requirements and determine the appropriate next steps for the program. Lastly, we turn to our promising siRNA pipeline. The recent activity in this space underscores the significant opportunity for this modality, and we are excited by our potential best-in-class approaches. Our DM1 and FSHD programs continue to advance rapidly. Enrollment is progressing well in both trials. For DM1, enrollment in the SAD study is complete and Cohort 4 of the MAD study at 6 mg per kg is currently enrolling. For FSHD, enrollment of the SAD study is complete and Cohort 6 of the MAD study or 12 mg per kg will begin enrolling this month. While we previously expected to release single dose ascending data by the end of the year, our team is currently prioritizing the transfer and validation of assays necessary to provide high-quality PD data. As a result, we now anticipate sharing these initial results in the first quarter of 2026. We also plan to initiate our trial for Huntington's disease by the year-end. This program utilizes a subcutaneous route of administration, allowing for deep brain regions like the striatum, particularly affected by Huntington's. In addition to the second-generation DM1 candidate selected at deal close, which has the ability to cross the blood-brain barrier and address the cognitive aspects of DM1. We have also selected 3 of our research targets, which we plan to discuss at a later date. We continue to be excited by our differentiated approaches with siRNA and look forward to updating you in 2026. I'll turn the call over to Patrick Moss for an update on our commercial performance. Next slide. Patrick? Patrick Moss: Thank you, Louise, and good afternoon, everyone. My comments today will focus on 3 areas: a review of our Q3 performance, my thoughts on the ESSENCE results and our expectations for the trajectory of ELEVIDYS. Next slide, please. Total product revenue for the quarter was $370 million, including $131 million in ELEVIDYS net product revenue and $239 million in PMO net product revenue. The pause in shipments to the ambulatory population, which resumed following the FDA's recommendation, created meaningful disruptions to patient access. Some infusion dates were canceled, requiring some families to reinitiate the logistical process, antibody testing, rescheduling appointments and reconfirming insurance authorization. New patient identification efforts were also delayed as a result of physicians requiring clarification on the reasons for the voluntary pause. Despite these challenges, our teams responded swiftly and decisively, working closely with sites and families to ensure continuity of care. Importantly, demand for ELEVIDYS proved resilient amongst those patients that had scheduled infusions with some infusions resuming within a week of lifting the pause on ambulatory shipments. We also continue to engage our key stakeholders, including payers. We've had productive discussions with payers since the pause and have not seen unfavorable shifts in coverage for ELEVIDYS. In the ambulatory population, approximately 220 million lives have a path to coverage. We continue to fight for our patients and to date, we're not aware of a single permanent denial for coverage. Our PMO franchise delivered strong demand based on performance this quarter. Performance also benefited from additional shipping days in the Q3 calendar compared to the upcoming fourth quarter. Now turning to the ESSENCE study. We look forward to connecting with physicians, patients and payers to share the data at upcoming congresses and through additional compliant channels. We believe the totality of the evidence demonstrating the value of our PMOs will be viewed by HCPs and families as proof of an innovative treatment option that can have an impact on the trajectory of the disease. Our PMOs have generated a significant amount of real-world evidence supporting the efficacy of these products. The real-world evidence, coupled with the data set from ESSENCE, only solidifies our view about the importance of these treatment options for patients living with Duchenne. As evidenced by our Q3 performance, we have successfully restarted shipping for ambulatory patients, and we have begun to see new ELEVIDYS enrollment forms submitted. However, the disruptions in the market this year, combined with the typical seasonal dynamics in Q4 will temporarily impact demand generation and the influx of new enrollment forms. Due to the resulting delays, we expect the Q4 infusion volumes to be flat to slightly down from Q3. Despite these near-term dynamics, we remain confident in the long-term opportunity for ELEVIDYS and are comfortable reiterating our guidance that the ambulant population alone represents an annual revenue opportunity with a $500 million floor. Our conviction is based on the wealth of data demonstrating the benefits of ELEVIDYS. Further, based on our ongoing dialogue with providers, we do not anticipate the inclusion of the box warning in the final label to have a significant impact on prescribing behaviors, and our field teams are fully equipped to support informed conversations with all stakeholders. The data continues to reinforce this long-term view. We are energized by the reception to our data presentations at this year's World Muscle Society, in particular, the 3-year functional outcomes data for ELEVIDYS has resonated strongly with health care providers, reinforcing the durability of benefit and the therapy's potential to slow disease progression. Now to remind everyone, we have now treated greater than 1,100 patients with ELEVIDYS in both the clinical and commercial setting, providing patients with an effective therapy that is designed to impact the trajectory of their disease. Taken together, these results underscore the strength of our portfolio and the resilience of our commercial execution. This team has led an incredible launch through undoubtedly turbulent times, and I have the conviction that this team will continue to deliver results. We remain deeply committed to supporting patients and families, and we are confident in our ability to navigate the near-term dynamics while advancing our mission to transform the lives of those living with this devastating disease. As I continue to meet with HCPs and hear family stories, I am moved by how our therapies are having a positive impact on the lives of patients living with Duchenne. I'll now turn the call over to Ryan Wong to discuss financial results. Ryan? Ryan Wong: Thank you, Patrick, and good afternoon, everyone. This afternoon's press release provided details for the third quarter of 2025 on a GAAP basis as well as a non-GAAP basis. Please refer to the press release available on Sarepta's website for a full reconciliation of GAAP to non-GAAP financial results. Next slide, please. I'd like to start my remarks today by thanking the Sarepta team for their commitment and diligence as we executed well against the revised strategy and refocused pipeline that we announced in July. Importantly, we took proactive steps in the third quarter to enhance our near-term liquidity and to improve our balance sheet and debt profile. We monetized strategic investments, completed a debt exchange, which reduced maturities due in 2027 from $1.15 billion to $450 million and significantly reduced our go-forward cost structure. In Q3, we were cash flow positive. Cash and investments increased from $850 million to $865 million. And from the strengthened financial foundation, we will continue to advance our pipeline and strategy. I will now touch on the key highlights from our third quarter financial results. Next slide, please. Total revenues were $399 million in the quarter, which consisted of $370 million in net product revenues and $29 million of collaboration and other revenues, which relates to contract manufacturing and royalty income from our partnership with Roche. Q3 cost of sales totaled $151 million, up from $92 million in the same quarter prior year. The increase reflects higher ELEVIDYS cost of goods due to depletion of previously expensed inventory and increased [indiscernible] costs. Additionally, we recorded $22 million in charges for write-offs of deposits tied to certain ELEVIDYS manufacturing suites and take-or-pay shortfall payments. Following the pause in shipping to the non-ambulatory population, we acted quickly with our strategic manufacturing partner to align ELEVIDYS production with near-term demand. As a result, we have deferred manufacturing commitments and payments from the first half of 2026 to 2027, while maintaining what we expect to be sufficient inventory to meet global demand. Moving on to expenses. Let me start with the restructuring charge reported in Q3. Following our July business and strategy update, which included a reduction in force and reprioritization of our pipeline, we incurred $41 million in restructuring costs, of which $35 million related to severance and other onetime termination benefits and the remainder related to the accelerated depreciation of certain impacted assets. Moving next to R&D. In the third quarter, GAAP R&D expenses were $219 million and non-GAAP R&D expenses were $207 million, both essentially flat to prior year. Nearly half of our reported R&D expense relates to the $100 million milestone paid to Arrowhead for meeting certain enrollment and safety thresholds in our SRP-1003 DM1 program. Turning to SG&A. We reported $92 million and $77 million on a GAAP and non-GAAP basis, respectively, representing a year-over-year decrease of 28% and 23%, respectively. These decreases were driven by lower compensation expenses as well as lower commercial spend following our cost restructuring efforts. Looking ahead to the remainder of the year, we expect combined non-GAAP R&D and SG&A expenses of approximately $420 million to $430 million in the fourth quarter. This includes $200 million payable to Arrowhead for the second DM1 milestone, which we anticipate recording in Q4 with payment due in the first quarter of 2026. For the full year, our guidance for combined non-GAAP R&D and SG&A expenses is approximately $1.86 billion. Excluding the Arrowhead transaction costs and DM1 milestones together totaling $884 million, our underlying expense guidance is roughly $976 million. Recall, our 2025 guidance prior to our July business and strategy update was between $1.2 billion and $1.3 billion, which means we have reduced planned expenses by nearly $300 million from the midpoint. This reflects our commitment to disciplined capital allocation, and we remain on track to meet our restructuring targets into next year. Lastly, in Q3, we reported an operating loss of $103 million and $36 million on a GAAP and a non-GAAP basis, respectively. Adjusting for the $41 million restructuring charge and the $100 million DM1 milestone, our underlying business would have reported a GAAP and non-GAAP operating profit of $37 million and $54 million, respectively. Additionally, adjusting for the $584 million Arrowhead upfront transaction cost, our underlying business has delivered a robust year-to-date GAAP and non-GAAP operating profit of $436 million and $561 million, respectively. In closing, with our financial performance and the actions we took in the quarter to strengthen our financial foundation, we believe we are well positioned to execute our strategy and meet our financial obligations even under revenue stress test scenarios. Looking ahead, our capital allocation priorities remain focused on investments that drive demand for our on-market therapies and advance our SNA platform towards potential near-term value inflection points. And now I'll turn the call back to Doug for closing remarks. Doug? Douglas Ingram: Thank you, Ryan. Let's open the call for questions, and then I'll make some closing remarks. Operator: [Operator Instructions] We'll go first to Anupam Rama at JPMorgan. Anupam Rama: I had just a quick question on ESSENCE. You guys talked a lot about some of the additional analyses and the COVID impact here. What other endpoints should we be looking for in a publication and/or medical conference presentation, FDA package that you think that would be supportive of some of the data that you presented here today? Douglas Ingram: Yes. Thank you for that question. I'll turn this to Louise. Louise Rodino-Klapac: Yes. Thanks for the question. So first, we'll be looking at the totality of evidence. So ESSENCE will be one part of that. But as we mentioned, the real-world evidence data is significant over many, many years and showing a benefit. In terms of ESSENCE, this is the top line. We have other secondary endpoints that include functional endpoints and also biological endpoints like expression, which are not complete yet. So all of that will be in the final CSR will be presented to the agency, and then that will be presented in a medical meeting. But as I mentioned in my remarks, the primary and secondaries favored the PMOs. And in terms of COVID, we saw the similar result that we saw with the primary, in which case you saw improvement with those endpoints when you looked at the COVID-free population. Operator: We'll go next to Gena Wang at Barclays. Huidong Wang: Maybe I'll just follow up regarding the COVID-free population. When we look at the p-value, it is still relatively high. It's 0.09. So like how do you think the FDA will look at the data sets here? And what could be the potential outcome with the FDA decision? One could be full approval? Should we also be worried about the drug could be pulled off the market as a potential worst-case scenario? Douglas Ingram: Thank you for the question, Gena. I'll make a couple of comments, and then I'll turn it to Louise. First of all, 0.09, I know that the standard is typically 0.05. Interesting enough, FDA leadership very recently noted with respect to rare diseases that 0.05 is relatively arbitrary and actually cited 0.09 as being potentially acceptable p-value. It says that 91% of the time, you're seeing a drug effect, particularly for rare disease. But I would also note that one of the reasons that we're seeing a p-value of 0.09, and we're not seeing a p-value closer to or better than 0.05 is that while 168 patients are included in the analysis here, 57 patients were excluded because they were -- their results were affected by the pandemic. And of course, that lowers the powering of the study substantially. So I think in light of the fact that we had to significantly lower the powering of the study to look at 168 versus for the additional 57 we would have otherwise seen, I think 0.09 is pretty darn impressive. And the effect, of course, not just the statistical significance of 0.09, but the effect is really important as we were showing a reduction in decline of 30%, which over the long run will be very, very important to these families. And one of the nice things about having these therapies commercially available for so long is that we get to see what happens over the long term, as you saw with respect to just one example of many VYONDYS, you look at that for 6 years, and these kids are seeing literally almost 3 years of delay in being in a wheelchair and the time to ventilation is significantly different. So I think the outcomes are a couple fold when we talk to the FDA. I really do not believe that there's a risk of losing marketing authorization, it would make very little sense given both the benefits we've seen with this therapy and considering this extraordinarily beneficial safety profile that we've seen over many years and when considering the standard that the FDA was very specific with us about as they approved VYONDYS in particular, and they were talking to ESSENCE and they said, the standard is you will be -- you will commit to voluntarily withdrawing marketing authorization, but only in a scenario where no relevant analyses would confirm a clinical benefit. Of course, we don't have that between the real-world evidence and the evidence we see here. So that -- I don't really think that is in the cards in the rational world. And then the real question is, can we transition this therapy from an accelerated approval to a traditional approval. We certainly think we have a good argument around that. We've been spending an enormous amount of time gathering data that supports this, and we think it would be the most efficient approach, but that will require discussions with the agency, and I can't make a prediction on that in advance of having good solid discussions and review of data with the agency. Now I said, Louise, I'm going to turn it over to you, and I will do that, but I did go on a bit of a monologue there. Louise Rodino-Klapac: Yes, I think you covered it well. Thank you. Operator: We'll go next to Tazeen Ahmad at Bank of America. Tazeen Ahmad: Mine is on the upcoming Arrowhead data. I wanted to get a sense of what level of data to expect from these early programs that you're looking at. Importantly, these indications, DM1, FSHD, et cetera, are ones that other companies are pursuing. Can you give us a sense of what level of data to expect so that we can potentially start to compare and contrast with the other programs that are ahead of you in development? Douglas Ingram: I'll turn this to Louise. Louise Rodino-Klapac: Sure. Well, of course, so we'll be sharing data with a single ascending dose study, and we'll be looking at safety and then we'll also have safety data for the multiple ascending dose by that time. So we'll have PK data, that's serum PK, muscle PK. And then as I mentioned in my remarks, we are working to validate and transfer the assays, the PD assays. And so that is knockdown for DM1 and looking at splicing. And then for FSHD, we're obviously looking at downstream FSHD gene. So these are assays that we want to validate and have through, through our pivotal studies. And so we're working hard to make sure that these are in a good place so that we -- when we present our PD data, can be carried through throughout our studies. So we're excited to see this result and present it to you early next year. Operator: We'll move next to Brian Abrahams at RBC Capital Markets. Kevin Meli: This is Kevin on for Brian. So we just had a couple on the proposed sirolimus study. Maybe can you just provide a little bit more color on any key sort of trial design features left to discuss there with the agency, how confident you are in the protocol that you've previously presented? And what if anything could be tweaked there? And would you still anticipate a potential readout in the first half of next year for that study? Douglas Ingram: Sure. Louise? Louise Rodino-Klapac: Sure. I think in a general sense, the protocol design is -- will be similar to what we presented. We haven't finalized it with the agency. But in general, in terms of the numbers of patients and the protocol for sirolimus, that hasn't changed. So it's been minor back and forth on the protocol itself. So as soon as we get that study started, we are ready to enroll quickly. Patients are lined up. And so by -- as you mentioned, in the first half of next year, we'll start to have data on the effectiveness and then in the second half of the year is when we'll have the full data set for the trial based on starting the trial soon. So we're hoping to get that initiated in the near term. Operator: Our next question comes from Joe Schwartz at Leerink Partners. Joseph Schwartz: Previously, I think you mentioned that there were around 75 infusion centers around the U.S. that were up and running, although to different degrees. So I was wondering how many are active once again after the pause? And how much variance is there across these centers in terms of the numbers of patients they're treating with ELEVIDYS now? Douglas Ingram: Patrick, you can take this one. Patrick Moss: Sure. Well, when we look at the top sites, they continue to treat. Now those less experienced sites. During the pause, they want to understand really the information that caused us to pause. But what we've seen now is the majority of those sites are also starting to submit enrollment forms as well. Operator: We'll go next to Andrew Tsai at Jefferies. Lin Tsai: I appreciate the update. So going back to the PMO franchise, can you remind us when the MISSION data is for EXONDYS 51 and how you would define success or failure in that study since I believe it's a dose response study, so there's no placebo arm. Douglas Ingram: Yes. Thank you very much. So that's a really interesting nuance. And Louise, you're going to correct me. I believe the readout date for MISSION is 2026. So to your very good point, MISSION is a post-marketing commitment that we have with respect to EXONDYS, but unlike ESSENCE and unlike VYONDYS and AMONDYS, it is not a confirmatory study. So there is no confirmatory study for EXONDYS and that was purposeful. The FDA in some of their memos indicated that what they really wanted to see was not a confirmation study, but rather a dose-ranging study. So there's -- essentially, it's dose ranging between 30 mg per kg, 100 mg per kg, even up to 200 mg per kg. And so the result of that is really a dose. Is 30 mg per kg the optimal dose or is 100 mg per kg the optimal dose? So that's the consequence of that study. It's not a confirmatory study, and that will read out in 2026, and we'll go from there. Operator: We'll take our next question from Salveen Richter at Goldman Sachs. Tommie Reerink: This is Tommie on for Salveen. Just wondering about guidance, if there's anything that you can say on full year for ELEVIDYS and about the stress tests that you've done in the past with the $900 million PMO, $500 million ELEVIDYS. And separately, just on ESSENCE, in the context of recent events, we're just wondering if your confidence that the FDA won't move the goalpost here. Douglas Ingram: I'm sorry, what was the last question? Move the goalpost for? Tommie Reerink: For ESSENCE. Douglas Ingram: Yes. I feel confident based on the fact that it was in writing. The standard that we were given was in writing. In fact, we had to commit back to them in writing that, that would be the standard. It did not come from a reviewer. It came from, in the first instance, the head of the neuro division and then it was cited by the supervisor for over neuro. So I think this was a very well-established standard that we have. Plus the fact is that these therapies have been on the market for a number of years. We have extraordinary real-world evidence on their use. As I think we mentioned before, this is one of the most onerous protocols for a therapy, you could imagine for commercial therapy, these young men and boys have to be infused on a weekly basis and yet families in recognition of the benefits they're seeing are -- have a compliance rate year over year over year that's greater than 90% commercially and the safety profile for these therapies is just -- is exceptional, I think, would be the fair way to say it. So I don't imagine that there'd be any reason why the division would want to change its standard. It would seem to be unnecessary. As it relates to guidance, we're not in a place to give broad guidance right now, but we feel on the stress test concept, we continue to feel comfortable on that stress test we talked about. That is not our guidance for next year. We're going to come together on that. I'm looking at Patrick when I say that. But we're -- we certainly feel very comfortable about that kind of baseline concept of $500 million for ELEVIDYS. Anything else you want to say about that for the rest of the year, Patrick? Patrick Moss: Nothing new to add. Thank you. Operator: We'll go next to Gil Blum at Needham & Company. Gil Blum: So when should we expect to receive data from -- expression data from patients receiving prophylactic sirolimus? And would any be provided from the [ ISD ] that was conducted separately? Douglas Ingram: Louise? Louise Rodino-Klapac: The expression data would -- assuming the study started soon would be late next year just in terms of saying the biopsies and analyzing them. In the study that Dr. Soslow conducted, biopsies were not part of that. I think that is something that he's looking at, but that was not part of the original study design. Douglas Ingram: I think that it's a very good question and a very interesting one. The primary reason that we're looking at the use of prophylactic sirolimus is the evidence we have preclinically and some of the early clinical data that it will greatly enhance the safety profile of this therapy, particularly for non-ambulatory patients. But one of the things we've seen preclinical, we have not seen clinically yet because we have -- no one's taken -- performed a biopsy yet. But preclinically, we've seen the opportunity to potentially greatly enhance expression, which in turn may significantly enhance benefit and durability and the like. So we're very interested in seeing in addition to the safety issue, which is without a doubt the primary reason for conducting this study, seeing some of that expression data as well, and that will be a next year event. Operator: Next, we'll go to Yanan Zhu at Wells Fargo. Yanan Zhu: Great. Just maybe a quick follow-up to a prior question. To what degree does FDA's reaction to ESSENCE spill over, for example, to EXONDYS 51? Is there a possibility that the decision or reaction positive or negative, is there a mechanism for it to also apply to 51 because there's no formal 51 confirmatory studies? And also wanted to -- curious, in your mind, what is the relevance of the precedent of NS Pharma, their confirmatory trial and that outcome, whether that has any implication to your situation? Douglas Ingram: I think the only thing I'd say about NS Pharma, and we don't know a ton about the details other than I think it's certainly proof that this division is being rational and isn't being excessively punitive for those who may not know, NS Pharma had a study for a PMO. That study did not hit stat sig, I think there were some reasons for that. And I think the division has been quite thoughtful about that. And that happened some time ago, and they certainly don't seem to be moving to do anything irrational. To your first question, the question is an interesting one. Do you think the outcome of ESSENCE has some read-through in some way to EXONDYS? And the short answer is, no. It does either positive or negative. I don't think it gives us a great mechanism to immediately make EXONDYS traditional approval if we're able to get traditional approval for VYONDYS and AMONDYS. And likewise, I don't think it has any other negative read-through to EXONDYS at all for the simple reason that the ESSENCE is specifically for 2 therapies, VYONDYS and AMONDYS that we're in that study and EXONDYS doesn't have that kind of study. Again, EXONDYS was approved with a post-marketing commitment to look at dose ranging. We'll have an opportunity to talk about transitioning to a traditional approval with EXONDYS, but only after we've completed our post-marketing commitment to look at that dose-ranging study of the 30, 100 and even up to 200 and then look at the benefits of that versus the downsides of extra dosing and the time it takes to infuse. So we'll look at all of that, and that will be its pathway to a traditional approval if things go well there. But ESSENCE doesn't never read through there as far as we can see logically. Operator: We'll move next to Mike Ulz at Morgan Stanley. Michael Ulz: Maybe just a follow-up on ESSENCE in terms of time lines here. When could you potentially meet with the FDA? And when would you expect to roughly have a final decision on that -- on the PMO franchise? Douglas Ingram: Louise, do you want to take that? Louise Rodino-Klapac: Sure. So the meeting request will go in by the end of the year. So the meeting will take place sometime in the first quarter based on that request. And so then later in the spring, the final CSR will be submitted and then the outcome of the meeting with the agency will determine next steps. So we'll update when we have something new to share, but the meeting will happen in the first quarter of the year. Operator: We'll go next to Brian Skorney at Baird. Brian Skorney: I guess the study has been running for 10 years now and the original design was 6-minute walk. And I don't think it was changed to this 4-step Ascend velocity until under -- just under a year ago. And prior to that wasn't flagged as a key secondary endpoint. So I guess with switching the endpoint a mistake, what does the 6-minute walk data look like? And what was the rationale last year for changing the analysis? Douglas Ingram: Louise, do you want to take this? Louise Rodino-Klapac: Sure. Yes. So the -- we evaluated the endpoints following our ELEVIDYS EMBARK data. And so we did an analysis of endpoints and engaged external KOLs to help us do that moving to an endpoint that was perhaps more sensitive in this. And based on the data, we -- taking the 4-stair climb versus the 6-minute walk test was the right decision in terms of it was determined to be the most sensitive endpoint in our hierarchy. And I think the additional analyses we did from both a COVID perspective and a prognostic scoring method also showed that when you applied those thresholds, we see that the -- in terms of COVID, we see almost reached significance. And then when we did with prognostic scoring method, we did see that we reached significance. So it was certainly the right endpoint for the study. Operator: We'll go next to Ritu Baral at TD Cowen. Ritu Baral: I wanted to dig in a little further on the dynamics that will drive the down quarter next quarter. Can you elaborate on, I guess, the changes in shipments? I mean, is this sort of a lag on the delay that the disruption or the shipping disruption caused? Or is it something more fundamental? And sort of wrapped in all of this is how is safety monitoring around ALIs changing for the ambulatory patients? Are you finding that clinicians are sort of adopting these new monitoring suggestions that were detailed in World Muscle for ambulatory patients? And is that slowing things down? Douglas Ingram: Yes. I'm going to turn this over to Patrick. I mean let me say in the broadest of stroke, Ritu, it is the downstream pail that occurs when we have this massive disruption. I know people were a bit surprised that we were resistant to this temporary pause. But you can see the impact. We had a temporary pause for a very short period of time, but that really creates a significant downstream disruption. We've said many times, the process to go from start form to an infusion can be 4 to 6 months. So there's just a resonating impact when you have just a complete pause and then you have to restart everything. But Patrick, you can provide more nuance than I can on this. Patrick Moss: Absolutely. And I'll add, in addition to what Doug just shared, we have really 3 dynamics this quarter. One, the medical conferences to where many of our HCPs are out of their offices for many days, weeks at a time. We've got also the major holidays that are going to impact infusions. And then the third is the inevitable illnesses that can pop up this time of the year. So all that comes together and it's what we've seen last year as well could impact this quarter's infusions. And so that's why we're projecting this quarter to be flat to possibly down in the fourth quarter. Operator: We'll go next to David Hoang at Deutsche Bank. David Hoang: So I guess maybe following up on some of the ELEVIDYS dynamics that were already asked about. Are you at a place where you can kind of provide a little bit of color on when you think ELEVIDYS demand would be normalized and we might see an inflection in revenues? And then as you think about some of the other competitor gene therapy products out there, one of which I think is seeking accelerated approval sometime next year, does that factor into kind of how you think about how ELEVIDYS demand may play out? Douglas Ingram: I'm not going to comment on nor editorialize on other people's claims with their drugs. But as it relates to commercial performance, Patrick, perhaps you want to provide some commentary on that? Patrick Moss: Yes. And the early view is that based on our commercial execution and the trends that we're seeing, it does support that floor that we talked about. As we get further into this quarter, we'll also see additional demands and additional enrollment forms come in, and we'll be able to give an update at a later time, more likely the JPMorgan time frame. Operator: Next, we'll go to Mitchell Kapoor at H.C. Wainwright. Unknown Analyst: This is [ Jade ] on for Mitchell. So you stated today that the majority of previous ELEVIDYS cancellations were reordered, but can you provide the actual hard numbers on the infusion postponements versus the number of cancellations you've gotten? And do you have like an actual number of start forms that have been filed for this third quarter? Douglas Ingram: Yes. We're going to use revenue as our metric. So we're not going to provide that level of detail. Do you have anything to say, Patrick, about the canceled doses, you can certainly touch on that. Patrick Moss: Yes. So during the pause, we had 14 cancellations, and we have seen 11 of those patients rescheduled and were redosed within the August time frame, and the remainder are still working through the system. Operator: Next, we'll go to Biren Amin at Piper Sandler. Biren Amin: I had a question on ESSENCE. Patients missed doses due to COVID, then you should expect dystrophin production on western blot and percentage of dystrophin-positive fibers to also be impacted between COVID and non-COVID patients. However, there was an analysis that I think the company presented interim data on at the World Muscle Meeting in October 2022 at week 48, that analysis showed no impact for 43 patients that were randomized to either AMONDYS or placebo on exon skipping dystrophin production, dystrophin-positive fibers, dystrophin intensity. Each of these endpoints were evalue static. So I just want to kind of understand how do you correlate that interim AMONDYS data on these biomarkers to the final functional data where you did see a COVID impact? Douglas Ingram: Louise, do you want to comment on that? Louise Rodino-Klapac: Yes. A couple of points on that. So we'll -- once we have all of the final data, we can certainly do a sensitivity analysis to look at this. I think one thing to remember is that the patients didn't have -- there's not a single patient that had biopsies at each time point. So it's difficult to track. So all patients had baseline biopsies and then a subset had them at 48 and another at 96. And so once we have all the data, we can go back and look for sensitivity to see if there was an impact on dystrophin expression. But it is complicated by the fact that not every -- that the patients didn't have sequential biopsies in the study in terms of 48 and 96 weeks, there were separate patients. Operator: We'll go next to Gavin Clark-Gartner at Evercore. Gavin Clark-Gartner: I just wanted to follow up on the ELEVIDYS trajectory question. So acknowledging there can be a 4- to 6-month lag, as you noted, have you seen a pickup in start forms over the last 1 to 2 months that gives you confidence there will be a notable revenue pickup in 2026? Douglas Ingram: Patrick? Patrick Moss: We're starting to see sites identify patients and send in their enrollment form. Every patient has a very distinct journey that they have to go through. So it's the antibody screening and the testing and their prescreening before they even start the authorization process. And so the early trends are supporting the positive outlook. And as we get more data, we'll share at a later time. Operator: Our next question comes from Yigal Nochomovitz at Citi. Unknown Analyst: This is [ Shivan Kim ] on for Yigal. Maybe just 2 quick ones from us. Regarding ELEVIDYS, can you speak on whether you're currently seeing prescribers use sirolimus prophylactically for ambulatory patients? And for non-amb patients, can you remind us on the latest thinking around balancing the potential higher risk of infection from using sirolimus and if there was any discussion amongst KOLs or FDA did not utilize sirolimus prophylactically in all non-amb patients given this risk? Douglas Ingram: All right. With respect to the latter question on the non-ambulatory, that will be the outcome of our study. We feel pretty confident going into it that the risk benefit is going to justify the prophylactic use of sirolimus, but we'll only know that when the study read out and we look at those issues versus potential issues associated with risk of infection. I will say that to your first question, we only -- we don't have a systematic look at what physicians might be using prophylactic sirolimus there. We definitely have anecdotal evidence that a significant number, particularly more sophisticated physicians have used it. And what we're hearing at least anecdotally is that they're not having a lot of problems with the use of sirolimus prophylactically. So what we've at least heard anecdotally is that there some are using it and they are finding it very manageable and I think trying the benefit from it. But this all has to be confirmed. And we have a study that we're going to start when we get to go ahead with the FDA, which hopefully, again, will be very soon. And then we'll be off and then we'll get the data back and we'll get to review it if we are confident that it's significantly changed the risk benefit. We certainly have a lot of conviction that it could, and we're going to talk to the FDA and start testing non-ambulatory patients again. Operator: We'll go next to Sami Corwin at William Blair. Samantha Corwin: Given the turnover at FDA, I understand that you had written guidance previously from the head of Neuro. But I guess what was the last time you interacted with the division regarding the ESSENCE trial? And then just curious on the percent of patients that missed consecutive doses in the ESSENCE trial that were in the non-COVID group. Douglas Ingram: As it related to that second issue on the consecutive doses, I think it more than doubled or around doubled in the COVID period versus the COVID-free period. We haven't had any specific discussions other than administrative-related discussions with the agency regarding ESSENCE over the last bit of time, certainly not in the last 6 months, I don't believe, unless Louise corrects me. But again, I think we're working with the -- I know you've seen without editorial [indiscernible] you see all this sort of turmoil at the FDA leadership level recently over the last few days. But I think at the division level, that's where this decision is going to be made. And I'm confident that the professionals in the division are going to take a careful look at this. And I think we are going to be in good shape with respect to marketing authorization. And I'm hopeful that we'll actually be in good shape when we talk to them about transitioning from accelerated approval to traditional approval. Operator: Next, we'll go to Kristen Kluska at Cantor Fitzgerald. Rick Miller: This is Rick Miller on for Kristen. Just one here. To follow up on the MISSION trial, you said good readout next year for EXONDYS. Do you have any insight on how the FDA might look at any of these dose-ranging data you could generate there? Would you plan to meet with the agency after that trial? And just any insight you can give on what that conversation might look like? Douglas Ingram: Yes. I think it's going to look at the totality of the evidence from that study and just ask the question, is there a benefit to these patients by increasing the dose perhaps to 100 mg per kg versus the 30 mg per kg, and it's going to be a totality of that evidence about whether that occurs or not is on the one hand, there might be a benefit. We might see some benefit either functionally or in expression. On the other hand, it has to be -- has to rise to a certain bar because we are seeing a benefit from EXONDYS at 30 mg per kg, and that already takes nearly an hour a week. And if you start increasing the dose to 100, certainly 200 is probably not actually viable for these patients. The amount of time that you're infusing these kids is enormous and the imposition is extraordinary. So that's the whole thing we have to look at and then together decide if -- I mean, the good news is we're going to be completely aligned in our view of the agency and us. If 100 mg per kg was superior to 30 mg per kg for these kids and the risk benefit and the administrative issues justified it, we'd be fine doing that, but we need to look at that data very carefully. So again, the MISSION is not a confirmatory study. The result of MISSION will either be we're going to be continuing to distribute EXONDYS at 30 mg per kg or we're going to be distributing EXONDYS at some dose higher than 30 mg per kg. And if it was higher, it will very likely be 100 mg per kg. Operator: And next, we'll go to Andy Chen at Wolfe Research. Brandon Frith: This is Brandon on for Andy. Regarding your floor assumptions on ELEVIDYS sales, to what degree are you factoring competitive pressures from emerging therapies? Douglas Ingram: We've considered emerging therapies. And again, this is just a stress test. It's not our guidance. It's just -- this is a number that we would be very comfortable. We'd be in fine financial shape. We'd be able to maintain our revolver and pay our debts and advance all of our programs. So we're feeling very comfortable about that as a floor. Operator: And that concludes our Q&A session. I will now turn the conference back over to Doug for closing remarks. Douglas Ingram: Well, thank you all very much for spending some time with us this evening. We all look forward to continuing to update you as we get through the rest of this year, and we'll have some additional milestones. And as we look forward into next year, we'll provide updated guidance next year, of course. And then we're really excited early next year to provide you an update on the actual clinical data from our siRNA programs. That's enormously important to us. So with that, have a lovely evening. Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.

196天前Insight Analytics约5分钟阅读

SOMMY 2026 Q2 财报电话会议

Operator: As it is time to start, we will now begin the Conference Call for the Presentation of the Financial Results for the Fiscal Year 2025 Second Quarter. Thank you very much for your participation. Today, Mr. Sasaki, Representative Director and Senior Managing Executive Officer, will give a briefing on the financial results for fiscal year 2025 second quarter. Later, he will be joined by Mr. Yamauchi, Executive Officer and General Manager of Accounting Department to take questions. We will conclude the call at 4:50. Mr. Sasaki, over to you. Keigo Sasaki: Thank you. I'm Sasaki from Sumitomo Chemical. Thank you very much for attending our conference call today despite your busy schedule. I'd like to thank the investors and analysts for your daily understanding and support to our management. Thank you very much for that. Now let me start with the presentation of the financial results for fiscal year 2025 second quarter. Please turn to Page 4. This is a summary page. Core operating income and net income attributable to owners of parent significantly improved compared to the same period of the previous year. Core operating income of Essential & Green Materials increased significantly year-over-year. There are also profits at Sumitomo Pharma with strong sales results, leading to recording of a sales milestone of ORGOVYX and partial divestiture of the Asian business. Compared to the forecast announced in August, in addition to strong sales at Sumitomo Pharma, there was improvement in foreign exchange gain or loss from a yen weaker than anticipated, as well as a reduction in the deferred tax liability, resulting in a reduction in the corporate income tax expenses, leading to increase in both core operating income and net profit. Please turn to Page 5. Consolidated financial results of the second quarter. Sales revenue was JPY 1,954 billion, down JPY 146 billion year-on-year. Core operating income was JPY 108.7 billion, up JPY 79.2 billion year-on-year. Nonrecurring items not included in core operating income was a loss in total of JPY 5 billion. In the same period of the previous year, there was an impact of recognizing our interest in Petro Rabigh' debt forgiveness gain of JPY 86.5 billion as a nonrecurring factor, leading to a profit of JPY 91.8 billion. So compared to the same period of the previous year, this has worsened by JPY 96.8 billion. As a result, operating income was a profit of JPY 103.7 billion, down JPY 17.6 billion year-over-year. Finance income was a loss of JPY 15.8 billion. Improvement of JPY 136 billion compared to previous year when a loss on debt waiver Petro Rabigh was recognized. Gain or loss on foreign currency transactions, including finance income expenses was a loss of JPY 6.5 billion, improvement of JPY 28.4 billion year-on-year. Income tax expenses was a gain of JPY 3 billion, increase of tax burden of JPY 7.2 billion year-over-year. Net income or loss attributable to noncontrolling interests was a loss of JPY 51.2 billion, worsening by JPY 65 billion year-on-year with the improvement of Sumitomo Pharma's income. As a result, net income attributable to owners of the parent for the second quarter was a profit of JPY 39.7 billion, up JPY 46.2 billion year-over-year. Exchange rate and naphtha price, which impact our performance, average rate during the term was JPY 146.02 to $1 and naphtha price was JPY 64,900 per kiloliter. Yen appreciated and feedstock price declined compared to the same period of the previous year. Next, Page 6. Total sales revenue was down JPY 146 billion year-on-year. By segment, sales revenue decreased in all segments, except Sumitomo Pharma. As for year-on-year changes of sales revenue by factor, sales price decreased by JPY 25 billion. Volume variance decreased by JPY 88.1 billion, and foreign exchange transaction variance of foreign subsidiaries sales revenue decreased by JPY 32.9 billion. Next, Page 7. Total core operating income increased by JPY 79.2 billion year-over-year. Analyzing by factor, price was plus JPY 6.5 billion, cost, plus JPY 6.5 billion. Volume variance, including changes in equity in earnings of affiliates was plus JPY 66.2 billion, all were positive factors. Next is performance by segment. First, Agro & Life Solutions. Core operating income was a profit of JPY 11.2 billion, down JPY 2.9 billion year-over-year. Price variance. Profit margin improved for overseas crop protection products. Volume variance, in addition to decrease in shipments of overseas crop protection products, there was lower income from exports due to stronger yen and stronger yen's effect on the sales of subsidiaries outside Japan when converted into yen. Next is ICT & Mobility Solutions segment. Core operating income was a profit of JPY 33.1 billion, down JPY 10.5 billion year-over-year. Price variance, selling prices of display-related materials declined. Volume variance, though there was a gain on the sale of a large LCD polarizing film business, there was lower income from exports due to stronger yen and stronger yen's effect on the sales of subsidiaries outside Japan when converted into yen and decrease in shipments of display-related materials. Advanced Medical Solutions segment. Core operating income was a loss of JPY 1.4 billion, down JPY 1.7 billion year-over-year. Shipments decreased because of difference in the timing of shipments compared to the same quarter previous year for some pharmaceutical ingredients and intermediates. Essential & Green Materials segment. Core operating income was a loss of JPY 18.6 billion, improvement of JPY 16.1 billion year-over-year. Price variance with a drop in naphtha price, which is a feedstock, profit margins improved in synthetic resins and aluminum. Volume and other variances, there was improvement in profitability in investments accounted for using the equity method at Petro Rabigh due to factors such as improved refining margins. For Sumitomo Pharma segment, core operating income was a profit of JPY 97.3 billion, up JPY 94.3 billion year-over-year. Price variance, selling prices declined in Japan with NHI drug price revisions. Cost variance. There was a decrease in selling expenses and general and administrative expenses due to progress in rationalization. Volume and other variances in addition to expanded sales of ORGOVYX, a therapeutic agent for advanced prostate cancer and GEMTESA treatment for overactive bladder, gain posted on a partial divestiture of Asian business and ORGOVYX sales milestone are included. This is all for the results per segment. Next is consolidated statement of financial position. As of the end of September 2025, the total asset stood at JPY 3,364.5 billion year-on-year, this is dropped by JPY 75.3 billion. This is mostly due to a drop in related company's shares by sales of businesses as well as a decrease in cash and equivalents by repayment of interest-bearing liabilities. Interest-bearing liabilities stood at JPY 1,191.7 billion, which has dropped by JPY 94.5 billion compared to the end of the previous term. Equity stood at JPY 1,179.6 billion, which is up by JPY 105.2 billion compared to the end of the previous term. And now let me explain the consolidated cash flow. The operating cash flow is plus JPY 57.5 billion. However, year-on-year, this is a drop by JPY 5.9 billion. The profit level improved. We saw a deterioration of working capital due to revenue increase at Sumitomo Pharma as well as corporate tax increase. And investing cash flow was minus JPY 16.7 billion year-on-year, this is a drop by JPY 91.1 billion. This term, we had a partial sales of Asian business at Sumitomo Pharma. But in the same period last year, we had a significant income by sales of [ low bound of ] shares by Sumitomo Pharma as well as the sales of Sumitomo Bakelite shares. As a result, free cash flow stood at JPY 41 billion compared to JPY 138 billion the same period of previous year. This is a deterioration by JPY 97 billion. Cash flow from financing activity was minus JPY 114.8 billion due to repayment of borrowing compared to the same period of last year. This is an increase in outflow of JPY 39.4 billion. And now I'd like to explain the outlook for fiscal year 2025 on a full year basis. First, let me explain the business environment surrounding our company. Regarding the economic situation, the global economy continues to show signs of a slowdown. Amid heightened uncertainty, the outlook remains unclear. Below, our assessment of the business environment for our key sector is indicated using weather symbols as usual. For agrochemicals at the top, crop protection, price competition is expected to persist with regional variations in slow-moving inventories in distribution. Methionine market bottomed out at the end of last fiscal year and recovered in the first half of this year, but is expected to decline in the second half. In displays, mobile-related components remained robust. For semiconductors, although there is a variation by sector, but the demand is anticipated to show a gradual recovery trend. Regarding petrochemicals and raw materials, low margins are expected to persist. And now on Page 17, you can see the summary of our financial forecast for fiscal year 2025. We have revised the previous forecast in May to incorporate the recent performance trends and the impact of the partial sales of Petro Rabigh shares. The core operating profit forecast for fiscal year 2025 is JPY 185 billion, which is an increase of approximately JPY 45 billion year-on-year and an increase of JPY 35 billion compared to the previous forecast. On the left-hand side, the actual gain on sales of business shown in gray was projected to be approximately JPY 50 billion in the May forecast. But by incorporating partial sales of shares in Petro Rabigh, it is revised to approximately JPY 80 billion. The profit from the business activities shown in blue, representing the underlying profit and loss is projected to show a significant year-on-year increase due to sales expansion at Sumitomo Pharma and reduced stake in Petro Rabigh, we revised it upward from the May forecast, targeting over JPY 100 billion. By segment, growth areas are -- these 2 segments, Agro & Life Solutions and ICT, Mobility, we expect achieving JPY 100 billion in profit from the business activities. Regarding the profit and loss associated with the partial sales of Petro Rabigh shares, the combined impact of the valuation loss associated with subscription to new class shares and the increase in loss accounted for by the equity method is expected to be minimal on the final P&L because they are offset with each other. And now the business performance forecast. We forecast the revenue of JPY 2.29 trillion, a decrease of JPY 50 billion from the previous projection. Core operating profit of JPY 185 billion. Net profit attributable to the owners of the parent of JPY 45 billion. Assumption on the FX and naphtha prices are as stated. Regarding sales revenue, Sumitomo Pharma expects a strong sales in North America, mainly for ORGOVYX. But Essential & Green Materials except the decrease in revenue due to a decline in shipments resulting from the sales suspension of Petro Rabigh products, which is our subsidiary company. Core operating profit by segment will be explained on the following slide. Net income attributable to the owners of the parent is expected to increase by JPY 5 billion from the previous forecast. And related to Petro Rabigh company's shares. Cash contribution methodology associated with Petro Rabigh was not clearly identified and the series of profit and loss impact was accounted for and the nonrecurring items. That is how it was incorporated in the forecast. But this year, this time, the methodology for cash contribution and the accounting treatment was finalized. As a result, for 6 months, the sales timing was delayed by 6 months. As a result, the losses we bear under the equity method will increase. As a result, the gains on sales of equity will increase. As a result, core profit significantly increases. And next, we incur valuation losses of the Class B shares we newly acquired. As a result, there are additions and deductions among accounting items, but the impact on net income is limited as they had been already incorporated in the previous projections. And therefore, impact is not big. Next, regarding the full year performance or the sales revenue and core operating income by reporting segment. On to Agro & Life Solutions, though shipments shifted from the first to the second half, performance has largely progressed as previously announced with the previous forecast kept unchanged. For ICT and Mobility, EV market recovery is slow and the semiconductor market recovery is slightly moderate compared to our projection with some unevenness. As a result, we have adopted a little bit conservative outlook compared to the previous announcement. Essential & Green Materials, as I explained earlier, is expected to see a significant increase in core operating profit. At Sumitomo Pharma, mainly due to strong sales in North America, therefore, is expected to see a significant increase in profit compared to the previous forecast. The other segment sees its profit drop compared to the previous forecast. This is due to the fact that at the time of the previous forecast, a certain degree of performance improvement measures were factored in. So they were incorporated into the other categories. However, in this announcement, based on the assumption that they are likely to materialize in each segment, Essential and Sumitomo Pharma numbers are calculated. And therefore, those factors are not incorporated into others. This concludes our explanation on the financial results and earnings forecast. And now we would like to entertain your questions. Thank you. Operator: [Operator Instructions] Now the first question from Morgan Stanley MUFG Securities, Mr. Watabe. Takato Watabe: In your new forecast, Petro Rabigh's sales impact, I'd like to hear more about it. In Essential, JPY 50 billion is included this time, but the increase in profit is JPY 23 billion. What is the reason for that? Not related to Petro Rabigh, there is minus JPY 40 billion for others. You explained because there were recoveries in other segments, but it seems to be too large. And nonrecurring items, it was minus JPY 45 billion, but with the gains for sale of Rabigh that was assumed, but that is negative. So what is the reduction of JPY 25 billion in nonrecurring items? With the sales related to Petro Rabigh, maybe your forecast was too bearish. Could you explain the reason? Keigo Sasaki: Yes. Thank you for your question. For Petro Rabigh, we announced the influence recently. But for the sales, it's JPY 50 billion of sales proceeds was announced. And as you know, here, there was a time gap of 6 months, and that impact is included. So 22.5% means that the equity method is continued to be applied. So there is an increase in the burden in terms of losses based on the equity method. And that is one factor. And JPY 50 billion, because there were losses from equity method, the sales cost dropped. So in net, it is lower than that. So that included -- the increase in profit was only about JPY 23 billion. Besides, there is included under finance losses for the B shares newly acquired, there is a valuation loss included. So sales of equities, when you calculate the total loss, actually, the impact is not that large. Takato Watabe: Yes, I understand. Petro Rabigh, there is a negative in terms of sales proceeds because of equity method. Keigo Sasaki: So let me add to that explanation. How was that included in the original forecast? I think that is your question. In the original forecast, core operating income -- essentially in Green and EGM, it was not included at all. That is one point. So that makes the difference. And for nonrecurring items, we were including some impact. And by adding some items, for example, valuation loss, it is very difficult to express. So the losses were included in the nonrecurring items. But that is not a nonrecurring item. That is a financial loss. So improvement of a nonrecurring item compared to the forecast is because of this background. So we are not considering the sales gains. Well, when it's not that we are not taking into consideration at all, as I will explain. And your question, you asked about other corporate expenses compared to the forecast, this has worsened about JPY 24 billion, JPY 25 billion. And that part, in the initial forecast, we included some forecast of improved performance in EGM and Sumitomo Pharma. For both, we had conservative figures and Petro Rabigh equity sales, we were not -- we couldn't talk about it. So without including those figures, these were all added together and included under other corporate expenses, but that is now being distributed into other segments. It is now included in the figures of the relevant segments. So it looks as if the total corporate figures has worsened, but that is the reason. Takato Watabe: Is it possible to have such a big negative figure for corporate, about JPY 40 billion? Is that what you mean? Keigo Sasaki: Yes. The reason why it was good so far. Sumitomo Bakelite and other items of profit and loss are included and sales proceeds that happened last year are included. And besides Sumitomo Chemical Engineering and Nihon Medi-Physics, those losses are included under others. But these 2 are already sold. So this fiscal year, there are not so many positive factors. And under others and adjustments, expenses are high. That is how you should interpret it. Medi-Physics, I think that was Life Science, but I understand. So it's not that you are assuming a larger buffer. If you ask me if you are -- we are conservative, basically, yes, our forecast is intended to be conservative, but we are not including a large buffer. Takato Watabe: So you are conservative. I understand. Operator: Now we would like to go on to the next question. Mizuho Securities, Yamada-san, please. Mikiya Yamada: I am Yamada from Mizuho Securities. I would like to double check about the core profit. Agro & Life Solutions in the first half, there was some shortfall. From the first to the second quarter, there was a seasonality. So you said that there is some visibility, but you had some shortfalls from the first half to the second half, there was a timing difference of the shipments. Was it the reason? On a full year basis, there was no change in the forecast. Therefore, my understanding must be correct, but I'd like to double check. And ICT Mobility Solutions, downward revision, the operating profit and the revenue were revised downward. EV and the semiconductor recovery or delayed that is the reason. Marginal profit margin -- marginal profit ratio against the revenue dropped by JPY 30 billion, operating profit drop was limited to JPY 3 billion. Therefore, the balance seems to be optimistic between the 2. So could you please explain this situation? Keigo Sasaki: First of all, AGL, from the first half to the second half, there was some shift. At this point, in Latin America, business is struggling. From the second to the third quarter, there is some shift that is our awareness. As much as possible, we would like to make a recovery within the third quarter. On the other hand, in North America or in India, in these regions, so because they are Northern Hemisphere there, we expect more to come. We do not have any unfavorable factors. Well, the slow-moving inventories start to recover. And based on that, so comprehensively, when it comes to AGL, we are likely to achieve the initial projection. Furthermore, JPY 145, that is the ForEx assumption for this projection. Currently, yen is a little bit weaker than that. So I believe that this will also make a further contribution. And then on to ICT, the major factors are, as correctly pointed out by you, EV and the semiconductor. Although there is some recovery, but not much recovery than we anticipated. So that is some negative impact. They are incorporated. And the profit margin is off, that is what you pointed out. Well, the revenue in itself may be we put the numbers quite roughly and sometimes we round the numbers. So it is not precise. It is better not pay too much attention to the profit. It does not mean that you made a significant change to ForEx assumption. That is why I thought something is off. However, you more precisely calculate core operating profit. That is why you ended up this result. Am I correct? Mikiya Yamada: Yes. And Agro & Life Solutions, regarding the sales status of new products, is there any delay? Or are there any new products that are sold earlier than schedule? Keigo Sasaki: Well, there is no major delay. That is our current understanding. Operator: The next question is from SMBC Nikko Securities, Mr. Miyamoto. Go Miyamoto: I'm Miyamoto from SMBC Nikko Securities. I also have a question about Agro & Life Solutions. As a business environment, you have a cloud mark. So what's the current situation? What is the situation of the inventory? There are differences from product to product. So could you explain a little more about it? And in addition, price competition continues. And in terms of price variance, there were improvements of profit margin of foreign crop protection chemicals. So it seems that -- could you explain the price trend and by rationale in different sales situation, could you talk a little more about it? Keigo Sasaki: Yes. Thank you for your question. For AGL, in the first half, in Latin America, situation was a little worse than what we had assumed. For our distribution inventory compared to the previous year, there are improvements, but still the level is high. And generic products, competition is still expected. For Rapidicil, Argentine, still, we will continue to emphasize expansion of sales. And [ differing ] in Brazil, it is the second season. So this -- we will also continue to expand sales of this large-scale insecticide. So we want to recover from the first half towards the second half. And the other regions, in the United States, it is improving quite a lot, I believe. And of course, competition with generic products exist. But as North America in general, there's improvement in the desire of our customers to accept our product. North America is a place that is just starting. So we will keep watching. And in India, India as well, there is a question of the distribution inventory, but there are improvements seen. Not only North America, but also in India, I think we can look forward to the situation in India by watching with care, we hope we will achieve our target at the beginning of the fiscal year. Go Miyamoto: About the price variance in Latin America, there's still a drop in price and is it getting higher in other regions? Keigo Sasaki: That is a general image. Go Miyamoto: And how about the situation, the places which price is getting higher? Keigo Sasaki: Price itself, rather than higher prices in the price variance, that is a tug of war with cost. So including the cost, the improvements in some places. That is the meaning here. Go Miyamoto: I understand. And on Page 29, in Latin America, there was sales and some carried forward in Japan, but the impact in North America is bigger. Keigo Sasaki: Yes, in Japan, currently, including the price of rice, prices are getting higher in Japan. The customers, the farmers have quite a strong desire to purchase their advanced sales. In Central South America, the market is larger. So still the impact remains. Operator: Now we'd like to go on to the next question. Daiwa Securities, Umebayashi-san. Hidemitsu Umebayashi: I am Umebayashi from Daiwa Securities. I would like to ask you some questions on ICT and Mobility Solutions. From the first quarter to the second quarter, the revenue is approximately JPY 8 billion. So therefore, it is a significant increase, but the profit, JPY 4 billion drop. So there was a gain on sales of the business in the first quarter. I understand that. But excluding that, so the revenue increase is significant. However, the profit was almost flat. So what is the reason for that? And especially in the industry, smartphone in North America is strong. And in the second half, you mentioned that you might be a little bit conservative. Why is it that the situation is deteriorating to this extent? Could you elaborate on that? Keigo Sasaki: Well, let me see. ICTM, in comparison with previous year, currently, yen is stronger. That is our assumption. So this is the segment most affected by the ForEx fluctuation. Another factor is the impact of tariff. So at the beginning of the year, we told you that in total, JPY 10 billion of impact will be felt from tariff. And we start to feel that impact now. Throughout the year, this is likely to be within the scope of our projection at the beginning of the year. So the reason for drop this time is, as I explained earlier, EV as well as mobility. These are the major reasons, partially compared to our initial expectation, there are some change from the semiconductor situation. Therefore, they are separately incorporated. Separator of EV feel the impact. So please understand in that way. Hidemitsu Umebayashi: Between the first quarter and the second quarter, revenue increased. However, the profit dropped. Well, the profit dropped because in the first quarter, there was gains on sales, but it did not occur in the second quarter. However, between the first quarter and the second quarter, what was the major change in the mobile business? Keigo Sasaki: What was the major change for the polarizing film between the first quarter and the second quarter? Well, there is an impact of the gains on sales, which did occur in the first quarter. So that may have an impact on profit. The display was performing quite well last year. So there was some rebound from the previous year. So there are some irregular elements incorporated here. So please do understand in that manner. Operator: The next question is from Nomura Securities, Mr. Okazaki. Shigeki Okazaki: I'm Okazaki from Nomura Securities. For core operating income, a question for confirmation. Essential Green Materials, you made upward revision. But in terms of fundamentals, compared to 6 months ago, is it right to say that there are no major changes? What is your view about Rabigh and Singapore and other places, as was included in previous question, from the first half to second half, losses -- core operating loss tends to increase. What is the item for that? This year, I understand there's not so much difference between first half and second half in terms of sales of business. Could you explain that? Keigo Sasaki: Yes. Thank you. First, for Essential, in terms of wafer mark, I explained, basically, from the beginning of the year until now, there are no changes. So Singapore, for example, for PCS, we are studying the possibilities of optimization in TPC, MMA. In particular for MMA, restructurings and also rationalizations took place. And on top of that, high profitability items, high value-added items are areas that we plan to shift to maintain the profit. So that is a policy. As for the environment, we have not changed our view. And for other areas comparing first and the second half, in the second half, for example, this is a matter of how we spend our expenses. For R&D expenses tends to be concentrated in the second half. That is a trend that we see. So that is also included. Operator: Now we are getting closer to the ending time. So now we would like to take the final question. BofA Securities, Enomoto-san, please. Takashi Enomoto: BofA Securities, I am Enomoto. I have a question on net income. Looking at the plan for the second half, there is a significant gap from the operating profit to net income. Various items are included in the operating profit. Why is it that the net income is so compressed in the second half of the year? Keigo Sasaki: Thank you very much for your question. Throughout the year, nonrecurring items, at which timing they will be recorded that also have an impact. JPY 5 billion was the only one that was generated in the first half. However, there are several structural reform-related expenditures that will be occurring, which will be around JPY 25 billion throughout the year. So the remaining portion will incur in the second half. And regarding the financial profit, it will be skewed towards the second half of the year. That is our view. This is due to ForEx. So this is the current view. It is currently at JPY 150. But based on the assumption of the yen is stronger to JPY 155, then the ForEx loss may occur. And talking about the tax, as I mentioned earlier, Sumitomo Pharma deferred tax liability reversal gain was observed in the first half. This is extraordinary items in the first half. So this will not appear in the second half. So there are several factors. And therefore, the loss will incur in the second half of the year. So that is my explanation. Takashi Enomoto: The ForEx loss, what is your projection of that for the second half? Keigo Sasaki: Not so much. But our assumption is that, the ForEx is JPY 145. Operator: This concludes the Q&A session. Lastly, Mr. Sasaki will give the final greetings. Keigo Sasaki: Thank you very much for attending today. This fiscal year is the first year of our medium-term plan. And within the medium-term plan, we have set targets. So to achieve the target, we will do our best. So we hope we can continue to have your support. Thank you very much for your participation today. Operator: This concludes today's conference call. Thank you very much for your participation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

