AI Investor Insight

CVLT 2026 Q2 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Commvault Second Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Michael Melnyk, Head of Investor Relations. You may begin. Michael Melnyk: Good morning, and welcome to our earnings conference call. Before we begin, I'd like to remind you that statements made on today's call will include forward-looking statements about Commvault's future expectations, plans and prospects. All such forward-looking statements are subject to risks, uncertainties and assumptions. Please refer to the cautionary language in today's earnings release and Commvault's most recent periodic reports filed with the SEC for a discussion of the risks and uncertainties that could cause the company's actual results to be materially different from those contemplated in these forward-looking statements. Commvault does not assume any obligation to update these statements. During this call, Commonwealth's financial results are presented on a non-GAAP basis. A reconciliation between the non-GAAP and GAAP measures can be found on our website. Thank you again for joining us. And now I'll turn it over to our CEO, Sanjay Mirchandani, for his opening remarks. Sanjay? Sanjay Mirchandani: Good morning, and thank you for joining today's call. Commvault had another strong quarter and an excellent start to the first half of the fiscal year. Highlights include: in constant currency, we added a record $47 million net new ARR. Subscription ARR rose 30% to $894 million. Total revenue grew 18% to $276 million. Additionally, we hit a major milestone earlier than expected. Total ARR grew 22%. And with that, we achieved $1 billion in total ARR 2 quarters earlier than our original March 2026 target. In Q2, SaaS ARR grew 56%, hitting $330 million. This was also 2 quarters earlier than projected. And for the fiscal first half, we achieved 42 on a rule of 40 basis. We couldn't have done it without the support of our customers and partners and the unwavering commitment to innovation and excellence from the Commvault team. Looking ahead, there are 3 key business drivers that continue to fuel our growth. One, strong demand for our Commvault Cloud Cyber Resilience platform from our hybrid cloud customers. Two, as I mentioned in prior quarters, the continued move to the cloud, which our platform is tailor-made to support. And three, customers rely on our innovation engine to meet their complex and evolving readiness and resilience requirements. I'll discuss each in more detail. First, hybrid cloud customers are embracing our Cyber Resilience platform. New attack vectors are constantly emerging. And with AI, data is more distributed and is being used in new ways which introduces more threat vectors for organizations to grapple with. The need for best-in-class detection, protection and recovery is paramount. Traditional data protection approaches don't cut. Customers need a platform that makes them ready to withstand the worst to keep their business continuous. We do this better than anyone else. This quarter, we saw strong momentum across our identity and data security focused offerings which grew double digits sequentially and represented nearly 40% of net new ARR. Our fastest-growing SaaS offering this quarter rapidly restores Active Directory and Entra ID to identity protection services. In Q2, a large bank in Asia Pacific chose Commvault's Active Directory offering to quickly recover its identity operations after a cyberattack. They also leveraged ThreatScan to validate clean recovery points and unified its hybrid workloads to close gaps and meet its regulatory requirements. This is cyber resilience in action. As we shared last quarter, we also continue to invest in our partner ecosystem, which makes our platform even stronger. This quarter, we announced a new partnership with BeyondTrust, a global leader in identity security. By integrating their capabilities with the Commvault Cloud platform, we can help joint customers advanced recovery while reducing unauthorized access to credentials, systems and data. We believe the momentum we're seeing across our identity and data security focused offerings will continue in the second half of the year, which brings us to our second growth driver, the continued move to the cloud. Cloud-borne and cloud-bound data is accelerating at a tremendous pace, and this is only going to increase with the rapid proliferation of AI. Today, Commvault has moved and protects approximately 8 exabytes of customer data into the cloud. This represents a greater than 40% CAGR over the past 5 years. We expect this rapid pace of growth to continue fueled by the fact that customers are increasingly storing AI data in the cloud. It makes our Clumio portfolio of offerings for AWS more relevant than ever. Over the past year, we introduced Clumio backtrack for F3 and brought Clumio's unique recovery capabilities of DynamoDB and Apache Iceberg. We are transforming the speed, scale and efficiency in which cloud data can be restored. This quarter, we saw healthy sequential growth in ARR from Clumio and continue to add new customers to the platform, including 3 Fortune 1000 customers and 2 Fortune 500 customers. And BBVA, one of the world's largest financial institutions chose Commvault to reduce its cloud-native complexity, strengthen its DORA compliance requirements and protects its mission-critical AWS data. Commvault cloud unified its data protection across 3 major hyperscalers, and Clumio unlocked a 40% cost savings. Additionally, we made tremendous progress with cloud-bound enterprises. In Q2, the number of SaaS customers grew nearly 9,000, representing a 40% increase year-over-year. Net dollar retention remains healthy at 125%. And we continue to see strong adoption of our SaaS offerings from existing customers. A global Fortune 1000 system manufacturer chose Commvault to support its hybrid cloud journey. Today, Commvault safeguards is virtual machines, databases, file systems and Microsoft 365 data. The customer also leverages Air Gap Protect and our integration with Azure Government Cloud to streamline operations and support its compliance initiatives, which brings me to our third growth driver, Commvault's Innovation Engine. Our innovation engine has never been better. Time and again, we've been first-to-market with unique capabilities that address our customers' most critical use cases. Innovations like Cleanroom Recovery, Active Directory and Cloud Rewind are closing the gap for customers evolving readiness and resilience requirements. Top industry analysts are taking notice. We are one of the few companies to be named a leader in the Forrester Wave, the Gartner Magic Quadrant and just this quarter, the IDC Marketscape on cyber recovery. The IDC MarketScape report highlighted our platform's comprehensive cyber recovery architecture, broad workload support and deep data security integrations for delivering enterprise-grade resilience. This is why customers choose Commvault. As enterprises embrace AI, we will help them address evolving resilient requirements. That's why we acquired Satori Cyber, which closed during the quarter and is being integrated into our Commvault Cloud platform. This acquisition is timely as it provides monitoring and front protection for large language models as well as automated discovery, classification and access management for structured data. We will discuss the evolution of resilience in the age of AI and introduce a richer set of innovations ever at Shift, our premier customer event on November 12 in New York City. I hope you can join us. And with that, I would like to turn the call over to our CFO, Jen DiRico, to discuss our results in more detail. Jen? Jennifer DiRico: Thanks, Sanjay. Good morning, and thank you for joining us today. Our solid Q2 results confirm that data is moving to the cloud at an accelerating pace. Our Commvault Cloud platform is well situated to benefit from this Shift. Case in point, in Q2, we set new records by adding $47 million in net new ARR and $29 million in net new SaaS ARR on a constant currency basis and we exceeded $1 billion in total ARR, reaching this milestone 2 quarters earlier than our initial target. Now I'll discuss our Q2 results and operating metrics followed by an update on Q3 and FY '26 guidance. Please note that all growth rates are on a year-over-year basis unless otherwise specified. On a reported basis, total annual recurring revenue increased by 22% to $1.04 billion or 21% on a constant currency basis. Subscription ARR increased 30% to $894 million, representing 29% growth on a constant currency basis. This was led by 56% growth in SaaS ARR to $336 million. And I'm excited to share that we exceeded our original $330 million SaaS ARR target 2 quarters earlier than planned. Subscription ARR now constitutes 86% of total ARR compared to 81% 1 year ago. Subscription ARR is the best indicator of the company's growth. Now I'll discuss Q2 revenue trends. Total revenue grew by 18% to $276 million led by a 29% increase in subscription revenue, including 61% growth from our SaaS platform. Term software revenue rose 10% to $93 million. Strong double-digit growth in transaction volume was tempered due to a shift in term duration, which reduced average deal size. In Q2, customers chose shorter contract duration to maintain flexibility between software and SaaS as they evaluate the timing of their transition to cloud. Q2 SaaS net dollar retention was steady at 125%, benefiting from both successful up-sell and cross-sell initiatives. We saw solid momentum across our identity and resilience offerings such as Air Gap Protect, Active Directory, Cleanroom, Cloud Rewind, Risk Analysis and ThreatScan, which collectively grew double-digit percentages sequentially and represented almost 40% of net new ARR. Active Directory, a mission-critical identity tool for an effective resilient strategy saw usage more than triple year-over-year as IT leaders adopt our data and identity recovery solution. In just 2 years, Active Directory is on pace to become one of our largest SaaS offerings. For example, we expanded our footprint with a large U.S.-based health care services customer who sought to address concerns around identity and resilience as one of its largest competitors suffered a crippling cyberattack. With the addition of Cleanroom, Active Directory enterprise and M365 backup, we are securing this customer against accidental deletion, corruption and providing peace of mind in being able to rapidly recover in case of an event. Additionally, we closed several 7-figure SaaS transactions during the quarter. Further evidence that Commvault Cloud is the gold standard for enterprise-grade resilience at scale. SaaS customers over $100,000 in ARR grew 55% year-over-year outpacing growth of the overall SaaS base. Due to the complexity of their requirements, this segment typically demonstrates a higher rate of multi-product adoption than our overall SaaS base. Now I'll discuss our profitability and free cash flow. Fiscal Q2 gross margins were 80.5%, which reflects the acceleration in the mix of SaaS and Shift in average software duration. Operating expenses of $170 million represented 61% of total revenue, consistent with the prior quarter and prior fiscal year. Q2 operating expenses reflected continued investments to support our strong ongoing growth trajectory. Non-GAAP EBIT was $51 million. resulting in a margin of 18.6%, which reflects the increased mix of SaaS bookings and the integration costs from Satori. For the first half of fiscal '26, we achieved a 42% on a rule of 40 basis, reflecting a healthy balance between revenue and profitability. Turning to key balance sheet and cash flow indicators. On September 5, we closed a private offering of $900 million of convertible senior notes with a coupon of 0%. This capital raise allows us to optimize our balance sheet and provide additional flexibility for capital allocation decisions. We achieved very favorable terms on this financing, reflecting strong investor demand against a solid market backdrop. We repurchased $131 million of stock during the quarter, of which $118 million was executed in conjunction with the convert. We ended the quarter with a diluted share count of approximately 45 million shares. Q2 free cash flow grew 37% year-over-year to $74 million primarily driven by continued strength in deferred revenue from SaaS contracts and strong cash collections against Q1 sales. We ended Q2 with over $1 billion in cash. Now I'll discuss our outlook for Q3 and our updated outlook for fiscal year '26. For fiscal Q3 '26, we expect subscription revenue which includes both the software portion of term-based licenses and SaaS to be in the range of $195 million to $197 million. This represents 24% growth at the midpoint. We expect total revenue to be in the range of $298 million to $300 million with growth of 14% at the midpoint. At these revenue levels, we expect Q3 consolidated gross margins to be in the range of 80% to 81%. We expect Q3 non-GAAP EBIT margins of approximately 18% to 19%, which reflects continued strong growth from our SaaS platform and ongoing shift in term software duration. Now I'll discuss our updated fiscal year 2026 guidance. As a reminder, ARR guidance is in constant currency using FX rates as of March 31, 2025. For a historical comparison, please refer to Page 30 of our Q2 earnings presentation. We now expect constant currency fiscal '26 total ARR growth of 18% to 19% year-over-year. This will be driven by subscription ARR, which we now expect to increase by 24% to 25% year-over-year. That represents an increase of 50 basis points at the midpoint for both metrics. From a full year fiscal '26 revenue perspective. We continue to expect subscription revenue to be in the range of $753 million to $757 million, growing 28% at the midpoint. Our guidance assumes a continued shift in term duration during the second half of the year. We reiterate total revenue of $1.161 billion to $1.165 billion, an increase of 17% at the midpoint. Moving to our full year fiscal '26 margin, EBIT and cash flow outlook. We now expect gross margins to be 80.5% to 81.5%. This range reflects continued growth in our SaaS platform, which carries a different gross margin profile than software. We now expect non-GAAP EBIT margins of approximately 18.5% to 19.5%. Non-GAAP EBIT margins reflect our ongoing investments in additional growth driving initiatives. We are raising our full year free cash flow outlook to a range of $225 million to $230 million. This guidance reflects benefits from recent federal tax law changes. To summarize, our first half results are evidence of strong market demand that we believe will continue throughout the year. Thanks to our leadership in innovation, our growth-focused investments and strong execution, we are well positioned to continue taking share of the expanding Cyber Resilience market. Now I will turn it back to the operator to open the line for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Aaron Rakers with Wells Fargo. Aaron Rakers: I guess maybe to start, Jen, can you talk a little bit about -- a little bit more about the Shift in term duration? I guess -- if I look at the guidance and the reiterated guidance for the full year, it kind of implies a deceleration of growth, call it into the 11% total range. Can you just unpack that a little bit why we would expect to see growth decelerate in fiscal 4Q? And maybe that's tied back to that shift in term? Jennifer DiRico: Absolutely. Thanks for the question, Aaron. First, let me just start by saying, I would say this is the -- this is our second best term software ARR quarter and that was coupled by the fact that we saw strong volume as well. So this is the second best net new customer addition quarter for term software. When we unpack the kind of variance in subscription revenue, it really came down to that shift in term duration and effectively back to the levels that we saw a couple of quarters ago. And so when we double click, what we really saw was customers wanting to maintain their flexibility, as I thought about the -- their anticipation move to the cloud. But ultimately, what we were really pleased with was the volume that we saw in our software term business. From a volume perspective, deals greater than $100,000 actually increased 17%. So ultimately, that's really where we see the strength coming from an ARR perspective, and we do believe that is the best indicator of growth. As we zoom out and think about the second half of the year, right, what we have seen is the continued acceleration of SaaS really meeting the moment from where customers are, and we have the best platform to do that. And ultimately, when we look at the pipeline for the second half of the year, we've been prudent as we think about the pipeline and ultimately have carried through the same trends that we saw in Q2 through the year -- rest of the year. But I would just end by saying the growth in our business really is dictated by the ARR that we see, and we've raised both the subscription ARR and total ARR by 50 basis points. Aaron Rakers: Yes. And then as a quick follow-up, I'm curious, kind of sticking on the growth theme a little bit. The slide deck highlights your expectations on a TAM growing, I think it's 12% CAGR over the next couple of years. I guess as we think forward, I mean, Commvault seems to be in a pretty good position is still possibly a share taker. Can you talk about the competitive landscape and whether or not we should think 12% kind of a baseline, and there's the ability to continue to grow above that? Sanjay Mirchandani: Sure. Aaron, it's Sanjay. Let me just take me the competitive landscape. So when you look at our growth, healthy double digits has been for a few quarters. This quarter included overall both SaaS and software and when you break down the TAM at least on the more classic data protection side, you'll see that the SaaS market is growing double digits and we're fast outpacing it at 55%-ish ARR growth this quarter on just our SaaS product. And when you look at the software TAM, that's probably growing 0 to low single digits and has been again for a while. Our software business is growing at a healthy double digit, which brings you to -- we're taking share and we continue to take share. So I would say that the way we're growing, at least on the software side is our customers are consolidating, desperate platforms over the years. They're rethinking their resilience strategy with us in the wake of all the ransomware and cyber attacks, and we continue to innovate on our platform. I'll let Jen flesh out the rest of your question. Jennifer DiRico: Yes, sure. And in response to the TAM growing 12%, I would point you back to our overall ARR growth and our subscription ARR. So fundamentally, we still believe we have the continued opportunity to take share in the market and grow faster than the TAM. Operator: Our next question comes from the line of Jason Ader with William Blair. Jason Ader: So some investors have asked whether we might be seeing the backup modernization cycle kind of winding down after a few years of elevated investments. How do you respond to that, Sanjay? Do you feel like we are sort of, call it, in the back 9 of some of that modernization activity in response to ransomware? Sanjay Mirchandani: I don't think so, Jason. I think we haven't seen a slowdown in cyber attacks or new threat vectors and/or the scale at which this is happening. So there's a lot of work to do. It's -- and we're working with customers around the world on very similar types of cyber resilience programs. I don't think so. You may see different implementations in the -- as we go into what I'm affection to calling the AI era. And there'll be different needs. There will be different threat factors. And we're working really hard to make sure that we're one step ahead of what customers are going to encounter. In fact, shameless plug at our Shift event on the 12th of November, we're going to unveil probably the most rich set of capabilities on our platforms ever. And so you'll see a lot more of where we believe the world is headed. And I don't want to give it all the way. Jason Ader: Okay. Okay. Good. And then just as a follow-up for you, Sanjay. Could you offer any comments on the deal announced last week between Veeam and Security AI? Sanjay Mirchandani: I guess Anand will be the right person to ask that question. But the way we look at it is, we've been saying this for a while. What we've been saying, if you -- I mean, I'm going to guess I've said this for the past 3 years, where the world of data security and the world of data protection as we know it has to come together if you want to be truly cyber-resilient. And what you're seeing with our acquisition, for example, of Satori Cyber was along the lines, I think, of what we may have done with their acquisition. The -- where identity, observability, okay, policy enforcement on all things within your enterprise when it pertains to data, all of these things have to work together because as cyber attacks get more sophisticated, if there's like between your data security elements and your data protection elements, you're exposed. And this is the bringing together of it. We announced our acquisition last quarter. Operator: Next question comes from the line of Eric Heath with KeyBanc Capital Markets. Eric Heath: Yes, I would say just looking at some of the net new ARR, it does look like it's still accelerating over the last quarter. So it doesn't really seem like a slowdown, but -- maybe a question for you Jen. Just curious what's giving you the confidence to kind of make the step up in investments and maybe how you're thinking about that trade-off and what is a 50 basis point raise to growth, but a 150 basis point reduction in margin relative to your prior guidance? Jennifer DiRico: Yes. Thanks for the question, and it's the right one. Ultimately, what we look at is what has and hasn't changed for the year as we think about guidance and our ability to continue to invest. And fundamentally, what has not changed is our ability to continue to take share. We see that in the fact that the volume and ARR is up, the volume number of customers and our overall rep productivity continues to increase. We're also seeing the fact that our net new offerings continue to contribute more and more to our ARR, right? So across the board, when I think about the opportunity to invest, when we go back and when we started this year, there were a couple of key things that we needed to see. And effectively, we're continuing to see them, right? And so ultimately, we said '26 is going to be a year of investment, and we're going to continue on that path because all signals say that the market has not changed. Sanjay Mirchandani: And Eric, this is Sanjay, it's a very competitive landscape. We have to be ahead of what is going on in the market. We run a very responsible business as you're probably tired of hearing me say, where we worry about the top, we worry about the bottom, we want to make sure that we build a sustainable company. So within those constraints, we continue to invest both in product. We're seeing a lot of accolades on our platform, and you haven't seen what we're bringing out yet. And obviously, we have to be where the customers are. So that's the thinking. Eric Heath: And just on that point, I mean, and a follow-on to Jason's earlier question, but do you perceive the competitive landscape getting more competitive? And how do we think about that high in terms of legacy displacement opportunities? Is it starting to shrink, and that's driving a more competitive environment? Sanjay Mirchandani: It's always been competitive, and it's just getting -- now with cyber being more relevant, more visible in boardrooms and with AI, it becomes a spot where -- it becomes more -- it just becomes more visible and more competitive. Now what we've always done -- and we -- and the reason we've been in business for 30 years and continue to get accolades on our platform is we out-innovate our competitors. And it's the formula that's worked for us and we meet our customers exactly where they are, whether it be on-premise, on the edge, in the cloud, back and forth, and we want to make sure that we deliver the technology to keep our customers protected. And that's how we win. I think there is still ample opportunity to consolidate and there's ample opportunity for us to get customers more resilient. Operator: Next question comes from the line of Howard Ma with Guggenheim. Howard Ma: Congrats on reaching the $1 billion ARR milestone earlier than you expected. For Sanjay, can you remind investors of the drivers of your term subscription business? You mentioned the share gains and the TAM earlier, but I imagine on-premise data growth is still the single biggest driver and perhaps under-appreciated by investors. You gave the 40% CAGR for data growth in cloud. Not sure if you have a sense of the on-prem data growth? And one more piece, too, is the identity and data security stat you gave, that's 40% of net new ARR. I wonder to what extent is that also benefiting the on-premise part of your business? . Sanjay Mirchandani: Yes. So Howard, good to hear from you. Our play has always been from the day we dreamed up Metallic, our SaaS offering. Our dream has always been to have the singular platform for hybrid customers. And I've said it over and over again, I don't know how fast the dial will turn on where they move things to the cloud but we want to give them that complete flexibility to be able to do that as well. And as the platform has evolved, we continue to see customers whose primary disposition is on-premise. So we work with our partners whether it be HPE, whether it be Pure, whether it be NetApp to continue to work with our customers on-premise for their workloads that matter there. And as they start moving more workloads or doing more things with the public cloud, our platform is the natural journey. It's a natural platform. It's the way in which they move things over and protect them on the other side. So for us, on-premise continues to be, and we're very proud of it, continues to be a growth driver. Now if you look at your second part of your question, on identity and security, that has to be -- that is a malleable thing, that has [ port. ] You don't have separate things going on in the cloud versus on-prem, especially when you have a hybrid environment. And our offerings, whether it be Active Directory or our partnership with Beyond Trust or the other things we're doing around that allows customers to have an integrated protection capability for their identities as they move more workloads into the hybrid growth. Now it's very important because when your identity is integrated closely with your protection, resilience is a lot deeper. It's a lot better. And we've been doing this for a while. And yes, we're seeing our AD and Entra ID and our identity capabilities, we're starting to become a significant contributor to a net new ARR. So that is a positive sign. Howard Ma: A follow-up for Jen, given the appreciation for Commvault's hybrid strength, are you seeing increased cross-sell between your term customers and SaaS customers? I recall you all gave us that it's probably from 2 years ago, I think it was like 40% of SaaS customers are also term customers. So I wonder if that percentage has gone up. And then specifically with respect to the change in term duration with compression, are higher mix of SaaS customers influencing the -- those that also use term, is that causing them to drag down the contract duration? Jennifer DiRico: Yes. So first, let me answer your first question around the mix between software customers also using SaaS. The stat we gave a little while ago was about 30% that continues to tick up slowly, right, but we're seeing that traction. And as Sanjay and I both shared in our script around the fact that customers are really wanting to maintain their flexibility, right? Whether they're starting with us on software or SaaS, the most important thing is that as customers continue to transition their workloads, we have that opportunity. So I think we're seeing that in the numbers. Sanjay, you can add. Sanjay Mirchandani: And Howard, we obviously help customers with the workloads logically. So there are some that overlap like virtual machines between cloud-driven, SaaS-driven or on-premise driven, that's a choice to give our customers, but things like protecting Microsoft 365 is all cloud driven. So what ends up happening is, as customers -- as we work closely with customers on their journey on their workloads, on their priorities, on their timing, we meet them where they are. And that's just how it works. And sometimes there's a Shift where they make the cloud a priority over on-premise. But the good news part all the way -- the good news all the way is that they commit to our platform, and then we enable them all the way, whether they're on-premise, on the cloud or on the edge. So I look at this movement as something we've been expecting and something that we're ready for with a tailor-made platform for our enterprise hybrid customers. Operator: Next question comes from the line of Rudy Kessinger with D.A. Davidson. Rudy Kessinger: Congrats on a strong quarter. When I look at ARR which obviously matters much more than revenue. Obviously, record net new ARR, and by my math, organic ARR growth at constant currency accelerated a point to 19%. Jen, you talked about ongoing investments in growth initiatives as part of the reason for the EBIT margin guidance coming down in addition to the gross margin compression. Could you just talk about where you're making those incremental investments? And could we see further ARR growth acceleration over the next year or so as a result of those investments? Jennifer DiRico: Yes, sure. So let me start by saying what we did was continue to keep operating expenses at about 61% of revenue that's consistent with prior quarter and prior year. The overall gross margin pressure that we saw really came down to the fact that our SaaS business continues to accelerate, which as we all know is a -- is a great thing and ultimately just has a different margin profile. And then overall, the Shift in term duration. So ultimately, this quarter, the pressure really came down to gross margin. As we think about the back half of the year, ultimately, what I would say to you is the investments we started out with the year in terms of continuing to accelerate our SaaS motion, right? We're still making those plays. As evidenced by the guidance for the back half of the year implies a $45 million of net new ARR on a constant currency basis, which, as you remember, is above that $40 million that I first started the year with. And so ultimately, our investments are paying off, and we're going to continue to [ execute ] it. Rudy Kessinger: Got it. And then any parameters, I guess, for the second half, obviously, you have the total implied net new ARR guidance. But just any parameters in terms of what we should expect from SaaS. I think the prior commentary was $20 million plus. Obviously, you did, I think, $29 million in Q2. Should we expect $25 million plus in SaaS net new ARR now in the second half? Or just any kind of guardrails around the SaaS and term license split in the second half? Jennifer DiRico: Yes. As you think about the split, the best way to think about it is approximately 60% of our net new ARR will be SaaS. Rudy Kessinger: Very helpful. Congrats. Operator: Next question comes from the line of James Fish with Piper Sandler. James Fish: I wanted to go back on the contract duration. Is the shorter contract duration being seems more on the existing installed base is the assumption I'm making? Or are you seeing it on new deals as well, a combination of 2? Jen, is there a way to think about where we're at on average duration at this point? And is there a vertical or 2 that's sticking out with this such as, obviously, we're talking federal generally this quarter, but now we're talking about it even more so given the shutdown? Jennifer DiRico: Yes. So first, what I would say to you is it's actually across the board, where customers are really wanting to maintain that flexibility as they think about either accelerating or just anticipating their journey to the cloud. Quantifying that, we were down 9% from a Shift to term quarter-over-quarter. But again, I would go back to really normalize to what we were seeing 3 or 4 quarters ago. And so ultimately, I think that is the -- that's how we're thinking about it. Did you have a second part of your question? James Fish: I was asking you guys historically have talked about duration here and there, and it used to be about 3 and then you start talking about new customer lands being, I want to say, 2 to 3, Mike can correct me. But where is average duration now? Trying to understand like how much of a headwind duration is right now to term license? Jennifer DiRico: Yes. I think, I would say I would just go back to the fact that I think we've shared that in the new deals, it kind of creeping up towards 3 years. Overall, we've seen that go down about 9% ultimately. And that's how we're quantifying the impact. Sanjay Mirchandani: James, I'm Sanjay -- one second, I just want to add to that. I understand that the other metric that I look at very closely or we look at very closely is the number of new deals that we're bringing into the business, okay. And this was the second the largest number of deals of -- new deals that we brought in on term software, okay, in this quarter. So if you look at that, the volume and it's significant, okay, and as customers move to hybrid, it's very logical that they have different implementation plans, and you have to meet them where they are. And then -- I look at this as is something that the transition customers have to go through, and we are ready for it, and we help them while they're going through it on the on-premise side, and we pick it up completely on the cloud side. And that's the way to think about it. James Fish: So look, I understand that there's greater SaaS mix and some term duration headwind here. But if I look at the gross margin, SaaS being sort of mid-60s at this point, the other kind of gross -- I'll say the remainder gross margin was down decently sequentially. Why isn't this just competitive pressures or further discounting in the space? Jennifer DiRico: Really, I would just go back to what I shared. It really is around the fact that, the bulk of this is very much the acceleration of SaaS and the shift to terms. There's really nothing else to talk about there. Sanjay Mirchandani: Nothing major. Jennifer DiRico: Nothing major. Operator: Next question comes from the line of Junaid Siddiqui with Truist Securities. Junaid Siddiqui: Great. Sanjay, as the pace of innovation increases and the cadence of new products that you launch accelerates, and I'm sure we're going to hear a lot more in a couple of weeks at Shift. What are some of the things that you are doing on the pricing and packaging front that can help customers consume more of that platform? Sanjay Mirchandani: Junaid, great question. And without giving it all the way, there is -- maybe we -- maybe you and I meet in 2 weeks and I take you through some of the innovation and how we're thinking about it. But the bottom line, there's a lot of work we're doing in there to make it super easy for customers to take additional services and capabilities as they get the core. So I mean, it's a very logical approach. In other words, if they start with software, we're going to make it super easy for them to consume any service that we have inside of the platform, be it delivered through the cloud or on-premise or on the edge. And we've given customers -- we've always given customers because of our architecture, the ability to really run our control plane the way they want. And so if you extrapolate what I'm saying into packaging and ease of consumption, we're working really hard behind the scenes to make this super easy for customers to land some place and then continue to logically build their resilience with new services over time. What's implicit in what we're doing, which is not your question, but I think it's important to understand is we're building a ton of testing tasks that customers have to do to be ready in the face of a cyberattack or an event and making sure that we're building that capability, that automation into the product platform and into the packaging, and that becomes really important. So without getting into the details, and I'm happy to spend time with you at Shift and walk you through it. But when you see the portfolio, I think it will be quite logical how it all comes together. Junaid Siddiqui: Great. And Jen, just in terms of capital allocation, I know you mentioned you bought some shares, especially in conjunction with the convert. But historically, I think you've talked about allocating north of 75% of free cash flow to buying back shares. Is that still the case? Is that how should we should think about in terms of buyback? Jennifer DiRico: Yes. Thanks for the question. So I would say our capital allocation strategy remains consistent. It's on the 3 pillars of share buybacks, M&A, investment and organic investment back into the business. As it relates to share buybacks, you're right, we purchased $118 million of share buybacks with -- conjunction with the convert. Year-to-date, that's been $146 million we've repurchased. We have not had a specific guide, but what I will tell you is that we expect to be opportunistic and active. And ultimately, what we said is from a modeling perspective, that share count should remain approximately flat at about 45 million shares. Operator: [Operator Instructions] There are no further questions at this time. I would like to turn the call over to Mr. Michael Melnyk for closing remarks. Michael Melnyk: Thanks, Desiree. I just want to remind everyone that the invitations to Shift, which is happening on November 12 in New York City have been e-mailed. If you didn't have registration or opportunity to register, you e-mail me at mmelnyk@commvault.com. We look forward to seeing you. You'll be able to see a very innovation-rich day and to hear from our customers, partners and spend some more time with management. So we encourage you to attend, and we look forward to seeing you in New York. Thankyou. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.

201天前Insight Analytics约5分钟阅读

HIG 2025 Q3 财报电话会议

Operator: Good morning, and welcome to The Hartford Insurance Group's Third Quarter 2025 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Kate Jorens, Senior Vice President, Treasurer and Head of Investor Relations. Thank you. Please go ahead. Kate Jorens: Good morning and thank you for joining us today for our third quarter 2025 earnings call and webcast. Yesterday, we reported results and posted all earnings-related materials on our website. Before we begin, please note that our presentation includes forward-looking statements, which are not guarantees of future performance and may differ materially from actual results. We do not assume any obligation to update these statements. Investors should consider the risks and uncertainties detailed in our recent SEC filings, news release and financial supplement, which are available on the Investor Relations section of thehartford.com. Our commentary includes non-GAAP financial measures with explanations, GAAP reconciliations available in our recent SEC filings, news release and financial supplement. Now I'd like to introduce our speakers, Chris Swift, Chairman and Chief Executive Officer; and Beth Costello, Chief Financial Officer. After their remarks, we will take your questions assisted by several members of our management team. And now I'll turn the call over to Chris. Christopher Swift: Good morning, and thank you for joining us today. The Hartford delivered outstanding third quarter results with core earnings of $1.1 billion or $3.78 per diluted share, both records for the company. These results reflect the strength of our franchise and disciplined execution of our strategy. We continue to grow top line while maintaining strong margins in a dynamic environment, supported by investments that advance our underwriting discipline while deepening relationships with customers and distribution partners. Highlights in the quarter include written premium growth in Business Insurance of 9% with an underlying combined ratio of 89.4%. In Personal Insurance, an underlying combined ratio of 90%, a 3.7-point improvement over prior year. In Employee Benefits, an outstanding core earnings margin of 8.3% and continued solid performance in the investment portfolio. All these items contributed to an outstanding trailing 12-month core earnings ROE of 18.4%. Let's take a closer look at third quarter performance. In Business Insurance, third quarter results reflect excellent growth with strong underlying margins, sustaining momentum from the first half of the year. Our small business franchise continues to set the standard for growth and profitability in the industry, delivering record-breaking new business premium with strong underlying combined ratios. Written premium growth of 11% was fueled by double-digit increases in our industry-leading package product and auto. E&S binding also delivered exceptional results with written premium up 47%, reaching over $100 million in the quarter. These results reflect the power of our underwriting expertise, AI-driven capabilities and strong digital platforms built on years of strategic investments. Written premium is expected to exceed $6 billion in 2025, representing 10% growth over prior year. Turning to Middle & Large business. Growth was outstanding with solid underlying margins. Written premium increased 10%, underscoring the strength of our diversified portfolio. This performance was fueled by robust new business generation, strong retention levels and solid pricing execution across the lines. Our underwriting approach continues to guide us towards opportunities that deliver attractive risk-adjusted returns while ensuring we remain selective and disciplined. Shifting to Global Specialty. Results were excellent with another quarter of underlying margins in the mid-80s. This performance reflects targeted growth strategies alongside strong risk and pricing fundamentals. Net written premium grew by 5% driven by U.S. financial lines, bond and across international, partially offset by a 3% dip in wholesale, primarily due to a decline in new construction projects. Within Global Specialty, we are taking advantage of innovative solutions that combine our specialized underwriting expertise with advanced technology and broad distribution of our small business franchise. Through our [ One Hartford ] approach, agents and customers can seamlessly quote and bind comprehensive coverages in a single unified experience. For example, this approach is resonating with small and midsized business customers who require professional and management liability coverage, not addressed by the standard package product. We remain focused on helping all business customers succeed by using digital capabilities, leveraging our broad distribution network and offering a comprehensive product suite that meets more of their needs. Moving to pricing. Business Insurance renewal written pricing, excluding workers' compensation, was 7.3%, above overall loss trend. Pricing execution remains highly disciplined. General liability remained firm and above loss trend, supported by rate increases and proactive underwriting actions focused on segmentation, limits management and geographic optimization. Excess and umbrella lines delivered double-digit pricing increases and primary lines moderated slightly while still in the high single digits. Despite modest easing this quarter, auto pricing remained near 11%, while workers' compensation pricing was slightly up from the second quarter. Across business insurance, property written premium grew 11% to $800 million with expectations for full year premium to reach $3.3 billion. Over the past 3 years through the team's thoughtful and disciplined strategy, including CAT management, the Business Insurance property book grew 50%. In Small business, property pricing within the package product remained strong, achieving 12% renewal written price increases. In general industries, property pricing was relatively consistent with the second quarter and above loss trend. Other property lines, primarily E&S and Large representing approximately 20% of the property book, achieved renewal pricing increases of 1.2%, up nearly 2 points from the second quarter. Turning to Personal Insurance. Results continued to improve over prior year. Homeowners had a strong quarter, highlighted by 10% written premium growth in mid-70s underlying combined ratio. Renewal written pricing remained flat to the second quarter at 12.6% driven by net rate and insured value increases. Auto underlying results improved by 3.6 points in the quarter with a year-to-date underlying combined ratio in the mid-90s. While Personal Insurance underlying margins are at targeted levels, total PIF growth continues to be impacted by a highly competitive market. We are pleased with growth in agency, where policies in force grew 17% over prior year, including 4% in auto. In the third quarter, we introduced Prevail to retail distribution, bringing new product, technology and experiences to our agency partners. We are now live in 6 states, and we'll continue to roll out Prevail Agency over time with 30 state launches planned by early 2027. Initial results are positive, with agents excited about our improved performance in competitive positioning with preferred market customers. Prevail represents a meaningful investment in our businesses, now benefiting both direct and retail channels. Earlier this month, the Hartford senior leadership team attended the CIAB Insurance Leadership Forum, a premier property and casualty industry event. We met with more than 50 key distributors and reinforced our commitment to consistent execution and strategic alignment. Brokers and agents recognize our industry-leading digital capabilities, as clear differentiators. We left the forum with increased confidence in the strength of our independent distribution relationships, positioning us to capture additional market share over time. Moving on to Employee Benefits. The core earnings margin of 8.3% was driven by excellent life and strong disability results. Persistency remained strong in the low 90s while fully insured premium and sales were flat year-over-year, reflecting a competitive market and lower large case sales in 2025. Quote activity and known sales for 2026 are trending very favorably as recent investments in technology and customer-facing tools gain traction in the marketplace. In terms of capital management, yesterday, we announced a 15% increase in the common quarterly dividend, continuing a track record of annual dividend increases supported by earnings power and strong capital generation. In addition, we are pleased that both S&P and Moody's upgraded the debt and financial strength ratings of the Hartford. Commentary from the agencies highlighted our effective risk selection and sophisticated pricing strategies, which have positively impacted underwriting performance across business cycles, with expectations for continued strength, supported by well-diversified revenues and earnings. In closing, as we enter the final quarter of 2025, our financial strength disciplined execution and strategic investments position the company to sustain strong results by leveraging industry-leading tools, underwriting expertise and advanced data science, we are confident in our ability to continue to navigate a dynamic market cycle and deliver superior returns for our shareholders. Now I'll turn the call over to Beth to provide more detailed commentary on the quarter. Beth Bombara: Thank you, Chris. Core earnings for the quarter were $1.77 billion or $3.78 per diluted share with a trailing 12-month core earnings ROE of 18.4%. In Business Insurance, core earnings were $723 million with written premium growth of 9% and an underlying combined ratio of 89.4%. Small business continues to deliver excellent results with written premium growth of 11% and an underlying combined ratio of 89.8%. Middle & Large business had another strong quarter with written premium growth of 10% and an underlying combined ratio of 91.4%. Global Specialty's third quarter was solid with written premium growth of 5% and an underlying combined ratio of 85.8%. The Business Insurance expense ratio of 31.1% was relatively flat from the 2024 period, however, increased sequentially as the impact of earned premium leverage was offset by higher incentive compensation and benefit costs. In Personal Insurance, core earnings were $143 million with an underlying combined ratio of 90%. Homeowners delivered an underlying combined ratio of 74.4%, a 1-point improvement over the prior year. Auto underlying results improved by 3.6 points in the quarter and remain in line with expectations, reflecting typical seasonality as the year progresses. The Personal Insurance third quarter expense ratio of 25.8% was relatively flat from the 2024 period. Written premium in Personal Insurance increased 2% in the third quarter. We achieved written pricing increases of 11.3% in auto and 12.6% in homeowners. With respect to catastrophes, P&C current accident year losses were $70 million before tax for 1.6 combined ratio points, which included $37 million of favorable prior quarter development. Through September 30, we have reached the $750 million attachment point for our aggregate property catastrophe treaty, which means that CAT losses of up to $200 million in the fourth quarter would be covered by the treaty. As a reminder, the aggregate cover does not include losses from the global reinsurance business, which purchases its own retrocessional coverage. Total P&C net favorable prior accident year development within core earnings was $95 million before tax, primarily due to reserve reductions in workers' compensation and personal auto liability and physical damage. We recorded $8 million of deferred gain amortization related to the Navigators ADC, which has now been fully amortized. As a reminder, the A&E ADC cover was exhausted in 2024, so any development from the fourth quarter A&E study will impact core earnings. Moving to Employee Benefits. Core earnings of $149 million and a core earnings margin of 8.3% reflect excellent group life and strong disability performance. The group life loss ratio of 74.2%, improved 3.3 points, reflecting lower mortality across both term and accidental life products. The group disability loss ratio of 70.6% increased 2.7 points from the prior year. Last year included a benefit of 2.2 points related to the long-term disability recovery rate assumption update, while current year long-term disability trends were slightly higher as expected. This was partially offset by pricing increases earning into our paid family and medical leave products. The Employee Benefits expense ratio of 26.7% increased 1.4 points, primarily driven by higher staffing costs, including increased incentive compensation and benefits, increased investments in technology and a higher commission ratio due to premium mix. Turning to investments. Our diversified portfolio continues to produce solid results. Net investment income of $759 million increased $100 million from third quarter 2024 due to income from limited partnerships and other alternative investments, a higher level of invested assets and reinvesting at higher interest rates, partially offset by a lower yield on variable rate securities. The total annualized portfolio yield, excluding limited partnerships, was 4.6% before tax, consistent with the second quarter. We continue to strategically manage the portfolio, balancing risk while pursuing accretive trading opportunities. In the quarter, we reinvested at 50 basis points above the sales and maturity yield, reflecting increased call and paydown activity on higher-yielding corporate bonds and certain structured securities. We remain focused on our ability to reinvest above the current portfolio yield. As expected, our third quarter annualized LP returns of 6.7% before tax were higher than the first half of the year, reflecting increased returns from our private equity portfolio. While still early, we anticipate fourth quarter results to be in a similar range to third quarter. Turning to capital management. As Chris mentioned, we increased our common quarterly dividend by 15% to $0.60 per share, payable on January 5, 2026. Over the past decade, we have delivered dividend increases averaging approximately 11% per year. The step-up in our dividend demonstrates our confidence in the sustained earnings power and capital generation of the organization. Holding company resources totaled $1.3 billion at quarter end. During the quarter, we repurchased 3.1 million shares under our share repurchase program for $400 million, and we expect to remain at that level of repurchases in the fourth quarter. As of September 30, we had $1.95 billion remaining on our share repurchase authorization through December 31, 2026. In summary, we are pleased with our outstanding performance for the third quarter and first 9 months of the year. We believe we are well positioned to continue to deliver industry-leading returns and enhance value for all stakeholders. I will now turn the call back to Kate. Kate Jorens: Thank you, Beth. We will now take your questions. Operator, please repeat the instructions for asking a question. Operator: [Operator Instructions] Our first question will come from Brian Meredith from UBS. Brian Meredith: Chris, I wonder if you could talk a little bit about workers' comp. It looks like we're starting to see some price increases there, which is great. Do you expect that trend to continue here? And do you think there'll be at a point here in the next, call it, 12 to 18 months where maybe rate there is in line with trend. And where are we right now rate versus trend? Christopher Swift: Yes. Thanks for the question and joining us. I would say the workers' comp market remains consistent. When we talked about pricing this quarter, it was really up 4 times from a slight negative to a slight positive. So that's really not a meaningful move. And if you look at sort of state filings and regulatory activity across all the states, I don't see much rate increases set up for 2026 at this point in time, primarily because as you know, Brian, I mean, it's a highly profitable line is still behaving pretty well. Loss trends are stable and predictable, and it doesn't set itself up for meaningful rate increases. I think you're aware of one state had a fairly meaningful rate increase in California because their loss trends were a little outsized compared to others. So I would say it's steady as she goes. And we feel good about the profitability -- the overall profitability of the book, whether it be on an accident year basis or calendar year, particularly when you look at our reserve releases, over the last 3 years have been pretty steady and predictable. Brian Meredith: Makes sense. And then I wonder if we could just dig in a little bit more into the underlying loss ratio in business insurance and commercial insurance. So I understand that most of the year-over-year deterioration is due to the workers' comp. But if I think about the other lines of business, you talk about rate has been in excess of trend and pricing has been excess trend for a long time. Are you holding those picks kind of constant right now, given where we are with port inflation and maybe potential impacts of tariffs, or are we actually seeing improvement there, and they're just being more than offset by comp? Christopher Swift: Yes. I think what I'd like to do, and I know you've studied our data, but let's look at the 9-month year-over-year underlying combined ratio. Currently, it's running 88.6% versus 88.1%. And I would say within those numbers, comp is performing as we expected. So there is no change in sort of anything that we've done with comp in this accident year. And obviously, prior accident years continued to develop favorably. I think what -- if I really attribute the difference in run rates through 9 months is really incentive compensation, so an expense component, not a loss component is higher than we planned, just given overall strong ROEs that we're generating and overall profitability. So if you sort of back that out, we're within a few tenths of what we think would be sort of a consistent -- generally consistent expectation at that 88.1%. And then I would even add further attribution, if we really look at the book. We mixed in property at a good level. You saw the 10% growth. But we did mix in more national account business, which tends to have a higher underlying combined ratio, both for comp and GL, that obviously impacted another few tenths. And then if I really want to quibble and look at it even more on a refined basis, we probably had a slightly more favorable non-CAT property experience last year compared to this year. So you put that all together, and you're dealing with sort of 0.5 point. And I would even share with you, as I think about the fourth quarter and the full year, I think we'll come in slightly below 88.6%, and call it a very productive, high-quality year and feel very good. Operator: Our next question comes from Andrew Kligerman from TD Cowen. Andrew Kligerman: So I'd like to start out with the terrific new business growth of 11% and 20% in small and then mid and large, respectively. I mean, those are phenomenal numbers in this environment. I know you touched on property a little bit, but maybe you could talk to the lines that were most strong in each of those 2 segments. And why you're able to see that kind of growth in a somewhat softening market? Christopher Swift: Thank you, Andrew, for the question. I'll give some highlights, but I'd let Mo to cover his point of view as too. But besides the major segments, you can see those growth numbers. If you pull back our Spectrum product in small commercial, it was up 13% in the quarter. Global Re was up 14%, Business Insurance, auto, was up 10%. I referenced national accounts before, which was up 17% in the quarter, really pleased with how that book is performing and or more importantly, our reputation in the marketplace in that national account area. So I would say it was broad-based. I would even say our excess liability line was up 20%. And workers' comp, I think, grew 3% year-over-year. So I would say it was just broad-based strong performance by the team. And Andrew, you've heard us, myself and Mo talk, I mean, we've asked the team to focus on margins and maintain those margins as we head into -- as we executed here in 2025. And I really feel like the team is executing flawlessly. They know how to draw lines in the sand and say no, and move on, but also our capabilities, our digital capabilities, all the investments that we've made across all our business segments, Mo, I think, are performing well. Adin Tooker: Maybe I'll just add a couple of pieces, Chris. Yes, I think flow, Andrew, remains really good in both businesses, both in small and middle. In small, that's admitted and non-admitted, so the flow we're seeing -- you saw that Chris quoted a plus 47% growth in the E&S lines binding in Small business. The flow in admitted and non-admitted channels remain really strong in small. And I think that's just a sign of how well the technology we're creating efficiency for our agents, and we see further opportunity for consolidation in the Small business space. And then in the middle space, I think Chris referenced it. But again, we've got real specialization we've built. The technology we have in Small is -- we're taking it into middle to make that process more efficient for agents. However, I think the Middle results will be more lumpy. We showed a plus 5% in Q2. We're showing, as you saw, plus 10% in Q3. I think we're really making decisions there that we just add them up at the end of the quarter and sometimes it's going to be a great number, sometimes it's going to be an okay number. So we feel really confident about the Small and the consistency of the growth there. I just feel like the Middle may be a little bit more choppy and more dependent on market conditions. Andrew Kligerman: That was super helpful. Shifting over to Personal lines. The auto line came in at a 97.9%, and I know there's a lot of seasonality there. But maybe you could talk about where you'd like that to kind of center? Like what would be the kind of range where you'd be very comfortable, and now that you've got the prevailed chassis kind of rolling out, do you see the policy count starting to pick up in the near future? Christopher Swift: Andrew, what I would say, as I said in my prepared remarks, we're at target margins today and feel good with what Melinda and the team have done to sort of restore our margins. As you know, we have a 12-month policy. So there's a little bit of a lag that we have to manage. So -- and I would say -- and I think we've talked about it in the past, if -- for an auto book, if we can run an underlying combined at 95% with 2 points of CAT, I feel good, and we're then in go mode to grow, which we are now. We are pivoting to growth, particularly in '26. The real opportunity, I think, for growth will be our new agency offering, which is, as I said, we're in 6 states now and 40 by early '27, which will add to incremental growth, particularly in addition to our AARP response. But a lot of our good competition is also pivoting to growth. So it's not going to be a layup. We're going to have to break a sweat and differentiate ourselves. But when we think about growing, we think about bundling, auto and home. And we still need to maintain sort of the loss cost environment that -- where we see loss costs going. So all I would say is I think it's balanced. I'm pleased where we're at. Melinda, I don't know if you would add any additional color. Melinda Thompson: Chris, I think that's all accurate. And I would just add that in addition to the new business efforts and the competitive environment we're experiencing there, retention certainly is another dynamic influencing growth, and we still have double-digit renewal price change being felt by our customers. So as that drops into single digits in the fourth quarter and continues to moderate in '26, that will help alleviate pressure on the retention and top line dynamics. Beth Bombara: And then Andrew, it's Beth. The only other thing that I would just add is, when we talk about being at an underlying combined ratio in auto of 95%, that would be for the full year. And I just want to remind you, again, that we see seasonality in our auto results under normal conditions where it increases roughly 2 to 3 points over the course of the year. So it's not as if every quarter would be at 95%, we'd expect the first half of the year to be lower in the second half of the year to be higher when we think about that in total. Operator: Our next question comes from Gregory Peters from Raymond James. Charles Peters: So the first question on pricing, you mentioned in your press release and your comments, the 7.3% benefit in the quarter. And I guess there's been a lot of growing chatter around increasing price competition. Maybe it's not as relevant in the small market, but maybe you can talk about some pressure points you're seeing on price, maybe from your distribution partners as it relates to the Middle & Large business or maybe it's even sitting inside the Global Specialty. Christopher Swift: Yes, Greg, thanks for joining us. You're right. The 7.3% we called out this quarter is ex workers' comp in our, I'll call it, standard insurance businesses. If you're interested, I would say, in Small business, ex comp, it's 9.3%, Middle & Large ex comp, 7.3%, and roughly, that's down 1-point-or-so from prior quarters sequentially. And some of that is to be expected, just given the overall performance of certain lines, particularly led by property. But I would say, and I'm going to ask Mo to add his color, is that the real discipline that we have, and it is still needed, is there anything liability related. You could think in commercial auto. You could think of primary GL excess umbrella. And I think I gave you some of those rates. But overall, from a GL basis, we're in high single digits. Excess in umbrellas low double digits, a little bit of a sequential drop, but still double digits and commercial auto is holding up in that 10% range. So I think those are the highlights that I would just point out to you and ask Mo to add his color. Adin Tooker: Greg, I'd just say that we still feel like the market is pretty fairly priced really and especially in the smaller end of our -- of each of our books, and that will be small, middle and the global books. And I think it's also really important to make sure that you understand our starting point. We have not been fixing anything here for 2 or 3 years. And we know that -- again, when we look at some of our peers, there's some higher rate action coming through, but I think that's relative to their starting point over the past couple of years. And so I just -- I feel confident in our ability to grow. We've given tools to the underwriters that I think are market leading, the data science, the actuarial tools. So -- and I think the underwriters are really executing well in each of the BI segments. And we've given leaders, I think, booked management tools that, again, I think are second to none in the industry. So I think all in all, we're executing really well. Just to your point on where we've seen competition. I think we've talked to you before about the public D&O market. I think we've proven that when the margins aren't there, we'll pull back. I think we've been patient on workers' comp just trying to pick our spots there, knowing that market has been competitive, but the returns are good. And the most recent example, Greg, that I'll point to is our large property book in Middle & Large that segment. We've been pulling back just especially on some of the larger accounts in that segment, we've seen the market really get hungry for the large premium in that segment. And then the only other thing I'll call out for you is we are watching the London market closely. The rate movement in the quarter was something that we kept our eye on. And I think we'll pick our spots internationally as well. Charles Peters: Thanks for that additional color, Mo. I'm going to pivot to my favorite topic that I'd like to ask you guys about from time to time, which is technology. During the third quarter, a couple of your peers came out with statements about the potential benefits of technology whether it's in production or in cost savings through headcount reduction. And it's certainly consuming a lot of oxygen in the industry. So I'd like to go back and maybe -- can you give us a sense of how your tech budget looks for the upcoming year? And maybe how you're allocating it to sustaining legacy systems versus new initiatives to sort of give us a state of the union on your tech outlook? Christopher Swift: Yes. Happy to provide that, Greg. I would say to your first point on sort of the impacts here. I think we're early on in this baseball game. I don't know if it will be an 18-inning baseball game for those of you that watched it last night. But it's early. And I think for us, our guiding principles on any technology, whether you want to call it a data science or artificial intelligence or general intelligence is really to sort of augment our human talent, not necessarily to replace it. And ultimately, what the objective is, is to create a more frictionless experience for our customers, for our agents and brokers where we can be fast, accurate and really differentiate ourselves on a just the ease of business. I think when that happens, I think we'll -- retention will go up. I think we'll attract more business, capture more market share as we've been saying. So that's the first premise. And the premise of where we ought to go from a process side is generally 3 major areas: claims, underwriting and operations. And so that's what we're focused on. It's -- we're trying to go as fast as we can. We've allocated substantial resources to looking at our processes and fundamentally improving them, redesigning them with sort of a tech AI focus from the get-go. So that's what I would say from an outlook side, what we're trying to do, just to give you numbers, we run basically $1.3 billion all-in IT run in an invest budget. And I would say a little over $500 million is sort of the invest side of that. And its various projects, some that you might be interested in. We're still taking all our data and applications to the cloud, which we're in our fourth year of a 6-year journey to get that done. We are rolling out some pretty cool stuff, particularly in the call center activity. We're rolling out AWS Connect, which everyone in the organization, all product lines, all service centers will use. We expect that to be completed in the first half of '26. And the list can go on. But I do want to try to refrain from giving too much detail because some of this is proprietary. It's competitive. We're trying to get a first-mover advantage. And I know you'll respect that philosophy that I have. But Beth, what would you add from... Beth Bombara: Yes. The only thing I would add, and maybe just to point out the language that you used, Greg, when you said, how much do you spend on legacy business -- legacy systems versus invest. And Chris gave you the breakout between run and invest. But I wouldn't have you think that, that run is all about legacy systems. We've been on a path for several years now of modernizing our core platforms. So those run costs are related to more modern systems, which really sets us up very well to be able to spend the dollars that we're talking about from the invest side to make the strides that Chris talked about. So I just wanted to just clarify that a little bit when you think about our platforms and what we've been doing over the last 10 years. Charles Peters: You gave us some new information. So appreciate it. Operator: Our next question comes from Alex Scott from Barclays. Taylor Scott: I wanted to go back to Personal lines and just some of the comments you made about retention. And as you're kind of getting into 4Q and you're starting to lap some of the bigger rate increases, are you seeing shopping rates come down at all for the policies where you're not taking as much price. I'm just trying to get a sense of how much is that being driven by the rate you're taking versus maybe the environment also still kind of just getting competitive with price decreases in some pockets and particularly direct-to-consumer and so forth. Christopher Swift: Yes. Alex, I'll let Melinda add her color, but I would say shopping is still elevated across -- just across the business, whether it be auto or home. I think people have been somewhat conditioned to shop, and obviously, digital makes it a lot easier. You saw our price increases in auto this quarter. I would say, as we -- you get into the fourth quarter and early '26, I think by the fourth quarter, those loss -- or those pricing numbers will probably drop into the high single -- single digits, and we'll continue then to moderate in early '26 and throughout which gives us, again, the opportunity to be competitive and try to grow our PIF count. But Melinda, what would you add? Melinda Thompson: Thank you, Chris. No, I don't think that shopping behavior in our book is any different than the broader industry. And I would say switching behavior has been higher driven by the multiple cycles of rate that, again, the industry has put in not anything specific to the Hartford. But I would point out, our retention is stable, and we're certainly reflective of the environment. And we implemented a number of initiatives to really focus on policyholder education and experiences, things to help them think about coverage counseling adjustments that they can make, billing reminders and other assistance. So we do a lot to try to create seamless experiences and a lot of connection with our customer as we navigate this period of time with more accelerated switching behavior. Taylor Scott: Helpful. Next thing I wanted to touch on was the capital position of the company. And I was just interested in the bigger increase in the common dividend in particular. And I wanted to get your thinking around what gives you the confidence on that. What are you seeing in the business? Is it the growth environment is slowing, or do you feel like kind of the capital position is strong enough that you can sort of do both in terms of increasing your capital distributions while still continuing to get kind of growth to get this quarter? Beth Bombara: Yes, Alex, I'll take that. And it really is about the fundamentals we see in our businesses and the earnings power that we have. We've been very focused through the years and looking to maintain a competitive dividend. And when we look at where our earnings growth has been, we felt very comfortable increasing it by the 15%. And I -- again, I think it just speaks to the strength of our underlying businesses. It still provides us plenty of opportunity to continue to invest for growth. So I wouldn't look at the change as any sort of signal and change in focus, and how we think about the prospects for our underlying businesses. Operator: Our next question comes from Elyse Greenspan from Wells Fargo. Elyse Greenspan: My first question, I want to start on Personal, auto again. I just curious if you guys saw any impact of tariffs on results in the quarter? And then is there any expectation that you'll see an impact going forward, right, when you point -- is that embedded within your expectation that you guys are now back at target margins? Christopher Swift: I would say a very negligible this quarter and really for the whole year, I think as we discussed in prior calls, Elyse, and then as we turn the clock into 2026, we'll make the appropriate trend picks for our loss costs, giving due credence to any tariff pressure, particularly in property or physical damage coverages. But at this point, I don't think they'll be significant. And I think we will know how to make the appropriate estimates and judgments. So I don't think there's anything unusual here. Just another factor that we'll have to consider in our loss trends. Elyse Greenspan: And then my follow-up was also on capital, but I guess on the different side. Buyback, right, has been kind of within this $400 million quarterly level, right, for more than a year. As you know, earnings growth are strong and the capital levels are strong at the company, what would you need to see, I guess, to increase from that $400 million baseline? And would that be, I guess, when do you think through that? Is that with the capital plan when you'll update us next quarter for next year potentially just coming off the $400 million? Christopher Swift: Yes. Elyse, I'll let Beth add her perspective. And you've heard us talk before, we like to be steady, predictable, and yes, any changes, we would have to contemplate. But I feel good about really what we're doing with our excess capital that we're generating, our companies are well capitalized, obviously, recognized by Moody's and S&P. We're funding meaningful growth, which we want to continue to do. Again, with the right margins, with the right mindset on profitable growth and then you see our healthy dividend that Beth commented upon. And you put it all together, it's still a good use of excess capital. And if we change the numbers or amounts, we'll let you know when we make those decisions. But we haven't made any of those decisions. Operator: Our next question comes from Ryan Tunis from Cantor Fitzgerald. Ryan Tunis: I guess just taking a look at the supplement, case value sort of looks like any type of underlying combined ratio pressure we had in Business Insurance this quarter was in middle markets. Not sure if I'm thinking about that right, but just some commentary, I guess, on the underlying combined ratio deterioration there. Christopher Swift: Ryan, if you're looking at sort of sequential, I would just call out, we had a strong national accounts quarter that put some pressure on the booking ratio there tends to be a little higher just given it's a long duration. And I don't know if it was any favorable or is there any property impact, no, I'm looking at you. But yes, I would just call out the national account mix that we had a strong quarter in national accounts. Adin Tooker: Yes, there's some slight favorability in property, but it was pretty minor overall non-CAT property. Ryan Tunis: Okay. And then I guess just in group disability, sound like there's some paid family comp stuff. But I'm just curious if any new trends worth pointing out there? Christopher Swift: Well, the trends in sort of just the lead product in totality, paid family or medical, I think, are encouraging. People want these products I think it's a fairly straightforward product to sort of price and understand. We've -- after we've seen people use them just a little bit more, and that's why we're making some of the profit actions and pricing actions that we're taking there. But it's a fast-cycling business, generally 1- or 2-year rate guarantee. So we think we could be reactive. And that book is a little over $500 million for us today, Mike Fish. And so I don't know if you would call anything out on leave, but I think the main difference was what we talked about in the quarter for LTD was the basis study that we did last year that didn't reoccur. And generally, LTD is behaving. Maybe we saw a little tick up in severity this quarter. So the people that went out on LTD tend to be a little more higher salaried folks. But that can bounce around from quarter-to-quarter, so -- but Mike, what would you add? Michael Fish: Yes, Chris, I think I'd just maybe add a couple of points. I think on the leave side, as you noted, we're seeing some increase in utilization of those benefits. So we're pricing that in both when cases come up for renewal as well as our new business price pick. So again, we'll continue to do that. And we do expect utilization to level out probably in the next couple of years. But again, as employees see the value of those benefits, we're making sure we're including that increased utilization in our premium rates. And then, Chris, as you noted on the overall long-term disability book of business, we're very pleased with the performance there. So again, even though loss ratio up a bit quarter-over-quarter. I'd say, in total, we're still performing well within pricing expectations. Just we saw some very -- and we've talked about this in past quarters, some very favorable incidence trends back last year and prior in '23. So I'd almost characterize it as a bit more of a normalization as we expected to see in the loss ratio this year. Operator: Our next question comes from Mike Zaremski from BMO Capital Markets. Michael Zaremski: Focusing on the smaller commercial end. Mo made some comments about further opportunity for consolidation in that space. If you could elaborate, that would be great. And just related, I'm curious is there -- if you look at the last 3-, 4-, 5-year trend, I think it's fair to assume that some players, maybe just you all, you can correct me, have taken a lot of market share there. Is there a level of market share in small commercial where you start to see some kind of friction where you just have a good issue just too much market share with some of your agency partners. Adin Tooker: Yes, our market share today, Mike, is less than 5% in the Small business space. So I don't think we felt that in any way so far. But to give you a little bit more context on what we're feeling, the -- I think coming out of CIAB, that Chris referenced in October, earlier this month, there was some really terrific feedback just about -- again, the continued themes of how good our technology is. How much time it saves relative to our competitors. Also once a small business placement is with us, our appetite has been consistent for years. So we're not pushing it back into the market. As there's been some disruption in that space, so there's a consistency of appetite that again keeps an agent from having to touch that policy again. I think we get feedback on the service capabilities that we built. We actually take time out of the agency's office, and we do that servicing for them so that we're saving them a couple of dollars on every policy. So I can keep going here. But I think broadly, our digital, our service, our placement capabilities in Small and the feedback that we get, just -- it's a better experience all around. So we expect to be able to continue to grow at a reasonable pace in that small business space and to take market share. Michael Zaremski: Got it. And my follow-up is more high level on the pricing power levels in small to mid-commercial. I guess the increasing questions we get, I'm sure you get to is where will pricing go? It seems to be a consensus that pricing will continue to decelerate. Would you say folks in our seat might be focusing a bit too much on the ROE of the industry being healthy, whereas loss cost trend appears to be much more elevated than it has historically. Any kind of insights you'd want to add into how we should think about kind of the forward trajectory, what's impacting pricing? Christopher Swift: Yes. I would say, Mike, again, honestly, selfishly, I mean I think the industry ROEs are good, are healthy. But if you look at other financial services companies, I mean, they generate really, really high ROEs compared to us. You look at banks or others that participate in that side of the business. I mean, our business is one of taking risk. We're taking long-term risk. We have a lot of variability in our loss cost trends. So there's margins and prudence that we try to price into our products. So you put it all together, I think we're earning a fair return and as you've heard us, Mo and I talk along with Beth, I mean, we're trying to maintain these margins and keep up with loss cost trends. And that sounds simple. I know it's hard to do in a competitive environment. But if we could do that and compound that over a longer period of time, that's a win for our shareholders. So do I feel like you're focused on the wrong things? No, I think you're focused on the right question on trend and growth and sort of that balancing equation. But as Mo just said, it all depends where you start, right? And if you have lines like workers' comp, where -- are producing good returns and results just because you're getting a lower price increase there. That's not necessarily a bad thing because that's a product that everyone needs. It's a lead product that we use then to account round and sell other products. So it's all part of the equation of pricing your products individually, but also keeping an eye on accounts, and what you're trying to do for agents, brokers and customers. Operator: Our next question comes from Rob Cox from Goldman Sachs. Robert Cox: Yes, I was just hoping you guys could remind us where you're trending some of the bigger lines of business to the extent you could share and I appreciate the comments on the national accounts, but also just curious if you touched up any of the loss trend assumptions across Business Insurance this quarter. Christopher Swift: I think -- I mean, I think the trends that we talked about, Rob, that are worth repeating is the liability trends are still elevated, you could judge by what we're doing from a pricing there. I think the overall point though, I'll just emphasize it again, particularly ex comp. We feel like we're on top of loss cost trends as we sit here today, and we'll try to maintain that on top position going forward. There's nothing really new in comp. Particularly on severity trends are behaving at least compared to our assumptions. So I don't think there's a new piece of data that we could share with you that we haven't already talked about. But Mo or Beth, would you add anything? Adin Tooker: No, I would just say the trends are relatively stable. And I think what we're -- especially on the liability line, so think anything GL, anything auto, the teams are keeping rates above loss cost, and I think that's going to be continue for some time. We are really pushing hard to make sure that we don't fall behind on those lines, knowing how the trend has been elevated over the past couple of years, and we intend to stay ahead of that. Robert Cox: Okay. Perfect. And just as a follow-up, I was just curious on the component of your 5.2% all-in pricing or 7.3% ex comp, the exposure-related portion of that. How has that been trending versus the pure renewal rate? Are you guys still getting a solid contribution there from the exposure component? Christopher Swift: Yes. The quarter, I would call it at 1.8%, and it's been sort of consistent of 75% rate and 25% exposure as we break that down. So just to be clear, that's at the 7.3% ex comp rate that I quoted before. Operator: We are out of time for questions today. I would like to turn the call back over to Kate Jorens for closing remarks. Kate Jorens: Thank you for joining us today. Please reach out with any additional questions and have a great day. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