196天前Insight Analytics约5分钟阅读

NSP 2025 Q3 财报电话会议

Operator: Good afternoon. My name is John, and I will be your conference operator today. I would like to welcome everyone to the Insperity Third Quarter 2025 Earnings Conference Call. [Operator Instructions] At this time, I would like to introduce today's speakers. Joining us are Paul Sarvadi, Chairman of the Board and Chief Executive Officer; and Jim Allison, Executive Vice President of Finance, Chief Financial Officer and Treasurer. At this time, I'd like to turn the call over to Jim Allison. Mr. Allison, please go ahead. James Allison: Thank you. We appreciate you joining us today. Let me begin by outlining our plan for today's call. First, I'm going to discuss the details behind our third quarter 2025 financial results and provide an update on our financial guidance for the remainder of the year. Paul will then comment on our ongoing efforts to accelerate growth and improve profitability in 2026, including the rollout of our new HRScale solution. I will return to outline some initial thoughts regarding expected drivers of financial performance for 2026. We will then end the call with a question-and-answer session. Before we begin, I would like to remind you that Paul or I may make forward-looking statements during today's call, which are subject to risks, uncertainties and assumptions. In addition, some of our discussion may include non-GAAP financial measures. For a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any such forward-looking statements and reconciliations of non-GAAP financial measures to their comparable GAAP measures, please see the company's public filings, including the Form 8-K filed today, which are available on our website. Our unit growth for Q3 2025 was within our forecasted range with the average number of paid worksite employees increasing by 1.2% over Q3 2024 to 312,842. New client sales results were encouraging. While worksite employees paid from new clients in Q3 fell just short of the Q3 2024 level, our Q3 booked sales efficiency and the resulting number of accounts that are in the queue for first payroll over the next few months have increased significantly from a year ago. Client retention remains strong, averaging 99% per month and in line with prior year results. Similar to last year, the departure of seasonal summer employees caused net hiring within the client base to be negative in the third quarter. The overall hiring environment continues to be challenging, and Q3 2025 activity was slightly weaker than Q3 2024. Adjusted EPS for the quarter was minus $0.20, and adjusted EBITDA was $10 million. These results fell below our forecasted ranges, primarily due to a further continuation of higher-than-expected benefits costs. Gross profit per worksite employee in Q3 2025 was $208 per month, down from $247 in Q3 of 2024, driven primarily by higher-than-expected benefits costs of $20 million. As you may recall from last quarter's call, we had expected our benefits cost trend to taper down over the second half of 2025 due to favorable demographic changes within our plan, combined with the relative benefits cost patterns in the comparison period, which had been more favorable in the first half of 2024 and resulted in higher year-over-year cost trend in the first half of 2025 that we did not view as reflective of the underlying trend for the year. Unfortunately, while we benefited from those favorable impacts, Q3 claims data revealed that they were outpaced by higher-than-expected outpatient and inpatient utilization and pharmacy costs, including a significant increase in large claims frequency, both sequentially over Q2 and also year-over-year. These factors resulted in a benefits cost trend of 9.1% for Q3 2025 over Q3 2024. The issues that we have experienced with increased health care claims costs are not unique to Insperity. At a macro level, the health insurance industry has reported an unexpected rise in health care costs and loss ratios. From our discussions with our carriers and outside advisers, there are a number of factors driving a higher level of health care utilization, including the increased use of prescription drugs and outpatient procedures, the prevalence of high-cost conditions and the introduction of new higher-cost treatments and drugs. Additionally, we have recently been made aware that the use of AI tools by health care providers has emerged as an additional contributor to the higher cost trends, impacting everything from condition diagnosis and treatment plans to clinical documentation and coding for insurance billings to preauthorization and appeals processing. Many insurance carriers have alluded to such issues in their comments on higher cost trends and loss ratios, and our understanding is that they are responding in a variety of ways to reduce issues around upcoding or unnecessary spending. From what we are hearing, it is the accumulation of all of these things happening at the same time that has created the unexpected increase in trend. At this point, the prevailing view in the industry is that the higher claims trend experienced in 2025 will persist in 2026. We responded quickly to the emergence of higher-than-expected benefits costs earlier in the year by increasing our pricing targets. Over the course of the year, these costs have continued to outpace our projections, and we have revised our pricing plan accordingly. We believe that the plan we are executing remains competitive in the broader marketplace and will continue throughout 2026. This plan is focused on attracting and retaining the right clients at the right price to produce sustainable profitability at normal historical levels. To date, we believe those plans are on track, and I will provide an update later in the call. Moving on to operating expenses. We continue to actively manage these costs below budgeted levels while continuing to invest in our strategic priorities. On a year-over-year basis, operating expenses in Q3 2025 decreased by 4%. Operating expenses declined sequentially from the second quarter of 2025 by $10 million with the most significant reductions in salaries and G&A costs. During the third quarter, we achieved significant software development success on the HRScale scale platform, which met the threshold to capitalize a portion of our Workday strategic partnership costs for the first time. For Q3, we invested a total of $17 million, of which $11 million is included in operating expenses. This compares with $19 million in Q3 of 2024, all of which was expensed. During the third quarter, we continued to return capital to our shareholders through our regular dividend program, paying $22 million in cash dividends. On a year-to-date basis, we have paid cash dividends of $68 million and repurchased 225,000 shares of stock at a cost of $19 million. We ended the quarter with $120 million of adjusted cash, and we had $280 million available under our credit facility. Now let me provide an update to our Q4 and full year 2025 outlook. Given our recent sales, client retention and client net hiring results, we expect average paid worksite employees to be in a range of $313,000 to $315,000 for the fourth quarter, an increase of 1.3% to 1.9% over Q4 of 2024. As a result, average paid worksite employee growth for the full year is expected to be 1%. We are forecasting full year adjusted EPS in a range of $0.84 to $1.47 and adjusted EBITDA in a range of $119 million to $153 million. As I mentioned earlier, our benefits cost trend over the first 3 quarters of the year has hovered around 9% as favorable changes in our planned demographics and planned migration have been outpaced by increased care utilization, pharmacy costs and large claim activity. We expect our full year benefits cost trend to remain at this elevated level. Q4 operating expenses are expected to decline sequentially once again. As a result, full year 2025 operating expenses are expected to be below 2024 levels by approximately 3%. For the full year, we expect the investment in our Workday strategic partnership to total approximately $58 million, of which $48 million would be included in operating expenses. This compares to $57 million in 2024, all of which was expensed. As for Q4, we are forecasting adjusted EBITDA in a range of negative $25 million to $9 million and adjusted EPS in a range of minus $0.79 to minus $0.16. For purposes of adjusted EPS, we are forecasting an effective tax rate of 28% for Q4 of 2025. The effective tax rate on GAAP EPS could fluctuate from that based on the level of nondeductible expenses as a proportion of pretax income. Looking at the big picture of 2025 at this point, we have a significant earnings shortfall from our initial budget. Nearly all of this shortfall is related to the benefits area, driven by the unexpected increase in health care cost claims costs. Other impacts, including a lower level of growth than initially forecasted, mix changes in the business and the impact of lower interest rates have been largely offset by the management of operating expenses below budgeted levels. Now at this time, I'd like to turn the call over to Paul. Paul Sarvadi: Thank you, Jim, and thank you all for joining our call. Today, my comments will focus on 4 important topics to frame the financial performance rebound and growth acceleration we expect in 2026 and beyond. First, I'll discuss the decisive and assertive actions we are taking to navigate the significant and unexpected step-up in health care claims we have experienced this year. Second, I'll present an update and perspective regarding the official rollout of HRScale this quarter, our joint solution with Workday that's designed to effectively enhance our PEO solution set for mid-market companies ranging from 150 to 5,000 employees. We believe the addition of this offering will position Insperity uniquely within the marketplace and serve as a new driver for large client sales and retention, advancing our growth model. Third, I'll provide an overview of our recent strong book sales performance and the momentum driving our flagship PEO solution, HR360, which is a key contributor to our growth and integral to our upcoming year-end transition. I'll conclude my remarks with some thoughts about the next 3 years and the plan we are working through that we believe will allow us to return to historical key metrics in our business model. The most urgent issue that we continue to address is the health insurance claim cost escalation. This issue has occurred across the marketplace and industry and has impacted Insperity in a severe manner over the last 3 quarters. We have seen 2 significant negative developments in the health insurance marketplace. First, the claim trend for the industry at large for 2025 is now expected to be 200 to 400 basis points higher than industry estimates at the beginning of the year. This unexpected increase that emerged during the year is significantly higher than a typical year. Analysis of our Q3 claims data revealed our benefits cost trend has increased from our initial estimate at the beginning of the year, in line with the higher trends now reported in the health insurance industry. Secondly, the increasing adoption of AI tools by health care providers appears to be a recent additional factor driving higher costs across a wide range of claim categories. As Jim mentioned, we have seen many providers cite utilization and revenue increases, while insurance carriers are reporting higher loss ratios and passing this higher level of claim trend on to employers. Jim has specifically addressed this claim cost escalation we've experienced in his remarks, including the expected effect on adjusted EBITDA in 2025. This factor accounts for nearly all the underperformance from our target for this key financial measure at the beginning of the year. So this is certainly the most significant challenge we are confronting. Now even though the full effect of this higher-than-expected trend has made a larger impact on our estimates for the full year than we thought last quarter, we believe the actions we have taken in response have been progressing on track to achieve a rebound in 2026. When we saw signs of a step-up in claim cost in Q1, we quickly initiated action plans to address this trend. We also adjusted these plans during the year as the trend continued to increase. To date, we've had measurable success in increasing pricing appropriately with client retention remaining solid in Q3. We believe our pricing remains competitive with the industry and with the broader health benefits marketplace for our clients, and we provide plan design options and other ways for clients to mitigate these increases. These pricing measures take time to fully take effect as we price new and renewing accounts each month in line with market trends. The initial effect of these measures began in Q3, and we expect the positive impact will continue to grow over the coming months as we complete our fall sales and renewal season. These pricing initiatives are strategically designed to support our profitability recovery as we move into 2026. Now in addition, we expect a significant new agreement with UnitedHealthcare announced today will add additional support and contribute substantially to our margin recovery. Since the first quarter, we have focused on negotiating a revised contract with UHC to go into effect at the start of this year. We've now signed the contract extension through 2028, which addresses our key short- and long-term objectives. The contract incorporates financial terms, plan design modifications and risk transfer alternatives that are projected to significantly reduce Insperity claim cost and mitigate expected trends and large claim risk for the upcoming year. Additionally, the agreement strengthens our partnership alignment to long-term favorable administrative and risk charges and credits as well as growth incentives. This structure and alignment of this agreement are paramount as we expect them to enhance the financial impact in subsequent years as the business expands. The project -- the projected immediate offset to the benefits cost trend combined with the lower large claim pooling level in 2026 presents a timely and important opportunity to reduce cost and lower risk. When you combine the effects of these significant cost management and pricing initiatives, we believe we have the foundation for a substantial rebound of gross profit and margins in 2026 beginning in January. The second hot topic I'd like to discuss is the rollout of our HRScale solution underway with active co-marketing and co-selling target prospects, including demonstrations of the platform. We are also working on deployment and enablement of beta clients and our software development success has proven the viability of the product, a milestone which impacts accounting treatment for our investment in the platform. This is a pivotal moment for Insperity due to the potential for HRScale to be a catalyst for growth into the future. It's important to recognize the tremendous accomplishment to reach this point in this length of time. We signed a strategic partnership agreement with Workday at the end of January 2024, just 21 months ago. This partnership was established to bring a unique comprehensive HR solution to a large underserved market of more than 40,000 companies employing more than 25 million employees by combining Insperity's HR service and Workday HR technology. We identified 4 pillars of work to create this joint solution with the potential to be a category of one and a competitive disruptor in the marketplace. The 4 defined pillars included our Insperity corporate tenant, our exclusive PEO client tenant, our deployment and enablement services and our joint go-to-market plan. This effort represented a significant financial investment and a commitment of time, effort and resources by both partners. In our case, we estimated $150 million investment, including $60 million in each of the first 2 years to build and take this joint solution to the marketplace. Following the signing of the agreement, we commenced the significant effort for this major development project, which involves integrating the client-facing Workday HR platform with our advanced Insperity HR compliance platform. Additionally, I set aggressive internal time line goals to achieve key milestones across the other 3 pillars with the emphasis on speed to market of the new product. We did not share these at the time due to too many unknowns, but we believe it's important to note now so we can look at the big picture and assess how we have performed up to this point. It's not uncommon for a significant project of this magnitude to take substantially more time and investment than initially projected to create a new product and prepare to take it to market. The internal goal for launching the first pillar, our corporate instance of Workday was January 1, 2025, and implementation was completed by April 1, 2025. We set the goal for the client tenant for completion to initiate deployment and enablement for beta clients on July 1, 2025. The client tenant uses functionality in the Workday solution that did not exist when we entered the agreement, and both of our companies had to work diligently together to create a solution that had not been built before. This milestone was achieved by October 1, 2025. Our deployment and enablement capability is in place now to allow us to bring on beta clients for a go-live date in March 2026 for first payroll in April 2026. In August, our go-to-market plan was launched with our product page on the website going live, our demand generation campaign implemented and prospect outreach underway. Co-selling, co-marketing and co-branding is in full swing and a pod or product-oriented delivery team of sales professionals from both partners are working together every day on a team that's wholly dedicated to this solution. They are rapidly advancing the sales motion and identifying and meeting with prospects to fill the HRScale sales pipeline. Based on our forecasted investment for the rest of the year, we expect to achieve all these milestones while staying within our original $120 million estimated investment for the first 2 years. The achievement of these initiatives within this time period and within the budget reflects the professionalism, dedication and proficiency of both the Insperity and Workday teams. It also demonstrates the strong cultural alignment of the strategic partnership, which we expect will support the successful rollout of HRScale and positively affect our return on investment for years to come. We expect the launch of HRScale as a significant growth catalyst for Insperity is particularly timely given the broader macro trends impacting our industry. For the past 2 years, the labor market has posed considerable challenges for small and medium-sized businesses, which has contributed to restrained growth across the business services sector. There's also uncertainty regarding the future impact of AI on employment, prompting companies in the HR service sector to seek a new catalyst for sustained growth. Had we not established our strategic partnership with Workday, we believe we would also be searching for such an opportunity. Instead, we believe we have our new growth driver already in place. Now on to my third topic, our confidence in this new growth driver is growing due to recent booked sales success. In Q3, our booked HR360 sales were substantially over budget and 45% greater than the same period last year. These strong results were driven primarily by outperformance in our mid-market and enterprise space, which is the target market for HRScale. We sold our largest account in history during this quarter, which is scheduled to come on HR360 in January and is planned to upgrade to HRScale by the end of the second contract year. The opportunity to have a discovery call with this large potential client resulted from the client becoming aware of the HRScale as an Insperity Workday joint solution. Over the last quarter, we've been encouraged by prospective clients' receptivity to Insperity Workday strategic partnership in a number of ways, including the ability to set appointments and the nature and level of the conversation. The system and service demos to beta and prospective clients have resonated well, and we are very pleased with the receptivity of the proposed value proposition. We believe the early feedback is validating our strong competitive positioning in the marketplace. It's also compelling to see prospective clients considering 2 product options with the opportunity to start on HR360 with a plan to upgrade to HRScale in the future. We also believe that the availability of HRScale and HR360 at different price points will positively impact the level of sales for both solutions. We believe our success and momentum in book sales through the third quarter puts us in a favorable position going into our year-end transition with more client worksite employees in the pipeline scheduled to become paid in January. This is also important in a year where we have higher pricing for new and renewing business, which could have some impact on client retention when our priority is to see margin improvement into the new year. The last topic I'd like to address today is our 3-year plan we expect to finalize this quarter with the objective of returning to the targeted growth and profitability metrics of our business model. Our historical key metrics in good times include double-digit unit revenue and gross profit growth, combined with operating leverage to achieve adjusted EBITDA annual growth rates north of 20%. Our work on this 3-year plan includes specific initiatives designed to return our key drivers to these metrics and generate corresponding shareholder returns. We are confident that a return to double-digit growth is possible with the implementation of our new growth driver, HRScale, even if future small- and medium-sized business employment gains remain modest. We anticipate improvements in gross profit margin as we align price allocations and direct costs moving forward and expect that the value proposition and pricing of HRScale will further support these outcomes. We expect operating expense efficiencies and improved margins from both internal and client-facing AI initiatives. As we grow, our AI strategy is already generating efficiency gains and should help us achieve greater operating leverage. Earlier this year, we launched a proprietary Insperity HI tool called Compass, which is already being used by our service providers. We are continuing to develop AI capabilities across our operations, including targeted and proprietary tools for things like predictive analytics and prospect scoring. We are also working to combine the speed and information reach of AI with the validation of our HR expertise to more efficiently deliver complete and accurate information to our clients. This improves response time and enables us to focus even more on the high-touch nature of our customer relationships which continues to be a strong competitive differentiator and retention driver. So in summary, we believe the elevated health care trend and malaise in the small- and medium-sized business labor market is masking significant progress we are making across the company in these areas to return to historical growth and profitability metrics. We take full responsibility for continuing to take appropriate action steps to address these issues, and we believe we will see significant progress ahead. At this point, I'll pass the call back to Jim to provide some further perspective on 2026 expectations. James Allison: Thanks, Paul. As this year has progressed, we have worked diligently to create and execute plans aimed at generating a significant profitability rebound in 2026. In the benefits area, we expect the elevated benefits cost trend to persist in 2026 based on input from our carriers, outside advisers and industry benchmarks. As a result, our response must remain swift and steadfast, and our focus is both on right pricing our book of business and reducing planned costs. On the pricing side, we continue to strategically implement higher pricing targets for both new and renewing business using AI tools and revised methodologies. Our focus is to attract and retain the right clients at the right price that can produce sustainable forward-looking profitability at our normal historical levels. This process began earlier this year, is progressing according to plan and will continue throughout 2026, consistent with what we're hearing in the broader market. Through a combination of higher pricing and the exit of lower profitability clients, we believe that we are on pace to exceed the projected benefits cost trends. Regarding our plan costs, I'm happy to report that we have successfully completed our contract negotiation with UHC and have extended our contract through 2028. The combination of cost savings from this contract and other plan design changes, both of which will be effective in January, are expected to have a favorable impact of about 2% of our gross benefits costs. In addition, we plan to reduce our health care claims risk in 2026 by lowering our pooling level from $1 million per member per year down to $500,000. For clarification, the pooling level represents the maximum annual amount of claims exposure we have for any individual plan participant, which provides a measure of protection against the severity of large claims. Taken altogether, these contractual changes reflect the strategic alignment of Insperity and UHC to provide exceptional value for our clients and plan participants, and they are foundational to both our 2026 financial performance and our long-term success. Regarding the rollout of HRScale, we expect to add clients into this solution during 2026, which is expected to incrementally impact worksite employee growth and revenue as we move through the year. As the rollout plan continues, we should be in a better position to comment on client traction and revenue potential in future calls. Once we achieve go-live and a stabilization period, the level of our investment is expected to decline and certain product development costs will be capitalizable, which we expect to positively impact operating expenses. A portion of those savings will be offset by new costs to build service capacity and for the implementation and ongoing service of HRScale clients as well as Workday platform maintenance and support. Taken altogether, operating expenses associated with HRScale in 2026 are expected to be about $15 million lower than the $48 million estimate for 2025. Even though we expect each of these positive contributors to be significant, we also recognize that there are likely to be a variety of other puts and takes in our financial performance. In addition, there are risks and uncertainties that could impact 2026 results, including changes in prevailing health care cost trends or planned utilization, the successful completion of our fall sales and renewal season and more broadly, changes in the macroeconomic environment and labor market. We will not be providing our financial outlook for 2026 until our earnings call in early February. But given the significant positive contributors that we have outlined, we believe that 2026 represents an opportunity to recover a majority of the earnings shortfall we have experienced this year. At this time, I'd like to open up the call for questions. Operator: [Operator Instructions] Our first question comes from Andrew Nicholas with William Blair. Andrew Nicholas: I wanted to first ask for some clarification, Jim, on that last comment you made about an opportunity to recover the majority of earnings shortfall. Is that related to 2024 as the base? Is that specific to the shortfall relative to your initial guidance? Just trying to think -- I think you're trying to guide us a little bit in terms of what next year looks like. I know there are a lot of moving pieces. Just trying to make sure I understand what you're specifically referencing in terms of the shortfall. James Allison: Yes. Thanks for the question, Andrew. Our initial guidance for 2025 and our actual results for 2024 were relatively similar. So what I'm referencing is pretty well aligned with both of those. Paul Sarvadi: I think the best way to look at it... James Allison: Go ahead, Paul. Paul Sarvadi: I'm sorry, yes. So I think what we're describing there is relatively straightforward in that we had an expectation at the beginning of the year, and you can see from our guidance today what -- where this year is forecasted to end up. And nearly all of the shortfall that occurred this year is from this one issue. And we expect, as Jim commented, to see a rebound from these 3 major elements of at least the majority of that shortfall in 2026. Andrew Nicholas: Understood. And then for my second question, in terms of 2026 kind of worksite employee growth, I understand that the macro hasn't been super supportive in terms of change in existing or net client hiring. But do you have -- to what extent should we be concerned with kind of these cost trends and the repricing on attrition? Do you expect it to have any impact? Or to what extent do you expect it to impact new sales heading into next year? Just want to understand if we should expect a decent kind of sequential step down in the first quarter tied to some of this repricing activity. Paul Sarvadi: Yes. Thanks for that question. No, we actually, again, are -- we have strong sales effort continuing. And we don't see the pricing changes that we're making to be far out of sorts with what's happening in the marketplace at large. So even I mentioned in my remarks that the most recent results in the third quarter, not only were sales 45% ahead of last year, but also the renewing business that came on, our renewal rates were still at the 99% level for the quarter. So we have not seen that dynamic causing a reduction. We are also going into this stage of the year with a significantly higher number of worksite employees scheduled to be paid in January. And I think in my remarks, I was kind of putting that out there just to make sure we understood that even though we may -- because of the priority to have some margin recovery, we probably will have some more go away, but I don't expect that to be -- I expect that to be offset by the degree to which we're ahead in new sales. Operator: Our next question comes from Jeff Martin with ROTH Capital Partners. Jeff Martin: I wanted to dive into kind of some initial anecdotal responses from your -- from this new pod that's jointly marketing the joint solution. What are you hearing from them? Are they finding this as a relatively smooth process? Anything they've learned along the way? And how encouraged are you by the initial results? Paul Sarvadi: Yes. It's hard to hold it all back because it's been very exciting. We even had a 3-day retreat meeting with the full pod just a week or 2 ago. And what's really exciting is that they are now seeing the full picture of this unique solution that we have developed that is the full HRScale. It is the full scalable solution of both service and technology in one comprehensive solution. And they've worked through how to help customers understand even a cost comparison to other options they have. They started to understand better how we have gone through the research to understand how to price this for the client. And the energy level is really impressive, and we are already beginning to fill the pipeline. And we're ahead of where I thought we'd be. Remember, we put this in place on July 1, gone through a lot of effort just to make all that work at this point. But now we're already out there calling on customers. We've got the messaging down, and we're getting great reaction from the prospects. Jeff Martin: Great. And then my other question is on the benefits repricing. Have you had to make adjustments from the initial repricing that you did in the first quarter? If so, could you provide some details around that? And -- is that a dynamic thing on a quarterly basis? Or how are you looking at that going forward as we are very close to starting 2026 here? Paul Sarvadi: Yes, that's always been a part of our whole operation where we are literally month-to-month on a rolling basis, we're looking at what pricing is necessary for the trend rate. In this case, of course, we've seen the trend escalate. And so where we were at the end of the first quarter, we started processing some pricing changes. But as the year progressed, we were continuing to raise the level of price increase up to and through and including everything we sent out for January 1. So we believe we're in good shape on that front. As Jim mentioned in his remarks, we expect our pricing going into next year to actually be exceeding this continuing higher rate that we've seen. So we're on a good track to balance that out in the appropriate timetable. Operator: Our next question comes from Mark Marcon with Baird. Mark Marcon: Just on the health care pricing, Paul and Jim, is it your expectation that on an apples-for-apples basis, same plan design, we're basically looking at a benefit cost trend that would be somewhere in the 9% range for next year? Or would it be higher or lower? James Allison: So apples-to-apples, same client, same people, same plan design. We would expect the average increase to be in the low double digits range. Paul Sarvadi: And what typically happens there, of course, is you quote the increase. And then we have tools and ways we can help the client mitigate the increase, other plans to choose from and other aspects of what we can do to help them manage that increase. And that's what's happening all over. When we look at the quotes that are coming in and the competitive situations, our increased level and our ability to help them manage that puts us in a very competitive position. And that's what I think we've demonstrated even up to this point in the process. Mark Marcon: I appreciate that. And then the second question is basically along the lines of you mentioned potentially managing out some of the lower profitability clients. I was wondering if you could give us a sense for the magnitude of that level of the client base. And one other thing, Paul, if I can squeeze one in. You and I, along with a lot of investors, we used to talk about the risk mitigation and whether it makes sense to be at $1 million versus $500,000. We had lots of discussions even back in 2019. Now that you're going down to $500,000, how would you -- it's obvious what the benefits are. What are the costs or what are the things that we should take into account in terms of thinking about that? Paul Sarvadi: Well, just to put it in historical perspective, we have looked at that for a long time. And of course, there was a time when we didn't have the $1 million limit. in our world. But what's happened over the years is the number of ways that someone can have a claim of a significant size like that, the number of ways has increased. But also, I think it's important to note that this contract that we have just signed with UHC is -- this is what we mean by better alignment in how we're looking at the entire game plan for our program. And in this particular case, the agreement to be able to look at the various levels every year and have them, I'm going to say, priced in a way that makes it fit our program. and for the whole program to be designed to have growth incentives and things of that nature. So I'm just telling you the elements, the terms of the agreement really line up to have the best program we can have for our people and have a higher level of consistency and predictability in the model. So being able to have a significant immediate cost reduction right now where we get a majority of even the shortfall we had this year back as we go into next year and be able to put a lower cooling level that's the $500,000 level, that's really good timing, obviously, against the backdrop of a sudden elevated claim level. James Allison: Mark and on your question, I was going to answer the question about pricing and a little bit more focus on unprofitable clients. I think generally speaking, as we're increasing our pricing, the curve is a little bit higher than it was. So you're not just raising the pricing equally across the board. We're taking actions to make sure that we're doing everything we can to retain our profitable clients. And so we think that the ones that do terminate are likely to be lower profitability than the ones that stay. Operator: Our next question comes from Tobey Sommer with Truist. Tobey Sommer: I was hoping if you could provide a little bit more detail on the pricing. On the prior earnings call, you said you've done some work and we're really encouraged by the opportunity being more significant than you had mentioned. And I just want to understand that to also provide color in a better grasp on how you can offset the incremental operating and service expenses associated with the new platform. James Allison: Thanks for the question, Tobey. Clarifying for anybody who's listening, you're referring to HRScale pricing. And yes. So if you think about what we are offering, obviously, we've got a lot of services that are similar to what we offer today. There are some new services that get unlocked or made more advanced because of new functionality available in the Workday platform and the opportunity for strategic services around those things as well as keeping the platform up to date and current. So we've taken all those things into consideration in our pricing. There's a significant uplift in what I would call the base price, if you will, or the list price of the product. And what we expect to be happening over this first 6 to 12 months, we're thinking about the pricing in terms of kind of 3 stages, if you will. So there's -- from a new client perspective, there's a beta stage and then there's an early adopter stage and then we'll be into the pure growth stage. And so we do plan to give some fairly significant discounts to the first customers that are willing to sign a contract and come on to the platform. And then we will reduce those discounts as we go through time and get to a growth stage. We still anticipate that even at those significant discounts, it's higher than what we historically have charged in HR360 for similar-sized clients. But I think one thing that's important to point out that I think Paul was alluding to in his script, having the 2 price points for these 2 products is really beneficial and actually supports the pricing of HR360 from what we're seeing over the course of our discussions and sales in 2025. So we see these as being complementary and supportive of each other at the different price points. Tobey Sommer: You mentioned being able to hit your target growth and profit metrics even if the SMB labor market is kind of sluggish. Like do you think you can hit the historical double-digit worksite employee growth even if SME job growth is flat versus, I think the long trend within your -- long-term trend within your customer base is around 5% per annum. Paul Sarvadi: Yes, Tobey, that is exactly what I said in my script. And I'm just reflecting what I see going on when you have a new offering where you've got over 40,000 businesses that have over 25 million employees. And when you sell them, the average size is 400 to 700 employees instead of your average size client being 25 to 30 or 30 employees. This is a significant catalyst for growth. And I think the timing of it is particularly exciting because of what we've seen in the small business -- small- to medium-sized business labor market. And we've seen now this is third year in a row with very low single-digit net gain within the client base. I would have never dreamt that. And we're on the front end of AI. So I see us being in a unique position in our space by having such a rifle-shot target, perfect-fit solution for this highly underserved and highly desirable client, being able to walk in the door with 2 of the leading companies in the HR space coming to the table, having made an incredible commitment and investment to make a hand-in-glove fit solution for these target accounts. And when you look at the whole pricing picture, where you're bringing so many different elements together and able for them to do this at a price that's never been able to do before, both upfront cost and ongoing cost, it is an engine for growth, and we're very excited about it. It's not time yet to convert that into the sales per salesperson per month and how the size, all that kind of stuff. But we're on that way now. We're on the way of keeping track of everything we're doing on every call and how it goes and what -- over this next year or so, I think we're going to see some exciting things where we can give you some better picture of the future. Operator: Our next question comes from Andrew Polkowitz with JPMorgan. Andrew Polkowitz: Congrats again on the launch of HRScale. I appreciate the color that you guys gave on the investment over year 1 and year 2. You also mentioned that you expect something to be effective, call it, low $30 million in investment in 2026. So that gets us pretty close to the aggregate $150 million you called out at the start of the process. I was just curious now that we're kind of in the early days of go-live, is that $150 million aggregate investment still the right framework? Or is there a different way we should be thinking about the cost of the go-live? James Allison: Andrew, thanks for the question. I would like to clarify one thing. When we talk about the operating expense impact of HRScale for next year, we're including ongoing operating expenses that have revenue offsetting them a little bit of probably some inefficiencies in the first year. But obviously, I would consider those to be operating expenses and not necessarily investment. The level of investment is down significantly lower than that. And I think you have to think about, as Paul alluded to -- we still have some months to go before we get to the first go-live and the stabilization period. So our investment kind of continues through that period, and then it's going to fall off relatively significantly and just have kind of a normal product road map associated with it. Now is that number -- we don't have a better number right now than $10 million a year going forward. Obviously, what we're looking at when we think about the product road map is the available resources across a lot of different projects and ideas, things that people want to do with HR360, things that people want to do with AI and other potential projects that are out there. And so this is a resource allocation decision that gets made there. So as we're thinking about the 3-year plan, as we're thinking about the budget for 2026, we'll be making some decisions in that regard. But obviously, a little bit fluid when we're trying to capture the opportunity, but also balance the level of investment with needs in other parts of the company. Andrew Polkowitz: Got it. That clarification is super helpful. Just for my quick follow-up, Paul, you mentioned that you guys consider for your midterm framework uncertainty about AI and employment. And just understanding that at this stage, no one really knows the full impact, I'm curious how you just think about that over the midterm relative to your kind of prior 3-year plan that you called out in the past. Paul Sarvadi: Sure. It's interesting because we haven't seen any of it yet where the malaise, so to speak, in the hiring front is rooted in specific AI job replacement. We haven't seen that yet. So everything we've seen so far is really more about the big picture of where things have been and some of the uncertainty and -- et cetera, that has caused a delay in decision-making, that type of thing. But I believe as we go forward, we want to be at least prepared for that. And that's why I think it makes sense that everybody should be looking at other growth engines. I just think the timing of ours being in place right now is really sweet. James Allison: If I can add to that a little bit, I would say -- when you think about what's going on in the small business environment today, to the extent that they're using AI tools, it's more likely to make them more effective right now as compared to more efficient. Efficiency could come certainly at some point in the future. But the other thing -- other point is as larger companies have potential efficiency gains and potentially reduce headcount, historically, that has led to a lot of entrepreneurship, people that are really smart. And I think about whether it's the dot-com boom or other times in the past that people leaving large companies decide to start small companies. And so I do think there's a possibility as we go through time that new business creation could provide some level of buffer against the employment efficiency. Operator: We have reached the end of the question-and-answer session. And I will now turn the call over to Mr. Sarvadi for closing remarks. Paul Sarvadi: Well, once again, I want to thank everyone for participating today, and we are really excited about both the UnitedHealthcare contract and the rebound that we're expecting in 2026 and also the exciting news about HRScale and how we're off to the races on that front. So thanks for participating today, and we look forward to further discussion with each of you. Thank you. Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

196天前Insight Analytics约5分钟阅读

PHG 2025 Q3 财报电话会议

Operator: Welcome to the Royal Philips' Third Quarter 2025 Results Conference Call on Tuesday, November 4, 2025. During the call hosted by Mr. Roy Jakobs, CEO; and Ms. Charlotte Hanneman, CFO, all participants will be in a listen-only mode. [Operator Instructions] Please note that this call will be recorded, and a replay will be available on the Investor Relations website of Royal Philips. I will now hand the conference over to Ms. Durga Doraisamy, Head of Investor Relations. Please go ahead, madam. Durga Doraisamy: Hello, everyone. Welcome to Philips' results webcast for the third quarter of 2025. I'm here with our CEO, Roy Jakobs; and our CFO, Charlotte Hanneman. The press release and investor presentation can be accessed on our Investor Relations website. The replay and full transcript of this webcast will be available on our website after this call concludes. I want to draw your attention to our safe harbor statement on the screen and in the presentation. I will now hand over to Roy. Roy Jakobs: Thanks, Durga. Good morning, everyone. Thank you for joining us today. We entered the third quarter with good momentum. We sustained it and delivered on plan for the quarter. Order intake grew 8%, marking the fourth consecutive quarter of improvement. It reflects the robust demand for our products and our disciplined execution. Comparable sales growth stepped up sequentially to 3% year-on-year. All businesses contributed to growth. Personal Health delivered particularly strong performance. Adjusted EBITDA margin expanded by 50 basis points to 12.3% in spite of the full quarter impact of currently imposed tariffs. It reflects solid gross margin delivery driven by innovation as well as the impact of our productivity and cost management. Overall, our performance in the first 9 months is tracking as expected, with momentum weighted towards the second half as orders and growth build through the year. We are delivering on our commitments, and we contain and sustain this momentum with disciplined execution into the fourth quarter to achieve our full year plan as we complete the year. We reiterate our full year comparable sales growth outlook in the range of 1% to 3%. We expect our 2025 adjusted EBITDA margin to be at the upper end of 11.3% to 11.8% range, reflecting our confidence in our execution. We continue to expect full year free cash flow to be between EUR 0.2 billion and EUR 0.4 billion. These expectations assume current tariff levels remain unchanged with mitigation fully on track. Now let's look at our third quarter performance in more detail. Starting with orders. Equipment order intake grew 8%, maintaining the momentum we have built over the last 12 months, including the typical quarter-to-quarter unevenness in large orders. Year-to-date, our order book is up 6% compared to last year. Our strong order performance in Q3 was driven by a sustained double-digit growth in North America. Strong order growth in Connected Care was partly offset by a modest decline in D&T. Within D&T, order growth in Image-Guided Therapy and Ultrasound in Q3 was offset by a small decline in Diagnostic Imaging following 3 consecutive quarters of positive order intake growth. We are pleased with 6% year-to-date order growth in D&T, driven by solid performance, and we continue to focus on strengthening commercial execution in DI and expect improvement in Q4. In Image-Guided Therapy, where we lead in minimally invasive procedures for cardio, neuro and oncology interventions, demand for high-end Azurion 7 system remained strong. Growth in Ultrasound orders reflect robust demand for our further enhanced leading EPIQ CVx systems, which highlights Philips' leadership in cardiovascular care. These AI-powered solutions enhance precision, streamline workflows and boost clinical confidence. Turning to Diagnostic Imaging. The demand for our BlueSeal MR 5300 and CT 5300 remains strong. We also advanced CT and MR innovation in radiation therapy planning, which I will touch on shortly. These systems, together with our strong imaging informatics offer are resonating with customers for their precision diagnostics and AI-driven workflow productivity, positioning us well for renewed momentum ahead. In Connected Care, demand for our hospital patient monitoring solutions continued to gain momentum. North America remains a key growth driver with strong demand, supported by major partnerships and continued hospital standardization with strong cybersecurity demands. We are especially pleased with the traction of our latest IntelliVue MX patient monitors, the AI-powered PIC iX central monitoring systems and our X3 transport monitors equipment measurement modules. With collaborations and partnerships that span the industry from Edwards Life Sciences to Medtronic, Masimo and Getinge, we have created an efficient interoperable patient monitoring and real-time data platform that addresses the key customer priorities. It's the ecosystem platform of choice for patient monitoring. Building on the strong value proposition, we expanded our enterprise partnerships as reflected in some new ones that we announced this quarter. For example, our monitoring and service agreements with leading U.S. health systems, such as Hoag Health System in Orange County and Rady Children's Hospital in San Diego. They empower our customers to focus on what matters most, improving patient outcomes while we handle system complexity. Moving to Enterprise Informatics, which also contributed to Connected Care's order growth in the quarter. Migration to the cloud remains a strategic priority to unlock further value in this business. This quarter, we signed a multiyear agreement with a major U.S. health system to move its radiology imaging to the cloud. And it's using Philips IntelliSpace Radiology on Amazon Web Services for that, improving efficiency, scalability and security while enabling future AI innovation. Turning back to Personal Health. Growth was strong and broad-based across all three businesses: Grooming and Beauty, Oral Healthcare, and Mother and Child Care. Sell-out trends remained healthy across Europe and most growth geographies. China remains subdued amid cautious consumer sentiment, and demand in the U.S. remains resilient. We saw strong demand for our premium products, including high-end shavers and IPL hair removal devices in Grooming and Beauty, but also for our Diamond Clean Series in Oral Health Care. Our continued investment in innovation fuels the momentum in orders we are delivering across the portfolio. In Q3, we expanded our pipeline with solutions designed to accelerate growth, enhance customer value and drive consumer engagement. We launched Transcend Plus in Ultrasound across our EPIC and Affiniti systems. It's featuring enhanced imaging and 26 FDA-cleared cardiovascular AI applications, the most in the industry, supporting faster, more consistent diagnostics. Similarly, in radiation therapy treatment planning, we continue to advance our innovation pipeline. At the American Society for Radiation Oncology, we introduced Rembra, Areta radiation therapy CT scanners and BlueSeal MR radiation therapy, which expanded our radiation oncology imaging portfolio and our sustainable MR leadership. Moving to consumers. We are also strongly driving our innovation pipeline in Personal Health. Last month, TIME named the Philips i9000 Prestige Ultra, one of the Best Inventions of 2025, a clear example of how our SenseIQ Pro AI technology continues to drive leadership in premium grooming. Our latest launches continue to resonate, not only with consumers, but with high-performing retailers, too. Lumea IPL debuted in the U.S. exclusively on Amazon with strong early uptake, and the next-generation Sonicare 6000 and 6400 models launched exclusively with Walmart. We continue to execute our priorities; from enhancing patient safety and quality, to improving supply chain resilience, and simplifying our operations. Our multiyear program to strengthen quality systems and embed a patient safety-first culture is delivering steady progress. In 2025, we passed six out of nine FDA inspections with no observations. Between 2024 and 2025, our 15 FDA inspections resulted in a 43 issuance rate, nearly 60% lower than in '21 to '23 despite a comparable number of inspections. Against that background, the FDA warning letter issued last week is disappointing, and we are fully committed and in full remediation since Q2 to resolve all observations to the agency satisfaction. We continue to work constructively with the regulatory agencies, also on new innovations. And we already received 27 FDA clearances through Q3, matching the total for 2024 and demonstrating an accelerating approval rate. We have also reduced global field actions by around 20% year-to-date, following a similar reduction last year, while we continue to improve complaint handling and strengthen corrective and preventive action processes. We remain fully focused on driving measurable lasting improvements in our business in collaboration with the global regulators and on reinforcing trust among patients, clinicians and investors. Moving to supply chain. We continue to make executional improvements. In Q2, we announced a multiyear nationwide agreement with Indonesian Ministry of Health to expand access to therapy using our Azurion platform. Now we are already installing the first system, a clear proof point of our speed and agility and execution strength. This collaboration exemplifies the broader progress we are making across our supply chain, where we continue to deliver tangible operational impact and greater resilience in an uncertain supply chain environment. This is also demonstrated by the continued increase in service levels across health systems modalities, reaching 87% in the quarter, a new high and another sequential step-up. Finally, we continue to simplify how we work with a more connected organization that focuses talent and resources where growth is happening. This shift is fueling continued progress in productivity and in performance. Turning to the regions. The fundamentals of the markets we serve remain sound. Dynamics vary per region. And in some areas, uncertainty is increasing. In North America, hospital demand remains strong with continued customer pull for platforms that deliver productivity to serve more patients at lower costs and to achieve better outcomes, increasingly enabled by AI. That said, demand is unevenly spread across hospitals and regions of the U.S. As hospital resource constraints in people and costs increase, they seek smarter, more productive ways to manage higher workloads with less people while serving more patients. So productivity has become a defining theme for our customers, one that sits at the heart of our innovation agenda. And this positions us well to capture growth, reflected in the sustained double-digit order intake growth over the past 12 months in the U.S. In China, tender activity has been gradually increasing throughout the year, although from a low base, fueled by stimulus measures. At the same time, centralized procurement kept expanding, which meant longer processing times and tougher competition, making it harder for bidding activity to translate into meaningful market growth. We continue to have a cautious view on the near-term outlook for China, but remain positive about the market's long-term growth potential. Capital spending remains stable in Europe and Latin America, while India and Saudi Arabia continue investing in health care and digitization, creating strong opportunities. In an uncertain environment, staying close to our customers and partners is more important than ever. We are also actively engaging with leading industry associations like AdvaMed in U.S., and MedTech Europe as well as authorities in key markets. Our objective remains clear: to advocate for patients and ensure access to care. Every dollar, euro or RMB spent on tariffs is one not spent on innovation. We must ensure tariff measures and trade barriers do not hinder innovation, access or affordability of care. We remain closely attuned to evolving customer and consumer dynamics to stay agile and responsive. We innovate to deliver better and more care. Charlotte will now discuss our third quarter performance in more detail and our outlook for 2025. Charlotte Hanneman: Thank you, Roy. The group achieved 3% comparable sales growth while our three business segments delivered 4.3%, underscoring the strength of our core operations. In Diagnosis & Treatment, comparable sales improved sequentially, in line with our expected phasing, increasing by 1% year-over-year. Image-Guided Therapy delivered solid growth, nearing the mid-single-digit range, marking consecutive multiyear expansion; a remarkable track record of consistent performance fueled by strong momentum in our flagship Azurion platform and strength in coronary intravascular ultrasound devices. Precision Diagnosis sales were broadly in line with last year. Strong growth in Ultrasound was driven by continued strength in cardiovascular, led by our EPIQ CVx systems. This was offset by a modest decline in Diagnostic Imaging, primarily due to the timing of orders. Our flagship products continue to perform well, particularly the CT 5300, which delivered a strong ramp-up in order conversions following its launch last year; the major contributor to a further improvement in gross margin within Diagnostic Imaging. Adjusted EBITDA margin decreased by 80 basis points to 11.8%, mainly due to the incremental headwinds from the currently imposed tariffs and cost inflation, partially offset by gross margin from recently launched innovations as well as productivity. Absent these headwinds, both gross and adjusted EBITDA margins improved year-on-year, highlighting the underlying strength and demonstrating robust operational execution. In Connected Care, comparable sales grew 5%, supported by strong growth in Monitoring. This was partially offset by lower Sleep & Respiratory Care sales, while Enterprise Informatics remained stable. Growth in Monitoring was driven by higher installation of latest IntelliVue MX patient monitors, X3 transport patient monitors and AI-powered PIC iX central monitoring systems across most geographies with particular strength in North America. Adjusted EBITDA margin improved by 410 basis points to 11.4%, including a 150 basis point gain from the remeasurement of a minority investment. Excluding this gain, the margin improved by 260 basis points to 9.9%, driven by operational leverage in the Hospital Patient Monitoring business, favorable mix effects and productivity, partially offset by tariffs and cost inflation. In Personal Health, comparable sales increased by 11% in the quarter with broad-based growth across all regions and strong performance across the three businesses within the segment. This sustained strong performance reflects robust demand across most geographies, including a resilient customer sentiment in North America. Growth was also supported by an easier comparison base in China following the impact of inventory destocking last year, which concluded in the second quarter of 2025. Personal Health adjusted EBITA margins improved by 60 basis points to 17.1%, driven by increased sales and productivity, partially offset by tariffs. Impacts from advertising and promotion spend remained slightly elevated year-on-year, though lower than in Q2 to support sustained demand and recent launches. These investments are delivering as intended, contributing to higher sales growth and are underscored by strong demand for our premium products across all businesses. Finally, sales in Other decreased by EUR 41 million, primarily due to lower royalty income as we expected, resulting in a EUR 21 million reduction in adjusted EBITDA for the quarter. Turning to our group results and operating highlights for the third quarter. Comparable sales growth improved sequentially, aligned with our expected phasing, increasing 3% with broad-based growth across all three segments, partially offset by lower royalty income as expected. Comparable sales in mature geographies grew 3%, led by North America with contributions from all segments. Growth geographies increased 5%, driven by strength in Personal Health and Connected Care, while Diagnosis & Treatment was broadly flat. Adjusted EBITA margin increased by 50 basis points to 12.3%, driven by higher sales, favorable mix effects and productivity measures, which more than offset the impact from incremental tariffs and lower royalty income. With tariffs evolving, we continue to actively mitigate their impacts, strengthening our ability to execute with consistency and deliver sustained performance. The impact year-to-date is tracking in line with our expectations. For full year 2025, we continue to anticipate a net impact of EUR 150 million to EUR 200 million after substantial mitigation with no revisions since the outlook we provided in July. As planned, short-term tariff mitigation initiatives in the third quarter focused on inventory management, specialty programs, exemptions and cost discipline and helped reduce the tariff impact. We also advanced medium-term initiatives meaningfully, including our supplier network and commitment to manufacturing location optimization. In August, we announced USD 150 million investment in the U.S., which will not only expand production, but also strengthen both cost efficiency and local supply continuity. We will continue progressing similar initiatives across the portfolio, carefully balancing regulatory, operational and customer considerations. In Q3, we delivered EUR 222 million in productivity savings, bringing the year-to-date total to EUR 566 million. We remain on track to achieve the EUR 800 million in productivity savings in 2025. Our disciplined approach to cost management and productivity initiatives has cumulatively delivered EUR 2.3 billion in savings since the start of our 3-year plan in 2023, exceeding our initial commitment to delivering EUR 2 billion by the end of 2025. As we build on this strong foundation, we are increasingly leveraging AI to unlock the next wave of productivity gains across the company. In Personal Health, since the second quarter, more than 80% of our marketing content has been created or enhanced using GenAI tools. This includes how we generate insights, we find creative content and even how we manage digital assets. These capabilities are already improving productivity and have delivered an increase in return on investment up to double-digit returns. In Enterprise Informatics, AI is accelerating R&D through greater use of AI-generated code, enhancing customer support with predictive AI agents and strengthening sales and marketing through AI automated content creation and real-time buyer analytics. For example, in customer support, our AI agents automatically perform remote system health checks and proactive maintenance, reducing support costs by 80%. In the quarter, adjusting items amounted to EUR 122 million, of which EUR 40 million were related to Respironics field action and consent decree remediation. This is below our Q3 2025 outlook of EUR 165 million, mainly driven by cost phasing within the year. Income tax expense increased by EUR 22 million, reflecting higher income before tax, while net income rose to EUR 187 million, mainly driven by higher earnings. Adjusted diluted EPS from continued operations was EUR 0.36 in the quarter, up 13% year-over-year, driven by positive contribution from growth. Despite significant volatility in major currencies, particularly the U.S. dollar, the impact on our adjusted EBITDA margin and EPS was broadly flat, reflecting disciplined hedging and optimized currency footprint and targeted commercial actions in markets most exposed to currency fluctuations. We delivered strong cash flow performance this quarter with free cash flow of EUR 172 million, representing EUR 150 million improvement year-over-year. Higher earnings drove this. Moving to the balance sheet. We ended the quarter with approximately EUR 1.9 billion of cash and net debt of approximately EUR 6.5 billion. We maintained our disciplined focus on working capital, delivering a solid year-over-year improvement in inventory as a percentage of sales despite ongoing tariff mitigation initiatives. Our leverage ratio remained in line with Q2 2025 and last year at 2.2x on a net debt to adjusted EBITDA basis. We remain committed to maintaining a strong investment-grade credit rating. Turning to the outlook. With 3 quarters behind us and continued strong execution, we have solid visibility for the remainder of the year. Our expectations for Q4 remain unchanged from the start of the year. We continue to expect sequential improvement in comparable sales growth, supported by sustained order conversion, sustained momentum in Personal Health sales and disciplined execution. For the full year, we continue to expect comparable sales growth in the 1% to 3% range with Connected Care growing within this range, Personal Health slightly above the mid-single-digit range and D&T delivering slight growth year-over-year. Year-to-date adjusted EBITDA margin improved to 11.2%, a 40 basis point increase despite higher tariffs, driven by strong execution and cost discipline. With continued momentum and even with the impact of tariffs, which is more pronounced in the second half of the year, we now expect full year adjusted EBITDA margin at the upper end of the 11.3% to 11.8% range. Turning to free cash flow. We continue to expect a full year range between EUR 0.2 billion and EUR 0.4 billion. As a reminder, this outlook includes the EUR 1 billion outflow related to the Respironics settlement paid in Q1. Our outlook excludes potential wider economic impact as well as ongoing Philips Respironics-related proceedings, including the Department of Justice investigation. With that, I would like to hand it back to Roy for his closing remarks. Roy Jakobs: Thank you, Charlotte. The third quarter progressed as expected, and we remain confident in delivering on our full year commitments. Looking ahead to our Capital Markets Day in February 2026, we will showcase the fundamental progress achieved under our 2023 to 2025 plan, establishing a strong foundation for the future. And we will share how we will and are evolving this into a next 3-year plan of consistent value creation and focused value acceleration. I'm incredibly proud of our passionate teams, staying close to customers, executing with discipline and keeping our momentum throughout the end of this year. Thank you, and we are now ready for your questions. Operator: [Operator Instructions] The first question comes from Mr. Julien Dormois from Jefferies. Julien Dormois: I have two. The first one would relate to a general question around price hikes going forward. You are obviously out of a period of inflation and also the tariff impact. So just curious how you think about price increase going forward. We can remember that 2 or 3 years ago, the whole industry proceeded with price hikes at the end of the inflation crisis. So just curious whether you should expect some benefit from that in the next couple of years. That would be my first general question. And the second question relates to PH. Obviously, a super strong quarter on easy comps. So just curious whether there is any restocking effect in China and maybe help us understand what was actually the contribution of China in this quarter. And that's it. Roy Jakobs: Thank you, Julien. Let me take the first one and then maybe Charlotte can take the second. So on the pricing, so as you have seen also from our bridge, kind of we are driving our margin expansion on the back of two key drivers that we see taking effect. One is expansion of gross margin. And that actually is especially the new innovations generating more traction in the total percentage of orders and then flowing through to sales. And that's where we see actually that price increases do support our margin, as well as the productivity and cost discipline actions that we are taking. We expect in the coming period that there will be some pricing given the inflationary environment that we're in. But we also know that kind of actually the inherent value increase of our innovations and how we price them in combination with kind of productivity and cost will be the bigger driver of that. So we see pricing opportunity, but not to kind of a large extent that kind of we also would impede growth because growth is still of critical importance, and we will keep driving that whilst we expand the margin at the same time as you have seen. Charlotte Hanneman: Yes. And then thank you, Julien. Your second question on Personal Health. We are very pleased with our Personal Health sales in the quarter of 11% indeed. As I said also just earlier, partially that was helped by a low comparable base in China. But even excluding China, we saw broad-based growth across all businesses and geographies. So very pleasing. And on your question on the restocking in China, we don't see any restocking. In fact, as we said, we finalized the inventory destocking at the end of Q2 and continue to be very, very cautious on making sure that those inventory levels are in line with our expectations. So no restocking now. Operator: The next question comes from Ed Ridley-Day from Rothschild & Co Redburn. Edward Ridley-Day: Really a strong improvement in productivity this year despite some of the challenges you faced. How should we think about maintaining that momentum into '26? And particularly on -- related to tariffs, you've almost fully offset the tariff headwind this quarter. Should we be perhaps assuming that you can fully offset the annualized tariff impact next year? Charlotte Hanneman: Thank you very much, Ed. Let me take that question. So first of all, we're very much focused on 2025 and delivering in line with our expectation, which is now at the higher end of the 11.3% to 11.8% range. And as you rightfully mentioned, we've been able to compensate a lot of the tariffs while we still have a net impact of EUR 150 million to EUR 200 million after substantial mitigation. And that gives us a lot of confidence. Now if I look ahead at 2026, of course, we have our Capital Markets Day on February 10, and we're looking forward to giving you a lot more details at that point in time. What I would tell you in broad strokes is we are happy with the momentum that we've seen from an order intake perspective, from a sequential sales step-up perspective, from a margin perspective. So we are very focused on continuing improving on all fronts, but more to come on February 10 from that perspective. Operator: The next question comes from Hugo Solvet from BNP Paribas Exane. Hugo Solvet: Congrats on the results. I have two, please. First, can you expand a bit on the order timing in D&T? And how would you expect Diagnostic Imaging sales to evolve going forward? And second, Roy, happy to get your thoughts on Section 232. How do you think this could impact Imaging and Connected Care business? And where do you stand exactly on reshoring of manufacturing in the U.S. in particular? Roy Jakobs: Thank you, Hugo. So on the order timing, and I think it's good indeed to -- if you look at the order buildup of D&T, as said, we are happy with the 6% year-to-date. You also say -- saw that is not yet fully evenly balanced, right? Q2 was really the quarter of D&T, Q3 is the quarter of CC, right? So we kind of -- as we have built up our order momentum, we're also getting some of these large deals. And Q2 was really a very strong D&T quarter. Q3 is a very strong CC quarter. Actually, in Q4, we expect D&T also to further step up. Also, we see that in our funnel. So actually, whilst there are certain lumpiness, the underlying improvement is visible, and you also see that coming through. The same is for the realization of sales. We also have seen the step-up in sales. Although also there, of course, it goes with the order conversion. And there, we see that some time lines are longer, but also we expect there an improvement in Q4, which also in DI is coming through. On top, I think it's also good to say that, as you know, from our strategy, we had in how we drive our businesses two different parts. One was we have growth businesses at higher margins that we explicitly drive for growth. And we have margin expansion businesses, and those are exactly doing what they should be doing. So we have been expanding DI margin, we have been expanding EI margin, we have been expanding SRC margin also in the third quarter. And we have been really driving growth strongly across the other growth businesses. Now of course, we want to have both margin and growth expansion from all segments, but actually, we're also driving them within the strategy. So in that sense, I think you have seen that we will kind of step up. And that's also what Charlotte mentioned in Q4, we also are launching, of course, new innovations like the radiation therapy suite that will support that as well, of course, we have the RSNA upcoming with some exciting news there as well. So that's kind of how we look at to continue to D&T trajectory into Q4, but also, of course, in the period to come next year. The 232, so we see that -- and I think there, we look at this in conjunction with tariffs. There's a lot of fluctuation out there. And we are focusing very strongly on the controllables to see how we can mitigate that. And I think we are happy that actually in Q3, we showed that we are able to offset in full the tariff impact. Now that's how it work because it's still substantial. We also have the same plan for Q4, where we want to deliver a strong margin quarter, that also helps us to kind of give the higher end of the range. We are, of course, following the 232 and are engaged because we're engaged in Europe and U.S. and China in advocating strongly that actually we can lower tariffs and actually forgo further impact on patient care. So in that sense, kind of, a, we are actively engaging in a dialogue; b, we are preparing ourselves to focus on the controllable so that we can deal with any consequences. On that last point also, we have further strengthened our footprint in the U.S. So we invested EUR 150 million in Reedsville, expanding our ultrasound but also wider facility there. We're also looking at our other facility to actually be even better prepared for the localization needs. And that's in line with kind of the trajectory we have been having across our supply chain. I mentioned that we've really strengthened our supply chain delivery and also the agility to kind of address challenges. And whether the challenges with tariffs or Nexperia, we are better prepared. And actually, we are upping our service levels and upping orders and sales. So we make sure that we stay resilient while we deal with uncertainties around us. Operator: The next question comes from the line of Mr. Hassan Al-Wakeel from Barclays. Hassan Al-Wakeel: A couple for me. Firstly, a follow-up on D&T, please. Last quarter, Roy, you talked about your win rate improving in China, particularly in CT on the back of spectral. How is that faring today? And do you think your softer China order commentary is a function of market growth or share losses or both? And then secondly, just if you can expand on the warning letter in ultrasound and informatics and what gives you confidence that this will not result in regulatory action, and that your more recent quality improvement measures are yielding company-wide change? Roy Jakobs: Yes. Thank you, Hassan. So on D&T, we have seen indeed, and that's also what was called out, further traction on the 5300 and CT as well as MR. And actually, that is building in the funnel. Next to that, we saw ultrasound really picking up. And actually, that in part also address maybe some concern from the warning letter. Actually, Ultrasound, we have been dialing up order intake momentum and sales momentum whilst we actually have been working in parallel the remediation since Q2 because it's not new, right? For us, we got the 43 at the end of Q1. We started to remediate in Q3 -- in Q2 and in Q3, and you have seen no impact on results. That's also why we can be quite confident on that this will not have impact on results. We are remediating the process part of it, and we are in full kind of remediation and take it very seriously, of course. But we also know that this is no product issue, not a patient safety issue, this is process remediation. And we have been working that whilst absorbing it and stepping up our products. Then on China, I think in China, you see that it's a mixed picture. Overall, the market momentum, I would still call out for health systems as subdued, right? We still don't see the market growth coming back as we all hope, and that's really a market phenomena. We see tenders increasing, but it's not turning to order growth because we see that they are not landing yet. Processing time are longer, they are being disputed, and that's something that actually we are facing as industry. On the other hand, we have seen that Ultrasound, for example, has been up in our mix, and we saw IGT also picking up. We saw some slowness in DI, where actually last quarter it was stronger. So actually, we're working also to kind of see how we can strengthen it again in Q4. So it's not that linear over the quarters. But in general, I think we are all waiting for further strengthening of China. Now we do expect it to come, but it's just not clear when. So therefore, we remain cautious. And of course, you know that the China part of D&T is just bigger than also the CC part. So you see that weighs a bit stronger on the portfolio. Maybe another data point what is important. If you look at DI in North America, we have been growing orders by 16% year-to-date. So whilst we are growing, of course, we're coming from a smaller base and that weighs upon us. But it's not we don't have momentum there, but of course, we are rebuilding from a smaller base. So those are a few, I think, data points on the D&T momentum. So we keep building it. We also have strong engagement with customers. We have been receiving many of them actually here for co-creation sessions and have been individually also part of that. So I see it coming also towards the next year, but we are sequentially building it through the quarters. Hassan Al-Wakeel: Roy, if I could just quickly follow up. In your prepared remarks, you talked about tougher competition on the ground in China as well as some of the market issues that you just talked about. Where is that manifesting itself? Roy Jakobs: Yes. I think what I mean with the tough competition is that in, of course, the centralized procurement, you have a much more regulated process around competition. And that makes that we see, and I think everybody is facing that, that you kind of much more guided in that process. There are more disputes coming out. So when you have one, people are rebottling it. So that's, I think, where you see on the ground that it's becoming tougher because it's not only clinical preference, there's also more process in the mix. I think that is a fair, I think, depiction of the China situation, and that's something that we all are dealing with, I think, all parties. And you saw it also, I think, in some commentary of others. I think we are working through that. I think on the other side, on the positive side, we also mentioned that kind of we are working to offset. And that's not only short term, but also longer term. The strong momentum of double-digit orders in North America, of course, is also a big part of mitigation for that. And there also, we could still deliver 8% total order growth despite that China is not back where it is. And of course, there, we are firing also on the strongholds that we have. And CC was particularly strong this quarter, but also we continue to build on the rest. So as we are shifting to get where the demand is coming more contribution, that's North America, but also Europe, you also see that kind of we will be building that into our sales of the various underlying segments. Operator: We will now take the next question from Mr. David Adlington from JPMorgan. David Adlington: Firstly, maybe just would be good to get your thoughts on GE's decision. Can you hear me? Roy Jakobs: Yes. David Adlington: Yes. So just on the GE's decision to sell the Chinese business. Just wondered if you thought there was potential to pick up share, but also good to get your thoughts in terms of why they might be looking to exit China? And then secondly, just wondered if -- as the hedges rolled off on the foreign exchange, just wondered what sort of headwind that will be to margin for next year? Roy Jakobs: Okay. So on GE, of course, I cannot speak on behalf of GE and what they're doing. What I do see is actually that indeed on the ground, we are dialing up our competitive positioning around innovations that we've been launching. And as I said, kind of we see that, that also is resonating. We saw the Ultrasound pickup. We see also that there is kind of more activity, but kind of we need to materialize that. And I think overall, globally, you see that we have good order momentum, and kind of that is because of the customer preference for our platforms. I think the approach of innovation that we are taking where we're really looking into the broader productivity and workflow support supported with a combination of products and AI, and Informatics is something that is resonating. So I would say that's kind of our competitive differentiation and where we have three strong platforms that we're pulling from, that customers can build upon, and they are interoperable and open so that kind of we can play with partnerships in the industry as well to strengthen the delivery towards customers. I think that's on the first part. And maybe you can take the second on FX, Charlotte. Charlotte Hanneman: Yes, absolutely. Thanks, David. So your question on FX. And of course, we're very pleased we're not seeing any impact from an FX perspective in Q3. Now if you go and also look at Q4, that's where we do expect some currency headwinds to come in, which also will impact our margin, and that's fully included in the guide of the higher end of the 11.3% to 11.8%. And where we will get that out in February, we'll also take the currency impact into account in our guide there. But what I would tell you overall that we've been doing very well in terms of offsetting any currency impacts, as you have seen also in Q3. Operator: We will now take the next question from Mr. Graham Doyle from UBS. Graham Doyle: Just two for me. Just firstly, on the tariff side of things. Just conceptually, when we think of the order book growth you've had, which probably would support, say, mid-single-digit growth next year, you think of the cost savings and the mitigation you've got in there. Just to be fair, is it reasonable to assume margins can expand next year with tariffs where they are at the moment? Just to get some clarity on that. We're not asking for a level, but just to assume that they can expand. And then just on China, we're hearing quite a bit about VBP within the CT and Ultrasound segments. And I know a couple of your peers have seen it, but mainly because they play in the sort of lower end of mid-level hospitals. Is this something that's affecting your business? Or do you just not play in those categories? Charlotte Hanneman: Thank you, Graham. Let me take the first question on tariffs. So as you know, so for this year, tariffs after substantial mitigations are impacting us to an extent of EUR 150 million to EUR 200 million. And despite that, we're expanding our margins at this point in time at the higher end of the 11.3% to 11.8% margin, so by 30 basis points. You said it, of course, the tariffs are annualizing next year, so that will be a little bit of a bigger impact. But the way we are looking at it is we know every year we need to improve, including the new reality around us. And one of the big new realities around us is tariffs. So without wanting to go into any specifics at this point in time because we'll do that on February 10, what I can tell you is that we're very much focused on improvement, improvement from a sales perspective, improvement from a margin perspective and also improvement from a cash flow perspective. Roy Jakobs: On the CT, Ultrasound question, VBP in China, I think the procurement rollout is quite broad-based. So we are also affected by that. So we see that as well in part of kind of the portfolio where we play. So that's, I think, a market phenomena. That's also where I was earlier alluding to that actually is causing some of the slowness that we see because actually that really causes longer processing times as well as a more orchestrated approach towards buying. And that has an impact -- continued impact on market growth in China. So therefore, we did see that as well for us. I think on the positive side, as I already mentioned, we saw really in Ultrasound positive growth coming in because also of some of the new launches that we have. Now we are also building the pipeline for the CT part, so we see that there is tender activity. But as I also mentioned, it's not yet kind of concluded. And therefore, kind of we remain a bit cautious on how this evolves because it's not very predictable yet when activity turns into orders and then turns into sales. Operator: The next question comes from the line of Veronika Dubajova from Citi. Veronika Dubajova: I am going to ask two, please, and a very quick third one, if you forgive me, just because that's one word, hopefully one. But I just want to circle back to the downgrade to the guidance, to the sales guidance for D&T. And obviously, Roy you've talked a lot about China, but can you sort of confirm that the downgrade is entirely just China related? Or is there anything else that you're seeing in other regions that's worrying you there? And I guess, how you feel about that kind of D&T growth momentum exiting this year underpinning this roughly 5% growth rate that consensus has for next year? If you can talk to that, that would be my first question. My second question is the low single-digit growth rate in IGT, quite a deviation from the trend that we've seen through the last couple of years. So curious if you have some thoughts on that. And again, if you can elaborate on what's driving that? And my third very, very quick, yes or no question is, do you expect the warning letter to have any impact on your ability to return to the CPAP market through the next 6 to 12 months? Roy Jakobs: Okay. Let me start with the D&T. So on the sales momentum, yes, there is some China impact in that. But the other portion that we have seen is also some longer conversion cycles of orders. There's no particular kind of other reason that we see in other regions. I said kind of especially in DI side, of course, we have a different footprint in terms of more weighted towards Europe and China and a bit less in North America, where we are building. But I also mentioned to you that we are actually building that with double-digit order growth. So actually, we are stepping that up, and we expect that also to continue. So yes, whilst the overall mix is a bit changing in the year, we remain with 1% to 3%. I haven't heard too many people talking about CC. It was quite extraordinary this quarter how they delivered in terms of the demand that there is as well as kind of supported in hospital-based monitoring and in kind of EI. So of course, we're tapping the opportunity and also growing and leveraging the strength of our portfolio in fullest. And that also holds true actually for IGT. So in IGT, the CSG has been high, especially if you look also then in terms of the compare from a 2 years comps in Q3, and that was also supply chain related. You see that kind of explains some of the LSD. But actually, we keep very much leading in IGT. The new launches are contributing to that. People are really excited about not only what we have been launching, but also the piping with Azurion and other innovations that we have. So actually, we remain very excited about the interventional opportunity that's out there and that we also keep pursuing. Then on the warning letter, no, I don't expect any impact to the CC because these are two separate topics. The CC has its own kind of SRC-related demand. As I mentioned earlier, we're fully on track in kind of working through those. This is a separate warning letter we need to address, and we are in full remediation of it. And as I said earlier, we don't expect any commercial impact of it. So in that sense, yes, it's a disappointment, and we are kind of acting it with very strong discipline follow-through, but we don't expect that to have any further operational impact. Operator: We will now take the next question from Mr. Richard Felton from Goldman Sachs. Richard Felton: Two for me, please, both on Connected Care. So first of all, I suppose just a follow-up on the strong order performance in Connected Care. Could you maybe add a little bit more color on what was driving that? And how much benefit was there from the longer-term partnerships that you signed in the quarter? And then secondly, on Enterprise Informatics specifically, I think it's roughly a year on since you extended your partnership with AWS to advance cloud services. How has that partnership impacted your Enterprise Informatics business from both a top and bottom line perspective? Roy Jakobs: Yes. Great questions, Richard. So let me start with Hospital Patient Monitoring and CC development there. I think we have been seeing strong demand on the patient monitoring side. And in combination with, I would say, really unique ecosystem that we have been building, we see us really winning. And that's not only kind of building on the momentum in the market, but also then kind of really taking positions also of competition. That is built also with partnerships. Now we mentioned two in the quarter, but it's not only of that, it's quite broad-based and also across regions. You know that we play mostly outside of China. So of course, CC doesn't have that China impact, but it's really kind of driving a very strong North America contribution. They're investing in patient monitoring, standardization, but also patient safety is important there to watch over their patients as well as the cybersecurity part. And we have been really also driving the partnership approach as you have been seeing. So we kind of offer a full open modular approach, and that's really working for the market and for our customers. So I think a winning formula there that we expect to continue to deliver results. And that not only has been driving order sales, but you saw also strong margin contribution because, as you know, the Hospital Patient Monitoring business is also a strong margin business. Then on EI, we also mentioned strong contribution from EI in the quarter. As I said, we drive, of course, EI for margin. So we saw margin improvement, but we also were very pleased with the order improvement. And that indeed is really also in combination with that offer that we have with AWS. The cloud migration is a big topic. Not only the cloud migration, we do also AI and some language model collaboration with them. So we see that really kind of supporting the engine. They're also doing some marketing and sales efforts because they, in essence, co-sell our solutions as well as that we, of course, support their cloud services when we go out to customers together. And that is a formula that also works within the market and with customers. So we see that kind of strengthening our approach, and that's indeed building the funnel and now also building the conversion since we started that collaboration with AWS. Operator: We will now take the next question from the line of Wim Gille from ABN AMRO ODDO BHF. Wim Gille: I have two questions actually. First, you reported 8% order intake growth in Q3, predominantly driven by CC this quarter. You also gave some color during this earnings call on the funnel for Q4, but I missed that answer. So can you reiterate it, basically giving a bit of granularity on how you see the sales funnel and the order intake develop into Q4 for both D&T as well as CC? The second question is related to E&I, Enterprise Informatics. As I understand it, order intake was pretty okay, but sales has been flat also in Q3 and was also quite disappointing or relatively low in the previous quarters. which reads a bit disappointing vis-a-vis market growth there. So what has been holding you back in the last couple of quarters? And when would you expect the order intake in E&I to come and convert into sales growth here? Roy Jakobs: Yes. Let me maybe take the first one in terms of the order momentum. So we said kind of when we look to the year, we expect a strong full year delivery of orders where we continue on the track that we have been building. So a positive order intake also into Q4, probably a bit more evenly based with CC and D&T. As I've said, kind of has been a bit lumpy through the quarters. But in Q4, we expect it to be more evenly based. Then depending on kind of what big orders will fall, you will see kind of this will have potentially some impact in Q4 or we see it next year back, but a strong finish in orders. Then on sales, also there, kind of we have said before, we are stepping up and also we will step up in Q4. And that will be across the different segments. So we will expect contribution from everybody in that step-up. So PH continue to be strong. We see CC continuing and also D&T stepping up. So in that sense, I think we maintain the momentum as we also signaled, and that's built up on the funnel. Now of course, still 2 months to go. So working hard to kind of get it over the finish line with our teams, but all kind of geared towards delivering upon what we also have guided for. And I think that's, of course, a reiteration of what we have been planning for and saying all year long. Charlotte Hanneman: Yes. And then maybe your question on Enterprise Informatics. Indeed, as you pointed out, our order intake has been very strong in Q3 for Enterprise Informatics, and we're very pleased with that. You probably also know that the order conversion cycle from order to sales in Enterprise Informatics is pretty long. So it will take quite a while for order intake growth to convert into sales. And Roy just spoke about AWS and our AWS partnership as well, which will also help contribute as we move customers to the cloud will also help drive sales growth there over time. Wim Gille: And in that transition where you are moving your clients to -- from on-prem to cloud, have you any indication -- can you give any indication where you are in that process? Is it like a quarter is done? Are you halfway there? Or are we now at the end of the conversion? Charlotte Hanneman: Yes. It's difficult to say, and it also depends really customer by customer. So we've done a number of successful conversions from on-prem to the cloud. But ultimately, the thing to keep in mind is that this will take time to fully execute on because it really touches also the hospitals and the hospital operations very, very deeply. So this will take time. But we've done a few that have been very successful. Operator: [Operator Instructions] We will now take the next question from Mr. Falko Friedrichs from Deutsche Bank. Falko Friedrichs: My first question is, how did the Respironics business perform in Q3? And are you seeing the momentum build as you reenter European markets? My second question is there has been a very large number of earnings adjustments again in the third quarter. Is that something you plan to significantly reduce going into 2026? Roy Jakobs: Yes. Let me take the first one, Falko. So on SRC, I think two parts. One, as I said before, of course, we have been driving very strong margin improvement. We have seen very strong margin realization in Q3 of SRC also that also contributed to the strong CC margin step-up. So that part of the strategy fully working. Also, we have seen really the OSA portfolio, so the sleep apnea portfolio stepping up. So we see actually as we're returning into the market, actually, that's something that is delivering growth to us. Where we see it being offset is with ventilation. There actually, we have improving portfolio and also been taking out. So that actually is going at the cost of the sleep momentum. So therefore, in the mix, you see that there is a slight pressure on the sales because of that ventilation reset. But we are very encouraged and excited by the fact that in sleep, both on the devices, but also the masks we see it stepping up. And that, of course, with the reentry that we have been doing across the various countries now in due course of this year. Charlotte Hanneman: Yes. And then Falko, I'll take your second question on the adjusting items. And although adjusting items came in significantly lower than we had guided for, I absolutely acknowledge that they're still high. And the moving pieces are, on the one hand, we continue to have costs related to the consent decree, Respironics consent decree, that will reduce over time. The other element is that we continue to have restructuring costs as we're continuing to simplify our operating model and to simplify Philips as a company. Now having said all of that, we are very much focused on, and it is a priority of mine to reduce adjusting items over time. So that is what we're fully focused on. There's a lot on the table there, a lot of strengthening of processes that we're doing. So over time, I see the reduction in adjusting items. And what I would also tell you is that adjusting items have already come down versus 2024 and 2025. So this is a journey and a trajectory we're on. Operator: The last question comes from the line of Mr. Oliver Reinberg from Kepler Cheuvreux. Oliver Reinberg: Two questions also from my side. Firstly, I just want to discuss the margin impact from innovation SKU reduction. I mean, I guess this is a kind of continuous effort. But can you just give us any kind of flavor in which year do you expect this kind of measures to peak? Will this probably be next year as the kind of order backlog is being worked through? Or would you expect the kind of margin contribution to be similar compared to 2025? And also, can you give us a flavor when you're pruning your kind of product portfolio, what was actually the headwind to comparable sales growth? Because my understanding is that you're not adjusting for that. And then the second question, if I may, just on Americas. I mean, you talked about different -- more uncertainty in some kind of regions. I was just wondering if this also relates to Americas where we pointed to different dynamics by region. So just try to get a kind of flavor how confident are you that this kind of growth in North America will continue into next year? Charlotte Hanneman: Yes. Thank you, Oliver. Let me take the first question on the margin impact from the SKU reduction, which we internally call Project Synchronizer. So what I would tell you, and if I take a step back on our margin improvement trajectory, we have consistently said that part of our margin improvement trajectory is related to gross margin improvement, and there are a couple of different reasons for that. On the one hand, we see improvement from gross margin driven by innovations and our innovations driving higher margins. So there's an aspect there. The other component, as you rightfully call out, is the SKU reduction where, for instance, we have pruned the number of transducers in ultrasound significantly, which leads to lower R&D costs, lower quality costs and lower supply chain costs. So all of that helps to drive improvement of margins, which is also again seen in Q3. So for instance, I'll give you one other data point there. Our gross margin in Diagnostic Imaging, where we've done also a lot of product pruning SKU reductions has improved year-over-year despite the tariffs. So that gives you a good sense of, on the one hand, we have the innovations like CT 5300, like MR BlueSeal driving gross margin expansion. On the other hand, there's also the impact from Project Synchronizer SKU reduction. Now if you then talk about how should we think about that year-over-year, this is a journey. So we've seen some impact in 2025. We'll see some impact in 2026 and the years to come. And then your last sub-question in your question was around the sales impact that we see from that. There's nothing really that I can call out there that stands out. There's not a major impact on CSG as I would see it now. It's really to focus on the great innovations that we have and doubling down on selling those with -- so that's what we're focused on. And then your second. Roy Jakobs: Yes, maybe conclude on North America. So actually, indeed, we see kind of winners and losers in the U.S. So we see some smaller hospitals really being pressured. They're also more dependent on Medicare, Medicaid patients. So some of those also in urban areas. So there, actually, we see there's a lot of pressure. We are working with them on productivity solutions more. And then we see the ones that are strong are expanding, and we're also very strongly winning with them. So therefore, actually, you have seen sustained momentum in North America, also our double-digit order intake growth. We actually expect that to continue. We have no signs yet that kind of this market from the needs that we are serving is cooling down. And that's, I think, good news. So we actually expect continued strength in North America. That's also why we have kept investing in winning in America with the further footprint, the specific customer relations and partnerships that we are concluding there, and we are excited about the opportunity there. Operator: That was the last question. Mr. Jacobs, please continue. Roy Jakobs: So thank you all for your questions. I think concluding, we delivered on our promise in Q3. Strong order intake growth, 8%. We had a positive step-up in sales growth to 3% and a margin expansion despite tariffs. Now we are fully focused on continuing to deliver in Q4 and therefore, concluding this year with in -- the reiteration of the sales range of 1% to 3%, we said that we would do upper end of our margin and strong cash delivery. And that will hopefully set us up for a good 2026, and we look forward to also kind of engage with you at the CMD. So thank you so much for your attention and your questions, and have a great further day. Operator: This concludes the Royal Philips Third Quarter 2025 Results Conference Call on Tuesday, November 4, 2025. Thank you for participating. You may now disconnect.