201天前Insight Analytics约5分钟阅读

SOFI 2025 Q3 财报电话会议

Operator: Good morning or good afternoon. My name is Adam, and I will be your conference operator today. At this time, I would like to welcome everyone to the SoFi Technologies Q3 2025 Earnings Conference Call. [Operator Instructions] With that, you may begin your conference. Unknown Executive: Thank you, and good morning. Welcome to SoFi's Third Quarter 2025 Earnings Conference Call. Joining me today to talk about our results and recent events are Anthony Noto, CEO; and Chris Lapointe, CFO. You can find the presentation accompanying our earnings release on the Investor Relations section of our website. Unless otherwise stated, we'll be referring to adjusted results for the third quarter of 2025 versus the third quarter of 2024. Our remarks today will include forward-looking statements that are based on our current expectations and forecasts and involve risks and uncertainties. These statements include, but are not limited to, our competitive advantage and strategy, macroeconomic conditions and outlook, future products and services and future business and financial performance. Our GAAP consolidated income statement and all reconciliations can be found in today's earnings release and the subsequent 10-Q filing, which will be made available next month. Our actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are described in today's press release and our subsequent filings made with the SEC, including our upcoming Form 10-Q. Any forward-looking statements that we may make on this call are based on assumptions as of today. We undertake no obligation to update these statements as a result of new information or future events. And now I'd like to turn the call over to Anthony. Anthony Noto: Thank you, and good morning, everyone. We had an excellent third quarter. Our one-stop-shop strategy is firing on all cylinders as we continue to deliver exceptional financial performance while also investing in our business to drive durable growth and strong returns over the long term. In fact, our focus on product innovation and brand building has never been stronger. There's more happening at SoFi today than at any other time in my 8 years with the company. We are stepping on the gas to accelerate the investment in our existing businesses and entering new areas, like crypto and blockchain, AI, SoFi Pay, providing fiat and crypto banking services and so much more. I'll discuss some of these efforts momentarily. But first, let me cover our key results for the quarter. Starting with the drivers of our durable growth. We added a record 905,000 new members in Q3, increasing total members by 35% year-over-year, a slight acceleration to 12.6 million SoFi members. We also added a record 1.4 million new products, also representing an acceleration of growth to 36% year-over-year and over 18.6 million products. Cross-buy reached its highest level since 2022, with 40% of new products opened by existing SoFi members. Our cross-buy rate has increased in each of the past 4 quarters demonstrating the effectiveness of our one-stop-shop strategy. Our strong member and product growth powered our revenue growth in the third quarter. Adjusted net revenue was a record at $950 million, up 38% year-over-year. Together, our Financial Services and Technology Platform segments generated revenue of $534 million, which is up 57% year-over-year and now represents 56% of total revenue. This is the first time these segments have generated more than $0.5 billion of quarterly revenue. In our Lending segment, adjusted net revenue grew 23% year-over-year to $481 million, driven by strong originations in this segment of $6.6 billion, up 23% from the prior year. Combined with a very strong $3.4 billion of originations in the loan platform business, total originations reached a record of $9.9 billion for the third quarter. This is an increase of $1.2 billion from our prior record. I'm also proud to report that total fee-based revenue across our business was also a quarterly record at $409 million, up 50% from the prior year, driven by strong performance from our loan platform business, origination fees, referral fees, interchange revenue and brokerage fee revenue. On an annualized basis, we're now generating over $1.6 billion of fee-based revenue, reflecting the deliberate diversification of our business towards more capital-light revenue streams. In addition to delivering durable growth, we delivered strong returns and profitability. In the third quarter, adjusted EBITDA was a record at $277 million, up nearly 50% year-over-year. Our adjusted EBITDA margin for the quarter was 29%. Our incremental EBITDA margin was 35% as we continue to balance reinvesting in the business to deliver long-term growth and delivering profitability. Net income for the quarter was $139 million at a margin of 14%. Earnings per share were $0.11. Finally, our tangible book value ended the quarter at $7.2 billion, which includes the benefit from a successful opportunistic capital raise during the quarter. Over the past 2 years, we have more than doubled our tangible book value. Our diversified business is uniquely built to deliver a winning combination of growth and returns. One way to measure this success is the Rule of 40 calculation, which is revenue growth plus EBITDA margin. We've beaten the Rule of 40 benchmark every quarter since going public, that's 17 straight quarters. Over that time, our average Rule of 40 score is 58, making us a top performer among fintechs and technology companies more broadly, and this quarter, we hit 67%. Despite these exceptionally strong results, I know that we are just getting started. The addressable markets across each of our products are massive in the United States, let alone in addition to international markets. In 2026 and beyond, we will uniquely start to benefit from both of the technology super cycles in AI and blockchain where almost every other industry only benefits from one. And with nearly 13 million members, the unmatched capabilities of our technology and the business scale of $3.8 billion in annualized revenue and a $45 billion balance sheet, we have a rock solid foundation to build on. Given these dynamics, I've never been more optimistic about our prospects than I am today. This is why we are further accelerating our level of investment to make our existing products even better by providing the best speed, selection and experience to build new products to help our members get their money right and to further strengthen our trusted brand name. Our investments will power our durable growth and drive stronger returns as we continue to scale. Let me now spend a moment discussing our brand building efforts, which are key to driving new members to SoFi and create a halo effect across our entire offering. During the third quarter, we launched an exciting new partnership with the NFL's most valuable player, Josh Allen, to promote the most valuable product in financial services, SoFi Plus. Our partnership with Josh is resonating with NFL fans, driving a 35% increase in unaided brand awareness among that target audience. Along with our broader marketing efforts, we drove unaided brand awareness to an all-time high of 9.1% during the quarter, up from last quarter's record of 8.5% and more than 4x higher than it was when we went public. Turning now to our product innovation. Last quarter, I spoke about how are in an unprecedented point in time with 2 technology super cycles taking place in crypto, blockchain and AI. These super cycles have the power to completely reinvent the future of financial services, and we have moved fast to take advantage of these opportunities. I'm pleased to report that this week, we launched our first payment product that leverages blockchain technology to provide fast, seamless, low cost and safe international payments with the launch of SoFi Pay. SoFi Pay gives members the ability to seamlessly send money in local fiat abroad by leveraging a layer 2 blockchain network and delivering local fiat into the account of the recipient. It's fully automated in the SoFi app at significantly faster speeds and lower costs compared to traditional services. Members will first be able to send money to Mexico with planned stage rollouts in Europe and South America in the near future. The SoFi Pay wallet will over time integrate SoFi USD stable coin that we hope to launch in 2026. We also have plans to offer the SoFi Pay app natively in the international markets for foreign citizens to send money to the U.S. and many other international markets. This is another addition to our unprecedented money movement offering, which allows members to seamlessly send money through person-to-person payments with a phone number, e-mail address as well as Zelle, ACH, self-serve wires and now the ability to send money international with SoFi Pay. I am also excited to share that this quarter, we'll be launching -- actually relaunching the ability to buy, sell and hold crypto assets, which will give members access to dozens of tokens directly in our SoFi app. Beyond offering the best selection, we will also be providing the best speed and convenience. Members can instantly fund buying cryptocurrencies from their FDIC-insured SoFi Money account, all within the integrated SoFi app. Members will also have the ability to transfer the crypto assets to SoFi and benefit from our broad range of products that are seamlessly integrated with our SoFi North American bank. And because many of our members may be new to crypto investing, we will support them with the best content to help them understand crypto investing and provide them with a peace of mind that comes from working with a regulated bank. But this is just the beginning of our ambitious crypto and blockchain product road map that will continue to come to life in 2026. I could not be more excited about the product road map and the multitude of use cases we have for our planned stablecoin, SoFi USD, and our ability to differentiate a stablecoin like no other company, given our unique bank license, technology capabilities, portfolio products and technology platform services. Turning now to the other supercycle AI. We continue to test and implement a number of AI applications across our business. Behind the scenes, AI technology has been key to streamlining our operations to better serve our members. This has included using AI through higher-quality engagement and giving our frontline member service team AI-driven tools to more quickly identify and resolve member issues. AI is also now being used to directly support members. Our AI support chat is helping members resolve questions in an efficient way, driving a noticeable impact on member satisfaction. It's currently integrated with our money and card products and will be rolled out across the entire SoFi platform this quarter. We have also launched the AI-driven Cash Coach to qualifying members. Here's how it works. From the home screen, members see a button saying cash to optimize. By tapping that button, the Cash Coach will look across both their SoFi and external accounts to see where cash utilization is suboptimal and provide them with personalized financial suggestions. For example, if a member is earning just 2 lousy basis points of interest on deposits with a big bank, it may suggest moving that cash to a SoFi account earns 3.8%. Paying down a big bank credit card balance from a big bank that has a 25% interest rate. Cash Coach is just the beginning. Next year, we will launch a more comprehensive SoFi Coach that incorporates insights across all areas of financial activity, not just cash, which will be able to help members understand how to spend less than they make and invest the rest by breaking down what they must do, what they should do and what they can do every day across their entire financial lives. For example, they could ask the SoFi Coach questions like, how has my credit score changed? How can I reduce my cost of debt? How much do I spend on subscriptions? How diversified is my portfolio? How is my investment compared to others my age? Over time, SoFi Coach will be able to do even more, like provide investment and lending options to choose from, help set up and track goals and simplify processes like canceling subscriptions and optimizing reward points. We are so excited about how this AI-driven tool will help engage members and help them spend less than they make so they can invest the rest. Ultimately, SoFi Coach will supercharge our financial services productivity loop and lead to a deeper relationship that drives a higher lifetime value. Turning now to product innovation within our segments, starting with the Financial Services segment and the loan platform business. LPB has been a game-changer for SoFi, diversifying our lending activity in a capital-light, low-risk way. It's a prime example of how we can leverage our unique tech customer acquisition and operations capabilities to build a differentiated platform at scale. During the third quarter, we originated $3.4 billion of loans through our loan platform business, an increase of over $900 million from just last quarter. On an annualized basis, after just 1 year, this business is now running at a pace of over $13 billion of originations and $660 million of high-margin, high-return fee-based revenue. Importantly, we continue to increase the loan platform business near-term volume that is outside of our traditional credit box effectively monetizing more of the roughly $100 billion of loan applications that we were not able to meet each year. Looking ahead, the opportunity for this business remains significant and demand from our partners continues to increase. Recently, as some concerns have emerged within the private credit markets, we've actually seen our LPB partners lean in to do more with SoFi, not less, reflecting a flight to quality and durability through interest rate and economic cycles. We have worked hard over the last 8 years to develop unique skills in underwriting, marketing, pricing, insights and data. And as such, we are benefiting from this flight to quality. Turning to invest. Earlier this month, we launched Level 1 Options, which has been consistently a requested feature by our members. Options are another way we are providing access to our members that they otherwise wouldn't have so they can build portfolios that align with their financial goals. As part of this rollout, we also provide educational resources explaining how options work, the risks involved and how to integrate them responsibly into a diversified investment strategy. Beyond options, we're also expanding our unmatched selection in the third quarter by providing access to IPOs like StubHub, Klarna and Figma and by launching the SoFi Agentic AI ETF. During the quarter, we also improved our features to make our invest products more intuitive and engaging. For example, we launched 24/7 instant transfers between invest and money, and we launched embedded rollovers and an enhanced rollover tracker giving members full visibility and control over their 401(k) rollover process. In the fourth quarter, we'll be making a number of additional enhancements. We are very excited about the progress made to build an investment platform that provides their members with way more options than what they would typically have access to. Turning now to SoFi Money, which has been a core part of our financial services productivity loop. In 3 years after acquiring our banking license, we have 6.3 million products and $33 billion of deposits. Our attractive APY is a compelling reason for members to make us their primary financial institution, but members also come to us for our best-in-class products and continued innovation. For example, we will soon be launching the SoFi Smart Card, a new card that brings together the best features to help our members spend, save and pay better. It will be part of our SoFi Plus offering, and it will serve as a platform for continuous innovation. The card will offer 5% back on food, our highest interest rate on deposits, credit builder capabilities, borrowing capabilities and so much more. This is yet another way in which we are pushing the limits on what is possible with banking products. Turning now to our Lending segment. Lending is the most tenured core capability of SoFi and it's how our business got its start. Since that time, we have made significant progress strengthening both our member acquisition and our underwriting capabilities. For loans that we hold on our balance sheet, we focus exclusively on high prime and super prime borrowers with strong cash flow and FICO scores. In fact, the average FICO score of our personal loan borrower is 745, and our student loan borrower is 773, but we don't stop at credit scores. We use tried and true underwriting techniques to assess each individual borrowers' cash flow and their ability to repay the loan. We are able to do this effectively at scale because of our innovative originations platform that leverages advanced technology and digitally-enabled processes. The result is excellent credit performance that continues today. In fact, during the third quarter, we saw our net charge-off rates improve, even as there has been moderate signs of stress showing up for some other companies. For both personal loans and student loans, net charge-offs were down more than 20 basis points in the third quarter. We also have a strong track record of building great lending products that help our members create a better future. For example, our innovative personal loan product allows members to refinance observably expensive credit card debt held at other institutions to save their hard-earned money. No longer will overachievers be suckered into chasing rewards only to realize they are paying over 20% interest on unpaid principal balances while earning essentially no interest on that same bank's deposit account. We've recently made this product even more attractive to our members by rolling out an interest-only period to raise awareness of the personal loan product and help ease the transition from making credit card payments to making personal loan payments. Similarly, in student lending, we have completely changed the game, becoming the preeminent company for refinancing student debt at more affordable rates. Our student loan refinance product can reduce some member's interest rate by a couple of hundred basis points, which will have a meaningful impact with a $40,000 loan balance. In fact, we estimate that we will save our members over $100 million in interest expense just on the student loans we refinanced during the third quarter. This is why we've made our product even more attractive by rolling out a feature that allows for the gradual step-up in payments to help members find their footing. We look forward to helping even more members refinance their student loans as interest rates come down in the future. Turning now to home lending, where we are seeing very strong results. In the midst of the higher rate environment, we built and launched a home equity loan product to help members take advantage of their equity that has been built up in their homes particularly over the last few years. In the third quarter, just 1 year after launch, we originated over $350 million of home equity loans, helping us set a record of $945 million of originations for all of home lending. In fact, Q4 will likely be the first quarter where we generate more revenue from home loans than from student loan refinance, which was our first product and the largest product prior to COVID. At the same time, we are preparing for lower rates to further accelerate our home loans business in 2026. We've not only strengthened our operations, but we have also enhanced our product to make them very attractive to estimated 3 million members, who currently have mortgages elsewhere and to those who may be first-time homebuyers. We believe our offering will drive strong growth as the market opens up. Turning to our Tech Platform segment. This business has been instrumental in our ability to innovate across the SoFi platform, and it's now allowing a broader range of companies to bring innovative programs that drive greater loyalty and engagement to their customers. In fact, today, we are incredibly excited to announce our newest partnership with one of the largest airlines in North America, Southwest Airlines, to power their Rapid Rewards debit card, which combines the convenience of debit payments, while earning points on everyday purchases. We have also signed on two major consumer brands, our largest yet, which will be announced in due course. These partnerships are a reflection of the strong and growing demand for our market-leading technology to power embedded financial products at scale for some of the most well-known brands around the world. As you can see, it was an eventful third quarter at SoFi. And we are as energized as ever as we wrap up the year and head into 2026. With that, let me now turn the call over to Chris. Chris Lapointe: Thank you, Anthony. We've delivered another strong quarter as we continue to drive durable growth and strong returns on the way to delivering record revenue in our eighth consecutive profitable quarter. For the quarter, revenue grew 38% year-over-year to a record $950 million. Adjusted EBITDA was also a record at $277 million and a margin of 29%. Net income was $139 million at a margin of 14% and earnings per share was $0.11. Similar to the last 2 quarters, this included a small benefit related to a lower tax rate. An important driver of our growth was the increased contribution from capital-light nonlending as well as fee-based revenue sources. Our nonlending businesses generated $534 million of revenue, up 57% year-over-year, and we also generated record fee-based revenue across all segments of $409 million, up 50% year-over-year. Turning now to our segment performance. In terms of financial services, for the third quarter, net revenue was $420 million, up 76% year-over-year. Contribution profit was $226 million, up nearly 2.3x from last year. Contribution margin was 54%, up from 42% last year. Net interest income for the segment was $204 million, up 32% year-over-year, which was primarily driven by growth in member deposits. Noninterest income grew nearly 2.6x to $216 million for the quarter, which equates to over $860 million in high-quality fee-based income on an annualized basis. Importantly, improved monetization continues its strong contribution to revenue growth. Financial services revenue per product surpassed $100 for the first time, reaching a record $104 in the third quarter. That's up over 28% year-over-year, and we see continued upside as newer products mature. In Q3, our loan platform business generated $168 million in adjusted net revenue, up 29% from just last quarter. Of this, $165 million was driven by the $3.4 billion of personal loans originated on behalf of third parties as well as referrals. Additionally, LPB generated $3 million from servicing cash flows, which is recorded in our lending segment. The growth opportunity for this business continues to be very strong. Beyond our LPB revenue, we continue to see healthy growth in interchange, up 55% year-over-year, driven by close to $20 billion in total annualized spend in the quarter across money and credit card. Shifting to our tech platform. For the third quarter, we delivered net revenue of $115 million, up 12% year-over-year. Contribution profit was $32 million at a contribution margin of 28%. Revenue growth was driven by continued monetization of existing clients, along with new deals signed in new client segments. Turning now to our Lending segment. For the third quarter, adjusted net revenue was $481 million, up 23% from the same period last year. Contribution profit was $262 million with a 54% contribution margin. These strong results were primarily driven by growth in net interest income, which increased 35% year-over-year to $428 million. During the quarter, we had record total loan originations of $9.9 billion, up 57% year-over-year. Personal loan originations were a record at $7.5 billion, of which $3.4 billion was originated on behalf of third parties through LPB. In total, personal loan originations were up 53% year-over-year. Student loan originations were $1.5 billion, up 58% from the same period last year. And home loan originations were a record $945 million, a year-over-year increase of nearly 2x. Capital markets activity was very strong in the third quarter. We sold and transferred through our loan platform business, a record $4.6 billion of personal, home and student loans. In terms of personal loans, we closed $175 million of sales in the whole loan form at a blended execution of 106.4%. All deals had similar structures to other recent personal loan sales with cash proceeds at or near par, and the majority of the premium consisting of contractual servicing fees that are capitalized. These sales included a small loss share provision that is above our base assumption of losses and immaterial relative to the exposure we would have had otherwise if we held on to the loans. Additionally, we sold $90 million of late-stage delinquent personal loans. By selling these loans, we're able to generate positive incremental value over time versus selling after they charge-off, both from our improved recovery capabilities and by maintaining servicing. In terms of home loan sales, we closed $585 million at a blended execution of 102.9%. And in terms of student loan sales, we closed $377 million at a blended execution of 105.9%. In addition to our loan sales, we executed a $466 million securitization of loans originated through our loan platform business. This channel provides our partners with meaningful liquidity to support their ongoing investment in the loan platform business. The transaction priced at industry-leading cost of funds levels with a weighted average spread of 98 basis points. Turning to credit performance. The health of our consumer remains strong and our credit continues to improve. Our personal loan borrowers have a weighted average income of $157,000 and a weighted average FICO score of 745, while our student loan borrowers also have a weighted average income of $157,000 with a weighted average FICO score of 773. For personal loans, the annualized charge-off rate declined by more than 20 basis points to 2.6% from 2.83% in the prior quarter. Had we not sold any late-stage delinquencies, we estimate that including recoveries between 90 and 120 days delinquent, we would have had an all-in annualized net charge-off rate for personal loans of approximately 4.2% versus 4.5% last quarter. The on-balance sheet 90-day delinquency rate was 43 basis points, consistent with the prior quarter. For student loans, the annualized charge-off rate also declined more than 20 basis points to 69 basis points from 94 basis points in the prior quarter. The on-balance sheet 90-day delinquency rate was 14 basis points, consistent with the prior quarter. The data continues to support our 7% to 8% net cumulative loss assumption for personal loans in line with our underwriting tolerance, although we continue to trend below these levels. Our recent vintages originated from Q4 2022 to Q4 2024 have net cumulative losses of 4.4% with 39% unpaid principal balance remaining. This is well below the 6.08% observed at the same point in time for the 2017 vintage, the last vintage that approached our 7% to 8% tolerance. The gap between the newer cohort curve and the 2017 cohort curve widened by a more favorable 29 basis points after a widening improvement of 19 basis points in Q2. Additionally, looking at our Q1 2020 through Q2 2025 originations, 60% of principal has already been paid down with 6.7% in net cumulative losses. Therefore, for life-of-loan losses on this entire cohort of loans to reach 8%, the charge-off rate on the remaining 40% of unpaid principal would need to be approximately 10%. This would be well above past levels, further underscoring our confidence in achieving loss rates below our 8% tolerance. Turning to our fair value marks and key assumptions. As a reminder, we mark our loans at fair value each quarter, which considers a number of factors, including the weighted average coupon, the constant default rate, the conditional prepayment rate and the discount rate comprised of benchmark rates and spreads. At the end of the third quarter, our personal loans were marked at 105.7%, in line with the prior quarter. This was primarily a function of a lower benchmark rate, which was mostly offset by higher prepayments and a modest change to the weighted average coupon as well as a modest change to the annual default rate, which was driven by loan vintage seasoning, not changes to the individual loan loss assumptions. At the end of the third quarter, our student loans were also marked at 105.7%, down 9 basis points from the prior quarter. This was a function of a modest decrease in the weighted average coupon, partially offset by a lower benchmark rate. Turning to our balance sheet. In July, we raised $1.7 billion of new capital in the form of common equity. This opportunistic raise significantly increased our capital levels and allowed us to reduce our higher cost debt by $1.2 billion, making our balance sheet even stronger and giving us great flexibility to pursue growth opportunities. In the third quarter, including this new capital, total assets grew by $4.2 billion. This was driven by $2.7 billion of loan growth and approximately $1.2 billion of growth in cash, cash equivalents and investment securities. Total company-wide cash at quarter end was $3.7 billion. On the liability side, total deposits grew by $3.4 billion to $32.9 billion primarily driven by growth in member deposits. Net interest margin was 5.84% for the quarter, down 2 basis points sequentially. This included a 7 basis point decrease in average yields as we saw a modest mix shift from personal loans to home and student loans and a 3 basis point increase in cost of funds, which was mostly offset by strong growth in interest-earning assets. We continue to expect healthy net interest margins above 5% for the foreseeable future. In terms of our regulatory capital ratios, we remain very well capitalized. Our total capital ratio of 20.2% at quarter end is well above the regulatory minimum of 10.5% as well as our additional internal stress buffer. Tangible book value grew $1.9 billion sequentially to $7.2 billion, including the benefit from the new capital raised. Intangible book value per share at quarter end is $5.97, up from $4.08 a year ago, a 46% increase. Let me now finish by providing our revised outlook for 2025. As we head into fourth quarter, for the full year 2025, we now expect to add approximately 3.5 million members, which represents approximately 34% year-over-year growth, above our prior guidance of 3 million members and 30% growth. We now expect adjusted net revenue of approximately $3.54 billion, above our prior guidance of $3.375 billion. This equates to year-over-year growth of approximately 36%, an increase from our prior guide of 30%. We now expect an adjusted EBITDA of approximately $1.035 billion, above our prior guidance of $960 million. This represents a 29% margin. We now expect adjusted net income of approximately $455 million, above our prior guidance of $370 million. And adjusted EPS of approximately $0.37, above our prior guidance of $0.31. This equates to fourth quarter adjusted EPS of approximately $0.12, which assumes a Q4 tax rate of approximately 10%. We now expect growth in tangible book value of approximately $2.5 billion for the year, above our prior guidance of around $640 million. We've had a great year thus far and look forward to a strong finish. Let's now begin the Q&A. Operator: [Operator Instructions] Our first question comes from the line of Dan Dolev at Mizuho. Dan Dolev: Chris, Anthony, amazing job. Very, very proud of you guys. Wanted to know, I mean, the question we're getting from investors for the past like month or so is consumer credit. I mean you guys have done incredibly well looking at NCOs coming down. But can you give us an overview of what's going on, maybe there's a FICO sort of differentiated thing here that helps SoFi? Just maybe an overall view of like how the health of the consumer credit across the different FICO trenches would be great. And congrats again. Anthony Noto: Sure. Thank you, Dan. The first message is our credit is performing very well. We have very strong performance by our members across each of the products, not just the performance of credit, but the spending that we see in SoFi Money, the engagement that we see in SoFi Invest and general behavior overall. We've been in the lending business for a pretty long period of time. When I joined in 2018, one of our key priorities is focused on quality of our loans over quantity and to make sure that those loans are durable through an economic cycle and through an interest rate cycle and any liquidity dislocations. And so we're constantly making changes to what marketing channels we're in. The trade-up between pricing and credit approvals, the unit economics of a loan, we focus on having a 40% to 50% variable profit margin on our loans and so sometimes we can drive more volume, sometimes we can drive higher margin. But it's a constant data science opportunity for us to perfect our loans. And the strength of the consumer loans performance speaks for itself, it's in the numbers. You can see our net charge-offs declined, i.e., improved versus last quarter. If you go back over the last couple of years, you'll see that we made a lot of credit changes to ensure that performance stayed high quality when we went through a 500 basis point interest increase and now we're seeing rates come down. So we're seeing really strong trends in the channels and great demand from high-quality borrowers. And we feel really confident. If anything changes, we'll make the adjustments accordingly. To remind everyone, we focus on a life loan loss between 7% and 8%, and all indications are that we're below that, as Chris has mentioned in the past. Chris Lapointe: And the only other thing I would add to Anthony's point is that we're also seeing really good demand from capital markets partners, which we view as a flight to quality. So all in all, we remain vigilant as always, but our balance sheet is strong with high-quality loans, excess capital and solid liquidity, and our partners are active and looking to expand their relationships with us, and that's a true testament to the credit that we're underwriting. Operator: The next question comes from John Hecht from Jefferies. John Hecht: Congratulations on a good quarter. I guess my question is predominantly around the rate environment, decreasing rates if you think about the forward curve. I'm wondering if you guys could talk about how the lower rate environment will affect the volume mix on the lending side? And particularly at what point do you think that could be a pretty big spike in student loan refinance activity? And then second, unrelated is maybe talk about what you guys expect in terms of deposit beta and what that means for NIM over the next few quarters? Anthony Noto: Thank you, John. We've said this in the past, our business is diverse, not because we woke up and said we should make our business diverse, but because of our strategy of being a one-stop shop. We've scaled our businesses across the portfolio of products that we offer being a one-stop-shop to a level that in environments, we can drive different businesses based on the characteristics of that environment. When rates were high, we took a specific strategy. As rates are coming down, we're taking alternative strategy and it's working. If rates stay exactly where they are, I think our business continues to operate incredibly well. I couldn't be more optimistic about our near-term trends and what we'll do in 2026 relative to our prior long-term guidance. So I don't worry about the environment we're in right now. I do worry about things like credit. I do worry about things like heightened inflation. We look at asset flows, et cetera, et cetera. So it's not like we're not worried about things. We just feel really good about the positive things versus the things that could cause a problem. As rates come down, I think our business only gets better. If we stay with unemployment below 5% to 5.5% and inflation is at 3%, I think we're in a really great environment. I'm not a student of believing inflation should be 2%. I think 3% is perfectly fine. I think we have global stability that will also be important. I think about things that could disrupt us as, one, economic, i.e., unemployment; two, financial liquidity. Rates are coming down, not going up; and then three is the macroeconomic factors that are at our control and exogenous events. As rates go down, our student loan business will benefit meaningfully. Rates have been very high for the last 3 years. Federal student rates are high, and we can give them a significant savings on a $70,000 balance. So we'll benefit from lower rates in student loan refinancing, for sure. The home equity market, the home loan market, the real estate market more broadly, will benefit from lower rates, both in refinancing as well as purchase. As it relates to refinancing, less than 5% of our members that have mortgages have been with us. So if you take everyone that's on our platform that's using SoFi and you look at the number of those people that have home loans or mortgages, only 5% of those with mortgages are with us. It's a huge opportunity for us to market lower cost of a mortgage to them. And we have the technology to know where the rates are, to deliver personalized messages to them, and we've built the back end and operational capabilities to deliver reliable mortgage in a specific period of time. So we feel really great about that. As it relates to SoFi Money, I've said this in the past, I'll say it again, it's starting to show itself now. In a high-rate environment, nonbanks can compete with us on interest rate. Many choose not to because they're trying to make more money with NIM, but it's easy when rates are high, when Fed funds are high. When Fed funds is low, it's going to be really hard for nonbank and nonlending companies to compete with us. Our competitive advantage will come through and show the world that we have the highest lifetime value in a broad based portfolio of products allows us to give a superior yield when others are struggling to provide that yield because of the fact that we have both lending and we're insured deposit institution, and we have a broad-based membership that we can market to efficiently for cross-buy. In the most recent quarter, 40% of our product growth came from cross-buy, that's with our members growing 35%. Chris, would you add anything? Chris Lapointe: Yes. The only other thing I would add, John, to your comments on deposit betas and NIM over the next few quarters, we've been really successful in maintaining healthy NIM margins. This last quarter, we were at 5.84%. Maintaining these strong margins has been a function of the loan pricing betas that we have as well as obviously, our cost of funds. What we've demonstrated on the loan pricing beta front is in rising-rate environments, we've been able to outpace rates and maintain really strong pricing. In down-rate environments, we've been able to maintain solid pricing above where rates have gone. And then from an asset yield perspective, we've been able to maintain strong asset yields and reduce our overall cost of deposits, all while maintaining healthy growth in member deposits last quarter. Historically, we've been at about a 65% to 70% deposit beta. We would expect that to continue going forward. Operator: The next question comes from Kyle Joseph from Stephens. Kyle Joseph: Just wanted to get your thoughts on the competitive environment. Obviously, we saw your guidance for membership growth go up, which is obviously a positive. Is that a function of just kind of internal marketing efforts and brand awareness? Or can we step back and think about things potentially getting less competitive out there? I think you talked about capital providers and the flight to quality you're seeing. So I just want to get your commentary there. Anthony Noto: It's a function of many factors, first, unaided brand awareness. Our goal is to drive unaided brand awareness higher. It provides productivity across our digital marketing capabilities and performance marketing. And so we talked about the 9.1% unaided brand awareness that we achieved in Q3, that we expect to continue into Q4. We have a number of new product launches that will also contribute, that will not just contribute directly because they're new products, but they'll also contribute indirectly after raising awareness that we're a one-stop shop. Specifically, our goal is to launch buy, sell and hold crypto by the end of the year. We'll continue to roll out SoFi Pay to other international markets. And so the second bucket is new products. And then the third, we have a pretty good understanding of what channels to market what product is in and have a good read on customer acquisition costs by channel. And so we're just ensuring that we continue to add more marketing at an efficient rate, focused on profitability and growth, and it's our confidence in being able to do that in a bigger way in Q4 than we did in Q3 in addition to the new product launches that we'll have, and the benefit from a brand awareness. So that's driving our confidence. I will tell you our goal is to continue to move along a linear curve to make sure that we're not falling off that efficient frontier of marketing and brand awareness and spending. But there's a lot of upside from spending at efficient rates if we chose to grow even faster. Operator: The next question comes from Andrew Jeffrey of William Blair. Andrew Jeffrey: Anthony, as you see faster growth in the nonpersonal loans business, which I think is really encouraging from a diversification standpoint, does that change your thought on how you fund that growth on balance sheet deposit driven versus the loan platform business? And are there opportunities in the loan platform business for nonpersonal loans? Just trying to think about what the funding mix looks like as the origination mix shifts a little bit? Anthony Noto: Sure. There are definitely opportunities in the loan platform business from nonpersonal loans, and Chris and the capital markets team is working on that. Funding off of deposits is definitely an element that drives our durability and our confidence in lending. The dependency on deposits will likely reduce over time and our cost of funds will also likely come down over time based on a bunch of decisions that we make as it relates to how to spend our capital. I do think you'll continue to see us drive revenue streams that are not connected to capital. 56% of our revenue is now coming from our tech platform and financial services business, and that's up pretty meaningfully over time. And you can see the benefit to our profitability line and our ROE and our tangible book value growth related to that. So there's a number of initiatives that we have, that we haven't talked about publicly that will also help as we leverage blockchain technologies in the lending space specifically that will help drive strong diversification of funding for our balance sheet. Operator: Next question comes from Kyle Peterson at Needham & Company. Kyle Peterson: Nice results. I wanted to drill down in the loan platform business, in particular. I know there's at least another fintech lender that kind of recently said that at least some of the loan buyers and such on from institutional investors were kind of consolidating purchases to kind of fewer platforms. I guess the strength this quarter, was it broad-based in terms of you guys adding participants on the platform on the funding side? Or was it fairly concentrated with existing partners? Just any color there. And if you guys are seeing anything similar would be really helpful? Chris Lapointe: Thanks, Kyle. So we saw growth across both new partners as well as existing partners who have partnerships with us. What we actually saw is a bit of a flight to quality where existing partners -- a number of existing partners came to us and asked to upsize their commitments, not only in Q3 but Q4. So we expect continued momentum to occur in the last quarter of the year. And then we also saw some growth in new partners as well as extended credit. So net-net, it was growth across the board. Operator: The next question comes from Reggie Smith at JPMorgan. Reginald Smith: Great quarter. I guess I had a follow-up on the loan platform business as well. Is there a way to kind of frame the number of buyers on the platform and kind of what your mixed full quarter capacity looks like? And then also talk about the process, I think you mentioned this a second ago, Chris, about how companies upsize their commitment? Chris Lapointe: Kind of out there at the end, Reggie, but I think you asked about the process for how companies upsize their commitments. In terms of your first question about the number of buyers on the platform and what the next quarter's capacity looks like, we aren't going to disclose the number of buyers that we have. We have disclosed a few publicly with Fortress and Blue Owl, but we have a number of partners on the platform. What capacity looks like next quarter? We did $3.4 billion of originations on behalf of others this past quarter in Q3. We expect that to continue to grow heading into Q4. In terms of how companies upsize their commitments, they typically come to us intra-quarter if they have excess capacity or demand for incremental loans. And if we're able to fulfill by the end of the quarter, we'll do so. Anthony Noto: The behavior we're seeing of consolidation down to higher quality that you mentioned, we think we're benefiting from that based on the activity we've seen from those partners. Operator: The next question comes from Peter Christiansen from Citigroup. Peter Christiansen: Nice trends here for sure. Anthony, I was just wondering, can you remind us where we are in your investment cycle, perhaps not just like the marketing or performance marketing, branding, those sorts of things, but maybe more so on capabilities? I know you're going to be onboarding some new clients on the tech platform pretty soon and now building out crypto, whether that's partnered or native. Just if you could frame for us where we are in the investment cycle. Anthony Noto: I would like to invest a lot more than we're investing, but we're trying to balance both growth and being responsible for delivering profitability and good returns. We don't want to go after penny less growth. And so the gating factor that we've put on and talked about publicly is to have at least a 30% incremental EBITDA margin. And I say the word at least because if the business does well relative to expectations, it's hard to spend back in a quarter. We may accelerate some hiring, but that really doesn't impact the near-term quarter, it impacts the next quarter. And we've hired a lot more people in 2025 than we set out at the beginning of the year because we've been driving both strong top line growth and really strong incremental profitability. I would love to spend every dollar we could down to that 30% incremental EBITDA margin. It's not always possible to do that. That 30% incremental EBITDA margin will be the standard until we see our growth drop below, call it, 15%. I think as long as we're growing above that, we should invest in the business to make the top line as large as it can be. And then over time, we can slow down our spending and drive margin expansion, but we're definitely not in the mode of driving margin expansion unless we outperform compared to the 30% incremental EBITDA margin. The areas we're investing is we'll continue to iterate our existing products. We're focused every day on 5 things of our existing products, fast, selection, content and convenience and then make them better together. There are some products that are new that we'll increase the investment in, such as SoFi Plus. We're really pleased with the progress we've made there. There will be additional things that we add into SoFi Plus as it relates to value, one of which is the smart card. We think it's the best of any card. It will have high rewards, 5% on food. They'll also have high interest or highest APY. In addition to that, you can also build your credit score and you'll be able to use that relationship with us to potentially borrow both ahead of time and post transactions. And that will be an evolving feature set after we launch, that will continue based on how we learn our members want to use the product, but focusing on the smart things that they want, and making it have the best of everything. We talked about Cash Coach on the call. There's a number of AI initiatives to help people spend less than they make and invest the rest. It is a unique formula that we can deliver on in addition to the investing piece. One of the things that's interesting about our buy, sell and hold for crypto is that the way we'll launch this product is going to be pretty novel. Someone will open up the SoFi Money account. If they don't have a SoFi Money account, they'll fund that SoFi Money account and then all their purchases are drawn from that SoFi Money account. What's the benefit of that? Well, that SoFi Money account has FDIC insurance. And we've added additional insurance for our members if they opt in, up to $2 million, not just $250,000. So someone can have an FDIC-insured bank account where they keep their funds and seamlessly be able to buy cryptocurrency and the money moves from one entity to the next seamlessly behind the scenes. A very efficient process that I think will be very differentiated, and we'll be the first bank to offer buy, sell and hold crypto. We've mentioned stablecoin on the call. I can just tell you, every day, there's a new opportunity for us to leverage the SoFi USD stablecoin that we'll plan to launch. And we have some unique advantages that we're already a Tier 1 bank. What do I mean by that? Because we are a Tier 1 insurer deposit institution, we could take the reserves of our stablecoin and put them at the Fed and earn Fed funds. What does that mean? Zero credit risk, zero liquidity risk. There's not a stablecoin provider in the United States that can make that claim. Very differentiated, super excited about it, and there's a number of other applications there. You can imagine that Fed funds that we earn on those reserves, they can be given back to the consumer. They can be given to businesses to accept our payment at point of sale, and it can provide a lot of different benefits to other ecosystem partners that cause them to want to partner with us as opposed to a non-Tier 1 nationally licensed bank. So we're going to invest as much as we can to that 30% incremental EBITDA margin and sustain high levels of growth until it slows down and then will drive profitability. Operator: The next question comes from Moshe Orenbuch from TD Securities. Moshe Orenbuch: Maybe a little bit about the competitive dynamic in the personal loan business. I saw one of your close competitors got acquired by a large bank. First, do you think that makes the business kind of a better competitive dynamic if that happens? Or maybe just talk about that a little bit? And if you could also just address, you talked about becoming more capital light. How much of that do you think comes out of the personal loan business in terms of doing less for your balance sheet or proportionately more in the loan platform side? Anthony Noto: In terms of competition for PL, I'd say it's generally been a competitive environment. But from entities that are not large national banks or the top 10 banks in our country, they just don't offer this product. I think there's a lot of reasons for why they don't offer this product. It's a gap in their portfolio that allows us to really gain, I think, more members at efficient costs. I think the reason why they probably don't offer their product is because they gouge people so about on credit cards, and it's such a great ROE product that they don't want to cannibalize the credit card. The way you make money in the credit card business is to revolving balances. Well, credit cards average in the United States over 20% interest on those revolving balances. If you actually had a prime member or super prime member, and told them they're going to charge 20%, they wouldn't sign up for that any day. But if you put that behind a fancy name of the card and all these benefits and high rewards, no one sees the high interest rate that they get. And they chase those reward points thinking they're getting some benefits from it. Then they end up with a balance that they can't pay off after 1 month. And then they said they'll do it after 2 months. And before you know, it's been 6 months. They now have a $10,000, $15,000 balance, they're paying 20% to 30% interest on it. Would you refinance them with a personal loan at 12%? Probably not. So I think this is a product that we're going to own from a leadership standpoint. We'll continue to fight away at these huge balances where people are paying over 20% interest when they can come to us and pay 12%, again, prime and super prime customers. Chris Lapointe: And then what I would say on your point about being capital light and how much of it comes out of the PL business, what I would say is total personal loan originations were up 53% this past quarter year-over-year and 7% sequentially to a record of $7.5 billion. So we don't see much in terms of overall cannibalization, given our current market share, which is about 15% of total unsecured loans out there within our credit box and that doesn't even scratch the surface of all of the outstanding credit card debt, as Anthony mentioned. So we're seeing really good momentum on the LTV side, and we're adding loans to the balance sheet at a pace that we are comfortable and happy with. This past quarter, we added about $2.7 billion of personal loans to the balance sheet, which is a good healthy clip for us. Operator: Our final question today comes from Devin Ryan, Citizens Financial Group. Devin Ryan: I want to come back to the student loan opportunity. Obviously, you talked about kind of the outlook moving into a better place there with the rate environment. Can you talk a little bit about how you see some of the actions of this administration driving kind of a better environment, whether it's the Big Beautiful Bill? And then a few weeks ago, there was, obviously, headlines around the government exploring, selling some of its $1.7 trillion in balances, which would seem pretty interesting for you guys. So love to get some thoughts on that. I'm not sure if you can speak to it directly, but just more broadly, if you can, just what you think that means for the market and kind of the direction of travel? Anthony Noto: Yes. I think it's all very positive for SoFi. I think we benefit from all of those decisions as they get made. We look at assets from time to time that are for sale. If the government decides to sell their student loan portfolio, we'll absolutely dig into it. It'd be a great customer acquisition tool, not to mention the fact that we can make a significant profit on that portfolio of assets. As it relates to potentially reducing the amount someone can borrow in order to go to college or grad school or business school or medical school or a law school, we'll be there to fill the hole. We want to help our members achieve the financial independence so they can live their ambitions. Paying for college, paying for a home is absolutely a critical decision they make. And we have to be there for all those major decisions they make. So we'll absolutely be there. If they need a solution that the federal government is not providing, then that will also be a great business. Our in-school business for loans is a very profitable business that's very attractive and doing more of that would be even better than the student loan refinancing. It's higher rates, it's backed by credit of another person and people really do want to pay back the benefit that they receive from getting a college education. So that would also be an opportunity. I would say more broadly, as we think about our educational system and think about the changing needs from a technology standpoint, AI, there may be new types of loans that we could get into from a student loan perspective that's outside of a 4-year type of experience, that's more suited for the professional environment new graduates will enter into. So I think we'll actually see some innovation because of what the government is doing and because of the impact technology is having on hiring undergrounds. Operator: And that concludes -- back to you. Anthony Noto: Thank you, operator. Sorry about that. As you can see, it was an eventful quarter at SoFi and we are energized as we wrap up 2025 and headed 2026. Today's results reflect the durability of the foundation our team has been tirelessly building over the last 8 years. It was not clear before today. I think it's safe to say that our results demonstrate that we truly have become a one-stop shop for your financial needs all in 1 digital platform. Many others have talked about achieving this strategy, but to date, no one else has come close to the breadth of products or complexity of operations that we have, not to mention the revenue scale we have, the profitability we're generating and the durability and broad diversification of revenue across our portfolio of products. This success positions us the best to benefit from the two tech super cycles unfolding and the continued strong sector transition globally from traditional finance companies to fintech companies. Suffice it to say, I'm more confident than ever that our strategy and our execution will continue to deliver our sustainable competitive advantage with the highest lifetime value and we'll accelerate our investment to ensure we maintain our lead. Along the way, we will remain guided by the SoFi Way. We are all operating as founders, problem solvers and partners to bring the best products and services to our members so we can have a meaningful impact on their lives, and lead them to a better, more secure financial future. By acting in the best interest of our members, we will build deeper relationships across our one-stop shop platform that will lead to durable growth and strong returns for our shareholders for decades to come. Thank you for joining our call, and we look forward to talking to you next quarter. Operator: This concludes today's conference call. You may now disconnect.

201天前Insight Analytics约5分钟阅读

ZDGE 2025 Q4 财报电话会议

Operator: Good day, and welcome to Zedge's Earnings Conference Call for the Fourth Quarter and End of Year Fiscal 2025 results. [Operator Instructions] I will now turn the call over to Brian Siegel. Brian Siegel: Thank you, operator. During today's call, Jonathan Reich, Zedge's Chief Executive Officer; and Yi Tsai, Zedge's Chief Financial Officer, will discuss Zedge's financial and operational results that were reported today. Any forward-looking statements made during this conference call during the prepared remarks or in the question-and-answer session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results in the future to differ materially from those discussed on today's call. These risks and uncertainties include, but are not limited to, specific risks and uncertainties disclosed in Zedge's periodic SEC filings. Zedge assumes no obligation to update any forward-looking statements or to update the factors that may cause actual results to differ materially from those that they forecast. Please note that our earnings release is available on the Investor Relations page of the Zedge website and has also been filed on Form 8-K with the SEC. Finally, on this call, we will use non-GAAP measures. Examples include non-GAAP EPS, non-GAAP net income and adjusted EBITDA. Please see our earnings release for an explanation of our use of these non-GAAP measures. Now I'd like to turn the call over to Jonathan. Jonathan Reich: Thank you, Brian, and good afternoon, everyone. Fiscal 2025 was a year of transition in which we reshaped Zedge to be more efficient, financially disciplined and positioned it for scalable and sustainable innovation. During the year, we completed a major restructuring aimed at positioning Zedge for sustainable, profitable growth. This included closing operations in Norway and a targeted rightsizing of GuruShots. These actions, when combined with the completion of the GuruShots retention program that was implemented at the time of the acquisition in 2022 are expected to reduce our gross annualized expenses by about $4 million. We also incurred approximately $1.5 million in cash restructuring costs and $1 million in noncash charges, which Yi will discuss in more detail shortly. Fortunately, as we enter fiscal year '26, the vast majority of these charges and cash expenditures are behind us, providing greater operating flexibility. This leaner cost base enables us to reinvest selectively in initiatives that offer the highest return potential, focusing on accelerating growth, improving margins and enhancing free cash flow generation. Operationally, business performance was mixed in Q4. Our Zedge Marketplace, which includes Zedge Premium, subscriptions and advertising performed well, while GuruShots appears to be plateauing. Separately, subscription revenue increased 21% year-over-year, and we ended the year at record levels with nearly 1 million active subscribers, an increase of 47% compared with Q4 of fiscal '24. We also saw continued growth in Zedge Premiums GTV. Fourth quarter Zedge Marketplace ad revenue grew year-over-year, but total ad revenue for the company was softer than expected due to a decline at Emojipedia from the competitive impact of AI search. Going into Q1, Google introduced a change to its search engine results page, whereby users can now directly copy and paste emojis from the search page. Although Emojipedia still ranks first or second across search, Google's change is diverting traffic away from the site. We are actively testing strategies to mitigate this outcome and strengthen Emojipedia's performance. We also made advances with DataSeeds.AI, our platform for providing rights-cleared, ethically sourced data sets for AI training. Since launching earlier this year, DataSeeds has secured contracts from several leading AI customers, underscoring the value and credibility of our approach. What makes DataSeeds uniquely positioned for success is our community of skilled photographers and graphic artists. Collectively, this group has produced a large and diverse image library of close to 30 million assets, which can be licensed for AI training. We can also leverage our creator community to generate customized on-demand data sets tailored to specific customer requirements. By launching themed GuruShots competitions aligned with client objectives, we can rapidly produce a critical mass of high-quality rights cleared data that directly supports each customer's unique AI training needs. In parallel, we have started building the DataSeeds Production Cloud, a managed global production network that mobilizes domain experts, including professional photographers, videographers and graphic artists to deliver highly unique and specific data sets at scale that don't lend themselves to photo competitions. This creates a scalable and differentiated advantage for DataSeeds in this fast emerging and explosive market. Turning to capital allocation. We repurchased approximately 640,000 shares in the fourth quarter and a total of 1.3 million shares for the full year using cash generated from operations. For the fourth quarter, our more aggressive share repurchases, along with restructuring and retention-related payouts temporarily reduced our cash position. We ended the year with approximately $19 million in cash and cash equivalents, reflecting our decision to strategically deploy capital where we see the greatest long-term value. These actions also underscore our confidence that Zedge's intrinsic value is not fully reflected in its current share price. In fact, following the end of the quarter, we also announced the initiation of our first quarterly dividend of $0.016 per share, further reinforcing our confidence in the strength of the company's cash flow generation and balance sheet. The share repurchase and dividend reflect a disciplined, balanced capital allocation strategy focused on returning value to shareholders while preserving the flexibility to invest in high-impact innovation and future growth opportunities. Fiscal '26 is going to be a year where we invest in growth and innovation. Our strategy is centered around five key areas of focus. First, expand and diversify our revenue base. For our core products, we plan to continue to innovate new features and optimize our monetization strategies. Late in fiscal '25, we integrated audio AI capabilities into the pAInt suite, and we intend to further expand those creative tools in '26. We are also evaluating how best to evolve GuruShots. One of the biggest questions we are working through is, do we focus on making the game more engaging or do we more closely couple it with DataSeeds as a massive content acquisition platform or both? It's too early to commit to a specific direction, but it's fair to say that we are monitoring performance and opportunity closely. Second is to accelerate product innovation. Our product innovation team has adopted a model that launches test marketing campaigns to measure interest before writing one line of code and then capitalizes on the benefits that AI, vibe coding and automations offer to accelerate the development of the new potential winners. Syncat, our recently introduced app that turns still photos into fun and potentially viral video clips, was the first example of this new strategy. This approach allows us to build smaller, more focused products rapidly, test them against defined key performance indicators and scale those that show promise. We call these early-stage launches Alphas, and we expect to introduce at least 6 new Alphas in fiscal '26 under this framework. Third, scale tapedeck and DataSeeds.AI. In September, we launched tapedeck in the U.S. on iOS. Tapedeck is a music platform dedicated to indie artists and designed to allow them to make a living from their music by offering transparency and fairness to them. The tapedeck pilot started with approximately 500,000 tracks and allows artists, labels, and distributors to set their own pricing and keep 80% of each sale or stream. In addition, it allows their fans the ability to pay extra or tip their favorite artists directly. Although it's too early to comment about performance, our goal is to expand to Android, web and international markets during fiscal '26. Similar to all Zedge products, tapedeck's expansion will be tied to performance, and we plan to refine its creator tools and explore additional monetization models. For DataSeeds, our priorities center on expanding the creator ecosystem, expanding the pipeline of qualified enterprise prospects and converting prospects into customers. Our focus remains on delivering bespoke, rights cleared and ethically sourced data sets that meet the rigorous standards and evolving needs of the AI industry. Fourth is improving operational efficiency. Fiscal '26 will begin to show the full benefit of our restructuring efforts. We'll continue to reallocate resources to the most attractive opportunities, improve process automation through the implementation of AI across the company and reinvest savings into projects with measurable returns. And fifth, execute a balanced capital allocation strategy. We will continue returning capital to shareholders through buybacks and dividends while maintaining the flexibility to invest in initiatives that enhance our long-term value. In summary, we enter fiscal '26 with positive momentum. We have three early-stage products, DataSeeds, tapedeck and syncat that are evolving and the completed restructuring positions us for improved cash flow and profitability. Combined with our innovation pipeline, these initiatives give us confidence that fiscal '26 will mark the next stage in Zedge's evolution, one which is focused, creative and financially disciplined. Now I'll turn the call over to Yi. Yi Tsai: Total revenue for the fourth quarter was $7.5 million, down 1.5% from last year. There were a couple of items to note here. First, Zedge Marketplace revenue was up mid-single digits for the quarter and would have performed even better if it were not for a onetime $144,000 benefit related to Zedge Premium in the year ago quarter. Also offsetting growth at Zedge Marketplace was an 11% decline at Emojipedia, consistent with Jonathan's earlier comments and the expected 39% year-over-year drop at GuruShots. Although sequentially, the business was down less than $25,000, showing stabilization. Advertising revenue was up slightly for the quarter as growth in the Zedge Marketplace was offset by lower ad revenue at Emojipedia. Zedge Plus subscription revenue increased 21% year-over-year, and our net active subscriber base grew 47%, reaching nearly 1 million subscribers. We continue to optimize our subscription plans and are seeing the benefits of those changes. Deferred revenue, which primarily represents subscription-related revenue, reached $5.4 million, up 10% sequentially and 73% year-over-year. This is an important metric as it reflects future revenue that carries essentially 100% gross margin. Zedge Premium GTV grew 7% from the year ago quarter and ARP MAU increased 17%, continuing the shift toward higher-value users and improved monetization efficiency. As noted earlier, GuruShots, which is reported under digital goods and services revenue remained a challenge, down 39% year-over-year. As part of our cost optimization initiatives, we significantly reduced user acquisition spending for GuruShots while we evaluate the best path forward. These revenue declines were expected and encouragingly, the year-over-year rate of decline improved by 600 basis points. We expect to begin lapping some of these weaker comparisons in fiscal 2026. Cost of revenue was 6.4%, roughly flat year-over-year in absolute dollars. SG&A increased about 1% to $6.9 million for the quarter. This reflects higher paid user acquisition where we are achieving strong returns and approximately $400,000 in reinvestment from restructuring savings into consulting, professional services and product development to support the ramp of DataSeed.AI and tapedeck, which partially offset restructuring savings. We also recorded $0.6 million in restructuring charges in connection with the actions announced in late January and early February compared to no restructuring or asset impairment charges last year. As a result, GAAP loss from operations was $0.7 million compared to a loss of $0.1 million last year, primarily due to those restructuring costs and growth investments. GAAP net loss and EPS was $0.6 million and negative $0.01 compared to breakeven results last year. On a non-GAAP basis, net income was $0.1 million and EPS was $0.00 compared to $0.3 million and $0.02 last year. Cash flow from operations was $0.7 million, and free cash flow was $0.5 million for the quarter. As Jonathan mentioned, cash payments related to the restructuring and retention bonuses tied to our 2022 acquisition of GuruShots reduced free cash flow by about $600,000 in the quarter and $1.5 million for the year. These payments are now complete and will not impact results in fiscal 2026. Adjusted EBITDA for the quarter was $0.3 million. From a liquidity perspective, we ended the year with $18.6 million in cash and cash equivalents and no debt. The sequential decrease reflects our repurchase of approximately 640,000 shares during the quarter and nearly 1.3 million shares for the year. As of mid-October, about $600,000 remains available under our current buyback authorization. Thank you for listening to our fourth quarter earnings call. We look forward to updating you again soon when we report results for the first quarter of fiscal 2026. Operator, please open the line for questions. Operator: [Operator Instructions] Your first question for today is from Allen Klee with Maxim Group. Allen Klee: If you could touch a little more on tapedeck and DataSeeds.AI in terms of the actions you're looking to take going forward and how you might think about what the opportunity is in both of these offerings? Jonathan Reich: Allen, thanks for asking the question. So I think that there are really sort of three buckets here. We've got tapedeck, which has been an initiative that we have built to address a portion of the world of music, mainly in the artists that are underserved today in terms of revenue generation. As you know, Tim Quirk, our SVP of Product, comes from that world. And the goal of this product is to provide a transparent platform where fans of indie artists can support their fans and do so in a fashion that allows for these Indie artists to make a good living from their artwork. The product has been built with many of the hooks needed in order to facilitate that outcome. And we've launched with 500,000 tracks. The need for additional music is there. And based upon performance and KPIs, we will make a decision in calendar year 2026 as to whether to continue this initiative or to really put it on the back burner. Moving to DataSeeds, similar notion of really managing the business towards KPIs. DataSeeds, as I've described, is a B2B offering, our first B2B offering, which is focused on providing foundational AI companies with data sets that they are in need of in order to meet their development goals. And we are hard at work at taking content that we have access to through GuruShots, content that we can create with the -- with collaboration with our creator community, whether that be GuruShots players or Zedge premium artists or even creating very, very bespoke content with professionals that extend beyond our existing user base. We have signed two contracts in fiscal Q4. One of the partners that we signed, and these are well-known global brands and so on and so forth. One of those partners has signed a new contract with us in Q1 with a significantly larger order size. What we're in belief of is that many of [ these prospects ] will start off doing something small with us. We will need to prove that we can provide the data that's needed in a fashion which adds value to their development process and the goals that they are trying to achieve. And if we are successful there, some portion of those customers will come back and order more content from us to the tune of larger amounts of money. And then finally, we've got syncat, which is the first of our new innovation products that is being -- that are being rolled off the conveyor belt quickly through the [ increasing ] of AI and vibe coding and automation and other tool sets. And the goal there, again, is to manage specific KPIs in order to demonstrate that if we meet the KPIs, we can double down. If we are unsuccessful in meeting the KPIs that we can scale fast and move on to the next MVP, if you will, or product concept. I want to underscore, and this is really important that before we even write one line of code, part of the process is to run marketing tests in order to determine that the marketing funnel is one which is affordable and will yield customers that we feel that we can monetize and earn a good return on. If we see that the marketing tests are unsuccessful, there is no justification to move forward and develop that concept that we have. So there's a lot of innovation tied to meeting KPIs, doubling down on the ones that are successful and continuing with that path. We're doing that with our existing resources. And we're not looking to hire additional heads. One could imagine to do such an initiative, we would need to bring on a lot of new people. That is not what our intention is. And we're doing that across the three tracks, whether it be DataSeeds, whether it be the innovation track or whether it be with tapedeck. I hope that answers your question. Allen Klee: That was great. One of the encouraging things I saw in your results was a sequential improvement in monthly active users, which maybe suggests that there's a possibility of some stability or potential growth eventually. What would you point to of the steps you've been taking to get those results? Jonathan Reich: So as Yi had indicated in his comments, we are being very discerning about our marketing spend and ensuring that we are focusing on bringing on high-value customers that can generate an attractive ROAS profile. And our spend is linked to what's happening in the market in real time. Specific to the Zedge Marketplace, we need to see ROAS return in a very short period of time because the Zedge marketplace is not an app that people will come back to on a daily basis like they would with a social network or communications app or [ human game ]. And therefore, we are able to react quickly. And we're able to ratchet our marketing spend based upon what is happening in the market at any particular point in time. We have had our data scientists develop a model that we are using in order to make investment decisions in paid UA. And I think that, that lends itself to some of the improvement that you're seeing. Clearly, our product evolution is something that contributes to that as well. And then there are just market dynamics where certain things are going on, let's just say, the holidays, people get new phones, they want to personalize their phone, they will then come to Zedge and download accordingly. So some of those are within our control and others are seasonal. But the ones that were in our control, we are really being very discerning about how we allocate our paid user acquisition spend in order to yield a good return. And that, I think, is a critical part of answering your question. Allen Klee: That's very helpful. So I heard you say that you took some of the restructuring savings and reinvested it back in maybe paid user acquisition spend or some other things. Could you just kind of go into kind of where that was focused? And is that something as far as you can tell now that you would continue to prioritize those areas? Jonathan Reich: Generally speaking, we've had a couple of cash expenditures around marketing. We've talked about the share repurchase and Yi said that we've got around $600,000 less than the share repurchase program, which totaled with a $5 million share repurchase program underway. And now with the initiation of the dividend, that will also consume some cash. Our goal is to fund all of these with our existing cash flow, not to have to dip into reserves ultimately. And if and when we see a tremendous growth opportunity that is backed up by numbers, we may spend more on marketing in order to seize that opportunity. I mentioned earlier, even with respect to DataSeeds, there is product that is being developed in order to meet enterprise client needs, but we are aligning that development with signed contracts and revenue in order to align expense and revenue as opposed to taking a perspective of build and then they will come. Yi, do you have anything that you want to add to that? I'm sorry Yi, do you have anything that you want to add to that? We may have lost, I don't know where he is. Allen Klee: Okay. That's fine. Your comments on Emojipedia, could you just explain again what kind of what Google changed and what actions you're taking to try to remediate that and how you're thinking about the timing of how you're hoping that those actions might kick in the results? Jonathan Reich: Sure. So there are really two different things that are going on with Emojipedia. One is an industry-wide phenomenon relating to the advent of AI search. And that can be ChatGPT, Perplexity, Anthropic's Claude, whatever the case may be, whereby user just goes in and types, let's say, Smile emoji. And ChatGPT will respond by posting a Smile emoji. User will then copy that emoji and put it into their e-mail or into their text message, whatever the case may be. That is independent of Google. Of course, Gemini provides the same sort of experience. Separately, Google consistent -- regularly and consistently updates the algorithm and the results for their search engine results page. And what they had rolled out as being brand new, has not ever happened in the past is at least for a limited number of emojis, if someone were to go in and search Smiley emoji, on the search results page, there would be a Smile emoji with a little copy or cut or paste button underneath it. And then immediately following that, you would find the link to Emojipedia. We are still ranked #1 or #2 in terms of overall search results, but the functionality of the search results page now allows for a user to immediately acquire the content that they are looking for. In the case of Emojipedia, Emojipedia is much more than just copy paste, but clearly, we have copy paste users. And let me explain other users in the world of Emojipedia. We have a lot of digital agencies. We have news outlets. We have researchers that need to have detailed information behind each individual emoji that they are using in a digital campaign writing about or the like. And that information is available only in Emojipedia or primarily in Emojipedia. And the copy paste users are the ones that are, so to speak, being affected because they no longer would go to Emojipedia for a straight copy paste type of experience. I hope that answers your question. Allen Klee: Yes. I had a question on deferred revenue, which you highlighted how that's been growing and how that can provide future revenue at close to 100% margin. How do we think about the amount of deferred revenue, the timing of how it gets recognized? Yi Tsai: Can you hear me, Allen? Allen Klee: Yes. Yi Tsai: Sorry about that, something wrong with my headphone. I talked, but you guys couldn't hear me. Yes. So the way deferred revenue work is that as we sell the lifetime subscription, we take the cash, but we amortize the revenue over 30 months. So whatever we not recognize as a revenue, we put it under deferred, which we will recognize over the next 30 months. So would that mean that we will just recognize those deferred revenue over time. And as long as we keep the subscriber pool steady, we would level out the revenue based on what we sell, not what we recognize. I hope I answered your question now. Allen Klee: Yes, that's great. So one other question. Your SG&A was roughly flat year-over-year, but up sequentially. And you highlighted a few things that was spent on. Is it reasonable to think that this quarter is kind of a decent run rate for what SG&A might be going forward? Yi Tsai: This quarter, SG&A, as Jonathan mentioned, we -- the savings from the restructuring was used to pay for the ramp-up in PUA and pay for some consulting fee related to new initiatives. So yes, going forward, the SG&A will probably decline a little bit because we're not spending the same amount in PUA and consulting for the new project as we did in Q4 of '25. Operator: This concludes our question-and-answer session and conference call. Thank you for attending today's presentation. You may now disconnect.

201天前Insight Analytics约5分钟阅读

ABG 2025 Q3 财报电话会议

Operator: Greetings, and welcome to the Asbury Automotive Group Q3 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Chris Reeves, Vice President, Finance and Investor Relations. Please go ahead, Chris. Chris Reeves: Thanks, operator, and good morning. As noted, today's call is being recorded and will be available for replay later this afternoon. Welcome to Asbury Automotive Group's Third Quarter 2025 Earnings Call. The press release detailing Asbury's third quarter results was issued earlier this morning and is posted on our website at investors.asburyauto.com. Participating with me today are David Hult, our President and Chief Executive Officer; Paul Whatley, our Vice President of Operations; and Michael Welch, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we will open up the call for questions and will be available later for any follow-up questions. Before we begin, we must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature, which may include financial projections, forecasts and current expectations, each of which are subject to significant uncertainties. For information regarding certain of the risks that may cause actual results to differ materially from these statements, please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 31, 2024, and any subsequently filed quarterly reports on Form 10-Q and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on the call. As required by applicable SEC rules, we provide reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on our website. Comparisons will be made on a year-over-year basis unless we indicate otherwise. We have also posted an updated investor presentation on our website, investors.asburyauto.com highlighting our third quarter results. It is now my pleasure to hand the call over to our CEO, David Hult. David? David Hult: Thank you, Chris, and good morning, everyone. Welcome to our third quarter earnings call. Our acquisition of the Chambers Group has already had a positive impact on many of our operating metrics. And while it is still early in the integration process, I am pleased with how our teams are coming together. We've talked many times in the past about how our transition to Tekion will transform how we sell and service vehicles and deliver a superior guest experience. Our litigation with CDK has reached a point where we can continue migrating stores onto the new BMS. Moving on to our operating performance for the quarter. Pent-up consumer demand and the expiration of the EV tax credit drove strong new volumes. And our new vehicle performance on an all-store basis highlights the impact of our Herb Chambers acquisition and the heavier weighting towards luxury brands. In the near term, we'll be opportunistic and react to what the market gives us. Our parts and service business delivered consistent results once again with same-store gross profit up by 7% and the customer pay segment up by 8% in the quarter. As referenced earlier, growing the business while avoiding expense leakage is a top priority for the team. In the third quarter, our same-store SG&A as a percentage of gross profit was 63.6%, a decrease of 32 basis points. Our strategy for deploying capital to its highest and best use has primarily emphasized large transformative acquisitions that expand our portfolio in the most desirable markets. Going forward, we are focused on delevering the balance sheet, optimizing the makeup of our portfolio and being opportunistic with share repurchases. As a reminder, we divested 4 stores in July with annualized revenue of $300 million in keeping with our disciplined approach to portfolio management. We resumed opportunistic share repurchases, buying back $50 million in shares in the quarter. The pace of future share repurchases will be dictated by portfolio management activities, share price levels and returns offered by organic and inorganic opportunities. And now for our consolidated results for the third quarter. We generated a record $4.8 billion in revenue, had a gross profit of $803 million, and a gross profit margin of 16.7%. We delivered an adjusted operating margin of 5.5% and our adjusted earnings per share was $7.17, and our adjusted EBITDA was $261 million. At the end of my remarks, I traditionally hand the call over to Dan Clara to walk through our operational performance. However, Dan was not able to be with us today. So I'll hand the call over to Paul Whatley, Vice President of Operations, who's been doing a phenomenal job running our stores. Now Paul will discuss our operational performance in more detail. Paul Whatley: Thank you, David, and good morning, everyone. Over the past few months, we've integrated a large acquisition with the Chambers Group. We've divested stores, and we've rolled out Tekion to 19 stores, and we still grew our business and new volume, fixed operations and overall same-store gross profit. I'm pleased the team has been able to successfully grow the business and maintain our margin profile while undertaking these large objectives for long-term success. And I'm going to provide some updates on our same-store performance, which includes dealerships and TCA on a year-over-year basis unless stated otherwise. Starting with new vehicles. Same-store revenue was up 8% year-over-year and units were up 7%. We did see elevated consumer demand for EVs to take advantage of the expiring tax credit and significant increases in EV volume versus quarter 2. New average gross profit per vehicle was $3,188 as the increase in EV sales and their lower PVR profile slightly pulled down our overall PVR. Brand unit performance varied widely depending on availability and consumer demand within certain OEMs. We continue to have relatively low day supply in key brands. Across all brands, our same-store new day supply was 58 days at the end of September, one day less than the end of Q2. We've generally been pleased with inventory balances against consumer demand. While it's been a stronger start to the year and inventory levels remained in check, we do expect headwinds through year-end with a softening labor market and challenges with vehicle affordability. Turning to used vehicles. Third quarter unit volume was down 4% year-over-year and used retail GPU was $1,551, a slight increase over the prior year. For the quarter, our team sourced over 85% of our used vehicles from internal channels. The largest portion of this comes from customer trade-ins, which tend to be our most profitable acquisition channel. Our same-store DSI was 35 days at the end of the quarter and we remain diligent on maintaining a healthy velocity of sales to manage inventory. Stepping back for a moment, we see our performance in used vehicles as our biggest opportunity to improve execution. The pool of available used cars starts to recover in 2026, improving further into '27 and '28. Our teams are focused on driving profitable volume growth over the coming quarters. Shifting to F&I. We earned an F&I PVR of $2,175, only $4 less than last year, and it would have been higher by $64 to $2,239 without the noncash deferral impact of TCA. In October, we finished the rollout of the Koons stores to TCA following the completion of the Tekion conversion at those locations. Michael will walk you through additional details regarding TCA. Despite macro challenges of consumer affordability, we continue to see a healthy adoption rate of TCA products. Historically, the average customer chooses about 2 products per deal and that number fell steady even as pricing challenges have become more acute. And finally, in the third quarter, our total front-end yield per vehicle was $4,638, down $230 sequentially, partially due to increased EV volume. Now moving to parts and service. As David mentioned earlier, our same-store parts and service gross profit was up 7% year-over-year, and we generated a gross profit margin of 58.8%, an expansion of 172 basis points. And once again, our fixed absorption rate was over 100%, a key measure for the strength of our business. When looking at customer pay and warranty performance, customer pay gross profit was up 8%, with warranty gross profit higher about 7%, or on a combined basis up 8%, lapping tough comps and warranty from recall work across multiple brands in 2024. We believe our stores are well positioned for growth trends within parts and service. We continue to invest in improved facilities and technology and in training for our people. And before I pass the call to Michael, I want to share a couple of highlights from the Chambers platform. Looking at our overall store numbers, the heavier luxury weighted mix lifted PVRs for both new and used. It's even more impressive considering that it was only for a partial quarter performance. I am very optimistic about how Asbury has strategically set itself up for long-term success by continuously improving our operations today. I will now hand the call over to Michael to discuss our financial performance. Michael? Michael Welch: Thank you, Paul, and good morning to our team members, analysts, investors and other participants on the call. And now on to our financial performance. For the third quarter, adjusted net income was $140 million, adjusted EPS was $7.17 for the quarter. In addition, the noncash deferral headwind due to TCA this quarter was $0.23 per share. Our adjusted EPS would have been $7.40 without the deferral impact. Adjusted net income for the third quarter of 2025 excludes net of tax $27 million in net gain on divestitures, $9 million related to the noncash asset impairment related to a pending disposal, $7 million of professional fees related to the acquisition of Chambers, $2 million in income tax expense related to the deferred tax true-up for the Chambers acquisition, and $2 million related to the Tekion implementation expenses. Adjusted SG&A as a percentage of gross profit for the total company came in at 64.2%. While we are confident in our ability to reduce SG&A expense, there may be transition-related expenses pulled forward over the next couple of quarters as we roll out Tekion to a greater number of stores. As it relates to new vehicle GPUs, we believe those will continue settling to our estimated range of $2,500 to $3,000. However, the trajectory and timing of this normalization would be sensitive to macro elements, and it may be difficult to pinpoint a solid time frame for when this occurs. The adjusted tax rate for the quarter was 25.4%. We estimate the fourth quarter effective tax rate to be approximately 25.5%. TCA generated $14 million of pretax income in the third quarter. The negative noncash deferral impact for the quarter was about $6 million. At the beginning of this year, we provided an outlook for TCA and the impact on earnings per share through 2029 based on information known at the time. With our recent acquisition and divestiture activity, delayed rollout of our Koons stores, and lower projected SAAR through 2030, we have revised our estimate for the TCA business, as shown in our presentation on Slide 18. We now expect less of the deferred revenue impact over the next several years, primarily as a result of changes in the SAAR estimates. Our initial projections were based on a faster return of 17 million SAAR level, while the latest publicly available forecast indicates something closer to high 15 million to low 16 million range. Now moving back to our results. We generated $543 million of adjusted operating cash flow year-to-date, an 11% increase over the comparable period last year. Excluding real estate purchases, we spent $104 million in capital expenditures so far this year. We now anticipate approximately $175 million of CapEx spend for 2025. This amount will depend on the timing of certain projects before year-end, and we expect some CapEx in 2026 associated with Chambers. We will provide a more robust view on 2026 CapEx following our Q4 results. Free cash flow was $438 million through the first 3 quarters of 2025, $50 million higher than 2024. We ended Q3 with $686 million of liquidity, comprised of floor plan offset accounts, availability on both our used line and revolving credit facility and cash, excluding cash of Total Care Auto. Our transaction adjusted net leverage ratio was 3.2x on September 30, following the Chambers acquisition. We believe our business model's ability to generate cash efficiently will help us reduce our leverage over the next 12 months while remaining agile enough to be opportunistic with share repurchases. The dilutions we sold this year enabled us to avoid lower return CapEx while also providing additional liquidity to reduce leverage and repurchase shares. We will continue to review our portfolio for similar opportunities. And finally, before I finish our prepared remarks, I want to thank our team members, and we look forward to finishing the year strong. And with that, this concludes our prepared remarks. We will now turn the call over to the operator and take your questions. Operator? Operator: [Operator Instructions] Our first question today is coming from Jeff Lick from Stephens Inc. Jeffrey Lick: Paul, welcome to the call. David, I was wondering just, obviously, with the Chambers acquisition and everything that was going on in Q3 with EVs and obviously, some of your competitors have talked about maybe the ICE incentive scenario being a little different in Q3 because of all the attention on EVs. I'm just wondering if you could kind of unpack where you see new GPUs going in Q4 as we get into the all-important luxury season? David Hult: Sure. Jeff, this is David. Traditionally, the fourth quarter is a great quarter for luxury and specifically in December. So we don't see any indications where that wouldn't be the case now. Our EV volume of units in Q3 compared to Q2 doubled and our EV average gross profit per car sold is significantly lower than what the hybrid and combustible engine gross profit is. So while that will probably slow down a little bit, even though they're still incentivized from the manufacturers in luxury, we think will pick up in the fourth quarter. At this point, we think our margins will hold up well in the fourth quarter. But again, difficult to predict not knowing what macro events could happen. Jeffrey Lick: And as it relates to Chambers when that gets into the 4Q will be the first quarter where it's all the way in there, just based on the 8-K that you guys filed, it would appear that Chambers will have a slightly accretive effect on new GPUs. Is that correct? David Hult: Absolutely. So far, since we've acquired them, their gross profits on new vehicles and used vehicles as the lead platform in our organization. They do a fantastic job generating growth on both sides. And you look at our numbers in Q3 on an all-store basis, they pulled up our PVRs on new and used. So we're very pleased with the operators and how they run their business. Jeffrey Lick: Awesome. Good luck on fourth quarter. Operator: Our next question today is coming from Ryan Sigdahl from Craig-Hallum Capital Group. Ryan Sigdahl: I want to dig into TCA just given the change or updated outlook here. So if I look at the previous assumptions from a year ago this time when you originally gave them, it was $5.69 of EPS accretion or incremental in 2029. Now it's $0.81. I guess, a 6% reduction in SAAR assumption, 17 million to 16 million has that type of impact on EPS. But I guess, can you help me walk through really the next several years? And what's changing? I assume there has to be more change in there than just the SAAR assumption? Michael Welch: So on that number, TCA, we have a couple of things in there. One, the Chambers acquisition will have that deferral headwind when we roll that out starting kind of mid next year. Also, we disposed of some pretty good stores out West in terms of the Toyota stores in California and the Lexus stores. And those will have an impact. We'll get the lack of the deferral hit, but you basically lose that volume in the future. So you have those 2 pieces on the acquisition and disposal side. And then Koons, we originally projected to roll out early this year. It rolled out in October. And so that's a delay on that kind of deferral hit. But the biggest one is just SAAR, we had assumed that we'd be back to 17 million SAAR in 2027 and then kind of stay at those levels for a couple of years. And now the projection is kind of high 15s to low 16s during that time frame. And that cumulative effect on SAAR [indiscernible] 17 and kind of the high 15 to 16 hits you every year and just kind of rolls out. We still expect to get back to that $5 of EPS. It's just going to be delayed until SAAR fully recovers. And so the biggest impact is just the SAAR piece of that equation. And you looked at the numbers, next year's number is significantly lower from a deferral hit. Again, just the SAAR being delayed has a big impact on the negative deferral hit that we expected next year. Ryan Sigdahl: So we can basically assume just kick it out 2 years kind of from the previous assumptions to get back to that EPS $5 plus? Michael Welch: Yes. Yes, it's probably 2031, 2030, again, it depends on when you think we get back to that high 16 million, 17 million SAAR range. We really have to get back to those levels to drive that volume necessary to get those levels. Ryan Sigdahl: And then maybe one more follow-up and then I'll leave this one. But would you eventually get there with the 16 million SAAR or just will take longer? Or do you actually need 17 million SAAR type volume to get to that level? Michael Welch: To get to the high $5 EPS, we need the 17 million SAAR because you need that volume level. Now you can also get there with future acquisitions and adding additional stores, but you need a total volume level to drive the products going through the system. So we have to get there with the 17 million SAAR or additional acquisitions. Ryan Sigdahl: Got you. Just for my follow-up, SG&A. Just curious, if I look kind of on an adjusted basis, gross profit up similar sequentially as SG&A. I guess just curious from kind of an SG&A to gross profit leverage as you look into Q4 and even into '26. Any comments would be helpful. Michael Welch: I think -- it all depends on what you think gross profit is going to do on the new vehicle side. We think fourth quarter hangs in there on a gross profit, so we should be able to maintain these SG&A levels. Going into next year, we should still be able to maintain these SG&A percentage of gross levels. But again, depends on what your view is on where new vehicle PVR shake out. Going out beyond that, once we get past the Tekion rollout, we will have some kind of onetime costs if we go through that rollout phase. We pulled those out as adjusted items this quarter. We'll continue to do that in future quarters. Once we get past the Tekion rollout, there's opportunities for productivity gains and cost savings because of the Tekion piece that will help us drive that number down. Operator: Next question today is coming from Rajat Gupta from JPMorgan. Rajat Gupta: Great. I had a question on just the total contribution from -- just the total -- just the acquisitions net of divestitures. If I look at the 8-K, it looks like when you do the adjustment on the leverage calculation, you're adding roughly $78 million of net EBITDA for the acquisition divestitures. It would seem like the third quarter contribution is more like $25 million, $26 million. I mean is it like $100 million-ish kind of annualized run rate EBITDA net of all the divestitures that you've done with Herb Chambers? Is that a reasonable run rate to assume for the total sold deals this year? I just want to clarify that. I have a quick follow-up. Michael Welch: Yes. I mean it's probably a little bit above that, but in that ballpark. We did -- we sold the Toyota and Lexus stores, so those were good EBITDA stores. But yes, in that ballpark point, a touch above that number. Rajat Gupta: Understood. That's helpful. Just a broader question on capital allocation. I was a bit surprised to see the buyback this quarter just given you just integrated Herb Chambers. I'm curious if you're able to rank order what your priorities are going forward, should we think about excess free cash flow going more into the delevering and buyback from here? Or is M&A still within the rank order? I'm just curious what -- if you could rank order those? David Hult: Rajat, this is David. I'll take a crack at it, and then Michael can respond. I think some of the divestitures that you've seen, and I talked about in my script as far as organic or inorganic, we'll continue to balance our portfolio, will generate cash with that. And I think there'll be a heavier focus on share repurchases. Debt will take care of itself over the next 12 to 18 months in paying itself down. If we think our share price is at an attractive price, that would probably be #1. And if for some reason, that isn't the case, then naturally buying down debt will be it. But we generate a lot of cash. That will continue through next year. So I would say share repurchase is debt, but they could trade place it depending upon what's going on at a moment in time. Operator: [Operator Instructions] Our next question is coming from Bret Jordan from Jefferies. Bret Jordan: A few of your peers who have reported were sort of talking cautiously about recent luxury trends sort of at the [indiscernible] and it sounds like you guys really aren't seeing that. Is that more brand-specific or region-specific around luxury performance? David Hult: Yes. I would -- Bret, this is David. I would say it's more brand than region specific. On a same-store basis, I think we're back 1% in the quarter on volume. So we don't think that's material. Naturally, Lexus is probably the hottest luxury brand out there right now, but they're all performing fairly well. And we're traditionally going into a quarter that does well with luxury -- it may be choppy October, November, but we still anticipate at this point, a strong luxury into the quarter. We're not seeing any material change in traffic or desire with the luxury consumer. Bret Jordan: Great. And then on parts and service and customer pay, could you sort of parse out what was price versus units in that 8% growth? David Hult: Sure. Almost half and half. It was a little bit more, I would say, 60% dollars and 40% traffic growth. So it's always nice to see the growth in traffic that we have from what we call our repair order count. Up 6%, 7% in the quarter for warranties like compared to our peers, that would have, if we were higher in warranty, that would have drove our overall fixed number higher, obviously, but we came off heavy comps last year from warranty. Bret Jordan: When did the comp peak last year in warranty? There were some big recalls late in the year. Is the fourth quarter the hardest warranty compare? David Hult: You're testing my memory, but I'm pretty sure it is. Operator: Next question today is coming from Glenn Chin from Seaport Research Partners. Glenn Chin: Just a couple of questions on Tekion. David, I think you mentioned it's been rolled out to 19 stores. If you can just give us an update on how it's going? Any surprises favorable and/or unfavorable and the pace at which we should expect to continue to be rolled out? And then lastly, any changes on the prospects for savings there? David Hult: Sure. If I missed something, Glenn, just circle back around. We have 23 stores on Tekion. The 19 stores that we did with Koons was Reynolds and 4 CDK. We start rolling out CDK stores in this quarter. So we anticipate, hopefully, towards the end of next year, we'll be done rolling out all the stores. From an efficiency standpoint, when you think about CDK or traditional DMS, most dealers have a lot of bolt-ons. So for your employees, they have to have multiple screens open to service one customer. We lose 70% of those bolt-ons with Tekion. So it makes it more efficient for our folks to communicate and be more transparent with our guests, but also raised our productivity per employee. So there's some good tailwinds there. Some things that were a little surprising to me, and maybe I just didn't think it through well because it's cloud-based software, and it's extremely intuitive compared to the traditional DMSs, I thought the understanding of migration to the software would be fast. It's been fast for someone that is new to the automotive business or it hasn't been on one of the traditional DMSs. They pick up Tekion fast. For our folks that have been on CDK for a 20-year-plus years or Reynolds, it's taken them a little bit longer to get comfortable and used to Tekion. And I would say for a traditional person that's been on one of the legacy DMSs for a long time. It's about 6 or 7 months before they really become efficient with the software where I thought it would have been closer to 3 months. If it's a new hire that doesn't know the industry or the software, they are adapting to the software extremely fast. So I just think it's going to take some time. When we get past the rollout and all the expenses that are involved in the rollout, there will absolutely be SG&A savings from a software standpoint, from a third-party software standpoint in what I would call fees for API connections that we had with the legacy DMS. Glenn Chin: Okay. And any change in those prospects for savings dated given it sounds like somewhat of a longer tail as far as adoption or efficiency gains? David Hult: Yes, there'll definitely be savings. I think we'll start to -- who knows how things go the next 6 to 9 months rolling out the rest of the stores. But as we sit here today, fourth quarter, we should fully realize the savings of the software cost. And then I would say the end of the first quarter of '27, you should really start to see the efficiency gains with Tekion. And look, not all horses are equal, not all markets are rolling out at once. So the early adopters or transitioning to the software will probably see gains middle of next year, while the stores that go on the back end of integration, will experience it in early '27. Operator: Next question today is coming from David Whiston from Morningstar. David Whiston: Just focusing on used vehicles. You hear all the time, everyone wants to get more of that volume, especially around buying off the street to avoid auction, it's obviously a great opportunity, but what more can you guys be doing in terms of marketing both old-fashioned marketing versus digital marketing to get more vehicles on street? Paul Whatley: David, this is Paul. We've got our Clicklane acquisition tool, which is one tool that we use to buy cars off the street. It's a digitally marketed platform that creates leads that are specifically for selling cars, not necessarily buying anything from us, but that's the #1 portion of the -- the second place is a service drive and those are where we're focusing. We also have opportunity, we think, in the lower end or lower priced cars with retaining more of our wholesale cars and we're more focused on that as well. David Hult: And David, I would add, we believe, from our standpoint, one of the benefits that we continue to lead this space in SG&A, sometimes volume doesn't create more profitability. Larger used car volume at lower gross profits, raise your SG&A. And while it's a very competitive market for preowned right now, because the pool is so shallow, it just doesn't make sense from our perspective to chase volume and be up 2% or 3% or 4% volume but backwards in profitability. So we're trying to balance that as best we can. As Paul said in his script, just because of the COVID hangover and the lack of cars being built back then, '26, there'll be more used cars in the market, '27 gets even better and '28, you're back to a normalized market. So I just think naturally, you'll see lifts in volumes as you go forward. The key is acquisitions because your gross profit is 100% determined on what you acquire the vehicle for. Operator: Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to David for any further closing comments. David Hult: Thank you, operator. This concludes today's call. We look forward to speaking with you all after the fourth quarter earnings. Have a great day. Operator: Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