196天前Insight Analytics约5分钟阅读

INSP 2025 Q3 财报电话会议

Operator: Good afternoon. My name is Dilem, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Inspire Medical Systems Third Quarter 2025 Conference Call. [Operator Instructions] I'll now hand the call over to your first speaker, Ezgi Yagci, the Vice President of Investor Relations at Inspire. You may begin the conference. Ezgi Yagci: Thank you, Dilem, and thank you all for participating in today's call. Joining me are Tim Herbert, Chairman and Chief Executive Officer; and Rick Buchholz, Chief Financial Officer. Earlier today, we released financial results for the 3 and 9 months ended September 30, 2025. A copy of the press release is available on our website. On this call, management will make forward-looking statements within the meaning of the federal securities laws. All forward-looking statements, including, without limitation, those relating to our operations, financial results and financial condition, investments in our business, full year 2025 financial and operational outlook and changes in market access are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements. Please see our filings with the Securities and Exchange Commission, including our Form 10-Q, which we filed with the SEC earlier this afternoon for a description of these risks and uncertainties. Inspire disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, November 3, 2025. With that, it is my pleasure to turn the call over to Tim Herbert. Tim? Timothy Herbert: Thank you, Ezgi, and thanks, everyone, for joining our business update call for the third quarter of 2025. I'll start by highlighting some key takeaways of our third quarter results. I'll then discuss our updated 2025 guidance, and Rick will provide a financial review. We will then open the call up for questions. As always, I want to start by reiterating our commitment to put the patient first and deliver strong patient outcomes. We continue to invest in innovation and clinical evidence as we lead the way in hypoglossal nerve stimulation, and this was on display at the recent ENT Society meetings where Inspire V performance data were presented. The results of our Singapore clinical study of 44 patients demonstrated significant performance improvement as well as a 20% reduction in surgical times and early experience from our U.S. Limited-Market-Release of over 100 patients demonstrated clinically relevant reduction in disease severity with patients averaging over 6 hours of nightly device use. Furthermore, we presented data showing Inspire's -- Inspire V 87% inspiratory overlap with the patient's breathing. As many of you already know, this is the foundation of our closed-loop stimulation system as the airway collapses during the inspiratory phase of respiration, synchronizing stimulation with inspiration is essential to optimize therapy. We are excited and energized by the strong performance of the Inspire V system and the clinical feedback on the simplified procedure and comfort settings has been tremendously positive. In addition, Inspire-related publications led the discussions at the ENT meetings, and we were excited to see 2 academic centers independently found that Inspire is an effective treatment for both supine and non-spine dependent OSA and that Inspire provides clinical benefit regardless of sleep position. Multiple papers demonstrated Inspire's ability to improve long-term cardiovascular comorbidities, including a study from University of Texas Health that assessed over 4,500 patients over a 10-year period in the TriNetX database. This is a large multi-institutional electronic health record network. The study showed that Inspire offered advantages in reducing long-term cardiovascular morbidity and mortality in patients of OSA compared to CPAP treatment. In another paper out of Thomas Jefferson University using the same database, Inspire was compared to CPAP and to no treatment. The study demonstrated that Inspire was associated with broadly improved non-apneic outcomes compared to CPAP and to no treatment. Specifically, they showed that Inspire therapy resulted in lower risk for myocardial infarction, cardiac arrest, ischemic stroke and depression, amongst others. Together, these studies are the first evidence that Inspire can reduce cardiovascular morbidity and mortality in the most vulnerable patients, namely those who are unable to tolerate CPAP. These outcomes are a testament to the importance of diagnosing and treating OSA and validate the continued investments we are making in innovation, clinical evidence, medical education and patient marketing. With respect to the Inspire V U.S. launch, the team made significant progress in the third quarter, and we are excited to report that physician training is over 98% complete. Contracting is over 90% complete for our centers and SleepSync onboarding is complete for over 75%, bringing the total to over 75% implanting Inspire V today. Given this progress and our strong momentum we are seeing, we are reiterating our full year revenue guidance of $900 million to $910 million, representing 12% to 13% growth compared to full year 2024. Switching to our quarterly results. We are very pleased with the strong revenue performance and cost discipline we demonstrated in the quarter. Third quarter revenue totaled $224.5 million or a 10% increase compared to the prior year period. Including the increased investment we are making in patient marketing, we were able to deliver operating income of $9.6 million and earnings per share of $0.34. This strong performance gives us confidence to increase our earnings per share guidance to $0.90 to $1, up from $0.40 to $0.50 previously. On patient marketing, we've started rolling out a new ad campaign, highlighting the fact that with Inspire, many patients report that they can dream again, complete with a holiday-themed ad featuring none other than Ebenezer Scrooge treating the sleep apnea. You may also have seen our new ad featuring a celebrity influencer partnership with Chock Chappele, the winner of last season's Golden Bachelorette, our real Inspire user since 2021, and we are encouraged by the early indications from these initiatives. Regarding reimbursement, CMS recently finalized the 2026 physician fee schedule at approximately $660 or an 11% increase for CPT code 64568. As you know, for Inspire V, centers bill CPT code 64568, which has been accepted for plans covering over 90% of our 300 million covered lives, including Medicare. This change will take effect January 1, 2026. We are still awaiting the final OPPS rules to be issued by CMS. As you are know -- as you are aware, in July, CMS proposed to increase the national average Medicare hospital reimbursement for CPT code 64568 to $32,000, up approximately $1,300 or 4% from 2025 and the ASC reimbursement to $28,000, up $1,300 or 5% compared to 2025. These positive reimbursement changes will take effect January 1, 2026, once approved. Following our last earnings call, we conducted our own survey of over 200 sleep physicians to better understand their treatment paradigm for OSA since the introduction of GLP-1s. What we confirmed is that the GLP-1s are driving increasing interest in sleep health and bringing more patients into the clinic, if only to get their GLP-1s covered by insurance with an OSA diagnosis. Inspire welcomes this trend as it opens the door to alternatives beyond CPAP. Based on the survey results, about half the sleep physicians now prescribe and manage GLP-1s themselves, while the rest refer patients back to family practice due to the burden of managing these patients, whether it's insurance hurdles, challenging side effects or because weight management just is not their area of focus. The survey also identified that sleep physicians are not comfortable prescribing GLP-1s alone, but prescribe concurrently with other treatment options initially CPAP. Patient monitoring, coupled with the insurance requirements to obtain refill prescriptions provide visibility into the patient's weight loss, adherence to CPAP and overall sleep health. These same physicians then understand the patient profile that may be recommended for Inspire therapy. Overall, the survey confirmed that patients will try GLP-1 prior to surgery, but also the patient pool has been increasing with the availability of GLP-1s to treat OSA. This reinforces our confidence that GLP-1s make it possible for higher BMI patients to lose weight and become eligible for Inspire therapy and Inspire is excited to help even more patients access effective lasting care. In summary, we remain focused on the patient to continue the growth and adoption of Inspire therapy. We will execute our growth strategy of driving high-quality patient flow and increasing the capacity of our provider partners to effectively treat and manage more patients. Our key strategies include training advanced practice providers, certifying additional surgeons qualified to implant Inspire therapy and driving adoption of SleepSync and our digital tools, all of which are embedded strategies in our commercial team's objective to increase provider capacity. Looking ahead, we are confident about our future and that we have the appropriate strategy in place to drive long-term stakeholder value. We have our arms around the headwinds that I have described and actions are already underway to accelerate adoption of Inspire V for the remainder of the year. And looking beyond 2025, we continue to take actions to position the company for strong profitable growth. With that, I'd like to turn the call over to Rick for his review of our financials. Richard Buchholz: Thank you, Tim, and good afternoon, everyone. Total revenue for the quarter was $224.5 million, a 10% increase from the $203.2 million generated in the third quarter of 2024. U.S. revenue in the quarter was $214.4 million, an increase of 9% from the $195.8 million in the prior year period. Revenue outside the U.S. was $10.1 million, which was a 37% increase year-over-year. Gross margin in the quarter was 85.8% compared to 84.1% in the prior year period. The year-over-year increase was primarily due to increased sales volume and increased sales mix of Inspire V, which is more cost effective to manufacture. Total operating expenses for the quarter were $183.1 million, an increase of 17% as compared to $156.5 million in the third quarter of 2024. This increase was primarily due to increased patient marketing expense and general corporate costs, partially offset by a reduction in R&D year-over-year. Operating expenses included $1.3 million in legal fees related to a civil investigative demand from the Department of Justice and patent infringement lawsuits with a competitor. These legal fees do not reflect costs associated with our ongoing operations. Please refer to our earnings press release for a reconciliation of these items. Interest and dividend income totaled $4 million in the quarter compared to $5.9 million in the prior year period. Operating income for the quarter totaled $9.6 million compared to an operating income of $14.3 million in the prior year period. Net income for the quarter was $9.9 million compared to net income of $18.5 million in the prior year period. This represented diluted net income per share of $0.34 for the quarter compared to $0.60 in the third quarter of 2024. Adjusted EBITDA for the quarter totaled $44 million compared to $44.5 million in the prior year period. The adjusted EBITDA margin in the third quarter was 20% compared to 22% in the third quarter of 2024. Adjusted net income per share totaled $0.38 compared to $0.60 in the prior year period. The weighted average number of diluted shares outstanding for the quarter was 29.6 million. Operating cash flow totaled $68.5 million for the third quarter, bringing the year-to-date total to $64.5 million. We completed $50 million of share repurchase in the third quarter, bringing the year-to-date total to $125 million, and we ended the quarter with $411 million in cash and investments. Our strong cash position allows us to remain focused on executing our growth strategies. Moving on to 2025 guidance. As Tim mentioned, we are reaffirming our revenue guidance range of $900 million to $910 million, representing an increase of 12% to 13% compared to full year 2024 revenue. We continue to expect full year gross margin to be in the range of 84% to 86%. We now expect diluted net income for the full year 2025 will be $0.90 to $1 per share, an increase from our previous range of $0.40 to $0.50 per share. We ended the quarter with 336 U.S. territories and 268 U.S. field clinical representatives. We are being more strategic in our approach to territory management and optimizing our model through targeted territory consolidation and increased field clinical reps. We hired 9 field clinical reps in the quarter, consistent with our strategy to get the ratio closer to 1:1 territory manager to field clinical rep. We now expect our reported tax rate in 2025 to be 25% as state minimum taxes are higher than expected. Furthermore, in the fourth quarter, we will likely eliminate a large portion of the valuation allowance on our deferred tax assets. This will create a large onetime tax benefit that we will call out when we report our fourth quarter results. We expect the full year diluted shares outstanding to be approximately 30 million. With that, our prepared remarks are concluded. Dilem, you may now open the line for questions. Operator: [Operator Instructions] And I show our first question comes from the line of Travis Steed from Bank of America Securities. Travis Steed: Congrats on the progress with Inspire V. Just curious how you're thinking about some of the puts and takes on 2026 at this stage. And anything to call out in terms of cadence, first half, second half and '26? Timothy Herbert: Travis, yes. Great question. I know this is top of mind for everyone. Travis, right now, we're focused on finishing the fourth quarter strong. Now it's still early in our '26 planning process. So I will not -- while we're not providing specific guidance at this time, I want to reiterate the underlying trends we're currently seeing. The Inspire V launch, positive clinical feedback and strong patient flow driven by our increased DTC investment give us confidence in the durability of our growth heading into next year. We'll provide formal 2026 revenue guidance in January once we've completed our year-end results and planning. Taking all into account and while not providing formal guidance, we can see accelerated growth from our third quarter and wish to provide an early indication of 10% to 11% growth for next year. In the meantime, our business fundamentals remain strong. We've seen and continue to see excellent momentum with Inspire V, both in physician adoption and patient outcomes. Our outreach campaign is generating record engagement. and our field organization is operating with greater focus and alignment than ever before, which is translating into more consistent execution. We're also realizing operational benefits from tighter integration across marketing and therapy development, which will continue to support long-term profitability. As always, we're mindful of near-term factors such as the Inspire IV inventory transition, GLP-1 trialing and ongoing competitive activity. Overall, we're executing with discipline and have reaffirmed our 2025 guidance. With Inspire V scaling and continued operational focus, we expect continued revenue growth and improvements in operating leverage. And as far as cadence, at this point, we expect to return to our historic norms prior to 2025 and the Inspire V launch. Operator: And I show our next question comes from the line of Adam Maeder from Piper Sandler. Adam Maeder: I'll echo the congrats on the progress. Maybe to start, just kind of a little bit of a follow-up there, very helpful response, Tim, to Travis' question. But I wanted to just try and better understand some of the trends that we're seeing in the business for the month of October as well as kind of the visibility that you have going forward, November, December. I think you typically schedule cases several weeks out. So it would just kind of be helpful to understand some of the dynamics and what you're seeing as we try and reconcile the implied Q4 guidance? And then I had a follow-up. Timothy Herbert: Sure. I think the key to it is really the trends we see with Inspire V. And as we talked throughout the last earnings call with everything from Medicare to available product to the transition with SleepSync, really the field getting their arms around all that and working with individual centers and really seeing that transition really transpire mostly in the third quarter. And we have some additional work. But we know the majority of the inventory in the field today is Inspire V. So we're already working through that inventory transition from IV to V. So we do see implants going forward. We know we always have our highest seasonality later in the year because of the high deductible insurance plans, and we're seeing those same trends now. And again, just to highlight, the marketing team is doing a great job with our new awareness campaign, and we are seeing the benefits of that as well. Adam Maeder: That's helpful, Tim. I appreciate the color there. And just for the follow-up, I guess you're a little bit over 75% of accounts that are implanting the Gen V device today. How do we think about kind of bridging that figure to 100% of your accounts? Just want to better understand kind of the remaining gating items there. It sounds like SleepSync is maybe the biggest one, but wanted to confirm that. And just one kind of clarification. the accounts that are adopting Gen V, are they only implanting Gen V going forward? Are they still kind of carrying a mix of Gen IV and Gen V Hopefully, that made sense. Timothy Herbert: No, Adam, that's a good clarification that we want to make. I think the -- we focus on the centers that are the highest implanters, the top 100, top 200 centers, of course, and make sure we get the majority of those centers across the line and taking care of patients with V. But even those centers, to your last point, we'll continue to do Inspire IV at a limited amount. I also will highlight there are centers due to economics and where they are in the United States and the Medicare reimbursement that they will continue to implant Inspire IV units, and we will continue to make Inspire IV available into the future. So I think we'll continue to bridge most centers over to Inspire V. But again, there will still be some additional centers carrying over and staying with Inspire IV. But I think the great majority will be complete with their transition by year-end. Operator: And our next question comes from the line of Robert Marcus from JPMorgan. Robert Marcus: I wanted to ask more on expenses and R&D and OpEx came in a good clip below where we and the Street were thinking. Great expense control led to really good earnings power. How should we think about, I guess, a, what exactly you're pulling back on; and b, how sustainable that is? Timothy Herbert: Well, you also got to remember, not necessarily pulling back, but you also remember we're kind of in a launch period with Inspire V. And a lot of our focus is working on stabilizing the manufacturing line and getting a second line up and running and focusing on the digital side, specifically with SleepSync. So we're going to continue to invest in R&D. And I think we want to be more consistent with R&D as we move forward to focus on our opportunities with Inspire VI with our digital tools and keep pushing those elements to it. But I do think it will be more in line with what you're seeing right now. Robert Marcus: Great. Maybe just a quick follow-up. Tim, if you could update us where you are in sort of the inventory conversion from IV to V. Was there any destocking or restocking in 3Q? What we should expect that's baked into the guide in 4Q? And is it all done exiting the year? Or is there still some more in '26? Appreciate... Timothy Herbert: As you recall, at the beginning of the third quarter was pretty much all Inspire IV inventory in the field. And now the majority of the inventory is already Inspire V, and that continues to change on a weekly basis. And we think that those centers transitioning over to Inspire V will work through their Inspire IV inventory predominantly by the end of the year. Again, Robbie, remember, there's a few centers that are going to stay with Inspire IV. So we'll continue to make that product available. But again, the reports and the success that people are having with Inspire V is really strong. And once people transition over, they want to continue to focus on that and increase the number of patients that they can treat. Operator: And I show our next question comes from the line of Danielle Antalffy from UBS. Danielle Antalffy: Congrats on the good progress in the quarter. I'll echo everyone else there. Just a question on thinking about ramping centers that are sort of lower to mid-volume. And -- and what you guys are doing around that? Because I do think ENT sort of mind share, I guess, I would say your capacity is still an important driver here, appreciating the benefits Inspire V brings. So just curious about what you guys are doing out in the field with these lower volume centers to get them higher and using on a more regular basis. Timothy Herbert: Thank you. A big initiative that we have ongoing there. We have formed a new team that is really focused on that group about reenergizing the ENT. And we're kind of using Inspire V as the catalyst to do that. Because remember, the difference between Inspire IV and V is you don't have to place the pressure sensing lead between the intercostal muscles, and that's always been a little bit of the uncomfortable part of the Inspire procedure for an ear, nose and throat surgeon. So Inspire V lets us come back to those ENT surgeons and to new surgeons and to reengage with them, reenergize them around the benefits of Inspire V, the easier implantability of the device, if you will, and really focusing on that. So we have a long history and list of those centers that have started but not reached their potential, and we're going back and revisiting them with this team, but also going to centers and starting to recruit additional ENTs who now find this procedure more acceptable that they don't have to mess with the chest wall and the pressure sensing lead. Danielle Antalffy: Are you -- and just a quick follow-up. Are you starting to see that? Or is this something -- it sounds like this is a relatively new initiative. So is this really something that is probably more contributing factor in '26 and beyond? Or is this already contributing? Timothy Herbert: Thank you, Danielle. I do think, yes, it's a contributing factor in '26 and beyond. But I do think we're going to see some activity with that in '25. And the key is getting surgeons to come in, let's try V. Let's get this transition to your center. Let's have you go in and do a couple of Vs. And we've already seen some evidence that, yes, this does work. And we can reenergize them and partner them up with a good sleep [ physician ] to build a strong system or a strong practice. And we've already seen early indications that we can excite the ENTs. So yes, we're going to continue this and work hand-in-hand with AAO, the American Academy of Otolaryngology, to make sure that we're running initiatives with the society as well. Operator: And I show our next question comes from the line of David Rescott from Baird. David Rescott: I wanted to follow up on some of the comments on the growth in the business and looking into 2026. The 2 big pieces, of course, that we all tend to track is utilization and these new center adds. I know last quarter, you talked about some of the pullback in spend impacting the opening of new centers. I think prior to 2025, you had a couple of centers that were deactivated each quarter. So just trying to get a sense for maybe where that center base or the trained center base stands today, whether or not we should assume that, that continues to be a factor behind growth next year or more so if utilization with Inspire V is going to be a bigger driver than growth -- than utilization has been growing. Timothy Herbert: Yes. Thanks, David. I think we got to combine those 2 comments, and the answer is yes. I think what we really like is the Inspire V is really the tool and the feature set there with, of course, the easier implantation of the device, the shorter implant times, but not only that, but the features that optimize outcomes and really increase the expectations for outcomes is really important. And so we don't see a lot of transition of centers away from Inspire over the last couple of quarters. In fact, we significantly increased the number of centers. And we think going back to the last question with Danielle, that being able to excite additional ENTs to do the procedure now that it doesn't have the pressure sensing lead kind of gives us a little bit more impetus to increase the number of centers. So we're going to continue on the pathway of not only growing utilization at existing centers with reduced surgical time, but also with the improved performance of the device and the implantability of the device to be able to continue to train new surgeons at existing centers as well as open new centers. David Rescott: Okay. That's helpful. And then maybe a follow-up to some of the comments on OpEx. I know you called out that there's going to be this higher tax benefit in Q4. I'm assuming or curious if that is implied in the $0.90 to $1 of EPS for the full year or if that gets backed out. Just trying to back into maybe what your exit rate on an OpEx basis and whether or not we should think about that as a jumping off point for 2026. Richard Buchholz: Yes, David, that potential tax benefit is not factored into our guidance. And so part of our improvement on the bottom line and operating margin, which I wanted to call out earlier was that we did have a 180 basis point improvement on gross margin. So that really helped drive our leverage in the third quarter, and that's because of the higher mix of Inspire V which drove higher gross margins. Operator: And I show our next question comes from the line of John Block from Stifel. Jonathan Block: Tim, the rough 10% to 11% revenue growth next year seems like a refined thought from the acceleration off of the 12% to 13% that you conveyed last quarter. And the quarter was good, and you talked about some of the facilities working down inventory. So maybe if you could just give some color what led to a little bit of a change in thought from 3 months ago to today? Is it just being a little bit more prudent? Or what do you see out in the field that led to the refined number? Timothy Herbert: No, I think that's it. We just have a little bit more experience, and it's early in our planning, too. And so I know it was top of mind for everybody, as we said on Travis' question that we needed to address that right upfront. But we did -- we weighed in on the progress making the Inspire IV inventory, as you discussed. We did talk about the GLP-1s a little bit as well as the -- any competitive effect that could be there. So we wanted to come out and just give an early indication. As we work through the fourth quarter and the rest of our planning, we'll come back with formal guidance in the January time frame. Jonathan Block: Okay. That's helpful. And then maybe just a quick follow-up. Can you guys just talk to the inventory on your balance sheet? I think it was $142 million at the end of the quarter with about $111 million in finished goods, it's up a good clip really throughout the year, throughout '25. Like what's in there? Are those IVs? Are those Vs, if they're all Vs, does it sort of clean up for a lot of next year? Maybe you could provide some color there. Timothy Herbert: Yes. It's both. I think the key is we are winding down the manufacturing of Inspire IV. That being said, we are going to still have Inspire IV available in the United States, as we talked about, but we also have a long regulatory process in Europe and in Asia for Inspire V. So we need to make sure that we have sufficient supplies of Inspire IV to carry us through until we can do the full international transition of Inspire V. So there is a big element of Inspire IVs in there that will burn down over time. That being said, we also are increasing our inventory of Inspire V. Now that we're getting stability with our manufacturing site. We're still operating with a single manufacturing site. And then also remember some of the piece parts that are shared between Inspire IV and Inspire V. So once we wind down IV, we'll be able to leverage some of that inventory into building additional units for Inspire V in the future. Operator: And I show our next question comes from the line of Larry Biegelsen from Wells Fargo. Larry Biegelsen: I guess, Tim, I was curious on the 10% to 11%, how are you thinking about the market growth with the new competitor coming into the market and what you're seeing from that new competitor so far? And I had one follow-up. Timothy Herbert: Sure. It's very early days right now. We -- they're just getting started. They got to work through all the reimbursement. So not a significant presence right now, but I think that we'll watch for that a little bit and continue to monitor that and come back and discuss that with greater detail when we give full guidance in January. Larry Biegelsen: Okay. And then maybe for Rick, on the seasonality in 2026, I just want to make sure I heard correctly with Tim's comments similar to -- prior to 2025, '23 and '24 were pretty similar. But -- and I'm sure you've done the math, Rick, if hopefully, I'm doing it right, it would imply like $205 in Q1 or low single-digit growth increasing through the year. Is that directionally right? And why would Q1 be so low? And I apologize if I did the math on the fly wrong. Richard Buchholz: The last couple of years, Larry, our seasonality was 15% sequential down in beginning of '24 and down 16% in '25. So that's kind of the recent historical trend. So we would expect, as Tim mentioned, that our cadence throughout the year will be comparable to kind of prior to 2025 and earlier. Operator: And I show our next question comes from the line of Anthony Petrone from Mizuho Americas. Anthony Petrone: Congrats on the progress in the quarter with the V. Maybe on the 10% to 11%, I appreciate, Tim, the comments on the survey work on GLP-1, but still this dynamic of how much is coming in from the high BMI dropping into the sweet spots for Inspire and how much is sitting on the sidelines as folks trial GLP-1. So in the 10% to 11%, how much was GLP-1 factored would be the first question. And a quick follow-up to that would be, if you do see indications that GLP-1 is resulting in combo therapy out of the gate, specifically with CPAP, that CPAP rate -- dropout rate is still quite high. So over time, do you think the new starts on CPAP can actually transition to a higher rate of new starts on hypoglossal nerve stimulation over time? Timothy Herbert: Absolutely. You laid that out nicely. I think the survey that we had, we learned quite a bit from that. And I think the -- it's just a significant number of patients coming into the sleep labs because they are getting increased phone calls to do a diagnosis for obstructive sleep apnea because they need that indication to be able to help with insurance coverage. Well, sleep physicians are reluctant to just do that. Sleep physicians are responsible and they're going to do the proper diagnosis and make sure that, that patient has proper care. And if they have moderate to severe sleep apnea, they're not going to just wait a year to see if the GLP-1 works. They are going to put them on concomitant therapy as you talk about. They're going to start them on CPAP. They're going to start them on a GLP-1, but they're going to have to track those patients, too, because that's the requirement of the insurance companies. So now we have an increased number of patients in the facilities with the sleep physicians and when they become -- or if they become noncompliant to CPAP, yes, they're going to be looking for alternative surgery or alternative therapy. And if they are of the right BMI, the sleep physicians know what patients do best with Inspire. And we would expect those to correctly be referred over to receive Inspire therapy and the sleep physicians will continue to manage those patients long term. So that is exactly the hypothesis of where we stand. We do believe that the GLP-1s can work in concert with Inspire can help people lose weight, reduce the lateral wall collapse and allow Inspire to treat those patients that have tongue-based collapse. So it's really 2 mechanisms of action that can work together. Operator: And I show our next question in the queue comes from the line of Shagun Singh from RBC. Shagun Singh Chadha: Tim, I wanted to go back to the 10% to 11% growth next year because consensus is currently at 14%. So that's a pretty big gap. And you called out Inspire V, you called out the inventory dynamics, GLP-1s competitive effect and you said competition is not a big headwind. I think GLP-1s, you are positive longer term. There could be some trialing. I guess I wanted to ask, are there other factors that need to be contemplated as we think about 2026? What gets you closer to consensus at 14%? Have you factored in anything on increased reimbursement? Or is that a headwind as you think about Inspire V adoption and utilization? And just even looking at Q4, I'm looking at a step down in growth on a [ stack 2-year ] basis and 6% exit rate. Can you just give us some commentary there on why that is? And you are talking about accelerating growth, but Q4 seems to be lower. Timothy Herbert: Yes, absolutely. You kind of laid out all those headwinds right there that we use to calculate, but there's also a lot of positives in there. And I think Inspire V performance and Inspire V acceptability is really strong. So once we complete the transition with V, that gives us great opportunity to kind of lean in and kind of reassess where we are with our guide. Now I know it's an early indication. It's not formal guidance, but we wanted to make sure that we put that out there. We know what we need to do to review that, and we're going to monitor that with Inspire with Q4 performance as well as when we come with full guide in January. But yes, we've kind of laid out the headwinds that we see that are going to challenge us, but we also want to leverage the opportunities that are there for us. Even the OPPS rule that just came out showing an increase in physician reimbursement for Inspire V as an opportunity because it really closes the gap between the reimbursement with 64568 versus the old code, 64582. And so there's a lot of positives mixed in there. So yes, we have a lot of work to do to be able to kind of work through the details for when we come with full guide in January. Ezgi Yagci: Shagun, I would just add, it's still very, very early. We're very happy to be able to give an early preview of 2026. But as Tim alluded to, there are quite a few puts and takes, and we're just trying to be prudent at this time. Operator: Our next question comes from the line of Vijay Kumar from Evercore ISI. Daniel Markowitz: This is Daniel Markowitz. So I had 2 questions. First, you noted about 75% of centers are ready to transition to the Inspire V, but that some continue to do Inspire IV for economic reasons. Can you just expand a little bit on those economic considerations? Are you hearing pushback to the physician reimbursement rate as it stands today? And would you expect this to change given the finalized 2026 physician fee schedule with an 11% bump to physician reimbursement? Timothy Herbert: No, it's really more -- a good question. It's more related to site of service or hospital reimbursement. And with Inspire IV and Inspire V, we can make Inspire IV available with an economic benefit to some of those centers to help them get back to doing implants. So there is some discounting on Inspire IV that can help us out. Inspire V, that's not true. So that's why some of these centers just choose to do IV based on the economics with the coding today. But as you saw, that doesn't affect our overall ASP or gross margin. Daniel Markowitz: Got it. Okay. That's helpful. And then for the second one, as you look forward to 2026, do you have any initial thoughts on the trend in operating expenses, especially as it pertains to the new marketing campaign and DTC spend picking back up? I guess also, was DTC spend back at a normal run rate for 3Q? Or is that still being held down quite a bit? Timothy Herbert: No, I think it was pretty close. We wanted to do an increase there because we held back in the first half of the year on DTC spend. But as you kind of look at OpEx going forward, we're going to see maybe a slight increase in DTC, but again, more level with full year, but we don't expect that to grow with the same level of revenue. Michael Sarcone: And I show our next question comes from the line of Michael Sarcone from Jefferies. Timothy Herbert: I guess, I'll just ask both of mine upfront. You might have already answered kind of the second one, I'll ask Tim. But last quarter, you had mentioned that at the accounts that were converted to Inspire V, you were seeing about 20% same-store sales growth. Given the outlook for kind of 10% to 11%, at least early on right now for 2026, it seems like that's not carrying through. I just wanted to maybe get an update on how that 20% same-store sales has progressed as you've kind of opened up more accounts with Inspire V. And then is there any interplay there with the Inspire V reimbursement on the physician fee level being lower? Ezgi Yagci: Mike, thanks for the question. So there's still absolutely a correlation between centers that have transitioned to Inspire V and faster volume growth that we saw through the end of Q3, which we're very, very pleased with. As we highlighted on our last earnings call, though, you shouldn't anticipate that 20% to continue for all centers. But we're very pleased with the correlation that we're seeing with Inspire V adoption and accelerated case volume. And again, as we noted on 2026, it's really early. There's still a lot of puts and takes, which we highlighted, and we just want to be prudent. But we're very, very pleased with what we're seeing with the Inspire V launch and experience to date. Operator: And I show our next question comes from the line of Chris Pasquale from Nephron Research. Christopher Pasquale: I wanted to understand the territory realignment a little better. Was there a corresponding reduction in the number of centers you're working with? Or are you just increasing the number of accounts the remaining reps are responsible for? Timothy Herbert: No, we're actually building efficiencies into our territory management. So what we want is, well, because you've been around for a long time, you know how we're kind of ramping and we started to ramp the number of field clinical reps as well. And we want to get that ratio closer to 1:1. So as we're doing that transition, we're doing some promotions of field clinical reps and territory managers and then come back and hire additional field clinical reps behind that, and that's going to be a trend going forward. I think we're finding greater efficiencies with larger territories with territory managers as long as they have the support staff like the field clinical reps to be able to do the case coverage and the training. So I think you'll see more of that in the future. Ezgi Yagci: Chris, I would just add that we've always talked about having the average territory managers support on average 4 to 6 centers, and we're still very much in that range. We did add a healthy clip of new centers in Q3 after slowing that initiative down in the first half of the year. Christopher Pasquale: Okay. And then I wanted to follow up on the question about margins and OpEx. The implied guidance implies that OpEx is going to grow at roughly twice the pace of sales in 4Q. That was obviously true in 3Q. And you guys signaled that in the near term, you would have elevated spending. But you're also talking about driving operating leverage next year, which would really seem to imply that spending is going to moderate given the top line growth you're signaling. So help me understand just the cadence here. Is this just a very temporary bolus that then really sort of changes as the calendar flips? Or how do those 2 things line up? Richard Buchholz: Yes. Chris, so yes, you're right on all your assumptions. Year-over-year OpEx growth for 2025 is going to be in that 16%, outpaces full year revenue growth, but we are going to have an improvement in operating margin sequentially into Q4. Still pretty early to talk about 2026, but the new guidance also implies full year operating margins in that 2.5% to 3%. And on a longer-term basis, we expect to improve that over time. Operator: And I show our next question comes from the line of Richard Newitter from Truist Securities. Richard Newitter: I just want to continue on Chris' question. I mean -- congratulations, it's great to see the expense control there this quarter. I guess what I'm just trying to understand is what -- we were all much higher. We thought your profit was going to preserve much better even with the revenue call down last quarter. I guess, I'm just trying to understand what's changed from the outlook that's causing kind of the $0.50 upward revision here. And then I know you're not giving explicit guidance next year on operating expenses, but we're all just trying to understand what the right normalized spending rate is and significant cost controls here. But it's not clear whether that's in some way linked to some improved efficiency that's going to come as a result of the territory consolidation. I guess is the 10% to 11% growth rate just requires less investment than what it did when you were initially a 15% to 20% growth. Just help us think through kind of what's changed because the earnings is kind of whipsawing around quite a bit here. Ezgi Yagci: Yes, I can start maybe. First and foremost, our revenue did outperform where consensus was modeling. So first and foremost, the revenue beat in the quarter is what's helping with some of the EPS. Below the line, yes, we did increase our investments on DTC, but we were very disciplined across other areas, and we will continue to look for those types of savings as we move forward. Yes, there has been some consolidation of territories that's also driving some of that savings. But you're absolutely right. We're going to continue to support the business. We're going to continue to invest in R&D, in patient marketing and in medical education, but we're going to do it in a very methodical and disciplined way and make sure that we continue to show operating leverage going forward. Richard Buchholz: Okay. And then maybe just one second one. I'm curious, are you able to actually see more procedures per account in the accounts that have adopted or been fully trained in Inspire V? And can you quantify that? Ezgi Yagci: We are seeing that. The math is getting -- I mean, it's -- a significant portion of our centers now are implanting Inspire V. It's over 75%. And yes, there is a correlation between accelerated volume growth and the use of Inspire V. We are seeing that for sure. Operator: And I show our next question comes from the line of Brett Fishbin from KeyBanc. Brett Fishbin: A lot of questions already on next year. So I'll ask one a little bit more qualitative. I think during the quarter, you had the press release with some of the Limited-Market-Release information about Inspire V in the U.S. One thing that stood out to me was the anecdote on one of the KOLs performing 12 implants per day. I believe that compared to 9 with Inspire IV. So something like a 30% to 40% increase in efficiency, which was above the 20% reported from Singapore. So just curious kind of like what drove that kind of performance? And are there specific items that can maybe be applied to other centers that have struggled to see that type of efficiency either in the past or with Inspire V? Timothy Herbert: Brett, that was a key topic at the AAO meeting or the ISS meeting where the surgeon was actually on stage talking about that. And the key is how do they set up their center to be able to do that. Finding the number of patients, that's not the issue. We all know that the challenge is having capacity with surgeons to take care of the patients demanding therapy. But what this individual is able to do is have access to 2 operating rooms. And they kind of laid that out and talked through people of having the access to be able to -- it's competing the Inspire time versus the time it takes to clean a room to do multiple rooms in a day and the efficiencies that, that can bring. And think about the efficiencies, not just from the surgeon performing multiple procedures, but there's a revenue bonus or benefit for the hospital to do that many procedures in a day. Think about Inspire. Think about what we're talking about with our OpEx and building efficiencies and us being able to have our field clinical rep there for a full day rather than doing a case having to drive across town with windshield time. So it's a win-win for everybody. And it really takes an experienced, efficient surgeon to do this. And so that drives the high quality surgeons that have experience doing numerous cases. So that is something that we really want to emulate across the board as the way to do that to set up surgical days to stack cases. Operator: And I show our next question comes from the line of Michael Polark from Wolfe Research. Michael Polark: Question on 2025 revenue growth affirmed 12% to 13%. As you reflect on the year, do you think you'll be calling out kind of a net inventory headwind at customers? Is it similar to the question I asked last quarter? And maybe framed differently, in the 12% to 13% for your revenue growth, do you think Inspire procedures grew faster than that in 2025? Timothy Herbert: I'm going to come back and let me answer the first one and make you repeat the second one. I think the way we're planning it out, we are going to discontinue the manufacturing of Inspire IV, but we made sure that we did a forecast going forward. Remember, we have a 3-year shelf life on these products to look at what's going to be available to support Europe and Asia as well as centers in the United States who want to continue with IV. So we are budgeting our manufacturing to align with our forecast for IV going forward. So what was your second question, Mike? Michael Polark: I'm just -- do you think are Inspire procedure volumes growing with the revenue in '25? Like is the rate of volume growth, 12% to 13% consistent with revenue? Or were the procedures potentially faster and the net impact of customers destocking IV and stocking up on V as the transition was affected, that was a slight headwind. Timothy Herbert: Go ahead. Ezgi Yagci: I think that may have been a slight headwind at certain times over the course of the year. But for the most part, the implant to sales ratio has been pretty steady. I think we can take a closer look at that as we wrap up the year and figure out if it makes sense to disclose that on a onetime basis. But I would say, generally speaking, implant volumes have trended pretty closely to sales. So I don't know that, that would be necessary. And as Tim noted earlier, the vast majority of inventory in the field sitting on shelves today is already Inspire V. So that gives us confidence as we look ahead into Q4 and beyond. Operator: And I show our last question in the queue comes from the line of Mike Kratky from Leerink Partners. Michael Kratky: Congrats on a nice quarter. One clarifying question there. Really appreciate the color on the survey of sleep physicians and certainly encouraging. It seems like you're expanding the top of the funnel. But were there any cross currents that are worth calling out there? And did you get the sense among physicians surveyed to what extent they're seeing or expecting GLP-1s to have a positive or negative impact on their overall Inspire procedure volumes? Timothy Herbert: I think the sleep physicians are gearing up that GLP-1s are increasing their procedure volume. And again, I think family practice doctors are sending them to sleep to get a diagnosis, but the sleep physicians are being more responsible. They're not just going to do a study and send that patient back, they're going to want to make sure they do a proper diagnosis and make sure that they have the proper procedure or therapy, not just leave them on a GLP-1 or not just send them back. So I think the survey kind of really showed that they're expecting an increase in their volume, but we also wanted to tease out what patients they refer for Inspire, and we're able to pick up that information as well. So we -- the knowledge base is there. They know what patients that can be helped with GLP-1s, and they know that if patients can lose weight, they can qualify for Inspire. Operator: This concludes the Q&A session for the conference. I'd now like to turn the call back to Tim for closing remarks. Timothy Herbert: Thanks, Dilem. As always, I'm grateful to the growing team of dedicated Inspire employees for their enthusiasm, hard work and continued motivation to achieve successful and consistent patient outcomes. The team's commitment to patients remains unmatched and is the most important element to our success. I wish to thank all of our employees as well as the health care teams for their continued efforts as we remain focused on further expanding our business in the U.S., Europe and Asia. For all of you on the call, we really appreciate your continued interest in and support of Inspire and look forward to providing you with further updates in the months ahead. Take care all. Thank you. Operator: This concludes today's conference call. You may now disconnect.

196天前Insight Analytics约5分钟阅读

RNG 2025 Q3 财报电话会议

Operator: Good afternoon, and welcome to the RingCentral Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Steven Horwitz, Vice President of Investor Relations. Please go ahead. Steven Horwitz: Thank you. Good afternoon, and welcome to RingCentral's Third Quarter 2025 Earnings Conference Call. Joining me today are Vlad Shmunis, Founder, Chairman and CEO; Kira Makagon, President and Chief Operating Officer; and Vaibhav Agarwal, CFO. Our remarks today include forward-looking statements regarding the company's business operations, financial performance and outlook. These statements are subject to risks and uncertainties, some of which are beyond our control and are not guarantees of future performance. Actual results may differ materially from our forward-looking statements, and we undertake no obligation to update these statements after this call. For a complete discussion of the risks and uncertainties related to our business, please refer to the information contained in our filings with the Securities and Exchange Commission as well as today's earnings release. Unless otherwise indicated, all measures that follow are non-GAAP with year-over-year comparisons. A reconciliation of all GAAP to non-GAAP results is provided with our earnings release and in the slide presentation, which you can find in the financial results section at ir.ringcentral.com. With that, I'll turn the call over to Vlad. Vladimir Shmunis: Thank you, Steven. Good afternoon, everyone, and thank you for joining our third quarter earnings conference call. Let me begin by welcoming the talented people from CommunityWFM to the RingCentral family. We have now added AI-driven workforce engagement management capabilities that strengthens our RingCX contact center solution. This also lays the foundation for a new stand-alone product line. We delivered another strong quarter in Q3 with subscription revenue growth at 6% year-over-year. These results reflect continued execution in our core business coupled with strong progress from our AI-led new product portfolio. In fact, our pure AI ARR is growing in strong double-digit rate sequentially. While also making meaningful contributions to overall ARR from these AI-enabled customers. Importantly, we are also delivering expanding margins, meaningfully lowering stock-based compensation and generating strong free cash flows. This strong performance is rooted in our leadership in voice, the most mission-critical mode of communication for businesses. While voice continues to be an important means of intercompany communications, it is critical for consumers engaging with businesses or B2C. This is particularly true in our top verticals, such as health care, financial services, retail and professional services. Revenue from these verticals represent over half of our entire business. As a further proof point, overall voice usage on our platform remains robust and is growing in double digits. In short, voice remains a critical modality for business communications as missed calls result in loss revenues, missed opportunities or worse. RingCentral has built a $2.5 billion business from ground up by providing a robust global secure and reliable voice first cloud communications platform that is trusted by over 0.5 million businesses with tens of billions of minutes of annual use. RingCentral has been at the forefront of moving business communications to the cloud. If you think about our initial offering as RingCentral 1.0, it was about enabling digital transformation for businesses worldwide by transitioning their business communications from on-prem to the cloud. By leveraging our voice first, global, secure and reliable cloud business communications platform, we have built a strong leadership position over the last 2 decades. This remains to be the case to this day. In the next phase of our journey, which I called RingCentral 2.0, we built on this foundation to become a multiproduct platform provider. Many customers prefer to purchase both their business communications and contact center solutions from the same vendor. Increasingly, organizations also need seamless interaction between contact center agents and other company employees to resolve customer inquiries. RingCentral has purpose-built solutions to meet these needs. There are situations where consumer inquiries are handled by employees who are not dedicated contact center agents. To support these scenarios, we enhanced RingEX with call queues, analytics and other contact center-like functions. This has been extremely well received with over 1/3 of our overall inbound traffic now being consumed by such informal contact center use. As for dedicated customer engagement needs, we've introduced our own native AI first contact center solution, RingCX. It is a fully integrated offering that is intuitive to use, easy to deploy and is infused with AI from the start. This product has been well received with strong traction and double-digit growth. And now we are entering the era of RingCentral 3.0. We are innovating rapidly with the majority of our $0.25 billion annual spend on innovation is now being dedicated to our new AI-led products. We are now expanding and extending our platform by adding a host of voice first AI agents as well as infusing AI across our entire product portfolio for a better customer experience and engagement. Why are we well positioned to win in this new AI era? RingCentral is the first point of contact between businesses and their consumers. This puts us in a unique position to deploy AI agents from the get-go, thus giving us a natural advantage as we lead the shift to intelligent business communications via agentic voice AI. To double-click our agentic AI product portfolio covers every phase of the customer journey before, during and after an interaction. Before the interaction, our AI Receptionist or AIR handles inbound calls, routes them intelligently and automate routine interactions before they reach a human. Since launch, AIR has seen strong early traction and is growing rapidly. For during the interaction, today, we announced our new AI Virtual Assistant or AVA. AVA is an AI agent that helps employees and agents in real time, surfacing insights, summarizing key points and automating tasks to enhance productivity. And for after the conversation, our AI Conversation Expert or ACE, formerly known as RingSense, analyzes calls, extract insights and provide actionable intelligence, is growing at a healthy double-digit pace and is helping customers understand and improve their customer experiences. Together, these AI-driven solutions AIR, AVA and ACE complement RingEX and RingCX and are already contributing meaningfully to growth. We're investing significantly with over 50% of our approximately $250 million R&D spend now focused on our new product portfolio. And we remain on track to exceed the $100 million in ARR from new products by the end of 2025. Adoption of our new AI-led products is broad-based across various customer cohorts from small businesses to large enterprises. Our GSP partners are also beginning to sell these new offerings, expanding our reach and accelerating adoption. Importantly, we have recently expanded our partnership with AT&T which began offering AIR to their customers, highlighting our shared commitment to intelligent communications experiences. Our small business and GSP businesses together now represent over $1 billion in ARR and continue to grow in double digits. With strong unit economics and increasing adoption of our AI portfolio. In summary, we are executing well across the board. Our core voice platform remains durable and mission-critical, and we are expanding into new high-growth markets through RingCX and our AI-led product suite. We've evolved from a UCaaS leader into a multiproduct AI-powered communications platform with multiple growth levers. We are excited about the road ahead as we enter the era of agentic voice AI, driving smarter, more efficient communications for our customers and sustainable profitable growth for our shareholders. I want to thank our employees for their dedication and focus on driving innovation and our customers for trusting us to be the voice of their business. With a tenured and talented management team in place, a strong commitment to innovation and the loyal and growing customer and partner base, we are well positioned for this next phase of our AI-led evolution. With that, I'll turn the call over to Kira to tell you more. Thank you. Kira Makagon: Thank you, Vlad. I'm looking forward to meeting many of you at our investor product briefing on Wednesday. It's a great opportunity for you to see our AI portfolio in action. I'll start by giving you an update on my strategic priorities. First, build upon our leadership in business voice with agentic voice AI. As Vlad noted, RingCentral is uniquely positioned here. Voice is mission-critical, and is the richest source of business intelligence. We're turning voice data into insights that elevate customer experiences, automate work and drive faster outcomes. I'm proud of how quickly we're executing against our agentic AI road map, delivering value throughout the entire conversation before, during and after. Before the conversation, we are seeing fast adoption of RingCentral AI receptionist or AIR. Since our launch earlier this year, we now have more than 5,800 paying customers and over 80% increase quarter-over-quarter. AIR ensures businesses never miss a call or an opportunity. And today, we rolled out new features in AIR including lead capture, enhanced appointment settings and contextual handover. We're thrilled to see that AIR is having a material impact on our customers' businesses. For example, with AIR, Televero Health now answers 100% of their calls and achieved a 15% increase in monthly appointment volume within just a few first month of deployment. This resulted in a $200,000 uplift in monthly revenue, providing meaningful ROI. During the conversation, today, we unveiled RingCentral's next-generation AI virtual assistant or AVA. For example, Trinity Logistics, a leading freight and logistics provider is saving 30 seconds to 1 minute per call by using AI to capture real-time notes and action items from every customer interaction. This frees up their salespeople to focus on building relationships and driving new business. For after the conversation, AI conversation expert or ACE, formerly known as RingSense unifies customer and employee conversations into 1 powerful analytics dashboard. We now have more than 4,300 customers using it, up from approximately 3,600 customers, reflecting sequential solid growth. Our customers are using it to coach their agents and improve efficiency. For example, Modisoft a point-of-sale cloud software company is using ACE to gain clear visibility into customer sentiment, behavior patterns and emerging trends, insights that they did not have before. ACE enables them to turn voice data into business outcomes. AIR, AVA and ACE together with our core RingEX and RingCX products create a fully integrated agentic voice AI workflow, before, during and after every interaction. This is the power of our unified AI first platform. The second priority, expand TAM through our multiproduct portfolio. We're seeing strong traction with RingCX. Customers value its simplicity, omnichannel flexibility, seamless integration with RingEX and a rich set of AI capabilities. As Vlad said, this product is enjoying double-digit sequential growth and makes up nearly half of our $1 million-plus TCV deals this quarter. The strong land-and-expand motion of AI first RingCX with RingEX is demonstrating our ability to increase our share of wallet. A good example of an expansion deal is one of Canada's largest insurance companies who was already using RingEX and chose to add RingCX with various AI modules. Together, these solutions are expected to improve outbound performance, reduce agent turnover and ultimately contribute to their revenue growth as they transform their contact center operations. Today, we also announced the integration of CommunityWFM into our workforce engagement management suite, a major step towards in helping organizations optimize contact center performance. By harnessing AI across 3 key pillars: agent performance, customer sentiment and operational planning, we're empowering smarter, more efficient operations. These capabilities are available as add-ons for the core RingCX package and now included in the new RingCX Advanced and Ultra packages. In parallel, we are expanding our core UCaaS offering. As Vlad said, a meaningful portion of RingEX inbound call minutes and SMS usage are used for customer engagement. To capitalize on this, we are introducing new paid add-ons, for enhanced call queues and advanced SMS. And we're bringing together RingEX and these add-ons in 1 simple integrated package called Customer Engagement Bundle. This expansion opens a new growth avenue and extends our total addressable market. Now on to my third priority. We're harnessing AI across our organization to work smarter, move faster and do more with less. While we're using a number of third-party tools to improve efficiency across all departments, we're particularly happy with adoption and internal use of our own products within our company. We call it RingCentral on RingCentral. Let me give you some examples. First, we were able to transition our 2,000-plus customer support agents to RingCX and now have deployed CommunityWFM for workforce engagement management to this entire organization in just a few short weeks. With AI quality management, we're driving faster resolution through our automated coaching with nearly 100% of calls being scored. Combined with an agent and supervisors assist capabilities, we're reducing average handle time by 15%. In sales, ACE has improved sales rep performance and customer satisfaction. ACE now coaches 100% of our prospect partner and customer calls in North America. This dropped sales quota attainment by 10%. These operational gains are translating into greater scalability, workforce efficiency, better customer experiences and improved margins. In summary, our multiproduct AI strategy is working. We're delivering measurable customer value, expanding our market opportunity and improving profitability. I'm incredibly proud of our teams and excited for what's next. With that, I'll hand it over to Vaibhav. Vaibhav Agarwal: Thank you, Kira, and good afternoon, everyone. Q3 was another solid quarter with disciplined execution across key metrics and the 3 priorities I outlined last quarter. First, driving sustainable, profitable growth while investing in new product innovation; second, expanding margins and free cash flow through disciplined cost management. Third, executing on capital allocation strategy focused on investing in innovation, paying down debt, returning capital through share repurchases and reducing stock-based compensation and dilution. Together, these priorities are aimed at expanding free cash flow per share and positioning RingCentral for durable long-term value creation. With that, let me turn to our third quarter performance. Starting with growth. Total revenue was $639 million, up 5% year-over-year and at the high end of our guidance. Subscription revenue grew 6% to $616 million, reflecting the durability of our core business and increasing traction from our AI-led products. As Vlad highlighted, we have multiple growth levers across the business. We delivered continued growth in our core business with healthy new customer adds and stable over 99% monthly net retention rates. As to our AI-led new products, we are growing in strong double digits sequentially, putting us well on track to exceed $100 million in ARR by year-end. In keeping with our philosophy of profitable growth, we drove record margins and free cash flow per share. This was made possible as we continue to drive efficiencies with hiring discipline, extended use of offshoring, vendor consolidation and increasing use of AI internally. Subscription gross margin remained strong at about 81%. Operating margin was 22.8% up 180 basis points year-over-year and above the high end of our guidance. Sales and marketing expense as a percent of revenue improved 140 basis points, driven by ongoing go-to-market efficiencies. Non-GAAP EPS increased 19% to $1.13 per diluted share. Reducing SBC remains a key focus. Through the first 3 quarters of 2025, new share grants declined year-over-year as we are able to achieve more with less with offshoring and use of AI. As a result of this, we are updating our 2025 SBC outlook to 11% of revenue, a 350 basis points improvement year-over-year. Our annual grants this year are expected to be about $150 million or 6% of revenue, which we expect to further improve upon in the years ahead. We expect SBC as a percent of revenue to trend lower to these levels over time as the older grants roll off. With the reduction in SBC and improved profitability, we delivered another quarter of positive GAAP operating and net income, which we expect to continue. Moving to free cash flow. We generated $130 million of free cash flow in Q3, up 23% year-over-year. This reflects ongoing efficiency gains and disciplined working capital management. As a result, we are raising our full year free cash flow outlook again to be between $525 million and $530 million, which represents over 30% year-over-year growth and a free cash flow margin of 21%. Lower SBC, coupled with our share repurchase program is driving a meaningful reduction in share count. We now expect fully diluted share count for 2025 to be approximately 92 million shares, returning to 2020 levels. We are optimistic of driving this further down in the years ahead. We now expect 2025 free cash flow of over $570 per share, which is an increase of about 35% year-over-year. We are delivering strong and compounding free cash flow per share and driving long-term shareholder value. Moving to capital allocation. Following the framework I outlined earlier, year-to-date, we have paid down $275 million of debt and repurchased $200 million of stock. We also acquired CommunityWFM which is consistent with our strategy of accelerating innovation by adding capabilities that enhance our product portfolio. During the quarter, we expanded and extended our credit agreement. The facility now totals $1.26 billion, of which $955 million remains undrawn. This refinancing was a proactive step to address our 609 million convertible notes due in March 2026. The refinancing maintains our current leverage profile and extends all debt maturities until 2030. Following our earlier upgrades from Fitch Ratings and Moody's, S&P has also upgraded our ratings, recognizing our improving leverage and free cash flow profile. Going forward, we remain committed to reducing gross debt to $1 billion by the end of 2026. We also view share repurchases as an attractive use of cash at current valuation levels. In Q3, we repurchased 3.9 million shares for $117 million with $384 million remaining under the current authorization. Moving to guidance. For the fourth quarter, we expect subscription revenue of $618 million to $626 million, total revenue of $638 million to $646 million. Non-GAAP operating margin of 22.8%, up approximately 145 basis points year-over-year. Non-GAAP EPS of $1.12 to $1.15 based on approximately 90 million fully diluted shares. Share-based compensation range of $64 million to $69 million. As a result, we expect our full year 2025 to be subscription revenue growth year-over-year of approximately 5.5% to 6% and total revenue growth year-over-year of approximately 4.5% to 5%, operating margin at approximately 22.5%, raising non-GAAP EPS to $4.29 to $4.33 per diluted share, improving share-based compensation range to $275 million to $280 million, raising free cash flow per share to approximately $5.71 to $5.79 per diluted share based on approximately 92 million shares. Let me conclude with 3 key takeaways. First, we delivered another quarter of profitable growth with revenue at the high end, margins reaching record levels and expected annualized free cash flow growth of over 30% year-over-year. Second, we are scaling our AI-led products, which are well on track to exceed $100 million in ARR by year-end. Third, we are delivering on our capital allocation strategy. We are on track to generate well over $500 million in annual free cash flow, resulting in more than $5.70 in free cash flow, which is best in class among the peer group. We are looking forward to meeting many of you at our investor product briefing on Wednesday at the NYSE. With that, let me open up the call for questions. Operator: [Operator Instructions]. Our first question today is from Kash Rangan with Goldman Sachs. Kasthuri Rangan: Thank you very much, team. This may be the last time for me on our RingCentral earnings conference call. I want to say it's been great working with you Vlad and the team. You've been resilient, you pivoted the company hard during the downturn, went for profitability and also steered the ship once again, not from a financial standpoint, but from a technological standpoint to be ready for the AI world ahead. I wish you really well in that journey ahead, and you've been once again validating the view that you're a very resilient leader and a very resilient company. Vlad, as you look ahead, I mean the product discussion certainly is thoughtful, but it also represents a lot of rebranding change, et cetera, et cetera, and I hear the term RingCentral 3.0 being thrown about. So as you project ahead, if a customer, a large Fortune 500 customer were to buy into your vision of RingCentral 3.0 and were to implement your full family and portfolio of products under the 3.0 banner, what are the business benefits that Fortune 500 company would stand the benefit that they couldn't get with RingCentral 1.0 or 2.0. That's it for me and best wishes for the team. Vladimir Shmunis: Yes. Yes, firstly, thank you very much for your very kind words. And obviously, very, very sorry to understand that this might be your last call with us. However, never say never. Never is a long time. So who knows? In any case, certainly wish you and yours very best in this next chapter of your life. To your question, RingSense 3.0 is a very, very big deal. It is taking voice communications that is truly the most ubiquitous, most commonly used means of consumers, reaching their business providers, service providers, brands, whichever way you want to look at it and establishing contact. So when you are reaching out to your doctor, you're probably calling him or her may be increasingly texting, okay? Same applies to your financial adviser. Same applies to your architect or another business service provider. Your mechanic and so forth. And with voice, as a global leader in voice and increasingly text communications, RingCentral is uniquely positioned to deploy AI at the very onset of every consumer to business interaction. We process tens of billions of minutes on our platform annually. And billions of text messages, okay? And for each and every one of those with agentic AI. And at this point, we're really pivoting hard to agentic voice AI, we are in a great position to enhance human-to-human interactions throughout the entire life cycle of a transaction and that includes offering assistance and AI agent before a human picks up the phone. So we call it AIR, AI receptionist, during the call, and we call it AVA, AI virtual assistant that, if you will, is our version of a copilot. And lastly, by far not least, is the AI expert, conversation expert, which we'll call ACE. So this is where, after a call and in a contact center use, we have -- most of the calls are being recorded and transcribed. This gives us an opportunity to analyze or enable our customers to analyze these goals at a deeper level, understanding caller intent, sentiment providing all kinds of deep analytics and very, importantly, feeding all of this data and knowledge right back into the cycle. So through ACE, both AIR and AVA become smarter and more powerful with increased use. So this is a watershed moment. It is on par for us with creation of the cloud itself that, as you know, we had a bit to do with and we have actually pioneered use of cloud in business voice and PBX in the cloud. And now with advent of AI and our application of agentic AI to voice and text, this gives us the ability to not only move these interactions and transactions to the cloud, but to also deeply enhance the experience for both callers, which is really a population of this world as well as parties being called, which is the entire global business community. So could not be more excited. Operator: The next question is from Elizabeth Porter with Morgan Stanley. Elizabeth Elliott: I wanted to follow up on the strength in your global service provider partnerships. Can you speak to which products are gaining the most traction and the durability of that growth? Are the GSP contribution becoming kind of more reoccurring and predictable or are they somewhat concentrated in the new deployments. And then just as a follow-up, as those partner scale, how should we think about the revenue mix and margin implications versus the direct sales? Vladimir Shmunis: Great. No, great question. Look, I believe we've disclosed that our GSP business is already a bit over 10% of our revenues. I think we also disclosed that it is a tailwind for our growth overall. So that entire GSP segment is growing in double digits, which is higher than a company overall. Predictability wise, it is as predictable as the rest of our business, because it is SaaS. It is cloud and all recurring revenue just like our direct business is, okay? What we've been seeing lately is -- and we were frankly pleasantly surprised is how readily the GSPs are adopting our new product portfolio. So they started out with RingCX, which was really our first major product after our original flagship RingEX product. But now with what we now call the 3As, which is AIR, AVA and ACE, there is definite energy with GSPs taking them, we announced just now is that our biggest and oldest GSP partner, which is AT&T is now adopting and deploying AIR on their version of RingCentral. So that's a big deal, okay? And look, it's very, very early. But given the success and learnings that we are seeing with AIR internally -- not internally, but in our direct business, we are quite optimistic that this will be now also will apply to AT&T and their scale as well as to a number of other service providers. Vaibhav Agarwal: Just to add to the profitability point, we have disclosed that GSPs from a -- one of the metrics we look at is time to breakeven. And from a time to breakeven standpoint, they are under 18 months. So they -- in addition to growth, they are also demonstrating strong unit economics. Operator: The next question is from Brian Peterson with Raymond James. Brian Peterson: So really nice job on free cash flow again this quarter. I guess, as we think about the durability of that metric going forward, is there anything that you guys can share in terms of long-term drivers or long-term targets? Would appreciate any context there. Vaibhav Agarwal: Yes. Thanks, Brian, for the question. This is Vaibhav, and I'll address that. So thanks for the call out on the free cash flow expansion. Look, we've done a lot of work over the last couple of years and very proud of what we have delivered. As you saw, we raised our free cash flow outlook today for the rest of the year at over $525 million or 30% of growth. When you look at the last 2 to 3 years, we've driven a 5x expansion. So we've gone from $100 million to $500 million. So we have a track record now of a number of years of driving expansion. Where is the expansion coming from? It's a concerted effort and a disciplined approach that we are taking in rightsizing the cost base. We are very disciplined when it comes to hiring. There is offshoring that we are using, vendor consolidation and there's increasing use of AI internally. So net-net, long story short, we are doing more than this. So that's point number one. And I expect that, that will continue as we look ahead. Point number 2 is from quality of a free cash flow standpoint. We are also making meaningful improvements. What I mean with that is operating margins are now converging with free cash flows, and that's a result of working capital efficiencies. So we've taken a number of steps there. And point number 3 is we look at free cash flow also in conjunction with SBC as a driver of free cash flow per share growth. So again, we've taken a number of steps. We are bringing in a lot of discipline around new share grants as a result of which SBC is going down, and that when combined with share buybacks is resulting in share count going down. So overall, the net-net result of all of this is our free cash flow per share, which for 2025 is almost at over $5.70 is growing faster, and it's best in the peer class. So overall, we believe there is more to be had here. And we have a strong foundation with our recurring business model and our diversified customer base that will give us an anchor to sustain and improve free cash flows over time. Vladimir Shmunis: I would actually like to add to that. That is, of course, all exactly right. But taking -- looking at it from the other side, from the product side. And here, I'm preempting a little bit. Some of the information we'll be sharing on Wednesday during our analyst product day. But as a product person, I am always keenly interested in actual usage of the platform because core belief is that if people are using your product, then you will be, as a provider, we will be able to derive value from it. And if people are using the product less then no amount of financial engineering or price increases or anything, you cannot counteract that trend if you're dealing with a falling knife. And to be blunt, we hear sometimes think that the whole market is a falling knife, our market. And that voice is going away and that video and other means of communications are taking over. And what we see is that nothing could be further from the truth, okay? Our usage on the platform is increasing, and it's actually increasing ahead of our revenue. So people are using more -- they are placing more calls on our platform. They're doing more text and utilizing or consuming more voice minutes, okay? And this is what gives us a great amount of confidence that our margins will actually continue improving because our core belief is that our costs will be rising slower than our revenues in the scheme of things. We are able to utilize cost efficiencies. We're using AI heavily internally, definitely being able to achieve a lot more with less and for as long as we see increasing usage of our platform. We have every reason to believe that free cash flow will follow. And again, with continued financial flow per share will follow and will be rising as well. We think quite likely this will be even ahead of revenue growth, which we also project to be continuing. So we think that we are perhaps at an early phase of another virtuous cycle here. Operator: Next question is from Siti Panigrahi with Mizuho. Sitikantha Panigrahi: I just have 2 quick questions. Starting with the contact center momentum. How are you seeing the train following your renewal with partnership with NICE and both in the up market and RingCX momentum on the down market. And a quick follow-up for Vaibhav. How are you thinking about your capital allocation framework given that you have to pay back -- pay down some of the debt? And how should we think about the buyback going forward? Vladimir Shmunis: Great. So I guess I'll take the first one. So look, so you mentioned CX and NICE. And as you all know, we were happy to report last quarter that we've extended the resale agreement with NICE. So that's in place. The user installed base that we have with NICE is stable. We are seeing upsells. We are reeducating the channel on the fact that this partnership is alive and well, because there was quite a bit of [ frauds ] from joint competitors. So that is being addressed. But these are longer sales cycles. And we see some positive movement, but certainly not at the level where it used to be at its peak. Having said that, quite a bit of that [ slag ] is being picked up by RingCX, which is a lighter weight product, less expensive product but also a lot easier to deploy. And we are showing very strong growth with that product with double-digit growth sequentially, which is a lot to be said for a product that's in strong tens of millions of dollars and still double-digit sequential growth. So we feel very, very good about that. We also think that with our introduction of our new Agentic Voice AI family. Again, AIR, AVA and ACE all of them are applicable to RingCX as well as to RingEX. So that's a very important point. Our agentic AI cloud covers both EX and CX, okay? So we think that, that will be a further accelerator. And I also already mentioned a number of important GSPs are picking up the entire portfolio, including CX. So we're quite optimistic. We also know what customer and partner requests are. We have enough of a history with this product now. And whatever people are asking for is on our immediate road map. And I want to mention, we have an annual spend on R&D. That's not insignificant. Majority of that spend is now dedicated towards new products, which is RingCX, AIR, AVA and ACE. And the fact also is that we're using quite a bit of AI for code development. We're seeing some amazing results being able to, in certain cases, develop by factors faster than using traditional methods. So expect rapid innovation, okay? We have introduced more products this year than at any point, more new products than at any point in our 20-plus-year history. And I'm not going to say that we'll be introducing 3, 4 new products every quarter that probably will get too confusing, if nothing else. But now expect quick iteration and quick improvements in what we have. And look, we really believe that we have a unique suite addressing needs of consumers contacting their business service providers. And we expect to go wide and deep on that. Vaibhav Agarwal: Yes. And Siti, in terms of capital allocation, look, our approach always has been a disciplined approach, and it's all aimed at improving free cash flow per share. The benefit of having over $525 million in free cash flow is that it opens up a lot of flexibility and provides opportunistic benefits of capital allocation. So first as a priority is always investing in innovation and growth. So as Vlad said, over $0.25 billion spend in product innovation, over half of which is going into new products. So that's the use of cash. We are also opportunistic in terms of M&A where it accelerates our product road map, case in point being the recent acquisition of CommunityWFM. And from there, look, we -- our strategy involves paying down debt and share buyback, and that depends upon the conditions such as valuation as well as interest rates. In terms of leverage, we are committed to deleveraging and strengthening the balance sheet. If you look at our leverage ratios over the last 3 years, we've gone down from 4x to under 2x. And we've continued that in 2025, we've reduced the debt and we've addressed near-term convert maturities such that there is -- there will be no debt due until 2030. And overall, we remain committed on that path of reducing gross debt to $1 billion by 2026. In terms of buybacks, it remains an attractive use of cash at the current valuation levels. This year, we bought back roughly $200 million of shares, and we still have close to $380 million remaining in authorization which we plan to execute on. So discipline in stock-based compensation as well as buyback stock will result in lowering share count, which we are committed to. So overall framework is to prioritize actions to enhance long-term shareholder value, while maintaining a strong balance sheet and financial flexibility, net-net of which is all aimed at improving free cash flow per share. Operator: Next question is from Ryan MacWilliams with Wells Fargo. Ryan MacWilliams: I'd love to hear your thoughts on how RingCentral has an advantage compared to start-ups in servicing the voice AI and AI receptionist use case. To me, these voice use cases are complex from a telephony standpoint and require call routing expertise from AI to human, that would be difficult to build without a history of providing telephony services. But is there more that comes to mind that gives RingCentral an advantage versus others in going after this agentic voice AI opportunity? Vladimir Shmunis: Yes. Yes. Fantastic question. So look, RingCentral used to be a start-up. To be blunt and fair, I still do everything I can in my power to continue behaving like a start-up. But it is a $2.5 billion start-up now. So startups have good ideas, smart people, and I am sure some of them will do well. But I don't believe that most of them will do well. And the reason is here is what they don't have. They do not have a network. They do not have decades of know-how and data of actual behavior and calling patterns that we have. They do not have the extended GTM capabilities. We have tens of thousands of reseller partners close, if not over 200,000 feet on the street that's been trained with RingCentral. We have this absolute unique GSP network. And very importantly, here there's other things that they don't have. They don't have, with maybe 1 or 2 exceptions, they don't have $250 million of annual spend that they can dedicate to this area, where we are laser focused on. But I tell you what, the most things they don't have is they don't have a 2,000 strong engineering team and product team that's been doing business communications at scale and globally for years and in certain cases for a couple of decades. And I also want to bring up this other point, I think that sometimes what people underappreciate about RingCentral is how deep our routes are and how stable the core team has been over literally 2.5 decades from our inception back in 1999. Engineering team, engineering leadership, the CTO who is my co-founder and many senior directors and VPs have been with us for over 10 years. I believe this is unique in the industry and gives us just unsurpassed know-how and depth and talent pool in being able to out-innovate anyone in the space. And I believe that this is likely to continue, okay? So AI, this AI revolution explosion is really the best thing that ever happened to us as a company. I think to the industry as a whole, but because we are at scale and we're a clear leader in a key communications modality, which is voice, I think that we will stand a lot to gain and including market share in the space. Ryan MacWilliams: Totally handling one or a handful of voice AI calls a day is a lot different than handling 10,000 voice calls a day. I appreciate the color. Vaibhav Agarwal: I think yes, and I... Vladimir Shmunis: Suspect it's more than 10,000. Kira Makagon: What -- way more. Operator: Next question is from Peter Levine with Evercore ISI. Peter Levine: Maybe want to just maybe talk about the acquisition of CommunityWFM. How does that strengthen kind of your end-to-end offering on RingCX. Kind of compare that to some of the stand-alone offerings out there in the market? And then second one, for, maybe can you just kind of walk us through your 4Q guide? I know there was a bit of a tick down for the full year. So maybe just walk us through the puts and takes whether deals that got pulled forward into Q3? Is it macro? Is the government shutdown just impacting kind of how we think about Q4. Kira Makagon: Okay. So this is Kira. Let me handle the WFM. So we have our RingCX suite of today contains a number of modules, the core CX product and the number of AI modules that work together with that base product for quality management, for agent assist, for interaction analytics, stream recording, all these work together and this works together with RingEX. With the acquisition of Community FM product -- WFM product, we've completed that suite. And actually today, we've announced something that we now call WEM Power suite. And that includes the acquisition from CommunityWFM, which is workforce management. That component was not something that was part of our core product and something that now is absolutely integrated and actually deployed at RingCentral for 1 over the last couple of weeks that went live and completes that offering that makes us a complete suite for CX deployments. In terms of how does this interact with existing customers, all existing customers can buy on any 1 of these modules in addition to the base modules that they've got. So the suite works together and a la carte. Vladimir Shmunis: Real quick, before we -- just to get this in, I just want to get back to the prior comment. So we actually do a little bit more than 10,000 calls a day. We just looked it up and is approximately 100 million calls. Yes, it's 100 million minutes a day, which translates into tens of millions of calls per day. Again, just to reiterate, we are running one of the world's largest business voice platforms. by use. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Steven Horwitz for any closing remarks. Steven Horwitz: Thank you, everyone, for attending today. We're looking forward to seeing many of you on Wednesday for our investor product briefing. For those who can't make it, it will be webcast on RingCentral IR site, and there will also be a replay there. Thank you. And for those of you who aren't there, we'll see you next quarter. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

196天前Insight Analytics约5分钟阅读

BOZTY 2025 Q3 财报电话会议

Operator: Welcome to the Boozt Group Q3 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO, Hermann Haraldsson; and CFO, Michael Bjergby. Please go ahead. Hermann Haraldsson: Thank you, and good morning, all, and welcome to our Q3 2025 webcast. Let's turn to the first slide, the agenda. We will have the usual agenda for the presentation. I will present the highlights of the quarter and the business update before handing over to Michael for the financials. So if we look at the next slide, our highlights. Overall, Q3 was a decent quarter with strong operational performance. We had good margin progression and a solid free cash flow, which is a testament to our strong business model. Our revenue growth is not where we wanted to be, but we have seen a gradual improvement, which is important heading into the most important part of the year for Boozt. This increase in the quarter was achieved despite a slightly difficult September, which was impacted by less favorable weather conditions for the autumn/winter collection. It was a bit warm. In the quarter, Boozt.com gradually gained revenue traction and particularly in September, where we made a very clear strategic shift to focus on premium in-season sale on Boozt.com. This change in September changed the composition of growth between Boozt and Booztlet and improved the gross margin significantly. I will come back to this shift later. Our profitability improved significantly in the quarter despite continued headwind from currency. The increase was driven by all OpEx ratios. Free cash flow was again strong. The underlying business is fundamentally very cash generative and with our disciplined management of inventory, it shows in the free cash flow. We have now generated almost SEK 500 million in the last 12 months and expect to generate more than SEK 500 million in cash in the year 2025. With this performance in Q3, we are pleased to be able to both upgrade our EBIT margin guidance and expand our share buyback program. The Board has now initiated the process to increase the current share buyback program from the current SEK 300 million to now SEK 415 million. With this increase, we will have delivered on our target to return SEK 800 million of capital back to our shareholders in 3 years as communicated at the Capital Market Day in 2023. On the outlook for the year, we now expect revenue growth of 0% to 3% or 2% to 5% in constant currency growth. Additionally, we increased our margin guidance. We now expect the adjusted EBIT margin for '25 to end between 5% and 6%. Now let's turn to Slide 5 for the business update. Driving multi-category purchases remains a key strategic goal of our department store model as it directly correlates with customer loyalty and improved financial performance. And crucially, in the current market environment, our diverse categories also helped mitigate the impact of a muted fashion demand. Over the last 12 months, we have successfully increased the purchase percentage of customers shopping from more than one category to 53% on Boozt.com. This is a step-up from 51% last quarter. This improvement occurred despite a strong inflow of new customers, around 170,000 joined this quarter, who typically start by shopping in a single category. Our total active customer base over the last 12 months was broadly unchanged and stands around 2.7 million. This is a number that we need to improve. It has, in 2025, been impacted by a slight decline in female shoppers, and this is now starting to improve. Please move to the next slide, please. I want to provide a few comments on the trend of our female shoppers. This is critical for us as we move forward on our growth journey. Revenue from the women's fashion category is gradually stabilizing after a longer period with some softness. This improvement is important because a stronger performance in women's fashion directly benefits our other categories as women are more often shopping from non-fashion categories, home, sport, beauty and kids. The improving trend is supported by the number of women shopping on our site. If we isolate the numbers for Q3, active customers shopping women's fashion on Boozt.com declined by 2%. We are taking several strategic steps to strengthen our women's category and continue the positive momentum we're seeing. First and foremost, we have expanded our teams within buying, merchandising and marketing to bring in new expertise and fresh perspectives. This enables us to create an even stronger and more relevant brand and product mix that meets the evolving needs of our female customers. The results are already showing. In October alone, we saw a good increase in women's shopping on Boozt.com compared to last year. At the same time, we are reinforcing Boozt.com as a premium destination by elevating the customer experience, making it more inspirational, personalized and fashion-driven. Through richer storytelling, curated campaigns and the use of advanced AI tools, we are creating a more seamless and engaging shopping journey. By the [ SS '26 ] season, our product listings and pages will feature more enriched and inspirational content to help customers find what they love even faster. Finally, we are diversifying our media mix to reach and inspire more women and men across platforms such as Meta and TikTok, while also experimenting with new opportunities on emerging AI-driven platforms. This improvement is supported by the clearer strategic distinction between Boozt.com and Booztlet.com. Please turn to the next slide. This slide summarizes the strategic clarification that is fundamental to performance going forward. We have since September and into Q4, deliberately made a clear distinction for the roles of our 2 platforms to maximize both brand value and operational efficiency. For Boozt.com, the strategy is firmly centered on its position as a premium destination. We are actively reducing the promotional activity to protect our brand equity as well as the value of our brands, strengthening long-term partner relationships. On top of that, our customers' multi-category shopping is the engine that drives loyalty and diversification as well as reducing our overall risk. We believe this has been an important step to get Boozt.com back to growth with 3% organic growth in Q3. Booztlet's prime focus, on the other hand, is on selling prior season stock with very limited access to current season products. Current season products could be accessed by Booztlet campaign buys, for example. Booztlet will continue to help reduce risk when purchasing and to maintain our current inventory. Overall, Booztlet's role as a clearing mechanism is working exactly as planned as we are managing inventory well even in a year like '25, where our growth is not what we had planned for. On top of this, Booztlet also gives us access to another customer group, which is looking for bargains when shopping. Active customers on Booztlet are now over 1 million, showing the relevance of the channel. Of these, 60% shopped only on Boozt.com and not Boozt.com in the last 12 months. The clear distinction between the sites is a fundamental part of our business model. It is long-term sustainable and ensures that we can optimize our premium market position by simultaneously safeguarding our balance sheet through effective inventory management. Next slide, before I hand over to Michael, I want to highlight the significant effect of our clearance sales on Booztlet. The clearance sale, which was started in September last year, is now fully concluded and our inventory is definitively rightsized and at the right quality. This crucial derisking would not have been possible without Booztlet as a dedicated clearing channel as deep discounts on our main site, Boozt.com would have tinted our brand equity. Inventory as a share of last 12 months revenue is now down to 38.2%, which we believe is a healthy level in our current state. This is a significant decrease of 5 percentage points compared to the same period last year, illustrating the importance of this exercise. It also supported our cash generation, driving our free cash flow to SEK 292 million in the quarter, a solid improvement compared to last year. We are now entering the most important trading season with a healthy and high-quality inventory position. This puts us in an optimal position to capture demand and to exploit market opportunities without excess risk. With that, I will now hand over to Michael and the financial review. Michael Bjergby: Yes. Thank you, Hermann, and good morning to all from me as well. I'll start on Slide 10 as we start off with a review of the revenue performance of the quarter. Now in Q3, it was important for us to get back to growth after Q2 and see an incremental improvement in the growth rate. With 3% organic or constant currency growth, we delivered this improvement and from a category perspective, driven by a recovery in women's fashion, as Hermann also described, our largest and most important -- strategically most important category. When reviewing the revenue across the 2 stores, Boozt and Booztlet, it appears like quite stable and uniform growth, but the quarter was, in fact, divided into 2 very different trading periods. Booztlet generated strong growth in the first months of the quarter during the clearance sales, and this reversed actually in September. For Boozt, it was opposite and the store generated very strong growth in September as the clearance sales was concluded. With our sharper distinction between the 2 sites and our focus on premium sales on Boozt.com, the relatively stronger growth in Booz compared to Booztlet continued into early Q4, and we believe that this is the right composition and the most healthy growth dynamics. Looking at the geographical revenue, the growth was relatively uniform across our key markets and all growing in the low single-digit area from a constant currency perspective. I'll move to the next slide and provide some comments on the profitability of the quarter because overall, we are satisfied with our profit development. It shows the strength of our business model, which can be quite scalable and something that we can continue to optimize across the value chain. It should not be a surprise that the gross margin is down in the quarter. It's quite natural when it is driven by the clearance sales in July and August. And it is quite natural that the gross margin is affected in a year, where revenue is lower than planned and expected. On top of this, we continue to see a negative impact in the gross margin from the FX development. But as Hermann mentioned also in September, when the clearance sales was finalized, the year-over-year development on the gross margin actually was positive and in local currency improving compared to last year. We improved the EBIT margin as we were able to more than offset the gross margin development through leverage on OpEx lines. We are continuously striving to optimize our efficiencies. We see that within the marketing spend. We see it within our fulfillment and distribution ratio. And as we continue to deliver -- to develop and also grow, we see long-term room for improvement on these lines continuously. We also saw a continued good development on the admin ratio driven by the previously communicated ceasing of Norwegian customs as well as the downsizing of field [indiscernible] FTEs in year. Depreciation was slightly up, driven by continued investment at our automated warehouse at Angelholm, but also investments in our best-in-class IT and [indiscernible]. Now please move to Slide 12, as I turn focus to our cash flow. The cash development was strong in Q3, and it's really a representation of our operating model and setup between Boozt and Booztlet, as we are managing our inventory and working capital. It's quite an achievement to manage inventory and even reduce inventory in a year, where sales is lower than planned. This is a key strength and risk mitigating accomplishment of the business model and the dynamics between the stores. Now generating free cash flow, which is 7x larger than EBIT as we did in this quarter is clearly not sustainable, but the quarter illustrates how working capital is the determining factor for our cash generation, and that is an important characteristic in a business like ours, where we trade massive volumes at relatively low margins, and I'll discuss these fundamentals of the cash flow over the cycle a bit more on the next slide. Because the more appropriate performance view of the cash generation is to review the last 12 months, i.e., over the full 4 quarters of the year. And in the last 12 months, our cash conversion has been close to 100%, and that's even with a slight outflow from working capital. We generated free cash flow of SEK 483 million out of a reported SEK 500 million EBIT. It shows how strong our underlying cash generation potential is. It is clear that when the business is growing very fast, it requires investments in working capital and in our warehouse capacity, but with more module growth, the cash conversion is fundamentally highly attractive like this year. As we are guiding free cash flow of more than SEK 500 million for the full year 2025, it can also be concluded and again, in Q4 '25, we expect to generate more cash than we did last year, reflecting continued operational improvements and continued strong management of working capital. Please move to the next slide for some comments on how the cash is used and generally our capital structure. As discussed, the business is highly cash generative in periods without the excessive growth. We are demonstrating this with our performance this quarter and with our outlook for the year. We do not want to sit on that cash. It has to work and it has to create return, and we strive to be disciplined in our return of excess cash to shareholders, currently mainly through share buybacks. As we are now extending our share buyback to purchase treasury shares worth more than SEK 400 million in the 1-year period since last AGM, we are actually returning quite a lot, and we're also achieving the target that we set out in our Capital Markets Day in 2023 and importantly, thereby delivering on our promises given. Despite the relatively large share buyback this year, we still have a very strong and quite conservative capital structure and currently with net cash, which means negative net debt of around SEK 200 million. This also means that we have very strong liquidity. We are maintaining a strong balance sheet because it creates room to maneuver and to capture opportunities in the market. And in that sense, we can -- as we face commercial growth opportunities in the market, we can attack and allow working capital swings in temporary periods. So with this, I have finalized my financial review, and I'll now turn to the future and our financial outlook on Slide #16. As Hermann mentioned in the beginning, we are satisfied with our strong operational performance, and we are updating our guidance to reflect the performance year-to-date. although we are currently facing the largest and most important months and trading periods of the year. The new revenue guidance corresponds to 2% to 5% constant currency growth for the year, and we still expect full year headwind of around 2 percentage points from currency. With the new guidance, the required constant currency growth in the fourth quarter is 2% to 10%. This corresponds to 0% to 8% in net revenue growth. It's a relatively broad range, but it underlines the uncertainty that November and December inherently carries. In regards to profitability, we are increasing the adjusted EBIT margin guidance driven by the factors that Hermann described earlier on the call. Fundamentally, we continue to see scope for further margin improvements. And this upgrade is an illustration of it. In a year with muted growth, focus on inventory clearance and also sharper distinction of Boozt and Booztlet, and on top of this quite material headwind from currency, we are still able to drive the underlying margin forward. For the full year, we estimate that the margin will be negatively impacted by around 1 percentage points due to the strengthening of SEK versus primarily euro, but also Danish kroner. The rest of our guidance remains unchanged, free cash flow of more than SEK 500 million and CapEx between SEK 150 million and SEK 170 million. I'll have my final slide with a few comments about our relocation coming up shortly because as you are aware, we are investing in Boozt to become a unique and really preferred employer in Copenhagen, the capital of Denmark. And creating a strong organization and really a powerhouse under one roof is a way for us to sharpen the organizational capacity. This investment carries some nonrecurring costs, and there are some compliance matters related to the move that I'll describe briefly. The nonrecurring costs are relatively limited and amount to around SEK 550 million, and it's mainly double leasing of the old headquarters at Hyllie, but also other smaller locations that we have as well as the restoration of our old headquarter. The larger part of these costs will be recognized in Q4 2025 and the rest in Q1 2026. The cash impact, however, will be spread across the year of 2026. Another implication of the move is that there will be a so-called exit tax related to the activities and operation, which are moving to Denmark. Our core assets like the Angelholm warehouse and our listing, et cetera, will be maintained in Sweden. So this will not be subject to any new tax legislation. But the exit tax payment in Sweden will create -- and that's important. It will create a deferred tax asset in Denmark based on the fundamental principle of the double tax treaty agreement between the 2 countries. So in layman terms, this means that the payment in Sweden can be deducted in Danish tax payments likely over a period of 5 years. And as a result, we expect no cash impact over the period from 2026 to 2030. But in 2026 alone, we expect excess cash tax payment of SEK 140 million. This concludes the prepared part of my presentation, and I'll now hand the word back to Hermann for some final remarks. Hermann Haraldsson: Thank you, Michael. And before moving on to the Q&A, I would like to share a few words on our strategic outlook. Our focus remains clear. We want to get back to sizable growth. Our operations are like a well-oiled machine. We are very efficient, and we want to increase our revenue growth to exploit our unique and scalable business model. We have strengthened our competitive position in the last couple of years, and I believe that the Boozt organization is now stronger than ever. With the move to Copenhagen, we will be a clear preferred employer and be able to attract key competencies and talent. On top of that, we are quite confident that consumer sentiment and thus the market return for the better and that Boozt will be positioned as one of the strongest players in the region to capture more than our fair share of that growth. So this concludes the presentation. And operator, will you please open up for questions. Operator: [Operator Instructions] The next question comes from Niklas Ekman from DNB Carnegie. Niklas Ekman: Yes. Can I start asking about the sales guidance, the updated sales guidance, given that your sales in the first 9 months are essentially flat and your guidance now of 0% to 3% growth. That seems to indicate then expectations of an improvement in Q4. And given your comments here, I mean, on the one hand, September sales being weak, you seem to be a little bit more confident here on October, but there's a lot of uncertainties about November and December. So what gives you confidence that your sales will essentially accelerate in the fourth quarter? Hermann Haraldsson: Well, kind of the quarter so far supports the guidance and comps are slightly easier for the fourth quarter. And so we think it's kind of -- as far as we see, there's nothing that indicates that things would become worse. And so -- but still, it's -- we think it's a cautious guidance, but still we are seeing some optimism, especially also because the women have returned again, growing again in the women's. So I think there's reason to believe that we are back to at least a moderate growth. Niklas Ekman: Very good. And I'm also curious, when you're talking about the reduced campaign activity at Boozt.com and kind of shifting that towards Booztlet, how much of this is kind of a voluntary move? How much of this is a result of pushback from suppliers? And are you now where you want to be? Or do you think that there will be a further move towards reducing that level of discounting at the core Boozt.com site? Hermann Haraldsson: Yes, a good question. I think as you know, we basically have been slightly overstocked for the last 2 years, meaning that we have had to reduce inventory and use our channels. And you also have to look after our brand partners, and it's entirely voluntary, but we want to kind of elevate the brands and keep the high brand profile. So kind of -- it's our initiative because we want to, again, create a more clear distinction between Boozt.com and Booztlet. I think that the overlap between the 2 shops and the offers were getting a bit too similar. So it's kind of a decision to create kind of 2 very distinct different shops. I think that we're actually on a good track. We are of course, we have to act with the market, and we are price takers, and we cannot sell more expensive than the rest, but we're definitely not price leaders. And we're moving into a more kind of inspirational and discovery like. And fortunately, our technology, AI helps a lot in doing that. So I think that we're in a good spot. And the inventory is right, so we don't need to clear, so we can actually also start to buy some campaign [ goods ]. So I think that we're in a quite strong position to capture growth when it returns. Niklas Ekman: Very good. But do you think that it's a challenge for you to drive growth if you hold back a lot of campaigns? Because I think in the past, the campaign activity at Boozt.com has also clearly been a growth driver. So moving away from that, is that a challenge for you right now? Is that a reason why we're seeing lower growth rates this year compared to the previous year? Hermann Haraldsson: I think it'd be a bit too -- I think it's a bit too far to say that is the main reason. I think that we've been hit by consumer sentiment and consumers holding back. But obviously, in the previous years, [ campaign buyers ] have been a big driver of us being able to offer strong campaigns. And as we have had too much inventory, we haven't bought too much campaign goods. Now with the inventory size, we can get back to doing campaign buys and promoting the campaign [ buyers ]. And this is kind of all in alignment with the brand's interest. I think that kind of we are moving in a position, where we can get a bit back to kind of being a retailer with strong brands and relevant and good offers. So I think that kind of we have put ourselves with our inventory position and with the kind of our brand and the distinction between 2 shops to be able to kind of again offer relevant campaigns without destroying margin or any brand relations. Niklas Ekman: And when you're talking about increase in campaign buys or campaign goods, are you talking already Q4? Or is this more an issue for 2026 and onwards? Hermann Haraldsson: We're starting in Q4 and -- but also in '26 onwards. So we see more campaign buys opportunities, both in the market and for ourselves than we've seen for quite some time. Operator: The next question comes from Benjamin Wahlstedt from ABGSC. Benjamin Wahlstedt: I was wondering if you could give a bit more flavor on the quarter's growth by month, please. What was your growth in September, for example, when warehouse clearances were done? Hermann Haraldsson: Yes, the growth was -- as we said at the end of -- at the Q2 call, we came into the quarter with growth. And in July and August, September was actually kind of flattish because weather was -- it was very warm. So it was quite uneven growth for the quarter actually. So that's why you should always be careful because especially when you -- the transition from summer to autumn to winter is like very dependent on temperatures and weather, et cetera, et cetera. So -- but it was quite uneven with September being more or less, less flat. Benjamin Wahlstedt: Right. Another possible interpretation of this report, I think, is that you spent too little on marketing in the quarter, reporting the lowest marketing ratio since mid-2019. And I was wondering if you could give us a bit more flavor or commentary regarding that. Hermann Haraldsson: Yes, we can do that. I don't think we spent too low and little because as we've been discussing before, it's all about kind of the marginal spend. And if the consumer is not there, you can just totally overspend on your marketing. And that's why we still have the ratio of how much do you want to pay for a new customer and what is the payback. So we're cautious. We've been holding a bit back on our offline campaigns. as also we said in the Q2 call, that's because we haven't been really ready. But I think that kind of -- I said the ambition is to get marketing down and -- and even though our cost structure allows us to spend more on marketing, we don't want to throw any money. And just by increasing performance marketing, it's a bad investment. So that's why you'd rather hold back and save that money for a full year. Benjamin Wahlstedt: Perfect. And this is sort of a follow-up on Niklas' previous question. Would you say that your strategy from, say, October onwards is a new strategy with less discounts than previously or less targeted discounts than previously? Or should we understand it as a return to the pre-inventory clearance strategy essentially? Hermann Haraldsson: I think you should interpret as a return to the pre-inventory reduction strategy. We -- over the last 2 years, we've been expecting higher growth and [ bought ] for that growth, and it has materialized, which has meant that we have had to kind of clear because we are religious about not having too much inventory and not doing any write-downs. So we've basically been forced to do that. Now with inventory being at a very good size, we are getting back to -- yes, as I said before, the phase, where we can -- we have the right inventory from the beginning of the season and can do opportunistic campaign buys to add some flavor and margin to -- and also add some basically attractiveness to the offer. So I think that we're kind of going back to, as you said, the pre-inventory write-down strategy, it's a long word. Benjamin Wahlstedt: All right. And finally, from my end, I was wondering if you could say anything else about the consumer environment as you see it currently in addition perhaps to the stronger October demand for the women's category. Should we understand that comment as being of like stronger growth for the whole business in October? Or is it more specific -- specifically related to the women's category? Hermann Haraldsson: Yes, sorry. Again, if you look at consumer sentiment, it's -- I think it's still below 0 in all the 4 Nordic countries, the 4 Scandinavian countries. So even though we're going up and Sweden seems to be the most positive country and probably even more positive next year, the Danes are still quite depressed. The Norwegians are getting closer to neutral and the Finns are also seem to be depressed. What we notice, of course, is that the women are coming back. So we have a growth in women buying on Boozt in October. But -- and there's a but, the average item price they're buying for is lower than last year. So they are still kind of holding back and being cautious. So I'm not sure if we're out of the woods yet. But with the stimuli that is coming in Sweden, also in Denmark, I think there's time to become a bit more optimistic about the future. So at least kind of we don't see any negative numbers anymore. So now it's just kind of the degree of positiveness. But again, it's very early because in 1 month's time, I might be really happy or depressed depending on how this black month and Black Friday and Cyber Monday goes. So it's kind of -- it's too early to conclude because it's the next 1.5 months that is going to decide everything. Benjamin Wahlstedt: Yes, of course. You 're -- well, if history tells us anything, you're usually pretty good black month, but let'sâ€¦ Hermann Haraldsson: [indiscernible]. Operator: The next question comes from Daniel Schmidt from Danske Bank. Daniel Schmidt: A couple of questions from me. Hermann, you talked about when we sort of heard from you the last time in Q2 that you basically missed maybe on womenswear when it came to dresses and so on in your purchasing heading into the spring season. Is there sort of anything that you've done entering the autumn/winter season that is sort of increasing the likelihood that you won't make that mistake again in terms of predicting the trends and so on? Hermann Haraldsson: Yes. That -- it's a good question, actually. Yes, there is because we became too cautious in the first half. We bought what we thought would be the sure thing. So we bought more depth than breadth. We kind of internally refer to it like we looked a bit more down, so looking too much to the numbers instead of looking up. So we set the buyers a bit more free and saying, okay, try to buy more inspiration, more breadth and try to see kind of there to take more risk again because our inventory position is so good. And then, of course, we bought less dresses going into the quarter. So that was kind of -- so it's kind of -- when you're in a position when you have too much stock, you tend to be -- become a bit more too cautious. And I think that we became a bit too cautious. So I think that we are going to be more -- liberate our buyers a bit more than we've done before because we know that we are very good at eliminating stock risk. So I think that you -- and I think that already now that the women can see that there's basically more and better choice in the shop. Daniel Schmidt: So that's basically a reflection of what you're seeing in October, you think? Hermann Haraldsson: Yes. I think that's a good bet that women are able to find more exciting stuff. They still buy the sure thing, but they also want to be inspired, right? And we're getting better at that. Daniel Schmidt: Just coming back to a detailed question on the marketing spend. And again, that was on the low side in Q3, and you already touched upon that, but it was also on the high side in Q2. And I think you wrote something about a timing effect, and you also mentioned that in Q2, they went a little bit overboard maybe or maybe it was also timing between the quarters. Is that correct? Or shed some more light on that? Hermann Haraldsson: Yes, that's correct. We had quite a big offline marketing campaign in May. which was a really bad month and the quarter [ get ] results. So we went slightly kind of -- I wouldn't say we went overboard, but the timing was unfortunately compared to the market, and our execution was maybe not spot on. So that's why kind of we are regrouping and redefining kind of what and how we want to communicate, especially offline. I think in our performance marketing, we're on a good track. We are using marketing technology to an even greater extent, and it shows promising results. But again, we've been discussing this for like -- like now 8 years, Daniel, that we are very, very careful not to overspend on performance marketing because the marginal cost of the margin customer is just too high. So we'd rather not spend and then accept low growth because often doesn't make sense. So that's why we're trying to guide it. And then again, the long term, our target is to get the margin cost ratio down to maybe 6%, 7%. So I think it's a path towards that goal. Daniel Schmidt: And then also maybe coming back to the inventory and the size of the inventory, and I clearly hear you that you've been overstocked for quite some time, and you've done quite a lot of excessive clearance of inventory in the past couple of quarters, and you seem very happy entering the fall and winter season. Is there any risk that the inventory is too low to get up to the upper end of the implicit top line guidance that you have for Q4? Or is the sort of the capability to add on campaign buys or additional inventory in the season better now to support if top line would sort of surprise positively or demand would surprise positively? Hermann Haraldsson: You're right. Yes. You're right that there is a risk if demand is higher than projected that we don't have enough inventory with what we have now. This is also why we've started already to do some strong campaign buys and are increasing our campaign buys budget because you're right that of course, if consumers become more happy and start to buy again, then we don't have enough inventory. But we are actually working on that. And I'm quite confident that if there is more growth than we guide, we would probably be able to kind of deliver on that growth. So -- but you're right that we are now going back to doing quite decent campaign buys. Daniel Schmidt: And does that go hand in hand a little bit when it comes to other revenues? How do you see that into Q4 and '26? Hermann Haraldsson: Yes, it does. It has [ other ] revenues, especially the retail media revenue is not 100% linked, but it's quite linked to the buy as it always has been. So with us, if we are turning the buy down, then other revenue is affected and it's difficult to compensate for that by offering additional campaigns also because if consumers are holding back, the brands feel it themselves. So they're also less inclined to spend more in marketing. So it kind of goes hand in hand, but it's not a 100% correlation. So we have been able to compensate slightly for that by offering better and more targeted campaign. Our BMP is actually getting better and better at both targeting and documenting the return on the marketing investments than before. But of course, it's linked to the buy. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Hermann Haraldsson: Okay. Thank you for listening in and the questions. And yes, we are just waiting for a very interesting 1.5 months. And hopefully, we'll meet happy again after Black Friday and over the next coming weeks. Thank you very much, and bye-bye.

196天前Insight Analytics约5分钟阅读

NTDTY 2026 Q2 财报电话会议

Sota Endo: Thank you for joining us for NTT DATA's briefing session for the 6 months ended September 30, 2025. I will serve as your facilitator. I'm Endo from IR. In terms of today's documents, please refer to our IR website presentation materials. First, let me introduce the speakers. Representative Director, President and CEO, Mr. Sasaki; Representative Director and Senior Executive Vice President, Mr. Nakayama; Director and Executive Vice President, CSO, Mr. Nishimura and Senior Vice President, Head of Finance Headquarters, Mr. Kusakabe. These are the 4 speakers. Today, we will skip the earnings presentation and start with a Q&A session. Sota Endo: [Operator Instructions] First, we will take questions from the floor. On the first row on the right-hand side from my side, please. Unknown Analyst: SMBC Nikko Securities. My name is [ Sakiguchi ]. I have 2 questions. The first question is regarding the domestic public and social infrastructure business. There was unprofitable projects is what I've heard. So with the -- there is an unprofitable projects with the government agency-related type of projects, it actually drags along. So what amount of this unprofitable project amount is recorded for the second quarter and the overall scale of the project and that what's going to happen of that for the second half of profit line for the public and social infrastructure. Well, Public and Social Infrastructure recently was performing strongly. So there was one way of looking at it that it probably did increase to a peak, but there was more orders after that, but also including the treatment of unprofitable projects, what is your outlook for this business segment is what I'd like to know. Sota Endo: So Sasaki would like to answer your question. Yutaka Sasaki: For the second quarter, what we posted for unproduct -- it's unprofitable business for public area was JPY 3 billion in total. Basically, in the past cases in several large-scale projects, and within over several quarters, there was a track record that we have posted this unprofitable amount. But this time, we have actually have visibility all the way to the risk. So for the third quarter and fourth quarter, our assumption is that there are no further losses that will be made. And how we look at the market, we believe that it's going to be still strong for the central -- this public and social infrastructure is central government and the local governments and also the telecom utility. And we believe that this is going to continue to steadily grow strong. So we would like to continue to bring in that demand and further grow. But as you have pointed out, for this fiscal year, on a year-on-year basis, profit-wise was a negative number. That means that it requires some measures to be injected. The SG&A that is spent towards the second half, we would like to thoroughly look into it and thoroughly so that we will be able to turn around for the remaining year and next year. And 2 projects and JPY 3 billion, looking at your scale of the business and comparing to the past, it's something that shouldn't be that worried about. Unknown Analyst: The second question, overseas, especially North America, you have quite a few orders of large-scale projects was explained. What is the content of that? Recently, the continuing project of the existing customers, but also there is the expansion projects receiving the large-scale orders was the explanation. So if that is the same way of thinking, so how are you evaluating the orders that you have received this time? And at the last press conference, you said that you want the contribution from these orders to come about from the third quarter. But around what timing is that going to be recognized? Yutaka Sasaki: Well, NTT DATA Inc. overall, there's a Chief Growth Officer person that is appointed now and acquiring the large-scale projects or targeting the large-scale accounts. To surely acquire them is the activities that is conducted under this Chief Growth Officer. And one more thing we're working on is a global practice, meaning they're not saying that to each region to do your best, but looking at it more like a global-wide perspective like global security or digital workplace. These are several offerings and solutions, the offerings that utilize the Indian resources, accumulating the know-how of that, and we wanted to roll that out to several large accounts. And this initiative has been worked on in a full scale since last year. And finally, we have the CGO and the global practice initiatives are being well combined. And especially in North America, it has enabled them to acquire large-scale orders or projects. So what's the content of it? Like in cloud and security is the large-scale project to cloud migration. It's one case. And the contract period is 3 to 5 years, multiple years. So it seems that the order received amount is larger. But from the second half of this fiscal year, it is going to be booked as net sales. So from the third quarter net sales for North American region, it is going to exceed what it has achieved last fiscal year. So the North American turnaround based on these orders received, we would like to surely pursue it. And by having the net sales being recorded or posted, that means the gross profit is also going to increase. And in North America, thorough initiatives are conducted in terms of reducing the SG&A. So they will be able to surely accumulate the profit. If that is so, the expansion growth, so that means new orders you're receiving, yes, quite an amount. Sota Endo: Next question from the floor. Over there, please. Daisaku Masuno: Masuno from Nomura. I'd like to ask about overseas data center. In the press conference, I asked the question, why don't you accelerate even more than the current plan? And you said that you will carefully select partners and consider the approach in a balanced manner. But I feel like now we are at a stage where you can take on more risk. So what are your thoughts regarding taking on further risk to accelerate? What kind of reference do you take in order to make that decision? And now that you are 100% subsidiary, rather than relying on the cash from the REIT -- sales to REIT, I believe that you can take on more risk in that perspective as well. Yutaka Sasaki: So becoming a 100% subsidiary of NTT, we are able to take action based on a bigger balance sheet, and we have the room to make investments with more leverage. I understand that. On the other hand, for cash allocation, there is data center and there's also M&A and also investment into pure assets. So there are different investment targets. And especially with regards to M&A in the age of AI, the rules of competition are changing. And so what kind of company should we acquire in order to win in a global competition is something that we really need to strategize on. Over the next 1 to 2 years, the competitive landscape in the age of AI will start to emerge. And so we don't want to just bet on data centers. We would like to also consider M&A opportunities to have the optimal cash allocation. On the other hand, as you said, we have a REIT, and we're able to do a cash cycle based on that. And we're also studying possibilities for utilizing third party in making investments. So rather than leveraging our balance sheet, how much we can expand our investment. That is something that we continue to study. Daisaku Masuno: So in terms of considering the allocation into data center, what are the indices or the environmental factors that do you look at in order to make the decision? Is it the investment into North America? I also heard that India is more profitable. So is it the demand from India? Yutaka Sasaki: Well, we have placed much importance on our communication with hyperscalers. The team's head is in North America and the North American team is talking to the big techs on a day-to-day level. And so we're able to grasp the demand going forward very directly. And the team is making various investments. And we also look at other areas where we can complement that team and make the investment decision. Sota Endo: Are there any questions from the room, from the floor? If you do, please raise your hand. It seems that no further questions from the floor. So we would like to ask those of you participating online, if you have any questions. First of all, Ueno-san from Daiwa Securities. Makoto Ueno: This is Ueno from Daiwa Securities. Can you hear my voice? Sota Endo: Yes, we can hear you. Makoto Ueno: The previous person asked the same question regarding Page 7, excluding the 2 projects that are unprofitable, which shows the operating profit trend, that was JPY 3 billion. But with that, there's still a JPY 2.5 billion decline in profit. But if you look more in detail on Page 6, net sales, the Public & Social Infrastructure, JPY 22.6 billion increase in net sales. So you are securing the increase in sales, but you have JPY 3 billion of a loss. But in other areas, there's about a JPY 7.4 billion of a decline. What is the content of that remaining JPY 7.4 billion? Yutaka Sasaki: Public and Social Infrastructure up to the operating profit, I would like to break down the declining factors. About JPY 3 billion of unprofitable projects exist. In addition to that, on a gross profit basis, about JPY 3 billion is added. So gross profit in total JPY 6 billion, we experienced a JPY 6 billion decline. As you mentioned, the sales increased, but -- and there's about 15% growth rate. However, excluding unprofitable projects, it's still JPY 3 billion decline in profit. Last year, there was a onetime large-scale, very profitable projects. So that not existing this fiscal year had the largest -- that was the largest factor. And SG&A, there's an increase of about JPY 4 billion. And that also was a factor to press down the operating profit. So the JPY 4 billion in gross profit decline and SG&A increasing by JPY 4 billion and JPY 10 billion, so a total of JPY 10 billion decline. So for SG&A activities and also the orders that are -- demand is strong, we have to hire the engineers and including the agent fees that is attached to hiring the people is also included in SG&A as well. But in a full year perspective, we would like to control the areas so that we'll be able to achieve the target. Makoto Ueno: So I just want to confirm the breakdown. So profitability is JPY 3 billion, and there's additional JPY 3 billion of gross profit because no large project that you've seen last year. And then there's SG&A and that total of JPY 10 billion, yes. So the impact of this to the second half. So the gross profit, the large project not being there is okay. But this JPY 4 billion SG&A, you probably can recover that through sales increase. So if you just compare second half and second half, there's no remaining, right? Yutaka Sasaki: For the SG&A, it depends on the order situation. But in the full year, we are aiming to achieve the full year target. Sorry to be very detailed. Makoto Ueno: But just looking at the enterprise, the [ BOJ ] short-term outlook and looking at the other companies' performance, the demand is extremely strong. But for you, the enterprise net sales is that from JPY 279 billion to JPY 289 billion, a 1.4% increase. So is it just that second half is lower or you're strong at the social financial -- social infrastructure financial and you're strong. So maybe you don't expect that much growth in enterprise, but why is this growth rate so low? What is the factor behind it? Yutaka Sasaki: The one thing is maybe -- apologies for lacking the explanation. the payment where this agent to collect the payment, their rate has changed. And there's about JPY 17 billion of that impact. And excluding this -- if you reverse that JPY 17 billion, there will be increase of about JPY 10 billion in revenue -- JPY 20 billion. And towards manufacturing businesses, the demand is strong. So as a momentum, we are placed in a good -- very good situation. So the new -- the net sales from the gross, we changed to net. Makoto Ueno: So include that the enterprise is having a strong growth. Is this going to continue into the second half? Yutaka Sasaki: Yes, we do expect it to continue. Makoto Ueno: Okay. And also regarding the data center question towards holding companies and towards your companies, there's repeating questions regarding data center. Maybe this is a different angle way of looking at it. The AI, which is strong globally, honestly speaking, I think this area has risks. And honestly, you have to have a several trillion yen fundraising capability or else NVIDIA is not even going to look at you. So regarding this AI area, you're not focusing that much and the data center that's going to grow as a real business, you are focusing on the AI investment for the data centers. Is that a wrong way of looking at it? Or are you going to invest in AI as well? Yutaka Sasaki: We have an alliance with OpenAI as well. But the public giant language model, we have no intention of creating something like that. So NVIDIA's GPU buying thousands of them and us creating a large-scale learning model, we have no intention of doing that as well. But on the other hand, the private AI like Tsuzumi or Mistral AI, relatively small-sized model we think that enterprise customers will utilize that more than now, and we call it private AI. So in Tsuzumi 2, with -- it only requires 1 GPU. So as NTT already made the announcement, especially LLM that's strong in Japanese and finance and medical areas, it's already learning. And if the customers add a learning area, then the learning speed is extremely fast. So towards those customers that are in need for that, we rent out our data center space and also combine that with the public AI and to have our customers utilize AI in this combined manner. And we believe that this can be rolled out globally as well. So conducting business with the hyperscalers. But in the private AI area, the government customers or manufacturing customers or finance industry customers, we would like to provide our service to them as well. So in that sense, regarding AI, including the infrastructure, we would like to become in a way that we'll be able to provide the service in a full stack manner. Makoto Ueno: That part, I highly evaluate that like IBM and Oracle being very strong is that instead of trying to develop a huge AI, but at the customer side, meeting the customer demand is enabling you more to make money. But the AI solution like AI agent, something that will gain sales, not the data center, but AI, you're mentioning Tsuzumi. But application-wise, are you already prepared or around what timing are you going to be able to record net sales? Yutaka Sasaki: Well, the so-called AI agent, we are paying attention to that. And up to now, we have conducted many POC and there are actual orders that we have received in this area. And we believe that there will be a business growth in this area moving forward. We are sure about that. That is why even within the hand that we wrote it, we are going to establish a new company making investments in Silicon Valley. For AI agent, as several offerings, there are something that will made into a certain template, but we would like to have a thorough analysis of the customer and making and developing an AI agent tailored to our customers. So the AI services or computing services that are tailored to the customer needs will be something that we are going to provide. So it's not that simply one can -- we are going to purchase packages and resell that, a lot of them. But instead of that, we are going to be on the customer side and provide the service that is required. And as AI evolved, we will update our services also. And AI in times will actually not tell the truth or lie to you. So in order to provide a thorough service, a managed service of our services that are provided is going to become important. So we would like to establish a thorough business model to provide our services. Makoto Ueno: At Page 17, OpenAI-related business, JPY 100 billion. So in agent-related separate from them in 2027, JPY 300 billion is what we aim for agent management. I believe that you were saying JPY 100 billion for overseas. Is that true? Yutaka Sasaki: Yes. Sota Endo: That concludes the question from Ueno. Next question, please? We have passed the planned time, but we were also late in starting this session. So if there is a question, we'll be happy to answer additional questions. And if you like to ask another question for those of you who have already asked a question, we are welcoming that as well. No questions? We -- either from the floor or from the remote participants? Well, we see no hands. And this concludes the NTT DATA Group's earnings presentation. Thank you very much.