201天前Insight Analytics约5分钟阅读

NOS.LS 2025 Q3 财报电话会议

Pedro Cota Dias: Hello, everyone. Good morning. Welcome to NOS's Third Quarter 2025 Conference Call. I'll hand you over to our CFO, Luis, who will deliver a short presentation, and then we'll open for Q&A as usual. Luis do Nascimento: Well, good morning, and welcome to NOS's third quarter conference call. We will begin, as usual, with the main highlights of the third quarter. A strong operational performance with the RGU trends significantly improving versus previous quarters. Consolidated revenue of EUR 457 million, strongly impacted by A&C decline despite resilient performance from Telco, an efficient cost management that is driving EBITDA growth and sustainable operational cash flow generation and a solid balance sheet and financial position with leverage below reference level of 2x. So a quick overview of our main KPIs. This quarter, revenues declined 1.2% to EUR 457 million, but EBITDA rose 2.7%. This positive EBITDA performance, along with a CapEx reduction of 2% led to improved EBITDA CapEx of almost 10%. Recurring free cash flow, excluding extraordinary effects, decreased 19% and net income increased 25%, reflecting the solid operational performance and our strategic transformation program. NOS proudly leads in global sustainability, having been recognized by both Time and the Financial Times in their international benchmarking rankings as one of the world's most sustainable companies. This impressive achievement places NOS as one of only 5 Portuguese companies in both lists and the only one from the telco sector. This highlights NOS's strong commitment and significant progress towards a sustainable future. Furthermore, NOS has received recognition from DECO Proteste, the leading Portuguese Consumer Rights Association Magazine, being named best in test for its mobile Internet, Wi-Fi and TV services. It's the first time any operator has secured all 3 core distinctions, underscoring NOS's strong commitment and investment in superior network and quality of service. On the operational performance side, this was another strong quarter of fiber-to-the-home expansion. More than 5.9 million households are now covered by NOS gigabit fixed network with FTTH representing almost 88% of households passed. This is a significant increase of 78,000 households quarter-on-quarter and almost 300,000 year-on-year. But despite the challenging competitive market, NOS strong offers and commercial capabilities delivered a very strong third quarter with a 2% increase to 10.9 million RGUs. With 131,000 net adds, this quarter posted the highest level of net adds since 2023, driven by solid numbers in both fixed and mobile RGUs. With 12,000 net adds of unique fixed accesses, this third quarter saw an acceleration of the operational momentum, driven by high levels of fiber deployment, low levels of churn and competitive offers, particularly from WOO brand and naked broadband that are changing the mix of new customers. In mobile, we do 111,000 net adds in the quarter. Mobile RGUs increased 3.3%, reflecting a stronger performance both in postpaid and prepaid. Postpaid has 160 net adds, posting very strong results driven by Woo and NOS competitiveness on convergent cross-sell. Prepaid net additions continued to improve since first quarter and just decreased 5,000 in the quarter, a clear improvement from Q2 seasonality despite competitive pressure. In summary, a solid operational performance and a strong improvement versus the previous quarters. Now moving to our Audiovisuals and cinema business. The number of tickets sold declined by 28% driven by the lack of blockbusters lineup this quarter in contrast with third quarter '24, which featured several box office hits, including Inside Out 2, the most watched film ever in Portugal. The Audiovisual segment was dragged down by cinema distribution, reflecting the lack of successful movies lineups in this third quarter as opposed to third quarter '24, where NOS distributed Inside Out 2. Only 3 NOS Audiovisual films ranked in the top 10 this quarter, harming NOS performance. Now on the financial performance side, NOS consolidated revenues decreased 1.2%, a reduction of EUR 5.5 million, driven by a EUR 6.8 million decline in the Audiovisuals and Cinema division and despite the resilient performance of the Telecom segment. Telco revenues show a resilient 0.3% growth, primarily due to the performance of the enterprise sector, which posted a 4.4% increase driven by the corporate segment. The B2C segment experienced a decline of 1.2% due to increased competition impacting [indiscernible] despite stronger operational activity. The new IT business showed a small decline of 0.4%, mainly driven by a reduction in the volatile resale of equipment and licenses. However, this was almost fully offset by a solid 8.4% growth in IT services. As previously explained, the Audiovisuals and Cinema division reported a 21% decline, driven by the 28% reduction in cinema attendance. So NOS's operational performance and the solid results of NOS transformation program supported on Gen AI-driven efficiency program continued to deliver a solid 2.7% EBIT increase, significantly above revenue with a robust contribution from telco and IT, which recorded increases of 4.3% and 10.4% and despite Media segment decline of 21%. This quarter, NOS achieved a 4.6% OpEx decline, largely due to proactive cost management and Gen AI supported transformation program that continues to boost structural efficiencies organization-wide. Two significant examples of AI impact this quarter include the automation of call center and customer care service through LLM-powered voice virtual assistants and Gen AI-based chatbots, which drove a 19% reduction in customer care costs. Furthermore, a 14% reduction in maintenance and repair costs was achieved by decrease in call times and intervention orders, also driven by AI. NOS CapEx continues the structural declining trend, and this quarter dropped 2% to EUR 91.5 million, mainly supported by the telco CapEx decline of 2%. In Telco, we saw a 2.4% reduction in customer-related investments and a 3.7% decrease in base CapEx. Expansion CapEx, however, saw an exceptional increase of 1.8% this quarter, driven by a temporary peak in NOS FTTH projects. IT CapEx increased by EUR 300,000 to EUR 1.9 million, driven by customer-related investment to support business growth and Audiovisuals and Cinema CapEx declined 7% to EUR 4.6 million, reflecting a return to a more normal spending levels. As a result, improved operational performance and efficient CapEx management drove a 9.6% increase in EBITDA AL minus CapEx. NOS show the consolidated net income rise 25% to EUR 65 million, a strong EBITDA growth supported by a solid operational performance and nonproactive cost management were key drivers, complemented by reduced financial costs and the EUR 5 million contribution from tax incentives. Free cash flow declined by 56% to EUR 51 million, primarily due to a reduction of almost EUR 50 million in extraordinary effects mainly related to tower sales to Cellnex and the tax receivable paid in advance in 2023, which positively impacted third quarter by EUR 30 million. However, this quarter, we have a negative impact of EUR 90 million in taxes from extraordinary gains in 2024 from tower sales and refund of activity fees. With NOS's extraordinary items, recurring cash flow dropped 19%, driven by a EUR 39 million increase in taxes that totally offset the positive impact of the strong operational performance, lower investments, a reduction in working capital and lower interest rates. To finalize, this quarter, NOS debt decreased to EUR 1,093 million and the financial leverage ratio dropped to 1.6x, well below the reference threshold of 2x. Additionally, NOS benefits from a lower average cost of debt, now below 2.8%, representing a decrease of 0.2% quarter-on-quarter and 1.2% year-on-year. As end of March, the company held EUR 343 million in cash and liquidity. So with this, we conclude our presentation, and we are now ready to answer to all your questions. Operator: [Operator Instructions] Our first question comes from the line of Mollie Witcombe from Goldman Sachs. Mollie Witcombe: I have 2 questions, please. Firstly, on the competitive environment. If you could give us a little bit more color on how that is progressing versus previous quarters, specifically in the budget segment. It would be really good to understand as well the uptick in net adds that you've seen. Is it mainly driven by WOO and the budget segment or elsewhere? And then my second question is on upside from cost efficiencies. Obviously, you've set out your transformation plan. To what extent are these savings already make a part of guidance? And to what extent do you think there's potential for further upside from cost efficiencies driven by AI savings? Miguel Almeida: Thank you very much for your questions. In terms of competitive environment, to be completely honest and transparent, these last few months, I don't think there's any news, anything relevant that is different from the previous months. So the dynamics since last November has been more or less the same. There's -- in our case, there is already some weight in terms of gross adds coming from the discount brands, but that number is still -- not even double digit. But still, it's more or less stable in terms of weight of gross adds. So to be honest, we don't see anything changing significantly from what we have seen in the first half of the year. Luis do Nascimento: On the cost efficient side, I would say that cost efficiencies are the main driver behind the operating cost decline of 2.6% in telco. Almost all of it are coming from efficiencies, as I said, from customer-related and from operating-related cost decrease, we believe they are sustainable as the Gen AI initiatives are still far from explored. It's a long-term program. So we believe that we will have efficiencies for a long period. Operator: We'll now move on to our next question. Next question comes from the line of António Seladas from A|S Independent Research. António Seladas: Thank you for the presentation. It's just one. It's related with the [indiscernible] that your retail customers are renegotiating their packages. So taking in consideration that this new environment is now about 1 year old. And at same time, your loyalty programs are for 2 years, so it's fair to assume that roughly 50% of your customers -- retail customers all have [indiscernible] package? Or do you think this is too optimistic? Miguel Almeida: Look, first of all, thank you for the question, António. We -- since in this new competitive environment, so again, last 12 months, the pressure on our retention lines, so customers trying to renegotiate contracts has not increased. It has been more or less stable. We haven't seen -- namely on these last few months, we haven't seen any pickup on customers trying to renegotiate contracts. So on that front, I would say also like in the competitive environment, things are pretty much stable. António Seladas: Nevertheless, your [indiscernible] blended price in retail are coming down 1% year-on-year on the second, now about 2%. So is this kind of performance that we should expect for the coming quarters? . Miguel Almeida: Look, that decline has a number of effects built into it. First of all, there are -- you have the data -- mobile data revenues that we had a one shot decline last December or November. That's a one-off effect that will not continue for the future. And then you have -- as I mentioned, we already have since last November, some gross adds coming from the WOO brand, the discount brand, which has a much lower ARPU than our brand. So in terms of -- and that progressively has an impact. And on top of that, I would recall that we didn't have the price increase beginning of this year. So if you have to add up all these effects to explain that decline. Operator: We'll now move on to our next question. . Next question comes from the line of Fernando Cordero Barreira from Banco Santander. . Fernando Cordero: Three questions from my side, if I may. The first question is as a follow-up on the strategic transformation plan. You have already highlighted the impacts on the customer care and in maintenance and repair costs. Are you foreseeing any other area in the operational side where the AI-driven efficiencies could be as relevant as in this, too? The second question is related with the [indiscernible] expansion. You have already commented in the presentation that you have already added 300,000 new homes. I would like to understand what is the still potential expansion of [indiscernible] network. What would be the, let's say, the number of households that could be deployed in the future just to understand which is also the impact on your potential top line growth? And the last question is, looking to your KPIs where the some performance in volumes has been offset by the trends in ARPU as you have already highlighted. I would like to understand -- or I understand that you are prioritizing volumes versus customer value versus ARPU can you help us to understand why have you opted by this scenario instead of prioritizing ARPU versus volumes? Just to understand what has been your way of thinking in the current strategy? Miguel Almeida: Thank you, Fernando. I would like to start with the last question, which I think it's very interesting. Well, I don't think it's fair to say that we are prioritizing volume against price. As I mentioned, we -- of course, we don't want to give too much space to the discount -- brands of the discount players. And we launched, as you know, a discount brand, and obviously, that has an impact because progressively, we have more customers within this brand with lower ARPUs, much lower ARPUs. And when you see the combined ARPU, that has an effect. But that's it. I don't think it's fair to say that we are prioritizing volume versus price. We are not going to give too much space to the new entrants, that's for sure. But we are trying to manage value. I don't think your comment is very fair, to be honest. I understand it. Don't take me wrong. I understand it. But this is a result of a number of things. Our strategy is not to prioritize volume against price. It's to find the right mix. Luis do Nascimento: Okay. So on the transformation program, the Gen AI is part of our program, and we -- the idea is to massify Gen AI across the entire organization. We have around 135 different use cases, and we have just started with around 25% of them. So there's a lot of room to massify GenAI across NOS. On the expansion, we are expanding FTTH, our own FTTH, and we will do it until the end of the first half of 2026. But we will have -- then we will have houses from third parties. So we expect it to have around 300,000, 350,000 houses for the next year, but a significant part of them from third parties. So our CapEx -- expansion CapEx will continue to decline in the -- in 2026. Fernando Cordero: Just a follow-up on the network expansion side. Not only I'm, let's say, looking to understand what could be the CapEx trend for next year. Also to understand, given that you are increasing your footprint by close to 5% and your customer base in terms of fixed assets by around 2%, I just 0I would like to understand which would be the network expansion that you are expected for '26, '27, not just on the impact of CapEx, but particularly in the impact of new addressable areas for your marketing activities? Miguel Almeida: I would share 2 comments on that. First of all, there is a time to take up. So one thing is to have the expansion. Another thing is to acquire customers, it takes time. So you cannot expect -- if you increase by 5% the number of households, you don't -- you cannot expect to increase the number of customers by 5% day 1. It takes time, and it takes a lot of time, obviously. So the take-up is going according to our expectations, but there's obviously a delay. On the CapEx side, what you can expect as we have been saying for quite some time now is CapEx going down. Part of this expansion -- fiber expansion is on third-party networks. So what you can expect for next year in terms of CapEx is a reduction. Operator: We'll now move on to our next question. Our next question comes from the line of José Cabezon from [ CaixaBank ] Unknown Analyst: One question regarding the efficiency plan. You have mentioned that you have 135 areas of where you can extract more efficiencies. Could you tell us the percentage of potential sales that have been already considered? And the amount that will be -- will emerge in the coming quarters? Luis do Nascimento: Okay. Well, to give you the percentage of efficiencies that we have, it's a form of guidance. So we are not sharing this number. Unknown Analyst: Okay. And my second question is regarding the comparison basis for us from this quarter. Are you expecting that the decline in RPUs and the changes that we are seeing year-over-year are going to soften in the coming quarters? Miguel Almeida: Well, let's say, our expectation is that it can get a little bit worse before it gets better. Long term -- sorry, just to add to that. So you're talking about the next quarter. Unknown Analyst: I am referring to the -- basically as from the next quarter, what we are going to see, especially in the first quarter of next year and the following ones? Miguel Almeida: Our expectation is that short term, probably it will decline a little bit more medium term. So looking 6 months, 9 months ahead, it will stabilize. Operator: We'll now move on to our next question. Our next question comes from the line of Roshan Ranjit from Deutsche Bank. . Roshan Ranjit: I've got 2, please, many follow-ups. Just on the competitive dynamic. And I guess, having had quite a strong start to the year, the new entrants momentum has perhaps stalled. I don't know if that's fair to say. How should we then be thinking about the scope for price increases next year? Because I think typically, it's around this time where you do inform your customer base around the kind of inflationary pricing indexation that we see. And I think this year, we didn't have anything. And secondly, it's around the network dynamics. And have you changed your stance or have you seen kind of incremental approaches for wholesale access? Anything that has changed on that front? Again, the new entrant has been pushing hard to increase their coverage. Any thoughts around that, if there's been any change or is it still the same? Miguel Almeida: Well, thank you for your questions. You're right, it's more or less around this time of the year that we have to inform customers, but it's still closer to the end of November, beginning of December. And the fact is that as of today, we have no decision. But I can tell you that we are evaluating the option, and we have no conclusion yet, but we are looking into it seriously. And we'll inform the market of our decision or not by the end of November. In terms of network development and wholesale access, namely from the new entrant, we don't know if -- with us, there's no discussions whatsoever. With the others, we don't know if there are any discussions, but in terms of closed deals, there's nothing new. Operator: We'll now move on to our next question. We have a follow-up question from the line of Fernando Cordero Barreira from Banco Santander. . Fernando Cordero: It's only one. I just would like to understand if there is any news regarding the legal situation of one of your majorholders, the 26% stake [indiscernible]. Just to understand if there has been any update or you have any update on that situation? Miguel Almeida: Well, that's the easiest question of all. No developments whatsoever. Nothing new. Everything is as it was 1 year ago, 2 years ago, 3 years ago. Operator: There are no further questions at this time. So I'll hand the call back to Pedro Dias for closing remarks. . Pedro Cota Dias: Okay. So thanks very much for tuning in, and we hope to see you back in fourth quarter 2025 results. Bye-bye.

201天前Insight Analytics约5分钟阅读

CARR 2025 Q3 财报电话会议

Operator: Good morning, and welcome to Carrier's Third Quarter 2025 Earnings Conference Call. I would like to introduce your host for today's conference, Michael Rednor, Vice President of Investor Relations. Please go ahead. Michael Rednor: Good morning, and welcome to Carrier's Third Quarter 2025 Earnings Conference Call. On the call with me today are David Gitlin, Chairman and Chief Executive Officer; and Patrick Goris, Chief Financial Officer. Except where otherwise noted, the company will speak to results from continuing operations, excluding restructuring costs and certain significant nonrecurring items. A reconciliation of these and other non-GAAP financial measures can be found in the appendix of the webcast. We also remind listeners that the presentation contains forward-looking statements, which are subject to risks and uncertainties. Carrier's SEC filings, including our Form 10-K and quarterly reports on Form 10-Q, provide details on important factors that could cause actual results to differ materially. With that, I'd like to turn the call over to Dave. David Gitlin: Thanks, Mike, and good morning, everyone. Q3 was generally in line with what we shared in mid-September. At the Laguna Investor Conference, we indicated that North American resi softness would create about a $500 million sales challenge and a $0.20 to $0.25 adjusted EPS headwind in the quarter. The actual impact was consistent with that. Partially offsetting this was better-than-expected performance in Commercial HVAC in the Americas, which was up 30% in the quarter, continued aftermarket traction, cost containment and a discrete tax benefit. . We also drove continued double-digit sales growth across multiple parts of our business, including CSE residential heat pumps, container and our businesses in India and the Middle East. In addition to driving strong growth across many parts of our portfolio, we are taking aggressive cost actions to reduce overhead, including the elimination of about 3,000 indirect positions, which is on top of footprint and direct labor actions required to rightsize for demand in our factories. Given confidence in our strategy and our track record of execution, our Board approved a new $5 billion share repurchase authorization. Turning to Slide 4. We are laser-focused on our strategic priorities and continue to gain traction on our key initiatives. Our 3 vectors of growth: products, aftermarket and systems are all progressing very well. With respect to our first vector, which focuses on gaining share through differentiated products, brands and channels, we booked our largest order ever earlier this month, securing another major win with a key hyperscaler. We also converted a top U.S. homebuilder to Carrier, further enhancing our leading position in the new home construction sector. In Europe, we were again recognized for our market-leading Viessmann heat pump products. In addition, our newly introduced Toshiba VRF product line and energy-efficient container units are both contributing to share gains in their respective markets. On aftermarket, we delivered 12% growth in the quarter and remain on track for our fifth consecutive year of double-digit growth. Connectivity and digital differentiation remain foundational. Connected chillers were up 30% in the quarter. And last week, we had a major multiyear software win in the Middle East with Abound, our digital platform for buildings. Paid subscriptions for Lynx, our digital platform for transportation, were up 40% in the quarter to about 210,000. Last on systems. Field trials for our carrier energy HEMS offering in North America are progressing well, and we remain on track for market introduction mid next year. We also continue to make significant progress on our Quantum Leap integrated system offering for data centers with customer discussions advancing well. In our CSE RLC business in Germany, we continue to qualify additional systems Prophy installers. Certified installers realized growth of 15% to 20% in the quarter, far above the average installer. Turning to CSA resi on Slide 5. Though we are, of course, not pleased with the unexpected decline this year, this is a best-in-class business. We hold the #1 market position and our share continues to grow. Our products and brands are second to none. Our extensive distribution and dealer partnerships help provide competitive differentiation. All of this results in great margins and cash flow in this business. We are working with our channel partners to collectively take all of our medicine this year. We are, therefore, being very purposeful about rightsizing field inventory levels as we head into 2026. At the end of Q3, field inventories were down 12% compared to last year. As of today, field inventory levels are down another 10 points since the beginning of the month and are down about 20% versus last year. By year-end, we expect inventory levels in the field to be down 30% versus last year, the lowest level since 2018. We will continue to play offense and given continued investments and our aggressive cost takeout, we expect to realize outsized returns as this business recovers. Turning to CSE's RLC business on Slide 6. The good news is that electrification across Europe is accelerating, and we are realizing the mix-up benefit from heat pump adoption. Our residential heat pump sales in Europe were up about 15% in the quarter with heat pump sales in Germany up about 45%. We expect this trend to continue. For example, we have seen heat pump subsidy applications in Germany increase and expect them to double versus last year to 300,000. Nevertheless, in the category of controlling the controllables, we run the business to be successful independent of subsidies. This is why we have been focused on significantly reducing product and installation costs for our heat pumps to incentivize the continued transition to electrification independent of government subsidies. More broadly, we continue to see a desire across European countries to become less reliant on gas and key leading indicators of continued heat pump adoption remain positive. Just last week, the EU gave another vote of confidence for ETS 2 to become effective on January 1, 2027, which as a reminder, is the system for increased pricing on carbon in heating and transport, supporting the continued transition to electrification. However, for the past couple of years, the strength that we have seen in heat pump unit growth has been more than offset by overall market unit declines driven by boilers. With heating units in markets such as Germany at 15-year lows, these markets are poised for recovery. Importantly, we continue to make key investments in market differentiation and expansion while taking significant cost out, positioning us well for 2026 and beyond. Turning to Slide 7. Our commercial HVAC business in CSA has had best-in-class performance over the past 5 years. At the time of our spin, this was the one area within our portfolio where we were underinvested. We said we would invest, gain share and increase margins, and we have. Our investments in technology, know-how, capacity and talent are paying off. Not only has the total business more than doubled in 5 years, but also our applied business, aftermarket opportunity to further accelerate our share gains, as you see on Slide 8. Data centers remain a top priority for us, and our traction has been excellent, especially on orders in the past few months. We remain on track to double our sales from $500 million last year to $1 billion this year. We expect to see continued growth in this vertical next year given that we project our backlog entering 2026 for 2026 to be up about 20% year-over-year. Relationships with all the hyperscalers and our colo customers are very strong. Our win rate and size of wins have continued to increase. For example, in addition to multi-hundred million dollar wins with hyperscalers, we recently secured a win with a colo customer in the Americas exceeding $100 million. Our overall backlog has increased quite a bit over the past few months and now extends into 2028. Before I turn it over to Patrick, some high-level perspectives on Slide 9. We are very well positioned to create outsized value for our customers and our shareholders. Through a purposeful transformation, we created a focused yet balanced portfolio with leading positions in targeted geographies and verticals. We like that we are not overly exposed to any one geography or vertical and in fact, have balanced exposure to the right geographies and verticals. As we look ahead, we expect the parts of our portfolio that have been strong to remain strong, particularly commercial HVAC and our aftermarket business, which together constitute just under 45% of our sales. And we expect that those parts that have faced near-term headwinds, particularly RLC in the Americas and Europe and Global Truck Trailer to be positioned for a return to growth. And when they do, we stand to have outsized benefit given our market-leading positions and the aggressive cost actions that we're taking this year. In terms of controlling the controllables as we always do, you know our formula from our Investor Day, share gains through differentiation, sustained double-digit aftermarket growth and investing in systems to drive unique value for our customers and TAM expansion. You can always count on us to drive cost out of the system in a programmatic and aggressive manner, and we will be disciplined with capital allocation with a near-term focus on share buyback. With that, I will turn it over to Patrick. Patrick? Patrick Goris: Thank you, Dave, and good morning, everyone. Please turn to Slide 10. For the quarter, reported sales were $5.6 billion, adjusted operating profit was $823 million and adjusted EPS was $0.67. The year-over-year decline in these financial metrics largely relates to much lower volumes in our CSA residential business. The results are largely in line with what we outlined in September with the exception that we saw a $0.07 benefit from a lower tax rate, about $0.05 of which timing between Q3 and Q4. Total company organic growth was down 4%. The 2024 exit of commercial refrigeration was also a 4% headwind, partially offset by a 1% tailwind from currency. Adjusted operating profit was down 21%, primarily due to lower volume in our CSA resi business. Tariffs were net neutral in the quarter. Adjusted EPS was down 13%. We included the year-over-year adjusted EPS bridge in the appendix on Slide 19. Free cash flow of about $225 million reflects lower operating profit as well as higher working capital levels given the sudden reduction in sales. Moving on to the segments, starting on Slide 11. Organic sales in the CSA segment declined 8%. Commercial delivered another exceptional quarter with sales up 30%. Residential and light commercial sales came in right about where we expected per our September update. Resi sales were down 30%, driven by a roughly 40% decline in volume, offset by double-digit regulatory mixup and pricing. Light commercial sales declined 4%. Aftermarket sales across the segment increased mid-teens with particular strength in controls. Segment operating margin was 19.7%, down 560 basis points, reflecting the impact of much lower resi volume. Moving to the CSC segment on Slide 12. Residential and light commercial sales were down low single digits, reflecting continued heating market unit declines in the region. As Dave mentioned, heat pump sales growth across Europe remains strong. Commercial declined mid-single digits, reflecting some large project timing that we expect to partially recover in Q4. Segment operating margin declined 110 basis points, driven by lower organic sales and mix, partially offset by productivity, including cost synergies. We are accelerating additional reductions in headcount and other cost actions in this segment. Turning to the CSAME segment on Slide 13. Organic sales declined 2%. Continued double-digit growth in India and the Middle East was more than offset by ongoing weakness in resi and light commercial in China. Within China, our resi and light commercial business was down mid-teens, partially offset by commercial, which was up mid-single digits. Segment operating margin of 11.6% was primarily driven by strong productivity gains, offset by lower volume. Finally, moving to CST on Slide 14. Organic sales were up 6%, led by continued very strong growth in container, partially offset by mid-single-digit decline in Global Truck and Trailer. North America Truck and Trailer was flat. Segment operating margin of 15.4% expanded by 80 basis points year-over-year, primarily driven by the 2024 exit of commercial refrigeration. Turning to Slide 15. Total company organic orders were down high single digits for the quarter. Excluding CSA resi orders, which were impacted by last year's elevated preordering related to the refrigerant transition, total company orders were up low single digits. CSA residential orders were down about 40% compared to orders up 30% last year. As expected, commercial orders in CSA have been and will continue to be lumpy given large data center wins. In CSA, residential and light commercial orders grew low single digits and are up mid-single digits year-to-date. We expect commercial orders in CSE to pick up in the coming quarters given a strong pipeline, including data center projects in this region. Orders in CSAME were flat with strong growth outside of China. CST orders were exceptionally strong, led by container up about 100% and Global Truck and Trailer, which was up about 25%. Shifting to guidance and moving to Slide 16. The updated guidance primarily reflects market weakness in our residential and light commercial businesses in the Americas and Europe. We now anticipate CSA resi to be down high single digits versus our prior outlook of up mid-single digits. In Europe, we now anticipate our RLC business to be down mid-single digits versus the prior outlook of about flat. Partially offsetting these headwinds, the Americas commercial business is expected to grow over 25% this year, an outstanding performance. Overall, we now expect about $22 billion in sales for 2025. About $700 million of the reduction versus our prior guide relates to CSA resi. Moving to profit and cash guide on Slide 17. We are revising our full year adjusted operating margin guidance. Our updated margin expectation for CS Americas and CS Europe reflect volume declines in the RLC businesses in both segments. In addition, we are adjusting our margin outlook for transportation given stronger expected container sales and lower NATT sales. We are adding to the cost reduction actions we initiated earlier this year to rightsize the business and now expect carryover savings in 2026 to amount to over $100 million. The net full year tariff impact in our current guide remains 0 in terms of operating profit. We expect full year adjusted EPS of about $2.65, including a lower adjusted effective tax rate closer to 21% and expect free cash flow of about $2 billion, reflecting lower earnings and higher anticipated cash restructuring costs of about $150 million. Finally, we continue to expect about $3 billion of share repurchases this year. Additional full year guide items are in the appendix on Slide 21. With respect to Q4, we expect CSA resi sales down approximately 30% and volumes down about 40% and continued significant headwinds from under-absorption as the channel continues to destock. Before moving to Q&A, let me make a few comments on how to frame 2026. First, we expect to end 2025 with CSA resi destocking behind us. Obviously, we expect a difficult compare in the first half of 2026 in CSA resi, which will have an impact on total company performance, particularly in the first quarter. Second, we are executing on significant cost actions, which we have spoken about previously. This should amount to roughly $0.10 carryover adjusted EPS tailwind next year. Third, we expect about a 100 basis point ongoing benefit from a lower tax rate. In total, we therefore expect about $0.20 of adjusted EPS tailwind in 2026 from the combination of carryover restructuring benefits, tax and share repo. It is too early to comment on the levels of 2026 organic growth, but it's fair to say that we target about 30% conversion. For planning purposes, given heightened levels of uncertainty, we are running the business assuming low single-digit organic growth in 2026. In addition, the net carryover impact of pricing and tariffs is expected to remain dollar neutral based on tariffs and pricing in place today. With that, I would like to ask the operator to open the line for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Jeffrey Sprague of Vertical Research Partners. Jeffrey Sprague: Just obviously, a couple of questions around resi. Just first of all, Dave or Patrick, looking at your consolidated inventories, they're up sequentially in the quarter, typically down. Clearly, you've pointed to more work to do to clear the channel. But can you unpack that for us, the volume decline that you're expecting in resi plus what other moving pieces might be going on in inventory? And maybe as part of that, obviously, getting the channel where you want it to be depends not only on your actions on production, but really how sell-through is progressing. So maybe just a little bit of color on what you think kind of sell-through or movement might be as we... Patrick Goris: Sounds good, Jeff. I'll take the first part of the question. So far, on a consolidated level, our inventories are up about $500 million. Of that, about $400 million is in our CSA resi segment. And of the $400 million increase in our CSA segment, the resi element is about $350 million of that increase. And basically, it's a reflection of 2 things. One, a sudden decline in residential volume. And so it takes some time for our supply chain to adjust to that. The second element is we have purposefully increased inventories a little bit this year related to our components replacement business to ensure that we can satisfy demand over there. We do expect this inventory to start reducing. Actually, it started reducing already. And the inventory levels will come down by the end of the year. They probably won't come down exactly to where we would like them to be. And the reason for that is we're really balancing within our factories, the levels of ongoing production with taking out a lot of labor that we just have them to rehire the first quarter of the year. And so there's a little bit of a balance there between operating profit and free cash flow and ensuring that we can meet demand -- expected demand in the first quarter of the year. So you can expect that increase to start coming down by the end of the calendar year. David Gitlin: And Jeff, it's Dave. In terms of field inventory levels, we are going to great lengths with our distribution partners to try to start next year with a clean slate, take all of our medicine this year. I mentioned that our expectation is that field inventory levels ending this year will be down 30% year-over-year. In terms of your question on movement, movement was down about 30%, it looks like in October, and we expect movement to be down in the mid-20s for November and December. Now remember, movement was very strong in 4Q last year. It was up about 30%. And then it started to get weaker as we got into Q1 of this year. So movement starting in Q1 of this year was negative. So we'll start to see some easier comps on movement. So when you end this year at inventory levels at 2018 levels, we feel like that's the right number. We don't feel like that destocking will be a further headwind as we get into next year, and then we'll have to see what movement does as we get into Q1. Jeffrey Sprague: And maybe just a follow-up. There's like 27 other questions, but I'll just ask one and pass the time. Patrick, in your answer, you mentioned kind of repair. Where do you guys stand on what's going on in the repair versus replace dynamic and just sort of the health of the consumer and kind of managing through price and the question of price elasticity? David Gitlin: Yes. As you know, Jeff, we get this a lot, and there's really no exact way to measure that. Our parts are up quite a bit, but we've been very purposeful about increasing our share of wallet on part sales. So we would expect that to be up given the initiatives we're driving. When we talk to our distribution partners, they do not see an outsized growth on discrete part sales, compressors or other key components where that would be indicative of a repair versus replace. Having said that, it's hard not to imagine that there is more consumers opting for repair over replace, and we're hearing some sporadic pickup of that in certain locations. So I would have to believe it's happening in the system, although it's really hard to dimensionalize just how much. Operator: The next question comes from the line of Scott Davis at Melius. Scott Davis: Just to follow up a little bit on Jeff's question. Has the inventory destock and kind of the reset, does that impact your ability to get the price that you wanted to get for 2026 when you think about -- you're still working off a little bit of a higher cost base overall. So does that change the price dynamic at all? David Gitlin: We'll have to see, Jeff, as we think about '26 pricing -- I mean, Scott, when we think about '26 pricing, we'll announce a mid-single-digit price increase here for next year. We'll probably announce that in the next couple of weeks. And we would expect to yield in the low single-digit range. When you think about this year, we've said that the combination of mix and price have both been around in that 10% range. That will continue here for 4Q. We'll get a little bit less of the mix benefit in Q4 here because we started shipping some of the 454B in the fourth quarter of last year. But in terms of price, I think this year has been probably closer to mid-single digits and next year is probably closer to low single digits. Scott Davis: Okay. That makes sense. And then if you don't mind, David, just giving us a little bit of detail on the restructuring. Are you talking about -- or you didn't say structuring, you said cost containment. But is there structural cost out versus kind of just kind of the usual cut in discretionary spend? Is there actual structural cost out that we can count on lingering not just into '26, but going forward? David Gitlin: 100%. I mean that's the entire purpose is to take out structural costs. This is not -- we're not just trying to squeeze short-term costs. We're focused on indirect headcount. We're looking at about 3,000 heads. And then the whole goal is to make sure that we are very disciplined about not adding those heads back in. And it's not just giving out targets and having people take the heads out. We're trying to do things like using Patrick's CBS organization to do things differently in terms of how we deal with collections or payables or do things much more efficiently. Bobby and our IT department using AI in groups like our legal department or elsewhere to make us more efficient in how we do things in the back office. So we're trying to do things a lot smarter, a lot more efficiently. We have 20,000 Copilot licenses that are starting to cascade across carriers. So the answer is 100% focused on structural cost takeout that comes out and stays out. Operator: Your next question comes from the line of Julian Mitchell of Barclays. Julian Mitchell: So just running off the initial thoughts or comments on next year, Patrick, I suppose one could surmise you get to something like a 2.90s of EPS or something maybe high single-digit EPS growth and mid-single-digit profit growth based off the low single-digit sales and 30% incremental placeholders. Within that framework, just trying to understand maybe a little bit deeper how you're thinking about CSA resi in terms of the outlook as you think about sell-out or movement dynamics and the recoupling of sort of sell-in versus that. Maybe flesh that out a little bit, please, as you think beyond December. Patrick Goris: Sounds good, Julian. So first of all, in my comments, what I was saying was that we expect to see a $0.20 adjusted EPS benefit just from the restructuring benefits, from tax and share repurchases. That is without any organic growth. And we said for internal planning purposes, just as to how we run the business that we're assuming low single digits of organic growth. If you look across our portfolio today, and Dave mentioned this, a little over 40% of our sales has been growing double digits and would expect that to continue next year. That's our aftermarket business and our global commercial HVAC business. That would get you to about 4% organic growth next year if that continues with the rest of the company flat. And so the question really is what happens with the balance of the company and a big part of that is CSA resi. At this point and still very early, our estimate is it may be flat to slightly up from a volume perspective. And in Europe, as Dave mentioned, it has been quite weak for a long period of time. Our largest market, Germany, the market there is at 15-year lows. We see a hard time that getting worse. And so we think flat might be a safe assumption, maybe it gets better. Julian Mitchell: That's very helpful. And then just maybe my quick follow-up would be looking at the CSA commercial HVAC businesses in terms of light commercial as well as the larger applied business. How are you seeing the non -- the demand in the nondata center verticals there? I understand orders are lumpy. I think they were down in CSA commercial in the third quarter, but a big data center Q4 order. But if we think about the nondata center demand in CSA, light and Applied, how is that looking? David Gitlin: Yes, Julian, if you look at the commercial HVAC business, non-data centers were up and from a sales perspective, in the low teens. So the data center business in our commercial HVAC business was up about 250%. Non-data centers up in the low teens. So total was up 30%. So our applied business in commercial HVAC in the Americas was up 60% Non-data centers, it continues to be a bit of a mixed bag. We're doing very, very well in things like the mega projects, health care, even more so in commercial than light commercial. But surprisingly, commercial real estate was even up again this quarter over last quarter. We don't see that as a trend. ABI is quite low. But for whatever reason, we've seen growth in commercial real estate 2 quarters in a row. Higher ed and K-12 are weak, both for commercial HVAC and light commercial. Patrick Goris: Actually, I believe that in Q3, within CSA Americas for commercial, the non-data center orders were actually up year-over-year. It's the data centers that were down given the lumpiness. Operator: Your next question comes from the line of Steve Tusa of JPMorgan. C. Stephen Tusa: Always for the details. Just on this resi, so you said you're getting mid-single-digit price this year. I guess when you think about the low double digit or whatever it was for the price mix, I guess, how much was mix and how much was price? I know there's like in the beginning, you were getting a bit more price than mix. But how does that break out in resi for the third quarter? David Gitlin: Yes. For 3Q, it would have been 3 and 8. C. Stephen Tusa: Okay. Got it. That's super helpful. And then when you guys talk about the 30%, I guess, back to Julian's question, I think that includes services. So I guess the applied business, if non-data center was -- or data center was up 250 and your applied was up 60%, that still implies that kind of the -- just getting more specific, the applied CSA was up? Or was the applied -- you said it was a mixed bag. Was that actually up, the applied CSA equipment. David Gitlin: I'm sorry I was just saying the mixed bag was around which verticals were strong and which wasn't. When we look at total CHVAC in the Americas was up 30%. The applied business, the equipment was up 60% aftermarket was up mid-teens and the controls business was up a little over 20%. C. Stephen Tusa: Okay. So that still implies the non-DC applied equipment was still up in the quarter? David Gitlin: Yes, up in the low teens. . Operator: Your next question comes from the line of Nigel Coe of Wolfe. Nigel Coe: Just a quick one on the data center backlog, Dave. I think you've mentioned you needed to kind of build that backlog to kind of grow in '26. I just want to make sure that the $0.9 billion of backlog you're expecting at the end of this year is kind of where you expect to be for 2026, and therefore, we should see nice growth next year. And can you just confirm that we're still on track for about $1.1 billion of revenues this year? David Gitlin: Yes, I would say $1 billion for this year, Nigel, in revenue and... Patrick Goris: Always was $1 billion. David Gitlin: Always $1 billion. So it was $1 billion, still is $1 billion. And I will tell you, in terms of -- we just discussed data center orders in 3Q, and we also mentioned that we've gotten really strong orders here in October. So I've been very pleased. We wanted to go into next year with a backlog that was higher than the backlog, of course, that we had coming into this year. This year, we came in with around $700 million in backlog for the year. Obviously, the total backlog is much higher. I'm talking about backlog just for deliveries in that following year. So we came in with $700 million for this year, and we'll do about $1 billion. We wanted to end close to $900 million, so we could drive nice growth for next year. And we're on track to end with backlog in that $900 million range. We're a little bit north of $700 million today. We got some -- a lot of very strong irons in the fire. And there's just a lot of exciting activity. Frankly, I just got back late last night from Tokyo. So we were over there. We've been working with our Japanese host. We've been working with the administration, had a number of meetings yesterday with Secretary Lutnick. So we signed this morning, we had one of my colleagues, Michael Gerges was over there signing an MOU. There's going to be investments here in the Americas for infrastructure and data centers. So we're continuing to push every angle with hyperscalers, colos and some of the unique opportunities that are out there, and we feel very well positioned for continued growth in this space as we go into next year. Nigel Coe: Okay. You sound surprisingly fresh considering you just got back from Japan. But in terms of the movement numbers you just threw out, incredibly weak. So I understand channel inventory is expected to be down to 2019 levels by the year-end. But I'm just wondering with end demand this week, is that enough channel burn? Are you confident that we are going to move into 2026 on a clean slate? David Gitlin: I am about as confident as we can be with kind of the soft movement market that we've been over these last few months and continue to be in. So we we've tried to plan 4Q in a way to avoid surprises like we had in 3Q. So 4Q and 3Q, we've assumed are effectively the same with total sales down about 30%, movement down -- I mean, volume down about 40%. And we've tried to handicap movement continuing to be weak throughout the rest of the year. So -- and that is even with a price increase that will become effective in January. So we're working very hard with our distribution partners. So when we wake up in January, we're not talking about further destocking. Obviously, we are going to see -- we can't have movement stay at these levels forever. We will have a little bit of year-over-year compare issues as we get into 1Q and that lightens, of course, as we go into 2Q and through the year. But even with a bit of a rebound on movement, we think we'll be very, very rightsized on field inventory levels starting in January. Operator: The next question comes from the line of Joe Ritchie of Goldman Sachs. Joseph Ritchie: So look, I really appreciate all the color you've given already on 2026. I'm trying to really understand like the interplay between your own inventories, organic growth and margins in the early part of the year because typically, you guys build inventory from the fourth quarter to the first quarter. Are we to assume that, that does not happen in 2026? And then how do we kind of think about like the decremental margins associated with the early part of the year given you guys do have tough comps and you have elevated inventory levels on your own balance sheet? David Gitlin: Okay. Joe, let me start and then turn it over to Patrick. Let me tell you how we're kind of dealing operations because we saw such a sudden and extreme shift in our forecast and our demand. So as we think about 4Q, we fundamentally had a decision to make. We frankly could have stopped production in a couple of our key lines and frankly, sites. And we decided to keep them going. A cold start is very, very difficult for operations. You'd have to have a drastic reduction in headcount, then you're suddenly hiring as you start to gear up for the season. So we've kept operations going in places like Tennessee and Monterrey at very low levels, but continued levels. So what that means for us is we've had a big absorption hit as we've gone 3Q into 4Q. We've seen some of our inventory levels a little bit higher than we'd like. We're pretty disciplined on working capital, but we've purposely made that trade-off to keep operations going, which means as we get into the season in the March time frame, we won't have as big a ramp in production, which might have a slight impact on absorption as we get in towards the end of 1Q. But I don't think anything major there, but we won't have the usual significant ramp as we get into season. Patrick? Patrick Goris: And then just on the incrementals or decrementals in Q1, Joel, the first quarter of this year, CSA, which had very strong resi volume, and of course, we had significant production levels as well. Our incrementals were 69% -- and so clearly, that's -- it's going to be a tough comp. And I would expect the decrementals in Q1 on the resi side to be similar to what we're seeing in Q3 and Q4. Joseph Ritchie: Got it. That's helpful. And then my quick follow-up. You've given the accretion from the buyback. Like any thoughts just given kind of the weakness in the stock this year, like any thoughts on an accelerated share repurchase program? Patrick Goris: At this point, Joe, we're focused on repurchasing about $3 billion for this year. And then the new authorization, our expectation is that it will take us into 2028, but nothing I can share at this point in terms of ASR. Operator: Your next question comes from the line of Andrew Kaplowitz of Citigroup. Andrew Kaplowitz: Dave, can you give a little more color into RLC Europe and what you think is going on over there? I think you recently said that the German heating market could bottom at 600,000 units. And the obvious drag on your results has been boilers. So maybe just how you see that market playing out in '26? What's the conviction level that we will mark a bottom this year? And maybe you can elaborate on what you're doing to get the margin up in that segment? David Gitlin: Yes. Let me do the first one first. I think it's a bit of a fool's in to call a bottom. But I will say that we saw such strong growth in 2022 -- so the market there has just taken a whole lot of medicine since. So the market this year, we thought would be closer to 650,000 or so. It's going to end up being in that 600,000 range. I'm talking about Germany specifically. So it does feel like when you look at any kind of chart over the last 40 years, the German market does seem to be getting to historic lows and prepared for some level of recovery. Now in Europe versus the United States, United States is almost all replacement. In Europe, you will see some planned replacement and a lot of that has been put on hold waiting for some things to settle out. The new German government is having more fiscal stimulus, which is positive. We'll see what happens with the heating law and subsidy levels, probably a little bit more clarity as we get into the end of this year into early next year. The good news is that if you look at the ratio in Germany between heat pumps and boilers, it's almost getting closer to parity. So in terms of what we saw this year with a big decline in boilers in the 30% range and a very unique thing around very expensive floor standing boilers, which we don't expect to be talking about again next year, we do think that if we can continue, which we expect to see that strong growth in heat pumps, remember, we're seeing subsidy levels up 2x this year versus last, about 300,000 subsidy applications. And we see a little bit more muted decline in the boilers, Germany should be poised for strength as we go into 2026. And then you've seen a mixed bag outside of Germany. Certain countries like France and Poland were weak. We saw strength in places like U.K. and even Italy was a little bit better than we had thought. So I think throughout Europe, we see continued heat pump adoption. We see really good traction on our initiatives, things like air conditioning sales and some of the system level sales. And we're just going to have to watch the market dynamics, but we've taken a lot of medicine over the last couple of years. So hopefully, we've seen bottom. Patrick Goris: And then Andy, very quickly on the cost out in Europe. Dave mentioned earlier, about 3,000 positions, overhead positions that we're in the process of taking out. Of that, about half of that is in European segment in CS Europe. Andrew Kaplowitz: And then I think you had suggested recently that CSAME and CST would return to organic growth in Q3. And while transportation did, CSAME still lagged a little bit. Can you give more color into the outlook? Is that just China still being sluggish? Patrick Goris: That is really China, Andy. And it goes back to resi, China. And so it's not on the commercial side. The one thing we're doing in China as well, and that's going to carry over a little bit in Q4 and so embedded in our guide is we are also looking at the field inventories in our China residential business. They have been somewhat elevated, and we are in the process -- our team over there is in the process of working with our partners there to reduce the inventory levels in the field there as well. Operator: Your next question comes from the line of Deane Dray of Royal Bank of Canada. Deane Dray: I was hoping to circle back on the destocking. And Dave, if you could put some of this into context, most of these decisions on the destocking are being made by your independent dealers. So I know if you could just kind of collectively their mindset in being aggressively taking inventory down to 8-year lows. And then once this is done, is there a risk that just you get a normal seasonal demand in the spring, a couple of hot days, and then we'll be back talking about inventory shortages and just how quickly can it ramp up, assuming normalized demand in the spring? David Gitlin: Well, look, Deane, that would be a tremendous problem to have. We -- what we have learned about this business is that it is very short cycle, and you can see sudden swings. And you can see sudden swings for a whole bunch of variables. So I will say that we've looked hard at our forecasting model, too, that we had a model that's kind of withstood the test of time in a short-cycle business over many, many years, but it clearly failed us over the past 5 months or so. So we've looked at it. We're using AI to see if we can get more correlations between certain variables so we can have a bit better. It's going to take a couple of quarters to figure out whether the new forecasting tool has some better correlation to some of these variables. But having said that, I do think that our independent distributors are being very clear-eyed about making sure that they start the year with inventory levels that they feel are balanced, and we're working very closely with them, distributor by distributor to make sure that they have what they feel they need, but not a single unit more than what they need. Could we see a nice influx of orders as we get into the spring, driven by whether it's weather or by consumer sentiment or by a rebound in new home construction, for sure. But right now, as we think about our own internal forecasting and quite honestly, our external forecasting, you'll see us err on the side of conservatism. Deane Dray: Understood. And then as a follow-up, the discussion about Applied, we see vertical -- if you take us through the verticals, you said they were mixed. Obviously, data center is at the top, but just kind of take us through the rest of them. And anything on the government slowdown, project pushouts, delays, anything you would comment there? David Gitlin: Yes. I'd say on the second part of your question, Deane, the only -- I'd say the only real impact we've seen on the government shutdown has -- we've seen it a bit in our light commercial business. That business is weaker than we thought going into 4Q. We thought 4Q would be flattish. We're now saying down about 15%. And part of it is even though rates seem to be coming down a bit for some of the small businesses, they've been a little bit limited on lending and credit. And some of that is loans processed by the SBA have been put on hold. So that's the one area with the shutdown that we've seen that we can directly correlate to a business has probably been in our light commercial business. I would say, overall, the verticals of strength vary by region a bit. Like, for example, in most parts of the world, health care has been very, very strong. And it's gotten a little bit weak over the last quarter in China. In China, renewables has been weak. But I would say if you're looking for trends globally, #1, 2 and 3 is data centers. That is strong in the Americas, and it's very strong globally. We're seeing pockets of strength in the Middle East and Southeast Asia. We're winning orders in India. We have our sales folks in China diverting from projects they had been on focused clearly on data centers. A lot of industrial production has been strong globally, including reshoring in the United States, some of the mega projects. Retail has been a mixed bag, but that's been an area of strength. Education K-12 is generally weak globally, certainly here in the United States. So -- and another area that you'll be hearing us talk a lot more about is mods and upgrades. So where we see limited new construction and commercial real estate in key parts of the world and especially in some very dense populations in certain cities, we're very, very focused on modifications and upgrades. So that's a whole new vector for us. We've been at it for a while, but we're doubling down on that area as well right now. Operator: Your next question comes from the line of Andrew Obin of Bank of America. Andrew Obin: Just a question on magnetic bearing chillers. Just where is the industry capacity? Where are you? Because our channel checks are picking up that overall, the industry sort of was a bit too successful in getting orders, and there's not a lot of capacity out there. So what's your ability to take market share? Or do you need to add capacity yourselves? David Gitlin: We're in great shape, Andrew. And it's been very purposeful. We've built a whole new facility in North America. We've expanded the existing facility that we have in Charlotte. So if you look at our capacity, just since 2023 in North America, our capacity for water cool chillers is up 4x total chillers, when you include air cooled is up 3x. And I think, look, that's been contributing to a lot of the share gains that we've seen on commercial HVAC. Some tremendous wins on the data center side. I could not be more proud of the team. And part of it is having the capacity now, and we have a lot more capacity to go -- not capacity to go, we have a lot more capacity to continue to grow without further investments. And part of it is the way we're interfacing with our customers. We said to our team and we said to our customers, if you have confidence in us, we will never let you down. We will track deliveries by the hour. We'll make sure that we're always there for you, not only on the delivery side, but technically in terms of installation, in terms of start-up. So a lot of our orders are coming from customers that we've proven that we are in their corner. And then part of it is the investments that we've made in the technical portfolio. We have a new air cooled chiller that has mag bearings. That's coming out right now, huge interest from our data center customers. So a lot of great wins and the investments that we've made over the last 24 months in the additional capacity are paying off. We don't need any more CapEx. We may do a little bit more in certain countries where that's a part of the win process, and we'll see how that plays out. But right now, we're well set in North America. Andrew Obin: And just a little bit more pace on resi coming back in '26. Should we be saying first -- because you sort of said flat to slightly up. So should we be saying Q1 down and then it gets positive after second quarter? Or is it first half, second half story? Patrick Goris: Clearly, the first half will be very difficult given the very strong first half we had this year. And so I think it's fair to say that we would expect resi first half, especially Q1 to be down year-over-year from a volume perspective. Operator: Your next question comes from the line of Chris Snyder of Morgan Stanley. Christopher Snyder: I wanted to ask about Americas margins into next year. It seems like the guide, if my math is right, puts Q4 at maybe a low double-digit to low teens exit rate. And if the company is, I guess, effectively underproducing to maybe about Q2 of next year, I would think the absorption headwinds drag through maybe around midyear. I guess, should we expect Americas margins down next year, just given how hard these first half comps are even if the segment can collectively grow in '26? Patrick Goris: Obviously, quite early to comment on 2026 margins, but I think that CSA margin this year will be around 21% or so, unless for some reason, resi would be significantly down next year, which we, at this point, do not expect, I would not expect the CSA margins in -- to be down next year. Actually, I would expect them to be up. Christopher Snyder: I appreciate that. And then just a follow-up on the price. I think you guys said expect low single-digit realization on fresh '26 price. I guess kind of how do you think about balancing the need to cover cost inflation, which is still evident versus just potential demand destruction. We have seen these price increases get multiplied as they work their way through the channel and on to the homeowner. And I think the risk would be that this just keeps the market in repair mode for longer. Any thoughts on how you guys balance that as an industry even? Patrick Goris: I think it will be important for us next year. And Dave mentioned that we expect to announce a price increase. We do expect to realize low single-digit price next year. Input costs are going up. And of course, we haven't spoken about this yet, but should there be any additional tariffs, this might impact the requirement -- the need to further adjust pricing. And so we certainly expect to realize additional pricing next year, though it will be much more modest, of course, absent any additional new tariffs. David Gitlin: And we do watch the elasticity curves. So we are sensitive to not taking actions that drive that dynamic between replace and repair and we'll continue to watch our curves. But even watching those quite carefully, we're confident we'll get some level of price next year, albeit more modest than this year. . Operator: Your next question comes from the line of Nicole DeBlase of Deutsche Bank. Nicole DeBlase: Can we just start with CST? Orders were up pretty significantly. Do you think we're starting to see this market rebound off the bottom? Or is it more about just easier prior year comps? David Gitlin: I would say on the good side, the container business has been tremendous. I mean, up 50% in the quarter. The year is going to be very strong, probably up 30%. And that's been share gains. It's been share gains the right way through our new product introductions. So that has been just a very, very good news story for us. It's hard to say with the North American truck trailer business, we've seen -- we expect that to have some good growth here in the fourth quarter. It was flattish in the fourth quarter. So the trends there are right, but it's too early to call a strong rebound, but we are seeing it move in the right direction. And I would say European truck trailer was a little bit down. It was down a few percent in Q3. It will be down another couple of percent here in Q4. So I kind of think of it similar to some of our resi businesses. Truck trailer, we're #1 player, very good margins, very well positioned. So as these markets, which have been a little bit depressed in Europe and the Americas, as they start to come back, and it's not clear exactly when, but as they start to come back over these next couple of quarters, that will drop through very well. Nicole DeBlase: Okay. Got it. And then can we just talk about Europe commercial as well? I think it was down mid-single digits in the quarter, and you had expected something a bit better than that. Orders were also down a bit. Can we just unpack what's going on there? Is this more of a comp issue as well? David Gitlin: Yes. I'd say it's -- I honestly would call it more of a timing issue than much of anything else. We see that even though orders weren't even great, orders tend to be lumpy, especially when we're pursuing some key data center customers. I think that this quarter will be up double digits. Internally, we're shooting for a fairly strong number, but it should be up double digits here in Q4. We expect to have good backlog going into next year. The data center pursuits have been very strong. There's a couple of unique things happening where, for example, in Q3, our rentals business was down more than 20% with year-over-year comparison with the Olympics in Paris. So there are some things kind of at the margin within the factories and within aftermarket. But overall, demand very strong, team very well poised for double-digit growth, and we expect very strong growth in this space for next year as well. Operator: Our last question for today comes from the line of Amit Mehrotra of UBS. Amit Mehrotra: Maybe just a couple of quick ones for me. One is not to beat a dead horse on pricing, but any movement on pricing related to tariffs over the course of the year? I know you guys took a price increase on May 1. Pricing discipline, obviously, very strong. So no questions there. But just with respect to any movement related to tariffs specifically vis-a-vis rebates or anything like that, just given how tariff have evolved over the course of the year? Patrick Goris: Yes, Amit, good memory. We implemented incremental pricing earlier this year related to some of the new tariffs. That was at the time of our Q1 earnings, we said it was about -- it would require about $300 million of incremental pricing. We updated that back in July with some of the additional actions we were taking, the pricing requirement was only closer to $200 million this year to offset tariffs. That number has not changed. So we're still in that $200 million range. And as I mentioned earlier, the carryover impact of tariffs, pricing and the cost equation of that is expected to be net neutral in 2026 based on tariffs in place today. Amit Mehrotra: Right. And then, Dave, just a quick follow-up. We're all trying to figure out the drivers of the weakness in residential HVAC this year and just a lot got thrown at the market this year, whether it was the prebuy, the slower -- shorter selling season, the refrigerant shortage, just a lot of stuff happened this year. You made an interesting comment, I think, last month where you talked about 1/3 of existing home sales translates to new HVAC shipments. It just seems like -- I understand that dynamic, but that number just seemed higher than I would have anticipated. So as you think about your demand models and the input to those demand models, we're all trying to answer this question about what volume looks like next year. What are the main kind of levers you're watching from a leading indicator perspective that may inform kind of how that market evolves? David Gitlin: Yes. Let me just start by clarifying that when people buy new homes, our experience is that usually 20% to 25% of the time, that results in a change to their HVAC system. So I think seeing the depressed new home construction, but also the sale of existing homes has been a double hit to demand. I think if you just step back and you think about resi as you go into next year, I would say the good news is that overall comps this year will be down high single digits. As Patrick said, we have much easier comps in the second half than the first half. We are taking a lot of actions to get field inventory levels ending this year at a level where we feel like destocking should not be a further headwind as we go into next year. On the positive side, interest rates hopefully will decline, and that should help both new home construction and the sale of existing homes, which, as we just discussed, does result in changes typically to HVAC systems and 20% to 25% of the time. And I think those that have been opting to do some level of repair over replace, there will be pent-up demand there. The things that we got to watch is we do have tough comps in the first quarter, perhaps a bit into 2Q as well. And it will all come down to the strength of the consumer, and it's just too early to say how that's going to play itself out. We won't get too much of a mix benefit next year. It's probably in the $20 million range or so. So it's going to come down. There's some reasons for optimism. There are some watch items, and we'll just have to see how next year plays out. Thank you. And let me just close by thanking you all for joining the call, and thanks to our 50,000 colleagues globally. This is a time where people are working extremely hard to control the controllables and support our customers. And I could not be more proud of our team and how energized and how hard they're working to make sure that we provide best-in-class support to our customers. So thanks to all my colleagues, and thanks to all of our shareholders. Operator: Thank you for attending today's call. You may now disconnect. Goodbye.