196天前Insight Analytics约5分钟阅读

GTM 2025 Q3 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. Welcome to ZoomInfo Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Jerry Sisitsky, Vice President of Investor Relations. Please go ahead. Jeremiah Sisitsky: Thanks, Michelle. Welcome to ZoomInfo's Financial Results Conference Call for the third quarter 2025. With me on the call today are Henry Schuck, Founder and CEO of ZoomInfo; and Graham O'Brien, our Chief Financial Officer. During this call, any forward-looking statements are made pursuant to the safe harbor provisions of U.S. securities laws. Expressions of future goals, including business outlook, expectations for future financial performance and similar items, including, without limitation, expressions using the terminology may, will, expect, anticipate and believe and expressions which reflect something other than historical facts are intended to identify forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our SEC filings. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the forward-looking statements and the slides posted to our Investor Relations website at ir.zoominfo.com. All metrics on this call are non-GAAP, unless otherwise noted. A reconciliation can be found in the financial results press release or in the slides posted to our IR website. With that, I'll turn the call over to Henry. Henry Schuck: Great. Thank you, Jerry, and welcome, everyone. We are executing well and capitalizing on a rapidly growing AI opportunity and go-to-market. In Q3, we continued to improve the business across every metric. GAAP revenue was a record $318 million, up 5% year-over-year, and adjusted operating income was $118 million, a margin of 37%, both were above the high end of our guidance with the highest level of AOI margin we've reported since Q4 of 2024 and the first time we exceeded the Rule of 40 since Q1 of 2024. During the quarter, we accelerated upmarket growth, improved net revenue retention for the fifth straight quarter, delivered another quarter of strong profitability and are again raising our financial guidance for the year. We are aggressively expanding the product portfolio with innovative go-to-market AI and workflow products as we continue our shift upmarket. I believe we are building and delivering the best solutions that we've ever put in front of customers, which is driving stronger daily engagement from a diverse set of go-to-market personas. Our operations suite again grew more than 20% year-over-year as our proprietary data asset continues to prove mission-critical to any AI-driven initiative that touches go-to-market. This is our fastest-growing product, and it's accelerating as it gets bigger. And with the launch of Copilot last year, its expansion into GTM Workspace this quarter and the evolution of our GTM Studio platform, we've begun to play offense again. Through the innovation we are driving, I believe it is only a matter of time before ZoomInfo will be synonymous with AI and go-to-market. We believe that our unique and proprietary data assets put us in the winners column as AI proliferates across go-to-market teams. While LLMs can reliably deliver data points available through the second or third page of search results, it is unique data not available on the public web that go-to-market teams require in order to stand out in increasingly competitive markets. If a customer is looking for every residential or commercial roofer in the United States or every company with at least three vehicles in their fleets or every non-franchised quick service restaurant in a certain ZIP code or to identify the buyers visiting their website or researching their competitors, they come to us, not just for this unique data asset, but also for our ability to tie that data asset to our contact and signal data and put them in a position to execute a sales or marketing workflow around these go-to-market attributes. By using Copilot and GTM Workspace, frontline go-to-market professionals get a single pane of glass to execute their daily workflows. GTM Studio is already generating strong interest from operations leaders and their counterparts in frontline sales leadership as they look to close the gap between idea and execution. We're also winning with our account-based marketing platform. ZoomInfo is recognized as the only vendor positioned in the Customers' Choice quadrant in the 2025 Gartner Voice of the Customer Report for ABM platforms, and we added millions of ACV in the quarter as customers like EmployBridge, Ciena, and MasterControl migrated from legacy ABM providers to our integrated ABM platform. With our Salesforce partnership, ZoomInfo Revenue Agent is now bringing the industry's most comprehensive B2B data and agents directly into Agentforce. Our data is enabling sales teams to use natural language queries to uncover hidden opportunities and engage the right contacts at the right time within their existing Salesforce workflows. Through our expanded platform, our unique and proprietary data asset and through recently released partner integrations, our pace of innovation continues to accelerate. During the quarter, we closed upmarket opportunities with insightsoftware, a fast-growing software provider to the office of the CFO, Ryder System, a $12 billion transportation and logistics company; BrightView, a multibillion-dollar commercial landscaper; and Circle K, a multinational convenience store brand. These wins highlight our focused move upmarket and the large total addressable market we have across a wide range of industries. Additionally, a global professional services firm expanded ZoomInfo enterprise-wide, adding sales seats, data and our marketing and talent solutions. Their CMO called it a no-brainer to improve sales pipeline generation, identify active buying signals, reduce wasted time on unproductive leads and connect with the right decision-makers. A large private unified data and AI company is now leveraging our sales intelligence platform to power its land-and-expand sales motion across enterprise accounts while also using us to efficiently penetrate new verticals. We demonstrated to one of the largest companies in the world how our data provided a 25% improvement in coverage rates compared to their existing data provider, including far superior coverage in the SMB and start-up space. Through company data initiatives, we have increased match rates for customers by more than 20% over the last 6 months. This data advantage is increasingly creating upmarket displacement opportunities from organizations using legacy vendors that provide stale and low-quality data. And many of the world's fastest-growing and most innovative AI native companies like Levelpath, Harvey, Pano.ai, and TiLT choose ZoomInfo as they scale their sales teams and need data signals and workflow to scale in the enterprise. To continue to win, we are providing our customers more than just another fragmented tool or another buzzy solution. We are providing the unified data foundation that connects CRM data, engagement signals, intent data, call transcripts, and market intelligence into one AI-ready system, giving sellers AI to allow them to shift their focus away from the time-consuming low-value tasks of building decks and account plans, filling out CRM fields, prioritizing prospecting lists, writing follow-ups and on to the art of sales, building relationships, adding consultative value and closing deals. For 20 years, ZoomInfo has been the trusted source of truth for company and contact data. That foundation isn't going away. It's becoming the launch pad for something much bigger. Today, our master data management capabilities unify fragmented go-to-market data across systems into a single intelligence layer, clean, connected, constantly updated. And now we turn that intelligence into action. With GTM Studio and GTM Workspace, execution becomes automatic. Sellers, operators, leaders, even their AI agents know exactly where to focus, what to do next and how to move the number. We're moving from powering decisions to powering outcomes from informing go-to-market to executing it. As we innovate for our customers, we continue to be focused capital allocators for our shareholders. In the quarter, we delivered a nearly 300 basis point sequential improvement in margins and are raising our growth expectations for the year. We remain confident in our ability to sustainably deliver revenue growth and expanding margins. And we continue to be aggressive buyers of our stock. We are increasingly confident in the trajectory of the business, which gives us even more conviction that our ongoing share repurchases will drive substantial shareholder value, and we will continue to put the majority of the cash we generate into repurchasing ZoomInfo shares for as long as that is the best and highest return use of our free cash flow. AI is giving us an opportunity to capitalize on our proprietary data assets. We are building stickier user engagement and customer relationships, and we have improved net revenue retention for the fifth straight quarter. With that, I'll turn the call over to Graham. Michael O'Brien: Thanks, Henry. Q3 GAAP revenue was $318 million, up 5% year-over-year, and adjusted operating income was $118 million, a margin of 37%, above the guidance ranges we provided. Over the last few quarters, we have highlighted the stabilization we have seen in the business. And this quarter, I'm excited to share several places where I now see signs of improvement. As you know, we have sharpened our focus on our upmarket business, which now represents 73% of our total ACV, up 10 percentage points in 2 years. This continued focus drove a 2-point acceleration upmarket with 6% upmarket ACV growth, coupled with a sequential improvement down market, which declined 10% year-over-year as compared to 11% in the prior quarter. Net revenue retention improved to 90% in the quarter, up 5 percentage points in the year and the highest level of NRR we have seen since Q2 2023. In-period net revenue retention for upmarket customers is again over 100% as we further entrench ZoomInfo as a mission-critical piece of the way scaled businesses go to market. We have always operated efficiently with disciplined investments driving high levels of profitability, and I am pleased to report a 37% adjusted operating income margin in the quarter, delivering year-over-year margin improvement, which, combined with our revenue growth, returned us to a Rule of 40 company for the first time in 6 quarters. We now have 1,887 customers with more than $100,000 in ACV, a 4% year-over-year increase in customers with ACV growth from that cohort materially outpacing customer growth. ACV growth in the quarter was particularly strong for this cohort. And next to Q4 last year, this is our best result in several years, adding 5x more ACV across our $100,000 logo cohort than we did in Q3 last year. ACV for the $1 million cohort accelerated in the quarter and was up more than 30% year-over-year. We delivered strong results this quarter, and we are again raising our expectations for the full year. Our upmarket strategy is working. Our innovation engine is accelerating, and our execution has been consistent. We are now guiding to low single-digit revenue growth for 2025 with an AOI margin of 36%, and we are confident in our opportunity to return to delivering Rule of 40 results on an annual basis as we drive a combination of revenue growth and expanding margins. And as opposed to a dynamic where equity is deployed as a substitute for cash compensation, our stock compensation relative to revenue runs well below software industry norms and continues declining with an increasing shift towards performance-based equity. And as a result, our Rule of 40 reflects a high-quality mix of strong operating performance and financial discipline. Operations growth accelerated in the quarter, continuing to grow greater than 20% year-over-year, and Copilot had another strong quarter. While still early, Copilot renewals are very promising with a mid- to high single-digit improvement to uplift on initial renewal as compared to renewals on Sales OS. As we focus on driving growth upmarket, we also remain steadfastly focused on making our downmarket business healthier as we do more to make it easier for smaller customers to buy the packages they need while reducing our cost of selling to the right customers in this segment. Our internal teams have done an excellent job leveraging ZoomInfo's proprietary data asset to engineer this shift. We built models identifying payment risk among smaller customers using our data to underpin collection risk prediction and new business risk scoring models. These integrate directly with our Salesforce instance and are fueled by ZoomInfo data to provide real-time risk assessments. Leveraging these models, we successfully reduced invoice write-offs by 45% since launching in 2024. In addition, the nature of our write-offs has changed with most write-offs now stemming from installments later in the contract of downmarket customers and the prevalence of write-offs where no payment was received is at all-time lows for the company. The quality of our customer base is improving, which is driving better conversion to revenue and improving collection trends. One item I would note is that as our business shifts upmarket, it is becoming more seasonal. And as such, year-over-year growth is becoming a more important lens through which to evaluate the business, while sequential growth is becoming less important. We expect the pattern of sequential revenue growth to fluctuate throughout the year, and you should not be surprised to see periods where the sequential trend steps up or down due to the amount of upmarket or down market activity and the linearity of ACV added in the current or prior quarter. With operations acceleration, positive Copilot renewal outcomes, a smaller downmarket business and improved upmarket NRR, overall net revenue retention continues to be on a positive trajectory, up 5 percentage points in the year. We also continue to shift customers to longer-term contracts with more than 50% of our overall book of business on a contract length greater than 1 year. This enables reps to be more consultative with customers and drives efficiency across the renewal process, which we will expect -- which we expect will continue driving better renewal outcomes and improving NRR over time. Turning to cash. Operating cash flow was $94 million in Q3. Unlevered free cash flow for the quarter was $95 million, an 81% conversion from adjusted operating income, consistent with seasonality from prior years and representing a margin of 30%. In Q3, we repurchased 8.3 million shares of common stock at an average price of $10.46 for an aggregate $87 million. Weighted average diluted shares outstanding for the quarter used in calculating non-GAAP diluted earnings per share was 334 million, and the non-GAAP share count exiting the quarter was 330 million. We have used 116% of the unlevered free cash generated since the start of 2024 to repurchase shares of stock, reducing our weighted average shares outstanding by approximately 80 million shares over the last 2 years. We expect to continue to use the cash flow we generate each quarter primarily to retire shares of ZoomInfo, and we are committed to opportunistically taking advantage of dislocations in share price as we remain resolute that share repurchases will generate the best possible long-term return for shareholders when done at a deep discount to intrinsic value like we see today. We ended the quarter with $135 million in cash, cash equivalents and investments, and we carried $1.3 billion in gross debt. As a result, our net leverage ratio is 2.6x trailing 12 months adjusted EBITDA and 2.4x trailing 12 months cash EBITDA, which is defined as consolidated EBITDA in our credit agreements. With respect to liabilities and future performance obligations, unearned revenue at the end of the quarter was $432 million and remaining performance obligations or RPO, were $1.17 billion, of which $824 million are expected to be recognized in the next 12 months. For those looking at calculated billings, the mix of our balance sheet reserve estimates and the changes in practices that we made relative to higher-risk businesses requiring prepayment in advance drove higher-than-normalized growth in calculated billings in Q3 last year. And as a result, I would caution you from extrapolating too much from the calculated billings growth trajectory in Q3 this year. In summary, we delivered strong results for the quarter with meaningful signs of improvement. Shifting to guidance. For Q4, we expect GAAP revenue in the range of $307 million to $310 million, adjusted operating income in the range of $117 million to $120 million and non-GAAP net income in the range of $0.27 to $0.29 per share. We are again raising guidance for the full year. And for 2025, we now expect GAAP revenue in the range of $1.237 billion to $1.240 billion, representing positive 2% annual revenue growth for the year at the midpoint of guidance and adjusted operating income in the range of $440 million to $443 million, representing a 36% margin at the midpoint of guidance. We expect non-GAAP net income in the range of $1.04 to $1.06 per share based on 341 million weighted average diluted shares outstanding, and we expect unlevered free cash flow in the range of $424 million to $444 million. In closing, we remain committed to properly managing expectations using a guidance framework consistent with prior quarters and are committed to delivering revenue growth, margin expansion and aggressive share repurchases in 2026, which when combined, support our expectation of accelerating free cash flow per share growth in 2026 relative to 2025. Now I will turn it over to the operator to open the call for questions. Operator: [Operator Instructions] And the first question will come from Mark Murphy with JPMorgan. Mark Murphy: Congratulations on a great performance. The magnitude of revenue upside is just noticeably larger for Q3 than it has been in the recent past. I think we're seeing the same on RPO. I'm wondering if you can drill down into what you think might have fueled that extra strength there in the quarter, for instance, should we say that it's Copilot ramping into more materiality? Could it be boomerang customers coming back onto the platform? Or could it be Google's AI overviews even maybe causing some companies to lean back into their outbound SDR hiring? Michael O'Brien: Yes. Thanks, Mark. Look, by every metric, Q3 was a really strong quarter. We executed well across the business. I'd say that the products that we're delivering are delivering better renewal outcomes. That mid-to-high single-digit uplift on initial renewal from Copilot is certainly above or above our internal expectation and that's contributing to revenue upside in the quarter. We talked about the largest TCV deal in history that we closed early in Q3. That contributed to revenue upside. Shifting the business upmarket is also contributing. So if you think about the 5 points that we've shifted away from downmarket to upmarket over the past year, the upmarket business is now 73% of total ACV. Those 5 points are effectively 5 points of revenue, whereas when that was down market, we would write off or churn through 20% to 30% of that. So when you look at the upmarket ACV growth of 6%, down market showing a sign of stabilization with the negative 10% year-over-year, you weight that and you start to get another kind of point or 2 of revenue growth just from better higher quality revenue base. The last kind of part of that bridge is if you look at usage-based and other revenue, which we generally don't include in our ACV disclosures, that was up $3 million year-over-year as well. And that's another point of growth to kind of contribute to that outsized revenue beat in Q3. Operator: And our next question comes from Elizabeth Porter with Morgan Stanley. Elizabeth Elliott: I wanted to follow up on the GTM Studio that just recently went live. Could you share some of the early customer feedback on the solution and specifically the breakdown that you're seeing between greenfield adoption versus existing customers replacing legacy tools or workflows? And what kind of leverage do you expect to see in some of those upsells with the new solution? Henry Schuck: Thank you, Elizabeth. The early feedback on GTM Studio has been really positive. We're really excited about bringing that to market. It's one of the most innovative solutions we've built at ZoomInfo and has the opportunity to be the biggest product we've ever released. At its core, GTM Studio is a data management platform that gives RevOps professionals, and frontline sales leadership the ability to organize and then architect a go-to-market strategy. First go-to-market Studio brings together and unifies all of your data, whether that be CRM data, call transcript data, e-mail data, ZoomInfo data, unique data that you have about product usage that lives in your data warehouses, brings that all together in one dynamic workspace to build a complete AI-ready view of your target market. That allows revenue operations professionals and leadership to build really unique audiences. And then with GTM Workspace and Copilot to directly execute those campaigns in those audiences with their frontline sellers. We view this as an incredibly white space opportunity that we have the opportunity to really execute against as we complete this year and into 2026 and see an incredible upside from what we're hearing from our customers and the innovative nature of the solution. Operator: And the next question will come from Siti Panigrahi with Mizuho. Sitikantha Panigrahi: Great. It's a great quarter. You talked about NRR up 1 point. Graham, could you talk about upmarket retention? How has that been trending? And especially when you're seeing this -- the NRR growth, how much of that driven by seat count versus cross-selling of your different other modules? Michael O'Brien: Yes, sure. The upmarket net retention was again above 100% in period in Q3. So we're definitely getting improving retention in that upmarket business as the mix becomes a greater part of the business. So we kind of get a compounding effect. It's coming from a lot of different places. We started building products a couple of years ago that were aimed at optimizing retention outcomes, and we're starting to benefit from that as these customers renew at much higher rates. We have upsell opportunity with Copilot now with GTM Workspace. We have upsell opportunity with go-to-market studio. Our operations business, which is our fastest-growing business, accelerated in Q3. So we have a multitude of vectors that are contributing to specifically upmarket net retention improvement. And then downmarket net retention improved sequentially in the quarter, too. So that was something that we wanted to see now that we're a year into the more rigorous qualification of new sales into that downmarket business into the pricing and packaging changes that we made at the beginning of Q3. And then you can also see this kind of as a sample in our $100,000 cohort, our $100,000 cohort had one of its best ACV quarters ever. And what you're seeing there is, historically, we were very focused on taking a customer that was spending $50,000 or $70,000 or $80,000 and getting them up into that cohort above that $100,000 threshold. We're still focused on that. We're still delivering positive logo growth there. But what's really promising is taking those customers who are already spending $150,000 or $200,000 with us and getting them up to $500,000 or up into our $1 million cohort. That's where the lion's share of growth is coming from upmarket now and in that cohort, and we are pleased to see another really strong quarter there for 100,000 logos in what is usually seasonally a little bit of a slower quarter. Henry Schuck: And Siti, also on retention and engagement with Copilot, as we release Copilot out to our customers, we anticipated because it was a better solution that our customers would engage more with it, and then that higher engagement would then turn into higher net retention rates. Obviously, we're just now sort of passing the first year of customers being on Copilot and that is coming to fruition. Our customers who are on Copilot have higher engagement and are now showing higher net retention outcome than their counterparts who are not on our copilot solution. And as we continue to release product that's more central to the workflow and more critical to go to -- mission-critical for go-to-market teams, we expect that trend to continue. Operator: And the next question will come from Brad Zelnick with Deutsche Bank. Brad Zelnick: Congrats, a lot of good signal in these results. Henry, can you expand on the agent force integration opportunity? What exactly is the use case? And how do you size that opportunity and the interest level that you're seeing? I know it's early, but whatever it is that you're seeing out there. Henry Schuck: Definitely. So at Dreamforce, Salesforce showcases a set of Agentforce agents. And we're really excited about this partnership because it's yet another proof point that AI and go-to-market should be grounded by ZoomInfo, whether that's in our products or agents running in other platforms like Agentforce, we grow when our intelligence gets consumed and Agentforce is a great partnership for that reason. You can now find the revenue agent in Salesforce's marketplace. It's featured, promoted and has co-selling incentives for the Salesforce team. And there are more products and collaboration plans, including an upcoming prospecting agent that we'll announce with extended press coverage. We feel really good about the signal that says, if you want to build AI and go-to-market, that AI needs to be grounded in ZoomInfo Intelligence. And we're seeing that across the enterprise. We're seeing that across our customer base. And with go-to-market studio, we're providing that to our customers as well. Operator: And the next question will come from Alex Zukin with Wolfe Research. Aleksandr Zukin: Maybe just again, addressing -- I think you did this in the script, but maybe putting a finer point on the delta between like really strong cRPO subscription bookings growth of 18% versus billings growth, which seemed a bit weaker. And more broadly, right, if I think about the exit rate implied by the guide for Q4 for next year, anything we should note about how to think about that with respect to what looks to be an improving demand environment as well as kind of increasing competitive product functionality that you guys are demonstrating? Michael O'Brien: Yes. I can take that. I'd say around the guidance and the exit rate, the approach there is consistent with prior quarters. We're really focused on delivering an upside Q4 here. And then we'll start talking about what that means for 2026 on the next call. On the billings growth, revenue growth, bookings growth, I think what you see in the current RPO being up 6% year-over-year, implied current calculated bookings growth of 18% is that there's some noise in that bookings just from the nature of how bookings is calculated. But I think that the RPO growth, the current RPO growth is like a good proxy for performance in the quarter. And then bridging that to billings, Q3 was largely the first clean year-over-year comparison we've had for a few quarters, except for billings. As I called out on the Q3 call last year, the mix of our balance sheet reserves and the changes that we talked about drove higher-than-normalized billings growth in Q3 last year, which makes that Q3 number this year look worse by comparison. When I think about the scale here, we're talking about an impact of about high single-digit millions year-over-year. Operator: And the next question comes from Taylor McGinnis with UBS. Taylor McGinnis: Maybe just to ask one off the last question. So -- you talked, I think, a little bit earlier about this shift with more business upmarket and causing more seasonality. Well, I guess when you look at the 4Q revs guide, it doesn't seem to imply that greater seasonality. So could you just talk through what are some of the assumptions embedded in the guide? And if there's still some headwinds that you're still working through on the revenue side as we get into 4Q? And I guess keeping in mind that seasonality, as we think about 2026, anything to keep in mind about sequential growth and how we're modeling it there? Michael O'Brien: Yes. When I think about the Q4 guide, I'd say that the guidance philosophy has not changed. We're continuing to managing expectations in a consistent manner as we have in the past several quarters. I think it's best to measure the growth on a year-over-year basis moving forward with the sequential trends continuing to fluctuate. Q3 performance was more front-end loaded than usual, and we expect Q4 to be increasingly back-end loaded which can influence that trend, but generally, that doesn't matter as much year-over-year. Henry Schuck: And I would just add, Taylor, that the momentum in our business feels better than it has in years, but we're going to continue to manage expectations to earn and keep our investors' trust. Operator: And our next question will come from Raimo Lenschow with Barclays. Raimo Lenschow: Congrats from me as well. Can you talk a little bit about like it does sound like the world is getting out better there. Can you talk a little bit about more nuance in terms of geographies, verticals, et cetera, where you see like things getting really better versus kind of stable or still weak? Henry Schuck: I mean I think that there was a lot in the better column this quarter, upmarket ACV acceleration, our upmarket retention improvements, company-wide retention improving for the fifth straight quarter, the accelerating operations growth, Copilot growth, all the product innovation and the positive feedback that we're hearing on Go-To-Market Studio. And then we've continued to operate with discipline and improving our profitability. We reached Rule of 40 again this quarter. I think when we think about what's happening in the world with AI, and the AI transformations that are happening at companies across our customer base, we're getting more and more confident that those transformations can't be successful without a valid data foundation, which we think of as context, context for the AI that's going to be deployed. And so we feel really good about the fact that as those transformations continue here, that we're going to be a necessary component to any go-to-market AI transformation across our customer base and across the universe of prospects that we sell to. So we feel really good about that. I think we saw improvement in downmarket retention sequentially as well, and we feel good about the new products driving better retention. And so I think there's just a lot in the positive column that gives us a lot of confidence in the business going forward. Michael O'Brien: [indiscernible] perspective. We saw software have improved retention sequentially for the sixth quarter in a row, and we also have really solid quarters in telecom, manufacturing and business services. Operator: And the next question will come from DJ Hynes with Canaccord. David Hynes: I'll share my congrats as well. Graham, for you, how much of the upmarket segment is on Copilot today? And then, Henry, the follow-up to that question is, do you feel like you have pricing right for Copilot now? Or are there still opportunities to potentially extract more value in the future? Michael O'Brien: Yes. We haven't disclosed what percentage of upmarket is on Copilot, but it's a significant portion where you got to think about upmarket as well. If you think about operations, which is more than 15% of our overall ACV, which is growing high 20s. That's almost exclusively an upmarket product or an upmarket user. So we've got a good kind of diverse mix of products and pricing models for that upmarket business. When we think about pricing for GTM Workspace for GTM Studio, we're designing pricing to optimize for customer simplicity and to remove barriers for customer adoption by providing a frictionless path to value. We want to balance the value we're delivering with monetization. So generally, we're thinking about these products as having a platform fee and then a prepaid AI action credit allotment. And really, what we're focused on in these next few months is driving early adoption learning as much we can about customer usage trends as we head into 2026. Henry Schuck: And we feel great about the value we're delivering for our customers. We think, with our new products, GTM Studio and GTM Workspace, there are many more opportunities for our customers to consume our data, to consume our AI within their organizations with their frontline sellers. But right now, we're focused on delighting our customers and making them feel like they're getting an enormous value from our partnership. And we're going to monetize where there are opportunities, but we want our customers to really be using our products in a mission-critical way. We'll see that benefit in net retention, and we'll see that benefit as they continue to consume our products throughout their organization. Operator: And the next question will come from Koji Ikeda with Bank of America. Koji Ikeda: I wanted to ask about the private unified data and AI company mentioned in the prepared remarks, a nice win there and clearly shows that they couldn't do it themselves. And so maybe can you talk a little bit about how that sales process went? And was it a bunch of back and forth with many proof of concepts? Or was it a pretty typically easy and smooth sale for you guys with this company? Henry Schuck: Yes. This was a customer who's actually been a customer of ZoomInfo for a number of years, and we've continued to grow that account through Merit across the organization. And as we continue -- as that company continues to move their business upmarket to target new personas and to bring on new salespeople, we're well positioned as we've already cleared security, data privacy review. We've built trust with our stakeholders there, we're uniquely positioned to continue to grow the account there, and we were and then executed against that. There's still a tremendous amount of opportunity within that account and across our enterprise clients. There are very few enterprise clients where we're wall-to-wall with an ELA of some sort. And so we see a lot of opportunity to continue to leverage our relationship with our customer base with the new products that we're releasing. Some of those products, when we're in the enterprise and we're selling large deals, those sales cycles are longer in the quarter. Our sales cycles overall were a little bit shorter than historically. But as we continue to shift the business upmarket, those sales cycles will extend a bit, but they come with a much larger price tag with them. Operator: And the next question will come from Parker Lane with Stifel. J. Lane: Henry, earlier in the call, you mentioned you've begun to play offense again. I was just wondering if you could talk about the current level of resourcing in your own go-to-market organization if that's at a level that can support you going on offense, and has it all changed the way you're thinking about inorganic contributions to the business, perhaps to accelerate the AI roadmap? Henry Schuck: Thank you for the question. Look, we feel like we're -- we have the right capacity within our sales organization to grow much faster than we've grown in the last number of years. We feel like what we've been missing are kind of 2 things, one that we've rebuilt over the last number of years, which is a really strong relationship with our customers, and we've spent the last number of years building strong consultative relationships with our customers to put us in a position to bring new products to them and new innovation to them that they are excited to receive from us. And so we've done a lot in the way that we've rebuilt the mentality of our go-to-market teams and the way that we serve our customers over the last few years to put us in a position where once we have products that we believe are best-in-class, that are innovative, that will change the way customers go to market, that we'd have an audience that was excited to receive them. And we think we're in that position now as we release GTM Workspace and GTM Studio to our customer base. We're excited about leveraging those relationships and the trust that we've built. From a capacity perspective, we feel really good. From a demand perspective, one of the things that we're seeing today, Mark mentioned it in his question is that customers are leaning back into their outbound SDR motions, where historically, they were looking for inbound opportunities, the shift in AIO and using LLMs to answer questions, has had an effect at the top of the funnel for our customers. And it's had a demand effect. And how do you fill demand when inbound is not filling that demand anymore, you have to go outbound. And so we're seeing our customers now hire more sales development reps, hire more full-cycle account executives, require self-sourcing from a prospecting perspective, and we're the partner that they trust to be able to arm those teams with the right data, and signals, and insights and now AI to be able to do that efficiently. Operator: And the next question will come from Tyler Radke with Citi. Tyler Radke: Earlier, you referenced kind of the Rule of 40, and certainly seeing good progress on that this quarter, but is that something that we should expect for next year? And how do you kind of think about the building blocks to get there? Is the 2% kind of exit rate a good proxy for next year? Michael O'Brien: Yes. I'm happy that on a quarterly basis, we achieved Rule of 40. This year, we're guiding to 2% revenue growth and 36% margin. So it's less likely that we would get there on a full year basis for 2025. And we're not guiding to 2026 today, but I will say we remain committed to properly managing expectations and then delivering revenue growth, margin expansion and aggressive share repurchases in 2026. And I kind of think of it through the prism of accelerating free cash flow per share growth in 2026 relative to 2025. Operator: And the next question will come from Brian Peterson with Raymond James. Johnathan McCary: This is Johnathan McCary on for Brian. Good to see the retention tick up, but I also wanted to ask on the net new business side, sales productivity there, and how that's performed against your expectations. And then, in some of those new Copilot wins, can you talk about any green shoots of evangelizing some of those new personas that you felt were a key unlock for ZoomInfo? Henry Schuck: I'll add a piece and then pass it to Graham. When we released Copilot, the idea behind it was to take this massive data asset and signal universe that ZoomInfo provides go-to-market professionals and then use AI to make their prospecting journey more productive. And it moved us from users having to manually sift through our data asset to using AI to tap into the full potential of our offering and then provide better go-to-market results. We are incredibly excited about the success that had for us. And particularly, it gave us this opportunity to go from what was historically top-of-the-funnel prospecting use cases, many times with SDRs to a broader base of account executives, account managers, customer success managers who got Copilot to be able to see risk in their business, to prioritize their accounts, to know their next best action. And so that gave us an opportunity to expand seats and personas from SDRs and top of the funnel prospectors to account executives, account managers, CSM, sales operations professionals. With the addition of Go-To-Market Studio and GTM Workspace, we feel like that's going to be an extension of our investment in Copilot. It will bring us even further into the use cases in account executives, account managers, SDRs, now RevOps and frontline sales leadership, who can leverage workspace and Go-To-Market Studio to drive execution in their Go-To-Market organizations. So we feel really good about not only the success we had in expanding personas with Copilot, but the opportunity in front of us to continue to expand personas with GTM Studio and GTM Workspace. Michael O'Brien: And then I can touch on the new business productivity. I'd say the trends there are what you would expect as we've deliberately shifted a lot of the resources upmarket. So down market, we've had fewer sellers where we've also rightsized packaging. We've qualified business at a more rigorous level. So on a pro rep basis, the productivity has been fairly consistent. And then if you think about the upmarket new business, that's still a $1 ACV number that's growing year-over-year. And as we've shifted kind of those reps to be more segmented and more focused on specifically upmarket customers, that was like a 9- to 12-month kind of ramp to get fully into that motion. And this quarter, Q2, Q3 really was the first time where we've gotten to the place where we feel like we're fully ramped and we're fully set up to run an upmarket versus down market new business motion. Operator: And the next question comes from Rishi Jaluria with RBC. Rishi Jaluria: Great to see some positive underlying trends in the business. I wanted to go back to Henry, you talked about how there's been a little bit of a shift in some of your customer base in doing more outbound versus inbound. Maybe I want to ask about ZoomInfo as a company, right? You talked in the past about wanting to invest in a little bit more of a PLG motion, while simultaneously going after this enterprise opportunity, which you've clearly seen some good signs of success in. Maybe, can you walk us through what are you seeing now with the changing search landscape with SEO becoming maybe a little bit less relevant, and AI search kind of coming to the forefront? And what sort of impact that's directly had on your business? Henry Schuck: Great. Thank you for the question. Look, we're seeing similar trends as others, and there's definitely an impact to the business from the AIO shifts. Now one of the positives here is that we have been in the process of shifting our focus upmarket to upmarket customers, where the impact of AIO and the changes in the SEO landscape is very mitigated. And so we feel really good about the fact that we made these shifts, that the business is less exposed to these shifts in AIO and SEO. And our PLG motion continues to perform in line with our expectations for this year, and then our focus from a sales organization perspective is on our upmarket business, and so we want significantly more of our new business mix to be in the upmarket. We're focused on growing our customers and our customer base. You saw that in our $100,000 cohort ACV growth in our $1 million cohort ACV growth and customer count growth, and you see that in our net retention numbers. We have a great customer base. They're hungry for new solutions, particularly around AI. They don't have a trusted partner there, and we feel like we have a really good opportunity now to provide them with innovative solutions and drive value for them. And then the business is much more upmarket today than it was a year ago or 2 years ago, and that's given us a lot of protection from these SEO and AIO changes. Operator: And the next question will come from Clark Wright with D.A. Davidson. Clark Wright: The Operations suite continues to be a key growth driver. And Henry, you made the point that the proprietary data assets that ZoomInfo has enhances enterprise's AI initiatives. How are you investing in leveraging AI internally to maintain and improve this data advantage? Henry Schuck: Yes. We are really proud of how we're using AI internally at ZoomInfo. We are customer-zero on all of the AI solutions that we're releasing to our customers. We have thousands of salespeople on these products before we release them to our customers. They're leaned in. It's driving efficiency and their ability to engage with customers in insightful ways. It helps them create decks, and QBR plans, and account plans and writes back to the CRM for them. It flags risk in their account base. So we feel really good about the way that we're leveraging AI across ZoomInfo. I would venture to guess that we are in the top decile of companies leveraging AI to drive efficiency and not just in our Go-To-Market organization. Graham talked about ways that we're using it in our finance organization. We're leveraging AI across our product organization. We've been able to drive efficiencies and lower headcount because we're leveraging AI to generate content for us to drive our product marketing motion. I think when we show other customers, our peer groups or our clients, the way that we use AI internally, they all walk away incredibly impressed by the way that we're leveraging it and wanting best practices, tear sheets that they can take back to their own organization. We're going to continue to invest in AI to drive meaningful efficiency in our business. Operator: The next question comes from Jackson Ader with KeyBanc. Jackson Ader: Graham, the commentary on 2026 free cash flow per share acceleration. I'm just curious if you think about splitting that between operational improvement versus, I think, the word you used was aggressive repurchases next year? Like, how should we think about the contribution from each of those sources as we head into next year? Michael O'Brien: Yes. I think about all 3 of them as contributors. And I know that hasn't necessarily been the case over the last couple of years. So I do think that we view this as we are committing to growing the top line. We are committing to improving margins, and we are committed to continuing to be aggressive with buybacks, and we're really excited about the compounding effect that hitting all 3 of those levers will meaningfully contribute to that acceleration of free cash flow per share in 2026. Operator: I show no further questions in the queue at this time. This will conclude today's question-and-answer session and also the conference call. Thank you for participating, and you may now disconnect.

196天前Insight Analytics约5分钟阅读

SFFLY 2025 Q3 财报电话会议

Operator: Ladies and gentlemen, welcome to the Schaeffler Group Q3 2025 Earnings Conference Call. I'm Sergen, 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 Heiko Eber, Head of Investor Relations. Please go ahead. Heiko Eber: Thank you, operator. Ladies and gentlemen, I'm very happy to welcome you to today's call on the financial results Q3 2025. The press release, the following presentation and our interim statement has been published today at 8 a.m. CET on our Investor Relations web page. And for sure, after the meeting, we will provide the recording and the transcript of this webcast. As a quick reminder, please note that all figures for 2024 are pro forma figures unless they are marked separately as reported figures, and the mentioned pro forma figures 2024 and related information are unaudited. As always, Klaus Rosenfeld, our CEO; and Christophe Hannequin, our CFO, have joined the conference call to guide you through the key information in our presentation. And, of course, afterwards, both gentlemen will be available for our Q&A. Now, without further ado, let me hand over to our CEO. Klaus Rosenfeld: Thank you, Heiko. Ladies and gentlemen, welcome to our Q3 call. You all have the presentation in front of you that we distributed this morning. You also saw the 3 press releases we published. I will start immediately on Page #4 with the summary. Good performance in a soft market environment is the headline. You see sales growth of plus 1.3% in Q3. I will go into a little bit more detail there. Gross margin at 20.3%. Please read the footnote. This is the gross margin excluding an extraordinary one-off loss of EUR 100 million due to the depreciation of SAP licenses. It's a comparable number to the 19.1% in Q3 previous year. So you see a quarter-over-quarter improvement there. EBIT margin at 4.5%, nearly a percentage point better than Q3 2024, also sequentially, clearly pointing in the right direction. Positive development and free cash flow, EUR 175 million in Q3, really points also in the right direction, also led us to upgrade our free cash flow guidance, as you saw in the last days. And then EPS is negative, in particular, due to the one-off restructuring, but also due to the depreciation of SAP licenses on an adjusted basis, it is positive. Now with this, let me quickly go through the business performance. You see on Page 6 the usual breakdown of where is the growth coming from. And we can basically say that except for the flattish development in Powertrain & Chassis overall, all divisions and regions contributed here. Europe is a little weaker than we would like to see it with minus 1.6%, also driven by Powertrain & Chassis. You see some of the unusual developments. Strong growth in Asia/Pacific is the same trend that we explained last time. It has to do with the shift of an important project from China to South Korea. And Americas with 18.4% in E-Mobility is new contracts that are now starting to perform. Vehicle Lifetime Solutions was 2.3%, weaker than in the previous quarters. But we always said this 2-digit growth is not going to continue. So with strong growth in Americas, also in the 2 other regions, Europe here, again, is the reason why this was not as strong as before. And Bearings & Industrials with 2.2%, I think, is in line with market. So a trend from our point of view that should not surprise anyone with 1.3%. At least the Q3 was a growth quarter despite all this turbulent environment. Page 7 then gives you more detail in our OEM business, auto powertrain, that's what we promised to give you, the breakdown by powertrain type both for the outperformance number and also for order intake and book-to-bill. And what you see is a continuation of the trend that we showed you for the first 6 months. 9 months, plus 13% outperformance in BEV shows that we are well on track there. And HEV is, for these 9 months, still below market. The same with ICE. The number has come down a little bit. Key for going forward is not what we are pointing today, but the order intake and the book-to-bill, and there you see that BEV and HEV are more or less on the same level with 1.8x. Let me say here, as we outlined also during our Capital Markets Day, we have a significant order book. Our key priority is to deliver that order book. We appreciate new projects, but only if they make sense and also drive our profitability. E-Mobility, next page, Page 8. As you probably expected, sales growth on the positive side, 4.7%, clearly driven by Americas and Asia/Pacific. Order intake in that quarter was EUR 1.2 billion, slightly below the second quarter, but still on track. That also leads to a book-to-bill in Q3 of 0.9. What really counts here is, from my point of view, the full 9 months. What is on the positive side here is the continuous improvement of the gross profit margin, plus 3 percentage points in Q3. And this also excludes the impact from the SAP licenses that for E-Mobility would have been EUR 24 million. You see 2 examples for new products -- for new projects. And with the development that we see here, we feel good that we are on track to deliver what we promised for the midterm. Powertrain & Chassis, slight sales decline. Gross margin continues to be strong and further improvement, 1.2 percentage points. Good order intake, but clearly with a book-to-bill that is below 1. As we always said, you need to, at the end of the day look at these 2 divisions somehow together, in particular when you think about the Powertrain business. And our idea that these hedges each other is clearly paying off. Vehicle Lifetime Solutions, I already said it, lower growth compared to previous quarters, in line with market and gross profit margin further improving. We always said it's not going to grow every quarter by 10%. But I'm really proud to say that our gross profit margin stays at a very high and satisfactory level. Bearings & Industrial Solutions, also here, we decided to improve our guidance a bit. The 5% to 7% was after a further improved third quarter. It's little bit outdated, so we moved it up to 6% to 8%. And we feel good that the business is further improving due to the various self-help measures, but also due to growth, in particular, in aerospace, but also in construction, agriculture, machinery, 2-wheelers and the new emerging area of medical equipment. Let's wait for the fourth quarter and see where we end up there. Capital allocation, Page #12. We continue our course here. Capital allocation schemes are known to you. We are very disciplined here. You see the reinvestment rate at 0.5x for the whole year -- for the whole business, excuse me, and that clearly means we are releasing capital at the moment. That is important to bring the SVA number back on track. We are now slightly below previous quarter with EUR 12.3 billion. And we will manage capital tightly. Let me also say this does not mean that we have restricted any type of growth because there's enough cash flow available to fund the projects that we're seeing. But as you know, we are restricted and want to bring SVA back to where it should be. Last page from my side before I hand over to Christophe, a short follow-up on the top 3 priorities that I explained during the Capital Markets Day. First is delivery of our order book. Again, we have seen a prominent SOP of electric drive products for a Chinese OEM. Again, an interesting player who is a pure play on the new energy vehicles. Several other SOPs, one in Europe for a premium European OEM and another one, again, for a European OEM and a Chinese OEM in chassis, rear wheel steering. So happy to say that the delivery of the order book is on track. The size is big and challenging, but we are learning. We are moving forward. And we are seeing good results from these 3 examples. Synergies is also on track. You'll remember what we said in the Capital Markets Day. We have more or less finalized our program that we call our Program Forward. Here is more detail on the plant in Steinhagen that was already in the numbers that we showed you. We will finish production in the year 2026, the portfolio. We consolidated into another plant, headcount in production is outlined, and at the moment, negotiated with workers' council. And I can tell you that this cooperation with employee representatives has always been an asset. It's painful for everybody, but it's the right track to -- it's the right step to streamline in particular our German operations. And last but not least, you saw the press release. We promised to streamline the business portfolio and reallocate capital. We said during the Capital Markets Day, there are 10 portfolio elements in the pipeline. This is now a first example. We have yesterday or this morning closed the contract with a Chinese specialist in turbocharger technology that requires our turbocharger business in China. It's a business that we inherited through Vitesco. It made EUR 100 million and is at the moment in a structural decline. So it makes a lot of sense to get rid of this. The agreement is signed. Please understand we're not disclosing more details, but it's a proof point of our promise to streamline. With that, I hand over to Christophe and -- for the financial performance. Christophe Hannequin: Thank you, Klaus. Good morning, everyone. After looking at the division look, let's take a step back and look at a single group level. Starting with sales. We delivered a strong quarter of growth once you adjust for foreign exchange. That growth, I'm happy to report, is profitable, as you can see on the gross profit evolution on the right side, EUR 119 million worth of volume effect. That's further proof point to the roadmap that we drew during the CMD. If you look at that EUR 119 million, close to half of it is driven by E-Mob. So we are growing, and we are growing profitably. The rest comes from the other divisions. We are also improving our cost structure or operational performance. That's the EUR 111 million that you see there. E-Mobility, again, displaying some improvements, about EUR 20 million worth of improvement linked with E-Mob. The bulk of the improvement actually comes from Bearings & Industrial, close to EUR 90 million quarter-over-quarter, demonstrating the measures, both for structural and in terms of operational performance, are paying off and are improving our gross profit and thereby our bottom line. A little bit of what I would call background noise on the next column with a mixture of inventory valuation, customer claims and a little bit of a restatement issued to be 100% transparent in the EUR 109 million. Foreign exchange, EUR 45 million, reflects the evolution year-over-year and our exposure to the different markets. All in all, from 19.1% to 20.3%. Again, this is corrected to neutralize the SAP license and not pollute the reading. If I go to the bottom line and now look at EBIT, this is even clearer, 1 full point worth of improvement from 3.5% to 4.5% of EBIT BSI year-over-year. You find again on the right side the strong gross profit improvement, excluding foreign exchange, the very controlled approach to R&D, some negative impact on SG&A, which is mostly driven by integration impacts. And foreign exchange, you can actually see here that the foreign exchange impact is lower at EBIT level than it is at gross profit level, thereby showing that the group has a little bit of an internal hedge even though the impact is still negative. And again, this drives a strong quarter at 4.5%. If we spend a little bit of time on each division, E-Mobility, as I mentioned, growing by almost 5%, improving its profitability by over 2 points, growing across all divisions and doing so in many regions, double digit in North America and some strong growth as well in China. So, again, the roadmap that we have announced quarter after quarter, we are delivering on it. On the PTC side, comment is one that you will hear, I guess, quite often from me in the next few quarters, it's all about balancing some slightly negative impact on the top line. There we see a slight decline. It was expected. It's linked to the phaseout business. But it is being balanced by an absolute laser-like focus on cost structure and restructuring to ensure that we protect margins and that we deliver the bottom line. In this quarter, the unit actually does more than that. And the improvement is over 1 point worth of EBIT year-over-year. Also, interesting to see that some business divisions are still in positive territories, so Engine & Transmission Systems at 3.4%. And when you look at the details, this is actually also driven by China, which is encouraging in terms of balancing our exposure. Vehicle Lifetime Solution, on the next slide, growing, still growing, slightly less than what you had seen in the past, but the environment is a little bit different. Nevertheless, delivering solid 2.3% worth of growth, 1.3 points worth of improvement in terms EBIT. Again, the interesting part there is where is the growth happening. It's happening outside of the traditional geographies for VLS, so strong growth in the Americas, which is still very much a conquest territory for us. And it's also happening if I look at it in terms of business division outside of the core Repair & Maintenance Solutions business division, but in the Specialty business in the Platform business. So resistance in, I guess, the home turf for VLS while the unit growth in terms of geography or in terms of product offering to the customer. Pricing, also on the favorable side, driving some of the EBIT improvement quarter-over-quarter -- year-over-year. Bearings & Industrial, if you go back to my initial comment, some growth, very -- double-digit growth in our Aerospace Bearings, plus 20%. Even more interesting, in my mind, positive growth in Automotive Bearings in a complicated automotive context. The division is still growing in that sector by 2%. Combining this growth with the very, very strong work done in terms of, a, restructuring, and b, focus on operational performance delivers an improvement of 1.4 points in terms of EBIT, almost at 8%. You can see the 7.9% for Q3 2025. This all translates into positive evolution of our free cash flow generation year-over-year, so we see almost a little bit more than EUR 0.5 billion worth of improvement from Q3 '24 to Q3 '25. I draw your attention on the bridge on the right side in echo to what Klaus said before to the EUR 244 million linked with CapEx, which is essentially us managing our CapEx spending to match it as close as possible to the need and the actual ramp-up of the different programs that are going through SOP and trying not to be too far ahead of the curve, not behind either in order not to put our customers at risk. So some really, really fine steering there in terms of pacing the spending and then also some steering in terms of focusing the spending where we create value. On what would be the last slide for me, our usual slide on debt profile, you can see the leverage ratio peaking in 2025 during Q2 at 2.4, now slightly improving in 2025. On the right side, our usual maturity profile, you can see that the 2025 topic is taken care of at this point through the bond issue earlier this year. Also, happy to report that the RCF facilities have been all extended as per our contracts all the way to the end of 2030, which is an interesting check in the box to have. When you look at 2026 and 2027, you can see that this is all quite manageable given the current conditions of the bond markets either this year or early next year. At this point, I will hand back over to Klaus to conclude on the guidance. Klaus Rosenfeld: Christophe, thank you very much. Ladies and gentlemen, I will be brief. You've seen that page. Just to repeat the basic logic, we increased guidance on free cash flow and also for Bearings & Industrial Solutions in those numbers. Let me finish with one more page on the other announcement we made today next to our numbers and also the little transaction in China selling turbocharger business. We announced this morning a cooperation agreement with NEURA. NEURA is, as most of you probably have heard, a leading German high-tech company active in the humanoid space. They don't -- not only do humanoids but other things as well. And we have agreed a partnership with them that will allow us to supply innovative actuation technology to them, which are, as you all know, key components for humanoid robots. NEURA and their founder, David Reger, are well known to the capital markets. It's the European player from our point of view. We're very proud of this -- for this agreement. Second, that's already digested, I think, last week, October 29, you heard about the U.K.-based robotics innovation company called Humanoid, also something where we are active. We completed a proof-of-concept phase with them with what is called the pre-alpha robot, also a specific design. And we are now moving into a second phase. This is just to show you 2 examples that will help us to grow into that new ecosystem. We will continue to report on this. It's clearly an attractive growth opportunity where Schaeffler is very well positioned to conquer a significant space as a technology provider and a supplier of choice. I'll leave it here. The last page is then the financial calendar. We are going on road show, separating West Coast and East Coast next week. And then there are the usual conferences for year-end. We also look forward to seeing some of you then in the new year in Frankfurt, New York and elsewhere. March 3 is our earnings release, and I am confident that we will bring the year to a successful close despite all the challenges that we have around us. With that, back to you, Heiko. Heiko Eber: Thank you. So operator, we would be ready for the first question, please. Operator: [Operator Instructions] And we have the first question coming from Horst Schneider from Bank of America. Horst Schneider: My questions, I would ask them one by one, please. The first one relates to this ongoing underperformance in automotive, which is driven by the phaseout of some of the Vitesco business. Can you maybe say how would the business have grown without these phaseout effects? And how long these phaseout effects still continue? So just try to get a feeling how long this drags down basically the outperformance. Klaus Rosenfeld: Horst, thank you for the question. I'm not 100% sure what you're referring to when you say outperformance. I mean, E-Mobility grew by 4.7%. Powertrain & Chassis is, as I showed on Page 6, more flattish. Yes, we are -- we were selling business, as I said, but that's a new thing. Maybe you can repeat or give a little bit more color on... Horst Schneider: Sorry, Klaus, I'm referring to Slide 7, which is a year-to-date perspective, to be honest. Maybe the effect is already over. Yes. Klaus Rosenfeld: Okay. You're saying the -- okay, now I understand it. It's 7, where you're saying ICE is below where market growth is. Well, I mean this is, from my point of view, a situation that clearly comes from a phaseout of certain things. I mean, this is a market growth for the whole ICE powertrain portfolio, and it's a function of how present are you with what kind of customer. As you know, we are strong in dampener technology. We are strong in the sort of old classical Schaeffler technologies, but there's also business here from Vitesco that drives us to some extent, but I don't have more detail at the moment. Horst Schneider: Yes. Okay. No worries. The next question refers more short term. Maybe if you can shed some light on the outlook for the fourth quarter. I know you have got your full year guidance in place, and that looks also fine. I just remember Q4 can be sometimes a tricky quarter, right, because unforeseen things can happen, as we experienced last year in industrial. So maybe it's also difficult for you to answer this question. But what trends do you see now in the fourth quarter? So I would assume that E-Mobility gross margin because the reimbursements come in and the highest share of that happens in Q4. And then Powertrain & Chassis, I was surprised about the good margin in third quarter. Is that something that continues also in the fourth quarter in that trend? And then, am I right to assume that industrial usually is a weak quarter in quarter 4? Klaus Rosenfeld: Well, I would phrase it like this. Q4 is typically a weaker quarter than the previous quarters because December, in particular, also is not as vibrant than before. Your description for E-Mobility, I think, is pretty spot on. I think that they will further grow and further improve because that's the trend. PTC, I just spoke with Matthias this morning in our preparation, and he said the call-offs are stable. That's a positive sign. He also clearly said that China is developing better than expected, what is also something on the positive. And when you look at tariffs, I think it's also fair to assume -- you're mentioning reimbursements on the E-Mobility side, classical situation, more Vitesco driven, but there is a synchronization benefit on the tariff side. We always said this, that will also support a little bit. So I think PTC, E-Mob will also benefit a little bit from this. Yes, Industrial is clearly a little bit of a question mark. If we wouldn't be confident that this quarter continues in the right direction, we wouldn't have raised guidance. The 6% to 8% is not a big move upwards, but what we see so far is with all the headwinds that are existing in that business, looking like a solid fourth quarter, let's put it this way. And in aftermarket, aftermarket is clearly something where I would expect that we don't get back to 2-digit growth numbers. But also there, the underlying fundamentals are continuing strong. So let's see what October brings and then we know more, but I would be cautiously optimistic that the fourth quarter is okay. Horst Schneider: Okay. That's great. The last one that I have is typically... Klaus Rosenfeld: For next year and all of that, that's clearly something that there are some unknowns and there are some uncertainties. Horst Schneider: That's great. The last question that I would have refers to E-Mobility because Valeo talked about negotiations with OEMs to get reimbursement on some contracts where the volume expectations have not been met. Do you see the same? Could that be a driver going forward that we have not yet in our forecast? Klaus Rosenfeld: Well, for sure. I mean, if you ask contracts where volume assumptions are massively under cut, then you seek compensation. That's a normal part of our business. But yes, that's -- there's nothing that we do not factor in. That's normal course of business from my point of view. But you all know that there is -- in the U.S., things have changed more dramatically because of the -- also the regulatory environment and the decisions that President Trump has taken. But in the other countries, that's not the case. But for the U.S., you clearly have a little bit of a shift in terms of how important is e-mobility going forward. Operator: The next question comes from Vanessa Jeffriess from Jefferies. Vanessa Jeffriess: Just wondering if you could please speak a bit more about the E-Mobility book-to-bill. I know you said you look on a 9-month basis. But with those customer postponements, are you seeing any exacerbation in those over the last few weeks? Klaus Rosenfeld: This was very difficult to hear. Can you -- madam, can you please repeat this? I don't know where this is coming from, but if you could speak a little slower, that would be good for us, excuse me. Vanessa Jeffriess: Sorry. Just with the E-Mobility book-to-bill and the customer postponements, I was wondering if you're seeing more postponements over the last couple of weeks, if that's exacerbating throughout the quarter. Klaus Rosenfeld: No. I think we have seen what, in particular, the big U.S. customers did, but there is no increasing trend of people giving back business. That's not the case. But any adjustments are part of our normal course of business, but I wouldn't. Christophe, maybe you have more insight. I don't know anything that points to a bigger trend towards the year-end, where we lose contracts or where volume goes back. Christophe Hannequin: Usually, our business tells us that the customer decisions are not always synced up with our communication deadline. So to have some volatility quarter-over-quarter during the year, it's not unusual. But as Klaus said, no underlying strong trend that we can detect on this. Vanessa Jeffriess: Okay. And then just on B&IS, just to be a bit more specific on what you said before. I know you said there might be some headwinds in the fourth quarter, but it seems in your new 6% to 8% range, it would be pretty difficult for you to get down to 6%. So I was just wondering your thinking around that and if there's anything specific in terms of headwinds. Klaus Rosenfeld: I would call it a cautious approach. We have -- you have seen that the last 2 quarters were all pointing in the right direction and above 7%. You saw what happened in Q4 2024. So we are certainly positive, but to increase it even further would have not been, from my point of view, responsible. Operator: The next question comes from Ross MacDonald from Citi. Ross MacDonald: Klaus and Christophe, it's Ross from Citi. My first question, Klaus, you mentioned Nexperia briefly in answering Horst's question. Can you maybe summarize where we stand on that issue as of today? I'm aware there's been some news flow over the weekend around potential exceptions. How do you see that situation playing out from here? Is it effectively resolved from your vantage point? Klaus Rosenfeld: It's definitely not resolved yet. But I can say for Schaeffler, so far, we have been -- not really been forced to stop any customer. I can praise the agility of our teams here, the risk management work when this came in. And we're clearly benefiting here from the strong experience and the insight that the Vitesco colleagues brought here to the table. Again, we have so far managed through this, knock on wood. It's different than the crisis that we saw some years ago because it is driven by this specific and certainly unusual Nexperia situation. It's, like before, a little bit of a race for where do you get a second source, how much do you have as inventory, which customer is asking for what. You need clear rules internally how you allocate what you have, and you need to be very quick to open up new purchasing channels. So far, that has worked well. But again, we are managing through that shortage like any other supplier as well. And I do hope that we get out of this with -- again, with not too much trouble. So far, that's okay. But we manage it on a day-by-day, week-by-week basis. But you need to look at that a little bit in a broader context. They agreed that certain export control restrictions will be relaxed. But the Nexperia situation is a little bit unusual. So you can't just simply apply this on Nexperia here because you have the insolvency situation in the Netherlands, you have the Chinese reaction to this. That's a specific situation that we need to handle separately. The agreement between the 2 presidents is clearly pointing in the right direction, and hope -- our hope is that this relaxes other situations as well. Ross MacDonald: Very clear. My next question is -- 2 questions really. But first one on the humanoid, and obviously, very nice to see continued momentum for that business. A lot of investors are asking around the volume implications, let's say, for '26, '27 on the back of these partnerships. I'm not sure if you can give any soft guidance on what we should expect in terms of growth for that start-up from here. Klaus Rosenfeld: Ross, it's one of the most relevant questions in that ecosystem, how many humanoids will be produced in 2030 or 2035. You have different projections. And again, we are a supplier in this situation. We think about this as a business where we can show our industrialization strengths. So the number of the volume per robot -- sorry, the volume of robots is critical here, as critical as our content per robot. Don't forget there are different types of robots. This is not only one design, but there are several designs. When you talk to different players, and take David Reger, for example, who is clearly one of the most prominent ones, he normally says 5 million. That's a larger number than what we are expecting at the moment, but it's good to be cautious here. But it's also good to know what you do when this really takes off quicker. But we are at the beginning. It's not that we can show you already numerous volume contracts. But the interest in this and also the interest in Schaeffler as one prominent player who is able to scale is definitely increasing, and that's shown by this contract. But I'm not in a position to give you an accurate prediction of what will come. That's the nature of the game. But what I can say is we will and want to be prepared for the next year and the year thereafter. I think we'll see more clearly in the next 12 to 24 months. I can also say we are looking at this from the 3 main regions, both U.S., China and NEURA is the main -- the top European player. Christophe and myself will be in China end of November also to look at our humanoid factory that we're building there, not to produce humanoids, but to deploy humanoids to see how they can help us in production. So this whole ecosystem is emerging. It's a very interesting play for us, and we will stay on top of the development. But I'm not in the position to give you now an accurate number how much robots you will see in 2030. We are cautious, but are prepared for a steeper ramp-up. Ross MacDonald: I actually have 2 more questions, but I promise to keep these very brief. The first one, actually from an investor, just thinking about the U.S. business for Vehicle Lifetime Solutions, we've seen a bankruptcy in that space with First Brands recently. Do you see that as an opportunity for Schaeffler to potentially gain some market share in the aftermarket tactically? And then my second question for Christophe on the free cash flow, just a housekeeping question, there is a significant benefit in the third quarter from the Other bucket, a positive EUR 91 million contribution. Could you maybe just give us some breakdown of what's driving that? How much is one-off in nature versus potentially carrying forward into the coming quarters? Klaus Rosenfeld: I will be brief on the first one. I mean, First Brand is an unfortunate situation, but it doesn't really affect us. I mean, your question was more on M&A type of growth, I would assume. The focus here is clearly on organic growth. Jens is at the moment in Las Vegas for the AAPEX show, a significant potential, and as we said, broadening our spectrum. You saw, I didn't comment on this, in the deck, also the NOx sensor. That's a great example for portfolio extension and tackling the truck and bus part. So I would not think about our growth predominantly being external growth, but internal growth. That doesn't mean that we are not looking at opportunities if they are there, but we will be very careful. Christophe Hannequin: On the cash side, I wish there was an easy answer to this one. It is a very long list of plus and minuses centering around restructuring from one end, incentive payments, payroll and taxes. It's leasing liabilities. Again, I struggle to give you a summary answer, happy to get into details offline after if you wish to, but there's no real one topic that we would point to. If we had to pick one, it maybe around the pension side. But even that, it's only tackling one part of your answer -- of your question. Ross MacDonald: Okay. Christophe, I mean, maybe it would be interesting just to understand if potentially on the restructuring costs you've sort of guided us to whether those are coming in below expectations, and therefore, you're able to write back some of that free cash flow, if that's an element of this or whether it's really just a big, commingled list of pluses and minuses, as you said. Christophe Hannequin: No, we're not signaling restructuring costs lower than expected. What you do have is some timing issues quarter-over-quarter. I mean, restructuring cash flows, it's as much of an art as it is a science. So we do have some movements quarter-over-quarter from 1 year into another potentially, but no signal so far that there would be less cash outflows related to restructuring. Operator: The next question comes from Michael Punzet from DZ Bank. Michael Punzet: I have 1 question on your special items. Maybe you can explain in a bit more detail what you have booked in Q3, especially with regard to the impairments? And maybe you can give us any kind of guidance what we should expect for the full year? Klaus Rosenfeld: I think it's on the SAP. Christophe Hannequin: The main one in Q3, again, it's the fact that we are moving from an on-premise solution to SAP to a cloud-based solution. So we're not able to apply the same accounting treatment that we would have in the past. So you have EUR 204 million being written off for that topic alone that's flowing through the adjustment line. The other ones are the usual ones that we have had from the previous quarters related to the merger of the 2 companies and the restructuring that come with it. The big ticket item this month for this quarter, it's SAP. Klaus Rosenfeld: And it's driven by the fact that we're moving into the cloud and that we have to give up the utilization rates that we were assuming so far. That triggers this. It's a little bit of an awkward situation that was heavily discussed with auditors. But it's not a classical impairment in a sense that you have an asset that doesn't function anymore, that doesn't produce value. We are changing here the way we are treating it because we are moving from on-premise what we had so far into the cloud. Christophe Hannequin: This was heavily discussed with our auditors. We are not the only group out there that's facing the situation. I'll just say that the accounting standard there is a very conservative approach to the topic. Michael Punzet: Okay. And what should we expect for Q4 or the full year in the overall figures for the special items or one-offs? Christophe Hannequin: For the SAP, there will be a little bit of it, just to close that topic, impacting October. But we are talking single or -- single-digit or low double-digit amount that's done for the rest of the year. For the other topics, again, the usual suspects that you find in every quarter since the merger and the announcement of restructuring programs. Operator: [Operator Instructions] We have a follow-up question coming from Horst Schneider from Bank of America. Horst Schneider: I have got follow-up questions. The first one is related to Defense business. We saw this week that the first German auto supplier says he wants to get into drone production. I just want to get an update where you stand on that, if that could be something for you as well. And maybe you can talk about the outlook of your Defense business maybe in that context. The second one is a follow-up on the Humanoid business. I know you cannot share a lot of details, but could you maybe say, given the order intake that you got so far, where you see the main business potential for you? Is it more in the U.S.? Or is it more in China? Or it's all over the world and you cannot say? Klaus Rosenfeld: Let me tackle -- take the last one. As I said, we want to play in all the 3 regions that you mentioned. There is a -- the jury is out there who comes with the first volume contract, and you clearly need to define what that is. It's, at the moment, not clear what's happening there. We see the U.S. there with the prominent names probably as the leaders because there is more concentrated on one prominent company. While in China, there are many, many players at the moment, where it's a little bit more difficult to distinguish who are the ones that we maybe should bank on. NEURA is, I think, the most prominent player here. At the end of the day, of course, this is all depending on the end customer demand. And I can only say this Amazon announcement that was also well received, we need more of these kinds of players to articulate their needs. And that will then flow through the Humanoid OEM and also through the supply chain. I personally think that the U.S. will drive that first phase, and we'll then see significant competition between U.S. and China. When you go to the 5-year plan, it's obvious that the industrial automation in China is key to the next 5 years in China. There is massive support there. But on the short term, my view is that we will -- we need to watch out for what's happening in the U.S. They will drive it. Yesterday, when David was here with us, also in the Board meeting, he gave us a little bit more insight. And it looks that the next 1 or 2 years will be decisive on who is going to be ahead. Maybe it's a little bit a statement that is more diplomatic, but we need to see how it unfolds. In terms of Defense, let me quickly put that in perspective. We have said at the Capital Markets Day, Phase 1, that the basic decision that we want to play in defense or play more in defense is taken also with our shareholders from the family side. We are now in Phase 2. Phase 2 has 3 main deliverables. The one is a more articulated product, sales and also industrialization strategy. Without saying too much detail, we are today in a situation where we are looking at the key opportunities for us, for sure. Flying objects, let me call it like this, are super interesting because there is scale in that area and there is a product that is needed in particular when you think about high-performing electric motors. That's also where the fact that we are automotive and aerospace helps us. There is opportunity in everything that are vehicles for us. There is opportunity also in some of the high energy weapons. There's also opportunity when you think about spare parts and repair solutions. So we're looking at focused areas with dedicated customers. We have a lot of calls, a lot of demand, a lot of people that are coming, can you help us with your supply chain experience, also from the start-up side. But we are, at the moment, still in that selection phase. The second phase will last probably until Q1 2026. What is key then if you want to really turn this into a solid business? You need a structure. You need a legal entity. You need to have the right certification, qualification, in particular, if you want to play at scale. And that's a second key element that we are working on. So all good in that second phase. More to come when we are finished with this phase and have decided where do we really want to play in terms of products and application. Operator: There are no more questions at this time. I would now like to turn the conference back over to Heiko Eber for any closing remarks. Heiko Eber: Thank you very much. So with this, we would like to close today's call. Thanks to our speakers. Thanks to everyone dialing in for your questions, your interest. And, of course, thanks to the team for the preparation. As always, if there are additional questions, please reach out to our IR team. And I would already like to draw your attention and block your calendars for January for the CES. The formal invitation to visit us at our booths in Las Vegas will be sent out shortly. I guess you have it on the radar anyhow. Thank you very much. Have a good rest of the day, and talk to you soon. Klaus Rosenfeld: Bye-bye. Thanks, everyone. 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. Goodbye.

196天前Insight Analytics约5分钟阅读

YAHOY 2026 Q2 财报电话会议

Operator: We'll now begin the LY Corporation financial results briefing for the second quarter of fiscal year 2025. Thank you very much for joining us today. We will be referring to the financial results presentation available on the LINE and Yahoo! LY Corporation website. During today's session, we kindly ask you to follow along with the material. Joining us today from LY Corporation are Mr. Takeshi Idezawa, President and CEO; Mr. Ryosuke Sakaue, Executive Corporate Officer, CFO; Mr. Yuki Ikehata, Corporate -- Executive Corporate Officer, Corporate Business Domain Lead; Mr. Makoto Hide, Executive Corporate Officer, Commerce Domain lead; Mr. Hiroshi Kataoka, Executive Corporate Officer, Media and Search Domain lead. First, Mr. Idezawa will provide an overview of our financial results for the second quarter of fiscal year 2025. Following his presentation, we will hold a Q&A session. The entire briefing is scheduled to take approximately 1 hour. We will be live and streaming this session. If there is any distortion or inconvenience in the video or audio, please try alternate server link. Takeshi Idezawa: This is Idezawa of LY Corporation. First, before explaining our financial results, I would like to comment on the system failure caused by a ransomware attack that occurred at our group company, ASKUL Corporation on October 19 and the partial leakage of information held by the company. We sincerely apologize for the significant concern and inconvenience caused to our customers who use our services as well as to our business partners. The details regarding the damage potential information leakage and recovery status have already been communicated by ASKUL. The company is continuing to work closely with external experts prioritizing a safe and prompt restoration of systems while investigating the cause and confirming the scope of impact including any personal data. LY Corporation is fully cooperating with all recovery and investigation efforts. As the parent company, we take this matter seriously, and are committed to restoring the situation and preventing recurrence and strengthen the information security framework across the entire group. Now let me explain our second quarter financial results. Please turn to the next page. First, here is an overview of the second quarter results. Consolidated revenue was JPY 505.7 billion, up 9.4% Y-o-Y. Consolidated adjusted EBITDA grew 11.3% Y-o-Y to JPY 125.4 billion showing solid profit growth. Additionally, progress in AI agentization and the expansion of LINE Official Account and Mini apps are progressing smoothly, preparations for the LINE renew are also steadily progressing. Home tab refresh scheduled within the year. We will now proceed with the explanations in the order of the agenda you see here. First, the consolidated company-wide results. Next page, please. These are the results for the second quarter. Although consolidated revenue was slightly behind the guidance due to the decline in search advertising revenue, adjusted EBITDA and EPS are on track with the guidance. Next page, please. These are the consolidated performance trends, driven by the growth of PayPay consolidated and progress in efficiency improvements at LY Corporation, adjusted EBITDA grew 11.3% Y-o-Y, achieving double-digit profit growth. The margin also improved year-on-year. Next page, please. These are factors of change in consolidated adjusted EBITDA. Although expenses increased, revenue growth in the Strategic Business and Commerce Business outpaced the expense increase, resulting in a year-on-year increase of JPY 11.7 billion in adjusted EBITDA. BEENOS and LINE Bank Taiwan have been fully consolidated since the second quarter with the 2 companies contributing JPY 900 million to adjusted EBITDA. Next page, please. This is consolidated total advertising-related revenue. This quarter, commerce advertising achieved double-digit growth driven by increased transaction value and the total ad revenue grew by 2.4%. Next page, please. This is consolidated e-commerce transaction value. Domestic shopping transaction value grew 13.1% year-over-year, supported by last-minute demand ahead of the discontinuation for awarding points for hometown tax donation program. Reuse saw year-on-year growth of 15.7%, driven by Yahoo!'s lead market growth and BEENOS contribution. Next page, please. Regarding the upward revision of the dividend forecast, we conducted share repurchase during the first half of the current fiscal year and the cancellation of these shares was completed on September 3. Consequently, as the number of shares eligible for dividends has decreased, the annual dividend has been revised upward from JPY 7 to JPY 7.3. Next page, please. This is on progress on the LINE app revamp. The renewals of the talk, shopping and wallet tabs have been rolled out in phases since September. Home tab renewal is scheduled to make a test release this year. Next page, please. This is on optimization of management resources. Firstly, on human resources, we are reallocating to growth areas such as AI agents, which will be explained later, Official Accounts and MINI Apps. We will reallocate our human resources so that by FY 2028, 50% will be allocated to growth areas. We will reduce the fixed cost by JPY 15 billion by the end of fiscal year by 2026 and build a leaner financial structure. Next page, please. From here, I will explain the financial results by segment. Next page, please. First, the Media Business. Although both revenue and adjusted EBITDA declined, continuous cost-saving efforts are yielding results, leading to improvement of adjusted EBITDA margin on Q-on-Q basis. This is performance analysis of the Media Business. While search advertising revenue contracted, growth in account advertising drove an increase in total advertising revenue. Next page, please. Account advertising continues to perform strongly in both the number of paid LINE Official Accounts and pay-as-you-go revenue. As this is an area we are strengthening alongside MINI Apps, we will provide a more detailed explanation of future strategies and initiatives later. Next page, please. Next, the performance trends for the Commerce Business. Second quarter revenue reached JPY 216.6 billion, a year-on-year increase of 7.2%. Adjusted EBITDA was JPY 33.3 billion, although profit declined due to increased promotional expenses related to the hometown tax donation program, the decline narrowed compared to the previous quarter. Next page, please. Performance analysis of the Commerce Business. The business as a whole is expanding steadily. In addition to the full consolidation of BEENOS, Yahoo! Shopping and subsidiary growth contributed to increased revenue. Next page, please. performance trends for strategic businesses such as payment and financial services. Revenue continued to be driven by PayPay consolidated, reaching JPY 109.7 billion, a year-on-year increase of 35%. Adjusted EBITDA also continued to grow, reaching JPY 22.9 billion, an year-on-year increase of 52.1% with margin remaining at a high level. Next page, please. Performance analysis of strategic businesses. Payments and financial services are both growing steadily. Furthermore, the full consolidation of LINE Bank Taiwan contributed to increased revenue. PayPay consolidated business overview. Each service is growing smoothly. Our number of payment per user and unit price, those KPIs are progressing smoothly. As a result, consolidated sales has increased Y-o-Y, plus 30.4%. Consolidated EBITDA was more than doubled. So the second quarter showed a significant strong growth. Next, from here, I will explain our key strategy going forward. Next page, please. As our company-wide key strategy, we will advance as 2 wheels that agentization of all services and the enhancement of Official Account and MINI Apps. In agentization for the 100 million users using our services, we will provide services like search, media, finance and commerce more conveniently via AI agents. And for corporate clients such as businesses, companies, stores and brands, we will provide customer contact points and business support function through our function enhances Official Accounts and MINI Apps by improving the value provided to both users and clients and by seamlessly connecting both via AI agents, we will realize new service experiences and expansion of revenue opportunities. Please turn to the next page. First, regarding our initiatives for AI agentization. First, our goal is daily AI agent used by our 100 million users in Japan, aiming for 100 million DAU. Currently, in October, DAU for AI services is 8.6 million, especially AI answers on Yahoo! JAPAN search and LINE AI Talk Suggestions are used frequently and user numbers have begun to expand. Also for AI Talk Suggest, user billing has started and monetization efforts has also begun. Going forward, we will promote AI agentization of each service and aim to expand users. Next page, please. Next, regarding the enhancement of OA, Official Account and MINI Apps. But before talking about the specific initiatives, I'd like to explain the structural transformation of the Media Business. Earlier, I explained the revenue decline in search advertisement in the Media Business, while steadily bolstering the conventional search and display advertising businesses, we will achieve sales and profit growth by further growing OA and MINI Apps where we can provide our original value. Over the next 3 years, we will increase the share of high gross margin OA and MINI Apps to about 40% and aim for an adjusted EBITDA margin of 40% to 45%. First, regarding the performance of OA, Official Accounts in Japan over the last 3 years, our track record, the number of paid OAs improved by a CAGR of 14% and ARPA also improved. And as a result, OA revenue also grew 16% annually on average and sales have grown to the scale of JPY 100 billion in Japan and JPY 140 billion, including global. Please turn to the next page. On top of this OA growth foundation by further building a MINI App platform and adding a SaaS-like store support solutions, will create a multilayered revenue structure and aim to double sales in 3 years. This fiscal year, as I mentioned, doubling the JPY 140 billion to JPY 280 billion. In this fiscal year, we will first focus on expanding MINI Apps based on OA and launching the SaaS business. Important KPIs for the revenue models of each areas are shown in the lower section of this page. MINI Apps are -- our scale expansion is very important for KPIs in the growth phase. In OA SaaS, we set ARPA improvement as KPIs. But we think these KPIs as leading indicators to monitor our business goals. Next page. Let me explain structurally. First, there is an OA, Official Account as a base. Currently, there are 1.3 million active Official Accounts used in Japan, in which number of paid Official Accounts are 310,000. We see the target accounts for future expansion such as businesses, companies, stores and brands at about 5 million. So we can still grow the number of OA accounts, and we will also further increase the ratio of paid accounts. The second layer, MINI Apps to OA using companies and stores, we will propose a customer contact point via MINI Apps, expanding MINI Apps numbers, growing users and creating businesses like payments and ads within them. The third layer is SaaS solutions, developing specialized support for high affinity industries like Store DX or reservations, aiming to raise ARPA. Service launch planned for 2026 first half. And we'll have more new solutions at the right timing when we can introduce them to you, we will. We will provide services more broadly and deeply and provide a deeper solution via SaaS by industry to expand our sales. Finally, regarding the recent growth of MINI Apps, as you can see on the left-hand side graph, number of apps has increased by 1.5x and the number of users has increased by 1.6x, steady growth. And we are strengthening our sales structures. We are enhancing proposal to bigger companies and installation at large enterprises like these are beginning. As you can see, and as a measure to strengthen inflow, we are leveraging LINE touch, which allows users to instantly launch MINI Apps at stores and the LINE apps revamp focusing MINI Apps will also begin. So we will further expand both the number of apps and the users and build a situation where businesses like advertising payments that can be provided. Let's turn to the next page. And finally, a summary of the Q2 financial results. Sales and profit expanded steadily. Our company performance was -- experienced a solid growth. Going forward, centered on AI agentization and Official Accounts and MINI Apps, we will accelerate the growth. We will promote AI agentization across all services, offer AI services to 100 million users and create new value. Also, we will enhance OA and MINI Apps. And while transforming the media portfolio, we will achieve growth and improved profitability. This concludes our Q2 financial results explanation. Thank you very much. Operator: We would like to now begin the Q&A session. [Operator Instructions] First from Goldman Sachs Securities, Munakata-san. Minami Munakata: I'm Munakata from Goldman Sachs. I have 2 questions. My first question is on search ads. In the first quarter and also in the second quarter, the impression I got is this business is quite tough. The degree of toughness, is it correct to understand that it's the extension of the first quarter? Or are there any additional reasons? And on search ad, what would be the realistic guidance towards the second half? That's my first question. Ryosuke Sakaue: Thank you for the question. I am Sakaue. I'm the CFO. Let me reply to your question. Second quarter year-on-year is worse compared to Q1. One of the factor is one major client budget allocation was weak, and that continued into the second quarter. And in addition, in other clients, the budget reduction happened. This I'm referring to large EC companies in Japan and vertical companies declined, and that can be called additional from Q1. So that was the additional factor for Q-on-Q deterioration. And Q3, Q4, I think the degree of negative -- negativity is same as Q2. For Q3 and Q4 as well, that is our forecast. Minami Munakata: I have a follow-up question. There are other clients with quite reduction. Is there any structural reason such as shifting in-house or revisiting ROI of advertising? Is it more of an economic trend? What is the nuance? Yuki Ikehata: This is Ikehata. Let me reply to your question. This is Ikehata. I would like to add some more comments. In addition, there were some industry -- well, in addition to prior quarter's reduction trend in other industry, partially, that is -- there was a reduction in ad spend for search ad. The concept of ad placement, I don't think that is such a reason. But overall, LINE Yahoo! search ad performance is being monitored and the advertisers operate. So based on that, there is -- there was a decline in ad placement. We will continue to work on the performance improvement of search ad, and that would lead to getting these customers back. So rather than any unique circumstances, we are to continuously work on performance improvement of search ad. Minami Munakata: I understood fully. Another question is on MINI App. This time, various figures were presented and outline was explained, and I was able to learn. Thank you very much for that. The portfolio shift -- this chart has been shown. Just to reconfirm display and search, basically, it's very difficult to grow these areas. Is that the assumption you are setting? And JPY 140 billion to be expanded to JPY 280 billion, that has been rather difficult. And what is the pathway you envision? For example, from the first half of 2026, you're going to start SaaS service. So from the second half of next year, do you expect the sales to accelerate? Takeshi Idezawa: This is Idezawa. Let me answer your question. Display, search, naturally, the measures to revamp or to boost them, we are taking measures. And also thanks to the organizational change that we have implemented, we are able to implement activities to work on recovery. But structurally speaking, I don't think this is an area where we can expect high growth rate. So from that perspective, we will support the baseline for the display, search. And then apps will drive the growth. And we have the target of Official Account doubling and CAGR-wise, it has been 16%. And so we have this growth of OA, Official Account as a basis. And to add on top of that, we are going to provide MINI Apps and SaaS services. So we will be pursuing the target by having breakdowns or compositions in mind. On MINI App, it's not a linear growth, but when we have a certain number of clients, then we can expect a significant activation. So the MINI App platform will be stronger in the later half. And then that would be the overall picture. Operator: Next question from SMBC Nikko, Mr. Maeda, please. Eiji Maeda: This is Maeda from SMBC Nikko. I have 2 questions as well, please. I'll be recapping the previous comments regarding search linked ad. Together with popularization of GenAI, the negative impact to queries. And when I look at the performance, some of the clients looks like ad placements are declining in numbers. So because of this GenAI, the performance is having a negative hit on the flip side. If you could please share more on the recent trend? And also for the market, we -- there is still a concern that GenAI rise can be a negative for a search-linked ad. If you could please share your outlook, that would be great. Ryosuke Sakaue: Thank you, Mr. Maeda. Sakaue, I will start, then possibly Kataoka will follow up. At the moment, Yahoo! Search, 10% of query comes from AI search. And at the same time, the answers from AI search are business query where there is no opportunity for search-linked ad, like questions and answers. Those are the search keywords that we get. So it doesn't have much impact to our revenue and profit making. But at the same time, mid- to long term, regarding those business query, I would think that the there will be more use on use of GenAI. So media and search, we expect the next 3 years to be flat plus extra. Hiroshi Kataoka: This is Kataoka speaking. As Sakaue mentioned, number of queries for search have not resulted in significant decline in the number of queries. There is no major time shift in the search trend. And ad performance itself hasn't deteriorated. So within this big global trend, there's more use cases from GenAI are increasing. And I'm sure more of our clients companies are considering to further use GenAI. We believe that there will be opportunity, the monetization business opportunity when it comes to GenAI-led search as well. So we are considering various different means to monetize. Eiji Maeda: Second question, regarding Commerce Business. In second quarter, each services growth on the Page 8. Regarding Yahoo! Shopping, the hometown tax, I wonder how much of that impact is included. I wonder in the second half, there can be a significant decline in the growth as a reversal factor. And if you exclude the BEENOS impact, what is your true growth opportunity? So the growth in the cruising pace and growth from a one-off reason, if you could please share for the results in the first half and what you expect for the second half, please? Unknown Executive: Okay. Sakaue would share some figurative indication then -- and I'll have my colleague, Hide to provide additional information. And regarding Yahoo! Search -- sorry, Yahoo! Shopping, for second quarter, the growth was about 19%, 1-9, so quite significant. And hometown tax, late high single digits, mid-single digit to high single-digit growth. And for Reuse, this includes Yahoo! Auction, Yahoo! Flea Market and BEENOS as to be about 15% growth. So excluding BEENOS, we do have mid-single-digit growth. Second quarter has this last-minute demands for hometown tax. So that led to this significant growth rate. Makoto Hide: This is Hide to provide additional information. Regarding Yahoo! Shopping, a significant impact from hometown tax. This is something that was happening at the end of the year in December time. So it's a front-loading of that demand now. Compared to the last year, Q3 growth rate will be stagnant, will slow down. For Reuse, excluding BEENOS, I do see the trend continuing. In other words, Yahoo! Auction growth is quite steady and Flea Market is growing significantly. So when you take the weighted average, our growth is mid-single digit. I would think that for the second half, we can expect a similar growth, and we'll have a synergy, as you can see on the right-hand side, to have a more significant growth in the midterm. Operator: Next, Okumura-san from Okasan Securities. Yusuke Okumura: This is Okumura from Okasan Securities. Can you hear my voice? Unknown Executive: Yes. Yusuke Okumura: I have 2 questions. On Page 26, you have been explaining on the account ad and MINI App expansion and double the sales from this, I would like to reconfirm Official Account, the platform part based part, the assumption is the current growth rate. And through MINI App several dozen billion will be added on top. Is that the assumption? If this becomes a reality, it's wonderful. But what is the background for being so bullish at the time of launch, the assumption of the MINI App or MAU in order to achieve your assumption, what kind of measures and scale of investment you're going to make in order to achieve your strategy? That is my first question. Unknown Executive: Firstly, the growth image of official apps, I would like to explain and the strategy to grow will be replied by Idezawa-san and Ikehata-san. The existing OA part, the current level of growth can be maintained. To be more specific, 10% to 15%. Currently, it is growing at nearly 15%. So maintaining the same growth level. The paid accounts can be expanded in this pace, but that will not bring us to double. So the gap will be compensated by MINI App and SaaS. The strategy will be explained by Ikehata. Yuki Ikehata: Thank you for your question. Let me just add some more comments. In your question, you said that it's still the starting phase and this forecast may be bullish at the starting phase. But right now, we already have Official Accounts and MINI Apps, although partially we are not monetizing yet to many customers, similar solutions are offered and being used, and it's been -- the customers are satisfied. So for MINI Apps, we will increase the number. And at the same time, we will focus on monetization. That is for next year and beyond. Official Account SaaS solution already, including third-party solutions, we are collaborating with various companies and various solutions are already being utilized. So our strategy is to monetize them from next year and onward. We haven't been able to try or something that does not fit the market to start from scratch. Well, that is not the case. We already have existing foundation of Official Accounts, and we are offering various services, and we will expand and further monetize. So that is the basis of our assumption to achieve these targets. Yusuke Okumura: What about the scale of investment? JPY 10 billion was the media investment for this year. What about the investment going forward? Unknown Executive: The details will be discussed, but we are working on the awareness strengthening through advertising for MINI Apps and we are going to focus on promotion and PR. And regarding manufacturing or production, as shown on the slide, we are to reassign human resources to these growth domains to speed up the launch of products. Yusuke Okumura: My second question, on LINE, you are going to implement AI agents. I would like to ask about that. ChatGPT has instant checkout and strengthening the functionalities, and they are expanding partners, the user side rather than ChatGPT, why do they use LINE's chat or AI agents? What is the value that you offer in the future? The relationship is that parent company is -- has strong ties with OpenAI. And what kind of positive influence will that relationship with OpenAI has with your company? Takeshi Idezawa: This is Idezawa. Let me reply to your question. Our company does not have our own LLM. So we use OpenAI solutions or other solutions. We pick and choose. It's not just LINE, but within our company, we have a variety of services, news, commerce, finance, auto, so each service will be agentized. That is what we are working on right now. And like Yahoo! and LINE or integrated agent will be created. So that is the perspective of our user interface. We do not have LLM ourselves. But on the other hand, we have a lot of touch points with so many users and services. So within one ID, ours can be used in a seamless manner. That is the value we offer. So that is why we are working on agentization of various services. Operator: Next from Mizuho Securities, Mr. Kishimoto, please. Akitomo Kishimoto: My name is Kishimoto from Mizuho. I have 2 questions too. Both are about LINE Ads. The first is commerce functions of LINE SHOPPING functions. I would think that it will be launched quite soon as a new platform. I know you've done some testing. So I wonder what is lacking in order to have a full launch? That's my first question. Makoto Hide: This is Hide speaking. We are providing bucket test. We have already launched the test launch for this within the LINE SHOPPING tab. We are not offering any service actively or making a big sales promotion. We are testing system stable operations. Then within this test bucket, we are trying to expand our product and services or to enhance sales promotion activities so that we'll be able to have 100% full launch. We have been working together with various internal stakeholders. The situation is a bit different from the users of shopping -- Yahoo! Shopping, where they already know what they want to buy or they want to buy certain things. LINE, we need to propose what is appropriate and right that would resonate to the LINE users. Once we know that right business model solutions, then we will be able to launch under such use case and sell products as well. So there's a great opportunity, and we've been testing at the moment. Akitomo Kishimoto: On Page 27, please, you mentioned about second tier, third tier. I'd like to ask you a question about the capability for the third tier. I understand that you have been reallocating your staff together with AI agents. I wonder whether you'll be able to run all these initiatives under the current manpower? Or are you going to strengthen your perhaps sales capabilities with more new recruits? Is this something you can do with the current resource? Unknown Executive: I'm sure it's based on the selection criteria, but thank you for your question. Your point, recently, we do have a certain amount of resource that we had to allocate that we had to secure from other departments to this department. So as mentioned on this page, we are going to have 50% of this existing business to new domain or the focus domains. So we will be shifting our business focus as well as resource allocation as well. And we also are considering more partnership, leveraging outside resources as well. We have many different ideas. Operator: Next, Nagao-san of BofA Securities. Yoshitaka Nagao: Can you hear? Unknown Executive: Yes. Yoshitaka Nagao: This is Nagao speaking. My first question is on MINI App MAU is to be increased from 25 million to 75 million and from 35,000, the KPI direction is being presented, the price charging per app or how you consider retention. What are the methods you're going to take? 60% comes from OA and 40% comes from MINI Apps. So proactive monetization will be necessary. So can you explain concrete ways you have in mind for monetization of MINI Apps. Yuki Ikehata: Thank you for the question. This is Ikehata speaking. Let me answer your question. Right now, well, MINI App numbers are to be increased, and we are to increase the number of users significantly. That is the plan. So on MINI Apps themselves from LINE application, there will be a lot of touch point from the users. So we are increasing touch points by linking with LINE app and LINE media to increase the opportunity for as many people as possible to touch MINI App. On the monetization of MINI App, the payment function and also advertising within MINI App and receive ad placement fee. So those are 2 monetization sources. The application that can generate fruits in terms of profitability is what we are planning to build. The sales force, we are strengthening right now so that as many people as possible will utilize MINI App and open Official Accounts. From next fiscal year and beyond, we expect monetization of revenue. We already are seeing the account openings by many on Official Account. So we have confidence. Yoshitaka Nagao: My second question is related to Page 24 of the material, the target of EBITDA margin, 40% to 45%. Right now, 37% or 38% is the Media Business margin. Official Account and MINI App domain overlaps SaaS domain. So when you expand the scale, the sales staff or development cost will be heavier upfront. And I have a concern that the profitability may decline. The existing search and display ad by the sales of that part decline will affect the overall margin. So what is the overall ad margin? And in achieving 40% to 45%, what would be the contribution of OA and MINI Apps? If possible, could you disclose those information? Unknown Executive: Rather than speaking on the concrete number, it's more of a guide, the search, the basis is that profitability is not that high, and we have been communicating that from before. There's a certain fee that we pay to Google. So the search margin originally is low. And adding with display, it's shown as flat, but the search will be down trend and display, we achieved certain growth in Q2. So the ratio of display will likely to expand. So the margin on the lower part will increase -- will improve. And on display, as you know, there is a commission with the agents that is included in the COGS. So it's -- that is the margin structure. OA the margin will be similar to display. The SaaS part, it will be dependent on the pricing structure, but vertical MINI App or SaaS peers, when we look at them, the profitability is quite high. Compared to ad business, it's low, but still, it's high enough to be able to support. On top of that, MINI Apps, the ad on MINI Apps and within MINI Apps, we will place ads in a network style. So that's the type of ad business that we would like to deploy within apps. So we expect that we can secure profitability on a certain extent. Yoshitaka Nagao: One quick question on Page 11, the JPY 15 billion reduction plan is shown in the medium term, the Media Business ad expense, in some part will increase, in some part it can decline, but the fixed cost of the Media Business will it be unchanged? Unknown Executive: This slide is the company-wide figure. This fiscal year, JPY 10 billion for LLM cost will be incurred. And next year and beyond, LLM expense will continue to rise. But through various programming, we can expect improvement of operational efficiency. So JPY 15 billion, even LLM commission rises next year, we intend to reduce the fixed cost, even including that JPY 15 billion, the promotion expense and advertising for commerce, it is linked with GMV. So that is not included in this figure. And on Media segment, there are subcontractors and some of the human resources cost through use of AI, we can create a leaner structure. So those are combined to set the target margin at 40%. Operator: Next, from Nomura Securities. Mr. Masuno. Daisaku Masuno: This is Masuno speaking from Nomura. Can you hear me? Unknown Executive: Yes, we can. Daisaku Masuno: I just have one question, please. Renewal of LINE apps, you are -- been talking about adding a commerce tab. And I know you have been trying various scenarios under beta. Fundamentally, are you trying to transition the info traffic to service like LINE GIFTS? Or are you going to provide a brand-new shopping experience to LINE users. So I wonder what kind of inflow -- what kind of user experience are you trying to create through this commerce tab? Unknown Executive: What we are testing right now under the current version, all the products that's on LINE tabs are LINE GIFT products. Going forward, in addition to the LINE GIFT products, the stores that are present in Yahoo! Shopping, some of their merchandises we would like to post there. So not just for gift needs, LINE SHOPPING, Commerce products, we would like to offer through that tab. So comprehensive portal shopping corner is how we like this service to grow to be. So what type of stores, what type of products from Yahoo! Shopping really has to do with the previous questions and answers that we had. What kind of products will be the right fit, best resonate to the LINE user. It really depends on that. That's what we are testing right now. So we have to have a right product mix on top of the GIFT products, we've been carefully studying what would be the type of product group that is worth promoting heavily behind it on this new effort. Daisaku Masuno: Okay. So this is not a purchase intent visit. I can understand LINE GIFT. I wonder for those users who are not thinking of purchasing anything would ever be a real customer, whether they would convert by visiting the site? Unknown Executive: Other than Yahoo! Shopping, our customers right now are searching for what they want out of tens of thousands of our products with a certain purpose, compare prices and make decision-making. We have a massive number of products on Yahoo! Shopping. It doesn't make sense to put all of that on LINE tab. I don't think it will drive sales. So out of what's available in Yahoo! Shopping, those stores, we need to focus on products with more uniqueness, originality and some product group with extremely high demand once they release, always sells out. So those will be the right products, we think to be on the LINE tab. Those will be the right products for this casual shopper. Daisaku Masuno: Are you talking about hundreds or thousands? I don't think you're talking about dozens of thousands. So I just have no idea about the scale of the products that would be available through this LINE tab. Unknown Executive: That is exactly what we are trying to get to. That's why we've been repeating the test. So it really depends on the -- we don't know. There's nothing that we can share with you regarding the size or scale of the stores or the type of products or the scale of the product. Operator: Next, Kumazawa-san of Daiwa Securities. Shingo Kumazawa: On Page 11, fixed cost reduction of JPY 15 billion. This is the topic of my question. Currently, what is the fixed cost? And how much is this JPY 15 billion? And from last year, you have been spending on security-related costs. Is that included in this reduction of JPY 15 billion? I believe it's mostly outsourcing that you can reduce. Are there any major items that you expect to reduce significantly? And I believe AI agent is contributing to reduction. So from -- compared to last year, how much reduction is this? Ryosuke Sakaue: This is Sakaue. I will answer your question. LY stand-alone fixed cost is roughly JPY 700 billion. As you stated in your question, security-related costs will come down. On the other hand, LLM commission will almost offset that increase. From April of next year, we will increase the office space to accommodate a 3-day commuting of our employees, and that means the cost increase. And by using AI, we intend to reduce JPY 15 billion in total. If we do not take any action, the fixed cost will likely to go up by JPY 2.5 billion to JPY 2.6 billion. In the areas of reduction, outsourcing part and software license from outside, the system that employees use, we can make progress in the integration of the platform. So double payment can be eliminated. So that is included as the cost reduction on software license. Shingo Kumazawa: The areas you can reduce, I understand it's difficult to name the concrete name or ServiceNow or others or Salesforce. Is it possible to cut them entirely rather than specific ones? Unknown Executive: It's an overall effort, frankly speaking. And for example, there are licenses that are given to all of the employees. But if we identify the staff that really uses, then we can reduce the number of license. And also, there may be redundant functions on the software and cut one of them. Operator: Next from [ SBR. Mr. Jose ], please. Unknown Analyst: I have a question regarding capital structure and security governance. I understand in the past, administrative [ court ] instruction was given from Ministry of Internal Affairs and Communication, administrative guidance pointing out your capital structure. Now that under new administration, any risks that you foresee or any changes to the relationship with the government regarding capital structure, please? Unknown Executive: Regarding the administrative guidance, we've been responding appropriately. And from -- for the 2026 March, we are making progress toward it. And regarding the capital movements, we've been continuing the discussions, reflecting our past track record. No major changes to or the [ FY 2026 ]. Unknown Analyst: I understand. So for 2026 March, you will conclude all the measures to meet the administrative guidance? Unknown Executive: Correct. Yes on track. Unknown Executive: Now, we would like to close because the schedule ending time has arrived. I would like to now have Idezawa to offer a final reading. Before Idezawa's final remarks, I mentioned about the fixed cost of JPY 700 billion, that was a mistake. It's roughly JPY 400 billion to JPY 500 billion. Takeshi Idezawa: This is Idezawa speaking. Thank you very much for raising a lot of questions. The environment surrounding AI is rapidly changing. And our 2 core strategy is AI agents and OA, and we will continuously grow by changing our business structure. That is the message of today's presentation. I will ensure that these plans will be executed steadily, and we would like to ask for your continued support. With this, we would like to close LY Corporation's FY 2025 second quarter earnings call. Thank you for staying with us until the end. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

196天前Insight Analytics约5分钟阅读

4005.T 2026 Q2 财报电话会议

Operator: As it is time to start, we will now begin the Conference Call for the Presentation of the Financial Results for the Fiscal Year 2025 Second Quarter. Thank you very much for your participation. Today, Mr. Sasaki, Representative Director and Senior Managing Executive Officer, will give a briefing on the financial results for fiscal year 2025 second quarter. Later, he will be joined by Mr. Yamauchi, Executive Officer and General Manager of Accounting Department to take questions. We will conclude the call at 4:50. Mr. Sasaki, over to you. Keigo Sasaki: Thank you. I'm Sasaki from Sumitomo Chemical. Thank you very much for attending our conference call today despite your busy schedule. I'd like to thank the investors and analysts for your daily understanding and support to our management. Thank you very much for that. Now let me start with the presentation of the financial results for fiscal year 2025 second quarter. Please turn to Page 4. This is a summary page. Core operating income and net income attributable to owners of parent significantly improved compared to the same period of the previous year. Core operating income of Essential & Green Materials increased significantly year-over-year. There are also profits at Sumitomo Pharma with strong sales results, leading to recording of a sales milestone of ORGOVYX and partial divestiture of the Asian business. Compared to the forecast announced in August, in addition to strong sales at Sumitomo Pharma, there was improvement in foreign exchange gain or loss from a yen weaker than anticipated, as well as a reduction in the deferred tax liability, resulting in a reduction in the corporate income tax expenses, leading to increase in both core operating income and net profit. Please turn to Page 5. Consolidated financial results of the second quarter. Sales revenue was JPY 1,954 billion, down JPY 146 billion year-on-year. Core operating income was JPY 108.7 billion, up JPY 79.2 billion year-on-year. Nonrecurring items not included in core operating income was a loss in total of JPY 5 billion. In the same period of the previous year, there was an impact of recognizing our interest in Petro Rabigh' debt forgiveness gain of JPY 86.5 billion as a nonrecurring factor, leading to a profit of JPY 91.8 billion. So compared to the same period of the previous year, this has worsened by JPY 96.8 billion. As a result, operating income was a profit of JPY 103.7 billion, down JPY 17.6 billion year-over-year. Finance income was a loss of JPY 15.8 billion. Improvement of JPY 136 billion compared to previous year when a loss on debt waiver Petro Rabigh was recognized. Gain or loss on foreign currency transactions, including finance income expenses was a loss of JPY 6.5 billion, improvement of JPY 28.4 billion year-on-year. Income tax expenses was a gain of JPY 3 billion, increase of tax burden of JPY 7.2 billion year-over-year. Net income or loss attributable to noncontrolling interests was a loss of JPY 51.2 billion, worsening by JPY 65 billion year-on-year with the improvement of Sumitomo Pharma's income. As a result, net income attributable to owners of the parent for the second quarter was a profit of JPY 39.7 billion, up JPY 46.2 billion year-over-year. Exchange rate and naphtha price, which impact our performance, average rate during the term was JPY 146.02 to $1 and naphtha price was JPY 64,900 per kiloliter. Yen appreciated and feedstock price declined compared to the same period of the previous year. Next, Page 6. Total sales revenue was down JPY 146 billion year-on-year. By segment, sales revenue decreased in all segments, except Sumitomo Pharma. As for year-on-year changes of sales revenue by factor, sales price decreased by JPY 25 billion. Volume variance decreased by JPY 88.1 billion, and foreign exchange transaction variance of foreign subsidiaries sales revenue decreased by JPY 32.9 billion. Next, Page 7. Total core operating income increased by JPY 79.2 billion year-over-year. Analyzing by factor, price was plus JPY 6.5 billion, cost, plus JPY 6.5 billion. Volume variance, including changes in equity in earnings of affiliates was plus JPY 66.2 billion, all were positive factors. Next is performance by segment. First, Agro & Life Solutions. Core operating income was a profit of JPY 11.2 billion, down JPY 2.9 billion year-over-year. Price variance. Profit margin improved for overseas crop protection products. Volume variance, in addition to decrease in shipments of overseas crop protection products, there was lower income from exports due to stronger yen and stronger yen's effect on the sales of subsidiaries outside Japan when converted into yen. Next is ICT & Mobility Solutions segment. Core operating income was a profit of JPY 33.1 billion, down JPY 10.5 billion year-over-year. Price variance, selling prices of display-related materials declined. Volume variance, though there was a gain on the sale of a large LCD polarizing film business, there was lower income from exports due to stronger yen and stronger yen's effect on the sales of subsidiaries outside Japan when converted into yen and decrease in shipments of display-related materials. Advanced Medical Solutions segment. Core operating income was a loss of JPY 1.4 billion, down JPY 1.7 billion year-over-year. Shipments decreased because of difference in the timing of shipments compared to the same quarter previous year for some pharmaceutical ingredients and intermediates. Essential & Green Materials segment. Core operating income was a loss of JPY 18.6 billion, improvement of JPY 16.1 billion year-over-year. Price variance with a drop in naphtha price, which is a feedstock, profit margins improved in synthetic resins and aluminum. Volume and other variances, there was improvement in profitability in investments accounted for using the equity method at Petro Rabigh due to factors such as improved refining margins. For Sumitomo Pharma segment, core operating income was a profit of JPY 97.3 billion, up JPY 94.3 billion year-over-year. Price variance, selling prices declined in Japan with NHI drug price revisions. Cost variance. There was a decrease in selling expenses and general and administrative expenses due to progress in rationalization. Volume and other variances in addition to expanded sales of ORGOVYX, a therapeutic agent for advanced prostate cancer and GEMTESA treatment for overactive bladder, gain posted on a partial divestiture of Asian business and ORGOVYX sales milestone are included. This is all for the results per segment. Next is consolidated statement of financial position. As of the end of September 2025, the total asset stood at JPY 3,364.5 billion year-on-year, this is dropped by JPY 75.3 billion. This is mostly due to a drop in related company's shares by sales of businesses as well as a decrease in cash and equivalents by repayment of interest-bearing liabilities. Interest-bearing liabilities stood at JPY 1,191.7 billion, which has dropped by JPY 94.5 billion compared to the end of the previous term. Equity stood at JPY 1,179.6 billion, which is up by JPY 105.2 billion compared to the end of the previous term. And now let me explain the consolidated cash flow. The operating cash flow is plus JPY 57.5 billion. However, year-on-year, this is a drop by JPY 5.9 billion. The profit level improved. We saw a deterioration of working capital due to revenue increase at Sumitomo Pharma as well as corporate tax increase. And investing cash flow was minus JPY 16.7 billion year-on-year, this is a drop by JPY 91.1 billion. This term, we had a partial sales of Asian business at Sumitomo Pharma. But in the same period last year, we had a significant income by sales of [ low bound of ] shares by Sumitomo Pharma as well as the sales of Sumitomo Bakelite shares. As a result, free cash flow stood at JPY 41 billion compared to JPY 138 billion the same period of previous year. This is a deterioration by JPY 97 billion. Cash flow from financing activity was minus JPY 114.8 billion due to repayment of borrowing compared to the same period of last year. This is an increase in outflow of JPY 39.4 billion. And now I'd like to explain the outlook for fiscal year 2025 on a full year basis. First, let me explain the business environment surrounding our company. Regarding the economic situation, the global economy continues to show signs of a slowdown. Amid heightened uncertainty, the outlook remains unclear. Below, our assessment of the business environment for our key sector is indicated using weather symbols as usual. For agrochemicals at the top, crop protection, price competition is expected to persist with regional variations in slow-moving inventories in distribution. Methionine market bottomed out at the end of last fiscal year and recovered in the first half of this year, but is expected to decline in the second half. In displays, mobile-related components remained robust. For semiconductors, although there is a variation by sector, but the demand is anticipated to show a gradual recovery trend. Regarding petrochemicals and raw materials, low margins are expected to persist. And now on Page 17, you can see the summary of our financial forecast for fiscal year 2025. We have revised the previous forecast in May to incorporate the recent performance trends and the impact of the partial sales of Petro Rabigh shares. The core operating profit forecast for fiscal year 2025 is JPY 185 billion, which is an increase of approximately JPY 45 billion year-on-year and an increase of JPY 35 billion compared to the previous forecast. On the left-hand side, the actual gain on sales of business shown in gray was projected to be approximately JPY 50 billion in the May forecast. But by incorporating partial sales of shares in Petro Rabigh, it is revised to approximately JPY 80 billion. The profit from the business activities shown in blue, representing the underlying profit and loss is projected to show a significant year-on-year increase due to sales expansion at Sumitomo Pharma and reduced stake in Petro Rabigh, we revised it upward from the May forecast, targeting over JPY 100 billion. By segment, growth areas are -- these 2 segments, Agro & Life Solutions and ICT, Mobility, we expect achieving JPY 100 billion in profit from the business activities. Regarding the profit and loss associated with the partial sales of Petro Rabigh shares, the combined impact of the valuation loss associated with subscription to new class shares and the increase in loss accounted for by the equity method is expected to be minimal on the final P&L because they are offset with each other. And now the business performance forecast. We forecast the revenue of JPY 2.29 trillion, a decrease of JPY 50 billion from the previous projection. Core operating profit of JPY 185 billion. Net profit attributable to the owners of the parent of JPY 45 billion. Assumption on the FX and naphtha prices are as stated. Regarding sales revenue, Sumitomo Pharma expects a strong sales in North America, mainly for ORGOVYX. But Essential & Green Materials except the decrease in revenue due to a decline in shipments resulting from the sales suspension of Petro Rabigh products, which is our subsidiary company. Core operating profit by segment will be explained on the following slide. Net income attributable to the owners of the parent is expected to increase by JPY 5 billion from the previous forecast. And related to Petro Rabigh company's shares. Cash contribution methodology associated with Petro Rabigh was not clearly identified and the series of profit and loss impact was accounted for and the nonrecurring items. That is how it was incorporated in the forecast. But this year, this time, the methodology for cash contribution and the accounting treatment was finalized. As a result, for 6 months, the sales timing was delayed by 6 months. As a result, the losses we bear under the equity method will increase. As a result, the gains on sales of equity will increase. As a result, core profit significantly increases. And next, we incur valuation losses of the Class B shares we newly acquired. As a result, there are additions and deductions among accounting items, but the impact on net income is limited as they had been already incorporated in the previous projections. And therefore, impact is not big. Next, regarding the full year performance or the sales revenue and core operating income by reporting segment. On to Agro & Life Solutions, though shipments shifted from the first to the second half, performance has largely progressed as previously announced with the previous forecast kept unchanged. For ICT and Mobility, EV market recovery is slow and the semiconductor market recovery is slightly moderate compared to our projection with some unevenness. As a result, we have adopted a little bit conservative outlook compared to the previous announcement. Essential & Green Materials, as I explained earlier, is expected to see a significant increase in core operating profit. At Sumitomo Pharma, mainly due to strong sales in North America, therefore, is expected to see a significant increase in profit compared to the previous forecast. The other segment sees its profit drop compared to the previous forecast. This is due to the fact that at the time of the previous forecast, a certain degree of performance improvement measures were factored in. So they were incorporated into the other categories. However, in this announcement, based on the assumption that they are likely to materialize in each segment, Essential and Sumitomo Pharma numbers are calculated. And therefore, those factors are not incorporated into others. This concludes our explanation on the financial results and earnings forecast. And now we would like to entertain your questions. Thank you. Operator: [Operator Instructions] Now the first question from Morgan Stanley MUFG Securities, Mr. Watabe. Takato Watabe: In your new forecast, Petro Rabigh's sales impact, I'd like to hear more about it. In Essential, JPY 50 billion is included this time, but the increase in profit is JPY 23 billion. What is the reason for that? Not related to Petro Rabigh, there is minus JPY 40 billion for others. You explained because there were recoveries in other segments, but it seems to be too large. And nonrecurring items, it was minus JPY 45 billion, but with the gains for sale of Rabigh that was assumed, but that is negative. So what is the reduction of JPY 25 billion in nonrecurring items? With the sales related to Petro Rabigh, maybe your forecast was too bearish. Could you explain the reason? Keigo Sasaki: Yes. Thank you for your question. For Petro Rabigh, we announced the influence recently. But for the sales, it's JPY 50 billion of sales proceeds was announced. And as you know, here, there was a time gap of 6 months, and that impact is included. So 22.5% means that the equity method is continued to be applied. So there is an increase in the burden in terms of losses based on the equity method. And that is one factor. And JPY 50 billion, because there were losses from equity method, the sales cost dropped. So in net, it is lower than that. So that included -- the increase in profit was only about JPY 23 billion. Besides, there is included under finance losses for the B shares newly acquired, there is a valuation loss included. So sales of equities, when you calculate the total loss, actually, the impact is not that large. Takato Watabe: Yes, I understand. Petro Rabigh, there is a negative in terms of sales proceeds because of equity method. Keigo Sasaki: So let me add to that explanation. How was that included in the original forecast? I think that is your question. In the original forecast, core operating income -- essentially in Green and EGM, it was not included at all. That is one point. So that makes the difference. And for nonrecurring items, we were including some impact. And by adding some items, for example, valuation loss, it is very difficult to express. So the losses were included in the nonrecurring items. But that is not a nonrecurring item. That is a financial loss. So improvement of a nonrecurring item compared to the forecast is because of this background. So we are not considering the sales gains. Well, when it's not that we are not taking into consideration at all, as I will explain. And your question, you asked about other corporate expenses compared to the forecast, this has worsened about JPY 24 billion, JPY 25 billion. And that part, in the initial forecast, we included some forecast of improved performance in EGM and Sumitomo Pharma. For both, we had conservative figures and Petro Rabigh equity sales, we were not -- we couldn't talk about it. So without including those figures, these were all added together and included under other corporate expenses, but that is now being distributed into other segments. It is now included in the figures of the relevant segments. So it looks as if the total corporate figures has worsened, but that is the reason. Takato Watabe: Is it possible to have such a big negative figure for corporate, about JPY 40 billion? Is that what you mean? Keigo Sasaki: Yes. The reason why it was good so far. Sumitomo Bakelite and other items of profit and loss are included and sales proceeds that happened last year are included. And besides Sumitomo Chemical Engineering and Nihon Medi-Physics, those losses are included under others. But these 2 are already sold. So this fiscal year, there are not so many positive factors. And under others and adjustments, expenses are high. That is how you should interpret it. Medi-Physics, I think that was Life Science, but I understand. So it's not that you are assuming a larger buffer. If you ask me if you are -- we are conservative, basically, yes, our forecast is intended to be conservative, but we are not including a large buffer. Takato Watabe: So you are conservative. I understand. Operator: Now we would like to go on to the next question. Mizuho Securities, Yamada-san, please. Mikiya Yamada: I am Yamada from Mizuho Securities. I would like to double check about the core profit. Agro & Life Solutions in the first half, there was some shortfall. From the first to the second quarter, there was a seasonality. So you said that there is some visibility, but you had some shortfalls from the first half to the second half, there was a timing difference of the shipments. Was it the reason? On a full year basis, there was no change in the forecast. Therefore, my understanding must be correct, but I'd like to double check. And ICT Mobility Solutions, downward revision, the operating profit and the revenue were revised downward. EV and the semiconductor recovery or delayed that is the reason. Marginal profit margin -- marginal profit ratio against the revenue dropped by JPY 30 billion, operating profit drop was limited to JPY 3 billion. Therefore, the balance seems to be optimistic between the 2. So could you please explain this situation? Keigo Sasaki: First of all, AGL, from the first half to the second half, there was some shift. At this point, in Latin America, business is struggling. From the second to the third quarter, there is some shift that is our awareness. As much as possible, we would like to make a recovery within the third quarter. On the other hand, in North America or in India, in these regions, so because they are Northern Hemisphere there, we expect more to come. We do not have any unfavorable factors. Well, the slow-moving inventories start to recover. And based on that, so comprehensively, when it comes to AGL, we are likely to achieve the initial projection. Furthermore, JPY 145, that is the ForEx assumption for this projection. Currently, yen is a little bit weaker than that. So I believe that this will also make a further contribution. And then on to ICT, the major factors are, as correctly pointed out by you, EV and the semiconductor. Although there is some recovery, but not much recovery than we anticipated. So that is some negative impact. They are incorporated. And the profit margin is off, that is what you pointed out. Well, the revenue in itself may be we put the numbers quite roughly and sometimes we round the numbers. So it is not precise. It is better not pay too much attention to the profit. It does not mean that you made a significant change to ForEx assumption. That is why I thought something is off. However, you more precisely calculate core operating profit. That is why you ended up this result. Am I correct? Mikiya Yamada: Yes. And Agro & Life Solutions, regarding the sales status of new products, is there any delay? Or are there any new products that are sold earlier than schedule? Keigo Sasaki: Well, there is no major delay. That is our current understanding. Operator: The next question is from SMBC Nikko Securities, Mr. Miyamoto. Go Miyamoto: I'm Miyamoto from SMBC Nikko Securities. I also have a question about Agro & Life Solutions. As a business environment, you have a cloud mark. So what's the current situation? What is the situation of the inventory? There are differences from product to product. So could you explain a little more about it? And in addition, price competition continues. And in terms of price variance, there were improvements of profit margin of foreign crop protection chemicals. So it seems that -- could you explain the price trend and by rationale in different sales situation, could you talk a little more about it? Keigo Sasaki: Yes. Thank you for your question. For AGL, in the first half, in Latin America, situation was a little worse than what we had assumed. For our distribution inventory compared to the previous year, there are improvements, but still the level is high. And generic products, competition is still expected. For Rapidicil, Argentine, still, we will continue to emphasize expansion of sales. And [ differing ] in Brazil, it is the second season. So this -- we will also continue to expand sales of this large-scale insecticide. So we want to recover from the first half towards the second half. And the other regions, in the United States, it is improving quite a lot, I believe. And of course, competition with generic products exist. But as North America in general, there's improvement in the desire of our customers to accept our product. North America is a place that is just starting. So we will keep watching. And in India, India as well, there is a question of the distribution inventory, but there are improvements seen. Not only North America, but also in India, I think we can look forward to the situation in India by watching with care, we hope we will achieve our target at the beginning of the fiscal year. Go Miyamoto: About the price variance in Latin America, there's still a drop in price and is it getting higher in other regions? Keigo Sasaki: That is a general image. Go Miyamoto: And how about the situation, the places which price is getting higher? Keigo Sasaki: Price itself, rather than higher prices in the price variance, that is a tug of war with cost. So including the cost, the improvements in some places. That is the meaning here. Go Miyamoto: I understand. And on Page 29, in Latin America, there was sales and some carried forward in Japan, but the impact in North America is bigger. Keigo Sasaki: Yes, in Japan, currently, including the price of rice, prices are getting higher in Japan. The customers, the farmers have quite a strong desire to purchase their advanced sales. In Central South America, the market is larger. So still the impact remains. Operator: Now we'd like to go on to the next question. Daiwa Securities, Umebayashi-san. Hidemitsu Umebayashi: I am Umebayashi from Daiwa Securities. I would like to ask you some questions on ICT and Mobility Solutions. From the first quarter to the second quarter, the revenue is approximately JPY 8 billion. So therefore, it is a significant increase, but the profit, JPY 4 billion drop. So there was a gain on sales of the business in the first quarter. I understand that. But excluding that, so the revenue increase is significant. However, the profit was almost flat. So what is the reason for that? And especially in the industry, smartphone in North America is strong. And in the second half, you mentioned that you might be a little bit conservative. Why is it that the situation is deteriorating to this extent? Could you elaborate on that? Keigo Sasaki: Well, let me see. ICTM, in comparison with previous year, currently, yen is stronger. That is our assumption. So this is the segment most affected by the ForEx fluctuation. Another factor is the impact of tariff. So at the beginning of the year, we told you that in total, JPY 10 billion of impact will be felt from tariff. And we start to feel that impact now. Throughout the year, this is likely to be within the scope of our projection at the beginning of the year. So the reason for drop this time is, as I explained earlier, EV as well as mobility. These are the major reasons, partially compared to our initial expectation, there are some change from the semiconductor situation. Therefore, they are separately incorporated. Separator of EV feel the impact. So please understand in that way. Hidemitsu Umebayashi: Between the first quarter and the second quarter, revenue increased. However, the profit dropped. Well, the profit dropped because in the first quarter, there was gains on sales, but it did not occur in the second quarter. However, between the first quarter and the second quarter, what was the major change in the mobile business? Keigo Sasaki: What was the major change for the polarizing film between the first quarter and the second quarter? Well, there is an impact of the gains on sales, which did occur in the first quarter. So that may have an impact on profit. The display was performing quite well last year. So there was some rebound from the previous year. So there are some irregular elements incorporated here. So please do understand in that manner. Operator: The next question is from Nomura Securities, Mr. Okazaki. Shigeki Okazaki: I'm Okazaki from Nomura Securities. For core operating income, a question for confirmation. Essential Green Materials, you made upward revision. But in terms of fundamentals, compared to 6 months ago, is it right to say that there are no major changes? What is your view about Rabigh and Singapore and other places, as was included in previous question, from the first half to second half, losses -- core operating loss tends to increase. What is the item for that? This year, I understand there's not so much difference between first half and second half in terms of sales of business. Could you explain that? Keigo Sasaki: Yes. Thank you. First, for Essential, in terms of wafer mark, I explained, basically, from the beginning of the year until now, there are no changes. So Singapore, for example, for PCS, we are studying the possibilities of optimization in TPC, MMA. In particular for MMA, restructurings and also rationalizations took place. And on top of that, high profitability items, high value-added items are areas that we plan to shift to maintain the profit. So that is a policy. As for the environment, we have not changed our view. And for other areas comparing first and the second half, in the second half, for example, this is a matter of how we spend our expenses. For R&D expenses tends to be concentrated in the second half. That is a trend that we see. So that is also included. Operator: Now we are getting closer to the ending time. So now we would like to take the final question. BofA Securities, Enomoto-san, please. Takashi Enomoto: BofA Securities, I am Enomoto. I have a question on net income. Looking at the plan for the second half, there is a significant gap from the operating profit to net income. Various items are included in the operating profit. Why is it that the net income is so compressed in the second half of the year? Keigo Sasaki: Thank you very much for your question. Throughout the year, nonrecurring items, at which timing they will be recorded that also have an impact. JPY 5 billion was the only one that was generated in the first half. However, there are several structural reform-related expenditures that will be occurring, which will be around JPY 25 billion throughout the year. So the remaining portion will incur in the second half. And regarding the financial profit, it will be skewed towards the second half of the year. That is our view. This is due to ForEx. So this is the current view. It is currently at JPY 150. But based on the assumption of the yen is stronger to JPY 155, then the ForEx loss may occur. And talking about the tax, as I mentioned earlier, Sumitomo Pharma deferred tax liability reversal gain was observed in the first half. This is extraordinary items in the first half. So this will not appear in the second half. So there are several factors. And therefore, the loss will incur in the second half of the year. So that is my explanation. Takashi Enomoto: The ForEx loss, what is your projection of that for the second half? Keigo Sasaki: Not so much. But our assumption is that, the ForEx is JPY 145. Operator: This concludes the Q&A session. Lastly, Mr. Sasaki will give the final greetings. Keigo Sasaki: Thank you very much for attending today. This fiscal year is the first year of our medium-term plan. And within the medium-term plan, we have set targets. So to achieve the target, we will do our best. So we hope we can continue to have your support. Thank you very much for your participation today. Operator: This concludes today's conference call. Thank you very much for your participation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

196天前Insight Analytics约5分钟阅读

4689.T 2026 Q2 财报电话会议

Operator: We'll now begin the LY Corporation financial results briefing for the second quarter of fiscal year 2025. Thank you very much for joining us today. We will be referring to the financial results presentation available on the LINE and Yahoo! LY Corporation website. During today's session, we kindly ask you to follow along with the material. Joining us today from LY Corporation are Mr. Takeshi Idezawa, President and CEO; Mr. Ryosuke Sakaue, Executive Corporate Officer, CFO; Mr. Yuki Ikehata, Corporate -- Executive Corporate Officer, Corporate Business Domain Lead; Mr. Makoto Hide, Executive Corporate Officer, Commerce Domain lead; Mr. Hiroshi Kataoka, Executive Corporate Officer, Media and Search Domain lead. First, Mr. Idezawa will provide an overview of our financial results for the second quarter of fiscal year 2025. Following his presentation, we will hold a Q&A session. The entire briefing is scheduled to take approximately 1 hour. We will be live and streaming this session. If there is any distortion or inconvenience in the video or audio, please try alternate server link. Takeshi Idezawa: This is Idezawa of LY Corporation. First, before explaining our financial results, I would like to comment on the system failure caused by a ransomware attack that occurred at our group company, ASKUL Corporation on October 19 and the partial leakage of information held by the company. We sincerely apologize for the significant concern and inconvenience caused to our customers who use our services as well as to our business partners. The details regarding the damage potential information leakage and recovery status have already been communicated by ASKUL. The company is continuing to work closely with external experts prioritizing a safe and prompt restoration of systems while investigating the cause and confirming the scope of impact including any personal data. LY Corporation is fully cooperating with all recovery and investigation efforts. As the parent company, we take this matter seriously, and are committed to restoring the situation and preventing recurrence and strengthen the information security framework across the entire group. Now let me explain our second quarter financial results. Please turn to the next page. First, here is an overview of the second quarter results. Consolidated revenue was JPY 505.7 billion, up 9.4% Y-o-Y. Consolidated adjusted EBITDA grew 11.3% Y-o-Y to JPY 125.4 billion showing solid profit growth. Additionally, progress in AI agentization and the expansion of LINE Official Account and Mini apps are progressing smoothly, preparations for the LINE renew are also steadily progressing. Home tab refresh scheduled within the year. We will now proceed with the explanations in the order of the agenda you see here. First, the consolidated company-wide results. Next page, please. These are the results for the second quarter. Although consolidated revenue was slightly behind the guidance due to the decline in search advertising revenue, adjusted EBITDA and EPS are on track with the guidance. Next page, please. These are the consolidated performance trends, driven by the growth of PayPay consolidated and progress in efficiency improvements at LY Corporation, adjusted EBITDA grew 11.3% Y-o-Y, achieving double-digit profit growth. The margin also improved year-on-year. Next page, please. These are factors of change in consolidated adjusted EBITDA. Although expenses increased, revenue growth in the Strategic Business and Commerce Business outpaced the expense increase, resulting in a year-on-year increase of JPY 11.7 billion in adjusted EBITDA. BEENOS and LINE Bank Taiwan have been fully consolidated since the second quarter with the 2 companies contributing JPY 900 million to adjusted EBITDA. Next page, please. This is consolidated total advertising-related revenue. This quarter, commerce advertising achieved double-digit growth driven by increased transaction value and the total ad revenue grew by 2.4%. Next page, please. This is consolidated e-commerce transaction value. Domestic shopping transaction value grew 13.1% year-over-year, supported by last-minute demand ahead of the discontinuation for awarding points for hometown tax donation program. Reuse saw year-on-year growth of 15.7%, driven by Yahoo!'s lead market growth and BEENOS contribution. Next page, please. Regarding the upward revision of the dividend forecast, we conducted share repurchase during the first half of the current fiscal year and the cancellation of these shares was completed on September 3. Consequently, as the number of shares eligible for dividends has decreased, the annual dividend has been revised upward from JPY 7 to JPY 7.3. Next page, please. This is on progress on the LINE app revamp. The renewals of the talk, shopping and wallet tabs have been rolled out in phases since September. Home tab renewal is scheduled to make a test release this year. Next page, please. This is on optimization of management resources. Firstly, on human resources, we are reallocating to growth areas such as AI agents, which will be explained later, Official Accounts and MINI Apps. We will reallocate our human resources so that by FY 2028, 50% will be allocated to growth areas. We will reduce the fixed cost by JPY 15 billion by the end of fiscal year by 2026 and build a leaner financial structure. Next page, please. From here, I will explain the financial results by segment. Next page, please. First, the Media Business. Although both revenue and adjusted EBITDA declined, continuous cost-saving efforts are yielding results, leading to improvement of adjusted EBITDA margin on Q-on-Q basis. This is performance analysis of the Media Business. While search advertising revenue contracted, growth in account advertising drove an increase in total advertising revenue. Next page, please. Account advertising continues to perform strongly in both the number of paid LINE Official Accounts and pay-as-you-go revenue. As this is an area we are strengthening alongside MINI Apps, we will provide a more detailed explanation of future strategies and initiatives later. Next page, please. Next, the performance trends for the Commerce Business. Second quarter revenue reached JPY 216.6 billion, a year-on-year increase of 7.2%. Adjusted EBITDA was JPY 33.3 billion, although profit declined due to increased promotional expenses related to the hometown tax donation program, the decline narrowed compared to the previous quarter. Next page, please. Performance analysis of the Commerce Business. The business as a whole is expanding steadily. In addition to the full consolidation of BEENOS, Yahoo! Shopping and subsidiary growth contributed to increased revenue. Next page, please. performance trends for strategic businesses such as payment and financial services. Revenue continued to be driven by PayPay consolidated, reaching JPY 109.7 billion, a year-on-year increase of 35%. Adjusted EBITDA also continued to grow, reaching JPY 22.9 billion, an year-on-year increase of 52.1% with margin remaining at a high level. Next page, please. Performance analysis of strategic businesses. Payments and financial services are both growing steadily. Furthermore, the full consolidation of LINE Bank Taiwan contributed to increased revenue. PayPay consolidated business overview. Each service is growing smoothly. Our number of payment per user and unit price, those KPIs are progressing smoothly. As a result, consolidated sales has increased Y-o-Y, plus 30.4%. Consolidated EBITDA was more than doubled. So the second quarter showed a significant strong growth. Next, from here, I will explain our key strategy going forward. Next page, please. As our company-wide key strategy, we will advance as 2 wheels that agentization of all services and the enhancement of Official Account and MINI Apps. In agentization for the 100 million users using our services, we will provide services like search, media, finance and commerce more conveniently via AI agents. And for corporate clients such as businesses, companies, stores and brands, we will provide customer contact points and business support function through our function enhances Official Accounts and MINI Apps by improving the value provided to both users and clients and by seamlessly connecting both via AI agents, we will realize new service experiences and expansion of revenue opportunities. Please turn to the next page. First, regarding our initiatives for AI agentization. First, our goal is daily AI agent used by our 100 million users in Japan, aiming for 100 million DAU. Currently, in October, DAU for AI services is 8.6 million, especially AI answers on Yahoo! JAPAN search and LINE AI Talk Suggestions are used frequently and user numbers have begun to expand. Also for AI Talk Suggest, user billing has started and monetization efforts has also begun. Going forward, we will promote AI agentization of each service and aim to expand users. Next page, please. Next, regarding the enhancement of OA, Official Account and MINI Apps. But before talking about the specific initiatives, I'd like to explain the structural transformation of the Media Business. Earlier, I explained the revenue decline in search advertisement in the Media Business, while steadily bolstering the conventional search and display advertising businesses, we will achieve sales and profit growth by further growing OA and MINI Apps where we can provide our original value. Over the next 3 years, we will increase the share of high gross margin OA and MINI Apps to about 40% and aim for an adjusted EBITDA margin of 40% to 45%. First, regarding the performance of OA, Official Accounts in Japan over the last 3 years, our track record, the number of paid OAs improved by a CAGR of 14% and ARPA also improved. And as a result, OA revenue also grew 16% annually on average and sales have grown to the scale of JPY 100 billion in Japan and JPY 140 billion, including global. Please turn to the next page. On top of this OA growth foundation by further building a MINI App platform and adding a SaaS-like store support solutions, will create a multilayered revenue structure and aim to double sales in 3 years. This fiscal year, as I mentioned, doubling the JPY 140 billion to JPY 280 billion. In this fiscal year, we will first focus on expanding MINI Apps based on OA and launching the SaaS business. Important KPIs for the revenue models of each areas are shown in the lower section of this page. MINI Apps are -- our scale expansion is very important for KPIs in the growth phase. In OA SaaS, we set ARPA improvement as KPIs. But we think these KPIs as leading indicators to monitor our business goals. Next page. Let me explain structurally. First, there is an OA, Official Account as a base. Currently, there are 1.3 million active Official Accounts used in Japan, in which number of paid Official Accounts are 310,000. We see the target accounts for future expansion such as businesses, companies, stores and brands at about 5 million. So we can still grow the number of OA accounts, and we will also further increase the ratio of paid accounts. The second layer, MINI Apps to OA using companies and stores, we will propose a customer contact point via MINI Apps, expanding MINI Apps numbers, growing users and creating businesses like payments and ads within them. The third layer is SaaS solutions, developing specialized support for high affinity industries like Store DX or reservations, aiming to raise ARPA. Service launch planned for 2026 first half. And we'll have more new solutions at the right timing when we can introduce them to you, we will. We will provide services more broadly and deeply and provide a deeper solution via SaaS by industry to expand our sales. Finally, regarding the recent growth of MINI Apps, as you can see on the left-hand side graph, number of apps has increased by 1.5x and the number of users has increased by 1.6x, steady growth. And we are strengthening our sales structures. We are enhancing proposal to bigger companies and installation at large enterprises like these are beginning. As you can see, and as a measure to strengthen inflow, we are leveraging LINE touch, which allows users to instantly launch MINI Apps at stores and the LINE apps revamp focusing MINI Apps will also begin. So we will further expand both the number of apps and the users and build a situation where businesses like advertising payments that can be provided. Let's turn to the next page. And finally, a summary of the Q2 financial results. Sales and profit expanded steadily. Our company performance was -- experienced a solid growth. Going forward, centered on AI agentization and Official Accounts and MINI Apps, we will accelerate the growth. We will promote AI agentization across all services, offer AI services to 100 million users and create new value. Also, we will enhance OA and MINI Apps. And while transforming the media portfolio, we will achieve growth and improved profitability. This concludes our Q2 financial results explanation. Thank you very much. Operator: We would like to now begin the Q&A session. [Operator Instructions] First from Goldman Sachs Securities, Munakata-san. Minami Munakata: I'm Munakata from Goldman Sachs. I have 2 questions. My first question is on search ads. In the first quarter and also in the second quarter, the impression I got is this business is quite tough. The degree of toughness, is it correct to understand that it's the extension of the first quarter? Or are there any additional reasons? And on search ad, what would be the realistic guidance towards the second half? That's my first question. Ryosuke Sakaue: Thank you for the question. I am Sakaue. I'm the CFO. Let me reply to your question. Second quarter year-on-year is worse compared to Q1. One of the factor is one major client budget allocation was weak, and that continued into the second quarter. And in addition, in other clients, the budget reduction happened. This I'm referring to large EC companies in Japan and vertical companies declined, and that can be called additional from Q1. So that was the additional factor for Q-on-Q deterioration. And Q3, Q4, I think the degree of negative -- negativity is same as Q2. For Q3 and Q4 as well, that is our forecast. Minami Munakata: I have a follow-up question. There are other clients with quite reduction. Is there any structural reason such as shifting in-house or revisiting ROI of advertising? Is it more of an economic trend? What is the nuance? Yuki Ikehata: This is Ikehata. Let me reply to your question. This is Ikehata. I would like to add some more comments. In addition, there were some industry -- well, in addition to prior quarter's reduction trend in other industry, partially, that is -- there was a reduction in ad spend for search ad. The concept of ad placement, I don't think that is such a reason. But overall, LINE Yahoo! search ad performance is being monitored and the advertisers operate. So based on that, there is -- there was a decline in ad placement. We will continue to work on the performance improvement of search ad, and that would lead to getting these customers back. So rather than any unique circumstances, we are to continuously work on performance improvement of search ad. Minami Munakata: I understood fully. Another question is on MINI App. This time, various figures were presented and outline was explained, and I was able to learn. Thank you very much for that. The portfolio shift -- this chart has been shown. Just to reconfirm display and search, basically, it's very difficult to grow these areas. Is that the assumption you are setting? And JPY 140 billion to be expanded to JPY 280 billion, that has been rather difficult. And what is the pathway you envision? For example, from the first half of 2026, you're going to start SaaS service. So from the second half of next year, do you expect the sales to accelerate? Takeshi Idezawa: This is Idezawa. Let me answer your question. Display, search, naturally, the measures to revamp or to boost them, we are taking measures. And also thanks to the organizational change that we have implemented, we are able to implement activities to work on recovery. But structurally speaking, I don't think this is an area where we can expect high growth rate. So from that perspective, we will support the baseline for the display, search. And then apps will drive the growth. And we have the target of Official Account doubling and CAGR-wise, it has been 16%. And so we have this growth of OA, Official Account as a basis. And to add on top of that, we are going to provide MINI Apps and SaaS services. So we will be pursuing the target by having breakdowns or compositions in mind. On MINI App, it's not a linear growth, but when we have a certain number of clients, then we can expect a significant activation. So the MINI App platform will be stronger in the later half. And then that would be the overall picture. Operator: Next question from SMBC Nikko, Mr. Maeda, please. Eiji Maeda: This is Maeda from SMBC Nikko. I have 2 questions as well, please. I'll be recapping the previous comments regarding search linked ad. Together with popularization of GenAI, the negative impact to queries. And when I look at the performance, some of the clients looks like ad placements are declining in numbers. So because of this GenAI, the performance is having a negative hit on the flip side. If you could please share more on the recent trend? And also for the market, we -- there is still a concern that GenAI rise can be a negative for a search-linked ad. If you could please share your outlook, that would be great. Ryosuke Sakaue: Thank you, Mr. Maeda. Sakaue, I will start, then possibly Kataoka will follow up. At the moment, Yahoo! Search, 10% of query comes from AI search. And at the same time, the answers from AI search are business query where there is no opportunity for search-linked ad, like questions and answers. Those are the search keywords that we get. So it doesn't have much impact to our revenue and profit making. But at the same time, mid- to long term, regarding those business query, I would think that the there will be more use on use of GenAI. So media and search, we expect the next 3 years to be flat plus extra. Hiroshi Kataoka: This is Kataoka speaking. As Sakaue mentioned, number of queries for search have not resulted in significant decline in the number of queries. There is no major time shift in the search trend. And ad performance itself hasn't deteriorated. So within this big global trend, there's more use cases from GenAI are increasing. And I'm sure more of our clients companies are considering to further use GenAI. We believe that there will be opportunity, the monetization business opportunity when it comes to GenAI-led search as well. So we are considering various different means to monetize. Eiji Maeda: Second question, regarding Commerce Business. In second quarter, each services growth on the Page 8. Regarding Yahoo! Shopping, the hometown tax, I wonder how much of that impact is included. I wonder in the second half, there can be a significant decline in the growth as a reversal factor. And if you exclude the BEENOS impact, what is your true growth opportunity? So the growth in the cruising pace and growth from a one-off reason, if you could please share for the results in the first half and what you expect for the second half, please? Unknown Executive: Okay. Sakaue would share some figurative indication then -- and I'll have my colleague, Hide to provide additional information. And regarding Yahoo! Search -- sorry, Yahoo! Shopping, for second quarter, the growth was about 19%, 1-9, so quite significant. And hometown tax, late high single digits, mid-single digit to high single-digit growth. And for Reuse, this includes Yahoo! Auction, Yahoo! Flea Market and BEENOS as to be about 15% growth. So excluding BEENOS, we do have mid-single-digit growth. Second quarter has this last-minute demands for hometown tax. So that led to this significant growth rate. Makoto Hide: This is Hide to provide additional information. Regarding Yahoo! Shopping, a significant impact from hometown tax. This is something that was happening at the end of the year in December time. So it's a front-loading of that demand now. Compared to the last year, Q3 growth rate will be stagnant, will slow down. For Reuse, excluding BEENOS, I do see the trend continuing. In other words, Yahoo! Auction growth is quite steady and Flea Market is growing significantly. So when you take the weighted average, our growth is mid-single digit. I would think that for the second half, we can expect a similar growth, and we'll have a synergy, as you can see on the right-hand side, to have a more significant growth in the midterm. Operator: Next, Okumura-san from Okasan Securities. Yusuke Okumura: This is Okumura from Okasan Securities. Can you hear my voice? Unknown Executive: Yes. Yusuke Okumura: I have 2 questions. On Page 26, you have been explaining on the account ad and MINI App expansion and double the sales from this, I would like to reconfirm Official Account, the platform part based part, the assumption is the current growth rate. And through MINI App several dozen billion will be added on top. Is that the assumption? If this becomes a reality, it's wonderful. But what is the background for being so bullish at the time of launch, the assumption of the MINI App or MAU in order to achieve your assumption, what kind of measures and scale of investment you're going to make in order to achieve your strategy? That is my first question. Unknown Executive: Firstly, the growth image of official apps, I would like to explain and the strategy to grow will be replied by Idezawa-san and Ikehata-san. The existing OA part, the current level of growth can be maintained. To be more specific, 10% to 15%. Currently, it is growing at nearly 15%. So maintaining the same growth level. The paid accounts can be expanded in this pace, but that will not bring us to double. So the gap will be compensated by MINI App and SaaS. The strategy will be explained by Ikehata. Yuki Ikehata: Thank you for your question. Let me just add some more comments. In your question, you said that it's still the starting phase and this forecast may be bullish at the starting phase. But right now, we already have Official Accounts and MINI Apps, although partially we are not monetizing yet to many customers, similar solutions are offered and being used, and it's been -- the customers are satisfied. So for MINI Apps, we will increase the number. And at the same time, we will focus on monetization. That is for next year and beyond. Official Account SaaS solution already, including third-party solutions, we are collaborating with various companies and various solutions are already being utilized. So our strategy is to monetize them from next year and onward. We haven't been able to try or something that does not fit the market to start from scratch. Well, that is not the case. We already have existing foundation of Official Accounts, and we are offering various services, and we will expand and further monetize. So that is the basis of our assumption to achieve these targets. Yusuke Okumura: What about the scale of investment? JPY 10 billion was the media investment for this year. What about the investment going forward? Unknown Executive: The details will be discussed, but we are working on the awareness strengthening through advertising for MINI Apps and we are going to focus on promotion and PR. And regarding manufacturing or production, as shown on the slide, we are to reassign human resources to these growth domains to speed up the launch of products. Yusuke Okumura: My second question, on LINE, you are going to implement AI agents. I would like to ask about that. ChatGPT has instant checkout and strengthening the functionalities, and they are expanding partners, the user side rather than ChatGPT, why do they use LINE's chat or AI agents? What is the value that you offer in the future? The relationship is that parent company is -- has strong ties with OpenAI. And what kind of positive influence will that relationship with OpenAI has with your company? Takeshi Idezawa: This is Idezawa. Let me reply to your question. Our company does not have our own LLM. So we use OpenAI solutions or other solutions. We pick and choose. It's not just LINE, but within our company, we have a variety of services, news, commerce, finance, auto, so each service will be agentized. That is what we are working on right now. And like Yahoo! and LINE or integrated agent will be created. So that is the perspective of our user interface. We do not have LLM ourselves. But on the other hand, we have a lot of touch points with so many users and services. So within one ID, ours can be used in a seamless manner. That is the value we offer. So that is why we are working on agentization of various services. Operator: Next from Mizuho Securities, Mr. Kishimoto, please. Akitomo Kishimoto: My name is Kishimoto from Mizuho. I have 2 questions too. Both are about LINE Ads. The first is commerce functions of LINE SHOPPING functions. I would think that it will be launched quite soon as a new platform. I know you've done some testing. So I wonder what is lacking in order to have a full launch? That's my first question. Makoto Hide: This is Hide speaking. We are providing bucket test. We have already launched the test launch for this within the LINE SHOPPING tab. We are not offering any service actively or making a big sales promotion. We are testing system stable operations. Then within this test bucket, we are trying to expand our product and services or to enhance sales promotion activities so that we'll be able to have 100% full launch. We have been working together with various internal stakeholders. The situation is a bit different from the users of shopping -- Yahoo! Shopping, where they already know what they want to buy or they want to buy certain things. LINE, we need to propose what is appropriate and right that would resonate to the LINE users. Once we know that right business model solutions, then we will be able to launch under such use case and sell products as well. So there's a great opportunity, and we've been testing at the moment. Akitomo Kishimoto: On Page 27, please, you mentioned about second tier, third tier. I'd like to ask you a question about the capability for the third tier. I understand that you have been reallocating your staff together with AI agents. I wonder whether you'll be able to run all these initiatives under the current manpower? Or are you going to strengthen your perhaps sales capabilities with more new recruits? Is this something you can do with the current resource? Unknown Executive: I'm sure it's based on the selection criteria, but thank you for your question. Your point, recently, we do have a certain amount of resource that we had to allocate that we had to secure from other departments to this department. So as mentioned on this page, we are going to have 50% of this existing business to new domain or the focus domains. So we will be shifting our business focus as well as resource allocation as well. And we also are considering more partnership, leveraging outside resources as well. We have many different ideas. Operator: Next, Nagao-san of BofA Securities. Yoshitaka Nagao: Can you hear? Unknown Executive: Yes. Yoshitaka Nagao: This is Nagao speaking. My first question is on MINI App MAU is to be increased from 25 million to 75 million and from 35,000, the KPI direction is being presented, the price charging per app or how you consider retention. What are the methods you're going to take? 60% comes from OA and 40% comes from MINI Apps. So proactive monetization will be necessary. So can you explain concrete ways you have in mind for monetization of MINI Apps. Yuki Ikehata: Thank you for the question. This is Ikehata speaking. Let me answer your question. Right now, well, MINI App numbers are to be increased, and we are to increase the number of users significantly. That is the plan. So on MINI Apps themselves from LINE application, there will be a lot of touch point from the users. So we are increasing touch points by linking with LINE app and LINE media to increase the opportunity for as many people as possible to touch MINI App. On the monetization of MINI App, the payment function and also advertising within MINI App and receive ad placement fee. So those are 2 monetization sources. The application that can generate fruits in terms of profitability is what we are planning to build. The sales force, we are strengthening right now so that as many people as possible will utilize MINI App and open Official Accounts. From next fiscal year and beyond, we expect monetization of revenue. We already are seeing the account openings by many on Official Account. So we have confidence. Yoshitaka Nagao: My second question is related to Page 24 of the material, the target of EBITDA margin, 40% to 45%. Right now, 37% or 38% is the Media Business margin. Official Account and MINI App domain overlaps SaaS domain. So when you expand the scale, the sales staff or development cost will be heavier upfront. And I have a concern that the profitability may decline. The existing search and display ad by the sales of that part decline will affect the overall margin. So what is the overall ad margin? And in achieving 40% to 45%, what would be the contribution of OA and MINI Apps? If possible, could you disclose those information? Unknown Executive: Rather than speaking on the concrete number, it's more of a guide, the search, the basis is that profitability is not that high, and we have been communicating that from before. There's a certain fee that we pay to Google. So the search margin originally is low. And adding with display, it's shown as flat, but the search will be down trend and display, we achieved certain growth in Q2. So the ratio of display will likely to expand. So the margin on the lower part will increase -- will improve. And on display, as you know, there is a commission with the agents that is included in the COGS. So it's -- that is the margin structure. OA the margin will be similar to display. The SaaS part, it will be dependent on the pricing structure, but vertical MINI App or SaaS peers, when we look at them, the profitability is quite high. Compared to ad business, it's low, but still, it's high enough to be able to support. On top of that, MINI Apps, the ad on MINI Apps and within MINI Apps, we will place ads in a network style. So that's the type of ad business that we would like to deploy within apps. So we expect that we can secure profitability on a certain extent. Yoshitaka Nagao: One quick question on Page 11, the JPY 15 billion reduction plan is shown in the medium term, the Media Business ad expense, in some part will increase, in some part it can decline, but the fixed cost of the Media Business will it be unchanged? Unknown Executive: This slide is the company-wide figure. This fiscal year, JPY 10 billion for LLM cost will be incurred. And next year and beyond, LLM expense will continue to rise. But through various programming, we can expect improvement of operational efficiency. So JPY 15 billion, even LLM commission rises next year, we intend to reduce the fixed cost, even including that JPY 15 billion, the promotion expense and advertising for commerce, it is linked with GMV. So that is not included in this figure. And on Media segment, there are subcontractors and some of the human resources cost through use of AI, we can create a leaner structure. So those are combined to set the target margin at 40%. Operator: Next, from Nomura Securities. Mr. Masuno. Daisaku Masuno: This is Masuno speaking from Nomura. Can you hear me? Unknown Executive: Yes, we can. Daisaku Masuno: I just have one question, please. Renewal of LINE apps, you are -- been talking about adding a commerce tab. And I know you have been trying various scenarios under beta. Fundamentally, are you trying to transition the info traffic to service like LINE GIFTS? Or are you going to provide a brand-new shopping experience to LINE users. So I wonder what kind of inflow -- what kind of user experience are you trying to create through this commerce tab? Unknown Executive: What we are testing right now under the current version, all the products that's on LINE tabs are LINE GIFT products. Going forward, in addition to the LINE GIFT products, the stores that are present in Yahoo! Shopping, some of their merchandises we would like to post there. So not just for gift needs, LINE SHOPPING, Commerce products, we would like to offer through that tab. So comprehensive portal shopping corner is how we like this service to grow to be. So what type of stores, what type of products from Yahoo! Shopping really has to do with the previous questions and answers that we had. What kind of products will be the right fit, best resonate to the LINE user. It really depends on that. That's what we are testing right now. So we have to have a right product mix on top of the GIFT products, we've been carefully studying what would be the type of product group that is worth promoting heavily behind it on this new effort. Daisaku Masuno: Okay. So this is not a purchase intent visit. I can understand LINE GIFT. I wonder for those users who are not thinking of purchasing anything would ever be a real customer, whether they would convert by visiting the site? Unknown Executive: Other than Yahoo! Shopping, our customers right now are searching for what they want out of tens of thousands of our products with a certain purpose, compare prices and make decision-making. We have a massive number of products on Yahoo! Shopping. It doesn't make sense to put all of that on LINE tab. I don't think it will drive sales. So out of what's available in Yahoo! Shopping, those stores, we need to focus on products with more uniqueness, originality and some product group with extremely high demand once they release, always sells out. So those will be the right products, we think to be on the LINE tab. Those will be the right products for this casual shopper. Daisaku Masuno: Are you talking about hundreds or thousands? I don't think you're talking about dozens of thousands. So I just have no idea about the scale of the products that would be available through this LINE tab. Unknown Executive: That is exactly what we are trying to get to. That's why we've been repeating the test. So it really depends on the -- we don't know. There's nothing that we can share with you regarding the size or scale of the stores or the type of products or the scale of the product. Operator: Next, Kumazawa-san of Daiwa Securities. Shingo Kumazawa: On Page 11, fixed cost reduction of JPY 15 billion. This is the topic of my question. Currently, what is the fixed cost? And how much is this JPY 15 billion? And from last year, you have been spending on security-related costs. Is that included in this reduction of JPY 15 billion? I believe it's mostly outsourcing that you can reduce. Are there any major items that you expect to reduce significantly? And I believe AI agent is contributing to reduction. So from -- compared to last year, how much reduction is this? Ryosuke Sakaue: This is Sakaue. I will answer your question. LY stand-alone fixed cost is roughly JPY 700 billion. As you stated in your question, security-related costs will come down. On the other hand, LLM commission will almost offset that increase. From April of next year, we will increase the office space to accommodate a 3-day commuting of our employees, and that means the cost increase. And by using AI, we intend to reduce JPY 15 billion in total. If we do not take any action, the fixed cost will likely to go up by JPY 2.5 billion to JPY 2.6 billion. In the areas of reduction, outsourcing part and software license from outside, the system that employees use, we can make progress in the integration of the platform. So double payment can be eliminated. So that is included as the cost reduction on software license. Shingo Kumazawa: The areas you can reduce, I understand it's difficult to name the concrete name or ServiceNow or others or Salesforce. Is it possible to cut them entirely rather than specific ones? Unknown Executive: It's an overall effort, frankly speaking. And for example, there are licenses that are given to all of the employees. But if we identify the staff that really uses, then we can reduce the number of license. And also, there may be redundant functions on the software and cut one of them. Operator: Next from [ SBR. Mr. Jose ], please. Unknown Analyst: I have a question regarding capital structure and security governance. I understand in the past, administrative [ court ] instruction was given from Ministry of Internal Affairs and Communication, administrative guidance pointing out your capital structure. Now that under new administration, any risks that you foresee or any changes to the relationship with the government regarding capital structure, please? Unknown Executive: Regarding the administrative guidance, we've been responding appropriately. And from -- for the 2026 March, we are making progress toward it. And regarding the capital movements, we've been continuing the discussions, reflecting our past track record. No major changes to or the [ FY 2026 ]. Unknown Analyst: I understand. So for 2026 March, you will conclude all the measures to meet the administrative guidance? Unknown Executive: Correct. Yes on track. Unknown Executive: Now, we would like to close because the schedule ending time has arrived. I would like to now have Idezawa to offer a final reading. Before Idezawa's final remarks, I mentioned about the fixed cost of JPY 700 billion, that was a mistake. It's roughly JPY 400 billion to JPY 500 billion. Takeshi Idezawa: This is Idezawa speaking. Thank you very much for raising a lot of questions. The environment surrounding AI is rapidly changing. And our 2 core strategy is AI agents and OA, and we will continuously grow by changing our business structure. That is the message of today's presentation. I will ensure that these plans will be executed steadily, and we would like to ask for your continued support. With this, we would like to close LY Corporation's FY 2025 second quarter earnings call. Thank you for staying with us until the end. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