201天前Insight Analytics约5分钟阅读

MMYT 2026 Q2 财报电话会议

Vipul Garg: Welcome to our fiscal '26 Second Quarter Earnings Webinar. Today's event will be hosted by the company's leadership team comprising Rajesh Magow, our Co-Founder and Group Chief Executive Officer; Mohit Kabra, our Group Chief Operating Officer; and Dipak Bohra, who has recently joined us as Group Chief Financial Officer. As a reminder, this live event is being recorded by the company and will be made available for replay on our IR website shortly after the conclusion of today's event. At the end of these prepared remarks, we will also be hosting Q&A session. Furthermore, certain statements made during today's event may be considered forward-looking statements within the meaning of safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. These statements are not guarantee of future performance, are subject to inherent uncertainties and actual results may differ materially. Any forward-looking information relayed during this event speaks only as of this date, and the company undertakes no obligation to update the information to reflect changed circumstances. Additional information concerning these statements is contained in the Risk Factors and Forward-looking Statements section of the company's annual report on Form 20-F filed with the SEC on June 16, 2025. Copies of these filings are available from the SEC or from the company's Investor Relations department. I would like to now turn the call over to Rajesh. Over to you, Rajesh. Rajesh Magow: Thank you, Vipul. Welcome, everyone, to our second quarter call for fiscal 2026. As you will recall, Q1 was impacted by a series of exceptional external events such as geopolitical tensions post the unfortunate Pahalgam terrorist attack on tourists and the tragic airplane crash at Ahmedabad. These events impacted the consumer sentiment for travel, especially for leisure. Additionally, supply side constraints continue to impact the domestic aviation market growth in Q1. I am happy to report, however, that as we entered Q2, the broader travel and tourism demand started to rebound across travel segments despite Q2 being a seasonally slow quarter. And our diversified product portfolio covering all travel customer segments of retail as well as corporate customers helped us deliver strong overall performance in the quarter. Barring the domestic air markets slow recovery due to temporary supply constraints where we continue to maintain our market share of 30% plus levels. All other modes of transport segments like bus, rail, camps and international air witnessed robust growth. Consequently, we saw a robust growth in our hotels and [ ACCO ] business, both for domestic and international travel segments as well. Our adjusted operating profit for the quarter was at $44.2 million, witnessing growth of 18% year-on-year. Consumer sentiment towards travel remains positive, supported by high propensity of experiential getaways and short breaks. In air segment, international outbound travel from India presents a significant growth opportunity. Being an unpenetrated segment for an online perspective, we remain focused on growing this segment. in Q2 fiscal year '26, our international air ticketing revenue grew by over 29.6% year-on-year in constant currency terms, far outpacing industry growth. Similarly, our international hotels revenue grew by over 42% year-on-year. Our international business now contributes 28% to the overall revenue, up from 25% during the same period last year. On macro front, we welcome the recent fiscal and monetary policy measures to rationalize and reduce GST rates. Income tax cuts announced in the budget and interest rate reductions to further boost the consumption. These measures will provide a further boost to the disposable income and discretionary spending, particularly within urban middle income, middle income households. Analysts estimate that the combined fiscal and monetary stimulus from these measures could unlock additional consumer spending of $3 billion to $3.5 billion during the latter of fiscal year '26. This, along with increasing desire to travel more among Indians should help in growth of travel market as well. Let me now move on to share the progress on our AI journey. AI continues to be at the center of our core strategy for us to enhance customer experience and improve productivity. We launched the beta version of our AI-powered conversational travel assistant Myra in August 2025 and is currently available in English and Hindi with voice and text features and plans to expand to more Indian languages soon. The initial response has been encouraging for collection of consumer insights as travelers begin to interact with this new interface. In a short span of time, the agent has scaled to over 25,000 conversations daily. Myra is poised to redefine and help travelers explore, plan, book trips all at one place, making it super simple for new users and comprehensive at the same time for complex travel use cases. By simplifying the discovery and booking experience through natural language interaction and personalized recommendations, we plan to transform how travelers plan their journey, journeys, making travel planning faster, easier and more intuitive. We aim to make our platforms the default search engine for the travel needs of Indians. Myra is contributing to this by significantly enhancing user engagement. More than 35% of travelers begin engaging with Myra up to 90 days before their trip, using it as a space for exploration and planning. What also stands out is how the return nearly 1 in 4 users come back seeking help across multiple categories, from and visa queries to flights, ForEx, hotels and local experiences. They're not just asking where to go, but also what to do once there turning Myra into an end-to-end companion that guides them for from inspiration to action. Myra is also helping us penetrate deeper into India with voice-first engagement strategy with new user share at about 20%. In Tier 2 and Tier 3 cities, voice adoption is 50% higher than in metros. 60% of voice queries come in English compared to just 20% in text chat. When travelers speak to Myra, they speak naturally freely and confidently with over 70% of conversations now being termed good conversations. Voice-led conversations are richer and longer, users ask follow-up questions, express preferences and describe context just as they would with a human travel expert in a country where digital electricity and linguist diversity very widely. Myra's voice-led discovery is quietly expanding access, unlocking the next wave of online travelers, who are more comfortable speaking than typing. For our cabs business, we also launched our GenAI-powered presales chatbot. The bot acts as an information provider as a recommender and provides assurance to the customer. We are expanding the coverage. This bot-plus assist approach drives a high conversion rate compared to traditional agent and traditional agent-led assistance for users who interact with it. We are expanding the bot's capabilities with a new agentic seller person for advanced search and quick actions while continuously improving accuracy and chat quality. Besides, as part of our ongoing efforts to enhance customer experience and to strengthen our post-sales flow further. We recently launched GenAI voice agent for our flights and hotels customers, which is designed to handle all customer queries received via calls and offer resolutions to the consumers in the same call. This agent is successfully integrated with our telephony system, enabling the AI agent to handle calls with background noise, interruptions and accurately interpret queries including complex sections like date change, web check-in, cancellations, et cetera. Let me now turn to business segment, starting with air ticketing business. The domestic supply continues to be impacted, thus affecting the overall domestic air passenger growth, which witnessed a decline of 3% year-on-year. The outlook for domestic supply in H2 is improving with daily expected to cross 3,200-plus, which is similar to Q3 of last year. We believe these issues are short term in nature and long-term outlook for Indian aviation sector continues to be robust. Our accommodation business which includes hotels, homestays and holiday packages delivered a strong 18% volume growth year-on-year in a seasonally weak quarter, short holidays and weekend gateways continue to define travel behavior and emerge as a key theme. We continue to see new demand peaks in the long weekends. For the weekend of 15th August, we had an all-time high hotel check-in, which was about 20% higher than the last peak. It was also very well supported by robust growth of 38% year-on-year in the hotel segment of our corporate business, helping us deliver strong overall growth. The outlook for India's hospitality sector remains optimistic, supported by sustained demand and expanding supplier base and a healthy pipeline of new signings across markets. According to HBS data, domestic and international chain hotels signed over 36,400 rooms by August 2025, a 32% increase over the same period last year. We continue to expand our supply base in domestic market. We now have 95,000-plus accommodation auctions available on the platform, covering 2,000-plus cities in the country. Events are emerging as a high-intent travel driver across entertainment, sports and cultural segments. We have built specialized mapping between major events and nearby stays, improving conversion through dynamic packaging. From IPL weekends to music festivals to these moments now form predictable demand peaks. With real-time availability, we are turning spontaneous plans into structured high-yield travel opportunities so that users can book their stay near to the venue as well in advance. Our international hotel business continues to report strong growth driven by rising air connectivity and the accelerated shift from off-line to online travel purchasing behavior. We are witnessing rapid adoption and digitization in Tier 2 and Tier 3 cities as first-time international travelers increasingly use mobile platforms to book stays, flights and activities together. We continue to increase our hotel inventory across international destinations, which are of interest for Indian travelers, recognizing the influence of food on hotel selection by Indian travelers, we enhanced our restaurants section to highlight user generated insights on breakfast, calling out Indian vegetarian options and familiar menu items, further strengthening relevance for India travelers. Our holidays package business grew in line with seasonality. We continue to strengthen our product proposition. We have launched curated packages to Vietnam with exclusive direct flights starting December 9, 2025. We have scheduled multiple flights for the upcoming winter season, as Fokko currently has no direct connectivity from India. The direct service will cut travel time from around 8 hours by connecting routes to just about 5 hours, making our air line far more accessible for Indian only holidaymakers. Indian travelers today are looking for designations that offer unique experiences, easy access and great value. For cockpits, the bill, but has remained relatively underexplored due to the lack of direct connectivity. We are making this unique destination directly accessible for Indians planning their international holidays this winter. Our homestay business continues to scale well and we'll continue to build the category and expand our homestay supply. We added over 49,000-plus rooms to the overall supply during the quarter resulting in a cumulative supply growth of about 35% year-on-year. Our aim is to build a category and solve for the consumer pain points. food availability remains one of the most frequent customer queries for alternative accommodation stays with a clear guest preference for properties offering ready meals over self cooking options. To address this, we revamp the food and dining module across both supply and consumer products. The new flow enables us to provide rich details on new availability, pricing, cuisines, variety and timings, along with cook availability and associated charges for customized means. In our bus ticketing business, we witnessed strong growth in Q2, led by strong inventory addition and with all regions growing 20% plus year-on-year. Inventory addition remained strong throughout Q2 fiscal year '26. This trend of investment in new buses, among private operators is likely to continue in the upcoming quarter as well due to increased festive demand. We expect further moyancy in new bus addition with reduction of GST for procurement of buses announced in September. During the quarter, we have onboarded Gujarat and Odisha State Transport Corporation, leading to the addition of 5,700-plus services. Our growth continues to be broad-based with all regions growing in double digits with North and Gujarat, Rajasthan growing at 40% plus in Q2. We have also launched bus booking options within our Red Rail stand-alone Android and iOS applications. We continue to strengthen our customer proposition within our trains business during the quarter. We launched the food on train feature in partnership with Zomato that's expanding on our customer convenience initiatives within the trains category. The service is now live across 130 stations and is accessible to both transacting and nontransacting users. Early results have been promising with strong conversion in our funnel engagement. Notably, a significant share of users are placing orders up to 2 hours prior to station arrival, an order span a wide range of cuisine types indicating both the flexibility and variety of selections available to customers. Our corporate travel business via both our platforms, that is myBiz and Quest2Travel is witnessing strong growth on the back of new customer acquisition our active Corporate customer count on myBiz is now over 75,500 plus compared to 59,000 customers during the same quarter last year. And for Quest2Travel, the active customer account has reached 527 corporates compared to 462 customers in the same quarter last year. Before I conclude, there is a quick reminder of key leadership role changes announced recently. After a successful stint of 14 years as group CFO, Mohit has taken on a larger role of leading business and has been elevated as Group Chief Operating Officer. In his current role, Mohit will work closely with business head and will drive the future growth agenda of the company. We also welcome Dipak Bohra, who joins us as Group CFO. Dipak is a chartered accountant, comes with 30 years of rich experience in the field of finance. Dipak joins us from Wipro, where he has handled large teams and led a variety of roles within the finance function. I wish them all the best for their new roles. With this, let me now hand over the call to Mohit for financial highlights of the quarter. Mohit Kabra: Thanks, Rajesh. Welcome onboard, Dipak and hello, everyone. The last 2 months of the previous quarter that in May and June were impacted by a series of external events and the weak sentiment for domestic air travels spilled over into the reported quarter due to continued supply constraints leading to a market degrowth of about 3% year-on-year in the domestic air market. Quarter 2, which is generally a low season quarter was also impacted by excessive rainfall, particularly in some of the North Indian states and union territories like Jammu & Kashmir, Laddakh, Himachal Pradesh, et cetera, which led to a degrowth in the 20s in these regions on a year-on-year basis during the quarter. Despite these macro conditions, we leveraged our one-stop shop approach across travel services to drive growth why accommodation other transport segments like bus ticketing to make the most of the overall bounce back travel demand during the quarter. As a result, the highlights of the quarter were hotels and packages adjusted margin growth, which accelerated from 16.3% year-on-year in Q1 to 21.6% year-on-year in constant currency during the reported quarter. Within this segment, the stand-alone hotels adjusted margin growth accelerated from 18.5% in the previous quarter to 23.1%. In the nonflight transport business, bus ticketing adjusted margin growth increased from 34.1% year-on-year in the previous quarter to 44.1% year-on-year in constant currency during this quarter. Before I get into the financial details, I would also like to call out a couple of accounting items in this quarter for a better understanding of the results that we are calling out right now. You would recall that last quarter, we had raised an additional capital of approximately $3.1 billion through a mix of primary offering of ordinary shares as well as convertible sernior notes maturing in 2030. The entire net proceeds from the offerings were used for repurchase of large shares. On the second slide, 2025, we completed the repurchase and cancellation of 34.4 million Class B shares. Out of $3.1 billion raised, about $1.4 billion were raised through 2030 zero coupon convertible notes. And while these notes have no interest costs associated with them, as per IFRS, about $1.1 billion has been recognized as debt on the balance sheet and the balance of about $319 million will be recognized as an interest cost in the P&L every quarter over the next 3 years until July 2028. As a result, $24.3 million has been recognized as interest costs during the current quarter related to the 2030 convertible notes in addition to about $4 million of finance costs, which is recognized every quarter for the 2028 notes issued earlier in 2021. Please note that this active interest cost of $28.3 million will not have any bearing on the operating profitability of the company as there is no actual interest outgo whether in cash or otherwise, as these are zero coupon convertible notes. Secondly, while our operations are predominantly in INR, our reporting currency is dollars, as a result of which there are usually translation-related ForEx gains or losses. A result of the sharp weakness in INR versus the USD during the current quarter, we have recognized the foreign currency loss of $14.3 million during the quarter. Both these items that is interest in ForEx cost of approximately $28.2 million and $14.3 million have been recorded in the finance cost line in the P&L. As a result, we reported loss for the quarter of $5.7 million compared to a profit of $17.9 million during the same quarter in the last year. However, our adjusted operating profit has registered a strong growth and has reached $44.2 million during this quarter compared to $37.5 million in the same quarter last year. Moving on to our segment results. Our air ticketing adjusted margin stood at $102.8 million, registering a year-on-year growth of 10.6% year-on-year in constant currency. In the domestic air market, we maintained our market share of about 30%. Our international air ticketing business continues to grow faster than the market in market share. Volumes in this segment grew by over 16% year-on-year, which is almost 2.5x the market growth of about 6% during the period. In the quarter, the mix of international air ticketing business has reached an all-time high of 43% compared to 37% during the same quarter last year. In the hotels and packages segment, adjusted margin growth stood at about 21.6% year-on-year in constant currency terms, resulting in adjusted margin of $105.8 million during the quarter. We have witnessed strong growth despite Q2 being a seasonally slow quarter for leisure travel. The growth for stand-alone hotels was even better by 23.1% year-on-year. The mix of international hotels and packaging revenue reached 23.4% during the quarter, up from 21.4% same quarter last year. Now bus ticketing business, adjusted margin stood at $37.7 million, registering a strong year-on-year growth of 44.1% in constant currency terms. Most of our internal services such as travel insurance, ForEx, et cetera as well as other transport services such as cabs and rails have also shown good growth during the quarter. As a result, adjusted margin from the others category came in at $20.5 million, a strong growth of 29.7% year-on-year in constant currency. Moving on to the expense side. Most expenses have come in line during the quarter. Marketing and sales promotion expense for the quarter stood at 5.2% of gross bookings compared to 5.1% in the previous quarter and 4.6% during the same quarter last year. This has been in line with our segment margins being better than both the previous quarter as well as the same quarter last year. As a result, our adjusted operating margin has actually improved from 1.66% of gross booking value during the same quarter last year to 1.8% of gross booking value during the current reported quarter. We ended the quarter with cash and cash equivalents of $835 million, translating to an increase of $31 million over the previous quarter. We will continue to look for organic and inorganic investment opportunities through the year. Looking ahead, while the growth in domestic air ticketing is marked by short-term supply side challenges, we believe the GST benefits have come in at a very appropriate time, a reduction in rates for procurement of new buses as well as reduction in GST for hotel stays up to a price point of 47,500 will help reform the travel demand -- for the demand for travel services after a muted first quarter. These measures are expected to boost demand, particularly in the value sensitive segments, supporting volume growth and market penetration in key regions, including Tier 2 and Tier 3 cities. With our omni-channel platform strategy across retail, B2B and corporates and the increasing supply of services being contracted across the length and breadth of the country, we remain focused on driving growth ahead of the industry. To conclude, our diversified portfolio, execution capabilities and optional discipline continue to push on as well for sustained long-term growth and value creation. With that, I'd like to turn the call back to Vipul for Q&A. Vipul Garg: Thanks, Mohit. [Operator Instructions] The first question comes from the line of Sachin Salgaonkar of Bank of America. Sachin Salgaonkar: Can you hear me? Vipul Garg: Yes, go ahead. Sachin Salgaonkar: I have 3 questions. First question is on the air capacity issue basis. Our understanding, it looks like most of the Air India planes are back and not all Indigo planes are back. So just wanted to understand where are we on the air capacity issue? And how should we expect demand going ahead, particularly for the December quarter? Rajesh Magow: Yes. Maybe I can take that, Sachin. So as I think it was there in my script, I was reading out. So in the current quarter, what is expected is that as far as domestic air market is concerned, that the daily departures will get back to about 3,200 plus, which is similar to the same period last year. That is as far as domestic. Now this data is obviously -- this is the -- it's quite informed data this basis, the inputs that we have from the we have from the airlines, which I think it's a good start. Ideally, obviously, we wanted it to grow, but as you know, this quarter, there was a dip 2, 3 percentage points. But now if it gets back to the same level, it's a decent start, and this is also -- it is because of the -- because of what you mentioned, right? So some planes are coming back and the others are coming back slowly. But very interestingly, worth also mentioning is that this is as far as domestic air market is concerned, but for international air in this quarter as compared to the same quarter last year, the number of departures actually went up about 30 departures daily departures went up. And out of that, the two main noticeable countries where it went up significantly was actually Thailand and UA, which are effectively the sweet spot for us and also for the overall Indian travel market for outbound. So as far as international is concerned, it's doing well. It's back. As far as domestic is concerned, constraints still remains, hoping it will lift soon. Sachin Salgaonkar: Very clear. And there are 2 parts elements going into the December quarter, right? One, what you highlighted right now, which is not the entire supply is up, but on the second hand, we are actually seeing benefits coming from a GST perspective. I would love to understand from you actually, are these because on the face of it, clearly, you should see GST benefits. But in terms of advanced booking and others, are we seeing this December turning out to be slightly better as compared to, let's say, December last year, purely on the back of more money in the hands of consumers? Rajesh Magow: Yes, I would say, Sachin, I think it's a decent start, but in all fairness for our category, specifically for travel, while for the other nontravel categories, a lot of the shopping and the consumption picks up before Diwali. For travel, it picks up actually after Diwali. And therefore, we will have to just wait and watch for a little bit more time. But early signs are clearly there. Like I think we should just look at this overall consumption both story, mostly looking at an overall GST reduction that has been announced sort of across the categories, which effectively put small money into your pockets. And that coupled with the fact that there is more desire to travel. I'm quite optimistic that travel as a category will also benefit out of this overall sort of GST reduction and more disposable income in consumers hands. Mohit Kabra: Sachin, let me just add, as you know, the advanced purchase window, particularly in India on travel is not very high. And as a result, it's kind of a bit more bookings, which happened in the last week or so ahead of scheduled travel. And therefore, it's kind of slightly difficult to call out in terms of future bookings in our kind of a market. But like Rajesh called out, it's a very positive development. And if you look at it from an Indian traveler point of view, our kind of average ASP on the hotel accommodations tends to be below the 7,500 kind of price point on which the GST reduction has been announced. So therefore, this will actually benefit bulk of the bookings. So to that extent, it should be a very positive development on driving kind of travel demand overall in the coming quarters. Sachin Salgaonkar: Very clear. Second question, marketing expenses clearly increased and moved to 5.2% as a percentage of gross bookings. I just wanted to confirm that this is mainly on the back of a slower consumer spend and less to do with competitive intensity. Is that a fair observation? . Rajesh Magow: See, I'll just call out that if you -- it's also got to kind of look at the overall marketing and sales conversion spending in tandem with our kind of segment margins. And like I called out across the Board, across segments, we have actually seen margins strengthening and particularly in weaker seasonality like Q2, this tends to happen. And both on a quarter-on-quarter basis as well as a year-on-year basis, we have actually improved margins and therefore, to some extent, that's also been kind of -- that's also got deployed. But with the improved mix across segments and the improved margins across segments, this actually is kind of pretty much in line in terms of the call out that we had made. Sachin Salgaonkar: Got it. And then on this -- the improvement in margin, is it seasonal? And should it normalize going ahead? Or we should see the take rate improvement continuing both that they had and hotels going ahead? . Mohit Kabra: To some extent, it remains seasonal because depending upon high and low seasonality, there is, at times, a little bit of a variation. And then all the more so in the current fiscal year because like we have been talking, the mix of air has been reducing. I mean for unwanted reasons because the overall market is supply constrained and here is the least kind of margin in terms of segmental margins per se. Therefore, overall margins have only improved, right? And that is something that we kind of taken care of. Going forward, if fair rebounces, the blended margin might kind of go down a little bit, but across categories, we still kind of expect margins to remain largely in line with what they have been. Sachin Salgaonkar: Yes. Got it. Third question on buyback. I just wanted to understand whether you guys have repurchased any stock in this quarter. And I know historically, you guys said that there is a thought process to opportunistically look to buy back. So I was looking to understand any buyback happened in this quarter? Mohit Kabra: So Sachin, nothing that has happened through the quarter as would have got reported and therefore, we called out that we've not kind of been able to do any buybacks in the current quarter. But we made certain changes to the buyback program. One, we've kind of now made it slightly more longer term kind of extending the buyback program up to fiscal year ending 31st March 2030, so that we have a window over for the next 4.5 years. The current buyback program had a balance left of over $114 million. We've increased that to $200 million and also increase the annual limit, which was earlier about $60 million or so to about $100 million, so that we can deploy a little more on the buyback program. And we've also included the the 2030 notes, the recently issued convertible notes mature in 2030 in the program so that we could kind of also buy back the CPs, which were recently issued. So making it more comprehensive across the -- across shares as well as both the convertible note offerings, which we have done in the past. So that's what I wanted to share. So I think we'll keep looking for opportunistic buybacks across shares and notes in the remainder part of the year. Sachin Salgaonkar: And Mohit, just to clarify, is it across both Class A and Class B shares? Are you at some point in the future if you want to buy C strip shares, this could be done as a part of this buyback? Mohit Kabra: Actually, since the Class B shares handled by one investor and the strategic investor. We have not included that, so that there is absolute clarity that we're looking at repurchase program deployment in the normal course happening for Class A or for the convertible notes. Should we be kind of doing any repurchase programs on the Class B shares, we'll call it out specifically in that particular period, just like we did it in the previous quarter. Sachin Salgaonkar: Got it. And lastly, obviously, with this incremental $43 million kind of a finance cost going ahead as well, from a positive net income. Is it fair to say that going ahead, we should see sort of a negative net income, although your free cash flow doesn't change. But optically, you do see a sort of a negative net income at the company going ahead also? . Rajesh Magow: No, absolutely. And therefore, I had called out the nuance around this. And as you know, these are actually zero coupon bonds. So it's more kind of in a manner of so notional interest cost, which is kind of being charged to the P&L, basis the effective interest methodology under IFRS. But as such, there is no real interest being paid whether in cash or in any other form. So I just wanted to call that out. Vipul Garg: Next question is from the line of Manish Adukia from Goldman Sachs. Manish Adukia: So my first question is on the overall growth profile of the business now. 1/4 of your business is from the domestic air in terms of revenue contribution, and that's not growing at all for almost 2 quarters in a row. But despite that, you have 20% overall revenue growth because other segments are doing well. Now when we think about medium to long-term growth outlook, where you said Indian market grows 8% to 10% and you can go 2x you're already in line with the medium, long-term growth outlook. But as domestic air improves, shouldn't we expect that the 20% revenue growth number further accelerates from here? Or you think that the bus segment, et cetera, outbound may decelerate from the current base, so even though domestic air may improve overall growth on revenues for the company probably remains around 20% level. So just wanted to get your puts and takes around that debate. . Rajesh Magow: Happy Diwali, Manish as well. And great question. And I think one of the advantage is that we kind of keep calling out for ourselves is that we are a one-stop shop in terms of travel services or ancillary services. And what that allows us is just in days, there is kind of weakness in any particular segment, there is an ability to try and drive incremental growth through the other segments. And similarly, if you look at it on the demand side also, having kind of multiple platforms are getting, say, across retail, B2B and corporate kind of demand, there's opportunity to kind of leverage is demand segment depending upon whether there is weakness in any of them and therefore, dial up the other ones. So I think we'll continue to do that. Hopefully, if you really see, despite these tough macro conditions, we've still been able to kind of post the -- post growth in the 20s. And therefore, like we had mentioned in the last quarter also, we do remain positive and hopeful that we'll be growing in the 20s for the full fiscal year despite the the one-offs for the first half of the year. And hopefully, if we kind of air kind of domestic air in particular bounces back, we hope that we are able to inch up the overall growth from being at the low end of 20s to kind of being more closer to the mid-end of the '20s. So let's see. It's very difficult to call out how each of the segments will kind of behave whether on the supply side or the demand side, but yes, the overall strategy is to kind of keep driving growth in the 20s in medium to long term. Manish Adukia: Sure. And maybe a follow-up on that. I think you're seeing growth in the 20s for the full fiscal year and to confirm is, despite the fact that March quarter should have a very strong base because of Kumbh last year, which would have impacted almost all your segments quite positively. So despite that, for the full year, Q1 19%, Q2, 20% and you're saying overall full fiscal still should end up 20% despite this, just to confirm. . Rajesh Magow: Absolutely, Manish. And I know there are these kind of one-offs that we had in the previous quarter on the positive side, and we have had a few negative kind of one-offs in this year, particularly in H1, but we are still keeping fingers crossed and hoping that we'll kind of continue to grow in the -- to grow in the 20s. Manish Adukia: Right. My second question is on competition and at an overall level, right? I mean, used to be your largest shareholder until a few years ago, and now they have acquired a significant minority stake in one of your competitors, and at least a publicly available data on n bus volumes, of course, of a low base, they seem to have grown faster than you over the last 3 or 4 quarters. So anything to read into that? And how should we think about any new entrants ability to also maybe expand into the hotel segment and potential competitive intensity in that going forward? Your thoughts there would be helpful. . Mohit Kabra: Couple of thoughts over there. One, overall, I would say it's always good to see increasing industrial investments in the travel industry as such, right? So it's a welcome sign. In fact, if you look at it from a -- from our own kind of vantage point of view, just last quarter, we had almost done like a $3.1 billion transaction, but that was essentially to kind of repurchase Class B shares, right? And while we are initially budgeted to deploy at close to about $100 million from the balance sheet, but we didn't have to do this and we have the significant interest that we saw on the primary offerings to fund the repurchase. So I think clearly, there is increasing interest in the overall travel industry. And if you look at it, overall, India, again, is a very kind of a very large market growing well and then there is also kind of an opportunity for driving online penetration. Although I would say that the segments which kind of, I would say, initially of online penetration have changed. So 10 years back, it might have been more accommodation, which was maybe in the early single digits of online penetration. And therefore, same competitive intensity growing much higher in that segment about a decade back. But today, those segments have changed. And if you know, as we have been calling out, we have ourselves been pretty aggressive in terms of driving online penetration, adding a lot more new segments and new travel services, ancillary services on the platform. So I don't really see any big concern. And the other fact is also that over the last few years, if you look at it, we have continuously invested behind driving online penetration across segments, whether it is transport, whether it is accommodation or whether it is other ancillary travel services, we have been doing that on a consistent basis. And whenever any other players in the market have also done that, we have generally ended up gaining on account of the overall expense because ultimately, these are category driving spend. And as a market leader, you tend to gain if the overall kind of investments in driving online penetration goes up. So we think of it more on those terms and remain pretty much kind of stay on course on our own -- driving our own agenda, which is largely to say that we keep driving growth much ahead of the industry growth at a significant multiple and we continue to be market leader across kind of travel segments, whether it is transport, whether it is accommodation or ancillary services, making sure that both MakeMyTrip and Goibibo, they remain the top to OTA brands and redBus remains pretty much the top ground transport brand for all Indian travelers. So that's the broader kind of response that I would have. We don't see much of change. Rajesh Magow: No, I think you've covered it all. I'll maybe just add one more point. Manish, if you go back in history a little bit and go deeper, you would realize that the share shift, I mean, firstly, the investments have come in. It's not for the first time investment has not come in the travel and tourism market and specifically in the OTA segment have come in the past. Disruptive investments have also gone in the past. But if you really see from an OTA standpoint, you would see at least an Indian OTA market. The share shift has happened in the say between the existing players and the new or challenges that sometimes appears and not necessarily, we've seen impact on either the growth rate or the market share gain over the years. And that's because of the fact that, one, of course, we will have to continuously keep executing our strategy as well and keep innovating for consumer experience all the time. But also the fact that over the years that the brand is -- and in the consumers' mind, all our 3 brands have got established very, very firmly and which obviously gives you sort of the benefit from a sort of dealing with any of the new competition perspective, et cetera, as well. So I think we should just keep that thing also in mind I guess, both the points. One, that this is not the first time investment when investment comes in overall market grows, which is good news. And then historically, if you really go deeper, you would realize that the share shift has happened pretty much if at all, within the sort of existing players and the newcomers and then that cumulatively, it doesn't really change too much. Vipul Garg: The next question is from the line of Aditya Suresh of Macquarie. Aditya Suresh: I have two questions. So first is just on the guidance in itself. So when we speak about 20%, can you just reiterate again at what line are you speaking about it on account terms, gross working adjusted revenue, overall revenue because I think there are distinctly different kind of dynamics, which are at play, depending on which trend you're looking at because even if I look at overall gross bookings, we're now the first 6 months, sub-10%, right? So can you sort of clarify that the guidance in itself, when you speak about 20%, what you're specifically referring to? . Mohit Kabra: Yes, Aditya, while there is no -- I mean we don't necessarily kind of going to put out a guidance, but more directionally, how are we kind of seeing growth coming in. And that's in terms of the adjusted margin that we report. So if you look at through the script also, we have called out the adjusted margin growth, and it's slightly on that metric that we kind of are going to look at it. And the simple reason being adjusted margin is kind of the number, which is kind of called out in line with how kind of OTA revenues are looked worldwide across segments because we do have some segments where we report on a gross basis, say, for instance, on the package side. And similarly, we do have kind of a certain amount of customer equation spends, which are otherwise can be treated as deductions from revenue from an IFRS basis point of view. So it is an adjusted margin basis that we are calling out. And if you look at it, adjusted margin across segments, then this is broadly the trajectory that we're kind of looking at. Now this might come in in terms of different adjusted margin growth across segments. But holistically, all the segments put together is where we are kind of looking at remaining in the 20s. Aditya Suresh: And then just specifically on hotels, right? So for this quarter, when I look at this in account terms, your number of bookings up 80% gross booking value was up 13%. IFRS 7 is up 5%, right? And I appreciate there are kind of foreign currency impacts here going on as well in that 5% revenue number that you're reporting. But clearly, there seems to be both as you're seeing more bookings, yes, but the value per booking is going down and also the take rate on that said booking is also going down, right? So can you like speak through that theme which you're observing? Mohit Kabra: Actually, not Aditya, maybe I'll just kind of give you once again, as I called out in the script also there's a lot of foreign currency translation impact, particularly in this quarter. Actually, the adjusted margin growth in our stand-alone hotels business, we just called out is at about 23.1% in the current quarter. And, it ended up significantly from the previous quarter, during which it was at about 18.5%. So the adjusted margin growth has come in much stronger and generally tends to come in better than the overall volume growth. Now this does change depending upon how the ASPs are behaving and how the overall kind of margin is trending in the category. This particular quarter, actually, even from a margin point of view, we saw a margin improvement coming through both on a quarter-on-quarter basis as well as on a year-on-year basis. So actually, it's held pretty well. And therefore, maybe I'll just guide you back to those sections of the script that I just called out just from a clarification point of view. Aditya Suresh: Okay. And then in terms of the ancillary business, right, so here, obviously, kind of higher take rate segments also forth. You've had a few new product launches in this quarter. So for example, something like experiences in city, which I think is new for you all have a Visa offering as well. Can you maybe speak about some of these new kind of revenue streams within ancillary services? Mohit Kabra: Actually, on the ancillary side or the other segment, if you look at it over the last couple of years, we are continuously guiding a variety of ancillary services. So I started with, say, maybe ForEx like about 3 years back, we've dialed up in the city over the last 2 years or so, we have now also kind of in this particular year, we had called out specifically that we would be kind of focusing on adding a lot of tools and activities on the experience side as part of the other segment. So yes, we'll continue to keep adding a lot more on this segment even going forward as well. So -- and you'll see that kind of called out. In fact, I had also -- in my script kind of called out that almost all the ancillary services, whether it is travel, insurance or ForEx, et cetera, have done well. And there are 2 kind of transport-led services in the other segment, which is largely cabs and more so intercity cabs and rails, which also have grown very well during the quarter. So the overall growth in the other category this quarter came in at about 29.7%. So broadly around the 30% mark. So continues to do very well. Vipul Garg: The next question is from the line of Gaurav Rateria of Morgan Stanley. Gaurav Rateria: Congrats on resilient performance in a tough macro environment. My first question is on your comment that you made that you would like MakeMyTrip to be the default search engine for travel. It's a pretty interesting comment. And also, you shared quite a bit of interesting metric around your engagement in the AI assistant. When I look at the measure of success over time, I thought that it would be the overall traffic increasing base of new customer acquisition improving and better repeat rates. When you look at some of the early trends, how have these metrics fair? Rajesh Magow: A very good point. And thank you, firstly, and happy Diwali to you too as well. And Gaurav, I have to say upfront, and like I said, right, it's beta launch and the insights are very encouraging. And right now, the phase is only to collect insights and see how do we sort of do 2 things. One, keep fine-tuning the product and keep improving the interaction so that the experience for the end consumer is very relevant, very personalized, very to the context, et cetera. . And the other is to also keep track and see how are they adopting to this new interface, specifically this Myra end-to-end, let's say, trip-planning tool that we were talking about. And the comment around we want MakeMyTrip to be the first port of call has always been there. But even in this new interface, more from trip planning perspective. So we've been perhaps the first port of call for the transactions, but also for the trip planning is our attempt the time around with this new interface. And I think it has a lot of sort of promise that it offers, and we'll see how it goes. But in terms of the success metrics that you talked about, ultimately, those are the 2 metrics that you just called out. We will see new user acquisition because we are looking at going really deeper and pushing the adoption through voice feature as well as vernacular. And as I mentioned, right now, Hindi and a lot of the English conversations happening, but we are looking at adding more regional conversations. And this time around, as we hear some of the quality of the calls and the handling by the -- by Myra, which is a digital agent it's very, very close to or even in some cases, better to the human agent. So the LLM, this time around various models. And on top of that, the amount of work that happens with our own data to fine-tune with the grounding internally is producing fantastic results. in terms of just interaction with the consumer, even if you are like from hinterland and so on, right? So there is a lot of promise right now. but the consumer adoption journey is going to take time as it takes time for every new interface. And we will see how it goes. And as and when, like we shared some early trends already, as and when we see some meaningful impact happening on this particular new interface that we launched, we will definitely come out and share -- having said that, if you keep this aside for a minute, because this is a new -- completely new interface that has been launched, very enhanced. There are many other places where we've been leveraging AI. And there, we have started seeing the impact. We've started seeing the impact, for example, in post sales already the number of calls that are being now handled seamlessly without any human intervention, it's going up. This is over and above the current sort of automated self-serves that we already had. There are -- there is a conversion improvement that we've seen in specifically in the hotels and accommodation side with the many AI-powered features using, let's say, enhanced videos, using video LLM, et cetera, and many other interventions with which have been -- what we've been doing in our current interface that is already there in the funnel. And that has seen very minutely we go and look at whether the conversion rate, all literally on an AB framework that we've seen improvement. And it is only going to sort of continuously keep improving as we sort of not only make the right kind of interventions, but also make it a lot more relevant and a lot more sort of to the context to the consumers. So -- but on this particular one, we'll come back as and when we have more data on impact metrics, as you spoke about. Gaurav Rateria: My second question is for Mohit. You've shared in the past profitability benchmark that you look to aspire, you've already reached that 1.8%. You had talked about 1.8% to 2% range. So in pursuit of balancing growth and profitability, how should we think about next 1 to 3 years in terms of this range, meaning what you said already? Or do you think there could be an upside to this range because you have already gotten to 1.8% in the current year? . Mohit Kabra: Yes, Gaurav, at least to begin with right now, like we've been saying, we do believe there is an opportunity to kind of dial up growth, particularly as say for instance, the domestic air ticketing district kind of bounces back to good growth. So that's something that we want to kind of keep in mind. And therefore, if you would ask me, at least in the shorter term, the focus would be a lot more will tilt towards kind of driving the growth agenda because even at 1.8%, like we have always called out, one of the rationales 1.8% to 2% was that even benchmark with the best-in-class in terms of the OTA margins globally with our kind of mix of segments between transport and accommodation with accommodation at about 40% ballpark. We do believe we'll compare with the best. However, longer term, like when you say the next 3 years or so, over the next 3 years, particularly if the mix of accommodation, goes up in the overall adjusted margin pie, which is expected to, then I don't see a reason why we should not have the potential to kind of put out a slightly better number than what we've already called out. But let's see. In the next few years should be an interesting journey on that count. . Vipul Garg: We've almost run out of time. This was the last question over to you, Rajesh, for your closing comments. Rajesh Magow: Thank you. Thank you, Vipul, and thank you, everyone, once again. Thank you for your patience and good line of questioning. As always, we look forward to see you next quarter. Thank you. . Mohit Kabra: Thank you, everyone. Vipul Garg: Thank you, everyone.

201天前Insight Analytics约5分钟阅读

ELPKF 2025 Q3 财报电话会议

Erica Binde Honningsvag: Good morning, everyone, and welcome to the third Quarter 2025 Results Presentation for Elopak. My name is Erica Honningsvag, and I'm the Investor Relations and Treasury Officer. Today's presentation will be held by our CEO, Thomas Kormendi; and our CFO, Bent Axelsen and will last for about 30 minutes, followed by a Q&A session, where the people here in the audience and the people watching online will be able to ask questions. So with that introduction, I will hand it over to our CEO, Thomas Kormendi. Thomas Kormendi: Thank you, Erica, and good morning to all of you here in Oslo. It's actually lovely to see such a filled room here today. And also, of course, a very warm welcome to everyone joining us on the webcast. Today, we are particularly happy actually to present the best ever financial result for the group to date. So it's a presentation with quite a few milestones, and we are very, very excited to present. Before we start on the quarter, of course, just for those of you who are not so familiar with Elopak, what we do is, we are in sustainable packaging. What we do is, we protect commodities, we enable nutrition around the world, and we do all of that with a mission of actually reducing the overall plastics consumption. So replacing more and more plastics with more and more carton packaging. But let's then look at the quarter, and it's been quite a unique quarter, as I said. First of all, we have seen a plus EUR 49 million EBITDA result with more than -- with 17% margin level. It's a very strong result in absolute terms, and it's also within organic revenue growth of 1.2%. Most of the revenue -- most of the result is driven by an incredible strong performance. Again, I have to say, in Americas with 18% growth, and also in a period where our plant in Little Rock, actually for the first quarter, started turning a profit, as we said that it would do actually after Q2 as well. It's also a quarter where we -- and I will address that more later in the presentation, have decided to increase the capacity ahead of time in U.S. with yet another line. So the third line to be installed and also now a quarter where we say that even though the EMEA business is meeting some consumption headwind generally, we are seeing that the business is resilient and doing well -- in spite of all of this. And finally and very importantly, I'm sure for many in this room here as well, this is a quarter where we have a solid cash generation. We've been able to pay back our net debt and are now facing a 2.1x leverage ratio, again, in line with -- almost in line with the midterm target. So overall, strong financial performance in the quarter and some very important milestones for the future growth of Elopak. Let's just think 2 minutes on the strategy that we presented back at the Capital Markets Day, and that we've been following up since and where you see that the quarterly result we have now is a direct result of the activities we have initiated throughout this period and on the back of the strategy. Our strategy consists of 3 elements: number 1 relates to the geographical, what we call global growth. For us, global growth for a very, very, very big part relates to America and the continued development in America. Needless to say, performance in America and what I've just shown is a testament that, that is actually paying off. The second one relates to the development around making our core stronger. And our core in Europe, where we have a significant part of our business, also relates to development, innovation around new materials in line with and meeting the regulations upcoming in EU such as the packaging and packaging waste regulation. A lot of the work in that field is directly transferable into the overall ambition we have in replacing plastics, what we call plastics to carton. This is a massive area way outside our current business but in adjacent areas, but also in the actual substrate shifts happening in our business, i.e., if you think of it, the milk currently packed in plastics moving into cartons, et cetera. But the potential, of course, is way, way, way beyond that. Now starting with number 1 and the geographical expansion, let's just turn and think about Americas, again, because it has been quite a journey for us. We -- as some of you remember and seen is, we decided back in '23 to establish a new plant in U.S. And that is on the back of a position we've had in U.S. for -- actually for 20 years. we came to North America in 2000, yes, and supplied North America with plants in Canada, our big Montreal plant and also the plants in Mexico and the Caribbean. In '23, we decided we need plant inside U.S. and then we established the plant -- decided to establish a plant in Arkansas, Little Rock. In September of the same year, we announced that we are going to put in another line in that plant because we saw increasing demand around our supply, our services, our packaging offerings and generally an opportunity in the market. In April of this year, we had the inauguration of the plant. The plant, I can happily say was built, constructed and made in time and on budget and has been up and running ever since and we are ramping up. And as you have heard earlier, we are now seeing the fruits with the plant turning a profitable business already here in Q3. So the demand actually in America is very clear. And if you think of it, we have been growing since 2020 on an average 15% a year. That's a 76% actually the growth in the Americas business in a market, in a stable, mature category such as milk and juice. So we have seen that there is a demand for what our services and for that reason, we have also taken the step now to announce the decision that we are going to build, extend our capacity with the third line in Little Rock, allowing us to drive our market share, continue to -- on the growth pattern we've been on, allowing us to establish a much broader portfolio than we had before, simply given that as equipment gets to the manufacturing plant, gets more and more full with existing orders, we need to have a broader setup to be able to offer a broader portfolio. And that is what we're going to do with the third line. So what is very fundamental is that with this third line that we're actually putting in place somewhere a year ahead of what we had originally thought. But with this, we confirm again that we will reach our targets as presented on the CMD back in '24, the midterm target as well as the long-term target. This will enable us to drive as I said, increase our value share -- our share of wallet with a number of our customers as well as increasing our market share in general in America. Because of the product mix, though, in America, which is in the third line, will be primarily focusing on smaller size packs, including anywhere from school milk size and upwards. For our large customers in the U.S., they always have a mixed portfolio in their sales, i.e., from very small ones to the larger half gallon sizes. For us, establishing a third line, enables us to get a higher share of wallet with them, supplying them the full portfolio and hence become a better and more valuable supplier to the industry and to our customers in general. So although we have a run rate because of the product mix on the third line, which is different than what we have announced on the first line. We're also going to see that with this, it's accretive to the group, and it's certainly very, very strongly supporting the group's industrial presence in America. It would also mean that we will have a higher level of flexibility in how we run operations in America. We will have a higher level of operations with line 2. And 3, which will allow us to ramp up line 2 at a faster pace because of line 3 than without line 3. And that has to do with product mix and how you move products and sizes, et cetera. Very important is, we are building line 3 because we have the commitment, full commitment on that line from customers in U.S. So the line 3 acts both as an industrial strategic investment, it has the full backing of customers, and it is definitely accretive to the group, and will strengthen our overall position in U.S. Now back to our results. And as you will see, we have a revenue that is down, but on -- due to the currency effect in U.S., on an organic level, we are up by 1.2% and up by around 2% for the full year. EBITDA wise, we have a strong performance, which is both in the quarter and of course, in the year, but in the quarter very strongly driven by the development in U.S. And remember, we have a negative currency effect that we'll address later in this period. All in all, we are heading now at 17%. And for those of you who recall our Capital Markets Day targets, we did say 15% to 17% midterm target. So it's -- it's a very healthy level for us to be at in this period here. There is a one-off though, which has to be set in EMEA of around EUR 1.5 million, which is also part of why we get a positive one-off -- of EUR 1.5 million. With this, as I said, this is actually the highest EBITDA we've had to date, and we are very excited with what that brings to the future. So with this, I think I'm going to hand over to you, Bent, on the financials. Bent K. Axelsen: Thank you, Thomas, from financials to more financials, which is fun today. Let's jump straight to it with EMEA. What we can see here is that we are delivering a revenue of EUR 206 million, which is 5% down compared to last year. But if we analyze the performance, the underlying performance, we can say that we do have a resilient performance despite continued soft consumption. Now why is that? If we look at our Pure-Pak revenues, they are stable year-over-year. So what we are seeing despite the soft consumption, we are continuing to increase market share. Specifically for this quarter, we are regaining our business in MENA as fresh dairy is strengthening in that region. And in the -- for the aseptic business, we are growing by taking market share and basically growing with our customers. If you look at the key contributor to the revenue decline, it's actually related to filling machines. We are commissioning around the same number of machines this quarter compared to last year, but the machines are smaller. So we have a negative mix effect. That actually explains around 60% of the revenue decline. So if you move on, we -- as we have reported before, we still observe a competition in the Roll Fed segment, and that is happening both in Europe and in India. In Europe, it plays out through lower volumes, albeit at -- the pace has slowed down. So we see a positive development in the Roll Fed area because we see that the trend is slowing down. In India, it plays out with a margin squeeze because it's a crowded place. We are growing organically 19% in India with our Roll Fed business. When it comes to profitability, we are reporting 36.7%, that is up 2% compared to last year. That comes from improved pricing and improved mix in Pure-Pak. And we also have this switch from Pure-Pak to Roll Fed, which is also contributing to the positive mix. And Thomas already mentioned the one-off, which is in Europe, which has also impacted these results by -- positively by EUR 1.5 million. So in conclusion for EMEA, resilient performance despite continued soft consumption. Over to America, the growth journey continues with a revenue growth of 11% or 18% on a fixed currency basis. So we are still seeing the interest and the demand in our products. So the growth is in revenue, is volume, carton and closures, and it's enabled by two things. Obviously, we have the ramp-up in the U.S., but we're also seeing improved productivity in the assets in Canada and in combination that is then enabling this growth. Also in America, we have a negative revenue impact in regards to filling machine. So it's the same explanation here. We have a mix effect. In this quarter, we have commissioned school milk machines, and they are smaller in size and also then smaller in revenues. If we move to the EBITDA, we see a very strong growth of the EBITDA, 21% growth of the EBITDA up to EUR 21 million with a margin of 24%. In addition to the top line growth itself, we have positive mix effects but we also do see the benefit of improved asset utilization, and we are leveraging our fixed cost base. It's also -- of course, as Thomas mentioned, very proud that this is the first quarter with positive EBITDA in Little Rock, a milestone for us. We are very, very pleased with that. The ramp-up continues, and it's obviously better than last quarter. But we obviously would have liked to see even faster ramp-up than what we have seen. When it comes to the joint ventures, we have an EBITDA or a share of net income of EUR 1.4 million. That is actually a decline from EUR 2.1 million and the explanation for that is a softer demand and a change in consumption habits. But overall, the key message is that we do have improved that utilization that enables growth in America. Let's take the group perspective and start with the net revenue mix. So this is EUR 7.4 million, and that is mainly driven by: one, the growth in America and the positive mix and pricing effects in EMEA. When it comes to raw material, this is again where we have the one-off, which is positive. And then we have a negative effect of EUR 0.6 million for the underlying raw materials. That comes from board price increases, all the price increases, even though the PE has softened year-over-year. Our operating costs are mainly explained by salary inflation of 3%. And also the ramp-up in Little Rock, which also is affecting the operating cost level somewhat naturally. The rest of the fixed cost base in the company remains rather stable. The last bridge element, we have already mentioned joint ventures and the FX, which also Thomas talked about, that is the result of the 6% weakening of the dollar versus the euro on an average year-over-year basis, leading to the 70%, which is on par with the best we have done. Let's move to the cash flow. It's probably the most exciting part of the financial this time because we also are not only reporting record profitability, but we are also reporting record cash flow generations -- sorry, cash flow generation from operations. The cash flow from operation is EUR 55 million. It's not only driven by the profitability but also driven by the improvement in working capital. This element is, to a large extent, driven by timing of accounts payables, that can go up and down between quarters. It was quite low last quarter, and then it's higher. So this could vary a little bit up and down, important to notice, but we also have an underlying improvement of our inventory in Europe from our working capital project. Also here, we are seeing the ramp-up effect of Little Rock. We are also building working capital, obviously, as a part of growing the top line in the U.S. Our cash flow from invested -- investing activities is EUR 11.5 million. We are still having EUR 2.4 million in investment in Little Rock in this quarter. The rest is our replacement program in Europe. While filling machine investments are lower than last year because most of the projects are sales rather than lease and then it doesn't impact the investment line. Cash flow from financing activities is also EUR 11.5 million, nothing special there, which brings us to a net debt of EUR 272 million, so which means that the cash bank debt has reduced EUR 31 million quarter-over-quarter, which we regard as a rather solid. With this cash flow generation, we are deleveraging the company. As Thomas said, we are bringing the leverage ratio very close to our midterm target of 2x. This comes from not only the payment of the debt, but we also have improved the LTM EBITDA by EUR 3 million. And the good thing with that, it enables future investment in our strategic initiatives and it allows us to continue to pay healthy dividends. And if you check your bank accounts, yesterday, you received dividends in total, EUR 21.5 million. This comes from the second installment of 2024 and also from the first half result of 2025 as we are in this transition year from annual dividend payments to semi -- to 2 payments per year. If you look at the right-hand side, it's a little bit difficult to see, but the curve is going upwards on ROCE. So we finally are seeing improvement of our return on capital employed, as we have talked about in earlier quarters. And that is coming from the fact that we are finally making profit from our Little Rock investments with the capital that we already have installed there. We have so far invested $86 million in Little Rock. We have $42 million to go, and we expect that around $6 million of those will come this year in Q4. So in summary, the financial position is really strong. And we are continuing to leverage the company despite the investment program. So this concludes the financial section, which was actually quite great to present. Thomas Kormendi: Thank you, Bent. Good, you liked it. So finally, as you can sense, we are really happy to report to the highest -- and I would change that into the best financials yet for the company. It's EBITDA, as you saw, but it's also the cash generation that we have succeeded with in the period. And it's also a period where we are reaffirming our strategy. We are confirming the strategy we are now putting in and deciding on the third line, really it's putting a strong footprint in the U.S. and in the Americas in general, North Americas. . We are also seeing EMEA despite these headwinds that we have talked about that we're actually seeing very solid developments in big parts of EMEA, not the least in South, not the least in MENA that gives us the confidence that we're also here on the right track, and we'll continue to develop the business in line with the plans we've outlined in the Capital Markets Day. So all in all, what we are now saying is we expect to deliver within our mid-term targets as you know, which is 4% to 6% organic growth and 15% to 17% on the margin side for the year. And with this, I think we're going to hand over to questions. Erica Binde Honningsvag: Thank you, Thomas. Thank you, Bent, for the presentation. So we will now open up the floor for questions, starting with the audience here first. [Operator Instructions] Marcus Gavelli: Marcus Gavelli, Pareto. So you have previously said that line 2 will be fully ramped up in H1, '26. At the presentation today, you said that line 3 will coincide with line 2. Could you try to provide some color on what you really meant by that because I assume that line 2 is still on track, and line 3 will come a bit later. Bent K. Axelsen: I just want to clarify that we will open line 2 in H1, '26, not ramp up. Thomas Kormendi: Yes, we would ramp -- what we said then was we are going to ramp up during '26, right? It's not that in -- that we are fully done. As we have said, we're going to install line 2 and start ramping up during next year. Thank you. So why are we saying that the two actually help each other? Well, it is like this, right? If you look at the industry and the -- I don't think in a way, the dairy industry is way different than many other industries, our big customers have a variety of sizes, formats, and evidently, we look at their supply -- suppliers, one of which is us to say, can you supply us with a broad set of formats in order for us to essentially become -- in order just to close a partnership with you. And the close partnership in our industry is really, really important because you know we have very long tenures generally in the industry. The closer we work with someone, the better we can develop it and the longer performance we can actually secure for our customers. So with this move, we ensure that we can use our line 2. On some formats, that would not have been possible had we not had line 3 to complement that. And from a customer point of view, they would then have said, it's difficult for us to move volume into you unless you can also do some other formats. That is the simple -- so it's a little bit opaque when I put it like this, but it is actually what it is. Marcus Gavelli: That's perfect. And then also with what you said in MENA with the volume growth commencing again, could you again try to provide some color on -- is that more of a one-off? Are you seeing some sea change over there? And then also how you think about, I guess, growth into Europe with price increases and so on. Thomas Kormendi: I think sea change is probably overdoing it. But I'm very optimistic around MENA, honestly. And it is what it is. It's a sensitive economy, right? So consumption is impacted by ups and downs, clearly, but the underlying business for us is the strategic direction we have is add more value to our customers in MENA by adding ESL, longer shelf lives, which drives down their cost, improves the performance of the products in shelf, have a better product with a better looking product on shelf, et cetera. And that is actually why we are seeing that we can gain business and are gaining business. Now the business we are gaining is not necessarily the business you see right now in this quarter because, as I say, there are ups and downs. But why I'm saying I'm positive is because underlyingly, we are moving in the right direction. And then what we have seen in previous quarters, a little bit how Ramadan falls and inventory builds up, et cetera. So in a way, I wouldn't put too much focus just on a quarter when it comes to MENA, much more is the underlying business moving in the right direction, and it is. Bent K. Axelsen: And also technically speaking, I think the quarter last year was relatively soft. So part of that is also a rebound, but it's really, as I must say, we need to look into a longer perspective to really get insight from the development. . Erica Binde Honningsvag: Okay. So then we will move forward with the questions that we have received online. Starting with a couple of ones from Jeppe, in Arctic. I will take them one by one. It's regarding the line 3. What are the expected revenue levels and EBITDA margin for the third line? Thomas Kormendi: So what we are saying is run rate is going to be lower than when we talked about line 1. It's a different product mix than what we talked about 1, which was really a very, very -- I wouldn't say simple because that would offend the people of Little Rock, but a different mix than saying actually 1 product versus different products, smaller formats. So it's going to be lower. We're not complete -- we are not explicit about it because we are looking at the plant in combination of the 3 lines, right? It's not this line, that line, this line. The combination of the lines will generate the result. And in fact, what we're even doing more is we are more occupied with looking at the Americas result than single lines and single factories. And on the Americas result, we can just reaffirm we are going to deliver the midterm targets and the long-term targets. And then we will fix the mixing between the various production lines. Bent K. Axelsen: I think the key here is the midterm target. And I also want to note that typically, the way we follow up the American business is in dollars. We did convert that to a euro top-down target in the Capital Markets Day. And back then, the currency was [ 108 ]. So obviously, things have happened to the currency as well. So that could also be good to remember when you are calculating. . Erica Binde Honningsvag: Okay. When do you expect production to start? And what's the planned ramp-up of line 3? Thomas Kormendi: We expect production of line 3 in '27, which means that with these lines, there's a certain lead time when you order them and then installing them, et cetera. And that's why we're doing it now to be able to actually produce in '27. Erica Binde Honningsvag: So does the addition of this line affect the ramp up of line 2? Thomas Kormendi: It does affect the ramp-up because it gives us flexibility to move products around. To the point of saying with the line 3, we can get more customers in who have a mix of products, more customers in will allow us to move products between the lines in a faster pace. And hence, we think it's going to be very beneficial for Line 2 as well. . Erica Binde Honningsvag: And last one from Jeppe. Will this dilutive school milk production form the joint venture? Thomas Kormendi: That is not the intent, no. Erica Binde Honningsvag: Okay. A couple of questions from Luis in [ BNP ]. Can you give some extra color on what the EUR 1.5 million one-off is related to? Bent K. Axelsen: I can do that. So basically, over the last couple of years, we paid too much in utility costs in one of our factories. And we got that money back. So we paid the amount. So it's nothing more dramatic than that. So it's basically a retroactive correction. Erica Binde Honningsvag: Is Roll Fed production integrated with Pure-Pak sleeve production or can otherwise repurpose activity? Thomas Kormendi: Can you just take it again, please? . Erica Binde Honningsvag: So is Roll Fed production integrated with Pure-Pak sleeve production or can otherwise repurpose activity? Thomas Kormendi: I assume this refers to -- if you -- okay, let me put it like this. If you look at our plants now, it's integrated as much as in the same plant, we will do both. But it doesn't mean necessarily it's all the same machines, of course, because you have -- in Pure-Pak, you have sealing machines, you don't use for Roll Fed, and you typically have different converters as well where possible. We are doing Pure-Pak and Roll Fed in Åhus, we will be doing Pure-Pak and Roll Fed in India as well. So you will have mixed factories, and you will have factories that are not mixed. Erica Binde Honningsvag: Last one from Luis, what is your competitive advantage in aseptic since you mentioned MENA customers are moving that way? Thomas Kormendi: Right. So that -- I think that's a very interesting actually question and something I could probably give a longer answer to it, but I will make it reasonably short. I think from a -- if you are in the aseptic business, right, you are going to look for something that I mean, let's now, let's go one step back. On the aseptic business, clearly, you need performance, technical performance, you need the performance on the packaging systems, et cetera. So that is the fundament for anyone who goes into this business. In the case of Pure-Pak, we have a technology that allows us to keep a low waste with our filling machines. That is because it is blank fed versus Roll Fed, and that actually means that the amount of waste during the production is much, much, much lower in those systems. That's number one. That's a more technical operational issue. Our machines, our system is running at a high technical efficiency, which is important, of course. But the market point is -- it is a system that is unique. It is the iconic system for carton packaging, milk packaging and it is actually the consumer preferred system as well from a handling and consumer point of view. This is, I think, evidenced by the development we have, for instance, in South, where we're seeing solid growth in the UHT long-life milk areas and also in other markets where it is. It is a system with a solid technical performance and a very -- and a high consumer approval. In short, we can do it much, much longer, if you like. You want to buy a machine, let me know. Bent K. Axelsen: We can also lease it. Erica Binde Honningsvag: Then we have a question from Ole Petter in SpareBanken. This quarter saw smaller machines both in EMEA and U.S., should we expect an increased share of smaller filling machines also for Q4 and into '26? Or was this a special for the third quarter? Bent K. Axelsen: I think this timing has proven to be very difficult to predict. So generally speaking, I would say that Q3 was usually -- was unusual from a size perspective. I think we haven't done an explicit forecast on that. But our hope is, of course, to get back to the big machines. So we can generate more blank sales and also improve our working capital position. But it will be -- this will be always going a little bit up and down between the quarters. Erica Binde Honningsvag: Then we have a question from Amer [ Jabbari ]. How does the cost pressure in raw materials impact your pricing directions in '26? Thomas Kormendi: Right. So this is, of course, early days to be specific around pricing. But what we do see is that there are raw materials, including board, which will go up in the coming period. And for us, of course, it will mean that we will also increase our prices for TransX. I cannot evidently explain the amount, but we will be increasing prices, yes. Erica Binde Honningsvag: Okay. We have a last one, but I think you covered it during the last question, was regarding board price changes for '26. All right. If there's no further questions from the audience here, I think we will round off today's Q&A session and also the results presentation. Thomas Kormendi: Thank you very much. . Bent K. Axelsen: Thank you.

201天前Insight Analytics约5分钟阅读

ZONNF 2025 Q3 财报电话会议

Pedro Cota Dias: Hello, everyone. Good morning. Welcome to NOS's Third Quarter 2025 Conference Call. I'll hand you over to our CFO, Luis, who will deliver a short presentation, and then we'll open for Q&A as usual. Luis do Nascimento: Well, good morning, and welcome to NOS's third quarter conference call. We will begin, as usual, with the main highlights of the third quarter. A strong operational performance with the RGU trends significantly improving versus previous quarters. Consolidated revenue of EUR 457 million, strongly impacted by A&C decline despite resilient performance from Telco, an efficient cost management that is driving EBITDA growth and sustainable operational cash flow generation and a solid balance sheet and financial position with leverage below reference level of 2x. So a quick overview of our main KPIs. This quarter, revenues declined 1.2% to EUR 457 million, but EBITDA rose 2.7%. This positive EBITDA performance, along with a CapEx reduction of 2% led to improved EBITDA CapEx of almost 10%. Recurring free cash flow, excluding extraordinary effects, decreased 19% and net income increased 25%, reflecting the solid operational performance and our strategic transformation program. NOS proudly leads in global sustainability, having been recognized by both Time and the Financial Times in their international benchmarking rankings as one of the world's most sustainable companies. This impressive achievement places NOS as one of only 5 Portuguese companies in both lists and the only one from the telco sector. This highlights NOS's strong commitment and significant progress towards a sustainable future. Furthermore, NOS has received recognition from DECO Proteste, the leading Portuguese Consumer Rights Association Magazine, being named best in test for its mobile Internet, Wi-Fi and TV services. It's the first time any operator has secured all 3 core distinctions, underscoring NOS's strong commitment and investment in superior network and quality of service. On the operational performance side, this was another strong quarter of fiber-to-the-home expansion. More than 5.9 million households are now covered by NOS gigabit fixed network with FTTH representing almost 88% of households passed. This is a significant increase of 78,000 households quarter-on-quarter and almost 300,000 year-on-year. But despite the challenging competitive market, NOS strong offers and commercial capabilities delivered a very strong third quarter with a 2% increase to 10.9 million RGUs. With 131,000 net adds, this quarter posted the highest level of net adds since 2023, driven by solid numbers in both fixed and mobile RGUs. With 12,000 net adds of unique fixed accesses, this third quarter saw an acceleration of the operational momentum, driven by high levels of fiber deployment, low levels of churn and competitive offers, particularly from WOO brand and naked broadband that are changing the mix of new customers. In mobile, we do 111,000 net adds in the quarter. Mobile RGUs increased 3.3%, reflecting a stronger performance both in postpaid and prepaid. Postpaid has 160 net adds, posting very strong results driven by Woo and NOS competitiveness on convergent cross-sell. Prepaid net additions continued to improve since first quarter and just decreased 5,000 in the quarter, a clear improvement from Q2 seasonality despite competitive pressure. In summary, a solid operational performance and a strong improvement versus the previous quarters. Now moving to our Audiovisuals and cinema business. The number of tickets sold declined by 28% driven by the lack of blockbusters lineup this quarter in contrast with third quarter '24, which featured several box office hits, including Inside Out 2, the most watched film ever in Portugal. The Audiovisual segment was dragged down by cinema distribution, reflecting the lack of successful movies lineups in this third quarter as opposed to third quarter '24, where NOS distributed Inside Out 2. Only 3 NOS Audiovisual films ranked in the top 10 this quarter, harming NOS performance. Now on the financial performance side, NOS consolidated revenues decreased 1.2%, a reduction of EUR 5.5 million, driven by a EUR 6.8 million decline in the Audiovisuals and Cinema division and despite the resilient performance of the Telecom segment. Telco revenues show a resilient 0.3% growth, primarily due to the performance of the enterprise sector, which posted a 4.4% increase driven by the corporate segment. The B2C segment experienced a decline of 1.2% due to increased competition impacting [indiscernible] despite stronger operational activity. The new IT business showed a small decline of 0.4%, mainly driven by a reduction in the volatile resale of equipment and licenses. However, this was almost fully offset by a solid 8.4% growth in IT services. As previously explained, the Audiovisuals and Cinema division reported a 21% decline, driven by the 28% reduction in cinema attendance. So NOS's operational performance and the solid results of NOS transformation program supported on Gen AI-driven efficiency program continued to deliver a solid 2.7% EBIT increase, significantly above revenue with a robust contribution from telco and IT, which recorded increases of 4.3% and 10.4% and despite Media segment decline of 21%. This quarter, NOS achieved a 4.6% OpEx decline, largely due to proactive cost management and Gen AI supported transformation program that continues to boost structural efficiencies organization-wide. Two significant examples of AI impact this quarter include the automation of call center and customer care service through LLM-powered voice virtual assistants and Gen AI-based chatbots, which drove a 19% reduction in customer care costs. Furthermore, a 14% reduction in maintenance and repair costs was achieved by decrease in call times and intervention orders, also driven by AI. NOS CapEx continues the structural declining trend, and this quarter dropped 2% to EUR 91.5 million, mainly supported by the telco CapEx decline of 2%. In Telco, we saw a 2.4% reduction in customer-related investments and a 3.7% decrease in base CapEx. Expansion CapEx, however, saw an exceptional increase of 1.8% this quarter, driven by a temporary peak in NOS FTTH projects. IT CapEx increased by EUR 300,000 to EUR 1.9 million, driven by customer-related investment to support business growth and Audiovisuals and Cinema CapEx declined 7% to EUR 4.6 million, reflecting a return to a more normal spending levels. As a result, improved operational performance and efficient CapEx management drove a 9.6% increase in EBITDA AL minus CapEx. NOS show the consolidated net income rise 25% to EUR 65 million, a strong EBITDA growth supported by a solid operational performance and nonproactive cost management were key drivers, complemented by reduced financial costs and the EUR 5 million contribution from tax incentives. Free cash flow declined by 56% to EUR 51 million, primarily due to a reduction of almost EUR 50 million in extraordinary effects mainly related to tower sales to Cellnex and the tax receivable paid in advance in 2023, which positively impacted third quarter by EUR 30 million. However, this quarter, we have a negative impact of EUR 90 million in taxes from extraordinary gains in 2024 from tower sales and refund of activity fees. With NOS's extraordinary items, recurring cash flow dropped 19%, driven by a EUR 39 million increase in taxes that totally offset the positive impact of the strong operational performance, lower investments, a reduction in working capital and lower interest rates. To finalize, this quarter, NOS debt decreased to EUR 1,093 million and the financial leverage ratio dropped to 1.6x, well below the reference threshold of 2x. Additionally, NOS benefits from a lower average cost of debt, now below 2.8%, representing a decrease of 0.2% quarter-on-quarter and 1.2% year-on-year. As end of March, the company held EUR 343 million in cash and liquidity. So with this, we conclude our presentation, and we are now ready to answer to all your questions. Operator: [Operator Instructions] Our first question comes from the line of Mollie Witcombe from Goldman Sachs. Mollie Witcombe: I have 2 questions, please. Firstly, on the competitive environment. If you could give us a little bit more color on how that is progressing versus previous quarters, specifically in the budget segment. It would be really good to understand as well the uptick in net adds that you've seen. Is it mainly driven by WOO and the budget segment or elsewhere? And then my second question is on upside from cost efficiencies. Obviously, you've set out your transformation plan. To what extent are these savings already make a part of guidance? And to what extent do you think there's potential for further upside from cost efficiencies driven by AI savings? Miguel Almeida: Thank you very much for your questions. In terms of competitive environment, to be completely honest and transparent, these last few months, I don't think there's any news, anything relevant that is different from the previous months. So the dynamics since last November has been more or less the same. There's -- in our case, there is already some weight in terms of gross adds coming from the discount brands, but that number is still -- not even double digit. But still, it's more or less stable in terms of weight of gross adds. So to be honest, we don't see anything changing significantly from what we have seen in the first half of the year. Luis do Nascimento: On the cost efficient side, I would say that cost efficiencies are the main driver behind the operating cost decline of 2.6% in telco. Almost all of it are coming from efficiencies, as I said, from customer-related and from operating-related cost decrease, we believe they are sustainable as the Gen AI initiatives are still far from explored. It's a long-term program. So we believe that we will have efficiencies for a long period. Operator: We'll now move on to our next question. Next question comes from the line of António Seladas from A|S Independent Research. António Seladas: Thank you for the presentation. It's just one. It's related with the [indiscernible] that your retail customers are renegotiating their packages. So taking in consideration that this new environment is now about 1 year old. And at same time, your loyalty programs are for 2 years, so it's fair to assume that roughly 50% of your customers -- retail customers all have [indiscernible] package? Or do you think this is too optimistic? Miguel Almeida: Look, first of all, thank you for the question, António. We -- since in this new competitive environment, so again, last 12 months, the pressure on our retention lines, so customers trying to renegotiate contracts has not increased. It has been more or less stable. We haven't seen -- namely on these last few months, we haven't seen any pickup on customers trying to renegotiate contracts. So on that front, I would say also like in the competitive environment, things are pretty much stable. António Seladas: Nevertheless, your [indiscernible] blended price in retail are coming down 1% year-on-year on the second, now about 2%. So is this kind of performance that we should expect for the coming quarters? . Miguel Almeida: Look, that decline has a number of effects built into it. First of all, there are -- you have the data -- mobile data revenues that we had a one shot decline last December or November. That's a one-off effect that will not continue for the future. And then you have -- as I mentioned, we already have since last November, some gross adds coming from the WOO brand, the discount brand, which has a much lower ARPU than our brand. So in terms of -- and that progressively has an impact. And on top of that, I would recall that we didn't have the price increase beginning of this year. So if you have to add up all these effects to explain that decline. Operator: We'll now move on to our next question. . Next question comes from the line of Fernando Cordero Barreira from Banco Santander. . Fernando Cordero: Three questions from my side, if I may. The first question is as a follow-up on the strategic transformation plan. You have already highlighted the impacts on the customer care and in maintenance and repair costs. Are you foreseeing any other area in the operational side where the AI-driven efficiencies could be as relevant as in this, too? The second question is related with the [indiscernible] expansion. You have already commented in the presentation that you have already added 300,000 new homes. I would like to understand what is the still potential expansion of [indiscernible] network. What would be the, let's say, the number of households that could be deployed in the future just to understand which is also the impact on your potential top line growth? And the last question is, looking to your KPIs where the some performance in volumes has been offset by the trends in ARPU as you have already highlighted. I would like to understand -- or I understand that you are prioritizing volumes versus customer value versus ARPU can you help us to understand why have you opted by this scenario instead of prioritizing ARPU versus volumes? Just to understand what has been your way of thinking in the current strategy? Miguel Almeida: Thank you, Fernando. I would like to start with the last question, which I think it's very interesting. Well, I don't think it's fair to say that we are prioritizing volume against price. As I mentioned, we -- of course, we don't want to give too much space to the discount -- brands of the discount players. And we launched, as you know, a discount brand, and obviously, that has an impact because progressively, we have more customers within this brand with lower ARPUs, much lower ARPUs. And when you see the combined ARPU, that has an effect. But that's it. I don't think it's fair to say that we are prioritizing volume versus price. We are not going to give too much space to the new entrants, that's for sure. But we are trying to manage value. I don't think your comment is very fair, to be honest. I understand it. Don't take me wrong. I understand it. But this is a result of a number of things. Our strategy is not to prioritize volume against price. It's to find the right mix. Luis do Nascimento: Okay. So on the transformation program, the Gen AI is part of our program, and we -- the idea is to massify Gen AI across the entire organization. We have around 135 different use cases, and we have just started with around 25% of them. So there's a lot of room to massify GenAI across NOS. On the expansion, we are expanding FTTH, our own FTTH, and we will do it until the end of the first half of 2026. But we will have -- then we will have houses from third parties. So we expect it to have around 300,000, 350,000 houses for the next year, but a significant part of them from third parties. So our CapEx -- expansion CapEx will continue to decline in the -- in 2026. Fernando Cordero: Just a follow-up on the network expansion side. Not only I'm, let's say, looking to understand what could be the CapEx trend for next year. Also to understand, given that you are increasing your footprint by close to 5% and your customer base in terms of fixed assets by around 2%, I just 0I would like to understand which would be the network expansion that you are expected for '26, '27, not just on the impact of CapEx, but particularly in the impact of new addressable areas for your marketing activities? Miguel Almeida: I would share 2 comments on that. First of all, there is a time to take up. So one thing is to have the expansion. Another thing is to acquire customers, it takes time. So you cannot expect -- if you increase by 5% the number of households, you don't -- you cannot expect to increase the number of customers by 5% day 1. It takes time, and it takes a lot of time, obviously. So the take-up is going according to our expectations, but there's obviously a delay. On the CapEx side, what you can expect as we have been saying for quite some time now is CapEx going down. Part of this expansion -- fiber expansion is on third-party networks. So what you can expect for next year in terms of CapEx is a reduction. Operator: We'll now move on to our next question. Our next question comes from the line of José Cabezon from [ CaixaBank ] Unknown Analyst: One question regarding the efficiency plan. You have mentioned that you have 135 areas of where you can extract more efficiencies. Could you tell us the percentage of potential sales that have been already considered? And the amount that will be -- will emerge in the coming quarters? Luis do Nascimento: Okay. Well, to give you the percentage of efficiencies that we have, it's a form of guidance. So we are not sharing this number. Unknown Analyst: Okay. And my second question is regarding the comparison basis for us from this quarter. Are you expecting that the decline in RPUs and the changes that we are seeing year-over-year are going to soften in the coming quarters? Miguel Almeida: Well, let's say, our expectation is that it can get a little bit worse before it gets better. Long term -- sorry, just to add to that. So you're talking about the next quarter. Unknown Analyst: I am referring to the -- basically as from the next quarter, what we are going to see, especially in the first quarter of next year and the following ones? Miguel Almeida: Our expectation is that short term, probably it will decline a little bit more medium term. So looking 6 months, 9 months ahead, it will stabilize. Operator: We'll now move on to our next question. Our next question comes from the line of Roshan Ranjit from Deutsche Bank. . Roshan Ranjit: I've got 2, please, many follow-ups. Just on the competitive dynamic. And I guess, having had quite a strong start to the year, the new entrants momentum has perhaps stalled. I don't know if that's fair to say. How should we then be thinking about the scope for price increases next year? Because I think typically, it's around this time where you do inform your customer base around the kind of inflationary pricing indexation that we see. And I think this year, we didn't have anything. And secondly, it's around the network dynamics. And have you changed your stance or have you seen kind of incremental approaches for wholesale access? Anything that has changed on that front? Again, the new entrant has been pushing hard to increase their coverage. Any thoughts around that, if there's been any change or is it still the same? Miguel Almeida: Well, thank you for your questions. You're right, it's more or less around this time of the year that we have to inform customers, but it's still closer to the end of November, beginning of December. And the fact is that as of today, we have no decision. But I can tell you that we are evaluating the option, and we have no conclusion yet, but we are looking into it seriously. And we'll inform the market of our decision or not by the end of November. In terms of network development and wholesale access, namely from the new entrant, we don't know if -- with us, there's no discussions whatsoever. With the others, we don't know if there are any discussions, but in terms of closed deals, there's nothing new. Operator: We'll now move on to our next question. We have a follow-up question from the line of Fernando Cordero Barreira from Banco Santander. . Fernando Cordero: It's only one. I just would like to understand if there is any news regarding the legal situation of one of your majorholders, the 26% stake [indiscernible]. Just to understand if there has been any update or you have any update on that situation? Miguel Almeida: Well, that's the easiest question of all. No developments whatsoever. Nothing new. Everything is as it was 1 year ago, 2 years ago, 3 years ago. Operator: There are no further questions at this time. So I'll hand the call back to Pedro Dias for closing remarks. . Pedro Cota Dias: Okay. So thanks very much for tuning in, and we hope to see you back in fourth quarter 2025 results. Bye-bye.

201天前Insight Analytics约5分钟阅读

IBDRY 2025 Q3 财报电话会议

Ignacio Cuenca Arambarri: Good morning, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us today for our 2025 9 months results presentation. As usual, we will follow the traditional format given in our events. We are going to begin with an overview of the results and the main developments during the period. Everything given by the top executive team that is today with us: Mr. Ignacio Galan, Executive Chairman; Mr. Pedro Azagra, CEO; and finally, Mr. Pepe Sainz, CFO. Following this, we'll move on to the Q&A session. I would also like to highlight that we are only going to take questions submitted via the web. So, please ask your question only through our web page, www.iberdrola.com. Finally, we expect that our event will not last more than 60 minutes. If any questions remain unanswered, we at IR team are, as always, fully at your disposal. Hoping that this presentation will be useful and informative for all of you. Now without further ado, I would like to give the floor to Mr. Ignacio Galan. Thank you very much, again. Please, Mr. Galan. Jose Sanchez Galán: Good morning, everyone, and thank you very much for joining today's conference call. In the first 9 months 2025, our reported net profit reached EUR 5,307 million, leading up a 17% increase in adjusted net profit, including capital gain from asset rotation -- excluding capital gain from asset rotation. This growth was driven by robust operating performance with reported EBITDA reaching EUR 12,438 million, mainly in our Networks business, where EBITDA rose by 26%. Thanks to a higher rate base driven by investment and improvement regulatory frameworks. EBITDA from Renewables & Customers was impacted by lower market price and higher ancillary service costs in Iberia due to changes in the digital operation after the blackout, which we are gradually passing through, partially offset by the contribution from additional renewable capacity. Investment reached a new record of EUR 9 billion in just 9 months, reflecting the execution of our plan. Networks investment increased by 12% for a total regulated asset base of close to EUR 50 billion. And we have added 2,000 megawatts of new capacity in the last 12 months. Driven by additional investment, operating cash flow increased by 10% to EUR 9,752 million, which combines with EUR 8 billion of new asset rotation and partnership and the capital increase of last July has allowed us to reduce the consolidated net debt by EUR 3.2 billion to EUR 48.5 billion, substantially improving our ratios in line with our BBB+ rating. The strong operating performance and the ongoing improvement in our financial position have led us to increase interim shareholder remuneration by 8.2% to EUR 0.25 per share. Reported EBITDA reached EUR 12,438 million, driven by a strong performance of our networks business, up 26% in the first 9 months, supported by higher regulated asset base in all countries, especially in the United Kingdom and Brazil and positive rate adjustment mainly in the United States and Brazil as well. As mentioned, EBITDA in Renewable Power & Customers was affected by the one-off impact in the change of system operation applied by Red Electrica in recent months as more synchronous generation has been introduced, which is impacting our retail business in the short term until these costs are passed through. In addition, we saw lower market price and a lower contribution from Mexico after the last year transaction. All these impacts were partially offset by additional renewable capacity. Networks once again -- that is once again a main contributor of our EBITDA, driven by the continued growth in our U.S. and U.K., which increased their combined share by 12 points, reaching 43% of the total EBITDA, reflecting the 13% increase in investment made in both countries, which together represents 60% of the group total as of September. As a result, total investment reached a new record of EUR 9 billion, up 4% year-on-year. By business and area, 60% of investment were allocated to Networks, where we invested EUR 4,904 million with a 12% increase year-on-year. Networks investment increased by 45% in United Kingdom to EUR 1,524 million, driven by the integration of ENW and 18% increase in investment in the Scottish Power Transmission and Distribution. Investment in United States reached EUR 1,739 million, in line with the last year as the 9% increase in distribution was offset by decrease in transmission investment due to the gradual completion of NECEC. Additionally, we invested EUR 1,215 million in Brazil, up 14% and EUR 426 million in distribution in Spain, 60% more than last year. As a result, our regulated asset base grew by 12% on year-on-year to EUR 49.3 billion. Investment in Renewables reached EUR 3,442 million, well diversified across geographies and technologies. 60% was allocated in United Kingdom and United States, with U.K. investment increasing by more than 45%, mainly linked to our offshore wind farms currently under construction. East Anglia THREE with 1,400 megawatts of capacity and East Anglia TWO with 900 megawatts. Our Offshore wind farms under construction in other countries are also making good progress with more than 50% of Vineyard Wind 1, 806 megawatts already in operation in the United States and the 315 of the Windanker wind farm in the Great Baltic -- in the German Baltic Sea advancing as scheduled. Investment in Onshore Renewables reached EUR 1,904 million with 62% in onshore wind. And we invested more than EUR 300 million in storage, including both pumped hydro in Iberia and batteries mainly in Australia. Moving to Network business performance. Regulatory framework continued to evolve positively across key geographies. In United Kingdom, the RIIO-ED3 methodology for distribution was published, representing a first step in a process that will lead to a new framework by April 2028. And in transmission, the RIIO-T3 Draft Determination was released, as you know, and we have expected final determination by -- before the year-end. In United States, current rate cases have resulted in a 10% average increase in tariff in New York and Maine, compared to last year. And Avangrid is already in the process of new rate cases in both the states they agree effective from May 2026. As mentioned, NECEC, our interconnection project between Canada and Massachusetts is on track to reach full commercial operation before year-end. And we are already working on projects that will continue delivering growth in transmission, mainly the Powering New York will result in EUR 1,650 million of planned investment in the coming years. In Brazil, following the annual update in Neoenergia Brasilia, rate has increased an average of 8% compared with last year. And the renewal of distribution concessions continued to progress. The concession Neoenergia Pernambuco was already signed, and we expect the other distribution companies to follow in the coming months. In Transmission, Neoenergia is on track to complete the last four lots under construction by December 2025, increasing annual remuneration in this business by BRL 600 million to more than BRL 2 billion per annum. Finally, in Spain, the process of the review of the remuneration methodology and the rate of return continue. Moving to Renewables. In the last 12 months, we have installed over 2,000 megawatts with significant progress in offshore wind. In United Kingdom, production of our Offshore wind farms in operation, West of Duddon Sands and East Anglia ONE exceed 2,400 gigawatt hours in the first 9 months of 2025. And we continue progressing the construction of East Anglia THREE with 20 monopiles already installed. In East Anglia TWO, where preliminary works are underway after having signed all major procurement contracts. On top of this, our East Anglia ONE North project with 900 megawatts was qualified for the upcoming AR7 auction scheduled by mid-November. In the United States, the construction of Vineyard Wind 1 is now above 50% completion with 32 turbines fully installed and more than 200 gigawatt hours produced. Finally, in France, St. Brieuc project produced 1,150 gigawatt hours during this period. And the output of our offshore wind farm in operation in German Baltic Sea reached 1,594 gigawatt hours as well. As mentioned, in Germany, we have another project under construction, Windanker, which is moving ahead as planned for commercial operation in 2026. Over the last 12 months, we have also installed 1,350 megawatts of Onshore technologies well spread across our geographies, 1/3 United States and U.K., including 200 megawatts of repowering project. Around 1/3 in Spain and the remaining 1/3 in another European countries and Australia. Finally, in Storage, we continue progressing with our pumped hydro project under construction in Iberia, including Torrejón Valdecañas with 15 gigawatt hours capacity. And in Australia, the Smithfield battery project is already in operation. The Broadsound project is progressing as planned for the total of 490 megawatt hours of storage capacity. All in all, we have currently close to 5,500 megawatts under construction, of which more than half correspond to Offshore wind project and 25% to Onshore wind. And we are very well positioned to capture additional growth if demand accelerates due to the electrification, thanks to a strong pipeline of 4.5 gigawatts of advanced projects ready to start construction by 2028, including Repowering project mainly in United States. Through September, we have also continued improving our financial strength. Thanks to a 10% increase in our operating cash flow to EUR 9,752 million, driven by higher cash generation in Networks and the execution as well of our asset rotation and partnership plan. Since January, we have signed transactions worth EUR 8 billion with a positive impact of EUR 4.5 billion in our net debt as of September. On asset rotation, as you know, we have already received close to EUR 1.1 billion from the sale of our Smart Meters business in United Kingdom. We have signed other transactions like the sale of our Renewable business in Hungary, which will allow us to collect EUR 128 million before the year-end. Finally, the regulatory approval required for the sale of our Mexican business continue on track. Regarding Partnership, we have added 708 megawatts to our joint venture with Norges Bank for Renewables in Iberia, reaching 900 megawatts in operation, fully on track to reach 2,300 by 2027 with a total co-investment of EUR 2.4 billion. Our partnership with Kansai in the Windanker Offshore wind farm in Germany will represent a total co-investment of EUR 1.3 billion. And our partnership with Masdar for Offshore wind in the U.K. and Germany, which will result in co-investment of EUR 6.8 billion is also progressing well. With the construction of East Anglia THREE moving forward in line with our plan as explained and in Baltic Eagle in Germany already energized. Increasing cash generation and the execution of our asset rotation and partnership plan, together with the capital increase executed last July has led to a reduction of EUR 3.2 billion in adjusted net debt year-to-date to EUR 48.5 billion, driving even better stronger financial ratios fully aligned with our BBB+ credit rating. FFO to adjusted net debt increased by 330 basis points to 26.2% and net debt is already less than 3x EBITDA. We also maintained a strong liquidity position of EUR 23 billion, sufficient to cover 25 months of financial needs. Thanks to our strong business performance and improving financial strength, the Board has approved an 8.2% increase in interim dividend of EUR 0.25 per share will be paid at the beginning of this year. As always, a supplementary dividend will be proposed for approval at the Annual Shareholders' Meeting paid in July. I will now hand it over to our CFO, who will present the group financial result in further detail. Thank you. Jose Armada: Thank you, Chairman. Good morning to everybody. Our adjusted net income for the first 9 months of the year, excluding the sale of the U.K. Smart Meters accounted for in this quarter, which is the capital gain is EUR 381 million gross and the same number net as we don't have a tax impact here and including the cap allowance in 2025, which is EUR 191 million, reached EUR 5,116 million, representing a 16.6% increase compared to the adjusted net income for the first 9 months of '24, excluding the divestment of the thermal generation assets, which impacted the net profit was EUR 1,165 million net and including the U.K. cap allowance for '24, which is EUR 81 million, as you can see in the slide. Excluding also the recognition of costs in the U.S. for EUR 389 million as it is a non-cash item, the first 9 months of '25 growth is 8%, reaching EUR 4,727 million. The main perimeter change, as you know, is that ENW has been fully consolidated since March. The FX evolution has had a minor effect on results. Thanks of our hedging policy with the dollar 2.5% lower and the real 10% lower. Reported net profit for the first 9 months of '25 reached EUR 5,307 million, decreasing by 3% year-on-year, affected by the asset rotation that I have just mentioned that has been EUR 784 million less in '25 than in '24. Revenues increased by 2.3%, driven by the Network business. Procurements rose 2.6% and gross margin grew 2%, reaching EUR 18.4 billion. Excluding the capital gains from the asset rotation, as I mentioned previously, which is referring to the Smart Meter divestment and the thermal generation assets, 9 months net operating expenses improved 7%, affected by lower storm costs that also lowers the gross margin. Net personnel expenses rose 0.4% due to higher number of employees. External services declined 6.1%, mainly due to the EUR 330 million lower storm costs. Other operating income increased by 21% compared to the adjusted 9 months of '24 due to the indemnities of past year costs, the ENW consolidation, partially offset by EUR 121 million negative impact of the East of Anglia THREE sale, EUR 4 million more than in the first half results due to a negative impact accounted in Q3. As you will see later, this impact is more than offset at the financial expenses level. Excluding the mentioned storm-related impacts and other adjustments, net operating expenses improved by 0.8%. Analyzing the results of the different businesses and starting by Networks, its EBITDA grew 26% to EUR 6,128 million, mainly driven by the strong performance of the U.K. and the U.S. linked to higher asset base and past cost recognition. In the U.S., EBITDA reached $2,046 million, 88% more with a 10% average higher rates in Distribution and a better contribution from Transmission, and positively affected in the first quarter by the decision of the New York regulator that allowed to register a regulatory asset under IFRS regarding past costs, which have already been accrued and recorded under U.S. GAAP, aligning both standards. It is worth highlighting, as the Chairman has mentioned, that NECEC finally is expected to start contributing from November of this year. In the U.K., EBITDA increased 22.5%, reaching GBP 1,129 million, including 7 months positive ENW contribution of GBP 253 million with a growing -- with growing results for transmissions driven by a higher RAV. In Brazil, EBITDA was up 12.6% to BRL 10,000 million. Thanks to the higher revenues in Distribution linked to higher inflation and an average 8% increase in rate reviews over a higher asset base. In addition, Transmission contributed positively with BRL 1.3 billion gross margin as construction progresses. And as the Chairman has said, it is expected to finalize all the construction of transmission lines this quarter and will contribute BRL 2 billion in '26, already fully completed. In Spain, EBITDA increased by 9.3%, reaching EUR 1,340 million, positively affected by the CNMC draft retribution rate of 6.46% versus the previous 5.58% and by positive adjustments to past year's remuneration. In this first 9 months, Energy Production and Customer business, EBITDA reached EUR 5.9 billion versus the EUR 6.7 billion in last year, excluding capital gains from asset rotation. The business reached c. 86% emission-free generation. In Iberia, EBITDA was EUR 3,052 million, 17.5% down with higher production more than compensated by lower margin and sales, explaining 30% of the year-on-year variation and higher ancillary services, higher levies and positive court rulings in '24 despite 1.2% revenue tax termination explained the remaining 70% of the decrease. Hydro reserves remain above the 10-year average. In the U.S., EBITDA remained flat reaching $813 million, supported by improved wind and solar performance, despite the fact that '24 was positively impacted by an Arctic Blast storm one-off of $34 million. In the U.K., EBITDA grew 5.3% to GBP 1,136 million, driven by the GBP 324 million capital gain from the U.K. Smart Meters divestment in this quarter. Excluding them, the business decreased 24.8% with lower wind resource and prices and weaker supply business, also driven by lower prices and volumes. Net operating expenses, including GBP 103 million negative one-off impact linked to the East of Anglia THREE sale more than compensated at the net financial result, as I have mentioned. In the Rest of the World, EBITDA grew 31.5% to EUR 588 million, with 61% higher offshore production due to higher contribution from wind farms, St. Brieuc in France and Baltic Eagle in Germany. With lower supply results due to the EUR 30 million negative impact in Portugal due to the ancillary services cost as in Spain as a consequence of the blackout. In Brazil, EBITDA fell 23.6% to BRL 947 million with lower renewable and thermal production compared to last year. Finally, in Mexico, EBITDA reached $467 million, decreasing 78.5% with lower reported contribution compared to last year that included the thermal asset capital gain. Depreciation and amortization and provisions were up 2% to EUR 4,272 million, driven by higher asset base despite the full year '24 adjustments impact and lower bad debt provisions, mainly in Spain. EBIT reached EUR 8.2 billion and grew 6%, excluding capital gains. Net financial results worsened EUR 93 million to EUR 1,445 million, driven by EUR 208 million higher debt-related costs due to EUR 7 billion higher average net debt -- average net debt in the first 9 months of the year, while interest rate related costs and FX improved by EUR 85 million due to the FX depreciation, especially of the real. And derivatives had a positive contribution of EUR 234 million due to the East of Anglia THREE derivatives, as I mentioned, compensate the lower net operating expenses. While the rest has had a negative impact mainly due to the Mexico hedges, mainly linked to the positive impact of the Mexico transaction last year compensated at the net profit level in the tax line. Cost of the debt improved 12 basis points, mainly thanks to lower short-term interest rates in euros and British pounds and to the depreciation, especially of the real, despite higher interest rates in Brazil. At the end of September, net debt is EUR 3.2 billion lower than the EUR 51.7 billion reported in '24 year-end, reaching EUR 48.5 billion. This positive evolution was driven by EUR 9.8 billion FFO generation, plus EUR 4.5 billion asset rotation and debt consolidation and the EUR 5 billion capital increase, more than covering the EUR 9 billion CapEx and the EUR 4.1 billion dividend as well as EUR 2.2 billion ENW net debt consolidation. As a consequence, our credit ratios are at very strong level in the BBB+ band. Our adjusted net debt-to-EBITDA is below 3x. The FFO adjusted net debt reached 26.2% and our adjusted leverage ratio is 43.3%, 2 percentage points lower than at the end of '24. 9 months '25 adjusted net profit grew 17% to EUR 5,116 million, taking away also U.S. cost recognition, which is a non-cash item, as I commented, the growth is 8%. And now the Chairman will conclude the presentation. Thank you. Jose Sanchez Galán: Thank you, Pepe. The result reflect the foundation of the plan presented a few weeks ago, a transformational plan based on a specific project capable of delivering double-digit growth in profit in the first 9 months of the year. Thanks to the rise in Networks investment up to 12% through September with attractive regulatory framework that are driving increases in tariff of 10% in the U.S. and 8% in Brazil as well as the expansion of our generation capacity of 2,000 megawatts just in the last 12 months with 5,500 more under construction and 8,500 of additional pipeline ready to cover any potential acceleration of demand growth. The implementation of our plan also reinforced our strong financial position, fully compatible with our BBB+ rating, supported by 10% increase in operating cash flow in our asset rotation and partnership plan and is also delivering a growth shareholder return with an interim dividend up 8.2% to EUR 0.25 per share. Driving by this consistent trend of improvement result and financial performance, today, we are improving our guidance for 2025 to a double-digit growth in adjusted net profit, reaching EUR 6.6 billion or more than EUR 6.2 billion even excluded EUR 389 million of Networks cost recognition in United States. This net profit guidance is already EUR 1 billion above the net profit target set for 2026 in our previous plan. Proving once again that our strategy, focus on Networks in the right countries with attractive remuneration frameworks and selective growth in renewables is allowing us to grow and beat our estimate constantly. You can be sure that we will continue working towards that objective. Thank you very much for your attention. Now we can begin with the Q&A session. Thank you. Ignacio Cuenca Arambarri: The following financial professionals have asked the following question to us. Philippe Ourpatian, ODDO; Fernando Lafuente, Alantra; Meike Becker, HSBC; Manuel Palomo, BNP Paribas; Pedro Alves, CaixaBank; Gonzalo Sánchez-Bordona, UBS; Robert Pulleyn, Morgan Stanley; Fernando Garcia, Royal Bank of Canada; Peter Bisztyga, Bank of America; Pablo Cuadrado, JB Capital Markets; Jorge Alonso, Bernstein Societe Generale; Javier Suarez, Mediobanca; Dominic Nash, Barclays; Javier Garrido, JPMorgan; and finally, James Brand, Deutsche Bank. The first one is, can you provide more details on the main factors driving the expected double-digit growth in net profit for 2025 and clarify how the exclusion of capital gains from asset rotations and the inclusion of cap allowances in the U.K. impact this guidance? Jose Sanchez Galán: So as I mentioned, we expect double-digit growth on adjusted net profit to more than EUR 6.2 billion, even excluding past cost recognition in New York, which is EUR 389 million. And look together close to EUR 6.6 billion. Pepe, but I don't know if you would like to clarify in more detail. Jose Armada: Yes. Well, thank you, Chairman. Well, as I commented, these numbers exclude specifically the capital gains from -- basically in Mexico with an impact of EUR 1,165 million and the Smart Meters in the U.K. with EUR 381 million, both at the net profit level, okay? And it includes as we presented in the Capital Markets Day, the cap allowances in the U.K., as you can see in the slide, EUR 190 million for '25 and EUR 81 million in '24. Obviously, for the end of the year, that will add a little bit more, okay? Ignacio Cuenca Arambarri: Okay. Second question, can you please provide guidance for net debt at 12 months 2025? Jose Armada: Yes. We're expecting the net debt by the year-end to be around EUR 51 billion. This is excluding the potential collection of the Mexico divestment. We are not including that in this guidance. But we are including the acquisition of the previous sale of the Neo stake in this EUR 51 billion guidance. This will be even with all these things below the '24 close of over EUR 51 billion at the end of '24. Ignacio Cuenca Arambarri: Next is regarding the use of capital gains. How will the capital gains from recent asset transaction be used in the future? Jose Sanchez Galán: So capital gain, as you know, from asset transaction will be applied as always to future efficiencies, just to improve the future results. Ignacio Cuenca Arambarri: Next is regarding the battery storage, our view of this success -- of this upcoming business for the sector? Jose Sanchez Galán: Well, I think now we talk about batteries. We will start talking about storage 25 years ago. I think as you remember, my first presentation, we were talking about renewables. We are talking about networks and we are talking about storage. I think we've been making renewable, we are making networks and we have been making storage. So, I think, what we've been doing in storage during the 25 years is we've been upgrading our hydroelectric facilities, making our -- most of our turbine reversible to become all those one bidirectional, making already pumping storage plant. We have in this moment a capacity of 120,000 megawatt hours of capacity. I think, it's a huge capacity already in storage. But also, we are investing in batteries, especially where we don't have hydro facilities in our -- or we are not project. I think, the main places is Australia. I think, they have attractive spread of support mechanism. And I think, we have in this moment, there are more than 550 megawatts under construction. But as well, we have another country. I think, we have 200 megawatts in construction in Spain and the U.K. And we have already more than 1,000 megawatts of projects in our pipeline that will be built up depending on the capacity payment of grants that can be provided. Ignacio Cuenca Arambarri: Next question is regarding the data center. What is the company's strategy regarding the growing demand from data centers? And what recent agreements have been signed with technological companies to supply energy? Jose Sanchez Galán: So as you know, data centers will be an important driver of demand growth. And I think -- and that is not new for us. We have already, for many years, we've been signing PPAs with tech companies. In this moment, we have more than 12 terawatt hours a year so far of contracts of PPAs already signed with technical companies, mainly in United States. But I think, because we consider that, that is an important area of demand growth is why we are facilitating the expansion of data centers in those countries, we have already, means for helping the technical companies to invest and to expand. I think, in this particular moment, we have an agreement in Spain with Echelon. And the first project, which is going to make a demand -- energy demand more than 1 terawatt hour a year is already ongoing. And we have another four projects progressing. So, we are active on those one, because we consider that, that is a driver for increase of the electricity demand, and that's why it is -- we would like to help these companies to do the necessary for making that happen. Ignacio Cuenca Arambarri: Next one is regarding the market situation of the United States. Given the recent increase in demand from data centers and industry and the rising energy prices in certain U.S. states, is the company considering increasing its renewable ambition or pipeline? And the second question regarding to this is, how will these market trends impact your PPA strategy and asset development plans? Jose Sanchez Galán: So, I think you will respond, Pedro, but I think just to give you -- it's true that in this moment, United States, the prices are rising. And our expectation is that prices will rise even more. I think, it's the fact that new CCGTs are built. This new CCGT is built, is going to make then the prices will increase, because there are already new power plant have to be already amortized toward those one which are already fully amortized. And I think, those one is pushing the prices up independent of the cost of the gas. But I think it's -- and that is a good opportunity for us. I think, it's a good opportunity, because we have almost 40%, 30% of our fleet is in merchant. And I think, the contract we have already with long-term PPA signed is already, let's say, ending during a certain period. And I think that makes the renovation of this contract probably that is going to increase the prices, we are already making that. All-in-all, that is certainly a great opportunity of increase of value of our assets -- renewable asset in United States. And that is why United States is there a tremendous, let's say, demand of buying existing renewable asset in operation. So, which I think, Pedro, you can already complete this comment. You agree. Pedro Blazquez: Okay. Thank you, Chairman. I think, the example -- a couple of examples, Texas and Oregon, where the prices are already rising, and we operate already 3,400 megawatts in those states. In the short term, this benefits our merchant assets. And then, it will be translated as the Chairman said, to the PPAs. And for example, in those states, we have more than 4,000 megawatts of potential pipeline to come. In the U.S., overall, we have 10,000 megawatts right now in operation, 30% of that is merchant and 70% is PPAs. The average PPA life is 10.7 years. I think, there is an opportunity for life extension and repowering. Around 360 megawatts under construction in the U.S., 432 globally and more than 800 megawatts of additional pipeline, 1,500 globally. So, I think this is good signs of what we can do right now to benefit from the demand increase. Ignacio Cuenca Arambarri: Next is related to Spain. Can you provide an update on the blackout investigation and the causes that triggered the event? Jose Sanchez Galán: I think, during the last weeks, has already had a lot of public reports, a lot of investigation even in the Senate and the different conference. And I think, this public report said clearly that this was a result of lack of synchronous energy to provide inertia in the system. So, they say also, as more renewable enter into the system, supply becomes also variable. And I think that require more synchronous energy. So, the fact now the system operator has changed the operation and is operating with more synchronous energy. So, I think what is saying in the public report and the public information is precisely what now is the system operator is already just doing. Certainly, that has an effect that is increasing the cost of ancillary services, which in our case, that we have most of our sales are under multi-annual contracts is affecting to our results, because we have not passed this extraordinary extra cost for our customers on all those ones, we have a multiyear contract. As Pepe mentioned, that in our case, is close to EUR 180 million affecting our accounts up to September. Ignacio Cuenca Arambarri: Next is related to Spain as well. What is needed to extend the operation of Almaraz Nuclear Plant? Is the 50% reduction in the Extremadura tax sufficient to ensure its continued operations? Jose Sanchez Galán: Well, I was -- you were listening to me for many long time, then the nuclear power plant are safe and are needed. So, I think they are needed more than ever in this moment for avoiding potential blackouts or potential problems in the service. Also, this power plant that you are talking about, they have national international license. So, which I think they allow them to operate at least up to 2030 without being forced to ask for any additional national, international license of operation. But there's something very, very important. It's a social -- national social demand in the country to maintain and operating. I think every week, there are demonstration, there are people writing of different tendencies, different ideas, different political parties and the civil society are asking to maintain and operating. So for two reasons, because of this social responsibility and because the need of this power for keeping the lights on in the country and providing a safe, cheap service is why we three, the owners of the power plant, we have asked the government the continuity of the Almaraz power plant. So, that means in this moment, only depend on the decision of the central government, the continuity of those power plant. There are not any another limitation. Technically, they are allowed to cooperate. Socially is demand, economically is the best solution. And in terms of the operation of the system is needed for keeping already the service operative. So, I think the energy policy made by the government. The government have to take the decision, and they will explain the consequences, whatever decision they will take about. Ignacio Cuenca Arambarri: Another trendy topic in Spain. Can you provide an update on the latest developments regarding the regulatory framework for networks in Spain? And how would the remuneration rate below 7% affect your investment plans? Jose Sanchez Galán: You're talking about Networks. Ignacio Cuenca Arambarri: Networks in Spain. Jose Sanchez Galán: Yes. I think that -- you know Networks in Spain for us is quite small compared with the Networks we have in other countries. I think, it's the fourth in terms, as you saw in our presentation, is the fourth of all our RAV in the different countries. The first one, largest RAV is in the state. The second largest RAV is in U.K. The third largest RAV is in Brazil and the fourth is Spain. So, I think it's small compared with the rest. But saying that, I think as far as I know, they are still that is in process. There are no new news. I think, which I already heard is they are already make a public consult about the terms which have been proposed, but we have no more details on that one. I think, something which is clear is either the government, central government, either the different government of the region are asking for the need of more, more investment in Networks. So, I think if that is not the proper framework, I doubt in this extraordinary investment, which is needed. So, it's going to be made as faster as it will require. Ignacio Cuenca Arambarri: Next, how are the increasing cost of ancillary services being managed? And to what extent are these costs being passed through to the customer as contracts are renewed? Jose Sanchez Galán: Pedro? Pedro Blazquez: I think as of September, yes, we have a negative impact because of our multiyear contracts. But of course, these costs are being passed through as contracts are renewed. We expect by '26, 70% of this already through customers and almost 90% by '27. Ignacio Cuenca Arambarri: Next is regarding the U.K. What is the company's perspective on the current regulatory environment in the U.K., particularly regarding the RIIO-T3 framework? Jose Sanchez Galán: I think, we have a very fluent dialogue with the regulator. I think recently, I met personally the Chairman, the Chair of Ofgem. I think, they are aware about the need of sufficient profitability remuneration and financial ability for already to make -- to attract the investment needed. I think, it's certain they make already a draft determination, which is the base of our rate case plan. I think, our business plan is already just based in this draft determination. But I think, I'm sure that the sensibility of the Ofgem is such that, I hope that there is a potential improvement during the negotiation, which -- to make certain upside, but we will know the final determination by December. So, I think now we are in the process of that one. But I think we are very open dialogue with the regulator, I think ourselves and another two players on this one. And I think they are -- my feeling is that they are already very sensible about the need of making already some adjustment to facilitate to make the huge investment which are needed. Ignacio Cuenca Arambarri: Next is, can you provide details and expectation on your strategy for the AR 7 auction in the U.K.? Jose Sanchez Galán: So as you know, we have already East Anglia ONE North ready to participate that one. So, I think we have a competitive project. We have all the security, all the supply chain secured. We -- but I think, we are very disciplined in terms of profitability criteria. I think yesterday, I heard the budget -- the final budget has been published, which I think only EUR 900 million allocated to offshore. But I think the flexibility to the Secretary of Energy to increase this amount depending on the numbers of bidders. I think, this number, remind like it is in my feeling, my opinion, is not sufficient to achieve the country objective in terms of power, in terms of decarbonization. I think there are no other changes in this year 7. They increase the life of the CFDs from 15 to 20 years. And I think they already make already a reference price, which is 11% higher than the previous one. So, which I think that will sense. But I think the budget, in my opinion, is absolutely insufficient. And I think, if the Secretary of Energy has already the power to modify the numbers after the auction. If that is not modified, my feeling is it should be difficult to achieve the targets where they are already thinking in terms of power, new power and in terms of decarbonization when they are already looking. But new power, in my opinion, they will not really achieve the numbers they were thinking about. Ignacio Cuenca Arambarri: Next, what is the current status of the Mexico operation? And when do you expect regulatory approvals to be finalized? Jose Sanchez Galán: I think in Mexico, you mentioned. Ignacio Cuenca Arambarri: Yes, the deal in Mexico, the pending deal in Mexico. Jose Sanchez Galán: Well, I think the agreement is signed. As far as I know, the buyer has already secured the financing, almost secured. And I think, now we are depending on the approvals of the different authorities. But as far as I know, the things are ongoing. I think, this week, our Mesonero, which is our M&A guy, I think, is in Mexico. And I think he will take fresh news already next week. So, but I think we are not already, let's say, we have not any negative input about that one, and I think they are going already according with schedule. Ignacio Cuenca Arambarri: Two last questions. The first one is probably for Pepe. Effective tax rate is below historical average. Should we expect this effective tax rate to be kept at similar level at the year-end? Jose Armada: Well, I think that we will have tax -- an effective tax rate at the year-end to be around 20%. Let me explain that this is below basically for several reasons. First of all, because -- right now, the contribution of countries with a lower tax rate is higher than in previous years. So the U.K. and the U.S. versus Mexico and Brazil. An impact that it is reducing the tax rate this year is, as I mentioned, the U.K. Smart Meters capital gain in the first 9 months is at the gross and net. So, there is no tax impact here. Last year, the thermal capital gain was affected by the Mexican corporate tax rate. And finally, as I mentioned, last year, we had a negative impact in the taxes due to hedges that we had in and had a positive impact in our financial expenses. And this year is the opposite. We are having a negative impact in the -- due to the last year transaction, a negative impact in our financial expenses due to the Mexican FX hedges that is compensated at the net -- at the tax level. So, all-in-all, that is the explanation why this year, in the first 9 months, the tax rate is below 20%. And the expectation is that by the end of the year, the tax rate will be around this 20%, as I mentioned. Ignacio Cuenca Arambarri: And last question is related to Spain and the contribution of the hydro production in terawatt hour in 2025, which is our expectation related to the average traditional average year. Jose Sanchez Galán: So, just looking here at the numbers. I think, up to today, I think, our production of hydroelectric is around 18 terawatt hours, which I think is an increase of around 3% to 4% over previous year. Approximately 2/3 is traditional conventional and 1/3 is pumping storage. So, I see pumping storage is taking the important role on this one. And I think, now the reserves is on the range of 6 terawatt hours. And I think that, now it's again, it starting raining, which I think heavily, so which I think in a few days, we hope level of reserves will increase. I think that is -- I think in terms of the year, I think it's important, but it's 3% more, but that is not the key of our result. As you know, our result is coming from other sources. Even in Spain, the result is not going -- is not as good as last year, because of the prices and the ancillary service, et cetera. But I think it's a good news in terms that our results are high and probably with these rains, which are now coming and expected, I think the result can be already maintained, which should be a good thing for next year as well, contribution to the next year profit or next year results. So, I think that's good. But I think, the news is it's 3%, 3% to 4% more than previous year. Pumping is 1/3, 2/3 is traditional and the results are in a good shape, very high. But I think that is already, there are room for increasing those one if the rainfall is continuing as the range as the expectation we have in this moment, with that give already certain possible, let's say, extra result for 2026. Ignacio Cuenca Arambarri: We have received as well a final question regarding the guidance for 2026, but probably this is something that we will be delivering next February. So, we anticipate something on the Capital Markets Day, but I mean, for those that has asked this question in February will be the deadline. So, just to finish this event, please let me now the floor to Mr. Galan to conclude the presentation. Jose Sanchez Galán: So, thank you very much, as always, for your very clever, intelligent and very good questions. And thank you very much for participating in part of this conference. And if there are any new questions that you consider, I think our Investor Relations will be ready, as always, to give you additional information you may require. Thank you very much, and see you soon. Thank you.

201天前Insight Analytics约5分钟阅读

SHG 2025 Q3 财报电话会议

Cheol Woo Park: Good afternoon. This is Cheol Woo Park, in charge of IR. I thank everyone for joining us at the 2025 third quarter earnings release by Shinhan Financial Group despite your busy schedule. Today, we have here with us Group CFO, Sang Yung Chun; Group CSO, SeogHeon Koh; Group CRO, Dong-kwon Bang; Shinhan Bank CFO, Jeongbin Lee; Shinhan Card CFO, Haechang Park; Shinhan Securities CFO, Jeonghoon Jang; and Shinhan Life CFO, Sunghwan Joo. We will start out with the CFO's presentation on business performance of Q3 2025, followed by a Q&A session with the executives present here with us. Let me now go to CFO Chun to start the presentation. Sang Yung Chun: Good afternoon. Thank you for joining us for the third quarter 2025 earnings release. I will begin from Page 2, business performance highlights. As of the end of September 2025, the group's CET1 ratio was preliminarily estimated at 13.56%, maintaining a stable level. It results from our unending RWA management effort combined with robust profit generation despite the won depreciation and growth in loan assets for future preparedness. Based on this, Board today resolved on cash dividend of KRW 570 per share for the third quarter. Shareholder return in 2025 is expected to be around KRW 2.35 trillion with KRW 1.1 trillion in cash dividend plus KRW 1.25 trillion in share buyback. The shareholder return policy is expected to remain unchanged in the foreseeable future given the stable CET1 ratio and financial soundness. In Q3, the group's net income was KRW 1.4235 trillion despite the decrease in securities-related profits as credit costs were well under control. The cost/income ratio also remained stable. Credit cost ratio stood at 46 bp, up 2 basis points year-on-year, but has generally improved, decreasing Q-o-Q. But whether the asset quality will turn around to decreasing trend, we will have to wait and see due to current combination of factors such as uncertainties in the macro environment and domestic economy. Next is Page 3, capital. As explained earlier, the group's CET1 ratio was kept at 6 bp lower Q-o-Q, thanks to stable net income despite the numerous factors driving up RWA. The group's RWA increased by KRW 8 trillion Q-o-Q, driven by growth in foreign currency-denominated RWA due to won depreciation and loan-driven asset growth. We will keep our utmost focus on maintaining a stable capital adequacy ratio by supplying sufficient funds where and when needed, while improving internal efficiency and strategic resource allocation. Please refer to the slide for details on assets and liabilities on Page 4. Page 5, group's profit and loss. The group's Q3 net income was managed at 8.1% decline Q-o-Q. There was a decline in securities-related profits, reflecting market rate movements, but credit cost was well controlled. ROE and ROTCE, key indicators in corporate value enhancement plan, rose by 0.7 percentage points, respectively Y-o-Y to 11.1% and 12.5%. I will go into more details by item from the next page. Page 6, interest income. Group interest income rose by 2.9% Q-o-Q, thanks to profitability-based asset growth and active margin control. The bank's loan in won increased by 2.7% Q-o-Q. The retail sector grew by 3.1%, primarily driven by policy funds on the back of growing market demand, while the corporate segment grew by 2.3% through proactive funding, also thanks to the active growth strategy from July. Please refer to Page 26 for further details. The bank's NIM rose to 1.56%, up 1 bp Q-o-Q. Although the interest-bearing asset yield fell by 12 bps Q-o-Q, reflecting market rates, including won-denominated loans, it was more than offset by the improvement in funding cost. Next page, noninterest income. The group's noninterest income decreased Q-o-Q, reflecting market conditions. Gains on securities, FX and derivatives declined, while fees remained stable. Credit card fees decreased Q-o-Q due to increased promotional expenses in response to seasonal factors like the Chuseok holidays, but brokerage fees, IB-related fees and product sales fees, including funds, surged Q-o-Q on the back of recent capital market activities. Insurance-related profits decreased by 2.4% Q-o-Q, but profitability remained stable, thanks to scaled up CSM management. Moving on Page 8, group's SG&A expense and credit costs. Group's SG&A increased by 2.2% Q-on-Q due to recognition of voluntary retirement costs at Shinhan Card. However, CIR on a cumulative basis remained stable at 37.3%, maintaining a sound level. Credit cost decreased by 30.1% quarter-on-quarter, reflecting the expiration of corporate credit rating impacts recognized in the previous quarter and the group's continued efforts to manage asset quality. Additional provisions arising from the government-led real estate PF workout plan also decreased significantly Q-on-Q, remaining within our anticipated range. Credit risk among corporate has risen due to delayed economic recovery and challenges persist among vulnerable customer segments. Along with timely funding, more prudent asset quality management will be needed. Turning to Page 9, here are the group's asset quality indicators. Group's NPL coverage ratio declined by 2.9 percentage points quarter-on-quarter as the balance of substandard and below loans in the nonbank sector increased. However, the bank's NPL coverage ratio improved by 12.17 percentage points quarter-on-quarter, supported by the NPL sales and strengthened asset quality management. Delinquency ratio at both the bank and card are also gradually improving. Detailed information on the group's loss absorption capacity NPL sales provided on the following page. Page 11 is profit and loss of our subsidiaries and overseas businesses. Shinhan Bank's earnings declined slightly from the previous quarter, impacted by noninterest income factors, including marketable securities. For details, please refer to Page 21. Shinhan Card posted higher earnings over previous quarter despite the decrease in merchant fee income and recognition of voluntary retirement cost, thanks to reduced credit cost supported by improved asset quality. Shinhan Securities earnings decreased Q-on-Q due to lower product management income. However, the company continues to restore its structural earnings capacity year-on-year through enhanced competitiveness in its core business areas. Shinhan Capital continued to face pressure on funding and credit cost showing a subdued performance. Specialty credit subsidiaries, including card and capital, are steadily improving fundamentals through asset rebalancing and various self-help measures and are expected to gradually recover profitability. Overseas services delivered differentiated results in Q3, particularly in Japan and Vietnam despite ongoing domestic and global uncertainties. Page 12 through 13 summarize our performance in digital initiatives and sustainable management activities. From Page 15 to 18 are the progress of our corporate value-up plan. Overall, the group has achieved solid results in terms of execution, speed and outcomes compared with the plans announced last year and early this year. Please refer to the materials for detailed information. From Page 18 onward, we will find details on the financial status, P&L and funding and investment operations of each subsidiary. Korean financial industry faces challenge, a productive financial transformation to support Korea's economic recovery and sustainable growth. Forward, Shinhan Financial Group will continue its consistent approach of allocating resources to corporate finance while providing timing and efficient funding. We will lead in fulfilling the financial industry's core role in intermediating capital management, managing risk and supporting growth. This concludes our presentation. Thank you very much for your attention. Cheol Woo Park: Thank you very much. And now we will take your questions. [Operator Instructions] And now we will take your questions. The first question will be delivered by Mr. Jung Jun-Sup from NH Securities. Jun-Sup Jung: I am Jung Jun-Sup from NH Securities. So I have 2. Now first is about the capital policy. So the government recently is talking about the dividend payout, the separation taxation and then also the similar in other industries as well. So now then in terms of the dividend tax, then I wonder whether related to the dividend tax, have there been any discussions about changes in the group's dividend policy? And then second is about the loan. So the government continues to control the household loans. And I believe that there has been a bit of an excess in the quota that has been given. Then also more recently, now the deposits are also appearing to decline. So it seems as if both the loans and deposits are unlikely to grow much in the future. Then looking ahead to the fourth quarter and beyond, then what would be the outlook for the group's loans and deposits? And also, how does the group intend to respond to these changes? Cheol Woo Park: Thank you very much for the questions. And please wait a moment for us to prepare our response. Sang Yung Chun: Thank you very much. So there were 2 questions. Now first, about the capital policy, I will respond to that. And then now with regards to the loan and deposit outlook for the longer term, then that will be responded to by the bank's CFO. Now first, about the capital policy. So you talked about the dividend payout separate taxation and then the non-tax dividend payout. And then first, regarding this, we have had some discussions at the BOD. So through the workshop, we have discussed the shareholder return policy. But given the fact that we have yet to come up with the business plan for next year, we have not made any decisions. But of course, having said that, now with the dividend payment separate taxation then now also to broaden the individual shareholders, now in order to be in alignment with the taxation policy, then we also intend to slightly increase the dividend payout. Having said that, now there's a number of indicators for our shareholder return policies. So for example, shareholder -- the share buyback and cancellation. So even if we do that, then this will not be undermining each of our policies. So we would also look into that. And next is about the tax-exempt dividend payout. And yes, we have also discussed this several times. And yes, we do have some profit available for dividend payout. But then now, looking at the industry trends then, now yes, there is also this kind of a dividend payout that is [indiscernible]. So we would have to wait and see, but we would also be positive about the changes as well. With regards to these overall changes, I do believe that we will be coming to some kind of decisions as the Board has to come up with the business plan for next year. But then overall, I can say that we are positive about both aspects. Lee Jeong-bin: Thank you very much. And now this is the CFO of the bank. So the question was about the deposits and loans. So now first, about the loans, then now in the first half, now given the fact that we have grown in the previous year, so we were conservative in terms of our loan growth outlook. So that was for the corporate loan. And then now for also loan, then -- now there was also some increase. And then also, yes, in terms of the banks, then we are a bit over the guidance that was given by the government. But then for the fourth quarter, I do believe that we will be in line with that. And then now for the corporate loan, as I have mentioned earlier, now there was some conservative growth in the first half. But then now in the third quarter, then there was over KRW 1 trillion growth in the corporate loan. And then now for the year, then we were actually planning for about KRW 9 trillion growth. But then now so the actual utilization will be about KRW 7 trillion to KRW 8 trillion. Then also the loan is in won so we were planning for about 5% growth. But then now for the year 2025, we will be growing by about high [indiscernible] so not too different from the plan. Then we're looking ahead to next year for the [indiscernible] loans growth. Now for the household loan, obviously, there are a number of regulations [indiscernible] specific environment for this. So it is not likely for the household loan to grow very [indiscernible] But then yes, there would also be some policy funds to be provided by the government. Then now for the corporate loans, then now compared to this year, so to be in line with the government's policy like the productive finance, I do believe that there will be more growth than this year. But having said that, next year, it is likely to be around 5% to 6% next year. And then about the [indiscernible]. And for this series, there were also some discussions about the deposit. And this is, of course, funding is very important. And also the cost management is also very important. So now then for this year, so we have also focused on the funding control to also defend the NIM. But then also, on the other hand, we also need to ensure funding stability. So yes, we also have a funding management strategy. Now in the fourth quarter, yes, there are -- for the traditionally, now this is the funding maturity period for the bank. So we are also making preparation. And also, the question was some concerns about the expected difficulties for the deposit. And yes, for the individuals and for example, the time deposit, it is being reduced, but then now we also are managing the interest rate quite tightly. So next year, next year perhaps, you can have more appropriate management of the interest rates so that we will be able to have stable funding. Unknown Executive: And then also last part of the question, so about funding moving to the capital market and how the group is making the decision for this. Now as the bank's CFO has mentioned, so it seems as if there is a little change in terms of the capital flow in and outside of the bank. But then now, we can see that now for the money flow, so we see that it continues to be stable. But now in terms of the resource allocation, now for the next year and rather than the resource allocation in the bank, we would also allocate more resources to the capital market, and we intend to be flexible depending on the market circumstances. Cheol Woo Park: I hope that answered your question. We will move to the next question. [Operator Instructions] HSBC's Won Jaewoong, you have a question. Please go ahead. Jaewoong Won: Thank you for good results. Now looking at Page 9, the bank delinquency rate seems to be staying stable. So I was fairly encouraged by that. Now then such trend in fourth Q do you think will continue also for the next year also? That's my first question. The next question is that card delinquency rate in the third Q, it dropped significantly. So the public will [indiscernible] support coupon, may that happen? Or on the card side, do you think there is also signs of stabilization? And the next question is about the credit cost. Now this year, the guideline was about mid 40 bp. I do believe that was your target range. Then in the third Q, you managed quite well, given that in the fourth Q, seasonality makes that we need more provisioning. So I think it could creep up. And does that mean that the credit cost needs to be expected higher than anticipated and fourth Q one-off provision, it's not going to be that high. That's my question. Cheol Woo Park: Well, thank you for your question. While we prepare for the answer, please bear with us. Unknown Executive: Yes. Thank you for that question. Now in terms of the asset quality prospects and second was related to credit costs. About credit cost, I will answer first. And about the asset quality on the overall situation, Group CRO, will respond to that. And Banks and Card CFO will talk about banks and cards asset quality related and respectively. Now in terms of guidance on credit costs, if I may give you the conclusion first. As I said, the mid-40 bp in the first half earnings call, I think it's going to hold for the coming period also. Of course, seasonality require more provisioning. But if our simulation shows that within this range, the mid-40 bp range would cover everything. Of course, in the future, on a short-term basis, there could be some unforeseen circumstances, but in the current position, I believe the mid-40 bp range still stands going forward. Dong-kwon Bang: And I'm CRO. Let me give you overall response to the asset quality. So bank delinquency rate, yes, you said it was stabilizing. So on a group level, not only bank, but for all of our subsidiaries, including nonbank side. In terms of asset quality, I think we are seeing signs of flattening. But as you know, there's a lot of uncertainties in terms of economic outlook and also there's also other external uncertain factors, including tariff situation. So in terms of now the prices and the current policies again are all uncertain. So the flattening, whether it will go down further, I think it's only to make any judgment. So fourth Q up to the first Q of next year, we just have to wait and see. So we will maintain the current trend up to that time, then I think the result will be positive. That's our anticipation. And as you know, on the banking side, on the banking sector, in Korea, we are one of the relatively best in terms of asset quality. So we will try best to maintain that. Lee Jeong-bin: Yes, I'm CFO of the Bank. So if I may add on a response to the CRO. So for Shinhan Bank, when it comes to asset quality, up to a few years ago, among the top 4 banks in Korea, we were actually falling a bit short. So asset quality, of course, is very important, while continuing growth is also important. So we have made various efforts for asset quality, like credit risk system, the management, the portfolio level. And as a result, among the top 4 banks, delinquency and other things are very much staying positively. But as the CRO stated, asset quality or delinquency rate, whether it has become stable, it's too early to say. But flattening, it seems to be continuing, but I think we need to keep our guards up. So within first half of next year up to that period, we have to keep close tab on the asset quality and manage it tightly. Additionally, on the banking side, the credit cost, we are managing on the bank level also. So on the fourth Q, when it comes to credit cards, we will implement more prudent policies. That's my opinion. Thank you very much. Hae Chang Park: So my -- I'm Card CFO. So the card delinquency ratio, we look at on a monthly basis and keeping close tabs on it. So we also look at the new loans that become delinquent. So it peaked in 0.45%, but it improved to 0.41% in September because of the public relief fund that you talked about that increased small merchant sales, thereby improving the overall finances of the small merchants. But going forward, the government will continue to support small merchants and self-employed. So we have to keep a close watch on that. For example, in the past, for a small merchant, low interest rate lending, they said they will put about KRW 10 trillion toward that. So if the policy continues, in the pandemic era, that also improved the situation. So we think that will be something we will also see here also. Thank you. Cheol Woo Park: Thank you very much. I hope that has answered your questions, and we will take the next question. [Operator Instructions] So there are -- yes. Yes, there is a question. From Hanwha Securities, we have Kim Do Ha. Do Ha Kim: I'm not sure whether it is a question that would have a specific answer, but I would just like to get your thinking about these topics. So now look at the slides, for the first time in a while, I could see that the interest spread. So it was rising by 3 bp. So from last May to this year, then we see that the interest rate was falling, but then it seems as if considering the circumstances, you were able to really defend the margin. Now then for next year, then if this is the trend, then we need to think about a higher margin next year? And also it seems as if the securities performance is also very good. So then in terms of the resource allocation for next year, then I wonder whether the shareholder return increasing, whether that will be the end all? But then for example, if the margin is going to be better or if the securities profitability is better, then perhaps you can allocate more for growth? So yes, I know that this is a question that defies an easy answer, but then I was just wondering what the group is thinking. So that is all. Cheol Woo Park: Thank you very much for the questions. And yes, please give us a moment to prepare our response. Sang Yung Chun: Thank you very much for the question. And yes, the question that you have raised is actually what we have been thinking for quite some time. So first of all, about the interest spread. Now this is what I would think. So first of all, the policy rate was cut twice this year and then also for the year, then we believe that there is going to be one more cut. And then now we see that, yes, gradually, the interest rate is falling. But then when we look at the market rate, then looking at the usage and also in Korea and then also the FX, so considering other circumstances, then the interest rate taking a clear fall is not really for certain. So that is something that we needed to consider. So yes, the margin perhaps compared to what we have thought last year, the margin did not fall as much as we had expected. Now that is for the short term, but then now for the longer term then both in the U.S. and Korea, then at least 50 bps or even more than 70 bps. So the prevalent view is that it is going to fall by over 70 bps. So then for the longer term, the interest rate is likely to come down. So then looking at the profit and loss for the end of September, then we can see that the interest rate increase was much lower than the overall revenue increase. So right now, we are just defending the interest income, but then over the long term, we believe that the interest income is likely to fall. So we need to be more conservative about this outlook. On the other hand, what we are more positive about is now on one hand, yes, there is the capital market and also the noninterest income, which is doing much better. So for example, brokerage and also the IB, so the noninterest income is actually quite sturdy. So those are also the areas, the businesses where we must have in order to keep growing. So we will continue to encourage that. But then in terms of the resource allocation, as I have mentioned earlier, basically, in terms of the allocation for growth, now compared to this year for next year, then rather than in the bank, the allocation would be heavier for the capital market is the direction for next year. But then again, in terms of the allocation for the growth then, now in terms of the shareholder return policy, so we have already stated the target for the shareholder return. So we will keep to this commitment. But then now the ROE continues to improve, but then also compared to the COE that we have, then it is still lower. So again, we will be flexible about this. But again, overall, the direction is to follow the plan for corporate value enhancement. And then also for the asset growth because the nominal growth is very low. So I mean there is a limit to how much we can pull this up. So in terms of the resource allocation, we will remain with the current framework. But then now in terms of the specific allocation, there could be more -- a bit more allocation to the capital market to be in line with the market circumstances. That is all. Thank you. Cheol Woo Park: Thank you. I hope that has answered your question, and we will take the next question. So next is Kim Jiwon from DAOL. Jiwon Kim: So CET1 ratio is my -- about -- my question. So it seems the lending side has grown. So as you said, RWA, it's relative though on the household lending, and you said that will be in alignment with government policy. But as being higher on the corporate side, you said that there will be more growth. And for us, RWA overall management strategy, how is going to see that going forward? And is there any factors where you could grow CET1 ratio further -- CET1 ratio further going forward? Cheol Woo Park: Please wait as we prepare an answer to your question. Sang Yung Chun: So RWA and also the future directionality of the -- that. So RWA, we have grown slightly in the Q3. So it looks -- it's higher than the first half. But if you look at the ratio of the growth compared to the previous year, it's still on the lower side. So on the third Q, RWA has grown slightly, but on a yearly basis, compared to the initial expectation of its growth, I think it will be lower than the expected. And going forward, the RWA growth rate, the recurring growth rate would stay on the path of the [ current ] year. And internally, if you take a deep dive for the household lending for the second and third Q because there was high market demand. However, due to regulatory environment now, household lending, I do not think, can grow further. Then on the corporate side, there will be the growth driver for us. But as you know, relatively speaking, corporate side, we have also allocated resources a lot in this area. So the corporate loan in terms of the share will grow, but it will be managed with the overall framework that we have. And in terms of CET1 ratio, compared to last year, this year, the level is a bit higher. So due to various variabilities that is anticipated, we increased it a bit. CET1 ratio, it's not always high being the better. So in terms of capital efficiency, the current mid-13% range is the adequate level. But by Q4 seasonality, there will be less earnings given so it will dip a bit from the current level. But on a yearly basis, we said the base will be 13.1%, but it will be managed in a higher level than that. Anyway, the CET1 ratio be it in the asset growth or it's a key in the shareholder return policy. So we maintain the base, but would also give a lot of buffer so they can be managed on a stable level. Cheol Woo Park: Thank you very much for the response, and we will take the next question. [Operator Instructions] So there are currently no questions requested. So it seems as if there are no further questions. And then with that, we will conclude the 2025 third quarter earnings release conference call by Shinhan Financial Group. You can find today's presentation at our web page as well as the Shinhan Financial Group IR YouTube channel. If you have any further questions, then please contact the IR team. And we will see you again in February next year for earnings release for the year of 2025. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

201天前Insight Analytics约5分钟阅读

055550.KS 2025 Q3 财报电话会议

Cheol Woo Park: Good afternoon. This is Cheol Woo Park, in charge of IR. I thank everyone for joining us at the 2025 third quarter earnings release by Shinhan Financial Group despite your busy schedule. Today, we have here with us Group CFO, Sang Yung Chun; Group CSO, SeogHeon Koh; Group CRO, Dong-kwon Bang; Shinhan Bank CFO, Jeongbin Lee; Shinhan Card CFO, Haechang Park; Shinhan Securities CFO, Jeonghoon Jang; and Shinhan Life CFO, Sunghwan Joo. We will start out with the CFO's presentation on business performance of Q3 2025, followed by a Q&A session with the executives present here with us. Let me now go to CFO Chun to start the presentation. Sang Yung Chun: Good afternoon. Thank you for joining us for the third quarter 2025 earnings release. I will begin from Page 2, business performance highlights. As of the end of September 2025, the group's CET1 ratio was preliminarily estimated at 13.56%, maintaining a stable level. It results from our unending RWA management effort combined with robust profit generation despite the won depreciation and growth in loan assets for future preparedness. Based on this, Board today resolved on cash dividend of KRW 570 per share for the third quarter. Shareholder return in 2025 is expected to be around KRW 2.35 trillion with KRW 1.1 trillion in cash dividend plus KRW 1.25 trillion in share buyback. The shareholder return policy is expected to remain unchanged in the foreseeable future given the stable CET1 ratio and financial soundness. In Q3, the group's net income was KRW 1.4235 trillion despite the decrease in securities-related profits as credit costs were well under control. The cost/income ratio also remained stable. Credit cost ratio stood at 46 bp, up 2 basis points year-on-year, but has generally improved, decreasing Q-o-Q. But whether the asset quality will turn around to decreasing trend, we will have to wait and see due to current combination of factors such as uncertainties in the macro environment and domestic economy. Next is Page 3, capital. As explained earlier, the group's CET1 ratio was kept at 6 bp lower Q-o-Q, thanks to stable net income despite the numerous factors driving up RWA. The group's RWA increased by KRW 8 trillion Q-o-Q, driven by growth in foreign currency-denominated RWA due to won depreciation and loan-driven asset growth. We will keep our utmost focus on maintaining a stable capital adequacy ratio by supplying sufficient funds where and when needed, while improving internal efficiency and strategic resource allocation. Please refer to the slide for details on assets and liabilities on Page 4. Page 5, group's profit and loss. The group's Q3 net income was managed at 8.1% decline Q-o-Q. There was a decline in securities-related profits, reflecting market rate movements, but credit cost was well controlled. ROE and ROTCE, key indicators in corporate value enhancement plan, rose by 0.7 percentage points, respectively Y-o-Y to 11.1% and 12.5%. I will go into more details by item from the next page. Page 6, interest income. Group interest income rose by 2.9% Q-o-Q, thanks to profitability-based asset growth and active margin control. The bank's loan in won increased by 2.7% Q-o-Q. The retail sector grew by 3.1%, primarily driven by policy funds on the back of growing market demand, while the corporate segment grew by 2.3% through proactive funding, also thanks to the active growth strategy from July. Please refer to Page 26 for further details. The bank's NIM rose to 1.56%, up 1 bp Q-o-Q. Although the interest-bearing asset yield fell by 12 bps Q-o-Q, reflecting market rates, including won-denominated loans, it was more than offset by the improvement in funding cost. Next page, noninterest income. The group's noninterest income decreased Q-o-Q, reflecting market conditions. Gains on securities, FX and derivatives declined, while fees remained stable. Credit card fees decreased Q-o-Q due to increased promotional expenses in response to seasonal factors like the Chuseok holidays, but brokerage fees, IB-related fees and product sales fees, including funds, surged Q-o-Q on the back of recent capital market activities. Insurance-related profits decreased by 2.4% Q-o-Q, but profitability remained stable, thanks to scaled up CSM management. Moving on Page 8, group's SG&A expense and credit costs. Group's SG&A increased by 2.2% Q-on-Q due to recognition of voluntary retirement costs at Shinhan Card. However, CIR on a cumulative basis remained stable at 37.3%, maintaining a sound level. Credit cost decreased by 30.1% quarter-on-quarter, reflecting the expiration of corporate credit rating impacts recognized in the previous quarter and the group's continued efforts to manage asset quality. Additional provisions arising from the government-led real estate PF workout plan also decreased significantly Q-on-Q, remaining within our anticipated range. Credit risk among corporate has risen due to delayed economic recovery and challenges persist among vulnerable customer segments. Along with timely funding, more prudent asset quality management will be needed. Turning to Page 9, here are the group's asset quality indicators. Group's NPL coverage ratio declined by 2.9 percentage points quarter-on-quarter as the balance of substandard and below loans in the nonbank sector increased. However, the bank's NPL coverage ratio improved by 12.17 percentage points quarter-on-quarter, supported by the NPL sales and strengthened asset quality management. Delinquency ratio at both the bank and card are also gradually improving. Detailed information on the group's loss absorption capacity NPL sales provided on the following page. Page 11 is profit and loss of our subsidiaries and overseas businesses. Shinhan Bank's earnings declined slightly from the previous quarter, impacted by noninterest income factors, including marketable securities. For details, please refer to Page 21. Shinhan Card posted higher earnings over previous quarter despite the decrease in merchant fee income and recognition of voluntary retirement cost, thanks to reduced credit cost supported by improved asset quality. Shinhan Securities earnings decreased Q-on-Q due to lower product management income. However, the company continues to restore its structural earnings capacity year-on-year through enhanced competitiveness in its core business areas. Shinhan Capital continued to face pressure on funding and credit cost showing a subdued performance. Specialty credit subsidiaries, including card and capital, are steadily improving fundamentals through asset rebalancing and various self-help measures and are expected to gradually recover profitability. Overseas services delivered differentiated results in Q3, particularly in Japan and Vietnam despite ongoing domestic and global uncertainties. Page 12 through 13 summarize our performance in digital initiatives and sustainable management activities. From Page 15 to 18 are the progress of our corporate value-up plan. Overall, the group has achieved solid results in terms of execution, speed and outcomes compared with the plans announced last year and early this year. Please refer to the materials for detailed information. From Page 18 onward, we will find details on the financial status, P&L and funding and investment operations of each subsidiary. Korean financial industry faces challenge, a productive financial transformation to support Korea's economic recovery and sustainable growth. Forward, Shinhan Financial Group will continue its consistent approach of allocating resources to corporate finance while providing timing and efficient funding. We will lead in fulfilling the financial industry's core role in intermediating capital management, managing risk and supporting growth. This concludes our presentation. Thank you very much for your attention. Cheol Woo Park: Thank you very much. And now we will take your questions. [Operator Instructions] And now we will take your questions. The first question will be delivered by Mr. Jung Jun-Sup from NH Securities. Jun-Sup Jung: I am Jung Jun-Sup from NH Securities. So I have 2. Now first is about the capital policy. So the government recently is talking about the dividend payout, the separation taxation and then also the similar in other industries as well. So now then in terms of the dividend tax, then I wonder whether related to the dividend tax, have there been any discussions about changes in the group's dividend policy? And then second is about the loan. So the government continues to control the household loans. And I believe that there has been a bit of an excess in the quota that has been given. Then also more recently, now the deposits are also appearing to decline. So it seems as if both the loans and deposits are unlikely to grow much in the future. Then looking ahead to the fourth quarter and beyond, then what would be the outlook for the group's loans and deposits? And also, how does the group intend to respond to these changes? Cheol Woo Park: Thank you very much for the questions. And please wait a moment for us to prepare our response. Sang Yung Chun: Thank you very much. So there were 2 questions. Now first, about the capital policy, I will respond to that. And then now with regards to the loan and deposit outlook for the longer term, then that will be responded to by the bank's CFO. Now first, about the capital policy. So you talked about the dividend payout separate taxation and then the non-tax dividend payout. And then first, regarding this, we have had some discussions at the BOD. So through the workshop, we have discussed the shareholder return policy. But given the fact that we have yet to come up with the business plan for next year, we have not made any decisions. But of course, having said that, now with the dividend payment separate taxation then now also to broaden the individual shareholders, now in order to be in alignment with the taxation policy, then we also intend to slightly increase the dividend payout. Having said that, now there's a number of indicators for our shareholder return policies. So for example, shareholder -- the share buyback and cancellation. So even if we do that, then this will not be undermining each of our policies. So we would also look into that. And next is about the tax-exempt dividend payout. And yes, we have also discussed this several times. And yes, we do have some profit available for dividend payout. But then now, looking at the industry trends then, now yes, there is also this kind of a dividend payout that is [indiscernible]. So we would have to wait and see, but we would also be positive about the changes as well. With regards to these overall changes, I do believe that we will be coming to some kind of decisions as the Board has to come up with the business plan for next year. But then overall, I can say that we are positive about both aspects. Lee Jeong-bin: Thank you very much. And now this is the CFO of the bank. So the question was about the deposits and loans. So now first, about the loans, then now in the first half, now given the fact that we have grown in the previous year, so we were conservative in terms of our loan growth outlook. So that was for the corporate loan. And then now for also loan, then -- now there was also some increase. And then also, yes, in terms of the banks, then we are a bit over the guidance that was given by the government. But then for the fourth quarter, I do believe that we will be in line with that. And then now for the corporate loan, as I have mentioned earlier, now there was some conservative growth in the first half. But then now in the third quarter, then there was over KRW 1 trillion growth in the corporate loan. And then now for the year, then we were actually planning for about KRW 9 trillion growth. But then now so the actual utilization will be about KRW 7 trillion to KRW 8 trillion. Then also the loan is in won so we were planning for about 5% growth. But then now for the year 2025, we will be growing by about high [indiscernible] so not too different from the plan. Then we're looking ahead to next year for the [indiscernible] loans growth. Now for the household loan, obviously, there are a number of regulations [indiscernible] specific environment for this. So it is not likely for the household loan to grow very [indiscernible] But then yes, there would also be some policy funds to be provided by the government. Then now for the corporate loans, then now compared to this year, so to be in line with the government's policy like the productive finance, I do believe that there will be more growth than this year. But having said that, next year, it is likely to be around 5% to 6% next year. And then about the [indiscernible]. And for this series, there were also some discussions about the deposit. And this is, of course, funding is very important. And also the cost management is also very important. So now then for this year, so we have also focused on the funding control to also defend the NIM. But then also, on the other hand, we also need to ensure funding stability. So yes, we also have a funding management strategy. Now in the fourth quarter, yes, there are -- for the traditionally, now this is the funding maturity period for the bank. So we are also making preparation. And also, the question was some concerns about the expected difficulties for the deposit. And yes, for the individuals and for example, the time deposit, it is being reduced, but then now we also are managing the interest rate quite tightly. So next year, next year perhaps, you can have more appropriate management of the interest rates so that we will be able to have stable funding. Unknown Executive: And then also last part of the question, so about funding moving to the capital market and how the group is making the decision for this. Now as the bank's CFO has mentioned, so it seems as if there is a little change in terms of the capital flow in and outside of the bank. But then now, we can see that now for the money flow, so we see that it continues to be stable. But now in terms of the resource allocation, now for the next year and rather than the resource allocation in the bank, we would also allocate more resources to the capital market, and we intend to be flexible depending on the market circumstances. Cheol Woo Park: I hope that answered your question. We will move to the next question. [Operator Instructions] HSBC's Won Jaewoong, you have a question. Please go ahead. Jaewoong Won: Thank you for good results. Now looking at Page 9, the bank delinquency rate seems to be staying stable. So I was fairly encouraged by that. Now then such trend in fourth Q do you think will continue also for the next year also? That's my first question. The next question is that card delinquency rate in the third Q, it dropped significantly. So the public will [indiscernible] support coupon, may that happen? Or on the card side, do you think there is also signs of stabilization? And the next question is about the credit cost. Now this year, the guideline was about mid 40 bp. I do believe that was your target range. Then in the third Q, you managed quite well, given that in the fourth Q, seasonality makes that we need more provisioning. So I think it could creep up. And does that mean that the credit cost needs to be expected higher than anticipated and fourth Q one-off provision, it's not going to be that high. That's my question. Cheol Woo Park: Well, thank you for your question. While we prepare for the answer, please bear with us. Unknown Executive: Yes. Thank you for that question. Now in terms of the asset quality prospects and second was related to credit costs. About credit cost, I will answer first. And about the asset quality on the overall situation, Group CRO, will respond to that. And Banks and Card CFO will talk about banks and cards asset quality related and respectively. Now in terms of guidance on credit costs, if I may give you the conclusion first. As I said, the mid-40 bp in the first half earnings call, I think it's going to hold for the coming period also. Of course, seasonality require more provisioning. But if our simulation shows that within this range, the mid-40 bp range would cover everything. Of course, in the future, on a short-term basis, there could be some unforeseen circumstances, but in the current position, I believe the mid-40 bp range still stands going forward. Dong-kwon Bang: And I'm CRO. Let me give you overall response to the asset quality. So bank delinquency rate, yes, you said it was stabilizing. So on a group level, not only bank, but for all of our subsidiaries, including nonbank side. In terms of asset quality, I think we are seeing signs of flattening. But as you know, there's a lot of uncertainties in terms of economic outlook and also there's also other external uncertain factors, including tariff situation. So in terms of now the prices and the current policies again are all uncertain. So the flattening, whether it will go down further, I think it's only to make any judgment. So fourth Q up to the first Q of next year, we just have to wait and see. So we will maintain the current trend up to that time, then I think the result will be positive. That's our anticipation. And as you know, on the banking side, on the banking sector, in Korea, we are one of the relatively best in terms of asset quality. So we will try best to maintain that. Lee Jeong-bin: Yes, I'm CFO of the Bank. So if I may add on a response to the CRO. So for Shinhan Bank, when it comes to asset quality, up to a few years ago, among the top 4 banks in Korea, we were actually falling a bit short. So asset quality, of course, is very important, while continuing growth is also important. So we have made various efforts for asset quality, like credit risk system, the management, the portfolio level. And as a result, among the top 4 banks, delinquency and other things are very much staying positively. But as the CRO stated, asset quality or delinquency rate, whether it has become stable, it's too early to say. But flattening, it seems to be continuing, but I think we need to keep our guards up. So within first half of next year up to that period, we have to keep close tab on the asset quality and manage it tightly. Additionally, on the banking side, the credit cost, we are managing on the bank level also. So on the fourth Q, when it comes to credit cards, we will implement more prudent policies. That's my opinion. Thank you very much. Hae Chang Park: So my -- I'm Card CFO. So the card delinquency ratio, we look at on a monthly basis and keeping close tabs on it. So we also look at the new loans that become delinquent. So it peaked in 0.45%, but it improved to 0.41% in September because of the public relief fund that you talked about that increased small merchant sales, thereby improving the overall finances of the small merchants. But going forward, the government will continue to support small merchants and self-employed. So we have to keep a close watch on that. For example, in the past, for a small merchant, low interest rate lending, they said they will put about KRW 10 trillion toward that. So if the policy continues, in the pandemic era, that also improved the situation. So we think that will be something we will also see here also. Thank you. Cheol Woo Park: Thank you very much. I hope that has answered your questions, and we will take the next question. [Operator Instructions] So there are -- yes. Yes, there is a question. From Hanwha Securities, we have Kim Do Ha. Do Ha Kim: I'm not sure whether it is a question that would have a specific answer, but I would just like to get your thinking about these topics. So now look at the slides, for the first time in a while, I could see that the interest spread. So it was rising by 3 bp. So from last May to this year, then we see that the interest rate was falling, but then it seems as if considering the circumstances, you were able to really defend the margin. Now then for next year, then if this is the trend, then we need to think about a higher margin next year? And also it seems as if the securities performance is also very good. So then in terms of the resource allocation for next year, then I wonder whether the shareholder return increasing, whether that will be the end all? But then for example, if the margin is going to be better or if the securities profitability is better, then perhaps you can allocate more for growth? So yes, I know that this is a question that defies an easy answer, but then I was just wondering what the group is thinking. So that is all. Cheol Woo Park: Thank you very much for the questions. And yes, please give us a moment to prepare our response. Sang Yung Chun: Thank you very much for the question. And yes, the question that you have raised is actually what we have been thinking for quite some time. So first of all, about the interest spread. Now this is what I would think. So first of all, the policy rate was cut twice this year and then also for the year, then we believe that there is going to be one more cut. And then now we see that, yes, gradually, the interest rate is falling. But then when we look at the market rate, then looking at the usage and also in Korea and then also the FX, so considering other circumstances, then the interest rate taking a clear fall is not really for certain. So that is something that we needed to consider. So yes, the margin perhaps compared to what we have thought last year, the margin did not fall as much as we had expected. Now that is for the short term, but then now for the longer term then both in the U.S. and Korea, then at least 50 bps or even more than 70 bps. So the prevalent view is that it is going to fall by over 70 bps. So then for the longer term, the interest rate is likely to come down. So then looking at the profit and loss for the end of September, then we can see that the interest rate increase was much lower than the overall revenue increase. So right now, we are just defending the interest income, but then over the long term, we believe that the interest income is likely to fall. So we need to be more conservative about this outlook. On the other hand, what we are more positive about is now on one hand, yes, there is the capital market and also the noninterest income, which is doing much better. So for example, brokerage and also the IB, so the noninterest income is actually quite sturdy. So those are also the areas, the businesses where we must have in order to keep growing. So we will continue to encourage that. But then in terms of the resource allocation, as I have mentioned earlier, basically, in terms of the allocation for growth, now compared to this year for next year, then rather than in the bank, the allocation would be heavier for the capital market is the direction for next year. But then again, in terms of the allocation for the growth then, now in terms of the shareholder return policy, so we have already stated the target for the shareholder return. So we will keep to this commitment. But then now the ROE continues to improve, but then also compared to the COE that we have, then it is still lower. So again, we will be flexible about this. But again, overall, the direction is to follow the plan for corporate value enhancement. And then also for the asset growth because the nominal growth is very low. So I mean there is a limit to how much we can pull this up. So in terms of the resource allocation, we will remain with the current framework. But then now in terms of the specific allocation, there could be more -- a bit more allocation to the capital market to be in line with the market circumstances. That is all. Thank you. Cheol Woo Park: Thank you. I hope that has answered your question, and we will take the next question. So next is Kim Jiwon from DAOL. Jiwon Kim: So CET1 ratio is my -- about -- my question. So it seems the lending side has grown. So as you said, RWA, it's relative though on the household lending, and you said that will be in alignment with government policy. But as being higher on the corporate side, you said that there will be more growth. And for us, RWA overall management strategy, how is going to see that going forward? And is there any factors where you could grow CET1 ratio further -- CET1 ratio further going forward? Cheol Woo Park: Please wait as we prepare an answer to your question. Sang Yung Chun: So RWA and also the future directionality of the -- that. So RWA, we have grown slightly in the Q3. So it looks -- it's higher than the first half. But if you look at the ratio of the growth compared to the previous year, it's still on the lower side. So on the third Q, RWA has grown slightly, but on a yearly basis, compared to the initial expectation of its growth, I think it will be lower than the expected. And going forward, the RWA growth rate, the recurring growth rate would stay on the path of the [ current ] year. And internally, if you take a deep dive for the household lending for the second and third Q because there was high market demand. However, due to regulatory environment now, household lending, I do not think, can grow further. Then on the corporate side, there will be the growth driver for us. But as you know, relatively speaking, corporate side, we have also allocated resources a lot in this area. So the corporate loan in terms of the share will grow, but it will be managed with the overall framework that we have. And in terms of CET1 ratio, compared to last year, this year, the level is a bit higher. So due to various variabilities that is anticipated, we increased it a bit. CET1 ratio, it's not always high being the better. So in terms of capital efficiency, the current mid-13% range is the adequate level. But by Q4 seasonality, there will be less earnings given so it will dip a bit from the current level. But on a yearly basis, we said the base will be 13.1%, but it will be managed in a higher level than that. Anyway, the CET1 ratio be it in the asset growth or it's a key in the shareholder return policy. So we maintain the base, but would also give a lot of buffer so they can be managed on a stable level. Cheol Woo Park: Thank you very much for the response, and we will take the next question. [Operator Instructions] So there are currently no questions requested. So it seems as if there are no further questions. And then with that, we will conclude the 2025 third quarter earnings release conference call by Shinhan Financial Group. You can find today's presentation at our web page as well as the Shinhan Financial Group IR YouTube channel. If you have any further questions, then please contact the IR team. And we will see you again in February next year for earnings release for the year of 2025. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