196天前Insight Analytics约5分钟阅读

PLTR 2025 Q3 财报电话会议

Ana Soro: Good afternoon. I'm Ana Soro from Palantir's finance team, and I'd like to welcome you to our third quarter 2025 earnings call. We'll be discussing the results announced in our press release issued after the market close and posted on our Investor Relations website. During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements regarding our fourth quarter and fiscal 2025 results, management's expectations for our future financial and operational performance, and other statements regarding our plans, prospects and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed after the market closed today and in our SEC filings. We undertake no obligation to update forward-looking statements, except as required by law. Further, during the course of today's call, we will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from GAAP measures. Additional information about these non-GAAP measures, including reconciliation of non-GAAP to comparable GAAP measures is included in our press release and investor presentation provided today. Our press release, investor presentation and other earnings materials are available on our Investor Relations website at investors.palantir.com. Over the course of the call, we will refer to various growth rates when discussing our business. These rates reflect year-over-year comparisons unless otherwise stated. Joining me on today's call are Alex Karp, Chief Executive Officer; Shyam Sankar, Chief Technology Officer; Dave Glazer, Chief Financial Officer; and Ryan Taylor, Chief Revenue Officer and Chief Legal Officer. I'll now turn it over to Ryan to start the call. Ryan Taylor: We had a monumental third quarter shattering expectations yet again. Our overall revenue grew 63% year-over-year and 18% sequentially. We outperformed across the board, driven by strong execution in the U.S. which accounted for 3/4 of our business in Q3, growing 77% year-over-year and 20% sequentially. Our Rule of 40 score soared to an unprecedented 114%, up 4 points year-over-year and a full 20 points since last quarter alone, reinforcing our position as the defining enterprise software company of our generation. Our U.S. commercial business grew an incredible 121% year-over-year and 29% sequentially, driven both by insatiable demand and the quantified exceptionalism compelling customers to scale AIP across their operations. Organizations are embracing an undeniable truth. Real enterprise AI at scale requires Palantir. We're seeing that AIP again and again, is the only platform delivering transformational impact in this market. And critically, AIP is the only AI platform that has an actual plan for compounding your enterprise's AI leverage, not just the model makers' leverage over you. Sharing this leverage with our customers is our highest priority. Our whole company is singularly focused around value creation for our customers, and I'm proud to share with you all the fruits of our labor. We closed our highest TCV quarter ever at $2.8 billion. Underlying this performance, we closed a staggering 204 deals worth $1 million or more of which 91 deals were worth $5 million or more and 53 deals were worth $10 million or more. In our U.S. commercial business, which now accounts for 34% of our overall revenue. We closed $1.3 billion in TCV, a milestone achievement for the fastest-growing area of our business with a more than 6x year-over-year growth rate on a dollar-weighted duration basis. The trajectory is clear. Customers are converting to larger enterprise agreements in short time frames, reflecting both the expanding scope of their AI ambitions and the immediate impact our software delivers. A leading medical device manufacturer signed a multiyear expansion just 5 months after their initial contract, increasing ACV more than eightfold. 2 weeks into their initial contract, the conversation evolved from a single use case to pursuing the opportunity of becoming an AI-first enterprise. Their CEO approached me to embrace a shared vision for an enterprise-wide AIP deployment to transform their entire organization. This transformation reflects a broader pattern we're seeing across our customer base. AI is a strategic imperative owned at the C-suite level with executive leadership recognizing the enterprise-wide AI adoption is the defining factor separating the AI haves and the AI have-nots. We're seeing C-suite-driven AI transformations across our customers. At a leading insurance company, the CEO has taken personal ownership of their AI transformation, meeting with our team regularly to orchestrate a company-wide transformation around AIP, reimagining every function from underwriting to claims processing, leading to a significant expansion of our work together. Our partnership with TWG Global named Vergence.ai continues to gain momentum as TWG's Thomas Tull noted "what was once a competitive advantage is now a competitive necessity." Companies that fail to incorporate AI into their core operations will be outpaced by those that do. These examples underscore what we are seeing. We are the only platform bringing true transformational impact to the enterprise AI market. Turning to our U.S. government business. Revenue grew 52% year-over-year and 14% sequentially as we continue to deliver mission-critical capabilities. We remain deeply committed to our founding mission of supporting the U.S. government honored by the privilege of equipping our nation with transformative software that actually works. We remain focused on delivering the most advanced defense capabilities in the world to the U.S. government and internationally to our allied partners around the world. The momentum we're carrying into Q4 is extraordinary. As we look towards the end of the year, our mission is clear: deliver the production capabilities that turn AI from promise into performance for the enterprises defining the future of their industries through AIP's compounding AI leverage. I'll now turn it over to Shyam. Shyam Sankar: Thanks, Ryan. 20 years of grinding has built a unique moat and a growing lead. Our products were built for this moment, and the numbers continue to show it. Realizing value from AI in the enterprise requires the elegant integration of LLMs workflow and software. And this is only possible with ontology. Our foundational investments in ontology and infrastructure have positioned us to uniquely deliver on AI demand now and in the world ahead. The most significant product developments are the accelerating progress in our AI applications inside of AIP, our AIP native development agent that understands how to connect to data sources, how to integrate and transform data, how to create ontologies and functions and build applications. It's unleashing incredible speed and productivity for our FDEs and customer developer is alike. At 1 customer, 2 human FDEs spawned an army of AI FDEs to migrate a customer off their legacy data warehouse in 5 days, something that would have taken an army of SIs up to 2 years. This is not a prototype. This is production across our customers, the results are shocking. AI Hivemind is a new AIP capability that orchestrates a form of a dynamically generated agents to tackle hard problem solving, idea generation refinement and executable proposal generation that is integrated with ontology and therefore, aware of the context of your enterprise. AI Hivemind was originally developed to solve extremely complex problems in the classified space. But it's already been used to help our commercial customers identify bottlenecks in their supply chain, proactively developing possible solutions and then leveraging AI FDE to code that up into an actual solution. In the government space, AI Hivemind is able to take its proposals and generate intricate mission plans right in Gaia and Maverick. Our focus with AIP continues to be enterprise autonomy, our normative view of where the value is for AI in the enterprise. Hivemind now lets the AI develop novel solutions to emergent challenges and to identify hidden opportunities. And the rest of AIP enables you to turn those ideas into an implemented reality. Closed-loop evolution of the business with AI possible because of AIP in ontology. We continue to make investments that allow enterprises to extend AIP to the far edge. Edge Ontology is a new lightweight implementation of ontology that runs on mobile devices. It enables customers to build mobile applications or embedded software for hardware, things like drones and robots and is fully integrated with your enterprises' AIP instance. Turning to field-facing updates. The U.S. Army issued an official public memo directing all army organizations to consolidate and centralize on Vantage, the Army data platform built on foundry and AIP. The Army views this, not merely as a technical decision, but a cultural decision, enabling the data-driven decision-making that continues to make our army the most lethal in the world. This directive will enable the Army to rapidly sunset legacy systems and enable more investment in the Army's Future Force concept and systems. Warp Speed and the American Tech Fellowship are early investments to support manufacturing and reindustrialization in America are bearing fruit. While Warp Speed launched by helping new defense entrants meet their surging production goals, it's now being rapidly adopted across the traditional defense industrial base and the maritime industrial base. The second cohort of the American Tech Fellowship will be wrapping up in the next few weeks. We started the American Tech Fellowship because we noticed that many of our best builders were frontline workers. They don't come from conventional consulting backgrounds. They don't have formal computer science backgrounds. To highlight a few of these folks, Mason, a Louisiana-based civil engineer is building AI applications for more accurate estimates for heavy construction projects, something that is only going to grow with our reindustrialization. Michael, who works for a potato farm in North Dakota is streamlining its operations and Cody from Georgia, who is a utilities expert is building in foundry to deliver safe, reliable energy across the South. These Americans are the true face of innovation, underscoring that it will be the American worker with AI that drives reindustrialization and American prosperity. Our customers have taken notice and asked us to create American tech fellowship programs for their employees, specifically to include Lear who highlighted their fellowship in their recent earnings call. With that, I'll turn it over to Dave to take us through the numbers. David Glazer: Thanks, Shyam. We had an outstanding third quarter achieving a Rule of 40 score of 114%, our highest ever by 20 points. We also generated our highest ever reported revenue growth rate of 63% year-over-year exceeding the high end of our prior guidance by 1,300 basis points and representing a 3,300 basis point increase compared to the growth rate in Q3 of last year. On the back of this extraordinary strength, we are guiding to revenue of $1.329 billion in the fourth quarter, representing 13% growth quarter-over-quarter, our highest-ever sequential revenue growth guide and 61% growth year-over-year. We're also raising our full year 2025 revenue guidance midpoint to $4.398 billion, representing a 53% year-over-year growth rate and 8-point or $252 million increase over our full year 2025 revenue guidance last quarter. In addition, we're raising our full year U.S. commercial revenue guidance to an excess of $1.433 billion, representing a growth rate of at least 104% year-over-year, a 19-point increase over the guidance we gave just last quarter. Accelerating demand for AIP continues to drive the outperformance in our U.S. business overall, which grew 77% year-over-year and 20% sequentially in the third quarter. Our U.S. commercial business grew 121% year-over-year and 29% sequentially and our U.S. government business grew 52% year-over-year and 14% sequentially. We delivered these exceptional top line results while also achieving our highest ever reported adjusted operating margin of 51%, exceeding the high end of our prior guidance by 500 basis points and highlighting the unit economics of our business at scale. Our revenue and profitability drove a 20-point sequential increase to our Rule of 40 score from 94% in the second quarter to 114% in the third quarter. On a trailing 12-month basis, we generated $2 billion in adjusted free cash flow for the first time in the company's history. Turning to our global top line results. Third quarter revenue grew 63% year-over-year and 18% sequentially to $1.181 billion. Third quarter U.S. revenue grew 77% year-over-year and 20% sequentially to $883 million. Excluding the impact of revenue from strategic commercial contracts, third quarter revenue grew 65% year-over-year and 18% sequentially, and third quarter U.S. revenue grew 78% year-over-year and 20% sequentially. We closed our highest ever quarter of TCV bookings at $2.8 billion, up 151% year-over-year. This eclipses our prior highest quarter of TCV bookings just last quarter by nearly $0.5 billion. Customer count grew 45% year-over-year and 7% sequentially to 911 customers. Revenue from our largest customers continues to expand. Third quarter trailing 12 months revenue from our top 20 customers increased 38% year-over-year to $83 million per customer. Now moving to our commercial segment. Third quarter commercial revenue grew 73% year-over-year and 22% sequentially to $548 million. This is the fourth consecutive quarter that revenue from our commercial business has been larger than our U.S. government business. Excluding the impact from strategic commercial contracts, third quarter commercial revenue grew 77% year-over-year and 22% sequentially. We closed $1.4 billion in commercial TCV bookings representing 132% growth year-over-year and 32% sequentially. AIP continues to drive existing customer expansions and new customer conversions in the U.S. Third quarter U.S. commercial revenue grew 121% year-over-year and 29% sequentially to $397 million. Excluding revenue from strategic commercial contracts, third quarter U.S. commercial revenue grew 126% year-over-year and 29% sequentially. In the third quarter, we closed $1.3 billion of U.S. commercial TCV bookings representing growth of 342% year-over-year and surpassing the $1 billion mark for the first time. Over the past 12 months, we closed $3.8 billion of U.S. commercial TCV bookings a 217% increase from the prior 12 months, highlighting the demand for AI production use cases. Total remaining deal value in our U.S. commercial business grew 199% year-over-year and 30% sequentially. Our U.S. commercial customer count grew to 530 customers, reflecting growth of 65% year-over-year and 9% sequentially. Third quarter international commercial revenue grew 10% year-over-year and 5% sequentially to $152 million. For international commercial business, we continue to capitalize on targeted growth opportunities in Asia, the Middle East and beyond but remain focused on accelerating the growth in our U.S. business. Revenue from strategic commercial contracts was $2.9 million for the quarter. We anticipate fourth quarter 2025 revenue from these contracts to be between $2 million to $4 million compared to $9.6 million in the fourth quarter of 2024. We anticipate 2025 revenue from these contracts to be less than half of 1% of full year revenue. Shifting to our Government segment. Third quarter government revenue grew 55% year-over-year and 14% sequentially to $633 million. Third quarter U.S. government revenue grew 52% year-over-year and 14% sequentially to $486 million. This growth was driven by continued execution in existing programs and new awards reflecting the growing demand for AI and our government software offerings. Third quarter international government revenue grew 66% year-over-year and 16% sequentially to $147 million, bolstered primarily by our continued work in the U.K. As previously mentioned, we closed our highest ever quarter of TCV bookings at $2.8 billion, up 151% year-over-year. Net dollar retention was 134%, an increase of 600 basis points from last quarter. The increase was driven both by expansions of existing customers and new customers acquired in Q3 of last year as we see the effect of the AI revolution. As net dollar tension does not include revenue from new customers that were acquired in the past 12 months, it does not yet fully capture the acceleration and velocity in our U.S. business over the past year. We ended the third quarter with $8.6 billion in total remaining deal value, an increase of 91% year-over-year and 21% sequentially and $2.6 billion in the remaining performance obligations, an increase of 66% year-over-year and 8% sequentially. As a reminder, RPO is primarily comprised of our commercial business as it does not take into account contracts with an initial term of less than 12 months and contractual obligations that fall beyond termination for convenience clauses, both of which are common in most of our government business. Turning to margin and expense. Adjusted gross margin, which excludes stock-based compensation expense, was 84% for the quarter. Adjusted income from operations, which excludes stock-based compensation expense and related employer payroll taxes was $601 million, representing adjusted operating margin of 51%. Q3 adjusted expense was $581 million, up [ 8% ] sequentially and 29% year-over-year, primarily driven by our continued investment in AIP and technical hiring. We continue to expect expenses to increase in the fourth quarter as we remain committed to investing in the product pipeline and the most elite technical talent, all while delivering on our goals of sustained GAAP profitability. Third quarter GAAP operating income was $393 million, representing a 33% margin. Third quarter GAAP net income was $476 million, representing a 40% margin. Third quarter stock-based compensation expense was $172 million and equity-related employer payroll tax expense was $35 million. Third quarter GAAP earnings per share was $0.18. Third quarter adjusted earnings per share was $0.21. Additionally, our combined revenue growth and adjusted operating margin accelerated to 114% in the third quarter, a 20-point increase to our Rule of 40 score from the prior quarter and our ninth consecutive quarter of an expanding Rule of 40 score. With the increase in our 2025 revenue and adjusted operating income guidance, we are now guiding to a Rule of 40 score of 102% for the full year. Turning to our cash flow. In the third quarter, we generated $508 million in cash from operations and $540 million in adjusted free cash flow, representing margins of 43% and 46%, respectively. Additionally, we achieved $2 billion in trailing 12-month adjusted free cash flow for the first time. Through the end of the third quarter, we repurchased approximately 2.6 million shares as part of our share repurchase program. As of the end of the quarter, we have $880 million remaining of the original authorization. We ended the quarter with $6.4 billion in cash, cash equivalents and short-term U.S. Treasury securities. Now turning to our outlook. For Q4 2025, we expect revenue of between $1.327 billion and $1.331 billion and adjusted income from operations of between $695 million and $699 million. For full year 2025, we are raising our revenue guidance to between $4.396 billion and $4.400 billion. We are raising our U.S. commercial revenue guidance to an excess of $1.433 billion, representing a growth rate of at least 104%. We are raising our adjusted income from operations guidance to between $2.151 billion and $2.155 billion, we are raising our adjusted free cash flow guidance to between $1.9 billion and $2.1 billion, and we continue to expect GAAP operating income and net income in each quarter of this year. With that, I'll turn it over to Alex for a few remarks, and then Ana will kick off the Q&A. Alexander Karp: Greetings. By any normal or even reasonable standard, these are not normal results. These are not even strong results. These aren't extraordinary results. These are arguably the best results that any software company has ever delivered. And that's not hyperbolic, despite what your analyst friends may want you to believe because they've been wrong at every price, they're wrong in every -- at every single round. But of course, they're perspective and they're not investing our own money. But a normal enterprise company should not have a Rule of 40 above 100%. A normal enterprise company at our base should not have over 100% U.S. commercial growth should not have 77% growth in the U.S. And by the way, that growth is being held down by a stagnant Europe, which is still a significant part of our business. So the pure unvarnished numbers are 77% growth off of a massive significant base with very significant cash flow with a company that throws off a Rule of 40 of 114%. And then if this world was at all sane, every single person in the financial world would stop and say, how did this happen? How did a company, which stood by the American Warfighter, marine special operators, people in clandestine services who stood up for a right of free speech and was really the first company to be completely anti-woke. How did this company stick up for the American Warfighter, actually give normal Americans venture quality results. So one of the issues we have with the arbiters of truth is, it was the American worker that we supported and the American worker that we helped make rich. And arbiters of truth somehow did not participate in that because they were such experts. And of course -- but what these numbers show is doing that and taking the American worker along with it and doing it in a way that foreshadowed the future FDE, ontology foundry, making each specific institution, making the American Warfighter fight the way the American Warfighter is born to fight. Empowering the [ tenets ] of being free and having the ability to do creative things in the battlefield context and then taking enterprises instead of selling them commodity parasitic software with a massive sales force with a kind of lumbering jargon-bearing leaders, offering you stakes and dinners and other things we shall not mention in order that you turn the value -- the high-value revenue of your enterprise over to them in return for these accolades, we created direct alignment with our customers. And what does that mean? It means when our customers have a unique and triable way of doing something, whether it's underwriting or fighting or making workers even more valuable. We put an FDE, we orchestrated in ontology. We take tribal understanding of their business, the specific nature of their business that makes them particular and valuable and lethal and we empower that. And how do we participate in that? Unlike seemingly in the most obvious way, we are downstream from the value creation. So when you see 141% or you see 77% or 63% and you ask, and by the way, with really a workforce that is not growing in any way linearly proportional to that growth and also with a sales force which is declining, which seems improbable. The reason why that's working is because we are making our clients more money or we're making them more dominant on the battlefield, and they're paying us a subset of that. And this is why these numbers are so extraordinary. The sociological and political version of this should be, wait a minute, how can we learn from this? How can we implement institutions? By the way, we have all these people talking about AI [indiscernible]. I'll tell you what 114% proves. There is a massive part of the AI market that actually cares about value creation, and that's the part we own. And we own that part because to do this, you have to have [ FDE ] orchestration, you have to have ontology and you have to have foundry and you have to have access to the game, and you have to have a deep understanding of how to do that. And you have to have done this for a very, very long time with products, by the way, and then the products are getting better and better and better and better. And I'll let Shyam talk about what we're doing on the battlefield to the extent that he can, but you see the very similar trajectory where we're giving America, both in industry and in government, a massive, unfair advantage. And again, you see it like if you look at our numbers, look at how poorly Europe is doing. Look how well America is doing. Look how we're doing this. And again, it's not just top line. The Rule of 114 that we have shows top line and bottom line growth that is distinctive, massive and unique. And on top of everything else, there is this issue in the U.S. that we're all focused on at Palantir which is what access -- what portion of the GDP growth that we're blessed to have in this country, meaning GDP growth defined or helped out and bolstered by AI. What percentage of that is available to the American worker. And so when we're -- AI -- GDP availability for the American worker, meaning, do they participate in this growth? Or is it just people around this table who are getting richer and richer. And then you see our platform on the battlefield, as Shyam was mentioning, the people doing the coding in AIP are vocationally trained smart Americans with specific knowledge. They don't have -- and actually, and you have people on the factory floor, very same thing. People across the nation, truck drivers. Anybody with specific domain expertise is more powerful, more valuable in our product than they were yesterday. In fact, the real misalignment of AI is with people with commodity like high-trained elite institution, general specialists, that's just not as valuable as it was. And yes, the destructive -- positive destruction of capitalism is going to put that class of people. Typically, the class of people that also is kind of skeptical of Palantir under enormous pressure. But it is our -- what I see in these numbers and what I think we see in these numbers is to be -- put it slightly over the top. Yes, we were right, you were wrong. And we are going to go very, very deep on our rightness because it is exceedingly good for America. It's exceedingly good for the American economy. It's as good for American workers. And you know what, I really enjoy turning on TV and seeing some analysts explain why some other company is better than ours simply because they didn't make any on our company and probably aren't. And we're just going to keep going and going and going. And then we're obviously not going to forecast for next year. But I would say, if you're thinking about how this company is going to go, look at our ability to value create, look at our ability to create revenue on the top end, look at it -- look at the unit economics of our business. If you're a technical expert in how do you evaluate business, evaluate those numbers against any other business you've ever seen and then make your decision. But yes, I'm wildly enthusiastic. I think we're wildly enthusiastic. And thank you for those of you who stayed with us to enjoy these numbers, especially Palantirians who work day and night to deliver these kind of numbers. Ana Soro: Thank you, Alex. We'll now turn to questions from our shareholders before opening up the call. We received a few questions asking what do you see as Palantir's unique differentiator that others may not understand? Shyam Sankar: Well, Alex mentioned a bit of this here. It's become fashionable actually for lots of companies to start hiring FDEs. The Financial Times had an article about how it's the most popular new job title. But what you see is that they don't really understand it. It's just mimetic. And if you -- everything Alex, you said, like we build software that works, that not software that ought to work. We build software for the world as it exists, not a world that never was. And this ability to find what's true, that comes from the FDE. Our measure of success is not did we sell the software, it's did we solve the problem. And we have built an entire software stack over 2 decades, downstream of creating value for our customers. That led to the ontology a decade ago, more than a decade ago, which is a fundamental prerequisite to getting value out of LLMs in the enterprise. In this past year, it led to AI Hivemind and AI FDE. Alexander Karp: The other thing, which like is implicit in that is the way we work puts us -- forces us to go up the chain of complexity every day. So we're taking on the most painful, most integral, most valuable parts of the stack in every enterprise. And it's precisely because like that's the way we actually lever our ability to deploy and orchestrate FDEs. That's the way we make our products stronger. And quite frankly, that's the way we produce these numbers because the closer you are to the front line of the very complex problem that a black box was not meant to solve, cannot solve. And at this point, everyone knows a joke to believe it could solve, that's where you -- and by the way, it's the safest position for us because this company, we will always believe that we are outsiders. We need to be in the place where the most valuable problem is being solved because that's the way we end up staying, solving the problem tomorrow and the way we get paid. Ana Soro: Thank you both. Our next question is from Dan with Wedbush. [Operator Instructions]. Daniel Ives: Look, obviously, another monster quarter for you guys, congrats. So my question for you is for Alex and team. What -- can you just walk through just the accelerated sales cycles that you're seeing from so many companies that have gone to the boot camps? Like what surprised you from when they come to you at that first sort of contact to now actually launching deals. I mean, maybe you could talk about that just in terms of everything you're seeing anecdotally. Ryan Taylor: Thanks, Dan. So I think we look at U.S. commercial. We closed $1.3 billion in TCV at 6x on a dollar-weighted duration basis from what it was a year ago. And of those deals worth 83 were worth of $1 million or more 40 were $5 million or more, the 21 deals were $10 million or more. I've been involved in a lot of those directly. I'm feeling exactly what you're asking on the ground from customers. And what's happening now is from the C-suite across the company, customers are coming to us looking to not just say, let's do a use case. The customers who are having the most impact are coming to us saying, how do we deploy this across our entire organization, how do we reorganize our entire organization around Palantir and AIP. And that's what's happening on the ground. And we're singularly focused on delivering the value to the customers, and that's our go-to-market. How do we get the product to them and deliver... Alexander Karp: Where Ryan is like really very much on the front line here is there's both how many customers approach you. I think where we're seeing the biggest shift is the customers who've approached us very quickly want to move to how would I change my enterprise to express it in a way that's most valuable according to my terms in your product? And then one -- and literally want a reorg, a short-hand version that we often use is you used to have to take a company private to change the unit economics of it. Basically, just like we're providing venture results, high-end venture results to normal investors in the last couple of years, what we're doing actually in enterprise is, is providing a private equity like transformation in the public markets, in the public space under the current leadership. And that's essentially what our best -- and by the way, the other thing Ryan would tell you about is our newer clients have much higher expectations of us. Like they're like, essentially, I want to transform my business. I want to do it in months. I want to do it in the public eye, while being in the public market, mostly not exclusively. And I want you to not only do the product side but also tell us how would you actually implement AI, foundry, ontology, FDE model and our tribal knowledge to do that. And it's a completely different game. We used to have to beg and plead to be like -- when we first started talking, we were begging and pleading to be at the margin of a problem that could affect a subset of the business. By the way, Shyam, it's like, unfortunately, can only tell you 1% what he's involved in. But this is like exactly the same in the U.S. government around the world. It's like the things that we're sitting on and working on are like crazy, crazy and important and are not downstream of the problem. They are the problem, and we're reshaping them. Ana Soro: Thank you both. Our next question from Mariana with Bank of America. Mariana Perez Mora: I'm going to do, as usual, a couple of questions, one on commercial, one on defense or government. On commercial, I'd like to follow up to Dan's question. And let's see if you can discuss what changed from a behavioral perspective, from a customer perspective to see this accelerated appetite to incorporate Palantir to not only accelerating how many customers you have, but also the existing customers go to -- go up the value chain. And what changed internally as well? We recently saw in a visit the like AI agents or AI FDE is, like how are you incorporating tech internally to be able to accelerate and catch up with that demand? And on the government side, U.S. government up 50% plus is really impressive. And how do you think about opportunities like Golden Dome going forward adding up to this? Alexander Karp: Well, you guys want to answer these questions? I think that there's an external one, which is like what does it feel like? That's clearly you. The internal one is a really subtle question. And I don't know anyone should jump in there? And then obviously, you should have Shyam opine on. Shyam Sankar: Yes. Well, do you want to start with commercial or... Ryan Taylor: Sure. Yes. I think on the external, I think it's like going deeper and deeper and more and more like tangible results with customers where they're -- there's a network effect in coming, like customer sharing impact that we're having and direct impact we're having with customers. Customers are seeing as we -- it's a continuation of what we've been doing, but going deeper and deeper with the customers on that impact. And I think that what we're seeing is more and more are now coming to us saying -- and the ones that are most impactful are coming to us saying, let's do more. Alexander Karp: Ryan is our best at being a wonderful -- I'll just give a vulgar version here. Our clients realize the choice is suck basically. And they've tried a lot of stuff. It hasn't worked. And then we're in so many verticals. We're -- let's just say, we're in vertical 252 and we dominate for one customer. People see that. And then they're like, "Oh, well, I'll try this with some, I don't know, knock off half fake thing. It's just like -- and then a lot of people really still don't understand that are still trying to do this long migration where LLMs are going to perform as if they're LLMs and ontology. And as if they are LLMs were not a commodity. And then -- but then in the marketplace, they see the final result of someone else using ontology, foundry, FDE. And now it's like, wait a minute, I'm paying hundreds of millions of dollars in getting nothing. And the person down the road, I kind of looked down on is way ahead of me and their unit economics are transforming overnight. And that just shifts the whole conversation because then we're like, okay, well, if you want it to work, you can have to do these 5 things. And these things are like you're going to have to talk to Ryan and they're going to have to -- I don't know, occasionally meet with me, and you're going to have to actually allow us to come in with engineers. And you're going to -- we're going to have to actually work on the problems that are valuable for your business and also look at the costs that are dragging you down. By the way, the cost for most businesses is not just the actual money they're wasting. That wasted money creates an ecosystem of waste. They're talking to all these vendors all the time about all these things will never work instead of solving the problem. And so like -- and so getting the pathogens out of their business is a real issue, and now they're really, really interested in this. And so -- and then on the internal front, I would say it's just we have to double down. The most important thing for us internally is with all this success, we do not want to give up the unique attributes of Palantir and somehow purchase fake ways for us that are artificial for us. And so making sure we are very, very close to the problem and making sure everyone here, like if you heard our internal dialogue, it's much more like who's on the factory floor here. What are we doing internally? How do we make sure our products are better and better? How do we make sure, say, Shyam is a savant at going around and figuring out what the underlying tech issue is, how are we making sure we have the best product team and the very, very exact right fit for every single deployment across our deployments that we care about, especially mission deployments, which we highly, highly overvalue in terms of our time and energy. And like how do you make sure Palantir stays as tribal and cultus and unique as it was 20 years ago? How do we double and triple down on that? And how do we recruit the right people. And then internally, we have, look, we power ICE, we power efforts to defend America and Ukraine and with allies. We're on the front line of all adversaries, including vis-a-vis China. And we support -- we're at ICE and we're -- we've supported Israel. Okay. These are very controversies. I don't know why this is all controversial, but many people find that controversial. Okay? So how do you align people to focus on these things in a way that is actually beneficial for us and our clients. These are really hard and tricky issues that we spend a lot of time. I would say, as an overarching thing, because what we found is the more we focus on our internal dynamics, the better our numbers are. That's why we have less salespeople, and we have 77% growth in 75% of our market, 121% growth in U.S. comp. Please tell that to some of your friends. I don't even understand how they can look at these numbers and not drop the key out of their [ Immortal Six ] and just like say, I mean, they're like they're fantastic numbers but it's like internal focus. Shyam Sankar: I'll make the mistake of trying to follow Alex there and just say on the internal side with AIFDE, that's why we actually originally built it. Our headcount has grown roughly 10%, but revenue grew 63%. How are we doing that? We've made our FDEs wildly more productive. And I mean, so much so that we decided to give it to our customers. And we've started to make our customers more productive. When you have a note like the Army Vantage note, where the Army is consolidating into the Army data platform, you now have an army, literal army of green suiters who need to become proficient developers in the software. And you have a generation of green suiters whose first interaction with the software is going to be with AI FDE. They're going to be super heroes on day 1. I think that it's accelerating adoption. It's accelerating understanding like the depth of adoption, not just are you using it, but how much of it are you really using? How much of it can you understand? And then quickly on your comment on the U.S. government business, like, yes, the number of opportunities out there are great. I can't comment on all the opportunities you mentioned there, but whether it's NGC2, the continued growth of, Maven, I mean we have, of course, America is involved with 3 conflicts right now in the world from Europe, the Middle East and in our own hemisphere right now. And things are getting a little spicy. By the way, let me say something slightly political, and I'm not saying other people agree with this. But when people are attacking our soldiers for stopping fentanyl from coming to this country, I want people to remember, if fentanyl was killing 60,000 Yale grads instead of 60,000 working class people, we'd be dropping a nuclear bomb on whoever was sending it for South America. So it's slightly -- like we -- in this -- at Palantir, we are on the side of the American -- average American who sometimes gets screwed because all the empathy goes to elite people and none of it goes to the people who are actually dying on our streets. And that's why it's like when you have an open border, it means that the average poor American earns less. I know my fellow progressives believe having an open border is going to make things, but that's because they're actually repping elite people instead of the working class. And the same thing in South America, is like to believe our constitution does not give us the right to stop 60,000 deaths a year of working class men and women is insane. And this company -- this country is right to stop that. And I am very proud. I don't know all the efforts we're involved in, but to the extent we're involved in these efforts, I and most Palantirians are very proud of this. Ana Soro: Thank you. Alex, as always, we have a lot of individual investors on the line. Is there anything you'd like to say before we end the call? Alexander Karp: We're rocking along. Please turn on the conventional television and see how unhappy those that didn't invest in us are, enjoy get some popcorn, they're crying. We are every day making this company better, and we're doing it for this nation, for allied countries and also for -- and I never really like the term retail investors. How about same people who put up their own money and fight for us -- and by the way, you are fighting for the right side of what should work in this country, meritocracy, lethal technology vis-a-vis adversaries, products that spread GDP to working-class women, men and women by making their value creation higher and by the way, your bank account. And thank you for that. Ana Soro: Thank you. That concludes Q&A for today's call.

196天前Insight Analytics约5分钟阅读

9613.T 2026 Q2 财报电话会议

Sota Endo: Thank you for joining us for NTT DATA's briefing session for the 6 months ended September 30, 2025. I will serve as your facilitator. I'm Endo from IR. In terms of today's documents, please refer to our IR website presentation materials. First, let me introduce the speakers. Representative Director, President and CEO, Mr. Sasaki; Representative Director and Senior Executive Vice President, Mr. Nakayama; Director and Executive Vice President, CSO, Mr. Nishimura and Senior Vice President, Head of Finance Headquarters, Mr. Kusakabe. These are the 4 speakers. Today, we will skip the earnings presentation and start with a Q&A session. Sota Endo: [Operator Instructions] First, we will take questions from the floor. On the first row on the right-hand side from my side, please. Unknown Analyst: SMBC Nikko Securities. My name is [ Sakiguchi ]. I have 2 questions. The first question is regarding the domestic public and social infrastructure business. There was unprofitable projects is what I've heard. So with the -- there is an unprofitable projects with the government agency-related type of projects, it actually drags along. So what amount of this unprofitable project amount is recorded for the second quarter and the overall scale of the project and that what's going to happen of that for the second half of profit line for the public and social infrastructure. Well, Public and Social Infrastructure recently was performing strongly. So there was one way of looking at it that it probably did increase to a peak, but there was more orders after that, but also including the treatment of unprofitable projects, what is your outlook for this business segment is what I'd like to know. Sota Endo: So Sasaki would like to answer your question. Yutaka Sasaki: For the second quarter, what we posted for unproduct -- it's unprofitable business for public area was JPY 3 billion in total. Basically, in the past cases in several large-scale projects, and within over several quarters, there was a track record that we have posted this unprofitable amount. But this time, we have actually have visibility all the way to the risk. So for the third quarter and fourth quarter, our assumption is that there are no further losses that will be made. And how we look at the market, we believe that it's going to be still strong for the central -- this public and social infrastructure is central government and the local governments and also the telecom utility. And we believe that this is going to continue to steadily grow strong. So we would like to continue to bring in that demand and further grow. But as you have pointed out, for this fiscal year, on a year-on-year basis, profit-wise was a negative number. That means that it requires some measures to be injected. The SG&A that is spent towards the second half, we would like to thoroughly look into it and thoroughly so that we will be able to turn around for the remaining year and next year. And 2 projects and JPY 3 billion, looking at your scale of the business and comparing to the past, it's something that shouldn't be that worried about. Unknown Analyst: The second question, overseas, especially North America, you have quite a few orders of large-scale projects was explained. What is the content of that? Recently, the continuing project of the existing customers, but also there is the expansion projects receiving the large-scale orders was the explanation. So if that is the same way of thinking, so how are you evaluating the orders that you have received this time? And at the last press conference, you said that you want the contribution from these orders to come about from the third quarter. But around what timing is that going to be recognized? Yutaka Sasaki: Well, NTT DATA Inc. overall, there's a Chief Growth Officer person that is appointed now and acquiring the large-scale projects or targeting the large-scale accounts. To surely acquire them is the activities that is conducted under this Chief Growth Officer. And one more thing we're working on is a global practice, meaning they're not saying that to each region to do your best, but looking at it more like a global-wide perspective like global security or digital workplace. These are several offerings and solutions, the offerings that utilize the Indian resources, accumulating the know-how of that, and we wanted to roll that out to several large accounts. And this initiative has been worked on in a full scale since last year. And finally, we have the CGO and the global practice initiatives are being well combined. And especially in North America, it has enabled them to acquire large-scale orders or projects. So what's the content of it? Like in cloud and security is the large-scale project to cloud migration. It's one case. And the contract period is 3 to 5 years, multiple years. So it seems that the order received amount is larger. But from the second half of this fiscal year, it is going to be booked as net sales. So from the third quarter net sales for North American region, it is going to exceed what it has achieved last fiscal year. So the North American turnaround based on these orders received, we would like to surely pursue it. And by having the net sales being recorded or posted, that means the gross profit is also going to increase. And in North America, thorough initiatives are conducted in terms of reducing the SG&A. So they will be able to surely accumulate the profit. If that is so, the expansion growth, so that means new orders you're receiving, yes, quite an amount. Sota Endo: Next question from the floor. Over there, please. Daisaku Masuno: Masuno from Nomura. I'd like to ask about overseas data center. In the press conference, I asked the question, why don't you accelerate even more than the current plan? And you said that you will carefully select partners and consider the approach in a balanced manner. But I feel like now we are at a stage where you can take on more risk. So what are your thoughts regarding taking on further risk to accelerate? What kind of reference do you take in order to make that decision? And now that you are 100% subsidiary, rather than relying on the cash from the REIT -- sales to REIT, I believe that you can take on more risk in that perspective as well. Yutaka Sasaki: So becoming a 100% subsidiary of NTT, we are able to take action based on a bigger balance sheet, and we have the room to make investments with more leverage. I understand that. On the other hand, for cash allocation, there is data center and there's also M&A and also investment into pure assets. So there are different investment targets. And especially with regards to M&A in the age of AI, the rules of competition are changing. And so what kind of company should we acquire in order to win in a global competition is something that we really need to strategize on. Over the next 1 to 2 years, the competitive landscape in the age of AI will start to emerge. And so we don't want to just bet on data centers. We would like to also consider M&A opportunities to have the optimal cash allocation. On the other hand, as you said, we have a REIT, and we're able to do a cash cycle based on that. And we're also studying possibilities for utilizing third party in making investments. So rather than leveraging our balance sheet, how much we can expand our investment. That is something that we continue to study. Daisaku Masuno: So in terms of considering the allocation into data center, what are the indices or the environmental factors that do you look at in order to make the decision? Is it the investment into North America? I also heard that India is more profitable. So is it the demand from India? Yutaka Sasaki: Well, we have placed much importance on our communication with hyperscalers. The team's head is in North America and the North American team is talking to the big techs on a day-to-day level. And so we're able to grasp the demand going forward very directly. And the team is making various investments. And we also look at other areas where we can complement that team and make the investment decision. Sota Endo: Are there any questions from the room, from the floor? If you do, please raise your hand. It seems that no further questions from the floor. So we would like to ask those of you participating online, if you have any questions. First of all, Ueno-san from Daiwa Securities. Makoto Ueno: This is Ueno from Daiwa Securities. Can you hear my voice? Sota Endo: Yes, we can hear you. Makoto Ueno: The previous person asked the same question regarding Page 7, excluding the 2 projects that are unprofitable, which shows the operating profit trend, that was JPY 3 billion. But with that, there's still a JPY 2.5 billion decline in profit. But if you look more in detail on Page 6, net sales, the Public & Social Infrastructure, JPY 22.6 billion increase in net sales. So you are securing the increase in sales, but you have JPY 3 billion of a loss. But in other areas, there's about a JPY 7.4 billion of a decline. What is the content of that remaining JPY 7.4 billion? Yutaka Sasaki: Public and Social Infrastructure up to the operating profit, I would like to break down the declining factors. About JPY 3 billion of unprofitable projects exist. In addition to that, on a gross profit basis, about JPY 3 billion is added. So gross profit in total JPY 6 billion, we experienced a JPY 6 billion decline. As you mentioned, the sales increased, but -- and there's about 15% growth rate. However, excluding unprofitable projects, it's still JPY 3 billion decline in profit. Last year, there was a onetime large-scale, very profitable projects. So that not existing this fiscal year had the largest -- that was the largest factor. And SG&A, there's an increase of about JPY 4 billion. And that also was a factor to press down the operating profit. So the JPY 4 billion in gross profit decline and SG&A increasing by JPY 4 billion and JPY 10 billion, so a total of JPY 10 billion decline. So for SG&A activities and also the orders that are -- demand is strong, we have to hire the engineers and including the agent fees that is attached to hiring the people is also included in SG&A as well. But in a full year perspective, we would like to control the areas so that we'll be able to achieve the target. Makoto Ueno: So I just want to confirm the breakdown. So profitability is JPY 3 billion, and there's additional JPY 3 billion of gross profit because no large project that you've seen last year. And then there's SG&A and that total of JPY 10 billion, yes. So the impact of this to the second half. So the gross profit, the large project not being there is okay. But this JPY 4 billion SG&A, you probably can recover that through sales increase. So if you just compare second half and second half, there's no remaining, right? Yutaka Sasaki: For the SG&A, it depends on the order situation. But in the full year, we are aiming to achieve the full year target. Sorry to be very detailed. Makoto Ueno: But just looking at the enterprise, the [ BOJ ] short-term outlook and looking at the other companies' performance, the demand is extremely strong. But for you, the enterprise net sales is that from JPY 279 billion to JPY 289 billion, a 1.4% increase. So is it just that second half is lower or you're strong at the social financial -- social infrastructure financial and you're strong. So maybe you don't expect that much growth in enterprise, but why is this growth rate so low? What is the factor behind it? Yutaka Sasaki: The one thing is maybe -- apologies for lacking the explanation. the payment where this agent to collect the payment, their rate has changed. And there's about JPY 17 billion of that impact. And excluding this -- if you reverse that JPY 17 billion, there will be increase of about JPY 10 billion in revenue -- JPY 20 billion. And towards manufacturing businesses, the demand is strong. So as a momentum, we are placed in a good -- very good situation. So the new -- the net sales from the gross, we changed to net. Makoto Ueno: So include that the enterprise is having a strong growth. Is this going to continue into the second half? Yutaka Sasaki: Yes, we do expect it to continue. Makoto Ueno: Okay. And also regarding the data center question towards holding companies and towards your companies, there's repeating questions regarding data center. Maybe this is a different angle way of looking at it. The AI, which is strong globally, honestly speaking, I think this area has risks. And honestly, you have to have a several trillion yen fundraising capability or else NVIDIA is not even going to look at you. So regarding this AI area, you're not focusing that much and the data center that's going to grow as a real business, you are focusing on the AI investment for the data centers. Is that a wrong way of looking at it? Or are you going to invest in AI as well? Yutaka Sasaki: We have an alliance with OpenAI as well. But the public giant language model, we have no intention of creating something like that. So NVIDIA's GPU buying thousands of them and us creating a large-scale learning model, we have no intention of doing that as well. But on the other hand, the private AI like Tsuzumi or Mistral AI, relatively small-sized model we think that enterprise customers will utilize that more than now, and we call it private AI. So in Tsuzumi 2, with -- it only requires 1 GPU. So as NTT already made the announcement, especially LLM that's strong in Japanese and finance and medical areas, it's already learning. And if the customers add a learning area, then the learning speed is extremely fast. So towards those customers that are in need for that, we rent out our data center space and also combine that with the public AI and to have our customers utilize AI in this combined manner. And we believe that this can be rolled out globally as well. So conducting business with the hyperscalers. But in the private AI area, the government customers or manufacturing customers or finance industry customers, we would like to provide our service to them as well. So in that sense, regarding AI, including the infrastructure, we would like to become in a way that we'll be able to provide the service in a full stack manner. Makoto Ueno: That part, I highly evaluate that like IBM and Oracle being very strong is that instead of trying to develop a huge AI, but at the customer side, meeting the customer demand is enabling you more to make money. But the AI solution like AI agent, something that will gain sales, not the data center, but AI, you're mentioning Tsuzumi. But application-wise, are you already prepared or around what timing are you going to be able to record net sales? Yutaka Sasaki: Well, the so-called AI agent, we are paying attention to that. And up to now, we have conducted many POC and there are actual orders that we have received in this area. And we believe that there will be a business growth in this area moving forward. We are sure about that. That is why even within the hand that we wrote it, we are going to establish a new company making investments in Silicon Valley. For AI agent, as several offerings, there are something that will made into a certain template, but we would like to have a thorough analysis of the customer and making and developing an AI agent tailored to our customers. So the AI services or computing services that are tailored to the customer needs will be something that we are going to provide. So it's not that simply one can -- we are going to purchase packages and resell that, a lot of them. But instead of that, we are going to be on the customer side and provide the service that is required. And as AI evolved, we will update our services also. And AI in times will actually not tell the truth or lie to you. So in order to provide a thorough service, a managed service of our services that are provided is going to become important. So we would like to establish a thorough business model to provide our services. Makoto Ueno: At Page 17, OpenAI-related business, JPY 100 billion. So in agent-related separate from them in 2027, JPY 300 billion is what we aim for agent management. I believe that you were saying JPY 100 billion for overseas. Is that true? Yutaka Sasaki: Yes. Sota Endo: That concludes the question from Ueno. Next question, please? We have passed the planned time, but we were also late in starting this session. So if there is a question, we'll be happy to answer additional questions. And if you like to ask another question for those of you who have already asked a question, we are welcoming that as well. No questions? We -- either from the floor or from the remote participants? Well, we see no hands. And this concludes the NTT DATA Group's earnings presentation. Thank you very much.

196天前Insight Analytics约5分钟阅读

SHA.DE 2025 Q3 财报电话会议

Operator: Ladies and gentlemen, welcome to the Schaeffler Group Q3 2025 Earnings Conference Call. I'm Sergen, 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 Heiko Eber, Head of Investor Relations. Please go ahead. Heiko Eber: Thank you, operator. Ladies and gentlemen, I'm very happy to welcome you to today's call on the financial results Q3 2025. The press release, the following presentation and our interim statement has been published today at 8 a.m. CET on our Investor Relations web page. And for sure, after the meeting, we will provide the recording and the transcript of this webcast. As a quick reminder, please note that all figures for 2024 are pro forma figures unless they are marked separately as reported figures, and the mentioned pro forma figures 2024 and related information are unaudited. As always, Klaus Rosenfeld, our CEO; and Christophe Hannequin, our CFO, have joined the conference call to guide you through the key information in our presentation. And, of course, afterwards, both gentlemen will be available for our Q&A. Now, without further ado, let me hand over to our CEO. Klaus Rosenfeld: Thank you, Heiko. Ladies and gentlemen, welcome to our Q3 call. You all have the presentation in front of you that we distributed this morning. You also saw the 3 press releases we published. I will start immediately on Page #4 with the summary. Good performance in a soft market environment is the headline. You see sales growth of plus 1.3% in Q3. I will go into a little bit more detail there. Gross margin at 20.3%. Please read the footnote. This is the gross margin excluding an extraordinary one-off loss of EUR 100 million due to the depreciation of SAP licenses. It's a comparable number to the 19.1% in Q3 previous year. So you see a quarter-over-quarter improvement there. EBIT margin at 4.5%, nearly a percentage point better than Q3 2024, also sequentially, clearly pointing in the right direction. Positive development and free cash flow, EUR 175 million in Q3, really points also in the right direction, also led us to upgrade our free cash flow guidance, as you saw in the last days. And then EPS is negative, in particular, due to the one-off restructuring, but also due to the depreciation of SAP licenses on an adjusted basis, it is positive. Now with this, let me quickly go through the business performance. You see on Page 6 the usual breakdown of where is the growth coming from. And we can basically say that except for the flattish development in Powertrain & Chassis overall, all divisions and regions contributed here. Europe is a little weaker than we would like to see it with minus 1.6%, also driven by Powertrain & Chassis. You see some of the unusual developments. Strong growth in Asia/Pacific is the same trend that we explained last time. It has to do with the shift of an important project from China to South Korea. And Americas with 18.4% in E-Mobility is new contracts that are now starting to perform. Vehicle Lifetime Solutions was 2.3%, weaker than in the previous quarters. But we always said this 2-digit growth is not going to continue. So with strong growth in Americas, also in the 2 other regions, Europe here, again, is the reason why this was not as strong as before. And Bearings & Industrials with 2.2%, I think, is in line with market. So a trend from our point of view that should not surprise anyone with 1.3%. At least the Q3 was a growth quarter despite all this turbulent environment. Page 7 then gives you more detail in our OEM business, auto powertrain, that's what we promised to give you, the breakdown by powertrain type both for the outperformance number and also for order intake and book-to-bill. And what you see is a continuation of the trend that we showed you for the first 6 months. 9 months, plus 13% outperformance in BEV shows that we are well on track there. And HEV is, for these 9 months, still below market. The same with ICE. The number has come down a little bit. Key for going forward is not what we are pointing today, but the order intake and the book-to-bill, and there you see that BEV and HEV are more or less on the same level with 1.8x. Let me say here, as we outlined also during our Capital Markets Day, we have a significant order book. Our key priority is to deliver that order book. We appreciate new projects, but only if they make sense and also drive our profitability. E-Mobility, next page, Page 8. As you probably expected, sales growth on the positive side, 4.7%, clearly driven by Americas and Asia/Pacific. Order intake in that quarter was EUR 1.2 billion, slightly below the second quarter, but still on track. That also leads to a book-to-bill in Q3 of 0.9. What really counts here is, from my point of view, the full 9 months. What is on the positive side here is the continuous improvement of the gross profit margin, plus 3 percentage points in Q3. And this also excludes the impact from the SAP licenses that for E-Mobility would have been EUR 24 million. You see 2 examples for new products -- for new projects. And with the development that we see here, we feel good that we are on track to deliver what we promised for the midterm. Powertrain & Chassis, slight sales decline. Gross margin continues to be strong and further improvement, 1.2 percentage points. Good order intake, but clearly with a book-to-bill that is below 1. As we always said, you need to, at the end of the day look at these 2 divisions somehow together, in particular when you think about the Powertrain business. And our idea that these hedges each other is clearly paying off. Vehicle Lifetime Solutions, I already said it, lower growth compared to previous quarters, in line with market and gross profit margin further improving. We always said it's not going to grow every quarter by 10%. But I'm really proud to say that our gross profit margin stays at a very high and satisfactory level. Bearings & Industrial Solutions, also here, we decided to improve our guidance a bit. The 5% to 7% was after a further improved third quarter. It's little bit outdated, so we moved it up to 6% to 8%. And we feel good that the business is further improving due to the various self-help measures, but also due to growth, in particular, in aerospace, but also in construction, agriculture, machinery, 2-wheelers and the new emerging area of medical equipment. Let's wait for the fourth quarter and see where we end up there. Capital allocation, Page #12. We continue our course here. Capital allocation schemes are known to you. We are very disciplined here. You see the reinvestment rate at 0.5x for the whole year -- for the whole business, excuse me, and that clearly means we are releasing capital at the moment. That is important to bring the SVA number back on track. We are now slightly below previous quarter with EUR 12.3 billion. And we will manage capital tightly. Let me also say this does not mean that we have restricted any type of growth because there's enough cash flow available to fund the projects that we're seeing. But as you know, we are restricted and want to bring SVA back to where it should be. Last page from my side before I hand over to Christophe, a short follow-up on the top 3 priorities that I explained during the Capital Markets Day. First is delivery of our order book. Again, we have seen a prominent SOP of electric drive products for a Chinese OEM. Again, an interesting player who is a pure play on the new energy vehicles. Several other SOPs, one in Europe for a premium European OEM and another one, again, for a European OEM and a Chinese OEM in chassis, rear wheel steering. So happy to say that the delivery of the order book is on track. The size is big and challenging, but we are learning. We are moving forward. And we are seeing good results from these 3 examples. Synergies is also on track. You'll remember what we said in the Capital Markets Day. We have more or less finalized our program that we call our Program Forward. Here is more detail on the plant in Steinhagen that was already in the numbers that we showed you. We will finish production in the year 2026, the portfolio. We consolidated into another plant, headcount in production is outlined, and at the moment, negotiated with workers' council. And I can tell you that this cooperation with employee representatives has always been an asset. It's painful for everybody, but it's the right track to -- it's the right step to streamline in particular our German operations. And last but not least, you saw the press release. We promised to streamline the business portfolio and reallocate capital. We said during the Capital Markets Day, there are 10 portfolio elements in the pipeline. This is now a first example. We have yesterday or this morning closed the contract with a Chinese specialist in turbocharger technology that requires our turbocharger business in China. It's a business that we inherited through Vitesco. It made EUR 100 million and is at the moment in a structural decline. So it makes a lot of sense to get rid of this. The agreement is signed. Please understand we're not disclosing more details, but it's a proof point of our promise to streamline. With that, I hand over to Christophe and -- for the financial performance. Christophe Hannequin: Thank you, Klaus. Good morning, everyone. After looking at the division look, let's take a step back and look at a single group level. Starting with sales. We delivered a strong quarter of growth once you adjust for foreign exchange. That growth, I'm happy to report, is profitable, as you can see on the gross profit evolution on the right side, EUR 119 million worth of volume effect. That's further proof point to the roadmap that we drew during the CMD. If you look at that EUR 119 million, close to half of it is driven by E-Mob. So we are growing, and we are growing profitably. The rest comes from the other divisions. We are also improving our cost structure or operational performance. That's the EUR 111 million that you see there. E-Mobility, again, displaying some improvements, about EUR 20 million worth of improvement linked with E-Mob. The bulk of the improvement actually comes from Bearings & Industrial, close to EUR 90 million quarter-over-quarter, demonstrating the measures, both for structural and in terms of operational performance, are paying off and are improving our gross profit and thereby our bottom line. A little bit of what I would call background noise on the next column with a mixture of inventory valuation, customer claims and a little bit of a restatement issued to be 100% transparent in the EUR 109 million. Foreign exchange, EUR 45 million, reflects the evolution year-over-year and our exposure to the different markets. All in all, from 19.1% to 20.3%. Again, this is corrected to neutralize the SAP license and not pollute the reading. If I go to the bottom line and now look at EBIT, this is even clearer, 1 full point worth of improvement from 3.5% to 4.5% of EBIT BSI year-over-year. You find again on the right side the strong gross profit improvement, excluding foreign exchange, the very controlled approach to R&D, some negative impact on SG&A, which is mostly driven by integration impacts. And foreign exchange, you can actually see here that the foreign exchange impact is lower at EBIT level than it is at gross profit level, thereby showing that the group has a little bit of an internal hedge even though the impact is still negative. And again, this drives a strong quarter at 4.5%. If we spend a little bit of time on each division, E-Mobility, as I mentioned, growing by almost 5%, improving its profitability by over 2 points, growing across all divisions and doing so in many regions, double digit in North America and some strong growth as well in China. So, again, the roadmap that we have announced quarter after quarter, we are delivering on it. On the PTC side, comment is one that you will hear, I guess, quite often from me in the next few quarters, it's all about balancing some slightly negative impact on the top line. There we see a slight decline. It was expected. It's linked to the phaseout business. But it is being balanced by an absolute laser-like focus on cost structure and restructuring to ensure that we protect margins and that we deliver the bottom line. In this quarter, the unit actually does more than that. And the improvement is over 1 point worth of EBIT year-over-year. Also, interesting to see that some business divisions are still in positive territories, so Engine & Transmission Systems at 3.4%. And when you look at the details, this is actually also driven by China, which is encouraging in terms of balancing our exposure. Vehicle Lifetime Solution, on the next slide, growing, still growing, slightly less than what you had seen in the past, but the environment is a little bit different. Nevertheless, delivering solid 2.3% worth of growth, 1.3 points worth of improvement in terms EBIT. Again, the interesting part there is where is the growth happening. It's happening outside of the traditional geographies for VLS, so strong growth in the Americas, which is still very much a conquest territory for us. And it's also happening if I look at it in terms of business division outside of the core Repair & Maintenance Solutions business division, but in the Specialty business in the Platform business. So resistance in, I guess, the home turf for VLS while the unit growth in terms of geography or in terms of product offering to the customer. Pricing, also on the favorable side, driving some of the EBIT improvement quarter-over-quarter -- year-over-year. Bearings & Industrial, if you go back to my initial comment, some growth, very -- double-digit growth in our Aerospace Bearings, plus 20%. Even more interesting, in my mind, positive growth in Automotive Bearings in a complicated automotive context. The division is still growing in that sector by 2%. Combining this growth with the very, very strong work done in terms of, a, restructuring, and b, focus on operational performance delivers an improvement of 1.4 points in terms of EBIT, almost at 8%. You can see the 7.9% for Q3 2025. This all translates into positive evolution of our free cash flow generation year-over-year, so we see almost a little bit more than EUR 0.5 billion worth of improvement from Q3 '24 to Q3 '25. I draw your attention on the bridge on the right side in echo to what Klaus said before to the EUR 244 million linked with CapEx, which is essentially us managing our CapEx spending to match it as close as possible to the need and the actual ramp-up of the different programs that are going through SOP and trying not to be too far ahead of the curve, not behind either in order not to put our customers at risk. So some really, really fine steering there in terms of pacing the spending and then also some steering in terms of focusing the spending where we create value. On what would be the last slide for me, our usual slide on debt profile, you can see the leverage ratio peaking in 2025 during Q2 at 2.4, now slightly improving in 2025. On the right side, our usual maturity profile, you can see that the 2025 topic is taken care of at this point through the bond issue earlier this year. Also, happy to report that the RCF facilities have been all extended as per our contracts all the way to the end of 2030, which is an interesting check in the box to have. When you look at 2026 and 2027, you can see that this is all quite manageable given the current conditions of the bond markets either this year or early next year. At this point, I will hand back over to Klaus to conclude on the guidance. Klaus Rosenfeld: Christophe, thank you very much. Ladies and gentlemen, I will be brief. You've seen that page. Just to repeat the basic logic, we increased guidance on free cash flow and also for Bearings & Industrial Solutions in those numbers. Let me finish with one more page on the other announcement we made today next to our numbers and also the little transaction in China selling turbocharger business. We announced this morning a cooperation agreement with NEURA. NEURA is, as most of you probably have heard, a leading German high-tech company active in the humanoid space. They don't -- not only do humanoids but other things as well. And we have agreed a partnership with them that will allow us to supply innovative actuation technology to them, which are, as you all know, key components for humanoid robots. NEURA and their founder, David Reger, are well known to the capital markets. It's the European player from our point of view. We're very proud of this -- for this agreement. Second, that's already digested, I think, last week, October 29, you heard about the U.K.-based robotics innovation company called Humanoid, also something where we are active. We completed a proof-of-concept phase with them with what is called the pre-alpha robot, also a specific design. And we are now moving into a second phase. This is just to show you 2 examples that will help us to grow into that new ecosystem. We will continue to report on this. It's clearly an attractive growth opportunity where Schaeffler is very well positioned to conquer a significant space as a technology provider and a supplier of choice. I'll leave it here. The last page is then the financial calendar. We are going on road show, separating West Coast and East Coast next week. And then there are the usual conferences for year-end. We also look forward to seeing some of you then in the new year in Frankfurt, New York and elsewhere. March 3 is our earnings release, and I am confident that we will bring the year to a successful close despite all the challenges that we have around us. With that, back to you, Heiko. Heiko Eber: Thank you. So operator, we would be ready for the first question, please. Operator: [Operator Instructions] And we have the first question coming from Horst Schneider from Bank of America. Horst Schneider: My questions, I would ask them one by one, please. The first one relates to this ongoing underperformance in automotive, which is driven by the phaseout of some of the Vitesco business. Can you maybe say how would the business have grown without these phaseout effects? And how long these phaseout effects still continue? So just try to get a feeling how long this drags down basically the outperformance. Klaus Rosenfeld: Horst, thank you for the question. I'm not 100% sure what you're referring to when you say outperformance. I mean, E-Mobility grew by 4.7%. Powertrain & Chassis is, as I showed on Page 6, more flattish. Yes, we are -- we were selling business, as I said, but that's a new thing. Maybe you can repeat or give a little bit more color on... Horst Schneider: Sorry, Klaus, I'm referring to Slide 7, which is a year-to-date perspective, to be honest. Maybe the effect is already over. Yes. Klaus Rosenfeld: Okay. You're saying the -- okay, now I understand it. It's 7, where you're saying ICE is below where market growth is. Well, I mean this is, from my point of view, a situation that clearly comes from a phaseout of certain things. I mean, this is a market growth for the whole ICE powertrain portfolio, and it's a function of how present are you with what kind of customer. As you know, we are strong in dampener technology. We are strong in the sort of old classical Schaeffler technologies, but there's also business here from Vitesco that drives us to some extent, but I don't have more detail at the moment. Horst Schneider: Yes. Okay. No worries. The next question refers more short term. Maybe if you can shed some light on the outlook for the fourth quarter. I know you have got your full year guidance in place, and that looks also fine. I just remember Q4 can be sometimes a tricky quarter, right, because unforeseen things can happen, as we experienced last year in industrial. So maybe it's also difficult for you to answer this question. But what trends do you see now in the fourth quarter? So I would assume that E-Mobility gross margin because the reimbursements come in and the highest share of that happens in Q4. And then Powertrain & Chassis, I was surprised about the good margin in third quarter. Is that something that continues also in the fourth quarter in that trend? And then, am I right to assume that industrial usually is a weak quarter in quarter 4? Klaus Rosenfeld: Well, I would phrase it like this. Q4 is typically a weaker quarter than the previous quarters because December, in particular, also is not as vibrant than before. Your description for E-Mobility, I think, is pretty spot on. I think that they will further grow and further improve because that's the trend. PTC, I just spoke with Matthias this morning in our preparation, and he said the call-offs are stable. That's a positive sign. He also clearly said that China is developing better than expected, what is also something on the positive. And when you look at tariffs, I think it's also fair to assume -- you're mentioning reimbursements on the E-Mobility side, classical situation, more Vitesco driven, but there is a synchronization benefit on the tariff side. We always said this, that will also support a little bit. So I think PTC, E-Mob will also benefit a little bit from this. Yes, Industrial is clearly a little bit of a question mark. If we wouldn't be confident that this quarter continues in the right direction, we wouldn't have raised guidance. The 6% to 8% is not a big move upwards, but what we see so far is with all the headwinds that are existing in that business, looking like a solid fourth quarter, let's put it this way. And in aftermarket, aftermarket is clearly something where I would expect that we don't get back to 2-digit growth numbers. But also there, the underlying fundamentals are continuing strong. So let's see what October brings and then we know more, but I would be cautiously optimistic that the fourth quarter is okay. Horst Schneider: Okay. That's great. The last one that I have is typically... Klaus Rosenfeld: For next year and all of that, that's clearly something that there are some unknowns and there are some uncertainties. Horst Schneider: That's great. The last question that I would have refers to E-Mobility because Valeo talked about negotiations with OEMs to get reimbursement on some contracts where the volume expectations have not been met. Do you see the same? Could that be a driver going forward that we have not yet in our forecast? Klaus Rosenfeld: Well, for sure. I mean, if you ask contracts where volume assumptions are massively under cut, then you seek compensation. That's a normal part of our business. But yes, that's -- there's nothing that we do not factor in. That's normal course of business from my point of view. But you all know that there is -- in the U.S., things have changed more dramatically because of the -- also the regulatory environment and the decisions that President Trump has taken. But in the other countries, that's not the case. But for the U.S., you clearly have a little bit of a shift in terms of how important is e-mobility going forward. Operator: The next question comes from Vanessa Jeffriess from Jefferies. Vanessa Jeffriess: Just wondering if you could please speak a bit more about the E-Mobility book-to-bill. I know you said you look on a 9-month basis. But with those customer postponements, are you seeing any exacerbation in those over the last few weeks? Klaus Rosenfeld: This was very difficult to hear. Can you -- madam, can you please repeat this? I don't know where this is coming from, but if you could speak a little slower, that would be good for us, excuse me. Vanessa Jeffriess: Sorry. Just with the E-Mobility book-to-bill and the customer postponements, I was wondering if you're seeing more postponements over the last couple of weeks, if that's exacerbating throughout the quarter. Klaus Rosenfeld: No. I think we have seen what, in particular, the big U.S. customers did, but there is no increasing trend of people giving back business. That's not the case. But any adjustments are part of our normal course of business, but I wouldn't. Christophe, maybe you have more insight. I don't know anything that points to a bigger trend towards the year-end, where we lose contracts or where volume goes back. Christophe Hannequin: Usually, our business tells us that the customer decisions are not always synced up with our communication deadline. So to have some volatility quarter-over-quarter during the year, it's not unusual. But as Klaus said, no underlying strong trend that we can detect on this. Vanessa Jeffriess: Okay. And then just on B&IS, just to be a bit more specific on what you said before. I know you said there might be some headwinds in the fourth quarter, but it seems in your new 6% to 8% range, it would be pretty difficult for you to get down to 6%. So I was just wondering your thinking around that and if there's anything specific in terms of headwinds. Klaus Rosenfeld: I would call it a cautious approach. We have -- you have seen that the last 2 quarters were all pointing in the right direction and above 7%. You saw what happened in Q4 2024. So we are certainly positive, but to increase it even further would have not been, from my point of view, responsible. Operator: The next question comes from Ross MacDonald from Citi. Ross MacDonald: Klaus and Christophe, it's Ross from Citi. My first question, Klaus, you mentioned Nexperia briefly in answering Horst's question. Can you maybe summarize where we stand on that issue as of today? I'm aware there's been some news flow over the weekend around potential exceptions. How do you see that situation playing out from here? Is it effectively resolved from your vantage point? Klaus Rosenfeld: It's definitely not resolved yet. But I can say for Schaeffler, so far, we have been -- not really been forced to stop any customer. I can praise the agility of our teams here, the risk management work when this came in. And we're clearly benefiting here from the strong experience and the insight that the Vitesco colleagues brought here to the table. Again, we have so far managed through this, knock on wood. It's different than the crisis that we saw some years ago because it is driven by this specific and certainly unusual Nexperia situation. It's, like before, a little bit of a race for where do you get a second source, how much do you have as inventory, which customer is asking for what. You need clear rules internally how you allocate what you have, and you need to be very quick to open up new purchasing channels. So far, that has worked well. But again, we are managing through that shortage like any other supplier as well. And I do hope that we get out of this with -- again, with not too much trouble. So far, that's okay. But we manage it on a day-by-day, week-by-week basis. But you need to look at that a little bit in a broader context. They agreed that certain export control restrictions will be relaxed. But the Nexperia situation is a little bit unusual. So you can't just simply apply this on Nexperia here because you have the insolvency situation in the Netherlands, you have the Chinese reaction to this. That's a specific situation that we need to handle separately. The agreement between the 2 presidents is clearly pointing in the right direction, and hope -- our hope is that this relaxes other situations as well. Ross MacDonald: Very clear. My next question is -- 2 questions really. But first one on the humanoid, and obviously, very nice to see continued momentum for that business. A lot of investors are asking around the volume implications, let's say, for '26, '27 on the back of these partnerships. I'm not sure if you can give any soft guidance on what we should expect in terms of growth for that start-up from here. Klaus Rosenfeld: Ross, it's one of the most relevant questions in that ecosystem, how many humanoids will be produced in 2030 or 2035. You have different projections. And again, we are a supplier in this situation. We think about this as a business where we can show our industrialization strengths. So the number of the volume per robot -- sorry, the volume of robots is critical here, as critical as our content per robot. Don't forget there are different types of robots. This is not only one design, but there are several designs. When you talk to different players, and take David Reger, for example, who is clearly one of the most prominent ones, he normally says 5 million. That's a larger number than what we are expecting at the moment, but it's good to be cautious here. But it's also good to know what you do when this really takes off quicker. But we are at the beginning. It's not that we can show you already numerous volume contracts. But the interest in this and also the interest in Schaeffler as one prominent player who is able to scale is definitely increasing, and that's shown by this contract. But I'm not in a position to give you an accurate prediction of what will come. That's the nature of the game. But what I can say is we will and want to be prepared for the next year and the year thereafter. I think we'll see more clearly in the next 12 to 24 months. I can also say we are looking at this from the 3 main regions, both U.S., China and NEURA is the main -- the top European player. Christophe and myself will be in China end of November also to look at our humanoid factory that we're building there, not to produce humanoids, but to deploy humanoids to see how they can help us in production. So this whole ecosystem is emerging. It's a very interesting play for us, and we will stay on top of the development. But I'm not in the position to give you now an accurate number how much robots you will see in 2030. We are cautious, but are prepared for a steeper ramp-up. Ross MacDonald: I actually have 2 more questions, but I promise to keep these very brief. The first one, actually from an investor, just thinking about the U.S. business for Vehicle Lifetime Solutions, we've seen a bankruptcy in that space with First Brands recently. Do you see that as an opportunity for Schaeffler to potentially gain some market share in the aftermarket tactically? And then my second question for Christophe on the free cash flow, just a housekeeping question, there is a significant benefit in the third quarter from the Other bucket, a positive EUR 91 million contribution. Could you maybe just give us some breakdown of what's driving that? How much is one-off in nature versus potentially carrying forward into the coming quarters? Klaus Rosenfeld: I will be brief on the first one. I mean, First Brand is an unfortunate situation, but it doesn't really affect us. I mean, your question was more on M&A type of growth, I would assume. The focus here is clearly on organic growth. Jens is at the moment in Las Vegas for the AAPEX show, a significant potential, and as we said, broadening our spectrum. You saw, I didn't comment on this, in the deck, also the NOx sensor. That's a great example for portfolio extension and tackling the truck and bus part. So I would not think about our growth predominantly being external growth, but internal growth. That doesn't mean that we are not looking at opportunities if they are there, but we will be very careful. Christophe Hannequin: On the cash side, I wish there was an easy answer to this one. It is a very long list of plus and minuses centering around restructuring from one end, incentive payments, payroll and taxes. It's leasing liabilities. Again, I struggle to give you a summary answer, happy to get into details offline after if you wish to, but there's no real one topic that we would point to. If we had to pick one, it maybe around the pension side. But even that, it's only tackling one part of your answer -- of your question. Ross MacDonald: Okay. Christophe, I mean, maybe it would be interesting just to understand if potentially on the restructuring costs you've sort of guided us to whether those are coming in below expectations, and therefore, you're able to write back some of that free cash flow, if that's an element of this or whether it's really just a big, commingled list of pluses and minuses, as you said. Christophe Hannequin: No, we're not signaling restructuring costs lower than expected. What you do have is some timing issues quarter-over-quarter. I mean, restructuring cash flows, it's as much of an art as it is a science. So we do have some movements quarter-over-quarter from 1 year into another potentially, but no signal so far that there would be less cash outflows related to restructuring. Operator: The next question comes from Michael Punzet from DZ Bank. Michael Punzet: I have 1 question on your special items. Maybe you can explain in a bit more detail what you have booked in Q3, especially with regard to the impairments? And maybe you can give us any kind of guidance what we should expect for the full year? Klaus Rosenfeld: I think it's on the SAP. Christophe Hannequin: The main one in Q3, again, it's the fact that we are moving from an on-premise solution to SAP to a cloud-based solution. So we're not able to apply the same accounting treatment that we would have in the past. So you have EUR 204 million being written off for that topic alone that's flowing through the adjustment line. The other ones are the usual ones that we have had from the previous quarters related to the merger of the 2 companies and the restructuring that come with it. The big ticket item this month for this quarter, it's SAP. Klaus Rosenfeld: And it's driven by the fact that we're moving into the cloud and that we have to give up the utilization rates that we were assuming so far. That triggers this. It's a little bit of an awkward situation that was heavily discussed with auditors. But it's not a classical impairment in a sense that you have an asset that doesn't function anymore, that doesn't produce value. We are changing here the way we are treating it because we are moving from on-premise what we had so far into the cloud. Christophe Hannequin: This was heavily discussed with our auditors. We are not the only group out there that's facing the situation. I'll just say that the accounting standard there is a very conservative approach to the topic. Michael Punzet: Okay. And what should we expect for Q4 or the full year in the overall figures for the special items or one-offs? Christophe Hannequin: For the SAP, there will be a little bit of it, just to close that topic, impacting October. But we are talking single or -- single-digit or low double-digit amount that's done for the rest of the year. For the other topics, again, the usual suspects that you find in every quarter since the merger and the announcement of restructuring programs. Operator: [Operator Instructions] We have a follow-up question coming from Horst Schneider from Bank of America. Horst Schneider: I have got follow-up questions. The first one is related to Defense business. We saw this week that the first German auto supplier says he wants to get into drone production. I just want to get an update where you stand on that, if that could be something for you as well. And maybe you can talk about the outlook of your Defense business maybe in that context. The second one is a follow-up on the Humanoid business. I know you cannot share a lot of details, but could you maybe say, given the order intake that you got so far, where you see the main business potential for you? Is it more in the U.S.? Or is it more in China? Or it's all over the world and you cannot say? Klaus Rosenfeld: Let me tackle -- take the last one. As I said, we want to play in all the 3 regions that you mentioned. There is a -- the jury is out there who comes with the first volume contract, and you clearly need to define what that is. It's, at the moment, not clear what's happening there. We see the U.S. there with the prominent names probably as the leaders because there is more concentrated on one prominent company. While in China, there are many, many players at the moment, where it's a little bit more difficult to distinguish who are the ones that we maybe should bank on. NEURA is, I think, the most prominent player here. At the end of the day, of course, this is all depending on the end customer demand. And I can only say this Amazon announcement that was also well received, we need more of these kinds of players to articulate their needs. And that will then flow through the Humanoid OEM and also through the supply chain. I personally think that the U.S. will drive that first phase, and we'll then see significant competition between U.S. and China. When you go to the 5-year plan, it's obvious that the industrial automation in China is key to the next 5 years in China. There is massive support there. But on the short term, my view is that we will -- we need to watch out for what's happening in the U.S. They will drive it. Yesterday, when David was here with us, also in the Board meeting, he gave us a little bit more insight. And it looks that the next 1 or 2 years will be decisive on who is going to be ahead. Maybe it's a little bit a statement that is more diplomatic, but we need to see how it unfolds. In terms of Defense, let me quickly put that in perspective. We have said at the Capital Markets Day, Phase 1, that the basic decision that we want to play in defense or play more in defense is taken also with our shareholders from the family side. We are now in Phase 2. Phase 2 has 3 main deliverables. The one is a more articulated product, sales and also industrialization strategy. Without saying too much detail, we are today in a situation where we are looking at the key opportunities for us, for sure. Flying objects, let me call it like this, are super interesting because there is scale in that area and there is a product that is needed in particular when you think about high-performing electric motors. That's also where the fact that we are automotive and aerospace helps us. There is opportunity in everything that are vehicles for us. There is opportunity also in some of the high energy weapons. There's also opportunity when you think about spare parts and repair solutions. So we're looking at focused areas with dedicated customers. We have a lot of calls, a lot of demand, a lot of people that are coming, can you help us with your supply chain experience, also from the start-up side. But we are, at the moment, still in that selection phase. The second phase will last probably until Q1 2026. What is key then if you want to really turn this into a solid business? You need a structure. You need a legal entity. You need to have the right certification, qualification, in particular, if you want to play at scale. And that's a second key element that we are working on. So all good in that second phase. More to come when we are finished with this phase and have decided where do we really want to play in terms of products and application. Operator: There are no more questions at this time. I would now like to turn the conference back over to Heiko Eber for any closing remarks. Heiko Eber: Thank you very much. So with this, we would like to close today's call. Thanks to our speakers. Thanks to everyone dialing in for your questions, your interest. And, of course, thanks to the team for the preparation. As always, if there are additional questions, please reach out to our IR team. And I would already like to draw your attention and block your calendars for January for the CES. The formal invitation to visit us at our booths in Las Vegas will be sent out shortly. I guess you have it on the radar anyhow. Thank you very much. Have a good rest of the day, and talk to you soon. Klaus Rosenfeld: Bye-bye. Thanks, everyone. 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. Goodbye.