201天前Insight Analytics约5分钟阅读

ELO.OL 2025 Q3 财报电话会议

Erica Binde Honningsvag: Good morning, everyone, and welcome to the third Quarter 2025 Results Presentation for Elopak. My name is Erica Honningsvag, and I'm the Investor Relations and Treasury Officer. Today's presentation will be held by our CEO, Thomas Kormendi; and our CFO, Bent Axelsen and will last for about 30 minutes, followed by a Q&A session, where the people here in the audience and the people watching online will be able to ask questions. So with that introduction, I will hand it over to our CEO, Thomas Kormendi. Thomas Kormendi: Thank you, Erica, and good morning to all of you here in Oslo. It's actually lovely to see such a filled room here today. And also, of course, a very warm welcome to everyone joining us on the webcast. Today, we are particularly happy actually to present the best ever financial result for the group to date. So it's a presentation with quite a few milestones, and we are very, very excited to present. Before we start on the quarter, of course, just for those of you who are not so familiar with Elopak, what we do is, we are in sustainable packaging. What we do is, we protect commodities, we enable nutrition around the world, and we do all of that with a mission of actually reducing the overall plastics consumption. So replacing more and more plastics with more and more carton packaging. But let's then look at the quarter, and it's been quite a unique quarter, as I said. First of all, we have seen a plus EUR 49 million EBITDA result with more than -- with 17% margin level. It's a very strong result in absolute terms, and it's also within organic revenue growth of 1.2%. Most of the revenue -- most of the result is driven by an incredible strong performance. Again, I have to say, in Americas with 18% growth, and also in a period where our plant in Little Rock, actually for the first quarter, started turning a profit, as we said that it would do actually after Q2 as well. It's also a quarter where we -- and I will address that more later in the presentation, have decided to increase the capacity ahead of time in U.S. with yet another line. So the third line to be installed and also now a quarter where we say that even though the EMEA business is meeting some consumption headwind generally, we are seeing that the business is resilient and doing well -- in spite of all of this. And finally and very importantly, I'm sure for many in this room here as well, this is a quarter where we have a solid cash generation. We've been able to pay back our net debt and are now facing a 2.1x leverage ratio, again, in line with -- almost in line with the midterm target. So overall, strong financial performance in the quarter and some very important milestones for the future growth of Elopak. Let's just think 2 minutes on the strategy that we presented back at the Capital Markets Day, and that we've been following up since and where you see that the quarterly result we have now is a direct result of the activities we have initiated throughout this period and on the back of the strategy. Our strategy consists of 3 elements: number 1 relates to the geographical, what we call global growth. For us, global growth for a very, very, very big part relates to America and the continued development in America. Needless to say, performance in America and what I've just shown is a testament that, that is actually paying off. The second one relates to the development around making our core stronger. And our core in Europe, where we have a significant part of our business, also relates to development, innovation around new materials in line with and meeting the regulations upcoming in EU such as the packaging and packaging waste regulation. A lot of the work in that field is directly transferable into the overall ambition we have in replacing plastics, what we call plastics to carton. This is a massive area way outside our current business but in adjacent areas, but also in the actual substrate shifts happening in our business, i.e., if you think of it, the milk currently packed in plastics moving into cartons, et cetera. But the potential, of course, is way, way, way beyond that. Now starting with number 1 and the geographical expansion, let's just turn and think about Americas, again, because it has been quite a journey for us. We -- as some of you remember and seen is, we decided back in '23 to establish a new plant in U.S. And that is on the back of a position we've had in U.S. for -- actually for 20 years. we came to North America in 2000, yes, and supplied North America with plants in Canada, our big Montreal plant and also the plants in Mexico and the Caribbean. In '23, we decided we need plant inside U.S. and then we established the plant -- decided to establish a plant in Arkansas, Little Rock. In September of the same year, we announced that we are going to put in another line in that plant because we saw increasing demand around our supply, our services, our packaging offerings and generally an opportunity in the market. In April of this year, we had the inauguration of the plant. The plant, I can happily say was built, constructed and made in time and on budget and has been up and running ever since and we are ramping up. And as you have heard earlier, we are now seeing the fruits with the plant turning a profitable business already here in Q3. So the demand actually in America is very clear. And if you think of it, we have been growing since 2020 on an average 15% a year. That's a 76% actually the growth in the Americas business in a market, in a stable, mature category such as milk and juice. So we have seen that there is a demand for what our services and for that reason, we have also taken the step now to announce the decision that we are going to build, extend our capacity with the third line in Little Rock, allowing us to drive our market share, continue to -- on the growth pattern we've been on, allowing us to establish a much broader portfolio than we had before, simply given that as equipment gets to the manufacturing plant, gets more and more full with existing orders, we need to have a broader setup to be able to offer a broader portfolio. And that is what we're going to do with the third line. So what is very fundamental is that with this third line that we're actually putting in place somewhere a year ahead of what we had originally thought. But with this, we confirm again that we will reach our targets as presented on the CMD back in '24, the midterm target as well as the long-term target. This will enable us to drive as I said, increase our value share -- our share of wallet with a number of our customers as well as increasing our market share in general in America. Because of the product mix, though, in America, which is in the third line, will be primarily focusing on smaller size packs, including anywhere from school milk size and upwards. For our large customers in the U.S., they always have a mixed portfolio in their sales, i.e., from very small ones to the larger half gallon sizes. For us, establishing a third line, enables us to get a higher share of wallet with them, supplying them the full portfolio and hence become a better and more valuable supplier to the industry and to our customers in general. So although we have a run rate because of the product mix on the third line, which is different than what we have announced on the first line. We're also going to see that with this, it's accretive to the group, and it's certainly very, very strongly supporting the group's industrial presence in America. It would also mean that we will have a higher level of flexibility in how we run operations in America. We will have a higher level of operations with line 2. And 3, which will allow us to ramp up line 2 at a faster pace because of line 3 than without line 3. And that has to do with product mix and how you move products and sizes, et cetera. Very important is, we are building line 3 because we have the commitment, full commitment on that line from customers in U.S. So the line 3 acts both as an industrial strategic investment, it has the full backing of customers, and it is definitely accretive to the group, and will strengthen our overall position in U.S. Now back to our results. And as you will see, we have a revenue that is down, but on -- due to the currency effect in U.S., on an organic level, we are up by 1.2% and up by around 2% for the full year. EBITDA wise, we have a strong performance, which is both in the quarter and of course, in the year, but in the quarter very strongly driven by the development in U.S. And remember, we have a negative currency effect that we'll address later in this period. All in all, we are heading now at 17%. And for those of you who recall our Capital Markets Day targets, we did say 15% to 17% midterm target. So it's -- it's a very healthy level for us to be at in this period here. There is a one-off though, which has to be set in EMEA of around EUR 1.5 million, which is also part of why we get a positive one-off -- of EUR 1.5 million. With this, as I said, this is actually the highest EBITDA we've had to date, and we are very excited with what that brings to the future. So with this, I think I'm going to hand over to you, Bent, on the financials. Bent K. Axelsen: Thank you, Thomas, from financials to more financials, which is fun today. Let's jump straight to it with EMEA. What we can see here is that we are delivering a revenue of EUR 206 million, which is 5% down compared to last year. But if we analyze the performance, the underlying performance, we can say that we do have a resilient performance despite continued soft consumption. Now why is that? If we look at our Pure-Pak revenues, they are stable year-over-year. So what we are seeing despite the soft consumption, we are continuing to increase market share. Specifically for this quarter, we are regaining our business in MENA as fresh dairy is strengthening in that region. And in the -- for the aseptic business, we are growing by taking market share and basically growing with our customers. If you look at the key contributor to the revenue decline, it's actually related to filling machines. We are commissioning around the same number of machines this quarter compared to last year, but the machines are smaller. So we have a negative mix effect. That actually explains around 60% of the revenue decline. So if you move on, we -- as we have reported before, we still observe a competition in the Roll Fed segment, and that is happening both in Europe and in India. In Europe, it plays out through lower volumes, albeit at -- the pace has slowed down. So we see a positive development in the Roll Fed area because we see that the trend is slowing down. In India, it plays out with a margin squeeze because it's a crowded place. We are growing organically 19% in India with our Roll Fed business. When it comes to profitability, we are reporting 36.7%, that is up 2% compared to last year. That comes from improved pricing and improved mix in Pure-Pak. And we also have this switch from Pure-Pak to Roll Fed, which is also contributing to the positive mix. And Thomas already mentioned the one-off, which is in Europe, which has also impacted these results by -- positively by EUR 1.5 million. So in conclusion for EMEA, resilient performance despite continued soft consumption. Over to America, the growth journey continues with a revenue growth of 11% or 18% on a fixed currency basis. So we are still seeing the interest and the demand in our products. So the growth is in revenue, is volume, carton and closures, and it's enabled by two things. Obviously, we have the ramp-up in the U.S., but we're also seeing improved productivity in the assets in Canada and in combination that is then enabling this growth. Also in America, we have a negative revenue impact in regards to filling machine. So it's the same explanation here. We have a mix effect. In this quarter, we have commissioned school milk machines, and they are smaller in size and also then smaller in revenues. If we move to the EBITDA, we see a very strong growth of the EBITDA, 21% growth of the EBITDA up to EUR 21 million with a margin of 24%. In addition to the top line growth itself, we have positive mix effects but we also do see the benefit of improved asset utilization, and we are leveraging our fixed cost base. It's also -- of course, as Thomas mentioned, very proud that this is the first quarter with positive EBITDA in Little Rock, a milestone for us. We are very, very pleased with that. The ramp-up continues, and it's obviously better than last quarter. But we obviously would have liked to see even faster ramp-up than what we have seen. When it comes to the joint ventures, we have an EBITDA or a share of net income of EUR 1.4 million. That is actually a decline from EUR 2.1 million and the explanation for that is a softer demand and a change in consumption habits. But overall, the key message is that we do have improved that utilization that enables growth in America. Let's take the group perspective and start with the net revenue mix. So this is EUR 7.4 million, and that is mainly driven by: one, the growth in America and the positive mix and pricing effects in EMEA. When it comes to raw material, this is again where we have the one-off, which is positive. And then we have a negative effect of EUR 0.6 million for the underlying raw materials. That comes from board price increases, all the price increases, even though the PE has softened year-over-year. Our operating costs are mainly explained by salary inflation of 3%. And also the ramp-up in Little Rock, which also is affecting the operating cost level somewhat naturally. The rest of the fixed cost base in the company remains rather stable. The last bridge element, we have already mentioned joint ventures and the FX, which also Thomas talked about, that is the result of the 6% weakening of the dollar versus the euro on an average year-over-year basis, leading to the 70%, which is on par with the best we have done. Let's move to the cash flow. It's probably the most exciting part of the financial this time because we also are not only reporting record profitability, but we are also reporting record cash flow generations -- sorry, cash flow generation from operations. The cash flow from operation is EUR 55 million. It's not only driven by the profitability but also driven by the improvement in working capital. This element is, to a large extent, driven by timing of accounts payables, that can go up and down between quarters. It was quite low last quarter, and then it's higher. So this could vary a little bit up and down, important to notice, but we also have an underlying improvement of our inventory in Europe from our working capital project. Also here, we are seeing the ramp-up effect of Little Rock. We are also building working capital, obviously, as a part of growing the top line in the U.S. Our cash flow from invested -- investing activities is EUR 11.5 million. We are still having EUR 2.4 million in investment in Little Rock in this quarter. The rest is our replacement program in Europe. While filling machine investments are lower than last year because most of the projects are sales rather than lease and then it doesn't impact the investment line. Cash flow from financing activities is also EUR 11.5 million, nothing special there, which brings us to a net debt of EUR 272 million, so which means that the cash bank debt has reduced EUR 31 million quarter-over-quarter, which we regard as a rather solid. With this cash flow generation, we are deleveraging the company. As Thomas said, we are bringing the leverage ratio very close to our midterm target of 2x. This comes from not only the payment of the debt, but we also have improved the LTM EBITDA by EUR 3 million. And the good thing with that, it enables future investment in our strategic initiatives and it allows us to continue to pay healthy dividends. And if you check your bank accounts, yesterday, you received dividends in total, EUR 21.5 million. This comes from the second installment of 2024 and also from the first half result of 2025 as we are in this transition year from annual dividend payments to semi -- to 2 payments per year. If you look at the right-hand side, it's a little bit difficult to see, but the curve is going upwards on ROCE. So we finally are seeing improvement of our return on capital employed, as we have talked about in earlier quarters. And that is coming from the fact that we are finally making profit from our Little Rock investments with the capital that we already have installed there. We have so far invested $86 million in Little Rock. We have $42 million to go, and we expect that around $6 million of those will come this year in Q4. So in summary, the financial position is really strong. And we are continuing to leverage the company despite the investment program. So this concludes the financial section, which was actually quite great to present. Thomas Kormendi: Thank you, Bent. Good, you liked it. So finally, as you can sense, we are really happy to report to the highest -- and I would change that into the best financials yet for the company. It's EBITDA, as you saw, but it's also the cash generation that we have succeeded with in the period. And it's also a period where we are reaffirming our strategy. We are confirming the strategy we are now putting in and deciding on the third line, really it's putting a strong footprint in the U.S. and in the Americas in general, North Americas. . We are also seeing EMEA despite these headwinds that we have talked about that we're actually seeing very solid developments in big parts of EMEA, not the least in South, not the least in MENA that gives us the confidence that we're also here on the right track, and we'll continue to develop the business in line with the plans we've outlined in the Capital Markets Day. So all in all, what we are now saying is we expect to deliver within our mid-term targets as you know, which is 4% to 6% organic growth and 15% to 17% on the margin side for the year. And with this, I think we're going to hand over to questions. Erica Binde Honningsvag: Thank you, Thomas. Thank you, Bent, for the presentation. So we will now open up the floor for questions, starting with the audience here first. [Operator Instructions] Marcus Gavelli: Marcus Gavelli, Pareto. So you have previously said that line 2 will be fully ramped up in H1, '26. At the presentation today, you said that line 3 will coincide with line 2. Could you try to provide some color on what you really meant by that because I assume that line 2 is still on track, and line 3 will come a bit later. Bent K. Axelsen: I just want to clarify that we will open line 2 in H1, '26, not ramp up. Thomas Kormendi: Yes, we would ramp -- what we said then was we are going to ramp up during '26, right? It's not that in -- that we are fully done. As we have said, we're going to install line 2 and start ramping up during next year. Thank you. So why are we saying that the two actually help each other? Well, it is like this, right? If you look at the industry and the -- I don't think in a way, the dairy industry is way different than many other industries, our big customers have a variety of sizes, formats, and evidently, we look at their supply -- suppliers, one of which is us to say, can you supply us with a broad set of formats in order for us to essentially become -- in order just to close a partnership with you. And the close partnership in our industry is really, really important because you know we have very long tenures generally in the industry. The closer we work with someone, the better we can develop it and the longer performance we can actually secure for our customers. So with this move, we ensure that we can use our line 2. On some formats, that would not have been possible had we not had line 3 to complement that. And from a customer point of view, they would then have said, it's difficult for us to move volume into you unless you can also do some other formats. That is the simple -- so it's a little bit opaque when I put it like this, but it is actually what it is. Marcus Gavelli: That's perfect. And then also with what you said in MENA with the volume growth commencing again, could you again try to provide some color on -- is that more of a one-off? Are you seeing some sea change over there? And then also how you think about, I guess, growth into Europe with price increases and so on. Thomas Kormendi: I think sea change is probably overdoing it. But I'm very optimistic around MENA, honestly. And it is what it is. It's a sensitive economy, right? So consumption is impacted by ups and downs, clearly, but the underlying business for us is the strategic direction we have is add more value to our customers in MENA by adding ESL, longer shelf lives, which drives down their cost, improves the performance of the products in shelf, have a better product with a better looking product on shelf, et cetera. And that is actually why we are seeing that we can gain business and are gaining business. Now the business we are gaining is not necessarily the business you see right now in this quarter because, as I say, there are ups and downs. But why I'm saying I'm positive is because underlyingly, we are moving in the right direction. And then what we have seen in previous quarters, a little bit how Ramadan falls and inventory builds up, et cetera. So in a way, I wouldn't put too much focus just on a quarter when it comes to MENA, much more is the underlying business moving in the right direction, and it is. Bent K. Axelsen: And also technically speaking, I think the quarter last year was relatively soft. So part of that is also a rebound, but it's really, as I must say, we need to look into a longer perspective to really get insight from the development. . Erica Binde Honningsvag: Okay. So then we will move forward with the questions that we have received online. Starting with a couple of ones from Jeppe, in Arctic. I will take them one by one. It's regarding the line 3. What are the expected revenue levels and EBITDA margin for the third line? Thomas Kormendi: So what we are saying is run rate is going to be lower than when we talked about line 1. It's a different product mix than what we talked about 1, which was really a very, very -- I wouldn't say simple because that would offend the people of Little Rock, but a different mix than saying actually 1 product versus different products, smaller formats. So it's going to be lower. We're not complete -- we are not explicit about it because we are looking at the plant in combination of the 3 lines, right? It's not this line, that line, this line. The combination of the lines will generate the result. And in fact, what we're even doing more is we are more occupied with looking at the Americas result than single lines and single factories. And on the Americas result, we can just reaffirm we are going to deliver the midterm targets and the long-term targets. And then we will fix the mixing between the various production lines. Bent K. Axelsen: I think the key here is the midterm target. And I also want to note that typically, the way we follow up the American business is in dollars. We did convert that to a euro top-down target in the Capital Markets Day. And back then, the currency was [ 108 ]. So obviously, things have happened to the currency as well. So that could also be good to remember when you are calculating. . Erica Binde Honningsvag: Okay. When do you expect production to start? And what's the planned ramp-up of line 3? Thomas Kormendi: We expect production of line 3 in '27, which means that with these lines, there's a certain lead time when you order them and then installing them, et cetera. And that's why we're doing it now to be able to actually produce in '27. Erica Binde Honningsvag: So does the addition of this line affect the ramp up of line 2? Thomas Kormendi: It does affect the ramp-up because it gives us flexibility to move products around. To the point of saying with the line 3, we can get more customers in who have a mix of products, more customers in will allow us to move products between the lines in a faster pace. And hence, we think it's going to be very beneficial for Line 2 as well. . Erica Binde Honningsvag: And last one from Jeppe. Will this dilutive school milk production form the joint venture? Thomas Kormendi: That is not the intent, no. Erica Binde Honningsvag: Okay. A couple of questions from Luis in [ BNP ]. Can you give some extra color on what the EUR 1.5 million one-off is related to? Bent K. Axelsen: I can do that. So basically, over the last couple of years, we paid too much in utility costs in one of our factories. And we got that money back. So we paid the amount. So it's nothing more dramatic than that. So it's basically a retroactive correction. Erica Binde Honningsvag: Is Roll Fed production integrated with Pure-Pak sleeve production or can otherwise repurpose activity? Thomas Kormendi: Can you just take it again, please? . Erica Binde Honningsvag: So is Roll Fed production integrated with Pure-Pak sleeve production or can otherwise repurpose activity? Thomas Kormendi: I assume this refers to -- if you -- okay, let me put it like this. If you look at our plants now, it's integrated as much as in the same plant, we will do both. But it doesn't mean necessarily it's all the same machines, of course, because you have -- in Pure-Pak, you have sealing machines, you don't use for Roll Fed, and you typically have different converters as well where possible. We are doing Pure-Pak and Roll Fed in Åhus, we will be doing Pure-Pak and Roll Fed in India as well. So you will have mixed factories, and you will have factories that are not mixed. Erica Binde Honningsvag: Last one from Luis, what is your competitive advantage in aseptic since you mentioned MENA customers are moving that way? Thomas Kormendi: Right. So that -- I think that's a very interesting actually question and something I could probably give a longer answer to it, but I will make it reasonably short. I think from a -- if you are in the aseptic business, right, you are going to look for something that I mean, let's now, let's go one step back. On the aseptic business, clearly, you need performance, technical performance, you need the performance on the packaging systems, et cetera. So that is the fundament for anyone who goes into this business. In the case of Pure-Pak, we have a technology that allows us to keep a low waste with our filling machines. That is because it is blank fed versus Roll Fed, and that actually means that the amount of waste during the production is much, much, much lower in those systems. That's number one. That's a more technical operational issue. Our machines, our system is running at a high technical efficiency, which is important, of course. But the market point is -- it is a system that is unique. It is the iconic system for carton packaging, milk packaging and it is actually the consumer preferred system as well from a handling and consumer point of view. This is, I think, evidenced by the development we have, for instance, in South, where we're seeing solid growth in the UHT long-life milk areas and also in other markets where it is. It is a system with a solid technical performance and a very -- and a high consumer approval. In short, we can do it much, much longer, if you like. You want to buy a machine, let me know. Bent K. Axelsen: We can also lease it. Erica Binde Honningsvag: Then we have a question from Ole Petter in SpareBanken. This quarter saw smaller machines both in EMEA and U.S., should we expect an increased share of smaller filling machines also for Q4 and into '26? Or was this a special for the third quarter? Bent K. Axelsen: I think this timing has proven to be very difficult to predict. So generally speaking, I would say that Q3 was usually -- was unusual from a size perspective. I think we haven't done an explicit forecast on that. But our hope is, of course, to get back to the big machines. So we can generate more blank sales and also improve our working capital position. But it will be -- this will be always going a little bit up and down between the quarters. Erica Binde Honningsvag: Then we have a question from Amer [ Jabbari ]. How does the cost pressure in raw materials impact your pricing directions in '26? Thomas Kormendi: Right. So this is, of course, early days to be specific around pricing. But what we do see is that there are raw materials, including board, which will go up in the coming period. And for us, of course, it will mean that we will also increase our prices for TransX. I cannot evidently explain the amount, but we will be increasing prices, yes. Erica Binde Honningsvag: Okay. We have a last one, but I think you covered it during the last question, was regarding board price changes for '26. All right. If there's no further questions from the audience here, I think we will round off today's Q&A session and also the results presentation. Thomas Kormendi: Thank you very much. . Bent K. Axelsen: Thank you.

201天前Insight Analytics约5分钟阅读

WRTBY 2025 Q3 财报电话会议

Hanna-Maria Heikkinen: Good morning, and welcome to this news conference for Wärtsilä Q3 2025 Results. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Today, our CEO, Hakan Agnevall, will start with the group highlights, continue with the business performance. And after that, our CFO, Arjen Berends, will continue with financials. After the presentation, there is a possibility to ask questions. Hakan, time to start. Håkan Agnevall: Thank you, Hanna-Maria. Thank you, and welcome, everybody. This quarter was a good quarter actually, and we are moving in the right direction, but it's also a quarter where you need to look a little bit under the hood. I mean, first of all, operating results and cash flow increased. Order intake was stable at around EUR 1.8 billion. But if you look at organic growth, it's actually up 6%. And also, if you look at Marine & Energy specifically, you see that Marine order intake was actually up 8%, and Energy order intake was up by 29%. The challenge, and I'll come back to that, is on our battery business, our energy storage business, where the order intake in Q3 for new equipment was basically 0. But Marine & Energy growing in a good way. This also leads to a strong order book of EUR 8.6 billion. Net sales decreased by 5% to EUR 1.6 billion. But also there, this is driven primarily by timing of deliveries on energy. So the deliveries in Energy will be tilted to the fourth quarter. I'll talk more about that later. Comparable operating results increased by 10%. So we continue our journey to reach our financial targets. We are now at 11.9% of sales. Operating results increased by 20% to EUR 230 million, which corresponds to 14.1% of net sales, and items affecting comparability amounted to EUR 35 million, mostly related to the divestment of ANCS. On services, our group service book-to-bill ratio continues to be well above 1. And cash flow, I will come back to that. We have a strong cash flow from our operating activities of EUR 340 million. Now let's look more into the details of the numbers. So if we start with the quarterly, the Q3 results. So order intake, as we talked about, is actually down 1%. But as I said, if you look on organic, organic growth, up 6%. You've also seen the growth in Marine, 8%; Energy, 29%. If we look at the net sales, goes from EUR 1.7 billion to EUR 1.6 billion, down 5%. But as I said, it's major related to prioritization of sales in Energy, and I will come back to that. If we look at book-to-bill, so we continue with a good book-to-bill above 1 at 1.1 this time. And I think this is the 18th consecutive quarter in a row where we have a book-to-bill above 1. Comparable operating result, EUR 195 million, up 10%, and we are now at 11.9% of net sales. And operating results, EUR 230 million, up 20% and now at 14.1% of net sales. If we look at the year-to-date, I think there are 2 figures that I would like to highlight. Our order book, which is up to 14%, up to EUR 8.6 billion and also our continued improved comparable operating result, up 18% going from 10.5% to 11.7%. Solid path to reach our financial targets. Looking at our 2 industries. If we look on the Marine market, we see a moderating demand for newbuilds. But still, in line with the 10-year average. And then if we look at Wärtsilä core segments, strong ordering across cruise, containers and LNG bunkering vessels. So the number of vessels that were ordered in Q3 decreased to 1,200 down from 1,700 corresponding period last year. The regulatory uncertainty, high newbuild prices and softer market conditions affecting negatively the newbuild investment demand in some segments. Ordering has though been uneven across vessel segments. We continued strong ordering appetite in Wärtsilä's key segments, cruise, containerships and LNG bunkering vessels. And contracting in our key segments is expected to remain clearly above the 10-year average level with the latest forecast, actually, indicating a 30% increase in contracting volumes between 2025 and 2027. Shipbuilding continues to expand, primarily in China. And in January to September, 259 orders for new alternative fuel capable vessels were reported, which accounts for 48% of the capacity of contract investments. On the Energy side, the increased demand drives investment in the energy transition. And the global energy transition continues to move forward. And EAI -- EAA -- IEA, sorry for that, International Energy Agency, not so easy to pronounce, this morning, expects renewables, grids and storage investments to post another record high in 2025 and investments in fossil fuels to decrease. BNEF reported that both wind and solar investments grew in the first half of the year compared to H1 in 2024. Energy-related macroeconomic development in 2025 has been heavily impacted by elevated risks in the geopolitical environment. In our engine power plants, market demand for equipment and services has been strong. Demand for baseload engine power plants is expected to remain stable with further growth opportunities in data centers. The drivers for engine balancing power plants continue also to develop favorably. In battery energy storage, though, the demand is closely linked to the increasing share of intermittent renewables, which in one side continues to progress slowly. However, the U.S. market is facing headwinds in the regulatory environment, though several drivers remain solid and actually also on the storage side now with data centers as a potential new opportunity. Going through the numbers. Organic order increased, as I said, organic order intake increased by 6%. Order intake overall remained stable. Marine order intake increased by 8%. Energy order intake increased by 29%, but energy storage order intake decreased by 79%. Equipment order intake remained stable and service order intake remained stable. If we look at the order book, we have a strong order book. Rolling book-to-bill continues well above 1. We see the trend. We also see that the order book is building up further and further into the future. So that is something to recognize. Organic net sales remained stable. So net sales decreased by 5%. Marine net sales increased by 18%. Energy net sales decreased by 30%. And this, once again, it's driven by the prioritization of deliveries between quarters. And we do expect that deliveries during the second half year will clearly be tilted in Energy to the Q4. Also, as you know, we have more and more equipment contracts moving from EPC to equipment and equipment contracts, to make it simple, they are invoiced when the delivery. EPC is a little bit more smooth than out. So you can also see this as one of the consequences of that we are actually moving our Gravita to equipment business. Energy storage, net sales decreased by 10%. Equipment net sales decreased by 11%. Service net sales remained stable. Profitability continues to improve. So net sales, given the context, decreased by 5%, but comparable operating results increased by 10% and comparable operating margin 12-month rolling is now at 11.6% compared to 10.6%. On technology and partnerships, so we continue to shape the decarbonization of Marine & Energy. The Energy, example, 217-megawatt dual-fuel power plant to deliver reliable power for Kentucky residents. So we will supply the engineering and equipment for 217-megawatt power plant in Kentucky in the U.S. The plant is needed to provide additional grid capacity, thereby helping East Kentucky Power Cooperative to meet increasing demand. And this order was booked by us in Q3. On the Marine side, we continue our close collaboration with Wasaline. And now we will together deliver the world's largest marine battery hybrid system project. So we have been selected as the electrical integrator for a major battery extension project for the Wasaline ROPAX ferry, the Aurora Botnia. When the project will be finished, it will be the world's largest marine battery hybrid system in operation, close to 13-megawatt hours. And the Aurora Botnia operates with a range of Wärtsilä solutions, including 4 highly efficient Wärtsilä 31DF engines. And this order was also booked in Q3. Marine, and here, we have a fantastic picture of a fantastic Finnish icebreaker. We are very much close to this segment, half of the world's icebreakers actually have engines from Wärtsilä. So exciting opportunities also in the dialogue between the governments of Finland and governments of the U.S. Marine. So increased order intake, net sales and comparable operating results and continued growth in equipment order intake. So we see overall order intake up 8%, net sales up 18%, and we do see also the continued improved profitability margin. The drivers in the bridge for the profitability, higher service and equipment volumes, better operating leverage. And on the headwind, it's increased R&D costs. We keep on investing in our future and being a technology leader in our space. If we look at the service business. Overall, Marine service book-to-bill well above 1. Strong growth in service agreements. However, in this quarter, we saw reduced order intake in retrofits and upgrades. So to the left, you can see 8%, I would say, solid CAGR growth in the Marine service business. On the right side, you see the different disciplines of our service business. You see the service agreement curve, accelerating in a good way. We now have about 30% -- 34% of our installed fleet under service agreement. The renewal rate continues to be above 90%, good progress. You also see the retrofits and upgrades coming down. But as we talked about before, retrofit and upgrade, that's a project business, and it can be a bit bumpy, and it's lumpy by nature. And we have a good pipeline in front of us that I can say. Energy. Increased order intake, lower net sales due to the timing of the deliveries, but continued growth in equipment and service order intake. So on the order intake side, up 29%. And this quarter, we haven't had a data center order. You remember, we had our first U.S. data center order in Q2. However, there is an exciting pipeline of data center opportunities in front of us, various stages of maturity. So there is a good pipeline coming. Net sales, down 30%, driven by the prioritization. Comparable operating results, the percentage is moving in the right direction. And if we look at the drivers, the higher service volumes clearly contributed to the profitability. But lower equipment sales in this quarter is, of course, a drag. And also here, we continue to increase our R&D investments to be a technology leader for the future. If we look at energy service business, the book-to-bill also continues to be well above 1. Strong growth in service agreements also here. However, also in Energy, reduced order intake in retrofits and upgrades. Here, you can see also a solid service business CAGR, 7% over 2 years. Also, it looks a little bit similar so as Marine. There is no correlation why this coincides, Marine & Energy. It's a coincident. But you can see agreement is continuing to go up also in Energy around 33%, 34% coverage, also the renewal rate on agreement above 90%, so very positive. We see the retrofit business clearly being down in Q3, but also here, we have a good pipeline in front of us. So energy storage, which, of course, on the order intake was challenging in Q3. So order intake low due to the U.S. tariffs, regulatory changes and also increased competition. On the positive side, really strong profitability in Q3, 6.9% EBIT, real EBIT in Q3. I think that's a strong delivery by the team. But of course, order intake coming down 79%. However, I want to highlight the press release we made yesterday where we took our first order in Q4. So we are also very clear that we do expect order intake to pick up in Q4. Net sales down 10%. The operating margin is -- continues to develop in a good way. And if we look at the bridge on the positive side, really solid project execution. We are delivering on our backlog in a very good way with a great risk reward and with happy customers. We also have higher service volume. So the service business is, of course, smaller than for the rest of our Wärtsilä business, but it's growing. And then on the negative side, we are investing, you could say, in growing, and that's part of our strategy that we have communicated in the past that we will expand on geographical coverage. So we are increasing head count supporting the new markets, new customers and the products. And here, you have the bridge Q3 '24 to Q3 '25. And I think really good development, Marine going from 10.4% to 12.4%, EBIT Energy from 13.6% to 15.9%. Energy storage, as I talked about before, from 4% to 6.9% and then portfolio business from 9% to 6.8%, but that is primarily driven by ANCS, which has now been divested. So we have taken that out and the business contributed profitably -- in a profitable way to portfolio. So comparable operating results increased by 10%. Other key financial side. Over to you. Arjen Berends: Thank you, Hakan. If we look at the other key financials, also very positive numbers in general. First of all, cash flow, clearly, a very strong cash flow in Q3. It was at least the highest cash flow in the last 50 years. We did not go further back, but EUR 340 million, clearly, a good number, taking us close to EUR 1 billion year-to-date. Good support in the cash flow from profitability, but also clearly from working capital. Working capital at the moment approaching, let's say, EUR 1.1 billion negative, which is also an all-time low. Net interest-bearing debt, clearly moving also in the right direction, EUR 1.4 billion at the moment, negative. And return on capital employed, ROCE, clearly improving from 44.6% at the end of Q2, now to 51.1%. So over the 50%, which is really remarkable for us as a company. Gearing, clearly, going also in the right direction. We have been running this at a negative number already for a long time, well below, let's say, our financial targets and solvency also clearly improving now with improved profitability. Earnings per share, both on the quarter as well as on the year-to-date clearly ahead of last year at the same time in the same quarter. If we look at the trends, cash flow as well as working capital to net sales ratio, both are moving in the right direction. If you look at the dotted line on the right side graph, working capital or let's say, 5-year average working capital to net sales ratio every quarter, we are, let's say, lowering the line basically. At the end of Q1, it was 2.4%. At the end of Q2, it was 1.3% and now 0.1%. So we are very close to a negative line here as well going forward. And actually here, I also want to comment, let me anticipate that, let's say, this negative working capital will sustain the next years. Looking at our financial targets and the progress there. If I start at the left side, top graph, Marine & Energy combined organic growth, plus 13%, well above, let's say, our targets of, let's say, 5%. So really going in the right direction here, same for profitability percentage at the end of Q2 was 13.1%, now 13.2%. So it's again a step up, a small step, but a step up. If we look at energy storage, of course, growth is not there as we want it to be, given all the, let's say, challenges that we had in the past quarters on that one with respect to order intake. But clearly, let's say, the delivery is going very well. And also, let's say, as Hakan also explained, let's say, generating good profitability from executing projects from the order book. Currently, we are at 4.2% of sales here and really within the frame of the financial targets. Group targets, I don't want to comment too much. I think gearing is very obvious. We are well below 0.5 positive. We are actually 0.5 more than negative and dividend, we have always met our financial targets of paying at least 50% of EPS out as dividend. With these words, back to you, Hakan. Håkan Agnevall: ROCE at 50%. This is... Arjen Berends: Yes, yes, fully agree. Håkan Agnevall: Now we continue our journey to become a more focused, stable and profitable company. So we are making progress in our portfolio business divestments. So as we announced in Q2, the divestment of ANCS to Solix was completed the 1st of July. And in Q3, this divestment had a positive impact of EUR 34 million on the result, and it's reported in the items affecting comparability in Q3. Annual revenue of the business was close to EUR 230 million in 2024. So that's also a data point. ANCS did not anymore contribute to the figures in Q3 2025 and the group order book has been adjusted accordingly, so impact about EUR 260 million. And on MES, as we announced in July 2025, Wärtsilä MES, Marine Electrical System to Vinci Energies and subject to approvals, the transaction, we expect the transaction to be completed in Q4 2025. So given -- let's look at our outlook then. So for Marine, we expect the demand to be better than in the comparison period. In Energy, we expect the demand environment for the next 12 months to be similar to that of the comparison period. But here, we also note that Q2 was all-time high in order intake. So we are coming from a very strong order intake in Energy overall. On storage, we expect the demand environment for the next 12 months to be better than in the comparison period. However, here we really highlight the geopolitical uncertainty that particularly impacts this business. Then we also make a general comment that we underline that the current high external uncertainties make forward-looking statements challenging. Due to high geopolitical uncertainty, the changing landscape of global trade and the lack of clarity related to tariff, now risks for postponement in investments, decisions and also of the global economic activity slowing down. All right. So that was a summary of Q3. And now we open up for Q&A. Hanna-Maria? Hanna-Maria Heikkinen: Thank you, Hakan, and thank you, Arjen. [Operator Instructions] Operator: [Operator Instructions] Next question comes from Max Yates from Morgan Stanley. Max Yates: I guess my first question, just starting on the data center-related business. I guess the first thing to understand, when you talk about anticipating better order intake in the fourth quarter, to what extent is that a comment around data center and the energy thermal business? Or are you really just relating to the energy storage business? And I guess, more broadly, when we look at quotations and conversations with your customers, I mean, maybe help us understand how those are evolving versus 6 months ago. I think there's a lot of expectation in the market that there's more emphasis on engine technology, there's a greater acceptance of the engine technology. Would you say you kind of see that reflected in your customer conversations and the number of these kind of hyperscalers and colocation companies that are kind of knocking on your door or flying into Wärtsilä. So any comment there would be appreciated. Håkan Agnevall: Absolutely. Quite a few questions, but I'll try to answer them. And even if I forget some of them, please remind me again. So just to clarify, this is about Energy Q3, Q4, that is on the sales side. I mean, our deliveries, where we clearly say that deliveries and therefore, sales recognition are clearly skewed to the fourth quarter. So that is not related to the whole data center. I will get to that later, but just so we are clear, so we have been clear in our communication. It's related to deliveries, and we're basically saying deliveries and therefore, sales recognition is skewed to Q4. I mean it was fairly low in Q3 for Energy. Max Yates: Sorry to interrupt, but you do say in the release, we anticipate ordering to pick up in the fourth quarter. So I guess I was just trying to understand on that comment. Is that storage or is that the thermal business? Håkan Agnevall: Okay. Okay, good. That's -- so first, I talk about Energy, and I made the comment on sales deliveries and Energy, that is our power plant business. Then coming to -- okay, sorry, if I misunderstood your question. If I talk about the storage business and on the storage business, yes, it's clearly that we expect order intake to pick up in Q4. And I mean, it was basically 0 for newbuild for equipment in Q3. So it will certainly pick up at a much higher level. And a proof point is that, as I mentioned yesterday, we announced our first order for Q4, and there is more coming. So -- and even though, clearly, the U.S. market is still slow. There are other markets like Australia, this order from yesterday was from Australia and there are also other markets to support the energy storage order intake for Q4. Then moving to data center. And then I have to ask you, were you referring to data center and energy storage or data center in our thermal business? Max Yates: The data center in your thermal business and specifically the growing interest in engines and how has that led to a rise in quotations on the number of projects you're discussing versus, say, 6 weeks ago? Håkan Agnevall: Yes. So we do see increase in interest in the engine technology. You might recall this what we've been talking about, and this is a journey of, I would say, 2 years. It used to be data center sizes, needing power, 5, 10, 20, 30, 50 megawatts. Now the data centers are growing in size, and it's -- the data center owners, they cannot get access to the utilities, so they need to build their own power generation, off-grid. And now we are talking about hundreds of megawatts, 100, 200, 300, 400 megawatts. And this is coming right in our sweet spot. And so this market is really heating up for us. And to your question, yes, we see a lot of engagement from customers, a lot of interest. I think many customers are more and more also recognizing the benefit of the engines compared to the competing technologies on the gas turbine side, but also on the high-speed engine side. So yes, there is more activities clearly. And then if I may just for clarification also because we also mentioned data centers in relation to our battery business, or battery storages. So then you might say, what the hell is this? I think what operate -- I mean, the data center operators, they are also finding out there are rather big swings. And there are the big swings in the minutes region, but there are also the big swings in the millisecond regions. And here, so it's balancing power. It's a good old balancing power. And you need -- you have 2 tools in the toolbox for the balancing power. And in this millisecond, second region, we see an increased interest actually for battery storage to kind of balance the load. Operator: The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I wanted to follow up on Energy, but sort of thinking more about the margin and what you've said on sort of like less EPC now concentrates the deliveries into Q4 more skewed than in the past. Does that apply also to how we should think about margin seasonality? Should we think about sort of like a more intense concentration of margin also in Q4 than in the past, in general? How does that work? Håkan Agnevall: Arjen, you take that? Arjen Berends: Yes. I would say, yes, margin correlates with sales volume. So margin that you make on the project is recognized in the quarter that you recognize the sales. And that depends on, is it percentage of completion, which is typically used in EPC contracts or, let's say, on time -- or let's say, completed contract method, which is then basically based on deliveries. So yes, when sales shift also margin shift at the same time in the recognition, correct? Daniela Costa: Great. It's just for -- it was just for Energy. I would say then that your comment on skewness on EPC. Arjen Berends: Yes, yes. And also, let's say, the EPC comment is related to Energy. Marine is basically all is completed contract method. Operator: The next question comes from Akash Gupta from JPMorgan. Akash Gupta: I have a follow-up on energy. So I think you are kind of indicating that revenue in equipment side will be strong in Q4, and this simply has to do with seasonality in delivery of equipment, which will be more in Q4 than Q3. I mean I just want to understand like what is causing this seasonality in delivery because I think I would assume that you would be producing these engines every quarter. And therefore, when it comes to delivery patterns, they would be more homogeneous. But maybe if you can help us explain what is causing this seasonality? And is this something we should expect every year that some periods may be more busy, some periods may be less busy on revenue? Or there is something unusual in 2025 that may not be repeating next year? Arjen Berends: I can answer that. Let's say, it's really about the delivery schedules that you've agreed with customers, okay? Some years, you have it more evenly spread. Other years, it's, let's say, more in certain quarters. What you mentioned earlier that, okay, production of engines does not relate to, let's say, income recognition or sales recognition in a certain quarter. It's the delivery to the customer that counts. And here, we follow basically what we have agreed with customers. So there are -- clearly, in every project, there are delivery schedules. And in this year, in the second half of the year, it's mostly into, let's say, Q4. I cannot comment whether this will happen every year because that depends on the orders that you have in that particular year. But let's say, if I try to put a little bit myself in the shoes of, let's say, customers that if you build a power plant or if you build a ship and you work with percentage of completion, most likely, yes, if you want to, let's say, have an impact on your results, yes, you want to have the delivery done before the year-end, if you close your financial year at the calendar year. So that might be one driver. But let's say, we follow the schedules that we agreed with customers. Akash Gupta: And maybe just a follow-up to that question. Does the size of project change this seasonality? Because I assume that if you have a large 200, 300-megawatt order, then you may want to ship everything in one go, which could create a bit of this pattern. So any comment on size of orders may be impacting revenue recognition profile? Arjen Berends: Yes. There are many delivery schedules in a certain project. It might be, let's say, shipping -- let's say, if you have a power plant with 10 engines, let's say, it might be one batch in this quarter and the next batch in the other quarter. It varies a lot by project. And it depends also quite much, let's say, where do you need to ship it to. So there is no, let's say, one pattern and one size fits all here. Håkan Agnevall: I agree. And it's not that for certain -- it's not a model where you bundle all the engines and you ship them at once. There are many different ways to deliver the engines. So normally, you deliver them in stages. It's easier to handle them at site, if you talk energy than receiving everything at once, et cetera. So I'm afraid it's much more complicated than that. And it's really related to how the customer want us to deliver, so to say, and that can vary quite a lot. Operator: The next question comes from Sven Weier from UBS. Sven Weier: Just wanted to follow up on what you said on data centers and battery storage because obviously, we had the announcement from NVIDIA mid-October around the next-generation data centers, the 800 VVC ecosystem, which builds in battery storage kind of as a standard. So I was just curious if you were also kind of referring to that announcement? And what do you need to do to be able to do business there in terms of the battery sourcing? I mean, how much have you already changed the sourcing maybe to Korea, which I guess will be in a much better starting point and China probably continues to be penalized. So that's the first one. Håkan Agnevall: So 2 things. I mean, I think actually that -- and this is my inside out -- outside in, sorry, outside-in observation that I think there is a lot of learning going on, on how the data centers are behaving as electric loads. I mean you have certain data centers that are focusing on learning, then you have other data centers that are focusing on interference, and they have completely different load profiles in terms of what energy they need and how it swings back and forth. So I cannot comment on the latest from NVIDIA. But clearly, there seems -- and there is an evolving understanding that for certain type of data centers, the swings can be pretty big and pretty quick. And that leads to an interest to the energy storage side, so to say. Then coming to where we source our batteries, yes, we certainly source from China, but we also source from other countries in Southeast Asia. We are also looking at possibilities for sourcing in the U.S. However, in our view, that is taking longer to move. Sven Weier: And would you say the largest share still clearly comes from China? Or how should we think about that? Håkan Agnevall: Yes. In the share of supply of batteries -- battery cells for Wärtsilä, the biggest share is still from China, yes. Sven Weier: Okay. But you started to already make the shift to other regions in the last quarter. Håkan Agnevall: Yes, correct. Sven Weier: And then maybe one quick follow-up on the thermal side and the discussions you have with the U.S. customer base for data centers. I mean, what is the biggest pushback? I mean, do you reckon there are still predefined views that kind of people think you don't get fired for buying a turbine, but no experiments with new tech because engines have probably not been used so much for baseload in the U.S.? Or what's the biggest hurdle you find in your discussions? Håkan Agnevall: No, I think the technology acceptance is certainly evolving. I mean we have one group of customers. They are fully into engines. They see the benefits, et cetera. Then there are other customer types, which is a little bit more what you're alluding to. It's a new technology. But I think this is how we've been selling the Wärtsilä propositions for many, many years, and we run our simulations, we show all the proof points, et cetera. And step by step, we convince customers because also in this application, there are some intrinsic benefits for the engine. Energy efficiency is higher than our competition. No derating on high altitude, which is sometimes important, very little water consumption, which is sometimes important. Really good -- I mean, ramping, we all know that from the balancing compared to the CCGTs, et cetera, et cetera. So for me, it's very similar, you could say, the business development and sales process that we have with many of our, you could say, regular customers. I think the difference is that the speed of execution and the desire from the customers to deliver, that is clearly 1 or 2 notches higher than, so to say. Operator: The next question comes from Panu Laitinmäki from Danske Bank. Panu Laitinmaki: I wanted to ask about cash flow and capital allocation. So you had EUR 1.4 billion of net cash. And maybe just to confirm that did you change your comment on the net working capital that you expect it to remain negative for longer as you previously, in my view, indicated it to kind of reverse? And then if that's so, does it kind of change your view on capital allocation, if it's like better for longer in terms of balance sheet? Are you more open to doing share buybacks? Or what will you do with the cash? Arjen Berends: Let's say, the allocation principles as such don't change. Let's say, we have been saying and I have been saying in many quarters that, okay, the negative working capital level is extraordinary. And okay, it's not so long ago that we went through the negative line, basically from positive working capital to negative working capital. You could, in a way, say it felt in the beginning a little bit uncomfortable, but we now see that this is a sustainable trend that we see. Will it be all the time that negative as we see it today? Question mark. Let's say, there are clearly, let's say, factors in the market that are currently there, which in the future might not be there. And I give one example. I think I gave it also last time. Yard order books are very long. Yards want to lock their cost. If they want to lock the cost in Wärtsilä, they need to put the order at Wärtsilä with a down payment. So you get cash earlier. Well, the exit cash or the cost, let's say, generation is later in the time. That's a positive impact, which is happening today. Will yard order books in the future get shorter again? It might reverse that trend. Difficult to say if that will happen, when it will happen. But at least for the coming years horizon, we anticipate that working capital will stay negative. Another trend, which I also, I think, mentioned last time is, for example, in energy, we have seen a few projects. I'm not wanting to call it a trend, but we have seen more projects than before, let's put it that way, where customers don't want to make, let's say, payment security arrangements, like LCs, bank guarantees, et cetera. That's fine for me. Cash upfront. Then we have a lot more cash early on before we actually make the cost. So is this something that will stay there? Difficult to say. For now, I think it will not change rapidly. But yes, this can change. So that's where we were in the beginning, very careful with, let's say, making bold statements about working capital staying negative. I think we feel much more comfortable about at least the coming few years to say, yes, it will stay negative. But sorry, I did not answer your capital allocation question. Let's say, the capital allocation principles don't change. And share buybacks, yes, that's for future consideration, not at the table today. Operator: The next question comes from Vaspaan Avari from Barclays. Vladimir Sergievskiy: It's Vlad, from Barclays. Two questions from me, if I may. Very strong margin in thermal energy this quarter. Congratulations on that. This lack of the equipment deliveries in the quarter, did it have positive or negative impact on the margin? Because, of course, on one hand, mix is favorable, but on the other hand, cost absorption is less. That's first question. Second question, could you comment on competitive environment in energy storage globally and maybe by key regions? Has there been any changes there recently? Håkan Agnevall: You take the first one? Arjen Berends: I did not catch the first one, to be honest. The line was... Håkan Agnevall: I think I get it, but it's better to say... Arjen Berends: The line was a bit... Vladimir Sergievskiy: I can easily repeat the first question. The question is the lower deliveries in the Energy business in Q3, did it have positive or negative impact on profitability in Q3, given that on one hand, the mix is favorable, but on the other hand, cost absorption is less. Arjen Berends: Shall I answer that, please? Håkan Agnevall: Please. Arjen Berends: So let's say, the answer is fairly simple. Let's say, of course, in absolute terms, it's negative because you have less sales that generates margin because we make positive margin on our new build business. But of course, from a percentage point of view, in the mix, it's a positive because service typically has higher margin percentages. So in the percentage mix, it's a positive. So it's both actually. But it depends if you look absolute or if you look percentage of sales. Håkan Agnevall: And then if I continue, as I understood your question, Vlad, is how is the competitive situation develop in energy storage more from a global perspective. And I would say that the competition is increasing, and I think there are 2 major drivers for it. One driver is, of course, the slowdown of the U.S. market with the regulation and tariff regimes, which then, of course, drives suppliers to focus on other markets. And the other trend is also that we see more vertical integration, where cell producers are also moving into the integrated space, so to say. So the competition is increasing, in general, I would say. Operator: The next question comes from Mikael from Nordea. Mikael Doepel: Still one on data center, if I may. In your view, I mean, how big part of the future data center market is relevant for the 50 to 400-megawatt sweet spot that you are referring to? So I assume that you have done some research on the topic. So just trying to understand the opportunity for Wärtsilä here. That would be my first question. I can come back to the second one. Håkan Agnevall: Now so just to give you -- I mean, the short answer, there is a significant opportunity. It's very hard to quantify. Why is it so hard to quantify? I can give you some other public data that has been compiled by a number of reputable players like the McKinseys, the Goldman, the JPs, the International Energy Agency. If you look at the forecast of -- if you just zoom in on U.S. If we look at the forecast, how much growth there will be in data center power from now to 2030, there is a span from those reputable players in their forecast from 20 to 100 gigawatts. So it's very hard to -- with that as a starting point to derive what is the concrete addressable market. I would say the underlying -- there is definitely a market for engines. There is definitely a market for -- I mean, if we -- there is definitely a market for off-grid. In the off-grid space, there is definitely a market for engines. And if you talk engines, there is definitely a market for Wärtsilä. We do see growth opportunities, but it's very hard to pin down what are the -- even the spans of the additional capacity that would go trickle down when the spread in the starting estimate is as broad as it is. Now we think that data center is a very interesting opportunity. We have a pipeline that is looking very interesting. No orders in Q2, but we have interesting pipeline. And we are also looking on how to further develop our delivery capabilities. Mikael Doepel: And the second question would be on the carbon capture systems. I think we haven't talked about that on that topic for a while. So I wanted to revisit that and maybe you could get a bit of an update where are we now in terms of the infrastructure developments there? What is the customer interest right now given the regulatory environment? And do you have anything in the pipeline and so on and so forth? Håkan Agnevall: So basically, just to make a quick recap, we actually did the commercial launch of a carbon capture solution for Marine. So it's an extension of our scrubber business. So we can now deliver 70% capture rate, 7-0, on a 10% to 15% energy penalty because it's really this for a large [indiscernible] between you how much you can capture and how much energy you put in. That is -- it needs to be a viable route, so to say. We have had our first pilots in full scale, and it's working very well. We had the commercial launch. So we are engaged with customers. Now clearly, this is a whole ecosystem that needs to evolve. I mean we add a piece to the puzzle. We can capture the carbon. We can store it on the vessel, but then you need to take a short and what do you do with it? And we all know there are basically 2 routes. You can use it for sequestration, pumping it back or you can use it as a raw material for some -- in some kind of chemical process, including synthetic fuels. Now the customers that we are talking to now, they are more the early adopters. The regulatory framework already before IMO, the recent IMO postponement, I think in April in the MEPC83, it was already decided to come back and work further on the regulatory context and coming back later. So that from IMO, it will still take some time for the regulatory landscape to evolve. I think EU is further ahead in this area, so to say. So this is a market that will evolve. It will take time. We have made it clear. And I would say we are engaged with our customers that are the kind of early adopters of the pioneers. Operator: The next question comes from Vivek Midha from Citi. Vivek Midha: I have a couple of questions. The first is on energy power plants. I was interested in hearing your latest view on pricing trends. We've seen big price uplift, for example, in the turbines. We, of course, can't see the underlying pricing trends, stripping out mix and scope and so on. We can only see the crude average selling price, and that appears to actually be down around 25% on my calculations versus the second quarter. So could you give us any indication on the underlying pricing trends and new order margins? Håkan Agnevall: So I would say, in general, it is a hot market in the Energy space, and it's a hot market for all the technologies that I know of, so to say. And of course, in that type of market, it gives the suppliers opportunities for price realization. Then, of course, there is a customer that -- where the offering needs to make sense for the customer to build a business case, et cetera. So there is always a balancing. But I would say, in general, I think the price realization is rather good. Vivek Midha: Understood. And just one follow-up as well differently on the Marine service growth. If I'm just looking at the spare parts development, it looks like there's been a drop year-on-year and the book-to-bill below 1. How should we think about that developing? And would it be fair to assume that the spare parts are the highest margin part of the service business? Håkan Agnevall: So overall, I wouldn't be concerned, and you clearly looked at what we call the 4 disciplines. It will vary a little bit. I think the big trend agreement is clearly growing. There's a bit of spare parts in agreements as well. And then we have the retrofits. And the retrofits, it looks pretty dramatic as a downturn, but it's the cyclicality of the retrofit business. And as we have indicated, we see we have a good pipeline in front of us. So our message on services, both in Energy and Marine with a book-to-bill above 1. It's a consistent continued message. Operator: Next question comes from Max Yates from Morgan Stanley. Max Yates: Maybe just 2 quick follow-ups. Just the first one is around your energy storage business and obviously, a softer quarter this quarter. It feels like some of the U.S. kind of competitors have talked about a much more positive market backdrop. So I guess I was trying to understand, is this an active decision by you not to participate so much in the U.S. market because it's viewed as more competitive and therefore, focus outside? Is there any reason if sort of storage gets better in the U.S., your either setup of sales network, your procurement because of tariffs makes you less able to participate? And do you think it is fair that you're kind of focusing on other markets? Just to really understand what looks like a bit of a kind of difference with your performance versus what some of the other peers in the U.S. are kind of talking about for this market? Håkan Agnevall: So I would say U.S. is an important market for us. But I would say, in relative terms, I mean, Australia and U.K. and a couple of other markets, they carry a lot of weight. There are other players that -- where U.S. is more important for them, but -- relatively speaking. But U.S., we are in the U.S. We have continued our kind of selective strategy in the sense that we don't try to be the solution for each customer type. We continue to focus on the customer types that value our delivery track record, which is -- it's really solid, our thermal track record, which is really solid and also our capability to leverage our power system skills to integrate the equipment. So -- and you could see, I mean, looking at our profitability, it has -- with the help of a good project execution, is translating to real bottom line. Now I cannot comment on others, but we will continue this selective strategy. Then what we said when we came out of the strategic review is that we will try to add a couple of geographical markets. We will try to expand. And so we are definitely going to remain in the U.S. We will probably try to add, but we will have a selective approach overall. Now in this situation, we also talk about that we are certainly looking at how do we improve -- further continue to improve our competitiveness. And this is, of course, continue to work on our costs and also exploring avenues for -- I mean, synergetic opportunities with the supply chain, so to say. So these are the areas that we are working on. Max Yates: Okay. And maybe just a very quick follow-up. On your energy deliveries, and this is your sort of thermal power plant business, are you seeing any customers, particularly in the U.S., pushing back related to tariffs? And any kind of obviously, you've said tariffs are built into the contract structure, the customer pays them. Are any customers slowing deliveries? And is that having any impact on the rate of delivery? Or is it purely just a timing issue? Håkan Agnevall: No, this is clearly a pure timing issue. I mean it's not about -- I think it's fairly well. Of course, customers are not happy about it, but I think customers understand the dynamic about that we are adding the import tariffs to our prices. Nobody likes it. We don't like it either, but that's a clear principle. We haven't had any cancellations or anything like that. So I mean, this Q3, it's purely -- we talked about the customer delivery schedules that happens to be in this way this year. Operator: The next question comes from Antti Kansanen from SEB. Antti Kansanen: It's Antti, from SEB. I have 2 questions regarding the trends in Marine Service, please. And I fully understand the volatility related to the retrofits and upgrade business, so we can kind of exclude that from the discussion. But looking at the agreement book-to-bill growth, could you please remind what do you actually book in terms of agreement orders? If I understand correctly, the backlog is the 24-month expected value. So is that also kind of what do you include in the agreement orders there? And then the second question is maybe on the slowing trend on the book-to-bill on the parts and field services. Do you think you are cannibalizing that with the agreement business? And kind of should we be a bit concerned that the sales growth in the Marine services will start to approach 0 as kind of the agreement is longer converting and maybe the more transactional is slowing down? Arjen Berends: I think there is -- let's say, the first part of your question, we can confirm that's correctly assumed. Let's say, it's good to -- we take 24 months in. And then, let's say, on the moment that we take an order in on an agreement, then let's say, we roll it every quarter basically, let's say, with 1 quarter forward until, let's say, the whole agreement lifetime is consumed, you could say. When it comes to the spare parts, is it -- sorry, our agreements, let's say, cannibalizing parts? No, I would not say so. Agreements are contributing to parts. But of course, it depends a little bit, let's say, what kind of agreement you have. Let's say, if you have an agreement where you get paid by running hour a certain fixed fee. And within that fee, you need to do the maintenance. Of course, your aim is to do as little as possible spare parts. Spare parts, typically, what we book as part of an agreement ends up in the graph basically as parts. So that's good to keep in mind. Håkan Agnevall: And I would say to the -- what I assume is your more fundamental question, how do we see book-to-bill in services going forward? And I would say that underlying, we have a very positive view on that. I would say both in Marine and Energy. Arjen Berends: Mix between the lines can change. But in general, we look positive. Antti Kansanen: If I think about earnings contribution within the aftermarket, I guess the parts business is very, very important in that regard. So do you have any kind of views on why the book-to-bill on a 12-month rolling basis has been slowing throughout '25. Is there something in the customer behavior that you can clearly kind of pick out what's causing this? Or is it just a normal fluctuations? Arjen Berends: I would say it's normal fluctuations. . Håkan Agnevall: I agree on that. Operator: The next question comes from Akash Gupta from JPMorgan. Akash Gupta: Yes. I have a follow-up on your capacity in Energy, and what sort of flexibility do you have given the demand that we see in the data center is more for gas engines, while I think in your business, you have both gas, oil and renewable fuel engines. So a question like, is there any way to quantify how much theoretical megawatt or gigawatt you can produce? And then how much of that is gas versus non-gas? And do you have flexibility to retool capacity for oil engines to gas engines? So any color on that would be helpful. Håkan Agnevall: So to -- I mean, some general -- so we -- our engines are fuel flexible. So it's not about oil or gas. I think the more critical thing for us when it comes to our supply chain and our manufacturing is the size of the engines. I mean, you have the large bore engines and you have the medium bore engines. So this is more where we need to be careful in our forecasting and how we manage our delivery capabilities. Just to clarify. So it's not fuel related, it's size related. Secondly, I understand you want to know the gigawatts, but so does competition, and I won't tell them. So sorry about that. Then what we clearly said that -- and for certain engine types, and I will not go for the same reason, I will not go into the details, which -- but for certain engine types, I mean, we are now looking at delivery times in the second half of 2027. But we still have other engine types where we can deliver next year. So it's a mixed situation. Hanna-Maria Heikkinen: Thank you, Hakan. Thank you, Arjen. And thank you for all of the good questions. I'm afraid that we have already run out of time for this call. So as a reminder, we are hosting several events every quarter, which are equally open for everybody who is interested in Wärtsilä as an investment. And next event will be hosted by Håkan. It's a CEO Strategy Call on November 27. So I hope to see you there. Thank you. Håkan Agnevall: Thank you for today. Arjen Berends: Thank you.