196天前Insight Analytics约5分钟阅读

AKER.OL 2025 Q3 财报电话会议

Christina Glenn: Good morning, and welcome to the presentation of Aker's Third Quarter Results for 2025. My name is Christina Schartum, and I'm the Head of Communications at Aker. I am joined in the studio today by our President and CEO, Oyvind Eriksen, who will walk you through the key highlights and recent developments across the portfolio. Our CFO, Svein Oskar Stoknes, will then take you through the financial results in more detail. After the presentation, we'll open up for questions. You're welcome to submit your questions at any time using the chat function. And with that, I'll hand it over to Oyvind. Øyvind Eriksen: Thank you, Christina, and good morning, everyone. Since launching a more focused Aker at the start of 2024, we have taken clear steps to simplify the portfolio, concentrate on fewer larger companies and invest in new growth areas. This quarter shows that the strategy is bearing fruit. Net asset value increased to NOK 67.5 billion, NOK 909 per share, and our share price rose nearly 20%, clearly outperforming both the Oslo Stock Exchange Benchmark Index and the oil price. We are seeing strong contributions from both our core energy business and our newer platforms: AI infrastructure, industrial software and real estate. The portfolio is becoming more balanced and less tied to commodity cycles. That's an important shift. Year-to-date, total shareholder return is nearly 50%, including dividends. We have increased the number of companies paying upstream dividends and received NOK 5 billion so far this year. In line with our dividend policy, the Board has approved a second dividend of NOK 26.5 per share, bringing the total to NOK 53 per share or NOK 4 billion in total. The strong performance is due to a number of value-accretive developments in our portfolio like the launch of Aker Nscale 50-50 joint venture for AI factory developments in the Nordics; our subscription of a 9.3% stake in Nscale with earn-out that can bring our shareholding up to 12.2%; the expansion of our real estate platform by acquiring 7.48% of the shares in Sveafastigheter; Aker BP delivering another solid quarter, raising its full year production guidance and making the Omega Alpha Discovery, one of Norway's largest in a decade; Cognite continuing its strong commercial development with Q3 SaaS bookings growing 425% year-over-year across multiple industries and geographies; and lastly, the Philly Shipyard delisting being completed. In short, our strategy is working. We are building more focused, more resilient Aker and creating long-term value for shareholders. Let me add a bit more context on how we're putting our strategy into action. We have made steady progress in simplifying the portfolio and building new platforms for growth in shareholder value and cash dividends. We have crystallized value through several transactions and exited noncore holdings. This allows us to focus our time and capital on a smaller number of companies with strong potential for returns. At the same time, we have invested in areas where we see long-term demand and attractive cash flows, particularly AI infrastructure and real estate. I will return to both of these shortly. This summer, we established Aker Nscale, a 50-50 joint venture between Aker and Nscale dedicated to developing large-scale AI data centers in the Nordics, starting with Northern Norway. This marks a new chapter for Aker. After previous attempts to build green industries proved unviable for realizing Narvik's potential. Momentum has accelerated. We announced two landmark customer agreements. OpenAI for the Stargate Norway project and Microsoft with a USD 6.2 billion 5-year contract. Construction is underway at the first site in Kvandal Narvik, with 230 megawatts of grid capacity secured and installed. Aker Nscale is now in the queue for an additional 290 megawatts. Thus, at full build-out, Kvandal is expected to reach up to 500 megawatts in total. The JV has a total of 10 plots in the portfolio. The company is actively working to secure grid access and regulatory approvals for several of these, a process that is essential for future development. At the same time, Aker Nscale is undergoing an intensive ramp-up with organizational development and active hiring underway to support project delivery and growth. Beyond infrastructure, the ambition is to build future digital industry in Norway, not just as a host for global tech but as an active developer and partner. We are working closely with Norwegian universities and technology communities to ensure knowledge transfer, competence development and local value creation. The data centers will run on 100% renewable energy. Its approach emphasizes data sovereignty and responsible AI development, which is of utmost importance to protect security interest in the future, which will be even more digitally integrated despite higher geopolitical tension and uncertainties. To support this, the JV is delivering sovereign cloud infrastructure, enabling AI workloads to be processed securely and in full compliance with European data regulations. Aker Nscale is creating new jobs supporting local suppliers and positioning Norway as a main hub in the European AI infrastructure market. This is a strategic move that diversifies our portfolio and delivers on our commitment to build new pillars for growth. Let me walk you through the core economics of how the business model for Aker Nscale is structured and why we see this as a significant value creation opportunity. The business model is designed for scalability, high profitability and predictable cash flows. The target is an unlevered return above 12% for a 3- to 5-year contract across GPU and data center investments, exceeding Aker's required rate of return. The model is based on GPU as a Service where we enter into long-term take-or-pay contracts running for 3 to 5 years with solid counterparts. This ensures full utilization over the contract period and gives a strong visibility on cash flow. These contracts typically include significant prepayments, which supports CapEx funding and reduce risk. The GPUs are installed in stages with prepayments for each phase. This approach allows us to manage CapEx efficiently and align investments with demand. The industry benchmark for EBITDA margins is above 70%, and our project is designed to deliver at or above this level. Importantly, the GPUs are fully amortized over the contract period, limiting residual risk. Consequently, there is a significant upside in terms of residual value potential after the contract period as the hardware is fully amortized and can be repurposed or sold. The cost structure is straightforward. GPUs account for about 80% of CapEx and OpEx is low. We hedged most of the power price for the entire contract period, minimizing exposure. And most of our contracts are with investment-grade counterparties and hence, financing is also robust. The scale is impressive. Significant customer agreements so far, including the USD 6.2 contract with Microsoft, more than 62,000 NVIDIA GPUs committed, 5-year contract periods with full utilization and residual value upside. First, development are targeted for August 2026 onwards, positioning Aker's Nscale in Narvik as one of the largest and most advanced AI data center projects in Europe. In short, this investment offers an attractive combination of scale, profitability and predictability underpinned by strong counterparties and robust risk management, all key qualities to become a key driver of value for Aker moving forward. Moving on to our direct ownership in Nscale, which is another cornerstone of our strategy in AI infrastructure. Earlier this quarter, Aker subscribed for a 9.3% stake in Nscale through Europe's largest ever Series B fundraising for AI infrastructure. This which was made alongside partners like NVIDIA, Nokia and Dell is not just a financial investment, it's a strategic position in one of the fastest-growing AI hyperscalers globally. Our agreement includes an earn-out mechanism, giving us the opportunity to increase our ownership to 12.2%. On top of that, our joint venture stake can be converted into additional shares in Nscale no later than at the future IPO positioning us for further upside as the company scales. Nscale itself is a remarkable story. Founded in 2023, the company has already secured multibillion-U.S. dollar contracts with the world's largest tech companies, and is delivering some of the largest GPU developments in the world. Nscale's vertically integrated model from data centers to software orchestration and its focus on renewable energy, have made it a partner of choice for leading technology companies. The pace of growth is extraordinary, with operations expanding across Europe, North America and the Middle East. This direct ownership gives Aker a seat at the table in a rapidly expanding market, with exposure to global growth, innovation and long-term value creation. It complements our operational partnership and strengthens our ability to shape the future of AI infrastructure in Europe. So in short, our stake in Nscale is a strategic lever for growth, innovation and shareholder value. AI infrastructure is only one part of the equation. The real value comes from transforming raw industrial data into actionable intelligence, and that's where Cognite stands out. Cognite's platform built around Cognite Data Fusion and Atlas AI is purpose-built for complex industrial environments, which is a huge market with high barriers to entry. The Cognite technologies unifies and contextualize data from operational sources, IT and engineering systems breaking down silos and creating a one single source of truth. This enables customers to deploy AI at scale, automate workflows and unlock new levels of efficiency, safety and sustainability. Q3 was Cognite's strongest quarter-to-date, with SaaS bookings growing record high 425% year-over-year and Q3 annual recurring revenue, up over 34%. While this performance was exceptional, we expect growth rates to normalize again next quarter, whatever that means in a boiling hot AI market. However, Cognite's momentum is more than just numbers. What sets it apart is its ability to deliver real impact in production. The Atlas AI platform allows customers to build and deploy industrial AI agents quickly using low code tools and preconfigured templates. These agents automate complex tasks from root cause analysis to predictive maintenance and generate significant business value. Cognite's reach now spans in energy, manufacturing, utilities and renewables with strong traction across Europe, North America, Middle East and Asia. Strategic partnerships with NVIDIA, Databricks and Snowflake reinforce Cognite's position as the go-to platform for industrial AI, enabling seamless integration and real-time AI-ready data sharing. More than commercial traction, this is a strategic validation. Cognite is becoming the trusted choice for companies seeking operational excellence through AI powered by structured data and domain expertise. In sum, Cognite is scaling with discipline, executing on its strategy and building a business positioned for long-term value creation. As we build new pillars for growth, real estate is playing a more central part in Aker's strategy as an active platform for long-term value creation. We have moved from passive ownership to operational excellence with scale across three listed platforms. Starting with SBB, the Nordic's leading real estate company in social infrastructure with SEK 93.7 billion in total property value. Despite recent challenges with a complex legal and financial structure, the fundamentals remain attractive. Our ownership gives us access to a substantial asset base and long-term potential. We are focused on strengthening governance, capital structure and operational discipline to support a more resilient platform. Next, Public Property Invest or PPI. Norway's leading player in social infrastructure, managing more than NOK 16 billion in property value. PPI continues to deliver predictable returns supported by strong tenants and disciplined dividend strategy. And finally, Sveafastigheter, Sweden's largest listed company in the regulated residential market with SEK 30 billion in property value. Sveafastigheter is our latest addition further expanding our footprint and operational reach. In addition, Aker Property Group manages NOK 5 billion in unlisted assets. focused on offices, logistics and industrial properties. Across these platforms, we are managing more than NOK 100 billion in property values combined. Our role is to support, strengthen and unlock the long-term potential, building a resilient real estate platform that complements our ambitions in AI and technology. So to sum up, Aker is executing on a strategy built for resilience and long-term value creation. We are delivering with sharper focus, simplifying our portfolio, investing in new pillars like AI infrastructure, industrial software and real estate, while also maintaining our industrial backbone. Our portfolio is now more diversified, less exposed to commodity cycles and positioned to benefit from long-term growth trends. Looking ahead, we remain committed to active ownership, disciplined execution and building trust with all stakeholders. The steps we have taken this year lay a solid foundation for continued value creation, financial flexibility and strategic progress. It's worth noting that our unlisted companies and liquidity reserve, together representing substantial value are still priced at virtually 0 by the market, highlighting a disconnect we see as a long-term opportunity. Aker is well positioned to capture opportunities in a changing market, and we will continue to build on our strengths as we move forward. That concludes my part of the presentation. I will now hand it over to our CFO, Svein Oskar Stoknes. Svein Stoknes: Thank you, Oyvind, and good morning. To begin, I will provide a brief overview of the key numbers for our listed and unlisted equity investments along with cash and other assets, followed by a more detailed discussion of our financial results. At the end of the third quarter, Aker's listed equity investments were valued at NOK 55 billion. This represented 72% of the company's total assets equivalent to NOK 743 per share. This was marginally down compared to the previous quarter and primarily due to negative value adjustments of NOK 1 billion related to Aker Solutions and NOK 0.6 billion related to Aker BP. And this was offset by a NOK 2.2 billion value increase of Aker BioMarine during the quarter. The net asset value of Aker Property Group's listed real estate investments in PPI and SBB is now also included under listed equity investments and included net of single-purpose debt. The investment in Sveafastigheter came after quarter end. Total dividends received from listed investments in the third quarter amounted to NOK 1.1 billion, with Aker BP accounting for NOK 856 million, Solstad Maritime for NOK 186 million and Akastor for NOK 35 million. Then over to Aker's unlisted equity investments, which represented 17% of Aker's total assets at the end of the quarter. These assets were valued at NOK 13 billion or NOK 179 per share. This represents an increase of NOK 0.7 billion from the previous quarter. The inclusion of Aker Holdco following the completion of the merger of Aker Horizons into Aker Holdco was the main driver of this increase. And this was partly offset by a negative value adjustment related to our investment in Gaia Salmon. Finally, cash and other assets, which represented 11% of Aker's total assets at the end of the quarter, equivalent to NOK 112 per share. Cash inflows totaled NOK 1.8 billion composed of cash dividends received from Aker BP, Solstad Maritime, Akastor and SalMar of and totaled NOK 1.1 billion in the quarter. In addition, we received a part down payment of the Aker Holdco shareholder loan of NOK 750 million. Cash outflows amounted to NOK 1.3 billion, including debt repayment of NOK 800 million and net investments and loans to portfolio companies of NOK 184 million, of which NOK 69 million to Aker Property Group. And cash outflows related to operating expenses and net interest totaled NOK 247 million for the quarter. This gave a cash balance at the end of the quarter of NOK 1.2 billion. The main components of fixed and interest-free assets are accumulated interest on receivables and NOK 0.5 billion of fixed assets. Then let's move to the third quarter financials for Aker ASA and holding companies, starting with the balance sheet. In accordance with our accounting principles, investments are recognized at the lower of historical cost and market value. At the end of the quarter, the book value of Aker's investments was NOK 28.6 billion, which represents a decrease of NOK 57 million compared to the previous quarter. This change primarily reflects negative value adjustments of our investments in Gaia Salmon and ICP of in total NOK 390 million. This decrease was partly offset by an increased book value of the investment in Aker Holdco of net NOK 233 million, in addition to a value increase of the shares in SalMar of NOK 96 million. The book value of equity at quarter end was NOK 27.6 billion, up NOK 445 million, mainly due to the profit before tax in the period. On a fair value adjusted basis, Aker's gross asset value was NOK 76.8 billion. After subtracting for liabilities, the net asset value amounted to NOK 67.5 billion or NOK 909 per share and the value-adjusted equity ratio was 88%. Of the total liabilities of NOK 9.3 billion, NOK 8.2 billion is related to bond debt and bank loans. And the noninterest-bearing liabilities includes NOK 545 million negative value on the AMSC TRS agreements. After quarter end, the TRS agreements were all settled at the end of October in connection with the liquidation of the company. Aker's financial position remains robust with a total liquidity buffer of NOK 7.8 billion, including undrawn credit facilities and liquid funds. After quarter end, our revolving credit facilities have been upped in size by NOK 2 billion, bringing the total RCFs to NOK 12 billion. Net interest-bearing debt amounted to NOK 1.7 billion at the end of the quarter, down from NOK 2 billion in the previous quarter, reflecting capital allocations made during the period and an increased cash balance at the end of the quarter. The loan-to-value ratio stood at 10%, reflecting our conservative approach to capital structure and Aker's weighted average debt maturity was 3 years. Including available options for credit and loan extensions, the overall effective loan maturity is approximately 4.1 years. Finally, moving to the income statement. Operating expenses in the third quarter were NOK 103 million. Dividend income was NOK 1.1 billion, mainly from Aker BP, Solstad Maritime and Akastor. The net value change was negative NOK 415 million, primarily due to a couple of negative value adjustments already mentioned, partially offset by gains in SalMar. Net other financial items totaled negative NOK 92 million. And finally, our profit before tax was NOK 460 million for the quarter. Thank you. That concludes today's presentation, and we will now proceed to Q&A. Christina Glenn: Thank you. We'll now continue with the Q&A. We have received several questions, starting with the data center initiative. Oyvind, can you elaborate on the risk profile for the Aker Nscale joint venture? And maybe also say a little bit more about whether you expect Aker needing to contribute more equity capital in addition to the USD 125 million already contributed? Øyvind Eriksen: Sure. The USD 125 million already committed and communicated relates to the Stargate Norway project. But generally speaking, it's likely that Aker will allocate more capital to AI infrastructure in the future provided that the investments will meet our investment criteria. As far as the risk profile or I would turn it around, the attractive business model is concerned. We signed a long-term take-or-pay contracts 3 to 5 years, with some of the most robust investment-grade companies in the world like Microsoft. And the contracts will typically contain significant upfront payments in order to help the financing of the CapEx-intensive developments. . Then the target is to amortize the GPUs, which accounts for 80% of the total investment during the course of the initial 5-year contract period, and to amortize 50% of the investment in the data center, the building and the infrastructure during the same initial 5-year contract period. And then it's obviously a huge opportunity to sell the GPUs and beyond the initial contract period. So that's the super profit for data center investments, which we believe will materialize but which is not a part of the initial investment decision and business case. Christina Glenn: What is the time line for revenue generation? Øyvind Eriksen: Well, the target is to commence operation for the Microsoft site in Narvik in August next year. And then revenues will start to stream. Christina Glenn: Great. There has been information on the Kvandal site in Narvik. There's also a little bit of information trickling out about other sites. Can you say a little bit more about how that's progressing? Has there been any investment committed on those sites and what the status is? Øyvind Eriksen: Well, we would like to grow the JV beyond the initial projects. And we have already dialogue with both existing customers and new customers about further data center developments, primarily in the Narvik region, but also in other parts of the Nordic region. So short term, it's about access to land and renewable power. Next step will be to negotiate customer contracts. And based on customer contracts, we will be able to make new investment decisions. Christina Glenn: Nordics going beyond Norway. Øyvind Eriksen: Of course, but the by far most attractive region in the world. to build data center is actually the Narvik area. Christina Glenn: Great. Then there's a question on the IPO of the Aker Nscale joint venture. Do you want to clarify anything on that? Øyvind Eriksen: The Aker Nscale joint venture. Christina Glenn: It says a possible IPO of the Aker Nscale joint venture. . Øyvind Eriksen: Yes. Well, we have no plan to IPO the JV as such. But the way the contract with Nscale is structured is that Nscale has a plan to IPO the company in a not-too-distant future, most likely in the United States. And prior to an Nscale listing, we have a right to roll up over 50% shareholding in the JV and exchange that shareholding in an additional Nscale shareholding. So the end game according to the current plan, is to end up as a significant shareholder in Nscale and with the JV consolidated 100%. Christina Glenn: So no IPO for the joint venture? Øyvind Eriksen: No IPO plan for the JV as such directly, but through Nscale. Christina Glenn: On the topic of IPOs. Can you say anything about timing for Cognite, which has seen an extraordinary quarter and year? Øyvind Eriksen: Well, I think I've been asked that question in most quarterly presentations since we established Cognite. And the answer is the same. We have no specific time line for a Cognite IPO yet. However, it's great to see that the inbound interest from investors continues to increase. So we have numerous financial and industrial players asking for shares in Cognite. So the optionality has always been high. And with the recent success, it continues to grow. Christina Glenn: Great. There's a question from an Aker Horizons shareholder wanting to know a little bit more about the path forward for Aker Horizons. Øyvind Eriksen: Well, you should read the announcement made by the Aker Horizons Board last week. We have no specific plans to develop and grow Horizon for the time being. The Board continues to explore different alternatives, including a liquidation of the company. Christina Glenn: And then the last question is, if you can give some more color on the process to solve SBB's financial situation. Is there a need to contribute more capital into that company and the real estate? Øyvind Eriksen: We are in a live dialogue with SBB both as a significant shareholder, but also as Board members. And the way Aker look upon SBB is that it is a company with great assets but a challenging balance sheet. So to fix the balance sheet of SBB is a matter of strategic importance in order to reposition the company for future growth. So I take for granted that the Board of SBB will announce the different steps to be taken when the Board has concluded the ongoing discussions. But the goal is clear, and that's to reposition SBB, strengthen the balance sheet and grow the company longer term. And we assume and expect that SBB like PPI and Sveafastigheter will be important assets in the Aker real estate portfolio going forward. Christina Glenn: Great. Thank you. That concludes today's presentation and Q&A. If you have other questions, please don't hesitate to reach out. Thank you for following.

196天前Insight Analytics约5分钟阅读

LATO-B.ST 2025 Q3 财报电话会议

Katarina Rautenberg: Welcome to the presentation of Investment AB Latour's Interim Report for the Third Quarter 2025. [Operator Instructions] I will now hand over to CEO, Johan Hjertonsson; and CFO, Mikael Johnsson Albrektsson. Johan Hjertonsson: Thank you very much, Katarina. Welcome, everybody. I'm here together with our CFO, Mikael, and we will take you through our Q3 report that we published earlier this morning. So if we start with the first slide, the overall group structure is unchanged. Continued good performance of our operations despite the challenging business climate. The construction market is still slow overall, but some areas are growing, thanks to trends like energy efficiency, automation, where several of our businesses are well positioned. I will comment more on the financial outcome more in detail later on in this presentation. As for the U.S. tariffs, Latour's exposure in the U.S. corresponds to the 11% of our total net sales and the effects from tariffs are limited. Caljan, Hultafors Group, Nord-Lock Group and REAC within Latour Industries have the most exposure in the U.S. And we aim to pass on as much of the increased cost to customers as possible related to tariffs. Then if we go to the next slide with our portfolio on the 10 listed companies. The majority of our companies have reported for the Q3 and the picture of a weaker business climate is fairly consistent. However, the financial effects varies depending on the industry and geographic exposure. And I think in general, our 10 listed companies in general, show strong resilience. And many of the listed companies has reported strong Q3 results, for example, ASSA ABLOY, Sweco and HMS. The acquisition activities are high in our listed holdings. One example among several is Tomra, who acquired C&C during the third quarter, a leading provider of bag drop solutions for collection and processing of beverage containers in the U.S. And if we go to the next slide, no major changes with the listed portfolio during the quarter. Earlier this year, however, we increased our holding in CTEK to 35.3%. In the 9 months period, the value development of the listed portfolio was minus 2%, whereas the SIXRX was 5.8%. And the value has increased since then. And until yesterday, November 3, the portfolio value was SEK 90 billion, and the total return amounts to 3% so far this year, whereas the SIXRX is 9.6%. And if we go to the next slide again, about the wholly owned industrial operations. The order intake has increased by 70% of which 10% was organic and net sales increased by 8%, of which 2% was organic. This is a strong development, especially considering the somewhat weak business climate. The overall demand is difficult to predict, and the picture is mixed between regions and industries. For example, Caljan's order intake is very strong in the quarter, indicating renewed investment activities in the logistics sector, while Hultafors Group, for example, is still suffering from a weak construction market. The total order backlog is on a strong level, ensuring stable net sales going forward for the next couple of quarters. We have good cost control, but various growth initiatives, combined with currency headwind puts pressure on the operating margin on a short-term perspective. Continuing investments in our companies, however, key to ensure long-term growth and profitability. Hence, we can tolerate somewhat lower margin for a shorter period of time, confidence that will pay off looking ahead. And the adjusted operating profit increased to SEK 936 million compared to SEK 935 million with an operating margin of 13.9%. And if we go to the acquisition slide, during the quarter, Nord-Lock Group has finalized the acquisition of 75% of the shares in Energy Bolting in the U.K. and Latour Industries has signed an agreement to divest Batec in Italy to the Swedish Company, Decon. Batec is a manufacturer of electric and manual handbikes with an annual revenue of approximately EUR 5 million. With Decon as a new owner, the company will get great support to further develop the Batec's product offering. Energy Bolting is a U.K.-based manufacturer of critical fasteners. The company has an annual net sales exceeding GBP 7 billion -- GBP 7 million. Earlier this year, we have finalized 6 acquisitions. All in all, the conducted acquisitions so far this year adds more than SEK 1.8 billion in net sales on an annual basis. And we're very happy with that with good M&A activity so far this year. And having said that, I hand over with a warm hand to Mikael to take us through our business areas to comment on that. So over to you, Mikael. Mikael Albrektsson: Thank you very much, Johan. And in ordinary fashion, we turn page and we start with the business area of Bemsiq Group. And Bemsiq had a continued good performance in the quarter with growing order intake driven by both organic growth and acquisitions. The total organic growth in net sales was 5%, which is a strong performance considering the challenging market within the real estate and construction industries. The operations in North America recorded the most robust development over the quarter. The adjusted operating profit amounted to SEK 110 million with a good margin of 21.4%. The margin was slightly negatively affected by ongoing growth initiatives and recent recruitments. Very well done Anselmi and team. We then turn page and move over to Caljan. And as Johan mentioned earlier, Caljan has recorded a very strong order intake during the quarter, well ahead of last year and a strong order backlog has been established for coming quarters. Net sales is down organically by 8% during the quarter. Aftermarket is growing while product divisions are below last year, adversely impacted by geopolitical uncertainty. But I think it's worth again to mention the very strong order intake in the period that shows a clear positive sentiment from customers' willingness to invest again. Caljan continued to have a good cost control and gross margin, however, not to fully compensate for the lower volumes and the operating margin amount to 13.3% in the period. Thank you, and very well done, Henrik and team. We then turn page and go to Hultafors Group. And the overall market conditions continues to be challenging for Hultafors Group in both Europe and North America and especially for the hardware divisions. The PPE division is, however, growing during the quarter. Total net sales grew organically by 2% compared to the corresponding quarter last year. The profit margin is lower than last year, mainly due to long-term investments for future growth and the adjusted operating profit amounted to SEK 214 million with a margin of 13.4%, which is good under the circumstances. All in all, very well managed by Anders and his team. We then turn page again and look at Innovalift. And order intake is growing by 41% in the period, supported by acquisitions and with a very healthy organic growth of 10%. Net sales grew by 36%, driven by both acquisitions and organic growth, especially within the Components & Modernisation segments. And the gross margin continues to improve step by step, however, slightly negatively affected by the cost inflation in Turkey. But as you can see on the chart, there is a very positive underlying trend on the margin within Innovalift. The quarterly adjusted operating profit amounted to SEK 109 million with a margin of 13.4%. All in all, very well done, Andrea and team. We then continue with business area Latour Industries, and the picture is somewhat mixed for Latour Industries business units, where we see a continued underlying good demand for REAC while the other business units are operating on somewhat slower markets. Order intake is growing organically by 7% during the quarter. Net sales is up 3% from last year and driven by a good performance by LSAB. The adjusted operating profit amounted to SEK 47 million, driven by strong results from MAXAGV. And the result is negatively affected by currency effects and the weak market climate as well as ongoing investments for the future. And it shall also be mentioned that Latour Industries currently has an under-absorption of their fixed cost on the central level following the distribution of Innovalift, putting additional pressure on the margin. But despite this, we are very happy to see a positive development on the margin during the quarter. And as the heading of the future states, the focus of Latour Industries continues to be on developing the existing holdings and to find new platform investments for future growth. So well done, Tina and your team. We then turn page again and look at Nord-Lock Group, who continues to develop very strongly despite a tough business climate, reporting growth across several metrics. Order intake grew organically by 5% during the quarter, and the net sales grew organically by a very healthy 13%, where all sales units contributed to the growth. And the order backlog is now on good levels. The quarterly adjusted operating profit increased to SEK 130 million with a strong operating margin of 25.5%. And as Johan mentioned before, Nord-Lock has acquired 75% of the shares in Energy Bolting in U.K., complementing the product portfolio in a very nice way. Very well done, Daniel and your team. We then turn page again to our last business area, Swegon, where we see that order intake is up 4% organically from last year. And given the business climate, this is a fairly good performance. Net sales were hampered by the general market uncertainty during the quarter. Total net sales grew by 10%, driven by acquisitions and organically, it was in line with last year. Profit margin is somewhat lower than last year, affected negatively by lower volumes, currency effects as well as investments in product development and other growth-oriented investments. And the adjusted operating profit came in at SEK 280 million with a margin of 11.2%. Very well done, Andreas and your team. We then continue the presentation to take a look at our net asset value. That decreased by 0.6% adjusted for dividends during the 9 months and amounted to SEK 210 per share compared to SIXRX that increased by 5.8%. The share price at the end of September was SEK 223, which means that there is a premium of 6% compared to how we present the net asset value. And as of yesterday, the net asset value was SEK 216 per share. The share price on the same day closed at SEK 238, which gives a premium to our way of describing the net asset value of about 10%. The consolidated net debt decreased during the quarter from SEK 16.9 billion to SEK 16.8 billion. And the net debt corresponds to about 11% of the market value of our investments, leaving headroom for further acquisitions going forward. And that summarizes my presentation, and I hand over back to you, Johan. Johan Hjertonsson: Thank you, Mikael, and some comments around the financial targets. The summary of the financial target during the last 12 months, we have had growth of 10%, EBIT margin of 13.8% and return on operating capital of 13.8%. And if this is the bottom of the cycle, the low cycle that we're in right now, I have to say that's fairly strong because our targets, as you can see here, growth above 10%, operating margin above 15% and return on operating capital above 15% are to be seen over a business cycle. And it's nice to see that growth is once again increasing, and it's driven both by acquisitions and organic growth. And the operating margin I have commented. So let's go to the next slide. And to summarize, we are very happy with the development during the third quarter, especially considering the business climate with a 10% organic growth in order intake and 17%, including M&A. Latour is a long-term sustainable investment company and a responsible owner of creating value for our shareholders. In our wholly owned operations, we continue to invest with a forward-looking view to enable future growth and profitability and in the end, create value for our shareholders. We have a strong corporate culture that we treasure, which is of great value when we move forward in a volatile and rapidly changing world. Thank you for listening. And thereby, we also open up for questions and the Q&A section. Operator: [Operator Instructions] The next question comes from Linus Sigurdson from DNB Carnegie. Linus Sigurdson: Starting off with a question on Bemsiq. So by no means is this a bad quarter, but we're seeing some deceleration of growth here. And you also talked about this short-term pressure on margin from growth initiatives. Could you just help us understand what kind of initiatives these are? And how material the impact is in the quarter and going forward? Mikael Albrektsson: Yes, absolutely. So good morning Linus, thanks for the question. And I mean, I think it's worth to mention that if you look on the historical growth rate for Bemsiq, it's been growing, I mean, double-digit 20% -- north of 20% for multiple years. And I think, of course, that takes its toll to the organization that every now and then you need to, in some way, also step up both, I mean, a bit of central resources, but also to, I mean, invest in the companies to be able to continue to bear that growth level. So I say, I mean, from -- it's that type of investment that is going into Bemsiq to I mean, build a bit more of a central structure as it is, as you know, very much an acquisition-driven growth journey as well in combination with taking the acquired companies to levels where we see that the quality of processes and quality of reporting and everything gets up to standard, which we think is necessarily to continue to grow organically over time. So I think that's what Johan means when that we are investing, but it will pay off over time. Johan Hjertonsson: And a more general answer to your question, Linus, we see that more than 1/3 of the drop on the EBIT margin is currency related that goes directly on the gross margin. And then I would say a large portion is that we have not taken down any forward-looking costs or investments in R&D, marketing or sales activities. And that's a kind of a credo for Latour that we continue those investments on a high level even in a tough market. And then I would say maybe 1/3 of the drop is related to that we have managed to get pricing out quite strongly related to tariffs and other things, but like maybe not 100% but almost. Linus Sigurdson: That is very helpful. And then I had a question on Caljan. Obviously, very impressive order intake and nice to see that the underlying demand is healthy. But it's been a while since we had sort of a normal environment for this company. Could you remind us the typical order book duration for a company like Caljan? Johan Hjertonsson: I would say the order book duration is a bit hard to say exactly, but about 6 months out, you could say, 3 to 6 months out on an average on the order book. Caljan do operate in a market that is fairly volatile. And you could see if we backtrack some years in the onset of the pandemic, there were some extremely heavy investments into the logistics sector because of e-commerce and so on. And then at the end of the pandemic, you could say the sector was overinvested. So it was very low demand, but it's also now very nice to see that the investments are coming back into the logistics sector. So it looks quite good for Caljan now. But to your point, Linus, there has been over the years, some swings in the demand in that market. Linus Sigurdson: Okay. My final question is on MAXAGV. Could you talk a bit about what kinds of end customers this company has? And if it's fair to assume that their geographic exposure is fairly local? Johan Hjertonsson: Yes. And please add on, Mikael. MAXAGV is automated guided vehicles is mainly for manufacturing and factories to help move material in an automatic way in factories. And I would say it's a fairly Nordic-based market that they are addressing. Do you want to add to that, Mikael? Mikael Albrektsson: No. I think that summarized it well. Johan Hjertonsson: Thank you. Thanks for your questions. Highly appreciate it. Let's see if we have any more questions or in the chat. Mikael Albrektsson: No questions in the chat. Johan Hjertonsson: Well, we have to assume it was crystal clear then. So thank you, everybody, for listening in and looking forward to speak to you when we present the full year report in the beginning of next year. Thank you all.

196天前Insight Analytics约5分钟阅读

9432.T 2026 Q2 财报电话会议

Naoki Akaishi: Thank you very much for joining us in spite of your busy schedule. We would like to begin NTT Holdings briefing session for the 6 months ended September 30, 2025. I am Akaishi from IR. I will be serving as the facilitator. First, let me introduce the speakers. Mr. Shimada, Representative Member of the Board, President and CEO; Mr. Hiroi, Representative Member of the Board, Senior Executive Vice President and CFO; Mr. Nakamura, Senior Vice President, Head of Finance and Accounting; and Mr. Hattori, Senior Vice President, Head of Corporate Strategy Planning. The announcement will be broadcasted live, and the video will be available on demand later. Also today, we will skip the earnings presentation and start with a Q&A session. Please refer to our IR website presentation materials for the documents regarding this presentation. We will take questions from those who are attending in person and then those who are preregistered attending via the web conference system. [Operator Instructions]. Now we will start the Q&A session. Naoki Akaishi: First, we will take questions from the floor. [Operator Instructions]. In the front row, on the right-hand side from my side. Satoru Kikuchi: My name is Kikuchi from SMBC Nikko Securities. Your company plan, you have not revised the plans. But looking at the contents of it or the breakdown of it, there are quite a change. The data center transfer gain is about JPY 20 billion less than the fiscal year start plan and SBI Sumishin due to the TOB of that, there's an overlap there, too. And NTT DATA, TOB has been completed, and noncontrolled interest is going down. So the profit is going to be boosted upwards. And also at the press conference, Mr. Shimada, you were saying that DOCOMO in the second half is going to accelerate its reinforcement of the customer base. At the start of the fiscal year, you were saying that the second half, the expenses will be controlled a bit more. It was the explanation. So I feel that there is a difference from there. And even though DOCOMO underperforms, the other areas, there's a buffer about around several -- [ JPY 10 billion ]. And I believe in the first half, there wasn't much that was used over there. So there are various changing factors that have occurred, but the content of the plan has not been revised at this point. You're saying, "It's okay. We're going to completely achieve it. Don't be worried about it." If that is the case, that's fine. But it seems that, that is actually not the case. So can you explain thoroughly one by one, that will be greatly appreciated. That's my first question. Akira Shimada: Kikuchi-san, thank you very much for your question. First of all, what we don't have a clear visibility yet is DOCOMO's competitive environment. From the second half of last year, in practice, the MNP as well as the quality issues were the focus point of Mr. Maeda and has been implementing initiatives to respond to that. So no more thinking. You think that last year in the second half, a lot of money has already been injected, therefore, compared to the first half of this fiscal year, you may think that the second half will not have an increase in cost, especially on a year-on-year basis. Normally, that will be the situation. However, if you look at the current most recent competitive arena, the competitors are seriously responding to the competition. And also for us, this fiscal year, we have in mind that we cannot lose this race. Therefore, if they're going to further strengthen their competitive -- competition measures, then we have to respond to that. But this is the area that we don't have a complete visibility. But on the other hand, how are we going to absorb that cost? This as well, just simply revising the forecast and allocate expenses to this. That's not the case, but utilizing the unutilized assets or reduce the cost where competition is not the issue. We need to look at the situation in a comprehensive manner. But having said that, on the other hand, selling assets, that is going to require a certain amount of time. Therefore, suddenly, if we try to do it in the fourth quarter, that will be difficult to do. Therefore, in this third quarter period, what kind of competitive environment is going to face us is what we need to see. And depending on that, things will be changing. So for now, we are responding to various things, and we would like to achieve the targets. But depending on the environment, we don't know what the environment of the competition is going to become. We don't know various things. So we would like to keep a very close eye on the third quarter competitive arena and respond to that. And for the data center, you said one by one. So regarding the data center is JPY 26 billion less than what we have originally assumed. However, as Sasaki-san from NTT DATA was explaining, actually, the order situation is quite strong. And net sales for the second half -- second quarter, the domestic unprofitable projects came about, and there was negative factors, both domestically and internationally. However, for domestic and overseas, the order situation is strong. So whether all that is going to cover this negativity, we don't have a clear picture, but they're also reinforcing the sales activities as well. So I'm hoping that they will be able to absorb this. And also, wholly owning NTT DATA, whether that will -- regarding boosting the bottom line because of that, currently, the financial expense is slightly increasing. So of course, this is one factor. However, we have not revised it because of this. And regarding the Sumishin SBI or SBI Sumishin, moving forward, how much of the services can be brought about that will bring synergy to us is the key. And so within DOCOMO, it is thoroughly being reviewed -- well, not just DOCOMO, but SBI Sumishin Net Bank as well. They want to grow. So together with them, this part is being considered and reviewed. And of course, I would like them to come out with a certain outcome. Well, the key is the mobile business is a consumer side competitive environment. That is going to be the key. Satoru Kikuchi: So that means that looking at various situations, you will consider selling assets. Well, you have done quite a bit of that 2 years ago. And there are assets that will generate profit? Are there any left, because you've done it 2 years ago? Unkown Executive: What we did 2 years ago is the [ sale of ] asset of NTT EAST and WEST. So DOCOMO business also has various assets on hand. So within DOCOMO Group, I want them to think of what can be done. Satoru Kikuchi: My second question is about the finance part. Regarding the business, I want to take a deep dive later for each company. But the finance part, then you have issued foreign bonds the other day. And I thought that you will provide us with explanation after everything is done, like the NTT DATA's TOB expenses and SBI Sumishin Net Bank's TOB that will be covered with DOCOMO's asset sales and the data center investment. So from next fiscal year onwards, the necessary capital -- what we are concerned about is the shareholders' return, which is the dividend and share buybacks. 6 months ago, you were saying that the direction and policy is not going to change and will be continued. And is that really possible? And also, when you wholly owned DOCOMO through TOB, the cash flow at the holdings company, you had about JPY 900 billion, and you were going to pay back your debt and shareholders' return investment. With that amount, you were able to make it through somehow. But currently, with NTT nonconsolidated, how much of cash flow are you expecting? And that cash flow, do you have to repay your debt? I think that's a discussion point. I think you don't have to repay and lower the leverage. But what kind of allocation of cash are you thinking of to maintain shareholder returns or maintain investment? I would like you to share your views. Takashi Hiroi: So Hiroi is speaking. I would like to answer your question. Well, this fiscal year, NTT DATA has been wholly owned, and SBI Sumishin Net Bank, we have acquired them. So cash-wise, it is quite tight. And also looking at NTT DOCOMO's performance with the cash flow that is recorded, they are using the surplus of the cash flow for the -- responding to the competition. So I think we will be at the bottom and a tight situation in terms of cash flow this fiscal year, making investments for growth and increasing cash is what we're aiming for. EBITDA is JPY 4 trillion, is the target we have. And we are progressing towards that. So once we see the effect of the investment in the medium term, this gap is going to be fulfilled, and the financial position is going to improve. But in terms of the soundness of the financial situation and balancing that with the shareholder return, basically, what we are doing right now is, the share buyback and the dividend level, basically, we are continuing to increase the dividend. We believe we will be able to solidly maintain that. And this fiscal year and next fiscal year for a little bit, we will have a tight cash flow situation. And of course, we can think of utilizing debt. But basically, the current credit rating of A-, we would like to maintain that rating and to do things so that we don't cause trouble for the bondholders or bond investors as well. That is how we would like to manage the financial position. That is all. Naoki Akaishi: We will take the next question in the front row, left-hand side, please. Daisaku Masuno: I'm Masuno from Nomura. I have a question for each segment. Starting with the Global Solutions overseas data center. Earlier, NTT DATA President made a press announcement. I believe that we can accelerate investment. I believe that more risk should be taken to accelerate investment. I felt that the President was a bit cautious. Do you have any thoughts about accelerating investment for DATA? Akira Shimada: Well, we want to accelerate. To be honest, we do want to accelerate our investment. But there's the construction capacity that needs to be factored in. So construction speed and also, are we going to do this with our own equity? That is another question. If we're going to tap into the funds from third party, then that will give us more power. And that is something that we are studying. We studied that possibility earlier, but the environment did not work out. Now the current environment is more favorable to involving third-party investment. So we will consider that in more earnest. And in terms of the construction speed, it does depend on the location, but we would like to accelerate investment globally in a way that is well balanced. And of course, we have to enhance projects with higher profit. For example, in India, the return is quite high. And so we would like to focus in areas where the return is higher. In terms of the construction capacity, that is a physical impediment. In terms of funding, from equity investors, lowering the equity ratio or involving third party is not that favorable, rather increasing debt through project finance rather than lowering the equity ratio. That would be our hope. We have no idea about -- we don't think about increasing equity or decreasing the equity ratio. We're just talking about using third-party funds for investment. So it's not like a third-party joint venture. No, that is not the case. Daisaku Masuno: My second question is regarding DOCOMO. One year ago, at the IR Day, when the medium-term plan was presented, DOCOMO's consumer business operating profit was to rise. And the premises for that was that the sales promotion will be made more efficient for the year ended March '27. But looking at the current situation, the promotion efficiency is actually declining. And so if the competitive landscape doesn't change, I believe that the current sales promotion efficiency will continue into the next fiscal year. So if your competitors don't reduce the sales promotion, what's going to happen in the next fiscal year? So the final year of the medium-term plan? Akira Shimada: Well, this may be similar to my answer to Kikuchi-san earlier. You are right that the scenario has changed somewhat from what we had imagined it to be 1 year ago. So our sales promotion cost is about the same as our competitors. In the past, DOCOMO was able to keep the sales promotion cost lower than our competitors. So what happened as a result of that was that our market share was going down. So now we are expanding about the same level of marketing cost as our peers. Now with the current status continue, if that is the case, then, of course, we will need to revisit the scenario. So reducing the marketing cost just by ourselves would mean that we reduce market share, the customer base itself. So we need to think about the balance. But the overall market is also seeing cost increase across different items, and how we absorb that cost increase is a struggle for not just us, but for all our competitors. So what kind of the competitive landscape you will see going forward is -- needs to be watched. And by closely observing that, I'm sure that I'll be able to better answer your question. Then accounting-wise, even if DOCOMO sells some of its assets, then, for example, we exclude that. And the data center sales, that is also excluded as well. So going up or down, that will not have a bearing on how it is valued. I think we need to show that DOCOMO recovers on its normalized basis. Daisaku Masuno: Lastly, for the regional communication business, can we say that the recovery is on track? I'm sure that the quarterly result is not sufficient, but the second quarter results didn't seem that satisfactory. Do you think that the structural reform is on track? Akira Shimada: In terms of NTT EAST and WEST, basically, the situation is on track. NTT WEST had some profit decline factors, which we had communicated to you before. There are assets that needed to be reduced from the books, which have become unnecessary. And these were already in the plan. So for making efficiency, introduction of AI at the call centers and using more AI in the support teams, all of that is on track. So for the NTT EAST and WEST, I'm not worried about the projections. Naoki Akaishi: [Operator Instructions] The person in the second row, please. Kazuki Tokunaga: Tokunaga from Daiwa Securities. I have two questions. The first is regarding the new Takaichi administration. Looking at the media report and looking at the Minister of MIC's press conference, they are going to work on the amendment of NTT law. However, having said that, up to now, quite a bit has been considered. And it seems that it has settled down once. So moving forward, what else can be considered is something that I cannot imagine. Therefore, at this point, for your company regarding NTT law, what you are seeking for? Or do you have any expectations for the new government is my first question. Akira Shimada: How the NTT law should be, as you have mentioned, Tokunaga-san, with the amendment that was done in the last 2 years, we believe that it has been moved forward quite a bit, is how we look at it. The major issue that remains, if I may say, is the total volume regulation, meaning that only have that imposed on NTT and is NTT the only one that should abide that due to securities manner -- securities reasons. And as Masuno-san mentioned, to improve the efficiency of NTT EAST and WEST, how they should do their work or how the organization should be, how they should conduct their work this time, there was quite of a deregulation done. So regarding the organization, changes are still remaining for improving efficiency. But within the law, it's stipulated that the discussions will resume 3 years from now. So there is no necessity at this point to rush on things at this point. However, at this point, what we would like the government to consider is regarding universal service provision. Well, the rule itself has been amended. But regarding the detailed how the system should be designed is not completed. So more than the amendment of the NTT law itself, but what has been amended this year -- up to this year, the content of that, we need to accelerate working on the details of that. Kazuki Tokunaga: The second question is kind of a follow-up question to Masuno-san. So there's -- in two parts. Regarding NTT DOCOMO, there may be a possibility of a scenario change and NTT EAST and WEST are in line as the plan. But I'm actually looking at a different direction. NTT DOCOMO, maybe July and September was tough. But in October, the MNP is turning positive. So in terms of the customer acquisitions, I believe that for the mobile communications, it's going to come back. But compared to the IR Day that was done -- IR Day, maybe the profit recovery level is quicker than that. So the first point is that the changes of scenario for DOCOMO, which KPIs is it? The revenues? The profit? And the second question is, including the rate change of NTT EAST and WEST, maybe we should not expect a large increase in profitability. Akira Shimada: So first of all, regarding NTT DOCOMO and NTT EAST and WEST, Tokunaga-san, regarding DOCOMO, you are a bit optimistic. But as Shimada mentioned before, that's different from how we look at it because the market competitive environment is quite intense. In October, the MNP has recovered, as you have mentioned. But at DOCOMO side, the marketing activities have been reinforced, and that's been increasing. And as a result of that, they're gaining the numbers. And we believe that this situation is going to continue, or we have to look at it that this is going to continue. So regarding NTT DOCOMO, in terms of the revenues and profits, we cannot be optimistic about it. But regarding NTT EAST and WEST, it is true that regarding the rate increase, we are implementing initiatives so that we'll be able to do so. But as we have assumed at the beginning of the fiscal year, the revenue and also the cost efficiency initiatives are progressing as planned. So I don't think there is a major change. And this fiscal year, GIGA School -- as we see in GIGA School and others, there's a large-scale investment, and that is done by the regional areas' sales rep for NTT EAST and WEST. And actually, that is bearing fruits, and that is contributing to the operating profit. That is the current situation. Thank you very much. Naoki Akaishi: We will now ask the members. [Operator Instructions] Okumura-san from Okasan Securities. Yusuke Okumura: I'm Okumura from Okasan. Can you hear me? Unkown Executive: Yes. Yusuke Okumura: I have two questions. First, regarding the data center business. This may be a question that I should pose to NTT DATA, but about JPY 90 billion book value asset was sold at about 2x the price. But the total IRR of these assets -- what was the total IRR? And also, the data center book value is around JPY 2 trillion now. So what is the unrealized value -- unrealized profit from this? Should we assume that it's about JPY 1 trillion? And also regarding the data center portfolio, what is the utilization rate? Or what is the contract period? Can you provide some KPIs for investors? Takashi Hiroi: So this Hiroi speaking. In terms of the data center REIT, IRR, we are not able to provide concrete numbers, but we are aiming for pricing that is aligned to the investors' perspective. So we believe that a fair valuation is being realized. And in terms of our entire data center business, what is the total value? What is something that we can provide better color on? Well, we are promoting more disclosure on the data center business. Data center valuation, there is a market for that. So EBITDA and profit-based multiple. So some kind of a total value can be assumed for our assets. And perhaps you can reference that in order to value the data center business as a whole. Yusuke Okumura: Now in terms of my second question, in terms of the creation of synergy with NTT DATA, I'd like to ask about the revisions to your medium-term plan. What kind of discussions are ongoing? So the synergy of having NTT DATA as a 100% subsidiary, will you just be updating EBITDA or the leverage ratio? Or will you be introducing new KPIs, like EPS? Or will you be considering balance sheet restructuring or changing the medium-term targets? Are you having those wide-ranging discussions? Can you share with us what is being discussed? Akira Shimada: This is Shimada. We are still in the process of discussing the synergy. And I actually mentioned this in the press conference. We need to first review NTT DATA's medium-term plan. And President Sasaki of NTT DATA also mentioned in terms of the global synergy that can be harnessed as a group. That is one very important factor. So NTT DATA's medium-term plan will be announced in spring next year. And the consolidated business plan will also be revisited at that time. So at this time, numerical targets or contents, how much we will review the medium-term plan, it is too premature to say because we need to have more concrete items to be able to provide more color on this. Yusuke Okumura: I apologize for asking a premature question. Naoki Akaishi: I would like to take a question from Morgan Stanley MUFJ Securities, Mr. Tsusaka. Tetsuro Tsusaka: This is Tsusaka from Morgan Stanley. Can you hear my voice? Unkown Executive: Yes. Tetsuro Tsusaka: I have one question regarding the mobile business and also a question related to the NTT DATA. Regarding the mobile business, before, you were not spending money than your competitors, but you are spending now at the same level as competitors, and you're still losing. And I think this is quite of a serious situation. And the other point is listening to Mr. Maeda's presentation for NTT DOCOMO, it seems that various things are being in place or prepared. However, didn't feel something that will stand out as becoming the core for them. So as a holding company, the strategy of NTT DOCOMO, are you making a decision that is really going well? Or if there is a question -- if your question towards the NTT DOCOMO's strategies, towards NTT DOCOMO directly, are you in a position that you can instruct them directly as a holding company? Or are you taking such an action to them is what I'd like to know? And the second question is related to NTT DATA. And at the NTT DATA, the President of NTT, Sasaki-san, was saying that it's global. And Shimada-san, you mentioned that it's global as well. And for global center business, you hold the #3 position globally. So you have quite of a solid presence there. But for the other businesses, I don't think they -- you can say that they have succeeded overseas, well, numerically -- from the new number perspective. So the reason why you are focusing on global -- the data center being a global business is fine. I understand that very well. But for the other businesses, that being global, I feel that there's no track record that has been achieved, is how we can see it. So how should we think about that? Akira Shimada: First of all, Mr. Tsusaka, thank you very much. Regarding the mobile business, whether a discussion is done or not, we are having a discussion with them. Because we are having the discussion, that is why the direction has been changed since last fiscal year, basically. They need to solidly and surely protect their customer base. And as I mentioned before, without spending cost or money and just damage their existing customer base, there's no future for the business. Therefore, we wanted them to thoroughly respond to the situation. For the second quarter, actually, the [ Elmos 0.5 giga ] was stopped as a plan, and there's an impact of that. And in fact, we slightly lost against the competitors. But as of October, MNP is net positive now. And the second quarter situation, I think, is a temporary situation, is how I look at it. But what's more important than that is regarding quality. We need to improve the quality, especially because everybody now is watching a lot of video. So the challenge is in the metropolitan areas, around the railway routes. We need to work on that, and we need to increase the number of base stations. However, today, it was said that in the second half that they're going to increase the construction process by threefold, but that needs to continue into next fiscal year. And also the 5G base station that has become old needs to be new, and we are replacing that to a new one. And that needs to be completed through this fiscal year and next fiscal year. So those are the two key points. And we are aligned with DOCOMO on this. And they are thinking of various cost reductions, but these are the necessary costs that needs to be spent. So for this year and next fiscal year as well, in terms of implementing new equipment and facilities is something that is necessary. Therefore, how are we going to overcome this situation and have a bright prospect for FY '27. Of course, I don't know the numbers for FY '27 yet. However, these type of factors will come about, and we are aware of that, and we are continuing our discussions on it. And regarding NTT DATA, at the global discussion, recently, the demand for AI is coming about quite strongly. And the tech services customers, conventional tech service customers is where the AI demand is coming from, especially South Europe, like Spain, Italy, in that region, the needs is heightening. In Germany, unfortunately, the automobile industry is not doing well. So there's an impact from that. And the U.K., performance is coming back slightly. And in the United States -- well, the U.S.A. is about the same situation like Southern part or Southern Europe. So we do have expectations to a certain extent in those regions. So the product itself is transforming and having the customer base is quite valuable. So in the areas other than data center business, to turn it around into a positive business, I want the business to be managed in that way. Thank you very much. Naoki Akaishi: Thank you very much. So we have exceeded the allocated time. We would like to take one more question either from the floor or remotely. Since there seems to be no further questions, we would like to conclude NTT Holdings presentation. Next will be from NTT DOCOMO. So please stay in your seats. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

196天前Insight Analytics约5分钟阅读