201天前Insight Analytics约5分钟阅读

IBE.MC 2025 Q3 财报电话会议

Ignacio Cuenca Arambarri: Good morning, ladies and gentlemen. First of all, we would like to offer a warm welcome to all of you who have joined us today for our 2025 9 months results presentation. As usual, we will follow the traditional format given in our events. We are going to begin with an overview of the results and the main developments during the period. Everything given by the top executive team that is today with us: Mr. Ignacio Galan, Executive Chairman; Mr. Pedro Azagra, CEO; and finally, Mr. Pepe Sainz, CFO. Following this, we'll move on to the Q&A session. I would also like to highlight that we are only going to take questions submitted via the web. So, please ask your question only through our web page, www.iberdrola.com. Finally, we expect that our event will not last more than 60 minutes. If any questions remain unanswered, we at IR team are, as always, fully at your disposal. Hoping that this presentation will be useful and informative for all of you. Now without further ado, I would like to give the floor to Mr. Ignacio Galan. Thank you very much, again. Please, Mr. Galan. Jose Sanchez Galán: Good morning, everyone, and thank you very much for joining today's conference call. In the first 9 months 2025, our reported net profit reached EUR 5,307 million, leading up a 17% increase in adjusted net profit, including capital gain from asset rotation -- excluding capital gain from asset rotation. This growth was driven by robust operating performance with reported EBITDA reaching EUR 12,438 million, mainly in our Networks business, where EBITDA rose by 26%. Thanks to a higher rate base driven by investment and improvement regulatory frameworks. EBITDA from Renewables & Customers was impacted by lower market price and higher ancillary service costs in Iberia due to changes in the digital operation after the blackout, which we are gradually passing through, partially offset by the contribution from additional renewable capacity. Investment reached a new record of EUR 9 billion in just 9 months, reflecting the execution of our plan. Networks investment increased by 12% for a total regulated asset base of close to EUR 50 billion. And we have added 2,000 megawatts of new capacity in the last 12 months. Driven by additional investment, operating cash flow increased by 10% to EUR 9,752 million, which combines with EUR 8 billion of new asset rotation and partnership and the capital increase of last July has allowed us to reduce the consolidated net debt by EUR 3.2 billion to EUR 48.5 billion, substantially improving our ratios in line with our BBB+ rating. The strong operating performance and the ongoing improvement in our financial position have led us to increase interim shareholder remuneration by 8.2% to EUR 0.25 per share. Reported EBITDA reached EUR 12,438 million, driven by a strong performance of our networks business, up 26% in the first 9 months, supported by higher regulated asset base in all countries, especially in the United Kingdom and Brazil and positive rate adjustment mainly in the United States and Brazil as well. As mentioned, EBITDA in Renewable Power & Customers was affected by the one-off impact in the change of system operation applied by Red Electrica in recent months as more synchronous generation has been introduced, which is impacting our retail business in the short term until these costs are passed through. In addition, we saw lower market price and a lower contribution from Mexico after the last year transaction. All these impacts were partially offset by additional renewable capacity. Networks once again -- that is once again a main contributor of our EBITDA, driven by the continued growth in our U.S. and U.K., which increased their combined share by 12 points, reaching 43% of the total EBITDA, reflecting the 13% increase in investment made in both countries, which together represents 60% of the group total as of September. As a result, total investment reached a new record of EUR 9 billion, up 4% year-on-year. By business and area, 60% of investment were allocated to Networks, where we invested EUR 4,904 million with a 12% increase year-on-year. Networks investment increased by 45% in United Kingdom to EUR 1,524 million, driven by the integration of ENW and 18% increase in investment in the Scottish Power Transmission and Distribution. Investment in United States reached EUR 1,739 million, in line with the last year as the 9% increase in distribution was offset by decrease in transmission investment due to the gradual completion of NECEC. Additionally, we invested EUR 1,215 million in Brazil, up 14% and EUR 426 million in distribution in Spain, 60% more than last year. As a result, our regulated asset base grew by 12% on year-on-year to EUR 49.3 billion. Investment in Renewables reached EUR 3,442 million, well diversified across geographies and technologies. 60% was allocated in United Kingdom and United States, with U.K. investment increasing by more than 45%, mainly linked to our offshore wind farms currently under construction. East Anglia THREE with 1,400 megawatts of capacity and East Anglia TWO with 900 megawatts. Our Offshore wind farms under construction in other countries are also making good progress with more than 50% of Vineyard Wind 1, 806 megawatts already in operation in the United States and the 315 of the Windanker wind farm in the Great Baltic -- in the German Baltic Sea advancing as scheduled. Investment in Onshore Renewables reached EUR 1,904 million with 62% in onshore wind. And we invested more than EUR 300 million in storage, including both pumped hydro in Iberia and batteries mainly in Australia. Moving to Network business performance. Regulatory framework continued to evolve positively across key geographies. In United Kingdom, the RIIO-ED3 methodology for distribution was published, representing a first step in a process that will lead to a new framework by April 2028. And in transmission, the RIIO-T3 Draft Determination was released, as you know, and we have expected final determination by -- before the year-end. In United States, current rate cases have resulted in a 10% average increase in tariff in New York and Maine, compared to last year. And Avangrid is already in the process of new rate cases in both the states they agree effective from May 2026. As mentioned, NECEC, our interconnection project between Canada and Massachusetts is on track to reach full commercial operation before year-end. And we are already working on projects that will continue delivering growth in transmission, mainly the Powering New York will result in EUR 1,650 million of planned investment in the coming years. In Brazil, following the annual update in Neoenergia Brasilia, rate has increased an average of 8% compared with last year. And the renewal of distribution concessions continued to progress. The concession Neoenergia Pernambuco was already signed, and we expect the other distribution companies to follow in the coming months. In Transmission, Neoenergia is on track to complete the last four lots under construction by December 2025, increasing annual remuneration in this business by BRL 600 million to more than BRL 2 billion per annum. Finally, in Spain, the process of the review of the remuneration methodology and the rate of return continue. Moving to Renewables. In the last 12 months, we have installed over 2,000 megawatts with significant progress in offshore wind. In United Kingdom, production of our Offshore wind farms in operation, West of Duddon Sands and East Anglia ONE exceed 2,400 gigawatt hours in the first 9 months of 2025. And we continue progressing the construction of East Anglia THREE with 20 monopiles already installed. In East Anglia TWO, where preliminary works are underway after having signed all major procurement contracts. On top of this, our East Anglia ONE North project with 900 megawatts was qualified for the upcoming AR7 auction scheduled by mid-November. In the United States, the construction of Vineyard Wind 1 is now above 50% completion with 32 turbines fully installed and more than 200 gigawatt hours produced. Finally, in France, St. Brieuc project produced 1,150 gigawatt hours during this period. And the output of our offshore wind farm in operation in German Baltic Sea reached 1,594 gigawatt hours as well. As mentioned, in Germany, we have another project under construction, Windanker, which is moving ahead as planned for commercial operation in 2026. Over the last 12 months, we have also installed 1,350 megawatts of Onshore technologies well spread across our geographies, 1/3 United States and U.K., including 200 megawatts of repowering project. Around 1/3 in Spain and the remaining 1/3 in another European countries and Australia. Finally, in Storage, we continue progressing with our pumped hydro project under construction in Iberia, including Torrejón Valdecañas with 15 gigawatt hours capacity. And in Australia, the Smithfield battery project is already in operation. The Broadsound project is progressing as planned for the total of 490 megawatt hours of storage capacity. All in all, we have currently close to 5,500 megawatts under construction, of which more than half correspond to Offshore wind project and 25% to Onshore wind. And we are very well positioned to capture additional growth if demand accelerates due to the electrification, thanks to a strong pipeline of 4.5 gigawatts of advanced projects ready to start construction by 2028, including Repowering project mainly in United States. Through September, we have also continued improving our financial strength. Thanks to a 10% increase in our operating cash flow to EUR 9,752 million, driven by higher cash generation in Networks and the execution as well of our asset rotation and partnership plan. Since January, we have signed transactions worth EUR 8 billion with a positive impact of EUR 4.5 billion in our net debt as of September. On asset rotation, as you know, we have already received close to EUR 1.1 billion from the sale of our Smart Meters business in United Kingdom. We have signed other transactions like the sale of our Renewable business in Hungary, which will allow us to collect EUR 128 million before the year-end. Finally, the regulatory approval required for the sale of our Mexican business continue on track. Regarding Partnership, we have added 708 megawatts to our joint venture with Norges Bank for Renewables in Iberia, reaching 900 megawatts in operation, fully on track to reach 2,300 by 2027 with a total co-investment of EUR 2.4 billion. Our partnership with Kansai in the Windanker Offshore wind farm in Germany will represent a total co-investment of EUR 1.3 billion. And our partnership with Masdar for Offshore wind in the U.K. and Germany, which will result in co-investment of EUR 6.8 billion is also progressing well. With the construction of East Anglia THREE moving forward in line with our plan as explained and in Baltic Eagle in Germany already energized. Increasing cash generation and the execution of our asset rotation and partnership plan, together with the capital increase executed last July has led to a reduction of EUR 3.2 billion in adjusted net debt year-to-date to EUR 48.5 billion, driving even better stronger financial ratios fully aligned with our BBB+ credit rating. FFO to adjusted net debt increased by 330 basis points to 26.2% and net debt is already less than 3x EBITDA. We also maintained a strong liquidity position of EUR 23 billion, sufficient to cover 25 months of financial needs. Thanks to our strong business performance and improving financial strength, the Board has approved an 8.2% increase in interim dividend of EUR 0.25 per share will be paid at the beginning of this year. As always, a supplementary dividend will be proposed for approval at the Annual Shareholders' Meeting paid in July. I will now hand it over to our CFO, who will present the group financial result in further detail. Thank you. Jose Armada: Thank you, Chairman. Good morning to everybody. Our adjusted net income for the first 9 months of the year, excluding the sale of the U.K. Smart Meters accounted for in this quarter, which is the capital gain is EUR 381 million gross and the same number net as we don't have a tax impact here and including the cap allowance in 2025, which is EUR 191 million, reached EUR 5,116 million, representing a 16.6% increase compared to the adjusted net income for the first 9 months of '24, excluding the divestment of the thermal generation assets, which impacted the net profit was EUR 1,165 million net and including the U.K. cap allowance for '24, which is EUR 81 million, as you can see in the slide. Excluding also the recognition of costs in the U.S. for EUR 389 million as it is a non-cash item, the first 9 months of '25 growth is 8%, reaching EUR 4,727 million. The main perimeter change, as you know, is that ENW has been fully consolidated since March. The FX evolution has had a minor effect on results. Thanks of our hedging policy with the dollar 2.5% lower and the real 10% lower. Reported net profit for the first 9 months of '25 reached EUR 5,307 million, decreasing by 3% year-on-year, affected by the asset rotation that I have just mentioned that has been EUR 784 million less in '25 than in '24. Revenues increased by 2.3%, driven by the Network business. Procurements rose 2.6% and gross margin grew 2%, reaching EUR 18.4 billion. Excluding the capital gains from the asset rotation, as I mentioned previously, which is referring to the Smart Meter divestment and the thermal generation assets, 9 months net operating expenses improved 7%, affected by lower storm costs that also lowers the gross margin. Net personnel expenses rose 0.4% due to higher number of employees. External services declined 6.1%, mainly due to the EUR 330 million lower storm costs. Other operating income increased by 21% compared to the adjusted 9 months of '24 due to the indemnities of past year costs, the ENW consolidation, partially offset by EUR 121 million negative impact of the East of Anglia THREE sale, EUR 4 million more than in the first half results due to a negative impact accounted in Q3. As you will see later, this impact is more than offset at the financial expenses level. Excluding the mentioned storm-related impacts and other adjustments, net operating expenses improved by 0.8%. Analyzing the results of the different businesses and starting by Networks, its EBITDA grew 26% to EUR 6,128 million, mainly driven by the strong performance of the U.K. and the U.S. linked to higher asset base and past cost recognition. In the U.S., EBITDA reached $2,046 million, 88% more with a 10% average higher rates in Distribution and a better contribution from Transmission, and positively affected in the first quarter by the decision of the New York regulator that allowed to register a regulatory asset under IFRS regarding past costs, which have already been accrued and recorded under U.S. GAAP, aligning both standards. It is worth highlighting, as the Chairman has mentioned, that NECEC finally is expected to start contributing from November of this year. In the U.K., EBITDA increased 22.5%, reaching GBP 1,129 million, including 7 months positive ENW contribution of GBP 253 million with a growing -- with growing results for transmissions driven by a higher RAV. In Brazil, EBITDA was up 12.6% to BRL 10,000 million. Thanks to the higher revenues in Distribution linked to higher inflation and an average 8% increase in rate reviews over a higher asset base. In addition, Transmission contributed positively with BRL 1.3 billion gross margin as construction progresses. And as the Chairman has said, it is expected to finalize all the construction of transmission lines this quarter and will contribute BRL 2 billion in '26, already fully completed. In Spain, EBITDA increased by 9.3%, reaching EUR 1,340 million, positively affected by the CNMC draft retribution rate of 6.46% versus the previous 5.58% and by positive adjustments to past year's remuneration. In this first 9 months, Energy Production and Customer business, EBITDA reached EUR 5.9 billion versus the EUR 6.7 billion in last year, excluding capital gains from asset rotation. The business reached c. 86% emission-free generation. In Iberia, EBITDA was EUR 3,052 million, 17.5% down with higher production more than compensated by lower margin and sales, explaining 30% of the year-on-year variation and higher ancillary services, higher levies and positive court rulings in '24 despite 1.2% revenue tax termination explained the remaining 70% of the decrease. Hydro reserves remain above the 10-year average. In the U.S., EBITDA remained flat reaching $813 million, supported by improved wind and solar performance, despite the fact that '24 was positively impacted by an Arctic Blast storm one-off of $34 million. In the U.K., EBITDA grew 5.3% to GBP 1,136 million, driven by the GBP 324 million capital gain from the U.K. Smart Meters divestment in this quarter. Excluding them, the business decreased 24.8% with lower wind resource and prices and weaker supply business, also driven by lower prices and volumes. Net operating expenses, including GBP 103 million negative one-off impact linked to the East of Anglia THREE sale more than compensated at the net financial result, as I have mentioned. In the Rest of the World, EBITDA grew 31.5% to EUR 588 million, with 61% higher offshore production due to higher contribution from wind farms, St. Brieuc in France and Baltic Eagle in Germany. With lower supply results due to the EUR 30 million negative impact in Portugal due to the ancillary services cost as in Spain as a consequence of the blackout. In Brazil, EBITDA fell 23.6% to BRL 947 million with lower renewable and thermal production compared to last year. Finally, in Mexico, EBITDA reached $467 million, decreasing 78.5% with lower reported contribution compared to last year that included the thermal asset capital gain. Depreciation and amortization and provisions were up 2% to EUR 4,272 million, driven by higher asset base despite the full year '24 adjustments impact and lower bad debt provisions, mainly in Spain. EBIT reached EUR 8.2 billion and grew 6%, excluding capital gains. Net financial results worsened EUR 93 million to EUR 1,445 million, driven by EUR 208 million higher debt-related costs due to EUR 7 billion higher average net debt -- average net debt in the first 9 months of the year, while interest rate related costs and FX improved by EUR 85 million due to the FX depreciation, especially of the real. And derivatives had a positive contribution of EUR 234 million due to the East of Anglia THREE derivatives, as I mentioned, compensate the lower net operating expenses. While the rest has had a negative impact mainly due to the Mexico hedges, mainly linked to the positive impact of the Mexico transaction last year compensated at the net profit level in the tax line. Cost of the debt improved 12 basis points, mainly thanks to lower short-term interest rates in euros and British pounds and to the depreciation, especially of the real, despite higher interest rates in Brazil. At the end of September, net debt is EUR 3.2 billion lower than the EUR 51.7 billion reported in '24 year-end, reaching EUR 48.5 billion. This positive evolution was driven by EUR 9.8 billion FFO generation, plus EUR 4.5 billion asset rotation and debt consolidation and the EUR 5 billion capital increase, more than covering the EUR 9 billion CapEx and the EUR 4.1 billion dividend as well as EUR 2.2 billion ENW net debt consolidation. As a consequence, our credit ratios are at very strong level in the BBB+ band. Our adjusted net debt-to-EBITDA is below 3x. The FFO adjusted net debt reached 26.2% and our adjusted leverage ratio is 43.3%, 2 percentage points lower than at the end of '24. 9 months '25 adjusted net profit grew 17% to EUR 5,116 million, taking away also U.S. cost recognition, which is a non-cash item, as I commented, the growth is 8%. And now the Chairman will conclude the presentation. Thank you. Jose Sanchez Galán: Thank you, Pepe. The result reflect the foundation of the plan presented a few weeks ago, a transformational plan based on a specific project capable of delivering double-digit growth in profit in the first 9 months of the year. Thanks to the rise in Networks investment up to 12% through September with attractive regulatory framework that are driving increases in tariff of 10% in the U.S. and 8% in Brazil as well as the expansion of our generation capacity of 2,000 megawatts just in the last 12 months with 5,500 more under construction and 8,500 of additional pipeline ready to cover any potential acceleration of demand growth. The implementation of our plan also reinforced our strong financial position, fully compatible with our BBB+ rating, supported by 10% increase in operating cash flow in our asset rotation and partnership plan and is also delivering a growth shareholder return with an interim dividend up 8.2% to EUR 0.25 per share. Driving by this consistent trend of improvement result and financial performance, today, we are improving our guidance for 2025 to a double-digit growth in adjusted net profit, reaching EUR 6.6 billion or more than EUR 6.2 billion even excluded EUR 389 million of Networks cost recognition in United States. This net profit guidance is already EUR 1 billion above the net profit target set for 2026 in our previous plan. Proving once again that our strategy, focus on Networks in the right countries with attractive remuneration frameworks and selective growth in renewables is allowing us to grow and beat our estimate constantly. You can be sure that we will continue working towards that objective. Thank you very much for your attention. Now we can begin with the Q&A session. Thank you. Ignacio Cuenca Arambarri: The following financial professionals have asked the following question to us. Philippe Ourpatian, ODDO; Fernando Lafuente, Alantra; Meike Becker, HSBC; Manuel Palomo, BNP Paribas; Pedro Alves, CaixaBank; Gonzalo Sánchez-Bordona, UBS; Robert Pulleyn, Morgan Stanley; Fernando Garcia, Royal Bank of Canada; Peter Bisztyga, Bank of America; Pablo Cuadrado, JB Capital Markets; Jorge Alonso, Bernstein Societe Generale; Javier Suarez, Mediobanca; Dominic Nash, Barclays; Javier Garrido, JPMorgan; and finally, James Brand, Deutsche Bank. The first one is, can you provide more details on the main factors driving the expected double-digit growth in net profit for 2025 and clarify how the exclusion of capital gains from asset rotations and the inclusion of cap allowances in the U.K. impact this guidance? Jose Sanchez Galán: So as I mentioned, we expect double-digit growth on adjusted net profit to more than EUR 6.2 billion, even excluding past cost recognition in New York, which is EUR 389 million. And look together close to EUR 6.6 billion. Pepe, but I don't know if you would like to clarify in more detail. Jose Armada: Yes. Well, thank you, Chairman. Well, as I commented, these numbers exclude specifically the capital gains from -- basically in Mexico with an impact of EUR 1,165 million and the Smart Meters in the U.K. with EUR 381 million, both at the net profit level, okay? And it includes as we presented in the Capital Markets Day, the cap allowances in the U.K., as you can see in the slide, EUR 190 million for '25 and EUR 81 million in '24. Obviously, for the end of the year, that will add a little bit more, okay? Ignacio Cuenca Arambarri: Okay. Second question, can you please provide guidance for net debt at 12 months 2025? Jose Armada: Yes. We're expecting the net debt by the year-end to be around EUR 51 billion. This is excluding the potential collection of the Mexico divestment. We are not including that in this guidance. But we are including the acquisition of the previous sale of the Neo stake in this EUR 51 billion guidance. This will be even with all these things below the '24 close of over EUR 51 billion at the end of '24. Ignacio Cuenca Arambarri: Next is regarding the use of capital gains. How will the capital gains from recent asset transaction be used in the future? Jose Sanchez Galán: So capital gain, as you know, from asset transaction will be applied as always to future efficiencies, just to improve the future results. Ignacio Cuenca Arambarri: Next is regarding the battery storage, our view of this success -- of this upcoming business for the sector? Jose Sanchez Galán: Well, I think now we talk about batteries. We will start talking about storage 25 years ago. I think as you remember, my first presentation, we were talking about renewables. We are talking about networks and we are talking about storage. I think we've been making renewable, we are making networks and we have been making storage. So, I think, what we've been doing in storage during the 25 years is we've been upgrading our hydroelectric facilities, making our -- most of our turbine reversible to become all those one bidirectional, making already pumping storage plant. We have in this moment a capacity of 120,000 megawatt hours of capacity. I think, it's a huge capacity already in storage. But also, we are investing in batteries, especially where we don't have hydro facilities in our -- or we are not project. I think, the main places is Australia. I think, they have attractive spread of support mechanism. And I think, we have in this moment, there are more than 550 megawatts under construction. But as well, we have another country. I think, we have 200 megawatts in construction in Spain and the U.K. And we have already more than 1,000 megawatts of projects in our pipeline that will be built up depending on the capacity payment of grants that can be provided. Ignacio Cuenca Arambarri: Next question is regarding the data center. What is the company's strategy regarding the growing demand from data centers? And what recent agreements have been signed with technological companies to supply energy? Jose Sanchez Galán: So as you know, data centers will be an important driver of demand growth. And I think -- and that is not new for us. We have already, for many years, we've been signing PPAs with tech companies. In this moment, we have more than 12 terawatt hours a year so far of contracts of PPAs already signed with technical companies, mainly in United States. But I think, because we consider that, that is an important area of demand growth is why we are facilitating the expansion of data centers in those countries, we have already, means for helping the technical companies to invest and to expand. I think, in this particular moment, we have an agreement in Spain with Echelon. And the first project, which is going to make a demand -- energy demand more than 1 terawatt hour a year is already ongoing. And we have another four projects progressing. So, we are active on those one, because we consider that, that is a driver for increase of the electricity demand, and that's why it is -- we would like to help these companies to do the necessary for making that happen. Ignacio Cuenca Arambarri: Next one is regarding the market situation of the United States. Given the recent increase in demand from data centers and industry and the rising energy prices in certain U.S. states, is the company considering increasing its renewable ambition or pipeline? And the second question regarding to this is, how will these market trends impact your PPA strategy and asset development plans? Jose Sanchez Galán: So, I think you will respond, Pedro, but I think just to give you -- it's true that in this moment, United States, the prices are rising. And our expectation is that prices will rise even more. I think, it's the fact that new CCGTs are built. This new CCGT is built, is going to make then the prices will increase, because there are already new power plant have to be already amortized toward those one which are already fully amortized. And I think, those one is pushing the prices up independent of the cost of the gas. But I think it's -- and that is a good opportunity for us. I think, it's a good opportunity, because we have almost 40%, 30% of our fleet is in merchant. And I think, the contract we have already with long-term PPA signed is already, let's say, ending during a certain period. And I think that makes the renovation of this contract probably that is going to increase the prices, we are already making that. All-in-all, that is certainly a great opportunity of increase of value of our assets -- renewable asset in United States. And that is why United States is there a tremendous, let's say, demand of buying existing renewable asset in operation. So, which I think, Pedro, you can already complete this comment. You agree. Pedro Blazquez: Okay. Thank you, Chairman. I think, the example -- a couple of examples, Texas and Oregon, where the prices are already rising, and we operate already 3,400 megawatts in those states. In the short term, this benefits our merchant assets. And then, it will be translated as the Chairman said, to the PPAs. And for example, in those states, we have more than 4,000 megawatts of potential pipeline to come. In the U.S., overall, we have 10,000 megawatts right now in operation, 30% of that is merchant and 70% is PPAs. The average PPA life is 10.7 years. I think, there is an opportunity for life extension and repowering. Around 360 megawatts under construction in the U.S., 432 globally and more than 800 megawatts of additional pipeline, 1,500 globally. So, I think this is good signs of what we can do right now to benefit from the demand increase. Ignacio Cuenca Arambarri: Next is related to Spain. Can you provide an update on the blackout investigation and the causes that triggered the event? Jose Sanchez Galán: I think, during the last weeks, has already had a lot of public reports, a lot of investigation even in the Senate and the different conference. And I think, this public report said clearly that this was a result of lack of synchronous energy to provide inertia in the system. So, they say also, as more renewable enter into the system, supply becomes also variable. And I think that require more synchronous energy. So, the fact now the system operator has changed the operation and is operating with more synchronous energy. So, I think what is saying in the public report and the public information is precisely what now is the system operator is already just doing. Certainly, that has an effect that is increasing the cost of ancillary services, which in our case, that we have most of our sales are under multi-annual contracts is affecting to our results, because we have not passed this extraordinary extra cost for our customers on all those ones, we have a multiyear contract. As Pepe mentioned, that in our case, is close to EUR 180 million affecting our accounts up to September. Ignacio Cuenca Arambarri: Next is related to Spain as well. What is needed to extend the operation of Almaraz Nuclear Plant? Is the 50% reduction in the Extremadura tax sufficient to ensure its continued operations? Jose Sanchez Galán: Well, I was -- you were listening to me for many long time, then the nuclear power plant are safe and are needed. So, I think they are needed more than ever in this moment for avoiding potential blackouts or potential problems in the service. Also, this power plant that you are talking about, they have national international license. So, which I think they allow them to operate at least up to 2030 without being forced to ask for any additional national, international license of operation. But there's something very, very important. It's a social -- national social demand in the country to maintain and operating. I think every week, there are demonstration, there are people writing of different tendencies, different ideas, different political parties and the civil society are asking to maintain and operating. So for two reasons, because of this social responsibility and because the need of this power for keeping the lights on in the country and providing a safe, cheap service is why we three, the owners of the power plant, we have asked the government the continuity of the Almaraz power plant. So, that means in this moment, only depend on the decision of the central government, the continuity of those power plant. There are not any another limitation. Technically, they are allowed to cooperate. Socially is demand, economically is the best solution. And in terms of the operation of the system is needed for keeping already the service operative. So, I think the energy policy made by the government. The government have to take the decision, and they will explain the consequences, whatever decision they will take about. Ignacio Cuenca Arambarri: Another trendy topic in Spain. Can you provide an update on the latest developments regarding the regulatory framework for networks in Spain? And how would the remuneration rate below 7% affect your investment plans? Jose Sanchez Galán: You're talking about Networks. Ignacio Cuenca Arambarri: Networks in Spain. Jose Sanchez Galán: Yes. I think that -- you know Networks in Spain for us is quite small compared with the Networks we have in other countries. I think, it's the fourth in terms, as you saw in our presentation, is the fourth of all our RAV in the different countries. The first one, largest RAV is in the state. The second largest RAV is in U.K. The third largest RAV is in Brazil and the fourth is Spain. So, I think it's small compared with the rest. But saying that, I think as far as I know, they are still that is in process. There are no new news. I think, which I already heard is they are already make a public consult about the terms which have been proposed, but we have no more details on that one. I think, something which is clear is either the government, central government, either the different government of the region are asking for the need of more, more investment in Networks. So, I think if that is not the proper framework, I doubt in this extraordinary investment, which is needed. So, it's going to be made as faster as it will require. Ignacio Cuenca Arambarri: Next, how are the increasing cost of ancillary services being managed? And to what extent are these costs being passed through to the customer as contracts are renewed? Jose Sanchez Galán: Pedro? Pedro Blazquez: I think as of September, yes, we have a negative impact because of our multiyear contracts. But of course, these costs are being passed through as contracts are renewed. We expect by '26, 70% of this already through customers and almost 90% by '27. Ignacio Cuenca Arambarri: Next is regarding the U.K. What is the company's perspective on the current regulatory environment in the U.K., particularly regarding the RIIO-T3 framework? Jose Sanchez Galán: I think, we have a very fluent dialogue with the regulator. I think recently, I met personally the Chairman, the Chair of Ofgem. I think, they are aware about the need of sufficient profitability remuneration and financial ability for already to make -- to attract the investment needed. I think, it's certain they make already a draft determination, which is the base of our rate case plan. I think, our business plan is already just based in this draft determination. But I think, I'm sure that the sensibility of the Ofgem is such that, I hope that there is a potential improvement during the negotiation, which -- to make certain upside, but we will know the final determination by December. So, I think now we are in the process of that one. But I think we are very open dialogue with the regulator, I think ourselves and another two players on this one. And I think they are -- my feeling is that they are already very sensible about the need of making already some adjustment to facilitate to make the huge investment which are needed. Ignacio Cuenca Arambarri: Next is, can you provide details and expectation on your strategy for the AR 7 auction in the U.K.? Jose Sanchez Galán: So as you know, we have already East Anglia ONE North ready to participate that one. So, I think we have a competitive project. We have all the security, all the supply chain secured. We -- but I think, we are very disciplined in terms of profitability criteria. I think yesterday, I heard the budget -- the final budget has been published, which I think only EUR 900 million allocated to offshore. But I think the flexibility to the Secretary of Energy to increase this amount depending on the numbers of bidders. I think, this number, remind like it is in my feeling, my opinion, is not sufficient to achieve the country objective in terms of power, in terms of decarbonization. I think there are no other changes in this year 7. They increase the life of the CFDs from 15 to 20 years. And I think they already make already a reference price, which is 11% higher than the previous one. So, which I think that will sense. But I think the budget, in my opinion, is absolutely insufficient. And I think, if the Secretary of Energy has already the power to modify the numbers after the auction. If that is not modified, my feeling is it should be difficult to achieve the targets where they are already thinking in terms of power, new power and in terms of decarbonization when they are already looking. But new power, in my opinion, they will not really achieve the numbers they were thinking about. Ignacio Cuenca Arambarri: Next, what is the current status of the Mexico operation? And when do you expect regulatory approvals to be finalized? Jose Sanchez Galán: I think in Mexico, you mentioned. Ignacio Cuenca Arambarri: Yes, the deal in Mexico, the pending deal in Mexico. Jose Sanchez Galán: Well, I think the agreement is signed. As far as I know, the buyer has already secured the financing, almost secured. And I think, now we are depending on the approvals of the different authorities. But as far as I know, the things are ongoing. I think, this week, our Mesonero, which is our M&A guy, I think, is in Mexico. And I think he will take fresh news already next week. So, but I think we are not already, let's say, we have not any negative input about that one, and I think they are going already according with schedule. Ignacio Cuenca Arambarri: Two last questions. The first one is probably for Pepe. Effective tax rate is below historical average. Should we expect this effective tax rate to be kept at similar level at the year-end? Jose Armada: Well, I think that we will have tax -- an effective tax rate at the year-end to be around 20%. Let me explain that this is below basically for several reasons. First of all, because -- right now, the contribution of countries with a lower tax rate is higher than in previous years. So the U.K. and the U.S. versus Mexico and Brazil. An impact that it is reducing the tax rate this year is, as I mentioned, the U.K. Smart Meters capital gain in the first 9 months is at the gross and net. So, there is no tax impact here. Last year, the thermal capital gain was affected by the Mexican corporate tax rate. And finally, as I mentioned, last year, we had a negative impact in the taxes due to hedges that we had in and had a positive impact in our financial expenses. And this year is the opposite. We are having a negative impact in the -- due to the last year transaction, a negative impact in our financial expenses due to the Mexican FX hedges that is compensated at the net -- at the tax level. So, all-in-all, that is the explanation why this year, in the first 9 months, the tax rate is below 20%. And the expectation is that by the end of the year, the tax rate will be around this 20%, as I mentioned. Ignacio Cuenca Arambarri: And last question is related to Spain and the contribution of the hydro production in terawatt hour in 2025, which is our expectation related to the average traditional average year. Jose Sanchez Galán: So, just looking here at the numbers. I think, up to today, I think, our production of hydroelectric is around 18 terawatt hours, which I think is an increase of around 3% to 4% over previous year. Approximately 2/3 is traditional conventional and 1/3 is pumping storage. So, I see pumping storage is taking the important role on this one. And I think, now the reserves is on the range of 6 terawatt hours. And I think that, now it's again, it starting raining, which I think heavily, so which I think in a few days, we hope level of reserves will increase. I think that is -- I think in terms of the year, I think it's important, but it's 3% more, but that is not the key of our result. As you know, our result is coming from other sources. Even in Spain, the result is not going -- is not as good as last year, because of the prices and the ancillary service, et cetera. But I think it's a good news in terms that our results are high and probably with these rains, which are now coming and expected, I think the result can be already maintained, which should be a good thing for next year as well, contribution to the next year profit or next year results. So, I think that's good. But I think, the news is it's 3%, 3% to 4% more than previous year. Pumping is 1/3, 2/3 is traditional and the results are in a good shape, very high. But I think that is already, there are room for increasing those one if the rainfall is continuing as the range as the expectation we have in this moment, with that give already certain possible, let's say, extra result for 2026. Ignacio Cuenca Arambarri: We have received as well a final question regarding the guidance for 2026, but probably this is something that we will be delivering next February. So, we anticipate something on the Capital Markets Day, but I mean, for those that has asked this question in February will be the deadline. So, just to finish this event, please let me now the floor to Mr. Galan to conclude the presentation. Jose Sanchez Galán: So, thank you very much, as always, for your very clever, intelligent and very good questions. And thank you very much for participating in part of this conference. And if there are any new questions that you consider, I think our Investor Relations will be ready, as always, to give you additional information you may require. Thank you very much, and see you soon. Thank you.

201天前Insight Analytics约5分钟阅读

WRT1V.HE 2025 Q3 财报电话会议

Hanna-Maria Heikkinen: Good morning, and welcome to this news conference for Wärtsilä Q3 2025 Results. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Today, our CEO, Hakan Agnevall, will start with the group highlights, continue with the business performance. And after that, our CFO, Arjen Berends, will continue with financials. After the presentation, there is a possibility to ask questions. Hakan, time to start. Håkan Agnevall: Thank you, Hanna-Maria. Thank you, and welcome, everybody. This quarter was a good quarter actually, and we are moving in the right direction, but it's also a quarter where you need to look a little bit under the hood. I mean, first of all, operating results and cash flow increased. Order intake was stable at around EUR 1.8 billion. But if you look at organic growth, it's actually up 6%. And also, if you look at Marine & Energy specifically, you see that Marine order intake was actually up 8%, and Energy order intake was up by 29%. The challenge, and I'll come back to that, is on our battery business, our energy storage business, where the order intake in Q3 for new equipment was basically 0. But Marine & Energy growing in a good way. This also leads to a strong order book of EUR 8.6 billion. Net sales decreased by 5% to EUR 1.6 billion. But also there, this is driven primarily by timing of deliveries on energy. So the deliveries in Energy will be tilted to the fourth quarter. I'll talk more about that later. Comparable operating results increased by 10%. So we continue our journey to reach our financial targets. We are now at 11.9% of sales. Operating results increased by 20% to EUR 230 million, which corresponds to 14.1% of net sales, and items affecting comparability amounted to EUR 35 million, mostly related to the divestment of ANCS. On services, our group service book-to-bill ratio continues to be well above 1. And cash flow, I will come back to that. We have a strong cash flow from our operating activities of EUR 340 million. Now let's look more into the details of the numbers. So if we start with the quarterly, the Q3 results. So order intake, as we talked about, is actually down 1%. But as I said, if you look on organic, organic growth, up 6%. You've also seen the growth in Marine, 8%; Energy, 29%. If we look at the net sales, goes from EUR 1.7 billion to EUR 1.6 billion, down 5%. But as I said, it's major related to prioritization of sales in Energy, and I will come back to that. If we look at book-to-bill, so we continue with a good book-to-bill above 1 at 1.1 this time. And I think this is the 18th consecutive quarter in a row where we have a book-to-bill above 1. Comparable operating result, EUR 195 million, up 10%, and we are now at 11.9% of net sales. And operating results, EUR 230 million, up 20% and now at 14.1% of net sales. If we look at the year-to-date, I think there are 2 figures that I would like to highlight. Our order book, which is up to 14%, up to EUR 8.6 billion and also our continued improved comparable operating result, up 18% going from 10.5% to 11.7%. Solid path to reach our financial targets. Looking at our 2 industries. If we look on the Marine market, we see a moderating demand for newbuilds. But still, in line with the 10-year average. And then if we look at Wärtsilä core segments, strong ordering across cruise, containers and LNG bunkering vessels. So the number of vessels that were ordered in Q3 decreased to 1,200 down from 1,700 corresponding period last year. The regulatory uncertainty, high newbuild prices and softer market conditions affecting negatively the newbuild investment demand in some segments. Ordering has though been uneven across vessel segments. We continued strong ordering appetite in Wärtsilä's key segments, cruise, containerships and LNG bunkering vessels. And contracting in our key segments is expected to remain clearly above the 10-year average level with the latest forecast, actually, indicating a 30% increase in contracting volumes between 2025 and 2027. Shipbuilding continues to expand, primarily in China. And in January to September, 259 orders for new alternative fuel capable vessels were reported, which accounts for 48% of the capacity of contract investments. On the Energy side, the increased demand drives investment in the energy transition. And the global energy transition continues to move forward. And EAI -- EAA -- IEA, sorry for that, International Energy Agency, not so easy to pronounce, this morning, expects renewables, grids and storage investments to post another record high in 2025 and investments in fossil fuels to decrease. BNEF reported that both wind and solar investments grew in the first half of the year compared to H1 in 2024. Energy-related macroeconomic development in 2025 has been heavily impacted by elevated risks in the geopolitical environment. In our engine power plants, market demand for equipment and services has been strong. Demand for baseload engine power plants is expected to remain stable with further growth opportunities in data centers. The drivers for engine balancing power plants continue also to develop favorably. In battery energy storage, though, the demand is closely linked to the increasing share of intermittent renewables, which in one side continues to progress slowly. However, the U.S. market is facing headwinds in the regulatory environment, though several drivers remain solid and actually also on the storage side now with data centers as a potential new opportunity. Going through the numbers. Organic order increased, as I said, organic order intake increased by 6%. Order intake overall remained stable. Marine order intake increased by 8%. Energy order intake increased by 29%, but energy storage order intake decreased by 79%. Equipment order intake remained stable and service order intake remained stable. If we look at the order book, we have a strong order book. Rolling book-to-bill continues well above 1. We see the trend. We also see that the order book is building up further and further into the future. So that is something to recognize. Organic net sales remained stable. So net sales decreased by 5%. Marine net sales increased by 18%. Energy net sales decreased by 30%. And this, once again, it's driven by the prioritization of deliveries between quarters. And we do expect that deliveries during the second half year will clearly be tilted in Energy to the Q4. Also, as you know, we have more and more equipment contracts moving from EPC to equipment and equipment contracts, to make it simple, they are invoiced when the delivery. EPC is a little bit more smooth than out. So you can also see this as one of the consequences of that we are actually moving our Gravita to equipment business. Energy storage, net sales decreased by 10%. Equipment net sales decreased by 11%. Service net sales remained stable. Profitability continues to improve. So net sales, given the context, decreased by 5%, but comparable operating results increased by 10% and comparable operating margin 12-month rolling is now at 11.6% compared to 10.6%. On technology and partnerships, so we continue to shape the decarbonization of Marine & Energy. The Energy, example, 217-megawatt dual-fuel power plant to deliver reliable power for Kentucky residents. So we will supply the engineering and equipment for 217-megawatt power plant in Kentucky in the U.S. The plant is needed to provide additional grid capacity, thereby helping East Kentucky Power Cooperative to meet increasing demand. And this order was booked by us in Q3. On the Marine side, we continue our close collaboration with Wasaline. And now we will together deliver the world's largest marine battery hybrid system project. So we have been selected as the electrical integrator for a major battery extension project for the Wasaline ROPAX ferry, the Aurora Botnia. When the project will be finished, it will be the world's largest marine battery hybrid system in operation, close to 13-megawatt hours. And the Aurora Botnia operates with a range of Wärtsilä solutions, including 4 highly efficient Wärtsilä 31DF engines. And this order was also booked in Q3. Marine, and here, we have a fantastic picture of a fantastic Finnish icebreaker. We are very much close to this segment, half of the world's icebreakers actually have engines from Wärtsilä. So exciting opportunities also in the dialogue between the governments of Finland and governments of the U.S. Marine. So increased order intake, net sales and comparable operating results and continued growth in equipment order intake. So we see overall order intake up 8%, net sales up 18%, and we do see also the continued improved profitability margin. The drivers in the bridge for the profitability, higher service and equipment volumes, better operating leverage. And on the headwind, it's increased R&D costs. We keep on investing in our future and being a technology leader in our space. If we look at the service business. Overall, Marine service book-to-bill well above 1. Strong growth in service agreements. However, in this quarter, we saw reduced order intake in retrofits and upgrades. So to the left, you can see 8%, I would say, solid CAGR growth in the Marine service business. On the right side, you see the different disciplines of our service business. You see the service agreement curve, accelerating in a good way. We now have about 30% -- 34% of our installed fleet under service agreement. The renewal rate continues to be above 90%, good progress. You also see the retrofits and upgrades coming down. But as we talked about before, retrofit and upgrade, that's a project business, and it can be a bit bumpy, and it's lumpy by nature. And we have a good pipeline in front of us that I can say. Energy. Increased order intake, lower net sales due to the timing of the deliveries, but continued growth in equipment and service order intake. So on the order intake side, up 29%. And this quarter, we haven't had a data center order. You remember, we had our first U.S. data center order in Q2. However, there is an exciting pipeline of data center opportunities in front of us, various stages of maturity. So there is a good pipeline coming. Net sales, down 30%, driven by the prioritization. Comparable operating results, the percentage is moving in the right direction. And if we look at the drivers, the higher service volumes clearly contributed to the profitability. But lower equipment sales in this quarter is, of course, a drag. And also here, we continue to increase our R&D investments to be a technology leader for the future. If we look at energy service business, the book-to-bill also continues to be well above 1. Strong growth in service agreements also here. However, also in Energy, reduced order intake in retrofits and upgrades. Here, you can see also a solid service business CAGR, 7% over 2 years. Also, it looks a little bit similar so as Marine. There is no correlation why this coincides, Marine & Energy. It's a coincident. But you can see agreement is continuing to go up also in Energy around 33%, 34% coverage, also the renewal rate on agreement above 90%, so very positive. We see the retrofit business clearly being down in Q3, but also here, we have a good pipeline in front of us. So energy storage, which, of course, on the order intake was challenging in Q3. So order intake low due to the U.S. tariffs, regulatory changes and also increased competition. On the positive side, really strong profitability in Q3, 6.9% EBIT, real EBIT in Q3. I think that's a strong delivery by the team. But of course, order intake coming down 79%. However, I want to highlight the press release we made yesterday where we took our first order in Q4. So we are also very clear that we do expect order intake to pick up in Q4. Net sales down 10%. The operating margin is -- continues to develop in a good way. And if we look at the bridge on the positive side, really solid project execution. We are delivering on our backlog in a very good way with a great risk reward and with happy customers. We also have higher service volume. So the service business is, of course, smaller than for the rest of our Wärtsilä business, but it's growing. And then on the negative side, we are investing, you could say, in growing, and that's part of our strategy that we have communicated in the past that we will expand on geographical coverage. So we are increasing head count supporting the new markets, new customers and the products. And here, you have the bridge Q3 '24 to Q3 '25. And I think really good development, Marine going from 10.4% to 12.4%, EBIT Energy from 13.6% to 15.9%. Energy storage, as I talked about before, from 4% to 6.9% and then portfolio business from 9% to 6.8%, but that is primarily driven by ANCS, which has now been divested. So we have taken that out and the business contributed profitably -- in a profitable way to portfolio. So comparable operating results increased by 10%. Other key financial side. Over to you. Arjen Berends: Thank you, Hakan. If we look at the other key financials, also very positive numbers in general. First of all, cash flow, clearly, a very strong cash flow in Q3. It was at least the highest cash flow in the last 50 years. We did not go further back, but EUR 340 million, clearly, a good number, taking us close to EUR 1 billion year-to-date. Good support in the cash flow from profitability, but also clearly from working capital. Working capital at the moment approaching, let's say, EUR 1.1 billion negative, which is also an all-time low. Net interest-bearing debt, clearly moving also in the right direction, EUR 1.4 billion at the moment, negative. And return on capital employed, ROCE, clearly improving from 44.6% at the end of Q2, now to 51.1%. So over the 50%, which is really remarkable for us as a company. Gearing, clearly, going also in the right direction. We have been running this at a negative number already for a long time, well below, let's say, our financial targets and solvency also clearly improving now with improved profitability. Earnings per share, both on the quarter as well as on the year-to-date clearly ahead of last year at the same time in the same quarter. If we look at the trends, cash flow as well as working capital to net sales ratio, both are moving in the right direction. If you look at the dotted line on the right side graph, working capital or let's say, 5-year average working capital to net sales ratio every quarter, we are, let's say, lowering the line basically. At the end of Q1, it was 2.4%. At the end of Q2, it was 1.3% and now 0.1%. So we are very close to a negative line here as well going forward. And actually here, I also want to comment, let me anticipate that, let's say, this negative working capital will sustain the next years. Looking at our financial targets and the progress there. If I start at the left side, top graph, Marine & Energy combined organic growth, plus 13%, well above, let's say, our targets of, let's say, 5%. So really going in the right direction here, same for profitability percentage at the end of Q2 was 13.1%, now 13.2%. So it's again a step up, a small step, but a step up. If we look at energy storage, of course, growth is not there as we want it to be, given all the, let's say, challenges that we had in the past quarters on that one with respect to order intake. But clearly, let's say, the delivery is going very well. And also, let's say, as Hakan also explained, let's say, generating good profitability from executing projects from the order book. Currently, we are at 4.2% of sales here and really within the frame of the financial targets. Group targets, I don't want to comment too much. I think gearing is very obvious. We are well below 0.5 positive. We are actually 0.5 more than negative and dividend, we have always met our financial targets of paying at least 50% of EPS out as dividend. With these words, back to you, Hakan. Håkan Agnevall: ROCE at 50%. This is... Arjen Berends: Yes, yes, fully agree. Håkan Agnevall: Now we continue our journey to become a more focused, stable and profitable company. So we are making progress in our portfolio business divestments. So as we announced in Q2, the divestment of ANCS to Solix was completed the 1st of July. And in Q3, this divestment had a positive impact of EUR 34 million on the result, and it's reported in the items affecting comparability in Q3. Annual revenue of the business was close to EUR 230 million in 2024. So that's also a data point. ANCS did not anymore contribute to the figures in Q3 2025 and the group order book has been adjusted accordingly, so impact about EUR 260 million. And on MES, as we announced in July 2025, Wärtsilä MES, Marine Electrical System to Vinci Energies and subject to approvals, the transaction, we expect the transaction to be completed in Q4 2025. So given -- let's look at our outlook then. So for Marine, we expect the demand to be better than in the comparison period. In Energy, we expect the demand environment for the next 12 months to be similar to that of the comparison period. But here, we also note that Q2 was all-time high in order intake. So we are coming from a very strong order intake in Energy overall. On storage, we expect the demand environment for the next 12 months to be better than in the comparison period. However, here we really highlight the geopolitical uncertainty that particularly impacts this business. Then we also make a general comment that we underline that the current high external uncertainties make forward-looking statements challenging. Due to high geopolitical uncertainty, the changing landscape of global trade and the lack of clarity related to tariff, now risks for postponement in investments, decisions and also of the global economic activity slowing down. All right. So that was a summary of Q3. And now we open up for Q&A. Hanna-Maria? Hanna-Maria Heikkinen: Thank you, Hakan, and thank you, Arjen. [Operator Instructions] Operator: [Operator Instructions] Next question comes from Max Yates from Morgan Stanley. Max Yates: I guess my first question, just starting on the data center-related business. I guess the first thing to understand, when you talk about anticipating better order intake in the fourth quarter, to what extent is that a comment around data center and the energy thermal business? Or are you really just relating to the energy storage business? And I guess, more broadly, when we look at quotations and conversations with your customers, I mean, maybe help us understand how those are evolving versus 6 months ago. I think there's a lot of expectation in the market that there's more emphasis on engine technology, there's a greater acceptance of the engine technology. Would you say you kind of see that reflected in your customer conversations and the number of these kind of hyperscalers and colocation companies that are kind of knocking on your door or flying into Wärtsilä. So any comment there would be appreciated. Håkan Agnevall: Absolutely. Quite a few questions, but I'll try to answer them. And even if I forget some of them, please remind me again. So just to clarify, this is about Energy Q3, Q4, that is on the sales side. I mean, our deliveries, where we clearly say that deliveries and therefore, sales recognition are clearly skewed to the fourth quarter. So that is not related to the whole data center. I will get to that later, but just so we are clear, so we have been clear in our communication. It's related to deliveries, and we're basically saying deliveries and therefore, sales recognition is skewed to Q4. I mean it was fairly low in Q3 for Energy. Max Yates: Sorry to interrupt, but you do say in the release, we anticipate ordering to pick up in the fourth quarter. So I guess I was just trying to understand on that comment. Is that storage or is that the thermal business? Håkan Agnevall: Okay. Okay, good. That's -- so first, I talk about Energy, and I made the comment on sales deliveries and Energy, that is our power plant business. Then coming to -- okay, sorry, if I misunderstood your question. If I talk about the storage business and on the storage business, yes, it's clearly that we expect order intake to pick up in Q4. And I mean, it was basically 0 for newbuild for equipment in Q3. So it will certainly pick up at a much higher level. And a proof point is that, as I mentioned yesterday, we announced our first order for Q4, and there is more coming. So -- and even though, clearly, the U.S. market is still slow. There are other markets like Australia, this order from yesterday was from Australia and there are also other markets to support the energy storage order intake for Q4. Then moving to data center. And then I have to ask you, were you referring to data center and energy storage or data center in our thermal business? Max Yates: The data center in your thermal business and specifically the growing interest in engines and how has that led to a rise in quotations on the number of projects you're discussing versus, say, 6 weeks ago? Håkan Agnevall: Yes. So we do see increase in interest in the engine technology. You might recall this what we've been talking about, and this is a journey of, I would say, 2 years. It used to be data center sizes, needing power, 5, 10, 20, 30, 50 megawatts. Now the data centers are growing in size, and it's -- the data center owners, they cannot get access to the utilities, so they need to build their own power generation, off-grid. And now we are talking about hundreds of megawatts, 100, 200, 300, 400 megawatts. And this is coming right in our sweet spot. And so this market is really heating up for us. And to your question, yes, we see a lot of engagement from customers, a lot of interest. I think many customers are more and more also recognizing the benefit of the engines compared to the competing technologies on the gas turbine side, but also on the high-speed engine side. So yes, there is more activities clearly. And then if I may just for clarification also because we also mentioned data centers in relation to our battery business, or battery storages. So then you might say, what the hell is this? I think what operate -- I mean, the data center operators, they are also finding out there are rather big swings. And there are the big swings in the minutes region, but there are also the big swings in the millisecond regions. And here, so it's balancing power. It's a good old balancing power. And you need -- you have 2 tools in the toolbox for the balancing power. And in this millisecond, second region, we see an increased interest actually for battery storage to kind of balance the load. Operator: The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I wanted to follow up on Energy, but sort of thinking more about the margin and what you've said on sort of like less EPC now concentrates the deliveries into Q4 more skewed than in the past. Does that apply also to how we should think about margin seasonality? Should we think about sort of like a more intense concentration of margin also in Q4 than in the past, in general? How does that work? Håkan Agnevall: Arjen, you take that? Arjen Berends: Yes. I would say, yes, margin correlates with sales volume. So margin that you make on the project is recognized in the quarter that you recognize the sales. And that depends on, is it percentage of completion, which is typically used in EPC contracts or, let's say, on time -- or let's say, completed contract method, which is then basically based on deliveries. So yes, when sales shift also margin shift at the same time in the recognition, correct? Daniela Costa: Great. It's just for -- it was just for Energy. I would say then that your comment on skewness on EPC. Arjen Berends: Yes, yes. And also, let's say, the EPC comment is related to Energy. Marine is basically all is completed contract method. Operator: The next question comes from Akash Gupta from JPMorgan. Akash Gupta: I have a follow-up on energy. So I think you are kind of indicating that revenue in equipment side will be strong in Q4, and this simply has to do with seasonality in delivery of equipment, which will be more in Q4 than Q3. I mean I just want to understand like what is causing this seasonality in delivery because I think I would assume that you would be producing these engines every quarter. And therefore, when it comes to delivery patterns, they would be more homogeneous. But maybe if you can help us explain what is causing this seasonality? And is this something we should expect every year that some periods may be more busy, some periods may be less busy on revenue? Or there is something unusual in 2025 that may not be repeating next year? Arjen Berends: I can answer that. Let's say, it's really about the delivery schedules that you've agreed with customers, okay? Some years, you have it more evenly spread. Other years, it's, let's say, more in certain quarters. What you mentioned earlier that, okay, production of engines does not relate to, let's say, income recognition or sales recognition in a certain quarter. It's the delivery to the customer that counts. And here, we follow basically what we have agreed with customers. So there are -- clearly, in every project, there are delivery schedules. And in this year, in the second half of the year, it's mostly into, let's say, Q4. I cannot comment whether this will happen every year because that depends on the orders that you have in that particular year. But let's say, if I try to put a little bit myself in the shoes of, let's say, customers that if you build a power plant or if you build a ship and you work with percentage of completion, most likely, yes, if you want to, let's say, have an impact on your results, yes, you want to have the delivery done before the year-end, if you close your financial year at the calendar year. So that might be one driver. But let's say, we follow the schedules that we agreed with customers. Akash Gupta: And maybe just a follow-up to that question. Does the size of project change this seasonality? Because I assume that if you have a large 200, 300-megawatt order, then you may want to ship everything in one go, which could create a bit of this pattern. So any comment on size of orders may be impacting revenue recognition profile? Arjen Berends: Yes. There are many delivery schedules in a certain project. It might be, let's say, shipping -- let's say, if you have a power plant with 10 engines, let's say, it might be one batch in this quarter and the next batch in the other quarter. It varies a lot by project. And it depends also quite much, let's say, where do you need to ship it to. So there is no, let's say, one pattern and one size fits all here. Håkan Agnevall: I agree. And it's not that for certain -- it's not a model where you bundle all the engines and you ship them at once. There are many different ways to deliver the engines. So normally, you deliver them in stages. It's easier to handle them at site, if you talk energy than receiving everything at once, et cetera. So I'm afraid it's much more complicated than that. And it's really related to how the customer want us to deliver, so to say, and that can vary quite a lot. Operator: The next question comes from Sven Weier from UBS. Sven Weier: Just wanted to follow up on what you said on data centers and battery storage because obviously, we had the announcement from NVIDIA mid-October around the next-generation data centers, the 800 VVC ecosystem, which builds in battery storage kind of as a standard. So I was just curious if you were also kind of referring to that announcement? And what do you need to do to be able to do business there in terms of the battery sourcing? I mean, how much have you already changed the sourcing maybe to Korea, which I guess will be in a much better starting point and China probably continues to be penalized. So that's the first one. Håkan Agnevall: So 2 things. I mean, I think actually that -- and this is my inside out -- outside in, sorry, outside-in observation that I think there is a lot of learning going on, on how the data centers are behaving as electric loads. I mean you have certain data centers that are focusing on learning, then you have other data centers that are focusing on interference, and they have completely different load profiles in terms of what energy they need and how it swings back and forth. So I cannot comment on the latest from NVIDIA. But clearly, there seems -- and there is an evolving understanding that for certain type of data centers, the swings can be pretty big and pretty quick. And that leads to an interest to the energy storage side, so to say. Then coming to where we source our batteries, yes, we certainly source from China, but we also source from other countries in Southeast Asia. We are also looking at possibilities for sourcing in the U.S. However, in our view, that is taking longer to move. Sven Weier: And would you say the largest share still clearly comes from China? Or how should we think about that? Håkan Agnevall: Yes. In the share of supply of batteries -- battery cells for Wärtsilä, the biggest share is still from China, yes. Sven Weier: Okay. But you started to already make the shift to other regions in the last quarter. Håkan Agnevall: Yes, correct. Sven Weier: And then maybe one quick follow-up on the thermal side and the discussions you have with the U.S. customer base for data centers. I mean, what is the biggest pushback? I mean, do you reckon there are still predefined views that kind of people think you don't get fired for buying a turbine, but no experiments with new tech because engines have probably not been used so much for baseload in the U.S.? Or what's the biggest hurdle you find in your discussions? Håkan Agnevall: No, I think the technology acceptance is certainly evolving. I mean we have one group of customers. They are fully into engines. They see the benefits, et cetera. Then there are other customer types, which is a little bit more what you're alluding to. It's a new technology. But I think this is how we've been selling the Wärtsilä propositions for many, many years, and we run our simulations, we show all the proof points, et cetera. And step by step, we convince customers because also in this application, there are some intrinsic benefits for the engine. Energy efficiency is higher than our competition. No derating on high altitude, which is sometimes important, very little water consumption, which is sometimes important. Really good -- I mean, ramping, we all know that from the balancing compared to the CCGTs, et cetera, et cetera. So for me, it's very similar, you could say, the business development and sales process that we have with many of our, you could say, regular customers. I think the difference is that the speed of execution and the desire from the customers to deliver, that is clearly 1 or 2 notches higher than, so to say. Operator: The next question comes from Panu Laitinmäki from Danske Bank. Panu Laitinmaki: I wanted to ask about cash flow and capital allocation. So you had EUR 1.4 billion of net cash. And maybe just to confirm that did you change your comment on the net working capital that you expect it to remain negative for longer as you previously, in my view, indicated it to kind of reverse? And then if that's so, does it kind of change your view on capital allocation, if it's like better for longer in terms of balance sheet? Are you more open to doing share buybacks? Or what will you do with the cash? Arjen Berends: Let's say, the allocation principles as such don't change. Let's say, we have been saying and I have been saying in many quarters that, okay, the negative working capital level is extraordinary. And okay, it's not so long ago that we went through the negative line, basically from positive working capital to negative working capital. You could, in a way, say it felt in the beginning a little bit uncomfortable, but we now see that this is a sustainable trend that we see. Will it be all the time that negative as we see it today? Question mark. Let's say, there are clearly, let's say, factors in the market that are currently there, which in the future might not be there. And I give one example. I think I gave it also last time. Yard order books are very long. Yards want to lock their cost. If they want to lock the cost in Wärtsilä, they need to put the order at Wärtsilä with a down payment. So you get cash earlier. Well, the exit cash or the cost, let's say, generation is later in the time. That's a positive impact, which is happening today. Will yard order books in the future get shorter again? It might reverse that trend. Difficult to say if that will happen, when it will happen. But at least for the coming years horizon, we anticipate that working capital will stay negative. Another trend, which I also, I think, mentioned last time is, for example, in energy, we have seen a few projects. I'm not wanting to call it a trend, but we have seen more projects than before, let's put it that way, where customers don't want to make, let's say, payment security arrangements, like LCs, bank guarantees, et cetera. That's fine for me. Cash upfront. Then we have a lot more cash early on before we actually make the cost. So is this something that will stay there? Difficult to say. For now, I think it will not change rapidly. But yes, this can change. So that's where we were in the beginning, very careful with, let's say, making bold statements about working capital staying negative. I think we feel much more comfortable about at least the coming few years to say, yes, it will stay negative. But sorry, I did not answer your capital allocation question. Let's say, the capital allocation principles don't change. And share buybacks, yes, that's for future consideration, not at the table today. Operator: The next question comes from Vaspaan Avari from Barclays. Vladimir Sergievskiy: It's Vlad, from Barclays. Two questions from me, if I may. Very strong margin in thermal energy this quarter. Congratulations on that. This lack of the equipment deliveries in the quarter, did it have positive or negative impact on the margin? Because, of course, on one hand, mix is favorable, but on the other hand, cost absorption is less. That's first question. Second question, could you comment on competitive environment in energy storage globally and maybe by key regions? Has there been any changes there recently? Håkan Agnevall: You take the first one? Arjen Berends: I did not catch the first one, to be honest. The line was... Håkan Agnevall: I think I get it, but it's better to say... Arjen Berends: The line was a bit... Vladimir Sergievskiy: I can easily repeat the first question. The question is the lower deliveries in the Energy business in Q3, did it have positive or negative impact on profitability in Q3, given that on one hand, the mix is favorable, but on the other hand, cost absorption is less. Arjen Berends: Shall I answer that, please? Håkan Agnevall: Please. Arjen Berends: So let's say, the answer is fairly simple. Let's say, of course, in absolute terms, it's negative because you have less sales that generates margin because we make positive margin on our new build business. But of course, from a percentage point of view, in the mix, it's a positive because service typically has higher margin percentages. So in the percentage mix, it's a positive. So it's both actually. But it depends if you look absolute or if you look percentage of sales. Håkan Agnevall: And then if I continue, as I understood your question, Vlad, is how is the competitive situation develop in energy storage more from a global perspective. And I would say that the competition is increasing, and I think there are 2 major drivers for it. One driver is, of course, the slowdown of the U.S. market with the regulation and tariff regimes, which then, of course, drives suppliers to focus on other markets. And the other trend is also that we see more vertical integration, where cell producers are also moving into the integrated space, so to say. So the competition is increasing, in general, I would say. Operator: The next question comes from Mikael from Nordea. Mikael Doepel: Still one on data center, if I may. In your view, I mean, how big part of the future data center market is relevant for the 50 to 400-megawatt sweet spot that you are referring to? So I assume that you have done some research on the topic. So just trying to understand the opportunity for Wärtsilä here. That would be my first question. I can come back to the second one. Håkan Agnevall: Now so just to give you -- I mean, the short answer, there is a significant opportunity. It's very hard to quantify. Why is it so hard to quantify? I can give you some other public data that has been compiled by a number of reputable players like the McKinseys, the Goldman, the JPs, the International Energy Agency. If you look at the forecast of -- if you just zoom in on U.S. If we look at the forecast, how much growth there will be in data center power from now to 2030, there is a span from those reputable players in their forecast from 20 to 100 gigawatts. So it's very hard to -- with that as a starting point to derive what is the concrete addressable market. I would say the underlying -- there is definitely a market for engines. There is definitely a market for -- I mean, if we -- there is definitely a market for off-grid. In the off-grid space, there is definitely a market for engines. And if you talk engines, there is definitely a market for Wärtsilä. We do see growth opportunities, but it's very hard to pin down what are the -- even the spans of the additional capacity that would go trickle down when the spread in the starting estimate is as broad as it is. Now we think that data center is a very interesting opportunity. We have a pipeline that is looking very interesting. No orders in Q2, but we have interesting pipeline. And we are also looking on how to further develop our delivery capabilities. Mikael Doepel: And the second question would be on the carbon capture systems. I think we haven't talked about that on that topic for a while. So I wanted to revisit that and maybe you could get a bit of an update where are we now in terms of the infrastructure developments there? What is the customer interest right now given the regulatory environment? And do you have anything in the pipeline and so on and so forth? Håkan Agnevall: So basically, just to make a quick recap, we actually did the commercial launch of a carbon capture solution for Marine. So it's an extension of our scrubber business. So we can now deliver 70% capture rate, 7-0, on a 10% to 15% energy penalty because it's really this for a large [indiscernible] between you how much you can capture and how much energy you put in. That is -- it needs to be a viable route, so to say. We have had our first pilots in full scale, and it's working very well. We had the commercial launch. So we are engaged with customers. Now clearly, this is a whole ecosystem that needs to evolve. I mean we add a piece to the puzzle. We can capture the carbon. We can store it on the vessel, but then you need to take a short and what do you do with it? And we all know there are basically 2 routes. You can use it for sequestration, pumping it back or you can use it as a raw material for some -- in some kind of chemical process, including synthetic fuels. Now the customers that we are talking to now, they are more the early adopters. The regulatory framework already before IMO, the recent IMO postponement, I think in April in the MEPC83, it was already decided to come back and work further on the regulatory context and coming back later. So that from IMO, it will still take some time for the regulatory landscape to evolve. I think EU is further ahead in this area, so to say. So this is a market that will evolve. It will take time. We have made it clear. And I would say we are engaged with our customers that are the kind of early adopters of the pioneers. Operator: The next question comes from Vivek Midha from Citi. Vivek Midha: I have a couple of questions. The first is on energy power plants. I was interested in hearing your latest view on pricing trends. We've seen big price uplift, for example, in the turbines. We, of course, can't see the underlying pricing trends, stripping out mix and scope and so on. We can only see the crude average selling price, and that appears to actually be down around 25% on my calculations versus the second quarter. So could you give us any indication on the underlying pricing trends and new order margins? Håkan Agnevall: So I would say, in general, it is a hot market in the Energy space, and it's a hot market for all the technologies that I know of, so to say. And of course, in that type of market, it gives the suppliers opportunities for price realization. Then, of course, there is a customer that -- where the offering needs to make sense for the customer to build a business case, et cetera. So there is always a balancing. But I would say, in general, I think the price realization is rather good. Vivek Midha: Understood. And just one follow-up as well differently on the Marine service growth. If I'm just looking at the spare parts development, it looks like there's been a drop year-on-year and the book-to-bill below 1. How should we think about that developing? And would it be fair to assume that the spare parts are the highest margin part of the service business? Håkan Agnevall: So overall, I wouldn't be concerned, and you clearly looked at what we call the 4 disciplines. It will vary a little bit. I think the big trend agreement is clearly growing. There's a bit of spare parts in agreements as well. And then we have the retrofits. And the retrofits, it looks pretty dramatic as a downturn, but it's the cyclicality of the retrofit business. And as we have indicated, we see we have a good pipeline in front of us. So our message on services, both in Energy and Marine with a book-to-bill above 1. It's a consistent continued message. Operator: Next question comes from Max Yates from Morgan Stanley. Max Yates: Maybe just 2 quick follow-ups. Just the first one is around your energy storage business and obviously, a softer quarter this quarter. It feels like some of the U.S. kind of competitors have talked about a much more positive market backdrop. So I guess I was trying to understand, is this an active decision by you not to participate so much in the U.S. market because it's viewed as more competitive and therefore, focus outside? Is there any reason if sort of storage gets better in the U.S., your either setup of sales network, your procurement because of tariffs makes you less able to participate? And do you think it is fair that you're kind of focusing on other markets? Just to really understand what looks like a bit of a kind of difference with your performance versus what some of the other peers in the U.S. are kind of talking about for this market? Håkan Agnevall: So I would say U.S. is an important market for us. But I would say, in relative terms, I mean, Australia and U.K. and a couple of other markets, they carry a lot of weight. There are other players that -- where U.S. is more important for them, but -- relatively speaking. But U.S., we are in the U.S. We have continued our kind of selective strategy in the sense that we don't try to be the solution for each customer type. We continue to focus on the customer types that value our delivery track record, which is -- it's really solid, our thermal track record, which is really solid and also our capability to leverage our power system skills to integrate the equipment. So -- and you could see, I mean, looking at our profitability, it has -- with the help of a good project execution, is translating to real bottom line. Now I cannot comment on others, but we will continue this selective strategy. Then what we said when we came out of the strategic review is that we will try to add a couple of geographical markets. We will try to expand. And so we are definitely going to remain in the U.S. We will probably try to add, but we will have a selective approach overall. Now in this situation, we also talk about that we are certainly looking at how do we improve -- further continue to improve our competitiveness. And this is, of course, continue to work on our costs and also exploring avenues for -- I mean, synergetic opportunities with the supply chain, so to say. So these are the areas that we are working on. Max Yates: Okay. And maybe just a very quick follow-up. On your energy deliveries, and this is your sort of thermal power plant business, are you seeing any customers, particularly in the U.S., pushing back related to tariffs? And any kind of obviously, you've said tariffs are built into the contract structure, the customer pays them. Are any customers slowing deliveries? And is that having any impact on the rate of delivery? Or is it purely just a timing issue? Håkan Agnevall: No, this is clearly a pure timing issue. I mean it's not about -- I think it's fairly well. Of course, customers are not happy about it, but I think customers understand the dynamic about that we are adding the import tariffs to our prices. Nobody likes it. We don't like it either, but that's a clear principle. We haven't had any cancellations or anything like that. So I mean, this Q3, it's purely -- we talked about the customer delivery schedules that happens to be in this way this year. Operator: The next question comes from Antti Kansanen from SEB. Antti Kansanen: It's Antti, from SEB. I have 2 questions regarding the trends in Marine Service, please. And I fully understand the volatility related to the retrofits and upgrade business, so we can kind of exclude that from the discussion. But looking at the agreement book-to-bill growth, could you please remind what do you actually book in terms of agreement orders? If I understand correctly, the backlog is the 24-month expected value. So is that also kind of what do you include in the agreement orders there? And then the second question is maybe on the slowing trend on the book-to-bill on the parts and field services. Do you think you are cannibalizing that with the agreement business? And kind of should we be a bit concerned that the sales growth in the Marine services will start to approach 0 as kind of the agreement is longer converting and maybe the more transactional is slowing down? Arjen Berends: I think there is -- let's say, the first part of your question, we can confirm that's correctly assumed. Let's say, it's good to -- we take 24 months in. And then, let's say, on the moment that we take an order in on an agreement, then let's say, we roll it every quarter basically, let's say, with 1 quarter forward until, let's say, the whole agreement lifetime is consumed, you could say. When it comes to the spare parts, is it -- sorry, our agreements, let's say, cannibalizing parts? No, I would not say so. Agreements are contributing to parts. But of course, it depends a little bit, let's say, what kind of agreement you have. Let's say, if you have an agreement where you get paid by running hour a certain fixed fee. And within that fee, you need to do the maintenance. Of course, your aim is to do as little as possible spare parts. Spare parts, typically, what we book as part of an agreement ends up in the graph basically as parts. So that's good to keep in mind. Håkan Agnevall: And I would say to the -- what I assume is your more fundamental question, how do we see book-to-bill in services going forward? And I would say that underlying, we have a very positive view on that. I would say both in Marine and Energy. Arjen Berends: Mix between the lines can change. But in general, we look positive. Antti Kansanen: If I think about earnings contribution within the aftermarket, I guess the parts business is very, very important in that regard. So do you have any kind of views on why the book-to-bill on a 12-month rolling basis has been slowing throughout '25. Is there something in the customer behavior that you can clearly kind of pick out what's causing this? Or is it just a normal fluctuations? Arjen Berends: I would say it's normal fluctuations. . Håkan Agnevall: I agree on that. Operator: The next question comes from Akash Gupta from JPMorgan. Akash Gupta: Yes. I have a follow-up on your capacity in Energy, and what sort of flexibility do you have given the demand that we see in the data center is more for gas engines, while I think in your business, you have both gas, oil and renewable fuel engines. So a question like, is there any way to quantify how much theoretical megawatt or gigawatt you can produce? And then how much of that is gas versus non-gas? And do you have flexibility to retool capacity for oil engines to gas engines? So any color on that would be helpful. Håkan Agnevall: So to -- I mean, some general -- so we -- our engines are fuel flexible. So it's not about oil or gas. I think the more critical thing for us when it comes to our supply chain and our manufacturing is the size of the engines. I mean, you have the large bore engines and you have the medium bore engines. So this is more where we need to be careful in our forecasting and how we manage our delivery capabilities. Just to clarify. So it's not fuel related, it's size related. Secondly, I understand you want to know the gigawatts, but so does competition, and I won't tell them. So sorry about that. Then what we clearly said that -- and for certain engine types, and I will not go for the same reason, I will not go into the details, which -- but for certain engine types, I mean, we are now looking at delivery times in the second half of 2027. But we still have other engine types where we can deliver next year. So it's a mixed situation. Hanna-Maria Heikkinen: Thank you, Hakan. Thank you, Arjen. And thank you for all of the good questions. I'm afraid that we have already run out of time for this call. So as a reminder, we are hosting several events every quarter, which are equally open for everybody who is interested in Wärtsilä as an investment. And next event will be hosted by Håkan. It's a CEO Strategy Call on November 27. So I hope to see you there. Thank you. Håkan Agnevall: Thank you for today. Arjen Berends: Thank you.

201天前Insight Analytics约5分钟阅读

NMR 2026 Q2 财报电话会议

Operator: Good day, everyone, and welcome to today's Nomura Holdings Second Quarter Operating Results for Fiscal Year Ending March 2026 Conference Call. Please be reminded that today's conference call is being recorded at the request of the hosting company. Should you have any objections, you may disconnect at this point in time. [Operator Instructions] Please note that this telephone conference contains certain forward-looking statements and other projected results, which involve known and unknown risks, delays, uncertainties and other factors not under the company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions. With that, we'd like to begin the conference. Mr. Hiroyuki Moriuchi, Chief Financial Officer. Please go ahead. Hiroyuki Moriuchi: Thank you very much. This is Moriuchi, CFO. I will now give you an overview of our financial results for the second quarter of the fiscal year ending March 2026. Please turn to Page 2. Group-wide net revenue came in at JPY 515.5 billion, down 2% from last quarter. Income before income taxes fell 15% to JPY 136.6 billion, while net income was JPY 92.1 billion, down 12%. Excluding gains from the sale of real estate recorded in the previous quarter, net revenue was up 10% and net income was up 40%, reflecting steady growth. Earnings per share for the quarter were JPY 30.49 and return on equity was 10.6%, reaching the quantitative target for 2030 of 8% to 10% or more for the sixth consecutive quarter. In addition, income before income taxes in the 3 international regions rose 63% to JPY 44.9 billion, marking the ninth consecutive quarter of profitability. For all 4 divisions in total, income before income taxes rose 25% to JPY 132.6 billion. In Wealth Management, the balance of recurring revenue assets and recurring revenue saw a net inflow for the 14th consecutive quarter, reaching an all-time high. And in Investment Management, assets under management also reached an all-time high on a 10th consecutive quarter of net inflows. Revenues and profits rose in both divisions. In Wholesale, the overall trend of growth in both revenue and profits strengthened further with net revenue in Equities reaching a record high in Global Markets and momentum remains strong in Investment Banking, too. The Banking division established in April also performed well. Before we go into details for each business, let us first take a look at the performance in the first half of the fiscal year. Please turn to Page 3. As shown on the bottom left, income before income taxes rose 26% year-on-year to JPY 296.9 billion. Net income rose 18% to JPY 196.6 billion, and earnings per share came in at JPY 64.53. Return on equity rose to 11.3% as medium- to long-term initiatives steadily bore fruit. In addition, group revenue rose by 11% and profits benefited from cost controls and operating leverage with a cost coverage ratio of 71%. Please see the bottom right for a breakdown of income before income taxes. Income before income taxes at the 4 main divisions rose 11% to JPY 238.4 billion. Growth in recurring business revenue in Wealth Management and Investment Management helped to stabilize overall performance and Wholesale continued its self-sustained growth based on the principle of self-funding, enabling income before income taxes to rise substantially, thereby driving overall performance. Banking got off to a good start and has made progress with preparations for the introduction of a deposit sweep service next fiscal year. In view of this performance, for the period ended September 2025, we expect to pay a dividend of JPY 27 per share. This works out at a dividend payout ratio of 40.3%. Please turn to Page 4. This time, we have added this slide to our presentation. We calculate stable revenues as the sum of recurring revenue at Wealth Management, business revenue at Investment Management and revenue at Banking. Steady growth in recurring assets in both Wealth Management and Investment Management, shown on the left, has resulted in strong growth in stable revenues, as shown in the graph on the right. And Banking has been steadily increasing its recurring business, including loans outstanding and trust balance, thereby expanding its foundation for growth. Now we will look at the second quarter results for each division. Please turn to Page 7. All percentages discussed from now on are based on a quarter-on-quarter comparison. Wealth Management net revenue increased 10% to JPY 116.5 billion, and income before income taxes grew 17% to JPY 45.5 billion. Income before income taxes was the highest in about 10 years since the quarter ended June 2015. Recurring revenue and the balance of recurring revenue assets both reached record highs as recurring revenue assets saw a net inflow for the 14th consecutive quarter. As major equity markets rose to fresh highs during the quarter, client activity increased and flow revenue registered strong growth. Meanwhile, the pretax profit margin reached a high level of 39%, buoyed by ongoing cost controls. The recurring revenue cost coverage ratio for the last 4 quarters came to 70%, leading additional stability to the division's performance. Please turn to Page 8, where you can see an update on total sales by product. Total sales declined around JPY 300 billion to JPY 6.4 trillion, but this was owing to a tender offer in excess of JPY 1 trillion during the previous quarter. As for recurring revenue assets, sales of investment trusts and discretionary investments grew steadily, supported by continued strong demand for long-term investment diversification. Regarding insurance, sales have continued at a high level, reflecting the relatively high U.S. interest rate environment. Next, let's take a look at the KPIs on Page 9. On the top left, you can see that recurring revenue assets saw a net inflow of JPY 289.5 billion. As major markets reached new highs, net inflows remained at a high level despite increased selling pressure from portfolio adjustments as our efforts to expand the recurring business proved successful, taking us to the next stage. Meanwhile, as shown on the top right, recurring revenue assets totaled JPY 26.2 trillion at the end of September and recurring revenue exceeded JPY 50 billion for the first time in our quarterly results, owing to a contribution from investment fees, which are collected on a half-yearly basis in the second quarter. As shown on the bottom right, the number of workplace services rose steadily to exceed 4 million. Next, let's take a look at Investment Management. Please turn to Page 10. Net revenue came to JPY 60.8 billion, up 20%. Income before income taxes amounted to JPY 30.7 billion, up 43%. Stable business revenue has been growing steadily. In addition to favorable market factors, 10 straight quarters of net inflows resulted in assets under management topping JPY 100 trillion and asset management fees reaching a new high. Investment gain loss came to JPY 16.8 billion, rising sharply by 69%. This reflects not only a large increase in investment gain loss related to American Century Investments, but also profits recorded at private equity investment firm, Nomura Capital Partners on the sale of shares held in Orion Breweries, which publicly listed. Let's now turn to Page 11 and examine our asset management business, which is the key source of business revenue for the division. The graph on the upper left shows that assets under management reached JPY 101.2 trillion at the end of September. As shown on the bottom left, net inflows amounted to JPY 498 billion. Net inflows to the investment trust business totaled around JPY 525 billion and net outflows from the investment advisory and international businesses were around JPY 26 billion. Net inflows in the investment trust business were achieved despite share price increases on the major markets, triggering profit-taking sales, pushing up funds kept in reserve in MRFs. But even excluding MRFs, funds flowed into Japan equity ETFs, private assets and balanced funds. The investment advisory and international businesses saw net outflows owing to reshuffling of investments by Japanese investors and outflows from Asian equities, which outweighed inflows to U.S. high-yield bonds and UCITS investment funds. As shown in the graph at the bottom right, alternative assets under management rose to a new high of JPY 2.9 trillion. This performance is the result of solid net inflows and not solely owing to market factors. Next, Wholesale Division. Please go to Page 12. Net revenue came to JPY 279.2 billion, up 7% as shown at the bottom left of the slide. Global Markets net revenue was up 6% and Investment Banking net revenue was up 15%. Meanwhile, stringent cost management resulted in division expenses only rising 3%. As a result, cost-income ratio improved to 81% and income before income taxes rose 27% to JPY 53.1 billion. Please turn to Page 13 for an update on each business line. Net revenue in Global Markets business rose 6% to JPY 235.7 billion. Fixed income revenue was JPY 121.9 billion, in line with the previous quarter. Let's look at the product breakdown. In macro products, rates revenues were down quarter-on-quarter in EMEA. FX/EM revenues in AEJ were also down. In spread products, credit revenue growth in Japan and AEJ was attained by capturing client flows and securitized products revenue growth was supported in the Americas by the prevailing direction of the interest rate environment. As a result, higher revenue from spread products offset lower revenues from macro products. Equities revenue rose 16% to a new high of JPY 113.8 billion. In equity products, revenues grew on higher client activity in Japan and AEJ, supporting a strong performance in the derivative business and the Americas business remained favorable. Execution services sustained strong revenue from the previous quarter. Please turn to Page 14. Investment Banking net revenue rose 15% to JPY 43.5 billion. Corporate action in Japan remained consistently strong and the international business also contributed to revenue growth. By product, in advisory, momentum remained strong in Japan with multiple transactions involving financial sponsors and moves to take companies private. And international business also made a contribution with M&A deals related to renewable energy and digital infrastructure, primarily in EMEA. Advisory continued to rank top in the Japan-related M&A league table for January through September and ranked 15th in the global M&A league table, demonstrating its global presence. In financing and solutions, revenue rose in DCM on continued solid performance in Japan and multiple international transactions, primarily in EMEA as well as ALF deals, particularly in the Americas. Now let's look at Banking. Please turn to Page 15. In Banking, net revenue came to JPY 12.9 billion, flat from the previous quarter. Income before income taxes fell 12% to JPY 3.2 billion. KPIs such as loans outstanding and investment trust balance remained at a high level and revenue from lending business and trust agent business held firm. Meanwhile, higher costs pushed down profit as an upgrade to the core banking system completed at Nomura Trust and Banking in May 2025 resulted in the associated depreciation being fully booked this quarter. Preparations for the deposit sweep service scheduled for introduction in FY 2026, '27 are progressing as planned. Now I will explain noninterest expenses. Please turn to Page 16. Group-wide expenses came to JPY 378.8 billion, a 4% increase from the previous quarter. Compensation and benefits totaled JPY 195.1 billion, rising 5%, reflecting an increase in performance-linked bonus provisions. Commissions and floor brokerage fees came to JPY 47.2 billion, up 5%. The increase was driven by a heavier volume of transactions. Other expenses came to JPY 52.8 billion, which includes JPY 3.1 billion related to acquisition and integration of the U.S. asset management business of Macquarie Group as well as the expense of paying compensation for losses arising from fraudulent trades in clients' accounts due to phishing scams. I will comment in more detail on how the phishing scams affected our profits this past quarter at the end of today's presentation. Lastly, we take a look at the financial position, Page 17. In the table on the bottom left, you can see that Tier 1 capital at the end of September came to approximately JPY 3.6 trillion, up roughly JPY 170 billion since the end of June, while risk-weighted assets came to JPY 23.5 trillion, up roughly JPY 660 billion. The common equity Tier 1 ratio at the end of September accordingly came to 12.9%. This is within our target range of 11% to 14%. Our common equity Tier 1 ratio finished the quarter down from the 13.2% marked at the end of June, but this decrease reflected the accumulation of positions commensurate with revenue opportunities as well as the increase in the value of risk-weighted assets due to market factors. As we explained 3 months ago, the calculation method for regulatory capital ratios will change once the acquisition of Macquarie Group's U.S. asset management business has been completed, and we currently expect this to depress the CET1 ratio by about 0.7 percentage points. This concludes our overview of second quarter results. We would like to provide more detail on the issue of fraudulent trading in client assets resulting from phishing scams. In response to instances of fraudulent trading, we have raised the security level in stages and the number and scale of damages have come down greatly from April peak. At this point, we have been in direct contact with nearly all clients that have been affected by the attacks, and we are working through the process of paying a compensation to them. There are times during the second quarter when the related damages increased again, but at present, the situation has settled down, owing to various steps undertaken to address the issue. In the second quarter, the negative impact on the profit came to JPY 4.8 billion. Although the number of damages fell sharply, fluctuation in share prices led to high costs in some cases to restore our clients' assets to their original condition. In this regard, we are working to avoid market volatility risk to the greatest extent possible. On October 18, we introduced a passkey authentication system that is recognized as an effective means of thwarting phishing attempts, and we are strengthening measures to eliminate such damages. Looking ahead, we expect that the impact of phishing scams will be much smaller than it has been up through the second quarter, judging from the current state of damages. Our swift action to implement high-quality security countermeasures does more than just limit the damages suffered by our clients. It enhances the security and convenience of the financial services we provide. Our plan is to be proactive in assembling effective account security measures in our role as an industry leader and thereby reinforce our brand as the most trusted partner for our clients. I would like to close with some final remarks. During the quarter just finished, stock indices in Japan and other major economies rose steeply amid lessened uncertainty over the trajectory of U.S. interest rates and widespread interest in AI-related stocks and other high stocks -- high-tech stocks. Those conditions helped us record another quarter of strong earnings as we expanded our stable source of revenue and successfully monetized robust client flows. EPS in the second quarter came to JPY 30.49 and ROE came to 10.6%. For 6 quarters in a row, we have attained a quantitative target for 2030 announced last year of consistently achieving ROE of 8% to 10% or more. In addition, ROE for the first half of the fiscal year was 11.3%. As mentioned at the beginning of this presentation, we have seen solid growth in our key sources of stable revenue, including revenue -- recurring revenue in Wealth Management, business revenue in Investment Management and net revenue in Banking. This has added further to the stability of our company-wide performance. Wholesale as well as steadily achieving independently sustainable growth under the self-funding approach. Revenues and profits in the division have both been increasing in the continuation of last year's trend and overseas business, which has long presented a challenge, has gained ground in making a steady profit contribution. Let me briefly touch on the situation in October. In Wealth Management, net revenue thus far in October is well above the levels observed in the second quarter. We have seen continuous medium- to long-term growth in investment trust and discretionary investment and other such products and services premised on the idea of long-term diversified investment, and this trend has continued in October. The flow from savings to investment has become well established, and we have tangible sense that the client base for investment in marketable securities have broadened steadily. We intend to continue playing our part to transform Japan into an asset management powerhouse by building relationship of trust with our clients and providing them with asset management services tailored to their needs. In Wholesale GM business, equity products have continued performing well. In Investment Banking, we expect the current high frequency of corporate actions to continue. In October thus far, the net revenue in Wholesale continues to be solid. Going forward, we aim to raise our profit baseline by taking on risks appropriate to market conditions, and we ask for your continued support. Operator: [Operator Instructions] The first question, Bank of America Securities, Tsujino-san. Natsumu Tsujino: This is Tsujino. Two questions. First is regarding the personnel expenses. And as explained, in Q1, you had the U.K. and according to the accounting rules, every year, the expenses tends to be high. So you started at a low level. And this time, compared to Q1, the yen has weakened slightly, so the costs are a bit higher. But even so, if you look at it on a Q-on-Q basis, the personnel or compensation and benefits has increased too much, I think. Considering the wholesale revenue and even compared to that, I think comp and benefits has increased too much is my impression. So could you add more color on that, please, is my first point. My other point is, and this was the case in the past, too, but the CET1 ratio is within target range. And after Macquarie acquisition, it will go down a little bit. And it was 12.5% or so, which -- and you said you were not exactly fully comfortable with that. So now the market is strong and the position tends to increase. So for this year, regarding the buybacks this year, is there going to be any change compared to the past? So could you -- maybe you can't disclose that, but any color on that, too, please? Hiroyuki Moriuchi: Tsujino-san, this is Moriuchi. Regarding your first question about comp and benefits, yes, the points you raised are all correct. And yes, let me add some color to that. Within the compensation and benefits, there's the bonus increase linked to our earnings. That is a big factor. And on top of that, there was some retirement bonus increase in Wholesale, for example. And that does tend to happen as part of our business. And in this quarter, the retirement payments was a little larger than usual. So that's my answer to your first question. And for the second question, regarding the CET1 ratio target, 12.9% is going to go down to 12.8%, but how we think about the buybacks this year? Well, as for buybacks and for shareholder return in general, we have committed to the market of 40% dividend or above and total payout ratio of 50% or above. And we plan to stick to that as we consider shareholder return. And we had the Macquarie closing and the CET1 ratio is going to decline further from here. And within Wholesale at the moment, we are seeing some high-quality deals and opportunities, and those are increasing. So from an investment perspective and financial discipline perspective and shareholder return, we will keep those 3 factors in mind, and it's quite hard to balance those 3. But we will make sure to stick to our commitments. Thank you. I hope that answers your question. Operator: The next person asking the question is SMBC Nikko Securities, Mr. Muraki. Masao Muraki: I'm Muraki from SMBC Nikko. I have 2 questions. First question is about markets department revenue. Now in macro, revenue seems weak and credit and equity derivatives -- sorry, securitized products and equity derivatives seem strong. But the way revenue is generated in Page 17, the credit risk RWA increase has followed -- or is continuing? And where are you taking the risk and what kind of revenue is being generated? And recently, you said there are quality deals, but what kind of risk taking is expected in the third quarter? So could you explain? That's my first question, market revenue and risk taking. And my second question is as follows. The First Brands failure, so such incident from such instance, did you have some impact or any lesson that you have taken? And regarding private credit, oftentimes, there are many inquiries we receive about private credit. But looking at your balance sheet, trading book loan is JPY 1.9 trillion. And other than that, excluding Nomura Trust and Banking, loan is about JPY 1.2 trillion. In Americas, securitized -- securitization department or private credit-related business, what is the size of the business in this overall number? Could you give me some sense? Hiroyuki Moriuchi: Thank you very much for your questions. For your first question regarding credit risk, where we are taking and how we are taking credit risks. In the first quarter and second quarter, as you say, SPPC and equity derivatives were very strong. Also, usually in credit trading business, our credit trading business contributed to revenue solidly. And what is the outlook for the third quarter, as you said, related to SPPC. There are interesting deals in the pipeline. On the other hand, your -- it's related to your second question, but in our credit business, including First Brands, whether we see abnormality in credit market, we receive such questions often. Regarding SPPC, internally, we have been having various discussions and high profitability deals lined up. On the other hand, in our balance sheet, concentration risk on SPPC is something we have to be mindful of. So more than ever before, we have to be selective in deciding which deal to do. So in our total portfolio, SPPC portion is not going to be grown rapidly from where it is now. Regarding your second question about First Brands related impact as well as lessons we have learned and also the scale or magnitude. Firstly, regarding this specific case or impact on our business or P&L was very small from this specific case. To a certain extent, we had some exposure, but it's negligible in size. Also, this name in question did not cause direct cost. And is there a broader implication related to this? As you say, regarding firm-wide stress testing, periodically and nonperiodically, we conduct a stress test to see the changing pattern of tail risk. Indeed, looking at our existing portfolio, whether the risk has grown bigger a lot or not, the risk is not growing rapidly because in SPPC business, private credit business portion in size is very small. So the SPPC business has mortgage structured lending and infrastructure business. So those represent a big portion. So regarding private credit, private credit-related business is right now in the sense of the balance sheet of our P&L, the impact from that is not big, even though I cannot give you a specific number. That's all. Masao Muraki: If possible, I am deviating from the earnings result, but I'd like to ask you about your perspective. So related to First Brands -- so risks related to First Brands, which you mentioned, what kind of risks are you paying attention to? For example, simply, but is it simple credit risk or nonbank intermediary-related risks or double collaterals were involved in some companies' transactions, but is there a risk of fraudulent transactions that you may be involved in? So specifically, what kind of risks are you being attentive to? Hiroyuki Moriuchi: It's not that because this incident happened, but regarding individual cases, credit, we need to perform due diligence closely to look at the creditworthiness of each case. And regarding the fraudulent case or scam, by -- all we can do is to conduct a thorough due diligence to screen for the fraudulent trading. Regarding the nonbank intermediaries, unlike commercial banks, we are a firm that's focused on the trading. So what we take is inventory as a counterparty. So how should I put it? Nonbank credit risks themselves are not taken greatly by us. The risk which I mentioned is in the sense that regarding individual transactions, we pay close attention to credit. And for example, for the specific individual cases, when we receive sizable deal to conduct, we are not a major firm. Our balance sheet size is limited. So to what extent do we allocate balance sheet to one transaction. So what is the level of concentration risk. So those are the items or matters that we closely evaluate as we make a decision, and that's what we will have to keep doing. Operator: The next question is from Mr. Watanabe of Daiwa Securities. Kazuki Watanabe: This is Watanabe from Daiwa Securities. Two questions, please. First is regarding the October revenue environment. And in wholesale equity and IB is strong, which I understand. But for FIG, what are the trends you see in FIG? And compared to Q2, if you look at the Wholesale division revenue, is it above or higher or lower, please? Number two is the tax burden, Page 5. If we look at it year-on-year, the pretax income is increasing, but the net profit is down. And international pretax income size is larger, but the tax rate is going up. Why is that, please? Two questions. Hiroyuki Moriuchi: Watanabe-san, this is Moriuchi. Regarding your first question, the fixed income trends. First, for Japan, fixed income is quite strong. In the first half, for the ultra-long-term domain, it was quite difficult, including position taking. But even in that domain, we are seeing a normalization. And the market is very active and the revenues are catching up in accordance with that is my impression for fixed income in Japan. As for international, I think we're seeing a similar trend, similar to first half. And from here on, depending on the rate environment going forward, there could be upside. And as part of the overall portfolio, when fixed income improves, that starts -- that tends to normalize the other businesses. But as we bundle the overall business, we are seeing an increase in stable revenues and that level is gradually improving is my impression. That's my first answer. Your second question regarding the tax burden or the tax cost going up slightly. Sorry, it's hard to go into the details. There's a lot of technical issues here. So what I can say now, well, I won't go into the technical details. Kazuki Watanabe: Just to check on the first point, in October, Wholesale division revenue compared to Q2, is it above? Is it higher? Hiroyuki Moriuchi: Well, overall, it is strong, but I would say it's about the same level. It's still only been 3 or 4 weeks. So we'll see where things go. It's still a bit early to say. But just for the first 3 weeks, I would say it's about the same level. Operator: The next question comes from JPMorgan Securities, Sato-san. Koki Sato: I am Sato from JPMorgan Securities. I have 2 questions. First question, sorry for dwelling on this, but Wholesale, Equities or especially equity product business. So the revenue has reached the record high level. But firstly, in the short term, in the first quarter, Americas derivative did well, if I recall. But this time, looking at the material, Japan, AEJ had a significant increase in revenue. Anyways, derivative seems to be the strong area. But if it is fine with you over the several quarters in each region, what has been the trend of movement of each business line over the last several quarters? And such trend, is it sustainable over the next several quarters in the future? Can you give me some sense? My second question is about risk asset. The target range is set at 11% to 14%. And in this situation, now after the closing of Macquarie acquisition, it will come to around 12%, but the CET1 ratio, CET, if it's JPY 3 trillion, if core equity, then if it's 11%, then it's going to be JPY 27 trillion. Then for the time being, is that going to be the allowable ceiling of risks you can take? Can I have that sense? So I'd like to ask you to elaborate on the capacity of risk taking. Hiroyuki Moriuchi: Sato-san, thank you for your questions. Firstly, your first question, equities, what was the equities performance in each region? And what is the extent of sustainability moving forward? This time for the U.S., I might not have -- the material might not have mentioned it. But in the first quarter, the Americas has been the driver of revenue and the strength continues in Americas, though that's not specifically mentioned. On the other hand, for Asia and Japan, compared to the first quarter on a Q-on-Q basis. Now second quarter results came in stronger. Overall, equities in AEJ, Japan and U.S.A. the performance was very strong. And to what extent for how long can we retain this strength? If equities continues to be this strong, then sometime down the road, there will be a point of normalization. That's what we are discussing internally. But as you are aware, not only in Japan, but in U.S.A. and Asia, we have geographical diversification. And within equities, we have various products and the last several years, we have worked to diversify and broaden the product range within equities. So in that sense, we are more tolerant or resistant against downside risk. In any case, equities have become stronger. So moving forward, we expect certain normalization, but in such situation, resource could be -- resource -- fixed income resource, which we had intentionally reduced could go up for macro and other fixed income. So I encourage you to take a look at the entirety of the portfolio. And regarding your second question, target range from 11% to 14%. After Macquarie closing, the ratio is around 12%. So what is the future capacity of risk taking, that's what you asked about. So it is a good point you made. But firstly, regarding Wholesale, so stringently, they are sticking to the self-funding concept as they grow their business. So self-sustaining growth is being driven. So in the third and fourth quarters, if Wholesale continues to perform strongly, then based upon the revenue and profit generated by Wholesale and based upon the capital accumulated -- to be accumulated, RWA headroom or capacity will be increased. On the other hand, for areas other than Wholesale, we have the question of whether we find a need for capital in the near-term future. But if there are opportunities for M&A or inorganic growth, then in a step change manner, resource may be grown. But in any case, it's going to be immediately after Macquarie transaction. So when it comes to finance, we would like to stay on the safe side, and we would like to be conservative to a certain extent, and we want to take a look at the balance. I hope I answered your question. Operator: The next question is from Morgan Stanley MUFG Securities, Nagasaka-san. Mia Nagasaka: This is Nagasaka. Two questions. On Slide 14, Investment Banking. In the second half and next year, how do you think about the pipeline towards the future? In Q2, Japan was strong. International also recovered. And according to your explanation, corporate actions will remain strong. So what about advisory, finance solutions? Could you add some comments by product, please, is my first point. My second question is regarding the ROE. In Q2, 10.6% ROE on a full year basis, and there were some one-off items, but even so, 10.6%. So what is the base ROE which you can achieve? I think -- I guess the base ROE has gone up quite a bit. And your target 2030 target of 8% to 10% plus, what is the -- and I guess your expected profit level to achieve that is going up. So are you going to reconsider the target profit level at this stage? Any thoughts on the upside, downside, as CFO, please? Hiroyuki Moriuchi: Thank you for your questions. This is Moriuchi. Regarding your first question about the pipeline by product. First of all, for advisory, in Japan, there are some cross-border opportunities and large opportunities and quite a lot of opportunities are building up in the pipeline. And for international, it depends on the region, but we have announced many deals. And also in the second half, there are some deals which we haven't announced, which is building up as well. And for advisory, the pipeline is building up quite nicely. Meanwhile for ECM, the fee pool is normalizing and shrinking somewhat. And there are some normalizations of the cross-shareholdings opportunities. But even for the reduction of cross-shareholdings, that seems to be picking up slightly. And in the second half, usually, it's the second half that corporate actions tend to be concentrated versus first half in this product. So we'll make sure to pitch and win these opportunities. And for DCM, the business remains strong. And for the second half, as rates are expected to go up, but we are expecting a certain level of deal flow. Advisory, very strong. DCM is -- we expect a similar level to continue. For ECM, compared to a typical year, it's a bit weak, but we expect some recovery would be the summary. Your second question regarding ROE. And in Q1, Q2, and based on the results, we are already booking more than 10% ROE. So are we not going to raise the level is your question. And yes, as you pointed out, if we look at the current earnings, our base earnings power is gradually improving. This is a result of portfolio reforms as well as the operational reforms at each business division, and those are leading to results. So in terms of ROE, we get a lot of inquiries about whether we are going to reconsider and revise it. And we are discussing a little bit internally, but the point here is that which part of the cycle we are in right now, that's something we need to be mindful of. And regardless of the economic cycle, we want the products in Wholesale to offset each other so that we can maintain the overall revenue level. That's the kind of portfolio we are aiming for. But if we are going to enter a slowdown, is something we need to consider. And even in that case, we want to maintain at least the 8%, which is the lower end of the range of 8% to 10%. And we are currently building up the earnings capability, and that's what we should be focusing on at the moment. I hope that answers your question. Operator: [Operator Instructions] As there is no more question, we'd like to conclude question-and-answer session. Now we'd like to make closing address by Nomura Holdings. Hiroyuki Moriuchi: Thank you. This is Moriuchi again. Thank you very much for attending the call despite your tight schedule. So we were able to show you the good results. And we still have third quarter and the fourth quarter remaining, so we will stay focused so that we can deliver results so that we can do so, the management members will keep making efforts. Thank you very much for your continued support. Thank you. Operator: Thank you for taking your time, and that concludes today's conference call. You may now disconnect your lines. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

201天前Insight Analytics约5分钟阅读

FOR 2025 Q4 财报电话会议

Operator: Good morning, and welcome to Forestar's Fourth Quarter and Fiscal 2025 Earnings Conference Call. [Operator Instructions] And please note, this conference is being recorded. I will now turn the call over to Mr. Chris Hibbetts, Vice President of Finance and Investor Relations for Forestar. Sir, the floor is yours. Chris Hibbetts: Thank you, [ Ole ]. Good morning, and welcome to the call to discuss Forestar's fourth quarter and fiscal year results. Thank you for joining us. Before we get started, today's call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Although Forestar believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to Forestar on the date of this conference call, and we do not undertake any obligation to update or revise any forward-looking statements publicly. Additional information about factors that could lead to material changes in performance is contained in Forestar's annual report on Form 10-K and its most recent quarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission. Our earnings release is available on our website at investor.forestar.com, and we plan to file our 10-K in the next few weeks. After this call, we will post an updated investor presentation to our Investor Relations site under Events and Presentations for your reference. Now I will turn the call over to Andy Oxley, our President and CEO. Anthony Oxley: Thanks, Chris. Good morning, everyone. I'm also joined on the call today by Jim Allen, our Chief Financial Officer; and Mark Walker, our Chief Operating Officer. As always, we appreciate your interest in Forestar and taking the time to discuss our fourth quarter and fiscal year results. The Forestar team finished the year strong, generating over $670 million of revenue in the fourth quarter and $1.7 billion of revenue for the full year, which was above the high end of our most recent guidance range. Despite the challenges for new home demand due to ongoing affordability constraints and cautious consumer sentiment this year, we grew annual revenues by 10% and increased our book value per share to $34.78, up 11% from a year ago. We achieved these results, all while maintaining a strong balance sheet and ending the year with $968 million of liquidity. Over the last 5 years, Forestar invested more than $7.3 billion in land acquisition and development and delivered more than 75,000 finished lots to approximately 60 local, regional and national homebuilders. During the same period, our book value per share has increased 92%. These results reflect the strength of our business model and our market-leading teams we have built out across our national footprint. Thank you to all the Forestar team members for your efforts this year. In fiscal 2026, we will continue to execute our strategic plan by investing for future growth, turning our inventory, maximizing returns and consolidating market share in the highly fragmented lot development industry. Our unique combination of financial strength, operating expertise and diverse national footprint enables us to provide essential finished lots to homebuilders and effectively navigate current market conditions. Jim will now discuss our fourth quarter and fiscal year '25 financial results in more detail. James Allen: Thank you, Andy. In the fourth quarter, net income increased 7% to $87 million or $1.70 per diluted share. For the year, net income totaled $167.9 million or $3.29 per diluted share. Revenues for the fourth quarter increased 22% to $670.5 million. The current quarter includes $103.4 million in tract sales and other revenue, which was primarily for sales of residential tracts and to a lesser extent, our first sale of a multifamily site. Revenue increased 10% to $1.7 billion in fiscal 2025, which includes $118.1 million of tract sales and other revenue. In the fourth quarter, we sold 4,891 lots with an average lot sales price of $115,700. And for the year, we sold 14,240 lots with an average lot sales price of $108,400. We expect continued quarterly fluctuations in our average sales price based on the geographic location and lot size mix of our deliveries. Our gross profit margin this quarter was 22.3%, down 160 basis points from a year ago. Our gross profit margin in the prior year fourth quarter was positively impacted by lot sales from an unusually high-margin project. Our fourth quarter pretax income increased 4% to $113.1 million, and our pretax profit margin was 16.9%. Pretax income for the year totaled $219.3 million, and our pretax profit margin this year was 13.2%. Our pretax income and profit margin for the quarter and the year were positively impacted by a gain on sale of assets of $4.5 million. Chris? Chris Hibbetts: SG&A expense for the fourth quarter was $42.7 million or 6.4% as a percentage of revenues. And for the year, SG&A expense was $154.4 million or 9.3%. Our average employee count for fiscal year 2025 increased 24% compared to the prior year, which has supported the continued expansion of our platform, including entering new markets and increasing community count. Roughly 90% of new hires in fiscal 2025 were in our local market operations. We are pleased with the progress we have made building our team and our ability to attract high-quality talent. We remain focused on efficiently managing our SG&A while investing in our teams to support our continued growth. Mark? Mark Walker: New home sales have been slower than last year as continued affordability constraints and cautious consumer sentiment continue to weigh on demand. However, mortgage rate buydown incentives offered by builders are helping to bridge the affordability gap and spur demand for new homes, mainly at more affordable price points. Our primary focus remains developing lots for new homes at prices for entry-level and first-time buyers, which is the largest segment of the new home market. The availability of contractors and necessary materials remain solid and land development costs have been stable. We have also seen improvement in cycle times despite continued governmental delays. Our teams utilize best management practices and work closely with our trade partners to develop lots to drive operational efficiency. Jim? James Allen: D.R. Horton is our largest and most important customer. 15% of the homes D.R. Horton started this year were on a Forestar developed lot. With a mutually stated goal of 1 out of every 3 homes D.R. Horton sells to be on a lot developed by Forestar, we have a significant opportunity to grow our market share within D.R. Horton. We also continue to work on expanding our relationships with other homebuilders. 17% of our fiscal 2025 deliveries or 2,489 lots were sold to other customers, which includes 927 lots that were sold to a lot banker who expects to sell those lots to D.R. Horton at a future date. We also sold lots to more than 20 different homebuilders this year, including 6 new customers. Chris? Chris Hibbetts: Forestar's underwriting criteria for new development projects remains unchanged at a minimum 15% pretax return on average inventory and a return of our initial cash investment within 36 months. During the fourth quarter, we invested $347 million in land and land development, of which approximately 80% was for land development and 20% was for land. For the full year, we invested approximately $1.7 billion in land and land development, of which 2/3 was for land development and 1/3 was for land. In fiscal 2026, we currently expect to invest approximately $1.4 billion in land acquisition and development. Mark? Mark Walker: Our lot position at September 30 was 99,800 lots, of which 65,100 or 65% are owned and 34,700 or 35% are controlled through purchase contracts. 8,900 of our owned lots are finished, which is down 11% from the third quarter. The majority of our finished lots are under contract to be sold. Consistent with our focus on capital efficiency, we target owning a 3- to 4-year supply of land and lots and manage our development in phases to deliver finished lots at a pace that matches market demand. Owned lots under contract to sell increased 13% compared to a year ago, 23,800 lots or 37% of our own lot supply. $193 million of hard earnest money deposits secure these contracts, which are expected to generate approximately $2.1 billion of future revenue. Another 27% of our owned lots are subject to a right of first offer to D.R. Horton based on executed purchase and sale agreements. Jim? James Allen: We have significant liquidity and are using modest leverage to keep our balance sheet strong. We ended the quarter with $968 million of liquidity, including an unrestricted cash balance of $379 million and $589 million of available capacity on our undrawn revolving credit facility. During September, we redeemed the remaining $70.6 million of 3.85% senior unsecured notes that were due in 2026. Total debt at September 30 was $803 million with no senior note maturities until fiscal 2028, and our net debt-to-capital ratio was 19.3%. We ended the quarter with $1.8 billion of stockholders' equity, and our book value per share increased 11% from a year ago to $34.78. Forestar's capital structure is one of our biggest competitive advantages, and it sets us apart from other land developers. Project-level land acquisition and development loans are less available today and have continued to be more expensive, which impacts the majority of our competitors. Other developers generally use project-level development loans, which are typically more restrictive, have floating rates and create administrative complexity, particularly in an elevated interest rate environment. Our capital structure provides us with operational flexibility, while our strong liquidity positions us to take advantage of attractive opportunities when they arise. Andy, I'll now turn it back over to you for closing remarks. Anthony Oxley: Thanks, Jim. Fiscal 2025 was another successful year for Forestar. We delivered revenue growth of 10% and increased our book value per share by 11%. We continue to execute our strategy to expand the business through significant investments in land and land development and growth of our team. These investments helped us enter 7 new markets and increase our community count by over 10%. We further strengthened our balance sheet through extending near-term debt maturities and increasing our liquidity. As we look forward to fiscal 2026, based on current market conditions, we expect to deliver between 14,000 and 15,000 lots and to generate $1.6 billion to $1.7 billion of revenue. We currently expect our first quarter will be our lowest delivery quarter of the year, and we expect our revenues in the second half of fiscal 2026 to be higher than the first half. We are closely monitoring each market as we strive to balance pace and price to maximize returns for each project. While we expect home affordability constraints and cautious homebuyers to continue to be near-term headwinds for new home demand, we are confident in the long-term demand for finished lots and our ability to gain market share in the highly fragmented lot development industry. We are well positioned to continue success with our lot portfolio across our diverse national footprint, operating expertise and strong balance sheet. [ Ole ], at this time, we'll open the line for questions. Operator: [Operator Instructions] Our first question today is coming from Trevor Allinson with Wolfe Research. Trevor Allinson: Looking at your '26 guidance, it looks like you're expecting deliveries to be up low single digits. That's roughly the same growth as your largest customer. As we think about you deepening your penetration with Horton, why would you not grow faster as we look into next year? Is it an expectation that sales to other builders come down? Or is it just some conservatism? What's driving kind of the in-line growth with Horton? Anthony Oxley: Thanks, Trevor. It's just their size. They -- if they grow at low single digits, we need to grow at mid-single digits just to maintain pace with them. So they've entered some new markets. We've entered 6 or 7 new markets for the year. We are growing market share in the markets where we are in, but it's just a matter of us catching up with them in those additional markets. We have the land. We have the team in place. So we are positioned. If the market is there, we could increase those units, but it's really going to depend on the spring selling season to see what the year gives us. Trevor Allinson: Okay. Makes sense. That's helpful. And then you talked about employee count being up 24% in fiscal '25. You built out your teams ahead of some anticipated growth here over the next couple of years. With that in mind, how should we think about your headcount moving forward and your leverage on SG&A in fiscal '26? James Allen: Well, our headcount has remained basically flat since the first quarter of fiscal '25. Most of that increase in headcount actually occurred in fiscal '24, but only partially recognized in fiscal '24. I would expect our headcount to continue to remain flat or maybe even drift down slightly as we move into fiscal '26. Operator: [Operator Instructions] Our next question is coming from Anthony Pettinari with Citigroup. Asher Sohnen: This is Asher Sohnen on for Anthony. I just wanted to ask, I think last week, we saw a builder talking about how they were getting some cost concessions and extended takedown schedules on their lots. So I was just wondering with Horton or your third-party customers, are you seeing any pushback on lot prices or maybe extended takedown schedules or anything like that? Mark Walker: Yes. From a land acquisition perspective, we've been successful renegotiating time and terms, but not so much land value. Throughout the years, our teams and we have developed a proven underwriting due diligence and market research strategy that helps us ensure that we're purchasing land at current market rates. In terms of lot pricing, lot pricing has -- we haven't seen a whole lot of pushback on our lot pricing today. Again, we manage that project by project to maximize returns. Asher Sohnen: Okay. That's helpful. And then I just wanted to drill down a little bit. I think you guys have a big presence in Texas and Florida. I was wondering if you can talk geographically around those regions specifically, what kind of trends you're seeing there? Anthony Oxley: Yes. We are seeing some pressure in some markets in Texas. It's choppy. Probably see a little bit more pressure in Florida, parts of Florida. But those are really large markets and particularly at the affordable price point where we tend to concentrate our business, we're still seeing good absorptions. Asher Sohnen: Great. That's helpful. And then if you won't mind me sneaking in one more, just a modeling question. In terms of the cadence of deliveries in 2026 in your guide, I think 2025 was pretty back half weighted. I'm just wondering if there's any thinking around '26. Unknown Executive: Yes. I mean, I think we're projecting '26 to be a similar cadence of '25. Certainly, our deliveries will be larger in the second half of the year, similar to this year. Operator: [Operator Instructions] Okay. As we have no further questions on the lines at this time, I'd like to turn the call back over to Mr. Andy Oxley for any closing remarks. Anthony Oxley: Thank you, [ Ole ], and thank you to everyone on the Forestar team for your focus and hard work. As we enter fiscal 2026, continue to stay disciplined, flexible and opportunistic while focusing on consolidating market share. We appreciate everyone's time on the call today and look forward to speaking with you again in January to share our first quarter results. Operator: Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.

201天前Insight Analytics约5分钟阅读

AXTA 2025 Q3 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Axalta Coating Systems' Q3 2025 Earnings Call. [Operator Instructions] Today's call is being recorded, and a replay will be available through November 4. Those listening after today's call should please note that the information provided in the recording will not be updated and therefore, may no longer be current. I will now turn the call over to Colleen Lubic, Vice President of Investor Relations. Colleen Lubic: Good morning, everyone, and thank you for joining us to discuss Axalta's third quarter 2025 financial results. I'm Colleen Lubic, Vice President of Investor Relations. With me today are Chris Villavarayan, our President and CEO; and Carl Anderson, our Chief Financial Officer. We posted our third quarter 2021 financial results and earnings release this morning. You can find today's presentation and supporting materials on the Investor Relations section of our website at axalta.com, which we will be referring to on this call. Our remarks today and the slide presentation may include forward-looking statements reflecting our current views of future events and the potential impact on Axalta's performance. These statements involve risks and uncertainties and actual results may differ materially. We are under no obligation to update these statements. Our remarks and the slide presentation also contains various non-GAAP financial measures. We included reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. Refer to our filings with the SEC for more information. I would like to now turn the call over to Chris. Chrishan Anthon Villavarayan: Thanks, Colleen, and good morning, everyone. Let's look at Slide 3. We're pleased to report another strong quarter with record adjusted EBITDA and record adjusted diluted EPS driven by our disciplined execution. Our team's focus on customer service and leadership in technology enabled us to outperform industry trends in many regions as we continue to secure new business across our global end markets. Net sales were approximately $1.3 billion. While the broader macro environment remains challenged, especially in North America, we're successfully navigating these headwinds. Industry trends were more stable in Europe, which represents more than 35% of our net sales. Global auto production was again a bright spot with current forecast ticking up in October to approximately 91 million builds for the full year 2025, a 2% increase versus 2024. We posted adjusted EBITDA of $294 million with a margin of 22.8%. This marks 12 consecutive quarters of adjusted EBITDA and adjusted EBITDA margin growth year-over-year. The results demonstrate the culture of continuous improvements that we have established across the company. To that point, we expanded the adjusted EBITDA margin in both segments. Performance Coatings adjusted EBITDA increased by 20 basis points from the prior year period to 25.5%, up 170 basis points from the second quarter of 2025. Net sales in Mobility increased 4% to the third quarter record of $460 million due to sustained growth in China and Latin America. The team's focus on new business wins, margin stabilization and operational rigor resulted in an adjusted EBITDA margin of 18% for the segment, an expansion of 230 basis points compared to last year. During Q3, we executed 100 million in share repurchases, reducing our shares outstanding by over 3% since 2023. Adjusted diluted EPS was $0.67, up 6% versus last year. This reflects our robust earnings power and our commitment to returning capital to our shareholders. Lastly, our net leverage was maintained at 2.5x, remaining the lowest level in Axalta's history. Let's turn to Slide 4. Achieving our A Plan target remains top priority, and the third quarter results show that the strategy is leading to enhanced profitability. This quarter marks the sixth consecutive period with an adjusted EBITDA margin above our A Plan target of 21%. The consistency of our adjusted EBITDA margin performance speaks to the foundational improvements we've made to our business. Our Mobility segment continues to perform well, driving 2% organic net sales growth year-to-date. This top line momentum was driven by roughly $60 million in new business wins and 12 quarters of adjusted EBITDA margin expansion in the segment, driven by strength in China and Latin America. In Refinish, we generated approximately $90 million this year in incremental net sales from the execution of our strategies, which include gaining more than 2,200 net new body shops, expanding into adjacencies, implementing pricing actions and integrating CoverFlexx. We believe that we're well positioned for growth in the business as volumes are expected to stabilize and grow into next year. On the industrial side, profitability remains ahead of schedule despite mid-single-digit declines in net sales were exceeding our 2026 A Plan target for profitability expansion one year early. The results show the effectiveness of our strategic product mix and cost management. This has been a great story, and I believe the business is well positioned to capitalize on volume upside once demand rebounds. Additionally, our cost discipline has been outstanding. Interest expense is down 15% year-to-date, bolstering our adjusted diluted EPS performance. Operating expenses declined by 5%, supported by our 2024 Transformation Initiative. This initiative is running well ahead of plan and has delivered approximately $40 million in incremental savings in 2025, further supporting margin expansion. Before turning the call over to Carl to discuss the results, I want to emphasize that we have delivered strong year-to-date results and are on track to achieve record adjusted EBITDA and record adjusted diluted EPS for the full year. Our performance reflects Axalta's dedication the strength of the A Plan and our commitment to delivering value to our shareholders. In the final quarter of this year, we remain focused on execution, operational excellence and disciplined capital allocation. Carl Anderson: Thank you, Chris, and good morning, everyone. In the third quarter, net sales were approximately $1.3 billion, down 2% year-over-year, primarily due to macro headwinds in North America. Positive price cost actions and disciplined cost management helped to offset mix headwinds, resulting in gross margins holding steady at 35%. Variable costs declined 1% year-over-year, and we expect the raw material environment to remain relatively flat through at least the first half of next year. SG&A expenses declined 7%, reflecting our ongoing focus on efficiency and cost management. Adjusted EBITDA increased $3 million versus last year to $294 million, a quarterly record. Adjusted diluted earnings per share increased 6% to $0.67, another quarterly record, primarily driven by lower interest expense and fewer shares outstanding. Operating cash flow was $137 million and free cash flow totaled $89 million. The decline from last year was driven by higher capital expenditures of $17 million and higher working capital as we have strategically held higher inventory levels this year to manage tariff uncertainty. We anticipate that free cash flow will improve significantly in the fourth quarter as working capital unwinds. Net sales for Performance Coatings, as shown on Slide 6, declined 6% year-over-year to $828 million, driven primarily by trends in North America, impacting both businesses. Refinish net sales came in at $517 million, slightly up on a sequential basis from the second quarter. Lower body shop activity and customer order patterns drove declines versus last year in organic net sales, impacting both volume and price mix. This was partially mitigated by favorable foreign currency translation and growth in Europe and Southeast Asia. Industrial net sales declined 4% year-over-year to $311 million primarily due to volume softness in North America, driven by weakness in industrial production and building and construction. Positive price/mix and favorable foreign currency translation partially mitigated volume headwinds. Performance Coatings delivered adjusted EBITDA of $211 million with a margin of 25.5%, an increase of 20 basis points year-over-year and 170 basis points sequentially. Let's look at Slide 7. Mobility Coatings third quarter 2025 net sales were $460 million, an increase of 4% from the prior year. Light Vehicle net sales increased 7% in the third quarter due to net sales growth in Latin America and China and positive price/mix, which offset volume declines in North America and Europe. Commercial Vehicle net sales declined 7%, primarily due to volume declines from lower Class 8 production, which were partially offset by positive price mix, new business wins and favorable impacts from foreign currency. Adjusted EBITDA for Mobility increased 20% year-over-year to $83 million, with adjusted EBITDA margin expanding to 18%. The team's focus on accretive new business wins and cost control have delivered 12 consecutive quarters of adjusted EBITDA year-over-year margin growth, as Chris mentioned earlier. Capital allocation continues to be a critical part of Axalta's value creation story as shown on Slide 8. Since the third quarter of 2023, diluted earnings per share has increased 55% and adjusted diluted earnings per share has grown more than 40%. We have reduced interest expense by 17% in the third quarter, and our net leverage ratio remained steady at 2.5x aligned with our strategy. Consistent with the A Plan, we have increased capital expenditures by approximately 50% when compared to the third quarter of last year, bringing our year-to-date spend to $138 million. Through the third quarter of this year, we have repurchased $165 million of shares with $100 million being deployed this quarter. Overall, our share count has decreased by 5 million shares since the beginning of the year or 3% since 2023. In the fourth quarter, we expect to accelerate our share repurchase strategy by repurchasing up to $250 million of our stock. Upon completion, we would have deployed over 90% of our free cash flow to share repurchases this year while still maintaining our leverage target. As we move forward, we expect to continue to generate sustainable earnings growth and strong free cash flow. The strength of our balance sheet gives us the flexibility to effectively allocate capital to drive long-term value for our shareholders. Let's turn to Slide 9 for a look at the full year. We expect to deliver record adjusted diluted earnings per share and adjusted EBITDA on lower revenue expectations. Previously, we anticipated that the external environment in North America and Europe would pick up in the third quarter, which would have generated a sequential benefit to net sales in the fourth quarter. However, this improvement did not materialize as expected, and we are adjusting our forecast for the softer demand. Additionally, we also expect softer Class 8 production levels and lower Light Vehicle builds in some regions, given some of the temporary supply challenges that are impacting the industry. In the fourth quarter, we now expect net sales to decline by mid-single digits compared to last year. Adjusted EBITDA is anticipated to be approximately $284 million and adjusted diluted earnings per share is projected to be around $0.60. For the full year 2025, our updated outlook reflects net sales of more than $5.1 billion, with adjusted EBITDA expected to be about $1.140 billion which is at the low end of our previous EBITDA guidance range. We are expecting a significant increase in free cash flow in the fourth quarter, which should put us around $450 million for the year, consistent with last year, but down slightly from our previous view. Additionally, we are forecasting adjusted diluted earnings per share to be $2.50 for the full year, an increase of 6% versus 2024 and an increase of approximately 50% versus the full year of 2023. I will now turn the call back to Chris. Chrishan Anthon Villavarayan: Thanks, Carl. We're well underway to deliver another record earnings year here in 2025, and we have always operated with the commitments made, commitments delivered mindset, and we're excited on what we can accomplish in 2026. Next year, we are planning for an improved Refinish demand environment in North America as claims stabilize and destocking headwinds abate. We continue to gain new body shops and are excited about our growth opportunities in accessories and the economy segment. Light Vehicle global production outlook is expected to be stable and we expect to have another record year in our mobility business. In North America, expectations for lower interest rates and less trade volatility should provide a positive backdrop for customer demand in our industrial business. Our team is poised and ready to execute on new business wins and manage costs through operational excellence and a strong pipeline of productivity projects. The team remains fully committed to delivering on our $1.2 billion adjusted EBITDA target. We expect to repurchase a significant amount of Axalta stock given my confidence on where we can take the business in the years to come. We're all about creating value for our shareholders, and I'm more excited than ever of what we can accomplish. Thanks for joining us today. Operator, please open the lines for Q&A. Operator: Yes, sir. [Operator Instructions] Our first question will come from Ghansham Panjabi with Baird. Ghansham Panjabi: I guess first off on 3Q, just as it relates to the auto Refinish component down 7% for the third quarter, at least for the volume component, how would you disaggregate that between just volumes in the industry versus the inventory destocking? And then just related to that, Chris, you talked about 2026. What are the specific strategies that you're pursuing to support an improvement going into next year from a commercial standpoint? Chrishan Anthon Villavarayan: Ghansham, thanks for the question. Well, giving you a view of Q3, what -- the way we look at it is markets are down about mid- to high single digits. And I would call it specific to us, destocking is also around that mid-single digits number and our performance. So whether if you look at the $90 million that I've talked about in terms of the growth that we had in the business or the incremental sales, whether it's what we did in pricing actions, what we did with new body shop wins of 2,200, which is really a good news story for us because on average, if you look at us, net new body shop wins for us, if you look at the last 3 years, average is around 2,400. So here we are in Q3, and we're already at 2,200. So it's actually a pretty good year for us. And then on top of that, whatever we do with adjacency sales as well as the CoverFlexx integration. So I think all of that is driven what's, as you pointed out, let's call it, this mid- to high single-digit drop in sales as you look at Q3. So what gives me confidence as I think about where is the market and do we see stabilization? And I can sit here and talk to you about insurance rates and what's happening with claims. But I think it's really important to start looking at our numbers. And if you look at our Q1, Q2, Q3 numbers for Refinish, we're running around that $520 million sales. And if you look at Q4, we're essentially saying that's going to drop down by about $20 million, which is what is seasonal and normal for us. So you can start seeing the business is starting to stabilize, and that's what gives me confidence as I look at next year and coming out, so we expect Q1 as always to be a little bit lower. But primarily Q2, we should be lapping where we were with the destocking. And then if you have the tailwind of destocking coming out starting Q2, plus assume the same win rate that we've had for this year, what we've done on average on our Refinish business of $70 million to $90 million you can start seeing that Refinish really starts picking up at the back half of next year. So I hope that answers that question for you. Operator: Our next question comes from Chris Parkinson with Wolfe Research. Christopher Parkinson: Chris, ever since you've taken the helm, I mean, costs have been a tremendous focus of your strategy. Can you just kind of give us any context to help us conceptualize where we stand today and how we should be thinking about the ongoing progress as it relates to 2026 in the context of your end market backdrop? Is this something that can continuously improve even when volumes kind of come back? Or is this something where you're going to have to add back costs and you're really operating at a fair rate? I mean just anything to help us triangulate how we should be thinking about that progress over the next 12 to 18 months would be incredibly helpful? Chrishan Anthon Villavarayan: Sure, Chris. I think coming in 2 years ago or 2.5 years ago, I think there was always this view that what Axalta had done with Axalta Way I, Axalta Way II, how could there be more cost in Axalta. And as you can see, I think if you went back to '22 and what we have accomplished, I'm really proud of the team. We have essentially executed on over 500 basis points and a lot of that is really what we have driven in cost. Obviously, when we put the A Plan in place, the markets across all our 4 end markets are in a different spot. And really, a lot of the performance is really coming from what we were able to do with our cost actions. And I actually use a term that I think Carl uses all the time, which is we're still early in our innings. And why do I feel that is if I look forward, again, take a look at how much we're investing in capital. And if you look between '23, '24 and '25, even as we look at this year, under a challenged macro, we're investing more than we ever have in our plans. And so if you have that return coming through in productivity for next year, you have an element of that. If you look at our Transformation Initiative, we talked about that being about $75 million. To date, we have accomplished about $60 million to $70 million. We still have a flow-through of about probably $20 million into next year. So you got that as well. And then what we can do with supply chain optimization, what we can do with footprint optimization, I still think, as Carl pointed it out, we're still early in our innings. I think there's still opportunities there is opportunity with costs that we can continue to drive into next year. And it will be a portion of our plan while we drive the growth as we think about '26. Operator: Our next question comes from Joshua Spector. Lucas Beaumont: This is Lucas Beaumont -- this is Lucas Beaumont for Josh. So I mean most of your '26 outlook comments kind of focused on Refinish. So then maybe if you could just kind of talk us through your expectations there for the other end markets, mainly industrial and commercial vehicles that you didn't really call that much? Chrishan Anthon Villavarayan: Sure, Lucas. So as I look at it, commercial vehicle, we still expect that to be, let's call it, very muted, certainly a different perspective than what we expected for the year being this pre-buy year when we started the plan 2 years ago. I think the expectation was '26 was going to be $60. I think this year, we're probably looking at '26 being around that $225 to $250 range at best. So I think the market certainly is down about 30%, but a true credit to the team is what they've really accomplished in pivoting towards commercial transportation solutions. So even if you look at our performance for this year, sales are down about 30% -- 25% to 30% in terms of volumes in Class 8. And we're down of just about 7%. And it's really because the teams have pivoted towards commercial transportation solutions. And what is that as we started selling to marine, we started selling to military, we started selling to RVs, off-highway. And so the teams pivoted to smaller customers, but a ton of smaller customers, and we're really able to pivot that. So as we look into '26, we believe that we can still continue to grow that business on the CTS side and also grow it globally. We do have opportunities in Latin America. We also have opportunities in China. So that's a great perspective, but as I think about CTS. And one of the things that we're primarily focusing on is really adding capacity also for our Commercial Vehicle business because at some point, that's going to return. We're well beyond -- below replacement volumes. So if you think about '27, when that returns, we certainly need to have the capacity. So that's, again, one of the things that we're focused on investing. If I look at industrial, our plans for industrial is the markets remain somewhat muted. There are signs if interest rates keep coming down, mortgage rates are at the lowest point in '25 at this point. But again, we need further interest rate cuts and obviously some kind of drive to improve residential and construction into next year. So it's not something that we're counting on, but it certainly will provide a tailwind. I think as we look at it right now, [ Freddie Mac and Fannie Mae ] are expecting about 3% to 4% growth into next year. Again, we're not counting on it because that was also a thought process for this year. But certainly, from an industrial dynamic, our perspective is that volume so that market stays flat to possibly up slightly. Commercial Vehicle, as I pointed out, will be down. Light Vehicle, we're expecting a slight step down. We're at about 91 million builds this year and our thought process is it will be slightly lower maybe by 200,000 or 300,000 vehicles for next year. And then finally, Refinish, we're expecting a stable environment into next year. So volumes down, but stable into next year. Operator: Our next question will come from Matthew DeYoe with Bank of America. Matthew DeYoe: Can you just rehash maybe some of the internal discussion around a dividend and thoughts there? And whether or not the Board is becoming maybe more receptive to this? And I guess, as I think more holistically about capital deployment, I know or I should say people generally, would say that you want to kind of be more acquisitive and reshape the portfolio a little bit, but how does your appetite change? Or does your appetite change for acquisitions considerably given your own valuation here today? Carl Anderson: Matt, yes, this is Carl. So as I think about capital allocation here in the near term, we do see tremendous value in our stock at this point. So that's why you're seeing a pretty significant shift, not only what we did in the third quarter, but also plans to deploy up to $250 million in the fourth quarter to buying back shares. I think as we look at the dividend, obviously, this is a board decision. We've had many discussions as it relates to that. And I think as we launch the next A Plan, I think that's probably a time that we'll spend even more with the Board on making a final decision on that. We do recognize we're currently an outlier at least in the chemical space. But I just continue, and we continue to see just tremendous value of repurchasing shares at this point. And I do think that fits into your M&A question. Again, where our trading multiples are right now, M&A is a little bit more challenging. What we can look to accomplish here in the near term. That's why I got back pivoting back and deploying more into share repurchases here, I think, is the appropriate and prudent move. But as we move forward, I think as -- where we could take this business longer term, M&A will definitely play a part of that. But I think we're a little bit of a timing window at this point. Chrishan Anthon Villavarayan: Just maybe to add a little bit to Carl, especially when we look at where we can get '26 and I think as we're building more confidence around the $1.2 billion for '26, it really puts light to the fact that we should probably be focused on buying back Axalta. Operator: Our next question will come from John Roberts with Mizuho. John Ezekiel Roberts: Could you dive a little deeper into some of the underlying drivers in the Refinish business, auto accident rates, insurance inflation, overall repair costs, those are the things I think, that caused the dip in the business? And what are you seeing from those drivers? Chrishan Anthon Villavarayan: Sure. Absolutely, John. So first, as I look at accident rate, accidents or collisions, I think nothing's changed. Accidents are still occurring. That's around -- there's a slight decline. It's about down 1%, but overall accidents are, let's call it, flat to down 1%. If I look at claims, obviously, this is the big driver to what's driving the disconnect. And if I look at North America, that's down about high single digits. Europe is lower, let's call it, in that mid-single-digit range. And the primary driver here is exactly what happened and what we've talked about quarter-over-quarter, which is insurance premiums going up significantly and also consumers pulling back from just a sense of the confidence and the macro. And around this, I think what you can start getting a sense and obviously, we've spent a lot of time because the Refinish business is such a large and very important part of Axalta is certainly something that we've watched carefully. And I think the good news is when I look at insurance cost -- insurance costs, as we said, if you look back to '24, insurance costs were going up almost double digits. If I look at '25, you can start seeing insurance premiums starting to go flat. And that's an overall perspective for the United States, actually in 27 states, insurance costs are actually coming down quite a bit. And I would say, overall, that would mean the other half of the states are going back -- going the wrong way. But overall, insurance rates are stable and starting to get flat. From a repair cost perspective, what we're starting to notice is repair costs are also starting to get flat and go down 1%. Again, as volumes and backlog start reducing at the body shops, you can start seeing that folks are starting to drive to balance this out. So I would -- that's one of the good perspectives that I think is driving a stable environment as I think of how we're preparing into '26. From a perspective of what we're seeing on the premium side, especially with cost of vehicles going up, as well as what's happening with used car pricing, you can certainly see that work is also starting to drive back. The leading indicators are starting to turn positive. And a perfect example of this is if you look at CarMax or Navana -- Carvana, you can start seeing that their performance is also improving by 20%. So that's a great indicator. Those guys are also large customers of ours, and we can start seeing as cars are coming back from lease or being returned, those folks are also having to fix cars before they obviously try to sell them again. So I think the right market environment is starting to switch. Obviously, winter is also coming, if I think about early next year, so I certainly believe '26 will be a different pace as we start the year for Refinish. Operator: Our next question will come from Mike Harrison with Seaport Research Partners. Michael Harrison: I was hoping that you could talk a little bit about some of the costs that you've been able to take out. I understand that the focus has been on structural cost. But I think, in particular, in Performance Coatings, very surprising to see the margin performance even with volumes and with price/mix lower. So to what extent are some of the cost actions you're taking right now temporary in nature or related to lower discretionary spend that we might need to think about accruing or coming back as we think about next year's cost structure, whether that's incentive comp or other discretionary spend? Carl Anderson: Yes, I think as we look at the cost actions we've taken not only in the third quarter, but really over the last couple of years, the vast majority, if not more, are really structural reductions that -- we have an ability to operate more efficiently and how we run the business. I would say there are some tactical things that we've done as it relates to more discretionary around T&E as an example. So some of that may come back as we get into next year. But I think as I look forward, maybe the better way to think about it is for every $1 of incremental revenue, our conversion rate on that to EBITDA, used to be around 35%, I would expect that should be running closer to -- we're going to be probably getting close to about 40%. And that just speaks to the overall structural reductions we've made and that we expect to stick as we move forward. Operator: Our next question will come from Patrick Cunningham with Citi. Patrick Cunningham: Just on the Refinish side, it's pretty firmly low single-digit price/mix declines. Is this primarily stemming from mix as you move into more mainstream and economy? And how would you characterize your outlook on underlying structural price into 2026? Chrishan Anthon Villavarayan: Patrick, just -- maybe it's actually 2 things. The first one is you're absolutely right as we're growing more into our mainstream and economy and certainly, if you look at our new body shop wins, one of the reasons we're doing so good at body shop wins for this year ahead of what we normally have is foray into mainstream and economy. And with the acquisition of CoverFlexx that's really enabled us to grow. Actually, the last 2 quarters, Q3 and Q2, where some of the highest number of mainstream and economy body shops with one in that segment. We have normally focused on the premium segment. And so you are seeing, let's call it, negative mix from that because the margins in mainstream and economy are lower than our premium margins. However, it's still accretive to Performance Coatings margins or overall Axalta margins. But separate from that, also, when you think about the fact that in this last year, most of our impact from destocking is primarily a North American issue and so whether it's the volume decline that we have seen because of where the market is in North America, plus destocking North America was one of our highest or is one of our highest margin businesses. So it drives a negative mix as well. And as we flip into next year and we get past the destocking issue, I think a lot of that will still be mitigated as especially because the mainstream wins, it will take quite a bit to offset the, let's call it, the step-up from destocking that we expect into next year. Operator: Our next question will come from Aleksey Yefremov with KeyBanc Capital Markets. Aleksey Yefremov: Good morning, everyone. I was hoping to get some of your initial thoughts on Refinish pricing strategy for next year. Should we expect '26 to be a typical Refinish year? Or are you adjusting your expense based on this current environment? Chrishan Anthon Villavarayan: Our plan is to probably to stick to a similar pattern as what we've accomplished for this year. So, Aleksey, that normal 2% is net pricing is what we drive. At this point, that's exactly what we're thinking for next year. Primarily, it's certainly a model that's worked. And I don't see us needing anything further than that. As we pivot into, let's call it, more mainstream as well, I mean the pricing dynamic is slightly different there. But overall, the aspect of driving growth, driving what we're going to be doing on the, let's call it, adjacencies perspective. Those have a little bit of a different pricing mix, let's call it algorithm. But other than that, what we do for the premium business will be probably in line with what we did this year. Operator: Our next question will come from David Begleiter with Deutsche Bank. David Begleiter: Just on Q4, in terms of 2 things, on production, are you running your plans normally? Or are you drawing down some inventory that could be hit to earnings? And on SG&A, should we think about a similar year-over-year decline in SG&A expenses, as you saw in Q3 of roughly 7% year-over-year? Carl Anderson: David, yes, SG&A, I would expect that performance in the fourth quarter will be very similar to what we saw in the third quarter as it relates to that reduction. And then as it relates to inventory, we are expecting a drawdown as we think about the working capital unwind. As I said in my prepared remarks, the third quarter, we did actually run higher inventory levels really just due to some tariff uncertainty in North America, but also within Brazil as we were ramping up our new business wins in that market. So overall, the fourth quarter is shaping up to be a very strong free cash flow quarter, but a big part of that will be the inventory reduction. Operator: Our next question will come from John McNulty with BMO Capital Markets. John McNulty: Can you flesh out a little bit what you saw on the raw material side, what you were seeing kind of in some of the major buckets, how much tariffs impacted you if you think you're pretty much through that tariff headwind at this point at least from an incremental headwind perspective? Chrishan Anthon Villavarayan: For raw materials, in tariffs, we're probably about $20 million or the expectation would be incremental costs that have kind of come in that we've been able to kind of manage through pretty effectively. So at this point, and you never know, but I would say we believe we're pretty much kind of behind that. And kind of the big buckets for us, in total, as we referenced, we saw the raw material basket down about 1% in the third quarter. And if I look at kind of the big items, I think solvents continue to be a very low pricing environment, and we continue to see that benefit. Same thing as it relates to [indiscernible] is another one that we've seen lower cost. There's been some offsets to that in some of the other baskets, such as monomers as well as some pigments as well. But net-net, very stable backdrop to raw materials at this point and we do believe that's going to continue on at least for the next 3 to 4 quarters. Operator: Our next question will come from Vincent Andrews with Morgan Stanley. Vincent Andrews: Chris, the slide indicates that you're expecting Refinish revenue to turn positive in 2Q '26. Do you expect volume to turn positive in 2Q '26? Or is that going to come later in the year or not at all? Chrishan Anthon Villavarayan: No, volumes -- Vincent, we're expecting volumes to also turn positive into Q2 as well. I think you'll get 2 benefits. Obviously, if you think about our body shop wins as well as the adjacencies, a lot of that will transition. Obviously, there's a bit of a ramp-up with that as well beyond what we have this year. So that you would have that tailwind on top of, let's call it, just the destocking coming -- abating. And so that you will get probably a drive from both of that. So from our perspective, we expect volumes to start trending positive in Q2 of next year. Operator: Our next question will come from Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas: You said you might purchase up to $250 million in shares in the fourth quarter. What will determine that? Does that have to do with the price of your shares and how much have you bought so far this quarter? Carl Anderson: Jeff, yes, I think for the quarter, we repurchased $100 million of shares in the third quarter. In the second quarter, we repurchased $65 million. So we've done $165 million to date. The $250 million is where the market is today, even if it's up probably 10% plus, we're a buyer of the stock. We have a big belief in where we can continue to take this company as it relates to earnings and revenue and what the future will bring. And at these trading multiples, it makes all the sense in the world to deploy almost all of our capital at this point to buying back shares. So we will be a big buyer of the shares here in the fourth quarter. Operator: Our next question will come from Mike Sison with Wells Fargo. Michael Sison: I'm just curious if -- I don't want to be a [indiscernible], but is 2026 Refinish doesn't normalize as an industry, how does your strategy change? And is there enough market share gain for you to generate some volume growth in the second half next year? And then BASF sold their business to private equity, are there opportunities -- is that good for the industry? Are there opportunities for market share gains? How do you sort of view that? Chrishan Anthon Villavarayan: Mike, so maybe I'll start with the first one. If I think about Refinish, overall, this industry has been very stable. Obviously, I look at what happened this year as something that is more temporary and certainly, as we look at where our numbers are coming in and once you take out destocking, you can get a sense that with the drop that we have seen there's a sense of stabilization that's happening. And I certainly see it as I look at our sales quarter-over-quarter-over-quarter. And so -- and if you start thinking about the fact that if you put in perspective the fact that Axalta is a leader in the Refinish space and certainly, with our market position and as I look at what's happening as we enter the economy space, certainly, as I think about the number of body shop wins in this challenging market, where we're all chasing sales, Axalta is winning when I think about the 2,200 body shops. So as I think about next year in a market that is in a similar perspective, I think if you pull out the destocking, there is still an opportunity for us to continue to grow, and we will pivot into other areas. So as you look at what are we doing into adjacencies, as I look at pushing what we're doing with putties, fillers, aerosols, we've essentially been able to take the product out of Europe within the U-POL acquisition and really pull it into North America. And we've gotten on thousands of shelves at O'Reilly and AutoZone to be able to take our aerosol product to market. And in essence, what we can do with private branding, what we can do with just expanding that portfolio even with some small bolt-on tuck-ins, I think there's an incredible opportunity with what we have as our strength in the market to be able to continue to grow that segment. We've been very focused on cost. I think as I look at next year, we can certainly pivot towards growth, especially with the strength of the underlying business. So as I think about Refinish, I think with what we have in the portfolio, as well as small elements that if we need to add, we can certainly have a growth story even in a challenged market. So that's the first perspective, as I think about, let's call it, Refinish. To answer the question on BASF, obviously, BASF has been a competitor of ours for a very long time back to DuPont days and all the 11 years of Axalta, and they certainly play a very strong -- they're a very strong competitor of ours in most -- both the Mobility space and the Refinish space. So it's a competitor we know well. And as I think about what is necessary under [indiscernible], I think the drive for margin will probably drive a very good competitor. And I think it will drive some discipline into the marketplace. And we've known them well. So it's probably a good story overall. So I don't expect anything different there. The good news is really the multiple that BASF was sold for. It really shows the valuation that the, let's call it, that Axalta is undervalued. And I think going back to Carl's comments, this is why we're doubling down on buying 90% of our free cash flow, using that to buy back shares. And to the question earlier about why are we confident about $250 million for next year. We're just going to essentially use our Q4 cash flow and essentially continue to buy back Axalta. And if I look at '26, and once you get very confident and once I feel confident around '26, I think the free cash flow from there, we have about $150 million left in our authorization. We'll certainly go back for another $0.5 billion or $1 billion. And I think we can certainly focus on continuing to buy back Axalta because it really shows the value that our margins can provide and what we can do with the business long term, and we'll certainly be an acquirer of our stock. Operator: [Operator Instructions] Our next question will come from Kevin McCarthy with Vertical Research Partners. Kevin McCarthy: Yes. Chris, are you still working on a new company-wide strategic plan to follow the A Plan? If so, I was wondering if you could just comment at least just qualitatively on what you think the company might need to focus on operationally in the years to come versus last couple of years? It sounds like you see runway on cost and clearly, a lot of room to accelerate repurchases. But any other color on where you'd like to take the company strategically? Chrishan Anthon Villavarayan: Yes. Thanks for the question, Kevin. And so certainly, I think if we think about the 5 elements that we defined under the A Plan, under 4 of them, we're certainly in a great position and we are there, a year ahead of plan. So you -- it really positions you to what we need to work on. And the 5 were say a growth, number one. Second was margin. We set a target of 21%. We're close to 23% as we stand right now. The next one was EPS, and we're certainly well beyond our plan there were, as I think about it, will be 70%, if I look at where we'll close the full year. The next one was leverage ratio, and we're -- we set a target of 2 to 2.5, and we'll be the -- right there at the end of this year at 2.5, probably 2.4. And then finally, under ROIC, we're also very close to that target. So the primary focus, as I think about, a, 2029, which are -- Kevin, our plan is to roll that out by May of next year, is to really drive the growth elements. I think the underlying business is performing exceptionally well coming in -- we had 2 areas to focus on. If I go back to the beginning of '23 and in the A Plan, we focused -- we wanted to essentially make sure we got the underlying business where we needed to. And I think that's certainly been a good story for us. And now it's to really pivot to growth. And so as I look at what we will define in the A Plan, there will be primarily a plan that uses -- Axalta has one of the highest margins in the coatings industry. And I think we can use a little bit of that firepower as well as really focus this exceptional team towards what we need to do to drive growth, and that's what you're going to see a lot more in the A plan. Operator: Our next question will come from Arun Viswanathan with RBC Capital Markets. Arun Viswanathan: I guess I just wanted to go back to just kind of a structural question on Refinish as well as Industrial. It appears that Refinish claims are obviously down significantly high single digits this year. Industrial has also been down maybe double digits for a little while now. So what's it really going to take to get these markets back going? Is it kind of inflation on the Refinish side and maybe PMIs on the Industrial side? Or what do you think? And is there anything that you guys can do within your own control to maybe spur some demand if you talk about innovation or maybe adding on the economy side or some other initiatives? Chrishan Anthon Villavarayan: So we normally start on the Refinish side. So Arun, thanks for the question. I'm going to start with Industrial. The Industrial story, as I said in my prepared remarks, I think has been a great story. And even if you look at this quarter, I'd say the markets have been down, let's call it, high single digits, probably just north of 7%, and we're down about 4%. And if I look back and go back to '22, which we were still in the COVID times, the sales, the industrial market, to your point, has been down about 20% to 25%. But we've been down -- we went back all the way to '22, our sales are only down about $100 million. So down, let's call it, mid- to high single digits. And so what's really -- why is this a good story is, if I look through the fact that in that time, the team has driven some incredible performance in the business. We set a target of 400 basis points of margin improvement. And I would say we're north of 500 at this point. And I still think there's more gas in the tank in that business. So we took a business that was, let's call it, very low single-digit margins to almost -- well, above double-digit margins. It's been a great story for us. And what did we do? We really [indiscernible] down some customers. We focused on pricing for the value that we bring to the business. And we really invested and essentially picked -- that business has 3, let's call it, segments, it's got building products. It's got industrial sales and it's got energy solutions. We focus -- and underneath that, there's 12 sub businesses. We focused on a few. We essentially really drove the performance through those to where we knew that we made a difference to our customers and we have certainly driven the margin as well as the growth in that business. Our Energy Solutions business is doing great. If we look at China, it's growing. We provide impregnating resins in that business for motors. We provide coatings for battery casings which is doing great in not only what we provide for vehicles, but also for the industry as cell for data centers. So that's again, a business that's doing very, very well. And so it's been a great business. The margins are in a great spot. There are still elements in that business that we can look at probably at some point, as I've said before, that we might get out of. But that said, the overall business is at a great spot. And what I think is necessary for that to grow is pretty straightforward. It's I think waiting for mortgage rates to adjust and or come down and building -- to your point, PMI, anything that can spur construction is certainly something that we're waiting for. But on top of that, we do believe that we can drive growth in Energy Solutions, coil and certain aspects of that business. So that's Industrial Solutions. In Refinish, I do believe that next year, we should see some stability. The destocking issue for us is specific for us because we have -- we go to market through 3 large distributors and one of those distributors essentially worked on acquiring another one. And that essentially meant that there was over 100 locations and warehouses that were essentially closed down. And so inventory was taken out of the system that takes about a year because of the process they went through. And in essence, we see that as something that will switch and will be temporary and something that we will get out of in Q2 of next year. So that's what gives me confidence in that market that we should have some level of stability. But our story here is really the fact that we continue to win. We believe that we can grow that market at the same rate or better as we proved this year. And we can certainly grow through new body shop wins. We can certainly push more in terms of adjacencies, and we can certainly get into the economy space. We have only 9% market share that we moved to 11% and we believe we can continue to grow that. So that's our story. And I think as we -- as Q1 starts up and as you look at our full year guide for next year, you should get confident around what our story is going to be for '26. Operator: Our next question will come from Laurence Alexander with Jefferies. Laurence Alexander: Just wanted to come back to 2 brief points. So one on the working capital, how do you see your working capital days evolving when your end markets recover? And secondly, on SG&A, what do you see is -- can we annualize the back half of this year as a run rate for next year? Or will there be a kind of reset in a healthier environment? Chrishan Anthon Villavarayan: Yes. So SG&A, I think you'll definitely see the same impact in the fourth quarter that you saw in the third quarter. As you kind of flip into the next year, there probably will be a slight increase, as I think about SG&A, just as a percent of sales as we think about having a little bit higher cost as it relates to merits in the organization. But it will still be running at a pretty low level on a percentage of sales basis as we kind of go forward. And then on working capital, as I said, I think in the fourth quarter, we are anticipating a pretty big increase from free cash flow. A lot of that is, as you can just look at how the third quarter came in, there will be some inventory reduction. It's a very strong seasonal quarter for us anyways. If I kind of go back in time, fourth quarter of '23, we generated over $250 million of free cash flow, over $200 million back in the fourth quarter of 2022 as well. So that speaks to the power and the acceleration of what we expect in the fourth quarter. And then as we move forward into next year on an increasing revenue environment, I think we will be very, very targeted on running the right inventory level. So we don't want to overshoot that as we think about managing overall working capital because I think getting into next year, the free cash flow capability should be very, very strong again for us. Operator: Thank you. At this time, there are no further questions. And this does conclude today's presentation. We appreciate your participation, and you may disconnect at any time.

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